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

Good morning, everyone and thank you for joining us for our FY '23 results presentation. I'm Craig McNally, and I am joined by Martyn Roberts, our Group Chief Financial Officer. Today, we will provide an overview of our performance for the 12-month period, an update on our strategic direction, before covering off on the outlook for the Group. I would like to start by thanking Ramsay's people and clinicians who have delivered the results today. We have continued to focus on providing the highest quality care to our patients, creating fit for purpose treatment facilities for our clinicians and supporting colleagues, public authorities and local communities impacted by local and regional issues including the pandemic, natural disasters and conflict. On behalf of the Board and senior management team I would like to recognize their fantastic performance through a period of significant change and thank them for their ongoing efforts. Turning to the key themes coming out of the result. The EBIT increase 14.6% as driven by stronger growth from Australia, Ramsay UK and Asia, it was partially offset by reductions in Ramsay Santé and Elysium. The 8.8% increase in NPAT includes materially higher financing costs and a higher effective tax rate. We are accelerating our digital and operational transformation to improve performance, patient experience and clinical outcomes that's with a particular focus on Australia. We c to invest in Australia to drive growth and so our greenfield and brownfield development programs have been modified to reflect the current environment with the emphasis shifting to digital and data programs. We will be targeting revenue growth by driving volume again above industry growth rates and negotiating further increases in reimbursement rates to compensate for the high cost environment. For the funding group, we're targeting leverage of less than 2.5x and that is helped with the potential sale of Ramsay Sime Darby but also increased earnings from the business and that's an improvement from the current position of leverage of 3.2x. In FY '24 we expect mid to high single digit top line growth and transformation initiatives in place will help drive margin improvement over time albeit in FY '24 margin recovery will be slowed by the inflationary cost pressures and an increase in digital and data investment. We're focused on continuing to improve our strong competitive position to take advantage of the positive long term trends in healthcare. Moving to the FY '23 result, which I've said at the operating level reflects a gradual recovery in Australia, a strong improvement in Ramsay UK and that's driven by materially higher volumes and productivity improvement. Another good result from Ramsay Sime Darby, and as I said, it's partially offset by lower results from Ramsay Sante and Elysium. As you can see on this slide EBIT margins excluding non-recurring items did improve from a weak third quarter. Generally trading in July has continued to follow the improved trends experienced in the fourth quarter. The Board determined a fully-franked final dividend of $0.25 per share taking the full year dividend to $0.75 per share, which represents a payout ratio of 60% which is at the bottom of our target payout ratio of 60% to 70%. We believe this balances the needs of shareholders with the company's focus on reducing leverage over time. Moving to the results in Australia. The operating environment in Australia was stop start throughout the year with a rate of growth slower than was expected. The challenging conditions were felt across the industry and it was pleasing to see this week's APRA data that despite the difficulties the businesses faced we have improved our market share of the private health insurance market over the 12-months to the end of June. Certainly that's more significant when we compare it to 2019. We believe this demonstrates the quality of our hospital portfolio and the outstanding care our clinicians and people provide to our patients. The less predictable environment added to the complexity of managing labor in an extremely tight market increasing labor cost ratios to higher than normal levels at various points in time. The results have started to benefit from a range of initiatives in this area with EBITDA margins in the fourth quarter being 200 bps above margins in the third quarter. We completed negotiations on a number of health fund contracts during the period at rates that are more reflective of the current environment. However, given the ongoing pressure on labor costs caused by public sector EBA results and generally higher costs, including increases in new state based levies, things like the mental health levy and the COVID levy, which in the full year are in excess of $11 million. We are revisiting our contracts to ensure the higher costs are encapsulated in reimbursement structures going forward. I'd just like to reiterate that to address the issues impacting the business at the current time, we have accelerated our business transformation programs and that is an immediate priority. Just looking at trends in activity, surgical volume growth reflected the backlog of cases due to surgical restrictions and high levels of cancellations due to COVID in the last few years. Growth was biased towards day and short stay surgery, reflecting the lower level of complexity in the case backlog, and we believe addressing both the public and private backlog will take a few years to play through and we are positioning the caps of this volume, where it makes commercial sense particularly on the public backlog. Non-surgical volumes started to improve in the second half, with rehab and medical admissions growing strongly as activity in the community rose and following stronger surgical volumes. Psych admissions remained below trend with overnight cases stronger than day admissions. We continue to look at a range of measures to leverage our expertise and capacity in mental health to grow volume, including the recruitment of additional psychiatrists and potentially working with the public sector on solutions to address the mental health crisis. Turning to the investment pipeline in Australia, spend on projects during the period was $208 million, and a number of smaller projects were completed in the period with an investment value of $73.8 million. Given the escalation in building material costs and other issues that the building industry is facing at the current time, our development program for the next 1 to 2 years will be between $250 million to $300 million per annum and targeted at the projects in the portfolio. In the out of hospital area, we continue to make selective investments in our new and adjacent out of hospital services. This strategy is designed to extend our relationship with the patient, making healthcare more seamless for them and creates a referral channel for our hospital network. We have progressed our digital and data strategy which has multiple streams of work with the initial investment focused on building our foundations, improving efficiency and productivity and driving better outcomes for our patients, people and doctors. This year, we invested $38 million in total of which $27 million was OpEx. Further to the numbers we released at the interim result, we've now further scoped the projects for the next couple of years and we've provided a breakdown of the spend between OpEx and CapEx on this slide. In FY '24, we expect OpEx, net of benefits from the various programs we are rolling out to be in the range of $60 million to $70 million or approximately $30 million to $40 million higher than in FY '23. At this stage, we expect net OpEx to peak in FY '25 at $70 million to $80 million and to become an overall net benefit to the business in FY '28. We'll obviously be trying to accelerate this timetable where possible. CapEx associated with current projects is also expected to peak in FY '25-'26 at between $70 million to $80 million. A large number of projects are all, or I should say a number of large projects costs, are already underway. While additional key projects are scheduled to be launched over the next 18-months, we have also delivered multiple smaller automation projects that create immediate value for the business. So this slide reflects in broad terms where investment will be allocated. There are approximately 48 projects currently underway and these focus on delivering the full multi-year strategic programs which include electronic patient health record, a patient hub project called the Ramsay Health Hub, and that is intended to build out a full end-to-end seamless digital admission process and patient experience, and a predictive insights project which is designed to improve our capability in AI and Machine Learning to support improved decision-making and scenario analysis. The focus of this work-to-date has been to