Ramsay Health Care Limited

Good morning everyone and welcome to Ramsey Healthcare's full year results presentation for the 12 months ending 30th of June 26. I'm Natalie Davis, the Managing Director and Group CEO and I'm joined today by our Group CFO Anthony Nielsen. Today we will share our financial results and the significant progress we have made over the past year in transforming the business. I'm pleased that we are maintaining high patient MPS scores and clinical excellence in every region Building transformation momentum in the Australian business and improving performance and capital returns across the group. I'd like to thank our incredible people and our clinicians who dedicate themselves to our patients and are the foundation of our success. Turning to slide four, we've made good progress delivering against our three key priorities. First, the multi-year transformation of our market leading Australian hospital business. Second, strengthening capital discipline and improving returns across the portfolio. And third, evolving our culture to innovate and accelerate delivery. Our strength and growth executive team and the capability they are building in key commercial and operational areas has enabled us to accelerate the pace of our transformation. In Australia, a high acuity growth focus, improved data utilisation revenue indexation and cost management has delivered underlying EBIT growth of 11.2% and a plus 30 basis points uplift in EBIT margin. Importantly, we're also well progressed with our proposed separation of Ramsey-Sante, which is on track for completion in late 2026, subject to a shareholder vote in November. Turning to slide 5 and looking at the headline numbers in constant currency movements for the full year. Revenue was $18.6 billion, reflecting 4.2% growth compared to FY25, driven by 8% revenue growth in Australia. Underlying EBIT increased 11.8% and underlying NPAT increased 22.9%, reflecting focus on improving performance through transformation programs in each region. Reported NPAT was $329 million. We strengthened capital discipline, focusing growth and development capex on Australia and procedural capacity, reflected in group ROIC increasing by 30 basis points and funding group ROIC plus 60 basis points to 6.3%. Our focus on performance improvement and cash conversion has seen Australia and both UK businesses net cash flow positive for the period and improved our funding group leverage to less than two times. The Board has determined a final fully franked dividend of 48.5 cents per share which is up 21.3% and taking the full year dividend to 91 cents per share up 13.8% on the prior period and representing a payout ratio of 60.3% of underlying earnings. These results highlight the momentum building across our business and the positive impact of our strategic initiatives. Slide 6 provides more detail on our underlying result and the split between the funding group contribution and Rambisante. All regions improved performance. Australia reporting 11.2% growth in underlying EBIT on 8% growth in revenue. Both UK businesses reporting growth in earnings through operational initiatives, mitigating the impact of lower funding by the NHS. Grand Pistante's improved EBIT was driven by its Swedish business and performance improvement initiatives, more than offsetting the difficult funding environment in France. Moving to focus on each region. Starting with Australia on slide 8, our transformation continues to build momentum driven by our Big Five hospital operations improvement initiatives. Our strategic focus on growing in high acuity and priority therapeutic areas Improving serialisation and focus on procurement initiatives has driven admissions and revenue growth and margin expansion. Pleasingly, we achieved this alongside improved patient, doctor and team NPS scores. With a new executive team in place, we've started to accelerate the execution of our 2030 strategy. We're looking forward to National Capital Private Hospital joining our ransom network next week and serving the local community. During the year we also signed a new partnership agreement with one of our major insurers which will enable us to focus on collaborating to strengthen the private health proposition. We've grown our Ramsey Research and Development Network to 22 sites and continue to grow clinical trials activity with a 28% increase. Turning to the Australian results in more detail on slide 9. The business delivered 11.2% growth in underlying EBIT driven by higher activity and acuity levels and improved utilisation of treatment capacity, improved private health insurance indexation and effective cost management. We reported a 30 basis point improvement in underlying EBIT margin to 9.4%. The impact of the new funding mechanism at Joondaloo Public Campus was partially mitigated to approximately negative $26 million by actions including a focus on timely discharge of patients, agency reduction, increased winter activity as our clinicians continue to provide excellent care to the local community. Underlying labour costs were flat as a percentage of revenue and lower excluding the impact of Joondalup funding, reflecting a focus on reduced agency use over the period. We were also able to lower supply costs as a percentage of labour through procurement savings. Our portfolio optimisation efforts have continued with foresight closed and excess land holdings put up for sale. Before moving to the key drivers of