Ramsay share price jumps on 22% profit boost 

Its earnings more than doubled last quarter as COVID impacts abated.

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Key points

  • The Ramsay share price is lifting 3.2% right now to trade at $68.02
  • It comes as the impacts of COVID on the company's business eased, allowing it to post $7.4 billion of revenue for the first half
  • Its United Kingdom leg outperformed, with earnings nearly tripling to $32.1 million

The Ramsay Health Care Ltd (ASX: RHC) share price is gaining this morning following the release of the company's first-half earnings.

Shares in the S&P/ASX 200 Index (ASX: XJO) private healthcare provider are up 3.2%, trading at $68.02.

Ramsay share price lifts on boosted dividend

  • $194.4 million statutory net profit after minority interests – up 22.3% on that of the prior comparative period
  • $549.6 million of earnings before interest and tax (EBIT) – a 12.3% jump
  • $7.38 billion of total revenue – a 10.4% lift
  • $441.6 million of operating cash flow – a 179.4% increase
  • Earnings per share (EPS) came to 82.9 cents – up 22.5%
  • 50 cent per share fully franked interim dividend declared – a 3% year-on-year improvement

Ramsay's business recovered last half as COVID-19 impacts abated, allowing for an increase in surgical activities.

The direct impact of the pandemic was immaterial in the second quarter, while the company's EBIT more than doubled quarter-on-quarter over the three months ended December.

What else happened last half?

Ramsay's business in the United Kingdom led to its growth last half. EBIT from the region rocketed 190% to $32.1 million amid roaring inflation.

Meanwhile, its EBIT slipped in Europe, falling 12.1% to $210.5 million as inflation and higher staff costs took their toll.

Back home, the company's Australian leg brought in $295 million of EBIT – a 6.3% improvement while that of its Asian joint venture reached $105 million – up 25.1% year-on-year.

What did management say?

Ramsay CEO and managing director Craig McNally commented on the results driving the company's share price today, saying:

The result reflects an increase in underlying surgical activity levels in all regions, non-surgical activity in some markets has been slower to recover and some regions have seen COVID related patient activity, such as testing, decline as COVID cases reduce and government-imposed requirements are removed.

We expect the underlying earnings momentum in the business will continue in [second half], albeit the path out of the COVID environment is not expected to be smooth.

We continue to expect a gradual recovery in earnings through FY23 and a more normalised environment in FY24.

What's next?

Ramsay expects underlying earnings growth for the rest of financial year 2023 to benefit from the extra capacity created in recent years, contributions from Elysium, and recent acquisitions in Europe. Though, labour force shortages continue to hamper its business.

It expects its dividend payout ratio to be between 60% to 70% of statutory net profit as the operating environment normalises.

Ramsay share price snapshot

The Ramsay share price has been performing well lately. It's gained 2.4% since the start of 2023 and 2% since this time last year.

For comparison, the ASX 200 has lifted 5% year to date and 1% over the last 12 months.

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 no position in any of the stocks mentioned. 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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