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

Good afternoon, everyone, and thank you for joining us. I'm Natalie Davis, and I'm here with Anthony Neilson, our CFO. I'm assuming you have all seen our announcement this morning detailing the outcome of the comprehensive strategic review of Ramsay's 52.79% shareholding in Ramsay Santé. We announced the strategic review this time last year and have considered a range of alternatives, including market testing executability of potential options. After careful consideration, we believe that a distribution of Ramsay Santé shares by way of an in-specie distribution to Ramsay shareholders will simplify the group and better position both businesses to pursue their distinct strategic priorities. In particular, for Ramsay Health Care, this will support our focus on the transformation and growth potential of our core Australian hospital business. Given Ramsay and Ramsay Santé operate in fundamentally different geographic markets with different capital profiles and strategic objectives, this alternative enables each business to focus more directly on its respective strategies, and we believe this will deliver greater long-term value for Ramsay shareholders. The proposal has limited separation complexity given Ramsay Santé already operates independently of Ramsay, including its own Board, separate financing and balance sheet arrangements. It also gives Ramsay shareholders the opportunity to retain an ownership interest in Ramsay Santé if they wish. The proposal will simplify Ramsay's reported financial profile through deconsolidation of Ramsay Santé from Ramsay's financial statements. Under the proposal and subject to all necessary approvals, Ramsay shareholders would receive Ramsay Santé shares proportional to their existing Ramsay shareholding via in-specie distribution. This is expected to be implemented through a scheme of arrangement and therefore, will be subject to Ramsay shareholder approval. Because Ramsay Santé is already listed on the Euronext Paris, we propose to assist Santé to put in place arrangements to enable shareholders to hold their interest by CHESS Depositary Interests, and these would be tradable on the ASX. If all approvals are obtained, we expect completion of the in-specie distribution in the fourth quarter of calendar 2026. As part of the broader strategic review, we've also given notice in line with the 6-month termination period to terminate the existing shareholders' agreement with Ramsay Santé's 39.82% shareholder Prédica. That agreement will terminate in accordance with its terms effective on the 1st of October 2026. Our Board remains committed to acting in the best interest of shareholders and will continue to consider any superior alternative outcome. We will provide further information to the market as appropriate. The management and Board believe that this proposal to distribute Ramsay Santé shares held by Ramsay to Ramsay shareholders will support value creation for Ramsay shareholders. We're happy to take questions, but please recognize we're not in a position to discuss the specifics of the potential distribution in further detail today. The time line envisages the distribution of a demerger booklet ahead of a shareholder vote in Q4 2026, and all relevant and necessary information will be included in the booklet. Please also note that we'll be releasing our half yearly results to the market next week, and any questions not related to today's announcement should be asked then. Thank you, and I'll now open up to some Q&A.

[Operator Instructions] Your first question comes from Lyanne Harrison from Bank of America.

I was wondering, could you share by any chance what some of the other considerations or options you consider for Santé?

Thank you for the question. We heard it very quietly, but I think the question was what other options did we consider. So you'll recall that we announced this review in February 2025, a year ago from now. And we have done a very thorough assessment of a number of options together with advisers, Goldman Sachs, and that's included market testing of those options and engaging with potentially interested third parties. Now we won't be commenting any more detail around the nature of the options that we considered and that were evaluated, but we do believe this is the best option going forward. And as we've said, we remain open to discussions on any alternative superior option, but we will be progressing with the proposal subject to shareholder approval by the end of the year.

Okay. And just in terms of discussions with potential options, should the, I guess, demerger or deconsolidation go ahead. I think when we think back to the KK (sic) [ KKR ] offer for Ramsay a few years ago now, one of the biggest hurdles for the transaction was the due diligence on Santé. So now ex Santé, would Ramsay be amenable to entertaining discussions should any sort of proposed buyer show interest -- in the Ramsay Group?

Sorry, in Ramsay Health Care?

Yes, in Ramsay Health Care, ex Santé.

Yes. So this call is about our strategic review of Ramsay Santé, and that's what we're talking about today.

Okay. One last question then in terms of any costs that might be left with the Ramsay Group in terms of corporate costs as a result of demerging Santé. Do you see any costs that might be worked through or remain stranded with the Ramsay business?

So I think we've talked about the fact that there's very limited operational synergies between our international businesses. So we'll be working through that, but we don't expect any material dis-synergies.

Your next question comes from Sacha Krien from Evans & Partners.

I'm just wondering if you can give us a bit more color on the termination of the shareholder agreement and whether or not that is required to execute this process? And whether or not that may -- whether any of the restraints within that agreement may -- now that they may be removed could open up some of the other pathways that you looked at?

So we decided to provide notice to terminate the shareholder agreement. It would need to have been refreshed at the beginning of October, and there was a 6-month notice period. Given the shift in our posture -- strategic posture towards Europe and the Santé shareholding, we felt that, that was the appropriate thing to do. We don't -- there is no requirement for us to obtain approval from the other major shareholder to be able to progress this proposal.

Okay. Great. And can you confirm whether or not there's any specific regulatory or French approvals that are going to be required to proceed with the scheme of arrangement?

