Healthcare buys Geneva for Auckland boost

WELLINGTON: Healthcare of New Zealand Holdings paid $51.9 million to buy rival Geneva Healthcare, giving the country’s biggest provider of homecare support a larger share of the Auckland market.

Wellingtonbased Healthcare NZ, which counts Quadrant Private Equity as a 40% shareholder, completed the acquisition on September 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% 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 October 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% to $361.4 million, lagging behind a 21% 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, announced around the same time as Healthcare NZ unveiled its merger bid. Healthcare NZ’s pay equity provision amounted to $453,000 as at October 31.

The Commerce Commission approved the acquisition on September 1. — BusinessDesk

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