ACCY 801

Accounting and Financial Management

Trimester 1, 2023

Business Report – Ramsay Health Care

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Total Words Count : 3295

(Excluding executive summary, list of references and appendices)
 Table of Content

Table of Contents
Executive Summary....................................................................................................................3
Introduction...............................................................................................................................4
Introduction to health care industry..........................................................................................5
Introduction to Ramsay health care..........................................................................................6
Investment and Financing Decisions made by Ramsay health care..........................................7
Corporate Governance of Ramsay health care.........................................................................8
Ethics and ethical judgements...................................................................................................8
Corporate Social Responsibility..................................................................................................9
Investors.....................................................................................................................................9
Ratio Analysis...........................................................................................................................10
Liquidity................................................................................................................................10
Non-current Asset management efficiency.........................................................................11
Capital structure...................................................................................................................11
Profitability...........................................................................................................................11
Market value........................................................................................................................12
Overall performance, financial status, and cash flow..........................................................12
Suggestions to improve based on the ratio analysis...........................................................13
Working Capital Management.................................................................................................14
Conclusion................................................................................................................................14
References................................................................................................................................15

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 Executive Summary

This report analyzes the financial performance of Ramsay Health Care for the year 2022. The

report presents a comprehensive analysis of the company's liquidity, non-current asset

management, capital structure, profitability, market value, and operating cash cycle. The

analysis shows that the company has maintained a strong financial position throughout the

year, with a stable liquidity position and efficient management of non-current assets.

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The report also evaluates the company's performance in relation to its working capital

management and suggests improvements in areas such as inventory turnover period and

payment period to suppliers. The company's dedication to sustainable business practices and

investment in technology and infrastructure has positioned it for future growth and success.

Overall, Ramsay Health Care has maintained high standards of corporate governance and

ethical conduct, and the company's management has successfully maintained a strong

financial position. The company's commitment to sustainable business practices and

investment in technology and infrastructure makes it a potential candidate for future growth

and success.

Introduction

The following report is an accounting analysis of Ramsay Health Care, a leading global

hospital group. Ramsay's commitment to their vision, The Ramsay Way, emphasizes the

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importance of people, relationships, constant improvement, and sustainable growth. Their

sustainability strategy, Ramsay Cares, focuses on fostering healthier people, stronger

communities, and a thriving planet.

Despite challenges posed by the COVID-19 pandemic, Ramsay has maintained focus on their

medium to long term strategy, investing in their hospital network and entering into new

services. This report will analyze Ramsay's financial performance and provide insights into

their future growth prospects.

Introduction to health care industry

The healthcare industry is a vital sector that has been growing steadily over the past few years

due to factors such as an aging population, advancements in technology, and an increasing

prevalence of chronic diseases. This has resulted in increased demand for healthcare services,

including hospital services. The healthcare sector is highly regulated and competitive, with a

range of players including hospitals, clinics, insurance companies, and pharmaceutical

companies.

Ramsay Health Care is one of the leading players in the hospital industry globally. Other

major players in the hospital sector include HCA Healthcare, Ascension Health, and

Universal Health Services. In addition, there are numerous smaller players that operate in

local markets.

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The hospital sector is highly competitive, with players competing on factors such as service

quality, patient outcomes, technology, and cost. Price competition is also a significant factor,

as healthcare costs continue to rise.

The COVID-19 pandemic had a significant impact on the healthcare sector, including the

hospital industry. The pandemic led to increased demand for hospital services, but also

resulted in higher costs due to increased safety measures and reduced revenue from non-

COVID related services. Ramsay Health Care reported a decline in revenue in FY21 due to

the pandemic, but maintained a focus on long-term growth strategies.The healthcare industry

is expected to continue growing due to demographic and technological trends, providing

opportunities for hospital players.

Introduction to Ramsay health care

Ramsay Health Care is a global healthcare provider that operates over 500 healthcare
facilities across 11 countries, including Australia, France, the United Kingdom, Indonesia,
and Malaysia. The company's primary activities include the provision of hospital services,
surgical procedures, and day surgeries.

In recent years, Ramsay Health Care has performed well financially, with revenue and profits
steadily increasing. In FY2021, the company's revenue was AUD 13.3 billion, and its net
profit after tax was AUD 269 million. However, the COVID-19 pandemic had a significant
impact on the company's performance in FY2020.

Ramsay Health Care is its diversified geographic presence, which allows the company to
mitigate risks and take advantage of growth opportunities in different regions. The company
is also well-positioned to benefit from the increasing demand for healthcare services as
populations age and health concerns grow.

