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ACURITY HEALTH GROUP LIMITED Results for announcement to the market
Reporting Period Six months to 30 September 2014
Previous Reporting Period Six months to 30 September 2013
Amount (000’s) Percentage Change
Revenue from ordinary activities
$NZ 56,547 Up 13.5%
Profit from ordinary activities after tax attributable to security holder
$NZ 4,944 Up 21.8%
Net profit attributable to security holders
$NZ 4,944 Up 21.8%
Interim Dividend Amount per security Imputed amount per security
Nil Nil
Record Date N/A
Dividend Payment Date N/A
Comments on results See attached media release
NTA backing 30 September 2014 30 September 2013
Net tangible asset backing per
ordinary share
$5.56 $4.80
Details of entities over which control has been gained or lost during the period
None.
Details of associates
Percentage holding Contribution to net earnings
Name Sep 2014 Sep 2013 Sep 2014 ($000)
Sep 2013 ($000)
Endoscopy Auckland Limited and Laparoscopy Auckland Limited
40% 30% 529 479
Acurity Health Group Limited
Half Year In Line With Forecast
Acurity Health Group Limited today reported net profit after tax of $4.94 million for the six months
ended 30 September 2014 (21.8% up on the result for the same period last year of S4.06 million).
Adjusting for the non-cash revaluation of interest-rate swaps, underlying earnings for the six months
ended 30 September 2014 were $5.02 million, an increase of 47.3% on prior half year earnings
expressed on the same basis.
Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) for the six months ended 30
September 2014 increased by 17.8% compared to the equivalent period in the prior year. This was
largely due to increased revenues from DHB outsourcing and cost savings.
Acurity’s chairman, Alan Isaac, said that “the six months ended 30 September have continued the
gains from the prior year with increased revenue, further initiatives to control costs, and an overall
increase in underlying earnings. There has been a good increase in revenue volumes driven in part by
pre-election DHB outsourcing and encouragingly some early signs of an increase in private patient
demand. We continue to see the trend towards shorter lengths of in-hospital patient stay. Overall we
report results in line with the recent forecast contained in the market update provided as part of
statutory process in dealing with the takeover offer from Connor Healthcare Ltd.”
Reported net earnings in both the current and prior comparable period were impacted by the
revaluation of interest rate swaps as required by International Accounting Standards. This is a non-
cash accounting adjustment that will continue to create volatility in reported earnings. The table
below shows the reconciliation of reported earnings and earnings adjusted to exclude this revaluation.
Six months
ended
30 Sep 2014
Six months
ended
30 Sep 2013 Change
Reported net profit after tax 4,944 4,059 21.8%
Add back revaluation of interest rate swaps (net of tax) 77 (651)
Adjusted net profit after tax 5,021 3,408 47.3%
Adjusted earnings per share (cents per share) 29 20 45.0%
Detailed earnings for the six months ended 30 September 2014
A breakdown of reported earnings for the six months ended 30 September 2014 compared to the
prior year is shown in the table below.
$000, except per share amounts
Six months
ended
30 Sep 2014
Six months
ended
30 Sep 2013 Change
Revenue 56,547 49,820 13.5%
Medical supplies expense 12,527 11,206 11.8%
Employee costs 16,284 16,016 1.7%
Specialist contract expense 10,151 6,830 48.6%
Other expenses 6,256 6,152 1.7%
EBITDA
11,329 9,616 17.8%
Depreciation and amortisation 4,019 4,208 (4.5%)
EBIT 7,310 5,408 35.2%
Interest expense (1,034) (1,326) (22.0%)
Interest rate swap revaluation (107) 904 (111.8%)
Share of profits of associates 529 479 10.4%
Tax expense (1,754) (1,406) 24.8%
Net Earnings 4,944 4,059 21.8%
Reported earnings per share (cents per share) 29 24 20.8%
Final dividend paid (cents per share) 11 8 37.5%
Interim dividend declared (cents per share) 0 6 (100.0%)
Reported revenues have increased 13.5% on the prior year however 6.4% of this increase is
attributable to lead provider revenue on behalf of the specialists. The majority of the remaining 7.1%
increase relates to additional DHB volumes resulting from the government elective surgery funding
initiatives.
