More annual reports from HLS Therapeutics:
2023 ReportA N N UA L R E P O RT 2 0 2 0
Pathology
Imaging
Day Hospitals
Wellbeing
at scale
H E A L I U S L I M I T E D
A C N 0 6 4 5 3 0 5 1 6
Contents
02
The year
in review
Chair and CEO’s letter
Group performance
Pathology
Imaging
Day Hospitals
05
Finance
Report
Financial statements
Notes to the financial
statements
14
16
24
26
28
73
80
03
Directors & senior
management
Board of Directors
Executive Leadership Team
Risk management
30
32
34
06
Other
information
Shareholder information
Financial calendar
Corporate information
119
IBC
IBC
01 Overview
About Healius
A market leading network
Our strategy
Key milestones
Healius supporting
communities during COVID-19
Medical Centres
04
Directors’
Report
Directors’ Report
Remuneration Report
Corporate Governance
Statement
Auditor’s Independence
Declaration
Independent Auditor’s Report
Directors’ declaration
2
4
6
8
10
12
38
43
66
67
68
72
The greatest
care
...for the
greatest
number
About Healius
Today Healius has three main businesses – Pathology, Imaging and
Day Hospitals/IVF – and Healius Primary Care (which includes Healius’
GP and Dental businesses and Health & Co), which is held for sale.
Through its unique footprint of centres and 12,500 employees, Healius
provides diagnostic services to consumers and their referring practitioners,
as well as enabling a range of independent healthcare professionals to
deliver patient care in partnership with Healius’ nurses and support staff.
Pathology
Imaging
Healius’ Pathology division, Specialist Diagnostic
Services or SDS, is one of Australia’s leading
providers of private medical laboratory and
pathology services.
Healius’ Imaging division, through its brand
Healthcare Imaging Services or HIS, operates
a network of sites across the country, in partnership
with around 120 independent radiologists.
SDS operates around 100 medical laboratories and over
2,100 patient collection centres across metropolitan,
regional and remote Australia. SDS employs around
200 specialist pathologists and over 6,000 scientists,
technicians, collectors and team members. Each year,
it provides one in every three pathology services in
Australia, extending from exclusively servicing some
of Australia’s largest and most complex private and
public hospitals to small and remote Australian
Aboriginal communities.
SDS provides leading medical laboratory and pathology
services covering key diagnostic activities of anatomical
pathology (histopathology and cytology), clinical pathology
(biochemistry, haematology, immunology and microbiology),
genomic diagnostics and veterinary pathology.
It offers these services through a variety of state-based and
specialty brands. These include QML, Laverty, Dorevitch and
Western Diagnostic Pathology which operate in Queensland,
NSW, Victoria and South Australia, Western Australia and
Northern Territory respectively. Key specialty brands include
Genomic Diagnostics, Australia’s largest non-government
diagnostic genetic sequencing facility.
2
HIS manages over 140 sites in total, comprised of
stand-alone community imaging centres, and imaging
facilities located within Healius Primary Care’s medical
centres and private and public hospitals.
HIS provides professional and support services to radiologists
enabling them to focus on the provision of quality care for their
patients. HIS employs a highly-trained team of radiographers,
sonographers, nuclear medicine technologists, nurses, centre
support staff and corporate staff. A full suite of modalities
and services are offered which include: X-ray, ultrasound,
computerised tomography (CT), mammography, magnetic
resonance imaging (MRI), nuclear medicine, positron emission
tomography (PET) and interventional radiology (including
treatment by spinal and joint injections).
The radiologists undertake a range of imaging services
including specialist women’s health, cardiac, neurology,
vascular, musculoskeletal and dental imaging. Around three
million radiography examinations are conducted in Healius’
sites each year.
With the announced sale of Healius Primary Care
in June 2020, we will transition out of the medical
centres and dental businesses towards the end
of 2020. Moving forward Healius will focus on its
specialist diagnostic businesses – pathology and
imaging – along with day hospitals and IVF.
Day Hospitals
Medical Centres
The Day Hospitals business comprises 15 day
hospitals, 11 of these are stand alone and four
Healius Day Hospitals are located within medical
centres, all operating under the Montserrat
brand. Healius operates four IVF clinics.
Montserrat
Driven by improving surgical technology and superior
patient outcomes, the healthcare industry is experiencing
a shift away from higher cost overnight procedures
towards day hospital procedures, with the number
of private day hospital admissions doubling in the last
10 years. This trend is likely to accelerate. Montserrat
is a unique and high quality business with well-run
facilities that are strategically located and accessible
to both specialists and patients. The business provides
a platform to diversify funding in non-Medicare revenues.
With its combination of day hospitals and haematology/
oncology clinics, it also delivers benefits and integration
opportunities to the pathology and IVF businesses.
Adora Fertility
Healius’ IVF business model, which brings together a team
of IVF specialists, GPs, nurses and scientists, has been
disrupting the IVF sector since 2014. The business has four
major clinics around the country and is now expanding
its footprint to include satellite clinics that enable wider
access to high quality and affordable fertility services
for couples residing outside major treatment centres.
Healius Primary Care (held for sale)
Healius partners with independent general practitioners
(GPs), dentists, specialists and other healthcare professionals
(HCPs) who address both acute and chronic conditions in their
patients. Healius provides a range of professional and support
services to HCPs enabling them to focus on the provision
of quality care for their patients. Healius has 69 Medical
Centres 1 across Australia which are generally open 365 days
a year, 7am to 10pm, and offer appointments and walk-in
services. The majority of services provided by the independent
HCPs in these centres are bulk billed.
Healius’ large-scale, multi-disciplinary Medical Centres are
equipped with treatment rooms, nursing support, pathology
and radiology. Many centres have a range of specialist
services including: Dental, Physiotherapy, Occupational Health,
Allied Health Services, IVF, Eye Specialists, Skin Specialists,
Skin Cancer checks and consultant Specialist Doctors.
Health & Co is the brand under which Healius has built
a network of 13 established GP practices. Health & Co partners
with independent doctors who want to continue to run their
practices with the benefits of its support, helping these owners
to further build their businesses through smarter services
and network advantages.
Primary Dental is Healius’ dental business and is one of the top
four dental operators in the country. The dental centres are
situated within Healius Medical Centres in 62 locations across
the country and offer accessible and affordable dental services.
1
Four small scale medical centres are in the process of being closed.
3
Healius – Annual Report 2020OVERVIEW A market leading
network
2,234
Pathology sites
2 ,1 37 ACC1
9 7 L A B O R AT O R I E S
146
Imaging sites
31 H OS PITALS
61 CO M M U N ITY CENT R ES
54 M ED I CAL CENT R ES
15
Day Hospitals sites
1 5 M O NTS ER RAT
4 I V F C L I N I C S
Medical Centres 2
Approved Collection Centres.
69 Medical Centres, 13 Health & Co and 62 Dental businesses held for sale. Four other small scale medical centres have been retained
by Healius and are in the process of being closed.
1
2
4
WA
213
S I T ES
QLD
653
S I T ES
NSW
778
S I T ES
VIC
623
S I T ES
202 Pathology
614 Pathology
712 Pathology
587 Pathology
6
5
Day Hospitals
6
Day Hospitals
2
Day Hospitals
1
Day Hospital
Imaging
33
Imaging
64
Imaging
35
Imaging
Australia Wide
Coverage
2,399 TOTA L
S I T ES
NT
17
S I T ES
TAS
28
S I T ES
17
Pathology
28 Pathology
SA
47
S I T ES
41
6
Pathology
Imaging
As at July 2020.
ACT
36
S I T ES
33 Pathology
3
Imaging
5
Healius – Annual Report 2020OVERVIEW Our strategy
Through accessible, high-quality,
consumer-centric healthcare
services, Healius is committed to
delivering excellence in healthcare
in Australia and creating value for
consumers, employees, investors
and the many communities in
which it operates.
6
6
Streamlined portfolio
From FY 2021 onwards, with the completion of the sale
of Healius Primary Care, Healius will focus on being
a specialist diagnostics company with a growing day
hospitals business leveraging its established market
positions and scalable businesses with a clear pathway
to enhanced shareholder value.
Healius will have balance sheet flexibility, low leverage
and a high level of liquidity together with significantly
reduced requirements for capital expenditure.
Being the second and third largest player in Pathology
and Imaging respectively in Australia, Healius will be
able to build on its strong brands, clinical leadership
and established network with targeted investment for
inorganic growth. It will look to invest in Day Hospitals,
a sector with economic, technological and regulatory
tailwinds, where short-stay multi-clinician facilities
offer a low-cost and clinically-equivalent alternative
to traditional overnight hospital care.
Healius has already undertaken an organisational review
which has seen the management structure simplified,
the divisions more autonomous and the group functions
more efficient. It will complete the right-sizing of its support
function cost base to reflect its smaller and more streamlined
portfolio, with targeted savings of $15 million in overheads
by the end of FY 2022.
Strategy
Sustainable Improvement
Program
The Sustainable Improvement Program (SIP) was introduced
in late FY 2019 to systematically reduce costs and improve
efficiencies across the Group. To-date it has served to reduce
the cost inflation inherent in the businesses.
From FY 2021, the SIP program aims to deliver real margin
expansion, with a focus on addressing more complex but
higher value structural improvements. Initiatives are focused
in four major categories:
• Digitisation and automation – optimise revenue,
via improved consumer experience and development
of new markets, and drive cost savings, via standardisation
and automation of processes.
• Network optimisation – rationalise network footprints in
Pathology and Imaging including laboratories, collection
centres, fleet of couriers, warehouses and imaging facilities.
• Workforce management – develop a better balance
of workloads in the frontline operations and a dynamic
rostering capability to more efficiently match supply
and demand with the workforce.
Sourcing – reduce costs of external spend, currently
$750 million, by direct sourcing or re-tendering.
•
Group
Pathology
Imaging
Day Hospitals
Sale of HPC 1 to deliver
portfolio simplification,
strengthen Balance Sheet
and remove a capital
intensive business
SIP 2 savings to-date
offsetting growth in cost base.
FY 2021 targeting margin
expansion from more complex
but higher value structural
improvements
Utilise Balance Sheet for
selective and targeted
inorganic growth in Day
Hospitals and Imaging
Revenue growth through
commercial opportunities
in COVID-19 testing
and specialties
Revenue growth
opportunities in hospital
channel specialties and
selective M&A
Network optimisation
of ACC footprint based
on value not volume
Network optimisation,
particularly NSW
community sites
Digitisation of
customer journey
Digitisation of
customer journey
Updated LIS 3 pathway
targeting lower cost and
risk and better alignment
of benefits
Workforce planning
and rostering
iCAR 4 effective completion
delivering efficiencies and
improved service
Workforce planning
and rostering
Montserrat – continued
ramp-up of new sites and
selective inorganic growth
from M&A and greenfields
Healius Day Hospitals
– margin improvement
initiatives to turnaround
and deliver value
Adora Fertility – charging
for selective services and
making the customer
journey accessible online
to deliver profitable growth
1
2
3
4
Healius Primary Care.
Sustainable Improvement Program.
Laboratory Information System.
Imaging Core Application Refresh.
7
Healius – Annual Report 2020OVERVIEW Key
milestones
AUG 2019
John McKechnie appointed
as Chief Executive Pathology
SEP 2019
Laverty Pathology, NSW
opens Serum Work Area
JUL 2019
Adora Fertility opens new
flagship clinic, NSW
8
AUG 2019
Maxine Jaquet appointed
as Chief Financial Officer
NOV 2019
Ben Korst appointed as
Chief Executive Day Hospitals
JUN 2020
Sale of Healius Primary Care
business announced
New state-of-the-art imaging
site opens at St George
Specialist Centre, Kogarah, NSW
NOV 2019
Tax case for FY 2003 to FY 2007
decided in favour of Healius
(subject to appeal)
APR 2020
COVID-19 testing
collaboration with Minderoo
Foundation announced
9
Healius – Annual Report 2020OVERVIEW Healius
supporting communities
during COVID-19
With a priority to protect the health and safety
of its people and the communities around
Australia, Healius set up dedicated COVID-19
collection centres, diagnostic testing capability,
GP isolation rooms and telehealth services.
As the global COVID-19 pandemic continued to develop in
Australia, this brought a level of concern of the virus spreading
through enclosed community spaces, which included waiting
rooms in Healius’ medical centres and collection centres.
Dedicated COVID-19 testing centres were rolled out across
the Healius network, followed by pop-up drive-through testing
clinics in convenient locations, within cities and regional
towns by our state-based pathology brands: Laverty
in NSW and ACT, QML Pathology in Queensland, Dorevitch
Pathology in Victoria and Western Diagnostic Pathology
in Western Australia.
These clinics were set up at short notice to provide fast and
convenient testing of patients, with new clinics continuing to
be rolled-out as required, supporting and servicing the health
and safety of local communities. To watch the drive-through
process in action, you can view it using the following link:
https://vimeo.com/417505970/27c11b437a.
At the same time, our teams within the medical centres were
also able to adapt GP consultations via a telehealth service.
This allowed patients who may have been suffering from
COVID-19 symptoms, or for chronic patients who require regular
monitoring and may have been nervous about visiting their GP
for face-to-face consultations, to undertake their consultation
remotely. It also allowed the vulnerable GPs within the Healius
network to provide patient consultations in a safe environment.
In response to the exponential growth in testing volumes
from May onwards, Healius’ capacity for testing COVID-19
has been increased including with equipment brought into
Australia by the Minderoo Foundation. This was foremost
in Victoria where Healius’ Dorevitch Pathology operation
partnered with the Department of Health and Human Services
(DHHS) to provide testing to many of the public hospitals in
metropolitan and regional Victoria, as well as private hospitals
and direct to GP-referred patients. To service the needs of
the DHHS and Australian community, Dorevitch Pathology
increased COVID-19 testing capacity with laboratories
in Victoria operating 24 hours per day, modifying its
laboratories to enable more COVID-19 testing equipment
to be installed and prioritising cases according to clinical
needs to ensure optimal turnaround times, while maintaining
its capacity to manage general pathology testing. As a result,
over 50% of Dorevitch’s COVID-19 test results were reported
within 24 hours in Victoria in July 2020.
Laverty Pathology, NSW and QML Pathology, QLD have also
increased laboratory testing capacity through the installation
of new equipment as well as employing additional scientists,
laboratory technicians and collectors to service the increased
community testing volumes.
As the economy continues to open, our pathology business
will be equipped to handle more testing for businesses,
government and airlines when travel reopens.
10
Our IVF customers
ADORA FERTILITY
Our Adora Fertility clinics were closed during the four-week government-imposed shut-down of IVF centres due to COVID-19.
During this period our Adora team rolled out a series of virtual webinar events as many patients were anxious about their IVF journey
being put on hold. These webinars allowed existing and potential IVF patients to remain connected to their clinic and IVF team from
the comfort and safety of their homes. The series of events were hosted by our experienced Fertility Specialists and National Medical
Director, who spoke on a range of fertility topics and answered questions for around 200 potential new patients on the following:
Initial
Investigations
and Treatment
Options
PCOS &
Ovulation
Assisted
Reproductive
Treatment
Elective Egg
Freezing
From May to July, IVF has bounced back with Adora seeing strong volumes and a high level of new patient enquiries.
11
Healius – Annual Report 2020OVERVIEW Medical Centres
The Medical Centres division was the foundation upon which
Healius was built and has grown to become a market leader
with a unique and national footprint of large-scale centres.
1985
1990
2002
2003
2008
2010
2017
Dr Edmund Bateman
opened Warringah
Mall 24 Hour Medical
Centre in Brookvale,
NSW offering
a diversified range
of services including
dental, specialists,
occupational
health and
integrated care.
First regional
medical centre
opens in
Dubbo, NSW.
Primary Health Care
acquired Symbion
Group including
Medical Centres.
Mixed billing
network Health &
Co commenced,
first new medical
centre in several
years opened.
Second Medical Centre
opened – Chatswood Medical
and Dental Centre, NSW.
First medical centre
outside NSW opens
in Elizabeth, SA.
54th large scale
medical centre opens.
Medical Centres
Large scale centres
A mix of appointment and walk-in
consultations offering a wide range
of on-site services that provide quality,
accessible and affordable care with
longer opening times.
Bulk-billing
Services typically bulk-billed and high
patient volumes with excess demand
provide general practitioners with
attractive earnings.
Catchment areas
Portfolio located in large and
growing catchment areas with
strong competitive positions.
12
Primary Dental
The Dental business is one of the top four dental operations
in the country, with 62 dental locations. Healius Dental is
focused on quality and affordable dental services.
Key features:
Co-location
Co-located with Medical Centres
with high patient volumes and
efficient delivery of services.
High quality care
Comprehensive service offering
by dentists with a focus on
providing high quality dental care.
Training
Strong training programs for dentists
and staff.
2018
2019
2020
Medical Centres
rebrand to Healius.
Introduced online
appointments and
several new services
including skin and
chronic disease
management, and
refreshed a number of
medical centres as part
of Project Leapfrog.
Four new medical
centres opened.
Healius offers telehealth
GP consultations during
COVID-19 pandemic.
Health & Co
13 CENTRES
~10% FY 2020
REVENUE
~$2M
AVERAGE
REVENUE PER
CENTRE
Smaller scale centres
With mainly appointment-based model
and focus on general practitioner
delivered services, offering longer
patient consultation times and a mix
of higher value services per patient.
Mixed billing centres
Allowing general practitioners to build
patient following.
SALE PROCESS
In February 2020, Healius announced a sale process
for its Medical Centres and Dental businesses in line
with its strategy to simplify the portfolio and focus
on its diagnostic services and day hospitals.
The sale vehicle was called Healius Primary Care
and included 69 Healius Medical Centres, 13 Health
& Co clinics and 62 Primary Dental centres, 61 of which
are located within the Healius Medical Centres, with
four other small-scale centres retained by Healius
which are in the process of being closed.
In June 2020, Healius announced the signing of a sale
agreement with certain funds managed by BGH Capital
for $500 million enterprise value which enabled the
realisation of value for the Medical Centres not fully
reflected in the historical share price.
Healius will continue to operate its existing pathology
collection centres and imaging clinics located
within the medical centres under long term leases
at market rents.
In announcing the sale, Dr Malcolm Parmenter,
Healius’ CEO said: “This is a seminal moment in the
history of Healius, which was founded as a medical
centres business by Dr Edmund Bateman in 1985
and grew to over 86 medical centres, including the
Health & Co clinics.
“Over the past few years we have transformed the
operations of the business, with new and extended
patient offerings, more flexible doctor contracts and
updated facilities and systems. I am confident that,
backed by the financial strength of BGH Capital,
the business will continue to successfully serve the
Australian community in the provision of quality,
accessible and affordable frontline healthcare.”
13
Healius – Annual Report 2020OVERVIEW Chair and CEO’s letter
Dear Shareholder,
We are pleased to present you with Healius’ 2020 Annual
Report. Healius aspires to be a purpose-led organisation
caring for the health and wellbeing of Australians at every
stage of life. Never has this purpose been so apparent than
it has this year. From the day-to-day care that Healius’
people deliver as they undertake their mission “to seek and
sustain life enhancing healthcare”, through to the key role
we play in responding to the challenges of the COVID-19
pandemic, Healius really is here to support the health
of Australia.
It has also been a year of intense corporate activity.
In February 2020, we assessed and rejected an acquisition
proposal by respected private equity firm Partners Group,
on the basis that the offer did not adequately value our
market leading businesses.
At the end of the year we also announced the
sale of our Healius Primary Care business, which
includes our medical centres and dental businesses,
a seminal moment in our history but one core to the
strategy of simplifying our portfolio.
COVID-19 impact
As a frontline healthcare provider, our overriding focus
was, and continues to be, to play a key role in combating
COVID-19. We made the decision early that preserving
our frontline healthcare capacity and capability should
be our prime focus. We responded quickly through setting
up pathology drive-through testing centres, reworking
our laboratories to expand COVID-19 testing capabilities,
and creating GP isolation rooms and telehealth services,
and most importantly, providing a safe environment for
our people and patients.
14
We are grateful for the terrific response from our people.
In addition to their huge effort in serving the community,
their selfless participation in the various labour management
initiatives kept our costs contained when revenue was reduced
so swiftly in the early months of the pandemic. The Board and
senior executives fully participated through pay reductions.
