Many in retirement are travelling comfortably, with three key factors contributing to their happiness – good physical and mental health and enough money to enjoy life.
Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
Private health system’s woes take toll on Ramsay share price
The private health care system is struggling and Ramsay Health Care (ASX:RHC), an Australian multinational healthcare provider and hospital network, has not been immune, with its share price dipping 20.4 per cent over the past year to close at $38.84 on Tuesday.
A weaker share price was despite the 2024 financial year to June 30 seeing a 9.4 per cent rise in revenue to $16.8 billion and an after-tax profit of $270.6 million – a modest 2.7 per cent dip compared with the previous corresponding period.
Shareholders were not neglected, enjoying a fully franked, full-year dividend of 80 cents a share, up 6.7 per cent from the previous year – a strong indicator of management’s confidence in future earnings.
In 2025, Ramsay’s focus on strategic investments is expected to deliver incremental value. With $286 million allocated to expanding treatment capacity through greenfield and brownfield projects in 2024, Ramsay opened flagship facilities such as the Northern Private Hospital in Melbourne and the Glendon Wood Hospital in the UK.
These investments are critical as they cater to the growing demand for healthcare services in high-growth regions.
Natalie Davis (pictured), who took the CEO and managing director role on October 1 after heading Woolworths’ supermarkets division, expects growth from continuing operations as patient activity increases and productivity improvements take hold.
“Shareholders can anticipate sustained dividend payouts supported by a solid balance sheet and disciplined capital management. Moreover, our investments in technology, clinical excellence and new facilities are poised to deliver incremental returns over the medium to long term.”
But none of this optimism can hide the fact that the private health care system is in crisis. A recent report by the Australian Private Hospitals Association (APHA), titled Private hospital viability: Immediate response to crisis, concluded that the sector was experiencing significant threats to viability, sustainability and investment appeal.
“If the trends illustrated in this paper continue, they will have a greater adverse impact on private hospitals and force the sector to write off capacity to serve privately insured patients. It may become unviable for many hospitals to continue operation.
“The significance, to the healthcare system in Australia, of such loss of capacity cannot be overstated. Patient access and quality in healthcare is central to our case for increased funding and support.”
The APHA has a vested interest. It could be overstating its case. But the fact the private hospitals recently went cap in hand to Canberra to request $1.3 billion in emergency funding suggests it’s an industry – the more than 600 private hospitals account for 70 per cent of elective surgery – that’s haemorrhaging.
That’s the macro health environment for Ramsay. On the corporate front, fund managers have gone on the record demanding it discards its offshore assets and focuses on its Australian operations, a request that the board and senior management have rejected – to date. At the very least, they want Ramsay’s 52.8 per cent stake in the French private hospital group Ramsay Sante offloaded.
For years, the market has been told about the structural tailwinds that private health care enjoys – and how this benefit companies such as Ramsay.
An ageing population, rising prevalence of chronic diseases, and increased demand for mental health services are driving growth in healthcare consumption globally. Ramsay’s robust network of more than 530 locations, spanning eight countries, places it at the forefront of addressing these needs.
Moreover, the company’s ongoing push into adjacent services such as primary care clinics, allied health and diagnostics diversifies its revenue streams while enhancing patient pathways. This integrated care model not only improves patient outcomes but also creates cross-selling opportunities that could boost shareholder returns.
But none of this is impressing shareholders. Until the industry is on a firmer financial footing, Ramsay can expect its share price to suffer – irrespective of how well it delivers its health services.