The private patient revenues component has been maintained in the context of the total overall
revenue and there was a small increase in ACC revenues. The additional DHB revenue was
predominately from the Hawkes Bay DHB however there were also increased volumes from Capital
and Coast DHB in Wellington and Bay of Plenty DHB in Tauranga.
The increase in medical supplies is a result of orthopaedic surgery volumes increasing through the DHB
outsourced work and the related prosthesis costs.
Although permanent employee numbers are down on last year employee costs increased 1.7% which
reflects an increase in the overall remuneration rates and additional staff called in to support the DHB
peak volumes.
The continued focus on cash controls has resulted in good operating cash flows and lower debt levels
which is reflected in lower interest expense.
Net earnings were again impacted by the ongoing revaluation of interest rate swaps to market values,
as required by accounting standards. The six months to September 2014 saw a decrease to reported
earnings pre tax of ($107,000) (2013 increase $904,000) resulting from revaluation of interest rate
swaps based on current market rates. This reflects the increase in swap rates over the past 6 months.
This is a non-cash adjustment which will be a source of ongoing volatility to future reported earnings.
Norfolk Southern Cross and Endoscopy/Laparoscopy Auckland
The Company has a 60% joint venture investment in the Norfolk Southern Cross partnership (which
owns Grace Hospital in Tauranga). The investment accounted for as a “joint operation” with the
earnings accounted for on a share of revenue and expense basis.
The Company also has a 40% equity accounted investment in both Endoscopy and Laparoscopy
Auckland (increased from 30% to 40% in September 2014 with further options to increase to 50% by
2016). Breakdown of net earnings for the six months ended 30 September 2014 are detailed below:
Associates (equity accounted)
Six months
ended
30 Sep 2014
$000
Six months
ended
30 Sep 2013
$000
Endoscopy Auckland/Laparoscopy Auckland 529 479
Reported earnings from associates 529 479
Wakefield Hospital Complex
As advised at the Annual Meeting in August we have commenced planning for the development of a
Next Phase Wakefield Hospital and Campus.
A Project Control Group of specialists, staff, and board representatives has been established which are
working through the requirements for the project and currently engaging a heath planner to develop
master plans.
Capital expenditure
The capital expenditure outlay increased to $5.5 million up from $2.2 million in the prior year primarily
due to investments at Grace Hospital in Tauranga on the Oropi Centre day stay development and a
replacement Da Vinci robot.
Takeover Offer
On 26 August 2014, Connor Healthcare Limited (“Connor”), a company associated with some of
Acurity’s largest shareholders, made a full takeover offer for all of the Acurity shares not owned by
Connor, at $7.25 per share (after initially indicating $6.50 per share).
The offer was conditional on:
1) Overseas Investment Office consent – which was received 22nd October 2014;
2) 90% minimum shareholder acceptance by 21st November 2014 – achieved 97.64%; and
3) Commerce Commission clearance - still awaited.
Under the terms of the offer, Connor has until 22nd December to satisfy the Commerce Commission
condition. The Commission anticipates releasing their decision on 28th November 2014.
Outlook
The company expects a continuation of the lift in revenues experienced over the past 12 months. The
Wellington market is improving with an increased amount of outsourced DHB work and steady growth
in ACC and insured patients. Investments in Auckland and Tauranga continue to show steady growth.
Chairman Alan Isaac said “the company sees growth continuing in line with forecasts, supported by
the ongoing focus on efficiencies and cost savings. ACC has increased its budget for elective surgery
and DHB outsourcing work has shown some growth in the recent months though with low margins.
The expectation is for this to continue for the remainder of the financial year.”
As a result of the necessity to provide a trading update and prospective financial information in
connection with the response to the recent takeover offer, the Company provided guidance in late
August that it anticipated that full year EBITDA was likely to be a small improvement on the prior
financial year. The August and September trading results have been in line with expectations so that
expectation remains valid.
Dividend
As the Company is currently the subject to Takeover Offer the Board have resolved not to declare an
interim dividend at this time.
