Ramsay Health Care Ltd
ASX:RHC
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
37.36
56.51
|
| Price Target |
|
We'll email you a reminder when the closing price reaches AUD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Ramsay Health Care Ltd
You don't have any saved screeners yet
Good morning, everyone, and thanks for joining us for our FY '22 full year results presentation webcast. My name is Craig McNally, I'm the Managing Director and CEO of Ramsay Healthcare. And I'm joined by Martyn Roberts, our Chief Group Financial Officer.
Today, we'll provide an overview of our performance for the 12-month period and update on our strategic direction before covering off on the outlook for the group. So moving on to the key themes of the year, Ramsay's people and doctors have continued to assist governments across all our regions in dealing with the pandemic through the treatment of COVID cases, the treatment of critical non-COVID patients, and also running activities such as vaccination and testing clinics. And as they've always done, our people have supported our local communities through crisis such as the floods in Australia and the conflict in the Ukraine by providing services and supplies.
I would like to take this opportunity to thank our people for continuing to support our patients and the communities in which we operate, really embodying Ramsay's purpose of people caring for people. And I'm really proud of what our people have achieved over the last few years, and the role of the organization has played and continues to play in supporting the response to the pandemic.
Throughout the pandemic and consistent with our values, we've taken the decision to retain our core hospital operations and staffing levels. And while this approach has impacted profitability in the short term, it does mean that we are well placed to ramp up our activities and service our patients and communities as volumes start to improve. We have absolute confidence in the future growth in demand for health care services. And so despite the challenges created by waves of COVID, we have continued to invest significantly in both organic and inorganic growth strategies, to upgrade and expand our facilities and broaden our service profile. This has included investment in our brownfield and greenfield development pipeline with a number of new projects completed during the year.
We've made 2 acquisitions of note this year, the mental health services business in the U.K., Elysium Healthcare; and the Swedish Specialty healthcare business, GHP Specialty Care. Both businesses build on our existing capabilities and are expected to be EPS accretive in FY '23. And the focus is now on extracting synergies and integrating those businesses.
We have continued to build on our digital and data foundations with the aim of leveraging our existing business base and supporting our entry into adjacent health services. And we have invested in our Ramsay Care strategy, which is focused on driving action through healthier people, stronger communities and a thriving planet. Importantly, underlying demand for health care services does remain strong in all our regions, and the pipeline of elective surgery cases has grown, driving private paid missions and private health insurance membership.
The business remains extremely well positioned to benefit from this demand. As you would have seen, we've released an update on the negotiations with the KKR-led consortium regarding a potential scheme of arrangement to acquire all the shares in Ramsay. There is nothing further that I can say in relation to the proposal at the current time, and I won't be taking any questions on it. Suffice to say that our Board is very focused on delivering the best outcomes for our shareholders.
So moving on to our people. Workforce retention and well-being, combined with recruitment, remain critical challenges in all our markets and are expected to remain the number one focus of the senior management team for the foreseeable future. Our group-wide people strategy revolves around developing capability, culture and the best people in health care. We have lifted our investment in a range of activities to grow our workforce through things like the graduate programs, cadetships and re-skilling programs. And our priorities really revolve around 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 spend more time with our patients.
Now moving to the group performance. The impact of COVID on Ramsay over the last 12 months has been the most significant of the pandemic, and it really reflects the increase in cases and community transmission in all our markets. Government-mandated surgical restrictions and movement in isolation orders have resulted in lower activity, higher costs and a change in case mix. And as the world has moved to living with COVID, our facilities have continued to juggle the impact on activity levels and costs of last-minute cancellations by doctors and patients, combined with higher labor costs as a result of staff sick leave. The result includes initial contributions from Elysium for 5 months and GHP for 2 months, which combined contributed $26 million to EBIT.
There were a number of nonrecurring items in the result primarily related to transaction costs, inventory write-downs and profit on disposal of assets. The Board determined a fully franked final dividend of $48.5 per share, which was flat on the interim dividend, taking the full year dividend to $0.97 per share.
So moving to the results in Australia. The Australian business did continue to support governments across the country, with both staff and capacity as COVID cases escalated through the year. The impact of COVID on the business accelerated in the second half of FY '22 as the Omicron variant spread, and that resulted in significant increases in COVID cases in the community, which drove higher labor costs due to increasing rates of employee absenteeism and a significant decline in activity levels due to the disruption caused by cancellations at short notice by doctors and patients. And that also made it difficult to flex costs.
The estimated impact of the disruption across the 12-month period was $264 million, which was net of the $12 million in viability payments, which were made by various state governments for the use of our services and capacity at various times through the year.
Turning to the Australian outlook. Underlying organic growth in activity is expected to be enhanced by the backlog in surgical activity and, to a certain extent, nonsurgical activities such as delayed cancer treatment. Our significant investment in new capacity and services over the last 2 years, combined with new clinician recruitment, will drive further growth. Earnings in FY '23 will continue to be impacted by elevated labor and PPE costs, while COVID cases in the community remain high. In July, the estimated impact of operating in the COVID environment, including higher labor costs, is estimated to have been $38.7 million.
The business is focused on driving growth in volumes, addressing cost inflation by achieving improved commercial terms with payers, building on our strong global procurement advantage and driving productivity back to pre-pandemic levels.
Moving to look at some of the trends in admissions in Australia. Now all states, except Victoria, have reported lower revenue and total admissions per work day against FY '21. The result in Victoria highlights the more severe restrictions in that state in FY '21. While surgical restrictions in Queensland and Western Australia weren't as severe as New South Wales and Victoria, those states weren't immune to the disruption, in particular, the impact of cancellations at short notice by doctors and patients. Overnight admissions per workday across all categories continued to be weaker against FY '21 and pre-COVID activity levels in FY '19. Surgical and psych day admissions were lower than the previous period, reflecting surgical restrictions in isolation orders. And in the case of psych, concerns about returning to the hospital environment.
Medical and rehab started to see improvements against the previous period in day admissions, medical admissions benefiting from the lifting of movement restrictions and isolation orders on the community.
Turning to the investment pipeline. The business continues to invest in its development pipeline. And while some projects scheduled to commence in FY '22 have been delayed, due to the impact of COVID on the building industry and external approval processes, the pipeline does remain strong, and a large number of projects were successfully completed during the period. The business invested $181 million in its development pipeline and completed projects with a total investment value of $232.5 million, delivering 240 net beds, 9 operating theaters, 18 consulting suites and 3 new procedure rooms.
