Roy Davidson, 28 February 2019



Ramsay Health Care (RHC) is the largest private hospital owner/operator in Australia and one of the top five globally. The company has hospitals and primary care clinics located in Australia, France, the UK, Scandinavia, and Asia, with an estimated 30% of the Australian private hospital market.

Favourable top-down drivers

RHC’s steady and defensive cash flows are supported by Australia’s ageing population and by increased hospital occupancy. The ageing population is translating into a rapid surge in demand for hospital space. To meet this demand, RHC continues to invest in brownfields developments. The company has a successful track record in this regard, consistently delivering a return on investment of greater than 15% on its projects.

Overseas operations a key contributor to earnings

RHC’s overseas operations make a significant contribution to earnings and positions the group well for the long-term. A global network provides greater scale, driving procurement costs lower and allows for the translation of best practice in one geography into another. RHC has built out a sizeable position in both the UK and France where its subsidiary, Ramsay Generale de Sante, is the country’s largest operator. RHC has a small presence in the Asian market where it is looking to expand its footprint, and recently acquired Nordic based Capio, boosting its European footprint.

Tough conditions across RHC’s businesses

RHC has endured a tough patch with a multitude of factors weighing on recent results. Firstly, volumes in the company’s core Australian markets have softened, primarily due to affordability concerns around private health insurance. This should continue to weigh on the business for the foreseeable future, though brownfields developments and procurement savings provide an offset. Secondly France has experienced funding cuts, though the new government appears much more supportive to the sector. Finally, the relatively small UK business has been hampered by NHS demand management but is showing signs of rebounding. With hospitals reliant on government funding/policy, this is par for the course, and we see RHC as well positioned as compared to peers due to its high quality portfolio and leading operations.

High quality healthcare exposure

Despite current industry headwinds, we expect RHC to continue to deliver solid earnings growth for some time yet due to its industry leading positions and its leverage to ageing populations and increased chronic disease rates. RHC’s management team also has a history of extracting synergies from acquisitions and generating attractive returns on brownfield developments. The company has a strong balance sheet, good cash flow generation, and we expect that it will be able to use its now much larger buying power to continue to reduce consumables costs in its hospitals.


  1. lower government funding
  2. reduced private health insurance coverage
  3. increased competition