Ends
Issued by Acurity Health Group Limited
24 November 2014
For further enquiries, please contact:
Matthew Kenny
Company Secretary
Acurity Health Group Ltd
Telephone +64 4 381 8127
ACURITY HEALTH GROUP
CONSOLIDATED INCOME STATEMENT For the six months ended 30 September 2014
Audited
Unaudited Unaudited
Year ended
Six months Six months
31-Mar-14
30-Sep-14 30-Sep-13
$000 Notes $000 $000
98,059
Revenue 3 56,547 49,820
Operating expenses
(21,322)
Cost of medical supplies
(12,527) (11,206)
(30,803)
Employee costs
(16,284) (16,016)
(13,738)
Specialist contract expense 3 (10,151) (6,830)
(11,994)
Other expenses
(6,256) (6,152)
(8,172)
Depreciation and amortisation
(4,019) (4,208)
Finance costs
(2,362)
Interest on term loans
(1,034) (1,326)
1,096
Revaluation of derivative financial
instruments
(107) 904
955 Share of profit in associates 529 479
11,719
Profit before income tax
6,698 5,465
(2,642)
Income tax expense
(1,754) (1,406)
9,077
Net profit for period attributable
to shareholders 4,944 4,059
Earnings per share
53
Basic & diluted (cents per share)
29 24
ACURITY HEALTH GROUP
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended 30 September 2014
Audited
Unaudited Unaudited
Year ended
Six months
Six
months
31-Mar-14
30-Sep-14 30-Sep-13
$000 Notes $000 $000
9,077
Profit for the period
4,944 4,059
Other comprehensive income
3,408
Increase in asset revaluation reserve
- -
(1,120)
(Decrease) in investment revaluation reserve
- -
11,365
Total comprehensive income
attributable to shareholders 4,944 4,059
ACURITY HEALTH GROUP
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 September 2014
Notes
Share
Capital
Asset Revaluation
Reserve
Investment Revaluation
Reserve
Retained
Earnings Total
$000 $000 $000 $000 $000
Balance at 1 April 2013 57,210 23,961 1,120 31,866 114,157
Net profit attributable to shareholders - - - 4,059 4,059
Total comprehensive income - - - 4,059 4,059
Dividends paid to Parent's
shareholders 4 - - - (1,382) (1,382)
Balance at 30 September 2013 57,210 23,961 1,120 34,543 116,384
Balance at 1 April 2014 57,210 27,369 - 37,486 122,065
Net profit attributable to
shareholders - - - 4,944 4,944
Total comprehensive income - - - 4,944 4,944
Dividends paid to Parent's shareholders 4 - - - (1,903) (1,903)
Balance at 30 September 2014 57,210 27,369 - 40,527 125,106
ACURITY HEALTH GROUP
CONSOLIDATED BALANCE SHEET As at 30 September 2014
Audited
Unaudited Unaudited
As at
As at As at
31-Mar-14
30-Sep-14 30-Sep-13
$000 Notes $000 $000
ASSETS
Current assets
1,788
Cash and cash equivalents
292 1,600
2,124
Inventories
2,138 2,172
9,343
Trade and other receivables and prepayments
11,328 9,270
- Available-for-sale financial asset - 2,096
13,255 13,758 15,138
Non-current assets
127,665
Property, plant and equipment
129,496 117,730
29,410
Intangible assets
29,108 34,058
7,156
Investment in associates 6 10,205 7,132
93
Trade and other receivables and
prepayments
93 93
164,324 168,902 159,013
177,579 Total assets 182,660 174,151
LIABILITIES
Current liabilities
18,799
Term borrowings - current portion 7 7,288 4,974
3,298
Trade creditors
4,041 2,990
8,073
Other payables and accruals
7,403 7,527
405
Derivative financial instruments
460 648
577
Tax payable
1,180 863
31,152 20,372 17,002
Non-current liabilities
11,252
Deferred tax liability
10,929 9,233
13,110 Term borrowings 7 26,253 31,082
24,362
37,182 40,315
55,514 Total liabilities 57,554 57,317
ACURITY HEALTH GROUP CONSOLIDATED BALANCE SHEET, contd
As at 30 September 2014
Audited
Unaudited Unaudited
As at
As at As at
31-Mar-14
30-Sep-14 30-Sep-13
$000 Notes $000 $000
EQUITY
Capital and reserves
attributable to the
Parent's shareholders
57,210
Share capital
57,210 57,210
27,369
Revaluation reserves
27,369 25,081
37,486 Retained earnings 40,527 34,543
122,065
Total equity
125,106 116,834
177,579 Total equity and liabilities 182,660 174,151
ACURITY HEALTH GROUP
CONSOLIDATED CASH FLOW STATEMENT For the six months ended 30 September 2014
Audited
Unaudited Unaudited
As at
As at As at
31-Mar-14
30-Sep-14 30-Sep-13
$000 Notes $000 $000
Cash flow from operating activities
96,104