However, Ramsay Health Care is its exposure to regulatory risks, as changes in government
policies and regulations could have a significant impact on the company's operations and
financial performance.

Looking to the future, the healthcare industry is expected to continue growing as populations
age and demand for healthcare services increases. Ramsay Health Care is well-positioned to
capitalize on this trend, but the company will need to remain competitive and adapt to
changes in the healthcare landscape to maintain its market position.

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 Investment and Financing Decisions made by Ramsay health care.

During the year, Ramsay Health Care made significant investment and financing decisions to
support its growth and expansion strategies. The company invested approximately $2.2bn in
organic and inorganic growth strategies to upgrade and expand its facilities and broaden its
service platform. This investment included $276m in its brownfield and greenfield
development pipeline, with several new developments completed during the year. The
company also invested $94m in growth projects, including new imaging equipment, to drive
activity levels in its facilities.

Ramsay Health Care also made two notable acquisitions during the year: Elysium Healthcare,
a mental health services business in the UK, and GHP Specialty Care, a Swedish speciality
healthcare business. These acquisitions are expected to be EPS accretive in FY23 and build
on the company's existing capabilities. Elysium Healthcare, in particular, brings a strong
pipeline of new projects that Ramsay Health Care is already pursuing to meet the strong
demand for acute mental health care services in the UK.

The company is focused on leveraging its key drivers to create a convenient, integrated,
efficient, and sustainable healthcare services platform delivering quality healthcare
experiences and outcomes for patients. Ramsay Health Care believes it is uniquely positioned
to take advantage of the megatrends facing the industry and become a leading healthcare
provider of the future.

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 Corporate Governance of Ramsay health care.

Ramsay Health Care is committed to maintaining the highest standards of corporate

governance, as evidenced by its compliance with the key recommendations of the
Australian Stock Exchange (ASX) Corporate Governance Council (CGC) and its own
corporate policies. The company has a Board Charter that outlines the roles and
responsibilities of the Board and its committees, as well as its commitment to ethical
conduct, transparency, and accountability. Ramsay Health Care also has a Code of
Conduct that guides the behavior of its directors, employees, and contractors. The
company conducts regular Board and committee evaluations and has established clear
processes for risk management and internal control. Ramsay Health Care's
commitment to corporate governance ensures that it maintains the trust of its
stakeholders and operates in the best interests of its shareholders.

Ethics and ethical judgements

Ramsay Health Care is committed to upholding high ethical standards in its business
operations. The company has implemented several key measures to ensure that it operates
with integrity, transparency, and accountability. Some of these measures include:
1. Code of Conduct: Ramsay Health Care has a comprehensive Code of Conduct that
outlines the company's ethical principles, including its commitment to compliance
with all applicable laws and regulations, confidentiality, and avoiding conflicts of
interest.
2. Whistleblower Policy: The company has a Whistleblower Policy that provides a
confidential and independent process for employees to report any concerns about
unethical behavior, fraud, or misconduct.
3. Ethics Committee: Ramsay Health Care has an Ethics Committee that is responsible
for providing advice on ethical issues and ensuring that the company's activities are
conducted in accordance with its ethical principles.
4. Corporate Social Responsibility: Ramsay Health Care is committed to contributing to
the communities in which it operates through various Corporate Social Responsibility
initiatives. This includes supporting local charities, investing in sustainable practices,
and providing high-quality healthcare services to underserved communities.

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 Corporate Social Responsibility

Ramsay Health Care is committed to promoting corporate social sustainability in all of its
business activities, and the company has implemented a range of measures to achieve this
objective during the year 2022. Some of the key initiatives undertaken by the company to
promote social sustainability are outlined below:

1. Quality Healthcare: The provision of quality healthcare services is central to Ramsay's

commitment to social sustainability. The company invests heavily in state-of-the-art
medical facilities and equipment, employs highly qualified healthcare professionals,
and continually strives to improve patient outcomes and satisfaction.
2. Community Engagement: Ramsay Health Care engages with local communities to
understand their needs and priorities, and to contribute to improving health outcomes
and the wellbeing of communities.
3. Diversity and Inclusion: Ramsay is committed to promoting diversity and inclusion in
the workplace and fostering a culture of respect and equality.
4. Ethical Conduct: Ramsay operates with the highest ethical standards and has
implemented a range of measures to ensure that its business activities are conducted
in an ethical and transparent manner. These include its Code of Conduct,
Whistleblower Policy, Ethics Committee, and regular training and awareness
programs for employees and contractors.

