ANNUAL
REPORT
2022
healthcare
Healius Limited ACN 064 530 516
Contents
01 Overview
02 The year
in review
03 Directors and senior
management
About us
Our network
Building a sustainable business
Our strategy
Connected healthcare
FY 2022 Key milestones
Agilex Biolabs
Continuing to support
communities through COVID-19
2
4
6
8
10
12
14
16
Chair and CEO’s letter
Group performance
Pathology
Imaging
Day Hospitals
Corporate
18
20
24
26
28
29
Board of Directors
Executive Leadership Team
Risk management
30
32
34
Connecting Australians
to better health outcomes
Healius is empowering healthcare excellence through technology
to reimagine customer experiences and power clinical insights.
Each year:
1 in 3
pathology samples
tested in our
laboratories
40,000+
procedures in our
day hospitals
3M+
radiography
examinations
04 Directors’ Report
05 Finance Report
06 Other information
Directors’ Report
Remuneration Report
38
43
Financial statements
Notes to the financial statements
Corporate Governance Statement
66
Auditor’s Independence Declaration 67
Independent Auditor’s Report
68
Directors’ declaration
72
73
79
Shareholder information
Financial calendar
Corporate information
116
119
120
1
HEALIUS — ANNUAL REPORT 2022
OVERVIEW
About us
Healius is one of Australia’s
leading healthcare
companies providing high
quality, accessible and
cost-efficient healthcare
services through our
Pathology, Imaging and
Day Hospitals businesses.
We are focused on
building a digital future for
diagnostics, transforming
the service experience for
our patients and referrers.
With a unique footprint
of more than 2,000
locations and 11,000+
employees, Healius’
focus is on the provision
of quality healthcare
services to consumers.
2
Pathology
Healius Pathology is one of Australia’s leading providers of private medical
laboratory and pathology services.
Healius Pathology operates 97 medical laboratories and approximately
2,000 patient collection centres across metropolitan, regional and remote
Australia. It employs around 200 specialist pathologists and over 6,000
scientists, technicians, collectors and team members.
Through a variety of established state-based and specialty brands,
Healius Pathology provides leading medical laboratory and pathology
services across key diagnostic activities. These include: anatomical
pathology (histopathology and cytology), clinical pathology (biochemistry,
haematology, immunology and microbiology), genomic diagnostics and
veterinary pathology.
Healius Pathology brands include QML, Laverty, Dorevitch and Western
Diagnostic Pathology which operate in Queensland, New South Wales,
Victoria and South Australia, Western Australia and Northern Territory
respectively. Key specialty brands include Genomic Diagnostics, Australia’s
leading non-government diagnostic genetic sequencing facility.
Each year, Healius Pathology provides one in every three pathology
services in Australia. These services extend from exclusively servicing
some of Australia’s largest and most complex private and public hospitals
to regional areas and remote Australian Aboriginal communities.
In January 2022, Healius acquired Agilex Biolabs, Australia’s largest,
most experienced and scientifically advanced bioanalytical laboratory
with over 25 years’ experience in clinical trials. Headquartered in
Adelaide, Agilex Biolabs provides bioanalytical services for therapeutics,
immunoassay bioanalysis of large molecules, biologics and vaccine
development. With its extensive experience, Agilex is well positioned for
growth in multiple therapeutics areas including oncology, which is the
largest market for clinical trials.
Healius Pathology continues to play a critical role in Australia’s public
health response to the COVID-19 pandemic. The extensive community
COVID-19 testing, collected through the division’s dedicated drive through
and COVID-19 ACC sites as well as in several hospital and aged care
facilities, was supplemented by Healius Pathology’s commercial and
direct-to-consumer initiatives, which included testing at workplaces,
mine sites, film sets and sporting codes.
Imaging
Day Hospitals
Lumus Imaging operates a network of 146 sites across the
country, comprising stand-alone community imaging centres,
and imaging facilities located within private and public
hospitals and in medical centres.
It has a highly-trained team of over 120 radiologists,
together with radiographers, sonographers, nuclear medicine
technologists, nurses, centre support and corporate teams.
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).
Radiologists undertake a range of imaging services
including specialist women’s health, cardiac, neurology,
vascular, musculoskeletal and dental imaging. Over three
million radiography examinations are conducted in Lumus
Imaging’s sites each year.
The Montserrat Day Hospitals business comprises
11 day hospitals, 10 of these are stand-alone and one,
called Warringah Day Surgery, is located within a medical
centre in Brookvale Sydney. The stand-alone hospitals
comprise one multi-specialist, short stay hospital called
Westside Private, six smaller stand-alone day hospitals and
three haematology/oncology clinics, collectively conducting
over 40,000 procedures a year.
Founded in 1996, Montserrat Day Hospitals operates well-run
facilities that are strategically located and accessible
to both specialists and patients. Approximately 200 doctors
work across Day Hospitals providing services in specialty
areas including: Dermatology, ENT, Gastroenterology,
General Surgery, Gynaecology, Haematology, IVF, Oncology,
Ophthalmology, Oral Surgery, Plastic Surgery, and Urology.
Westside Private Hospital is a short stay overnight facility
located in Taringa, Brisbane which has over 50 specialists
operating out of it and offers services across numerous
specialty areas including Orthopaedics.
During the year, Montserrat commenced construction of
Murdoch Private Hospital in Western Australia, an integrated
hospital with short stay facilities and a cancer centre, due for
completion in 2023.
In early FY 2023, Healius issued an Information Memorandum
for its Day Hospitals division. As a result, this division will be
held for sale in FY 2023.
3
HEALIUS — ANNUAL REPORT 2022OVERVIEW OVERVIEW
Our network
Sites as at July 2022
2,095
Pathology
sites
Hospitals
29
Community centres
67
Medical centres
50
1,998 Approved Collection Centres
97
Laboratories
146
Imaging
sites
11
Day Hospitals
sites 1
1
Short stay hospital
10
Montserrat Day Hospitals
4
1 Day Hospitals held for sale in FY 2023.
205 Pathology
5
4
Imaging
Day Hospitals
214
sites
20 Pathology
20
sites
564 Pathology
38
5
Imaging
Day Hospitals
688 Pathology
60
2
Imaging
Day Hospitals
607
sites
750
sites
WA
NT
SA
QLD
NSW
ACT
VIC
TAS
40
sites
561
sites
24
sites
36
sites
34 Pathology
6
Imaging
528 Pathology
33
Imaging
24 Pathology
32 Pathology
4
Imaging
5
HEALIUS — ANNUAL REPORT 2022OVERVIEW OVERVIEW
Building a
sustainable
business
Through accessible,
high-quality, connected
healthcare services,
Healius is committed
to delivering excellence
in healthcare, creating
value for consumers,
employees, shareholders
and the many communities
in which we operate.
Healius’ mission is to seek
and sustain life-enhancing
healthcare, delivered
by people who care.
Our sustainability vision
is to become a leading
socially-responsible
company. Five key areas
have been identified
as priorities for the near
to medium term:
6
Our People
Our Customers
Improve employee
recognition and benefits
Foster diversity and inclusion
Foster employee talent
training and career pathways
Through digitisation,
automation and advanced
applications, improve the
way diagnosis is delivered
to referrers and patients
Develop regular customer
feedback mechanisms
with targets
Enhance privacy and
cyber security controls
Key Investment Highlights
Well positioned in attractive markets:
Ready to capture growth and create value:
Solid core market fundamentals
Ability to consolidate and integrate
for network growth
Scaled diagnostics operator
Defensible incumbent positions
Clear operating leverage
Double-digit Return on Invested
Capital (ROIC) growth opportunities
Early positions in emerging
diagnostics (e.g. genomics).
Cost-out track record
Compelling digital proposition
and strategy
Customer-centric re-orientation
Balance sheet strength
Proven commitment
to shareholder returns.
Our Communities
Our Planet
Our Shareholders
Continue involvement
with local charities
Develop a national charity
partnership aligned to
Healius’ brand and vision
Support university
partnerships and
student placements
Expand work on human
rights within supply chains
with a focus on reducing
risks of modern slavery
Create a pathway to carbon
neutrality for Scope 1 and 2
emissions through hybrid
fleet, LEDs, solar power and
green power purchasing
Improve the use of resources
and the handling of waste
including medical waste
and single-use plastic
Consider other Scope 3
emissions/reduction
opportunities
Report against
Sustainability Roadmap
Assess/adopt use of
Sustainable Development
Goals (SDG) and other
global reporting frameworks
Consider review/audit
of Sustainability data
More information in relation to Healius’ Sustainability strategy and priorities can be found in the 2022 Sustainability Report
available on the Healius website https://www.healius.com.au/invest-in-us/reports/sustainability-report/.
7
HEALIUS — ANNUAL REPORT 2022OVERVIEW OVERVIEW
Our strategy
With our customers at the centre of everything we do and
through a culture of care and compassion, Healius strives to
improve existing businesses and develop new opportunities
as part of our long-term commitment to being a sustainable
and socially responsible company.
The strategic focus areas for the Group can be summarised
as follows:
Grow the core
This is centred around a customer-based strategy to increase
revenue in core Australian markets by optimising mix, product,
price and distribution. The business also continues to improve
its Pathology Approved Collection Centre (ACC) and Imaging
site networks with the focus on better performance per facility.
Progress during the year included:
• B2C and B2B launches and rollouts around COVID-19 testing
and a patient feedback program
• ACC footprint optimisation based on a standardised
approach supported by enhanced analytics. This is
delivering efficiencies and improved collection economics,
with revenue per ACC growing 10.9% since FY 2019
• Rebranding Imaging sites to Lumus Imaging with all 124
•
in-scope sites completed during the year
Pursuing strategic opportunities with major health players
to diversify revenue sources.
Our vision is to create sustainable value for all our stakeholders
by supporting clinical decisions across the Australian healthcare
system, realised through the provision of personalised insights
and superior customer experience across our national network
of general pathology and diagnostic imaging businesses.
Our strategy rests on three pillars:
•
Insights: Delivering precise and comprehensive insights for
screening, diagnosis, therapy and research & development
Service: Serving patients and clinicians with superior
healthcare experiences
Growth: Creating clinical and financial value in new
and growing diagnostic markets.
•
•
This strategy is supported by global and Australian
tailwinds in healthcare including, but not limited to,
the increasing importance of screening and diagnosis
in reducing downstream healthcare costs, the autonomy
and decision-making of individuals as healthcare consumers,
the convergence of diagnostic pathology and radiology in
the treatment of disease, the innovations in diagnostic testing
(especially genomics, specialty pathology, and AI), and the
expansion of digital health.
Our capital allocation and group-wide programs
(Sustainable Improvement Program (SIP) and Healius Digital)
demonstrate our commitment to long-term sustainable
growth, improving returns from core diagnostic businesses
and developing the right capabilities. With a more simplified
portfolio and strong balance sheet, the Company is well
positioned for the future. The FY 2022 acquisition of Agilex
is an example of disciplined adjacency growth (clinical trials
research) where Healius has a natural advantage (at-scale
operator of Australian laboratory services).
8
Productivity potential
We are targeting the optimisation of our internal labour
productivity across the Group and ensuring disciplined
procurement management through price negotiation with
vendors, volume and demand management by the businesses,
and procurement policies and controls.
Progress during the year included:
•
In Lumus Imaging, the national rollout of our Booking
Optimisation tool for sonography was completed
• Across the Group, a new Time and Attendance module
was rolled out to underpin our dynamic rostering tool
Savings across a number of procurement categories
including voice telecommunications, teleradiology
and transcription services, with additional categories
expected to benefit in FY 2023.
•
Laboratories of the future
This is focused on modernisation of clinical information systems
in our Pathology laboratories including improvement and
standardisation of operational workflows across departments.
Progress during the year included:
•
Progressed development of new Laboratory Information
System Modules for Cytology and Microbiology to digitise
effort-intensive workflows for pathologists and migrate out
of legacy systems
• Commenced roll-out of a new Instrument Manager for
standardised configuration of our Pathology lab analysers
• Built and launched Digital Pathology in histopathology
and haematology including trials of AI supported workflows
through global partnerships.
Digital journeys
This is focused on digitising core services across Pathology
and Imaging to improve experiences for customers (referrers
and patients) and employees, as well as process efficiencies.
Progress during the year included:
• Built and launched an Electronic Referrals solution
for doctors to send Pathology and Imaging requests
via SMS to patients
• Built and launched a Collections Portal for staff in collection
centres to digitise paper-based manual processes across
registration, test ordering, and collection of specimens
• Built and launched a Booking System for staff in Imaging
centres to prioritise and convert incoming referrals to
appointments through outbound calls to patients
Progressed with build of a Results App for Specialist doctors
and staff in hospitals to view patient results and order
add-on tests with a market-leading experience.
•
9
HEALIUS — ANNUAL REPORT 2022OVERVIEW OVERVIEW
Connected
healthcare
At Healius, we are building a digital future for diagnostics,
transforming the service experience for our patients and
referrers through the development of digital products.
Our focus is to create one leading diagnostics platform that connects our doctors, patients, pathologists,
radiologists, scientists and technicians. We are taking an end-to-end approach across diagnostics.
As part of this transformation, we are updating our systems to a unified Laboratory Information System (LIS)
that will provide benefits for all businesses across our network. We are also digitising our referrals and booking
systems, results delivery and payments that will drive efficiencies and create more positive user experiences.
10
Power clinical insight
Unlocking the power of AI to deliver
superior clinical insights, supporting the
prevention and treatment of diseases,
improving health outcomes for our patients
Reimagine customer experiences
Creating and implementing efficiencies and
solutions through digital journeys that improve
the way we interact with doctors and patients
Modernise diagnostic systems
Next generation of information systems that
make life easier for clinicians
11
HEALIUS — ANNUAL REPORT 2022OVERVIEW OVERVIEW
FY 2022
Key milestones
Completed
~$200 million
share buyback
DEC
2021
JAN
2022
Acquired
Agilex Biolabs
JULY
2021
Acquired
Axis Diagnostics
—
Lumus
Imaging
announced strategic
partnership with Qure.ai
—
Record daily number
of COVID tests
65,000
12
AUG
2021
Launched
Lumus Imaging
rebranding
Appointed
John Mattick as
Non-executive
Director
—
Launched
Digital Collections
Portal
APR
2022
MAY
2022
Announced
three-year partnership
supporting Children’s
Cancer Institute
JUN
2022
Sale
of Adora Fertility and
three Healius Day
Hospitals
13
MAR
2022
FEB
2022
Investment
in additional COVID testing
capacity including rapid
PCR testing
—
Opened
Lumus Imaging
Tweed Heads South
—
Launched
E-referrals
Announced share buyback of up to $100 million—Completedrefinancing of Group borrowings—Commencedconstruction of Murdoch Private Hospital, Western AustraliaHEALIUS — ANNUAL REPORT 2022OVERVIEW OVERVIEW
Agilex Biolabs
In January, Healius acquired Agilex Biolabs,
one of Australia’s leading bioanalytical service
and toxicology study providers with over 25 years’
experience in performing regulated bioanalysis.
Customers
Employing over 100 scientific professionals across its Adelaide
and Brisbane laboratories, Agilex provides a comprehensive
suite of drug development support services to meet the
end-to-end preclinical and clinical study needs of biotech
and pharmaceutical companies around the world, across
all major therapeutic areas. Clinical trials represent a global
market consisting of global biotech and pharmaceutical
customers who are required by regulators to investigate new
vaccines and drugs for safety and efficacy through human
trials. Bioanalytical laboratory services and prerequisite safety
studies, such as provided by Agilex, are fundamental to the
results of these trials.
Capabilities
Agilex has capabilities that span a broad range of therapeutic
areas, including particularly strong experience and exposure
to oncology, which is the largest therapeutic area globally for
clinical trials. Agilex Biolabs has a reputation for quality with
internationally recognised certifications and is the only FDA
audited bioanalytical laboratory in Australia.
Areas of expertise include:
• High performance, regulated bioanalysis of small molecules,
•
peptides, proteins and biologics
Immunoassay bioanalysis of large molecules (critical to drug
development, ensuring drug safety and efficacy)
Markets
The global market for bioanalytical laboratory services is found
within the research and development spend by pharmaceutical
and biotech sponsors who are developing new therapeutic
drugs and vaccines. Australia is an attractive international
clinical trial destination given its reputation for high quality
medical research and regulatory standards, in addition
to speed and cost advantages relative to the US market.
14
• Biomarkers
•
Immunobiology bioanalysis (to understand the functional
effects of a drug in preclinical or clinical programs)
Toxicology.
•
Agilex is well positioned to benefit from clinical trial market
growth trends and has recently increased the scale of its
operations to meet growing demand. Over the last 12 months,
Agilex has significantly expanded its scientific staff and
in February completed its facility expansion in Adelaide,
with capacity to accommodate significant growth over the
coming years. The new Agilex large molecule facility features
cutting-edge bioanalytical techniques and equipment such
as digital droplet quantitative RT-PCR analysis and an EliSPOT/
FluoroSPOT multi-spot reader for high-sensitivity molecule
detection, specifically designed for fast-growing therapeutic
areas including oncology, gene therapies and vaccines.
Compelling strategic fit
The acquisition of Agilex Biolabs offers strategic benefits
to Healius and a logical adjacency to Healius’ core
diagnostics business, providing a platform for growth via
a unique Australian entry point into the attractive global clinical
trials sector with growth opportunities. Agilex is a high margin,
capital-light business with immediate and long-term growth
potential and provides diversification of revenue with exposure
to high quality global customers.
With its highly experienced team, Agilex increases the
innovation and scientific/clinical research and development
capabilities of Healius, adding to existing strengths in genomics
and histopathology. This will not only enhance both Healius
Pathology’s and Agilex’s service offerings, but it also improves
our employee value proposition, especially for scientific and
laboratory staff.
Elevating Australia’s scientific acumen
Agilex Biolabs stands tall as Australia’s largest and
most technologically advanced regulated bioanalytical
laboratory for clinical trials.
The recent additions of toxicology study capabilities
and cell and gene therapy analytical techniques have
positioned us to accelerate our growth as a trusted
partner to drug developers worldwide as more and more
sponsors turn to Australia as their First-in-Human clinical
trial destination for new molecular entities (NMEs) and
novel vaccines. Unique to Australia is a remarkably efficient
regulatory pathway to FIH studies and the Research
and Development (R&D) Tax Scheme, which encourages
international biotechnology companies to conduct their
studies in Australia by offering a 43.5% cash rebate.
