Ramsay Health Care is expected to meet mixed sentiment at the open after the private hospital operator declared a significant full year net loss in one breath but then announced plans to sell its underperforming European business in the next.
Overall, while underlying profit was up 10.7% to $158.9 million - reflecting activity and revenue growth in all regions - the net loss came in at $104.9 million once one-off costs of $263.8 million were included.
One-off costs related to the group’s underperforming Elysium Healthcare mental healthcare business in the UK, which contributed $291 million towards the writedowns, plus $34 million in non-cash provisions.
Despite the mixed results, the dividend was steady at 40c.
Shareholders can take some solace from management’s decision to appoint Goldman Sachs to explore and advise on strategic options associated with offloading Ramsay’s 52.8% shareholding in underperforming Ramsay Santé, which employs 38,000 people across five countries.
Speculation around Ramsay’s likely decision to sell its majority stake in the France-based subsidiary started last July after it sought refinancing. One of the benefits of moving to a minority shareholding would remove the need to consolidate the accounts, which would allow it to classify earnings from the group as associate income.
While there is no certainty how any transaction will eventuate, Ramsay noted that it “will remain disciplined and give consideration to the current operating performance of Ramsay Santé, market conditions and execution certainty, which will influence the decision to undertake, and timing of, any strategic activity.”
Commenting on today’s result, managing director Natalie Davis reminded investors of recent leadership changes and strategic realignment of the group's operating model to focus on Australia, streamline the business and build capability.
While there is significant value and growth opportunity in the Australian hospitals business, Davis also noted that multi-year transformation is required to improve performance and improve capital returns across the portfolio.
“Pleasingly, we saw activity and revenue growth in all our regions in the first half of FY25, with solid performance in Australian hospitals and continuing performance momentum in our UK hospitals. However, profitability continues to be impacted by industry-wide challenges and weak results in Elysium and Ramsay Santé,” said Davis.
Other key numbers announced today include:
- Ramsay Australia - reported a 3.8% increase in earnings driven by a 5.3% increase in revenue from customers.
- UK region - excluding the impact of non-recurring items, the region reported a 9.3% increase in EBIT reflecting another good performance from the UK acute hospital business.
- Ramsay Santé - excluding the impact of non-recurring items Ramsay Santé reported a loss of €19.8m after tax and minority interests.
- Net interest expense (inclusive of AASB 16 lease costs) is forecast to be $580-610 million.
- Ramsay Healthcare has a market cap of $7.7 billion making it an ASX100 stock; the share price is down 35% in one year and down 2% year to date.
Consensus is Hold.
This article does not constitute financial product advice. You should consider independent advice before making financial decisions.
