Green Cross Health Full Year Results to 31 March 2020
1
Green Cross Health Limited (NZX: GXH)
Full Year Result announcement for the audited twelve months ended 31 March 2020
GREEN CROSS HEALTH REPORTS FULL YEAR PROFIT OF $13.5M
25 June 2020, AUCKLAND, NZ: Listed primary healthcare provider Green Cross Health, the group behind
Unichem and Life Pharmacy, The Doctors and Access Community Health, reported revenue of $568.5m
for the year to 31 March 2020, consistent with the previous year. Net Profit After Tax Attributable to
Shareholders was $13.5 million, after a -$0.6m impact of applying the new IFRS 16
1
accounting standard.
The result was also impacted by goodwill disposals of -$1.4m and intangible asset write-offs of -$2.4m
(after tax).
Result Summary:
• Revenue of $568.5m (+0.2%)
• Operating Profit (EBIT) of $31.0m (+5.5%)
• Net Profit After Tax Attributable to Shareholders of $13.5m (-16.2%)
• Net Profit After Tax Attributable to Shareholders before one-off non-cash items
2
was $17.6m (+9.3%)
• Pharmacy Revenue down 1%. Operating Profit down $4.8m at $22.5m, or down $2.6m at $24.7m
excluding one-off non-cash items (FY19: $27.3m)
• Medical performed well, with Revenue up 8.5% and Operating Profit up 81.1% to $8.0m
• Community Health Revenue flat and Operating Profit up $2.4m to $2.5m
• Operating Cash Flow $54.3m (before the application of IFRS 16: $34.8m)
• Reduction of net debt by $10m, with group debt facility headroom of a further $10m
• COVID-19 impact not material for the year ended 31 March 2020.
Green Cross Health Group CEO Rachael Newfield, says, “the result for the year was positive, with revenue
constant year on year. The turnaround in the Community Health division, combined with the continued
growth of the Medical division, more than offset the ongoing competitive pressure in the Pharmacy
division. Pleasingly, our Balance Sheet has strong liquidity, which will enable the Company to traverse
the next period, with challenges stemming from COVID-19 and the related impact on customer spending.
It also positions the company well to selectively consider acquisitions over the medium term.”
__________________________
1
The application of IFRS 16 has meant operating leases have been brought onto the Balance Sheet in the year
with a corresponding lease liability. The operating lease charge has been replaced with the amortisation of the
right-of-use asset and lease interest charges in the Statement of Comprehensive Income. The year ended 31
March 2020 was impacted by this change, with EBITDA increasing by $19.5m, EBIT increasing by $3.8m and Net
Profit After Tax Attributable to Shareholders decreasing $0.6m. No prior period adjustment was made for the
application of IFRS 16.
2
One-off non-cash items include goodwill disposals of $1.1m (total goodwill disposals of $1.4m less $0.3m
attributable to non-controlling interest), intangible write-downs of $2.4m plus the IFRS 16 application impact of
$0.6m.
2
Unichem & Life Pharmacy Division
Pharmacy Revenue declined marginally (-1%) in the year, reflecting some store closures in the prior
year and early FY20, offset by two new pharmacies in Karori Wellington which were acquired in
February 2020. Same store revenue was up 1.5% year on year, driven by dispensary volumes which saw
an increase in repeat prescriptions by 4.7% - highlighting the value of our automated script reminder
service, which now has over 200,000 customers.
Operating Profit was down $4.8m to $22.5m, with part of this decline attributable to goodwill on
disposals of $1.4m, the write-down of intangibles $3.3m (before tax) and a higher depreciation charge
as investments in prior periods were operationalised. Offsetting these one-off non-cash items, was a
+$2.5m impact from IFRS16 at the Operating Profit line. The write-down of intangible assets was after
a strategic review of internal projects’ performance and with impairment required for those not
aligned to the division’s strategic direction.
Focus continues to be on protecting margin via a differentiated pricing strategy as well as implementing
a revised product offering which includes greater emphasis on exclusive distribution arrangements. Our
online offer continues to evolve, with our fulfilment capabilities and processes now well established,
particularly given customer demand during the COVID-19 lockdown period.
Furthermore, we continue to strengthen our digital capability to leverage the 1.7 million Living Rewards
loyalty database, obtaining insights to ensure we can personalise our offering to customers and engage
with a customer segment that spends on average 40% more than non-Living Rewards members. In the
next period, retail performance will face challenges from modified consumer spending as a result of
COVID-19, coupled with ongoing competitive pressures. Priority is being placed on recalibrating
occupancy and rent costs, to ensure the cost structure of our pharmacies are right-sized in light of these
pressures. Our national footprint and trusted Unichem and Life Pharmacy brands provide a solid
foundation upon which we can successfully adapt our business to the changing market conditions.
The Doctors Medical Division
Medical Revenue grew 8.5% to $76.5m, with Operating Profit up 81.1% to $8.0m. This performance was
the result of improved operational efficiency, organic revenue growth and an IFRS16 impact of +$1.2m.
Acquisitions in recent years have now fully integrated into the division, and nearer the end of the
financial year, Drury Medical Centre was added, increasing the portfolio to 42 centres.
Enrolled patients at 31 March 2020 totalled 267,000, which include increases from the Drury acquisition
as well as the purchase of a doctor’s book which was amalgamated into The Doctors Fred Thomas.
The Medical division continues to work closely with the Ministry of Health and Primary Health
Organisations to ensure equitable access to primary healthcare throughout New Zealand. The initiative
to increase access to health care for Community Services Card holders has improved affordable access
to lower socio-economic groups.
Operationally, the Medical division improved its focus on triaging of patients via Healthcare Homes, an
operating model designed to improve utilisation and provide superior patient outcomes. The division
commenced trialling the provision of digital health services in a number of centres prior to year-end.
3
Going forward, the strategy remains to grow revenue organically, while further reducing the operating
cost per patient and targeting compelling acquisition opportunities.
Community Health Division
Pleasingly, the Community Health division saw a healthy increase in Operating Profit to $2.5m, an
increase of $2.4m over the comparative period. The key driver of the improvement in performance was
operational efficiency with costs decreasing -3.0% on reduced revenue of -0.6%, highlighting the success
of cost management and investment in technology, while still maintaining a client-centred approach.
The cost containment and re-sizing of business operations have been required due to ongoing funding
constraints.
During the year, we continued to focus on higher clinical needs, bedding in the ACC Integrated Home
and Community Support business that was awarded following a successful tender at the end of last
financial year. The division’s specialist nursing care business, Total Care Health continued to expand
into new regions and new segments of care, targeting convenient client access.
Notwithstanding the improved performance, the slim operating profit margin of 1.6% exposes the division
to adverse changes in the Home and Community Support sector. More funding is required to ensure the
ongoing viability of the Community Health division and the sector as a whole. This sentiment was
reflected in the Government’s Health and Disability System Review of March 2020, which highlighted
that the health and disability system is significantly underfunded.
Going forward, the focus for the division remains on profitability of contracts rather than top line
revenue growth as well as advocating for additional sector funding.
COVID-19, Dividend and Future Focus
The Board recognises there is continuing uncertainty as a result of COVID-19, and whilst it has confidence
in the resilience of the company to navigate this period of volatility, it is committed to maintaining a
strong balance sheet in order to absorb the impact of COVID-19 and the associated economic downturn.
The company has done this with an absolute focus on preserving cash inducing drawing down a portion
of unutilised bank facilities to shore up liquidity. In addition to weathering the storm of lockdown this
approach helps protect the company from the need for a dilutive capital raise and positions the Company
to be able to capitalise on future opportunities. With this in mind, the Board has made the precautionary
decision not to declare a full year dividend. Subject to liquidity, the Board expects to return to declaring
dividends from November 2020.
Going forward the company remains committed to delivering to patient and customer expectations. The
company is focussed on right-sizing its cost base, targeting labour and occupancy cost reductions, as
well reviewing the Pharmacy and Medical portfolios to determine any sites which will not be sustainable
going forward.
Green Cross Health is committed to providing all New Zealanders accessible, quality primary healthcare.
As part of this commitment, the company continues to advocate for the removal of the prescription co-
payment Government tax and for increased funding in the Home and Community Support sector.
[Ends]
4
Contact:
Ben Doshi
ben.doshi@gxh.co.nz
Rachael Newfield
rachael.newfield@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 361 Unichem and Life pharmacies covering
almost every New Zealand community, Green Cross Health’s 8,000 team members make more than 3.6m
home visits to more than 42,500 community health clients and care for 267,000 enrolled patients at
medical centres.
---
GXH Annual Results Presentation 25 June 2020 Pg1GXH Annual Results Presentation 25 June 2020 Pg1
GXH Annual Results Presentation 25 June 2020 Pg2GXH Annual Results Presentation 25 June 2020 Pg2
Community Health
Operating Profit
$2.5m
Revenue
$568.5m
0.2%
Operating Profit/EBIT
$31.0m¹
5.5%
Net Profit After Tax
$13.5m²
(attributable to shareholders)
-16.2%
Note:
1
Net operating profit before IFRS16 application (Accounting for Leases) $27.2m (-7.5%);
Note:
2
NPAT attributable to shareholders before one-off non-cash items is $17.6m. These one-offs include goodwill disposals of $1.1m (total goodwill disposals of $1.4m less $0.3m attributable to non-
controlling interest), intangible write-downs of $2.4m, plus the impact of IFRS 16 application of $0.6m.
Note:
3
Medical Operating Profit before IFRS16 application $6.8m (+54%)
Pharmacy
Same store sales
1.5%
Medical Operating Profit
$8.0m
3
81.1%
GXH Annual Result -Financial Highlights
+$2.4m
GXH Annual Results Presentation 25 June 2020 Pg3
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
communities.
This is our promise.
GXH Annual Results Presentation 25 June 2020 Pg4
Who we are
GXH Annual Results Presentation 25 June 2020 Pg5
Pharmacy Division
New Zealand’s largest network of health retailers:
supporting easy access to quality health care
GXH Annual Results Presentation 25 June 2020 Pg6
Pharmacy Performance
•Revenue down 1% at $336.4m, following prior period store closures as part of our ongoing portfolio review
•Operating Profit down $4.8m to $22.5m, with part of this decline attributable to goodwill on disposals of $1.4m, the write-
down of intangibles $3.3m (before tax), offset by IFRS 16 at the operating profit line of +$2.5m.