The Agilex Biolabs team consists of over 100 scientists,
in addition to management and support staff. We are
proud to carry the reputation we have earned as Australia’s
premier partner for biopharma. Our growing experience
spans nearly a thousand studies so far: nonclinical
and clinical, proprietary compounds and biomarkers,
GLP and non-GLP, large and small molecules, with top
biopharma clients in the USA, APAC, and EU.
Going forward, we are well positioned to provide reliable,
high-quality support to the biopharma industry as they
broach new frontiers with safe and effective therapeutics.
In conjunction with Healius’ network of pathology and
diagnostic imaging, we are aligned in our mission to
improve health outcomes with quality support services.
During the year, Agilex Biolabs launched a new laboratory
for the analysis of large molecule therapeutics, more than
doubling the geographic area of our Adelaide campus.
The addition of this 2,520m2 facility expands the service
capabilities of Australia’s most technologically advanced
bioanalytical partner, with dedicated buildings and teams
for large and small molecule projects.
We continue to expand and add capabilities to best serve
Australia’s growing life sciences sector and our international
biopharma clientele. Our Brisbane campus is also set to
expand by the end of 2022, significantly increasing our
toxicology services capacity.
15
HEALIUS — ANNUAL REPORT 2022OVERVIEW OVERVIEW
Continuing to
support communities
through COVID-19
Healius performed a record number of COVID-19 screening tests
during the year, with over 13 million PCR tests conducted since
the start of the pandemic. We are proud of our people for their
resilience and extraordinary efforts.
Healius continues to support
Australian communities delivering
COVID-19 testing as part of Australia’s
public health response.
Since the start of the pandemic,
Healius Pathology has conducted
over 13 million COVID-19 PCR tests.
Due to the increased transmissibility of
the Omicron strain, coupled with testing
requirements for inter-state travel
during the holiday season, there was
a surge in demand for PCR testing over
December and January. Our frontline
workers including pathologists,
scientists and lab workers, collectors,
couriers, and our support teams
including call centre, administration
and IT, worked 24/7 during peak
times in service of the community,
many cancelling planned leave over
the Christmas and New Year break.
Throughout the year, our people
worked tirelessly to process record
levels of testing, on some days
collecting up to 65,000 tests. Over the
course of the year our collectors faced
extreme conditions, including the heat,
snow, flood and storm conditions.
Through our state-based pathology
brands: Dorevitch Pathology in Victoria,
Laverty in NSW and ACT, QML Pathology
in Queensland and Western Diagnostic
Pathology in Western Australia and
Northern Territory, Healius continues
to operate pop-up, drive-through
testing sites, and walk-through clinics
in convenient metro and regional
locations to provide critical testing
services for Australian communities.
Healius Pathology was able to utilise
its strong network, moving tests to
laboratories in different states to help
meet surges in testing demand.
We are proud of our people for
their commitment and continuous
effort, who once again overcame
the challenges presented by COVID,
to care for and support our patients
and local communities. Across all
of our businesses, our people worked
throughout lockdowns and restrictions,
to deliver quality healthcare to our
patients and referrers.
Commercial COVID testing
Healius Pathology performs a range
of commercial COVID testing and
direct-to-consumer initiatives,
which includes testing at workplaces,
mine sites, film sets, for sporting
teams and cruise lines. Healius also
played a key role in the reopening
of borders and recommencement of
travel, offering travel testing direct
to consumers and through strategic
partnerships with the travel industry.
Healius has worked with embassies
and airlines to design and produce
Travel Pathology Reports that meet
country specific requirements, and are
able to be authenticated by carriers,
transit and final destinations globally.
Healius was first to introduce IATA Travel
Pass integration. Healius’ offering for
travel testing includes market-leading,
digitally verifiable results delivered
securely with options for same day
turn-around.
Investment in COVID
The evolution of COVID has been
difficult to forecast, with the virulence
and transmissibility of each new
strain varying, and continuing to
evolve and evade vaccine immunity.
Studies have shown that COVID PCR
testing consistently detects COVID two
to three days earlier in an infection than
a Rapid Antigen Test.
In response to increasing COVID cases
and to prepare for the possibility of the
emergence of new, more transmissible
variants, Healius invested in additional
testing equipment including rapid PCR
machines in order to strengthen Healius’
testing capabilities. The investment has
improved efficiencies, lowering cost per
test and increasing capacity to keep
turnaround times as short as possible.
This has enabled our laboratories to flex
up and down as required. PCR testing
is also able to diagnose whether the
infection is COVID, influenza or one
of several other respiratory viruses.
The additional testing capacity has
been utilised recently to test for other
respiratory illnesses that have once
again started to circulate within
our communities, to help keep our
communities safe.
16
Resilience of our people
BY QUEENIE COLQUHOUN
Since the pandemic began in March of 2020 so many of us have suffered fatigue. If you think you had it bad,
spare a thought for some of the frontline workers.
For Matthew Wilson, a respiratory collector at Laverty Pathology, fatigue has been a constant, but he’s
been able to stay resilient thanks to the great people he has met on the job. Matthew has been working
in his role since the Avalon outbreak in January 2021 and has worked in several locations throughout Sydney
since. He was spurred to work as a respiratory collector as he watched the Avalon cluster begin and wanted
to assist the community during the difficult period. He was also drawn to the job due to his desire to gain
practical experience in the medical field.
“Working during a pandemic isn’t always easy as the demands change daily, but the positive interactions with
patients and fellow collectors make every day enjoyable. I would say I have stayed resilient due to the supportive
team we get to work with,” says Matthew.
“There hasn’t been a time that I’ve wished I didn’t come into work because I know that I work with such positive
people that support and keep me motivated.”
For the most part, Matthew says that the public have been great to deal with, and incredibly understanding
of the difficulty of his job. Although Matthew says he wishes people knew just how long he and his peers worked
during their shifts. While respiratory collectors are involved in the COVID-19 protection process, they don’t hold
all the answers.
“We as respiratory collectors are front line workers who are always questioned about many things that we do
not have answers to such as vaccinations but are always questioned about it,” he says.
“I would also like to say that all respiratory collectors including myself understand how frustrating and difficult
this pandemic can be and we are all doing our best to help you to the best of our ability.”
Working in a safe and pleasant environment with great co-workers and excellent managers and supervisors
who work hard, Matthew says it’s easy to be inspired and motivated. When things begin to return to normal
Matthew hopes to continue his career at Laverty Pathology as a phlebotomist. He thanks his employers and
his coworkers for creating the atmosphere to fuel his ambitions, recognising that – for him – something positive
has come out of the pandemic disruptions.
17
HEALIUS — ANNUAL REPORT 2022OVERVIEW THE YEAR
IN REVIEW
Chair and
CEO’s letter
Dear shareholder,
FY 2022 has been a year of delivery for Healius, with record
results underpinned by our success in rapidly scaling up and
down our operations to meet changing demand in the year,
the roll-out of nearly half of our Sustainable Improvement
Program and substantial progress on our digital initiatives.
First and foremost, we would like to thank our people for their
dedication and commitment in serving the healthcare needs
of Australian communities and in delivering our record results
this financial year. We are sure most readers have had enough
of COVID-19, but we must thank our teams for their extraordinary
response during the challenges of the Delta and Omicron
outbreaks. During the year, our Pathology teams performed
a daily record of 65,000 COVID-19 PCR tests, an incredible
achievement. They have also shown adaptability as Omicron
has become endemic in the population and disrupted the
delivery of our business-as-usual services. They continue
to respond with selfless dedication and we are grateful for
their untiring service.
FY 2022 in review
The strong financial performance of your Company
is self-evident in the results, with returns at record levels.
We reported a more than doubling of underlying net profit
to $309.3 million and free cash flow of $532.2 million in the
year. Approximately 45% of this was returned to shareholders
in buybacks and dividends.
From July 2021 to January 2022, Healius conducted extensive
COVID-19 testing. Thereafter testing reduced, with the Omicron
variant becoming endemic in the population. Healius also
provided critical non-COVID pathology services, but at
lower-than-trend levels with its market share stable. It also
continued to deliver its imaging and day hospital services,
albeit variously impacted by lockdowns, elective surgery
restrictions and cancellations due to COVID-19.
During the year we continued to invest in growth. In July 2021,
we acquired Axis Diagnostics, based in Queensland,
and we are pleased with its performance to date. We also
invested in two new Lumus Imaging sites based in Tweed
Heads South and Nambucca Heads, both in NSW and rolled
out the new Lumus Imaging brand.
In January, Healius acquired Agilex Biolabs, one of Australia’s
leading bioanalytical laboratories. This strategic acquisition
provides us with a platform in the growing clinical trials
sector. With high growth and margin potential, we believe
Agilex is a logical adjacency to Healius’ existing core
diagnostics business.
Taking into consideration the strong performance of your
Company and the level of buybacks in the year, total dividends
of 16.0 cents per share fully-franked have been determined,
up from 13.25 cents per share in FY 2021. This includes a final
dividend of 6.0 cents per share and represents an annual
yield of 4.4% (based on the 30 June 2022 closing share price).
Connected healthcare
Although we faced many challenges, Healius certainly did
not waste the opportunities presented during this pandemic.
We were the first to market in Australia with a commercial
travel COVID-testing solution, helping consumers navigate
the ever-changing landscape of travel testing. What’s more,
Healius was first to respond with paperless COVID
drive-throughs, increasing convenience and safety for
consumers, reducing both the risk of COVID transmission
and human error, while allowing us to be more efficient.
During the year we also introduced a range of key
consumer innovations in business-as-usual operations,
including E-referrals in Pathology and Imaging and a digital
collections portal to help with a seamless experience in our
collection centres.
18
To support a rapid cycle of continuous improvement in our
customer offerings, we have deployed a voice of customer
program across our ~2,000 pathology sites this year with
feedback embedded in management performance metrics.
Compelling competitive position
Following a period of transformation, we now have
a simplified portfolio, more competitive networks including
a more profitable ACC footprint, broader growth options
and more firepower for delivering this growth. We are
in a far better position compared to FY 2019, with less
capital intensity in our business and greater free cash
flow producing a fortified balance sheet and strong
shareholder returns.
Our return on invested capital has grown, over and
above the COVID benefit, and through our Sustainable
Improvement Program, our margins are expanding
to highly competitive levels.
In FY 2023 we are exploring opportunities to sell the
Day Hospitals business and we are pleased with the
level of interest at this stage of the process.
Sustainability focus
Over the past year, we have set our Sustainability aspiration
and identified our five priority areas.
As a service company, our success is underpinned by our ability
to attract and retain the right talent, putting our people front
and centre, with the right tools and support to deliver the best
possible outcomes. We aim to create a strong, collaborative,
performance-driven culture with a clear sense of belonging.
We aim to be carbon neutral by FY 2026 with 75% of the
program identified. We are optimistic that we will identify
further reductions in the near future as electric cars and other
green initiatives become more readily and cost-effectively
available in Australia.
To ensure we embed Sustainability into the Group, we have
set up the necessary governance structures with a dedicated
executive Sustainability Steering Committee reporting
to the main Board, as well as Sustainability KPIs within our
Remuneration Framework. You can read more about our
sustainability initiatives in our 2022 Sustainability Report.
LOOKING AHEAD
In the near term, as the underlying healthcare demand
drivers remain strong, including an ageing population
with greater longevity but more complex health issues,
reversion of our business-as-usual services to long-term
growth rates is expected to occur as well as a period
of catch-up from known underdiagnosis in the system.
This, together with a baseload level of COVID-19 testing,
will deliver growth in services, with Healius well-positioned
to capitalise on the demand.
We are moving at pace, with a lot more exciting
innovations in the pipeline for FY 2023. We are focused on
optimising our businesses, achieving margin improvement
and growth. We have made great headway in our digital
program delivery, but there is plenty more to come.
Our long-term vision is to create sustainable value
for our stakeholders by supporting clinical decisions
across the Australian healthcare system. Our strategy
rests on insights, customer service and growth. It is
underpinned by the increasing importance of screening
and diagnosis in reducing downstream healthcare costs,
the convergence of pathology and radiology in the
treatment of disease, and exciting innovations in testing,
especially genomics, specialty pathology, precision
medicine and AI.
We would like to thank the entire Healius family for their
dedication and resilience in another extraordinary year.
Finally, we thank you, our shareholders, for your continued
support and look forward to delivering again in FY 2023.
ROBERT HUBBARD
CHAIRMAN
MALCOLM PARMENTER
MANAGING DIRECTOR
AND CEO
19
HEALIUS — ANNUAL REPORT 2022THE YEAR IN REVIEW THE YEAR IN REVIEW
Group
performance
30 JUNE 2022
$M
UNDERLYING 1
2,337.7
492.3
309.3
30 JUNE 2021
$M
1,913.1
266.5
148.4
30 JUNE 2022
$M
REPORTED
2,336.2
467.4
307.9
16.00
30 JUNE 2021
$M
1,900.7
255.4
43.7
13.25
Revenue 2
EBIT
NPAT (Reported incl. discontinued operations)
Dividends cps 100% franked
Group underlying results
Market conditions
In the year ended 30 June 2022 (FY 2022), Healius continued to play a pivotal role in Australia’s response to the COVID-19 pandemic,
during the Delta and Omicron outbreaks. Since February 2022, with Omicron becoming endemic in the population, PCR testing
has reduced. It now sits between 10,000–12,000 per working day supplemented by respiratory testing as influenza resurfaces
in the community.
Healius also continued to provide critical non-COVID pathology testing, as well as imaging and day hospital services.
These services were at reduced volumes compared to the prior comparable period (pcp), due to the impacts of state-based
lockdowns, elective surgery restrictions and isolation requirements in 1H 2022 and of endemic COVID-19 on both demand from
patients and availability of staff in 2H 2022.
Importantly, broad demand for non-COVID services is expected to return as the underlying drivers in both pathology and imaging
remain strong including an ageing population with greater longevity but more complex health issues. A period of catch-up for the
resulting backlog in routine care is expected to occur although the timing is uncertain while COVID-19 remains endemic.
1
All comments in this year in review relate to underlying results for continuing operations unless otherwise noted. For a reconciliation to reported
results, refer ‘Group reported results’ on page 23.
2 Group revenue is shown net of inter-segment sales of $1.8 million (FY 2021: $2.2 million) while the divisional tables are shown gross of inter-segment
sales. For a reconciliation refer note A1 to the Consolidated Financial Statements.
20
Healius performance
FY 2022 was a year of delivery for Healius with record results underpinned by the Group’s ability to successfully scale up and down
its operations with demand, roll-out of 45% of the Sustainable Improvement Program (SIP) Phase 2 initiatives (measured as annualised
benefits), and substantial progress its digital program to reimagine its customer experience and power clinical insights.
Financial performance is self-evident in the results, with EBITDA and EBIT margins at record levels. While successfully managing its
demand peaks, Healius also demonstrated cost containment, with labour cost growth contained at 12% and consumable costs
at 17%, compared to revenue growth of 22%. Of particular note was the Pathology division’s ability to flex down its costs as COVID-19
testing demand reduced in the second half of the year.
Underlying EBIT for the period excludes the costs relating to corporate transactions ($10.5 million) and the Pathology digital costs
($10.5 million). Adora Fertility was also excluded from underlying results, with its performance and profit on sale recognised as part
of discontinued operations in reported NPAT.
Mirroring profits, gross operating cash flow was at a record level of $677.1 million with EBITDA conversion over 90%. The Group
generated free cash flow of $532.2 million and approximately 45% of this was returned to shareholders in buybacks and dividends.
Healius also invested for growth purchasing Axis Diagnostics and Agilex Biolabs, the latter a leading domestic clinical trials
laboratory. At the end of the year the bank gearing ratio remained conservative at 1.0x, well below medium term targets of 1.7–2.2x.
Taking into consideration both the strong performance of the Company and the level of buybacks in the year, total dividends
of 16.00 cps fully franked (13.25 cps in FY 2021) have been determined by the Board including a final dividend of 6.0 cps fully franked.
This represents an annual yield of 4.4% (based on the 30 June 2022 closing share price).
21
HEALIUS — ANNUAL REPORT 2022THE YEAR IN REVIEW Group performance
Cash flow and gearing
Group cash flows (including continuing and discontinued operations) for FY 2022 were as follows:
REPORTED
Gross cash flows from operating activities
Net income tax paid
Net cash flows from operating activities
Maintenance capex
Free cash flow
Growth capex
Payments relating to acquisitions
Proceeds from capital recycling
Montserrat earn-out and settlement, and deferred consideration
Net interest paid and finance costs (including on lease liabilities)
Payment of lease liabilities
Dividends, buyback of shares and shares purchased for Long Term Incentive Plan (LTIP)
Net debt funding/(repayment)
Net increase/(decrease) in cash held
30 JUNE 2022
$M
30 JUNE 2021
$M
677.1
(90.3)
586.8
(54.6)
532.2
(38.9)
(303.3)
31.9
(36.8)
(48.0)
(214.5)
(259.6)
345.6
8.6
571.9
(46.0)
525.9
(39.9)
486.0
(33.6)
–
460.4
–
(72.1)
(203.1)
(153.8)
(555.7)
(71.9)
In FY 2022, Healius achieved strong gross operating cash flows, 18.4% above the prior period, with cash flow conversion over 90%.
Free cash flow grew by 9.5% to $532.2 million. Approximately 45% of this was used to reward shareholders with $139.4 million
in buybacks and $98.1 million in dividends paid in the year.
The Group has achieved materially lower capital intensity following the divestment of Healius Primary Care (HPC) in 1H 2021.
However, as announced at the FY 2021 results, investments are now being undertaken in digital and other initiatives under
the SIP program and in selective growth M&A. In the period, Healius invested:
•
•
•
$290.7 million for the acquisition of Agilex Biolabs (net of cash acquired)
$12.6 million for the acquisition of Axis Diagnostics (net of cash acquired)
$38.9 million in organic growth capital.
The Group’s balance sheet remains strong and conservatively geared below medium-term targets, positioned to continue to meet
the on-going capital needs of the business, reward shareholders, fund value-generating investments and maintain a liquidity buffer.
Group net debt and key ratios on 30 June 2022 were as follows:
REPORTED
Bank loans and financing arrangements 1
Cash 2
Net debt
Bank gearing ratio (covenant <3.5x) 3
Bank interest cover ratio (covenant >3.0x) 4
30 JUNE 2022
$M
30 JUNE 2021
$M
606.1
(81.3)
524.8
1.0x
44x
258.1
(72.7)
185.4
0.7x
10x
Bank loans of $610 million (FY 2021: $260 million) are shown net of unamortised borrowing costs.
FY 2021 cash includes cash in discontinued operations.