This included the completion of the new Hollywood Emergency Department in Perth, a surgical expansion at GreenSlopes in Brisbane, the completion of the Stage 3 development at Westmead in Western Sydney, an expansion of the Pindara Hospital on the Gold Coast, and the redevelopment of Ballera Hospital on the Mornington Financial in Victoria. Key delays include the expansions of Joondalup Private Hospital in Perth and our hospital at Lake Macquarie, which are both large complex developments and approvals have taken longer than originally anticipated.
The spend in FY '23 is expected to be in the range of $250 million to $300 million, with FY '24 and FY '25 investment likely to be in the range of $250 million to $400 million per annum with investment focused on hospitals in large regional centers including Wollongong and Port Macquarie.
As we highlighted last year, we are focused on growing our day surgery capacity, both within hospitals and through stand-alone day facilities, with several new sites approved this year and others under construction. We have opened 11 new Ramsay Psychology clinics in Australia, that's over the last 12 months. And we've got plans to establish 20 more of those clinics in the next 2 years. Our hospital-in-the-home business is expanding, and we are now delivering care to the equivalent of a 104-bed virtual hospital through our business, Ramsay Connect.
Following the appointment of our new Global Chief Digital and Data Officer, the Australian business has developed a 5-year strategic digital road map to guide investment around 4 transformational themes: The creation of an integrated ecosystem for patient-centric care, which includes the development of our digital front door; clinical excellence through digital and digi physical care, including the rollout of electronic patient health records and investment in AI and analytics to support clinical outcomes; leveraging our data to drive our actions, decisions and improve clinical outcomes; and the creation of a digitally enabled operating environment, streamlining activities and giving our nursing and clinical staff time back with the patient.
Investment in the Australian digital and data strategy and cybersecurity in FY '23 will be in the order of $30 million to $35 million, which we expect to largely be expensed given the nature of most of the spend is software as a service. We expect investment in future years will be significant as the plan is implemented.
Turning to the U.K., Ramsay U.K., the acute hospital business, reverted to its traditional pre-COVID operating arrangements with NHS England for the first half of the year, and that's where we get paid for the activity we actually undertake. Following the Omicron driven rise in hospitalizations prior to Christmas, the NHS England approached Ramsay to enter into a new volume-based agreement to cover the period 10th of January to 31st of March, '22, and the business during that time was also able to treat private patients.
The U.K. was impacted by the same COVID factors of the Australian business, resulting in approximately 30,000 episodes of care canceled at short notice across the year. The estimated impact of costs related to operating in the COVID environment was GBP 30.6 million. These costs did decline over the year but remain above pre-COVID levels. Demand from private patients continue to grow, representing over 28% of total admissions in FY '22. And within this, self-pay admissions was the fastest-growing segment, albeit from a low base. The result includes $26.2 million of transaction costs and an $18 million write-down of inventory.
Capital expenditure in brownfield and new developments for the period was $46 million, with projects, including the completion of Buckshaw Hospital in Chorley, the third hospital the business has opened during the pandemic. We're really pleased to complete the acquisition of Elysium on the 31st of January. We believe the business has a strong strategic fit with Ramsay's existing mental health businesses, and the business contributed $284 million in revenue and $23 million in EBIT for the 5 months of ownership.
So turning to the outlook for the U.K. Subject to the impact of further waves of COVID, Ramsay U.K. is expected to benefit from its strong partnership with the NHS, combined with private patient growth to drive an increase in activity levels. We're actively working with the U.K. government and the NHS around the model for the delivery of additional capacity over the medium to long term to address the ever-expanding public waitlist for elective surgery and nonsurgical services. The business will benefit from new facilities opened over the last 18 months, combined with a new 2-theater day surgery facility expected to be commissioned in the second half of FY '23 at Kettering, and a new theater being developed at New Hall.
The FY '23 U.K. result will benefit from a full 12-month contribution from Elysium. The Elysium result is expected to benefit from an increase in average paid beds driven by brownfield developments, and higher average occupancy levels.
We do expect both businesses will continue to be impacted by inflationary pressures and significant labor shortages impacting some parts of the workforce, and that will make it difficult to operate completely at full capacity. The business is investing in new recruitment programs to support the business as demand returns.
On to Europe. Ramsay Santé maintained its commitment to taking care of COVID patients in Europe and has continued to support governments to manage the pandemic through both COVID testing and vaccinations. The business continued to be impacted by the additional costs associated with operating in the COVID environment. The costs were mitigated to an extent by the COVID-related subsidies received both in France and the Nordics countries. The Nordics business reported strong growth in earnings, a combination of underlying organic growth and the benefit of acquisitions. Excluding the impact of a number of noncore items, EBIT from the Nordics grew 14% on the previous period.
Consistent with its strategy to enter adjacent health care service markets, Ramsay Santé made a number of acquisitions in the Nordics region, the most significant being the acquisition of GHP based in Sweden. So turning to the European outlook, while COVID is expected to continue to impact the operating environment while cases are high in the community, Ramsay Santé remains focused on supporting governments in its regions to address the COVID pandemic; pursuing its strategy of moving further along the patient pathway through investment in adjacent services; optimizing the hospital and clinic network in France through brownfield investment; extracting the synergies from recent acquisitions in the Nordics and selectively seeking further bolt-on acquisitions to optimize its primary care and specialty health care platforms; developing and supporting new policies to attract and retain our people; improving the efficiency of our back-office support systems to support the growth in the business; and investing in our digital platform to support and grow demand for our services.
Following the recent rise in Omicron cases, the French government has indicated that a new revenue decree providing support for private hospital operators will be issued for the period covering the 1st of July to the 31st of December, 2022.
Moving to Asia and the equity accounted contribution from our joint venture, Ramsay Sime Darby increased 41.7% to $15.3 million, and that primarily reflects the contribution from the Bukit Tinggi Medical Center in Malaysia, which was acquired in May 2021. As we announced on the 22nd of March this year, we are, together with our partner, Sime Darby, currently exploring a potential sale of the joint venture, and those discussions continue.
We are proud of the progress we've made on our Ramsay Care sustainability strategy. Programs implemented this year are focused on investing in our people, upskilling in key areas, including leadership in mental health support training. A major milestone for the business has been establishing a group-wide commitment to science-based targets to achieve net zero greenhouse gas emissions by 2040. We've already established a number of programs to support achieving this target.
And now I'll hand over to Martyn to run through the financials in more detail.
Thanks very much, Craig, and good morning, everybody. Turning to the P&L. The components of total revenue are slightly distorted primarily due to the U.K. business moving back to pre-COVID commercial arrangements with the NHS, which saw its revenue contribution move from revenue from government under support contracts back to revenue from patients. The growth in total revenue was 3.3%. But as you can see, the strength of the Australian dollar in particular against the euro means that the constant currency terms' total revenue increased 4.6%. This primarily reflects good growth in the Nordics region and initial contributions from Elysium and GHP.