•Two new stores acquired in February 2020 in Karori, Wellington –plus rebuild of Life Newmarket, Unichem Parklands and
Unichem Highland Park
•Same store sales growth of 1.5%, and same store script numbers up 1.3%
322.6
341.3
340.2
336.4
300
310
320
330
340
350
2017201820192020
$m
Pharmacy Operating Revenue
27.9
28.9
27.3
22.5
0
4
8
12
16
20
24
28
32
2017201820192020
$m
Pharmacy Operating Profit
IFRS 16 Adjustment
GXH Annual Results Presentation 25 June 2020 Pg7
Retail Disciplines
•Evolve retail offering to changing consumer behaviour post COVID-19
•Focus on margin management
Customer Engagement
•Strengthen digital capability around 1.7m Living Rewards database
•Grow e-commerce
•Advocate for removal of $5 prescription co-payment to increase
accessibility and equity for all New Zealanders
Network Scale
•Optimise equity store network
•Leverage national footprint and trusted Unichem and Life Pharmacy
brands
Financial Returns
•Adapt to changing market conditions
•Strong focus on reducing labour and occupancy costs
Pharmacy Future Focus
GXH Annual Results Presentation 25 June 2020 Pg8
Medical Division
Growth, leadership and sustainable models of care
GXH Annual Results Presentation 25 June 2020 Pg9
Medical Performance
•Revenue up 8.5% to $76.5m, primarily as a result of organic growth
•Operating Profit up 81.1% to $8.0m, reflecting improved operational efficiency, organic revenue growth and an IFRS 16
impact of +$1.2m
•Operating Profit margin increased from 6.3% to 8.9% excluding IFRS16
•267,000 enrolled patients as at 31 March 2020, including increase from Drury Surgery acquisition
•Ownership in 42 Medical Centres
49.3
52.7
70.5
76.5
0
10
20
30
40
50
60
70
80
90
2017201820192020
$m
Medical Operating Revenue
2.9
3.7
4.4
8.0
0
1
2
3
4
5
6
7
8
9
2017201820192020
$m
Medical Operating Profit
IFRS 16 adjustment
GXH Annual Results Presentation 25 June 2020 Pg10
Network Scale
•Continue to build The Doctors brand
•Network and patient number growth through targeted
acquisitions and organic revenue growth
Patient Engagement
•Deploy digital technology to increase efficiency and
enhance delivery of high quality patient care
•Work closely with funders to ensure equitable access
Financial Returns
•Continuous improvement in operational efficiency and
scale
•Improve utilisation via systematic triaging of patients
Medical Future Focus
GXH Annual Results Presentation 25 June 2020 Pg11
Community Health
Division
Delivering sustainable services to maintain and
support clients’ independence within their own home
GXH Annual Results Presentation 25 June 2020 Pg12
Community Health Performance
•Revenue down 0.5% to $155.6m following exit of unprofitable contracts
•Cost improvements of 3%
•Operating profit increased $2.4m to $2.5m
•Improved performance reflecting cost management and utilisation of technology
•Continued advocacy for additional sector funding to ensure viability of business and sustainability of sector
•Focus continues to be on profitability of contracts rather than top line revenue growth
115.7
143.2
156.5
155.6
0
20
40
60
80
100
120
140
160
180
2017201820192020
$m
Community Health Operating Revenue
3.0
1.2
0.1
2.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2017201820192020
$m
Community Health Operating Profit
IFRS 16 adjustment
GXH Annual Results Presentation 25 June 2020 Pg13
Community Health Future Focus
Service Offering
•Focus on higher clinical needs segments
•Expand geographic coverage of Community Nursing
business
Digital Communication
•Harness technology to enhance workforce efficiency and
client outcomes
Financial Returns
•Continue cost reduction initiatives
•Focus on profitability of all contracts, targeting growth in
higher margin areas
•Advocate for additional sector funding to ensure
sustainability
GXH Annual Results Presentation 25 June 2020 Pg14
Group Financial Result
12 months ending 31 March 2020
GXH Annual Results Presentation 25 June 2020 Pg15
Year End Result -Group Revenue and Profit
•Revenue of $569m flat year on year
•Operating Profit of $31.0m, up 5.4%
•Before application IFRS 16, Operating Profit down 7.5% to $27.2m
•Performance impacted by goodwill disposals of $1.4m and intangible write-offs of $3.3m (before tax)
34.9
30.0
29.4
31.0
0
5
10
15
20
25
30
35
40
2017201820192020
$m
GXH Operating Profit
IFRS 16 Adjustment
487.6
537.2
567.2
568.5
400
450
500
550
600
2017201820192020
$m
GXH Operating Revenue
GXH Annual Results Presentation 25 June 2020 Pg16
Net Profit After Tax (attributable to shareholders)
•NPAT attributable to shareholders of $13.5m, down 16.2%
•NPAT attributable to shareholders of $14.1m before application of IFRS 16 (down 12.5%)
•NPAT attributable to shareholders of $17.6m before all non-cash one-offs: goodwill disposals of $1.1m (after NCI portion),
intangible write-offs of $2.4m (after tax) plus the IFRS 16 application impact of $0.6m.
17.0
15.6
16.1
14.1
0.0
5.0
10.0
15.0
20.0
2017201820192020
$m
GXH Net Profit after Tax Attributable to Shareholders
IFRS 16 Adjustment
13.5
GXH Annual Results Presentation 25 June 2020 Pg17
Operating Cash / Investments
•Operating Cash of $54.3m ($34.8m before the
application of IFRS 16)
Enabling investment ($10.8m) in:
•Drury Surgery (new holding)
•Karori pharmacies (two new holdings)
•Waiuku Medical Pharmacy (increased holding)
•Centre City Pharmacy Dunedin (increased holding)
•Life Pharmacy in Westfield Newmarket(new site)
29.9
33.1
31.4
54.3
0
5
10
15
20
25
30
35
40
45
50
55
60
2017201820192020
$m
GXH Operating Cash Flow
IFRS 16 adjustment
GXH Annual Results Presentation 25 June 2020 Pg18
Net Debt / Debt Capacity
•$10m improvement in Net Debt to $22.6m
•Debt facilities with BNZ mature 22 August 2022
•$10m of headroom on BNZ group debt facility
•Strong Balance Sheet will help absorb COVID-19
and economic downturn impact
•Financing ratios:
–Debt / EBITDA –1.44x
1
–Operating profit / Interest –16.2x
1
–Fixed Charge Cover –2.3x
1
-47.3
-38.4
-32.5
-22.6
-50
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
2017201820192020
$m
Net Debt (Borrowings Less Cash)
Note: ¹ The application of IFRS 16 materially impacts these calculations. The headroom and ratios show the position pre application of IFRS 16.
GXH Annual Results Presentation 25 June 2020 Pg19
Earnings Per Share
•EPS at 9.42 cps (9.85 cps before the
application of IFRS 16)
14.18
11.02
11.25
9.85
0
2
4
6
8
10
12
14
16
2017201820192020
Cps
Earnings Per Share
IFRS 16 adjustment
9.42
GXH Annual Results Presentation 25 June 2020 Pg20GXH Annual Results Presentation 25 June 2020 Pg20
Disclaimer
The information in this presentation was prepared by Green Cross Health Limited (GXH) with due care and attention. However, the
information is supplied in summary form and is therefore not necessarily complete, and no representation is made as to the accuracy,
completeness or reliability of the information. In addition, neither GXH nor any of its subsidiaries, directors, employees, shareholders 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 connection with it.
This presentation may contain forward-looking statements and projections. These reflect GXH current expectations, based on what it thinks
are reasonable assumptions. GXH gives no warranty or representation as to its future financial performance or any future matter.Except as
required by law or NZX listing rules, GXH is not obliged to update this presentation after its release, even if things changematerially. This
presentation does not constitute financial advice. Further, this presentation is not and should not be construed as an offer to sell or a
solicitation of an offer to buy GXH securities and may not be relied upon in connection with any purchase of GXH securities.
This presentation contains a number of non-GAAP financial measures, including Gross Margin, Operating Revenue, EBITDA, and Net Debt.
Because they are not defined by GAAP or IFRS, GXH calculation of these measures may differ from similarly titled measures presented by
other companies and they should not be considered in isolation from, or construed as an alternative to, other financial measuresdetermined
in accordance with GAAP. Although GXH believes they provide useful information in measuring the financial performance and condition 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 considered in conjunction with the consolidated financial statementsfor the period
ended 31 March 2020.
---
GREEN CROSS HEALTH RESULTS ANNOUNCEMENT 25/06/2020
(for Equity Security issuer/Equity and Debt Security issuer)
Results for announcement to the market
Name of issuer
GREEN CROSS HEALTH LIMITED (GXH)
Reporting Period 12 months to 31 March 2020
Previous Reporting Period 12 months to 31 March 2019
Currency
New Zealand Dollars
Amount (000s) Percentage change
Revenue from continuing operations
$568,531 0%
Total Revenue
$568,531 0%
Net profit from continuing operations attributable
to shareholders
$13,490* -16%
Total net profit attributable to shareholders
$13,490* -16%
Final Dividend
Amount per Quoted Equity Security
Imputed amount per Quoted Equity Security
Record Date
Dividend Payment Date
Current period Prior comparable period
Net tangible assets per Quoted Equity Security** -$0.10 -$0.12
A brief explanation of any of the figures above
necessary to enable the figures to be understood
* Net Profit Attributable to Shareholders was $13.5
million, after a -$0.6m impact of applying the new IFRS16
accounting standard. Before the application of IFRS 16,
Net Profit After Tax Attributable to Shareholders was
$14.1m compared to $16.1 million in the prior period.
** Due to the nature of the Company’s business,
intangibles assets are a major component of total assets.
Net assets per quoted equity security are $0.94 (31
March 2019: $0.94).
Please refer to the attached audited Financial Statements
for the twelve months ended 31 March 2020.
Authority for this announcement
Name of person
authorised to make
this announcement
Ben Doshi – Group CFO
Contact person for this
announcement
Ben Doshi – Group CFO
Contact phone number +64 9 580 6846
Contact email address
ben.doshi@greencrosshealth.co.nz
Date of release through MAP
25/06/2020
Audited financial statements accompany this announcement.
---
Green Cross Health Limited
Consolidated Financial Statements
For the year ended 31 March 2020
Directors’ declaration
•
•
For and on behalf of the Board of Directors:
Kim EllisCarolyn Steele
ChairDirector
24 June 202024 June 2020
The Directors consider that they have taken adequate steps to safeguard the assets of the Group,
and to prevent and detect fraud and other irregularities. Internal control procedures are also
considered to be sufficient to provide a reasonable assurance as to the integrity and reliability of the
financial statements.
