The Ramsay (ASX:RHC) share price is sliding on third quarter update

The Ramsay Health Care Ltd (ASX: RHC) share price edges higher on a credit rating update and solid third quarter results

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The Ramsay Health Care Ltd (ASX: RHC) share price is falling this morning. This comes after the company announced key new information and updates within its presentation at the Macquarie Australia Investment Conference. 

At the time of writing, the Ramsay Health Care share price is trading for $66.62. down 0.7%.

What might drive the Ramsay share price 

Credit rating update

Credit rating agency Fitch has accredited Ramsay with an investment-grade credit rating of BBB (stable). 

Ramsay CFO Martyn Roberts said in response to the company’s first international credit rating: 

Achieving this credit rating is a positive first step in our program to diversify Ramsay’s sources of debt and extend and stagger the tenure.

Ramsay Australia update 

Ramsay Australia is the largest private hospital operator in Australia with 72 hospitals and an estimated market share of 27%. Additionally, Ramsay Australia contributed approximately 46% of the Group’s revenue in 1H21. 

Ramsay’s Australia division reported a 4.6% increase in total patient revenue for 3Q21. This was driven by a broad increase in services. In particular, this growth included surgical and non-surgical admissions, psych and rehab admissions, maternity volumes, and activity levels.

The update also noted that average costs per month associated with operating in a COVID environment are gradually reducing. However, the company is working through the higher cost of inventory acquired at the height of COVID. Furthermore, it will continue to be impacted by inflated costs for some items in the current environment. 

Ramsay UK update 

Ramsay UK experienced an 82% decline in revenues in 1H21 to $86 million from $493 million in 1H20. This decrease was due to capacity restrictions. From 1 January 2021 to 31 March, Ramsay has operated under a new volume-based agreement with the National Health Service England (NHS). This agreement utilised the capacity of 14 Ramsay hospitals during 3Q21. 

Ramsay continued to treat non-COVID NHS priority cases. However, continued strict lockdown conditions resulted in a 6.2% decline in admissions on the prior corresponding period. 

From a year-to-date perspective to 31 March 2021, admissions are tracking at approximately 83% of the prior corresponding period (pcp). The relaxation of lockdown restrictions in recent weeks has seen a recovery in the pipeline of private and self-funded patients. 

Ramsay Europe update 

Ramsay Europe is the second-largest private care provider in Europe. The company operates specialist clinics and primary care units in approximately 350 locations across five countries. Ramsay Europe contributed approximately 52.5% of the Group’s revenue in 1H21. 

In mid-March, the French Government started to restrict elective surgery capacity. The company reveals that the average capacity across all French facilities during March/April was 40%. As a result of elective surgery restrictions and COVID lockdowns, admissions for 3Q21 was announced to be “materially below” the pcp. 

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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