Leading healthcare provider Ramsay Health Care Limited (ASX: RHC) released its 2019 full-year results to the market today. Here’s what you need to know.
About Ramsay Health Care
Ramsay is the largest private hospital operator in Australia, Scandinavia and France, while also having a major presence in the UK. The company has been operating for more than 50 years, after being established by Paul Ramsay AO in Sydney in 1964. Ramsay has 480 facilities across 11 countries with 77,000 staff, annually treating around 8.5 million patients.
Here Are The 5 Key Points
- Revenue increased by 24.4% to $11.4 billion
- EBITDA of $1.6 billion, up 14.1%
- Core NPAT of $590.9 million, representing a 2% increase on FY18
- Core EPS of 285.8 cents, up 2.1%
- Fully-franked final dividend of 91.5 cents, up 5.8%
Segment Results
Ramsay’s Australian operations delivered overall EBITDA growth of 6% on the prior corresponding period (pcp), which management viewed positively given the uncertainty around the potential impact of the Federal election on the private health sector.
Continental Europe delivered a result in-line with company expectations, with revenue up 2.6%. The acquisition of Swedish healthcare company Capio was completed during the period and Ramsay is in the advanced stages of integration.
After a poor start to the financial year, Ramsay’s UK segment strengthened in the second half showing solid revenue and EBIT growth, which was helped by a return to National Health Service (NHS) volume growth. Growth in NHS volumes was 7.4% on the pcp.
Ramsay’s Asian joint venture, Ramsay Sime Darby, posted strong operating performances in both Indonesia and Malaysia, as well as a 10% overall increase in admissions. During the period, Ramsay also opened its first day surgery in Hong Kong.
Balance Sheet & Dividend
Ramsay’s net debt position worsened during the period, extending out to $4.85 billion, which was partially attributable to the debt funding used to complete the Capio acquisition.
The company declared a fully-franked final dividend of 91.5 cents, up 5.8%, bringing the full-year dividend to 151.5 cents fully-franked. This represents a 5.2% increase on the FY18 dividend and means that Ramsay shares are currently trading at a ~2.2% dividend yield.
The Rask Finance video below explains franking credits:
Analyst Estimates
Bloomberg analysts were expecting NPAT of $540.27 million and a 89.7 cent final dividend. Ramsay beat both of these estimates by ~9% and ~2% respectively.
Management Commentary
Commenting on Ramsay’s 2019 financial year, Managing Director Craig McNally said: “In FY19, a focus on growth and enhancing our operating model saw Australia and Continental Europe achieve earnings growth. We continue to be well placed in these markets with market leading positions in Australia, France and Scandinavia, which enables us to achieve improved economies of scale, best practice, cost leadership and innovation”.
McNally also went on to discuss the consolidation of Ramsay’s position as a leading international healthcare service provider, saying, “Our scale and size gives us the opportunity to explore greater efficiencies and to establish stronger partnerships, which will generate earnings growth along the healthcare value chain.”
FY20 Outlook
According to management, industry fundamentals are continuing to drive increased demand. The company provided core EPS growth guidance on a like-for-like basis of 2% to 4% for FY20.
Ramsay is also anticipating stronger admissions volume growth, which is enhanced by its brownfield investment program in Australia and the turnaround in NHS volumes in the UK.
What Now?
Rask Media writer Jaz Harrison has previously written an article outlining the positives and negatives of an investment in Ramsay Health Care. I tend to agree with Jaz’s sentiments in that whilst Ramsay is a proven performer that looks set to ride the tailwinds of ageing populations, I don’t believe its current growth prospects justifies the recent share price.
Ramsay isn’t the only lower-risk ASX share to consider. The stocks in the free report below are all proven and reliable long term businesses.
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At the time of writing, Cathryn has no financial interest in any of the companies mentioned.