Receipts from customers
55,092 50,091
122
Interest received
25 32
(76,379)
Payments to suppliers and employees
(45,857) (39,882)
(2,602)
Income tax paid
(1,474) (1,149)
(2,362)
Interest paid
(1,034) (1,326)
14,883
Net cash inflows from operating
activities 5 6,752 7,766
Cash flow from investing
activities
(5,541)
Purchase of property, plant and
equipment
(5,517) (2,150)
(40)
Purchase of software
(32) (77)
-
Purchase of Shares in EA/LA 6 (3,034) -
993
Dividends received from associates
606 633
213
Dividends received from investment
- -
2,079
Proceeds from available-for-sale
financial asset
- -
3
Proceeds from sale of property, plant
and equipment
- -
(2,293)
Net cash outflows for investing
activities (7,977) (1,594)
Cash flow from financing activities
53,460
Term loans drawn down
60,290 35,050
(63,899)
Repayments of term loans
(65,922) (41,334)
(3,457)
Dividends paid to Parent's
shareholders
(1,903) (1,382)
(13,896) Net cash inflows for financing activities (7,535) (7,666)
(1,306)
Net (decrease) in cash held
(8,760) (1,494)
3,094
Opening cash brought forward
1,788 3,094
1,788 Ending cash carried forward (6,972) 1,600
Cash carried forward includes the
following:
1,788
Cash and cash equivalents
292 1,600
-
Bank overdrafts 7 (7,264) -
1,788 (6,972) 1,600
ACURITY HEALTH GROUP NOTES TO THE INTERIM FINANCIAL STATEMENTS
For the six months ended 30 September 2014
1 BASIS OF PREPARATION
Acurity Health Group Limited was incorporated on 7 November 1988 as Wakefield Hospital
Limited. The Company changed its name to Wakefield Health Limited on 1 August 2005, then
changed its name to Acurity Health Group Limited on 6 August 2012.
The Group, comprising Acurity Health Group Limited and its subsidiaries, is a profit-oriented
entity and its consolidated interim financial statements have been prepared in accordance
with Generally Accepted Accounting Practice in New Zealand and comply with NZ IAS 34
Interim Financial Reporting and IAS 34Interim Financial Reporting.
The interim financial statements of the Group have been prepared in accordance with the requirements of the Financial Reporting Act 2013, the Companies Act 1993 and the New Zealand Stock Exchange (NSX). Acurity Health Group Limited is registered under the Companies Act 1993 and will become a FMC Reporting Entity under the Financial Markets Conduct Act 2013 on 1 December 2014.
These interim financial statements should be read in conjunction with the financial statements
and related notes in the Group's Annual Report for the year ended 31 March 2014 and have
been prepared using the same accounting policies and methods of computation as the Annual
Report.
2 ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the previous financial year.
3 REVENUE
Audited Unaudited Unaudited
Year ended Six months Six months
31-Mar-14
30-Sep-14 30-Sep-13
$000 $000 $000
82,839 Provision of private healthcare services 46,371 42,914
13,738 Specialist contract revenue 10,151 6,830
1,482 Other revenue 25 76
98,059 Total Revenue 56,547 49,820
ACURITY HEALTH GROUP
NOTES TO THE INTERIM FINANCIAL STATEMENTS
For the six months ended 30 September 2014
3 REVENUE, contd
Specialist contract revenue
Specialist contract revenue comprises revenue received related to surgeons and anaesthetists
where the Group is contractually the lead provider of the services. This arises on contracts
with ACC, DHBs and the Southern Cross Healthcare Affiliated Provider Scheme. The fees paid
to surgeons and other specialists for the performance of their services are included in
specialist contract expenses.
During the 2014 year, the Group amended the specialist contract revenue to reflect contracts
where the Group is considered as the principal in the transaction rather than as an agent. For
the period ended to 30 September 2013 we have restated the comparative figures to include
an additional $1.79 million of specialist contract revenue and have made a corresponding
increase of $1.79 million to specialist contract expenses for same period. There was no net
impact on the profit and loss and no impact on assets and liabilities recognised.
