Ramsay Health Care Limited (RHC) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. For those who don't know me, my name is Michael Siddle, and I'm the Chairman of Ramsay Healthcare. On behalf of the Board and management, I extend to you a warm welcome to the company's 2021 Annual General Meeting. I'm informed that we have a quorum present, and accordingly, I declare the meeting open. I'd like to begin by acknowledging the traditional custodians on the land on which we meet here today in Sydney, the Gadigal people of the Eora Nation, and I pay my respects to elders, past and present. Whilst we had hoped to be able to hold an in-person meeting this year, given the uncertainty caused by this year's lockdowns and the potential health risks arising from the COVID pandemic, the Board determined to hold this year's Annual General Meeting virtually. We appreciate your understanding and for joining the virtual meeting, and I can assure you it is our intention to return to face-to-face meetings as soon as possible. I'll ask Henrietta Rowe, our Group Counsel and General -- and Company Secretary, to go through the technical and procedural matters for the AGM shortly. Let me now introduce your Board of Directors, all of whom are here today, except for Claudia, who is attending the meeting virtually. We have Craig McNally, our CEO and Managing Director; Peter Evans, I'll say more about Peter and his contribution later; Karen Penrose; David Thodey; Alison Deans; James McMurdo; and Claudia Süssmuth Dyckerhof, who joins us from Hong Kong. I'll now ask Henrietta to talk through the procedural matters for this meeting. These are similar to last year and are lengthy but important. It will cover how you ask a question and the voting procedures for the meeting. Henrietta?

Thank you. Thank you, Chairman. We are taking questions from shareholders of ordinary shares today or their representatives. You can submit written questions at any time. You do not need to wait until the relevant item of business. We encourage you to submit your questions as soon as possible. We will then seek to address your questions during the discussion on the appropriate item of business. We will endeavor to answer as many questions from shareholders as we can. We are also pleased to accept verbal questions this year. You may ask a verbal question in relation to an item of business when that item is before the meeting. [Operator Instructions] Questions sent via the online meeting platform will be moderated to avoid repetition. If questions are particularly lengthy, we may need to summarize them in the interest of time. We have a new audio questions facility for those who wish to ask a verbal question. [Operator Instructions] If you have any issues using the system, please return to the platform. We have also received some written questions from shareholders in advance. These will be addressed during the course of the meeting. If your question relates to a personal experience at one of our hospitals, we will contact you after the meeting to follow through. We are not able to address these questions during the meeting, particularly because of privacy concerns. If you would like a copy of the minutes of Ramsay's 2020 ] Annual General Meeting to be sent to you, please contact Boardroom, and this will be arranged. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, polling on items 2 to 4 is now open. If you are eligible to vote at this meeting, you will see a voting tab appear at the top of your screen. The resolutions will be displayed, and you will be presented with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You can change your vote up until the time the Chairman declares voting closed. The Chairman will give you a warning before he closes voting. Any appointed proxy who has been given discretion on how to vote should vote in the same manner. Any appointed proxy that has been directed how to vote and has no discretionary votes to cast does not need to vote as those votes will automatically be counted in accordance with the directions. I will now hand back to our Chairman.