While we don't report core and noncore profit anymore, there were a number of items that impacted the EBIT results, totaling $60.5 million compared to $34.1 million in the prior period, the most significant being transaction costs, profit on asset sales and inventory write-downs. Profit before tax includes a $26.7 million benefit from 2 items in the net interest line. The net upfront cost of the early repayment of 2 fixed rate loan facilities of $7.4 million offset by a mark-to-market on swap arrangement in Ramsay Santé's debt facility of $34.1 million. The effective tax rate for the period was 29.6% compared to 31% in the pcp, primarily reflecting the lower corporate tax rate in France flowing through Ramsay Santé. We currently expect our effective tax rate to be around 30% in FY '23.
Moving to cash flow and the significant move in working capital is the result of an increase in trade and other receivables as funding from the French government provided under the revenue guarantee scheme reduced and more usual invoicing and payment patterns with customers resumed. Cash capital expenditure increased significantly, reflecting the strong development pipeline. The large movements in divestments and financing cash flows reflects the repayment of the amount held in escrow at 30th of June 2021 for the Spire transaction, combined with the acquisitions of Elysium and GHP.
Moving to capital expenditure in more detail. Total spend across the regions increased 8.7% on the pcp to $733 million, driven by the increase in the development pipeline in Australia. This is lower than original expectations, reflecting delays in external approvals and general building activity in Australia. This does not reflect cancellations of projects.
Spend in FY '23 is expected to be in the range of $0.85 billion to $1 billion. Spend in FY '24 and '25 is expected to remain high due to additional projects combined with those delayed projects. I've already covered off the main movements on the balance sheet for the period being the movement in working capital associated with the return of funds for the French government and the repayment of funding associated with the Spire transaction and recent acquisitions.
Leverage at the funding group level increased reflecting recent acquisitions combined with lower earnings due to COVID-related issues. Obviously, leverage metrics do not reflect the benefit of a full 12 months contribution from the recently completed brownfield development. During the period, Fitch revised its methodology for assessing leverage to total gross debt, including lease debt, to operating EBITDA, remembering that this is only rating the funding group position. Our estimate of this metric at the 30th of June is 4.88x.
With that, I'll now hand you back to Craig for some comments on strategy and the outlook.
Thanks, Martyn. We have continued to invest in and make progress against the strategy that we outlined at the investor briefings in December last year. So our strategy is divided into 4 pillars, and it's guided by our vision to be a leading integrated health care provider.
First pillar is growing, modernizing and leveraging our world-class hospital network to strategically grow our existing market share, and that's through organic growth, brownfield and greenfield expansion and strategic acquisitions.
Second pillar is to move purposefully into new and adjacent services, focused on moving along the patient pathway, retaining that patient relationship by providing coordinated care using our data and digital capabilities to improve the experiences for our patients and clinicians.
The third pillar is about extracting the highest potential value from the business through operational excellence, and that includes building on our strong global advantage in strategic sourcing, which will continue to be one of the key areas of focus.
And finally, the fourth pillar is about reinforcing Ramsay's strong organizational foundations to underpin the strategy and ensure we can leverage our scale.
And now turning to the trading outlook. Over the last 2 fiscal years, we have invested approximately $2.7 billion to expand and upgrade our well-positioned world-class hospital network and move strategically into adjacent services. We are confident that this investment is underpinned by the long-term trends driving health care demand. In the near term, the industry does continue to be under pressure from a high level of COVID cases, which result in highly restricted guidelines around the patient pathway, together with the flow on impact on the workforce, which impedes the recovery in volumes and productivity. It's promising, however, to see the recent declines in cases and hospitalizations in all our markets.
And in common with most industries, we're experiencing inflationary cost pressure across our businesses. We will be negotiating improved terms with our payers to reflect this. And to this end, it was pleasing to reach agreement with Bupa for a new 3-year contract, and we look forward to working constructively with our health funds and governments to effectively manage through the current inflationary pressures.
Ramsay believes the outlook for the group remains strong. Our world-class hospital network, combined with our outstanding people and clinicians gives us confidence that the business is well placed to take advantage of the positive long-term dynamics driving the health care industry. We expect a gradual recovery through FY '23 and more normalized conditions from FY '24 onwards.
Now just before we go to questions, I have just been informed that we've received a letter from the KKR Consortium regarding the indicative proposal. We placed a halt on trading in order to review and inform the market prior to any trading occurring. So there's nothing further I can add or provide at this time.
So with that, I'll go to questions.
[Operator Instructions]
Your first question comes from David Low with JPMorgan.
Craig, I guess the letter from KKR cost to shadow everything but we'll wait for detail on that one.
I'm pointing to COVID cost, yes, on the COVID costs, I mean my quick calculations are the amount that you've specified for July is actually higher than the average we saw over the half. I sort of calculated about $25 million a month and it looks like 38-ish in July. And one, if my math is right and two, does that tell us that the COVID costs are actually higher currently and the sort of impact, at least over the next few months might be slightly worse than we've seen in the average over the period so far?
David, it's Martyn. I'll answer that one. So it's not just costs, just to be clear, so that's the impact. So of the $264 million, about $50 million was the inflated costs that we've been talking about since the start of COVID, those type of costs we've been talking about. The remainder is activity that's detailed as a result of COVID. And as the cases have been so much higher in the second half of the financial year, that's why the impact has been higher in the second half of the financial year.
But combined with some surgical restrictions in January, and then in WA in March and April. But particularly in Q4, with the extreme amount of COVID cases in the community, the patients, doctors canceling activity and also restrictions where we had to close down wards or not taking admissions in mental health facilities wherever there's been outbreaks, et cetera. So all that's included in that number.
And we have that huge wave in July, hence the larger number in July that you have seen. So those inflated costs, which we've talked about for ages in terms of inflated PPE, screening at the front of the hospital, changes in catering, those kind of things, they're still roughly around the sort of $4 million to $5 million a month in Australia. And they've sort of been similar for some time, and they were around about that in July as well.
What we have seen in the U.K., where those kind of costs were about GBP 3 million a month in the first half, they've come down to sort of GBP 1 million to GBP 2 million a month. So that gives us some kind of encouragement. And there's recently been some announcements around even further reduced testing of staff, et cetera, in the U.K., which is one of the bigger costs. So yes, that's just to clarify that for you.
And just to add a little bit of color to that, Martyn, as highlighted July was a particularly high month in COVID cases in the community, and that's reflected in absenteeism. So absenteeism costs are particularly high for July. But we are seeing some improvement through August. And so that's a small period of time, but a positive sign in terms of as community cases come down, sort of the impact on workforce, et cetera, does reduce.