deliver better clinical coding and theatre utilization. We will provide a more detailed view of these projects at an Australian investor session we are planning in early November, but suffice to say the investment in this area is designed to improve our competitive position and drive the growth of the business in both the immediate and long-term. Turning to the outlook for the Australian business, our Australian business is uniquely positioned to benefit from the underlying growth in demand for healthcare services in the future. We have ramped up a range of operational and transformational programs in 3 broad areas. Firstly, improved revenue management, which will include leveraging technology to streamline processes and improve consistency of coding and billing. Secondly, activity growth, which will include redesigning models of care generally and targeting increased public work. And thirdly, operational excellence and cost efficiencies. We'll give you more detail on these programs in November. We expect the FY '24 result to benefit from mid-single-digit volume growth, combined with indexation together with the productivity and other benefits flowing from the programs I've just spoken about. There are factors that will slow margin improvement, including higher digital and data OpEx, the ongoing impact of inflation on costs, in particular labor costs, and the higher state taxes and levies I've just mentioned. Capping off the Asia-Pacific region is our joint venture in Southeast Asia, Ramsay Sime Darby, which reported a full strong year result, reflecting growth in inpatient activity in our Malaysian hospitals. The equity accounted after-tax contribution increased 30.1% to $19.9 million. I would note that RSD earnings are seasonally stronger in the first half of the financial year. Following the release of our ASX announcement in June, we have, together with our partner Sime Darby, commenced the sale process for RSD, which has resulted in the receipt of a number of non-binding indicative offers. We are in the process of narrowing the number of parties we'll take through to the next stage of the process, and we expect to announce the outcome of the process before the AGM in late November. Turning to the U.K., Ramsay U.K., our acute hospital business, reported a very strong turnaround in performance, driven by a 14.4% increase in admissions, a higher level of acuity, and the benefits of an improved operating environment. Labor shortages are starting to ease, although the market remains tight in some areas, and inflationary pressures have peaked. The business has done a very good job of offsetting these pressures this year. After operating in line with budgets for the first 5 months of ownership, Elysium had a disappointing year, with acute labor shortages in non-clinical staff in particular, resulting in materially higher labor costs and lower occupancy due to the difficulty in staffing facilities. The business has invested in centralizing recruitment and training facilities to fast-track onboarding and training, and improve retention rates, which is proving to be successful. As a result of these initiatives, vacancy rates have started to decline, assisted by an improving labor market in the U.K., and a growing offshore recruitment pipeline, lowering agency costs. Labor as a percentage of revenue has declined to 68% in July from the FY '23 full-year ratio of 72.5%. In accordance with the accounting standards, the carrying value of Elysium's physical sites was reviewed at year-end, resulting in a $20.5 million impairment of the carrying value of 3 of the sites in the 84-site portfolio. Turning to the outlook for the U.K., Ramsay U.K. is expecting mid-to-high single-digit volume growth in FY '24, driven again by both NHS volumes as well as private pay that continues to grow as a segment of the market. A new hospital at Kettering, which is called Glendon Wood, has opened in the last few weeks, which is also expected to contribute to top-line growth. Elysium's focus this year will be continuing to reduce vacancy levels, replacing agency workers with permanent staff, and lifting occupancy levels. Their performance is expected to improve over FY '24. The business has a strong relationship with the NHS, and the underlying demand for mental health services supports the medium-term outlook for the business. NHS tariffs for the year commencing 1 April 2023 were finalized in mid-August. The final tariffs for both businesses are in line with our expectations. Turning to Ramsay Santé, where after a slow start post the Northern Hemisphere summer, activity levels did pick up with growth in both surgical and non-surgical activity, and higher volumes in its allied and primary health services in the Nordic region. Support from governments in all its regions introduced in response to COVID declined 28% to $290 million. The MSO tariff increase for the year commencing 1 March is 5.4%, with the follow-up care and rehab tariff at 1.9%. The business does not believe these tariffs compensate them for the cumulative impacts of inflation over the last few years. Ramsay Santé is working with the industry to ensure the French government understands where the cost challenges exist to better inform future tariff settings. The Nordic region reported a strong result driven primarily by businesses acquired in FY '22, including GHP, that contributed revenue of $314 million, or $269 million more than in the prior period. The EBIT result had the benefit of non-recurring items of $43.1 million, including profit on asset sales of $55.3 million in total, as the business continues to optimize its portfolio. The Nordic result was impacted by a decline in COVID-related activities, such as testing, as well as lower volumes and average level of acuity at St Göran hospital. Absenteeism due to sickness and staff shortages impacted capacity utilization, although this improved in the second half of the year. Turning to the outlook, in the short term Ramsay Santé's priorities will be to continue to implement programs to address significant inflationary cost pressures, and invest in its agreement on quality of life at the workplace to address the labor shortages that remain a key issue in some areas. The French government has extended the revenue guarantee to 31 December 2023, with the safety net structure now reduced to 70% of any shortfall experienced, reflecting the decline in COVID cases in the community. The Nordics will be focused on the integration of recent acquisitions, the continued development of an integrated digital platform, and resolving the performance at St Göran. In the medium term, Ramsay Santé will continue to focus on its strategy to become an integrated digi-physical healthcare business, attracting and retaining patients through the delivery of a contiguous health services pathway. This will encompass investment in new services, including select investment in primary care, imaging, prevention, and outpatient and at home services, as well as strengthening the base hospital network and exploring new payer opportunities. As I've said, while skills shortages have eased globally, challenges remain across the healthcare workforce, notably in training and recruiting the next generation of workers while retaining and engaging our people. The key priority areas of Ramsay's workforce strategy include providing flexible working conditions, more accessible learning and training opportunities, expanding our leadership programs, and investing in technology to simplify processes and allow our people to focus on providing high quality care. Through the year, we've built on our successful programs with new and expanded initiatives for local and international recruitment, and I'm pleased to say that, it's starting to show results. In Australia, vacancies, turnover, and time to fill are all down over the past 12-months. We are recruiting nurses locally and internationally. We're also growing our leadership capability at all levels of the business. Efforts in our U.K. acute hospital business have seen the clinical vacancy rate drop from 13% to 9% over the year, and Elysium opened a new recruitment hub in January and has onboarded more than 447 net FTEs, including 197 international healthcare workers. Our sustainability strategy is showing progress across the board, with our net zero ambition on track to reduce scope 1 and 2 emissions by 42% by 2030. Our efforts to reduce emissions include a greener theatres campaign, and most of our hospitals are in the process of greatly reducing the use of the anaesthetic gas desflurane in favor of gases with lower emissions. We know we can't reach our targets alone, and this year we have achieved our goal of getting at least 40% of our suppliers to complete sustainability assessments, and we are on track to reach our 2026 target of 80% of suppliers. I'll now hand you over to Martyn to run through the financials in more detail.

