Ramsay Health Care: 1H beat - despite challenges, momentum to continue

About the author:

Dr Derek Jellinek
Author name:
By Dr Derek Jellinek
Job title:
Senior Analyst
Date posted:
24 February 2023, 7:00 AM
Sectors Covered:

  • Ramsay Health Care's (ASX:RHC) 1H23 results beat, with revenue gains across all regions on increased surgical activity, although profit was aided by NRIs, acquisitions and government payments.
  • While COVID-related headwinds are subsiding, labour shortages and inflationary pressures remain, dampening a full recovery in margins and underlying profitability.
  • We continue to view a gradual uplift in volumes and improving leverage, given improved payor terms, better recruitment/retention, likely French Government revenue guarantee extension (until 31-Dec-23), and additional capacity gains.
  • We have adjusted our FY23-25 earnings higher, with our price target increasing to (login to view). Add.


1HFY23 results were ahead of expectations, with NPAT A$194m (+16%; Morgans A$168m), on revenue A$7,381m (+10%; +14% in cc; Morgans A$168m), albeit supported by EU government payments (A$227m vs A$203m), NRIs (A$34.4m, vs -A$33m) and acquisitions (A$560m).

Adjusted EBIT (ex A$56.3m NRIs) fell 6% to A$493m and margins contracted (151bp, 6.7%), as gains in Australia, Sime Darby and UK (acute hospitals), was offset by higher labour costs/shortages and slower recovery in activity levels in EU and UK mental health business Elysium (6mo contribution).

OCF grew 146% to A$442m, on improved earnings and WC changes, with the fully franked interim dividend up 3% (51c).

No quantitative FY23 guidance was given, with management expecting a “gradual recovery” through FY23 and more “normalised” conditions from FY24 onwards.


APAC - (revenue +4% A$2.8bn; EBIT +8%, A$307m; margin +40bp, 10.8%); improved activity driven by elective day surgery (+3.7% on FY22), as COVID cases declined (costs: 1Q A$57m, 2Q immaterial); non-surgical admissions remain “patchy” (-1.5% on FY22); successful negotiations with numerous private payors more reflective of inflationary environment; staff shortages remain, but nursing vacancies are improving (-20-30% since Mar-22, but still above pre-COVID levels) and recruitment/retention focus; strong development pipeline.

UK- (acute: revenue +3%, A$528m; EBIT +179%, A$28m; margin 5.3%); swung back into profit on an improving operating environment and less COVID disruption (1Q A$10m; 2Q immaterial); impacted by inflation (40 year highs); benefits expected from private patient growth; Elysium (revenue A$382m; EBIT A$4m, margin 1%) was impacted by staffing shortages; benefits expected from staffing and cost focused programs (Jan appoints up “significantly”; occupancy improving) along with strong mental health services demand.

EU - (cc revenue +10%, A$3.4bn; EBIT -11%, A$211m; margins -80bp, 6.2%); surgical/non-surgical activity up in France and the Nordics; Government support up (+12%; A$227m), but could not offset inflationary pressures and increased staff costs; range of initiatives to address staff shortages (vacancy down 69% since Jan-22); the French Government is likely to extend the revenue guarantee (from 1 Jan-23 to 31 Dec-23), which should provide stability to the acute hospital business.

Forecast and valuation update

FY23-25 underlying earnings are adjusted higher, 6%/4.4%/4.3%, respectively, reflective of growing volumes, and gradually improving margins.

Our blended DCF, PE, EV/EBITDA price target moves to (login to view).

Investment view

While the operating environment remains unpredictable and dynamic, with doctor/patient behaviour, inflation and workforce issues all defining the earnings profile, higher activity and improving costs are suggestive of growing momentum.

Price catalysts

  • FY23 results 24-Aug-23.


  • PHI vagaries.
  • COVID-19 impacts.
  • Weaker volumes.
  • Margin compression.
  • Regulatory changes.
  • Slower Capio integration.

Find out more

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You can find further detailed analysis of company results this reporting season by browsing our reporting season tag, and view a full list of upcoming results on our Reporting Season Calendar.

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