Thank you, Henrietta. I'll now give a short overview of the past year, after which Craig will give you a much more detailed presentation. Over the past 12 months, Ramsay employees and clinicians have once again played an important role in supporting the public health system in our regions during the COVID pandemic. In some jurisdictions, we have played a crucial role in treating COVID patients within our hospitals, and in other regions, we have been caring for non-COVID patients in our hospitals to free up capacity in the public system. Our teams have provided resources and staffing for community vaccination hubs, and we have set up an operated vaccination and testing clinics in several of our regions. The World Health Organization named 2021, the International Year of Health and Care Workers. This global recognition highlights the dedication and sacrifice of millions of health care workers during a COVID pandemic. We have chosen to acknowledge and thank our workforce across hospitals, day surgeries, pharmacies and corporate areas by profiling 1 employee every week for the entire year. We want to share their motivations, learn what they love about their role and what advice they would give to those considering a future in health care. The cover of our annual report this year highlights some of our extraordinary people, and you can read their inspiring stories on our regional websites. On behalf of the Board and senior management, I'd like to thank our team around the world for living the values of The Ramsay Way and embodying core Ramsay's vision of people caring for people during such a remarkably challenging time. I would also sadly like to extend our condolences to those in the extended Ramsay family, who have lost colleagues and loved ones to COVID. As I flagged last year that, sadly, Peter Evans is retiring from the Board at the end of this annual meeting. Peter has been an engaged and active nonexecutive director of Ramsay since his appointment in 1990, and prior to that, as an executive joining us in 1969, a long time ago. Since the very early days, he has made an enormous contribution to the development of Ramsay. On behalf of the other Board members, I would like to thank Peter for his guidance and input into the strategic direction of this organization over many years. I'm also pleased to announce today the appointment of Steve Sargent as a nonexecutive director of the Ramsay Board effective the 25th of November. Steven has joined us today on an informal basis. He brings to Ramsay an extensive international executive experience, including 22 years at General Electric, where he led businesses, including health care, across the U.S.A., Europe and Asia. He has been serving on a range of boards since 2015 and is currently a director of boards, including Origin Energy Limited and the Origin Energy Foundation Limited, Origin's philanthropical arm; infection prevention company, Nanosonics Limited; and The Great Barrier Reef Foundation. So welcome, Steve. Now turning to our results for the fiscal year 2021. We were pleased to report a 58% rebound in our statutory net profit to $449 million for the 12-month period to the 30th of June 2021. The solid growth in earnings reflects the strong growth in surgical admissions across our regions where lockdown restrictions were not in place. We were also pleased to determine a fully franked final dividend of $0.103 per share, taking the full year dividend to $0.1515 a share, a material increase on the COVID-impacted fiscal year 2020 payout and flat on the pre-COVID fiscal year '19 full year dividend. The higher-than-normal payout ratio of 79% reflects our confidence in the strength of the business and recognizes those shareholders who have supported us through the pandemic. During fiscal year 2021, Ramsay officially launched its sustainability strategy under the banner of Ramsay Cares. We have established 3 global focus areas to support healthier people, stronger communities and a thriving planet. Our approach to sustainability and any material social and environmental risks is overseen by the Board's Global Risk Management Committee. Craig will run through some of the initiatives and targets that have been launched this year in his presentation. Fiscal year 2022 has begun with all our regions still dealing with the challenges of the COVID environment, including lockdowns and surgical restrictions in Australia; a fourth wave of COVID cases in France as the country emerged from the restrictions; and in the U.K., a spike in COVID cases and surgical cancellations after Freedom Day and the associated isolation orders. Despite these bumps on the road out of the pandemic, the Board is confident that as each region adapts to the new normal, we are well positioned for growth through addressing the backlog in demand for health care services in both the public and private systems and benefiting from the long-term underlying growth drivers in the health care system. I would like to close again by thanking our employees and our clinicians. The Board is extremely proud of our team, not just for the vital work they have done through a very difficult period in the company's history, but also for their commitment to supporting each other and the health and well-being of our communities. So I'll now hand over to our Managing Director, Craig McNally, to present a more detailed summary of the past year and our start to fiscal year 2022.