We are also grateful to our landlords who provided rental
concessions and we received in the order of $7 million
in delays or waivers.
The Federal Government provided $11 million of financial
support to maintain our operating capacity and implement the
Minderoo sourced testing equipment, increasing our capacity.
This financial support offset a portion of our revenue decline
from April when matters were at their worst. This enabled us
to keep our remote and rural services operating and maintain
our permanent staffing levels. We are very appreciative
of this support and the strong working relationships we have
developed with the public health authorities both Federally
and in the States.
Without the collective support of our stakeholders, we would
have necessarily undertaken further cost cutting measures
including laying off staff, reducing services and inevitably
reducing our capacity. As it was, we kept all our permanent staff
on our payroll, including in Primary Dental and Adora IVF which
were both required to cease operations for a period of time.
2020 in review
Looking at the financials, Healius delivered an Underlying
Net Profit After Tax (NPAT) of $55.4 million for continuing
operations for the year ended 30 June 2020 (FY 2020),
compared to $70.3 million for the prior comparable period.
Our businesses were tracking in line with guidance until
mid-March 2020, with strong growth in revenue and
earnings in Pathology, Imaging and Montserrat Day Hospitals.
When the spread of COVID-19 accelerated in Australia,
we saw a rapid and significant decline in volumes
in non-critical and routine services in line with community
concerns around visiting healthcare centres. At their worst,
volumes were down over 30% and 40% in Pathology and
Imaging respectively on prior comparable periods.
With the reopening of the economy in May and June,
Healius saw an improvement in volumes, however with
differing recovery rates by business and by geography.
Pathology, our largest business, recovered strongly, delivering
revenue growth of 3% to $1.2 billion and Underlying Earnings
Before Interest and Tax (EBIT) of $115.1 million, a 4% increase.
In Imaging, revenue was down 4% to $376.7 million
and underlying EBIT down significantly to $17.2 million,
impacted by COVID-19 lock down measures and
restrictions on elective surgery.
The Day Hospitals business is a tale of two parts, with
Montserrat profitable, achieving EBIT of $3.1 million, while
Healius Day Hospitals and Adora IVF were loss-making,
impacted by relevant clinical restrictions in March and
April. We are focused on turning Healius Day Hospitals
and Adora IVF around to deliver profits in FY 2021.
The underlying results are used as our prime measure of
operating performance. Statutory NPAT for the year was a loss
of $70.5 million compared to a profit of $55.3 million in FY 2019.
The FY 2020 Statutory result included $142.5 million loss relating
to the sale of the Healius Primary Care business, primarily driven
by a non-cash impairment of goodwill.
At the end of FY 2020, we delivered a strong balance sheet
with ratios comfortably within bank covenants, increased
liquidity and a successful refinancing of our tranche 1 debt
facility. Through cash conservation measures during COVID-19,
operating cash flow was above the prior year and capital
expenditure was carefully managed.
Sale of Medical Centre business
In June 2020, we announced that Healius had entered into
a binding agreement to sell the Healius Primary Care business
to funds managed by BGH Capital for an enterprise value
of $500 million. We expect the receipt of approximately
$470 million in cash proceeds in FY 2021, after buyer
transaction and separation costs, which should deliver
significant balance sheet flexibility.
Despite the challenging environment from the COVID-19
pandemic, the successful sale of Healius Primary Care is
testament to the quality of this business and its people, enabling
the realisation of value which we believe was not fully reflected
in our share price. At the same time the sale has simplified our
business portfolio to the strong foundations of our diagnostic
businesses and the growth opportunities in day hospitals.
Our people
Our success depends on putting our people front and centre,
with the right tools and support to deliver the best possible
patient outcomes. This cultural focus on our organisational
health will continue as our business evolves over the coming years.
In November 2019, Healius announced changes to its senior
executives. Ben Korst was appointed Chief Executive Day
Hospitals, managing Montserrat, Healius Day Hospitals and
Adora Fertility. Ben has been the CEO of Montserrat since 2010.
Additionally, Errol Katz retired after serving nine years on our
Board as Non-executive Director.
Sustainable improvement program
At the end of FY 2019, we introduced the Sustainable
Improvement Program to systematically reduce costs and
improve efficiencies across Healius, with a target of $70 million
in savings, representing 4–5% of the cost base. During FY 2020,
Healius delivered in-year savings of $37 million across more
than 150 initiatives in labour, property, and consumables with
an annualised run rate of $54 million. These savings were key
to ameliorating cost inflation during the year.
In FY 2021, the program aims to deliver margin expansion,
with a focus on addressing more complex but higher value
structural improvements including digitisation and automation,
network optimisation, workforce management and more
competitive external contracting. In addition, with many of our
strategic programs now complete, adjustments between our
reported and underlying results should be significantly reduced
with the Laboratory Information Systems (LIS) Platforms
the only non-underlying project going forward.
Going forward
We remain committed to our crucial frontline role in the fight
against COVID-19 and our overriding priority is the health and
safety of our people, healthcare professionals, our patients
and the Australian community.
Following the reopening of the economy in May, our Pathology
division has demonstrated its resilience with increasing
COVID-19 testing more than offsetting any softness in
non-COVID-19 testing. This has continued into July and August
with significantly elevated levels of testing in the community,
up to 16,000 tests per day on occasion, in response to State
based outbreaks. At the time of writing, we have completed
more than 1 million COVID-19 tests, more than half since
30 June 2020, which we believe are an indispensable part
of the country’s fight against COVID-19.
We also have a number of commercial contracts for
COVID-19 screening including for the Federal Government
and Opposition, their staff and families and with the AFL.
We expect these commercial contracts to continue to
increase as organisations endeavour to operate in a safe
environment when they reopen.
However, the Stage 4 lock-down in Victoria, which
commenced in early August 2020, has negatively impacted
business-as-usual testing in the Pathology and Imaging
divisions, in particular in the Imaging division which does
not have a COVID-19-testing revenue ‘hedge’.
Looking to the future, Healius is in a strong position as we
deliver critical and largely non-discretionary health services
at scale. With the sale of Healius Primary Care, Healius will
have a streamlined portfolio and a sound balance sheet.
As the second and third largest player respectively in
Pathology and Imaging in Australia, we will continue to build
on our strong brands, scalable platforms, clinical leadership
and established positions. We will look to invest further in Day
Hospitals, a sector with economic, technological and regulatory
tailwinds as alternative to traditional overnight hospital care.
We would like to thank the Healius management team,
healthcare professionals, employees and our fellow Directors
for their continued passion, commitment and sheer hard work
and sacrifices over the last 12 months. We are extremely proud
of the efforts and dedication of our people during the demands
of the COVID-19 pandemic. We would also like to thank you,
as shareholders, for your continued support and encouragement.
ROBERT HUBBARD
CHAIR
MALCOLM PARMENTER
CEO
15
Healius – Annual Report 2020THE YEAR IN REVIEW Group performance
Group performance
Revenue
EBIT
NPAT (continuing operations)
NPAT (incl. adjustment for discontinued operations)
UNDERLYING 1
REPORTED
30 JUNE 2020
$M
30 JUNE 2019
$M
1,600.4
102.7
55.4
1,565.4
125.9
70.3
30 JUNE 2020
$M
1,597.4
76.0
72.0
(70.5)
30 JUNE 2019
$M
1,566.4
107.6
57.2
55.3
Underlying results
During the year ended 30 June 2020, Healius was tracking ahead of the prior comparative period and in line with guidance
until mid-March, with strong growth in revenue and EBIT in Pathology, Imaging and Montserrat Day Hospitals.
In mid-March, the spread of COVID-19 accelerated in Australia and the Federal Government instigated a national
lock-down. As a frontline healthcare provider, Healius focused on helping to combat the virus with dedicated COVID-19
pathology drive-throughs and collection centres, increased COVID-19 testing capabilities at its pathology laboratories,
and GP isolation rooms and telehealth services.
All comments in this Review relate to underlying results for continuing operations unless otherwise noted. Underlying results for continuing
operations for the year ended 30 June 2020 exclude the results of Healius Primary Care, the impact of the loss on sale of Healius Primary Care,
items considered to be outside the underlying activities of the Group and the impact of AASB 16. For a reconciliation and analysis, refer section
below titled “Group reported results”.
1
16
The Group experienced an increase in its COVID-19 testing and telehealth services but a sharp and rapid decline in volumes
in non-critical and routine services in line with community concerns around visiting healthcare centres and the cessation of all
non-urgent elective surgery. At their worst, volumes were down over 30% and 40% in Pathology and Imaging respectively
compared to the prior comparable period. Additional costs for personal protective equipment and screening in GP clinics
were incurred to provide a safe environment for patients and staff.
During mid-March to April with the extent of the volume declines and the timing of any recovery unknown, management
implemented measures to cut its operating costs, notwithstanding its largely fixed cost base, including reducing opening hours
and temporarily closing pathology metropolitan collection centres and imaging sites. While keeping all its permanent workforce
employed, it undertook labour management with the assistance of employees and unions. It also negotiated approximately
$7 million in short-term rental concessions across the Group.
The Pathology division is eligible for government assistance, currently estimated at $11 million in connection with its revenue
declines in April, in return for the ongoing delivery of its services including in remote and regional areas, maintaining permanent
staffing levels, and reducing senior management and Board salaries and fees. Montserrat and Healius Day Hospitals will receive
a combined $1.7 million in JobKeeper and viability payments. Without this support, further reductions in services and other
measures would have been undertaken.
From May onwards, the economy started progressively opening up and Healius saw a good recovery in its volumes although with
differing recovery rates by division and by state. This dynamic situation has continued into FY 2021 and the Group remains focused
on the proactive management of the business in response to localised COVID-19 outbreaks and state government initiatives.
Overall in FY 2020, the Group recorded a 2% growth in revenue, notwithstanding the significant impact of COVID-19.
Underlying EBIT was down 18%, underpinned by a strong trading performance in Pathology and Montserrat in combination
with cost-saving initiatives. This partially offset the significant COVID-19-related decreases in Imaging.
Divisional results
The underlying EBIT performance of each operating division is set out below. An analysis of the performance and the strategies
which underpin each business is contained in the following divisional sections.
FY 2020
$M
Revenue
EBITDA
Depreciation
Amortisation
EBIT
FY 2019
$M
Revenue
EBITDA
Depreciation
Amortisation
EBIT
PATHOLOGY
IMAGING
DAY HOSPITALS
CORPORATE
1,160.1
142.3
(20.9)
(6.3)
115.1
376.7
31.8
(12.1)
(2.5)
17.2
65.4
(1.7)
(4.9)
(0.2)
(6.8)
0.1
(15.3)
(4.3)
(3.3)
(22.9)
PATHOLOGY 2
IMAGING 2
DAY HOSPITALS
CORPORATE 2
1,128.3
136.1
(19.8)
(5.3)
111.0
391.3
53.8
(13.4)
(2.0)
38.4
46.7
(0.2)
(2.9)
(0.3)
(3.3)
0.3
(15.8)
(3.1)
(1.3)
(20.2)
GROUP 1
1,600.4
157.0
(42.3)
(12.0)
102.7
GROUP 1
1,565.4
174.0
(39.2)
(8.9)
125.9
1
2
$1.9 million of intercompany revenue/expenses have been eliminated at the Group level (FY 2019 $1.2 million).
FY 2019 includes minor restatement of long service leave balances: Pathology $0.1 million, Imaging $0.3 million, Corporate $0.1 million.
17
Healius – Annual Report 2020THE YEAR IN REVIEW Group performance
Dividends
On 26 February 2020, Healius’ Board determined that an interim dividend of 2.6 cents per share, fully franked, would be payable.
On 14 April 2020, due to the negative impacts of COVID-19 on the business at that time, the Board determined to defer payment
of this dividend for six months. This dividend is expected to be paid as rescheduled on 15 October 2020.
Notwithstanding its relatively strong FY 2020 result, the Board does not consider it appropriate to pay a final dividend for FY 2020
because it has received the benefit of assistance and, in some cases, personal sacrifices from its stakeholders including its
people, landlords and Government throughout a challenging second half of FY 2020.
Given the strong outlook for FY 2021, the Board expects regular dividends to re-commence in the first half of 2021. Moreover,
following the completion of the sale of Healius Primary Care, the Board intends to review its capital structure including
consideration of an out-of-cycle dividend and other capital uses. The Board hopes to provide an update on this capital
management review at its Annual General Meeting (AGM) on 22 October 2020.
Sale of Healius Primary Care
Together with its 1H 20 results, Healius announced a sale process for its Medical Centres and Dental businesses including
Health & Co, called Healius Primary Care, in line with its strategy to simplify the portfolio and focus on its diagnostic services
and day hospitals.
In June 2020, Healius announced the signing of a sale agreement signed with certain funds managed by BGH Capital for
$500 million enterprise value, enabling the realisation of value not fully reflected in the historical share price. The sale proceeds
of approximately $470 million 1 will significantly strengthen the Group’s balance sheet and support growth initiatives. Completion
is expected in 1H 21.
Group results for continuing operations in FY 2020 exclude the trading of Healius Primary Care since this business is deemed
to be ‘held for sale’ under the accounting standards for this period. The comparable period has also been adjusted. Reported
results for FY 2020 include an adjustment for a loss from discontinued operations which primarily represents a non-cash write-off
of goodwill (refer section titled ‘Healius Primary Care (Discontinued operations)’).
Sustainable Improvement Program (‘SIP’)
The Sustainable Improvement Program (SIP) was introduced at the end of FY 2019 to systematically reduce costs and improve
efficiencies across the Group. Pathology and Imaging labour, Pathology property and Pathology consumables were identified
as the largest addressable opportunities with a target of $70 million in savings announced, representing 4–5% of the cost base.
In FY 2020, over 150 initiatives commenced, delivering savings in labour, property, consumables and IT. Across the Group, in year
savings of $37 million 2 were achieved, notwithstanding the inevitable shifting of focus to COVID-19-related challenges from
mid-March onwards. The annualised run rate of $54 million 2 in savings makes up a good portion of the program’s total target
of $70 million. These savings have served to partially offset cost inflation across the Group.
From FY 2021, the program aims to deliver margin expansion, with a focus on addressing more complex but higher value structural
improvements. Initiatives are focused in four major categories:
• Digitisation and automation – optimise revenue, via improved consumer experience and development of new markets, and drive
cost savings, via standardisation and automation of processes.
• Network optimisation – rationalise network footprints in Pathology and Imaging including laboratories, collection centres,
fleet of couriers, warehouses and imaging facilities,
• Workforce management – develop a better balance of workloads in the frontline operations and a more dynamic rostering
capability to better match supply and demand with the workforce, and
Sourcing – reduce costs of external spend, currently at $750 million, by direct sourcing or re-tendering.
•
Healius’ corporate costs include centralised support services for the Group where functions benefit from scale, and core corporate
costs including strategy, capital and stakeholder management, Board fees and executive incentives. Approximately $90 million
is managed at a Group level of which approximately $70 million is allocated to the operations in the form of an overhead charge
based on headcount, footprint, and usage. Divisional overhead allocations were reset following the sale of Healius Primary Care
at appropriate go-forward rates.
Healius has already undertaken an organisational review which has seen the management structure simplified, the divisions more
autonomous and the Group functions more efficient. It will complete the right-sizing of its support function cost base to reflect its
smaller and more streamlined portfolio, with targeted savings of $15 million in overheads by the end of FY 2022.
1
Up to $75 million may be deferred up to 18 months, payable once the dental business returns to pre-COVID-19 trading levels. Also subject
to movements in working capital and capital expenditure and sale costs over the period until completion.
2 After implementation costs of $13 million.
18
Streamlined portfolio
With the completion of the sale of Healius Primary Care, Healius will be a specialist diagnostics company with a growing day
hospitals business. It will have balance sheet flexibility, low leverage and a high level of liquidity together with significantly
reduced requirements for capital expenditure.
Being the second and third largest player in Pathology and Imaging respectively in Australia, Healius will build on its strong brands,
clinical leadership and established positions with targeted investment for growth. Over time, it will look to invest in Day Hospitals,
a sector with economic, technological and regulatory tailwinds as an alternative to traditional overnight hospital care.
Balance sheet management
At the end of FY 2020, Healius delivered a strong balance sheet with ratios comfortably within bank covenants. Through cash
conservation measures during COVID-19, operating cash flow was above the prior year and capital expenditure was carefully managed.
Healius successfully refinanced the first tranche of its syndicated bank debt facility of $500 million which was due to mature
in January 2021. The facility has been increased by $70 million to $570 million and its maturity extended to January 2024, with
covenants remaining unchanged. The second tranche of $525 million is due to expire in January 2023. As a result of the refinance,
Healius had $424 million of liquidity at 30 June 2020 and a good buffer to sustain any further disruptions from COVID-19.
The completion of the sale of Healius Primary Care in FY 2021 will deliver cash proceeds in the order of $470 million 1 which will give
the Group significant flexibility for capital management and value-generating investments.
In addition, a substantial portion of capital expenditure will cease following the sale of Healius Primary Care in FY 2021 with
35% of FY 2020 capital expenditure totalling $122 million relating to Healius Primary Care.
Cash flow
Group cash flow for FY 2020 was as follows:
Operating cash flow
Maintenance capital
Growth capital
Payment of lease liabilities
Cash flow after capital investment and lease liabilities
Proceeds from issuing shares
Debt funding/(reduction)
Dividends
Capital Recycling
Net increase in cash held
Opening cash
FX
Closing cash
30 JUNE 2020
$M
30 JUNE 2019
$M
339.2
(55.9)
(66.0)
(186.4)
30.9
–
15.0
(21.2)
–
24.7
119.7
0.1
144.5
127.6
(51.6)
(176.4)
–
(100.4)
244.0
(66.0)
(52.3)
10.5
35.8
84.0
(0.1)
119.7
The Group’s operating cash flow before AASB 16 was $153.4 million and exceeded FY 2019 notwithstanding the impact of COVID-19,
reflecting management’s cash conservation during 2H 20, including network rationalisation, rental negotiations, and labour management.
1
Up to $75 million may be deferred up to 18 months, payable once the dental business returns to pre-COVID-19 trading levels. Also subject
to movements in working capital and capital expenditure and sale costs over the period until completion.
19
Healius – Annual Report 2020THE YEAR IN REVIEW Group performance
Capital expenditure
Operating cash flow was used to fund $55.9 million in maintenance capital (FY 2019 $51.6 million) and $66.0 million in growth capital
(FY 2019 $176.4 million including $68.3 million for the acquisition of Montserrat).
Maintenance capital expenditure for Pathology, Imaging and Day Hospitals totalled $34.3 million in FY 2020 and for Healius
Primary Care totalled $21.6 million primarily on upfront payments to healthcare professionals. The latter expenditure will no longer
be required following the sale of Healius Primary Care in FY 2021.
Growth capital expenditure for Pathology, Imaging and Day Hospitals totalled $44.7 million in FY 2020 and included:
•
•
•
$10.7 million for strategic projects,
$11.0 million for the Montserrat acquisition earn-out relating to the commissioning of the four new sites, and
$5.2 million for a small pathology acquisition.
Growth capital expenditure for Healius Primary Care totalled $21.3 million and included $10.4 million GP clinic earn-outs and
acquisitions. Once again, this growth investment will not continue following the sale of Healius Primary Care in FY 2021.
Gearing
Group net debt and gearing at 30 June 2020 was as follows:
REPORTED
$M
Bank and finance debt 1
Cash 2
Net debt
Bank gearing ratio (covenant <3.5x) 3
Bank interest ratio (covenant >3.0x)
30 JUNE 2020
$M
30 JUNE 2019
$M
810.1
(144.5)
665.6
2.7x
8.9x
797.9
(119.7)
678.2
2.4x
9.5x
At 30 June 2020, gearing and interest ratios remain comfortably within bank covenants due to stringent cash management,
despite significant COVID-19 related trading disruptions.