our results, slide 10 details some of the underlying trends in the Australian private healthcare market. The market is showing improving fundamentals with hospital coverage continuing to grow as Australians prioritise their healthcare, growing by 2.5% per annum in the last three years, and payout ratios gradually improving, however with some ways to go. Acute private hospitals remain the predominant setting for private healthcare and are evolving their services to include day procedures. Downsharing from gold policies to silver hospital coverage continues, impacting private mental health and maternity in particular. Now delving deeper into Ramsey Australia's activity trends on slide 11. Excluding the impact of Peel and Border Cancer Hospital, which have both returned to public operation, you can see we observe strong growth in our core surgical and day activity, coupled with higher inpatient acuity. Surgical admissions, which account for more than half of our total admissions, grew 4.1%, increasing 40 basis points as a percentage of our total admissions, reflecting our focus on growth in key therapeutic areas. Medical admissions were up 3.2% and rehabilitation admissions increased by 3.8%. And mental health admissions declined by 3.9%, but this was mainly due to declining day admissions, with overnight mental health admissions, which contribute the majority of our revenue in mental health, increasing by 0.9%. Looking at funding types, private admissions grew 2.8%, public admissions increased by 9.5%, reflecting strong activity as you look, and a 7.7% increase in public and private activity. Day-only admissions increased by 3.8%, boosted by new surgical centres at Charleston and Caloundra, while overnight IFTAs increased by 3%, reflecting a higher overnight acuity mix. Moving to slide 12 and our strategic use of data insights and the uplift in our sales force are supporting growth in the number of visiting medical officers or doctor partners. Our share of complex therapeutic activity and improved theatre utilisation. We achieved 3.3% growth in admitting VMOs enabled by improved catchment-based data insights. Our theatre utilisation improved to 70% in FY26 from 69% in FY25 as we opened an additional 22 new theatres during the 12-month period, indicating our success in increasing utilisation of theatres at our key sites. and we increased robotics usage supported by improved robotics utilisation tracking. Slide 13. Total capex was $365 million which was flat on the prior period and below the original forecast of $410 to $440 million, reflecting lower than forecast development spend as we focus on improving utilisation of existing facilities and the timing of reimbursements from landlords of $30.8 million, primarily associated with the development of key lease sites in Insula and Ballura. Our development investment in Australia remains focused on increasing procedural capacity in major hospitals within growth corridors. In total, we opened 22 theatre and procedure rooms during the period. The increase in routine and maintenance capex reflects an investment in existing facilities to ensure strategically located sites are fit for purpose in the future and continue to meet high clinical safety and amenity standards. In financial year 27, we're planning to open 11 new theatres cath labs at sites including our largest hospital, Hollywood. In financial year 27, we'll continue with our key programs to drive the transformation of the business with our initiatives underpinned and enabled by our investment in data technology and AI. We've defined our technology roadmap with priorities including the upgrade of our patient administration system which will be part of our broader revenue cycle management transformation to speed up cash collection, improve accuracy to reduce rework and streamline administrative manual processes. and a smart rostering system and team map to enable flexible working, reduce administrative burden for our hospital teams and improve effectiveness of our rosters. Moving to slide 15 and the outlooks. As we continue to focus on delivery of our multi-year transformations, Australia is targeting incremental year-on-year EBIT growth, both including and excluding the NatCap acquisition, and margin expansion driven by activity growth, improved capacity utilisation, revenue indexation in line with cost indexation, operational improvement initiatives and including a $10 to $15 million increase in investment in IT, technology and transformation. National capital is expected to be underlying EPS accretive in the first 12 months of ownership. Transition operating costs are expected to be in the range of $9 to $11 million in financial year 27. Total capex for Australia is expected to be $380 to $410 million, inclusive of NatCap. Moving to the UK region on slide 16, where both our UK hospitals and Elysium businesses are focused on performance improvement plans to mitigate weakness in NHS funding. Basically, both businesses delivered an increase in underlying EBIT who were net cash flow positive. UK hospitals focused on acuity, private activity growth and cost management to mitigate NHS funding headwinds from Q2. The Elysium turnaround is beginning to gain traction under the leadership of new CEO Joe O'Connor in weak market conditions through a focus on right-sizing our services to local demand and cost reduction. Moving to each business in turn, beginning on slide 17. Our UK hospitals delivered