The Directors are pleased to present the financial statements of Green Cross Health Limited for the
year ended 31 March 2020.
For the year ended 31 March 2020
IntheopinionoftheDirectorsofGreenCrossHealthLimited,thefinancialstatementsandnotes,on
pages to 2:
Comply with New Zealand generally accepted accounting practice and give a true and fair
view of the financial position of the Green Cross Health Limited Group as at 31 March 2020 and
the results of its operations and cash flows for the year ended on that date.
Have been prepared using appropriate accounting policies, which have been consistently
applied and supported by reasonable judgements and estimates.
The Directors believe that proper accounting records have been kept which enable, with
reasonable accuracy, the determination of the financial position of the Group and facilitate
compliance of the financial statements with the Financial Reporting Act 2013.
1
© 2020 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
Independent Auditor’s Report
To the shareholders of Green Cross Health Limited
Report on the consolidated financial statements
Opinion
In our opinion, the accompanying consolidated
financial statements of Green Cross Health Limited
(the company) and its subsidiaries (the Group) on
pages 7 to 26:
i. present fairly in all material respects the Group’s
financial position as at 31 March 2020 and its
financial performance and cash flows for the
year ended on that date; and
ii. comply with New Zealand Equivalents to
International Financial Reporting Standards and
International Financial Reporting Standards.
We have audited the accompanying consolidated
financial statements which comprise:
— the consolidated statement of financial position
as at 31 March 2020;
— the consolidated statements of comprehensive
income, changes in equity and cash flows for
the year then ended; and
— notes, including a summary of significant
accounting policies and other explanatory
information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of
Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and the
International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA
Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the
IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the
consolidated financial statements section of our report.
Our firm has also provided other services to the Group in relation to tax compliance services. Subject to certain
restrictions, partners and employees of our firm may also deal with the Group on normal terms within the
ordinary course of trading activities of the business of the Group. These matters have not impaired our
independence as auditor of the Group. The firm has no other relationship with, or interest in, the Group.
Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually
and on the consolidated financial statements as a whole. The materiality for the consolidated financial
statements as a whole was set at $1.3 million determined with reference to a benchmark of Group profit before
tax. We chose the benchmark because, in our view, this is a key measure of the Group’s performance.
3
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the consolidated financial statements in the current period. We summarise below those matters and our key
audit procedures to address those matters in order that the shareholders as a body may better understand the
process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely
for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not
express discrete opinions on separate elements of the consolidated financial statements.
The key audit matter How the matter was addressed in our audit
Impairment of goodwill ($127.2 million)
Refer to note 13 of the consolidated financial
statements.
The Group has grown significantly through
acquisitions in its Pharmacy, Medical and
Community Health business units which has
re sulted in the recognition of goodwill in the amount
of $74.5 million, $33.7 million and $19.0 million,
respectively.
In the event the business units under-perform
compared to their business cases, there is a risk that
th e goodwill arising on acquisition may no longer be
s
upported.
As disclosed in note 13, the Group performs an
annual impairment test of goodwill and uses a
discounted cash flow model to determine the
recoverable amount of its business units to which
goodwill has been allocated.
In performing this assessment, assumptions are
made in respect of future economic and market
co nditions, including the impact of COVID-19.
Cashflow forecasts include consideration of the
Group’s strategic business plan for each business
unit and their impact on forecast sales and operating
costs. Additionally, management determined
terminal growth rate
s and discount rates which
re flect an assessment of the time value of money
an
d the risks specific to each business unit.
The annual impairment test performed by t he Group
was significant to our audit due to the magnitu de of
th e goodwill balance and because the assessment
process invo lved judgment about the future
performance of the business units.
Our audit procedures included:
— Ensuring the allocation of goodwill to the Group’s
business units is appropriate;
— Evaluating the methodology, mathematical accuracy
and assumptions applied in the discounted cash
flow models. We used our own valuation specialists
to assist us with the consideration of terminal
growth and discount rates;
— Challenging management’s cash flow assumptions
over projected cash flows taking into consideration
COVID-19, and the expected impact of the Group’s
business plans for each business unit by reference
to their historical performance and the internal and
external factors that influence their operations;
— Performing sensitivity analysis around the key
assumptions used in the models;
— Reviewing the appropriateness of related
disclosures in the consolidated financial
statements.
We found the judgements and assumptions used in the
assessment of goodwill impairment to be balanced.
4
The key audit matter How the matter was addressed in our audit
Adoption of NZ IFRS 16 Leases
Refer to Note 2(c) of the consolidated financial
statements.
The Group has adopted NZ IFRS 16 Leases
effective from 1 April 2019, using the modified
retrospective approach. The new standard requires
the Group to recognise its lease commitments as
a liability in the consolidated statement of financial
position, along with an associated right of use
asset. Previously operating leases were not
recognised in the statement of financial position.
The adoption of the standard has resulted in the
recognition of a right of use asset of $92.9 million
and a lease liability of $98.5 million.
As disclosed in Note 2(f), a number of judgements
and estimates have been made by management in
establishing the opening balances. These include:
— Incremental borrowing rates at the time of
adoption;
— Lease terms, including any rights of renewal
expected to be exercised, and
— Application of practical expedients adopted
on transition.
The group’s adoption of NZ IFRS 16 was
significant to our audit due to the complexity of the
judgements and assumptions involved in the
calculation of the right of use assets and
associated lease liabilities.
Our audit procedures included:
— Assessing the Group’s process relating to the
recording, recognition, and measurement of
leases;
— Assessing the Group’s judgements made in
applying practical expedients against the
requirements of NZ IFRS 16;
— Engaging our valuation specialist to assess the
appropriateness of the incremental borrowing
rates used;
— Testing completeness of the identified lease
contracts by checking leased stores, medical
centres and offices, to a breakdown of rental
expense and property listings;
— Selecting a sample of leases and examining the
calculation of the associated lease liability and
right of use asset. For each lease selected we
performed the following:
− Agreed key inputs such as commencement
date, expiry date, rent amount, and rent
payment frequency to the underlying lease
agreement;
− Reviewed assumptions used to determine
the lease term including rights of renewal and
assessed whether they were supported by
current business plans;
− Recalculated the lease liability and right of
use asset based on key inputs;
− Checked the appropriateness of the
classification of the lease liability between
current and non-current based on the
remaining term of the lease.
— Assessing the disclosures in the consolidated
financial statements against the requirements of
NZ IFRS 16.
We found the methodology used by the Group in
transitioning to NZ IFRS 16 to be appropriate. We
consider the judgements and assumptions used to be
balanced.
5
Other information
The Directors, on behalf of the Group, are responsible for the other information included in the entity’s Annual
Report. Other information includes the Directors Declaration and the other information included in the Annual
Report. Our opinion on the consolidated financial statements does not cover any other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or otherwise appears materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have received the Directors Declaration and have
nothing to report in regards to it. The Annual Report is expected to be made available to us after the date of this
Independent Auditor's Report and we will report the matters identified, if any, to the Directors.
Use of this independent auditor’s report
This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been
undertaken so that we might state to the shareholders those matters we are required to state to them in the
independent auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the shareholders as a body for our audit work, this independent
auditor’s report, or any of the opinions we have formed.
Responsibilities of the Directors for the consolidated financial
statements
The Directors, on behalf of the company, are responsible for:
— the preparation and fair presentation of the consolidated financial statements in accordance with generally
accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial
Reporting Standards) and International Financial Reporting Standards;
— implementing necessary internal control to enable the preparation of a consolidated set of financial
statements that is fairly presented and free from material misstatement, whether due to fraud or error; and
— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate or to
cease operations or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial
statements
Our objective is:
— to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error; and
— to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs NZ will always detect a material misstatement when it exists.
6
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit of these consolidated financial statements is located at
the External Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor's report is Aaron Woolsey.
For and on behalf of
KPMG
Auckland
24 June 2020
Consolidated statement of comprehensive income
For the year ended 31 March 2020
20202019
Note$’000$’000
Operating revenue4
568,531567,236
Operating expenditure6.2
Depreciation and amortisation
11,13
(8,565)(8,431)
Depreciation - leases
12
(15,629)-
Impairment
13
(4,672)-
Share of equity accounted net earnings
15
1,216874
Operating profit before interest and tax30,99229,373
Interest income11444
Interest expense(1,787)(1,989)
Interest expense - leases
12
(5,678)-
Net interest expense(7,351)(1,945)
Profit before tax23,64127,428
Income tax expense
7
(6,689)(7,339)
Profit after tax for the year16,95220,089
Other comprehensive income
for the year, net of tax --
Total comprehensive income for the year16,95220,089
Attributable to:
Shareholders of the Parent 13,49016,105
Non-controlling interest3,4623,984
Attribution of profit and comprehensive income to
shareholders and non controllin
g interest
16,95220,089
Earnings per share:
Basic earnings per share (cents)
8
9.4211.25
Diluted earnings per share (cents)
8
9.4111.22
The accompanying Statement of Accounting Policies and Notes to the
Financial Statements on pages 11 to 26 form part of the financial statements.
7
Consolidated statement of changes in equity
For the year ended 31 March 2020
Share
Ca
pital
Retained
Earnings
Non-
controlling
interest
Total
e
quity
Note$’000$’000$’000$’000
Balance at 1 April 201890,60927,8867,108125,603
Profit for the year16,1053,98420,089
Total comprehensive income for the year16,1053,98420,089
Transactions with owners, recorded directly
in equity
Dividends to shareholders
9
(10,021)(10,021)
Distribution to non-controlling interests(2,026)(2,026)
Impact of other transactions with non-
controlling interest
(128)422294
Balance at 31 March 201990,60933,8439,489133,940
Share
Ca
pital
Retained
Earnings
Non-
controlling
interest
Total
e
quity
Note$’000$’000$’000$’000
Balance at 1 April 201990,60933,8439,489133,940
Impact on application of IFRS 16 - net of tax(2,167)(419)(2,586)
Restated as at 1 April 201990,60931,6769,070131,354
Profit for the year13,4903,46216,952
Total comprehensive income for the year13,4903,46216,952
Dividends to shareholders
9
(10,039)(10,039)
Distribution to non-controlling interests
(2,333)
(2,333)
Impact of other transactions with non-
controlling interest
(1,324)108(1,216)
Balance at 31 March 202090,60933,80310,308134,719
The accompanying Statement of Accounting Policies and Notes to the
Financial Statements on pages 11 to 26 form part of the financial statements.
