Ramsay strengthens earnings as Santé separation approaches

Earnings recovery supports higher dividend

Ramsay Health Care Limited (ASX:RHC) has used its FY26 annual report to make a straightforward case for operational recovery: underlying net profit after tax attributable to owners rose 22.9% in constant currency to $364.1 million, while revenue from contracts with customers increased 4.2% to $18.6 billion. The board lifted the fully franked full-year dividend 13.8% to 91 cents per share, implying a 60.3% payout of underlying earnings.

Reported NPAT attributable to shareholders reached $329.2 million, compared with $24.0 million a year earlier. That dramatic percentage increase needs careful handling: the prior-year result absorbed a $291 million post-tax impairment in the UK region. The underlying result is the cleaner measure of the year’s progress, with group underlying EBIT up 11.8% in constant currency to $1.16 billion.

Australia carries the transformation

Australia was the main engine of improvement. Underlying EBIT rose 11.2% to $639.8 million as admissions, acuity, theatre utilisation, private health insurance indexation and cost management combined to lift the margin by 30 basis points to 9.4%. Like-for-like admissions increased 3.3%, while Ramsay added 22 theatres and procedure rooms and invested $150 million in Australian development projects.

The Funding Group, which excludes Ramsay Santé and underpins Ramsay’s banking covenants and credit rating, ended the year with leverage at 1.83 times. Operating cash flow rose 45.9% to $869.1 million and free cash flow increased to $382.4 million. Ramsay also refinanced approximately $2.5 billion of Funding Group debt facilities during the year, extending tenor and improving the syndicated loan margin by 30 basis points.

UK improvement comes with unfinished work

The UK region delivered a 14.6% constant-currency increase in underlying EBIT, despite lower NHS volumes. Ramsay UK hospitals offset weaker NHS activity by focusing on higher-acuity cases and private work, while underlying EBIT at Elysium rose 43.5% as central-cost reductions, lower agency use, site optimisation and fee negotiations began to take effect.

That recovery is not yet a clean bill of health. Elysium reduced available beds at underperforming sites by 9.8%, closed seven sites during the year and had five sites up for sale at the reporting date. The business remains in turnaround mode, making execution in FY27 important to the durability of the UK improvement rather than merely its headline percentage.

Santé separation moves to shareholder vote

The most consequential strategic event is the proposed in-specie distribution of Ramsay’s 52.79% holding in Ramsay Santé. Shareholder meetings are scheduled for 24 November 2026, immediately after Ramsay’s annual general meeting, with completion also subject to regulatory and Court approvals. If approved, Ramsay Santé is expected to be reported as a discontinued business in Ramsay’s FY27 results, leaving the Funding Group as the more relevant operating lens.

Ramsay Santé itself remains loss-making after minority interests, although its underlying loss narrowed despite the withdrawal of €20 million in French government support and weak tariff indexation. The Nordics provided the brighter counterweight, with underlying EBIT up 65.6% in constant currency. The separation therefore offers a simpler corporate structure, but it also removes a large European operating portfolio from the group’s consolidated earnings and leaves shareholders to assess the two businesses on their own capital and earnings profiles.

FY27 tests the recovery

Ramsay expects further underlying EBIT growth and margin improvement across Australia and both UK businesses. The company has also completed the $251 million acquisition of National Capital Private Hospital in Canberra, funded from existing debt facilities, with the asset consolidated from 1 September 2026. Its integration will compete for management attention with the Santé separation and the planned Australian investment program.

The next hard evidence arrives around the demerger vote and at Ramsay’s investor day on 30 November. Until then, the central question is whether the improved earnings are becoming self-sustaining: Australia has momentum, the UK has a turnaround underway, and Ramsay Santé is approaching the point where it may stand apart from both.