Ramsay Health Care Limited (ASX: RHC) has just reported its half year result to December 2018, is the share price a buy?
Ramsay is the largest private hospital operator in Australia, Scandinavia and France. It also has a major presence in the UK. It has been operating for more than 50 years, having been started by Paul Ramsay AO in 1964. It has 480 facilities across 11 countries with 77,000 staff, annually treating around 8.5 million patients.
Here’s What Ramsay Reported
Ramsay recently acquired European private healthcare business ‘Capio’. Including Capio, total revenue and EBITDA grew by 14.9% and 9.8% respectively to $5.1 billion and $728.6 million (click here to learn what EBITDA means).
Excluding Capio, revenue and EBITDA increased by 6.1% and 7.2%.
Core net profit including Capio grew 1% to $290.8 million, excluding Capio core net profit went up 1.8% to $293.2 million. Statutory net profit grew 9.6% to $270.1 million. According to Bell Potter, analysts were expecting a net profit of $280 million.
The key Australian segment grew revenue by 4.8% to $2.6 billion and EBITDA went up by 5.7% to $484.6 million. Ramsay’s share of the Asian joint venture’s profit grew by 29.4% to $11 million.
However, in the UK revenue only grew by 1.6% to £209.6 million and EBITDAR fell 9.2% to £44.8 million.
Ramsay Dividend and Balance Sheet
The Ramsay Board decided to increase the interim dividend by 4.3% to 60 cents per share.
After the Capio acquisition the Ramsay balance sheet is now has a leverage ratio of 3.2x, the highest it has been since the Capio UK acquisition over a decade ago.
Ramsay Management Comments
Managing Director Craig McNally said: “The scale, diversity and quality of our portfolio across geographies and in terms of mix of public and private provision, as well as our deep and experienced leadership, remains unique sources of differentiation for our business.”
Is Ramsay a buy?
Mr NcNally outlined that although the hospital business expects substantial synergies and opportunities with Capio, it’s expected to be dilutive (reduce) earnings per share (EPS) in FY19.
Despite that, Ramsay still expects Core EPS to grow up to 2%, including the Capio effects. However, Brexit may pose some challenges although a positive tariff improvement is expected in the country.
I do believe that Ramsay is a high quality business with useful ageing population tailwinds. It’s a pretty good defensive business, but I’m not sure if the current growth rate makes today’s share price worth a buy.
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