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Green Cross expands with Peak Primary medical centres acquisition

Friday 10th October 2014

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Green Cross Health, formerly Pharmacybrands, has bought medical centre operator Peak Primary, which was in breach of its banking covenants in 2013, for an undisclosed sum as it continues its expansion across the primary health sector.

The Auckland-based healthcare business expects to settle the deal for Peak Primary, which owns 11 medical centres, by the end of this month, it said in a statement. Radius Medical, a Green Cross subsidiary, will take over the business, while Peak Primary's chief executive Roger Bowie will take a minority stake in Radius and become its managing director. The initial earnings contribution from the acquisition will be immaterial to profit, Green Cross said.

Peak Primary's 2013 accounts were tagged by auditor Grant Thornton over the looming expiry of its bank facility, which left current liabilities exceeding current assets by $6.1 million. The medical centre owner owed $3.3 million to ANZ Bank New Zealand as at Dec. 31, and was in breach of its covenant during the year. The term was extended to Sept. 15, 2014, the accounts said.

Shareholders owed $1.7 million in related party loans confirmed their intention to provide financial support to meet Peak Primary's obligations through the 2014 year, according to the accounts.

Peak Primary reported a loss of $108,000 in calendar 2013 on revenue of $26.6 million, according to financial statements lodged with the Companies Office.

Green Cross is chasing growth through acquisitions in the primary healthcare sector, and bought a 50 percent share of Total Care Health Services in March, its first expansion into community healthcare.

Prior to the name change in March, Green Cross had largely been seen as a retail pharmacy operating the Unichem, Amcal, Life Pharmacy, Radius and Care Chemist brands and running medical centres. The company has consolidated its five pharmacy brands down to Life Pharmacy and Unichem, and relaunched its reward programme, Living Rewards, which it said it wants to expand across all business units.

The acquisition will take Green Cross's footprint to 36 medical centres.

"We have stated our desire to expand our medical business as we move towards becoming a leading provider of primary health services in New Zealand," chairman Peter Merton said.

Peak Primary was formed in 2008 when Bowie and two other private investors began investing in medical centres. According to records on the Companies Office, Peak Primary is 61 percent owned by Malaysian health group, Qualitas Health, while Fa Ventures One, an investment vehicle of New Zealand doctors and trusts, holds a 26 percent stake while Bowie and former Peak chief executive Mark Willis share the remaining 13 percent stake between them.

In May, Green Cross boosted annual profit 14 percent to $18.8 million in the year ended March 31, as its new pharmacy and medical acquisitions came on stream. Sales rose 3.8 percent to $258 million, outpacing a 1.2 percent lift in the cost of sales to $146 million.

Shares of the NZX-listed health investor fell 1.6 percent to $1.80, and have advanced some 46 percent since the start of the year, outperforming the NZX All Index's 6.5 percent gain over the same period.


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