8
Consolidated statement of financial position
As at 31 March 2020
20202019
Note
$’000
Restated
Equity
Share capital90,61090,610
Retained earnings33,80233,843
Total equity attributable to shareholders of the parent124,412124,453
Non-controlling interest10,3089,490
Total equity134,719133,943
Current assets
Cash and cash equivalents33,89916,652
Trade and other receivables
10
43,10736,076
Inventories34,72032,804
Total current assets
111,72685,532
Non-current assets
Property, plant and equipment
11
22,22722,291
Right of use assets
12
86,090-
Intangible assets
13
133,524137,664
Deferred tax asset
14
16,05512,912
Equity accounted group investments
15
6,9886,398
Total non-current assets
264,884179,265
Total assets
376,610264,797
Current liabilities
Payables and accruals
16
90,65279,975
Income taxes payable
16
1,1861,760
Borrowings
17
3,3595,556
Lease liability - current
12
13,705-
Total current liabilities
108,90287,291
Non-current liabilities
Borrowings
17
53,11443,563
Lease liability - non current
12
79,875-
Total non-current liabilities
132,98943,563
Total liabilities
241,892130,854
Net assets
134,719133,943
The accompanying Statement of Accounting Policies and Notes to the
Financial Statements on pages 11 to 26 form part of the financial statements.
9
Consolidated statement of cash flows
For the year ended 31 March 2020
20202019
Note
$’000
Restated
Cash flows from operating activities
Dividend received
15
653706
Receipts from customers561,500568,525
Interest received11444
Payments to suppliers and employees(498,510)(525,636)
Income taxes paid(9,456)(12,199)
Net cash inflow from operating activities1854,30131,440
Cash flows from investing activities
Purchase of property, plant, equipment and software
intangibles
(7,264)(8,947)
Acquisition of interests in equity accounted investments(26)-
Acquisition of interests in subsidiaries and non-controlling
interests
5
(3,546)(3,372)
Proceeds from sale of shares in subsidiary-688
Net cash outflow from investing activities
(10,835)(11,631)
Cash flows from financing activities
Proceeds from borrowings19,29919,575
Repayment of borrowings(11,944)(19,680)
Payment of lease liabilities
12
(13,778)-
Interest expense
12
(1,787)(1,989)
Interest expense - leases
12
(5,678)-
Distribution to non-controlling interest(2,333)(1,986)
Dividends paid(10,039)(10,045)
Net cash outflow from financing activities
(26,259)(14,125)
Net increase in cash and cash equivalents
17,2075,684
Add opening cash and cash equivalents16,65210,754
Cash acquired: business combinations
5
40214
Closing cash and cash equivalents
33,89916,652
Reconciliation of closing cash and cash equivalents to the
consolidated statement of financial position:
Cash and cash equivalents33,89916,652
Closing cash and cash equivalents
33,89916,652
The accompanying Statement of Accounting Policies and Notes to the
Financial Statements on pages 11 to 26 form part of the financial statements.
10
Notes to the financial statements
For the year ended 31 March 2020
1.Reporting Entity
2.Basis of preparation of Financial Statements
(a) Statement of compliance
(b) Basis of measurement
(c)
Interest expense
Net cash inflow from operating activities
Interest expense
Non-current borrowings32,914
9,00041,914
31 March 2018NZ IAS 1
(Old)
ImpactNZ IAS 1
(New)
Statement of financial position$’000$’000$’000
Current borrowings16,310
(9,000)7,310
Green Cross Health Limited (the “Parent” or the "Company") is a New Zealand company registered under the Companies Act
1993 and is an FMC entity for the purposes of the Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013. The
Financial Statements have been
prepared in accordance with these Acts. The Company is listed on the NZX Main Board ("NZX").
The consolidated financial statements of Green Cross Health Limited comprise the Parent, its subsidiaries, and its interest in
associates and joint ventures (together referred to as the “Group”).
The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (“NZ
GAAP”). They comply with New Zealand equivalents to International Financial Reporting Standards (“NZ IFRS”), and other
applicable Financial Reporting Standards, and authoritative notices as appropriate for a Tier one for profit entity. They also
comply with International Financial Reporting Standards.
The financial statements were approved by the Board of Directors on 24 June 2020.
The financial statements of the Group are prepared under the historical cost basis unless otherwise noted within the specific
accounting policies below.
Changes in accounting policies
NZ IAS 1 Amendment
The Group has early adopted Amendments to IAS 1 Classification of liabilities as current or non-current in the current year. The impact of
adoption on these consolidated financial statements has been outlined in the table below.
31 March 2020Original Adjustment
Restated
NZ IAS 7 Statement of Cash Flows
The Group has also voluntarily changed its accounting policy under NZ IAS 7 Statement of Cash Flows, where Interest expense is now
classified as a financing cash flow instead of an operating cash flow.
Statement of cash flows$’000$’000$’000
Cash flows from operating activities
(1,787)1,787-
52,5141,78754,301
Cash flows from financing activities
Net decrease in cash and cash equivalents-
-(1,787)(1,787)
Net cash outflow from financing activities(24,472)(1,787)(26,259)
18,220
34,89553,114
31 March 2020NZ IAS 1
(Old)
ImpactNZ IAS 1
(New)
Statement of financial position$’000$’000$’000
Current borrowings38,254
(34,895)3,359
The Group has applied this change in accounting policy retrospectively by adjusting the comparative amounts disclosed for the
comparative period as if the new classification has always been applied. The impact on the current period and the comparative
period is summarised below.
The Group has consistently applied the following accounting policies to all periods presented in these consolidation financials
statements, except as mentioned below.
Current borrowings25,556
(20,000)5,556
Non-current borrowings23,563
20,00043,563
31 March 2019NZ IAS 1
(Old)
ImpactNZ IAS 1
(New)
Statement of financial position$’000$’000$’000
Non-current borrowings
11
Notes to the financial statements
For the year ended 31 March 2020
Interest expense
Net cash inflow from operating activities
Interest expense
(d)
(e) Functional and presentation currency
(f)Significant estimates and judgments
(i)Classification of investments
(ii) Impairment of goodwill and indefinite life intangible assets
(iii) Accounting for leases under NZ IFRS 16
These financial statements are presented in New Zealand dollars ($), which is the functional currency of the entities of the Group.
All financial information presented in New Zealand dollars has been rounded to the nearest thousand.
The preparation of financial statements in conformity with NZ IFRS requires the Directors to make judgments, estimates and
assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of some
assets and liabilities. Actual results ma
y differ from these estimates.
The carrying values of goodwill and intangible assets with an indefinite useful life, are assessed at least annually to ensure that
they are not impaired. This assessment requires the Directors to estimate future cash flows to be generated by cash
generating units to which goodwill and intangible assets with indefinite useful lives have been allocated. Estimating future
cash flows entails making judgments including the expected rate of growth of revenues and expenses, margins and market
shares to be achieved, and the appropriate rate to apply when discounting future cash flows. Note 13 of these financial
statements provides more information on the assumptions the Directors have made in this area and the carrying values of
goodwill and indefinite life intangible assets. As the outcomes in the next financial period may be different to the assumptions
made, it is impracticable to predict the impact that could result in a material adjustment to the carrying amount.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if
the revision affects both current and future periods. Information about the significant areas of judgment exercised or estimation in
applying accounting policies that have had a significant impact on the amounts recognised in the financial statements are
described as follows:
Classifying investments as either subsidiaries, associates or joint ventures requires the Directors to assess the degree of
influence which the Group holds over the investee. In arriving at a conclusion the Directors take into account the
constitutional structure of the investee, governance arrangements, current and future representation on the Board of
Directors, and all other arrangements which might allow influence over the operating and financial policies of the investee.
Where appropriate, comparative information has been reclassified to conform to the current period's presentation.
Comparatives
In authorising the financial statements for the year ended 31 March 2020, the Directors have ensured that the specific accounting
policies necessary for the proper understanding of the financial statements have been disclosed, and that all accounting policies
adopted are appropriate for the Group’s circumstances and have been consistently applied throughout the year for all Group
entities for the purposes of preparing the consolidated financial statements.
NZ IFRS 16 Leases
The Group has initially adopted NZ IFRS 16 Leases from 1 April 2019. NZ IFRS 16 introduced a single, on-balance sheet accounting model
for lessees. As a result, the Group, as a lessee, has recognised right-of-use assets representing its rights to use the underlying assets and
lease liabilities representing its obligation to make lease payments.
The Group has applied NZ IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is
recognised in retained earnings at 1 April 2019. Accordingly, the comparative information presented for 2019 has not been restated for
the affects of adoption of NZ IFRS 16, i.e. it is presented, as previously reported, under NZ IAS 17 and related interpretations. See note 12.
31 March 2019
OriginalAdjustment
Restated
Statement of cash flows$’000$’000$’000
Cash flows from operating activities
Net increase/ (decrease) in cash and cash equivalents-
(1,989)1,989-
29,4511,98931,440
Cash flows from financing activities
-(1,989)(1,989)
Net cash outflow from financing activities(12,136)(1,989)(14,125)
NZ IAS 7 Statement of Cash Flows (continued)
A number of judgements and estimates have been made by management in establishing the opening balances of the right
of use asset and lease liability. These include determining the applicable incremental borrowing rates at the time of
adoption, assessment of the lease terms, including any rights of renewal and whether it is reasonably certain they will be
exercised, and application of certain practical expedients adopted on transition. See Note 12.
12
Notes to the financial statements
For the year ended 31 March 2020
(iv) COVID-19 pandemic
(g) Subsidiaries
(h) Non-controlling interests
(i)Transactions eliminated on consolidation
(j)Goods and services tax (GST)
(k) Statement of cash flows
(l)Inventory
3.New standards and interpretations issued and not yet effective
The Group reforecast its cashflows and considered the impact of COVID-19 on the valuation of intangibles and the Group’s
ability to comply with the terms of its debt facilities. Management do not consider that COVID-19 will have a material effect
on the valuation of the Group's assets or its ability to comply with debt covenants.
The Group's ownership interests in subsidiaries ranges from 25% to 100% (2019: 25% to 100%). The Group consolidates 29 out of 40
entities where it holds less than half of the voting rights. This is on the basis that the Group's contractual arrangements with these
entities result in them meetin
g the definition of being subsidiaries as set out above.
