Briefing – 24 February 2011Financial Results
Half-year ended 31 December 2010
Christopher Rex, Managing Director
AGENDA
Half-year Financial HighlightsFinancial Performance– Group, Australia, UK, France
Operating Environment– Australia, UK, France
Brownfield Developments UpdateCapital ManagementSuccessful & Sustainable Growth StrategyOutlook
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HALF-YEAR FINANCIAL HIGHLIGHTS
Strong core NPAT reflects underlying strength of Australian business, ramp-up of brownfields and continuing growth in the UK
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Core net profit after tax up 27.1% to $115.8 millionCore EPS up 20.8% to 53.9 centsAustralia and Indonesia revenue up 8.7% to $1.5 billionEurope revenue up 19.3% to $384.9 millionGroup EBIT up 19.2% to $204.5 million
– Australia and Indonesia EBIT up 16.8% to $174.4 million
– Europe EBIT up 34.8% to $30.1 million
Interim dividend 22.5 cents fully franked, up 21.6%Guidance reaffirmed for core NPAT growth for the Group of 22%-24% in FY11, translating to core EPS growth of 18%-20%
GROUP FINANCIAL PERFORMANCE
FY11$m
FY10$m
%Increase
Australia/Indonesia
UK France Group(1) Group
Operating Revenue 1,479.2 290.5 94.4 1,864.1 1,682.9 10.8%
EBITDA 222.1 37.4 12.3 271.8 235.3 15.6%
EBIT 174.4 22.8 7.3 204.6 171.6 19.2%
Core NPAT (2) 115.8 91.1 27.1%
Core EPS (3) 53.9¢ 44.6¢ 20.8%
Interim Dividend – Fully Franked 22.5¢ 18.5¢ 21.6%
1. Includes a six-month contribution from Ramsay Santé which was acquired on 29 March 2010 2. Core NPAT is from continuing operations and before specific items and amortisation of intangibles3. Core EPS is from continuing operations and before specific items and amortisation of intangibles and after CARES dividends
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HALF-YEAR ENDED 31 DECEMBER
NOTE: All numbers are in Australian dollars unless otherwise stated
RECONCILIATION TO REPORTED PROFIT
FY11$m
FY10$m
%Increase
Core NPAT 115.8 91.1 27.1%
Specific items & amortisation of intangibles (net of tax) (1)(13.0) (12.5)
Reported Net Profit after Tax 102.8 78.6 30.8%
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HALF-YEAR ENDED 31 DECEMBER
(1) Specific items & amortisation of intangibles (net of tax)FY11$m
FY10$m
Deferred annual non-cash rent expense relating UK hospitals (9.9) (11.5)
Net other specific items (2.0) 0.1
(11.9) (11.4)
Amortisation of Intangibles (1.1) (1.1)
(13.0) (12.5)
GROUP CORE NPAT AND CORE EPS
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$115.8m
Core NPAT up 27.1% to $115.8 millionCore EPS up 20.8% to 53.9 cents
27.1%
20.8%
Core NPAT (A$m)Core EPS (cents/share)
$61.5m
Jun ‘08 Jun ‘09 Jun ‘10 Dec ‘08 Dec ‘09 Dec ‘10
$77.7m$87.4m
$68.7m
$91.1m
June Half December Half
$115.8m
DIVIDEND GROWTH
Interim dividend up 21.6% on the previous corresponding periodRamsay has maintained its dividend payout ratio whilst investing in major brownfield developments
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Dividends (cents per share)
17.5¢21.5¢
25.0¢
16.5¢18.5¢
22.5¢
Final Dividend Interim Dividend
Jun ‘08 Jun ‘09 Jun ‘10 Dec ‘08 Dec ‘09 Dec ‘10
FINANCIAL PERFORMANCE – AUSTRALIA/INDONESIA
HALF-YEAR ENDED 31 DECEMBER
FY11$m
FY10$m
Increase
Operating Revenue 1,479.2 1,360.3 8.7%
EBITDA 222.1 190.9 16.3%
EBIT 174.4 149.3 16.8%
EBITDA Margin (%) 15.0% 14.0% 100 bps
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Australia and Indonesia performed strongly on all operating levelsSignificant increase in EBIT reflects strong organic growth and increasing contribution from brownfields
HALF-YEAR ENDED 31 DECEMBER
FY11£m
FY10£m
Increase/(Decrease)
Operating Revenue 175.9 171.6 2.5%
EBITDAR 43.9 43.8 0.2%
EBIT 13.8 11.8 16.9%
EBITDAR Margin (%) 25.0% 25.5% (50 bps)
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Margins holding up well under new ISTC pricing regime and tapering off of material cost efficienciesNHS volumes continuing to grow in challenging economic and operating environment NHS admissions up 9.6% and now comprise approximately 60% of total Ramsay UK admissions
FINANCIAL PERFORMANCE – UK
Private hospital sector an integral part of the Australian health care system, treating more than 40% of all patients
Stable operating environment
Public system subject to reforms
Little or no impact for the private sector
Bipartisan political support for strong private sector
Health insurance membership growing
Growth in demand underpinned by positive demographics