Great. I guess that's what I was looking for to understand how things are trending. Look, the only other question I had probably for you, Craig, is big picture, I mean, it's standing back COVID has been with us for a while now. And we see the outlook commentary gradual improvement and better and, well, hopefully normal in '24. Has there been changes do you think in the way health care is going to be provided as a result of the pandemic?
Are there any sort of challenges or opportunities that you can now see this far in that where Ramsay can do better or perhaps will be more challenged than they were in the past?
Look, I'm going to say not materially, but it does demonstrates. So as we look at what we're doing around patient experience and integrating services becomes increasingly important. So when we -- just a small part of the business, we look at what's happening with Ramsay Connect. And I mentioned we've now got services to the equivalent of a virtual hospital of 104 beds.
Those things -- whilst that will not make a financial contribution at all really, they're just important parts of the way the model will be integrated and provided. And what we see with a lot of that is, it's not necessarily substituting for inpatient care. It's -- as we look at growth and demand for health care services, all parts of the system are increasing, and they're increasing demand on all segments -- or generally all segments in the system.
What we've said for quite some time is that we see a faster growth rate in the less acute services, and we'll continue to see that. So it's how we provide that. And the other piece will be the relationship that we have with the public sector, and so what we provide for them. And so what we're seeing with that is we're moving out of the COVID relationships, if you like, into what those longer-term relationships will be, one, they're on a more commercial basis, but two, it gives us a bit more flexibility in the way we provide some of those services as well.
Your next question comes from Chris Cooper with Goldman Sachs.
Just on the commentary around the hope to renegotiate terms with payers. Medibank, I believe, is sort of locked away for the next sort of 18 months or so. Bupa is obviously now locked away for 3 years. I would imagine governments could be a little cumbersome to deal with in this climate. Could you just give us a little bit more detail on your hopes and expectations there, please?
Yes. Actually, some of the governments have been pretty good in addressing short-term issues. So we're seeing the NHS revisiting tariff and pricing as a result of wage inflation, that those discussions are happening in France as well. So there is a reaction to the pressures that the broader system is under.
And so whilst I think -- always think that price to inflation does lag a bit, and we've got the other systems that we have in place tend to drive that. And you've just got to keep getting better at forecasting what cost inflation looks like, but that's been challenging, obviously.
The health fund issue, you are correct in saying that the nature of those agreements or the timing of those agreements is what they are. I mean my view on that, and to be really clear, we didn't go out of contract or terminate the agreement with Bupa lively, and it wasn't just a negotiating tactic. It was a position that we won't have agreements with health funds unless they're in our best interest going forward, and they are sustainable, and we need to reflect on both sides.
So if we're in a position where we have agreements that we're sitting on at the moment, that aren't in our best interest going forward, then I'm not reluctant to terminate those agreements before the expiration of them.
Okay. And perhaps one for Martyn, just on sort of cash flow and balance sheet. So normally this is -- and not all of this is within your control, I guess, but I guess much of it is as well. Clearly, lots of movement in the year. Just really after some sort of commentary on when we get back to sort of normal or sort of cash conversion, sort of balance sheet metrics that we were accustomed to seeing prior to the pandemic.
I know there's a lot of working capital movements that we need to think about here, and you don't seem to be shy in investing CapEx dollars at the moment. So just some sort of broader medium-term thoughts around cash flow and balance sheet market would be great.
Yes. I want -- as we've identified, it is an EBITDA issue, not necessarily a debt issue and that's a short-term COVID impact as we see it. From a cash conversion perspective, you've highlighted the main issues there. We've called out for quite some time that we were getting money in advance from the French government, and that had to normalize at some stage, and it did during the period.
So I would say our working capital levels at the end of the period returned to somewhat of normality across the group. And yes, you're right, we're not shy in our strategy of investing in brownfield for the future because we do see all those underlying tailwinds that Craig talked about in the future.
And they're long-term investments, they're not just investments for the next year or 2 that will be there for quite some time. So from an operating cash flow perspective, all those sort of weird movements around Spire and French government, they will normalize now. The acquisitions are done, and so we should be moving back to some kind of normality in cash conversion. These variable lot obviously is what our EBITDA is going to be and we're not obviously in a position to be able to give you any forecast around that.
Your next question comes from Andrew Goodsall with MST Marquee.
Sorry, apologies. Just want to ask around, is there a jurisdiction that you would -- you'd be looking at that gives you some encouragement around the profile of recovery? And I'm thinking Nordics did quite well, perhaps COVID is being handled a bit different there. Or some people suggest West Australia in Q3 was what we could look like when we recover. Just to give us a sense of what that recovery or return to normal looks like on the cadence of operations at that time.
Yes. Thanks, Andrew. The -- look, there's been so much volatility and not a lot of clear air in any jurisdiction, to be frank. So there's been short periods where we've had clear air. We still had workforce issues and -- but when we've had that limited clear air, the recovery of volumes is encouraging.
But I'm also encouraged that when markets will move to operating in a COVID environment going forward, and just this week, the U.K. announced that it will stop asymptomatic testing on staff and patients, for health care providers. So that's an encouraging step forward, and an indication that the markets will look to -- and if that's successful for the U.K., I'm hoping we'll see that transition to other markets, that there's a desire to get back to the normal operating practice and not have all the constraints that's around COVID.
But really, if you look -- I mean, you called out the Nordics and sort of the way that business has performed through COVID has been really positive. But it's really difficult to draw a line of anywhere and tell you that, that's what we think the future looks like.
Got it. Perhaps another way to think about it, if you look at the provisioning for deferrals by the private health insurers, is your sense that they're in the right ballpark in terms of what the backlog looks like?
Andrew, it's not for me to comment on the provision.
Perhaps -- or you could certainly say they're under provisioned.
But I think there are reasons and there's no consistency in those either, so.
Yes. Okay. But it's clear that everyone agrees there's a backlog. And I guess it's just now a matter of trying to get some clear air as you say take advantage of that. Final one for me. Just the French government extension of payments, I guess, just trying to understand if that's a certainty. And if it is, what's the quantum -- or is it going to be broadly similar or lower?
Yes, Andrew, it's Martyn. So it's not been decreed yet, but this has been quite typical over the last 18 months whereby they inform us that it's going to happen. And then during the period that it applies to, they -- normally about halfway through that period, they issue a decree. So there's no reason for us to suspect that's not going to be the case going forward.
We have been told that it's going to be in place through December. The times of that obviously haven't been confirmed. It may be different, or may not be. I think the general principle of it will be similar that it's a revenue guarantee scheme. But whether that applies to the same amount of business or the same remit or not, we don't know yet. We don't know the detail, but should be similar.
