Shares in the country’s largest private hospital operator, Ramsay Health Care (RHC) jumped to new all time highs yesterday after it boosted interim dividend and upgraded its earnings guidance for the 2014 financial year .
That was after it revealed a 14% rise in net profit to $157.8 million.
Interim dividend was boosted 17% to 34c a share (fully franked) from the 29c a share paid in the previous corresponding period. The dividend will be paid on March 26.
The shares jumped more than 6%, to a new high of $47.50 at the close.
That took the gain in Ramsay shares to more than 53% over the past 12 months, compared to an 8% rise for the ASX200.
RHC 1Y – Ramsay Healthcare boosts outlook, dividends, shares hit record
The company’s underlying profit, which removes a non-cash portion of a rent expense for its hospitals in the UK (and is probably a better guide), increased by nearly 16% to $171.6 million in the six months ended December 31. This result was in line with market estimates of $172 million.
Ramsay’s revenue rose 14% in the six months to $2.4 billion in the half, which was also in line with expectations.
The company increased its guidance for core net profit growth over the 2014 financial year to 16% – 18%, from the previous range of 12% to 14%.
Ramsay managing director Chris Rex said in the statement the strong result was driven by demand for high quality hospitals and service, as well as effective management and well executed expansions of existing hospitals.
"Newly completed projects are already contributing to earnings and we are continuing to receive upside from projects completed in prior years," Mr Rex said.
“Leveraging off the quality and depth of the Group’s hospital portfolio in Australia, the Board approved a further $70 million in capacity expansions at its Australian facilities during the six months.
“Strategically, the six months has been successful in terms of executing our global expansion strategy.”
During the half year, Ramsay added 33 international facilities to its portfolio with the acquisition of three hospitals in Malaysia in a joint venture with Sime Darby Berhad completed in July 2013 and the purchase of 30 psychiatric facilities in France which completed in December 2013.
“We have gained significant scale in France with the addition of these new hospitals to our portfolio and, with Sime Darby, we have a solid platform to expand further throughout Asia,” he said in yesterday’s statement.
Ramsay said its Australian and Asian business achieved revenue growth of 10.2% and EBIT growth of 13.2% during the period. "Operating margins for the Australian business continue to improve," the company told the ASX.
Ramsay’s UK business continued to perform well during the six months, with EBITDA rising 4.4% to £23.0 million. And in France, Ramsay Santé performed well with EBITDA increasing by 37.3% to €17.3 million due to the continued improvement of the existing operations, coupled with the contribution from the Clinique de l’Union acquisition (acquired in June 2013).
The company said that during the half, Ramsay took the opportunity to access favourable debt markets and "is pleased to have executed an extension of the existing debt facilities to 1 July 2017 and 1 May 2019 with improved pricing and terms".
"Ramsay continues to have significant debt capacity headroom to fund future acquisitions, its continuing brownfield capacity expansion programme and ongoing working capital needs," Ramsay said.
There’s one important takeaway from this very solid result – Paul Ramsay, the major shareholder and chairman, also has a media company called Prime, in which Seven West Media has a substantial shareholding.
But consider this, Ramsay’s half year revenue of $2.4 billion is greater than the advertising revenue for the free to air TV industry for the same period of $2.07 billion.
TV industry revenue resumed growing in the six months to December, Ramsay’s revenues from Australia and Europe are surging in comparison.
The stronger revenue growth for the healthcare sector should leave a message of the extent of the decline in the media sector.
Ramsay’s share price has exploded in the past year whereas Prime’s price has fallen from more than $1.20 to 94.5c yesterday.
But at least the FTA TV sector is seeing growing revenue, unlike the print sector where it’s still falling.