Group reported results
This review focuses on the underlying results of Healius which adjust for several items not considered to be part of core trading
performance. The reconciliation between reported and underlying results for FY 2020 is as follows:
FY 2020
$M
EBIT
Interest
PBT
Income Tax benefit/
(expense) 4
NPAT continuing
operations
NPAT discontinued
operations
REPORTED
DISCONTINUED
OPERATIONS
NON-UNDERLYING
ITEMS
NON-UNDERLYING
ATO CASE
AASB 16 IMPACT
UNDERLYING
76.0
(29.6)
46.4
25.6
72.0
(142.5)
142.5
43.2
43.2
(23.6)
(23.6)
(46.6)
(16.5)
29.7
13.2
(4.0)
9.2
102.7
(23.5)
79.2
(23.8)
55.4
Bank loans and finance liabilities shown net of unamortised borrowing costs.
FY 2020 cash includes $137.5 million from continuing operations and $7.0 million from Healius Primary Care.
1
2
3 Bank gearing ratio is calculated based on underlying EBITDA before the impact of AASB 15 and 16 and adjusted for share-based payments.
4 Reported and underlying tax expense does not reconcile due to non-deductible items within statutory tax expense. Underlying tax is
assumed at 30%.
20
Healius Primary Care (Discontinued operations)
As noted above, in June 2020 Healius announced the sale of its Medical Centres and Dental businesses, called Healius Primary
Care, for $500 million enterprise value. Group reported results for FY 2020 include an adjustment for discontinued operations.
The trading result for Healius Primary Care for the year,
This comprises:
•
• An impairment loss from the difference between the net sale proceeds and value of assets to be sold, and
• Costs associated with the sale.
Accordingly, a loss on sale of $142.5 million has been recognised, as follows:
DISCONTINUED OPERATIONS
PROFIT/(LOSS) ON DISPOSAL
Revenue from Contracts with Customer
Expenses
Earnings before interest, tax and impairment 1
Net finance costs
Profit before Tax
Impairment loss recognised on the remeasurement to fair value less costs to sell
Loss before tax from discontinued operations
Income tax (expense)/benefit from discontinued operations before impairment
Income tax benefit on impairment loss
Profit/(Loss) for the year from discontinued operations
FY 2020
$M
253.7
(236.3)
17.4
(21.5)
(4.1)
(151.0)
(155.1)
(0.8)
13.4
(142.5)
Further details are set out in the Notes to the accounts (Note E3). The loss primarily represents a non-cash write-off
of goodwill previously held on Balance Sheet.
Non-underlying items
The underlying results of Healius adjust for several items not considered to be part of core trading performance.
Pre-tax non-underlying items of $43.2 million can be analysed as follows:
Strategic projects
Montserrat acquisition
Impairments
Other
Transactions with discontinued operations
EBIT
FY 2019
$M
243.9
(234.9)
9.0
(8.6)
0.4
0.0
0.4
(2.3)
0.0
(1.9)
FY 2020
18.3
14.5
11.6
8.5
(9.7)
43.2
Strategic projects
As previously advised, there are three key strategic projects which are transformational in nature and unlikely to be undertaken
again at such a collective magnitude. The projects are the technology platform upgrades in Pathology and in Imaging, and the
corporate renewal program (previously four projects including Project Leapfrog which is now part of the discontinued operations).
They are reported separately both internally and to the market in order to neither distract from nor distort the underlying performance.
Adjustments in FY 2020 were as follows:
Platforms in Pathology $9.9 million (FY 2019 $10.3 million),
•
•
Platforms in Imaging $3.0 million (FY 2019 $3.1 million), and
• Corporate renewal program $5.4 million (FY 2019 $9.2 million).
Going forward, only the technology platform upgrades in Pathology will be recorded as a non-underlying project and adjusted
between reported and underlying results.
1
Excludes transactions with continuing operations including rental income.
21
Healius – Annual Report 2020THE YEAR IN REVIEW Group performance
Montserrat acquisition
Healius’ acquisition of Montserrat Day Hospitals in FY 2019 included earn-outs contingent on Montserrat achieving certain financial
milestones in FY 2021 and FY 2022 and $16.6 million was recognised for these potential earn-outs in the accounts. No earn-out
was achieved in FY 2020 due to the impacts of COVID-19. However, given strong budgeted performance in FY 2021, an additional
amount of $14.5 million has been accrued for FY 2021 potential earn-out.
Impairments
Impairment costs of $11.6 million primarily relate to Healius Day Hospitals and Eye Clinics that are now standalone businesses
following separation from Healius Primary Care.
Other
Other non-underlying adjustments of $8.5 million primarily relate to:
• Redundancy costs under the organisational redesign program, consistent with the simplification of the Group
management structure, and
• Costs of surplus Head Office space from transitioning to a more flexible operating model for Head Office employees,
driven by COVID-19.
Transactions with discontinued operations
The accounting standards require businesses held for sale to include in their results only transactions with external parties and
hence to eliminate any intercompany transactions during the period. Accordingly, rental revenue from the Pathology and Imaging
divisions, net of overhead charges and other costs, have been eliminated within discontinued operations and the corresponding
net costs have also been eliminated in continuing operations. These net costs have been added back for the underlying results
of continuing operations.
Non-underlying items: ATO Case 2003–2007
In 2015, Healius was advised by the Commissioner of Taxation (“the Commissioner”) that lump sum payments made by it to
healthcare practitioners for the financial years 2010 to 2014 were tax deductible. Healius subsequently filed an application for
similar tax deductions for the financial years 2003 to 2007 1, subject to the Commissioner’s discretion in allowing an out-of-time
objection. Following the Commissioner’s decision not to allow such an objection, Healius commenced legal proceedings which
culminated in a favourable decision by the Federal Court of Australia in November 2019. The Commissioner appealed to the
Full Court of the Federal Court of Australia and this appeal was heard in August 2020. Healius is awaiting the decision of the
appeal. In the meantime, Healius has recognised the following as non-underlying benefits in its reported results due to the
favourable Federal Court ruling and the introduction of AASB Interpretation 23 (clarification of accounting for uncertain tax
treatments) in FY 2020:
•
•
$46.6 million income tax benefit, and
$23.6 million interest benefit (which is taxable).
Adoption of AASB 16
AASB 16 was adopted by Healius from 1 July 2019. This standard has removed the distinction between operating and finance leases
with most leases now being recognised as a right-of-use asset and a lease liability except for short term leases and leases of low
value assets. Healius has applied the new standard using the modified retrospective approach, which requires no restatement
of comparative information in the reported results. Because of this, the underlying performance of the business has been stated
before the impact of AASB 16 in order to ensure comparability year-on-year. From FY 2021 onwards, underlying (and reported)
performance will be stated including the impact of AASB 16 in both the current and the prior periods.
The impact of AASB 16 on reported results for FY 2020 is to recognise depreciation and finance costs in the place of operating lease
charges. The net impact on Healius’ reported results in FY 2020 is a $9.2 million after-tax loss due to a range of factors including:
• Many of Healius’ large leases are relatively new and the recognition of interest costs is higher in the early years,
•
The majority of Pathology leases, which are small leases and/or have CPI increases, cannot be valued at a modified right
of use asset value (which would be lower) and hence deliver a higher P&L expense in FY 2020, and
• Both of the above will unwind over time with the P&L impact reversing.
1
Healius was in a loss-making position for taxation purposes during FY 2008 and FY 2009.
22
Importantly, the adoption of AASB 16 currently has no economic impact on Healius, nor on its banking covenants, cash flows
or shareholder value.
The impact of AASB 16 on the P&L is as follows:
P&L
Property and other expenses
EBITDA
Depreciation
EBIT
Finance costs
Profit before tax
Tax @ 30%
NPAT
30 JUNE 2020
$M
30 JUNE 2020
$M
180.2
(163.7)
(29.7)
4.0
180.2
16.5
(13.2)
(9.2)
Operating lease expenses reversed
Depreciation of right of use assets recognised
Interest paid on lease liabilities recognised
The impact of AASB 16 on the cash flow for FY 2020 is as follows:
CASH FLOW
Gross cash flows from
operating activities
Interest paid on lease liabilities
Net cash provided
by operating activities
Payments of lease liabilities
Net cash used in financing activities
30 JUNE 2020
$M
30 JUNE 2020
$M
226.8
(41.0)
(185.8)
Operating lease payments reversed from gross
operating cash flows
Interest paid on lease liabilities recognised
in operating cash flows
185.8
(185.8)
Principal payments on lease liabilities recognised
in financing cash flows
The impact of AASB 16 on the closing Balance Sheet for FY 2020 is as follows:
BALANCE SHEET
Right of use assets
Total assets
Current interest-bearing
lease liabilities
Non-current interest-bearing
lease liabilities
Total liabilities
30 JUNE 2020
$M
30 JUNE 2020
$M
876.9
Leases recognised as assets and depreciated
(173.9)
(763.9)
876.9
(937.8)
Leases recognised as liabilities representing future lease
payments discounted at incremental borrowing rate
Leases recognised as a liabilities representing future
lease payments discounted at incremental borrowing
rate
As shown above, there is a net asset reduction of $60.9 million due to the differences in the profile of depreciation and lease
liabilities run-off on Healius’ property leases.
23
Healius – Annual Report 2020THE YEAR IN REVIEW Pathology
Pathology is the largest division of Healius. It is a well-run business,
with strong state-based brands which are all number one or two
in their markets.
The strength of Healius’ Pathology division is well known, with long-term underlying
drivers, strong market share, network and scale.
In FY 2020, Pathology grew its revenues by 2.8%, due to a combination of average
fee increases of 2.9% and volume declines of 1.5%. The result was underpinned
by good trading up until the mid-March national lockdown and by a good recovery
in business-as-usual testing from May along with strong COVID-19 community
testing volumes.
The average fee increase was delivered from a range of initiatives in the year
including private billing for electrocardiograms (ECGs), overseas patient billing
and health fund gap billing. It was also due to the COVID-19 testing fee from the
Government which has enabled the reconfiguration of laboratories to accommodate
COVID-19 testing equipment, the roll-out of drive-through testing centres to enable
easy and secure access for the public, and the focus on quick and accurate
results delivery.
Overall, Pathology’s EBIT result improved 4% compared to FY 2019 as a result of strong
cost control measures in combination with good trading other than in the mid-March/
April national lockdown.
At the height of the COVID-19 lock-down restrictions, the division responded with
rapid cost control measures including temporarily closing a number of collection
centres and negotiating rental reductions and deferrals. Employment levels were
maintained with staff and unions working together with management to navigate
the dynamic situation.
In addition, the division received Government support conservatively estimated
at $11 million, due to its significant volume declines in April. This support was in return
for undertakings around availability of its remote and regional services, maintenance
of staffing levels across the Group and remuneration and fee reductions for the Board
and senior management. Without this support, additional cost reductions would have
been undertaken.
The Sustainable Improvement Program (SIP) delivered $17 million in savings in
business-as-usual activities. Both labour costs and approved collection centre costs
grew at a lower rate than revenue. The division also focused on controlling capex
spend during the period, with the increase attributable to the acquisition of a small
pathology group and the development of a new laboratory in Western Australia,
due to complete in FY 2021.
The performance of the division was as follows:
30 JUNE 2020
$M
30 JUNE 2019
$M
BETTER/(WORSE)
%
1,160.1
142.3
(20.9)
(6.3)
115.1
36.9
1,128.3
136.1
(19.8)
(5.3)
111.0
35.1
2.8
4.6
(5.6)
(18.9)
3.7
(5.1)
$1,160M
OPERATING REVENUE
$115M
UNDERLYING EBIT
2,234
SITES
Revenue
EBITDA
Depreciation
Amortisation
EBIT
Total capital expenditure
24
STRATEGY
Pathology
Major initiatives are focused on:
• Revenue growth – growing revenue through new
streams. The division has made good progress
in converting commercial COVID-19 testing
opportunities, with partnerships with organisations
such as the Federal Government and the AFL.
The division also continues to see growth in niche
specialists including genetics. Despite the
impact of COVID-19, there has been good growth
in non-invasive prenatal testing which was up ~30%
on the prior period.
• Network optimisation – ongoing cost control and
efficiencies from the Sustainable Improvement
Program including right-sizing its footprint
of collection centres and laboratories, based
on value rather than volume.
• Workforce management – workforce capability
management through planning and rostering
initiatives, including courier run efficiencies.
• Digitisation – improving its digital capability
in the customer journey, for example through
e-referrals and results, to maximise efficiencies
and improve customer and referrer experience.
Pathology is also investing in a modern infrastructure
platform that will provide significant clinical,
operational and financial benefits to support future
growth. This includes:
• Upgrade to the main laboratory testing equipment,
•
called the Serum Work Area, which covers around
60% of all pathology tests. This will increase
automation and improve clinical methodologies
while being at a lower cost per test. Laverty in New
South Wales was completed in 1H 20, and QML
in Queensland, Dorevitch in Victoria and Western
Diagnostic Pathology in Western Australia and
Northern Territory are on track for completion
in FY 2021.
Implementation of the national Laboratory
Information System, or LIS, project to enable Healius
to standardise processes and conventions, increase
functionality and better meet referrers’ needs.
The project will deliver a single instance of LIS within
the existing system as well as additional modules
for pre-analytical, reporting and specialities, such
as genomics. A detailed program will be announced
in 1H 21 on completion of vendor discussions and
project planning.
25
Healius – Annual Report 2020THE YEAR IN REVIEW Imaging
Healius’ Imaging division partners with independent radiologists
who undertake a full range of medical imaging services including
cardiac, neurological, vascular, musculoskeletal and dental imaging.
In FY 2020, Imaging was tracking ahead of the prior comparable period and
in line with guidance until mid-March when volumes rapidly declined as a result
of the COVID-19 pandemic and the national lock-down, peaking in excess of 40%
compared to prior comparable period. From May, volumes started to return to normal
in line with the reopening of the economy and the resumption of elective surgery.
Unlike Pathology, Imaging does not have a natural ‘hedge’ in the form of COVID-19
testing to offset the declines in the business-as-usual testing. Overall, FY 2020
revenue was down 4%.
The division’s EBIT was $17.2 million for the period, a decrease of 55% due to
COVID-19 related volume declines and increased costs of personal protective
equipment. Faced with a largely fixed cost base and a rapid and significant
volume decline, Imaging was able to achieve some cost savings including
temporary site closures, reduction in opening hours and redeployment of staff.
Labour management was undertaken with the support of the unions and staff
while permanent employment levels were maintained. The division was not
eligible for Government support such as JobKeeper.
30 JUNE 2020
$M
30 JUNE 2019
$M
BETTER/(WORSE)
%
376.7
31.8
(12.1)
(2.5)
17.2
13.4
391.3
53.8
(13.4)
(2.0)
38.4
22.1
(3.7)
(40.9)
9.7
(25.0)
(55.2)
39.4
$377M
OPERATING REVENUE
$17M
UNDERLYING EBIT
146
SITES
Revenue
EBITDA
Depreciation
Amortisation
EBIT
Total capital expenditure
26
STRATEGY
Imaging is focusing on digitising the patient journey
and optimising its front-line services and processes.
Major initiatives are:
• Digitisation – The Imaging Core Application Refresh
(iCAR) has delivered a new radiology information
system (RIS) and a new picture archiving and
communication solution (PACS) to the division.
iCAR roll-out is now complete, in all but a small
number of sites. These platforms have improved
radiologist workflow, voice recognition, referrer
delivery channel and images. Cost efficiencies are
being realised and iCAR is enhancing the way the
division interacts with referrers and their patients.
A further component of Imaging’s technology road
map is to digitise the end-to-end patient journey,
including referrals, booking forms, check-in and
results. Benefits are expected from FY 2022 onwards.
• Revenue growth – Imaging is leveraging iCAR
to target the top five specialty referral groups
to grow revenue. The business also remains focused
on developing and growing the higher margin
hospital channel.
• Network optimisation – Imaging has identified
opportunities to improve its returns through
network optimisation, particularly in its footprint
of community sites in NSW.
• Workforce management – The division aims to
optimise its front-line labour through benchmarking
and rostering initiatives to drive efficiencies.
27
Healius – Annual Report 2020THE YEAR IN REVIEW Day Hospitals
The Day Hospitals division has been created to bring together
Montserrat, Healius Day Hospitals and Adora Fertility IVF under
a single management structure. The Day Hospitals division operates
in a sector where advancements in medicine and technology and
on-going cost pressures are moving patients away from high-cost
overnight hospitals into short-stay day hospitals.
Montserrat’s flagship hospital, Westside Private Hospital, has equivalent high-level
facilities to the Ambulatory Surgical Centres in the USA, which perform same-day
outpatient surgical care and have become an integral part of that country’s healthcare
system. Cancer treatments, cardiology, and orthopaedic procedures are projected
to grow strongly in the outpatient setting, reducing hospital costs and improving clinical
outcomes in a day hospital setting. The interest from consumers, private health insurers
and governments in potential new models of care is strong.
Montserrat Day Hospitals
In FY 2020, Montserrat delivered $34.2 million of revenue, an increase of 81% over
FY 2019. Montserrat traded strongly until mid-March, with revenue increasing
primarily due to the ramp-up of its four new facilities, including Brisbane’s
multi-specialist Westside Private Hospital. Volumes were impacted by the elective
surgery restrictions due to the COVID-19 pandemic in mid-March and April but
moved back towards pre-COVID-19 levels with the lifting of these restrictions.
Montserrat EBITDA at $5.4 million is broadly in line with expectations at the time
of the acquisition and includes a $2.6 million contribution from the four new facilities.
Notwithstanding the COVID-19-related volume declines, the business achieved EBIT
of $3.1 million in FY 2020, a significant increase on the prior year. It accessed $0.6 million
in JobKeeper from the Federal Government for seven of its hospitals, without which
it would have necessarily undertaken cost containment initiatives.
Healius Day Hospitals
Healius Day Hospitals recorded revenue of $12.5 million for FY 2020. Its 2H 20 volumes
were impacted by the COVID-19-related elective surgery restrictions. Overall, the
business delivered an EBIT loss of $6.7 million for the year, impacted by COVID-19,
the closure of its Bankstown facility, and certain one-off costs due to the separation
from Healius Primary Care. The four Healius Day Hospitals accessed various State
Governments’ Viability Guarantee agreements totalling $1.1 million.
IVF
Healius’ IVF business, Adora Fertility, grew revenue by 10% to $18.7 million. Its volumes
were impacted by the elective surgery restrictions, with a four-week total shut down.
Pleasingly, strong GP and specialist commitment to telehealth consultations ensured
continued patient throughput during this time. IVF volumes recovered with the
reopening of the economy, with demand strong in May, June and July.
The business had an EBIT loss of $3.2 million in FY 2020, half of which arose during
the lock-down. It did not receive any Government support. Initiatives were introduced
towards the end of the year to improve pricing and increase the revenue per cycle.
Pleasingly, Adora Fertility delivered profits in June and July 2020.
During the year the business undertook some capital-light initiatives including the
enhancement of its sites. A focus on targeted social media campaigns drove increased
demand from new patients and Adora Fertility continues to grow its market share.
$65M
OPERATING REVENUE
$3M
MONTSERRAT
UNDERLYING EBIT
15
DAY HOSPITAL SITES
28
STRATEGY
Montserrat Day Hospitals
Montserrat is focused on further growth through the
ramp up of its four new sites which are expected to
double their EBITDA contribution in FY 2021. The division
will look for inorganic growth opportunities both M&A
and greenfields, as a leading player with a scalable
platform in a fragmented industry.
Healius Day Hospitals
The business is focused on a turnaround from its
current loss-making into profit. It aims to achieve
this through the integration and rebranding of the
Healius Day Hospitals into Montserrat, through
improving margins by merging supply chains
and billing systems and by focusing on business
development and labour management.
The business has rationalised its network with the
closure of Bankstown and is in the process of selling
its Eye Clinics. Going forward, Healius Day Hospitals
will partner with GP owners rather than operating
individual specialist clinics.
IVF
The business is focused on capitalising on its market
share and delivering profitable contribution to the
Group. It will continue to optimise its service model
through digitisation of delivery activities, grow brand
awareness and monetise selective services to increase
revenue per cycle. IVF is also upgrading capacity
in Western Australia to meet expected demand.