No, I'll just add to that. I mean, I think sort of running off the previous comment I made about public work. I just think that -- and we've spoken about really over the last 2 years. I think the relationship we've built with payers through COVID will bring improved performance to the group down the track.
And if I use France as an example, the new authorizations that we get in France as a result of that stronger relationship sort of point positively to the future.
Your next question comes from Lyanne Harrison with Bank of America.
If I could come back to that -- to David's question around COVID impact. And so obviously, saw that a little bit higher in July -- oh, the July of this year. But also you mentioned that the U.K., for example, is lower and commented about the no longer asymptomatic testing in the U.K.
But to what extent, is some of that seasonal? If we look into the next 6 months, should we expect the COVID impact costs in Australia to reduce? And then in other areas in the Northern Hemisphere to start increasing as they head into winter?
If I had a crystal ball and I can tell you what was happening with the next COVID wave, I'd probably be retired doing something else. I think what's happened, though, not to be facetious about it, is that everyone's a better understanding what the impact of the waves are and so managing them better. And so I think what, in the Australian context, I think most state governments have recognized that the hard line of surgical restrictions didn't really have the benefit that they thought.
And so I think people are just getting better at understanding what those impacts are. And for a next COVID wave, if it comes, then people are better prepared. So I think the consequence of some of the decisions around restrictions, lockdowns, et cetera, have resulted in people getting delayed access to health care. And I don't think anyone sees that as a good thing. So I think we'll see improvement in that.
And then my next question is on, I guess, investment in greenfield and brownfield site. So in '22, about $370 million of that, the majority going into Australia. In terms of the balance, can you talk a bit -- I couldn't find it in the notes -- can you talk about the remaining $200 million or so in terms of which regions would they invest it in and to what? What types of greenfield or brownfield sites?
Sorry, you broke up a bit there. So was the question in terms of what was the balance invested in outside of Australia?
That's correct.
Yes. It was pretty split between U.K. and France and the Nordics. We continue to work on our cluster strategy. In France, we do have obviously investments outside of brownfields and greenfields in the U.K. and France around imaging equipment, that kind of stuff. So in France, we do invest fair amount of money on that.
So you'll see on Slide 18, we've given you a split there of the CapEx by region. So you can have a look at that and we've got a split by type as well if you want some further information. But you can see there, Australia was 42% of the total CapEx. U.K. was 12% and Europe was 46%.
Your next question comes from Saul Hadassin with Barrenjoey.
Craig, I just wanted to ask you about the ability to actually achieve or to do catch-up work, not either pent-up demand. So how much of an issue is it as it relates to just staff shortages in general? I know you've touched on this, particularly in France.
But across regions, if volumes do indeed come back or demand for particularly elective surgery comes back in what position are you to increase theater utilization? In other words, how much of this is just having staff come back from being sick with COVID or isolating as opposed to actually needing more staffing on the ground across the different regions?
Look, if I go back to -- we got to think a bit which time frame when we -- sort of FY '21 and we were -- we had surgical volumes that are sort of like a 7% or 8% premium to what they had been previously. We can manage with the stuff we have. There is -- I don't underestimate the significance of the impact of absenteeism in the workforce. That has been running at particularly high levels, and that has been the major constraint.
So if we look at our -- we've been recruiting well. There has been turnover in the business, but we've been recruiting well. But even in recruiting, we're still -- workforce issue is simply because of absenteeism. It's not to say that going forward, that the industry is still under pressure and people making decisions about working less, not necessarily leaving the workforce, but part time as working less time. And so we're trying to track that.
But the overall issue that's been the most concerning for us is the workforce absenteeism. So that comes back. We've got more capacity. And putting aside COVID infections in the community resulting in sort of closure of capacity. If we get back to a position where we've got that workforce back in, we will still have all the workforce challenges that we had leading into COVID.
And so the strategies we have around workforce -- and Australia as an example, it will be 800 graduate nurses that we recruit into the business this year. That will hold us in good stead in the future. The upskilling program, the cadet shifts, particularly for enrolled nurses, are all things and decisions and investments that we've made, understanding that workforce pressures are going to continue.
So not trying to say absent -- once absenteeism is back into a manageable level, everything is okay. It's the combination of all those things we think puts us in good stead.
Just one more for me, the commentary around the digital strategy in Australia and the spend. Do you have a sense out of how material of that spend is going to be over the next 5 years in sort of total dollars, just noting the $30 million to $35 million is targeted for '23. And then any estimation of what the returns could look like in terms of benefits that flow through of that -- those dollars invested?
Yes. It's Martyn. So yes, we haven't called out, we're just getting started. So yes, we do have a rollback. We do have a plan. Clearly, we made some estimates what that might look like, but we're going through that process right now. The returns will vary depending on the project. So some of the investments that we'll be making will be kind of foundational in the early period, which may not have a huge amount of returns.
But that then enables us to do all the other significant investments that we want to do that will give us productivity improvement, that will give us new revenue streams, et cetera, which will have very good returns. So this is a long program with a -- probably, as we set a 5-year road map of investment, which then will have increasing returns and benefits at the back end of that.
So -- but what it looked like, we've gone to market, we've done looking for different systems, et cetera. So it's pretty early days in terms of knowing what the costings are. But this initial investment is to really get us started.
Your next question comes from Gretel Janu with Credit Suisse.
Firstly, just in terms of cost inflationary pressures, can you give us some outlook for what you expect in terms of nurse wage inflation in the different regions for FY '23 as well as consumable costs?
Look, FY '23, whilst there's upward pressure on wages generally, most of our arrangements for FY '23 are locked away. And so as we come out of arrangements depending on where the state of the economy is and the general industry, we anticipate there will be upward pressure. And what -- and we'll respond to that.
And one of the responses will be how we deal with our payers, whether they be government or health insurers. But for FY '23, no significant material change from what you already understand. And so Australia, we've got the EBA structures. For the U.K., we've seen minimum wage increase in the national minimum wage increase in the U.K., which has had a flow-on effect.
But we've seen -- as I said before, I think we've seen a good reaction from the NHS to recognize that, and then -- and then increase pricing. And similar in France, and we look back at France for the last year and the significant increase in wages for nursing staff, which was then recovered through an increase in tariff.
And I just think those dynamics continue, and there will be some timing issues in some of that. But that's I think what we're going to see for the next few years.
Great. And just in terms of consumable costs, anything that we should be aware of there from an inflationary perspective?
Well, I mean, it's not as significant a cost as personnel costs, which is by far and away, our biggest cost and then add on to that process, which is managed through certainly in Australia, the listing from the schemes there. Certainly, we are seeing PPEs not coming down at all. So that's still at inflated levels.
