Ramsay shares halted after earnings slashed and takeover letter lands

Is the healthcare provider about to update the market on the mega takeover offer from the KKR & Co consortium?

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Key points

  • Ramsay Health Care released its financial year 2022 results
  • Its shares were placed in a trading halt pending an announcement
  • COVID-19 lockdowns have hammered earnings, profit and dividends

Ramsay Health Care Limited (ASX: RHC) shares are in a trading halt on Friday morning after the company released its 2022 full-year financials.

While no official indication for the halt was given, Ramsay managing director and chief executive Craig McNally reportedly mentioned in an investor call that a letter had been received from the consortium led by KKR regarding its acquisition proposal.

What did the company report?

  • Revenue up 3.1% to $13.74 billion
  • Earnings before interest and tax down 21.3% to $891.3 million
  • Statutory profit down 39% to $274 million
  • Final dividend per share down 52.9% to 48.5 cents
  • Full-year dividend per share down 39.7% to 97 cents

What else happened in FY22?

Ramsay Health Care operates private hospitals and healthcare facilities, and saw its business plunge during COVID-19 lockdowns. Australia's two largest cities, Sydney and Melbourne, both spent many months during the 2022 financial year repressing elective procedures.

The other big piece of news impacting Ramsay during the year came from a private consortium led by KKR & Co, which proposed to acquire the business at $88 per share. That deal, which values Ramsay at $14.8 billion, is a 20% premium to the halted price on Friday morning.

What did management say?

McNally said:

FY22 proved again the resilience of Ramsay's people and business in the face of further severe disruption from COVID. I would like to thank our people and partners for continuing to work with us to support our patients, navigating the difficult operating environment while transitioning to the next phase of the pandemic.

What's next?

The company did not make any specific group-wide forecasts on revenue, earnings or profit.

McNally said:

We have maintained our focus on the group's medium to long term strategy continuing to invest to optimise our world class hospital network for future demand while entering into new and adjacent services. To support this we are investing in our digital and data road map, and have continued Ramsay's long standing commitment to research and clinical trials. These investments place Ramsay in a strong position within the sector to benefit from the growth in demand for healthcare services over the medium to long term.

The company's presentation stated:

In the near term, the industry continues to be under pressure from a high level of COVID cases in the community combined with the highly restrictive guidelines around the patient pathway together with the resultant impact on the availability of the workforce, impeding a recovery in volumes and productivity. 

Underlying earnings growth in FY23 will benefit from the additional capacity created over the last few years combined with full year contributions from Elysium and recent acquisitions in Europe. The focus will remain on driving the synergies, realising the growth opportunities and improving returns.

Ramsay Health Care share price snapshot

Ramsay shares were treading water before the KKR takeover proposal came along in April, still sitting 23.9% below their pre-COVID high.

The deal for $88 per share understandably put a rocket under the stock, although it has since settled back to $72.92, up 1.46% year to date.

After the latest update, Ramsay now hands out a dividend yield of 1.3%.

Motley Fool contributor Tony Yoo 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 Scott Phillips.

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