Ramsay Healthcare Limited (Australia) Financial Performance 2019

Introduction

The aim of this report is to interpret the annual report of Ramsay Healthcare Limited (Australia) and analyse the financial performance of the company (“Ramsay Health Care”, 2019). Accordingly, judgments can be made for applying the appropriate accounting standards as per various business scenarios.

Ramsay Health Care happens to be a global healthcare company (“Ramsay Health Care”, 2019). It has an excellent reputation for providing high quality services and delivering world class care to the patients. The company is regarded as a leader in patient care and is considered among the top that specializes in hospital management (“Ramsay Health Care”, 2019). The prime focus has been the doctors and the staff associated with the company, who has always strived to provide high quality service to its clients. The prime slogan of the company has been – ‘People Caring For People’ and this is how the company has been operating its business till date. The prime focus has been on care which is a critical part of the daily operations to meet the expectations of the patients (“Ramsay Health Care”, 2019).

Ramsay Healthcare Australia belongs to the health care industry and happens to be the largest for-profit hospital operator. It has 72 hospitals along with units for day surgery (“Ramsay Health Care”, 2019). More than a million patients are admitted here and more than twenty three thousand babies are delivered. It is estimated that over thirty thousand people are employed with this operator.

Apart from private hospitals, it also operates four other public facilities in Australia. It has also come up with a community pharmacy that operates over thirty five in-house dispensaries and pharmacies (“Ramsay Health Care”, 2019). There is also a retail franchise operation to support more than fifty five community franchise pharmacies.

Ramsay also understands that it is important to emphasize on training and research and so emphasizes under-graduate as well as post-graduate training for the medical and the nursing workforce (“Ramsay Health Care”, 2019).

Therefore, based on the above information, it seems that the company is present in the growth phase of the business life cycle since almost every aspect of the business is in a state of expansion (“Ramsay Health Care”, 2019).

Conducting a competitor’s analysis revealed that Ramsay Health Care has got quite a few competitors (“Ramsay Health Care”, 2019). The top three are – Healthscope, Sonic Health Care, and St. John of God Health Care. Apart from these, there are a few more namely – Private Health Care, Bio Reference Laboratories, Quest Diagnostics, Sharp Health Care, St. Vincent Health Australia, Mater Health Services and Sydney Adventis Hospital (“Ramsay Health Care”, 2019).

Currently, Ramsay Health Care is at a good position and is well respected throughout the global health care industry for the quality of the service as well as the safety standard that it has been able to maintain till date (“Ramsay Health Care”, 2019). The fuel for business growth comes from recognizing and encouraging people and the teams that work tirelessly to provide the best possible service (Watson, 2015).

Organization funding

Internal and external sources of funds

In the internal source for funds, the finance is generated from within the business. This sort of finding is required when the requirement of the fund is less (“Ramsay Health Care”, 2019). The loss of capital here is low. Such funding is done when there is a need to limit the boundary of a business. That is, not to grow very big (Maas, Schaltegger & Crutzen, 2016). The amount sourced in this is low to medium and there is no collateral required. Examples of such funding are earnings, reserves, profits along with assets of the company (“Ramsay Health Care”, 2019).

On the other hand, an external source of fund is arranged from outside of the business. This sort of funding is required when the requirement for the fund is huge. The cost of capital, in this case, is medium to high (“Ramsay Health Care”, 2019). This sort of funding is needed when the expansion plan is to grow from local to national and then to global. The amount of money sourced would be medium to huge and for this reason, the collateral would be required. Examples of such funds are equity funding, debt funding and so on.

As for Ramsay Heal Care, the external source for fund applies since the company is looking to expand globally. It is already present in France, Sweden, Norway, Denmark, United Kingdom, Germany, and Italy (“Ramsay Health Care”, 2019). In Asia, the company is having its presence in Malaysia, Indonesia, and Hong Kong.

Financial Structure / Financial Health Analysis

The financial structure, which is also referred to as the capital structure of a company, is basically the mix of equity and debt. This is used by companies to fund their operations and it directly affects the value and the risk that is associated (“Ramsay Health Care”, 2019).

The financial report of Ramsay Health Care suggests that the total liabilities of the company ($9,716,597,000) is more than the total equity ($2,571,542,000), as on December end 2018. That means the ratio of debt or liability to equity is 3.78 (“Ramsay Health Care”, 2019). Now given the fact that Ramsay belongs to the healthcare segment and it is of global standard, so the high ratio is quite justified since the company would need good funding for covering its short term as well as long term objectives (“Ramsay Health Care”, 2019).

 

 

Financial performance

The five key elements of any financial report (or the annual report) would be the following:

Asset

Upon analyzing the annual report of Ramsay Health Care, it can be seen that details of financial assets net tangible assets, non-strategic assets, development assets, current assets as well as non-current assets have been adequately covered in the financial sections (“Ramsay Health Care”, 2019). The total asset value as declared by the company for the year 2018 is $12,288,139,000 (“Ramsay Health Care”, 2019).

Liability

The financial report also covers the liabilities of Ramsay Health Care. In the financial report, both the current as well as the non-current assets have been mentioned (“Ramsay Health Care”, 2019). The current liabilities include trade and other payables, borrowings, and loans that bear interest, provisions, derivative financial instruments, and payable income tax. Among the non-current liabilities, the report has mentioned about loans and borrowings that bear interest, provisions, obligations for the employees, derivative financial instruments, creditors and deferred tax liability. The total liabilitieshave been calculated at $9,716,597,000 for 2018 (“Ramsay Health Care”, 2019).