Overall the performance of the division was as follows:
MONTSERRAT
HEALIUS DAY HOSPITALS
IVF
TOTAL DAY HOSPITALS
30 JUNE 2020
$M
30 JUNE 2019
$M
30 JUNE 2020
$M
30 JUNE 2019
$M
30 JUNE 2020
$M
30 JUNE 2019
$M
30 JUNE 2020
$M
30 JUNE 2019
$M
12.5
10.8
Revenue
EBITDA
Depreciation
Amortisation
EBIT
Total capital
expenditure
34.2
5.4
(2.3)
0.0
3.1
2.6
18.9
1.8
(1.2)
(0.2)
0.5
(5.3)
(1.4)
0.0
(6.7)
4.2
2.2
(2.5)
(0.8)
0.0
(3.3)
6.2
18.7
(1.8)
(1.2)
(0.2)
(3.2)
3.4
17.0
0.5
(0.9)
(0.1)
(0.5)
3.9
65.4
(1.7)
(4.9)
(0.2)
(6.8)
46.7
(0.2)
(2.9)
(0.3)
(3.3)
8.2
14.3
29
Healius – Annual Report 2020THE YEAR IN REVIEW Board
of Directors
Robert
Hubbard
BA (HONS), FCA.
NON-EXECUTIVE
CHAIR
Mr Hubbard was appointed as a Non-executive Director in December
2014 and Chair of the Audit Committee in February 2015. He was
appointed Chair of the Board on 24 July 2018, at which time he retired
as Chair of the Audit Committee. He remains a member of the Audit
Committee, joined the People & Governance Committee on 24 July 2018
and was a member of the Risk Management Committee up to that date.
Rob holds a Bachelor of Accounting (Honours) degree from the
University of Birmingham. He is a Fellow of the Institute of Chartered
Accountants in Australia. He previously held partnership positions
in the accounting, corporate finance, assurance and audit divisions
of PricewaterhouseCoopers and acted as external auditor for some
of Australia’s largest ASX-listed companies.
Malcolm
Parmenter
MB, BS, MAICD.
MANAGING
DIRECTOR &
CHIEF EXECUTIVE
OFFICER
Dr Parmenter joined Healius as Managing Director and Chief
Executive Officer (CEO) in September 2017. He has a wealth of
knowledge and practical experience in the operation of frontline care,
with over nine years’ tenure as CEO of Independent Practitioner
Network Limited (IPN), both as a listed company and under the
ownership of Sonic Healthcare Limited, and subsequently two years
as CEO of Sonic Clinical Services.
Malcolm has a strong understanding of healthcare delivery,
both in Australia and abroad, and has spent more than 20 years
as a General Practitioner.
Gordon
Davis
MBA, GAICD.
NON-EXECUTIVE
DIRECTOR
Mr Davis was appointed as a Non-executive Director in August 2015.
He was appointed as a member of the Risk Management Committee
in March 2016, as Chair of the Audit Committee on 24 July 2018, and
as Chair of the Risk Management Committee on 19 August 2019, at
which time he ceased as Audit Committee Chair but remained a
member of that committee.
Gordon holds a Bachelor of Forest Science (Honours) and a Master
of Business Administration from the University of Melbourne and
a Master of Agricultural Science from the University of Tasmania.
He is a Graduate of the Australian Institute of Company Directors.
Prior to becoming a Non-executive Director, Gordon was Managing
Director of AWB Limited between 2006 and 2010. He has also served
in a senior capacity on various industry associations.
30
Sally Evans
BHSC, FAICD,
GAIST.
NON-EXECUTIVE
DIRECTOR
Ms Evans was appointed as a Non-executive Director in August
2018, also being appointed as a member of the Nomination and
Remuneration Committee and the Risk Management Committee.
On 19 August 2019, she was appointed as Chair of the newly renamed
People & Governance Committee. Sally has over 30 years’ experience
in private, government and social enterprise sectors and has worked
in Australia, New Zealand, the United Kingdom and Hong Kong
with responsibilities across the broader Asia Pacific region.
Sally has served as a Non-executive Director of Gateway Lifestyle
Operations Limited. She is a Fellow of the Australian Institute
of Company Directors, Graduate of the Australian Institute
of Superannuation Trustees, and holds a Bachelor of Applied
Science from the University of Otago.
Paul Jones
MB, BS, FAMA.
NON-EXECUTIVE
DIRECTOR
Dr Jones was appointed as a Non-executive Director in November
2010. During FY 2020, he was a member of the Audit Committee
(until 19 August 2019), the People & Governance Committee
(from 19 August 2019) and the Risk Management Committee.
Paul has over 35 years’ experience in a broad range of general medical
practice, including 15 years’ experience in Healius Group medical
centres. He originally trained at the Repatriation and General Hospital,
Concord NSW and subsequently at Calvary Public Hospital, Bruce ACT.
He has been a Director and Federal Councillor of the Australian Medical
Association (AMA), a past President of AMA ACT and a member of the
Federal AMA Council of General Practice. He was formerly a general
practitioner adviser to Calvary Public Hospital and held roles as GPVMO
and Director, Medical Education Program. He is a former Chair of ACT GP
Workforce Working Group and was a member of the ACT Health Minister’s
GP Task Force in 2009. In 2010 he was awarded Fellowship of the AMA.
Arlene
Tansey
JURIS DOCTOR
(JD), MBA, BBUS
(ADMIN), FAICD.
NON-EXECUTIVE
DIRECTOR
Ms Tansey was appointed as a Non-executive Director in August
2012. During FY 2020, she was a member of the Audit Committee
(appointed Chair on 19 August 2019), the People & Governance
Committee (as Chair until 19 August 2019 and member until
26 November 2019) and the Risk Management Committee
(from 19 August 2019).
Previously, Arlene worked in commercial and investment banking
in Australia and in investment banking and law in the United States,
including senior roles at Macquarie Bank and ANZ. She has a Juris
Doctorate (Law) from University of Southern California and an MBA
in finance and international business from New York University. Arlene
is a Member of Chief Executive Women, International Women’s Forum
Australia and a Fellow of the Australian Institute of Company Directors.
Former Board Members: Errol Katz, Non-executive Director, ceased 25 November 2019.
31
Healius – Annual Report 2020DIRECTORS & SENIOR MANAGEMENT Executive
Leadership Team
Malcolm
Parmenter
MANAGING
DIRECTOR &
CHIEF EXECUTIVE
OFFICER
Dr Parmenter joined Healius as Managing Director and Chief Executive Officer
(CEO) in September 2017.
He has a wealth of knowledge and practical experience in the operation
of frontline care, with over nine years’ tenure as CEO of Independent Practitioner
Network Limited (IPN), both as a listed company and under the ownership of Sonic
Healthcare Limited, and subsequently two years as CEO of Sonic Clinical Services.
Malcolm has a strong understanding of healthcare delivery, both in Australia
and abroad, and has spent more than 20 years as a General Practitioner.
Maxine
Jaquet
CHIEF FINANCIAL
OFFICER
Ms Jaquet was appointed Chief Financial Officer in August 2019. She joined
Healius in July 2015 as Group Director – Commercial and Chief Executive for
Health & Co from March 2016. Maxine has extensive commercial and operational
line management experience in the consumer goods and industrials sectors.
Maxine has managed a number of significant transformations generating
substantial margin improvement and business growth, including the turnaround
of the International business for Qantas in her prior role as Head of Alliances.
With a depth of expertise in developing customer-centric growth, she has led
a customer transformation program in a global FMCG and managed the Qantas
Group’s multi-brand commercial structure. Maxine also a background in providing
financial and strategic advice.
John
McKechnie
CHIEF EXECUTIVE
PATHOLOGY
Mr McKechnie was appointed Chief Executive Pathology in August 2019 following
more than 35 years with the Healius Pathology division both in Western Australia
and more recently in Queensland.
Commencing his career as a Medical Scientist, John has also worked as
a laboratory and operations manager. In 1998 he was appointed the state
operations manager of WDP, before joining the QML team in 2002. Since 2015
John has been the CEO of both QML Pathology and TML Pathology, responsible
for their strong performance, successful strategic direction, executive recruitment,
and people-management. He has also been a member of the group executive
team in Pathology. Throughout his career John has developed strong financial,
analytical, change management, and people skills.
Dean
Lewsam
CHIEF EXECUTIVE
IMAGING
Mr Lewsam joined Healius in April 2012 and held various operational management
roles in the Imaging Division. In October 2015, Dean was appointed Chief
Executive for Imaging where he has continued to advocate for the expansion
and advancement of Healius’ Imaging network.
Dean has over 30 years’ experience in the Australian healthcare sector having
previously held executive management roles with major listed groups in the
pathology, general practice and diagnostic imaging industries.
32
Ben
Korst
CHIEF EXECUTIVE
DAY HOSPITALS
Mr Korst has extensive experience in the management and operations
of Day Hospitals within Australia. Ben has been the CEO at Montserrat since
2010, during which time he has grown the business from three to 10 hospitals.
Ben has a background in Finance, being a graduate of Commerce from the
University of Queensland and having worked at Ernst & Young in Corporate
Finance. He has also worked at BSM Steel, and immediately prior to joining
Montserrat, at Informa Australia Pty Ltd as its Managing Director.
Janet
Payne
GROUP EXECUTIVE
CORPORATE AFFAIRS
Appointed as Group Executive Corporate Affairs in July 2015, Ms Payne
joined Healius from CIMIC Group Ltd where she was Head of Investor Relations.
Prior to this, Janet worked in a range of market-facing roles, including investor
and media advisory, and board advisory.
Janet managed the Initial Public Offering and established investor
relations at Qantas Airways Limited. She was formerly in the finance
industry, having started her career at KPMG in London and Sydney.
Peter
Wilson
GROUP EXECUTIVE
PEOPLE & SHARED
SERVICES
Mr Wilson has been responsible for leading large businesses through transition
and transformation within the aviation industry, having been Chief Operating
Officer and Chief Pilot for Qantas Airways and later working with Virgin Australia
and Tigerair. Peter was key in driving process and productivity improvements
at Qantas to deliver a leaner operation while setting strategic direction and
delivering on financial, customer, safety, people and regulatory objectives.
He was appointed as Interim CEO with Tigerair to restructure business
fundamentals, identify revenue opportunities and areas for cost reduction
for the incoming CEO.
Mark
Neeham
GROUP EXECUTIVE
GOVERNMENT &
EXTERNAL AFFAIRS
Mr Neeham has responsibility for developing and implementing Healius’
relationship strategies with Government, professional and industry bodies
and external stakeholders.
Mark joined Healius in May 2015 from the Crosby|Textor Group where he was
the group’s Executive Director. Having worked in senior professional positions
for political parties in Australia and the UK, Mark has extensive experience
in executive leadership, organisational management, strategy, communications
and cultural change.
Since 2018, Mark has also been President of Australian Pathology, the peak body
for private pathology in Australia.
Scott
Beattie
CHIEF EXECUTIVE
MEDICAL CENTRES
Mr Beattie joined Healius in November 2017 as Group Executive, Commercial
Solutions with responsibilities for developing and implementing commercial
strategies across the Group including: business development, marketing, customer
experience, major partner relations and IVF and Specialists/Day Surgeries.
In May 2018, Scott transitioned into the new role of Group Executive, Technology
& Innovation, leveraging his wealth of experience in the Australian healthcare sector
and knowledge of healthcare technology and emerging digital health platforms.
Scott brings over 16 years’ experience in the frontline healthcare sector, having
held a range of senior roles at Sonic Clinical Services and IPN. These have included
line management responsibility, strategy and development, service innovation
and cross business integration. Scott also practised as a corporate lawyer at the
beginning of his career.
33
Healius – Annual Report 2020DIRECTORS & SENIOR MANAGEMENT Risk
management
Healius has designed
a Risk Management
Framework consistent
with current
best practice.
The Risk Management Framework formalises the approach adopted by all
of Healius’ businesses to manage risk. The future performance of Healius, including
its share performance, may be influenced by a range of risk factors, many of which
are outside the control of Healius. A non-exhaustive list of key risks, including those
specific to Healius and those of a more general nature, is set out in this section.
Healius’ business, financial condition, or results of operations could be affected
by any of these risks, either individually or in combination.
Identifying and mitigating risk is key to Healius achieving its objectives and
protecting shareholder value. By following the Risk Management Framework,
Healius has a consistent risk management methodology that can be applied
to all strategic, operational and contractual objectives.
Risk Management – Principles and Guidelines
Healius has adopted the International Organisation for Standardisation AS/NZS ISO 31000:2018 ‘Risk Management
– Principles and Guidelines’ approach to risk management, ensuring each division considers risk when making key decisions
that drive its business, and maintains a disciplined focus on operational excellence and effective risk management.
The Principles underpinning the risk management framework are:
01
Creates and
protects value
07
Tailored
02
Integral part of
organisational processes
08
Takes into account human
and cultural factors
03
Part of decision
making
09
Transparent
and inclusive
04
Explicitly addresses
uncertainty
05
Systematic, structured
and timely
10
11
Dynamic and
responsive to change
Facilitates continuous
improvement
06
Best available
information
34
Summary of risks
CONTEXT
RISK
MITIGATION
Pandemic
Risks including
COVID-19
Pandemic risks such as COVID-19
pose business continuity risk to Healius.
There is the risk that staff and pathology
laboratories are adversely impacted
by a pandemic, such as COVID-19, which
limits our ability to provide testing facilities.
There is also the risk from shutdowns
across communities that may adversely
impact the volume of business-as-usual
testing in pathology, number of patient
visits to medical centres and the volume
of referrals to Imaging, Day Hospitals and IVF.
Healius continually monitors and reports on
the number of staff and healthcare professionals
impacted by a pandemic such as COVID-19,
and required to self isolate. Healius continually
monitors daily volumes across all divisions
and structures resources accordingly.
Regulatory
Compliance
Healius operates in sectors which
are subject to extensive laws and
significant levels of regulations relating
to the development, licencing and
accreditation of facilities and services.
Healius maintains high quality standards
and audit processes to ensure it continually
meets licencing and accreditation
standards across all business units.
Revenue
Concentration
and Government
Policy
Economic Drivers
Healthcare
Professionals
(HCPs)
Healius is committed to providing affordable
healthcare. Bulk-billing its services
to patients and receiving reimbursement
through the Government’s Medicare
Benefits Schedule (MBS) is a key feature
of this. As a result a substantial proportion
of the Group’s revenue is derived from the
MBS. Any changes to the MBS or any other
Government funding initiatives could impact
profitability through reductions in revenue.
Healius maintains tight control over
costs and continually reviews the range
of service offerings available to patients.
Healius is continuing to diversify
into other service areas to generate
non-MBS revenue streams.
The Group Executive Government
Relations monitors legislative and
regulatory developments and engages
proactively to manage this risk.
While the majority of Healius’ revenue
comes from MBS reimbursements, Healius
does charge out-of-pockets on some
services. In addition there may be a general
perception that some healthcare services
are expensive. Consequently consumers may
delay or not use services due to affordability
concerns, impacting volumes and revenue.
Healius contracts to provide services to HCPs,
including general practitioners, surgeons,
specialists and radiologists. A significant
component of Healius’ revenue is dependent
upon HCPs providing services to patients
in Healius facilities. Failure to maintain
strong relationships with these parties may
impact the ability to retain and recruit
HCPs. This may impact growth prospects,
revenue earned, the cost structure and
profitability of Healius’ businesses.
Healius maintains tight control over
costs and continually reviews the range
of service offerings available to patients.
Healius advertises its services are
bulk-billed where appropriate and educates
the consumer on any out-of-pocket costs.
Healius has managers and staff dedicated
to building and maintaining relationships,
increasing engagement and addressing
any issues with HCPs on a timely basis.
Surgeons are able to select the facility in which
they operate, therefore Healius, through
Montserrat, has invested in high quality facilities,
systems and services to meet the needs
of surgeons who operate in our Day Hospitals.
Healius also has Clinical Councils in place
to provide forums for sharing ideas and
information with HCPs.
35
Healius – Annual Report 2020DIRECTORS & SENIOR MANAGEMENT Risk management
CONTEXT
RISK
MITIGATION
Referrers
People
Employee
Relations
Healius is reliant upon HCPs continuing to
choose a pathology or diagnostic imaging
services provider affiliated with Healius.
A reduction or loss of referrals may impact
the financial performance of Healius.
Healius has managers and staff dedicated to
maintaining relationships, increasing engagement
and addressing any issues with HCPs, referrers
and non-doctor clients on a timely basis.
Healius is dependent on the quality of its
staff, their skills, expertise and commitment
to the Group. A loss of key staff may risk the
loss of significant corporate knowledge.
Healius has developed staff engagement and
leadership programs to increase the level of
employee engagement across the Group, and
identified key staff for programs that focus on
retention and succession planning for the Group.
Many of Healius’ employees are covered
by a complex array of awards, enterprise
bargaining agreements and other workplace
agreements which periodically require
classification, renegotiation and renewal.
Healius has developed staff engagement
programs to increase the level of
employee engagement within all areas
of the business, including those covered
by awards and agreements.
In addition, a number of recent Court
decisions and Government announcements
have made it clear that the employee
relations landscape will continue to evolve.
Negotiations could result in issues
which may lead to disruptions to
Healius’ operations and increased
direct and indirect labour costs. These
may adversely impact the financial
performance and reputation of Healius.
Healius has managers and staff dedicated
to negotiating workplace agreements.
Healius has recently created a dedicated
Employee Relations function to ensure that
it remains compliant with its employee
relations requirements and obligations.
IT Systems
Healius relies on effective information
technology systems. Operations
may be significantly impacted
by disruption to a core IT platform.
Healius has IT support systems in place
to underpin business operations.
Cyber Security
Healius maintains sensitive clinical and
financial information and its databases
may be at risk from cyber attacks.
Healius has an information security management
framework and information security policy which
are based on ISO 27001 and NIST best practice
standards which align with Healius’ risk appetite.
Healius has an ongoing program to
strengthen defences against unauthorised
access, and to protect patient and
financial data with IT managers and staff
dedicated to information security.
Competition
36
Competition may come from new entrants
into the market, existing competitors
attempting to increase market share or
from disruptive technologies that may change
that way services are delivered. A change in
competition may impact Healius’ profitability,
its ability to attract and retain HCPs and to
secure attractive locations for its businesses.
Healius maintains its competitive edge through
an extensive footprint of centres, investment
in quality and innovation in healthcare services,
and a cost-conscious operating model.
In addition, senior management is attuned
to market developments and is able
to respond to any competitive threats.
CONTEXT
RISK
MITIGATION
Business
Strategies and
Transformation
Projects
Healius is undergoing significant
transformation as it seeks to position
itself for future growth and sustainability.
There is a risk that significant change
may impact current operational
focus and ineffective implementation,
misguided strategies or industry changes
of initiatives and strategies, may impact
the financial performance of the business.
Healius is applying portfolio management to
prioritise and align change initiatives to Healius’
business strategy, in order to mitigate this risk.
Reputation
Acquisitions
Climate Change
Healius’ reputation may be impacted
by a future event that creates adverse
perception of the Group for the
public, investors, regulators, or rating
agencies that directly or indirectly
impacts earnings and value.
Healius maintains stringent quality standards,
audit processes and effective involvement
of executive and senior management
in decision making to ensure it continues
to provide quality healthcare and minimise
the risk of reputational damage.
Healius has an acquisition program
to acquire businesses which may be
either rolled into our existing businesses,
or provide new service offerings
in the community. There is a risk that
the acquisitions may not generate the
financial returns or performance hurdles
required to meet Healius benchmarks.
Climate change risks may be either
‘physical’ with financial implications
resulting from potential damage to
assets, indirect impacts from supply
chain disruption, or ‘transitional’
through changes to regulations
and consumer behaviour.
Healius has a robust due diligence process
to assess the merits of each proposed
acquisition, and plans the transition of the
acquired business into the Healius Group.
Healius manages its operations in
an environmentally sustainable manner,
focusing on energy and renewables to improve
efficiency, adapting to changes in consumer
behaviour and reducing its carbon footprint.
In the event of extreme weather conditions
impacting the operation, through damage
or disruption from supply chain, Healius has
the network to continue operations in other
locations where possible.
Healius Primary
Care Separation
The sale of Healius Primary Care will
require separation from the Group
of IT systems, property leases and other
support functions. There is a risk that
this places increased pressure upon
limited resources in the timeframe required.
