Release Date: February 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ramsay Health Care Ltd (ASX:RHC, Financial) reported a 5.4% growth in total hospital admissions, driving a 7.8% revenue growth on a constant currency basis.
- The company successfully negotiated improved revenue indexation with several health funds and public payers, with benefits expected to flow through in the second half.
- Ramsay Health Care Ltd (ASX:RHC) completed the sale of Ramsay Sime Darby, strengthening the balance sheet and reflecting disciplined portfolio management.
- The UK region reported a 114% overall increase in EBIT in local currency, driven by strong growth in admissions and productivity improvements.
- The company is making significant investments in digital capabilities, expected to deliver further productivity benefits and improve patient safety.
Negative Points
- Higher net financing charges and weakness in the Australian dollar against the euro and pound negatively impacted earnings.
- The reliance on government support payments in France is declining, impacting earnings as the business transitions away from one-off compensation payments.
- Non-recurring items contributed significantly less to the results compared to the prior period, affecting overall profitability.
- Ongoing cost pressures, particularly wage inflation, are not fully reflected in reimbursement structures, slowing margin recovery.
- The company faces challenges in the construction sector, including higher costs and slow approval processes, impacting the development pipeline and capital expenditure.
Q & A Highlights
Q: Could I just start with a clarification on the mid-single digit top line growth? Is that volume growth?
A: Yes, it is volume growth. We expect mid-single digit volume growth to drive our full year expectation, and this is on a constant currency basis.
Q: Can you provide more details on the improved rates from health funds and their impact on the full year?
A: The renegotiations with health funds in Australia have been positive, and we expect the benefits to flow through in the second half. However, the impact in the first six months was not material.
Q: Why do you expect lower volume growth in the second half compared to the first half?
A: The first half benefited from trading over the last big COVID wave in July and August of the prior year. Volume growth is hard to predict, and we are conservative in our estimates.
Q: Where are you still seeing cost pressures, and are they normalizing?
A: Wage inflation remains a concern, but supply costs have tempered. We are not seeing the same increases as before, and we are focused on getting reimbursement rates that reflect these costs.
Q: Can you explain the significant CapEx in France in the second half?
A: Most of the investment in France is maintenance CapEx due to our significant portfolio. There is also some growth CapEx, particularly in imaging, but a lot of it is routine and compliance-related.
Q: How has trading been in January and February, and do you still expect a stronger second half?
A: January started slowly, but volumes recovered well in the second half of January and into February. We expect a stronger second half.
Q: Are you still expecting flat margins for FY24, and how should we think about margin improvement?
A: Any margin recovery through volume and productivity improvements will be offset by increased digital and data spend. Margins are expected to improve year-on-year beyond FY24 as digital costs flatten and benefits start to materialize.
Q: What is the status of negotiations with other insurers, and will there be partial contributions in the second half?
A: There is nothing imminent, and we expect material contributions from negotiations in the back half of the calendar year.
Q: How do you plan to attract more doctors in the long term?
A: We focus on providing a great environment for doctors, including investments in IT, clinical infrastructure, and training. Our involvement in teaching and research also makes us an attractive place for doctors to work.
Q: What are your views on the prospect of a long-term fix for funding in France?
A: There is recognition of the need for increased funding in healthcare, but the French economy is under significant pressure. The industry is working hard to put its case to the government for appropriate compensation for inflationary impacts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