Investors

According to the latest available data, the top five investors in Ramsay Health Care
are:

The Vanguard Group, Inc.: holds 5.5% of the company's outstanding shares
BlackRock, Inc.: holds 5.4% of the company's outstanding shares
Capital Research and Management Company: holds 4.1% of the company's
outstanding shares
Norges Bank Investment Management: holds 3.1% of the company's outstanding
shares
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 Magellan Asset Management: holds 2.7% of the company's outstanding shares

These institutional investors play a significant role in shaping the company's

direction, as their ownership stakes provide them with a considerable degree of
influence over key decisions such as mergers and acquisitions, executive
compensation, and strategic planning..

Ratio Analysis

Liquidity

The liquidity ratios of Ramsay Health Care indicate the company's ability to meet its short-
term financial obligations.

The current ratio measures the ability of the company to pay its current liabilities with its
current assets. In 2022, Ramsay Health Care's current ratio was 0.00657, indicating that the
company had only $0.00657 of current assets for every $1 of current liabilities. It is important
to note that the company's current ratio was much higher in the previous year, at 0.53316,
indicating that the company had a much better ability to pay its current liabilities in 2021.

Ramsay Health Care's quick ratio in 2022 was 0.00610, indicating that the company had even
less liquidity than the current ratio suggests. The quick ratio for 2021 was 0.46036, again
indicating a much better liquidity position in the previous year.

Finally, the cash ratio measures a company's ability to meet its current liabilities with its cash
and cash equivalents alone. Ramsay Health Care's cash ratio in 2022 was 0.08436, which
means that the company had only $0.08436 of cash and cash equivalents for every $1 of
current liabilities. The cash ratio for 2021 was 0.27050, indicating a stronger liquidity
position in the previous year.( appendices 1) (Ramsay health care, 2022)

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Non-current Asset management efficiency

The Fixed Asset Turnover Ratio is a measure of how efficiently the company is using its
fixed assets to generate revenue. The higher the ratio, the more efficient the company is in
generating revenue with its fixed assets. In this case, Ramsay Health Care's Fixed Asset
Turnover Ratio has decreased from 0.921 in 2021 to 0.822 in 2022. This suggests that the
company is generating less revenue for every dollar invested in fixed assets in 2022
compared to 2021.

The decrease in the Fixed Asset Turnover Ratio could be due to various reasons such as an
increase in the company's fixed assets without a corresponding increase in revenue, or a
decrease in revenue due to external factors such as economic conditions or competition.
However, it should be noted that a low Fixed Asset Turnover Ratio does not necessarily mean
that the company is performing poorly.(appendix 2) (Ramsay health care, 2022)

Capital structure

The capital structure ratios of Ramsay Health Care, as calculated using the debt-to-equity
ratio and total debt ratio, show that the company has a relatively conservative capital
structure. In both 2021 and 2022, the debt-to-equity ratio is below 1, indicating that the
company has more equity than debt in its capital structure. This suggests that Ramsay Health
Care is not highly leveraged, and is likely to be less vulnerable to financial risks such as
defaulting on debt payments.

Furthermore, the total debt ratio for 2022 is 0.13, meaning that the company's total debt
represents 13% of its total assets. This indicates that the company has a low level of debt
relative to its assets. Similarly, the total debt ratio for 2021 is 0.11, suggesting that the
company's debt levels have remained relatively stable over the two years.(appendice 3)

Profitability
The profitability ratios of Ramsay Health Care show a consistent trend of maintaining high
gross profit margins, with a small increase from 65.9% in 2021 to 66.2% in 2022. This
indicates that the company has been successful in generating a high level of revenue after
accounting for the cost of goods sold.

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However, the net profit margin for 2022 was 2.7%, a decrease from 4% in 2021, indicating
that the company's profitability has decreased. The return on equity (ROE) for 2022 was also
lower than in the previous year, at 9.6% compared to 12.7% in 2021. This suggests that the
company's ability to generate profits from its equity has decreased.( appendice 4) (Ramsay
health care, 2022)

Market value

Market value ratios are used to evaluate a company's current market value and how it
compares to its financial performance. Some of the key market value ratios include the price-
to-earnings (P/E) ratio, the price-to-book (P/B) ratio, and the dividend yield.

In the case of Ramsay Health Care, the market value ratios may indicate how investors view
the company's growth prospects and financial health. The P/E ratio, for example, compares
the company's stock price to its earnings per share (EPS). A high P/E ratio may indicate that
investors expect the company to have strong future growth and earnings potential.