Thanks, Michael, and I add my welcome to shareholders joining us today via the virtual platform. I'd like to start by adding my thanks to all of our people across the world for responding and rising to the challenge of unprecedented conditions created by the pandemic. For example, in Australia, in recent times, more than 700 Ramsay employees have worked with the public system in various capacities, including at vaccination hubs, and we've been treating non-COVID patients at many of our hospitals to help ease the pressures on the public system. In the U.K., Ramsay has been applauded for an outstanding response to COVID in partnership with the NHS. Ramsay U.K. has looked after more than 650,000 NHS patients, hosted more than 20 NHS services from its facilities and provided more than 16,000 cancer treatments for NHS patients. In Europe, Ramsay Santé has played a critical role in assisting the French government by treating more than 19,000 COVID patients since the beginning of the pandemic. Across the Nordic region, our people have stepped up to treat COVID patients, providing COVID testing in our primary health care facilities and, more recently, to assist in the rollout of the vaccination program. Our joint venture in Asia, Ramsay Sime Darby, has been assisting with escalating COVID case numbers in Indonesia and Malaysia since the start of 2021. Our people have been providing testing and vaccination services and treating public and private COVID patients in our hospitals. As our people, patients, doctors and partners grapple with the effects of COVID-19, we've been determined to make sure their health and well-being formed a central pillar in our sustainability strategy. That strategy came together with input from Ramsay people across Australia, the U.K., Europe and Asia. Their ideas and aspirations helped inform Ramsay's Global Sustainability Policy and new Ramsay Cares strategy. The Ramsay Cares strategy was launched this year and includes numerous targets around our 3 sustainability pillars: caring for people, planet and community. Our goals cover important issues such as diversity and inclusivity, mental health, reducing our carbon footprint and waste and shoring up ethical supply chains. Our sustainability targets and examples of some of the great initiatives underway across our regions are included in our latest impact report. Along with a major solid rollout, we've achieved gender balance across our senior leaders; boosted our research in clinical trials; started a range of new development and leadership programs, including our first cohort of global corporate graduates; and contributed to community projects such as the Ramsay Sime Darby Food Bank, which is helping people during COVID lockdowns in Malaysia. As a demonstration of our commitment to driving sustainability across the business, we have embedded sustainability targets in our debt facilities through sustainability-linked loans. Turning to our FY '21 results in more detail. The solid growth in earnings reflects the strong growth in surgical admissions across our regions when lockdown restrictions were not in place. However, our results continued to be impacted by surgical operating restrictions and the flow-on impact of social distancing and lockdowns on demand for nonsurgical services. Our earnings included revenue and cost support from governments in Europe and the U.K. for the use of our facilities and the provision of services to the public sector during COVID. I would note that the majority of revenue earned in the U.K. and France is, in normal circumstances, earned from the public sector, reflecting the structure of the market and our businesses in those countries. However, during COVID, we operated under specific arrangements with governments in our regions to deal with the pandemic. In Australia, we reported $11.1 million in revenue earned under COVID-related agreements with state governments, reflecting limited cost recovery for services provided to the public sector during outbreaks of the pandemic. Under these arrangements, we maintained our entire 30,000 strong workforce to be at the disposal of the public sector at considerable cost to us, and we did not access JobKeeper. The FY '21 results also include the impact of higher costs associated with operating in a COVID environment. Margins reflect both the drop in nonsurgical admissions and the higher proportion of lower-acuity surgical services in the catch-up volume. Our strong balance sheet has been maintained with leverage at the wholly owned funding group level on a pro forma basis declining to 0.7x, driving lower financing costs over the year. The balance sheet places us in a strong position to deliver on our strategy, to be a patient-centric, digitally enabled, integrated health care provider. As outlined in our results release, we have built an expanded pipeline of development opportunities across all our regions, but most particularly in Australia, and this will drive growth over the medium term as we leverage the underlying strength in demand for health care services. Group capital expenditure in FY '22 is expected to be in the range of $900 million to $1.1 billion, a significant increase on the $674 million spent in FY '21. Most of the increase is being driven by the Australian development pipeline, along with higher investment in digital and growth strategies. Moving to an update on the Australian business. Over the past few months, our business has been actively involved in supporting the pandemic response. Our pharmacies have been involved in the rollout of vaccines to the community. As part of supporting the mental health and well-being of our staff through this difficult period, we launched the Ramsay Well-being Challenge, The Mental Health Week. The campaign challenged participants to try something new to help thrive in every aspect of life. As highlighted in our recent trading update, our FY '22 earnings year-to-date have been significantly impacted by lockdowns, surgical restrictions, isolation orders and, particularly in the case of our hospitals in Southeast Queensland, border closures. The disruption to our activities has started to decline as lockdowns and surgical restrictions have been lifted in Sydney and patients become more comfortable with returning to hospital environments. The financial impact of this disruption on earnings in the first quarter of fiscal year 2022 is estimated to have been $55 million. The Australian business has accelerated its pipeline of development opportunities to ensure that we are well placed to leverage our existing position in the market to the demographic changes in the next decade and position ourselves for the evolution in the delivery of health care services. Investment will be focused on fast tracking brownfield developments, building out our mental health offering, expanding into new adjacencies that support the broader patient journey and strengthen the integrated care model and continuing to focus on cancer care, building on our proposition of one of the largest providers of cancer care services in Australia. Whilst short-term earnings have been materially impacted by the current wave of COVID cases, we are confident that as Australia moves to a position where lockdowns and surgical restrictions are not necessary, we will experience good growth in admissions as the backlog of surgeries is gradually addressed, and nonsurgical admissions return as the environment normalizes. Turning to our European business. And after extremely challenging 18 months on the COVID front line, it was pleasing to see that COVID cases across our markets in Europe had moderated, assisted by good vaccination rates, and most social restrictions are now lifted. However, we are mindful that it is quite possible that we will see an increase in COVID infections in the near term. Activity levels for the first quarter of FY '22 were below the prior corresponding period, reflecting the impact of a fourth wave of COVID cases in Southern France in the Northern Hemisphere summer and a strong post-COVID bounce in admissions last year. Staff attrition following COVID, combined with mandatory vaccination for all staff in hospitals in France from mid-September, has exacerbated the shortage of nurses, which has impacted the ramp-up of the business to meet the recovery in volumes. The focus of the management team is on remaining and recruiting nursing staff to enable the business to meet the demand from our patients and clinicians. The Nordic region has reported solid volumes following the lifting of social restrictions, driven by an increase in specialist care patients in Sweden and Denmark and the continuation of COVID testing and vaccination activities. The business is focused on capturing its share of the strong demand for health care services post the restrictions relating to COVID. As you can see on this slide, as part of Breast Cancer Screening Awareness Month, Ramsay Santé encouraged patients and the general public to get checked for breast cancer through their campaign, Pink October. This is part of a broader campaign to encourage people not to neglect regular health checkups due to concerns about visiting health care settings. Turning to the U.K. Our business is focused on attracting its share of the significant demand for health care services following the lifting of COVID restrictions. This slide shows a poster for a campaign designed to attract patients and clinicians to Ramsay hospitals. U.K. business has experienced highly disruptive short-term challenges through the first 5 months of fiscal '22 due to isolation orders impacting patients, doctors and staff at short notice. A material number of procedures were canceled over the period. However, the underlying pipeline of admissions remains strong, and the business expects canceled procedures to be rebooked over time. The operating environment has started to improve following the relaxation of rules around isolation and COVID protocols in hospital settings at the beginning of October. The business is adapting its operating model and processes to a living with COVID setting while ensuring that Ramsay continues to treat patients in a safe clinical environment. Public volumes have been slow to pick up than private volume as the NHS implements new processes and procedures. The U.K. government and the NHS have publicly stated that they remain committed to reducing the significant health care wait list in the U.K. Ramsay continues to work closely with government and the NHS around the model for delivery of additional capacity to the market. We officially opened the Buckshaw Hospital day-case facility in Chorley on the 21st of October, the third new facility that we've opened in the past 15 months. The facility will offer a range of services to both NHS and private patients. Turning to our Asian joint venture, Ramsay Sime Darby. And after a very dramatic increase in COVID cases in the first half of this calendar year, case numbers are slowly improving as vaccination rates increase. As a result, government-imposed movement orders are starting to lift. Activity levels for the first quarter were higher than the prior corresponding period due to underlying growth from the provision of COVID-related services, including testing, vaccination and the treatment of public patients, combined with the inclusion of the Manipal Hospital in Malaysia, which we acquired in May 2021. Ramsay Sime Darby has introduced A Better Health Post-COVID Program, to help patients who are experiencing lingering health issues from COVID to regain their strength and overall well-being. And finally, turning to the outlook for the business. While the financial results for the FY '22 period have been impacted by COVID-related disruption, it is pleasing to see that the underlying demand for health care services remains strong in all our regions. As the region in which we operate emerge from lockdowns, we are well positioned for growth through addressing the backlog in demand for health care services and benefiting from the underlying growth drivers in the system. The management team will be focused on ensuring that we have programs in place to retain and attract good people to support the business moving forward. Our strong balance sheet and cash flow support our development pipeline and position us well to deliver on our long-term strategy, and we will continue to remain disciplined in our approach to investment. I would like to finish by once again thanking all our people for their ongoing commitment to supporting our patients, clinicians and the broader community. I'd also like to thank you, our shareholders, for your ongoing support as we continue to navigate the pandemic and beyond. I'll now hand back to Michael to move to the formal part of the meeting.

