Ramsay on track for 13-15% FY profit rise

February 23, 2012

The head of Australia's largest private hospitals operator, Ramsay Health Care, has attacked the federal government's plan to means test the private health insurance rebate.

The attack came as Ramsay on Thursday unveiled a 22 per cent rise in first half profit to $125.7 million and upgraded its full year net profit growth guidance to 13-15 per cent.

Christopher Rex said the "disappointing" means-test legislation, which passed parliament's lower house in early February, was poor policy.

He warned it could hurt the company's earnings, particularly if people pulled out of private health insurance or downgraded their cover - though he expected the immediate impact on Ramsay would be minimal.

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"The research undertaken into this issue proffers a range of possible outcomes. But, in all cases the immediate- to short-term impact on Ramsay is expected to be minimal," he said.

"Ramsay is concerned that, in the longer term, people affected by the legislation may choose to downgrade their cover which would have an adverse effect on the financial viability of the private health insurance industry and, therefore, it has the potential to impact the group in ensuing years.

"In Australia, the private hospital sector remains integral to the country's overall health system and, indeed, given the emerging theme of public-private partnerships, the role of the private sector could grow even further."

Despite the company's disappointment on the means test, it was upbeat about its full year earnings potential.

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Ramsay said it now expected its core net profit and earnings per share would rise by between 13 and 15 per cent in its 2011/12 financial year, barring unforseen circumstances.

It had previously flagged 10-12 per cent growth.

Ramsay's net profit for the six months to December 31, 2011, rose to $125.7 million, from $102.8 million in the previous corresponding period.

The result was driven by a strong performance by Ramsay's Australian hospitals, a ramp-up of brownfield developments, lower costs and improvements at its UK business.

Ramsay lifted its interim dividend 13 per cent to 25.5 cents, fully franked.

Mr Rex said strong organic growth and Ramsay's investment in capacity expansion would keep adding to earnings.