Green Cross Health 2019 Annual Meeting Presentations

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 1
GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 1
Annual
Shareholders’
Meeting
30 July 2019

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 2
GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 2
Agenda
•
Chairman’s address
•
Group Executive Officer’s address
•
Voting on Resolutions
•
General Q&A
•
Refreshments

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 3
Peter Merton
Chairman

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 4
Rachael Newfield
Group CEO

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 5
Our Purpose
Working together to support healthier communities.We are passionately committed to the health and wellness of New
Zealand, and
to providing the best support, care and advice to our communiti
es.
This is our promise.

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 6
GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 6
Financial Highlights
Revenue
$567.2m
+5.6%
Pharmacy
Same Store Sales
+1.1%
EBITDA
$36.9m
+2.3%
Medical
Same Centre
Revenue
+4.9%
Net Profit After Tax
$16.1m
(attributable to
shareholders)
+3.2%
1
Consistent
Final Dividend
3.5 cps
Note: 
1
2018 restated to incorporate changes in Accounting Standards and
restatement of alternate leave liability. See note 2 (c) of th
e 2019 financial statements.

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 7
Pharmacy Performance
•
Revenue flat at $340m
•
Operating Profit down 5.5% at $27.3m
•
Operating Profit margin decreased from 8.5% to 8.0%
•
Same store sales growth was 1.1%
•
Record low cold and flu winter season also resulted in retail s
ales in the cough/cold and pain “over the counter” categories
being down 5.9% year-on-year
•
Living Rewards loyalty membership grew 8% to 1.6m customers
295.6
322.6
341.3
340.2
250275300325350
2016
2017
2018
2019
$m
Pharmacy Operating Revenue
25.0
27.9
28.9
27.3
202224262830
2016
2017
2018
2019
$m
Pharmacy Operating Profit

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 8
Retail and Health
Customer Engagement
Network Scale
Financial Retu
rns
Focus on core retail
disciplines
Grow exclusive product
range
Grow e-commerce
Maximise Chinese market
opportunity
Optimise digital health and
retail communications
channels with customers
Utilise 1.6m customer loyalty
database, analytics and AI to
personalise offers
Continue to grow the
franchise network
Optimise equity store
network
Reshape to fit new
environment
Changes in r
anging,
e-commerce, pricing and
expenses to achieve returns
Future Focus

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 9
Medical Performance
•
Revenue up 33.8% to $70.5m
•
Operating Profit up 20.4% to $4.4m
•
Operating Profit margin decreased from 7.0% to 6.3%
•
Same centre revenue growth was 4.9%
•
255,000 enrolled patients, an increase of 18,000 (+7.6%) in the
period
•
Ownership in 41 Medical Centres
46.5
49.3
52.7
70.5
0
20406080
2016
2017
2018
2019
$m
Medical Operating Revenue
2.8
2.9
3.7
4.4
012345
2016
2017
2018*
2019
$m
Medical Operating Profit

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 10
Network Scale
Customer Engagement
Financial Returns
Network and patient number
growth through targeted
acquisition and market
share growth
Build The Doctors brand
Deploy digital technology to
increase efficiency and enhance
delivery of high quality patient
care
Continuous improvement in
operational efficiency and scale
to create capacity and lead to
improved profitability
Opportunity for cross referrals
Future Focus

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 11
Community Health Performance
•
Revenue up 9.3% to $156.5m
1
•
Operating Profit was down $1.1m to $0.1m
2
due to continued funding challenges
•
Included in the $0.1m operating result is a $0.4m increase in l
eave liability resulting from support worker pay increases
due to pay equity legislation
Note * & 
1
: Reclassification of $14.3m to Revenue from Operating expenditure as per IAS20. See note 2 (c) of the 2019 financial statements
.
* &
2
: Operating Profit includes a restatement of alternate leave li
ability. See note 2 (c) of the 2019 financial statements. 2018 s
egment result also excludes unfunded increases in
Leave Liability of $1.9m (
due to the implementat
ion of pay equity legislati
on). This is excluded from the segment result due to
its abnormal nature but included in reported Group
result as outlined in note 4
of the financial statements.
105.7
115.7
143.2
156.5
0
4080
120160
2016
2017
2018*
2019
$m
Community Health Operating Revenue
0.6
3.0
1.2
0.1
01234
2016
2017
2018*
2019
$m
Community Health Operating Profit