Thank you, Craig, and I hope everybody found that an informative summary of our business activities. We'll now move to the formal agenda of the meeting, and the first item of business is the consideration of the financial report of the company and its controlled entities and the reports of the directors and auditors for the financial year ended the 30th of June 2021. Whilst there is no resolution for this item, it's an opportunity for shareholders to ask questions, including in relation to the business and operations generally. We have our auditor, Doug Bain from Ernst & Young, present, and available to answer any questions you have on the conduct of the audit, the preparation and content of the auditor's report, and the company's accounting policies and auditor's independence. As per the requisite legal requirements, fiscal year 2021 was Doug's last year as lead audit partner for Ramsay, and he has handed over to Mr. Ryan Fisk, who now has commenced as a lead audit partner, and we still have Vida working for us as well. We thank Doug for his contribution and welcome him and Ryan to the meeting today. I'll now respond to any questions or comments that we have received on this item or in relation to the operations generally. Henrietta, do we have some questions?

Yes, Chairman. We have received a number of written questions from shareholders on this item. The first question received from company shareholder Demir Proprietary Limited is, how well was the company prepared for COVID.

Yes. So look, I think no one in the world, including us, anticipated the impact of this pandemic. Meanwhile, our priority throughout has been the well-being of our employees, patients and clinicians and the sustainability of our business. I'm very proud of our exceptional team around the world who continued to work to deliver the best care to people and communities facing very challenging circumstances. In each of our regions, Ramsay employees and clinicians played a key role in supporting national health systems and public health campaigns against COVID, and this role has continued in 2021. Despite the unavoidable disruption of the pandemic, we reported a solid financial result in fiscal year 2021. This reflects the resilience of the organization in the face of an incredibly challenging and operating environment.

Our second question from Demir Proprietary Limited is, does the company have strong internal controls.

Look, we're very satisfied. We have strong internal controls in place. It's a focus from the Board down. One of the Board's key responsibility is monitoring systems of risk management, internal controls and legal compliance, and we're supported in this by the Board committee structure and an internal audit function.

Demir Proprietary Limited has also asked, "Does the company have sufficient legal staff?"

Look, we have a global legal team and regional legal teams with the requisite depth and experience and knowledge in each jurisdiction to properly support the business, both operationally and strategically.

We have also received 3 questions from Mr. [ Rex Mori ] and Mrs. [ Deborah Lynn Mori ]. They are, "When will you have a DRP plan? When will you have a rights issue? And when will long-term shareholders get bonus shares?"

On the first question, we've not activated the dividend reinvestment plan as our balance sheet is well capitalized at the current time following the capital raising in May 2020. DRP plans are EPS dilutive unless the additional capital is required and invested. However, we considered activating the DRP on a regular basis. For the same reason, we have no plans to raise further capital via rights issue. And finally, at this time, we have no plans to issue bonus shares in lieu of cash dividends. Bonus shares, of course, are dilutive unless the additional capital is required.