The separation activities have been
split into various work streams with teams
in place responsible for respective work
streams. There is a high level Steering
Committee overseeing the work
stream progress.
37
Healius – Annual Report 2020DIRECTORS & SENIOR MANAGEMENT The Directors of Healius Limited (referred to as “Healius” or “the Company”) submit their Report for the financial year ended
30 June 2020 (referred to as “the year” or “FY 2020”), accompanied by the Financial Report of Healius and the entities it controlled
(referred to as “the Healius Group” or “the Group”) from time to time during the year. Pursuant to the requirements of the
Corporations Act 2001 (Cth) (Corporations Act), the Directors report as follows:
Directors
CONTINUING DIRECTORS DURING FY 2020
• Robert Hubbard
• Malcolm Parmenter
• Gordon Davis
•
•
Sally Evans
Paul Jones
• Arlene Tansey
DIRECTORS WHO CEASED DURING FY 2020
Errol Katz (retired as Director 25 November 2019)
•
Qualifications and experience of Directors
CONTINUING DIRECTORS
The qualifications and experience of each continuing Director are set out on pages 30–31 of this Annual Report.
FORMER DIRECTORS
Errol Katz MPP, MB, BS (Hons) LLB (Hons)
NON‑EXECUTIVE DIRECTOR
Dr Katz was appointed as a Non‑executive Director in 2010. He served as Chair of the Risk Management Committee and
as a member of the People & Governance (formerly Nomination and Remuneration) Committee until 19 August 2019.
Dr Katz has degrees in Medicine and Law from Monash University, and a Masters in Public Policy from Harvard University, where
he was a Menzies Scholar. He has worked as a doctor at the Alfred Hospital, as a strategy consultant at the Boston Consulting
Group and in strategy and operational roles at Visy Industries. Dr Katz currently works in private equity and investments.
Group Company Secretary
QUALIFICATIONS AND EXPERIENCE OF COMPANY SECRETARIES DURING FY 2020
Charles Tilley B.Sc (Hons) LLB (Hons) FGIA FCIS
Mr Tilley has been Group Company Secretary since February 2015. Mr Tilley joined Healius in 2014 as a Senior Legal Counsel,
advising the Healius Group on various matters concerning litigation and employment law. Prior to joining Healius, Mr Tilley had
15 years’ experience in the financial services industry, advising a Big Four institution on corporate law, litigation, commercial and
employment law.
Alison Stephenson BA Grad Dip Corp Gov AGIA ACIS
Ms Stephenson was formally appointed as a Company Secretary of the Company in August 2019. Ms Stephenson has served
as Assistant Company Secretary of the Healius Group since August 2016. Prior to joining the Group, Ms Stephenson had 15 years’
experience in company secretarial roles in various organisations, primarily in the financial services industry.
38
38
Directors’ Reportfor the year ended 30 June 2020 Directors’ meetings during FY 2020
The number of meetings of the Board and of each Board committee held during FY 2020 and the number of meetings attended
by each Director are set out below:
BOARD
OF DIRECTORS
AUDIT
COMMITTEE
PEOPLE & GOVERNANCE
COMMITTEE
RISK MANAGEMENT
COMMITTEE
FY 2020
ELIGIBLE
ATTENDED
ELIGIBLE
ATTENDED
ELIGIBLE
ATTENDED
ELIGIBLE
ATTENDED
Robert Hubbard 1
Gordon Davis
Sally Evans 2
Paul Jones 3
Errol Katz 4
Malcolm Parmenter
Arlene Tansey 5
30
30
30
30
8
30
30
30
30
29
28
6
30
28
6
6
N/A
1
N/A
N/A
6
6
6
N/A
1
N/A
N/A
6
5
N/A
5
5
N/A
N/A
4
4
N/A
5
5
N/A
N/A
4
N/A
N/A
4
4
4
2
N/A
3
4
3
3
2
N/A
3
Robert Hubbard was granted leave of absence from one People & Governance Committee meeting.
Sally Evans was granted leave of absence from one Board of Directors meetings and one Risk Management Committee meeting.
Paul Jones was granted leave of absence from two Board of Directors meetings and one Risk Management Committee meeting.
Errol Katz was granted leave of absence from two Board of Directors meetings.
1
2
3
4
5 Arlene Tansey was granted leave of absence from one Board of Directors meeting and was an apology for one Board of Directors meeting.
The above leaves of absence were typically granted, or apologies made,in circumstances where the relevant meeting was called
at short notice and other unavoidable commitments precluded the relevant Director from attending.
Further meetings occurred during the year on specific issues, including meetings of the Chairman with the CEO and meetings
of Directors with management. From time to time, Directors attend meetings of committees of which they are not currently members.
Committees of the Board in FY 2020
AUDIT COMMITTEE
PEOPLE & GOVERNANCE COMMITTEE
RISK MANAGEMENT COMMITTEE
Chair
Gordon Davis (until 19 August 2019)
Chair
Arlene Tansey (until 19 August 2019)
Chair
Errol Katz (until 19 August 2019)
Arlene Tansey (from 19 August 2019)
Sally Evans (from 19 August 2019)
Gordon Davis (from 19 August 2019)
Members
Gordon Davis
Robert Hubbard
Members
Sally Evans
Robert Hubbard
Paul Jones (until 19 August 2019)
Paul Jones (from 19 August 2019)
Members
Gordon Davis
Sally Evans
Paul Jones
Arlene Tansey
Errol Katz (until 19 August 2019)
Errol Katz (until 25 November 2019)
Arlene Tansey (until 26 November 2019)
Arlene Tansey (from 19 August 2019)
39
Directors’ Reportfor the year ended 30 June 2020Healius – Annual Report 2020DIRECTORS’ REPORT Directorships of other listed companies held by Directors
DIRECTOR
COMPANY
Gordon Davis
Midway Limited
Nufarm Limited
Sally Evans
Oceania Healthcare Limited
Robert Hubbard
Bendigo and Adelaide Bank Limited
POSITION
Director
Director
Director
Director
DATE APPOINTED
DATE CEASED
06/04/2016
31/05/2011
23/03/2018
02/04/2013
Central Petroleum Limited
Director and Chairman
06/12/2013
14/05/2018
Arlene Tansey
Orocobre Limited
ADBRI Limited
Aristocrat Leisure Limited
TPG Telecom Limited
Wisetech Global Limited
Director and Chairman
30/11/2012
Director
Director
Director
Director
05/04/2011
04/10/2019
21/07/2016
13/07/2020
01/06/2020
Significant change in the state of affairs
There was no significant change in the state of affairs of the Group during the year. During the year, the Company elected to sell
its Healius Primary Care business. The sale is expected to complete in FY 2021.
Principal activities
During the year, the Group had three principal continuing activities – pathology, imaging and day hospitals. Through a unique
footprint of centres, the Group provides facilities and support services to independent general practitioners, radiologists and
a range of other healthcare professionals, enabling them in turn to deliver care to their patients in partnership with the Group’s
pathologists, nurses and other employees.
Review and results of operations
A review of the operations of the Group during the year, and the results of those operations, appears on pages 16–29 of this Report.
Events after the end of the year
Refer to Note A4 to the Financial Statements on page 90 of this Report for details on the subsequent events relating to the
FY 2003–2007 tax case.
As at the date of this Report, there has not been any other matter or circumstance which has arisen since the end of the year
which, in the opinion of the Directors, has significantly affected, or may significantly affect, the operations of the Group, the results
of those operations, or the state of affairs of the Group in future financial years.
Future developments
Apart from the information provided in the Chair’s letter in the Going Forward section on page 15 of this Report, disclosure
of information regarding likely developments in the operations of the Group in future financial years (including the Group’s business
strategies) and the expected results of those operations other than that disclosed in this Report is likely to result in unreasonable
prejudice to the Group. Accordingly, no further information is included in this Report.
Proceedings on behalf of the Company
There are no proceedings brought or intervened in, or applications to bring or intervene in proceedings, on behalf of the Company
by a member or other person entitled to do so under section 237 of the Corporations Act.
Rounding of amounts
The Company is an entity of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Report) Instrument 2016/191,
dated 24 March 2016, and in accordance with that Instrument, amounts in this Report and the Financial Report are rounded off
to the nearest hundred thousand dollars, or where the amount is $500,000 or less, zero in accordance with that Instrument.
40
Directors’ Reportfor the year ended 30 June 2020 Dividends
During FY 2020, the FY 2019 final dividend of 3.4 cents per share (100% franked) was paid to the holders of fully paid ordinary shares
on 27 September 2019.
In respect of FY 2020 an interim dividend of 2.6 cents per share (100% franked), is to be paid to the holders of fully paid ordinary shares
on 15 October 2020.
Healius operates a Dividend Reinvestment Plan (DRP) and a Bonus Share Plan (BSP). These plans were suspended effective
close of business on 16 February 2016 until further notice and consequently no shares were issued in FY 2020 under either the DRP
or the BSP.
Shares under option
Options are held by employees of the Group. Details of all unissued ordinary shares of Healius under option at the date of this
Report are set out below. No option holder has any right under the options to participate in any other share issue of Healius
or of any other entity.
TLTIP FY 2020
Balance as at date of this Report
–
–
36,394,239
36,394,239
–
–
–
–
36,394,239
36,394,239
OPENING BALANCE
ISSUED SINCE
PRIOR ANNUAL
REPORT
EXERCISED SINCE
PRIOR ANNUAL
REPORT
LAPSED SINCE
PRIOR ANNUAL
REPORT
CLOSING BALANCE
Shares issued on the exercise of options
No ordinary shares of Healius were issued during, or since the end of, FY 2020 on the exercise of options.
Indemnification of officers and auditors
Subject to the following, no insurance premium was paid during or since the end of FY 2020 for a person who is or has been
an officer or auditor of the Group.
During the year, Healius paid a premium in respect of a contract insuring the Directors and Executive Officers of Healius and
of any related body corporate, against liability incurred that is permitted to be covered by section 199B of the Corporations Act.
It is a condition of the insurance contract that its limits of indemnity, the nature of the liability indemnified, and the amount of the
premium, not be disclosed.
The Constitution of Healius provides that each officer of Healius must be indemnified by Healius against any liability incurred
by that person in that capacity. However, Healius must not indemnify that person if to do so would be prohibited by section 199A
of the Corporations Act, any other statutory provision, or judge‑made law. Pursuant to this requirement, each Director of Healius
is party to Deeds of Indemnity, Board Papers Inspection and D&O Coverage, which provide for indemnity against liability
as a Director, except to the extent of indemnity under an insurance policy or where prohibited by statute.
To the extent permitted by law, Healius has agreed to indemnify its auditor, Ernst & Young (Australia) (EY), as part of the terms of its
audit engagement agreement, against claims by third parties arising from the audit (for an unspecified amount). No payment has
been made to indemnify EY during or since FY 2020.
Healius has not otherwise, during or since the end of FY 2020, indemnified or agreed to indemnify an officer or auditor of Healius
or any related body corporate against a liability as such an officer or auditor.
Past employment with external auditor
There is no person who has acted as an officer of the Group during the year who has previously been a partner at EY when that firm
conducted Healius’ audit.
Non‑audit services
During the year EY performed certain other services in addition to their statutory duties as auditor.
The Audit Committee reviews the non‑audit services performed by the auditor on a case‑by‑case basis. In accordance with
advice received from the Audit Committee, the Directors are satisfied that the provision of these non‑audit services by the auditor
(or by another person or firm on the auditor’s behalf) is compatible with, and did not compromise, the auditor independence
requirements of the Corporations Act. The Directors are so satisfied because the Audit Committee or its delegate has assessed
each service, having regard to auditor independence requirements of applicable laws, rules and regulations, and concluded
in respect of each non‑audit service or type of non‑audit service that the provision of that service or type of service would not
impair the auditor’s independence.
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act is included in this Report.
Details of amounts paid or payable to the auditor of the Group for audit and non‑audit services provided during the year are given
in Note E9 on page 118 of this Report.
41
Directors’ Reportfor the year ended 30 June 2020Healius – Annual Report 2020DIRECTORS’ REPORT Management of safety risks
Healius is committed to ensuring that the health and safety of employees, contractors and all people attending Healius’ facilities
is given the highest priority. Healius’ goal is to continually improve the safety environment for our employees, contractors and
patients. Healius’ Workplace Health and Safety (WHS) performance is constantly monitored through the setting of targets
against which actual performance is measured, and this performance is reported via regular monthly reports being provided
to senior management, monthly WHS Dashboard provided to the Board and quarterly performance reporting to the Board.
WHS is incorporated into business planning, purchasing and contracting policies and the design of workplaces.
In order to improve Healius’ health and safety performance, resources are allocated to the maintenance and improvement of the
WHS management system. Professional health and safety staff work very closely with the Employee Representative Committees
which have been established over a number of years in order to incorporate employee representation and consultation into
health and safety initiatives as well as a forum for disseminating information to improve health and safety across all business units.
During FY 2020 there was a detailed review of the resources devoted to the management of the WHS Systems to ensure resourcing
remains appropriate to the requirements of operations.
Healius recognises our responsibilities to contractors. As part of our health and safety procedures, contractors are required
to provide evidence that they have WHS management systems in place and the Company has monitoring procedures in place
for addressing any health and safety issues that may arise from contractor performance. Workplace induction is provided
to contractors prior to the commencement of any work through our online Contractor Induction Program.
Key health and safety performance indicators are as follows:
Completion of Health and Safety Plan activities
by worksites
94%
FY 2020
FY 2019
94%
Mini audits – measuring compliance to Health
& Safety Management System
94% of the 189 mini audits conducted
met or exceeded target.
85% of the 277 mini audits conducted
met or exceeded target.
Internal Health & Safety audits – measuring
compliance to National Audit Tool Version 3
96% of the 33 internal audits
conducted met or exceeded target.
94% of the 47 internal audits
conducted met or exceeded target.
Number of WHS prosecutions
Lost Time Incidents per Million Hours Worked
Zero
5.0
Zero
5.4
For FY 2020, all incidents were investigated and there was no systematic breakdown in the WHS Management System.
Healius has a comprehensive program of health and safety internal audits that are conducted during the course of the year. Audit
findings may be either areas of nonconformance with WHS procedures or be areas for improvement. All findings are discussed with
auditees before being finalised. The final reports are presented to senior management and include the findings, recommendations
to address findings, persons responsible for implementation of recommendations and timeframes for implementation.
Training in health and safety is provided to staff at induction to ensure staff perform their duties safely. There is an established
training program that provides regular training, refresher training and information. Further training is provided when specific issues
are identified through regular workplace supervision, hazard reporting and risk assessment.
Healius is self‑insured for workers’ compensation in NSW, Victoria, Queensland and Western Australia. Healius underwrites workers
compensation claims in these States, with re‑insurance policies in place in each of these States to provide protection against large
cost claims. In the other States and territories Healius holds insurance policies for workers compensation.
Healius makes available to its people information on: Rights, Responsibilities and Obligations; Making a Claim; and Complaints
Handling Procedures in relation to claims. As part of its management of claims, accounting provisions are recognised based
on claims reported; and an estimate of claims incurred but not reported. These provisions are determined on a discounted
basis and having regard to actuarial valuations. Reporting on current claims and provisions is made to senior management
and to the Board.
Healius is engaged in continuous improvement to raise health and safety standards. During the year, there was a comprehensive
review of occupational violence events and a detailed root cause analysis of manual handling incidents. In FY 2021 Healius
is planning a number of strategic projects including a review of WHS resource allocation following the refocusing of the Group
on pathology, imaging and day hospitals.
Environmental regulation
The operations of the Group are not subject to any site‑specific environmental licences or permits which would constitute
particular or significant environmental regulation under the laws of the Australian Government or an Australian Territory.
Healius, through its internal policy and processes, is committed to managing operations in an environmentally sustainable manner
to maximise resource efficiency in relation to the consumption of energy and natural resources and minimise waste.
42
Directors’ Reportfor the year ended 30 June 2020 Remuneration Report
1
2
3
4
5
6
7
8
Letter from the Chair of the People & Governance Committee
Key decisions and outcomes in FY 2020
Setting Senior Executive remuneration
3.1
3.2
Overview of the design
Notable components
Executive KMP – remuneration outcomes for FY 2020
4.1
4.2
4.3
4.4
Key Management Personnel
Executive KMP – opportunities and outcomes for FY 2020
Executive KMP – base package outcomes for FY 2020
Executive KMP – STI opportunity and rationale for FY 2020 and
FY 2020 outcomes
Executive KMP – LTI opportunity for FY 2020 and rationale
Executive KMP – LTI outcome for FY 2018
4.5
4.6
4.7
Executive KMP – tracking of ROIC performance under former LTI plan
Executive KMP remuneration in detail
5.1
5.2
Executive KMP remuneration – statutory disclosure for FY 2020
Executive KMP – service and performance rights and options
awarded, vested and lapsed during FY 2020
Executive KMP – equity holdings in FY 2020
Company performance
5.3
5.4
Non‑executive Directors (NEDs)
6.1
6.2
6.3
6.4
6.5
Non‑executive Director remuneration policy
Non‑executive Director fees
Other Non‑executive Director benefits
Non‑executive Director remuneration during FY 2020
Non‑executive Director equity holdings in FY 2020
Healius’ Remuneration Governance
Remuneration details relating to FY 2020
Senior Executive employment terms
8.1
Senior Executive Short‑term Incentive Plan (STIP) details
8.2
Senior Executive Transformation Long‑term Incentive Plan (TLTIP) details
8.3
Remuneration‑related policies
8.4
Transactions with KMP
8.5
44
45
46
46
46
47
47
48
50
50
50
51
51
52
52
54
55
56
57
57
57
57
58
58
59
60
60
60
61
63
64
43
Healius – Annual Report 2020DIRECTORS’ REPORT 1.
Letter from the Chair of the People & Governance Committee
Dear Shareholder,
On behalf of your Board of Directors, I am pleased to present the Remuneration Report for the financial year ended 30 June 2020
(FY 2020). This report details the remuneration framework and outcomes for Healius’ Key Management Personnel (KMP) in FY 2020.
The remuneration framework aims to ensure that Total Remuneration Packages (TRP) of our executive KMP are linked to shareholder
value. The link is achieved through the variable elements of TRPs with potential Short‑Term Incentive (STI) and Long‑Term Incentive
(LTI) awards deemed “at risk” and dependent upon performance.
Additionally, the remuneration framework takes into account a more holistic view of KMP performance including promulgation
of Company values and risk management. This is done through a balanced scorecard tailored for each KMP.
FY 2020 has seen significant challenges for Healius in meeting the healthcare needs of the Australian community. The COVID‑19
pandemic has presented, and continues to present, unprecedented difficulties. In our frontline role Healius’ people (including the
Directors and the executive KMP) have risen to this challenge and have made sacrifices, including through pay cuts and leave
management programs, in order to assure the continued operations and viability of the Company. Sacrifices have also been made
by the Company’s shareholders, with no FY 2020 final dividend paid, and by governments state and federal, with a Commonwealth
Government Grant agreement benefiting our Pathology division, a number of Montserrat day hospitals receiving JobKeeper and
various state government viability agreements assisting the Healius Day Hospitals business.
In light of these sacrifices, the Board determined that no STI Awards under the format and targets agreed at the beginning of FY 2020
would be made to executive KMP or to other Senior Executives.
FY 2020 also saw Healius’ shareholders approve the new Transformation Long‑Term Incentive Plan (TLTIP) at the 2019 Annual
General Meeting. At a time when consumers are increasingly demanding better ways to access healthcare services, we are striving
to create a substantial improvement in our value proposition to put us at the forefront of healthcare in the Australian community
and deliver sustainable long‑term shareholder returns. As a result, we are in a period of significant strategic change. The Board
determined to simplify the Healius portfolio by placing the Healius Primary Care business on the market, with the sale announced
on 15 June 2020 and the completion of that sale in progress at the time of writing. The sale proceeds will give the Company
greater flexibility to invest in its existing businesses, through margin improvement, evolutionary change and acquisitions. The TLTIP
provides the Board with effective tools to incentivise management to drive this strategic change. You can find details of the TLTIP
at Section 4.5 of this Report.
We have again produced a simplified Remuneration Report for FY 2020, aiming to make it easy to understand and readable.
