Ramsay Health Care : Transcript of 3QFY22 Trading Update Conference Call

Transcript 3QFY22 Conference Call

29th April 2022

Operator:

Thank you for standing by and welcome to the Ramsay Health Care Conference Call. All participants are in a listen only mode. There'll be some opening remarks followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to the hand the conference over to Mr Craig McNally, CEO. Please, go ahead.

Craig McNally:

Thank you and thanks everyone for joining the call this morning. Given the continued volatility in quarter three, we wanted to provide the trading update for the period. This should be - and the details in the trading update should be no surprise given the February half year update we gave, which covered a lot of what we anticipated to happen in the quarter.

We are, however, really positive about what the future is when we come out of the volatile period. We have flagged previously that we see costs escalation early into FY23 and so we're looking really through to FY24 as what will be a normal trading year and we expect all the underlying drivers that support the business and demand for healthcare to be able to deliver back to where we used to be.

Those drivers really, in the short term, are dealing with the backlog of surgical activity which will inevitably come through in all the markets in which we operate. The length of that depending - you know, the length of dealing with that backlog will depend on the circumstances in each market but we're positive we'll see that coming through FY23.

But beyond that, and I think demonstrated by our confidence in the future and the investments we're making to position ourselves in the future, the drivers that we all are aware of in terms of ageing population, growing population, advancements in technology, community expectations et cetera, will all continue to push demand in healthcare and we are - in terms of the evolution of our strategy and positioning ourselves for the future, are really confident, hence the continued investment that we make.

On this call, I'm sure lots of people will want to know about the two significant processes that are underway which is the KKR-led and sought - consortium's offer to the Ramsay Health Care Board and the sale process for Ramsay's Sime Darby. I won't make any comment on them other than to say they are - those processes are continuing and what has been announced previously is still the case.

I'd like to take the opportunity to thank our staff and doctors again for what they do and they've been fantastic through what has probably been the most disruptive quarter that we've had through the last two years. So they've done a fantastic job in concentrating on caring for our patients and looking after each other. So I'd like to thank them and with that, happy to open up for the questions.

Operator:

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speaker phone, please pick up your handset to ask your question. Your first question comes from Andrew Goodsall with MST Marquee. Please, go ahead.

Question:

(Andrew Goodsall, MST Marquee) Thanks very much for taking my questions. My first one, just if - you've been a bit detailed about how we got there with the third quarter EBIT in Australia but could you be a bit more expansive with what's happening with the UK? It seems that things are getting worse on the cost level and then in Europe, it does actually look like things are better but they're - just conscious there may be some one-off pieces to those.

Craig McNally:

Yes, I'll start and let Martyn talk about some of the financial detail. So through the quarter, we've still seen a lot of cancellations. So despite what we've seen in terms of increase in referrals, the level of cancellations due to isolation of staff, doctors and I've got to say, to a lesser extent, patients. They're still resolving a lot of short-term cancellation and that has not enabled a lot of flexibility around the cost base as we keep staff engaged. So that's been the primary dynamic in the UK but as we move forward, we're still confident about that volume increase in dealing with what is still a massive backlog of work to be undertaken.

Martyn Roberts:

Yes, so Andrew, it's Martyn. Regarding the UK, you may not have had time to do all of the maths yet but obviously the quarterly result that we've reported, that includes $11.7 million EBITDA contribution from Elysium. So you've got revenue and costs coming in from Elysium in there.

There's also $18.9 million non-recurring item there which was the write-off of some significant amounts of PPE that we bought in the initial phase of the pandemic, which is getting very close to its use-by date that we haven't been able to use. It sounds like a lot - a big number but if you remember the mad panic and scramble that happened in that first few weeks and months of the pandemic, webought as much as we could get and some of it, we're actually - were the kind of things that were really not appropriate to use anymore.

So once you back out that $18.9 million, the EBITDA for Q3 was $37.1 million, which is certainly better than Q2 and you back out Elysium, you have $25.4 million. That's better than Q2. So we - it's still nowhere near what it was in the prior year, mainly because of the massive increase in furloughing and disruption to staffing that we've had to double employ people and back fill them and in terms of the disruption through the cancellations that we've been talking about on a few of these calls so far.

So there's some small green shoots there. Certainly, the team are managing to re-book a lot of the cancellations now, so getting into a good rhythm of being able to do that but still a long way from getting back to normal. I hope that answers your question.

Question: (Andrew Goodsall, MST Marquee)

Sorry, just in France, it looks like things are improving. If you could just - any additional colour you can add there?

