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Australia’s Ramsay eyes offshore expansion

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Ramsay Health Care Ltd, Australia’s biggest private hospital operator, expects to grow core earnings by 10-12 per cent this year as it scours France, Spain, India and the United States for new businesses to buy. Ramsay, which competes against Healthscope Ltd and owns more than 60 hospitals in Australia as well as three in Indonesia, has largely stayed out of a wave of domestic mergers, moving offshore and avoiding competition concerns. Its next large purchase was probably a couple of years away, Chief Executive Chris Rex said in an interview on Monday. “Unless something absolutely incredible were to come out of the woodwork over the next 12 months, which we just simply couldn’t not go for, I suspect we’re looking more in the timeframe of 2-3 years before we would make a sizeable acquisition,” Rex said. “We’re quite diligent in getting a full understanding of a market before we enter it,” he said, adding that India had “a lot of very exciting demographic features but it’s quite hard to get a toe hold.” Ramsay shares, which traded above AUSD 12 in May, closed on Monday 3.5 per cent higher at AUSD 10.25. Brent Mitchell, analyst at Shaw Stockbroking, said the earnings forecast was conservative but gave investors some comfort, and relief that UK operations had performed well despite an economic slowdown in Britain. “People have really looked at the UK and seen it struggling, obviously they are not too affected,” Mitchell said. Ramsay’s UK operations, acquired from Sweden’s Capio AB in late 2007, had exceeded expectations and would be “modestly” EPS accretive a year ahead of plan, Rex said. An ageing population and increased life expectancy, demand for higher quality care and patients’ desire to choose doctors and hospitals would underpin growth in 2009. Core net profit for the year to end-June rose 11.5 per cent to AUSD 124.2 million (USD 108 million), while core earnings per share grew 11.8 per cent. Net profit after items fell 14 per cent to AUSD 92.1 million from AUSD 107.1 million a year earlier, in line with analyst expectations in a survey estimates. A one-time charge of AUSD 26.5 million was posted on rental expense for its UK hospitals, restructuring and integration costs and a write-off of borrowing costs from an earlier refinancing. Ramsay plans to spend 28 million pounds (USD 52 million) over 2009-10 on expanding the UK business. In Australia, Ramsay has AUSD 550 million committed for improvements and capacity expansion, of which around AUSD 200 million has already been spent. Rex said government plans to raise the income threshold at which Australians would be penalised for not buying private health insurance was unlikely to impact earnings. “We’re not anticipating our volumes to be adversely affected by the change,” said Rex. “It’s clearly not a positive move for the market but neither is it going to create major difficulties. The fundamentals that underpin the private health sector are very sound,” he said.

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