1
2
3 Bank gearing ratio is calculated based on underlying EBITDA before the impact of AASB 15 and 16 and is adjusted for share-based payments.
Net debt is adjusted for parent company guarantees and unamortised borrowing costs.
4 Bank interest cover ratio is calculated based on underlying EBITDA divided by finance costs (excluding AASB 16 interest).
22
Group reported results
This year in review section focuses on the underlying results of Healius which adjust for items not considered to be part of core trading
performance. The reconciliation between reported and underlying for FY 2022 is set out below.
REVENUE
Underlying revenue
Reclassification of grant income from revenue to other income
Transactions with discontinued operations 1
Reported revenue
EBIT
Underlying EBIT
Pathology digital transformation
Corporate transactions
Montserrat earn-out and settlement expense
Transactions with discontinued operations 1
Reported EBIT
NPAT
Underlying NPAT
After-tax adjustments to underlying EBIT (set out above)
After-tax adjustments to finance costs (close out of interest rate swaps)
ATO case – tax and interest
Tax differential for non-deductible items (underlying tax calculated at 30%) 2
Profit/(Loss) from discontinued operations
Reported NPAT incl. discontinued operations
30 JUNE 2022
$M
30 JUNE 2021
$M
2,337.7
–
(1.5)
2,336.2
1,913.1
(9.8)
(2.6)
1,900.7
30 JUNE 2022
$M
30 JUNE 2021
$M
492.3
(10.5)
(10.5)
–
(3.9)
467.4
266.5
(11.3)
(1.1)
(3.0)
4.3
255.4
30 JUNE 2022
$M
30 JUNE 2021
$M
309.3
(17.5)
–
–
2.2
13.9
307.9
148.4
(7.8)
(6.6)
(63.1)
(4.6)
(22.6)
43.7
1
2
Transactions with discontinued operations represent rental income received in Corporate from Healius Day Hospitals and corporate recharges
for costs incurred on behalf of discontinued operations. In FY 2021 transactions with discontinued operations also included rental costs incurred
by Pathology and Imaging from Healius Primary Care.
Refer Note A4 to the Consolidated Financial Statements.
23
HEALIUS — ANNUAL REPORT 2022THE YEAR IN REVIEW
BUSINESS
REVIEW
Pathology
1,998
APPROVED
COLLECTION
CENTRES
$1.9B
OPERATING
REVENUE
$498M
UNDERLYING
EBIT
Healius Pathology delivered
record revenue of $1.9 billion,
with EBIT nearly doubling to
just under $500 million.
Healius Pathology continued to play a leading role in the
COVID-19 testing regime, especially in 1H 2022. The division
has conducted more than 13 million COVID-19 tests to-date,
successfully scaling up its laboratories and collection footprint
to meet demand. Healius Pathology also undertook extensive
commercial and direct-to-consumer COVID-19 testing and
invested in capacity, reducing the cost per test and improving
turnaround times.
Underlying Performance
As demand for PCR screening declined in 2H 2022,
Healius responded to market conditions by reducing
the number of drive-through collection centres. It also
utilised the additional capacity to test other respiratory
illnesses, with influenza circulating in the community
in recent months for the first time in two years.
The successful delivery of COVID-19 testing was a significant
driver of revenue growth in FY 2022. Core or non-COVID
revenue was down marginally, with the commercial channel
achieving strong growth, and Healius’ market share in
bulk-billed revenue stable. Overall, the market was down
on a like-for-like basis with the industry impacted by endemic
COVID-19 infections in 2H 2022 (Medicare Benefits Schedule
was down 3.9% 1).
Healius expects non-COVID revenue will grow as COVID-19
infection numbers decrease and the community returns
Revenue
EBITDA
Depreciation and amortisation
EBIT
Capital expenditure
30 JUNE 2022
$M
30 JUNE 2021
$M
BETTER/(WORSE)
%
1,890.4
1,452.1
698.4
(200.0)
498.4
43.7
428.3
(175.5)
252.8
31.0
30.2
63.1
(14.0)
97.2
(41.0)
1 COVID-19 testing removed plus an estimate of COVID PEI and BBI. Source: Australian Pathology.
24
to diagnostic testing, including a period of catch-up
for the backlog of pathology services. Growth is likely to
return to the long-term annual averages of around 5–6%,
although the timing is uncertain.
EBITDA and EBIT margins of 37% and 26% respectively
demonstrated strong operational delivery together with
the benefits of the SIP program. Importantly second
half EBITDA margins were consistent with FY 2021 levels,
despite the 15% reduction in the scheduled COVID-19 fee
from 1 January 2022, showcasing Healius Pathology’s ability
to flex costs down in the challenging market conditions.
Under the SIP program, Healius Pathology improved
its EBIT through the optimisation of its operations.
Development of digital solutions has progressed well
throughout the year, with e-referrals and the collection
portal deployed and instrument management and
results portal solutions underway. In FY 2023, focus areas
include courier route optimisation and standardising
laboratory workflows.
A total of $43.7 million in capital was invested in the
period which included digital initiatives and the investment
in PCR testing capacity. The Serum Work Area has been
successfully completed with over 90% of the investment
realised in benefits to-date.
In December, Healius announced the acquisition
of Agilex Biolabs, a strategic adjacency in pathology
offering a high-margin capital-light growth profile,
revenue diversification and complementary capabilities.
It is being reported in the Pathology division. Revenue for
the five months post acquisition was up 30% on PCP while
full year revenue was up 52%. The business is investing in
its Australian operations for long-term growth.
25
HEALIUS — ANNUAL REPORT 2022THE YEAR IN REVIEW BUSINESS
REVIEW
Imaging
$394M
OPERATING
REVENUE
146
SITES
124
SITES
REBRANDED
During the period, Lumus Imaging’s
revenue declined by 3%, reflecting
the industry-wide impacts of
lockdowns between July 2021
and January 2022 and endemic
COVID-19 thereafter, as well
as elective surgery restrictions.
Lumus Imaging’s revenue was in line with market for the year
and ahead in the second half with a strong performance
in Queensland. Widespread use of telehealth and GP
shortages impacted the division’s Medical Centre volumes.
(Lumus Imaging is the only listed imaging provider with
contracts in medical centres, with its old Healius Primary
Care business, now named ForHealth).
Volumes are expected to return, including a period of
catch-up for delayed diagnostic screening and elective
surgery. Lumus Imaging is well-placed to capitalise on
this backlog with a strong hospital presence.
Underlying Performance
Revenue
EBITDA
Depreciation and amortisation
EBIT
Capital expenditure
26
30 JUNE 2022
$M
30 JUNE 2021
$M
BETTER/(WORSE)
%
393.9
79.7
(60.6)
19.1
41.0
406.9
84.5
(53.6)
30.9
18.6
(3.2)
(5.7)
(13.1)
(38.2)
Large
Lumus Imaging well positioned
to deliver growth
The rebrand of our Imaging division to Lumus Imaging
continues to deliver benefits, with all 124 in-scope
sites rebranded during the year. The project has
delivered a more cohesive Imaging network due to
a range of initiatives including upgrading site locations,
Lumus Imaging brand signage, updates to website and
digital capabilities and new uniforms across the business.
The unified national brand has boosted brand recognition
within the community and employee engagement and
has enhanced the way the business interacts with its
patients and referrers.
During the year, Lumus Imaging invested in a new state
of the art medical imaging facility in Tweed Heads South.
The new facility offers multi-modality skilled staff, offering
MRI, ultra-low dose CT, and other services that are
predominantly bulk-billed. This regional investment is
another example of Healius providing quality, affordable
and accessible healthcare. The new regional facility
means patients in the area no longer have to cross
the border to Queensland for metropolitan-level medical
imaging services, which was particularly difficult during
COVID-19 lockdowns.
EBITDA margins were flat but EBIT margins declined.
COVID-related effects and increased sick leave impacted
margins, in addition to site closures under the BUPA
Immigration screening contract. Depreciation increased
mainly due to the full-year impact of third-party leases
with ForHealth which further compressed EBIT margins.
SIP initiatives progressed, including the Lumus Imaging
brand launch and development of automated booking,
referral and rostering systems. These SIP investments
are included in operating costs (previously treated
as non-underlying items).
A total of $41.0 million in capital was spent in the period.
The increase over FY 2021 was due to the purchase rather
than lease of imaging equipment and the buy-back
of previously leased equipment. Going forward we
expect that maintenance capital expenditure will
return to long-term averages.
27
HEALIUS — ANNUAL REPORT 2022THE YEAR IN REVIEW BUSINESS
REVIEW
Day Hospitals
$49M
OPERATING
REVENUE
$5.3M
UNDERLYING
EBIT
11
DAY HOSPITAL
SITES
Pleasingly, Westside
Private Hospital,
Montserrat’s prototype
for future short-stay
facilities, again delivered
strong revenue growth,
up 12% in the year.
Underlying Performance
Montserrat’s revenue and procedure numbers were down slightly,
experiencing similar conditions to Lumus Imaging, with lockdowns impacting
between July 2021 and January 2022 and endemic conditions thereafter.
Volumes are likely to return as COVID-19 case numbers decline,
including a period of catch-up for delayed procedures and Montserrat
is well-placed for this rebound.
The division’s performance included investment to support the identification
and roll-out of long-term growth initiatives including a new day hospital and
cancer centre at Murdoch in Perth, Western Australia. Prior period results also
included JobKeeper and commercial support payments which account for
approximately 50% of the decline in EBIT.
Capital expenditure of $3.7 million was invested in the period. In addition
to the Murdoch facility, Montserrat has a pipeline of greenfield and M&A
opportunities under consideration as it looks to capitalise in this growing sector.
In early FY 2023, Healius issued an Information Memorandum for its Day
Hospitals division. As a result, this division will be held for sale in FY 2023.
Revenue
EBITDA
Depreciation and amortisation
EBIT
Capital expenditure
28
30 JUNE 2022
$M
30 JUNE 2021
$M
BETTER/(WORSE)
%
48.7
12.6
(7.3)
5.3
3.7
49.5
15.5
(6.5)
9.0
2.9
(1.6)
(18.7)
(12.3)
(41.1)
(27.6)
Corporate
Corporate functions include
the management of centralised
support services, where those
functions benefit from scale,
and core corporate costs including
strategy, capital and stakeholder
management, group finance,
treasury, property, legal, Board
costs and management incentives.
Overheads are allocated to the divisions in the form
of a charge based on headcount, footprint, or usage.
The remaining costs are classified as corporate overheads.
In FY 2022, revenue was earned on subleases to discontinued
operations and from the transitional services agreement
following the sale of HPC in 1H 2021, both of which were offset
by correspondingly higher costs of delivery.
Corporate costs include the full year impact of the investment,
during 2H 2021, in a previously-announced capability ramp
up, in particular in IT support. This accounts for the increase
in the year.
Capital expenditure of $5.1 million was invested in the period
with the majority of the spend on information technology systems.
Underlying Performance
Revenue
EBITDA
Depreciation and amortisation
EBIT
Capital expenditure
30 JUNE 2022
$M
30 JUNE 2021
$M
BETTER/(WORSE)
%
6.5
(19.9)
(10.6)
(30.5)
5.1
6.8
(14.5)
(11.7)
(26.2)
5.8
n/a
(37.2)
9.4
(16.4)
12.1
29
HEALIUS — ANNUAL REPORT 2022THE 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
Birmingham City University. 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 AND
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
B FOREST SC(HONS),
MAG SC, 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.
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.
30
Paul Jones
MB, BS, FAMA.
NON-EXECUTIVE
DIRECTOR
Dr Jones was appointed as a Non-executive Director in November
2010. During FY 2022, he was a member of the Audit Committee
and the People & Governance 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.
Jenny
Macdonald
BCOM, MEI, GAICD,
CA ANZ.
NON-EXECUTIVE
DIRECTOR
Ms Macdonald was appointed as a Non-executive Director and Chair of the
Audit Committee effective 3 November 2020. Jenny has a strong background
in financial and general management roles across a range of industry
sectors including fast moving consumer goods, resources, travel and digital
media. Jenny commenced her career with KPMG, working in the London and
Melbourne offices in a number of practice areas, including audit, she spent
more than nine years with that firm. After gaining experience in the resources
sector, Jenny held executive roles in the travel and tourism industries and
digital media at Flight Centre and REA Group. From 2014–2016, Jenny was the
Chief Financial Officer and then Interim Chief Executive Officer of Helloworld,
an ASX-listed multi-channel travel company. Jenny holds a Bachelor of
Commerce from Deakin University, a Master of Entrepreneurship and Innovation
from Swinburne University, a Graduate Diploma from the Securities Institute
of Australia and is a Graduate of the Australian Institute of Company Directors.
John
Mattick
AO, FAA, FTSE,
FAHMS, FRSN, HON,
FRCPA, GAICD.
NON-EXECUTIVE
DIRECTOR
Kate
McKenzie
BA, LLB, MAICD.
NON-EXECUTIVE
DIRECTOR
Professor Mattick was appointed as a Non-executive Director effective
31 March 2022. John is SHARP Professor of RNA Biology at UNSW Sydney
and was previously Chief Executive of Genomics England, and Director of the
Garvan Institute of Medical Research in Sydney. John was appointed an
Officer of the Order of Australia in 2001 for services to scientific research in the
fields of molecular biology, genetics and biotechnology. He is a Fellow of the
Australian Academy of Science, the Australian Academy of Health & Medical
Sciences, the Australian Academy of Technology & Engineering and the Royal
Society of New South Wales. He has also been elected an Honorary Fellow of
the Royal College of Pathologists of Australasia and an Associate Member of
the European Molecular Biology Organization. John has been a member of
the Australian Health Ethics Committee and the Research Committee of the
National Health and Medical Research Council. John has received numerous
awards including the Advance Global Impact Award, the University of Texas
MD Anderson Cancer Center Bertner Award for Distinguished Contributions
to Cancer Research, the Human Genome Organisation Chen Medal for
Distinguished Academic Achievement in Human Genetics and Genomic
Research, the International Union of Biochemistry and Molecular Biology
Medal, and the inaugural Gutenberg Chair at the University of Strasbourg.
Ms McKenzie was appointed as a Non-executive Director effective
25 February 2021. Kate was appointed as a member of the People
& Governance Committee and as a member of the Risk Management
Committee on the same date. Kate is a highly experienced Chief Executive
Officer and Non-executive Director with extensive experience in large
change management. After starting her career in the public sector,
Kate joined Telstra in 2004 as Group Managing Director Regulatory,
Public Policy & Communications. In her 12 years at Telstra, Kate held a range
of executive roles in strategy, marketing, products and wholesale. Prior to
leaving Telstra, Kate was Chief Operating Officer, responsible for networks,
IT, field services, property and NBN relations and delivery. In 2017 Kate
was appointed Chief Executive Officer of Chorus, a New Zealand listed
telecommunications company. Kate is passionate about innovation and
technology, and co-founded muru-D, an incubator which has produced 136
graduating companies, with 107 still in operation; Gurrowa, a co-creation
lab, and partnerships with universities, such as investment in Quantum
Computing with the University of New South Wales.
31
HEALIUS — ANNUAL REPORT 2022DIRECTORS AND SENIOR MANAGEMENT Executive
Leadership Team
Malcolm
Parmenter
MANAGING
DIRECTOR AND
CHIEF EXECUTIVE
OFFICER
Maxine
Jaquet
CHIEF FINANCIAL
OFFICER AND
CHIEF OPERATING
OFFICER
John
McKechnie
CHIEF EXECUTIVE
PATHOLOGY
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.
Ms Jaquet was appointed Chief Financial Officer in August 2019 and her
role was expanded to include Chief Operating Officer in January 2021.
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 has
a background in providing financial and strategic advice.
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 Western Diagnostic Pathology, 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.
Mr Lewsam departed Healius in July 2022.
32
Henry
Barclay
CHIEF EXECUTIVE
DAY HOSPITALS
Mr Barclay joined Healius in November 2021. Henry has over 20 years’
experience in strategic, commercial, financial, and operational leadership
and extensive involvement in the Australian day hospital industry.
Henry has a demonstrated track record of successful strategic organic
and inorganic corporate business development. Prior to joining
Montserrat, Henry was a member of the foundational management
team of the Cura Day Hospitals Group for over 10 years, served as
Chief Financial Officer at AMS Group and held the position of Director
at Deloitte.
Prasad
Arav
GROUP EXECUTIVE
DIGITAL AND
TECHNOLOGY
Mr Arav joined Healius in April 2021 and is currently the Group Executive
Digital and Technology.
Prasad has over 20 years’ experience in technology-focused executive
roles and management consulting. He has successfully managed
digitisation of businesses and new market expansions across Big Four
banking, health, insurance, and retail industries. Prior to joining Healius,
Prasad was Chief Digital Officer and CIO for a health insurer and Chief
Strategy Officer for a global technology company. Prasad is a graduate
from the University of New South Wales and has also held senior consulting
roles at McKinsey and KPMG.
Mark
Neeham
GROUP EXECUTIVE
GOVERNMENT
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.
Janet
Payne
GROUP EXECUTIVE
CORPORATE AFFAIRS
Ms Payne was appointed as Group Executive, Corporate Affairs in
July 2015, Ms Payne joined Healius from CIMIC Group Ltd where she
was head of investor relations. Janet has worked in a range of roles,
including investor and media advisory and board advisory.
Janet managed the Initial Public Offering and established investor
relations at Qantas Airways Limited. Her former corporate roles were
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.
33
HEALIUS — ANNUAL REPORT 2022DIRECTORS AND SENIOR MANAGEMENT Risk
management
Healius has designed a Risk Management Framework
consistent with current best practice.
Identifying and mitigating risk is key to Healius achieving its objectives, building a sustainable business and protecting
shareholder value. The Risk Management Framework formalises the approach adopted by Healius’ businesses to manage
risk and provides Healius with a consistent methodology that can be applied to all strategic, operational and contractual
objectives. Healius assesses the consequence and likelihood of risks in all areas including health and safety, environment,
operations, finance, legal and compliance, and reputation.
The future performance of Healius, including share price performance, may be influenced by a range of risk factors,
many of which are outside the control of Healius and its Directors. 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.
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 our business,
and maintains a disciplined focus on
operational excellence and effective
risk management.
Identify
Review /
monitor
Assess /
evaluate
Control /
mitigate
34
CONTEXT
RISK PRIORITIES
AIMS AND ACTIONS
Pandemic risks
including COVID-19
Pandemics such as COVID-19 pose
a risk to Healius as community
shutdowns may adversely impact
demand for its traditional healthcare
services. In addition, Healius may
be unable to provide crucial services
if people or facilities are impacted.
