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Opinion: Europe remains a problem for Ramsay

Yesterday’s stock price fall for Ramsay Health Care was not entirely unexpected. Shares in Australia’s largest private hospital operator dropped 5.75% to A$63.90 (US$49.81) after it revealed distinctly unimpressive first half figures.

Profits were down 3.7% to A$246.5 million.

Managing director Craig McNally admitted “ongoing challenges in the operating environment in Europe”. He wasn’t wrong and nor is the outlook expected to get better any time soon.

At the heart of the problem is Ramsay Générale de Santé, its French business, acquired in October 2014. Revenues fell 1.1% to €1.1 billion (US$1.35 billion) and EBITDAR was down 5.8% to €194.1 million.

“We are focused on achieving efficiencies in these businesses and, to this end, we are investing in a major transformation project in our French operations that will centralise non-core hospital resources and distinguish this business for the long term,” he said. Non-core hospital functions such as finance, administration and HR, will be relocated to a separate shared service centre in the outer suburbs of Paris

All good news, but this is not going to start until the second half and is going to take three years. A sign of how disruptive this is going to be is that Ramsay has provided for a restructuring charge of €43.7 million.

Although its presence is smaller, business is not much better in the UK. British revenues fell 4.8% to £206.2 million (US$286.7 million) with EBITDAR down 4.6% to £49.4 million thanks to NHS management demand strategies.

The issue for investors is that there are no discernable upsides in the short term. Pollyannas could point to Australian revenues. Domestic turnover was indeed up 4.3% to A$2.5 billion with a pleasing 9.1% jump in corresponding EBIT, but proposed caps on health insurance premia from the opposition Labor party could soon bring that growth to a shuddering halt.

Demographic trends and an aging population still support the Ramsay business case, but the next couple of years are going to be anything other than easy.

Posted on: 01/03/2018 UTC+08:00


News

StarMed@Farrer Square, the subsidiary of SGX-listed private healthcare provider Health Management International, has agreed to buy additional units in Farrer Square for S$36.7 million (US$26.7 million).
Orthopaedic specialists Asian Healthcare Specialists (AHS) has signed an investment agreement with Vanda 1 Investments, which is managed and controlled by Temasek Holdings unit Heliconia Capital Management.
Medical technology company Medmain has announced the alpha testing of its ground-breaking, pathology diagnostic software: PidPort. This was originally developed in Japan to enable precise and incredibly fast diagnosis of human body pathologies of all types, with most diagnoses completed in less than one minute. Medmain recently began testing the software in hospital sites in Japan, Thailand and Estonia.
Medical diagnostic imaging services provider Capitol Health has acquired a further two clinics in South West WA, which trade under the name West Coast Radiology and service the high-growth area surrounding Eaton (close to Bunbury) and Busselton.
China's Ping An Good Doctor (PAGD) announced its cooperation with more than 100 First-Class Hospitals at Grade III in China, including the 303th Hospital of Chinese People's Liberation Army, Qingdao Eye Hospital, the First Affiliated Hospital of Jinan University and the Third Affiliated Hospital of Southern Medical University, to build comprehensive "smart hospitals". At present, Ping An Good Doctor covers more than 1 million outpatients per day, effectively reducing the burden on hospitals, doctors, patients and the government.
Global alternative asset manager The Carlyle Group together with Meinian Onehealth Healthcare Holdings has invested in and become the single largest shareholder of Adicon, one of the largest independent clinical laboratory companies in China.
RepliCel Life Sciences, a company developing next-generation technologies in aesthetics and orthopaedics, has raised C$5.1 million (US$3.8 million) from YOFOTO (China) Health Industry.
China's Ping An Good Doctor (PAGD) has announced a strategic partnership with Zhongxin Pharmaceuticals. The two parties will build an online cardiovascular disease management centre in China.



Analysis

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