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Ramsay reports healthy dividend, profit growth and CEO exit

Glenn Freeman  |  23 Feb 2017Text size  Decrease  Increase  |  

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Ramsay Health Care has delivered a 12.8 per cent uplift in both net profit after tax (NPAT) and dividends for the half-year ended 31 December 2016.


Australia's largest private hospital operator, Ramsay Health Care (ASX: RHC), recorded $267.8 million in core NPAT for the half.

Shareholders will receive a fully-franked interim dividend of 53 cents a share--up from 47 cents a year earlier.

Outgoing managing director Chris Rex--who today announced his retirement after seven years at Ramsay's helm--emphasised "solid half-year on half-year admissions growth in the company's major markets" as key contributors to the result.

He also called out macro factors including an "an ageing and growing population, clinical innovation and increasing consumer expectations".

"Our strategically located, well-diversified business in Australia continues to experience strong admissions growth, which underpins the need for ongoing brownfield investment," Rex said.

Ramsay completed $142 million of developments during the first half of fiscal 2017, with a further $90 million development expenditure approved. This added 166 hospital beds, six operating theatres and two emergency centres.

The group's retail pharmacy network strategy also progressed, with 22 storefronts in the Ramsay Pharmacy retail portfolio, and further growth anticipated in the second half of fiscal 2017.

"We believe its deep pipeline of brownfield projects and recent move into community pharmacy bodes well for earnings growth over the medium to long term," said Morningstar senior equity analyst Chris Kallos.

"We also think Ramsay's centralised procurement strategy, leveraging the global purchasing power of the group, bodes well for margin expansion."

Within its offshore operations, Ramsay UK recorded strong revenue growth on the back of National Health Service admissions. The division recorded 2.4 per cent growth in earnings before interest, taxes, depreciation, amortisation and restructuring (EBITDAR). However, it maintains a "watching brief on the impact of Brexit".

In France, EBITDAR was up 6.5 per cent, with key contributions from HPM hospitals, which Ramsay acquired in December 2015.

Morningstar's Kallos said it was a "positive result that was in line with expectations". However, he noted, with some surprise, the share price fall that coincided with the board's announcement of Rex's retirement--after seven years as CEO and 20 years with the company.

Ramsay's share price was off 5 per cent to $68.23 in midday trade on 23 February.

With no successor named yet, Kallos said other members of the company's management team--with the possible exception of group finance director Bruce Soden--were largely unknown to the market.

"Chris Rex was the face of Ramsay. This is probably why people are placing so much emphasis on his departure."

However, Kallos makes no suggestion of any change to Morningstar's "exemplary" stewardship rating in response to the announcement.

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Glenn Freeman is Morningstar's senior editor.

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