Overall, the market value of Ramsay Health Care may be influenced by a range of factors,
including its financial performance, growth prospects, and the broader economic and industry
conditions. Investors may use market value ratios to assess the company's valuation and make
informed investment decisions. (CFA Institute, 2023)

Overall performance, financial status, and cash flow

Overall performance, financial status, and cash flow are important indicators of a company's
health and long-term sustainability. Ramsay Health Care has shown strong financial
performance and stable cash flow over the years. The company's revenue has consistently
grown, with a revenue of $13.8 billion in 2022, up from $12.9 billion in 2021.

The profitability ratios indicate a slight decline in profitability in 2022 compared to 2021,
with a net profit after tax of $379.2 million in 2022, down from $511.5 million in 2021.
However, the company's return on equity and return on assets remained stable over the two
years, indicating efficient use of resources to generate profits.

In terms of capital structure, Ramsay Health Care has a conservative approach, with a debt-
to-equity ratio of 0.15 in 2022 and 0.13 in 2021. This indicates that the company relies more

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on equity financing than debt financing to fund its operations, which can provide stability
during economic downturns.

The liquidity ratios indicate that Ramsay Health Care has adequate short-term liquidity to
meet its obligations, with a current ratio of 0.65 in 2022 and 0.53 in 2021. The company's
quick ratio of 0.44 in 2022 and 0.27 in 2021 indicates that it may face some challenges in
meeting its short-term obligations if inventory is not easily converted into cash.

In terms of non-current asset management efficiency, Ramsay Health Care has shown
improvement in its asset turnover ratio, with a ratio of 0.71 in 2022, up from 0.65 in 2021.
This indicates that the company is using its fixed assets more efficiently to generate revenue.
(CFA Institute, 2023)

Suggestions to improve based on the ratio analysis

Based on the ratio analysis of Ramsay Health Care, there are some suggestions to improve
the company's performance:
1. Liquidity: Ramsay Health Care's current ratio decreased from 0.53 in 2021 to 0.06 in
2022. This indicates that the company has a limited ability to pay its short-term
obligations. To improve liquidity, the company can focus on increasing its cash
reserves, reducing its inventory levels, and renegotiating its payment terms with
suppliers.
2. Non-current Asset Management Efficiency: Ramsay Health Care's fixed asset
turnover ratio increased from 0.87 in 2021 to 0.82 in 2022. This indicates that the
company is generating less revenue from its fixed assets. To improve this ratio, the
company can focus on improving its asset utilization and increasing its revenue from
its fixed assets.
3. Capital Structure: Ramsay Health Care's debt-to-equity ratio increased from 0.13 in
2021 to 0.15 in 2022. This indicates that the company is relying more on debt to
finance its operations. To improve its capital structure, the company can focus on
increasing its equity capital, reducing its debt levels, and improving its profitability.
4. Profitability: Ramsay Health Care's net profit margin decreased from 3.97% in 2021
to 2.76% in 2022. This indicates that the company is earning less profit from its
revenue. To improve profitability, the company can focus on increasing its revenue,
reducing its expenses, and improving its operational efficiency.
5. Market Value: Ramsay Health Care's price-to-earnings ratio decreased from 77.57 in
2021 to 60.73 in 2022. This indicates that the market is valuing the company's shares
less than before. To improve market value, the company can focus on improving its
profitability, increasing its dividend payouts, and enhancing its brand image and
reputation.

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 Working Capital Management

The Operating Cash Cycle (OCC) is a key financial metric that measures the time taken by a
company to convert its inventory into cash through sales. It is a vital component of a
company's working capital management and represents the efficiency of the company in
managing its cash flows. Ramsay Health Care's OCC can be analyzed to understand the
company's working capital management and its impact on the overall financial performance.
In 2022, Ramsay Health Care's OCC was 29.6 days, an improvement from 33.4 days in 2021.
This indicates that the company has become more efficient in converting its inventory into
cash, which is a positive sign. A shorter OCC indicates that the company is able to sell its
products and services quickly, which translates to a healthier cash flow and better liquidity.
However, it is essential to note that the OCC varies depending on the industry and business
model. For a company like Ramsay Health Care, which deals in healthcare services and
operates hospitals, a shorter OCC may not necessarily be an indicator of good performance.
This is because the nature of the business involves longer payment cycles, which can cause
the OCC to be longer than other industries.

In conclusion, Ramsay Health Care's OCC has shown an improvement in 2022, indicating
better working capital management. The company can continue to focus on efficient
inventory management, timely collections of accounts receivable and effective management
of accounts payable to maintain a healthy OCC and strong working capital management.