Changing political flavour in states could lead to opportunities
OPERATING ENVIRONMENT - AUSTRALIA
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Economy remains challenged and facing substantial public expenditure cuts
NHS largely protected from spending cuts
Major reorganisation of NHS currently underway
Private sector involvement recognised as vital and could grow
PMI remains flat
Some green shoots in self pay sector
Short term challenges but medium/long term remains exciting
Growth in demand underpinned by positive demographics
OPERATING ENVIRONMENT - UK
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OPERATING ENVIRONMENT - FRANCE
Operating environment stable
Current blended provision well regarded
Economy appears robust
Reorganisation of health administration undertaken has devolved decision making
Growth in demand underpinned by positive demographics
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BROWNFIELD DEVELOPMENTS UPDATE
Ageing and expanding population fuelling ongoing investment in brownfield developments− Beyond current brownfield commitments, Ramsay anticipates investing
approximately $100M per year on average on new projects to meet growing demand for health care
o Additional $50M funding approved during December half
− Completed projects adding to earnings at EBIT level and contributing positively to EPS
− On track to achieve ROI target of 15% within 3 years, with some smaller projects reaching return hurdles earlier than forecast
− Total funding of $730M (gross) approved for quality pipeline of projects since 2007 of which $455M spent on completed projects
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Key projects which have opened in FY11
BROWNFIELD DEVELOPMENTS UPDATE
Hospital Project Opened
North Shore (Sydney) Additional private rooms, theatres, birthing units and car parking October 2010
Cairns Clinic New psychiatric clinic October 2010
Pindara (Gold Coast)Additional operating theatres, dedicated endoscopy unit, oncology unit, ICU beds, multi-storey car park
November 2010
Westmead (Sydney) Additional beds, including ICU, additional operating theatre November 2010
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Key projects which have opened in FY11
BROWNFIELD DEVELOPMENTS UPDATE
Hospital Project Opened
North West (Brisbane) New theatres, day surgery, beds and delivery suites February 2011
Kareena (Sydney) Additional beds, theatres, rehabilitation gym, hydrotherapy pool
February 2011
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Key projects to open in balance of FY11
Hospital Project TimelineLake Macquarie Extension for orthopaedic, urology
and general surgery services Due to open March 2011
Joondalup (Perth) Stage 1 – additional beds, expanded emergency department.
Due to open March 2011
CAPITAL MANAGEMENT
5.1
2.7 2.7
3.7
3.3
2.42.1
2.0
3.0
4.0
5.0
6.0
FY05 FY06 FY07 FY08 FY09 FY10 Dec‐10
Leverage = Net Debt / EBITDA
Affinity Acquisition $1.4 B
Capio UKAcquisition £193 M
Ramsay SantéAcquisition €87M
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Debt Profile− Committed senior bank debt
facilities of $1.9B in place until November next year
− Headroom of $600-$700M after current brownfield commitments
Cash Flow− High cash conversion rate
(more than 100%)
SUCCESSFUL & SUSTAINABLE GROWTH STRATEGY
Three key drivers of growthOrganic− Underpinned by demographics, quality portfolio of hospitals, ongoing business
improvement
Brownfield investment− Growing demand driving Ramsay’s ongoing investment in capacity expansion
Acquisitions− Exploring further acquisitions in the UK and France, researching opportunities
in other markets
− Ramsay has proved it can export its management model
− Must add long-term value to shareholders
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Sustainable growth enhanced by focusing on hospitals and taking a prudent approach to acquisitions
OUTLOOK
Business well positioned to continue performing strongly
Ramp-up of completed Brownfield developments to continue adding to earnings at EBIT and EPS level
Ramsay UK continues to perform strongly in a challenging environment
Opportunities for consolidation in France, actively assessing bolt-on acquisitions
Barring unforseen circumstances, Ramsay reaffirms guidance for FY11 Group Core NPAT growth of 22%-24%, translating to Core EPS growth of 18%-20%
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QUESTIONS