Ramsay (ASX:RHC) share price gains as earnings 'severely impacted' by COVID

Here's how Ramsay performed during over the first half.

| More on:
doctor looks out window resting head in hand

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Ramsay share price opened 2.5% lower at $62.90 this morning before recovering to trade in the green
  • The stock's wobble followed the release of the company's earnings for the first half of financial year 2022
  • Over the 6-month period, Ramsay's profits slipped 29% and its Australian business was hit with $107 million of COVID-related costs

The Ramsay Health Care Limited (ASX: RHC) share price is gaining after the release of the company's results for the first half of financial year 2022.

At the time of writing, the Ramsay share price is $64.94, 0.59% higher than its previous close.

Ramsay share price rises despite profits slumping 29%

  • Revenue of $6.68 billion – 1.2% higher than that of the first half of financial year 2021
  • Earnings before interest and tax (EBIT) of $489.2 million – 16.2% lower
  • Statutory profit of $158.9 million – down 29.7%
  • Earnings per share (EPS) of 67.7 cents – a 30.1% fall on that of the prior comparable period
  • 48.5 cent fully franked interim dividend declared ­– flat with the previous interim dividend

The first half was a rough period for Ramsay Health Care as COVID-19 outbreaks hampered its business.

Its lower profit reflects the impact of movement, isolation, and surgical restrictions.

As a result, the company believes its Australian business fronted $107 million of extra costs.

Additionally, non-recurring costs brought a $34.7 million loss last half, compared to a positive contribution of $43.4 million in the prior comparable period.

However, not including non-recurring items, the company's profits before tax ended just 1.3% lower than the prior first half.

In the Asia Pacific region, Ramsay's revenue increased 0.5% to $2.73 billion while its EBIT fell 5.9% to $285.4 million.

It was hit harder in the United Kingdom. There, the company's revenue increased 6.7% to $512.9 million but its EBIT tumbled 173% to a loss of $35.6 million.

In Europe, the company's revenue grew 2.8% to around $3.23 billion while its EBIT stayed above water at $239.4 million – a 3.3% increase.

It also put $91.1 million towards its Australian investment pipeline last half. It completed $164.3 million worth of projects including 136 beds, 3 theatres, and 5 consulting suites.

What else happened during the half?

The company announced its acquisition of United Kingdom-based hospital and care home operator Elysium Healthcare last half, though it was completed in January.

The acquisition cost it around $1.4 billion. The Ramsay share price fell 0.9% on the news.

Though, its purchase of Elysium wasn't the only acquisition talk from the United Kingdom.

In July, Spire Healthcare shareholders voted against Ramsay's proposed roughly-$1.9 billion takeover.

Despite the disappointing news, the Ramsay share price gained 0.6% on the back of failed acquisition.

What did management say?

Ramsay CEO & Managing Director Craig McNally commented on the company's first half results, saying:

Our [financial year 2022] interim result has been severely impacted by further waves of COVID which have impeded surgical activity, increased costs, in particular staffing costs due to isolation orders, and resulted in lower non-surgical activity due to movement restrictions. We have continued to provide our facilities and services to governments in our regions to address the impact of the pandemic on the public system and this has been, in Australia in particular, at a significant cost to the business.

Despite the complex operating environment we have remained focused on pursuing our strategic vision, investing in growing, modernising and leveraging our world class hospital network and moving purposely into new and adjacent services.

What's next?

The remainder of financial year 2022 might be tough for Ramsay, but it's expecting better things for the future.

Business activitity over the second half is expected to stay volatile while costs are predicted to remain high. At the same time, COVID-19's spread and staff vacancies will likely impact activity levels.

The company believes January brought $48 million of additional costs to its Australian business due to the Omicron outbreak.

Costs for additional staffing and PPE due to the pandemic are predicted to begin to drop over the coming months but remain in place in financial year 2023.

Additionally, a backlog of elective surgeries and services is expected to benefit the business.

In Australia, a ban on elective surgeries in Victoria and New South Wales over January and part of February will likely impact the company's full year results. Similar restrictions are set to be put in place in Western Australia next month.

Cancellations due to the availability of staff, doctors, and patients might dampen the company's United Kingdom business in the second half.

The company is continuing to focus on its investment in brownfield expansion and the reconfiguration of its existing facilities.

It expects total spend on its Australian development pipeline to be between $190 million and $230 million in financial year 2022.

Additionally, its full year results will include 5 months of contribution from Elysium.

Ramsay Health Care share price snapshot

2022 so far has been rough on the Ramsay share price.

It has fallen 9% since the start of this year. Though, it's still 2% higher than it was this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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.

More on Earnings Results

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Earnings Results

ASX 200 stock jumps 10% on strong FY24 results

How did this KFC restaurant operator perform in FY 2024?

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin, waiting in anticipation.
Consumer Staples & Discretionary Shares

Guess which ASX 200 stock just slashed its final dividend by 23%

This retailer had a tough time during the 12 months. Here's how it performed.

Read more »

Man jumps for joy in front of a background of a rising stocks graphic.
Earnings Results

Catapult shines: 20% sales growth propels ASX tech stock to new 52-week high

A strong annual result from this tech player has caught investor attention.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Earnings Results

Xero share price leaps 8% on staggering earnings upheaval

A major turnaround in profitability is sending investors into a frenzy over Xero shares today.

Read more »

a construction worker sits pensively at his desk with his arm propping up his chin as he looks at his laptop computer while wearing a hard hat and visibility vest in a bunker style construction shed.
Materials Shares

Which ASX 200 stock just plunged 12% despite record full-year earnings?

It looks like an impressive report card but UBS doesn't like the FY25 guidance.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Earnings Results

ASX 200 tech stock lifts off on another record-setting half-year profit

Investors are bidding up the ASX 200 tech company following its half-year results.

Read more »

increasing rural asx share price represented by happy looking sheep
Earnings Results

Why is this ASX All Ords stock staying strong as profits crash 76%

How is this company's share price marching higher after mowing down more than three-quarters of its profits compared to a…

Read more »

Two men sit side by side on a couch with video game controls in their hands and expressive looks on their faces as they react to the action in front of them in a home setting.
Earnings Results

Guess which ASX 200 stock is surging 11% on an 'outstanding' result

This ASX gaming giant just posted a 17% jump in profits, and its shareholders are basking in the glory.

Read more »