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Green Cross Health profit falls 15% as pay equity creates funding shortfall

Wednesday 30th May 2018

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Green Cross Health reported a 15 percent fall in annual profit as the listed medial services provider made up the unfunded shortfall left in the government's $2 billion pay equity package for aged and residential care workers, overshadowing underlying earnings growth. 

Net profit attributable to shareholders fell to $16.8 million, or 11.85 cents per share, in the 12 months ended March 31 from $19.6 million, or 14.18 cents, a year earlier, the Auckland-based company said in a statement. That was weighed down by a $1.9 million increase in its leave liability as a result of the government's pay equity deal for 55,000 workers, and a one-off gain a year earlier. Stripping that out, underlying earnings rose 11 percent to $18.7 million on a 7.2 percent revenue gain to $522.9 million. 

"This additional cost, which has impacted all providers, is a result of pay equity funding not fully compensating providers for the increase in employee entitlements," Green Cross said. "While discussions continue between industry representatives and the Ministry of Health there is no evidence to suggest that this shortfall will be funded." 

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. 

Its pharmacy division of 357 outlets accounts for the bulk of earnings, lifting revenue 5.8 percent to $341.3 million and boosting earnings 3.5 percent to $28.9 million. That was boosted by one acquisition in the period and two new sites in Auckland. 

The community health division bore the impact of the pay equity deal shortfall, with earnings down 5.8 percent to $2.8 million on an 11 percent increase in revenue to $128.9 million, while the media services unit boosted profit 26 percent to $3.7 million on a 6.9 percent gain in revenue to $52.7 million. 

Grant Bai, chief executive of the pharmacy and medical divisions, said the company wants to develop new systems and make better use of technology to lift its performance, with the status quo "not an option to economically meet the future healthcare needs of our communities". 

The board declared a final dividend of 3.5 cents per share, payable on June 29, taking the annual payout to 7 cents, unchanged from a year earlier. 

The shares last traded at $1.67, having edged up 0.6 percent so far this year. 


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