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Green Cross Health lifts net profit 3.2% as medical division posts strong result

Wednesday 29th May 2019

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Green Cross Health said net profit lifted 3.2 percent as its medical division posted a strong result. However its community health division faced funding challenges and its pharmacy division saw its gross margin decline.

Net profit attributable to shareholders was $16.1 million in the 12 months ended March 31, versus a restated $15.6 million in the prior year, the Auckland-based company said in a statement. 

The prior year was restated due to accounting changes that required a write-off of $500,000 capitalised contract bidding costs and a $700,000 increase in the provision for alternate leave liability due to a correction in the calculation of this provision, it said.  

Green Cross, which was formerly PharmacyBrands, operates the Unichem and Life Pharmacies, The Doctors medical centres, Total Care Health community nursing services and Access Community Health.

Total revenue lifted 5.6 percent to $567 million as "the medical division has continued to post strong results as it benefits from both organic growth and selective acquisitions," said chair Peter Merton. 

Revenue in the medical division lifted 34 percent to $70.5 million. The division has increased enrolled patients by approximately 18,000 since March 2018 to 255,000. Its operating profit was up 20.4 percent at $4.4 million. 

Two medical centres were acquired during the year and it increased its investment in two associate medical centre businesses, moving to a majority interest. The net acquisition cost on medical centres over the 12 months was $3.3 million, the company said. It now has 41 medical centres. 

Revenue growth in community health continued, up 9.3 percent to $156.6 million. Green Cross noted, however, profit was $100,000 versus $1.2 million in the prior year, largely due to continued funding challenges as the government's $2 billion pay equity package for aged and residential care workers did not fully compensate providers for the increase in employee entitlements.

The operating result includes a $400,000 increase in leave liability resulting from support worker pay increases due to pay equity legislation. The last of these scheduled pay rate rises will occur on July 1, 2021, it said. 

 The division delivers services to maintain and support people's independence in their homes.

"The company hopes more sustainable community health funding will be a result of the health and disability funding review currently being undertaken by government," Green Cross said. 

Pharmacy revenue fell 3 percent to $340 million and operating profit in the division was down 5.5 percent to $27.3 million "largely because of gross margin decline". Infrastructure works disrupted several stores and a record low cold and flu winter season resulted in retail sales in the cough/cold and pain “over the counter” categories being down 5.9 percent year-on-year. 

Merton did not provide guidance but said the company said "Green Cross Health is confident in delivering future earnings growth, both organically and through selective acquisitions. Whilst the tougher commercial environment has limited acquisition opportunities in the short term, the company believes this cycle will change in the near future."

It will pay a final dividend of 3.5 cents to shareholders on the register on June 13. The dividend - which is consistent with the prior year - will be paid on June 27. 

The shares last traded at $1.15 and are down 0.9 percent so far this year. 


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