Healius continually monitors daily
volumes across all businesses and
structures resources accordingly.
Adherence to best-practice guidelines
for self-isolation, use of personal
protective equipment, hygiene, and office
closures help mitigate the risk of infections.
Government policy and
economic impacts
Healius aims to diversify into non-MBS
revenue streams, maintain tight control
over costs and continually reviews the range
of service offerings available to patients.
Healius monitors legislative and regulatory
developments and engages proactively
to manage this risk. It maintains an active
role in industry associations to ensure its
voice is heard by governments at all levels.
Healius advertises that its services are
bulk-billed where appropriate and educates
the consumer on any out-of-pocket costs.
Healius is committed to providing
affordable healthcare. Bulk-billing
its services to patients and receiving
reimbursement through the Federal
Government’s Medicare Benefits
Schedule (MBS) is a key feature of
this commitment and a substantial
proportion of the Group’s revenue is
derived from the MBS, including from
referrals from general practitioners (GPs)
in Australia. Any changes to the MBS or
any other government funding initiatives,
including the level of rebates to GPs,
could impact profitability (both positively
or negatively) through changes to fees
or test availability within the MBS system.
Healius also charges out-of-pocket
fees on some services and 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.
Healthcare customers
and consumers
Healius is reliant upon referrers,
healthcare professionals such as
surgeons, and consumers choosing
to use its services and facilities.
Healius is also dependent on its ability
to negotiate and retain private health
fund, public and private hospital,
and other commercial contracts.
Healius has people dedicated to
maintaining relationships, increasing
engagement and addressing any
issues with its clients and customers.
Healius has invested in facilities, systems,
people and services in its aim to meet
and exceed the needs of its customers.
35
HEALIUS — ANNUAL REPORT 2022DIRECTORS AND SENIOR MANAGEMENT Risk management
CONTEXT
RISK PRIORITIES
AIMS AND ACTIONS
People capabilities and
employee relations
Sustainability for Healius is underpinned
by its ability to attract and retain
the right talent and capabilities.
New technologies and changing
consumer perceptions are driving
the need for specialist skillsets
including analytics, digital expertise
and cyber security.
There is significant competition to
recruit such talent, which can increase
labour costs and reduce profitability.
A number of recent legislative
amendments, Court decisions
and Modern Award variations have
increased the complexity of the
employee-relations landscape.
Healius aims to be a workplace
of choice, to live its WE CARE values,
and to meet gender and other diversity,
inclusion and equality goals.
Healius is investing in the value proposition
to its employees and implementing
employee-related initiatives, such paid
parental leave across the Group.
It is also enhancing its people information
tools to better manage its people.
Healius has created a dedicated
function to assist it in remaining
compliant with its employee relations
requirements and obligations.
Data management and
cyber security
Healius maintains sensitive clinical
and financial information and failure
to appropriately use and secure
data can have severe consequences.
Healius’ systems and databases
are increasingly subject to security
risks including cyberattacks.
Healius understands that protection
of privacy of individuals whose personal
information is collected is paramount.
It has an ongoing program to strengthen
defences against unauthorised
access and to protect clinical and
financial data within these systems.
Supply chain and
modern slavery
Healius is reliant upon the importation
of consumables, such as reagents,
and equipment. Prices and availability
may impact the efficient operating of
its services. There is also a risk of modern
slavery within these supply chains.
Competition
Competition may come from new
entrants into the market, existing
competitors, or from disruptive
technologies that may change
the way services are delivered.
A change in competition may impact
Healius’ profitability, the ability to
attract and retain people, or secure
attractive locations for its businesses.
36
Healius aims to continually manage known
supply chain risks. It has a dedicated
procurement function and a range
of suppliers which helps to reduce
disruption. Healius’ commitment to
human rights and the eradication of all
types of modern slavery is overseen by
the executive Sustainability Steering
Committee. Its approach to modern
slavery eradication is multi-faceted
and includes supplier questionnaires,
due diligence, risk assessments and specific
terms included in supplier agreements.
Healius aims to maintain its competitive
edge through a focus on and
investment in data-led operations,
consumer-centricity, product innovation,
network optimisation and developing
organisational competencies for the future.
CONTEXT
RISK PRIORITIES
AIMS AND ACTIONS
Acquisitions
Reputation and
regulatory compliance
Climate change
Healius is exploring opportunities to fund
strategic investments in adjacencies
to the current portfolio and to extract
synergistic value from its strong
balance sheet. There is a risk that the
acquisitions may not generate the
financial returns or performance hurdles
required to meet Healius benchmarks.
Healius recognises that its reputation
can take time to build but can
be easily eroded. Healius’ reputation
may be impacted by an event that
creates adverse perception of the
Group by the public, consumers
and customers, investors, regulators,
or rating agencies that directly or
indirectly impacts earnings and value.
Healius operates in sectors which
are subject to extensive laws and
significant levels of regulation relating
to the development, licencing and
accreditation of facilities and services.
Healius recognises that climate change
is a global issue. Climate change risks
may be either ‘physical’ with financial
implications resulting from potential
damage to assets, ‘indirect’ through
impacts from supply chain disruption,
or ‘transitional’ through changes to
regulations and consumer behaviour.
Healius has a due diligence process
to assess the merits of each proposed
acquisition and the transition of the
acquired business into the Group.
Healius aims to maintain quality
standards and a culture of accountability
through its risk and governance systems,
policies and procedures, with effective
involvement of executive and clinical
management to ensure it provides quality
healthcare and minimises the risk of
reputational damage. Healius aims to
continually meet licencing and accreditation
standards across all businesses.
Healius aims to manage its operations
in an environmentally sustainable
manner, adapting to changes in
consumer behaviour and reducing its
carbon footprint. Healius has the stated
aim to be carbon neutral by 2026.
In the event of extreme weather conditions
impacting operations, Healius has
a network of facilities which can continue
operations in alternative locations.
37
HEALIUS — ANNUAL REPORT 2022DIRECTORS AND SENIOR MANAGEMENT Directors’ Report
for the year ended 30 June 2022
The Directors of Healius Limited (referred to as ‘Healius’ or ‘the Company’) submit their Report for the financial year ended
30 June 2022 (referred to as ‘the year’ or ‘FY 2022’), 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 2022
•
Robert Hubbard
• Malcolm Parmenter
• Gordon Davis
•
•
•
•
Sally Evans
Paul Jones
Jenny Macdonald
Kate McKenzie
NEW DIRECTORS DURING FY 2022
John Mattick (from 31 March 2022)
•
Qualifications and experience of Directors
CONTINUING DIRECTORS
The qualifications and experience of each new and continuing Director are set out on pages 30–31 of this Annual Report.
Committees of the Board in FY 2022
AUDIT COMMITTEE
Chair
Jenny Macdonald
Members
Gordon Davis
Robert Hubbard
Paul Jones
PEOPLE & GOVERNANCE COMMITTEE
RISK MANAGEMENT COMMITTEE
Chair
Sally Evans
Members
Robert Hubbard
Paul Jones
Kate McKenzie
Chair
Gordon Davis
Members
Sally Evans
Jenny Macdonald
Kate McKenzie
Group Company Secretary
QUALIFICATIONS AND EXPERIENCE OF COMPANY SECRETARIES DURING FY 2022
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
Directors’ Report
for the year ended 30 June 2022
Directors’ meetings during FY 2022
The number of meetings of the Board and of each Board committee held during FY 2022 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 2022
ELIGIBLE
ATTENDED
ELIGIBLE
ATTENDED
ELIGIBLE
ATTENDED
ELIGIBLE
ATTENDED
Robert Hubbard 1
Gordon Davis
Sally Evans
Paul Jones 2
Malcolm Parmenter
Jenny Macdonald
John Mattick 3
Kate McKenzie
15
15
15
15
15
15
4
15
15
15
15
12
15
15
3
15
6
6
N/A
6
N/A
6
N/A
N/A
6
6
N/A
6
N/A
6
N/A
N/A
5
N/A
5
5
N/A
N/A
N/A
5
4
N/A
5
5
N/A
N/A
N/A
5
N/A
4
4
N/A
N/A
4
N/A
4
N/A
4
4
N/A
N/A
4
N/A
4
1
2
3
Robert Hubbard was granted leave of absence from one People & Governance Committee meeting.
Paul Jones was granted leave of absence from three Board of Directors meetings.
John Mattick was granted leave of absence from one Board of Directors meeting.
Any leaves of absence indicated above were typically granted 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 Chair 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.
Directorships of other listed companies held by Directors
DIRECTOR
COMPANY
POSITION
DATE APPOINTED
DATE CEASED
Gordon Davis
Midway Limited
Nufarm Limited
Sally Evans
Ingenia Communities Holdings Limited
Oceania Healthcare Limited
Robert Hubbard
Allkem Limited
Bendigo and Adelaide Bank Limited
Director and Chair
Director
Director
Director
Director
Director
Jenny Macdonald
Australian Pharmaceutical Industries Limited Director
Bapcor Limited
Redbubble Limited
Redflow Limited
Siteminder Limited
Kate McKenzie
Allianz Australia Limited
AMP Limited
Chorus Limited
Stockland Corporation Limited
Director
Director
Director
Director
Director
Director
Director
Director
06/04/2016
31/05/2011
01/12/2020
23/03/2018
30/11/2012
02/04/2013
09/11/2021
09/11/2017
31/03/2022
01/09/2018
22/02/2018
22/12/2017
30/09/2019
21/10/2021
01/01/2012
30/06/2020
18/11/2020
20/02/2017
20/11/2019
02/12/2019
39
HEALIUS — ANNUAL REPORT 2022DIRECTORS’ REPORT Significant change in the state of affairs
There was no significant change in the state of affairs of the Group during the year.
Principal activities
During the year, the Group had three principal continuing activities – pathology, imaging and day hospitals. The Group provides
facilities and support services to independent 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 20–29.
of this Report.
Events after the end of the year
Since the end of the reporting period the Group has decided to sell the Day Hospitals business in its entirety. The sale process
was initiated in July 2022 when an Information Memorandum was distributed to potential buyers and is expected to be completed
in FY 2023.
Other than the event described above, there has not been any other matter or circumstance that has arisen since the end of the
financial year that 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
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 as 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.
On-market buyback
Pursuant to ASX listing Rule 4.10.18, the Company notes that an on-market buyback is in progress as at the date of this Report.
Securities purchased for employee incentive scheme
During FY 2022, the Company purchased 4,390,678 ordinary Shares on-market at an average price of $5.034156 per Share to satisfy
the entitlements of the holders of Performance Rights issued under the FY 2019 Long-Term Incentive Plan (an employee incentive
scheme) to acquire ordinary Shares on the vesting of those Performance Rights.
Dividends
During FY 2022, the FY 2021 final dividend of 6.75 cents per share (100% franked) was paid to the holders of fully paid ordinary Shares
on 8 October 2021.
In respect of FY 2022 an interim dividend of 10.0 cents per share (100% franked), was paid to the holders of fully paid ordinary Shares
on 5 April 2022. The Board determined payable a final dividend of 6.0 cents per share (100% franked), to be paid to the holders of fully
paid ordinary Shares on 21 September 2022.
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 2022 under either the DRP or the BSP.
40
Directors’ Reportfor the year ended 30 June 2022 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.
Transformation Long-Term Incentive Plan
(TLTIP) FY 2020–22
Balance as at date of this Report
OPENING BALANCE
36,394,239
36,394,239
ISSUED SINCE
PRIOR ANNUAL
REPORT
EXERCISED SINCE
PRIOR ANNUAL
REPORT 1
LAPSED SINCE
PRIOR ANNUAL
REPORT 1
CLOSING BALANCE
–
–
9,588,818
9,588,818
10,511,513
10,511,513
24,262,825
24,262,825
1 Cashless exercise mechanism resulted in 7,968,917 exercised Options subsequently lapsing; these are captured in both the exercised and lapsed
columns as required under the Corporations Act, however do not impact the closing balance.
Shares issued on the exercise of Options
1,619,901 fully paid ordinary Shares of Healius were issued during, or since the end of, FY 2022 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 2022 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 a Deed of Indemnity, Board Papers Inspection and D&O Coverage, which provides 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 2022. Healius has not otherwise, during or since the end of FY 2022, 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 E8 on page 114 of this Report.
41
Directors’ Reportfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022DIRECTORS’ REPORT Management of safety risks
As a provider of healthcare, Healius is committed to ensuring a safe work environment for our people as well as safe spaces for our
patients and customers. We review our Group Work Health and Safety Management System (WHSMS) annually and regularly audit
our practices to ensure the highest standards of safety are maintained.
In FY 2022 a significant increase in reported incidents was seen related to COVID-19 exposures in the workplace. Excluding COVID-19,
fewer people were injured across the Group and fewer people needed time off work. Further analysis is required to determine if the
decline relates to changing work practices over the period, or a safer system of work.
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.
Self-insurance licence obligations require that the Healius WHSMS is audited against the National Audit Tool Version 3. The tool
evaluates safety performance and compliance and is used by state-based WorkSafe regulators to measure health and safety
systems of the Group.
Key health and safety performance indicators are as follows:
TARGET
Completion of Health and Safety Plan
activities by worksites
90% of planned activities
completed
Mini audits – measuring compliance
to WHSMS
75% Compliance Rate
Internal Health and Safety audits – measuring
compliance to National Audit Tool Version 3
80% Compliance Rate
FY 2022
92%
FY 2021
98%
97% of the 162 mini
audits conducted met
or exceeded target
97% of the 218 mini
audits conducted met
or exceeded target
94% of the 33 internal
audits conducted met
or exceeded target
91% of the 35 internal
audits conducted met
or exceeded target
Number of WHS prosecutions
Lost Time Incidents per Million Hours Worked
Zero
Zero
Zero
4.2 1
Zero
5.8
1
Adjusted LTIFR. LTIFR including COVID-19 related exposure incidents is 18.2.
Performance against key proactive health and safety indicators stays strong. This indicates that over the past 12 months,
we have not seen a decline in the site level implementation of the WHSMS, despite the operational challenges faced by the business.
This is commendable given the environment, decreased site visits and remote auditing brought about by COVID-19.
Since the onset of COVID-19 in March 2020 we have adapted our safety protocols, equipment, and process as we navigate increased
workload along with new ways of working and, pleasingly, we have maintained our safety standards.
The LTIFR, including COVID-19 exposure incidents, is 18.2, however the increase is not unexpected given the increased testing volumes
in conjunction with significant outbreaks in NSW and VIC.
Through the course of FY 2022 the Group transitioned to a managed COVID-19 environment, where lockdowns and restrictions have
largely ceased, with a new appreciation of what it takes to keep our people fit, mentally and physically, to ensure that we can continue
to provide high levels of service to our patients and communities.
Increasing our organisational capacity and capability to manage fatigue well is a key priority for the Group. We will continually identify
and address conditions yet to be fully understood that emerge from the pandemic.
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. Strategic projects are identified through the
monitoring of incidents trends, employee feedback and WHS audit findings. In FY 2023 will commence work building out our WHSMS
to effectively manage and report on the expanded obligations organisational Health and Wellbeing.
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.
More information on the Group’s sustainability initiatives are available in the Sustainability Report, available at
https://www.healius.com.au/invest-in-us/reports/sustainability-report/.
42
Directors’ Reportfor the year ended 30 June 2022 Remuneration Report (Audited)
This report sets out the remuneration arrangements for the Company’s executive Key Management
Personnel (KMP) and Non-executive Directors for the year ended 30 June 2022 (FY 2022). It is prepared
in accordance with section 300A of the Corporations Act 2001 (Corporations Act).
Letter from the Chair of the People & Governance Committee
1.
Overview of senior executive remuneration framework
2.
3.
4.
5.
6.
1.1
1.2
Overview
Notable components of the plans
Healius’ Remuneration Governance
Executive Key Management Personnel FY 2022
Executive KMP – Framework and outcomes FY 2022
4.1
4.2
4.3
4.4
FY 2022 Fixed Annual Remuneration
FY 2022 Short-Term Incentive Plan (STIP)
FY 2020 Transformation Long-Term Incentive Plan (TLTIP)
FY 2022 Company performance
Executive KMP – Table of opportunity, awards and receipts
FY 2022 – non-statutory
Executive KMP – Statutory disclosures FY 2022
6.1
6.2
6.3
Executive KMP – Statutory disclosure FY 2022
Executive KMP – Service and Performance Rights and Options awarded,
vested and lapsed during FY 2022
Executive KMP – Equity holdings FY 2022
7.
Non-executive Director (NEDs) remuneration FY 2022
7.1
7.2
7.3
7.4
7.5
Non-executive Director remuneration policy
Non-executive Director fees
Other Non-executive Director benefits
Non-executive Director remuneration
Non-executive Director equity holdings in FY 2022
8.
Remuneration policies in detail FY 2022
8.1
8.2
8.3
8.4
8.5
Senior executive employment terms
Senior executive Short-Term Incentive Plan details
Senior executive Transformation Long-Term Incentive Plan details
Remuneration-related policies
Transactions with KMP
44
45
45
46
47
48
48
48
48
51
53
54
56
56
56
57
58
58
58
58
59
59
60
60
60
61
64
64
43
HEALIUS — ANNUAL REPORT 2022DIRECTORS’ REPORT Letter from the Chair of the People & Governance Committee
Dear Shareholder,
On behalf of your Board of Directors, I am pleased to present
the audited Remuneration Report for the financial year ended
30 June 2022 (FY 2022) which sets out the remuneration
framework for our senior executives and specific outcomes for our
Key Management Personnel (KMP). Our framework aims to attract,
retain and reward talented employees while aligning their ‘at risk’
arrangements to sustained shareholder value creation.
This year, we further streamlined the number of our KMPs
to Group CEO, Group CFO/COO and Pathology CEO, as this
better reflects the size and materiality of our current portfolio.
In FY 2022, we reviewed KMP fixed annual remuneration
(FAR) taking into consideration the Group’s size and
complexity, an individual’s skills, expertise and responsibilities,
current market conditions and benchmarking including
against comparator groups. As a result, our Group CFO/COO
and Pathology CEO were awarded increases in FAR. In relation
to the Group CEO, Dr Malcolm Parmenter, no increase has been
awarded in this year or, indeed, since his commencement in 2017.
Turning to our variable remuneration, short-term incentives
(STIs) have been granted for FY 2022 based on an individual’s
balanced scorecard which has assessed financial outcome
as well as strategy and operations, with company values
acting as a gateway and sustainability included for the first
time. Consistent with last year, your Board considerations went
beyond accepting the strong results as a given to assessing
what was required to successfully deliver our COVID-19 testing
program and business-as-usual services, as well as the
progress on the strategic and margin expansion initiatives.
