Ramsay Posts In-Line Results but Fiscal 2019 Outlook Guidance Disappoints; Shares Oversold

Narrow-moat Ramsay Health Care posted full-year results in line with recent guidance provided in June but outlined a softer fiscal 2019 than we forecast. Net profit of AUD 579.3 million on revenue of AUD 9.2 billion, up 6.8% and 5.4%, respectively, tracked our expectations. The final fully franked DPS of AUD 86.5 cents took total dividends for the year to AUD 1.44 per share, fully franked, representing an increase of 7% and equating to 51.5% payout of adjusted EPS. The key driver of the result was the Australian division, representing 54% of group revenue, which grew at a more subdued 5.5% on the prior corresponding period compared with historical averages of around 7%-8%. In contrast, the 12.1% improvement in EBITDA to AUD 896 million led to a divisional EBITDA margin of 18%, up 106 basis points, which is evidence of improved operational efficiencies.