So this proposal is a distribution of shares that Ramsay Health Care holds in Ramsay Santé to Ramsay Health Care shareholders. And so the approvals will be based in Australia. And there will be a demerger booklet prepared that will be reviewed by ASIC and a court process followed by a shareholder approval through a scheme of arrangement, and that will be by Ramsay Health Care shareholders.

Okay. And then final question for me, just the consultation with employee bodies in France. Can you just confirm that, that won't result in any sort of conditional approvals that are required ahead of the execution? I think the answer is no based on what you just said, but I just want to check that.

Yes. So the Ramsay Santé will be leading the process. It's a consultation process. So -- no, it's not subject to conditions, but we do need -- Ramsay Santé does need to consult.

Your next question comes from Craig Wong-Pan from RBC.

I was just wondering if there's any cost savings for Ramsay Health Care from once you distribute your shareholding like in terms of management time or other reporting or accounting costs?

We're not thinking about this proposal in terms of cost savings. And as I said, the operational synergies are fairly limited at the moment. But what we do think is it will enable us to really focus my own time and the leadership time on the significant transformation that's underway in Australia. And you'll recall, at the beginning of my tenure as CEO, I laid out 3 priorities for the business. And the first one was transforming the Australian business, so we really realize our potential here. And so the simplification of the international portfolio will help us to be able to continue to drive that momentum.

Okay. And then just the actual costs for setting this up and implementing it, have you got an estimate for what that could be?

We don't have an estimate of the costs. But in this case, the separation is relatively simple because Ramsay Santé is already an independent company. It has its own management team. It has its own Board. It's already listed on the Euronext. It has its own balance sheet and financing arrangements.

Okay. And then just last question. I know Ramsay Santé has its own balance sheet and debt, and you've got your wholly owned funding group, but could those rates from your lenders improve with the spin-off of Ramsay Santé? Or would that actually not sort of lead to any changes there?

So the debt we hold is already part of the funding group, as we call it and we publish separate funding group accounts. So it's already separated from Ramsay Santé.

Your next question comes from David Low from UBS.

Just one for me. Just the presentation of accounts going forward. I mean this is sort of akin to a discontinued business now. Is there a plan to present the accounts perhaps at the full year on the basis that they will go forward?

I'm going to pass that question to our CFO, Anthony, to answer.

David, look, at full year, we'll still have consolidation given that it's a scheme of arrangement. So given the scheme is subject to a shareholder vote, and we need the certainty of that shareholder vote, we won't be approaching a held-for-sale type accounting until the fourth quarter of this year, closer to the shareholder vote.

That's clear. I was hoping that we might get cleaner accounts.

Your next question comes from David Bailey from Morgan Stanley.

A quick one for me. Just scheme of arrangement, just confirming 75% shareholder approval to get this across the line?

Yes, that's correct.

Your next question comes from Steven Wheen from Jarden.

Natalie, I was just interested in whether or not you've got a view or a perspective from Prédica with regards to this change? And what their intentions are going forward under the new or sort of maybe more liquid position that will be on the Euronext going forward.

So we have been collaborating with both Ramsay Santé and Prédica as we've progressed this strategic review, but it wouldn't be appropriate for me to talk on behalf of Prédica.

Okay. So next question would be just with regard to the shareholders' agreement, what are some of the terms that are -- that you have been subject to that might now change now that you're going to be terminating that shareholders' agreement?

I don't think we've ever spoken about the terms of the shareholder agreement. So I won't be commenting on that. But just noting that after that shareholder agreement -- we still -- as long as we have the shareholding, we're still the majority shareholder in Ramsay Santé. I also note that given the significance of this announcement for Ramsay Santé, we would expect Ramsay Santé to be making an announcement when the market opens.

Your next question comes from Laura Sutcliffe from Citi.

To the best of your understanding, would this distribution, if it goes ahead, be taxed neutral for Australian shareholders of Ramsay?

I'm going to pass that one to Anthony Neilson.

Laura, we'll be working with the [ ATO ] seeking class order around demerger relief, and that will all be outlined in the demerger booklet when it's issued in October.

Your next question comes from Christine Trinh from Macquarie Bank.

Just a really quick one. Just interested on the view of the Ramsay Foundation on the in-specie distribution, please.

I'll leave it to the Ramsay Foundation to comment, but we'll be engaging with all of our shareholders on the proposal, including preparing the demerger booklet and explaining the rationale for why we think this is in the best interest of shareholders.

[Operator Instructions] Your next question comes from Andrew Goodsall from MST Marquee.

I think all my questions have been taken, but perhaps the one minor one is, I know you said it's not taking up too much of your time -- sorry, we will free up your time. But just in terms of fees or any other sort of one-offs that you've incurred that we might see come out of the accounts?

Look, you could expect there are some costs associated with transaction fees and preparation of the demerger booklet, et cetera. And I think you'll have to wait until our results to -- for us to estimate the quantum of that.

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

Thank you, and thank you, everyone, for your time today and the questions. Just to reiterate that we've conducted a very detailed strategic review of our shareholding in Ramsay Santé. And we do believe that this proposal to distribute Santé shares held by Ramsay to our shareholders does support value creation for our shareholders, and we'll provide further information in due course throughout the year given the time line that we've outlined today. Thank you very much.