Thanks very much, Craig, and good morning, everyone. As Craig has outlined, the 12% increase in revenue reflects improved surgical and non-surgical activity across all regions, combined with a $767 million increase in revenue from recently acquired businesses. During the period, all regions felt the impact of high inflation, particularly in labor costs, along with labor shortages in key areas, which impacted capacity utilization. In addition, the first quarter of the year was impacted by the COVID environment. As the decision to conduct the sale process for RSD was made before the end of June, the business has now been classified as a discontinued business and an asset held for sale. The segment note in the accounts only represents continuing businesses for both this year and last year, however, there is a table in the OFR that gives you the segment earnings inclusive of RSD for a proper comparison with previously reported figures. The result includes non-recurring items, which we have given you more detail on in the OFR. The EBIT contribution this year from these items was a positive contribution of $42.1 million, compared to a negative $60.5 million contribution in the prior period. I would note that when you strip out the impact of these in each of the halves, EBIT in the second half of the year was only down 1.5% on the first half, reflecting more acute seasonality in Australia this year, and a weaker half from Elysium. Below the EBIT line, non-cash mark-to-market movements in both Ramsay Santé and the Funding Group's debt facilities made a $26.8 million positive contribution this year, compared to $34.1 million in the prior period. Excluding these items, net financing costs, if you exclude AASB 16 leases, increased 71.5%, reflecting higher base rates and higher average drawn debt across the period compared to the prior period. FY '24 total net interest expense, including AASB 16 leases, is currently forecast to be in the range of $570 million to $600 million, subject to movements in base rates, of course. If a sale of RSD does occur, it is expected that the proceeds will be used to pay down drawn debt, which would reduce this range further. Our tax rate was also higher in the year, at 33.2% compared to 29.6% in the prior period, due primarily to the non-deductibility of some interest costs in the U.K. Operating cash flow increased 79% on the prior year, reflecting an improvement in the operating environment and the change in working capital as Ramsay Santé converted French government receivables under the revenue guarantee scheme to cash. Cash flow includes receipts from the sale of non-current assets and businesses of $66.3 million, offset by the acquisition by Elysium of adolescent mental health services facilities for $68 million. We've included this next slide to remind people about our funding structure. The consolidated group is really made up of 2 entirely separate balance sheets with their own capital structures. You've got the Ramsay Funding Group, which is basically everything except Santé, i.e. Australia, the U.K. and our equity accounted share of profit for RSD. And then you've got Ramsay Santé. Ramsay Santé has its own covenant-like debt facilities, which have no recourse to the Funding Group and are secured by assets on its own balance sheet. The Funding Group does not contribute capital to Ramsay Santé for working capital or CapEx needs. And indeed, Sante's acquisition last year of GHP was fully funded by their own debt facilities. Moving to leverage. On this slide, we've given you the Funding Group net debt and leverage ratios on a AASB 117 basis, which is the ratio that's used by our banks and Fitch. As Craig said, we finished the year with Funding Group leverage of 3.2x, and we are targeting a ratio of less than 2.5x, which we would expect to achieve through the use of the potential proceeds from the sale of RSD and through organic growth. We've also included the Consolidated Group leverage, both pre and post AASB 16, although, as I've said, Ramsay Santé is separately self-funded by covenant-like debt facilities secured against their balance sheet with no recourse back to the Funding Group. There are in fact no debt facilities provided to the Consolidated Group as such. The weighted average cost of our consolidated debt has increased from 3.24% excluding CARES at the beginning of FY '23 to 4.73% at the end of June 2023, which is reflective of the increase in base rates over that period. At 30th of June, approximately 73% of the consolidated group debt is hedged at an average base rate of 2.57%. Turning to the Funding Group debt profile, and post the 30th of June, we've repaid a $1 billion of the facilities that were due to mature in the first half of FY '25, with new committed revolving bank loan facilities, which mature in the first half of FY '26. These were refinanced at similar margins to the facilities they were replacing. Over the next 6 months, we will commence a process to extend the tenor of each of the $500 million tranches of the sustainability linked loan, which mature in the first half of financial year '25, '26 and '27 by a further 2 years each. Facilities considered surplus to requirements will be terminated upon completion of refinancing activities scheduled during the next few months. Moving to capital expenditure in more detail. Total spend across the regions was $772 million, with declines in spend by Ramsay Santé and the U.K. acute hospital business offset by a full year of the Elysium business and higher spend in Australia. Spend in Australia was above the prior period, but below our previous forecast due to the impact of building approval delays and other related bottlenecks. FY '24 spend is now expected to be in the range of $890 million to just over a $1 billion and will include higher digital and data CapEx in Australia. I'll now hand you back to Craig for some comments on strategy and the outlook.

Thanks, Martyn. As I've said, we are well positioned to benefit from the strong industry tailwinds driving long-term growth. I think you see that positioning manifesting in the relative performance against peers in each of our markets. The long-term growth is -- will be driven by technology and clinical developments, growing and ageing populations and the associated risk rising incidence of chronic conditions, which is also resulting in increasing health costs for governments, as we see rising healthcare expenditure as a proportion of GDP, and that creates commercial opportunities to partner for private healthcare providers. As we leave behind the disruption of the last few years, we are recalibrating our long-term strategy and positioning in the market. While we remain committed to our strategy of creating an integrated digitally enabled healthcare services platform, the emphasis of our investment program will evolve with changes in the market. The priority is to continue to strengthen our core hospital business through a series of transformational programs and by investing in a wider range of services that feed into and support the core, driving an improved outcome for patients. This will drive top line growth and an improvement in margins over time. We remain disciplined about M&A and we're not considering any material offshore acquisitions at the current time. Turning to the immediate outlook. We expect group FY '24 earnings will reflect mid-single digit top line growth, driven by low to mid-single digit growth in activity levels, combined with high reimbursement rates, which are not currently reflective of the inflationary environment. As we saw in FY '23, margin recovery will be slowed by ongoing cost pressures that are not fully reflected in reimbursement structures, combined with an increase in digital and data OpEx investment, which is an important plank for our future growth. In the short-term, our focus is on improving the performance of the Australian business and returning the Elysium business to a stable platform from which it can take advantage of the growth opportunities in the mental health services market. On Slide 26, there's some guidance around the various metrics for FY '24, which I'll leave you to read. Before we open up for questions, I'd just like to reinforce that while in the short-term, we have to cycle through the impact of inflationary cost pressures. The quality of our portfolio, combined with our industry-leading talent gives us great confidence that we're well-positioned to take advantage of the forecast growth in demand for healthcare services. So with that, I'll open up for questions.

Our first question comes from David Low with JPMorgan.

