Is healthcare an investment safe haven in these days of Covid and its Delta variant?
Ramsay Health Care investors will take a final dividend of $1.03 for the year, meaning a full-year payout of $1.51, lifting shareholder rewards back to pre-COVID levels.
But if the takeover of UK private hospital operator Spire Healthcare for more than $1 billion had not been rejected by holders of the target company, would Ramsay have been as generous with its own shareholders?
Mentions of the rejection and its role in the sharp lift in dividend were few and far between in Thursday’s announcement and commentary from the market.
Ramsay reported profits up 59% on last year to $449 million for the year to June.
For the year June, Ramsay reported a 3.9% increase in revenue to $12.435.5 billion, made up of a 7.8% increase in Asia Pacific revenue, a 6.9% lift in European revenue, but a 21.3% fall in UK revenue.
Some of the latter’s decline was offset by revenue from government agreements.
This includes payments for the use of its facilities and services to assist with COVID outbreaks. Ramsay also received payments in some regions for the additional costs associated with operating in a COVID environment.
The company reported a 29.1% increase in earnings before interest and tax (EBIT) to $1.132.6 billion thanks to strong earnings growth across all three of its geographic segments.
Ramsay said its EBIT growth was driven by Asia-Pacific EBIT increasing 18.9% to $636 million, European EBIT jumping 38.3% to $403.8 million, and UK EBIT surging 83.4% to $92.8 million in FY 2021.
The jump was largely due to a bounce-back in admissions across the globe after the first waves of coronavirus.
The pandemic is still having a significant impact on the company, however, with the current round of snap lockdowns across the country hitting full-year earnings by about $83 million.
In Australia, the ongoing costs of COVID prevention will cost between $4 million and $5 million a month, the company said in Thursday’s statement to the ASX.
CEO Craig McNally believes coronavirus will continue to hit earnings into next year.
“Our FY22 results will be impacted by the ongoing global response to the COVID pandemic, including the effectiveness of global vaccination programs in reducing the number and severity of COVID cases,” he said.
While the company didn’t issue any guidance for the coming year, those comments about the continuing cost impact from Covid from the CEO should be seen as a tacit admission that earnings and revenues will be under pressure, the longer the lockdowns and disruptions continue.
Ramsay shares rose 1.7% to $67.78.
