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.
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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.
