13th November 2020
Ramsay Health Care September Quarter Update - Transcript of Conference Call
Operator: Ladies and gentlemen, thank you for standing by and welcome to the Ramsay Health Care Market update briefing. At this time, all participants are in listen only mode. Mr. McNally will make some brief opening remarks followed by a question and answer session at which time, if you wish to queue for a question, you will need to press zero followed by one on your telephone. I would now like to hand the conference over to your host today, Mr. Craig McNally, CEO. Thank you, sir. Please go ahead.
Craig McNally: Okay, thank you. And thanks everyone for joining the call this morning. I'll just be very brief in my opening comments and leave as much time as possible for Q&A. The reason for the update is really is I think we've indicated the market. We were looking at whether we would do it for the AGM or not. And so with the AGM approaching and also an investor conference next week, we thought it was timely to release that today. And the reason, you know, that we wanted to release it is just to provide an obvious reason to provide more information to the market in what is a very uncertain and volatile time for us. And it continues to be the case. So we thought it was prudent to give you all information we thought we could give you. The real point, I think one of my upfront is that point about the uncertainty that in different markets, we are in different stages of recovery or falling back into the impact of COVID. And so whilst we see activity fluctuating in different parts of the market and different specialty areas, it will have an obvious impact on what the performance ultimately will be. So it is a unique circumstance for us to issue the trading update, but it is a unique environment. Happy to open up the questions.
Operator: Thank you, sir. Ladies and gentlemen, as a reminder if you'd like to ask a question, please slowly press zero followed by one on your telephone. That is zero followed by one on your telephone. Our first question is from the line of Chris Cooper from Goldman Sachs. Please go ahead, sir. Thank you.
Chris Cooper: Morning. Thank you for taking the questions. The first one, please just on cost in Australia, I know that in July you quantified the incremental cost of $6 million; I believe it was dollars per month. Today I notice has gone up to $8 to $9 million a month. Can you just walk us through what's changed there? I can see here you've included the wording around procurement benefits. Can you quantify that for us in a little bit more detail, please?
Martyn Roberts: Yes, Chris its Martyn. So the $6 million we'd given you, if you remember, it was only for one month. And so, you know, it does go up and down quite a bit. So we've got three months of data now, that's the first change. The second change is adding in the procurement benefits, which we have not been before. What's become apparent is with decreased volumes, particularly in Europe and the fact that a lot of those procurement benefits come in on a calendar basis there will be a negative impact from that. We had alluded to that in previous sort of commentary, but we haven't put a number around it. So we thought it would be better to add the two together and provide you with that update. So those costs are still, you know, in relation to PPE increases, to the cost of screening at the entrance to our hospitals and other things such as catering arrangements, that kind of stuff. We are working pretty hard at the moment to try and see how we can alleviate some of those costs, particularly on the screening. So in our hospitals outside of Metro areas in Australia, for example, we're starting to install automatic temperature testing, bit like you would have seen at airports back in the day. And also, you know, app-based registration rather than employing people on the front desk. So we are actively trying to reduce those
costs, but we just thought it'd be good to update the market on what the three month run rate is and include those procurement benefits, which won't be quite as much as what we've had in the past.
Chris Cooper: Thanks So Martyn, another question for you as well. I mean, you mentioned that the EBITDA decline in Australia, you said half was related to surgical activity restrictions, of course, and the other half was due to these costs, the procurement benefits, but also a mix impact. On the second half, the cost, plus the mix impact, can you just give us a little bit more granularity there, because clearly, we see signs there that the mix is improving in recent weeks. So, you know, maybe we could get behind that. But clearly it sounds as though from what you're saying that the cost element might be a little bit more sticky. Can you just help us desegregate how we should think about that recovery in the EBITDA over the coming months?
Martyn Roberts: The cost element will be more sticky than the mix element albeit the work we're doing that I talked to you before will lower the costs over time. The mix impact I'd love to give you a forecast, but I can't. It's really going to depend on consumer reaction to, you know their sort of feeling about coming into mental health facilities. We've still got restrictions in terms of rehab, or the number of people we can fit into our gyms and those kinds of things, and I can't say how long those things are going to carry on for, so I don't know. Craig, do you want to add anything to that.
Craig McNally: No, I think that's what we've talked about for the last, you know, three or six months is about the two impacts. One is the restrictions that we have in operating in a COVID environment, and then two is community and consumer sentiment about and what they behind these guys, but he said we don't get a lot of visibility on that.
Chris Cooper: Understood. Very last one if you don't mind. Can you just to give us an update please, on the Medibank negotiation and whether you expect them to be able to sort of shoulder the burden of some of these incremental costs that you refer to?
Craig McNally: There's been good progress on the negotiation. So we were close. And that's all I can probably say, Chris.
Chris Cooper: Thanks guys.
Craig McNally: Thanks.
Operator: Thank you very much. Your next question is from the line of Saul from UBS. Please go ahead. Thank you.
Saul Hadassin: Thanks. Good morning. Craig, just a question on the surgical activity in Australia, so clearly ex Victoria a very strong rate of growth, which I'm sure everyone was expecting based on the degree of backlog, but can you talk to your expectations or where you see that clearance at as of now, for how long do you think that volume will remain at that level? And are you starting to see signs of that clearance effectively now done? And if not, when do you expect to reach a sort of a more normalized level of organic growth in surgical admissions?
