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Mid-Cap

Ramsay Healthcare - Recent Results

September 15, 2015 | Team Kalkine
Ramsay Healthcare - Recent Results

Ramsay Health Care Limited


Ramsay Health Care Limited is an Australian company engaged in operating private hospitals and has three operating segments namely the Asia Pacific, UK and France. The Company owns and operates 117 hospitals and day surgery facilities across Australia, the United Kingdom, France and Indonesia and the facilities cater for a range of health care needs from day surgery procedures to surgery, as well as psychiatric care and rehabilitation. The Company has approximately 14,500 beds and handles over one million patients per annum. In the United Kingdom, it has a network of 38 acute hospitals and day procedure centers.


Revenue Growth (Source: Company Reports)

Results for FY 2015

The shares jumped on the announcement of another set of results reporting bumper profits. The Company reported an increase of 49.9% in revenues and an increase of 27% in profits to $ 386.5 million. Business in the Australia/Asia segment and in the United Kingdom showed growth but the real jewel in the crown was the business in France. Because of the merger of Ramsay Sante and Generale de Sante (in which the Company has a controlling interest of 50.9%), it is now the largest private hospital group in France.
 
Among the financial highlights were the growth of 19% in core NPAT to $ 412.1 million, 20% in core EPS to 196.6 cents per share, and, for the group, 49.8% growth in revenues to $ 7.4 billion and in EBIT of 37.4% to $ 803.9 million. In Australia/Asia, revenue was up 8.2% to $ 4.1 billion and EBIT by 8.6% to $ 521.4 million. In the United Kingdom, revenues grew by 8% to £ 413.2 million and EBIT by 14.6% to £ 40.5 million. In France, revenues were up 440.8% to € 1.74 billion and EBIT by 391.5% to € 144 million. The fully franked final dividend of 60.5 cents per share amounted to an increase of 18.6% over the previous year and the full year dividend fully franked was up by 18.8% to 101 cents per share. The statutory reported net profit after tax after deducting non-core items came to $ 385.5 million, a growth of 26.9% over the previous year.


Core EPS and Dividend Growth (Source: Company Reports)
 

Strategy

 
Managing director Christopher Rex said that the international expansion strategy, robust organic growth, brownfield developments and good cost management all contributed to the results. He pointed out that the company has successfully developed a global portfolio of hospitals which are strategically located to meet the needs of the respective communities and operated with both cost efficiency and the philosophy of people caring for other people. During the financial year, $ 190 million of brownfield development will be undertaken to ensure that the facilities are up to date and provided with the latest medical equipment. The priorities for the Company continue to be employee safety and patient outcomes.
 

Operations

 
The Australian and Asian business achieved revenue growth of 8.2% and EBIT growth of 8.6% because of the strong volume growth caused by the ageing demographic and the increased burden of disease. The UK business produced outstanding results with double-digit growth in NHS admissions and a 14.6% growth in EBIT to £ 40.5 million. The operations in France have performed at or above expectations and the first nine months of the ownership of Generale de Sante confirms that the business is operating in line with due diligence standards and the integration of the two hospital portfolios is in progress with synergies to be realised over the next 12 months. The merged entity is in good position in each of its regional markets to attract enhanced volumes from an ageing and expanded population.
 
With regard to the brownfield capacity expansion, developments worth $ 190 million have been completed including the expansion worth $ 58.2 million in Heidelberg, Melbourne, the $ 53.3 million expansion on the Gold Coast and the $ 19.5 million expansion in Sydney. During the year, a further $ 197 million was approved for new capacity expansion across the world in line with the focus on meeting the needs of the communities served by keeping facilities up to date and providing the latest in facilities and medical equipment.
 

Acquisition update

 
The merger with Generale de Sante was finalised on 01 July 2015 following shareholder approvals and the newly merged entity in which Ramsay holds a controlling interest of 50.9% now includes 115 facilities with 101 hospitals and employs more than 20,000 people. It is the largest private hospital group in France. Further, acquisition opportunities continue to present themselves in France as a result of the consolidation of the sector and the group has recently commenced exclusive negotiations to acquire 9 hospitals located in Lille owned by the HPM group. The acquisition is now subject to the necessary regulatory approvals and is expected to be completed later in the calendar year. The group has also, through its joint-venture partnership with Sime Darby, signed an agreement with the Chinese healthcare company Jinxin to jointly operate five hospitals in the Chinese city of Chengdu. A successful operation will give the group a foothold in China and allow them to develop operating experience in what is potentially a highly exciting market.
 

Demand Scenario (Source: Company Reports)

Balance sheet and cash flows

 
Continued generation of strong and consistent cash flows from operations and efficient working capital management resulted in the high cash conversion rate of 100% of EBITDA to gross operating cash flows. The strong balance sheet and the robust generation of cash flows provide the group with the flexibility of funding the increasing demand of capacity expansion, future acquisitions as well as the continuing needs for working capital.


RHC Daily Chart (Source: Thomson Reuters)

Future outlook

 
The comprehensive and sustainable strategy for growth has positioned the group as one of the largest and most successful private hospital operators in the world. Their track record demonstrates that they have created a business model which can be successfully implemented anywhere in the world and has led to market leadership in 2 developed countries, Australia and France. Because of the potential growth opportunities and a successful growth strategy, the Company is targeting core NPAT and core EPS growth of 12% to 14% for FY 2016.
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