How Will Ramsay Health Care Overcome Its UK Mental Health Impairment?

Strong Revenue Growth Across Regions

Ramsay Health Care has delivered a solid financial performance for the full year ended 30 June 2025, with revenue rising 6.8% to A$17.8 billion. This growth was driven by increased patient activity and tariff indexation across its core markets in Australia, the UK, and Europe. The company’s underlying net profit after tax (NPAT) from continuing operations, excluding non-recurring items, increased by 1.7% to A$305.3 million, reflecting operational improvements despite some headwinds.

UK Mental Health Business Faces Challenges

However, the headline NPAT was heavily impacted by a significant non-cash impairment charge of A$305 million related to the underperformance of Ramsay’s UK mental health arm, Elysium Healthcare. The impairment reflects ongoing occupancy challenges, rising wage costs, and lower-than-expected margins, which have pressured the UK segment’s profitability. Management has initiated a strategic review and cost reduction program, including ceasing new site investments and reducing corporate roles, aiming to stabilize and improve performance going forward.

Dividend Maintained Amidst Uncertainty

Despite these challenges, Ramsay declared a fully franked final dividend of 40 cents per share, maintaining an 80 cents per share full-year dividend. The payout ratio stands at 63.7% based on underlying earnings, reflecting the company’s commitment to returning value to shareholders while balancing reinvestment needs. Notably, the Dividend Reinvestment Plan has been suspended indefinitely for the final dividend, signaling a cautious capital management approach.

Capital Investment Focused on Growth and Efficiency

Capital expenditure increased to A$778 million, with investments concentrated on expanding hospital capacity, including major projects at Joondalup and Warringal hospitals in Australia, as well as digital and data initiatives aimed at operational efficiencies. Ramsay Santé, the European arm, refinanced its debt facilities, extending maturities and optimizing costs, albeit with a higher weighted average cost of debt reflecting market conditions.

Outlook – Cautious Optimism for FY26

Looking ahead, Ramsay expects continued activity growth across all regions and anticipates EBIT growth in Australia, supported by private hospital momentum and improved revenue indexation. However, the Joondalup public hospital’s new funding mechanism linked to the Western Australia ‘State Price’ is expected to negatively impact earnings by approximately A$37 million before mitigation. Net financing expenses are forecast between A$600 million and A$620 million, with dividend payout guidance maintained at 60-70% of underlying NPAT. The company’s leverage remains within target levels, supporting financial flexibility.

Overall, Ramsay Health Care’s FY25 results reflect a business balancing growth opportunities with operational challenges, particularly in the UK mental health sector. The company’s strategic focus on efficiency, capital discipline, and regional diversification will be critical as it navigates the evolving healthcare landscape.