Craig, if I could just start with a clarification. At the start of the presentation, there's a slide that says top line growth, mid to high single-digit. At the outlook page, it says mid-single digit top line growth. Which one should we be using?

The mid-single digit. Yes.

Maybe I'll go on to other questions, but if you can get a clarification. You've talked about health fund negotiations, where you've talked about the rates not covering cost inflation. Can you give us a sense as to where negotiations are at now, whether you are seeing some success, whether you're confident that negotiations through this year will lead to a rate environment that's more inline?

It's always challenging, as you know, David. Certainly, the engagement with most health funds through this year has been positive. So as we've had cycled through negotiations that were due anyway, plus going back to the table early with most funds, there's been a positive engagement. We've seen other results and commentary around the industry, but it's still not where it should be. I mean, there is some reluctance from 1 or 2 funds in particular, and so that will be more challenging. But the big issue is you've seen a significant shift in margin from the provider sector to the health funds. And when -- and we've certainly outperformed the rest of the industry, but the commentary on the industry and from our competitors is very much that there's a tipping point where the health funds have got to come to the party. Now it's important, and we will be at the forefront of that. We can't let the current trajectory continue for the industry, irrespective of what our position in that is.

And David, it's Martyn here. Maybe you're cross-referencing our Australian outlook, which has mid-single digit volume growth, and then our group outlook, which has low to mid-single digit volume growth. That's because Ramsay Santé is forecasting low single-digit volume growth, if that makes sense. Maybe that's where the confusion is.

Yes. I think one of the early slides does seem to be talking about the group. It says mid to high, and then the outlook says mid -- we'll work through that one. I got one other topic, if I could. So just on the NHS tariffs, and particularly with the Elysium business, I'm trying to understand that what we saw in the June quarter, is that reflective of a higher tariff? And are we confident that the Elysium business can move back into a profitable contribution in FY '24?

I'll answer the second part first. Absolutely, yes. The Elysium business will continue to improve. It had a reasonable start to FY '23. It had a poor middle of FY '23, the second and third quarters particularly, and then a much stronger recovery in FY '24, and we anticipate that will continue to be the case. The full increasing tariff, so it has -- the Elysium just doesn't have one tariff negotiation, it's got 2 or 3 main positions. As not back end -- as you get into the back end of FY '24, over the last quarter, they are reflected. It's the tail of that, but not fully reflected. And then there's just probably at a very marginal level, there's still the resolution of the doctor's dispute with the NHS that will then have a small flow on effect still to come.

Our next question comes from Lyanne Harrison with Bank of America.

Can I start with the labor? Obviously, you said labor markets are improving, but in terms of the overall business, are there more markets -- are there some markets that are more challenged than others? And any particular skill sets, obviously you call that Elysium and non-clinical, but can you provide some color on some of the other markets as well?

Yes. At a macro level, not from sort of country-to-country necessarily. It's more within geographies, so regional areas are more challenged and that's always been the case. And they're more challenged in particular skilled areas, whether it be operating theatre nurses or intensive care nurses. And that remains the case. But that was -- that's sort of an issue that's been around the industry for a while, certainly exacerbated by COVID, but certainly in a much better position. And we've talked previously about some of the longer-term strategies that we're putting in place to grow our own more, so not relying on the industry to deliver everything for us. So as we -- and I think we said, as we listed things like the graduate nurse program in Australia, that would be at least a couple of years to deliver for us. That's still the case. We're into the second year of that increased grad nurse cohort. So whilst the -- just recognizing, whilst the labor issue is not as critical as it might have been foreseen to be through COVID, it's still an issue that will face the industry going forward. And so we've got to be continually looking at how we recruit and retain staff? How we develop our own staff? How we target specific skills? How we use those skills at the top of their license? All those issues are still at play.

Okay. And, you know, how should we think about, if we try to quantify that a little bit? How should we think about it in terms of how much is that labor constraint restricting capacity or resulting in under-utilization of capacity? Or how can we expand, how much can Ramsay expand capacity if that labor was available?

It's moved through that period where it was a real impact on capacity to now it's at the margins. In terms of capacity restriction, we don't think of it like that. There are sort of pockets from time-to-time that you've got to address, but that's sort of normal business.

Okay. And just one more, coming back to David's comments about growth in different markets. France, you called out being low single-digit growth or volume growth in '24. What are the key challenges that you're seeing in that market?

Oh, I'm going to say, it's no different to any of the other markets. Certainly, there's labor challenges, pricing, and sort of the impacts on inflation in all markets mean that you've got to sort of deal with the pricing issue. As I called out in the presentation, Ramsay Santé, we still believe that despite the 5.4% tariff increase, that wasn't sufficient to catch up on the last -- in the inflationary environment for the last couple of years. So that's an ongoing exercise. And the industry negotiations and our own negotiations with government will continue on that. So that's, I mean, I think like all markets, it's how to recognize that the cost base has risen and is rising, and then to have that reflected in pricing.

Okay. I'll leave it there.

Yes. No, I was going to say, sorry, just on France, one of the challenges, and it's a bit of a different structure than Australia is in that staffing recruitment in the specialized areas. Pharmacists is a particular challenge that we've seen more so in France than we do in other markets.

Our next question comes from Andrew Goodsall with MST Marquee.

Just speaking with France for a moment, obviously, the margins there are still poor and declining. But what we're finding from a forecasting point of view, it's very hard to separate the interplay between subsidies and the underlying trading. So just trying to get a sense of, I guess, where we are in that cycle, where the subsidies, I guess, sort of revert back to immaterial and underlying trading steps up? And I don't think we saw it in the first or fourth quarter, but just do you think we're sort of, or could you characterize what that looks like in your view and when that might take place?

Yes, Andrew, so your line's a bit scratchy, but I think I got the question. Yes, look, the fourth quarter was relatively subsidy-free, let's say, and we were trading off the new tariff that had come in from earlier in the year, so it's probably more reflective of where the kind of margin of business is at going forward than certainly any of the previous quarters, which I agree, we're lumping it all over the place. So I think, as Craig has said, the idea is to try and get those subsidies baked into tariff rather than the one-off sort of lump sums that we get, because A, it does make it very unpredictable, and B, it obviously doesn't stick in the base, so you just have to keep doing it over and over and over again. So that's really the key negotiation that Pascal is leading for the industry.

That's terrific. And just Elysium, obviously, you're expecting a FY '24 turnaround, just trying to get a sense whether that's more back-end loaded, just in terms of your progress there?

Well, no, I think as we come in, it will increase over the year, no doubt, but as we come out of quarter 4 for FY '23, we certainly saw improvement, that that was tangible. That continued through July, and so we expect that performance to increase from now.

