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Industry woes weigh on Ramsay

Glenn Freeman with AAP  |  30 Aug 2018Text size  Decrease  Increase  |  
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Australia's largest private hospital operator, Ramsay Health Care (ASX: RHC) has reported a 6.8 per cent rise in underlying net profit of $579.3 million for fiscal 2018.

However, it posted a 21 per cent loss in non-adjusted terms. Year-on-year profit declined 21 per cent to $388.3 million, from $488.9 million in fiscal 2017. This was attributed largely to impairments within its UK and French hospital operations of $122 million and $29.9 million, respectively.

The result aligned with guidance delivered by Ramsay management in June, "but we view the outlook as a bit soft, pointing to a sustained weakness in the Australian environment," says Chris Kallos, Morningstar senior equity analyst.

Ramsay operates 223 hospitals across Australia, UK and France, with a growing international footprint.

medical hospital

 Ramsay operates 223 hospitals across Australia, UK and France.

Locally, this includes 73 hospitals and day surgery units. Reinvestment in its Australian hospitals has averaged about $200 million a year over the last decade.

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In the year to 30 June, Ramsay spent $171 million on capital investment completions, which included 208 gross beds, seven theatres, and 21 consulting suites. This figure is tipped to rise to $240 million in fiscal 2019, and management has approval to boost this figure as high as $320 million, according to Kallos.

While this reduced revenue growth attributable to its local operations, Kallos emphasises it helps strengthen its future positioning for ageing patient demographics and changing care needs. This includes greater demand for neurological treatments.

Kallos notes the mediocre results are largely due to industry-wide conditions in Australia, along with tougher environments in UK and Europe: "Being global gives them exposure to some offshore risks too," he says. 

Ramsay managing director, Craig McNally, indicated the results were "impacted by the significant downturn in NHS volumes in our UK business, as well as softer growth rates in our Australian business.

He also cited its decision to temporarily slow the rollout of its Ramsay Pharmacy franchise network "while we invest in infrastructure and resources to successfully scale this franchise business for the long term".

Morningstar's Kallos expects patient volumes in Australia to remain soft, flat in Europe and neutral in the UK – where government changes, including Brexit concerns, are detrimental.

Australia comprises about 55 per cent of overall group revenue, followed by France's 37 per cent contribution and UK's 8 per cent.

Global revenue rose to $9.18 billion, or 5.4 per cent, from $8.70 billion, of which the Australian business contributed $4.9 billion, up 5.5 per cent on last year.

Ramsay profit falls on write-downs

  • Net profit down 21pct to $388.3 mln
  • Revenue up 5.5pct to $9.18 bln
  • Fully franked final dividend of 86.5 cents/share, up 5.0 cents from year ago

  

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Glenn Freeman is senior editor, Morningstar Australia

© 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.

. Glenn Freeman is senior editor, Morningstar Australia.

© 2021 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

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