As a result of our assessment, KMP have received STIs in
the range of 89%–93% of the maximum available to them.
Importantly, FY 2022 is the first year of measurement
of the TLTIP which was approved at the AGM in November
2019. The TLTIP was established by your Board to ensure
senior executives were aligned to shareholder returns over
five years given the long-dated nature of the strategic
changes underway at that time including digital technology
in Pathology. Hence, a mega grant of options was made
in FY 2020 with performance hurdles tied to Earnings Per Share
(EPS) and relative Total Shareholder Return (TSR) measured over
a period of three to five years, being end of FY 2022 to FY 2024.
While acknowledging the large quantum of options exercised
this year under the TLTIP, these options are a mathematical
outcome of the terms of the TLTIP and reflect its purpose
in rewarding executives for growth in shareholder returns over
a three-year period.
Coupled with a strong balance sheet which can be deployed
to deliver inorganic growth, your company is well positioned
to improve its performance and increase returns in its core
businesses. We have multiple growth pathways including
expansion of our efficient networks, enhancement of our
digital experiences to patients and referrers, and growth
in our diagnostic offerings in particular in high-margin clinical
domains and specialties.
As FY 2022 was the final year to which the TLTIP applied,
a new executive LTI plan is under development for FY 2023
to be considered by shareholders at the 2022 AGM.
The remit is to keep the plans as simple as possible while
aligning them with our strategy, shareholder returns and
general market practice.
For your Non-executive Directors (NEDs), we plan to undertake
a review of fees in FY 2023 as these fees have not been
updated since FY 2018. Your NEDs have a target of one year’s
fees in equity by 30 June 2025 or five years after the date
of appointment if later, under the policy introduced in FY 2021.
A policy requiring executive KMP to hold equity remains under
active consideration by your Board.
As Chair of the People & Governance Committee, I look forward
to engaging further with you and considering your valuable
feedback. I hope you will continue to support us by voting
to adopt this Remuneration Report at our upcoming Annual
General Meeting.
Yours sincerely
Sally Evans
Independent Non-executive Director
Chair of the People & Governance Committee
Looking at the growth in shareholder value over the period
from 1 July 2019 to 30 June 2022, Healius share price has grown
by 22% compared to a 1% decline in the ASX/S&P 200, our EPS
CAGR is 61.1% and our TSR is 37.2%. The company is a stronger
and better business than in FY 2019 with:
• More simplified portfolio
• More competitive margins and higher return on invested
capital through two Sustainable Improvement Programs
Fortified balance sheet with higher cash-generative
businesses
Significant advancement of our digital technology to
improve consumer experience, internal business process
efficiency and clinical insights
Progress on our people and culture initiatives, recognising
that our success is underpinned by our ability to attract
and retain the right talent
•
•
•
• Greater rewards to shareholders through buybacks
•
and increased dividends
Successful delivery of our part in Australia’s public health
response to COVID-19.
44
Directors’ Reportfor the year ended 30 June 2022 1. Overview of senior executive remuneration framework
1.1
OVERVIEW
Remuneration Principles
Support Healius’ Purpose, Mission and Values and the business strategy
•
• Attract, reward and retain high calibre senior executives
• Align the rewards of these executives to performance and sustained shareholder value
• Continually reviewed to ensure relevance.
Fixed Remuneration
(FAR)
Short‑term Incentive Plan
(STIP)
Long‑term Incentive Plan
(LTIP)
•
Externally
benchmarked against
market relativities,
including comparator
group for rTSR in TLTIP
• Based on individual
experience with
awards above the
mid-point only where
an individual has
extensive experience
in the industry, the role,
and due to the scope
of responsibilities
• Ongoing assessment
against change in
role scope, market
relativities, and general
wage movements
• Ongoing
consideration of
retention preferences
and succession
planning in a tight
recruitment market.
•
•
45% of FAR at maximum (52.8% for CEO
and CFO/COO)
To reward achievement over the course
of a single financial year
• Measured against an individual’s
scorecard which includes financial,
operational and strategic Key
Performance Indicators (KPIs) with
leadership behaviours acting as
a gateway to any award
• Comprises cash (two-thirds) and equity
(one-third) in the form of Service Rights
which are deferred for one year
• Creates senior executive equity ownership
•
Scalability in financial metrics incentivises
senior executives to continue to outperform
when a lower goal has been achieved.
•
•
130% of FAR at maximum (152% for CEO
and CFO/COO)
Fixed mega-grant based on FAR at
commencement of TLTIP. Not indexed
to increases in FAR over the duration
of the TLTIP
• Aligned with shareholder interests
•
To reward multi-year performance,
achievement of strategic objectives
and retain key talent
• Measured by rTSR and underlying Earnings
per Share (EPS) growth (also underlying
EBIT growth before corporate recharges
for Divisional CEOs)
TLTIP comprises a one-off grant
of Options covering three years from
FY 2020
•
• Options exercisable in equal tranches
at the end of FY 2022, FY 2023 and
FY 2024
• Creates senior executive equity ownership
Scalability incentivises senior executives
•
to continue to outperform when a lower
goal has been achieved.
CEO remuneration mix
The following diagram illustrates the remuneration mix of the Healius CEO at stretch or maximum potential:
CEO
33%
11%
6%
50%
Fixed 33%
Variable 67%
FAR
STI – cash
STI – equity
TLTIP – equity
TLTIP - EQUITY
STI-EQUITY
STI - CASH
FAR
45
Directors’ Reportfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022DIRECTORS’ REPORT 1.2
NOTABLE COMPONENTS OF THE PLANS
FY 2020 TLTIP
Overall remuneration principles
Link to shareholder value
The remuneration of senior executives is designed to link reward
with shareholder value, both current year and longer-term
sustained value creation.
Use of underlying earnings
In the three-year FY 2020 TLTIP, underlying earnings for
continuing operations are used in the measurement of EPS
growth and divisional EBIT, rather than statutory earnings,
to ensure management do not benefit from a lower starting
point in FY 2019 and, hence, higher growth over time.
(Up to FY 2019, Healius was undergoing a period of significant
transition and statutory earnings were consistently lower than
underlying earnings. The latter excluded, for example, the costs
of turning around the Medical Centres business before its sale.
From FY 2020 onwards, Healius has reduced the gap between
statutory and underlying earnings).
From FY 2022 onwards, to provide confidence in the TLTIP
earnings base, adjustments to statutory results for the TLTIP
are limited to the investment in the Pathology laboratory
information systems (now known as Pathology Digital).
The Pathology Digital implementation will form part of
the STIP KPIs and hence project management, cost control
and benefits realisation will be incorporated into remuneration
considerations through this mechanism.
Minimisation of adjustments
In the three-year FY 2020 TLTIP, no adjustment will be made for
the impact of AASB 16 in the measurement period. This decision
has been made notwithstanding the negative impact on the
measurement of EPS growth during the period.
Positive gate for rTSR
A positive rTSR gate applies to the vesting of TLTIP relating
to Healius’ rTSR performance against its comparator group.
No award can be made if Healius’ rTSR over the measurement
period is zero or negative, even if Healius has performed better
than the comparator group.
Dynamic comparator group for rTSR
As part of the introduction of the TLTIP in FY 2020, the rTSR
comparator group was reviewed, extended and updated
to better reflect comparable market capitalisation, growth
profiles, consumer surrogates and investment substitutes.
The link is achieved through the at-risk pay elements,
or variable remuneration, of a senior executive’s package.
These incentives are aligned to shareholder value through
the financial, operational and strategic KPIs in the STIP,
and rTSR and EPS targets in the TLTIP.
Multi‑year vesting of equity
The rolling nature of remuneration payments encourages
executive retention. STIP equity is deferred for one year
and TLTIP Options are measured and vest after three,
four or five years, subject to the achievement of performance.
FAR
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
Years 4–6 TLTIP
Clawback provisions
Payments or vesting related to STIP and TLTIP 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.
FY 2022 STIP
Balanced scorecards
For the FY 2022 STIP, each KMP was assigned specific
objectives around financial, operational and strategic
outcomes, ensuring they were measured and rewarded for
initiatives over which they have responsibility, which contribute
directly to the Company’s strategy and which deliver increased
shareholder value.
Leadership and people behaviours were a gateway for
the STIP award, including the Board’s discretion to modify
any award to zero if deemed necessary. Additionally,
progress towards Sustainability targets has been included
for the first time in FY 2022.
46
Directors’ Reportfor the year ended 30 June 2022 2. Healius’ Remuneration Governance
Healius’ Remuneration Governance Framework and the Charter of the People & Governance Committee are available on
the Company’s remuneration governance portal at: http://www.healius.com.au/about-us/corporate-governance/-us/
corporate-governance/
In summary the remuneration governance framework is as follows:
Healius Board
Ultimate responsibility for all remuneration‑related matters
People & Governance Committee
Sally Evans – Chair | Robert Hubbard | Paul Jones | Kate McKenzie
Appointed and authorised by the Board to assist in fulfilling its statutory and fiduciary duties.
People and culture
Senior executive remuneration, recruitment, retention, performance evaluation, incentives and termination
The Committee is responsible for making recommendations to the Board about:
• Diversity
• Healius’ Purpose, Mission and Values
• Governance
•
•
• Remuneration framework for Non-executive Directors
• Board succession planning and leadership development
•
• Required competencies of Directors
• Appointment and re-election of Directors.
Performance evaluation of the Board, its committees and Directors
Officers or employees
External consultants
Other stakeholders
•
•
•
To assist it in meeting its responsibilities, the Committee has the authority to seek information and retain legal,
accounting or other advisers, consultants or experts
The Committee communicates with senior executives about remuneration-related matters, to ensure that senior
executives are aware of the Board’s performance expectations and the connection between the achievement
of the Board’s strategy for Healius, shareholder value and financial rewards for management
The Committee consults widely with stakeholders including shareholders, proxy advisers and other stakeholders
on their views on remuneration policy and disclosures.
47
Directors’ Reportfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022DIRECTORS’ REPORT Executive Key Management Personnel FY 2022
3.
KMP are the Non-executive Directors, the executive Director and employees who have authority and responsibility for planning,
directing and controlling the material activities of the Group, directly or indirectly. The following roles and individuals were identified
as executive KMP for FY 2022 (Non-executive Directors are identified in section 7). This includes a reduction from four to three KMP
in FY 2022 to better reflect the size and materiality of the current portfolio of the Group.
NAME
Malcolm Parmenter
Maxine Jaquet
ROLE
Managing Director and Chief Executive Officer (CEO)
Chief Financial Officer (CFO) and Chief Operating Officer (COO)
Chief Financial Officer (CFO)
John McKechnie
Chief Executive Officer Pathology
DATES
September 2017
January 2021
August 2019
August 2019
Executive KMP – Framework and outcomes FY 2022
FY 2022 FIXED ANNUAL REMUNERATION
4.
4.1
A review of fixed annual remuneration (FAR) was undertaken in FY 2022 as part of an ongoing evaluation of remuneration
policies and outcomes. This review considered the Group’s size and complexity, an individual’s skills, expertise and responsibilities,
market realities including the current tightening in the recruitment market, and benchmarking.
The review of executive KMP FAR resulted in:
• Malcolm Parmenter’s FAR did not increase for FY 2022
• Maxine Jaquet’s FAR increased from $800,000 to $900,000 for FY 2022 due to benchmarking analysis of her role,
together with succession planning and retention imperatives
John McKechnie’s FAR increased from $725,000 to $750,000 for FY 2022 due to benchmarking analysis of his role in overseeing
the most complex division in the Group
The increases in FAR did not result in a concurrent increase in options under the three-year TLTIP.
•
•
The Board notes stakeholder comments in connection with the CEO’s FAR in particular in comparison to the median of the index
in which Healius currently sits (S&P/ASX 100-150) and comments as follows:
• Malcolm was recruited at a time when Healius was in the ASX 100 index and Malcolm’s FAR was based on his extensive
healthcare experience and capabilities. Since that time, Malcolm has not received any increase in his FAR
• Malcolm has overseen a period of significant progress in the performance and sustainability of the Group. This has
been achieved through Malcolm’s carriage of enterprise management together with fundamental improvements in the
organisational structure, operations, people, technology platforms, and consumer focus.
4.2
FY 2022 SHORT-TERM INCENTIVE PLAN (STIP)
Framework
Key outline of the FY 2022 STIP is as follows, with further details set out in section 8 below:
•
The purpose of the STIP is to reward achievement over a single financial year, measured against an individual’s scorecard which
includes relevant and tailored financial, operational and strategic KPIs
The STIP ensures executive KMP are measured and rewarded for initiatives over which they have responsibility, which contribute
directly to the Company’s strategy and which deliver increased shareholder value
Leadership behaviours act as a gateway for the STIP award, including the Board’s discretion to modify any award to zero.
In FY 2022 progress towards sustainability targets has been included in the scorecards of KMP
The STIP currently equates to 45% of FAR at maximum (52.8% for CEO and CFO/COO) and the maximum opportunity equates
to 120% of target
Under the plans, the Board retains discretion to increase awards above maximum in exceptional circumstances
Two-thirds of the STIP is paid in cash and one-third in the form of Service Rights which are deferred for one year.
•
•
•
•
•
•
48
Directors’ Reportfor the year ended 30 June 2022 Treatment rationale
In assessing the FY 2022 STIP awards, the Board was aware of the potential misinterpretation of the strong financial returns
achieved in the year as being a windfall gain from COVID-19 testing (a COVID Bonus).
As was set out in last year’s Remuneration Report, the overriding aim of your Company throughout the COVID-19 pandemic has
been in ensuring Healius played an instrumental role in Australia’s public health response by offering extensive COVID-19 screening
services. The Board’s view is that management has delivered on this aim throughout FY 2022 and in particular in 1H 2022 during the
Delta and early Omicron outbreaks when extensive COVID-19 PCR screening was mandated and the teams worked around the
clock, extended well beyond normal levels.
The Board also believes that management has successfully delivered in the year, over and above COVID-19 testing, as follows:
• On-going provision of critical non-COVID pathology testing as well as imaging and day hospital services.
• Operational success in delivery of strong margins, through rigorous cost control and agility in scaling operations
•
•
•
as demand fluctuated.
Structural improvements with 45% of its Sustainable Improvement Program initiatives (based on annualised benefits) completed.
Investment in its digital future, with first-to-market COVID-19 offerings and substantial progress on customer-facing initiatives
such as e-referrals and results portals and on the central laboratory system modernisation. This investment will serve to underpin
the Sustainable Improvement Program margin growth and deliver further benefits in its own right.
Successful capital management and delivery of greater shareholder rewards, including completion of the CY 2021 $200 million
share buyback, commencement of the CY 2022 share buyback (with a ceiling of $100 million), together with a targeted program
of capital investment in network assets including Imaging facilities and high-modality equipment.
• On-going portfolio optimisation with the completion of the Adora Fertility sale, the exploration of opportunities to realise value
in Montserrat Day Hospitals, with a sale process underway in early FY 2023, and longer-term growth beyond the core with the
acquisition of Agilex Biolabs as a specialty adjacency in Pathology.
Outcomes
The following table provides the STIP outcomes for the executive KMP in FY 2022:
Malcolm Parmenter
Maxine Jaquet
John McKechnie
MAXIMUM
OPPORTUNITY
$871,200
$475,200
$337,500
ACTUAL
$776,820
$443,520
$306,562
% OF MAXIMUM
OPPORTUNITY
89.17%
93.33%
90.83%
CASH
$517,880
$295,680
$204,375
DEFERRED
EQUITY
$258,940
$147,840
$102,187
49
Directors’ Reportfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022DIRECTORS’ REPORT The KPI scorecard for CEO, Malcolm Parmenter, is set out below:
KPI
Financial 30%
TARGET
$M/%
MAXIMUM
$M/%
ACTUAL (QUANTITATIVE OBJECTIVES)
PERFORMANCE (QUALITATIVE OBJECTIVES)
MAXIMUM
ACHIEVED
% OF
MAXIMUM
Group underlying EBIT
$206.8
$248.2
Group cash flow (underlying EBITDA
as proxy)
$464.0
$556.8
Underlying EBIT margin
11.15%
13.38%
$492.3
$770.8
21.06%
Operational 10%
Maximise operational efficiency,
service delivery and revenue
potential across the network
SIP
targets
> SIP
targets
45% of Sustainable Improvement Program
initiatives delivered and margin expansion
goal reconfirmed. ACC network delivering
10.9% more revenue than FY 2019.
Y
Y
Y
N
100%
100%
100%
75%
Y
100%
N
83%
N
83%
Successful integration of Imaging acquisition.
Murdoch Day Hospital development approved.
Purchase of strategic adjacency in Agilex
Diagnostics with 52% annualised revenue
growth. Day Hospitals prepared for sale.
Substantial progress on Digital agenda.
First-to-market COVID-19 initiatives.
Consumer-facing e-referrals rolled out
in Pathology and Imaging, online bookings
in Imaging, and collections portal in Pathology
with results portal underway. Central LIS
modernisation underway with instrument
manager and laboratory portal progress.
All businesses sized for delivery of
business-as-usual services. Strong cost
containment in the year and demonstrable
ability to scale up and flex down operations
to meet fluctuations in demand, with >30%
underlying EBITDA margin in FY 2022.
Montserrat CEO transition delivered.
New Imaging CEO signed up.
N
67%
Strategy implemented, focus areas identified
and targets set, including carbon neutrality
by 2026, KPIs cascaded to management.
Report to be published in Q1 FY 2023
N
83%
Gateway met
n/a
n/a
Gateway met
n/a
n/a
Strategic 40%
30%: Develop portfolio growth
strategy for the Group specifically
opportunity/ies for successful
acquisition/growth adjacent to
existing diagnostic capabilities
30%: Develop and implement digital
strategy for service delivery and
operational efficiency, specifically
consumer and referrer digital
strategy and digital plan to support
Group's operating model
20%: Lead the recovery in
non-COVID revenue across
all businesses
20%: Through organisational review,
embed leadership transitions for
key divisions
Sustainability 20%
Implement Sustainability strategy
for the Group
Leadership (Gateway)
Align to ‘WE CARE’ values
People (Gateway)
Ensure plans for safety
and wellbeing; capability,
performance and development.