The Group consolidates the results of its subsidiaries from the date that control commences until the date on which control
ceases. At such point as control ceases, it derecognises the assets, liabilities and any related non-controlling interests and other
components of equity. Any interest retained in the former subsidiary is measured at fair value when control is lost.
Financing activities reflect changes in borrowings and equity.
Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing
the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated
against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as
unrealised gains, but only to the extent that there is no evidence of impairment.
The statement of cash flows has been
prepared using the direct method subject to the netting of certain cash flows.
Cash flows in respect of investments and borrowings that have been rolled-over under arranged banking facilities have been
netted in order to provide meaningful disclosures.
Operating activities include all cash received from all revenue sources and all cash disbursed for all expenditure sources
including taxation refunds or payments and other transactions that are not classified as investing or financing activities.
Investing activities reflect the acquisition and disposal of property, plant and equipment and intangibles, loans to associates, and
investments in associates, subsidiaries and joint ventures.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form
an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose
of the statement of cash flows.
The statement of comprehensive income has been stated so that all components are exclusive of GST. All items in the statement
of financial position are stated net of GST with the exception of receivables and payables, which include GST invoiced.
While the group has 44 (2019: 43) subsidiaries with non-controlling interests, there are no subsidiaries with individually material non-
controlling interest.
Subsidiaries are entities that are controlled by the Group. Control exists when the Group is exposed to, or has rights to, variable
returns from its involvement in the investee and has the ability to affect those returns through its power over the investee. Power
arises when the Group has existing rights to direct the relevant activities of the investee, i.e. those that significantly affect the
investee’s returns. Control is assessed on a continuous basis.
Non-controlling interests are present ownership interests and are initially measured at either fair value or the non-controlling
interests’ proportionate share of the acquiree’s identifiable net assets. The choice of measurement basis is determined on a
transaction-by-transaction basis. Under the proportionate interest method, goodwill is not attributed to the non-controlling interest
and the Group recognises only its share of goodwill whereas under fair value, the non-controlling interest includes its
proportionate share of goodwill.
Changes in the Group’s interest in a subsidiary that do not result in a change in the control conclusion are accounted for as
transactions with equity-holders in their capacity as equity holders.
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on a weighted average
principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred
in brin
ging them to their existing location and condition.
A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 March
2020. These have been assessed for applicability to the Group and the Directors have concluded that they will not have a
significant impact on future financial statements, except for amendments to NZ IAS 1 which the Group has elected to adopt
early.
On 11 March 2020 the World Health Organisation declared a global pandemic as a result of the outbreak and spread of
COVID-19. Following this, on Wednesday 25 March 2020 the New Zealand Government raised its Alert Level to 4 (full
lockdown of non-essential services) for an initial 4 week period. A number of the Group’s pharmacies, medical centres and its
homecare operations continued to operate in a reduced capacity during level 4 due to the essential nature of their activities
and the service they provide to the community. The Group’s activities have progressively returned to full operation as the
country reduced its Alert levels. A recovery in the sales to normal levels is expected throughout Level 1, however, the impact
of COVID-19 on the econom
y remains uncertain.
13
Notes to the financial statements
For the year ended 31 March 2020
4.Segment reporting
•
•
•
Operating segments
Information about reportable segments
External revenues
Total Revenue
Cost of products sold
Employee benefit expense
Lease expenses
Other expenses
Interest income
Interest expense
Interest expense - leases
Reportable segment assets
Equity accounted investments
Capital expenditure
Reportable segment liabilities
*Intersegmental elimination
30,236
686
169,235
376,610
-6,988
--(195,386)
568,531
22,4958,0422,447(1,992)
(32,637)(10,197)(5,040)(1,992)(49,867)
902-1,216
-
(3,525)
(61,256)(54,494)(145,361)
The Group’s main operations are in the pharmacy industry providing pharmacy services through consolidated stores, equity
accounted investments and franchise stores. The medical services segment includes fully owned and equity accounted medical
centres, and support services provided to these medical centres, as well as medical centres outside the Group. The community
health se
gment provides services direct to the community to support independent living.
The Board monitors the various revenue streams within each reportable segment separately however, they do not meet the
criteria for separate disclosure due to the following:
Profit after tax
Share of equity accounted net earnings
Tax expense
23,641
-
March 2020
336,449
336,449568,53176,509
The Group has three reportable segments: pharmacy services, medical services and community health.
Aggregation of the operating segments within each reportable segment is consistent with the core principal of NZ IFRS 8, i.e.
aggregating will not distort the interpretation of the financial statements for the users;
-(261,110)
The operating segments within each reportable segment share the same economic characteristics; and
-
Medical
Services
$'000
76,509-
155,573
155,573
(195,386)
The nature of the products and services, and the nature of the regulatory environment are the same for the operating
segments.
Note
6.1
Community
Health
$'000
Corporate
$'000
Total
$'
000
Pharmacy
Services
$'000
2,4394,549
935
(8,287)*
Impairment
(4,672)
Segment Profit
Net Profit attributable to the shareholders
of the parent
(5,678)
Profit before tax
-
26,768
59,843
16,952
294,818(8,287)
-7,444
241,892
(3,462)Non-controlling interest
13,490
54,176
5,823
(2,897)(392)(237)-
(1,787)
(6,689)
314
(4,672)
30,992
114
-
--
Depreciation - leases
Depreciation and amortisation
(11,097)
(6,323)(1,330)
(2,957)
(913)
(1,575)-
-
(15,629)
(8,565)
14
Notes to the financial statements
For the year ended 31 March 2020
4.Segment reporting (continued)
Operating segments (continued)
External Revenues
Total Revenue
Cost of products sold
Employee benefit expense
Lease expenses
Other expenses
Interest Income
Interest expense
Reportable segment assets
Equity accounted investments
Capital expenditure
Reportable segment liabilities
5.Business combinations
Total assets
Total liabilities
Identifiable net assets
Consideration transferred
Satisfied by:
Cash consideration
Deferred consideration
Total consideration
Less cash acquired (included in assets above)
Net cash consideration
Goodwill
Total consideration
Identifable net assets
Goodwill
The amount of revenue included in the consolidated statement of comprehensive income is $8.1 million with a net
profit after tax of $0.6 million in respect of the entities aquired during the year.
$'000
1,828
(208)
1,620
Carrying valueFair value
$'000
1,828
Goodwill recognised as a result of the acquisitions are as follows:
(1,620)
1,926
(208)
1,620
3,546
-
3,546
(40)
3,505
3,546
Business combinations acquired during the year include; Centre City Pharmacy (2004) Limited, Waiuku Medical
Pharmacy (2010) Limited, Karori Pharmacies (2020) Limited, Drury Surgery Limited. None of these acquisitions are
individually material to the Group's result.
Identifiable assets acquired and liabilities assumed
*Intersegmental elimination
Note
6.1
Corporate
$'000
264,797
(8,431)
16,105
27,428
(7,339)
(30,633)
(1,989)
(3,984)
-
874
Pharmacy
Services
$'000
Medical
Services
$'000
(16,025)
340,196
(4,108)
(9,674)
(61,459)(51,768)
(6,106)(1,168)
44
(21,310)
29,373
(149,273)(750)(263,250)
(46,817)
(198,929)
567,236
(1,177)-
-
(2,417)
-
-
-
Share of equity accounted net earnings
Segment Profit
-
945
Net Profit attributable to the shareholders
of the
parent
Non-controlling interest
4,111
618256
27,3014,43951
29,814
-
Profit after tax
March 2019
6,398
5,1193,706-9,770
92,63822,963(12,668)*130,854
20,089
Total
$'000
567,236
Depreciation and amortisation
156,501
(1,157)
Profit before tax
27,921
Community
Health
$'000
156,501
2,287
Tax expense
-
211,121
340,196
(4,843)
70,539-
(1,667)
36,529(12,668)
(198,929)---
70,539
Depreciation - leases
Impairment
-
-
-
-
-
-
-
-
15
Notes to the financial statements
For the year ended 31 March 2020
6.Operating performance
6.1
Revenue
Pharmacy retail and dispensary
Other pharmacy revenue
Medical fee income
Home care
Disaggregation of Contract Revenue
Year ended 31 March 2020
Timing of revenue recognition
Transferred at a point in time
Transferred over time
Year ended 31 March 2019
Timing of revenue recognition
Transferred at a point in time
Transferred over time
Pharmacy retail and dispensing services
Other pharmacy revenue
Medical services
Home care services
Contract assets and contract liabilities
Contract balances
Trade receivables which are included in trade and other receivables
Contract assets
Contract liabilities
Significant changes in the contract assets and the contract liabilities during the period are as follows:
Medical
Services
$'000
70,539
34,813
35,726
Medical
Services
$'000
76,509
35,315
Community
Health
$'000
156,501
50,602
2019
Contract
liabilities
Total
$'000
Revenue recognised that was included in the contract liability balance at the beginning of
the period
Transfer from contract assets recognised at the beginning of the period to receivables
11,561
5,072
Pharmacy
Services
$'000
336,449
$’000$’000
298,261304,627
2020
The Group operates its own Living Rewards loyalty programme. When a retail sale is made and points are earned, the resulting revenue is
allocated between the loyalty programme and the other components of the sale. The amount allocated to the loyalty programme is deferred,
and is recognised as revenue when the points are redeemed under the terms of the programme or when it is no longer probable that the points
under the programme will be redeemed.
21,466
11,561
(5,072)
These mainly include franchise fees and supplier income. Control for franchise services pass over time as the services are delivered over the
term of the franchise agreement. Payment terms for franchise fees is generally 20 to 30 days. Supplier income is earned, as promotional services
are rendered over a specified time period by the Group. Payment terms are generally 20 to 30 days.
Medical services include capitation and health services and patient fees. Control for capitation and health services passes over time as the
healthcare services are delivered to the patient over a certain time period. Payments terms are generally 20 to 30 days. Patient fees are earned
at a point in time. Control passes to the customer when service has been delivered to a customer. Patient fees are predominantly by credit card,
debit card or in cash.
Homecare services consist primarily of community health and support services. Control passes to the customer as the services are delivered and
simultaneously consumed by the customer. Payment terms are generally 30 to 60 days.