Equity

The equity mentioned in the annual report include capital issued, shares treasury, CARES (Convertible Adjustable Rate Equity Securities), other reserves, retained income, parent interests, and non-controlling interests (“Ramsay Health Care”, 2019). The total equity, as reported by Ramsay for the year 2018 stands at 2,571,542 (“Ramsay Health Care”, 2019). That apart, there was a separate consolidated statement summarizing the changes in the equity

Revenue

The annual had the details of the total revenue (including AASB15 adjustment), revenue generated from the set-ups in Asia, United Kingdom, and continental Europe, total operating revenue, summary of consolidated statutory revenue and earning, revenue generated from contracts with customers, income from sale of development assets, net profit on disposal of non-current assets, revenue from patients (both public as well as private), segment revenue and inter-segment revenue (“Ramsay Health Care”, 2019).

Expenses

The Ramsay Annual report had adequately covered the details of the expenses like interest expense, share based payment expense, lease expenses, rent expense, segment expense, income tax expense, and non-core item expenses (“Ramsay Health Care”, 2019).

The research was conducted to check if anything was reported by the company post the annual report and it seems there were none. Whatever the company had to declare was methodically and categorically mentioned in the annual report (“Ramsay Health Care”, 2019).

Also, there was no trace or reference of any accounting policy that might have been changed by Ramsay (“Ramsay Health Care”, 2019).

 

Assets – PPE and Intangibles

PPE or Property, plant, and equipment are the class of assets that are non-current and tangible. On the other hand, the intangible assets of a company comprised of patents, copyrights, and the goodwill or the reputation that are also non-current assets (“Ramsay Health Care”, 2019).

The annual report of Ramsay has mentioned both and for the year 2018 the PPE and the intangibles have been valued at $4,658,171,000 and $4,190,729,000 respectively (“Ramsay Health Care”, 2019).

The accounting policy for PPE adopted by Ramsay is as follows:

• Initial recognition and measurement
• Subsequent measurement.
• Loans and receivables
• De-recognition.

The intangible asset reported by the company is goodwill. The composition of the goodwill would comprise of the brand name of the company, good customer base, and excellent customer relations (“Ramsay Health Care”, 2019).

The accounting policy adopted by Ramsay for intangible assets is the fair value.

PPE has been reported impaired by Ramsay in the financial statement and the value of the same in 2018 stands at $1,020,000 (“Ramsay Health Care”, 2019).

Regarding the intangible, since the test for goodwill impairment could not be performed for Australia and France, therefore no impairment indicators exist for 2018 (“Ramsay Health Care”, 2019).

 

Sustainability

Ramsay Health Care is very serious about top-notch health care services, long sustainable growth as well as good returns for the shareholders (“Ramsay Health Care”, 2019). The board is serious about good governance for achieving the corporate objectives. Ramsay is already a part of the ESG (Strong environmental, social and governance practices) as per globally accepted standards.

The company is presently having almost sixty thousand employees and cater to almost three million patients every year. To ensure that everything goes smoothly, the Ramsay corporate governance has got 78% of directors who are independent, 22% of directors who are female and 20% executives reporting to the Managing Director who are females (“Ramsay Health Care”, 2019).

As for the safety at the workplace is concerned, there have been zero fatalities.

The analysis done so far did not reveal anything that might indicate ‘Profit Before People’. In fact, it was the other way round. Ramsay has been operating based on the philosophy of ‘People Caring for People’ (“Ramsay Health Care”, 2019). This implies that the focus is on the employees who are considered as an asset.

The company is very active when it comes to community investment and so it makes significant investments in research, training, and teaching. For research, two non-profits have been founded – ‘Ramsay Hospital Research Foundation’ in Australia and Foundation Generale de Sante in France (Agrawal & Cooper, 2017).

The company is also serious about investing back into the local communities and hence support a wide range of initiatives like the ‘Rotary Medical Equipment Donation Programme’. Also, there is the ‘Ramsay Health Care Triathlon Pink’ for breast cancer (Atanasov & Black, 2016).

The Paul Ramsay Foundation was formed following the demise of the founder. It happens to be among the top 50 charities on earth and is also one of the largest in Australia. The foundation focusses on helping communities in Australia that are at a disadvantage and also funds activities having the potential of long term benefits (Kothari, 2019).

To achieve improvements on the environmental front, the prime focus is on the reduction of energy consumption and carbon emission. Continuous effort is given to ensure that water usage is reduced as much as possible (Killian & O’Regan, 2016). Efforts are on to reduce waste and conserve natural resources too. Also, adequate investment is done on new buildings and infra structure.

Importance of social responsibility and sustainability in the modern corporate world

Social responsibility and sustainability are important in the contemporary corporate world since it is fast becoming an indirect marketing tool for various companies. By projecting a positive image, not only can profits be generated but an image can also be created as being socially conscious (Ijiri, 2018).

A proper social responsibility policy can play an important role in building up relationships with customers and this can be crucial for the success of a company (Caskey & Laux, 2016). Another advantage is retention of the top industry talents since many have the ambition of being a part of something big. Such people when given the right opportunity can produce amazing results (Balakrishnan, Watts & Zuo, 2016). Moreover, this facilitates in standing out from the completion as well.

Conclusion

Post the analysis of the annual report as well as information provided on the web site, it can be concluded that Ramsay Health Care still stands a chance to make its financial position better by lowering the debt to equity ratio. Other than that, it is doing excellently well in the other areas especially the record of zero fatality. Also, the company is aware of the social responsibilities and has made significant progress in that domain. Ramsay is clearly in the growth phase of business and the reports and the other facts indicate that it is very serious about maintaining the standards. Even though there are quite a few competitors. However, if the company can stick to its systems and maintain the policy of ‘People Caring for People’, it will always continue to be an industry leader.