Momentum diagnosis

3 May 2023

Sector: Health Care

3Q23 UPDATE

Need To Know

9-month group Revenue and EBIT up 11%yoy, NPAT up 17%yoy
Surgical volume momentum returning following slow December/January period
RHC expecting gradual recovery in earnings through FY23 and more normalised conditions in FY24

Group revenue growth reflects growth in surgical admissions and a recovery in non-surgical admissions, combined with contributions from Elysium Healthcare acquisition in January 2022 and acquisitions in Europe. The Elysium acquisition however added little at an EBIT line, dragging on overall group earnings, being in the midst of price renegotiations and an impact on the French business with Government payments being the main culprit. Group margins were weaker in the quarter with seasonal weakness driven by the Australian holiday season.

Financing costs also increased significantly reflecting higher base rates, higher average drawn debt and a reduction in the interest rate swap gain in Ramsay Santé compared to the prior period. New finance costs are expected to be at the top end of the $430-460m guidance, in-line with the market.

Labour shortages and inflationary pressures continue to impact the business, however RHC noted that operating environment continues to improve, evidenced by a ~GBP£60m improvement in the UK hospitals business on the prior 9-month period. The company continues to focus on retention of key employees and noted that workforce pressures are starting to ease. Surgical admissions continue to be skewed to day surgery given the backlog of surgeries is weighted to less complex elective surgery. Activity in March as measured by inpatient day admissions were the second highest in five years in APAC.

Investment View

The exit run-rate is difficult to ascertain given that the March quarter is typically the weakest trading period given the Australian holidays, as well as the previous period being fraught with Covid surges. The quarter however shows clear signs of recovery, with Australian EBIT growing 43% on the prior period, demonstrating clear momentum recovery. The higher debt and continued labour shortages remain a slight concern; however the trading conditions outlook is favourable. We expect continued positive momentum, retaining our Buy recommendation.

View the latest Research Report

Stock Overview

Share Price

Company Overview

Ramsay Health Care Limited is an Australia-based healthcare services company. The Company operates through four segments: Asia Pacific, UK, France, and Nordics.

Disclaimers and Disclosures

Issuer

The information and opinions contained within Sandstone Insights Research were prepared by MST Financial Services Pty Ltd (ABN 54 617 475 180, AFSL 500557) ("MST").

Reliance

Whilst MST make every effort to use reliable, comprehensive information in the construction of its reports, MST make no representation, warranty or undertaking of the accuracy, timeliness or completeness of information in this report. Save for any statutory liability that cannot be excluded, MST and MST employees, representative and agents shall not be liable (whether in negligence or otherwise) for any error or inaccuracy in, or omission from, this advice or any resulting loss suffered by the recipient or any other person.

General Advice

Any advice contained within Sandstone Insights Research is general advice only and has been prepared without taking into account any person’s objectives, financial situation or needs. Any person, before acting on any advice contained within Sandstone Insights Research, should first consider consulting with a financial adviser to assess whether that advice is appropriate for their objectives, financial situation and needs.

General Disclosures

This report should be read in conjunction with MST Disclaimers and Disclosures and is published in accordance with MST Conflict Management Policy which are available on the MST website: https://www.sandstoneinsights.com.au.

Currency of Research

The recommendations made in a Sandstone Insights Research report are current as of the publication date. If you are reading a report materially after publication, it is likely that circumstances will have changed and at least some aspects of the analysis may no longer hold.

Access and Use

Any access to or use of Sandstone Insights Research is subject to the Terms of Use. By accessing or using Sandstone Insights Research you hereby agree to be bound by our Terms and Conditions and hereby liable for any monies due in payment of accessing this service. In addition you consent to us collecting and using your personal data (including cookies) in accordance with MST Privacy Policy, including for the purpose of a) setting your preferences and b) collecting readership data so MST may deliver an improved and personalised service to you. If you do not agree to MST Terms of Use and/or if you do not wish to consent to MST use of your personal data, please do not access this service.

Equities Research Methodology

Please click here for information about MST equities research methodology.