The following table provides information, about receivables, contract assets and contract liabilities from contracts with customers:
2019
Pharmacy
Services
$'000
324,159
12,290
340,196
9,076
331,120
$’000
Community
Health
$'000
155,573
47,180
108,393
472,745
Total
$'000
568,531
100,664
467,867
568,531567,236
38,18835,569
Revenue from contracts with customers:
76,50970,539
155,573156,501
25,257
(6,019)
Reportable segments
As at 31 March 2020, the amount of revenue deferred and recognised as a contract liability for the loyalty programme is $6.0m. This will be
reco
gnised as revenue as the loyaltypoints are redeemed or expire, which is expected to occur over the next fifteen months.
31 Mar 202031 Mar 2019
11,816
5,831
105,899
567,236
94,491
$’000
Pharmacy retail and dispensary services include retail sales, dispensing, professional advisory and care services. For all these services control is
considered to pass to the customer at the point when the customer can use or otherwise benefit from the goods and services. For retail sales,
control
passes at point of sale. Retail sales are predominantly by credit card, debit card or in cash.
41,194
Current contract assets represent revenue where the service has been provided but not yet invoiced to the customer. When the customer has
been invoiced, any outstanding balances are included in receivables. Contract liabilities reflect payments received for services that have not
yet been provided and the payments will be recognised as revenue over time.
Costs directly related to the acquisition of a contract or renewal of an existing contract are capitalised and amortised over the life of the
contract. Cost relating to fulfilling a contract are only capitalised if they meet the recognition criteria under NZ IFRS 15. Costs incurred in
obtaining a contract are only capitalised to the extent they are incremental.
Contract
assets
Contract
assets
Contract
liabilities
2020
14,273
16
Notes to the financial statements
For the year ended 31 March 2020
6.2Operating expenditure
Cost of products sold
Employee benefit expense
Lease expenses
Other expenses
Audit fees
Other services provided by auditors
Auditor’s remuneration to KPMG comprises:
Annual audit of financial statements
Annual audit of financial statements - Prior year
Other services provided by auditors:
Taxation services
Other services
Tax services relate to compliance and related services.
7.Income tax expense
Current tax expense
Deferred tax expense (see note 14)
Total income tax expense
Imputation credit account:
Available for use in subsequent periods $10.1m (2019: $1.2m).
Profit before tax
Income tax expense at 28%
(Add)/deduct the tax effect of adjustments:
Non deductible write-offs
Other
Taxation accounting policy
8.Earnings and assets per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
Net tangible (liabilities) / assets per share (cents)
Net assets per share (cents)
3,52521,310
195,386198,929
233
(530)594
140123
185
(6,689)
235
20202019
$’000
261,110263,250
316341
(6,620)
23,641
(6,689)
2,140
(7,680)
233
--
1,739
530,306
113
123140
233
140
-
(9,078)
$’000
10
509,888
185
185
(7,339)
94.11
2020
Bad debts written off and movement in doubtful debt provision
(8,829)
(7,339)
(10.38)
The calculation of diluted earnings per share is based on the profit attributable to equity holders of the parent and a weighted average
number of ordinary shares issued during the year after adjustment for the effects of all dilutive ordinary shares of 143,394,426 (2019:
143,485,759).
2019
(11.62)
244
11.22
(385)-
The calculation of net tangible assets per share is based on net assets less deferred tax and intangible assets (refer Note 13 and Note 14)
and the closing number of ordinary shares at the end of the year.
Directors’ fees in respect of the subsidiary companies
48,22446,351
Income tax expense is charged to profit and loss and comprises current tax and deferred tax, unless it relates to an item recognised in other
comprehensive income or equity in which case it is recognised in other comprehensive income or equity.
27,428
The calculation of basic earnings per share is based on the profit attributable to equity holders of the parent and a weighted average
number of ordinary shares issued during the year of 143,152,759 (2019: 143,152,759).
Directors’ fees in respect of the parent company
20202019
$’000$’000
The earnings per share, and dividend per share is calculated using the Group’s result divided by the weighted average number of shares
for the listed entity, Green Cross Health Limited.
453
431
9.42
93.57
The calculation of net assets per share is based on net assets and the closing number of ordinary shares at the end of the year.
Numerical reconciliation between tax expense & pre-tax accounting
profit
Current tax is the estimated tax payable on the current period’s taxable income using current tax rates, adjusted for any under or over accrual in
respect of prior periods.
Deferred tax is recognised using the balance sheet liability method, allowing for temporary differences between the carrying am
ounts of assets
a
n
d liabilities for accounting purposes and the carrying amounts for tax purposes. A deferred tax asset is recognised to the extent that it is
probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no longer probable that the related benefit will be realised.
9.41
11.25
17
Notes to the financial statements
For the year ended 31 March 2020
9.Dividends to shareholders of the parent company
Dividends per share (cents)
10.Trade and other receivables
Trade receivables
Contract assets
Accrued income
Other receivables and prepayments
Provision for doubtful debts
11.Property, plant and equipment
Opening cost
Acquisitions through business combinations
Additions
Disposals
Closing cost
Opening accumulated depreciation
Acquisitions through business combinations
Depreciation for the period
Disposals
Closing accumulated depreciation
Closing book value
Work in progress
Total Property, plant and equipment
Property, plant & equipment accounting policy
12.Leases
As a lessee
Right of use assets
Balance at 1 April 2019
Balance at 31 March 2020
Depreciation
Additions to property of $11.4m have been made to Right of use assets during the current year.
Lease liabilities
Balance at 1 April 2019
Balance at 31 March 2020
2,113
21,466
Depreciation is provided on a straight-line basis on all property, plant & equipment components to allocate the cost of the asset (less any
residual value) over its useful life or if it relates to assets in a leased premises, the life of the lease if shorter. The residual values and remaining
useful lives of asset components are reviewed at least annually.
Any resulting gain or loss on disposal of an asset is recognised in the profit and loss in the period in which the asset is disposed of.
(949)
47,128
6,029
Current estimated useful lives of property, plant and equipment are between two and twelve years.
8,195
(1,070)
$’000
25,257
1,176
2,743
75,112
53,143
11,56114,273
68,044
The Group’s leased assets include property leases for pharmacies, medical centres and offices. The lease terms of these leases typically range
from 6 to 30 years (inclusive of any renewal options). Some leases provide for additional rent payments that are based on changes in CPI or
market rental rates. The Group also leases motor vehicles and equipment, which typically run for a period of 3 to 5 years. Previously, the Group
classified all its leases as operating leases under NZ IAS 17.
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred
substantially all of the risks and rewards of ownership. Under NZ IFRS 16, the Group recognises right-of-use assets and lease liabilities for the
majority of its leases – i.e. these leases are on-balance sheet.
2019
322
20,652
6,036
-1,133
21,969
58,667
(1,154)
$’000
1,575
2020
Subsequent expenditure that extends or expands the useful life of property, plant & equipment or its service potential is capitalised. All other
costs are recognised in the profit and loss as expenditure when incurred.
Property, plant & equipment owned by the Group consists primarily of leasehold improvements and is stated at cost less accumulated
depreciation and any impairment losses. Property, plant & equipment acquired in stages is not depreciated until the asset is ready for its
intended use.
22,291
79,319
22,226
(505)
5,010
53,143
2,534
1,698
(870)
36,076
75,112
146
(2,825)
7.007.00
In June 2019 Green Cross Health Limited paid a final dividend for the March 2019 year of 3.5 cents per qualifying ordinary shares to
shareholders, which was fully imputed to 28%.
In December 2019 Green Cross Health Limited paid an interim dividend of 3.5 cents per qualifying ordinary shares to shareholders, which
was full
y imputed to 28%.
20202019
43,107
1,95992,907
The carrying amounts of right-of-use assets and lease liabilities are as below:
$’000$’000$’000$’000
94,5742,0151,95998,548
91,0931,4071,08093,580
83,7051,3451,04086,090
14,202734694
Property Motor VehiclesEquipmentTotal
Property Motor VehiclesEquipmentTotal
$’000$’000$’000$’000
88,9332,015
15,630
18
Notes to the financial statements
For the year ended 31 March 2020
12.Leases (continued)
ͻ
ͻ
ͻ
ͻ
(i)
ͻ
ͻ
ͻ
ͻ
ͻ
ͻ
ͻ
On transition to NZ IFRS 16, the Group elected to perform a reassessment of its contracts to determine which of its contracts are now identified as
leases under NZ IFRS 16. Therefore, the definition of a lease under NZ IFRS 16 has been applied to both contracts as at 1 April 2019 and contracts
entered into or changed on or after 1 April 2019.
The Group used the following practical expedients when applying NZ IFRS 16 to leases previously classified as operating leases under NZ IAS 17.
Lease liabilities
2,055
Non-controlling interest
1 April 19
$’000
Operating lease commitments at 31 March 2019 as disclosed in the Group’s consolidated financial
75,995
Contracts reassessed as leases as defined under NZ IFRS 165,543
Effect of discounting using incremental borrowing rates at 1 April 2019(13,026)
- Recognition exemption for leases with less than 12 months of remaining lease term at transition
(1,923)
419
Transition
Retained earnings2,167
1 April 19
$’000
Right-of-use assets92,907
Deferred tax asset1,003
Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of remaining lease term at the
date of initial a
pplication.
Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
Used hindsight, such as in determining the lease term for contracts that contain options to extend or terminate a lease.
On transition to NZ IFRS 16, the Group recognised additional right-of-use assets and additional lease liabilities, recognising the difference in
retained earnings. The impact on transition is summarised below.
(98,545)
Lease incentives in advance (presented as part of “payables and accruals”)
When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its
incremental borrowing rate at 1 April 2019. The weighted-average rate applied is 6.27%.
- Extension options reasonably certain to be exercised31,956
Lease liabilities recognised at 1 April 201998,545
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at
cost, and subsequently at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurements of the lease
liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the
Grou
p uses its incremental borrowing rate as the discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payment made. It is re-measured
when there is:
a change in future lease payments arising from a change in an index or rate; or
a change in the estimate of the amount expected to be payable under a residual value guarantee; or
changes in assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is
reasonabl
y certain not to be exercised; or
any other change in the future lease payments or the lease term due to a lease modification that’s not accounted for as a separate lease.
The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The
assessment of whether the Group is reasonably certain to exercise such options impact the lease term, which significantly affects the amount of
lease liabilities and right-of-use assets recognised.
At transition, for leases classified as operating leases under NZ IAS 17, lease liabilities were measured at the present value of the remaining lease
payments, discounted at the Group’s incremental borrowing rate as at 1 April 2019. Right-of-use assets are measured at either:
Their carrying amount as if NZ IFRS 16 had been applied since the commencement date, discounted using the Group’s incremental
borrowing rate at the date of initial application – the Group applied this approach to its largest property leases; or
An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments – the Group applied this
approach to all other leases.
