Ramsay Health Care (RHC) shares fell more than 9% yesterday in early trading after the company surprised the market with the news that CEO, Chris Rex plans to retire this year after nine years in the top job.
The news overshadowed another record quarterly profit from Ramsay, up 13.8% to $255.9 million. Revenue for the December half rose 3.4% to $4.3 billion and core earnings before interest, tax, depreciation and amortisation jumped 7% to $648.9 million.
Ramsay will pay an interim dividend of 53 cents a share, up 12.8%.
Mr Rex said the company’s strong results in the first half of 2017 were driven by the global demand for healthcare.
This growth in demand comes from the combination of an ageing and growing population, clinical innovation and increased customer expectations.
“Our strategically located, well-diversified business in Australia continues to experience strong admissions growth, which underpins the need for ongoing brownfield investment,” Mr Rex said yesterday.
“In our international market, both the UK and France also experienced strong volume growth with Ramsay UK recording its highest month ever for NHS admissions in November 2016.”
Mr Rex said the company continued to look for opportunities for hospitals in new and existing markets and its franchise retail pharmacy network (the major expansion plan for Australia) would position the company to provide integrated care services to patients.
But investors were not interested in that – they were more worried about the lack of any obvious successor at Ramsay to Mr Rex.
But the company said it had a “comprehensive” CEO succession process under way. Mr Rex would continue to lead the company in the meantime.
Ramsay chairman Michael Siddle paid tribute to Mr Rex, saying he had been instrumental to the company’s success.
"During his time as CEO, Ramsay has become one of the largest health care companies in the world, operating 220 hospitals and facilities across six countries, and is a market leader in France as well as Australia," he said in a statement to the ASX on Thursday morning.
"He will leave us with a strong and robust company with an experienced and proven management team." Investor nerves were calmed somewhat by comments in yesterday’s statement from Ramsay such as “The board and Mr Rex are committed to implementing an orderly transition to Mr Rex’s successor,” the statement said.
“Mr Rex has confirmed that he will continue to lead the company until such time as this is achieved."
And they were also helped by the reaffirmation on Thursday of the company’s four pronged strategy.
The company wants to continue to deliver organic growth, brownfield hospital capacity expansion, collaboration with private and public healthcare partners and explore strategic acquisitions in existing and new markets. There’s here in Australia and overseas where Mr Rex and the late Paul Ramsay the founder) saw a lot of growth.
