Healthcare NZ pays $51.9M for rival Geneva Healthcare, posts drop in profit
By Paul McBeth
April 3 (BusinessDesk) - Healthcare of New Zealand Holdings paid $51.9 million to buy rival Geneva Healthcare, giving the country's biggest provider of homecare support a bigger share of the Auckland market where it was under-represented.
Wellington-based Healthcare NZ, which counts Quadrant Private Equity as a 40 percent shareholder, completed the acquisition on Sept. 29, funding the deal with a $40 million bank loan, financial statements lodged with the Companies Office show. The loan covenants include interest cover and total leverage ratios, and a restriction on shareholder distributions to be capped at 100 percent of net profit.
Such a restriction would have stifled Healthcare NZ's dividends in the 2017 financial year, with the firm paying $10.6 million in the 12 months ended Oct. 31 on a profit of $4.3 million. The bottom line more than halved from $9.4 million, due largely to $5.5 million of impairment charges and losses on the sale of investments, including writedowns to goodwill after losing a major Nelson Marlborough DHB contract and software.
Still, revenue climbed 19 percent to $361.4 million, lagging behind a 21 percent increase in salaries and wages to $292.4 million. Operating cash flow edged up to $21.3 million from $20.1 million.
The community healthcare firm almost doubled its provisioning for holiday pay to $26.4 million from $13.8 million. A number of employers ended up underpaying staff for several years after a 2004 change to the Holidays Act led to a widespread miscalculation of entitlements.
The period also included the government's $2 billion pay equity deal for 55,000 aged and residential care workers, which was announced around the same time as Healthcare NZ unveiled its merger bid. Healthcare NZ's pay equity provision amounted to $453,000 as at Oct. 31.
The Commerce Commission approved the acquisition on Sept. 1, finding the merger wasn't likely to substantially weigh on competition with a big enough market offering funders including Accident Compensation Corp, district health boards and the Ministry of Health enough alternative suppliers.
The country's second-biggest provider is Access Homehealth, owned by NZX-listed Green Cross Health Group, serving 20,900 clients with 3,700 support workers and 166 community nurses, and generating a first-half operating profit of $1.6 million on a 14 percent increase in revenue to $62.9 million.