Health Care Stock to Watch- Ramsay’s revenue up by 22.5% and share price cuts down

In this reporting period, companies in almost every sector have been affected, at first due to bushfires, and then by the coronavirus epidemic. The companies have been updating the market with their respective financial results, and while there have been quite a few challenges during the past few months, despite that, some of the companies have recorded positive performances.

Among the companies, updating the market with their results is health care sector player -Ramsay, who has reported positive revenue as well as an increased NPAT. The company mentioned that it had performed well internationally; however, due to some challenges in Australia, its performance was partly offset.

Let us zoom the lens for Ramsay’s first half results for the financial year 2020-

Ramsay Health Care Limited (ASX:RHC) Revenue up 22.5%

A global health care company Ramsay Health Care Limited is engaged in providing high quality services and offering excellent patient care as well as hospital management. Ramsay is one of the biggest and most diverse private health care companies across the globe and provides primary and acute health care services from its 480 facilities throughout 11 countries.

The reason behind the success of the company is the delivery of high-quality results among the patients and focusing on relationships with staff and doctors.

Ramsay updated the market with its financial results for the first half of 2020 (ended 31 December 2019) mentioning that the performance is in line as it was expected. During the first half Ramsay continued to invest in infrastructure and research to position the business for the future, including, integration of IT systems and digitalisation.

The highlights from its half year results are-

Financial highlights-

• Ramsay mentioned that the core net profit after tax (NPAT) was recorded to be $273.6 million, increased by 3.4%;
• The core earnings per share (EPS) of the company was reported to be 132.5 cents, up by 3.7%.
• Ramsay reported revenue of approximately $6.3 billion increased by 22.5%;
• EBITDAR of the company up by 17.4% to nearly $1.1 billion;
• The company declared fully franked interim dividend of 62.5 cents/share, increasing by 4.2% on the previous corresponding period.
• RHC’s balance sheet and reliable generation of cash flow, continues to support the company with the flexibility to fund the constant requirement for brownfield capacity expansion, ongoing working capital needs as well as for future acquisitions.

Segment Results- Ramsay mentioned that its performance in Continental Europe, the United Kingdom, and Asia was good during the first half, but this was partially offset by more challenging conditions in Australia.

Australia- Ramsay’s Australian operations reported revenue growth of 3.9% and an overall EBITDAR growth of 2.4% on the pcp. The equity accounted share of Asia joint venture net profits increased by 13.6% to approximately $12.5 million.

In the first half of 2020, Ramsay completed $50 million worth of brownfield projects. Moreover, $189 million worth of developments were approved by the board during the period, which includes 207 net beds, eight operating theatres and a new emergency department.

The company is planning to expand its services beyond the hospital walls and streamlining care coordination for the patients from hospital to home

United Kingdom- In the United Kingdom Ramsay performed well and revenue moved up by 8.7% to £267.6 million and EBITDAR up by 6.0% to nearly £47.7 million. Ramsay UK recorded its best half performance in recent years assisted by an increase in overall activity.

Continental Europe- In Europe, revenue increased by 44.3% to €1.9 billion and EBITDAR up by 38.0% to €319.1 million.

Outlook-

• Ramsay mentioned that there are positive signs for its business in the United Kingdom and Europe in terms of volume as well as tariff growth;
• The company anticipates the softer growth environment in Australia to remain in the short term;
• Ramsay mentioned that coronavirus might impact the global business of the company hence, it is monitoring the impact of coronavirus on supply chain as well as admissions;
• The company expects core earnings per share growth on a like-for-like basis of 2-4% which corresponds to negative core earnings per share of -6 to -4 per cent under the new lease accounting standard AASB16, for the financial year 2020.

Appointment of non-executive director-

According to one ASX update dated 25 February 2020, Ramsay unveiled that Karen Penrose will join the company’s board as a non-executive director. Ms Penrose has had a vast experience in leadership and CFO roles mainly in the financial services and she will join Ramsay board from 1 March 2020.

Currently, she is working as a non-executive director with Estia health, Vicinity Centres, Spark Infrastructure Group and Bank of Queensland. Her extensive board experience and background definitely would be valuable for the Ramsay to achieve its set targets for 2020.

Stock performance

On 27 February 2020, stock of RHC settled the days’ trade at $73.620, marginally down by 1.538%. from the previous closing price. The market capitalisation of the stock stood at around $15.11 billion, with nearly 202.08 million shares outstanding. The 52 weeks high and low price of the stock was noted at $80.930 and $60.000, respectively. RHC stock has generated a positive return of nearly 3.83% on a year to date basis and a positive return of 10.80% in last six months.

Ramsay’s businesses in Europe, Asia and the United Kingdom performed well during the first half of the financial year 2020, however, in Australia its performance was not up to the mark due to the challenging conditions. Also, the company mentioned that there are positive signs for its business growth in the United Kingdom and Europe.

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