Applied a single discount rate to a portfolio of leases with reasonably similar characteristics (motor vehicles leases and equipment leases).
Relied on previous assessments of whether leases are onerous applying NZ IAS 37 Provisions, Contingent Liabilities and Contingent Assets
immediately before the date of initial application as an alternative to performing an impairment review.
19
Notes to the financial statements
For the year ended 31 March 2020
12.Leases (continued)
(ii)
Tax effect
Interest expense - leases
For the impact of NZ IFRS 16 on segment information, see Note 4.
Impacts for the period
NZ IFRS 16 (New)
The impact for the period is summarised below, by comparing the affected financial statement line items accounted for under the old leases
accounting standard NZ IAS 17 against the amounts accounted for under the new leases accounting standard NZ IFRS 16.
Lease liabilities - current-
(13,705)(13,705)
Lease liabilities - non current-
(79,875)(79,875)
Payables and accruals*(92,538)
1,886(90,652)
Statement of financial position$’000$’000$’000
Right of use assets-
86,09086,090
Deferred tax asset13,958
2,09716,055
31 March 2020NZ IAS 17 (Old)Impact
Statement of comprehensive income$’000$’000$’000
Operating expenditure(529,343)
19,456(509,888)
Depreciation and amortisation
(8,565)(15,629)(24,195)
Effect on net assets / (liabilities)
(3,507)
* Movement is due to derecognition of lease incentives previously accounted for as income in advance under NZ IAS 17.
31 March 2020NZ IAS 17 (Old)ImpactNZ IFRS 16 (New)
31 March 2020
Maturity analysis of contractual undiscounted cash flows
Less than one year
17,474
Interest expense - leases
-(5,678)(5,678)
1,0941,094
Effect on profit / (loss)
(758)
-
31 March 2020NZ IAS 17 (Old)ImpactNZ IFRS 16 (New)
Statement of cash flows$’000$’000$’000
Payments to suppliers and employees(517,966)
19,456(498,510)
Two to five years
46,536
More than five years
60,124
Total
124,134
Effect on cash inflow / (outflow)
-
The Group sub-leases some of its properties. Under NZ IAS 17, the head lease and sub-lease contracts were classified as operating leases. On
transition to NZ IFRS 16, the right-of-use assets recognised from the head leases are measured at cost on transition to NZ IFRS 16. The sub-lease
contracts are classified as operating leases under NZ IFRS 16.
As a lessor
Interest expense
(1,787)-(1,787)
-(5,678)(5,678)
Payments of lease liabilities
-(13,778)(13,778)
20
Notes to the financial statements
For the year ended 31 March 2020
Note
13.Intangible assets
Software & Other intangible assets
Opening cost
Acquisitions through business combinations5
Additions
Disposals
Assets written-off
Closing cost
Opening accumulated amortisation
Amortisation for the period
Disposals
Assets written-off / impairment
Closing accumulated amortisation
Closing book value
Goodwill
Opening cost
Other acquired goodwill
Additions5
Disposals
Closing cost
Total intangible assets
Intangible assets accounting policy
Estimated useful lives of the asset classes are:
Software 3 - 5 years
Goodwill accounting policy
1,574
200
-(3,529)
2,5362,395
126,492
20,276
Any resulting gain or loss on disposal of an intangible asset is recognised in the profit and loss in the period in which the intangible asset is
dis
posed of.
Subsequent expenditure that extends or expands the useful life of an intangible asset or its service potential is capitalised. All other costs are
recognised in the profit and loss as expenditure when incurred.
Intangible assets disclosed in the financial statements relate to computer software, trademarks and other indefinite life intangible assets.
Indefinite life intangible assets are tested annually for impairment.
20202019
11,405
11,171
20,276
-
234
1,926
127,242126,492
Internally developed software in the amount of $3.3m was impaired in the current year as a result of a strategic review of existing projects.
-(233)
7,385
Goodwill arises on the acquisition of subsidiaries. Goodwill represents the excess of the purchase consideration over the fair value of the net
identifiable tangible and intangible assets at the time of acquisition.
(3)
19,564
(675)
9,105
9,105
123,017
3,241
133,524
Intangible assets recognised by the Group are stated at cost less accumulated amortisation and any impairment losses with the exception
of goodwill (see below).
Goodwill is allocated to the relevant cash generating units expected to benefit from the acquisition and tested for impairment annually, or
earlier at any interim reporting dates if there are indicators of impairment.
If the recoverable amount is less than the carrying amount of the cash generating unit then an impairment loss is recognised in profit and loss
and the carrying amount of the asset is written down. Recoverable amount is calculated as the greater of the fair value less cost to sell and
value in use.
The relative value of the goodwill allocated to the relevant cash generating unit is included in the determination of any gain or loss on disposal.
Intangible assets acquired in stages are not amortised until the asset is ready for its intended use.
17,687
Amortisation is provided on a straight-line basis for software to allocate the cost of the asset (less any residual value) over its useful life. The
residual values and remaining useful lives of software are reviewed at least annually. Other intangible assets represent franchisee store
rebranding costs and have an indefinite life.
137,664
(1,376)-
$’000$’000
1,261
16
6,282
(878)(321)
21
Notes to the financial statements
For the year ended 31 March 2020
13
Discount rate - post tax
Terminal growth rate
Carrying amount of goodwill allocated to the unit ($000)
Discount rate - post tax
Terminal growth rate
Carrying amount of goodwill allocated to the unit ($000)
Sensitivities
14.Deferred tax asset
The movement in deferred tax asset during the year is made up of the following:
Group – 2020
Provisions and accruals
Tax losses
Right of use assets*
Lease liabilities
*Opening balance includes the deferred tax impact of IFRS16 adoption
Group – 2019
Provisions and accruals
Tax losses
Carrying value of other intangible assets with indefinite useful
lives ($000)
9.43%9.50%
$’000
3,650
1,235
1.50%
19,061
1.50%
Impairment test assumptions 2019
1.50%
74,513
Community
health
7.93%
Discounted cash flow (DCF) models have been based on three-year forecast cash flow projections. The budget for the year-ending 31 March
2021 is the basis for the first year's projections and projections for subsequent periods have been based on the Group's three-year Outlook.
Terminal cash flows are projected to grow in-line with the New Zealand long-term inflation rate.
Pharmacy
services
--
Carrying value of other intangible assets with indefinite useful
lives ($000)
Impairment test assumptions 2020
$’000
Reco
gnised in
profit and loss
Opening
restated
For the purpose of impairment testing, goodwill is allocated to the Group's operating divisions which represent the lowest level within the Group
at which the goodwill is monitored for internal management purposes. Within pharmacy and medical, whilst a cash generating unit (CGU) may
be an individual store or medical centre, goodwill is allocated across all operations within a division that have similar economic characteristics
and collectively benefit from acquisitions that increase the Group's portfolio.
-
7,145
2,048
1.8%
75,06832,36319,061
2,048
8.35%9.90%
Closing
No impairment was identified for Pharmacy or Medical services as a result of this review, nor under any reasonable possible change, in
any of the key assumptions described above.
The estimated recoverable amount of the Community Health CGU exceeds its carrying value by $6.7m. The projected EBIT for the
Community Health CGU is forecast to remain at current levels over the forecast period. The projected EBIT would need to decrease by
32% for the recoverable amount to be equal to the carrying value of the Community Health CGU.
33,667
7,004
Property, plant and equipment
196
(219)
1.8%
$’000
Medical
services
Impairment testing (continued)
13,915
(141)
2,140
2,257
11,173
1,683
1,738
2,288
16
Pharmacy
services
Medical
services
Community
health
9.85%
31
4,885
6,785
(26,589)
27,593
(24,105)
26,202
2,484
(1,391)
1,967
12,912
3,650
1.8%
7,004
2,061
16,055
Property, plant and equipment
2,257
22
Notes to the financial statements
For the year ended 31 March 2020
15.Equity accounted group investments
The movement in equity accounted investments comprises:
Investment in associates and joint ventures
Disposal of associates and joint ventures
Share of net earnings
Dividend
There are no individually material associates or joint ventures.
Amount of goodwill within the carrying amount of equity accounted group investments:
(Disposal) / investment in associates and joint ventures
Summary associate and joint venture financial information
As at and for the year ended
As at and for the year ended
Reporting dates
Investments in associates and joint ventures accounting policy
16.Trade and other payables and income taxes payable
Trade payables
Payable to non-controlling interest
Contract liabilities
Accruals
Employee entitlements
Income tax payable
Employee entitlements accounting policy
Note2020
$’000
2019
$’000
6,264
1,186
26
6,019
11,357
5,072
(84)
31 March 2019
$’000
$’000
-
(34)
$’000
1,760
41,063
4,058
13,938
Accounting policies adopted by associates and joint ventures are generally consistent with those of the Group. Where a material
difference does exist, appropriate adjustments are applied to ensure congruence with the policies of the Group, the most significant of
these being the recognition of deferred tax.
33,599
90,652
Liabilities
-
8741,216
24,342
91,838
2019
Net Profit
after tax
$’000
The aggregate results of the associates and joint venture financial position and current year's profit are as follows:
Revenue
50
18,409
The controlled entities and all associates have a 31 March reporting date.
A joint venture is a joint arrangement in which the parties that have joint control of the arrangement have rights to the net assets of the
arrangement. Joint control is the contractually agreed sharing of control of the arrangement which only exists when decision about the
relevant activities re
quire the unanimous consent of the parties sharing control.
Employee entitlements for salaries, bonuses, long service, alternate and annual leave are provided for and recognised as a liability when
benefits are earned by employees but not paid at the reporting date.
23,805
3,024
79,975
81,735
39,478
Opening carrying amount
6,398
2,941
(706)
Assets
3,269
An associate is an investee over which the Group has significant influence, which is the power to participate in the financial and operating
policy decisions of the investee but not to control or jointly control those policies.
8,614
2020
$’000
(653)
6,9886,398
$’000
5,727
The results and assets and liabilities of associates and joint ventures are incorporated into the financial statements of the Group using the
equity method of accounting. Under the equity method, the initial investment in the Group financial statements is measured at cost and
adjusted thereafter for the Group’s share of profit and loss and other comprehensive income of the associate and joint venture. Any
goodwill arising on the acquisition of an associate or joint venture investment is included in the carrying amount of the investment net of
dividends received. Where the Group’s share of losses of the associate of joint venture exceeds the Group’s interest in that associate or
joint venture, the Group discontinues recognising its share of losses unless it has a legal or constructive obligation to continue doing so. The
equity method is discontinued where the Group ceases to exert significant influence over the investee.