Chairman, we also have a comment from Mr. [ Jack de Moldeau ]. "Your performance is poor."

Look, I don't agree with that. I'm extremely proud of the way Ramsay and our people have responded to the challenges of the pandemic. The reason we are here is to provide services to patients, and we have an exceptional team across all of our regions that has gone above and beyond to do just that, to deliver the best care to patients during a very challenging time. In my speech, I mentioned some of the highlights of the way we've worked with governments around the world to care for communities and support national health systems. From a financial perspective, despite the unpredictability of pandemic lockdowns and surgical restrictions across our regions, we reported a solid financial report for fiscal year 2021.

We now have 2 related questions that I will read out together from company shareholder Vz Super Proprietary Limited. "How is working for government, RHC have nationalized, going to make profits? When will RHC start making its own company decisions instead of waiting on government to tell it what to do?" From shareholder, Mr. [ Vince Sapio ], "When will RHC be free from government interference and control, nationalized without a premium?"

Look, we've played an extremely important role to support national efforts in the fight against the pandemic. Across the globe, our relationship with governments has strengthened as a result. We partner with all types of organizations for the benefit of our patients and all our stakeholders. And I can assure you, Ramsay always makes its own decisions.

We also have a number of questions from Mr. [ Timothy Michael Clifton ]. "To what extent has the COVID pandemic affected business in areas such as Ramsay Sime Darby in hard-hit pandemic areas such as Indonesia, Malaysia and Hong Kong? Does Ramsay Health have an exit business strategy in place for the future in areas such as Indonesia, Malaysia and Hong Kong, where the COVID pandemic eventually abates? When the COVID lockdowns are finally lifted, at what rate -- at what rates is financial recovery expected to increase for Ramsay Health Care?"

Look, I think I might let Craig respond to these questions.

Yes. Look, the pandemic has had a significant impact, as outlined in our presentations. We anticipate a more favorable operating environment going forward in FY '22 as COVID-related movement and border restrictions ease, and the strong latent demand for health care services can be met. In terms of business strategy, we have a strategy in place in each region, including Asia. We've been focusing on where the business wants to be in 2030 and what needs to be done to get there. Our overarching vision is to leverage Ramsay's global platform to be a leading patient-centric integrated health care provider of the future.

Thanks, Craig. Are there any more questions, Henrietta?

There are. We've received a question from Ms. [ Athena Pizolli ]. "What percentage of RHC's hospital admissions in each country are due to COVID itself? What percentage of RHC's hospital admissions in each country are due to the adverse reactions to the COVID vaccine?"

I'd probably get Craig to answer that one.

Well, direct COVID patients, the proportion of admissions is low, and it depends on the region. So in Australia, we didn't treat many COVID patients directly in the early stages. We took some patients, particularly in Western Australia, where we took patients off the cruise ship, Artania. The big impacts have been in Europe, in France and Sweden, particularly, but still, it's a smaller proportion of what we do overall.

We also have 2 additional questions on this item from company shareholder, Alcat Proprietary Limited. "What are Ramsay's future plans to expand into the pharmacy industry in Australia? And what other expansions in Australia or overseas are in the pipeline?"

Do you want to answer that one as well, Craig?

Yes. No. Thanks, Michael. On the first question, the pharmacy business is moving to a model that focuses on hospital dispensaries and community franchise pharmacies co-located with medical centers and Ramsay sites in order to support patient pathways as part of an integrated health care solution. In terms of expansion, growth is a key pillar of our group strategy, as I've discussed. Among other initiatives, this will involve strategic expansion through brownfield and greenfield developments to expand our footprint and create hospitals of the future. We are significantly increasing our development pipeline in fiscal 2022, and investment is expected to continue at elevated levels over the next few years. Over the medium term, returns from this investment are expected to be in line with previous achievements.

Okay. Thanks, Craig. Do we have any more questions? Henrietta?

We do. We have another question from shareholder, Ms. [ Athena Pizolli ]. She's asked, "How likely is it that RHC in each country will be able to return to its own private hospital status as against the government's requests and orders? When is this likely to take place?"

Craig, I think another one to you.

Thank you. Look, I think the pretty first for us at the moment is to be part of the overall solution in all the markets in which we operate. Now getting back to a more normal business depends on where those countries are in the response to the COVID pandemic, and what we're seeing as vaccination rates increase, is we are getting back to more normal operating patterns. However, in the short to medium term, there still will be restrictions, and that will impact the business. However, as I mentioned earlier, we've got strategies for what we need to be doing coming out of COVID environments, but I think one of the benefits, if there is such a thing in a difficult challenging environment we've had over the last couple of years, the relationships with government have been strengthened, and so I see that continuing well into the future, and so I'm not looking that we need to be totally independent from what government does. We need to be part of it -- We're a health care system, we need to be part of that, but hopefully, all markets get back to some normalized practice as soon as possible.

