Ramsay Health Care Limited (ASX: RHC)

Focus on Differentiating the Business - Ramsay Health Care Limited is an Australian operator of hospitals with reach across over 235 hospitals and day surgery facilities across Australia, the United Kingdom, France, Indonesia, Malaysia and Italy. The Group focuses on investing strategically in brownfield expansions which contributes towards the long-term growth for the business. But Ramsay is facing some challenges and slowdown in its UK operations and now in Australian Market as well. To overcome these conditions, the Company is implementing a range of cost management and procurement strategies which will ensure that it remains a leader in cost-effective healthcare delivery in all the markets in which it operates.

The Company recently was reviewing the carrying value of its assets and after looking at the Group’s performance in respect of its UK hospitals in the current challenging environment, it reported its statutory financial statements for the 12 months ending 30 June 2018 and will recognise a charge of £70 million (A$125 million) net of tax (consisting of an onerous lease provision and asset write-downs related to certain UK sites). During the review, six UK sites were identified which required onerous lease provisioning and/or fixed asset impairment and which included Berkshire Independent, Ashtead, Mount Stuart, Croydon, Renacres and Clifton Park hospitals. Further, it was noted that these provisions and impairments were non-cash in nature and will not impact Ramsay’s debt facilities or compliance with its debt facility covenants and its final dividend for FY18.


UK Financial Performance (Source: Company Reports)

Lately, the Group witnessed weaker growth rates in procedural work and inpatient admissions in its Australian operations in recent months as well as delays in the rollout of the Ramsay Pharmacy franchise network. Now after disappointing May results and with no material improvement anticipated for June, the Group anticipates that its FY18 Core EPS growth will be approximately 7 per cent as compared to the guidance of 8 per cent to 10 per cent which was previously provided in conjunction with the release of its results for the six months ended 31 December 2017.

The Group will continue to focus on its operational efficiencies and on building its non-NHS business. Though funding boost for the NHS recently announced is a positive step but RHC does not expect any immediate benefit and is ready to face any kind of challenges in terms of its UK operating conditions. Since past 5 years, the stock price has been rising that is by 75.72 per cent and the same was up by 7.60 per cent in last five day after a 10.48 per cent fall noted in last six months. The stock slipped by 7.53 per cent as on 21 June 2018 as the market was displeased with the guidance downgrade. We recommend to “Hold” the stock at the current market price of $57.49 while the Company is still trying to make continuous efforts on resetting and strengthening its business despite the prevailing challenging conditions.

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