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 12
Service Offering
Digital Communication
Financial Returns
Focus on higher clinical needs
segments
Expand geographic coverage of
Community Nursing business
Harness technology to enhance
workforce efficiency and client
outcomes
Negotiate sustainable funding for
existing and future contracts
Exit contracts that are not
financially viable
Future Focus

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 13
Group Financial Result
12 months ending 31 March 2019

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 14
Group Revenue and Profit
•
Revenue of $567m up 5.6%
•
Operating Profit (EBIT + associate earnings) $29.4m down 2.2%
•
EBITDA
2
at $36.9m up 2.3%
1
Note: * & 
1
: 2018 restated to incorporate
changes in Accounting St
andards and restatement
of alternate leave liability. See note 2 (c) of
the 2019 financial statements.
2
: EBITDA is a non-GAAP measure. It is the net of Operating Revenue less Operating Expenditure and excludes Share of Equity acco
unted net earnings.
#
: 2017 +$2.8m and 2016 +$1.7m Operating Profits both include Share Option Fair Value Gain.
447.7
487.6
537.2
567.2
0
100200300400500600
2016
2017
2018*
2019
$m
GXH Operating Revenue
30.1
34.9
30.0
29.4
24283236
2016+
2017+
2018*
2019
$m
GXH Operating Profit
#
#

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 15
Net Profit After Tax (attributable to shareholders)
•
Net Profit after Tax attributab
le to shareholders of $16.1m up
3.2% from $15.6m
1
Note: * & 
1
: 2018 restated to incorporate
changes in Accounting St
andards and restatement
of alternate leave liability. See note 2 (c) of
the 2019 financial statements.
#
: 2017 +$2.8m and 2016 +$1.7m include Share Option Fair Value Gain.
19.6
17.0
15.6
16.1
05
10152025
2016+
2017+
2018*
2019
$m
GXH Net Profit after Tax attributable to Shareholders
#
#

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 16
Operating Cash / Investments
•
Operating Cash of $29.5m
•
Reverted to normal level (after Pay Equity pre-funding in Community Health in 2018)
Enabling investment in:•
New acquisitions – net $3.4m, including:
– St Heliers Health Centre– Waimauku Doctors / Silver Fern Medical Centre– Total Health Doctors Whakatane
(increased holding)
– The Doctors New Lynn
(increased holding)
•
Capital assets – $8.9m
– New Pharmacy stores / S
tore and Medical
Centre Refits
– IT systems development – Lifepharmacy.co.nz;
customer digital engagement tools, workflow management
18.4
29.9
33.1
29.5
05
101520253035
2016
2017
2018
2019
$m
Operating Cash Flow

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 17
Net Debt / Debt Capacity
•
15% improvement in Net Debt to $32.5m
•
$18m headroom on core debt facility of $60m and $20m headroom on secondary facility of $30m
2
•
Financing ratios:
– DEBT / EBITDA –1.33x– EBIT / Interest –14.3x– Fixed Charge Cover
1
–2.5x
Note: 
1
calculation:
EBITDA
excluding $21m lease cost / (Interest + $21m Lease Cost)
2
core debt excluding cash on hand
-52.6
-47.3
-38.4
-32.5
-60-50-40-30-20-10
0
2016
2017
2018
2019
$m
Net Debt (Borrowings Less Cash)

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 18
Earnings Per Share / Dividends
•
EPS marginally up at 11.22 cps
•
Final Dividend consistent @ 3.5 cps
•
Gross Dividend Yield ~8.5%
Note: 
*
2018 restated to incor
porate changes in Accounting
Standards and restatement of alternat
e leave liability. See note 2 (c) of th
e 2019 financial statements.
12.53
14.18
11.02
11.22
2016
2017
2018*
2019
Earnings Per Share