Embed succession planning
50
Directors’ Reportfor the year ended 30 June 2022 FY 2020 TRANSFORMATION LONG-TERM INCENTIVE PLAN (TLTIP)
4.3
The FY 2020 Transformation Long-Term Incentive Plan (TLTIP) was established in early FY 2020 by the Board to ensure senior
executives were aligned to shareholder returns over a five-year period given the long-dated nature of the strategic changes
underway at that time including core technology platforms in Pathology. A one-off mega-grant of Options representing
three-years’ worth of LTIs was made in early FY 2020 split into three equal tranches measured over a period of three,
four and five years (FY 2022—FY 2024).
Vesting conditions
FY 2022 represents the first year of measurement and vesting of the first tranche of TLTIP options. A summary of the vesting
conditions for the TLTIP is set out below with further details set out in section 8.
TLTIP awards for executive KMP are determined using the following ratios:
TLTIP PERFORMANCE MEASURE
CAGR Group underlying EPS
Group rTSR
CAGR divisional underlying EBIT
GROUP CEO AND CFO/COO
CEO PATHOLOGY
67%
33%
0%
40%
20%
40%
Compound Annual Growth Rate (CAGR) of Underlying EPS was selected by the Board to ensure a measurable and close alignment
to shareholder returns. Vesting conditions are as follows:
PERFORMANCE BAND
CAGR OF UNDERLYING NPAT/SHARES ON ISSUE
% OF OPTIONS EXERCISABLE
Below Entry
Entry
<4%
4%
Nil
25%
Between Entry and Mid-point
Straight line 4%–7%
Straight line 25%–50%
Mid-point
7%
50%
Between Mid-point and Maximum
Straight line 7%–10%
Straight line 50%–100%
At or above Maximum
≥ 10%
100%
rTSR was selected by the Board to motivate senior executives to drive returns which outperform those of comparable companies.
rTSR has a positive gate and is measured against a comparator group as set out in Section 8. It is calculated as follows:
PERFORMANCE BAND
Below Entry
Entry
Between Entry and Maximum
At or above Maximum
rTSR RANK (P VALUE)
% OF OPTIONS EXERCISABLE
. 16,783 Shares and all NED Share Rights held by Sally Evans.
40,588 Shares held by Pannly Pty Ltd ATF Jones Family Trust. 12,623 Shares and all NED Share Rights held by Paul Jones.
2
3
4
5 All Shares and NED Share Rights held by Jennifer Macdonald.
6
7
4,500 Shares held by MCK Family Holdings Pty Ltd. 1,004 shares and all NED Share Rights held by Kathryn McKenzie.
FY 2021 NED Share Rights and FY 2022 NED Share Rights issued under the NED Share Plan to participating NEDs through salary sacrifice.
All securities were issued pursuant to shareholder approval under ASX Listing Rule 10.14. During FY 2022, the final 67% of FY 2021 NED Share Rights
vested into Shares in August 2021 following the Company’s FY 2021 results announcement. Also during FY 2022, FY 2022 NED Share Rights were
issued. 50% of FY 2022 NED Share Rights vested into Shares in March 2022 following the Company’s HY 2022 results announcement. The remaining
50% of FY 2022 NED Share Rights vested in FY 2023 following the announcement of the Company’s FY 2022 results, which will be reflected in the
Company’s 2023 Remuneration Report.
59
Directors’ Reportfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022DIRECTORS’ REPORT 8.
8.1
Remuneration policies in detail FY 2022
SENIOR EXECUTIVE EMPLOYMENT TERMS
KEY TERM
SUMMARY OF KEY TERM
Senior executives
The CEO, other KMP who hold executive roles, and other direct reports to the CEO.
Employing company Idameneo (No 789) Ltd. (This is the service company in the Healius Group and a large number of Group
employees are employed by this entity).
Basis of employment Permanent full time. No fixed or maximum term.
Period of notice
Six to 12 months, from either party.
Termination
without notice
Termination
payments
Healius may terminate the senior executive’s employment without notice if, in the opinion of Healius,
the senior executive engages in misconduct, fraud, commits a serious or persistent breach of the
agreement, or other specified circumstances occur.
Capped at 12 months Fixed Annual Remuneration (Healius is not required to pay or provide, or procure the
payment or provision, of any payment or benefit to the senior executive which would require shareholder
approval). The treatment of incentives under the STIP and TLTIP in the case of termination is addressed
in separate sections of this Report.
8.2
SENIOR EXECUTIVE SHORT-TERM INCENTIVE PLAN DETAILS
KEY TERM
Period
Eligibility
SUMMARY OF KEY TERM
1 July 2021–30 June 2022 inclusive.
Senior executives and other persons approved by the Board. NEDs are not eligible to participate.
Potential
annual award
For the CEO and CFO/COO, 52.8% of FAR, equivalent to 17% of Total Potential Remuneration
(at maximum level performance).
For other executive KMP, 45% of FAR, equivalent to 17% of Total Potential Remuneration
(at maximum level performance).
Plan gate and
Board discretion
The Board retains the discretion to either abandon the plan or modify outcomes to ensure that they are
appropriate given the circumstances that have prevailed over the measurement period (this is intended
to ensure alignment between performance and reward outcomes).
A specified ‘gate’ condition may apply to offers of STI such that no award will be payable in relation to any
KPI if the gate condition is not met or exceeded.
FY 2022: Must meet leadership behavioural standards aligned to the Company’s ‘WE CARE’ values.
FY 2023 invitations: To be determined.
Termination
of employment
If a STIP participant ceases to be an employee of the Healius Group, and the termination of their employment
is in circumstances other than Special Circumstances (defined below), then all unvested Rights held by the
participant will be forfeited and lapse unless and to the extent otherwise determined by the Board.
If an STIP participant’s termination is in Special Circumstances, then Service Rights granted under the STIP
in the financial year of termination may still vest on Vesting Day.
Service Rights that do not lapse at the termination of employment will continue to be held by participants
with a view to testing for vesting at the end of the relevant measurement period.
Special Circumstances means death, total and permanent disablement as determined by the Board,
retirement with the prior consent of the Board, redundancy, retrenchment or other Company-initiated
terminations other than for cause.
Change of Control
including takeover
A Change of Control occurs when the Board advises participants that one or more persons acting in concert
have acquired, or are likely to imminently acquire ‘control’’ of the Company as defined in section 50AA of the
Corporations Act.
In the event of a Change of Control, the Board may:
•
•
terminate the STIP for the measurement period and pay pro-rata awards based on the completed
proportion of the measurement period and taking into account performance up to the date of the
Change of Control
continue the STIP but make interim non-refundable pro-rata awards based on the completed
proportion of the measurement period and taking into account performance up to the date of the
Change of Control, or
• allow the STIP to continue.
In the absence of the Board exercising its discretion above, unvested STIP Service Rights immediately vest
on at least a pro-rata basis upon the Change of Control.
60
Directors’ Reportfor the year ended 30 June 2022 8.3
SENIOR EXECUTIVE TRANSFORMATION LONG-TERM INCENTIVE PLAN DETAILS
KEY TERM
Purpose
SUMMARY OF KEY TERM
The purpose of the TLTIP is to create a strong link between performance and reward by providing
an at-risk element of executive remuneration that focuses on performance over the strategic plan period,
up to five years. The TLTIP aims to align management rewards with shareholder value, thereby incentivising
management to deliver the Company’s current strategic plan.
Eligibility
Senior executives and other persons approved by the Board. NEDs are not eligible to participate.
Potential annual
award
For the CEO and CFO/COO, 152% of FAR, equivalent to 50% of Total Potential Remuneration
(at maximum level performance).
For other executive KMP, 130% of FAR, equivalent to 47% of Total Potential Remuneration
(at maximum level performance).
Form of awards
Under the TLTIP, awards to executive KMP are made in the form of Options.
The number of Options to be issued is calculated using the fair market value of the Options as calculated
by an independent external accountant using standard methodologies.
The number of Options issued is sufficient to satisfy maximum level performance.
Multiple year grant
For Senior executives, the years FY 2020–FY 2022 inclusive were the subject of a multiple year grant
(‘mega grant’), in which three years’ worth of TLTIP Options were granted, split into three equal Tranches,
in FY 2020. No additional grants were made in FY 2021 or FY 2022.
The measurement period for the Performance Conditions for each Tranche is as follows:
•
•
•
Tranche 1 (1/3 of the Options issued to the relevant participant) FY 2020– FY 2022 inclusive
Tranche 2 (1/3 of the Options issued to the relevant participant) FY 2020–FY 2023 inclusive, and
Tranche 3 (1/3 of the Options issued to the relevant participant) FY 2020–FY 2024 inclusive.
Exercise of Options
Any Option issued under the TLTIP is an option to purchase an ordinary Share of the Company on a specified
future date (the Exercise Date) for a specified price (the Exercise Price).
If the Exercise Price on the Exercise Date is exceeded by the Company’s traded Share price on the Exercise
Date, the Option is ‘in the money’ and can be exercised and the issued Shares sold by the relevant
participant for a profit. If the Exercise Price on the Exercise Date is higher than or equal to the Company’s
traded Share price on the Exercise Date, the Option is ‘out of the money’ and will generally not be exercised
(and so will lapse).
For the FY 2020–FY 2022 multiple year grant of Options, the Exercise Price was set by the Board at the
standard volume weighted average price (VWAP) for the Company’s Shares for the 10 trading days following
1 July 2019, the starting point for each measurement period, which was $3.05.
The relevant TLTIP participant has the choice as to whether an Option is exercised on the Exercise Date.
The Board may determine to allow a cashless exercise of Options.
Exercise of Options is also conditional on the Performance Conditions being satisfied.
The Exercise Date Schedule for FY 2020 TLTIP Options is as follows:
•
•
•
Tranche 1 (1/3 of the Options issued to the relevant participant) will be exercisable at the end of FY 2022
Tranche 2 (1/3 of the Options issued to the relevant participant) will be exercisable at the end of FY 2023, and
Tranche 3 (1/3 of the Options issued to the relevant participant) will be exercisable at the end of FY 2024.
61
Directors’ Reportfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022DIRECTORS’ REPORT KEY TERM
SUMMARY OF KEY TERM
Expiry date of
Options
The Options expire on the first to occur of:
(a) 3 March 2035
(b) the Option lapsing in accordance with a provision of the Equity Incentive Plan Rules
(including in accordance with a term of an offer under the TLTIP)
(c) failure to meet a vesting condition or any other condition applicable to the Option within the vesting
period, or
(d) the receipt by the Company of a notice in writing from a participant to the effect that the participant
has elected to surrender the Option.
rTSR comparator
group
Inghams Group Limited
Invocare Limited
When implementing the TLTIP, the Board determined to update the comparator group of companies used
to assess rTSR. The comparator group was 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 is as follows (an asterisk denotes the relevant company was also part
of the previous comparator group used under the Company’s previous Long-Term Incentive Plan):
1300 Smiles Limited * 2
•
• Accent Group Limited
• Ansell Limited *
• ARB Corporation Limited
• Australian Pharmaceutical Industries Limited * 2
• Australian Clinical Labs Limited 1
• Bapcor Limited
• Bega Cheese Limited
• Blackmores Limited
• Bravura Solutions Limited
• Breville Group Limited
• Capitol Health Limited *
• Carsales.Com Limited
• Clinuvel Pharmaceuticals Limited
• Collins Foods Limited
• Corporate Travel Management Limited
•
•
•
•
•
• Japara Healthcare Limited * 2
• JB Hi-Fi Limited
• Link Administration Holdings Limited
• McMillan Shakespeare Limited
• Metcash Limited
• Pacific Smiles Group Limited *
• Pact Group Holdings Limited
• Premier Investments Limited
• Ramsay Health Care Limited *
• Regis Healthcare Limited *
• Resmed Inc *
• Sigma Healthcare Limited *
• Somnomed Limited *
• Sonic Healthcare Limited *
• Southern Cross Media Group Limited
• Virtus Health Limited * 2
Eagers Automotive Limited
Estia Limited *
Event Hospitality & Entertainment Limited
1
The Board added Australian Clinical Labs Limited to the comparator group following the ASX listing of this direct
competitor of the Company in 2021.
2 Companies which have been delisted or which are subject to a control premium as at the date of assessment of
rTSR may be removed or have their TSR adjusted at the Board’s discretion.
Re‑testing
There is no re-testing of Performance Conditions or deferral of the Exercise Date of Options.
Lapse and
transferability
Any Option not exercised on the Exercise Date automatically lapses.
Other than in limited circumstances, Options may not be disposed of, transferred or otherwise dealt with,
and lapse immediately on a purported disposal, transfer or dealing.
62
Directors’ Reportfor the year ended 30 June 2022 KEY TERM
SUMMARY OF KEY TERM
Termination of
employment
If a participant ceases to be an employee of the Company, and the termination of their employment
is in circumstances other than Special Circumstances (defined below), then all unvested Options held
by the participant will be forfeited and lapse unless and to the extent otherwise determined by the
Board. If a participant’s termination is in Special Circumstances, then Options on issue will be forfeited
on a pro-rata basis unless otherwise determined by the Board.
Options that do not lapse at the termination of employment will continue to be held by participants
with the same Performance Conditions, Exercise Date and Exercise Price.
Special Circumstances means death, total and permanent disablement as determined by the Board,
retirement with the prior consent of the Board, redundancy, retrenchment or other Company-initiated
terminations other than for cause.
Bonus issues, rights
issues and capital
reorganisation
In cases of bonus Share issues by the Company, the number of Options held by a participant will be
increased by the same number as the number of bonus Shares that would have been received by the
participant had the Options been fully paid ordinary Shares in the Company (except in the case that the
bonus Share issue is in lieu of a dividend payment, in which case no adjustment will apply). In the case
of general rights issues to shareholders there will be no adjustment to Options. In the case of an issue
of rights other than to the Company’s shareholders, there will be no adjustment to Options.
In the case of other capital reconstructions, the Board may make such adjustments to Options
as it considers appropriate.
Change of Control
including takeover
A Change of Control occurs when the Board advises participants that one or more persons acting in concert
have acquired, or are likely to imminently acquire ‘control’ of the Company as defined in section 50AA of the
Corporations Act.
In the event of a Change of Control of the Company, the Board has discretion to determine that vesting
of all or some of the Options should be accelerated. If a Change of Control occurs before the Board has
exercised its discretion, a pro rata portion of Options will vest, calculated based on the portion of the
relevant performance period that has elapsed up to the Change of Control, and the Board retains
a discretion to determine if the remaining Options will vest or lapse.
Amendment
The Board may amend or terminate the TLTIP at any time provided that the rights of participants
to awards earned prior to the amendment or termination are not affected, unless otherwise agreed
in writing by the participants.
63
Directors’ Reportfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022DIRECTORS’ REPORT 8.4
REMUNERATION-RELATED POLICIES
KEY TERM
SUMMARY OF KEY TERM
Securities Trading
Policy
KMP may only trade during a ‘trading window’ (with some limited exceptions as set out in the policy).
The following periods in a calendar year are ‘trading windows’, unless otherwise determined by the Board:
•
Four weeks commencing one trading day after the day of release of the Appendix 4D (half-year report),
typically in mid-February
Four weeks commencing one trading day after the day of release of the Appendix 4E (preliminary final
report), typically in late August
Four weeks commencing one trading day after the day of Healius’ Annual General Meeting,
typically in late October or November
The duration of the offer period for an offer of securities made pursuant to a prospectus or
cleansing statement
•
•
•
• Any other period declared by the Board in its discretion to be a trading window.
Equity Holding
Policy
Healius does not currently have an equity holding policy applicable to executive KMP; the adoption of such
a policy remains under consideration by the Board.
Executive
Remuneration
Consultant Policy
and Payments
• Healius’ policy requires that Executive Remuneration Consultants (ERCs) are approved and engaged
by the Board before any advice is received. This policy enables the Board to state whether the advice
received from ERCs has been independent and why. Interactions between management and the ERC
must be approved and are supervised by the People & Governance Committee when appropriate.
• Where KMP remuneration recommendations are received from an ERC, the Board can be satisfied
that those KMP remuneration recommendations are free from undue influence from KMP to whom
the recommendations related because:
-
the Board is confident that the policy for engaging ERCs is being adhered to and is operating
as intended
the Board is closely involved in all dealings with ERCs, and
each KMP remuneration recommendation received is accompanied by a declaration from the ERC
to the effect that their advice has been provided free from undue influence from the KMP to whom
the recommendation relates.
-
-
• During FY 2022, KMP remuneration options were provided to the Board by an ERC in respect of the
FY 2023 LTI plan. No remuneration recommendations were made by that ERC.
8.5
TRANSACTIONS WITH KMP
KEY TERM
SUMMARY OF KEY TERM
Transactions with
current KMP
•
From time to time, KMPs (and their personally-related entities) enter into transactions with the Healius
Group, including the use or provision of services under normal customer, supplier or employee
relationships. These transactions:
-
occur within a normal employee, customer or supplier relationship on terms and conditions no more
favourable than those which it is reasonable to expect the Group would have adopted if dealing
at arm’s length with an unrelated person
- do not have the potential to adversely affect decisions about the allocation of scarce resources
made by users of the financial report, or the discharge of accountability by the KMP, and
- are trivial or domestic in nature.
Loans to current KMP • No loans have been made to any of the KMP or their related parties during FY 2022.
64
Directors’ Reportfor the year ended 30 June 2022 Signing of Directors’ Report
Signed in accordance with a resolution of the Directors made pursuant to section 298(2) of the Corporations Act 2001.
On behalf of the Directors.
Robert Hubbard
Chair
16 September 2022
65
Directors’ Reportfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022DIRECTORS’ REPORT Healius is committed to ensuring that its policies and practices reflect a high standard of corporate governance.
The Board has adopted a comprehensive framework of Corporate Governance Guidelines. Throughout FY 2022,
Healius’ governance arrangements were generally consistent with the Corporate Governance Principles and
Recommendations (4th edition) published by the ASX Corporate Governance Council.
In accordance with ASX Listing Rule 4.10.3, Healius’ FY 2022 Corporate Governance Statement can be viewed at:
https://www.healius.com.au/about-us/corporate-governance/.
6666
Corporate Governance Statement Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s independence declaration to the directors of Healius Limited
As lead auditor for the audit of the financial report of Healius Limited for the financial year ended 30
June 2022, I declare to the best of my knowledge and belief, there have been:
a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit;
b. No contraventions of any applicable code of professional conduct in relation to the audit; and
c. No non-audit services provided that contravene any applicable code of professional conduct in
relation to the audit.
This declaration is in respect of Healius Limited and the entities it controlled during the financial year.