Craig, Ms. [ Athena Pizolli ] has asked again, to repeat the question, "What percentage of RHC's hospital admissions in each country are due to the adverse reactions to the COVID vaccine?"

= I'll say the same answer then. It's a low percentage. Most of the activity which we have undertaken has been for non-COVID patients. However, in France and Sweden in particular, there was an increased number of COVID patients, and I called out in my presentation, in France, we've treated 19,000 COVID patients since the pandemic commenced, but it's still a smaller proportion of overall activity.

Thank you, Chairman. That concludes the questions on this item.

Thank you, Henrietta, and thank you to all the shareholders for their questions. We'll now move to the next item. The second item is the adoption of the 2021 remuneration report. This remuneration report reflects our new remuneration framework that was adopted last year in consultation with proxy advisers, institutional investors, equity analysts and other stakeholders. I'll now respond to any questions we received on this item. Do we have questions?

We have 2 related questions that I will read out together. The first is from Mr. [ Gregory Patrick Watts ]. "Whilst we agree with LTI plans, why pay out 50% for average performance, i.e., at the middle of the cohort? Wouldn't it be better to pay 0 at the midpoint of peers than pro rata from there, reward outperformance, not average performance?" The second question is from Mrs. [ Christine Gaywoss ]. "On the LTI plan, why pay out 50% at the midpoint being average? Payout should only commence when performance is above average."

Okay. I think I'll ask our excellent Chair of the People and Remuneration Committee, Alison Deans, to respond to those questions.

Thanks, Michael, and thanks for the question. Look, it's market practice for 50% vesting to occur at the 50th percentile of performance, and it's obviously important that our remuneration is competitive and fair, so in line with market practice. So the Board is comfortable that our framework is in line with market practice and delivers an appropriate level of reward for the performance achieved. It's also important to note that the 50% vesting of the TSR tranche only relates to a percentage of the overall number of performance rights granted. There are 2 packages of grants with different hurdles applying to each package, and I'd also note that the outcome this year was that no LTI vested. This was in line with the company's share price performance being below the 50th percentile and demonstrates that there is alignment with the interest of shareholders.

Thanks, Alison. Do we have any more questions, Henrietta?

No, Chairman. That concludes questions on this item.

Excellent. Okay, and I thank shareholders again for their questions. Please ensure that you have cast our vote on this item. The proxy results are shown on the screen. The third item is the election of directors. The first director to be considered for election is Mr. David Thodey. David was elected as a director of the company in November 2018. He is our lead independent director, Chairman of the Nomination and Governance Committee and a member of the People and Remuneration Committee, and an excellent director, I might add. On behalf of the Board, I strongly recommend a vote in favor of David's reelection, and I'll now ask David to say a few words in relation to his reelection.

Well, thanks very much, Michael. And as he said, my name is David Thodey. I have been on the Board now for 4 years, and I'm really grateful to be standing again for reelection and to be joining a really capable Board here with wonderful colleagues. So it has been a challenging few years. COVID really has been quite an unexpected challenge for us and the whole industry, and also, as we're now emerging from COVID with the challenges of staff and the pressure they've been under, as Michael and Craig have taken you through. But I do believe our company is well placed for growth as we move forward, and I think as we execute our long-term strategy for growth, we have a great skills base on the Board, and I think I can bring some of my skills to bear to the benefit of our company. Let me just quickly go through them. So firstly, as we continue to transition from really being this wonderful domestic, founder-led hospital management business to being a truly global health care business, I think that my previous experience at IBM and then at Telstra does sort of give us a perspective as we start to scale. Secondly, something that has really differentiated Ramsay for so long is this commitment to our people and because people is what we're about, and our deep purpose is people caring for people, and that's something that I really do share with the whole Board and everyone within the Ramsay family. Thirdly, as we have to implement a far more aggressive digital technology strategy, I think my experience across IBM and then subsequently in some of the work I've been doing is really important as we try to deliver a better experience to staff, patient and doctors. So that, I think, is a critical element of our future. And then just lastly, as a number of the questions have alluded to, public policy is very important, and my experience and work in regulated industries, I think, can help us make sure that we continue to anticipate both societal changes but also changes in public health care policy, which will continue to be a critical part of our success. So with my growing experience and being a Board director, I'm looking forward to helping the Chair and the Board as your lead independent director to make sure we have the highest levels of governance, and we continue to perform our role as directors with care and diligence. It really has been a privilege to serve you as a director over the last 3 years, and I am delighted to make myself available again for another term as a director of this great Australian company.

Thank you, David, and we look forward to working with you for the next 3 years as well. I'll now respond to any questions or comments we've received on this item. Do we have any questions?