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 19
Resolutions & Voting

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 20
Resolutions
•
Resolution 1: Re-election of Dr Tony Edwards
•
Resolution 2: Remuneration of the Auditors
•
Special Resolution: Revocation and Adoption of new Constitution

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 21
Q&A

GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 22
GXH Annual Shareholders’ Meeting Presentation
30 July 2019
Pg 22
Disclaimer
The information in this presentation was prepared by Green Cros
s Health Limited (GXH) with due
care and attention. However, th
e
information is supplied in summary form and is therefore not ne
cessarily complete, and no representation is made as to the acc
uracy,
completeness or reliability of the information. In addition, ne
ither GXH nor any of its subsidiaries, directors, employees, sh
areholders nor any
other person shall have liability whatsoever to any person for
any loss (including, without limitation, arising from any fault
or negligence)
arising from this presentation or any information supplied in c
onnection with it.
This presentation may contain forward-looking statements and pr
ojections. These reflect GXH current expectations, based on wha
t it thinks
are reasonable assumptions. GXH gives no warranty or representa
tion as to its future financial performance or any future matte
r. Except as
required by law or NZX listing rules, GXH is not obliged to upd
ate this presentation after its release, even if things change m
aterially. This
presentation does not constitute financial advice. Further, thi
s presentation is not and should not be construed as an offer t
o sell or a
solicitation of an offer to buy GXH securities and may not be r
elied upon in connection with any purchase of GXH securities.
This presentation contains a number of non-GAAP financial measu
res, including Gross Margin, Operating Revenue, EBITDA, and Net
Debt.
Because they are not defined by GAAP or IFRS, GXH calculation o
f these measures may differ from similarly titled measures pres
ented by
other companies and they should not be considered in isolation
from, or construed as an alternative to, other financial measur
es determined
in accordance with GAAP. Although GXH believes they provide use
ful information in measuring the financial performance and cond
ition of
GXH business, readers are cautioned not to place undue reliance
on these non-GAAP financial measures.
The information contained in this presentation should be consid
ered in conjunction with the consolidated financial statements f
or the period
ended 31 March 2019 and Interim Report for the period ended 30
September 2018.

---

1


Green Cross Health (NZX: GXH)
Annual Shareholders’ Meeting, Tuesday, 30 July 2019 at 2.30pm.

Chair & Group CEO Speeches

Peter Merton, Chair
Slide 3:
Before Rachael takes you through the business results and commentary for the
2019 year, I would like to make a few comments on the non-operating side of the
business.
The most significant change we have made for many years occurred last year when
we appointed a new CEO, Rachael, from outside the Health industry. Our
objectives and expectations were and are to take the performance of Green Cross
to the next level in terms of scale and performance. We have moved reasonably
quickly from a small business operating in a regulated market that we knew very
well, to a more diverse set of businesses operating in a rapidly changing and less
regulated environment.
We see Rachael’s structured and measured approach will set the business up for a
successful expansion, combined with the ability to improve current performance
without the shackles of historical practices. Rachael has settled in well and is
dealing with the world of health and health retailing very well.
For the same reasons we undertook an independent board review facilitated by
Propero. The results of the survey have given us a number of suggested actions
that will lead to improvements in the governance of your company going forward.
Several independent, non-financial, surveys have been recently published which
certainly put Green Cross Health in an enviable position. In the Randstad employee
survey, we were in the Top 10 companies people wanted to work at in NZ. In the
2019 KPMG Customer Experience Excellence survey we were again in the Top 10 of
NZ companies.
Both of these results are a tribute to the team and the work done over many years
at both the culture and branding levels. These results plus the fact that we fulfil
nearly half of the country’s prescriptions and are New Zealand’s biggest retail
brand provide a very good basis to obtain the commercial growth that we are
after.
The pharmacy business is obviously the core of Green Cross and it has been the one
exposed to a rapidly changing environment, specifically the growth of discounting
of prescriptions by some large foreign retailers. Over the last few years we have
been putting our marketing emphasis on our high value customers and this has
been successful as seen by the sales numbers and the growth of our loyalty card
members. Margin has been sacrificed to some extent, but new initiatives should
see that recover somewhat in the future.

