Ramsay resumes dividends as it signals return to normalcy from Covid-19

Australia’s biggest private hospital group is confident the world is beginning to return to normal post COVID-19.

Australia’s biggest private hospital group, Ramsay Health Care, will resume paying dividends as a sign of confidence the post-coronavirus world is beginning to emerge.

Australia’s biggest private hospital group, Ramsay Health Care, will resume paying dividends as a sign of confidence the post-coronavirus world is beginning to emerge.

Despite net profit sinking 12.5 per cent to $226m in the six months to December 31, chief executive Craig McNally said Ramsay’s hospitals were functioning at “100 per cent unrestricted capacity” and cashflow was strong enough to reward investors again.

“We had a cautious optimism about what the foreseeable future in Australia looks like,” Mr McNally told The Australian.

“We paid the dividend because we are confident about the cash flow and balance sheet position we are in.

“Surgical backlogs and latent demand for non-surgical services are expected to drive volumes as the general public’s comfort with the hospital environment improves. Ramsay expects to assist with relieving pressure on public wait lists.”

Investors welcomed Mr McNally’s comments, with Ramsay’s share price soaring 7.7 per cent to $68.18 compared with a 0.8 per cent gain across the broader sharemarket.

Government-enforced elective surgery bans hit the group’s first half earnings, with overall revenue falling 6.6 per cent to $5.92bn for the half year.

The Morrison government agreed to underwrite Ramsay’s Australian hospitals in exchange for agreeing to treat public patients to free up the public system, but that deal was on a cost recovery basis only.

However, fulfilling the backlog of surgeries is expected to buoy Ramsay in the second half, also though Mr McNally gave no specific guidance.

And as the world begins to return to normal and government coronavirus support tapers, Mr McNally said acquisition opportunities will begin to emerge.

Last April, Ramsay launched a $1.4bn capital raising to create a war chest aimed at accelerating its out-of-hospital growth strategy and become a fully integrated healthcare company.

“We continually scan all the markets for things that we think are strategic opportunities. The speed at which some assets may have come to market have slowed because of COVID-19, nit accelerated, and that’s because of the support mechanisms that have been put in place across different industries.

“Medium to long term, we are still very positive about growth — not just organic and by developing business but by acquisition as well.”

Some critics of the federal government’s JobKeeper wage subsidy say it has created zombie companies, propping up businesses that were struggling before the pandemic struck. This has sparked predictions that a raft of collapses will begin after the taxpayer-funded support ends on March 28.

“You have got to think about JobKeeper coming off in the context of the country getting back to normal,” Mr McNally said.

“If JobKeeper had come off when activity couldn’t increase and was restricted, then there would have been a much more significant downside risk. But it’s coming off in the context of getting back to normal or whatever the new normal is.

“I don’t expect people to fall off a cliff but I think there will be continued pressure on some parts of the sector.”

Further supporting the return to some kind of normalcy, is the Morrison government beginning its COVID-19 immunisation program this week, with frontline health workers among the first in the queue.

Mr McNally said Ramsay staff in Australia have begun being vaccinated against, while almost all of the group’s UKL staff had received the jab.

“The rollout will continue in Australia and we will be part of that. Overseas in the UK, they’ve done a really good job and got off to a flying start on vaccination. 96 per cent of our staff in the UK have been vaccinated.”

Despite the renewed confidence emerging as COVID-19 vaccinations finally begin being rolled out, Mr McNally said he could not provide full-year guidance for the group.

“While the rollout of the vaccine gives us optimism that some normalcy in operating conditions and capacity will return, in light of the risks associated with further spikes in COVID-19 cases, and the flow on impact to our facilities, we are not in a position to provide financial year 2021 guidance.

“We believe we are well positioned into FY22 to take on additional volume associated with surgical backlogs and latent demand for non-surgical services and we will continue to look for opportunities to invest in our existing platform to create the leading ecosystem for patient-centric integrated care ”

Ramsay will pay an interim dividend of 48.5c, fully franked, on March 31. This compares with a payout of 62.5c in the previous corresponding period.