We have received a question from the Australian Shareholders' Association. "The ASA determines its voting intentions within its published guidelines. One of those guidelines is around the idea of workload for Board members. As advised, the ASA thinks that being on 5 boards would give the board number -- the board member, the time they need for a company, particularly when issues arise for a company. The COVID crisis has been and continues to be an issue for Ramsay, and we understand that there were many informal Board meetings during the early part of this pandemic. It was for this reason that the ASA wanted to query Mr. Thodey before deciding on our vote to support his reelection to the Board. It is now our understanding that Mr. Thodey has resigned his position from the CSIRO, so the question of workload is unnecessary, and we apologize that we didn't understand this when our voting intentions were published. We did note from the annual report that Mr. Thodey had attended all the formal meetings that were called, and we published that observation. If Mr. Thodey would still like to tell the meeting how the experience of COVID has impacted his experience of his Board work, I'm sure we'd still be curious enough to know. It is such an extraordinary time."

Well, firstly, thank you for the question, and I -- there was no need to apologize. Actually, my role at CSIRO was extended because of COVID. I was due to retire or resign in 2020, but because the government was going through all the challenges that I was asked to stay on for another year. So no need to apologize on that front. But to respond to your specific question around the impact of COVID on board, unquestionably, it has been very large. As we've really sort of moved into uncharted territory, especially in the early times, I think every board that I've been on has had to sort of meet more often and to try to work through those issues, but we confronted many of those issues in 2020. 2021 has been not quite as demanding but still has required more time. I'd also add that every industry is different. So if I refer to the work I do in the digital technology online businesses, the actual workload had not changed that much because we weren't as impacted as much as I compare that to Ramsay when we were subject to government requiring us to close down elective surgery. So it is -- it's not a one-size-fits-all. But I do just want to stress, I mean, I take my responsibility as a Board director very seriously, and if I ever felt that I was unable to commit enough time to job, I prefer to resign. Because when you're in these roles, it's very important that you do give as much as you can, and I think for all the directors I work with on this Board, that is what I see. So I think that probably gives a little bit of a sense of where we're at.

Can I just add to that, that I certainly or we have -- certainly haven't seen David being overworked in his Board capacity. He's always available, always happy with an e-mail to the staff. So he's a great director and a great contributor. So you have -- there are no concerns about his workload from the Board's point of view. But thank you for the question.

Chairman, that concludes questions on this item.

Okay. So can you please ensure that you've cast your votes? The proxy results are shown on the screen. I think Mr. Thodey looks pretty safe there. The second director to be considered for election is Ms. Claudia Süssmuth Dyckerhof. Claudia was elected as a director in 2018, and she's a member of the Risk Management Committee. On behalf of the Board, I strongly recommend a vote in favor of Claudia's reelection. And I'd like to say it's been a difficult couple of years for Claudia because she's been stuck over in Europe and Hong Kong, which is isolated a few times and quarantined a few times, but she has always been available. She certainly contributes, and we're delighted to have her on the Board. So I'll ask her now if she'd like to say a few words about her reelection.

Thank you, Michael, and good morning, everyone. Greetings from Hong Kong. I'm Claudia Süssmuth Dyckerhof, and as much as I would like to be with my colleagues in Sydney, unfortunately, the COVID travel restrictions in Australia still make it once more impossible for me to be there physically with you today. But you can be assured I'm deeply connected and engaged with and for Ramsay, and at least I could travel to Europe during the summer, and I could work with Ramsay Santé, which was a delight, and to really see and work with the people. Today, I need to talk to all of you again virtually, I think something that we have worked and learned to do in the last 22 months, and I stand before you today seeking your support for my reelection to the Board of Ramsay Health Care. Let me briefly provide some background about me and, more important, about my work at Ramsay. Since 2018, I have the privilege of serving Ramsay in my capacity as an NED. I'm a German passport holder, happily married, a mother of 5 children between 8 and 21, and while my home base in Switzerland, my family and I have been living and working in Asia for the last 6.5 years, now in Hong Kong. I'm a dedicated, very passionate health care person. And after 21 years with McKinsey in Europe, the U.S. and then 10 years in Asia, focusing entirely on health care, and that kind of comprises pharmaceuticals, med device, payers but then also providers, I decided to move into an NED role -- board roles. And now I work with large corporates listed as well as less mature, more agile, innovative start-ups in the health care domain, and that is what excites me, working on topics that really matter to patients. I really do care about patient centricity, patient outcomes and making a difference to patients, and that's exactly what Ramsay is, making a difference on the medical side from, again, medications, med device and then the medical service side. And I strongly believe that we can only address the real patient needs if we all work together in the ecosystem around the world. Now to my work at Ramsay. COVID has certainly provided all of us with additional challenges to think through more than the normal agenda, I would say, and at Ramsay, we did not only have to fulfill the different regulations by the governments. We were obviously confronted with government restrictions around the world, government expectations, and what we really cared about was to do what is best for our patients. As the Board really worked really diligently with the management team to address the challenges of COVID, and the key goal was always and will remain optimal health care delivery, and I want to note this that at times, that meant to raise our voice for those patient groups that were potentially a bit neglected, given there was so much focus on COVID patients. And we all know that patients with chronic diseases, with cancer, with the need to get orthopedic surgery and so on, they continue to have their own medical needs, and those do not stop because of COVID. So we felt a real obligation to make sure we get the right balance there. Michael mentioned it already. I'm a member of the Risk Committee, and I truly enjoy my work. I can assure you that we reflect on various risks for Ramsay, not only COVID related. It kind of ranges from cybersecurity to securing optimal care, avoiding or reducing [indiscernible] events, optimal patient but also health care worker satisfaction. Our people need to be satisfied and need to be happy people to do the best for our patients. And then there are many more responsibilities as an NED at Ramsay that go much [Audio Gap] experience working with different health care companies around the globe that I can really leverage at Ramsay. With this, I hope I have contributed, and I want to continue to contribute to optimal care for our patients and really also for the continued value creation for Ramsay shareholders as Ramsay certainly pursues the next phase of growth. I respect your support of my reelection and the responsibility that goes with it. I know I want to continue being a Board member of Ramsay Health Care and do the best for the Ramsay Health Care shareholders. Thank you.