In Europe, gas prices, in particular, are having a big impact. Fortunately, in our acute business in the U.K., we've got -- we're still on historical agreements on electricity and gas. So we haven't -- we've been able to avoid some of those massive increases. Not so much from the Elysium, but in around the U.K. business, so that's been good.
So it's a mixed bag across the globe, I would say, for us. But we've got a significant procurement activity where we're always focusing on those, trying the things and trying to offset them. We've got direct manufacturing connections through into China. So we get a pretty good line of sight in terms of what's happening in terms of those kind of things that we can then have conversations with our other suppliers.
Just to add on, I think sort of broader procurement strategy, we've got a large range in a diversified base of supply. So how we engage with each of those. I mean they're competitive amongst themselves. So we need to look at what our global procurement leverage is and continue to work on that.
Great. And then just in terms of your Slide 8, the admission trends in Australia. Just looking at psych and rehab in particular there. So consistently weak. I mean, you did have some improvement in rehab recently. But I guess, do you think that there's -- for these 2 types of mix that they will be structurally weaker going forward now versus pre-pandemic?
Sorry I missed the specifics of that, Gretel.
So psych and rehab.
Rehab and psych.
I think what we're seeing is going on for a while at least, a little bit but I think, generally, what we're seeing is -- no lack of demand for psych.
Psych is really a supply side issue at the moment. and getting -- supply side and getting people comfortable with the environment again. So getting psychiatrists and looking at the models, their engagement with psychiatrists is something we've been working on for a while anyway, as shortage of psychiatrists continue in the system.
So it's about getting our models of care right, but there is no question there is unmet demand in psychiatric. What we're seeing in rehab is we're seeing a change in the case mix in rehab, and rehab is too easily sort of lumped on to one heading.
So in what we're seeing, and we've seen for a little while and probably accelerated at the moment, is more neuro rehab, more reconditioning, particularly for cancer patients. We're seeing less of the high functioning orthopedic rehab, and we're seeing a lot more low functioning orthopedic rehab where people are more compromised, and that's a reflection of sort of demographics.
Rehab volumes sort of have a link to surgical volumes as well. And so as surgical volumes have come down, rehab volumes have come down. So I think -- and I know this goes against what health funds would want to say, is that growth in rehab will continue. It just won't be the same patient case mix that you saw in rehab 5 years ago.
So still very positive about rehab and positive about mental health in the long term once we get the supply side structure organized properly.
Your next question comes from David Bailey with Macquarie.
My question is just around investments. So just in terms of the capital you're deploying just if you think it will support your market position over the medium to longer term? And then maybe focusing on Australia ongoing investment at case psych, do you remain confident in the characteristics of those catchment areas, at those sites, sites that you'll see ongoing demand for services? .
Short answer is yes. I mean we do a lot of work. I think you appreciate in developing business cases and it starts with the -- what the catchment needs are from a health care provision point of view, what are the solutions that we can put in place.
And that's just not hospital capacity or hospital services as we look at routines, how we integrate services. So we don't take a short-term view on what the next 2 or 3 years looks like. We're always trying to forecast beyond that. And with that, we've made those investment decisions, which reflects the confidence we have in that analysis.
Do you think that improves your position over the medium to longer term?
From a competitive position. Well, I do think some of our competitors are struggling and struggling financially. And I think the things that we always look to bring to bear and leverage are the quality of the portfolio we have, the types of services that we provide, the level of complexity.
Nobody else is going to match a 920-bed fitting hospital as Hollywood is. And so it's how we leverage that. One example is putting an Emergency Department into Hollywood to better manage direct referrals into that business. We have the capacity and the expertise to execute on those things and -- that comes with the portfolio, the quality of the people we have, the engagements with doctors that we have, the investments we make in teaching and research, which makes us an attractive organization to work with.
It's all of those things that come into play and probably even more exacerbated when there's pressure.
Understood. And then just in terms of day hospitals a bit of a focus there. Just wondering if the strategy is organic growth or you potentially look to M&A as well?
A little bit, but not substantially. I think our position on day surgery is not inconsistent with what it's been for a little while, but day surgery is growing. But -- it has been growing for -- as a proportion of surgical activity for 20 years.
And so we're looking at how we enhance the day surgery activity we have in the existing facilities. And 60 -- well over 60% of our procedural activity is done on a daily basis. And so it's a significant part of our business already. I think we've got 45-day surgery units within our hospital portfolio in Australia. So we'll continue to invest in that and enhance back so that there's flicker, there's better patient experience that will help us manage costs as well.
And then we'll look at locations that we think have potential for growth. And so growth corridors that we don't exist currently or we don't have a footprint in currently, maybe a day surgery is an option for that, and we've made a couple of decisions.
As I said in the presentation around some new day surgery, stand-alone day surgery facilities, but it won't be a proliferation of those in the short term. And one, the economics around them is very difficult, and that hasn't changed much. But strategically, we think that's something we'll see rolling out over the next 5 years or so and continue with that. Yes. So I think that's where we're at with that.
Your next question comes from Sean Laaman with Morgan Stanley.
Craig, Martyn, I hope you're both well. My first question -- good to hear. My first question, comes around the public sector backlog in Ramsay's potential role in helping alleviate that situation. Would you view Ramsay as an operator of taking contracts to operate sort of public hospitals themselves? Or using some of your capacity in your private hospitals to service that public sector backlog?
And -- how does the doctor incentives work in that situation, i.e., if a doctor in theory might not be able to charge a copayment when they're servicing a public patient. How does that actually work?
Okay. There is no simple answer to that, Sean, unfortunately. So what is happening is that the engagement with state governments and some state governments, in particular has increased around what the medium-term future looks like.
And so in mental health, we've got some good examples. There's an arrangement that we've agreed this year with Victoria to provide 24 beds in Melbourne for public patients, and then additional capacity for day patient and outpatient. In Western Sydney, we've got an arrangement with South Western Sydney LHD to provide 8 to 12 patients a day for public patients and then another range of services for outpatients.
And they've been around particular issues, around women's health, eating disorders, et cetera. And so those arrangements I continue to see happening. In the more mainstream picture and where the bigger volumes are around surgical activity, predominantly -- well, I'll come back -- I don't see managing of public hospitals on the agenda in the medium term.
I think there's a couple of examples, and we've seen in our own portfolio where governments have taken those facilities back at the completion of the contract terms. And I don't see government sort of launching into that. However, what I do see happening is they will engage with private hospitals and operators like ourselves to use existing capacity. But I'll also look for longer-term arrangements where specific capacity could be developed.