Ernst & Young
Douglas Bain
Partner
16 September 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
6767
Auditor’s Independence DeclarationHEALIUS — ANNUAL REPORT 2022HEALIUS — ANNUAL REPORT 2022DIRECTORS’ REPORT
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent auditor’s report to the members of Healius Limited
Report on the audit of the financial report
Opinion
We have audited the consolidated financial report of Healius Limited (the Company) and its
subsidiaries (collectively the Group), which comprises the consolidated statement of financial position
as at 30 June 2022, the consolidated statement of profit or loss, the consolidated statement of other
comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, notes to the financial statements, including a
summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying consolidated financial report of the Group is in accordance with the
Corporations Act 2001, including:
a. Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2022
and of its consolidated financial performance for the year ended on that date; and
b.
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
consolidated financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial report of the current year. These matters were addressed in the
context of our audit of the consolidated financial report as a whole, and in forming our opinion
thereon, but we do not provide a separate opinion on these matters. For each matter below, our
description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the consolidated financial report. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit
opinion on the accompanying consolidated financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
6868
Independent Auditor’s Report
CARRYING VALUE OF GOODWILL
Why significant
As disclosed in Note B2 of the consolidated financial
report and in accordance with the requirements of
Australian Accounting Standards, the Group
performed an annual impairment test of all cash
generating units (CGUs) to which goodwill of
$2,344.3m was allocated to determine whether the
recoverable value of each CGU exceeded its carrying
amount at 30 June 2022.
A fair value less cost of disposal model was used to
calculate the recoverable amount of each cash
generating unit.
This was considered a Key Audit Matter due to the
value of the balance relative to the Group’s total
assets, extent of audit effort and significant judgment
required to assess the reasonableness of cash flow
forecasts, growth rates, discount rates and terminal
growth rates used by the Group in undertaking the
impairment review.
Page 69
How our audit addressed the key audit matter
Our audit procedures included the following:
► Assessed whether the impairment testing
methodology used by the Group met the
requirements of Australian Accounting
Standards.
► Assessed the basis of preparing cash flow
forecasts, by considering the reliability of
previous forecasts and budgets, current trading
performance and the impact of COVID-19.
► Assessed the appropriateness of other key
assumptions such as the discount and growth
rates applied with reference to publicly available
information on comparable companies in the
industry and markets in which the Group
operates.
► Tested the mathematical accuracy of the cash
flow models.
► Performed sensitivity analyses on the key
assumptions including discount rates, terminal
growth rates and EBIT forecasts for each of the
Group’s CGUs.
► Assessed the implied EBITDA multiples as a
cross‑check of the recoverable amount derived
from the discounted cashflow models against a
range from comparable companies and
transactions.
► We involved our valuation specialists in
performing these procedures.
► Assessed the adequacy of the financial report
disclosures contained in Note B2.
Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the
information included in the Group’s 2022 annual report, but does not include the consolidated
financial report and our auditor’s report thereon.
Our opinion on the consolidated financial report does not cover the other information and accordingly
we do not express any form of assurance conclusion thereon, with the exception of the Remuneration
Report and our related assurance opinion.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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Independent Auditor’s ReportHEALIUS — ANNUAL REPORT 2022HEALIUS — ANNUAL REPORT 2022DIRECTORS’ REPORT
Page 70
In connection with our audit of the consolidated financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the consolidated financial report or our knowledge obtained in the audit or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Group are responsible for the preparation of the consolidated financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the Corporations
Act 2001 and for such internal control as the directors determine is necessary to enable the
preparation of the consolidated financial report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial report, the directors are responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the Group
or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the consolidated financial report as
a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with the Australian Auditing Standards will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of this consolidated financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
► Identify and assess the risks of material misstatement of the consolidated financial report,
whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
► Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the consolidated financial report or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
7070
Independent Auditor’s Report
Page 71
► Evaluate the overall presentation, structure and content of the consolidated financial report,
including the disclosures, and whether the consolidated financial report represents the underlying
transactions and events in a manner that achieves fair presentation.
► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial report. We
are responsible for the direction, supervision and performance of the Group audit. We remain
solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the consolidated financial report of the current year and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on the audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 43 to 64 of the directors’ report for the
year ended 30 June 2022.
In our opinion, the Remuneration Report of Healius Limited for the year ended 30 June 2022,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Group are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express
an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Ernst & Young
Douglas Bain
Partner
16 September 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
7171
Independent Auditor’s ReportHEALIUS — ANNUAL REPORT 2022HEALIUS — ANNUAL REPORT 2022DIRECTORS’ REPORT
The Directors of Healius Limited (Healius) declare that:
A.
in the Directors’ opinion, there are reasonable grounds to believe that Healius will be able to pay its debts as and when
they become due and payable
B.
in the Directors’ opinion, the financial statements and notes thereto are in accordance with the Corporations Act 2001 (Cth),
including section 296 (compliance with accounting standards) and section 297 (true and fair view)
C. the financial statements and notes thereto are in compliance with International Financial Reporting Standards issued by the
International Accounting Standards Board as provided in the introduction to the Notes to the consolidated financial statements
D. there are reasonable grounds to believe that Healius and the controlled entities identified in Note D2 will be able to meet
any obligations or liabilities to which they are, or may become, subject to by virtue of the Deed of Cross Guarantee between
Healius and those controlled entities pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, and
E. the Directors have been given the declarations required by section 295A of the Corporations Act 2001 (Cth) from
the Chief Executive Officer and Chief Financial Officer for the year ended 30 June 2022.
Signed in accordance with a resolution of the Directors made pursuant to section 295(4) of the Corporations Act 2001 (Cth).
On behalf of the Directors
Robert Hubbard
Chair
16 September 2022
7272
Directors’ declaration Financial statements
Consolidated statement of profit or loss
Consolidated statement of other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
About this Report
A
B
C
D
E
Group performance
A1
A2
A3
A4
A5
Segment information
Revenue
Expenses
Income tax expense
Earnings per share
Operating assets and liabilities
B1
B2
B3
B4
B5
B6
B7
B8
B9
Receivables
Goodwill
Property, plant and equipment
Other intangible assets
Lease liabilities
Right of use assets
Payables
Deferred consideration
Provisions
Financing and capital structure
Interest-bearing liabilities
C1
Issued capital
C2
Treasury shares
C3
Dividends on equity instruments
C4
Financial instruments
C5
Commitments for expenditure
C6
Group structure
D1
D2
D3
Subsidiaries
Deed of cross guarantee
Parent entity disclosures
Other disclosures
E1
E2
E3
E4
E5
E6
E7
E8
E9
E10
E11
Notes to the statement of cash flows
Discontinued operations
Taxation
Contingent liabilities
Share-based payments
Related party disclosures
Key Management Personnel disclosures
Remuneration of auditor
Businesses acquired
Adoption of new and revised standards
Subsequent events
Shareholder information
Financial calendar
Corporate information
74
75
76
77
78
79
79
80
80
82
82
83
84
85
85
86
88
89
90
90
91
91
92
94
94
95
95
96
96
101
102
102
105
106
107
107
108
109
110
111
113
113
114
114
115
115
116
119
120
73
FINANCE REPORTHEALIUS — ANNUAL REPORT 2022 Revenue
Other income and gains
Employee benefits expense
Property expenses
Consumables
Repairs and maintenance
IT expenses
Insurance
Transaction and digital transformation costs
Short-term equipment hire
Other expenses
Depreciation
Depreciation – right of use assets
Amortisation of intangibles
Earnings before interest and tax
Finance costs
Profit before tax
Income tax expense
Profit for the year from continuing operations
Gain/(loss) for the year from discontinued operations
Profit for the year
Attributable to:
Equity holders of Healius Limited
Basic earnings per share from continuing operations
Basic earnings per share from continuing and discontinued operations
Diluted earnings per share from continuing operations
Diluted earnings per share from continuing and discontinued operations
NOTE
A2
A3
A3
A3
A4
E2
NOTE
A5
A5
A5
A5
2022
$M
2021
$M
2,336.2
1,900.7
0.5
(951.4)
(53.1)
(316.7)
(30.5)
(48.3)
(7.6)
(21.0)
(35.7)
(126.5)
(44.5)
(219.7)
(14.3)
467.4
(50.5)
416.9
(122.9)
294.0
13.9
307.9
13.5
(848.9)
(59.6)
(270.6)
(29.1)
(42.7)
(7.6)
(15.4)
(8.5)
(129.1)
(38.1)
(195.4)
(13.8)
255.4
(87.6)
167.8
(101.5)
66.3
(22.6)
43.7
307.9
43.7
2022
CENTS PER
SHARE
2021
CENTS PER
SHARE
50.4
52.8
49.7
52.0
10.7
7.1
10.6
7.0
Notes to the financial statements are included on pages 79 to 115.
74
Consolidated statement of profit or lossfor the year ended 30 June 2022
Profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Fair value gain/(loss) on cash flow hedges
Reclassification adjustments relating to realised cash flow hedges for amounts
recognised in profit or loss
Reclassification adjustments relating to ineffective cash flow hedges
Exchange differences arising on translation of foreign operations
Income tax relating to items that may be reclassified subsequently to profit or loss
Other comprehensive income for the year, net of income tax
Total comprehensive income for the year
2022
$M
307.9
0.8
5.3
–
–
(1.8)
4.3
312.2
2021
$M
43.7
(1.8)
7.8
11.3
(0.4)
(5.2)
11.7
55.4
Notes to the financial statements are included on pages 79 to 115.
75
FINANCE REPORTConsolidated statement of other comprehensive incomefor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022
Current assets
Cash
Receivables
Consumables
Assets held for sale
Total current assets
Non-current assets
Goodwill
Right of use assets
Property, plant and equipment
Other intangible assets
Other financial assets
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Payables
Deferred consideration
Tax liabilities
Provisions
Lease liabilities
Liabilities held for sale
Total current liabilities
Non-current liabilities
Provisions
Interest-bearing liabilities
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Treasury shares
Reserves
Accumulated losses
Total equity
NOTE
E1
B1
B2
B6
B3
B4
E3
B7
B8
E3
B9
B5
B9
C1
B5
C2
C3
30 JUNE
2022
$M
30 JUNE
2021
$M
81.3
241.3
49.2
–
371.8
2,344.3
1,074.9
196.0
75.2
5.8
68.8
3,765.0
4,136.8
169.6
5.7
67.3
175.0
223.7
–
641.3
18.6
606.1
949.2
1,573.9
2,215.2
1,921.6
70.1
199.8
35.9
25.1
330.9
2,042.3
1,087.2
157.7
76.3
5.6
82.2
3,451.3
3,782.2
195.5
38.9
46.8
165.7
224.4
13.4
684.7
28.9
258.1
953.2
1,240.2
1,924.9
1,857.3
2,422.9
2,575.6
–
19.9
(521.2)
1,921.6
(3.6)
16.9
(731.6)
1,857.3
Notes to the financial statements are included on pages 79 to 115.
76
Consolidated statement of financial positionas at 30 June 2022
ISSUED
CAPITAL
2,575.6
TREASURY
SHARES
(3.6)
CASH FLOW
HEDGE
RESERVE
SHARE-BASED
PAYMENTS
RESERVE
OTHER
RESERVES
ACCUMULATED
LOSSES
22.1
(0.7)
$M
Balance at 1 July 2021
Profit for the year
Fair value gain on cash flow hedges
Reclassification adjustments
relating to realised cash flow
hedges recognised in profit or loss
Income tax relating to components
of other comprehensive income
Total comprehensive income
Buyback of shares (Note C2)
Shares issued via Non-executive
Director (NED) Share Plan
Payment of dividends
Shares purchased for Long Term
Incentive Plan
Share based payments
Transfers
Balance at 30 June 2022
$M
Balance at 1 July 2020
Profit for the year
Exchange differences arising on
translation of foreign operations
Fair value loss on open
cash flow hedges
Reclassification adjustments
relating to realised cash flow
hedges recognised in profit or loss
Reclassification adjustments
relating to ineffective
cash flow hedges
Income tax relating to components
of other comprehensive income
Total comprehensive income
Buyback of shares (Note C2 & C3)
Shares issued via Short Term
Incentive Plan
Payment of dividends
Share based payments
Transfers
–
–
–
–
–
(135.8)
0.2
–
(22.1)
–
5.0
2,422.9
ISSUED
CAPITAL
2,672.3
–
–
–
–
–
–
–
(97.4)
(3.6)
0.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.6
–
–
–
–
–
–
–
–
–
(4.5)
–
0.8
5.3
(1.8)
4.3
–
–
–
–
–
–
(0.2)
(16.6)
–
–
(1.8)
7.8
11.3
(5.2)
12.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7.9
(9.2)
20.8
13.5
–
–
–
–
–
–
–
–
(0.7)
–
11.8
(2.5)
22.1
(731.6)
307.9
–
–
–
307.9
–
–
(98.1)
–
–
0.6
–
–
–
–
–
–
–
–
–
–
–
(0.3)
–
(0.4)
–
–
–
–
(0.4)
–
–
–
–
–
(737.6)
43.7
–
–
–
–
–
43.7
–
–
(40.2)
–
2.5
TOTAL
1,857.3
307.9
0.8
5.3
(1.8)
312.2
(135.8)
0.2
(98.1)
(22.1)
7.9
–
TOTAL
1,931.3
43.7
(0.4)
(1.8)
7.8
11.3
(5.2)
55.4
(101.0)
–
(40.2)
11.8
–
(0.7)
(521.2)
1,921.6
TREASURY
SHARES
CASH FLOW
HEDGE
RESERVE
SHARE-BASED
PAYMENTS
RESERVE
OTHER
RESERVES
ACCUMULATED
LOSSES
Balance at 30 June 2021
2,575.6
(3.6)
(4.5)
(0.7)
(731.6)
1,857.3
Notes to the financial statements are included on pages 79 to 115.
77
FINANCE REPORTConsolidated statement of changes in equityfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022 Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Gross cash flows from operating activities
Net income tax paid
Net cash provided by operating activities
Cash flows from investing activities
Proceeds from sale of business (net of cash disposed)
Payment for property, plant and equipment
Payment for business acquired (net of cash received) – Agilex Biolabs
Payment for business acquired (net of cash received) – Axis Diagnostics
Payments for earn out, settlement and deferred consideration
Payment for Imaging healthcare professionals
Payment for Pathology healthcare practices and subsidiaries
Payment for other intangibles
Proceeds from the sale of property, plant and equipment and intangibles
Payment for Healius Primary Care (HPC) healthcare professionals
– discontinued operations
Payment for Healius Primary Care (HPC) practices and subsidiaries
– discontinued operations
Net cash (used in)/from investing activities
Cash flows from financing activities
Finance costs on interest-bearing liabilities
Interest paid on ineffective hedge close out
Interest paid on lease liabilities
Interest received
Payments for buyback of shares
Shares purchased for Long Term Incentive Plan
Proceeds from/(repayments of) borrowings
Payment of lease liabilities
Dividends paid
Net cash used in financing activities
Net increase/(decrease) in cash held
Cash at the beginning of the year
Effect of exchange rate movements on cash held in foreign currencies
Cash at the end of the year
NOTE
2022
$M
2021
$M
2,456.2
(1,779.1)
677.1
(90.3)
586.8
28.2
(81.4)
(290.7)
(12.6)
(36.8)
–
–
(12.1)
3.7
–
–
(401.7)
(13.0)
–
(35.0)
–
(139.4)
(22.1)
345.6
(214.5)
(98.1)
(176.5)
8.6
72.7
–
81.3
2,129.6
(1,557.7)
571.9
(46.0)
525.9
459.3
(48.4)
–
–
–
(0.7)
(1.5)
(12.9)
1.1
(5.3)
(4.7)
386.9
(21.9)
(11.3)
(39.5)
0.5
(97.4)
–
(555.7)
(203.1)
(56.3)
(984.7)
(71.9)
144.5
0.1
72.7
E1
E9
E9
E1
E1
Notes to the financial statements are included on pages 79 to 115.
78
Consolidated statement of cash flowsfor the year ended 30 June 2022 About this Report
OVERVIEW
Healius Limited (Healius), is a for-profit entity domiciled in Australia. These financial statements represent the consolidated financial
statements of Healius for the financial year ended 30 June 2022 and comprise Healius and its subsidiaries (together referred
to as “the consolidated entity” or “the Group”).
STATEMENT OF COMPLIANCE
The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001,
Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board.
The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.
BASIS OF PREPARATION
The financial report has been prepared on the basis of historical cost, except for the revaluation of certain financial instruments.
Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars.
The financial report has been prepared on a going concern basis. Where applicable, prior year comparatives have been restated
in line with current year presentation.
NEW AND AMENDED STANDARDS ADOPTED
There are no new accounting standards or interpretations that are applicable for the first time in financial year 2022 which have
a material impact on the disclosures or amounts recognised in the consolidated financial statements of the Group. The Group has
not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.
ROUNDING OF AMOUNTS
Healius is a company of the 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 the financial report are rounded to the nearest hundred
thousand dollars, unless otherwise indicated.
SIGNIFICANT ACCOUNTING POLICIES
Accounting policies have been consistently applied to all the years presented, unless otherwise stated. Accounting policies are
selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and
reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. Significant accounting
policies are included within the relevant notes to the financial statements.
Preparation of the financial report requires management to make judgements, estimates and assumptions that affect the reported
amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures. Uncertainty about these assumptions
and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected
in future periods. Information on key accounting estimates and judgements can be found in the following notes:
ACCOUNTING ESTIMATE AND JUDGEMENT
Carrying value of goodwill
Recognition and recoverability of other intangible assets
Measurement of deferred consideration
Provisions
NOTE
PAGE
B2
B4
B8
B9
86
89
91
92
BASIS OF CONSOLIDATION – SUBSIDIARIES
Subsidiaries are those entities controlled by Healius. The financial statements of subsidiaries are included in the consolidated
financial report from the date that control is obtained until the date that control ceases. All inter-entity transactions, balances
and any unrealised gains and losses arising from inter-entity transactions have been eliminated on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
Investments in subsidiaries are carried at their cost of acquisition in the parent company’s financial statements.
79
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022 A. Group performance
This section contains details of the way the business measures performance for the purpose of internal reporting along with
details of the key elements of the consolidated statement of profit or loss, earnings per share, accounting policies and key
assumptions relevant to the consolidated statement of profit or loss.
A1. Segment information
Operating segments are identified based on the way that the Chief Executive Officer and Board of Directors (also collectively
known as the chief operating decision makers) regularly review and assess the financial performance of the business and
determine the allocation of resources. For internal management reporting purposes, the Group is organised into the following
four divisions or operating segments:
OPERATING SEGMENT
ACTIVITY
Pathology
Imaging
Day Hospitals
Other
Provider of pathology services, including speciality pathology and clinical trials.
