Ramsay Health Care : ASX Announcement - Half Year Financial Results for the six months ended 31 December 2021 transcript

24th February 2022

Transcript of HY22 Results Webcast

	[START OF TRANSCRIPT]
Craig McNally:	Good morning everyone and thank you for joining us for our
	FY22 half year results presentation webcast. My name is Craig
	McNally and I'm the Managing Director and CEO of Ramsay
	Health Care and I'm joined by Martyn Roberts, our Group Chief
	Financial Officer.
	Today we will provide an overview of our performance for the
	six-month period and a brief update on our strategy, including
	the recently completed acquisition of Elysium Healthcare, before
	covering off on the outlook for the Group.
	Moving to an overview of the six-month period. As we
	highlighted in our November update, the COVID environment
	has continued to impact our activities with further waves of the
	virus resulting in government mandated restrictions on capacity
	utilisation and a material impact on the availability of our people,
	doctors and patients, driving significant disruption in our
	operating environment and higher costs.
	Importantly, underlying demand for healthcare services remains
	strong in all our regions. When the operating environment
	permits, we've seen strong growth in demand. Ramsay's people
	and doctors have continued to assist governments in France, the
	Nordics, Malaysia, Indonesia and Australia in dealing with the
	pandemic through the treatment of COVID cases, the treatment
	of critical non-COVID patients and running activities such as
	vaccination and testing clinics.
	I'd like to take this opportunity to thank our teams for continuing
	to support our patients and the communities in which we
	operate, embodying Ramsay's purpose of people caring for
	people. The management of employee availability in the short
	term due to fatigue, illness and isolation orders has had a
	significant impact on costs and activity levels over the period and

is expected to be a key issue facing the business while COVID lingers in the community.

The recruitment and retention of our people in the medium term are significant challenges facing us and the global healthcare industry more broadly. Ramsay is investing to attract, develop and retain industry leading talent to support our growth and culture.

The investment in brownfield and greenfield expansion and the upgrade of our facilities footprint has remained a key focus during the period, with new facilities opened in Australia, the UK and Europe and the investment in a significant pipeline of developments continues.

We have continued to build on our digital and data foundations with the aim of leveraging our existing business base and supporting entry into adjacent health services. Our recently appointed Global Chief Digital and Data Officer, Dr Rachna Gandhi, is working with our teams to build out our global digital and data roadmap as well as leading the development of the strategy in Australia.

As we recently announced, we successfully completed the acquisition of leading UK based mental healthcare provider Elysium Healthcare, a business that we believe will deliver opportunities for organic and inorganic growth in the UK. As well as collaborating with our mental health care businesses in Australia and Europe to ensure Ramsay continues to deliver leading patient outcomes in this critical area.

Martyn will go through the balance sheet in more detail, but it remains strong, and we continue to have capacity to support further investment in our growth plans. Our Ramsay Cares strategy continues to develop and is focused on driving actions through healthier people, stronger communities and a thriving planet.

Importantly, the business remains well positioned to benefit from the additional volume that has been created by the backlog of elective surgery and a building pipeline of non-surgical cases.

Moving to the group performance. The financial impact of COVID on Ramsay over the last six-month period has been severe, primarily reflecting the significant increase in COVID cases in the community in all markets compared to prior periods.

The increase in cases drove surgical capacity restrictions and movement and isolation orders which resulted in lower activity, skewed case mix and significantly higher costs. These impacts resulted in a decline in profit before tax of 23.8%.

There were a number of non-recurring items in this year and last year's results, primarily around profit on the sale of assets and transaction costs. Stripping these items out, Group profit before tax declined 1.3% over the previous period, a credible result given the stressful external environment the business has been operating under. The Board determined a fully franked dividend of $0.45 per share, which was flat on the prior period.

Moving to the result in Australia. Our New South Wales and Victorian activities were the most severely impacted by surgical restrictions across the six-month period, however our hospitals in Queensland and Western Australia were not immune to the disruption. In particular the increased costs and decline in activity created by isolation orders on the availability of our people, doctors and patients.

Case mix issues, higher personnel costs due to the impact of surgical restrictions and viability agreement requirements as well as the impact of isolation orders and higher supply costs, including PPE, impacted margins over the period. The estimated impact of the disruption over the six-month period on the Australian business was $107 million.

Despite the difficult operating environment, the business continues to invest in its development pipeline and while some projects scheduled to commence in FY22 have been delayed due to the impact of COVID on the building industry and external approval processes, the pipeline remains strong. A number of large projects were successfully completed during the period.

Turning to the outlook. Business activity has continued to be impacted in January and February by the reintroduction of surgical restrictions in New South Wales and Victoria, the allocation of capacity to the public hospital system in Queensland and the impact of isolation orders on activity levels and costs in all states.

In January total admissions per workday declined 11.5% on the prior period and case mix remained unfavourable with private patient activity in New South Wales and Victoria restricted. It was replaced by public patient activity under state COVID arrangements, with little or no margin and overnight rehab and psych patients have also been heavily impacted.

The impact on our January results of the disruption is estimated to have been $48 million, reflecting the extreme severity of the impact in the month. We currently don't expect the extent of this impact to extend for the six months of this second half of FY22, on the basis that surgical restrictions are being eased in all states except Western Australia and Omicron COVID case numbers appear to have peaked in January, which will reduce the costs resulting from disruptions relating to isolation orders.

We expect the road out of the current environment will be volatile in the short term and the financial impact in the second half of FY22 is expected to once again be material. The total impact will depend on the duration of the current restrictions, which have eased in recent weeks and the profile of the pandemic in Australia moving forward.

Over the medium term we believe the business remains well placed to benefit from the strong underlying demand for healthcare services in the community.

Moving to look at some of the trends in admissions and case mix over the last six months. It is becoming increasingly difficult to look through the numbers given the impact of COVID on our activities has now run across four, six-month reporting periods.

However, you can see in the chart in the left-hand corner the change in admissions across the various categories against last year, where disruption from COVID was principally in Victoria, and against the first half of FY20, which was pre-COVID. You can see that in areas such as psych and rehab we continue to be impacted against the pre-COVID environment.

The decline in surgical admissions primarily reflects New South Wales capacity restrictions, given it is our biggest market, and as you can see in the right-hand chart, while Victoria had restrictions in place during the half they were not as severe as in the prior period.

The increase in maternity admissions since the pandemic continued during the half. Based on current forward bookings, the stronger volumes experienced over the last 12 months are expected to normalise to pre-COVID levels going forward.

At the bottom of the page, we have the monthly trends in admissions per workday against the same period in FY21 and FY20. The bottom left chart shows a stronger performance in surgical admissions against FY20 and FY21, reflecting the strong growth experienced in surgical admissions in the first half of FY21, following the first wave of the pandemic and the end of the extended lockdown in Victoria.

The decline in January reflects the peak of Omicron cases in the community in New South Wales, Victoria and Queensland and a surge in the number of our doctors and team members