Craig McNally: Yeah. Good question Saul. The thing that we don't see, and I've talked about this before, you don't get a lot of visibility on what's coming into the system. So, you know, you're reliant on doctor's practices to give you some insight into what their bookings are looking like. And some are better than others, as we all know. So it's hard to say what - well, it's two things. Hard to say what proportion of the incremental volume is purely - it's
not actually, it's the wrong word I'm going to describe it. What proportion of the volume, not just the incremental volume, is catch up? So what's happened to the base volume? So in that comment about consumer behaviour, are we still seeing people defer what is truly elective worth? And I believe we are. And, so more than just that incremental volume is related to catching up the backlog, I think. How long it goes for, I still think we're not seeing a decrease in that at the moment. But I expect we'll see that at lower levels for a longer period of time still. Well, that - I've got to say there is a lot more confidence coming back into the system, either through the doctors about, a level of normality resuming.
Saul Hadassin : Thanks, Craig, that's good data. And just one follow up on that in terms of the case mix within that surgical activity, is there any differential between overnight higher acuity surgical work versus day procedures?
Craig McNally: Short answer is no. The thing growth has been lower in lower acuity exceeding the growth rate is the higher acuity stuff, but that's a trend we've been seeing for a long time. But I haven't seen anything that sort of says, you know, things are disproportionate now because of COVID at the moment.
Saul Hadassin: Sure. Okay. That's great. That's all I had. Thank you.
Craig McNally: Okay. Thanks.
Operator: Thank you. Your next question is from the line of Andrew Goodsall from MST Marquee, please go ahead. Thank you.
Andrew Goodsall: Good morning. Thanks very much for taking my questions. First, just want to understand the public work that you might be seeing whether it's here in Australia or just an update on the UK contract or tender for the £10 billion over four years?
Craig McNally: Okay. The bigger public work - so the longer term traditional, I'll come back too. There is a short-term public work being done principally in Queensland and New South Wales. And that's been happening for the last few months anyway, but the ongoing discussions around longer-term arrangements, so multi-year arrangements are still continuing in Australia. So we haven't seen, a rush on public work, but it is incremental to what it has been previously. For the UK and Victoria nothing's happened obviously. For the UK, the tender process for dealing with the backlog, the waiting list backlog of NHS work it's a slow process as you can imagine, but they've just in the last couple of days indicated its going ahead but, there's no official position yet they have indicated that who will be awarded access to the tender which is pretty much all the incumbents. So we will be part of that, but that's as far as it's gone. And I'm anticipating this will be post-Christmas.
Andrew Goodsall: Got it. That's great. And just on Victoria, we've been hearing the rumours, there is a reasonable change to the, I guess they call it a blitz. Just anything you're hearing there or is it just too early?
Craig McNally: Too early, but we're sort of getting the same noises, I think.
Andrew Goodsall: Yep. And then just finally I know you've sort of parlayed into this, but is there any operating environments, so for instance, like Western Australia, where there's been very low COVID impact that you would - that you'd point to is potentially an indicator of what Australia might look like more generally as - you know, if the rest of the country comes out, is there sort of, I guess, an optimism and, you know, one operating jurisdiction of - that gives you sort of a sense of what things might - could look like?
Craig McNally: I'll say this, there's certainly some jurisdictions across the world where it is optimism. I think it's way too early to tell, you know, if that leads to some sense of normality
Andrew Goodsall: That's great. Thanks very much.
Craig McNally: You're welcome.
Operator: Your next question is from the line of David Lowe from JP Morgan, please go ahead.
David Low: Thanks for that. Let me just start with a general one, a bit in the number of quarterly updates from companies today, given such involved topic areas. Ramsay release is quite cryptic. It's that it's very difficult to down what these very distant places mean in terms of the actual numbers that came through in the quarter, can I get a just touching that as to why you tried to do it this way?
Martyn Roberts: I think the question David was others have provided more financial information in their quarterly updates analysis a bit cryptic.
Martyn Roberts: So I think David, particularly in the UK and France at the moment, profit figures for the quarter are not very helpful at all. Where there's a whole smoothing impact that we've got from the revenue guarantee scheme in France and the costs recovery scheme in the UK that to give you profit figures for those types of environments just wouldn't be helpful at all. We just felt it was important to update in terms of volumes and with that, that's the area where we've had a lot of questions on. And so we've tried to answer the kind of questions that people have had and give a bit more of an update. That's really the reason why we haven't given you sort of the group profit numbers or anything like that.
David Lowe: Okay. Well, thank you for that. I guess we are going to go ahead and try and pass these numbers into financials. And just the one question I've got on that cost of eight to $9 million a month, you're saying -that half of the impact on EBITDAR. That would imply a of $60 million fee that EBITDAR in the first quarter in Australia.
Martyn Roberts: That was very hard to hear you there. I think the question was, do I multiply eight and 9 million by three and that's the miss in the first quarter or double it and that's the miss. What we've said is that you've got eight to 9 million in extra COVID cost plus a negative impact from mix as well. And you'd have to double that and we're purposely not giving you that number because it's going to move around all over the place and we don't think it's helpful.
David Lowe: Okay. One more from me, Victoria - so we're back to normalized operating conditions, as I understand that the viability funding is calculated quarterly, does Ramsay expect to book a profit in Victoria this quarter?
Martyn Roberts: We'll be back to normal operating in two weeks' time or 10 days' time. And the reconciliation - so the agreement came back actively on foot on the 23rd of July. So there will be a reconciliation for that period. So 23 July to 23 November. And the period up until 23 July was normal trading so a shorthand to dial there's a small profit problem.
David Lowe: Right. Thanks very much.
Martyn Roberts: Thanks.
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Ramsay Health Care Limited published this content on 13 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 November 2020 00:14:01 UTC