2

The discounting of the prescription fee has highlighted two main areas. Firstly, $5
(the prescription charge the government charges and we collect) matters to a lot
of people and that can be extrapolated to it providing a barrier to access to
medicines for many people. Secondly, there is something perverse that sees us
collect a government tax, but being competitively penalised when others
contravene government policy and decide not to charge it. We have been actively
communicating that it is time government reviewed the prescription charge fee to
ensure it is in line with their “equity of access” to healthcare policies.
The new retail environment is opening up a large range of categories that the
public identify with “pharmacy”. This provides our Life and Unichem pharmacies
the opportunity to expand into areas that we have not been in for many years.
These categories include oral hygiene, hair products, baby products, sports
nutrition and the like. The marketing to public is being done for us, and we intend
to capitalise on the opportunities.
The debt reduction that we have worked on for the last few years has put us in a
sound position to invest more significantly in acquisitions. Where pharmacy
acquisition stacks up commercially, we will pursue opportunities over the coming
year. Our Access business has gone through most of the pain associated with
legislation changes, although it remains a challenging environment, and our
medical team are growing that part of the business well.
I would like to take this opportunity to thank the healthcare professionals around
the country that represent the Green Cross brand every day in the care of patients
and customers.

Rachael Newfield, Group CEO
Slide 5:
First just to recap the current make-up of the business:
• We have grown to 360 pharmacy stores – split between the Life and the
Unichem brands.
• Our medical centres now number 41, with 255,000 enrolled patients.
• Community Health delivered 4.2m home visits last year and employs over
3,000 support workers.
• Each of the divisions is in quite a different space. Once we’ve been through
the highlights of the group result, I’ll take you through the financial
performance of each division, along with the plan for each division going
forward.
Slide 6:
Moving down the left hand side of the slide for the group results, overall revenue,
EBITDA and Net Profit after tax attributable to shareholders were all up year on
year.
And to the right hand side of the slide, at a divisional level, Pharmacy store same
sales were up 1.1% year on year and same centre medical revenue was up 4.9%.
The dividend is consistent year on year.

3


Slide 7:
Looking first at the Pharmacy division, our total revenue was flat at $340m, with
our operating profit down 5.5% to $27.3m. As Peter mentioned, our response to
the competitive environment has clearly put pressure on margins.
Same store sales were up 1.1%, which was a solid result given a record low cold
and flu winter season.
From a customer perspective, the continued growth in our Living Rewards loyalty
membership programme was pleasing. We grew 8% to 1.6m members.
Slide 8:
So what’s the plan going forward?
One of my initial observations is we very much need to focus on retail basics. This
includes tightening up our buying and our selling processes and increasing our
emphasis on cost and margin management. We have some work to do around our
pricing strategy in particular. Competition is here and it is growing, so we need to
get our basics sorted. This is going to be a big focus in the year ahead.
The work the team has started on exclusive product ranges is going well. This
needs to be extended to ensuring we are capitalising on new categories and
products. We need to continue to differentiate our customer offer from the
competitors to ensure we protect margin.
The upgrade of lifepharmacy.co.nz is now complete. While there will be continual
refinement of the e-commerce site, it is time for us to develop our online
customer offer to capitalise on the investment the company has made in this
asset. Similarly, we are at very early stages in the Chinese market and will keep
developing our offer to these customers.
In terms of engaging with customers, New Zealanders expect retailers to have an
omni-channel presence. We are no exception. We need to be using multiple
channels to provide relevant information and offers to our customers. Creating a
clear plan for this and starting to implement it is on the agenda for the coming
year.
Coming into the business, I see the Living Rewards programme as a clear
differentiator for Green Cross Health vs. its competitors. Our 1.6m loyalty
members present a huge opportunity for the division. We have a massive amount
of data about our customers. But, while we have a lot of data, we are only at the
beginning of being able to turn it into meaningful, actionable information.
Given there are over 1,000 pharmacies in NZ and Green Cross represents 360 of
them, there is still scope to grow the franchise network. We need to do that
sensibly though, so we don’t undermine our existing franchisees. And, of course,
optimising the store network will always be continuous.
So to deliver financial returns going forward, we are in a rebuild and reshape
phase. The market is changing and we need to reshape to fit the new
environment. This includes investing in new capabilities and staff training.
Overall, Pharmacy has a strong base to build on - particularly the nationwide
network, the strength of the Unichem and Life brands, and the Living Rewards