It includes a summary of key decisions and outcomes for FY 2020 at Section 2 and a non‑statutory table of what each of the
executive KMP was awarded and paid this year at Section 4.2. Apart from the information in this Report, you can find further details
of Healius’ remuneration framework on our website.
As Chair of the People & Governance Committee I thank you for your ongoing support. I hope you will continue to support us by voting
to adopt this Remuneration Report at our upcoming 2020 Annual General Meeting.
Yours sincerely
Sally Evans
Independent Non‑executive Director
Chair of the People & Governance Committee
44
Directors’ Reportfor the year ended 30 June 2020 2.
Key decisions and outcomes in FY 2020
Current
Executive KMP
• Malcolm Parmenter
Managing Director and Chief Executive Officer (CEO)
• Maxine Jaquet
Chief Financial Officer (CFO) (from 19 August 2019) (previously Chief Executive Health & Co)
•
John McKechnie
Chief Executive Pathology (from 19 August 2019)
• Dean Lewsam
Chief Executive Imaging
Base pay/fees
• Annual review of base pay resulted in no across‑the‑board increases in executive KMP base pay for FY 2020.
• Maxine Jaquet and John McKechnie were awarded base pay increases on appointment to their new roles.
• Dean Lewsam was awarded an increase to align to the other divisional Chief Executives and within
market comparability.
• During the COVID‑19 pandemic, from late March 2020 to the end of FY 2020, executive KMP undertook
an effective 20% pay reduction (30% reduction for the CEO) through cuts to their base pay and agreed
annual leave adjustments.
Short Term
Incentives (STI)
Long Term
Incentives (LTI)
•
•
•
•
•
•
In FY 2020 the Board decided that no STI, under the format and targets agreed at the beginning of the year,
would be awarded to executive KMP, in view of the Company’s annual performance and the sacrifices made
by various other stakeholders to ensure the continued operations and viability of the Company during the
COVID‑19 pandemic.
In connection with the introduction of the TLTIP (see below), the Board shifted 25% of STI potential for executive
KMP into long‑term incentive potential, for STI awards in future years.
In addition, the Board changed the cash/equity split of executive KMP STI awards from 75% cash/25% equity
(with half the equity component deferred for one year and half deferred for two years) to two‑thirds cash/
one‑third equity (with all the equity component deferred for one year).
The FY 2018 LTI was tested as at 30 June 2020. None of the Performance Rights vested as neither criterion,
being Healius’ relative total shareholder return measured against a comparator group (rTSR) and cumulative
returns on invested capital (ROIC), was met.
Following approval at last year’s AGM, the Board adopted the Transformation Long‑Term Incentive Plan (TLTIP)
for FY 2020 – FY 2022 inclusive.
The principal improvements in this equity‑based plan are:
‑
long‑term value creation is prioritised by moving 25% of the existing potential STI award potential
(at budgeted performance levels) into the long‑term plan. This includes increasing the portion moved
by 1.2 times dollar value reflecting the longer‑dated and riskier nature of a Long‑Term Incentive (LTI) award;
the grant of Options (rather than Performance Rights) in order to reward participants for the growth
potential in the Company’s share price and thereby strengthen their alignment to shareholders’ interests;
‑
‑
‑ a one‑off grant of Options, rather than annual grants, to cover a three‑year period from FY 2020 with
Options exercisable in equal tranches at the end of FY 2022, FY 2023 and FY 2024. This one‑off grant
creates more incentive for participants and enables the length of the TLTIP to be extended to align with
the longer‑dated timeframe of the strategy; and
the exercise of Options to be subject to cumulative underlying Earnings per Share (EPS) growth and
relative Total Shareholder Return (rTSR) for the CEO and CFO (split 2/3 to 1/3 between EPS growth and
rTSR) to ensure a measurable and close alignment to shareholder returns. For the divisional CEOs,
a divisional underlying Earnings Before Interest and Tax (EBIT) growth target has been added to increase
their motivation through a directly controllable metric (with the split 40%/20%/40% between EPS growth,
rTSR and EBIT growth).
45
Directors’ Reportfor the year ended 30 June 2020Healius – Annual Report 2020DIRECTORS’ REPORT 3.
3.1
Setting Senior Executive remuneration
OVERVIEW OF THE DESIGN
Total Remuneration Package (TRP)
•
Support the business strategy and reinforce Healius’ Purpose, Mission and Values.
• Attract, reward and retain high calibre Senior Executives including executive KMP.
• Align the rewards of these executives to performance and sustained shareholder value.
Base Package
•
•
•
49% of TRP at
Target/Mid‑point
(46% for CEO and CFO).
Externally
benchmarked against
relevant comparator
companies.
Set around the
mid‑point at which
50% of relevant
comparator
companies lie below.
• Annually reviewed
re: competency,
responsibilities
and performance.
• Management of
exceptions, for
example when
particular talent needs
to be retained or there
is an individual with
unique expertise who
needs to be acquired.
Variable Pay
Short‑term Incentives (STI) and Long‑term Incentives (LTI)
•
•
51% of TRP at Target/Mid‑point “at risk” (54% for CEO and CFO).
Links executive reward to Company performance and shareholder value, while balancing
current year results and cash flow with longer‑term value creation.
• Creates executive KMP equity ownership with one‑third of STIs and 100% of LTIs granted in equity.
• Delivers returns over an extended period with STI equity deferred for one year and LTI equity
•
measured after at least three years.
Some financial metrics determined against scalable measures of Threshold or Entry
(80% probability of achievement), Target or Mid‑point (50%–60% probability) and Stretch
or Maximum (10%–20% probability). Scalability incentivises Senior Executives to continue
to outperform when a lower goal has been achieved.
STI
LTI
19% of TRP at Target (20% for CEO and CFO).
•
• Measured against an individual’s
•
32% of TRP at Target or Mid‑point
(35% for CEO and CFO).
balanced scorecard which includes
financial, non‑financial and behavioural
Key Performance Indicators (KPIs), and
takes an holistic view of performance,
strategic implementation, culture
and risk‑management.
• Comprises cash (two‑thirds) and
deferred equity (one‑third) in the form
of Service Rights.
• Determined by rTSR and underlying EPS
growth (also underlying EBIT growth for
divisional Chief Executives).
• Comprises deferred equity in the
form of Options.
3.2
3.2.1
NOTABLE COMPONENTS
Link between Senior Executive remuneration
and Company performance
The remuneration of Senior Executives is designed to link
executive reward and Company performance, balancing
current year performance with longer‑term sustained value
creation. The link is achieved through the at‑risk pay elements
of an executive’s package which represent 50% or more
of total remuneration (at Target or Mid‑point levels).
Healius’ STI plan is not a guaranteed part of executive KMP
remuneration. Indeed, in FY 2020 the CEO recommended and
the Board concurred that no STI would be awarded under
the format and targets agreed at the beginning of the year
in view of the sacrifices made by various stakeholders to ensure
Healius’ ongoing operations and viability during the COVID‑19
pandemic and in view of the Company not meeting its targeted
Underlying Net Profit After Tax (UNPAT) due to the impacts
of COVID‑19.
No LTI Rights vested in FY 2020 relating to the FY 2018 year,
as the performance targets for the three‑year measurement
period were not met.
3.2.2 Multi‑year vesting of equity
Rights and Options granted in a given year as part of STI and
LTI awards will not vest, if at all, until later. STI equity is deferred
for one year and LTI Options are measured and vest after three,
four or five years and then only if targets are met. Shares are
issued at the start of the next financial year. The rolling nature
of remuneration payments encourages executive retention.
Base Package
STI Cash
STI Equity
LTI Equity
Salary plus
superannuation
and benefits
67% of Y1 STI
Award
33% of Y1 STI
Award
0–100% of Y1
LTI Award
(performance tested)
Year 1
Year 2
Year 3
Year 4
46
Directors’ Reportfor the year ended 30 June 2020 Positive gate for rTSR
3.2.3
In order to align remuneration with shareholder outcomes,
a positive TSR gate applies to the vesting of LTI relating
to Healius’ TSR performance against its comparator group.
No award can be made if Healius’ TSR over the measurement
period is zero or negative, even if Healius has performed better
than the comparator group.
Clawback provisions for STIs and LTIs
3.2.4
Payments or vesting related to STI and LTI in the prior three
financial years are subject to Healius’ clawback policy
if it transpires that they were based on materially incorrect
performance information or that actions taken by the relevant
Senior Executive to secure a benefit were, are or will be
detrimental to the best interests of Healius.
3.2.5
Stretch or Maximum performance target for STIs
and LTIs
Where a Stretch or Maximum performance target is included
in an STI or LTI assessment criteria, it generally has only
10%–20% probability of achievement and is intended to equate
to exceptional performance. It creates an incentive for Senior
Executives to continue to outperform even when the Target
or Mid‑point level of performance has been achieved.
The 10–20% probability a Maximum award is particularly
important to understand in connection with the issue of LTI
Options. These are issued at Maximum amounts even though
the probability that the full amount will eventually vest is low.
Comparator group for rTSR
3.2.6
As part of the introduction of the TLTIP, the rTSR comparator
group was reviewed and updated. The group has been
extended from 21 to 36, removing previous companies
which were not considered comparable, and including
non‑healthcare companies from the ASX 51–150 in order
to better reflect comparable market capitalisation, growth
profiles, consumer surrogates and investment substitutes.
The comparator group was selected from companies listed
on the ASX, with assistance from external remuneration
consultants and using the following broad parameters:
• Be broadly defined to avoid “cherry‑picking”.
• Be large enough to produce valid statistics and small
•
•
enough to be reasonably specific.
Include direct competitors for capital, talent or market
share of comparable scale.
Include companies from the healthcare sector
of comparable scale where direct competitors are
not sufficient.
• Be sufficiently liquid to ensure that TSR results are reliable.
• Be balanced in terms of market capitalisation between
smaller and larger companies.
3.2.7
Limitation of variance between statutory
and underlying results
Underlying earnings are to be used in the measurement
of EPS growth and EBIT, rather than statutory earnings,
to ensure management do not benefit from a lower starting
point for statutory earnings than underlying earnings in FY 2019
and hence a higher delta over time. In order to provide
confidence on adjustments between underlying and statutory
results, such adjustments from FY 2022 onwards are limited
to the implementation costs of the Laboratory Platforms
in Pathology and no others. All earnings targets will also
be adjusted to ensure valid comparisons year‑on‑year,
for example earnings will be adjusted for the effect of AASB 16
on performance.
Executive KMP – remuneration outcomes for FY 2020
KEY MANAGEMENT PERSONNEL
4.
4.1
KMP are the Non‑executive Directors, the executive Director and employees who have authority and responsibility for planning,
directing and controlling the activities of the Group, directly or indirectly. The following roles and individuals were identified
as executive KMP for FY 2020 (Non‑executive Directors are identified in section 6).
4.1.1
Current executive KMP
NAME
ROLE
DATES
Malcolm Parmenter
Managing Director & Chief Executive Officer (CEO)
6 September 2017
Maxine Jaquet
Chief Financial Officer (CFO)
Chief Executive Health & Co
Dean Lewsam
Chief Executive Imaging
John McKechnie
Chief Executive Pathology
4.1.2
Former executive KMP
19 August 2019
1 March 2016 to 18 August 2019
23 October 2015
19 August 2019
Malcolm Ashcroft
Chief Financial Officer (CFO)
Acting Chief Executive Officer
13 July 2015 to 27 August 2019
23 May 2017 to 5 September 2017
Wesley Lawrence
Chief Executive Pathology
8 December 2016 to 16 August 2019
Timothy Haggett
Chief Executive Medical Centres 1
23 October 2017 to 25 November 2019
1
As announced in the Company’s Trading and Management Update of 25 November 2019, the role of Chief Executive Medical Centres moved
from primarily transformative and strategic in nature to primarily executional and operational in nature and so was not classified as KMP after
25 November 2019.
47
Directors’ Reportfor the year ended 30 June 2020Healius – Annual Report 2020DIRECTORS’ REPORT EXECUTIVE KMP – OPPORTUNITIES AND OUTCOMES FOR FY 2020
4.2
The following table provides shareholders with a picture of:
•
•
Remuneration opportunities of executive KMP in FY 2020, at Target/Mid‑point performance.
The total remuneration of executive KMP awarded in respect of FY 2020 performance, some of which may be paid or vest
during subsequent financial years.
The total remuneration of executive KMP received during FY 2020, some of which may represent incentive awards from earlier
financial years.
•
This information may be helpful to assist shareholders in understanding the cash and other benefits received by KMP from the
various components of their remuneration during FY 2020.
This is a non‑statutory table and does not include termination benefits. Please refer to section 5 for Healius’ statutory FY 2020
remuneration tables for executive KMP.
SHORT–TERM
INCENTIVE (STI)
(67% CASH; 33%
DEFERRED EQUITY
FOR FY 2020)
BASE PACKAGE
SHORT‑TERM INCENTIVE (STI)
(FY 2020 – 67% CASH; 33% DEFERRED EQUITY)
(FY 2019 – 50% CASH; 50% DEFERRED EQUITY)
LONG‑TERM INCENTIVE (LTI)
(100% DEFERRED EQUITY)
OTHER
PAYMENTS
TOTAL REMUNERATION
ANNUAL BASE
PACKAGE
INCLUDING
SUPER
($) 1, 2
BASE PACKAGE
ACTUALLY PAID
IN YEAR INC.
ANNUAL LEAVE
ADJUSTMENTS
($) 3
TARGET STI
OPPORTUNITY
TARGET STI
AMOUNT
($) 4
4
5
6
1,650,000
1,650,000
725,000
600,000
725,000
650,000
725,000
895,000
895,000
800,000
800,000
750,000
750,000
1,549,432
1,650,000
683,482
600,000
700,309
613,384
603,675
145,223
895,000
323,077
800,000
100,962
750,000
726,000
961,950
319,000
300,000
271,875
325,000
271,875
N/A
521,785
N/A
400,000
N/A
375,000
YEAR
3
FY 2020
FY 2019
FY 2020
FY 2019
FY 2020
FY 2019
FY 2020
FY 2020
FY 2019
FY 2020
FY 2019
FY 2020
FY 2019
FY 2020
FY 2019
6,270,000
5,345,000
4,106,160
5,308,384
1,588,750
2,883,735
Nil
Nil
0%/100%
0%/100%
Nil
1,097,668
302,911
159,832
2,762,700
2,883,735
Nil
4,106,160
244,504
5,308,384
4,409,071
6,810,388
TARGET LTI
OPPORTUNITY
(ONLY VESTS
AFTER 3–5 YEAR
MEASUREMENT
STI OUTCOME FOR YEAR (TO BE PAID
STI FROM PRIOR YEARS
IN FOLLOWING YEARS) 5
(PAID IN YEAR) 5
PERIOD IF
HURDLES ARE
LTI FROM PRIOR
YEARS (VESTED
MET)
IN YEAR)
AWARDED
STI
($)
7
STI AWARDED/
NOT AWARDED
(% OF TARGET)
8
CASH STI
VALUE OF STI
EQUITY VESTED
PAYMENT FROM
FROM PRIOR
PRIOR YEAR
YEARS
TARGET LTI
AMOUNT
($)
9
($)
10
($) 6
11
LTI VESTED
FROM PRIOR
YEARS ($)
OTHER
PAYMENTS
RECEIVED IN
YEAR ($) 7
12
13
TOTAL
REMUNERATION
AWARDED
FOR YEAR’S
TOTAL
REMUNERATION
PERFORMANCE
RECEIVED
(EXC LTI)
DURING YEAR
($)
14
($)
15
Nil
Nil
Nil
Nil
Nil
Nil
Nil
N/A
Nil
N/A
Nil
N/A
Nil
0%/100%
0%/100%
0%/100%
0%/100%
0%/100%
0%/100%
0%/100%
399,329
Nil
Nil
Nil
84,150
117,018
N/A
0%/100%
232,503
0%/100%
137,655
N/A
N/A
N/A
Nil
Nil
Nil
0%/100%
127,013
76,638
1,254,000
N/A
34,847
33,775
47,392
40,630
N/A
69,627
49,526
26,419
N/A
47,988
35,901
961,950
566,200
300,000
471,250
325,000
471,250
N/A
521,785
N/A
400,000
N/A
375,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
1,549,432
1,650,000
683,482
600,000
700,309
613,384
603,675
145,223
895,000
323,077
800,000
100,962
750,000
244,504
1,626,070
2,049,329
718,329
717,925
747,701
771,032
603,675
214,850
1,421,533
349,496
937,655
148,950
912,914
N/A
N/A
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
POSITION
1
NAME
2
Current executive KMP FY 2020
CEO
Malcolm Parmenter
CFO
Maxine Jaquet
Chief Executive Imaging
Dean Lewsam
Chief Executive Pathology
John McKechnie
Former executive KMP
CFO
Malcolm Ashcroft
Chief Executive Medical Centres
Timothy Haggett
Chief Executive Pathology
Wesley Lawrence
TOTAL EXECUTIVE KMP
REMUNERATION
Guide to using the Table
1 Column 14 is the total remuneration paid or awarded for FY 2020 performance to the relevant KMP (with FY 2019 comparison), some of which
may be paid in future periods. It is the sum of columns 5 and 7. While the number of Options granted in FY 2020 under Healius’ TLTIP is set out
in section 5.2 of this Report, the value of vested and exercised Options (if any) relating to the FY 2020 TLTIP award will not be known until the relevant
measurement periods end at the close of each of FY 2022, FY 2023 and FY 2024 and the applicable performance criteria are tested. Consequently,
no amount is included in this table for FY 2020 LTI.
2 Column 15 is the total remuneration received during FY 2020 by the relevant KMP (with FY 2019 comparison), some of which relates to past
periods. It is the sum of columns 5, 9, 10, 12 and 13. Where part of these amounts involve the valuation of vested Rights, the dollar value
is calculated based on the closing Share price on the day that Shares are issued for the vested Rights (not applicable in FY 2020).
48
Directors’ Reportfor the year ended 30 June 2020 This is a non‑statutory table and does not include termination benefits. Please refer to section 5 for Healius’ statutory FY 2020
remuneration tables for executive KMP.
SHORT–TERM
INCENTIVE (STI)
(67% CASH; 33%
DEFERRED EQUITY
FOR FY 2020)
BASE PACKAGE
ANNUAL BASE
PACKAGE
INCLUDING
SUPER
($) 1, 2
4
BASE PACKAGE
ACTUALLY PAID
IN YEAR INC.