And would you put that July performance, just in terms of getting in positive EBIT territory, would that be still not there yet, but maybe second round?

No, no, no, it's positive EBIT.

Positive EBIT, yes, positive EBIT now, yes.

Okay. Okay. Excellent. And then just finally, Australia looks like it's going well. When we listen to the insurers, they're still talking a tough story on claims. I think Medibank's out there today saying sort of 2.6 or something like that, in terms of their sort of forecasts, and NIB was a bit higher, I think. But just, yes, I guess, where are you in some of those major negotiations? And is the 2.6 wrong, or do you need to tough it out more with them?

Well, we don't intend to tough it out any longer than we have to…

Tough it out? I was going to say punch it out. Maybe that's a better way to put it.

No, no. Just reiterate the comments I'd just made, that the health funds need to recognize, and I think you're seeing some of that come from a number of health funds, they're recognizing that the cost base for hospitals has increased. And so the environment for negotiating agreements is different. However, when you get to the table, things can be a little different. And so we don't intend to sit back and just live with what we have. We have to, and absolutely determined to get the health fund benefits at the level that reflect what's happened to the cost base. Now how that transpires, as I said, there are some health funds who are very, very engaged in recognizing how to address that issue, and there are 1 or 2 who aren't.

Okay. And final one, it's probably a bit of detail. But with the sort of back and forth around prosthesis reform, I know hospitals have not been happy with where that's landed. Just your quick thoughts on that?

Yes. Look, it's still a consultation process. And certainly, there's 2 aspects to it, really. One is just the reduction in prosthetic price, which is essentially a pass-through, has a benefit for health insurers in terms of lowering the claims they pay for prosthesis. But the biggest -- sort of the biggest impact is on the suppliers themselves about, what's happening to pricing. It's essentially as a pass-through, as we've talked about many times. And then you've got the change in the structure, and so what happens with the general miss category, and there's a negotiation around that. And the real issue there, and I've been really clear about it before, is -- if it then becomes a bundled payment and is not included in the prosthetic list itself, then that's a negotiation with the health funds, and we will absolutely seek recovery of that. Now, we're in a better position than most to get that. I understand that, but there's a lot of lobbying going on from all parts of the system on that consultation process, and so it's still yet to land, but we will make sure that for our business, whatever the change in structure is, the pricing reflects that.

Our next question comes from Sean Laaman with Morgan Stanley.

Hope you're both well. Craig, I'm just wondering how you think the government thinks about the current situation. So we've got the insurers reporting give or take, high-teen gross margins, high single-digit net margins. I guess, there's some inherent inefficiencies gained from the pandemic in those margins, such as more rehab and psych in the home, or cheaper sites of alternate care. But then I expect that sort of claims come back and start to erode those margins somewhat. Do you think, moving forward, that the government will potentially move away from permitting sort of sub-3% sort of price increases and think more single digit at the risk of sort of disrupting participation in the overall system? Or do you think sort of better indexation essentially has to flow down from the fairly generous margins that the insurers are reporting today?

Oh, there's a challenging question. So what do I think? Certainly, insurers are living the life at the moment. And so I think one of the challenges for government, and this is a much sort of deeper issue, is that the federal government and the Federal Department of Health only legislate around health insurance. There's no private hospital sector of the health department. And so they've just introduced, and to their credit, they've introduced a new role to be sort of a liaison as much as anything else, I think, on the private sector. So the private hospital sector needs to -- and it happens every change of government, every change of minister, needs to make sure that we're educating government about what the issues are around health care and what's happening in the system. Because they can get a very distorted view if they're just looking at their own legislative controls. So that's the first piece. In answer to your question about where do I think government will land on sort of capping premium increases, I'm not sure, but I think there is a general recognition that keeping them below 3% in this inflationary environment is going to be really difficult. Now, where that lands, I'm not sure. But there are many other sort of reform issues that need to be considered as well. Now we've gone -- we went through years of getting to the gold, silver and bronze banding structure. That hasn't been successful because all you're seeing is health funds having strategies to push people down into silver and bronze where they don't have to pay things, and gold policies increasing at much higher rates as part of that strategy. So I think there's lots of opportunity to engage on sort of reform. But absolutely, in my previous point was the margin shift from the provider side of the industry, and I'll talk our own book, but the industry's book really, where the people who take the risk of providing services and employing workforce and are under the most pressure from the inflationary environment, particularly around workforce, and the margin shift from the provider side to the insurer side is something that we can't continue with.

I appreciate that answer. And you called out good growth in day hospitals, I think, today. Do you think there's sort of more an opportunity for Ramsay to build more day hospitals or sort of standalone ambulatory surgical centers as they call them in the U.S.?

Short answer is no. And I'll use an example. I'll use a couple of examples, really. I've said for many years that the economics around developing new capacity in the standalone day surgery or short-stage surgery environment are really difficult. Now, we picked up Orange Private Hospital, which was a new build in the last couple of years, driven by property developers, as it often is, who then get operators to pick up the lease bill going forward. That business went bust in 2 years, and so it fell into our lap. It works for us because somebody else has taken the pain on the investment. We can then integrate that with our private hospital in Orange, but you'll see -- you haven't seen a lot of new capacity built in. It's been the odd ones. But you haven't seen a lot of new capacity built in that sector because the economics don't work. And so then you have to look at what does work. There's certainly a shift to day surgery, and it's been much greater in the last couple of years than the trend was previously, and that's partly-- I'm not going to say mostly COVID-driven, because what we're not seeing is we're not seeing things that materially were done as an inpatient shifting to being done as a day patient. We are seeing more things that were always done as day patients being done as day patients. So we need to get better at being convenient, being efficient in providing those services, and that's been part of our strategy for a couple of years. But -- and when I look at our increase in market share in day surgery compared to the increase in market share for the standalone day surgical sector, we're still grabbing market share over and above those. So now we can point to many banks, no gap sort of growth from I think today's announcement was 600 procedures to 2,300 procedures. That's about 0.4% of our surgical activity. It's probably about 0.1% of the surgical activity in the sector. It's just not an issue.

Sure. And one final one, Craig. How reliant are you on graduate nurses? Are they a material portion of the overall nurse base every year? And have there been any sort of restrictions to intake as a result of the pandemic? So young nurses not wanting to actually enroll in the program because of whatever reason across the pandemic?