Martyn Roberts:

Yes, look, I mean, I think as we said on the Q1 call, it is quite lumpy quarter to quarter. Mainly because of the revenue guarantee scheme and the accruals there. It's still pretty challenging in terms of volume and staff shortages, albeit the staff shortage issue seems to be getting slightly better currently.

But yes, the result in the Nordics actually was very strong within that result. We haven't split it out, you'll see that when we get to the full year but the Nordics is performing particularly strongly and the France business from an EBIT perspective kind of evens out when you get to the half.

Question: (Andrew Goodsall, MST Marquee)

Okay and then - on a very, very short term but just what your order book looks like going in to the fourth quarter? Just get a sense of whether activity levels are up and we know, of course, COVID's still pretty disruptive out there but just whether - 4Q on 3Q, proportionally, the benefits you're seeing flow into that Q4?

Craig McNally:

Yes, so I think what we're seeing is increased surgical activity. However, particularly in Australia but we're talking about France at the moment, April will not be good. Easter running into ANZAC Day hasseen a lot of people - particularly doctors, take leave and we saw that in France as well where doctors were taking leave over Easter. They don't have ANZAC Day, obviously but they - so putting aside that period which will depress April, what we're otherwise seeing is those volumes coming back into the system.

Question: (Andrew Goodsall, MST Marquee)

Terrific and the cost base? Seeing it getting any better or just still being knocked around by COVID?

Craig McNally:

Still being knocked around by COVID, absolutely. We've still got capacity restrictions because of workforce and I should have said at the outset, workforce remains the biggest issue we have in all of our markets. But it certainly very positive signs of improvement in France.

Question: (Andrew Goodsall, MST Marquee)

Great. Thank you. Thanks very much.

Craig McNally: You're welcome.

Question: (Gretel Janu, Credit Suisse)

Thanks, good morning. Just in terms of Australia, I'm just trying to work out the impact of cancellations and staff absenteeism there. So are you able to quantify like you have for the UK, the level of cancellation or more alternatively, can you give some colour on the utilisation that you were running at in the quarter for those periods and particularly the states that weren't impacted by surgical restrictions?

Craig McNally:

Yes, I mean I'll start with surgical restrictions were one issue and they certainly are reduced activity but there was a lot more impact than I - as I sort of alluded to. The quarter was more disrupted than any other quarter we've had through COVID. Really because of the high rates of infection in the community, which then translated into lots of isolations for staff, doctors and patients.

We don't have the - I can't tell you the absolute cancellation numbers in Australia but the impact and - of isolation in particular was - I'll say the same thing, it was more significant in that quarter than we - by a long way than we've seen in other quarters. Then…

Question: (Gretel Janu, Credit Suisse) So going - sorry?

Craig McNally:

No, no, I was just going to then go onto April for Australia. It was severely impacted by the holiday period.

Question: (Gretel Janu, Credit Suisse)

Yes, so sorry, just going forward, I guess, do you have any degree of confidence that it will improve in the coming quarter outside of April and the holidays there?

Craig McNally:

Yes. Confident of certainly the surgical activity increasing and we - when we - just got to caveat that with, we've still got a - rates of infection in the community which are resulting in staff absenteeism and hence reduction in capacity.

So we've got to see that cleared but despite that, we're seeing increase in surgical bookings, absolutely. We're seeing a slower return in non-surgical activity and I think as we've talked about many times, medical activity, we really need to see - not that I'm wanting it to happen but a flu season come through which'll see respiratory admissions increase again.

Psych, still a bit slower to recover and that's related to as much as anything else, psychiatrist absenteeism and there's rehab, there's a direct correlation with the increase in surgical activity about how quickly rehab recovers.

Question: (Gretel Janu, Credit Suisse)

Great. Thank you very much.

Craig McNally: Welcome.

Question: (Sean Laaman, Morgan Stanley)

Thank you. Good morning, Craig. Good morning, Martyn. Hope you're both well. My question relates to nurse supply and I'm wondering if the pandemic has - there's been some learnings in there with respect to better managing nurse supply and rostering? Is there a positive as we exit the pandemic?

The second part to that is, what is your current view on nurse supply versus pre-pandemic and do you think you can get back to pre-pandemic numbers in nurse supply?

Craig McNally:

Okay, there's a lot in that. I don't want to be too simplistic on it but we've got a range of initiatives that are both short-term and medium-term in terms of workforce and we've talked about them