ANNUAL LEAVE
ADJUSTMENTS
($) 3
5
TARGET STI
OPPORTUNITY
TARGET STI
AMOUNT
($) 4
6
1,650,000
1,650,000
725,000
600,000
725,000
650,000
725,000
895,000
895,000
800,000
800,000
750,000
750,000
1,549,432
1,650,000
683,482
600,000
700,309
613,384
603,675
145,223
895,000
323,077
800,000
100,962
750,000
726,000
961,950
319,000
300,000
271,875
325,000
271,875
N/A
521,785
N/A
400,000
N/A
375,000
YEAR
3
FY 2020
FY 2019
FY 2020
FY 2019
FY 2020
FY 2019
FY 2020
FY 2020
FY 2019
FY 2020
FY 2019
FY 2020
FY 2019
Current executive KMP FY 2020
POSITION
1
CEO
CFO
NAME
2
Malcolm Parmenter
Maxine Jaquet
Chief Executive Imaging
Dean Lewsam
Chief Executive Pathology
John McKechnie
Former executive KMP
CFO
Malcolm Ashcroft
Chief Executive Medical Centres
Timothy Haggett
Chief Executive Pathology
Wesley Lawrence
TOTAL EXECUTIVE KMP
REMUNERATION
Guide to using the Table
SHORT‑TERM INCENTIVE (STI)
(FY 2020 – 67% CASH; 33% DEFERRED EQUITY)
(FY 2019 – 50% CASH; 50% DEFERRED EQUITY)
LONG‑TERM INCENTIVE (LTI)
(100% DEFERRED EQUITY)
OTHER
PAYMENTS
TOTAL REMUNERATION
STI OUTCOME FOR YEAR (TO BE PAID
IN FOLLOWING YEARS) 5
STI FROM PRIOR YEARS
(PAID IN YEAR) 5
TARGET LTI
OPPORTUNITY
(ONLY VESTS
AFTER 3–5 YEAR
MEASUREMENT
PERIOD IF
HURDLES ARE
MET)
LTI FROM PRIOR
YEARS (VESTED
IN YEAR)
STI
AWARDED
($)
STI AWARDED/
NOT AWARDED
(% OF TARGET)
CASH STI
PAYMENT FROM
PRIOR YEAR
($)
VALUE OF STI
EQUITY VESTED
FROM PRIOR
YEARS
($)
TARGET LTI
AMOUNT
($) 6
LTI VESTED
FROM PRIOR
YEARS ($)
OTHER
PAYMENTS
RECEIVED IN
YEAR ($) 7
TOTAL
REMUNERATION
AWARDED
FOR YEAR’S
PERFORMANCE
(EXC LTI)
($)
TOTAL
REMUNERATION
RECEIVED
DURING YEAR
($)
7
8
9
10
11
12
13
14
15
Nil
76,638
1,254,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
N/A
Nil
N/A
Nil
N/A
Nil
0%/100%
0%/100%
0%/100%
0%/100%
0%/100%
0%/100%
0%/100%
399,329
Nil
84,150
Nil
117,018
N/A
N/A
Nil
0%/100%
232,503
N/A
0%/100%
N/A
0%/100%
Nil
137,655
Nil
127,013
N/A
34,847
33,775
47,392
40,630
N/A
69,627
49,526
26,419
N/A
47,988
35,901
961,950
566,200
300,000
471,250
325,000
471,250
N/A
521,785
N/A
400,000
N/A
375,000
FY 2020
FY 2019
6,270,000
5,345,000
4,106,160
5,308,384
1,588,750
2,883,735
Nil
Nil
0%/100%
0%/100%
Nil
1,097,668
302,911
159,832
2,762,700
2,883,735
N/A
N/A
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
244,504
Nil
Nil
Nil
Nil
1,549,432
1,650,000
683,482
600,000
700,309
613,384
603,675
145,223
895,000
323,077
800,000
100,962
750,000
1,626,070
2,049,329
718,329
717,925
747,701
771,032
603,675
214,850
1,421,533
349,496
937,655
148,950
912,914
Nil
4,106,160
244,504
5,308,384
4,409,071
6,810,388
1 Column 14 is the total remuneration paid or awarded for FY 2020 performance to the relevant KMP (with FY 2019 comparison), some of which
may be paid in future periods. It is the sum of columns 5 and 7. While the number of Options granted in FY 2020 under Healius’ TLTIP is set out
in section 5.2 of this Report, the value of vested and exercised Options (if any) relating to the FY 2020 TLTIP award will not be known until the relevant
measurement periods end at the close of each of FY 2022, FY 2023 and FY 2024 and the applicable performance criteria are tested. Consequently,
no amount is included in this table for FY 2020 LTI.
2 Column 15 is the total remuneration received during FY 2020 by the relevant KMP (with FY 2019 comparison), some of which relates to past
periods. It is the sum of columns 5, 9, 10, 12 and 13. Where part of these amounts involve the valuation of vested Rights, the dollar value
is calculated based on the closing Share price on the day that Shares are issued for the vested Rights (not applicable in FY 2020).
Notes
1 Column 4. Base Package and target amounts are shown on an annual basis. As John McKechnie commenced during FY 2020 these amounts
were not paid in full in FY 2020. Column 5 shows the pro‑rata amount actually paid in FY 2020.
2 Column 4. The annual base package for Maxine Jaquet increased to $725,000 effective 19 August 2019 (on her appointment as CFO). Column 5
shows the actual amount paid in FY 2020 which includes the period 1 July 2019 to 19 August 2019 when she was being paid at her previous salary.
3 Column 5. This column has been adjusted to account for cash salary reductions and annual leave adjustments agreed with the relevant
executive KMP as part of the Company’s response to the COVID‑19 pandemic.
4 Column 6. Stretch STI may exceed Target STI depending on the criteria set by the Board from year to year (not applicable in FY 2020 or FY 2019).
5 Columns 7–10. Zero STI was awarded to KMP in relation to FY 2020 and FY 2019.
6 Column 11. The target LTI Amount represents the mid‑point TLTIP Award for one year’s worth of LTI. Maximum LTI is up to 200% of Mid‑point LTI.
7 Column 13. The amount included for Malcolm Ashcroft in FY 2019 is for the vesting of a sign on arrangement dating from 12 September 2016.
The amount was paid by way of the issue of 68,681 ordinary Shares in the Company on 13 July 2018 at a price of $3.435 per Share (closing price
on that date).
49
Directors’ Reportfor the year ended 30 June 2020Healius – Annual Report 2020DIRECTORS’ REPORT EXECUTIVE KMP – BASE PACKAGE OUTCOMES FOR FY 2020
4.3
The annual review of pay resulted in no across‑the‑board increases in executive KMP base pay for FY 2020. Dean Lewsam was
awarded a base pay increase to align to the other divisional Chief Executives and within market comparability. Maxine Jaquet
and John McKechnie were awarded base pay increases on appointment to their new roles.
During the COVID‑19 pandemic, the executive KMP accepted an effective 20% pay reduction (30% for the CEO) through cuts
to their base pay and agreed annual leave adjustments.
EXECUTIVE KMP – STI OPPORTUNITY AND RATIONALE FOR FY 2020 AND FY 2020 OUTCOMES
4.4
Healius’ STI plan is at‑risk remuneration and is not a guaranteed part of executive KMP remuneration.
In FY 2020, the CEO recommended and the Board concurred that no STI would be awarded under the format and targets agreed at the
beginning of the year, in view of the Company not meeting its targeted UNPAT and in view of the sacrifices made by other stakeholders.
Executive KMP STI outcomes are measured against an individual’s balanced scorecard which includes financial, non‑financial and
behavioural KPIs, and takes an holistic view of performance, strategic implementation, culture and risk management.
Group and Divisional UNPAT and Group Cash Flow
4.4.1
Group and divisional UNPAT and Group cash flow were selected by the Board as being the most appropriate method of measuring
the Company’s FY 2020 financial performance. These measures typically accounted for around 70% of an executive KMP’s potential
STI award.
As for the FY 2019 STI plan, Healius incorporated Threshold, Target and Stretch goals into the UNPAT metrics, in order to incentivise
Senior Executives to continue to achieve once a lower goal had been achieved.
Role‑specific strategic objectives
4.4.2
Role‑specific strategic objectives ensure KMP are measured and rewarded for initiatives over which they have responsibility,
which contribute directly to the Company’s strategic plan and which aim to deliver increased shareholder value. They are focused
on specific KPIs that are both measurable and tied directly to the Group’s strategy and they have been set to be sufficiently
challenging to each member of the KMP. These typically account for around 30% of an executive KMP’s potential STI award.
Leadership behavioural KPIs
4.4.3
As for the FY 2018 and FY 2019 STI plans, Healius’ Purpose, Mission and Values continued to underscore these KPIs in the FY 2020 STI
plan. For the FY 2020 STI plan, as for FY 2019, leadership behaviours were not ascribed a specific percentage of an executive KMP’s
STI award, but rather were a modifier for the whole STI award. This included the Board’s retained discretion (not exercised) to modify
an otherwise 100% award to zero in the case of poor leadership behaviours.
As no STI remuneration was awarded to executive KMP for FY 2019 or FY 2020, detailed STI targets, including the balanced
scorecards, are not set out below. They will be reinstated in future Annual Reports if STIs are awarded by the Board.
4.5
EXECUTIVE KMP – LTI OPPORTUNITY AND RATIONALE FOR FY 2020
Measurement period for FY 2020 LTI awards
4.5.1
LTI awards relating to FY 2020 are subject to the new Transformation Long‑Term Incentive Plan (TLTIP). Options vest after
a three‑to‑five year measurement period.
For Senior Executives in FY 2020, a three‑year grant of Options was made; one third will be assessed after 30 June 2022, one third
after 30 June 2023 and one third after 30 June 2024. No annual grant of Options will be made to these Senior Executives in FY 2021
or FY 2022. This one‑off grant creates more incentive for participants and enables the length of the TLTIP to be extended to align
with the longer‑dated timeframe of the Company’s strategy.
Under the TLTIP, Healius issues Options for LTI awards to executive KMP and Senior Executives. These Options will not vest and
become exercisable unless and until:
•
•
•
the relevant predetermined measurement period set by the Board ends;
the Company’s performance is assessed against performance criteria; and
the level of vesting is determined by the Board based on the Company’s performance.
rTSR, underlying EPS growth and divisional underlying EBIT growth criteria for FY 2020 LTI awards
4.5.2
LTI awards for executive KMP will be determined using the following criteria:
•
•
•
40% based on Compound Annual Growth Rate (CAGR) in underlying Earnings Per Share (EPS) (66.7% for the CEO and CFO);
20% based on relative Total Shareholder Return (rTSR) (33.3% for the CEO and CFO); and
40% based on the underlying Earnings Before Interest and Taxation (EBIT) of the relevant executive KMP’s business division
(not applicable to CEO and CFO).
Underlying earnings are to be used in the measurement of EPS growth and EBIT, rather than statutory earnings, to ensure
management do not benefit from a lower starting point for statutory earnings than underlying earnings in FY 2019 and hence
a higher change over time. In order to provide confidence on adjustments between underlying and statutory results, such
adjustments from FY 2022 onwards will be limited to the implementation costs of the Laboratory Platforms in Pathology
and no others. All earnings targets will also be adjusted to ensure valid comparisons year‑on‑year, for example earnings
will be adjusted for the effect of AASB 16 on performance.
50
Directors’ Reportfor the year ended 30 June 2020 rTSR was selected by the Board to motivate Senior Executives to drive returns which outperform those of comparable companies
and thereby make Healius a superior investment. rTSR is calculated as follows:
TSR
Share price movement + dividends (14‑day Volume Weighted Average Price).
Comparator Group
See table in 8.3.
Linear vesting scale
Below Entry performance, none of the
relevant Options become exercisable.
50% of Options become exercisable at Entry,
being point at which 50% of comparator
group lie below.
Positive Gate
Nil award if Healius’ TSR is zero or negative.
100% of Options become exercisable at
or above Maximum, being point at which
75% of comparator group lie below.
Between Entry and Maximum performance,
relevant Options become exercisable
on a linear scale between 50% and 100%.
Underlying EPS was selected by the Board to ensure a measurable and close alignment to shareholder returns.
Underlying EPS
Underlying Net Profit After Tax/Number of ordinary shares on issue.
Performance
conditions
The following targets for Compound
Annual Growth Rate (CAGR) in underlying
EPS have been set:
• Between Entry and Mid‑point performance,
relevant Options become exercisable
on a linear scale between 25% and 50%.
Entry: 4% Mid‑point: 7% Maximum: 10%
• Below Entry performance, none of the
relevant Options become exercisable.
• At Entry performance, 25% of the
relevant Options become exercisable.
• At Mid‑point performance, 50% of the relevant
Options become exercisable.
• Between Mid‑point and Maximum performance,
relevant Options become exercisable
on a linear scale between 50% and 100%.
• At or above Maximum performance, 100%
of the relevant Options become exercisable.
From FY 2022 onwards, the only adjustment allowed (for TLTIP assessment purposes) between
statutory and underlying performance is the costs of the Laboratory Platforms in Pathology.
Gate Limiting condition
on Underlying
Performance
Divisional Underlying EBIT was selected by the Board to incentivise ongoing earnings growth over a sustained period.
The divisional underlying EBIT performance conditions are set by the Board as part of the Company’s budgeting process.
The prospective disclosure of these targets will not be made as it is commercially sensitive. For the purposes of awards under
the TLTIP, the Board’s target‑setting process ensures that divisional Chief Executives (and other TLTIP participants to whom
EBIT growth Performance Conditions are assigned) are rewarded only for consistently achieving EBIT growth within their division.
As with the underlying EPS performance condition, adjustments between underlying and statutory results from FY 2022 onwards will
be limited to the implementation costs of the Laboratory Platforms in Pathology. All earnings targets will also be adjusted to ensure
valid comparisons year‑on‑year, for example earnings will be adjusted for the effect of AASB 16 on performance.
EXECUTIVE KMP – LTI OUTCOME FOR FY 2018
4.6
The measurement period for FY 2018 LTI awards was FY 2018–FY 2020. The LTI performance criteria set by the Board for FY 2018
and Healius’ results for FY 2018–FY 2020 inclusive, are set out in the following table:
LTI PERFORMANCE MEASURE
TARGET PERFORMANCE
ACTUAL RESULT
OUTCOME
rTSR
ROIC
P50 of comparator group
HLS TSR (<0)%; Comparator group
N/A because HLS TSR <0%.
Below Threshold/Target
Nil award
8.4%
HLS ROIC 5.7%
Below Threshold
Nil award
As the performance criteria were not met, there will be no LTI awarded in relation to FY 2018. All Performance Rights issued
to executive KMP in relation to the FY 2018 LTI have lapsed.
4.7
EXECUTIVE KMP – TRACKING OF ROIC PERFORMANCE UNDER FORMER LTI PLAN
AWARD YEAR
FY 2019
FY 2018
THRESHOLD
%
TARGET
%
STRETCH
%
ACHIEVED 1
%
MEASUREMENT
PERIOD
VESTING DATES
(IF TARGETS ACHIEVED)
7.1
8.2
7.3
8.4
7.5
8.6
5.5
5.7
FY 2019–2021
After 1 July 2021
FY 2018–2020
After 1 July 2020
1
These figures are based on the Company’s actual performance in the completed financial years of the relevant measurement period.
AWARD
OUTCOME
Open
Nil
51
Directors’ Reportfor the year ended 30 June 2020Healius – Annual Report 2020DIRECTORS’ REPORT POST‑EMPLOYMENT
LONG‑TERM
BENEFITS
EMPLOYEE BENEFITS
EQUITY SETTLED SHARE‑BASED PAYMENTS
SUPER
LONG SERVICE
CONTRIBUTIONS
($)
LTI 4
($)
TOTAL
($)
TERMINATION
BENEFITS 5,6
($)
LEAVE 2
($)
20,500
38,631
14,583
10,160
27,387
13,178
10,441
(60,769)
15,346
5,777
13,694
(213,019)
18,361
(195,100)
99,370
21,003
20,531
21,003
20,531
21,003
20,531
18,175
4,039
20,531
8,482
20,531
2,827
20,531
96,532
123,186
STI 3
($)
23,706
59,186
4,996
19,077
6,947
27,166
2,812
13,803
43,294
8,172
20,403
7,540
26,152
67,976
195,278
1,594,130
133,165
687,945
81,973
593,135
91,432
452,764
270,833
145,776
(149,827)
57,827
(173,727)
85,439
3,275,253
595,612
3,232,745
1,899,523
1,410,685
710,967
1,340,002
773,741
1,099,500
374,557
1,091,239
209,711
935,121
(363,674)
887,694
7,303,526
6,298,283
–
–
–
–
–
–
–
–
–
–
–
–
1,001,910
1,091,503
2,093,413
Executive KMP remuneration in detail
EXECUTIVE KMP REMUNERATION – STATUTORY DISCLOSURE FOR FY 2020
5
5.1
The following tables outline the remuneration received by Healius’ executive KMP during FY 2020 prepared according to statutory
disclosure requirements and applicable accounting standards.
NAME
Current Executive KMP
Malcolm Parmenter
Maxine Jaquet
Dean Lewsam
John McKechnie 1
(from 18 August 2019)
Former Executive KMP
Malcolm Ashcroft
(until 27 August 2019)
Timothy Haggett
(until 25 November 2019)
Wesley Lawrence
(until 16 August 2019)
TOTAL EXECUTIVE KMP
REMUNERATION
SHORT‑TERM EMPLOYEE BENEFITS
CASH SALARY
($)
CASH STI
($)
NON‑MONETARY
BENEFITS 1
($)
1,603,613
1,629,469
676,017
579,469
692,844
592,853
601,746
141,184
874,469
314,595
779,469
98,134
729,469
4,128,133
5,185,198
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,269
2,124
2,269
2,124
2,269
2,124
–
2,536
2,124
1,418
2,124
851
2,124
11,612
12,744
YEAR
2020
2019
2020
2019
2020
2019
2020
2020
2019
2020
2019
2020
2019
2020
2019
ANNUAL
LEAVE 2
($)
(32,476)
26,417
3,872
(2,367)
(3,583)
26,457
13,562
2,931
(10,301)
21,094
41,072
(86,280)
5,617
(80,880)
86,895
Represents the taxable value of fringe benefits for the respective FBT year ended 31 March.
1
2 Changes in accrued leave represent annual leave and long service leave accrued or utilised during the financial year. Negative amounts
represent the utilisation of annual leave for continuing employees and reversal of balances for former employees.
3 Relates to Service Rights granted in respect of the FY 2017 and FY 2018 STI Plans and calculated in accordance with AASB 2 Share-based Payments.
4 Relates to Performance Rights granted in respect of the FY 2018 and FY 2019 LTI Plans and Options granted in respect of the FY 2020 TLTIP and
5
6
all calculated in accordance with AASB 2 Share-based Payments.
Termination benefits for Malcolm Ashcroft include annual leave, long service leave and ex gratia payments for a period worked after he ceased
to be KMP and in lieu of receiving an STI payment for FY 2020 as well as termination benefits.
Termination benefits for Wesley Lawrence include annual leave, long service leave and amounts received whilst on gardening leave as well
as termination benefits.
52
Directors’ Reportfor the year ended 30 June 2020 Executive KMP remuneration in detail
5
5.1
EXECUTIVE KMP REMUNERATION – STATUTORY DISCLOSURE FOR FY 2020
The following tables outline the remuneration received by Healius’ executive KMP during FY 2020 prepared according to statutory
disclosure requirements and applicable accounting standards.
SHORT‑TERM EMPLOYEE BENEFITS
CASH SALARY
($)
CASH STI
($)
NON‑MONETARY
BENEFITS 1
($)
NAME
Current Executive KMP
Malcolm Parmenter
Maxine Jaquet
Dean Lewsam
John McKechnie 1
(from 18 August 2019)
Former Executive KMP
Malcolm Ashcroft
(until 27 August 2019)
Timothy Haggett
(until 25 November 2019)
Wesley Lawrence
(until 16 August 2019)
TOTAL EXECUTIVE KMP
REMUNERATION
YEAR
2020
2019
2020
2019
2020
2019
2020
2020
2019
2020
2019
2020
2019
2020
2019
1,603,613
1,629,469
676,017
579,469
692,844
592,853
601,746
141,184
874,469
314,595
779,469
98,134
729,469
4,128,133
5,185,198
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,269
2,124
2,269
2,124
2,269
2,124
–
2,536
2,124
1,418
2,124
851
2,124
11,612
12,744
ANNUAL
LEAVE 2
($)
(32,476)
26,417
3,872
(2,367)
(3,583)
26,457
13,562
2,931
(10,301)
21,094
41,072
(86,280)
5,617
(80,880)
86,895
1
Represents the taxable value of fringe benefits for the respective FBT year ended 31 March.
2 Changes in accrued leave represent annual leave and long service leave accrued or utilised during the financial year. Negative amounts
represent the utilisation of annual leave for continuing employees and reversal of balances for former employees.
3 Relates to Service Rights granted in respect of the FY 2017 and FY 2018 STI Plans and calculated in accordance with AASB 2 Share-based Payments.
4 Relates to Performance Rights granted in respect of the FY 2018 and FY 2019 LTI Plans and Options granted in respect of the FY 2020 TLTIP and
all calculated in accordance with AASB 2 Share-based Payments.
5
Termination benefits for Malcolm Ashcroft include annual leave, long service leave and ex gratia payments for a period worked after he ceased
to be KMP and in lieu of receiving an STI payment for FY 2020 as well as termination benefits.
6
Termination benefits for Wesley Lawrence include annual leave, long service leave and amounts received whilst on gardening leave as well
as termination benefits.
