Ramsay Health Care’s 10% Rally Signals a Turning Point in Hospital Recovery

Ramsay Health Care Finds Its Pulse Again

Today, Ramsay Health Care’s (ASX: RHC) shares are up around 10 % after releasing its ASX presentation for Q1 FY26. The update showed a strong start to the new financial year, with total revenue rising 6.5%, supported by an 8 percent lift in private hospital revenue and a 3% increase in admissions. The result highlights a clear reacceleration in growth across Ramsay’s core Australian hospital network, underpinned by solid patient volumes and ongoing recovery in elective procedures.

EBIT rose 6% year on year, even after adjusting for the removal of the Joondalup public-campus funding system, which slightly distorts the year-on-year comparison. This shows that the underlying operational momentum remains intact. The company is benefiting from higher activity levels, improving case mix, and stable pricing dynamics. Investors appear to be responding not just to the numbers, but to the sense that the business is regaining consistency after several challenging years of cost inflation and policy changes.

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Ramsay’s Margin Surgery

Operating leverage came in at around 0.9x, meaning that for every 1% increase in revenue, EBIT rose 0.9%. That is a solid result, though not full flow-through, as the business continues to absorb the impact of the Joondalup funding change and the early stages of its efficiency programs.

The main source of margin pressure remains the new funding mechanism at the Joondalup public campus, which has reduced EBIT by roughly A$37M per year. This is a direct hit to margins because it lowers reported revenue without cutting associated costs. Management is working to offset the drag through operational efficiencies, procurement savings, and contract renegotiations, but it remains a clear near-term headwind that will take time to fully unwind.

The Shareholders Takeaway for RHC

For FY26, Ramsay Health Care’s capex guidance was set at the lower end of the A$200M to A$250M range, reflecting a more focused approach to reinvestment. Spending is being rephased toward expanding procedural capacity within major hospitals and improving utilisation of existing facilities rather than pursuing large-scale new builds.

Management also reaffirmed its commitment to returning value to shareholders, with the dividend payout ratio lifted to between 60 and 70 percent of NOPAT. This signals confidence in cash generation and balance sheet flexibility.

The key takeaway for the quarter was that pricing power and cost discipline are returning to the core of the business. Private hospitals continue to demonstrate stronger pricing alignment with cost inflation, while efficiency gains are flowing through operations. Together, these trends point to a healthier margin profile and renewed earnings consistency across Ramsay’s domestic portfolio.