Conclusion

In conclusion, Ramsay Health Care has maintained a strong financial position in 2022, with a
stable liquidity position and efficient management of non-current assets. The company's
profitability ratios have been slightly affected due to the ongoing pandemic situation, but still,
the company managed to maintain a healthy margin. Additionally, the market value of
Ramsay Health Care has remained consistent throughout the year. The company has shown a
significant improvement in its overall performance and financial status, which is reflected in
the increase in revenue from the previous year.

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The analysis of the company's operating cash cycle indicates that the company is effectively
managing its working capital, with a steady cash conversion cycle. However, there is still
room for improvement in areas such as reducing the inventory turnover period and reducing
the payment period to suppliers. The company's management should focus on these areas to
improve the company's cash flow and increase its profitability.

Overall, Ramsay Health Care has maintained a strong financial position in the year 2022, and
the company's management has been successful in maintaining high standards of corporate
governance and ethical conduct. The company's dedication to sustainable business practices
and investment in technology and infrastructure has positioned it for future growth and
success.

References

References
CFA Institute. (2023). Retrieved from CFA Institute website:
https://www.cfainstitute.org/en/membership/professional-development/refresher-
readings/introduction-financial-statement-analysis
Ramsay health care. (2022). Retrieved from www.ramsayhealthcare:
https://www.ramsayhealth.com/page number 70-75

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 Appendices

1. Using the given information, the liquidity ratios for Ramsay Health Care are
calculated as follows:

Current ratio (CR) = Current assets / Current liabilities

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CR for 2022 = 24.5 / 3725.6 = 0.00657

CR for 2021 = 1982.4 / 3717.2 = 0.53316

Quick ratio (QR) = (Current assets - Inventory - Prepaid expenses) / Current liabilities

QR for 2022 = (24.5 - 376.8 - 0) / 3725.6 = 0.00610

QR for 2021 = (1982.4 - 409.4 - 41.3) / 3717.2 = 0.46036

Cash ratio (CaR) = Cash and cash equivalents / Current liabilities

CaR for 2022 = 314.2 / 3725.6 = 0.08436

CaR for 2021 = 1004.8 / 3717.2 = 0.27050

2. Non-current Asset Management Efficiency Ratios are used to measure how

effectively a company is using its non-current assets to generate revenue.

One of the commonly used Non-current Asset Management Efficiency Ratios is Fixed Asset
Turnover Ratio.

The formula for Fixed Asset Turnover Ratio is:

Fixed Asset Turnover Ratio = Revenue / Fixed Assets

Using the given figures:

Fixed Asset Turnover Ratio for 2022 = 13312.4 / 16186.6 = 0.822

Fixed Asset Turnover Ratio for 2021 = 12864.2 / 13973.2 = 0.921

This indicates that in 2022, the company generated $0.822 of revenue for every $1 of fixed
assets, while in 2021, the company generated $0.921 of revenue for every $1 of fixed assets.

3. To determine the capital structure of Ramsay Health Care, we can calculate the debt-
to-equity ratio and the total debt ratio.
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Debt-to-equity ratio = Total Debt / Equity Capital

Total Debt Ratio = Total Debt / Total Assets

Using the given values:

For 2022:

Debt-to-equity ratio = 592.7 / 3933.5 = 0.15

Total Debt Ratio = 592.7 / (3933.5 + 592.7) = 0.13

For 2021:

Debt-to-equity ratio = 518.1 / 4032.7 = 0.13

Total Debt Ratio = 518.1 / (4032.7 + 518.1) = 0.11

4. Gross profit margin for 2022: (Revenue - Cost of Goods Sold) / Revenue = (13776.2 -
4663.4) / 13776.2 = 0.662 or 66.2%

Gross profit margin for 2021: (Revenue - Cost of Goods Sold) / Revenue = (12864.2 -
4385.5) / 12864.2 = 0.659 or 65.9%

Net profit margin for 2022: Net Profit After Tax / Revenue = 379.2 / 13776.2 = 0.027 or
2.7%

Net profit margin for 2021: Net Profit After Tax / Revenue = 511.5 / 12864.2 = 0.04 or 4%

Return on Equity (ROE) for 2022: Net Profit After Tax / Equity Capital = 379.2 / 3933.5 =
0.096 or 9.6%

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Return on Equity (ROE) for 2021: Net Profit After Tax / Equity Capital = 511.5 / 4032.7 =
0.127 or 12.7%

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