POST‑EMPLOYMENT
BENEFITS
LONG‑TERM
EMPLOYEE BENEFITS
EQUITY SETTLED SHARE‑BASED PAYMENTS
SUPER
CONTRIBUTIONS
($)
LONG SERVICE
LEAVE 2
($)
21,003
20,531
21,003
20,531
21,003
20,531
18,175
4,039
20,531
8,482
20,531
2,827
20,531
96,532
123,186
20,500
38,631
14,583
10,160
27,387
13,178
10,441
(60,769)
15,346
5,777
13,694
(213,019)
18,361
(195,100)
99,370
STI 3
($)
23,706
59,186
4,996
19,077
6,947
27,166
2,812
13,803
43,294
8,172
20,403
7,540
26,152
67,976
195,278
LTI 4
($)
TOTAL
($)
TERMINATION
BENEFITS 5,6
($)
1,594,130
133,165
687,945
81,973
593,135
91,432
452,764
270,833
145,776
(149,827)
57,827
(173,727)
85,439
3,275,253
595,612
3,232,745
1,899,523
1,410,685
710,967
1,340,002
773,741
1,099,500
374,557
1,091,239
209,711
935,121
(363,674)
887,694
7,303,526
6,298,283
–
–
–
–
–
–
–
1,001,910
–
–
–
1,091,503
–
2,093,413
–
53
Directors’ Reportfor the year ended 30 June 2020Healius – Annual Report 2020DIRECTORS’ REPORT 5.2
EXECUTIVE KMP – SERVICE AND PERFORMANCE RIGHTS AND OPTIONS AWARDED, VESTED AND
LAPSED DURING FY 2020
FY 2020 equity awards to executive KMP can made in the form of Service Rights or Options. Executive KMP also hold Performance
Rights from the previous LTI Plan, and during FY 2020 received Shares on vesting of FY 2017 and FY 2018 STI Service Rights.
1
Service Rights are used for the equity portion of STI awards and, once issued, are subject to the relevant Senior Executive
remaining employed by Healius for a predetermined period; at the end of which the Service Rights vest and one ordinary
share is issued for each vested Right. 100% of the Service Rights vest after one year. A Service Right is used for the equity
portion of the STI award in order to enable deferral of a portion of the STI award to promote Senior Executive retention.
2 Options are used for LTI awards to Senior Executives under the TLTIP and, once issued, are subject to various predetermined
performance criteria being met by the Company over the measurement period. At the end of the measurement period, if the
Board determines that the performance criteria have been met, the Options vest, that is, become exercisable (in a proportion
determined by the Board) and, on payment of the Exercise Price, one ordinary Share is issued for each vested Option. If the
performance criteria have not been met then the Options lapse and no Shares are issued.
3 Performance Rights are used for LTI awards to Senior Executives under the previous LTI Plan and once issued, are subject
to various predetermined performance criteria being met by the Company over the measurement period. At the end of the
measurement period, if the Board determines that the performance criteria have been met, the Performance Rights vest and
one ordinary share is issued for each vested Right. If the performance criteria have not been met then the Rights lapse and
no shares are issued.
Service Rights and Performance Rights are granted for nil monetary consideration and do not have an exercise price. Options are
granted for nil monetary consideration. Each type of security is issued by Healius Limited.
5.2.1
Service Rights
NAME
GRANT
VESTING
DATE 1
RIGHTS VESTED
DURING YEAR
(NO.)
VALUE OF RIGHTS
VESTED DURING
YEAR 2
($)
RIGHTS LAPSED
DURING YEAR
(NO.)
Current Executive KMP
Malcolm Parmenter
Maxine Jaquet
Dean Lewsam
Former Executive KMP
Malcolm Ashcroft
Timothy Haggett
Wesley Lawrence
FY 2018 STI – Tranche 1
FY 2018 STI – Tranche 1
FY 2017 STI – Tranche 2
FY 2018 STI – Tranche 1
FY 2017 STI – Tranche 2
FY 2018 STI – Tranche 1
FY 2017 STI – Tranche 2
FY 2018 STI – Tranche 1
FY 2018 STI – Tranche 1
FY 2017 STI – Tranche 2
1 July 2019
1 July 2019
1 July 2019
1 July 2019
1 July 2019
1 July 2019
1 July 2019
1 July 2019
1 July 2019
1 July 2019
25,461
5,365
6,212
7,461
8,284
14,824
8,308
8,777
8,098
7,845
76,638
16,149
18,698
22,458
24,935
44,620
25,007
26,419
24,375
23,613
–
–
–
–
–
–
–
–
–
–
1
For Rights that have vested during the year the vesting date is the actual date on which ordinary Shares were issued for the vested Rights.
2 Calculated based on the closing Share price on the day that ordinary Shares are issued for vested Rights (the vesting date in the tables above)
being $3.01 on 1 July 2019.
5.2.2
Performance Rights
NAME
GRANT
Current Executive KMP
Maxine Jaquet
Dean Lewsam
Former Executive KMP
Malcolm Ashcroft
Wesley Lawrence
FY 2017 LTI – ROIC
FY 2017 LTI – rTSR
FY 2017 LTI – ROIC
FY 2017 LTI – rTSR
FY 2017 LTI – rTSR
FY 2017 LTI – ROIC
FY 2017 LTI – rTSR
FY 2017 LTI – ROIC
AWARD
DATE 1
VESTING
DATE 2
RIGHTS LAPSED
DURING YEAR 3
(NO.)
31 August 2017
31 August 2017
31 August 2017
31 August 2017
31 August 2017
31 August 2017
31 August 2017
31 August 2017
1 July 2019
1 July 2019
1 July 2019
1 July 2019
1 July 2019
1 July 2019
1 July 2019
1 July 2019
80,863
80,863
78,167
78,167
153,694
153,694
80,323
80,323
Award date in determined in accordance with the principles of AASB 2 Share-based Payment.
For Rights that have lapsed during the year the vesting date is the first date after the end of the measurement period, which is the first day
on which ordinary Shares could be issued once the relevant Rights have vested.
The FY 2017 LTI allows for retesting of Performance Rights, extending the measurement period (and therefore the vesting date) by one year
compared to the dates in the above table. The Board has determined that no retesting will be undertaken in relation to the FY 2017 LTI.
1
2
3
54
Directors’ Reportfor the year ended 30 June 2020 5.2.3 Options
The table below details movements during the year in the number of Options in Healius Limited held by KMP, their close family
members, and entities controlled, jointly controlled or significantly influenced by KMP or their close family members.
NAME
GRANT
OPTIONS
AWARDED
DURING
YEAR
(NO.)
FAIR VALUE
PER OPTION
AT AWARD
DATE
($) 1
VALUE OF
OPTIONS
AWARDED
DURING
YEAR ($)
AWARD DATE 1
VESTING
DATE 2
EXERCISE
PRICE
($)
OPTIONS
VESTED
& EXBLE
DURING
YEAR
(NO.)
OPTIONS
LAPSED
DURING
YEAR
(NO.)
Current Executive KMP
Malcolm
Parmenter
FY 2020 TLTIP – EPS
2,462,531
28 February 2020
0.42
1,034,263
1 July 2022
FY 2020 TLTIP – rTSR 1,231,266
28 February 2020
0.41
504,819
1 July 2022
FY 2020 TLTIP – EPS
2,462,531
28 February 2020
0.47
1,157,390
1 July 2023
FY 2020 TLTIP – rTSR 1,231,266
28 February 2020
0.46
566,382
1 July 2023
FY 2020 TLTIP – EPS
2,462,531
28 February 2020
0.50
1,231,266
1 July 2024
Maxine
Jaquet
FY 2020 TLTIP – rTSR 1,231,266
28 February 2020
FY 2020 TLTIP – EPS
1,111,870
28 February 2020
FY 2020 TLTIP – rTSR
555,935
28 February 2020
FY 2020 TLTIP – EPS
1,111,870
28 February 2020
FY 2020 TLTIP – rTSR
555,935
28 February 2020
FY 2020 TLTIP – EPS
1,111,870
28 February 2020
FY 2020 TLTIP – rTSR
555,936
28 February 2020
John
McKechnie
FY 2020 TLTIP – EPS
555,248
28 February 2020
FY 2020 TLTIP – EBIT
555,248
28 February 2020
FY 2020 TLTIP – rTSR
277,624
28 February 2020
FY 2020 TLTIP – EPS
555,248
28 February 2020
FY 2020 TLTIP – EBIT
555,248
28 February 2020
FY 2020 TLTIP – rTSR
277,624
28 February 2020
FY 2020 TLTIP – EPS
555,248
28 February 2020
FY 2020 TLTIP – EBIT
555,246
28 February 2020
FY 2020 TLTIP – rTSR
277,624
28 February 2020
Dean
Lewsam
FY 2020 TLTIP – EPS
555,248
28 February 2020
FY 2020 TLTIP – EBIT
555,248
28 February 2020
FY 2020 TLTIP – rTSR
277,624
28 February 2020
FY 2020 TLTIP – EPS
555,248
28 February 2020
FY 2020 TLTIP – EBIT
555,248
28 February 2020
FY 2020 TLTIP – rTSR
277,624
28 February 2020
FY 2020 TLTIP – EPS
555,248
28 February 2020
FY 2020 TLTIP – EBIT
555,246
28 February 2020
FY 2020 TLTIP – rTSR
277,624
28 February 2020
0.49
0.42
0.41
0.47
0.46
0.50
0.49
0.42
0.42
0.41
0.47
0.47
0.46
0.50
0.50
0.49
0.42
0.42
0.41
0.47
0.47
0.46
0.50
0.50
0.49
603,320
1 July 2024
466,985
1 July 2022
227,933
1 July 2022
522,579
1 July 2023
255,730
1 July 2023
555,935
1 July 2024
272,409
1 July 2024
233,204
1 July 2022
233,204
1 July 2022
113,826
1 July 2022
260,967
1 July 2023
260,967
1 July 2023
127,707
1 July 2023
277,624
1 July 2024
277,623
1 July 2024
136,036
1 July 2024
233,204
1 July 2022
233,204
1 July 2022
113,826
1 July 2022
260,967
1 July 2023
260,967
1 July 2023
127,707
1 July 2023
277,624
1 July 2024
277,623
1 July 2024
136,036
1 July 2024
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
3.05
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
2
Award date and fair value per Option calculated in accordance with the principles of AASB 2 Share-based Payment.
For Options awarded during the year the vesting date is the first day after the end of the measurement period, which is the first day on which the
relevant Options can vest.
5.3
EXECUTIVE KMP – EQUITY HOLDINGS IN FY 2020
Ordinary Shares
5.3.1
The table below details movements during the year in the number of ordinary Shares in Healius Limited held by KMP, their close
family members, and entities controlled, jointly controlled or significantly influenced by KMP or their close family members.
NAME
Current Executive KMP
Malcolm Parmenter
Maxine Jaquet
Dean Lewsam
John McKechnie
BALANCE AT
BEGINNING
OF YEAR
(NO.)
59,597
49,609
30,955
16,087
VESTING OF RIGHTS
(SHARES ISSUED)
(NO.)
SHARES
PURCHASED/(SOLD)
(NO.)
BALANCE AT END
OF YEAR
(NO.)
25,461
11,577
15,745
–
–
–
(13,000)
–
85,058
61,186
33,700
16,087
55
Directors’ Reportfor the year ended 30 June 2020Healius – Annual Report 2020DIRECTORS’ REPORT Rights and Options
5.3.2
The table below details movements during the year in the number of Rights and Options in Healius Limited held by KMP, their
close family members, and entities controlled, jointly controlled or significantly influenced by KMP or their close family members.
On vesting, each Right or Option is exercised for one ordinary Share in the Company.
NAME
CLASS
BALANCE AT
BEGINNING OF
YEAR
(NO.) 1
RIGHTS/
OPTIONS
AWARDED AS
COMPENSATION
DURING YEAR
(NO.) 1
RIGHTS/
OPTIONS
VESTED DURING
YEAR
(NO.) 2
RIGHTS/
OPTIONS
LAPSED DURING
YEAR
(NO.) 3
RIGHTS/
OPTIONS
FORFEITED
DURING YEAR
(NO.) 4
BALANCE
AT END OF
YEAR
(NO.)
Current Executive KMP
Malcolm Parmenter
Service Rights
51,998
–
(25,461)
Performance Rights
1,280,160
Maxine Jaquet
Service Rights
Options
–
17,169
Performance Rights
593,494
–
11,081,391
–
–
Options
–
5,003,416
Dean Lewsam
Service Rights
Performance Rights
Options
John McKechnie
Service Rights
Performance Rights
Options
23,521
602,998
–
–
–
4,164,358
3,613
115,138
–
–
–
4,164,358
Former Executive KMP
Malcolm Ashcroft
Service Rights
38,583
Performance Rights
1,106,086
Timothy Haggett
Service Rights
Wesley Lawrence
Service Rights
Performance Rights
Performance Rights
17,925
500,994
24,383
700,358
–
–
–
–
–
–
–
–
(11,577)
–
–
(15,745)
–
–
–
–
–
(23,132)
–
–
–
–
(161,726)
–
–
(156,334)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(500,994)
–
26,537
1,280,160
11,081,391
5,592
431,768
5,003,416
7,776
446,664
4,164,358
3,613
115,138
4,164,358
15,451
798,698
9,148
–
8,440
–
–
(307,388)
(8,777)
–
(15,943)
–
–
–
–
(160,646)
(539,712)
1
2
3
4
The balance at the beginning of year for John McKechnie represents the number of instruments he held at the date he commenced as KMP.
Vesting of the second tranche of FY 2017 Service Rights and the first tranche of FY 2018 STI Service Rights.
Lapsing of FY 2017 LTI Performance Rights.
These Rights were forfeited and were not exercisable at the end of FY 2020.
5.4
COMPANY PERFORMANCE
Five (plus)‑year performance table
5.4.1
The following provides a summary of the key financial results for the Company over the FY 2020 period and the previous five
financial years in accordance with the five‑year performance requirements of the Corporations Act plus one additional year:
SHORT TERM CHANGE
IN SHAREHOLDER VALUE
OVER 1 YEAR
(SP INCREASE + DIVIDENDS)
LONG TERM (CUMULATIVE)
3 YEARS CHANGE IN
SHAREHOLDER VALUE
FY
30‑Jun‑20
30‑Jun‑19
30‑Jun‑18
30‑Jun‑17
30‑Jun‑16
30‑Jun‑15
REVENUE
($M)1
1,585
1,805
1,705
1,659
1,637
1,618
REPORTED
PROFIT/
(LOSS)
AFTER TAX
($M) 2
UNDERLY‑
ING PROFIT/
(LOSS)
AFTER TAX
($M)3
CLOSING
SHARE
PRICE
($)
CHANGE
IN SHARE
PRICE
($)
DIVIDENDS
($) 4
AMOUNT
($)
(71)
56
4
(517)
75
128
55
93
88
92
104
112
3.05
3.02
3.37
3.64
3.95
5.04
0.03
‑0.35
‑0.27
‑0.31
‑1.09
0.50
0.05
0.14
0.16
0.16
0.20
0.29
0.08
‑0.21
‑0.12
‑0.15
‑0.89
0.79
AMOUNT
($)
‑0.25
‑0.48
‑1.16
‑0.25
‑0.06
%
‑6.87
‑12.08
‑22.93
‑5.57
‑1.19
%
2.62
‑6.23
‑3.22
‑3.80
‑17.63
17.31
Underlying revenue.
Statutory or reported profit.
1
2
3 Underlying profit from continuing and discontinued operations.
4 Cash amount (after franking credits).
56
Directors’ Reportfor the year ended 30 June 2020 Non‑executive Directors (NEDs)
NON‑EXECUTIVE DIRECTOR REMUNERATION POLICY
6
6.1
The NED Remuneration Policy, which applies to NEDs of the Company in their capacity as Directors, can be found at
https://www.healius.com.au/about‑us/corporate‑governance/ . It includes details on Board fees, committee fees, superannuation,
other benefits, and securities (if issued). Key points include:
•
• Board fees are externally benchmarked against relevant comparator companies.
• Board fees, including superannuation, are set around the point at which 50% of relevant comparator companies lie below.
• NEDs are required by Healius’ Constitution to retire by rotation at least every three years and may, if they wish to do so,
The aggregate annual fee limit for NED remuneration is $1.4 million, as approved by shareholders in 2008.
stand for re‑election. A third of NEDs on the Board (other than casual appointees and alternate Directors) must also retire
at each AGM.
• With effect from 1 July 2020, the Board adopted a NED Equity Holding Policy requiring each current and new NED to hold Healius
Shares to the value of one year’s annual fees (assessed at the time of purchase), with the holding to be in place by the later
of 30 June 2025 or 5 years after the date of the relevant NED’s appointment. Application of an Equity Holding Policy to Executive
KMP remains under consideration by the Board.
• A NED Equity Plan, under which NEDs are able to salary sacrifice fees for Shares in the Company, was approved by shareholders
at the Company’s 2019 AGM and is in the process of implementation. The Plan will assist NEDs in acquiring more Shares in the
Company, thereby increasing NED alignment with shareholders.
NON‑EXECUTIVE DIRECTOR FEES
6.2
The following table sets out the fees applicable to NEDs for FY 2020:
FUNCTION
Main Board
Audit Committee
People & Governance Committee
Risk Management Committee
ROLE
Chair
Member
Chair
Member
Chair
Member
FEE (INCL SUPER)
FY 2020/2019
($)
300,000 1
130,000
30,000
15,000
25,000
12,500
1
The Chair’s remuneration is all‑inclusive and the Chair is not entitled to receive any additional remuneration for chairing, or being a member of,
any committee of the Board.
OTHER NON‑EXECUTIVE DIRECTOR BENEFITS
6.3
Non‑executive Directors do not participate in Healius’ LTI or STI plans, nor are they eligible to receive any performance‑based
remuneration such as cash incentives or equity awards.
Healius pays superannuation to NEDs in accordance with Australian superannuation guarantee legislation. Termination benefits
other than those accrued through superannuation contributions are not provided to NEDs.
57
Directors’ Reportfor the year ended 30 June 2020Healius – Annual Report 2020DIRECTORS’ REPORT NON‑EXECUTIVE DIRECTOR REMUNERATION DURING FY 2020
6.4
The following table outlines the remuneration received by Healius’ NEDs during FY 2020 prepared according to statutory disclosure
requirements and applicable accounting standards.
During the COVID‑19 pandemic, Non‑executive Directors agreed to a 20% cut in Board and Committee fees and the Chair to a 30% cut.
NEDs do not sit on any subsidiary Boards at Healius.
NAME
Current Non‑executive Directors
Robert Hubbard
Chair
Gordon Davis
Sally Evans
Paul Jones
Arlene Tansey
Former Non‑executive Directors
Errol Katz (until 25 November 2019)
Total
YEAR
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
BOARD
FEES
($)
COMMITTEE
FEES
($)
SUPERANNUATION
CONTRIBUTIONS
($)
266,999
271,954
115,036
115,192
112,789
100,928
112,785
116,336
115,046
115,818
48,909
115,468
771,563
858,985
–
–
35,696
40,682
31,060
21,649
21,984
27,500
37,320
38,958
6,189
37,500
132,249
166,289
10,501
20,068
11,090
14,808
13,666
11,645
12,803
13,664
11,196
14,704
5,234
14,532
64,490
91,132
TOTAL
($)
277,500
292,022
161,822
170,682
157,515
134,222
147,572
157,500
163,563
169,480
60,333
167,500
968,303
1,116,406
6.5
NON‑EXECUTIVE DIRECTOR EQUITY HOLDINGS IN FY 2020
NAME
Robert Hubbard 1
Gordon Davis 2
Sally Evans 3
Paul Jones 4
Errol Katz 5
Arlene Tansey 6
INSTRUMENT
Shares
Shares
Shares
Shares
Shares
Shares
OPENING BALANCE
PURCHASED/OTHER
CLOSING BALANCE
NUMBER
51,951
55,759
–
40,588
25,000
15,920
NUMBER
25,000
–
15,000
–
–
–
NUMBER
76,951
55,759
15,000
40,588
25,000
15,920
51,951 Shares held by Paris SMSF ATF Robert Hubbard & Leanne Muller. 25,000 Shares held by Hubbard Investments Pty Ltd.
1
2 All Shares held by GR & G Davis Superannuation Fund.
3 All Shares held by RBC Investor Services Australia Nominees Pty Ltd
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