No, overall -- I'll start with the first part of your question. Out of about 17,000, 18,000 nursing staff we have in Australia, we took an intake of 800 grad nurses last year. That will be the same again this year. So in our system over a 2-year grad nurse cycle, we'll have 1,500-odd grad nurses out of 18,000 nursing staff. So that's the sort of proportion. And we've been able to fill those grad nurse cohorts. So we haven't seen that people aren't coming into them because there's an aversion to nursing or the pandemic's had an influence on that. But you've got to look at those things over the longer-term as well and not take a data point from this year or next year.

Before we move on, just to clarify David's earlier question, you should take the outlook from our outlook slide, which is mid single-digit top line growth. That's our outlook for top line growth, just to clarify.

Our next question comes from David Stanton with Jefferies.

I wonder if I could get your commentary just in the face of what Martyn just said there. You talked to utilization in 2024 -- F '24 to-date in your Australian-based business hospitals. How is utilization compared to, say, I don't know, 12 months ago?

Well, I'll let Martyn maybe talk about the details. But what we've seen in terms of volume, we are continuing to see volume increases, albeit not in maternity services. They are still declining. But in every other sub-sector of the way we look at case mix, we've seen volume increases, certainly in July, but generally F '23. Some have been greater than others, surgical activity, obviously. I mean, rehab gets called out. Our rehab growth is really strong, and particularly into July. So medical patients, non-surgical patients, stronger in the second half than they were in the first half, again, strong through July. So Australian volumes for July just continuing that trend coming out of quarter 4.

Understood. So it's fair to say that your bigger-based hospitals are nice and full compared to, say, even 12 months ago.

Well, then we get into utilization. They've got more activity going through them, no doubt. But we're also getting -- I mean, we're getting better, as we always do. You always think you've sort of hit a ceiling on productivity and how efficient you're using capacity. But you always find ways to keep improving that. And part of that is related to the transformation projects we've got going on, in particular the digital and data work. I sort of called out some of the automation projects. And so some of those have shown some immediate success that give us some more efficiency and get our people focused on the right things. And I used the -- and I've probably used the half -- whilst we're doing more surgical procedures and looking at the Australian context, we're not doing as many after-hours lifts. So we're not doing as much in the evenings and the weekends. But we're still processing more work. So we're getting better utilization through the main part of the week. So that aspect, I think we see that in other things like cath labs and probably beds is the lesser of those.

Understood. And you mentioned, at least for me, something reasonably new, that you're wanting to do more public work in Australia, in your private hospitals, particularly in surgery. And I think you said psych as well. Bottom line, is that lower margin than straight private work, please?

We recut -- it was through the COVID period. But we recut those agreements. They are now commercial arrangements that we have with the states and we'll only do it on that basis. And we do recognize that public volumes will increase for us. They're still low in the scheme of things in terms of the overall proportion of the work we get. Public volumes are still at best in single digits, but probably a bit lower than that. This is -- sorry, public volumes in our private facilities, not in our public facilities. So not like the June lumps of the world. So -- but it will increase, but increase off a low base.

Understood. And last one from me. Martyn, wouldn't want you to feel left out. You talked to an overall interest expense number for 2025. Can you talk to how that will hopefully decrease into -- sorry, for '24?

'24.

Yes, correct. Sorry. Can you talk to how that hopefully will change and hopefully go down into '25? Or should we be thinking sort of the same kind of number? What are the puts and takes for '25, I guess?

Well, first you've got the biggest part of that is AASB 16 leases. So if we're getting new facilities, et cetera, over time, then that will have an impact. Certainly one of the reasons why it was slightly higher than what we guided for FY '23 was Ramsay Santé reduced the threshold for their AASB 16 lease accounting. So we had a bit of a kind of jump there in their AASB 16 lease number. In terms of finance costs, I think as we called out, 73% of FY '24's interest is fixed at the rates we've given you. And so beyond FY '25, the balance there is, yes, you've got slightly less amount of hedging for FY '25 than that, but at reasonable levels. And so it is relatively locked in at the amounts we've got currently. So the benefit of having as much hedging as we've had over the last probably 12 to 18 months is probably we've been paying lower interest than we would have done if we hadn't have hedged it. But clearly that's the -- the take of that is that because you hedge, you may not benefit as much from rates when they go down when they come. But if they do start coming down in FY '25, we will get a small benefit from that, but we'll also be running off the fixed rates that we've got now.

So to that extent, it sounds like it's, we should be looking at a '25 in line with '24. Is that unreasonable?

Well, we haven't given guidance on FY '25 interest. It's a long way away, so.

Our next question comes from Mathieu Chevrier with Citi.

My first one was just on the kind of inflation or indexation -- sorry, adjustments we should be expecting in Australia in FY '24?

Oh, we never say what price indexation will be, other than to say that, we're going to continue to push it to recover margin and reflect the impact of the inflationary environment. And that's the cumulative impact of the inflationary environment.

Okay. And on the volume, I mean, mid-single digit volume, that's probably in line with the kind of volumes you were seeing pre-pandemic. Do you think there's -- we're going to see higher growth eventually, or do you think that you're seeing that already?

I think what you see, you take a longer-term perspective and you look at the way that demand will increase as demographics change and the rates of intervention for different demographic groups impact overall healthcare demand, and no doubt it increases. You then look at how you service that. And so we've talked a long time about, the rates of growth for non-hospital services, for the less acute services, will probably grow at a higher rate than the more acute services. So we have to look at how we provide that whole range of services, how we integrate them? So I think it's sort of reflective of what we see in the medium-term.

Yes, I'll just add. So in Australia, we've said mid-single digit volume growth. I think for the group, we've said low to mid-single digit because we see lower than that growth in activity, certainly in France, which is a very big market for us. In Australia, part of that mid-single digit volume growth is a catch-up from the impact of COVID in July and August last year, where volumes were restricted with that last big wave of COVID. And then you've got a certain amount of capacity that we've added on as well. So certainly industry growth wasn't mid-single digit volume growth pre-COVID at all.

But it reflects our strategy and expectation that we will continue to grow above the industry growth.

Exactly. Yes.

Yes. Understood. And then just on France, I mean, you got a payment of about $45 million there for inflation. Do you think that will repeat in F '24?

As we said before, there's some intense lobbying going on to try and get that, but we'd rather get that built into the tariff rather than these one-off payments, which you just have to, to your point, keep getting year-on-year if you want to keep up with the inflation, when it's not a very productive way of going about business. I mean, to a certain extent, the 5.4% tariff increase we had in France at the start of the year was some way to go towards that. But we don't think that's reflective of the last 2 years' inflation, and that's why the industry is going back to try and get some more. So we'd rather it come through tariff. If it did come through a one-off COVID payment, of course, we'd take it. But we're really trying to get that bill into the tariff.

Our next question comes from Saul Hadassin with Barrenjoey.