underlying EBIT growth of 10.3% in constant currency, successfully mitigating an 8% decline in NHS activity and tariff indexation below cost growth. The result was achieved through a focus on higher complexity NHS work and private activity growth of 2.9%, which drove a 6.7% increase in average revenue per admission. The business focused on disciplined cost management program resulting in labour costs as a percent of revenue declining by 30 basis points and the EBIT margin improving 80 basis points. Turning to slide 18. Now we expect Ramsey UK to deliver EBIT growth in financial year 27 with the focus on driving higher acuity and growth in private medical insurance and self-pay activities. ongoing delivery of efficiency transformation programs across finance and operations including rostering initiatives and creation of finance shared services hubs and continuing to work closely with local and national NHS stakeholders to attract NHS work and target acuity. NHS tariff guidance for the year beginning 1 April 26 has been recently lifted to 1.24% The backdated amount related to 1 April 26 to 30 June 26 will be included in the FY27 results. Turning to slide 19. Elysium's turnaround plan gained traction in the second half of FY26, delivering a 43% growth in underlying EBIT for the year. This was achieved through site and ward closures to match local demand, reduced central and agency costs, including a reduction in FTEs, and an average fee uplift of 4.4%, reflecting complexity of patient services. There was also a strong focus on working capital and a reduction in debtors, which combined with reduced capex for a positive cash flow. Elysium's reported result includes a net 13.2 million of costs associated with its restructure, including site impairments of net 9.9 million. Our ongoing focus for Elysium on slide 20 is to continue delivering on the turnaround plan, which includes increasing conversion rates of new patient opportunities, including a focus on complex recovery services, further improvements to labour mix, including reducing agency costs further, negotiating with payors for appropriate pre-op lists reflecting service complexity. We're targeting EBAC growth in financial year 27 as the business turnaround continues to progress. Heading now to Europe, and on slide 21, we're on track with our separation plans for Ramsey Sante to support long-term value creation for Ramsey shareholders as we move towards a Ramsey shareholder vote in late November. The business has continued to focus on performance improvement in both France and the Nordic. Moving to slide 22, and despite funding headwinds in France, Ramsay-Santo reported a reduced underlying loss in Europe. The Nordics region delivered a strong result, driven by Sweden's performance improvement, which included the impact of the new Saint-Goran eight-year contract and improved performance in its other services, including proximity care. France has multiple work streams on foot, focused on operational efficiency, which partially mitigated the funding shortfall. On slide 23, Ramzi-Sante's focus in financial year 27 will include cost control, efficiency and cash generation, growing profitable activity including growth in Sweden and the four-year impact of the new St. Grant contract and sustained advocacy for fair tariff outcomes in France. Turning to slide 24, the proposed separation of Ramsay-Sante is well on track with the demerger meeting for the shareholder vote progressing towards 24 November 2026. The benefits of the demerger proposal include it simplifies Ramsay's portfolio, enabling us to focus on transformation and growth potential of our core Australian hospitals business, It also simplifies our reported financial profile through Z-consolidation of Ramsey Sante from Ramsey's financial statements. Z-mergers should improve Ramsey Sante's focus, an already established, independently managed and publicly listed business, to continue to pursue its European focus strategy and transformation. There is limited separation complexity given Ramsey Sante already operates independently of Ramsey including separate financing and balance sheet arrangements. And it gives our shareholders the opportunity to retain ownership interest in Ransi Sante. Assuming shareholders vote in favour of the separation, Ransi Sante will be treated as a discontinued business line item in our financial year 27.5 and four-year results. Costs associated with the demerger will be detailed in the scheme booklet. Moving to sustainability on slide 25. And Ramsey remains on track with both our 2030 Scope 1 and 2 greenhouse gas emissions targets and our 2028 supplier engagement targets. We're committed to working with our partners to understand and address emissions across our supply chain. However, our progress in this area is limited to how quickly our suppliers are able to reduce and manage their own Scope 1 and 2 emissions. As a result, we've revised our long-term net zero greenhouse gas emission targets, taking into account the current and anticipated commercial and operating environment. We'll now target net zero Scope 1 and 2 emissions by equity share by 2050 instead of 2040, and Ramsey UK and Elysium Healthcare will target net zero Scope 3 emissions by 2050. Our net zero scope three group target will be considered following engagement with our suppliers in line with our new term target. I'll now hand over to Anthony to provide a more detailed look at our financial performance.