4 DIVIDENDS
Year ended 31-Mar-14
Six months 30-Sep-14
Six months 30-Sep-13
Cents
Cents
Cents
per
per
per
Share $000 Share $000 Share $000
Recognised amounts
Fully paid ordinary shares
8.0 1,382 Final - prior year 11.0 1,903 8.0 1,382
6.0 1,037 Interim - current year - - - -
6.0 1,038 Special - current year - - - -
The dividends are fully imputed.
ACURITY HEALTH GROUP
NOTES TO THE INTERIM FINANCIAL STATEMENTS
For the six months ended 30 September 2014
5 NOTES TO THE CASH FLOW STATEMENT
Reconciliation of profit for the period with cash flows from operating activities
Audited
Unaudited Unaudited
Year ended
Six months Six months
31-Mar-14
30-Sep-14 30-Sep-13
$000 $000 $000
9,077 Net profit for the period
4,944 4,059
Non-cash items included in net profit
8,172 Depreciation and amortisation expense
4,005 4,159
68
Loss on disposal of property, plant and
equipment
14 49
(3) Doubtful debts expense
8 (11)
(1,096)
Revaluation of derivative financial
instruments
107 (904)
(1,103)
Gain on disposal of investment in available-
for-sale asset
- -
(955) Share of profit in associate
(529) (479)
(68) Deferred tax
(281) (180)
Impact of changes in working capital
items
13 Decrease/(Increase) in inventories
(14) (34)
(387) Increase in receivables
(2,168) (387)
1,269 Increase in payables
106 1,058
109 Increase in taxation
560 436
Items classified as investing activities
(213) Dividends received
- -
14,883
Net cash inflows from operating
activities 6,752 7,766
ACURITY HEALTH GROUP
NOTES TO THE INTERIM FINANCIAL STATEMENTS
For the six months ended 30 September 2014
6 INVESTMENTS IN ASSOCIATES
In September 2014, the Group exercised its option to purchase a further 10% shareholding in
Endoscopy Auckland Limited and Laparoscopy Auckland Limited for total consideration of $3.0
million. Notional goodwill of $2.8 million has been identified as a result of this additional
investment. The remaining option to acquire a further 10% stake in each business is
exercisable in September 2016. The vendor has a matching option to put the shares to the
Group.
For accounting purposes, the additional 10% interest in each company has been treated as
effective from 1 September 2014. Accordingly, the Group's income statement for the six
months ended 30 September 2014 includes five months at 30% and one month at 40% of
equity earnings for each company.
7 BORROWINGS
I
8 COMMITMENTS
Commitments for the purchase of property plant and equipment but not accrued for at 30
September 2014 were $1.72 million (30 September 2013: $0.7 million).
Audited Unaudited Unaudited
Year ended Six
months Six
months
31-Mar-14
30-Sep-14 30-Sep-13
$000 $000 $000
Current
- Bank overdrafts
7,264 -
18,799 Bank borrowings
24 4,974
18,799 7,288 4,974
Non-current
13,110 Bank borrowings 26,253 31,082
13,110 26,253 31,082
ACURITY HEALTH GROUP NOTES TO THE INTERIM FINANCIAL STATEMENTS
For the six months ended 30 September 2014
9 SUBSEQUENT EVENTS
On 14 November 2014 the Board approved a taxable bonus issue of 2 shares for every 11
existing ordinary shares conditional on Connor’s takeover offer being declared unconditional
in all respects. Subject to there being no extension of the closing date or condition date for
Connor’s offer, the bonus issue will have a record date of 5.00pm on 28 November 2014. The
bonus issue does not change the aggregate consideration that will be paid to shareholders
who accept the Connor takeover offer or who have shares compulsorily acquired. Each
shareholder will receive $7.25 for each share held prior to the bonus issue.
10 RELATED PARTY TRANSACTIONS
During the period ended 30 September 2014, Connor Healthcare Limited, of which Austron
Limited (“Austron”) and the Royston Hospital Trust Board (“Royston”) are shareholders, made
a takeover offer and costs related to the takeover totalling $355,000 were charged to Connor
by the Group. The balance outstanding by Connor at 30 September 2014 was $355,000 (2013:
$nil).
No new classes of related party transactions have arisen during the period ended 30
September 2014 and the nature of existing related party relationships are unchanged from
those disclosed in the Group's Annual Report at 31 March 2014 other than those mentioned in
the preceding paragraph.