Just 1 for you, Craig. In the outlook commentary, you referenced trends that have emerged through COVID and this modification of your approach to CapEx. I'm just keen to explore that a bit more. You mentioned earlier in the Q&A about high growth in day surgery. That's been evident for quite some time. So what do you mean by trends that have emerged? Is it a reflection of slower recovery and overnight case mix? Is it psych? Is mental health not going to come back anywhere near where it was in terms of inpatient admissions? Just some context would be great for that commentary.

Well, it's not all related to COVID. So getting down into the detail of that, certainly from the construction industry side, we're just seeing our ability to spend that brownfield CapEx being constrained. So there's a bit of a slowdown in that. But in that, we always look at what we think the longer-term growth rates will be and so what capacity do we need to put in place. Hence, we're still investing in brownfield. We've got the greenfield coming on at Northern Hospital. In terms of trends in activity, still there's a lot of un-serviced mental health patients there. And that's a supply issue more than a demand issue. So as we get sort of different models of care and the recruitment activity for psychiatrists continues to grow and where we've been able to increase the number of psychiatrists that admit to the hospitals, we've seen growth in inpatient activity. So I think mental health, much more complicated sub-sector of health care, but still very fragmented. For our mental health businesses, how we integrate the inpatient acute services with day programs, with the outpatient psychology piece, that's still a longer-term trend. So we still see growth in mental health, absolutely. I'm not sure the other trends you're referring to.

I guess it's specifically…

The bit I missed, which is the key piece. When we look at brownfields, we've had a trend away from inpatient bed capacity, for example. That will continue to be the case with more of that spend being on engine room stuff. But the digital and data spend will increase and become a bigger proportion of our Australian CapEx, obviously, but CapEx in the other markets as well. And that sort of reflects the ambitions, not just because of COVID. COVID accelerated some of this, obviously, but our ambitions about how we position the business to provide better patient experience, to engage with clinicians more, to provide better clinical outcomes by using our data more effectively. All those things we just need to up the ante on. The things that we've been doing, and when we look at the transformation programs we've got in place around revenue management and cost efficiency and driving volumes through better engagement, they're all things we've done in the past and we've done well in their own context. But lifting the focus, the amount of resources and investment we've put into accelerating those programs is probably the key message out of that. Sorry, you were going to say something else?

No, it's okay. That's fine.

The next question comes from Steve Wheen with Jarden.

Just wanted to understand whether or not you've been able to, with being caught out, I guess, by surgeon behavior in January and perhaps April as well, whether you've been able to pass any of the risk back onto them to actually stop them from cancelling their fetal lists at such late notice. I mean, it seems to have a free option over that activity. So just wondering, if you've been able to change some of the behavior there by putting some risk back onto them?

No, we haven't put any risk back onto them. I don't want to be speaking to the front page of the paper story with the doctors. Now, what we've seen, and we certainly called out in the first half, and we saw it in January, sort of increased leave from doctors, and they've smashed me since then about saying that. But what we've seen is it isn't just doctors. We saw an increase in leave as the whole economy and the opportunity to travel opened up again. And so I'll go through sort of what we've experienced for some of the markets that are ahead of that. We had a similar sort of profile in Europe, and that settled back down to what is now a normal practice. Fully anticipate that to be the case in the Australian context. But I think overlaying that also, you've just got sort of a change in perspectives about work-life balance between all sectors of the community. And so that was sort of accelerated through COVID, and the industry has always said in the future we'll need more doctors to service similar volumes. That will still be the case. So doctor recruitment is critical. But I wouldn't say, we're ever going to be in a position where we're trying to penalize doctors or get doctors to take risk. What we have to do, and sort of what we did to an increasing extent in the U.K. as cancellation rates sort of rose significantly there, is just have processes so we identify that as quickly as we can, that we've got some mechanisms to backfill as quickly as we can, and just utilize that capacity and resource better. And I think that has been the case.

Okay. I wanted to, Martyn, 1 for you, just to make some clarifications around the interest. It's not entirely clear to me why that interest cost is so much higher than, I guess, the top end even of what you've guided to 3 months ago. Yes. So you did mention something about the lease, but was that the only reason?

No, there was a couple of things. So it was mainly Ramsay Santé. So they've got some unaffected accounting stuff now. They've got some ineffective hedges in their business, so you do get a bit of variability in their mark-to-market, some of their swaps. And that didn't come in to the number that we forecasted at the third quarter. So that was an impact. And also, as I said, they reduced the threshold of the amount that they would do double ASB-16 lease accounting on across their leases. And so that did move some of their cost line from rent down into depreciation and therefore double ASB-16 lease interest. There were a couple of items there that were a bit unforeseen when we were at the third quarter.

Okay. And so from the point of view of the covenants that you've had given a bit of a grace period on, the cost associated with that and maybe even any additional costs from, I guess, attempting to do the bond, I'm just trying to understand, is there elements of that interest expense that might not be there going forward? And finally, have you included any expectation in your FY '24 interest guidance around the proceeds from the sale of Sime Darby?

Yes. The answer to the last question is no. I think as I called out in my speech, clearly if we do sell Ramsay Sime Darby, we'll use that to pay down debt and that will significantly change our interest line. But no, that's not in that guidance. In terms of the additional costs, so from being above the 3.5x limit that we were at in December, so it's a permanent increase in our covenant to 4x. And the restriction on that is if we are between 3.5x to 4x, it was an extra 10 basis points on our interest, so pretty minimal additional interest costs. And clearly, ending the year at 3.2x, that will have only applied to the last 6 months that won't apply to this financial year. And then the cost of setting up the AMTN and EMTN program were immaterial in the whole scheme of things.

Okay. One final 1, just back on Ramsay Sante and I guess your commentary around the subsidies. Are you basically saying that, the revenue guarantee, whilst it's been extended to 31st of December, is really of no benefit to you given the reduction in the safety net?

Sorry, say that again.

I'm just trying to understand, is the revenue guarantee helping you in the first half of '24? Or are you back at levels where you actually don't need the revenue guarantee and it's just the underlying business that's actually driving your results?

I mean, the key answer is it depends on the amount of activity we have in the first half of FY '24. But I think in FY '23, we only claimed EUR 89 million for the revenue guarantee and that would have probably been more in the first half than the second half. So as activity starts to improve, clearly we require less and less of it. It is a slightly reduced guarantee as well, with this you only get 70% of the gap. But, yes, I think the reason why we're not anticipating it extending on the end of December is by virtue of the fact that we're probably going to be in a position where it's going to end up being immaterial amounts anyway. And so there's no point in the government having it there in any case.