I'm not saying it will be, but it could be developed to deal with public patients, particularly. And so it will be a mix of things, but there's no question that the engagement with the public sector has increased. And as we go back and reflect on the things we talked about over the last couple of years, about a recognition that the private hospital sector has capacity and capability to do more than that they maybe thought initially. And I think we've seen that reflected in those discussions now.
And that's just not sort of reflected on the Australian context, but we see the same happening in Europe as well, much, much stronger relationships. And I called out the increase in authorizations in France as an example of that. So, positive.
Right, Got it. My second question, I know it's not directly in your wheelhouse, but it is related. I'm assuming by your earlier comments that the arrangement with Bupa was successful on the Ramsay side. And then we note just more broadly the insurers of forsaken price increases, given what's happened with activity, I guess, at least until November.
And then we've seen a restoration of participation in the system since the pandemic began, some more people having hospital treatment coverage, which will be good for you and the industry. But I'm wondering that the role of this progressively lower price increases that we have seen on premiums over the last 5 years, and we're now are sitting on zero, essentially.
I'm wondering if we get to the next round of negotiations, if the government has a view or what your view is, if we see a bump up beyond, say, the 3% something that we've seen on private health insurance premiums or not. And if we don't see it, do you think the industry broadly has till 8 margin?
Okay. A couple of, again, a complex question with not a simple answer. I think what is important is to grow the pie. So for both insurers and providers, it's important to demonstrate the value of private health care. So I think that's something that we need to be collaborating on and not just between insurers and private hospitals, but also with government and public systems about the value of increasing the pie.
Because -- and the obvious example is access into to public hospitals will -- has become more difficult and will continue to increase. So waiting is whilst they're not front and center in the media in Australia, they are increasing. And so that is an incentive in itself for people to take out private health insurers.
And we've seen that, as you rightly point out, reflected in 8 quarters of increased participation. So then what does the community bear in terms of premium increase? That's certainly something more for the insurers to answer. All I'll say is sort of what I said before, the circumstances in the industry, and particularly around the inflationary environment and not what people could reasonably forecast. And so there are agreements in place that don't reflect that.
We've got to sit down and renegotiate those that are existing or upcoming to reflect those environments. We've also got to take cost out of the system and hence the digital and data strategy. One of the real objectives of that is to streamline processes and sort of take out processes that are redundant, so that we play our part in sort of making sure that the system is more efficient.
So lots of elements of that. But -- and it is complex. Otherwise, it would have been resolved easily some years ago. But as the environment changes, then we need to be flexible about the way we think about that.
Your next question comes from Steve Wheen with Jarden.
Just prompted by your comments about the impact on -- of the current environment on your competitors, particularly in Australia. I just wonder if you could give any color around doctor recruitment in that context. And certainly in light of you continuing to spend from a CapEx perspective, whether that's sort of putting you in a better light to attract and retain some of these doctors to operate in your theaters?
Yes. Doctor recruitment is not a science. But I think what is important is we see the doctors as our partners. And so we engage with them on that basis to understand what's happening in their business, how we can help them certainly how we can make ourselves attractive for them to come to us.
Investment is one of those things. We have more surgical robots in our business than anybody. And so as we look at the next generation of doctors and the way their training has been undertaking -- undertaken, it's important that we keep investing in technology that allows them to practice effectively and efficiently. We do invest more in teaching and training and research than anybody else in the sector. And that's not just because we're bigger on a pro rata basis. We certainly invest a lot more. That's important for doctors.
So all of those things are things that we saw before COVID and were prioritizing before COVID. Probably our ability to keep doing that should hold us in good stead going forward. Again, reflecting back on the quality and complexity of our portfolio, we've got big complex hospitals that we've got significant clinical infrastructure that doctors want to be part of. And so growth in those facilities tend to be higher than growth in other facilities as well.
And so is that manifesting at the moment with an increase in the doctors that are utilizing your services versus last year or pre-COVID?
Yes. We continue to recruit doctors. And how is it manifesting? It's hard to tell when the volume isn't where it should be. So we get -- we're certainly -- the engagement with our doctors is that they -- one, their activity is compromised by staff absentees in their own practice and their own isolation from time to time.
But if you try and look past that, we've got more doctors, and we've got more capacity. We've got state-of-the-art operating theaters. We've got the state-of-the-art other facilities. We've got nursing staff and other clinicians who are highly trained. And so these are the things that doctors look for.
Yes, great. Understood. Just again, back on the arrangements with the payers with the most recent signing. You've always schooled us that not to look at the headline, sort of indexation number. It's more around the conditions that are agreed upon as to where there is transfers of risk. I wonder if there's been any movement in more recent negotiations where you have been able to achieve some wins from the risk perspective that, that lies embedded within some of the conditions in these arrangements?
Yes. Look, I don't talk about the specifics of anything about those agreements. But I think there is a -- what we've seen is an increased willingness, if you like, and that's both parties to look at increasing collaboration. And I think sort of reflected that in some of the announcements with the HCF agreement, for example.
But also there's a recognition that we need to streamline the agreements and sort of the business rules that sit in that, that don't actually add any value. They're all sort of processes that cost money, that are unnecessary. So there is certainly improvement on that side rather than just the indexation as well.
Excellent. And one final one for me. Just with the backdrop of the offer that can't be spoken of. I'm wondering if that backdrop -- sorry?
Sorry. I'm just saying which offer was that?
I just wonder if they started to change your perspective on sale and leaseback in your own right and your ability to maybe monetize some of the uncapped value that sits on your balance sheet with regards to some of these properties?
Look, I think irrespective of that process, and we won't talk about it, it's business as usual for us. And so -- and you've seen that in the investments we've made. We've talked from time to time about sale and leaseback and what our position would be. And we've certainly been assessing the benefit of a -- I'll let Martyn talk about the more specific issues, but the issues for us have really been about leakage in that.
And we're where the short-term benefit is against the long-term benefit and capital gains, tax leakage and stamp duty leakage has been significant considerations for us. But we've been looking at, should we have a smaller portfolio where we minimize that leakage and what does that look like. And so it's something that -- it's probably being considered more regularly than it was in the past for us. And that's not necessarily as a result of any offer process.
Your next from John Deakin-Bell with Citigroup.
Craig, just interested on that Slide 8, you've got the trends in admissions and the surgical admissions are kind of where they were in 2019. But since then, you've opened a lot of brownfields and increase the capacity of your network in Australia. Can you just give us a sense of how much spare capacity you've got?
And then and I'm assuming that all gets better in, let's say, 2024, what are the limiting factors to actually being able to fill that capacity, whether that's nursing staff or surgeons. Just to give us a sense of where you might get in, in a year or 2.
