Ramsey Health Care Ltd (ASX: RHC) is a global health care company mainly operating private hospitals. Ramsay has 480 facilities across 11 countries, which makes them one of the largest hospital health care companies globally. Ramsay’s main markets are Australia, the United Kingdom and Continental Europe. Its market capitalisation is around A$13 billion.

What are the implications of COPVID-19 on Ramsay’s report?

The COVID-19 pandemic has resulted in the suspension of most elective surgery in each of Ramsay’s major operating geographies and led to an uncertain operating environment. In effect, the private hospitals are supporting public hospitals in managing the increase in hospital patients associated with COVID-19.

In Australia, non-urgent elective surgery ceased on 1 April 2020. Ramsay has entered into, or is negotiating, agreements with the various state and territory governments on the basis that these governments make monthly payments to Ramsay on a cost recovery basis. The effect of these arrangements is that profit cannot be generated during the period of these agreements.

In European countries with the exception of France, in broad terms, Ramsay and the various governments are entering arrangements similar to Australia. In the case of France, the Government is providing approximately 85% of revenue from the previous corresponding period in calendar year 2019 (for acute services).

Any easing of restrictions on elective surgery is expected to be gradual and will vary by region. In Australia, the National Cabinet announced on 22 April 2020 an easing of restrictions on certain elective surgery in public and private hospitals in Australia from 27 April 2020. The control of CPOVID-19 in Australia is well ahead of European countries so any easing of restrictions may be some time away.

What are Ramsay’s plans to address the current operating environment?

On 23 April 2020, Ramsay announced plans to raise A$1,200 million in new equity via an underwritten institutional placement and up to an additional A$200 million via a non-underwritten share purchase plan. Placement will be conducted at a price of A$56.00 per share which represents a 12.9% discount to the last closing price of A$64.29 on 21 April 2020. The institutional placement will result in approximately 21.4 million new shares being issued, which represents approximately 10.6% of Ramsay’s existing issued ordinary shares. The new shares issued under the institutional placement will rank equally with existing Ramsay ordinary shares.

Ramsay has also decided to temporarily suspend dividend payments. No indication is provided when these payments may resume. Further, Ramsay has provided no earnings guidance for the second half of FY20. Finally, Ramsay indicated that it has received consents to amend or waive key banking covenants its lenders.

Ramsay expects that these initiatives will enable it to strengthen its balance sheet and increase financial flexibility in an uncertain operating environment and position Ramsay for future growth opportunities.


 

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April 22, 2020