And I think the nuance of that is it's a facility-by-facility assessment. So some hospitals might be a little sly and ramp up, so they might be a little bit. But Martyn's right that by the time we get to 31 of December, we're certainly positive about where the overall recovery in the business is and we'll be able to not be reliant on it at all.

Got it. Okay.

And to just -- volumes are increasing, so we're in a static position there.

Yes. Okay.

Next question comes from Chris Cooper with Goldman Sachs.

Craig, a clarification on your outlet commentary, that the way you described margins is that the recovery will be slowed. Can I just confirm we should interpret that to mean you do expect margins to expand in each region, but perhaps at a lower rate than you expected this time last year?

We certainly expect – I'll let Martyn do the nuance. We certainly expect underlying trading margin to increase as volumes increase, as we get the productivity and transformation programs moving through. But there will be some dampeners on that. The digital and data spend in Australia, for example, doesn't have a benefit in FY '24, so it will have a headwind to the margin. The inflationary environment and working through the process and the cycle of getting increases from our payers doesn't translate from day 1 of FY '24. So you've got that still as a headwind to margin. But there's certainly initiatives that we're undertaking that underlying margin continues to grow. As we've said previously, that's a multi-year target for us to get margins to where we think they need to be.

Yes. When we talk about margin recovery, we do anticipate group margins from year-on-year should improve. The biggest 1 being Elysium, of course, where we would expect to go from virtually zero margin for the year, if you add back non-recurring items to a more profitable position similar to where it had been before. If you look at the Q4 run rates, if you look at Australia, as Craig said, any benefits we might get from volume growth will be offset by data and digital costs. In Ramsay, U.K., they had a really good quarter 4. It's probably reflective of where we would see things going forward. Ramsay Santé had an unfettered, as I said before, kind of margin. Their Q1 is always very low, though, when they're all on holidays. So I wouldn't take that as a run rate for the whole year, but it's not a bad run rate to look at.

Okay, so your commentary there, Martyn, on Australia specifically, the fourth quarter run rate, you mentioned you expect volume growth to continue to help in fiscal '24, of course, but that will be offset by the additional cost investment. You're suggesting margins in Australia should be flattish in '24, but you see upside in the U.K. driven by Elysium.

Yes, that's not what I said, but the first part of what I said was what I said.

I understand. Okay. And while I've got you, can I just get an update on labor productivity across the business? I know your preferred metric is productive hours per inpatient day, and when you were speaking to us in May, you indicated you were seeing a level around about 5% lower than pre-COVID. Can I just get an update on that? Have you seen any progress there in the final quarter and into FY '24?

Yes, productivity back then would have probably been the reverse. It would have been higher or worse than pre-COVID, let's say. Certainly, the last couple of months, the team have got that back down to kind of pre-COVID levels, and so we're seeing some good activity there. That's a large result of some of the cost improvement initiatives that we've called out in the release. So there has been some very focused activity on looking hospital by hospital, where the roles we need and the hours we need, and so that is bearing some fruit. So I'd say, we're probably back around pre-COVID levels now. That's the objective for the rest of the year as well, so we need to keep focused on it.

Got it. And final 1 on interest expense, Martyn. You mentioned the sale of the JV, if it goes ahead, would be used to pay down debt directly. You also said just now that would significantly change the interest expense line. Could you just give us some sensitivities there on what significant means in that context?

I'll let you try and work that out. I'm not going to give away what we think we're going to get for the sale of the business, and it's not done yet, so that might be a bit preliminary to start talking about that.

The next question comes from David Bailey with Macquarie.

Yes. Just following on from Chris's question. For the group for '24, do you expect EBITDA margins to improve or contract?

We haven't given guidance on margins. What we've said is that margin recovery will be curtailed in FY '24 by inflationary impacts and the cost on digital and data.

Fair enough. Digital benefits coming through in '28. Thinking about Elysium, do you expect to meet your return on invested capital hurdle for that business? If so, when, and what are the moving parts to get there?

Well, if you remember, our investment hurdles for acquisitions are return on invested capital of 10% in year 5. That's a long way away. Certainly, that was what we signed off on the business plan. Clearly, we've had a bump in the road. First 6 months, we were banging on track of our business case, which obviously would have been extrapolated out to hit that target. We've had this short period where we've been really hampered through recruitment of people and therefore occupancy. But certainly, the plan is to get that back up and firing over the next couple of years. But we're still early days yet, and the target for that metric is in year 5.

Got it. And maybe just in terms of some structural changes, do you think there's been a structural change in rehab is the first question? And then in terms of specialist behavior, do you think that some of the more established specialists are looking for more, maybe work fewer hours, and then the younger guys coming through are wanting more of a work-life balance? Is that a headwind going forward?

Okay, I'll take the first piece on rehab. No, as I indicated before, our rehab is recovering strongly. I mean, you get back to a more fundamental sort of analysis of rehab about rehab isn't just rehab. And so, when we've talked over a number of years about changing the case mix in our rehab to be less dependent on those mobile orthopaedic patients who, you know, were admitted to inpatient programs, and some doctors and other doctors didn't admit them. So we have got much less reliance on orthopaedics in our rehab businesses generally, but also particularly on those mobile orthopaedic patients, which then is -- the corollary of that is, we're increasing other areas of rehab, whether it's cancer rehab, neuro rehab, prehab, all of those things. Rehab is getting more acute. So the case -- the acuity of our rehab patients is increasing. But we're seeing strong growth in rehab. And, you know, we've said before, we think that will be the case into the future as the population ages and you get more musculoskeletal deterioration. So, I've never subscribed to, and I still don't subscribe to other people's theories about rehab is in decline. On doctor behavior, I think I've called out before, doctors are no different from everyone else in society. There is more work-life balance comes into, new generations of the workforce. Doctors are the same. And so as a sector and as a healthcare sector generally across all countries, training more people is going to be important. And so workforce for the future about whether that's doctors or nurses or allied health professionals or others, there's a lot of work goes into trying to project that. So I wouldn't isolate the doctors.

There are no further questions at this time. I'll now hand it back to Craig for closing remarks.

Okay. Thanks, everybody, for your time. The message, I want to leave you with is, you know, recovery is continuing. We are seeing volume growth. We've got a range of initiatives in terms of the way we run our business. And so the transformation sort of agenda moving forward, we have upped the ante on that. And so, you'll see us talk about that a lot more. And I've sort of flagged that in November, we'll do a much more detailed presentation of where digital and data is as a component of that. We're very focused on leverage. And so our ambition to be, sort of have that funding group leverage at below 2.5x is a very real one. So, I'll leave you with the message that things are improving. And we want to see that improvement accelerate through FY '24 and beyond. So, again, thanks for your time. Bye.