4

programme. The next year is going to be a year of working on the basics to put us
into a better position to enable us to compete going forward.
Slide 9:
Medical continued to deliver its growth strategy with revenue increasing to $70.5m
and profit up 20.4% to $4.4m.
Same centre revenue growth was up 4.9% with patient growth up 7.6%.
Slide 10:
The plan for Medical is straight-forward.
We continue to grow the network, looking for acquisitions that stack up
commercially. With 41 centres nationally, we still need more scale to become a
well-recognised brand.
There is plenty of opportunity to better utilise technology to both reduce costs and
to improve the customer experience. Similarly, we have scope to increase
operational efficiency and lift profitability across our centres.
Last of all, there is an obvious link to ensure we are encouraging referrals to our
Community Health division.
Slide 11:
And third, we come to the performance of our Community Health division.
While we grew revenue, operating profit was only $100k. That’s disappointing.
As Peter mentioned, the division has gone through most of the pain associated with
legislation changes. We will need to work smarter to make a return in the
challenging legislative environment.
Slide 12:
So what does the future look like for Community Health?
We need to focus on the higher needs segments that utilise our more specialist
care resources. And we will continue to grow our regional presence with our Total
Care Health nursing business.
Using technology to minimise costs is going to be key for this division. Given the
margins are low, we need to ensure we utilise technology well.
Last of all, we are conducting a review of all our contracts. We need to
understand which are sustainable and which aren’t. We will work with providers
to rebalance services or exit as needed.
Slide 13:
We covered the consolidated financial highlights earlier, now to a bit more detail.
Slide 14:
As I mentioned earlier, group revenue was up 5.6% to $567m, on the back of
growth in Medical and Community Health.
Operating profit was marginally down 2.2%, while EBITDA was up 2.3% to $36.9m.

5

Slide 15:
Net Profit After Tax (attributable to shareholders) was up 3.2% to $16.1m.
Slide 16:
The cashflow result was again solid. With pay equity pre-funding in the
Community Health division coming to an end, operating cashflow dropped to
$29.5m.
That operating cashflow was used to fund investments of $3.4m. Those
investments were primarily in the Medical division to support our growth strategy.
Operating cashflow was also directed to capital investment, including in IT
systems, particularly in the Pharmacy division.
Slide 17:
We have maintained a conservative balance sheet which places us in a strong
financial position. Our net debt reduced to $32.5m. We have plenty of room in
our current funding facilities to support further investment in growth.
Slide 18:
Last of all, earnings were marginally up at 11.22 cps. And, as mentioned, the final
dividend is consistent at 3.5c per share.
On a personal note, I’d like to say thank you to everyone for the warm welcome to
the company. We have plenty of opportunity ahead of us. And plenty of hard
work! I’m looking forward to seeing us deliver the results.

Contact:

Lisa Getkate
Executive Assistant to Group CEO
P: +64 9 571 9088
E: lisa.getkate@gxh.co.nz



About Green Cross Health
Green Cross Health (NZX: GXH) is a trusted New Zealand primary health care provider with multi-
disciplinary health care teams with the purpose of working together to support healthier
communities. Green Cross Health is focused on creating sustainable health care solutions with
positive outcomes and experiences.
New Zealand owned and operated, Green Cross Health operates under branded groups Unichem and
Life Pharmacies, The Doctors medical centres, Total Care Health community nursing services and
Access Community Health to provide support, care and advice to diverse New Zealand communities.
Providing convenient access to professional health care with 360 Unichem and Life pharmacies
covering almost every New Zealand community, Green Cross Health’s 8,000 team members make
more than 4.2m home visits to more than 30,500 community health clients and care for 255,000
enrolled patients at medical centres
.