2,405
15,790
21
52,498
31 March 2020
4,0244,024
Opening carrying amount
4,024
23
Notes to the financial statements
For the year ended 31 March 2020
17.Borrowings
Current
Non-current
Borrowings and advances accounting policy
18.Operating cash flows reconciliation
Profit after tax for the year
Add/(deduct) non-cash items:
Depreciation, amortisation and impairment
Other non-cash items
Receivables and accruals movement
Inventory
Payables and accruals movement
19.Shares on issue
Shares authorised and on issue
Opening number of shares
Shares issued - fully paid
Shares issued - partly paid
Shares cancelled - partly paid
Shares held as treasury stock
Treasury stock
Share capital
20.Financial Instruments
43,563
56,47449,119
2019
The Group's interest rate on outstanding loans is calculated based on BKBM or cost of funds plus a margin. The current interest rate is between
2.50% and 4.66% (2019: 4.14% - 5.54%). A 0.5% increase/decrease in the effective interest rate would result in a decrease/increase in after tax
profit of $203,000.
Green Cross Health Limited and all its subsidiaries provided guarantees and indemnities in favour of BNZ covering all loans held by the parent
and subsidiary companies. Loans within partnership subsidiaries are covered by a GSA agreement over the individual business assets.
$’000
The Group's primary lender is the BNZ. As at balance date, the Group has undrawn banking facilities of $10m (2019: $18m). The maturity of the
debt facility with BNZ is 22 August 2022.
3,359
53,114
$’000Restated
The Group is party to financial instruments as part of its normal operations. Financial instruments include cash and cash equivalents, borrowings,
trade and other receivables and trade and other payables.
Security has also been provided by Green Cross Health Limited in favour of ANZ in relation to one Pharmacy subsidiary.
2020
5,556
Financial assets and financial liabilities are recognised at amortised cost.
20,089
54,301
(150)
(183)
'000
2020
As at balance date, two subsidiaries are in breach of covenanted ratios in respect of their bank borrowings. All debt in breach amounting to
$0.7m has been classified as current in these financial statements.
8,431
10,677
1,395
28,867
(2,623)
Borrowings and advances are initially recognised at fair value, including directly attributable transaction costs. Subsequent to initial
recognition, borrowings and advances are measured at amortised cost using the effective interest method, less any impairment losses on
advances.
Restated
16,952
6,752
3,493
(7,031)655
(1,916)
Add/(deduct) changes in working capital items:
$’000
2019
$’000
2020
-
Net cash inflow from operating activities
-
Financial instruments are initially recognised at their fair value less transaction costs, and subsequently measured at their amortised cost. A
financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are
derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to
another party without retaining control or substantially all risks and rewards of the asset. Financial liabilities are derecognised if the Group’s
obligations specified in the contract expire or are discharged or cancelled.
-
'000
143,486
31,440
2019
The redeemable ordinary shares held by Life Pharmacy Trustee Company Limited to satisfy the Senior Management incentive schemes have not
been included in the calculation of the total number of shares issued by the Group as these shares have not been issued externally by the
Group.
143,153143,153
All ordinary shares carry equal rights in terms of voting, dividend payments and distribution upon winding up.
-
143,
486
-
Risk management policies are used to mitigate the Group’s exposures to credit risk, liquidity risk and market risk that arise in the normal
course of operations.
143,486143,303
(333)
Incremental costs directly attributable to the issue of ordinary shares, share options and share capital are recognised as a deduction from
equity.
24
Notes to the financial statements
For the year ended 31 March 2020
20.Financial Instruments (continued)
Credit risk
The status of trade receivables at reporting date is as follows:
Trade and other receivables
Not past due
Past due 0-30 days
Past due 31-120 days
Past due more than 120 days
Total
Liquidity risk
Market risk
Capital management
49,017
Less than
one year
$’000
-
28,807
16,08928,807
The carrying amount of the Group’s on-balance sheet financial instruments including trade and other receivables, cash and cash equivalents,
borrowings and trade payables, closely approximate their fair values as at 31 March 2020 and 31 March 2019. The assessment of fair value
relating to borrowings was determined by reference to observable market data (level 2).
Trade and other payables
-
56,073
1,376
60,828-60,828
$’000
16,089
Borrowings restated
As interest rates change, the fair value of financial instruments may change. Refer to note 17 for details of the interest rates for the group loans
and borrowings, which are the most significant financial instruments.
The allocation of capital between its specific business segments’ operations and activities is, to a large extent, driven by the optimisation of the
return achieved on the capital allocated. The process of allocating capital to specific business segment operations and activities is undertaken
independently of those responsible for the operation.
The Group’s policies in respect of capital management and allocation are reviewed regularly by the Board of Directors.
52,130
49,01749,017
98,13756,251
Total non-derivative liabilities
101,148
7,234
The Group’s capital includes share capital and retained earnings. The Group is not subject to any externally imposed capital requirements.
49,119
Between two
years and five
years
$’000
(1,070)
Impairment
-
$’000
-
-
1,437
1,646
-
1,070
2020
$’000$’000
2019
Between one
year and two
years
-
29,559
44,177
Liquidity risk represents the Group’s ability to meet its contractual obligations. The Group evaluates its liquidity requirements on an ongoing basis.
In general, the Group generates sufficient cash flows from its operating activities to meet its obligations arising from its financial liabilities and has
credit lines in place to cover potential shortfalls. The following table sets out the contractual cash flows for financial liabilities that are settled on
a gross cash flow basis:
$’000
-
(870)
121,737
117,302
60,828
Trade and other payables
Total non-derivative liabilities
1,37664,288
2020
-
1,819
(870)
36,947
3,46056,07356,47460,909
$’000$’000
Borrowings
$’000
Contractual
cash flows
(1,070)
Less than
one year
Carrying Value
873
Carrying ValueContractual
cash flows
Between two
years and five
years
2019
Between one
year and two
years
$’000$’000$’000$’000
4,869
The Group’s maximum credit risk resulting from a third party defaulting on its obligations to the Group is represented by the carrying amount of
each financial asset on the statement of financial position. The Group is not exposed to any material concentrations of credit risk other than its
exposure within the retail pharmacy and government sectors. The Group monitors credit limits on a monthly basis. All credit facilities to external
parties are provided on normal trade terms (unsecured, to a maximum of 45 days). At any one time, the Group generally has amounts owed to
and amounts owed by the same counterparty, although no legal right of set-off exists. The Parent company holds direct debit authorities for
amounts payable under the contractual terms of its franchise agreements. The Parent regularly monitors the credit ratings issued, and any
qualifications to those ratings, to the financial institutions (and those of the ultimate parent financial institution) used by the Group.
39,851
Gross receivableGross receivable
20192020
Impairment
25
Notes to the financial statements
For the year ended 31 March 2020
21. Related parties
Related party transactions for the group:
Transaction ValueBalance Outstanding
Payable to non-controlling interests (note 16)
Key management personnel remuneration
Short-term and other employee benefits
Share vesting costs
22.Share based payments
(a) Description of share-based payment arrangements
There were no ROS issued to key or senior managers during the 2020 or 2019 financial years.
in thousands
Outstanding at 1 April
Cancelled during the year
Exercised during the year
Granted during the year
Outstanding at 31 March
Exercisable at 31 March
Instruments outstanding at 31 March 2020 had an exercise prices of $2.37(2019: $1.25 - $2.37) and a weighted average
contractual life of 1 year (2019: 1.1 years). The weighted average share price at the date of exercise for ROS during the year
was nil (2019: nil).
Share based payments accounting policy
23.Subsequent events
There have been no subsequent events which require disclosure in these financial statements.
Equity earnings from associates
Equity-settled share based payments awarded to employees are measured at fair value at the date of grant and are recognised as an
employee expense, with a corresponding increase in equity, over the period from the date of grant to the date on which the employees
become unconditionally entitled to the option. The fair value at grant date is determined using an appropriate valuation model.
2
2019
2,642
8741,216
2019
2020
Weighted
average
exercise price
2020
Number of
instruments
2019
7
that holds the shares on behalf of the employees. Each ROS is partly-paid to $0.01 and carries an entitlement to dividends and
150,000 Redeemable Ordinary Shares (ROS) have been issued by the parent to Life Pharmacy Trustee Company Limited as trustee of a trust
Redeemable ordinary shares granted to senior managers:
653
Dividend Income
Management service charges and on charged costs
to equity accounted investments
-
-
Franchise fees and on-charged costs to equity
accounted investments
458
Receivable from other related parties
703
39
At each reporting date, the Group revises the estimate of the number of options expected to vest. The cumulative expense is revised to reflect
the revised estimate, with a corresponding adjustment to equity.
and voting rights in proportion to the extent paid. On exercise, the ROS are fully paid and converted into ordinary shares. The total charged to
the profit and loss in the period was $0 (2019: $0).
$’000
2020
2,415
$’000
2020
$’000
2019
$’000
41
818
100
706
1029
-
$’000
748
$’000
3,024
2,4152,644
At 31 March 2020, the Group had the following share-based payment arrangements:
2,941
The Group provides compensation to key management personnel which comprises the directors and executive officers. Some senior
executives also participate in the share option scheme. Key management personnel (includes the Group CEO, the Group CFO, some
senior executives and company directors) compensation comprised:
Weighted
average
exercise price
2019
(b) Reconciliation of outstanding ROS
Number of
instruments
2020
150
$1.90
-
$1.90
$2.17
-
150
-
333
-
$1.
90
--
333
$2.
37
$2.37
-
--
333
183
-
(183)$1.26
During the period, there was one group director who had a shareholding in a subsidiary and also had a shareholding in the Parent company.
The Group has commercial franchise agreements with stores relating to marketing levies and franchise fees. The Group also enters into
transactions on behalf of the stores which are on-charged. These transactions comprise items such as training courses, supplier agreements,
central advertising campaigns, loyalty card costs, and IT related costs. The Parent has leased some equipment which is on-leased to associate
companies. The Parent performs accounting services, based on commercial terms, for some of the stores.
The Parent has shareholder agreements with the other shareholders of the associates. The agreements set out the return on investment/profit
sharing arrangements relating to these investments. Payable to non-controlling interests represents loans advanced to the Group.
26
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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