Thanks, Claudia. We are a global health care company, and Claudia brings a very important global perspective on the subject with her extensive experience around the world, I think it was for years. So we're delighted to have her on the Board, and she's a great contributor. Do we have any questions on Claudia's election?

No questions on this item.

Excellent. So please ensure you've cast your vote on this item. I think it's pretty comprehensive. Item 4 is the proposed grant of performance rights to Craig McNally. The Board firmly believes that the company's long-term growth has been sustained and underpinned by our long-term incentive program, which aligns executive reward with shareholder wealth through the achievement of the performance conditions, as described in the Notice of Meeting. I'll now respond to any questions on this matter. Do we have any questions, Henrietta?

Chairman, we don't have any questions on this particular item of business. However, we do have a further question on the remuneration report item. Thank you. "Isn't it market practice to be average?" That question is from Mr. [ Howard Harry Coleman ].

I'm not sure I understand the question. Is it -- could you repeat the question?

So the question -- it's a follow-up from Alison's comments on the LTI and the TSR being included and the 50% mark being market practice, and I think the follow-up question to those comments is, "Isn't it market practice to be average?" I think the question should be is it market practice to be average, perhaps.

Want me to...

Yes, please.

I'm not sure I understand the question, and I'm not sure I add relative to what I said previously. Look, I think the important context here is that we want remuneration to be competitive in market, and that's why we do look at market practice. We also want it to be aligned to shareholders, and that's why we have a combination of factors that lead to the LTI with TSR being just one of them, and that is -- but that is why the vesting schedule does for -- the TSR component of LTI does start at 50% if you're above the median.

Okay. Look, can I just say, look, our remuneration practices are designed to retain our staff. We have some of the best staff in the world, no doubt, and we want to retain them. So we have to be fair to shareholders, and we align their interest to the shareholders' interest, but it's important we retain them. We remunerate them accordingly, and we want to make sure that our incentive scheme is fair and balanced, and I think it is.

Thank you, Chairman. We have been asked follow-up questions from Mr. [ Howard Harry Coleman ]. I do think you've addressed the question, but I will read it out so that the shareholder understands that you have heard the question. "Shareholders want to invest in companies that are above average with executives that achieve above average. So why copy market practice to be average? And then again, in other words, why aim to be average?" I think you addressed the question.

Yes. [ Howard ], I think it's [ Howard ] who I know from past year, so he's a great supporter of the company. I think we -- I hope we've answered the question. That is market practice, and we're happy, and we are advised by our remuneration consultants, and I think we're happy to basically run with that practice. But thank you, Howard.

Chairman, that concludes questions on this item. .

Okay. So please ensure you've cast your vote on this item. The proxy results again are shown on the screen, and again, it's quite comprehensive. Ladies and gentlemen, that concludes our discussion on the items of business. I'll close the voting system for items 2 to 4. Please ensure that you have cast your vote on these items of business. We'll pause for a short moment to allow all shareholders to finalize their votes. [Voting]

Okay. Voting is now closed. So we'll have another short pause for approximately another minute while the results of the items are calculated. Once ready, they will be displayed on the webcast. So we can pause for another minute. I think the votes are -- the result of the votes for item 2 to 4 are shown on the screen. I think they are shown on the screen. Sorry, here they are. All right. Well, it's obvious that all the resolutions have been passed fairly comprehensively. So that brings us to an end to the 2021 Annual Meeting. Thank you for your participation again. I'd like to finish by again thanking Peter Evans. He's been a wonderful servant of this company and a great friend of mine and the rest of the Board and management, and we seriously will miss him, although we may find something for him to do in the future. So Peter, thank you, on behalf of the Board, very much for everything you've done for this company. And the meeting is now closed.