What can I tell you, John? Certainly, physical capacity. I mean and we're still making investments, as you've seen in the presentation, in developing theaters. So that's site specific about where we're coming under forecast pressure in the next few years about where we see activity moving. And so that will continue to be the case.
And so when we look out the next 3 or 5 years about where do we need additional theater capacity, we'll develop that, sorry. But in the short term, we've got capacity to take on surgical volumes that are higher than they were in FY '19. And we've got a really small amount of capacity that the constraining factor is workforce. And so absenteeism and then -- one of the areas where workforce has been challenge is more critical care areas.
So ICU, operating theaters are the 2 areas that we find most challenging in recruiting skilled staff. And so developing our own is a really key component of that. And so as part of our -- for example, our graduate nurse program, the second year of that 2-year program is really focused on people selecting where they want to work, if there's a subspecialty they wouldn't work in.
So we're training a lot more operating theaters staff for ourselves. So that will hold us in good stead over the next few years. So we'll just continue to do that. And as I said, to answer your question previously, that's an ongoing process despite sort of recovering absenteeism levels.
And just, Martyn, on the U.K. and France, you commented that the U.K. that inflation was about 5% and then France, you referred to significant inflationary cost pressures. Assuming the volumes get back to normal at some point, can the EBIT margins get back to where they were pre-pandemic or of the inflation impacts precluded that from happening in the margins in '24 or '25 will be lower than where they were in 2019?
Yes. I think as I said before, the key factor there is wage inflation. So who knows where -- I mean we're seeing forecasts of general inflation in the U.K. being almost predicted to be up around 18% with some of the reporting comment yesterday. But that's across general costs.
The wage inflation is going to be the most important. And as Craig said, the NHS have been recognizing that, and some of that's been reflected in tariff. And that's really the biggest variable in terms of getting back to decent margins is what that indexation looks like on the top line.
Certainly, we're focused on productivity and around our own costs. But the challenge we were saying and people say, back to pre-COVID levels, well FY '24, FY '25 is a long time, it's pretty close. So the world has changed and our business has changed. We've opened 3 hospitals here in COVID in the U.K. And so the biggest part, as I said before, is managing our own productivity and then negotiating as much as we can with government or payers to make sure that those costs are being reflected within our indexation.
And I think -- sorry, just to add to that. When we look at how those negotiations happen, I mean, in Australia, we negotiate just as a Ramsay entity with our payers. But when we look at what's happening with industry negotiations in France, the private hospitals are very aligned with the public hospitals. So that gives some strength of those negotiations, which it's not dissimilar in the U.K. and so the government responses, and as we have alluded to a couple of times, have been more positive. So I think that's good.
Your next question comes from David Stanton with Jefferies.
If we could start, just in Australia, I'd be very interested to hear given what you've called out in terms of wages. Your rates of casuals or agency now into F '23 compared to pre-COVID levels, where -- if you could give us some kind of number where you were in percentage terms on a given shift, pre-COVID and where you might be now, that would be greatly appreciated.
Yes. Probably can't give you an absolute number, David. I talked to you about the trend in what's happening. So it's been through COVID we've held everybody's hours, whether they be part time, casual or certainly full time. And so there's sort of been a classification issue as well sort of in the industrial climate.
People who were casual is doing regular shifts, sort of moved from being casual to permanent part timers by election. So those sort of things will change the numbers from what they were historically. But what we do see, and I did touch on it a moment ago, is people looking to reduce hours. And so we need more people in that part time and casual group to give us the flexibility.
And so we need that flexibility to get back to those operating disciplines that we had pre-COVID and getting productivity back into the system. But we don't see any concerns about the mix between full time and part time and casual, but I can't give you the absolute numbers.
Fair enough. I mean we've heard pretty -- your competitors are talking about pre-COVID. They were at 5%, now they're at 25% casual/agency? Can you comment?
Well, no, no, no. We don't have anything that looks like that. And particularly when you're thinking about agency. Agency usage through the pandemic was actually reduced. And we've always been pretty good at managing agency hours down. This -- I'm going to say, the exception to that is just when absenteeism does go up. There's more demand for agency, but the numbers of nursing staff working in agencies is less than it was and partly because of the closed borders and international nurses not coming to the country, which in itself is an issue that needs to be addressed.
And one of the things we'll be pushing at the Jobs Summit next week is, Australia has just got to become more competitive with the rest of the world on recruiting skilled workforce. We look at what we can do internationally as we are miles behind in Australia.
Understood. And for our records question, I always like to get is how many operating theaters do you think you'll open in Australia in F '23?
I don't have the number in get go but...
David, in the investor presentation before Christmas, we had the wrap of operating theaters for the next few years. I'll just have to update that for some of the delays, but that's still -- or none of those project is been canceled. So you can take it from that.
There were 9 in FY '22 new theaters, with $181 million of spend, and $250 million to $300 million for '23.
Okay. Kelly, maybe we can have a chat offline. And then finally, team, you have been previously talking about investing in health care adjacencies and given it's business as usual for you as you previously said, where are we -- where is Ramsay at with that in terms of -- has that changed really, that thought changed during the COVID period that we've been through?
No, it hasn't. Our view on that hasn't changed. So that is part of our strategy moving into new and adjacent services. And as Craig called out earlier, day surgery strategy is part of that. Our out-of-hospital community work sits is part of that. So the Ramsay Psychology, Ramsay Connect, our pharmacy, Allied Health, all those type of things are what we're focused on.
I mean, obviously, in the U.K. and France, we have very strong imaging businesses, and that's always been on our consideration set in terms of moving into that. And I think what we've said is anything that's on campus that patient-facing is under our consideration. So our view hasn't really changed on that at all.
Yes. I think it's reflected in Europe. We've moved from 130 primary care centers to 270 in 1 year. So that's been a good growth.
And you did mention previously patient transport being something you were looking at in France. Is that still on the agenda?
That's falling way down the agenda, David.
There are no further questions at this time. I'll now hand back to Mr. McNally for closing remarks.
Okay. Thanks, everyone, for your time. Obviously, we've got some other work to do post this. But I just want to leave you with the message that whilst the result really does reflect the situation and circumstances around COVID.
We're still extremely confident about what the future is for us. Hence, you see the investments we're making and not just investing in physical capacity in terms of brownfields and greenfields. That is certainly part of what we do. But the other investments we made, the digital and data strategy, positioning us for the long term, the investments that you don't see specifically around workforce and teaching and research investments.
So we're very positive about what the future looks like post-COVID. And that's driven by the things we generally talk about. Demand for health care services is going to increase as a result of demographic changes, growing populations, aging populations, new technologies, all that still is in place. So thank you for your time.
That does conclude our conference for today. Thank you for participating. You may now disconnect.