Thank you Natalie. Good morning everyone. Moving to our group financial performance on slide 27, it's important to note that all regions reported EBIT growth in local currency, reflecting positive transformation momentum in Australia, and a focus on operational improvement programs across all regions. This drove a 30 basis point improvement in EBIT margins to 6.2% with cost discipline resulting in a 20 basis point improvement in employee costs as a percentage of revenue and a 10 basis point improvement in medical supplies and consumables as a percentage of revenue. Underlying EPS grew 27% in constant currency. The underlying effective tax rate was approximately 35%, consistent with our guidance. Reported tax was slightly higher at approximately 37%. These rates are high relative to corporate tax rates in the jurisdictions Ramsey operates, reflecting the impact of French CVAE, which is a corporate value-add tax, and Ramsey-Sante's loss-before-tax result in the FY26 period. The final dividend of 48.5 cents per share brings the full year dividend to 91 cents per share, up 13.8% from FY25, with a payout ratio of 60.3% of underlying earnings. Turning to slide 28, we continue to maintain a strong focus on cash generation. Operating cash flow reflects a 46% improvement in the funding group, coming from Australia and both UK businesses. offset by a negative working capital variance in Ramsey Sante, primarily reflecting the timing of payments from the French government versus the prior period. The decline in CAPEX spend reflects capital discipline in development expenditures in Australia and the UK operations. This resulted in free cash flow of $697 million, which was relatively flat compared to the prior year. Net cash inflow from divestments mainly relates to sale and leaseback of four sites in France and the sale of hotdog investment in Australia. Dividends paid increased, reflecting the suspension of the dividend reinvestment plan for the final dividend in FY25. Moving to slide 29, our consolidated balance sheet remains stable, with key changes relating to The net impact of currency translation on the balance sheet was approximately $300 million reduction in net assets. An underlying increase in property plan and equipment includes the completion of developments in Australia, partially offset by the restructure of portfolios in all regions. Working capital movements mainly relate to movements in Renzi-Sante associated with the timing of government receivables and the Elysian portfolio restructure resulted in a $300 million reduction to the right of use assets. Roche increased 110 basis points to 11% for the group. Turning to slide 30, and the funding group, which excludes Ramsey Sante, delivered underlying impact growth of 17.9% to $398.4 million, with a 5.2% increase in revenue in constant currencies. The result was driven by underlying EBIT growth across all businesses, with an improved performance in Australia of plus 11.2% in underlying EBIT, a plus 10.3% underlying EBIT contribution from our UK acute business and a plus 43.5% increase in underlying EBIT for a listing. The result included a 7.3% increase in depreciation, reflecting the completion of major projects in Australia over the period. higher financing costs reflecting the increase in base rates over the period and reduced hedging compared to the prior period, and an underlying tax rate of approximately 29%. Roche for the funding group increased 124 basis points to 14.8%. Moving to slide 31, the funding group's leverage has decreased to 1.83 times and remains well below our target range of 2.5 times. Interest cover is also strong at 8.94 times. All businesses in the funding group were net cash flow positive for the year, showing a strong focus on improving cash flow, working capital management, capital allocation and returns across the funding group. We maintain liquidity of $1.066 billion, some of which will be utilised for the $251 million acquisition of NatCap next week. Leverage is expected to continue to be below our target range post this acquisition. The weighted average cost of debt in FY27 is currently expected to be approximately 5.5% and approximately 60% of our funding group debt is hedged for FY27. In FY27, total net interest costs, inclusive of AASB 16 lease costs, for the funding group are forecast to be $280 to $300 million. On slide 32, Manzi-Santé remains well supported by its own funding arrangements. In July 2026, they announced the completion of a refinancing of €1.75 billion of senior debt, extending their tenor by two years to 2033 and including a change of control provision which is consistent with our proposed separation. Its bank leverage ratio was 4.7 times at 30 June and liquidity stood at €487 million, comprising €185 million in undrawn bank facilities and €302 million in cash. Turning to slide 33, and as I have shown above in the results, our focus on improving capital management and cash flows delivered improved returns and lowered leverage for the funding group over the period. Disciplined cost management across the funding group resulted in underlying EBITDA margins of plus 60 basis points, and underlying employee benefits as a percentage of revenue declining 20 basis points. Activities over the period included a focus on revenue cycle management and improved working capital across all businesses with cash conversion in Australia improving by four days over the period and further work to do. Focus on utilisation of facilities and portfolio optimisation resulted in a decrease in capex and improved capital allocation across the business. Cash generation from portfolio optimisation will continue in Australia and Elysium. These activities and focus on improved results drove an improvement in the funding group ROCHI to 14.8%. Turning to slide 34 and group CapEx was $734.2 million, a decrease of 6.1% in constant currency, reflecting disciplined development spend in Australia, focused on expanding procedural capacity. Lower capex in the UK and flat in Europe, reflecting our capital discipline in the current funding environment, mainly due to lower development and growth expenditures. And routine and compliance spend was increased in Australia to ensure our hospitals are future fit. Our high clinical quality and safety standards and the inventiveness of our hospitals is maintained. Our forecast range for funding group capex in FY27 is $480 to $520 million. consistent with the FY26 spend of $488 million in constant currency. Overall, we made good progress from a financial perspective in FY26, with the company in a strong financial position to continue to deliver in FY27. With that, I'll now hand back to Natalie for the outlook and closing remarks.

Thanks, Anthony. And turning to slide 36. In closing, I want to reiterate our commitment to continuing delivery of our strategic priorities. In FY27, we expect to continue the positive momentum with EBIT growth expected in Australia and the UK businesses. We're looking forward to completing the national capital acquisition, caring for the local community and welcoming the team to Ramsey next week. We're preparing for the proposed separation of Ramsey Santé in December, subject to Ramsey's shareholder vote on 24 November. The Group Executive will host an Investor Day on 30 November to share our progress and plans as we continue to evolve Ramsey for the future. I'm proud of the progress we've made as a team and our unwavering commitment to providing excellent care for our patients. Thank you for joining us, and we'll now open the floor for questions.