Provider of imaging services from stand-alone imaging sites,
hospitals and medical centres.
Operator of day hospitals.
Comprises corporate functions.
The Group operates predominantly in Australia.
Intersegment
Cross segment fees are charged for the use of facilities and services. These charges are eliminated on consolidation.
Presentation of segment revenue and results
Segment revenues and segment results are presented on an underlying basis.
Underlying results exclude the impact of non-underlying items relating to:
•
• Other significant non-recurring items.
Strategic initiatives, and
Underlying results include the payment for rent, recharging of costs and other transactions with discontinued activities which are
required to be excluded from reported results.
UNDERLYING RESULTS
2022
Segment revenue
Intersegment sales
Total revenue
EBITDA 1
Depreciation
Amortisation of intangibles
Depreciation – right of use assets
EBIT 2
PATHOLOGY
$M
1,890.4
IMAGING
$M
DAY HOSPITALS
$M
393.9
48.7
698.4
(21.2)
(7.2)
(171.6)
498.4
79.7
(16.2)
(3.1)
(41.3)
19.1
12.6
(3.0)
–
(4.3)
5.3
TOTAL
CONTINUING
OPERATIONS
$M
2,339.5
(1.8)
2,337.7
770.8
(44.5)
(14.3)
(219.7)
492.3
OTHER
$M
6.5
(19.9)
(4.1)
(4.0)
(2.5)
(30.5)
1
2
EBITDA is a non-statutory profit measure representing underlying earnings before interest, tax, depreciation and amortisation.
EBIT is a non-statutory profit measure representing underlying earnings before interest and tax.
80
Notes to the financial statementsfor the year ended 30 June 2022 A1. Segment information (continued)
2021
Segment revenue
Intersegment sales
Total revenue
EBITDA 1
Depreciation
Amortisation of intangibles
Depreciation – right of use assets
EBIT 2
PATHOLOGY
$M
1,452.1
IMAGING
$M
406.9
DAY
HOSPITALS
$M
49.5
428.3
(20.8)
(7.3)
(147.4)
252.8
84.5
(10.7)
(2.8)
(40.1)
30.9
15.5
(2.7)
–
(3.8)
9.0
TOTAL
CONTINUING
OPERATIONS
$M
1,915.3
(2.2)
1,913.1
513.8
(38.1)
(13.8)
(195.4)
266.5
OTHER
$M
6.8
(14.5)
(3.9)
(3.7)
(4.1)
(26.2)
1
2
EBITDA is a non-statutory profit measure representing underlying earnings before interest, tax, depreciation and amortisation.
EBIT is a non-statutory profit measure representing underlying earnings before interest and tax.
Reconciliation of underlying segment revenue to reported revenue:
Total underlying segment revenue from continuing operations
Reclassification of grant income from revenue to other income
Transactions with discontinued operations
Reported revenue
Reconciliation of underlying segment result to reported profit before tax:
Underlying results from continuing operations before tax
Strategic initiatives and other significant non-recurring items
Transactions with discontinued operations
Reported EBIT
Finance cost
Reported profit before tax
SEGMENT RESULT
2022
$M
2021
$M
2,337.7
1,913.1
–
(1.5)
(9.8)
(2.6)
2,336.2
1,900.7
SEGMENT RESULT
2022
$M
492.3
(21.0)
(3.9)
467.4
(50.5)
416.9
2021
$M
266.5
(15.4)
4.3
255.4
(87.6)
167.8
81
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022
A2. Revenue
Trading revenue
2022
$M
2021
$M
2,336.2
1,900.7
ACCOUNTING POLICIES – REVENUE
Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer.
The Group recognises revenue when it transfers control of goods or services to a customer.
The Group recognises revenue from the following major sources:
•
•
• Hospital Provider Agreements.
Provision of pathology services
Provision of imaging services, and
(a) Provision of pathology services and provision of imaging services
Revenue from the provision of pathology services and the provision of imaging services is recognised at the point in time
when the relevant test has been completed.
(b) Hospital Provider Agreements
Day Hospitals negotiate Hospital Provider Agreements with private health funds, from which the majority of revenue is generated.
Transactions with private health funds primarily involve the provision of day medical procedures. These transactions reflect the
performance of a single obligation and revenue is recognised on the date the service is provided to the patient.
A3. Expenses
EMPLOYEE BENEFITS EXPENSE
Employee benefits
Defined contribution superannuation
Share-based payments
2022
$M
878.9
64.6
7.9
951.4
2021
$M
780.4
54.8
13.7
848.9
Healius and its related entities meet their obligations under the Superannuation Guarantee Charge Act 1992 by making
superannuation contributions, at the statutory rate, to complying defined contribution superannuation funds on behalf
of its employees. Contributions to defined contribution funds are recognised as an expense as they become payable.
PROPERTY EXPENSES
Short-term lease payments
Other property expenses
FINANCE COSTS
Interest cost from FY 2003–2007 tax case
Interest expense
Interest on lease liabilities
Unwinding of discounting on provisions
Ineffective cash flow hedge
Amortisation of borrowing costs
For more information on the interest impact from FY 2003–2007 tax case, refer to Note A4.
82
2022
$M
19.5
33.6
53.1
2022
$M
–
12.8
35.0
–
–
2.7
50.5
2021
$M
26.9
32.7
59.6
2021
$M
23.6
17.4
34.0
1.1
7.6
3.9
87.6
Notes to the financial statementsfor the year ended 30 June 2022
A3. Expenses (continued)
Interest expense comprises the interest expense on interest-bearing liabilities and gains/losses arising on interest
rate swaps accounted for as cash flow hedges reclassified from equity.
Unwinding of the interest component of discounted non-current provisions is classified as a finance cost.
Other borrowing costs associated with arranging interest-bearing liabilities are initially recognised in the consolidated
statement of financial position (refer Note C1) and are subsequently amortised through the consolidated statement of
profit or loss on a straight-line basis over the term of the interest-bearing liability they relate to.
A4.
Income tax expense
The prima facie income tax expense on pre-tax accounting profit reconciles to the income
tax expense in the financial statements as follows:
Profit before tax
Income tax calculated at 30% (2021: 30%)
Tax effect of non-temporary differences:
Share related (benefit)/expense
Non deductible acquisition costs
Other items
2003–2007 tax objection (see note below)
Under/(over) provision in prior years
Income tax expense
Comprising:
Current tax
Deferred tax
Under provision in prior years
Income tax expense
2022
$M
2021
$M
416.9
125.1
(4.2)
1.6
0.3
(2.3)
–
0.1
122.9
110.3
12.5
0.1
122.9
167.8
50.3
4.1
–
1.7
5.8
46.6
(1.2)
101.5
69.0
(12.9)
45.4
101.5
Current and deferred tax is recognised as an expense or income in the consolidated statement of profit or loss,
except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised
directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into
account in the determination of goodwill.
NOTE: ATO OBJECTION DECISIONS – YEARS 2003–2007
Healius had previously recognised an income tax benefit and a tax receivable of $46.6 million, and associated interest receivable
of $23.6 million in its 30 June 2020 financial statements, based on a favourable decision received from the Federal Court of Australia
relating to its tax objections for the 2003–2007 years regarding lump sum payments made to healthcare practitioners during
those years.
The Commissioner appealed the Federal Court of Australia’s decision and on 9 October 2020 the Full Federal Court decided in favour
of the Commissioner. On 6 November 2020 Healius applied for special leave to appeal the Full Court’s decision, however on 4 March 2021
the High Court of Australia dismissed the special leave application. Healius therefore reversed the income tax benefit and tax receivable
of $46.6 million and associated interest receivable of $23.6 million (less $7.1 million tax) in its 30 June 2021 financial statements.
83
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022
A5. Earnings per share
BASIC AND DILUTED EARNINGS PER SHARE
EARNINGS
The earnings used in the calculation of basic and diluted earnings per share are the same
and can be reconciled to the consolidated statement of profit or loss as follows:
Profit for the year from continuing operations
Profit attributable to equity holders of Healius Limited
WEIGHTED AVERAGE NUMBER OF SHARES
The weighted average number of shares used in the calculation of basic earnings per share
Effects of dilution from service rights
The weighted average number of shares used in the calculation of diluted earnings per share
EARNINGS PER SHARE
Basic earnings per share from continuing operations
Basic earnings per share from continuing and discontinued operations
Diluted earnings per share from continuing operations
Diluted earnings per share from continuing and discontinued operations
2022
$M
294.0
307.9
2022
000’s
583,542
8,364
591,906
2022
CENTS
50.4
52.8
49.7
52.0
2021
$M
66.3
43.7
2021
000’s
618,819
7,715
626,534
2021
CENTS
10.7
7.1
10.6
7.0
Any share options and performance rights on issue are contingently issuable shares and are included in the calculation of diluted
earnings per share only where the performance conditions have been met as at 30 June 2022.
84
Notes to the financial statementsfor the year ended 30 June 2022 B. Operating assets and liabilities
This section provides information on the assets used by the Group to generate operating profits and the liabilities incurred.
B1. Receivables
Measured at amortised cost
Current
Trade receivables
Allowance for expected credit losses
Prepayments
Accrued revenue
Other receivables
Ageing of trade receivables
Current
30–60 days
60–90 days
90 days +
Movement in allowance for expected credit losses
Balance at beginning of year
Provision for the year
Amounts written off during the year as uncollectable
Transfer to assets held for sale
2022
$M
2021
$M
199.5
(22.0)
177.5
21.6
36.3
5.9
241.3
54.5
36.4
8.7
99.9
199.5
23.1
14.1
(15.2)
–
22.0
170.6
(23.1)
147.5
15.7
33.9
2.7
199.8
84.2
26.7
11.8
47.9
170.6
23.0
20.3
(19.6)
(0.6)
23.1
Trade and other receivables are initially recognised at fair value and are subsequently carried at amortised cost, using the effective
interest rate method, less an allowance for expected credit losses (allowance for doubtful debts).
No interest is charged on trade receivables. The Group’s policy requires customers to pay the Group in accordance with agreed
payment terms. All credit and recovery risk associated with trade receivables has been provided for in the consolidated statement
of financial position. Trade receivables have been aged according to their original due date in the above ageing analysis.
The Group applies a simplified approach in calculating expected credit losses using a provision matrix based on its historical credit
loss experience and adjusting for any known forward-looking issues specific to the debtors and the economic environment.
Further discussion of the credit risk associated with trade receivables is included in Note C5.
85
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022
B2. Goodwill
Carrying value
Opening balance
Acquisition of businesses
Closing balance
Impairment tests
Goodwill is allocated to the Group’s cash-generating units (CGUs) as follows:
Pathology
Imaging
Day Hospitals
2022
$M
2021
$M
2,042.3
302.0
2,344.3
1,876.1
371.5
96.7
2,344.3
2,040.2
2.1
2,042.3
1,589.0
356.6
96.7
2,042.3
Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination
over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised at the date
of the acquisition. Goodwill is subsequently measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the CGUs, or group of CGUs, expected to benefit from
the synergies of the business combination.
On disposal of an operation within a CGU, the attributable amount of goodwill is included in the determination of the profit or loss
on disposal of the operation.
The accounting for the acquisition of Agilex Biolabs Pty Ltd (Note E9) has not yet been finalised, however the Group has allocated
the estimated value of goodwill arising from this acquisition to the Pathology CGU on a provisional basis.
IMPAIRMENT OF GOODWILL AND OTHER NON-FINANCIAL ASSETS
The carrying amount of goodwill is tested for impairment annually at 30 June and whenever there is an indicator that the asset
may be impaired. Where an asset is deemed to be impaired, it is written down to its recoverable amount.
In its impairment assessment, the Group determines the recoverable amount based on a fair value less costs of disposal
calculation, under a five-year discounted cash flow model cross checked to available market data (level 3 fair value measurement
in the fair value hierarchy – refer Note C5 for further details on the hierarchy). The five-year discounted cash flow uses:
•
•
year one cash flows derived from the financial year 2023 Board-approved budget, and
for financial years 2024–2027, growth rates have been determined with reference to historical company experience,
industry data and a long-term growth rate consistent with historic industry trend levels.
The Board-approved budget takes into account the Group’s view with regards to the potential economic impacts of COVID-19
on the business. In determining the FY 2023 cash flow projections, management has considered the impact of COVID-19 on trading
results in FY 2022, and potential impact in FY 2023.
86
Notes to the financial statementsfor the year ended 30 June 2022
B2. Goodwill (continued)
The key assumptions in the Group’s discounted cash flow model as at 30 June 2022 are as follows:
ASSUMPTION
HOW DETERMINED
Forecast revenue
Cumulative average revenue growth rates for FY 2023–FY 2027 are as follows:
Pathology: (0.7%) (30 June 2021: 2.3%)
•
•
Imaging: 5.8% (30 June 2021: 6.2%)
• Day Hospitals: 9.4% (30 June 2021: 7.7%)
Consistent with the prior year, forecast revenue has been determined with reference
to historical company experience and industry data. Pathology revenue growth rate factors
in assumptions for change in COVID volumes in future years.
Terminal value growth rates
The terminal value growth rates assumed are:
Pathology: 3.0% (30 June 2021: 3.0%)
•
Imaging: 3.0% (30 June 2021: 3.0%)
•
• Day Hospitals: 3.0% (30 June 2021: 3.0%)
Discount rates
The terminal value growth rates have been determined with reference to historical company
experience for the CGU and expectations of long-term operating conditions. The growth rates
do not exceed long-term growth rates for the industry in which the business operates.
Post-tax discount rates for each CGU reflect the Group’s estimate of the time value of money
and risks specific to each CGU.
In determining the appropriate discount rate for each CGU, consideration has been given to the
estimated weighted average cost of capital (WACC) for the Group, adjusted for business risks
specific to that CGU. The post-tax discount rate for each CGU is:
•
•
• Day Hospitals: 8.75% (30 June 2021: 8.75%)
Pathology: 7.8% (30 June 2021: 7.8%)
Imaging: 8.0% (30 June 2021: 8.0%)
SENSITIVITY ANALYSIS
The Group has conducted a sensitivity analysis on the key assumptions above to assess the effect on the recoverable amount
of changes in the key assumptions.
The following table sets out the change in forecast revenue growth rates, terminal value growth and discount rates that would be
required in isolation in order for the carrying value of the Pathology, Imaging and Day Hospitals CGUs to equal the recoverable
amount.
CGU
Pathology
Imaging
Day Hospitals
INCREASE/(DECREASE) IN ASSUMPTIONS REQUIRED FOR
RECOVERABLE AMOUNT TO EQUAL CARRYING AMOUNT
REVENUE
GROWTH PER
ANNUM
TERMINAL
GROWTH PER
ANNUM
(1.4%)
(0.5%)
(0.9%)
(4.6%)
(1.9%)
(1.7%)
DISCOUNT
RATE
3.3%
1.5%
1.3%
ACCOUNTING ESTIMATES AND JUDGEMENTS: IMPAIRMENT OF GOODWILL
Determining whether goodwill is impaired requires an estimation of the fair value of the CGUs or group of CGUs to which goodwill
has been allocated. The valuation model used to estimate the fair value of each CGU or group of CGUs requires the Directors
to estimate the future cash flows expected to arise from the CGU or group of CGUs and apply a suitable discount rate in order
to calculate net present value. The key assumptions used to estimate fair value of the group’s CGUs are disclosed above.
87
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022 B3. Property, plant and equipment
2022
$M
Net book value
Opening balance
Additions
Business combinations
Capitalisation of assets under construction
Transfers and disposals
Depreciation expense
Closing balance
Cost
Accumulated depreciation and impairment
Closing balance
2021
$M
Net book value
Opening balance
Additions
Capitalisation of assets under construction
Disposals
Depreciation expense
Transferred to assets held for sale
Closing balance
Cost
Accumulated depreciation and impairment
Closing balance
PLANT AND
EQUIPMENT
LEASEHOLD
IMPROVEMENTS
ASSETS UNDER
CONSTRUCTION
79.7
39.1
6.2
25.9
(1.5)
(32.5)
116.9
377.2
(260.3)
116.9
72.3
0.8
0.3
6.2
(0.6)
(12.0)
67.0
170.0
(103.0)
67.0
5.7
41.5
0.8
(32.1)
(3.8)
–
12.1
12.1
–
12.1
PLANT AND
EQUIPMENT
LEASEHOLD
IMPROVEMENTS
ASSETS UNDER
CONSTRUCTION
86.2
21.8
1.3
(1.5)
(26.8)
(1.3)
79.7
315.0
(235.3)
79.7
75.4
1.2
20.1
(1.3)
(13.0)
(10.1)
72.3
170.3
(98.0)
72.3
5.1
22.7
(21.4)
(0.7)
–
–
5.7
5.7
–
5.7
TOTAL
157.7
81.4
7.3
–
(5.9)
(44.5)
196.0
559.3
(363.3)
196.0
TOTAL
166.7
45.7
–
(3.5)
(39.8)
(11.4)
157.7
491.0
(333.3)
157.7
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment losses. Cost includes
expenditure that is directly attributable to the acquisition of the item.
Depreciation commences once an asset is available for use and is calculated on a straight-line basis so as to write off the net
cost of each asset to its estimated residual value over its expected useful life. The estimated useful lives, residual values and
depreciation methods are reviewed at the end of each annual reporting period. Where, as a result of this review, there is a change
in the estimated remaining useful life of an asset, it is accounted for on a prospective basis with depreciation in future periods
based on the written down value of the asset as at the date the change in useful life is determined.
The following estimated useful lives are used in the calculation of depreciation:
CLASS OF PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements
Plant and equipment
USEFUL LIFE
1–20 years
3–20 years
Property, plant and equipment is reviewed at each reporting period to determine whether there is any indication that the assets may
have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). The recoverable amount is the higher of fair value less costs of disposal and value in use.
An impairment loss is recognised in profit or loss for the amount by which an asset’s carrying amount exceeds its recoverable amount.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount
of the cash generating unit (CGU) to which the asset belongs.
88
Notes to the financial statementsfor the year ended 30 June 2022
B4. Other intangible assets
2022
$M
Net book value
Opening balance
Additions
Business combinations
Capitalisation of intangible assets under construction
Other
Amortisation expense
Closing balance
Cost
Accumulated amortisation and impairment
Closing balance
2021
$M
Net book value
Opening balance
Additions
Capitalisation of intangible assets under construction
Disposals
Amortisation expense
Transferred to assets held for sale
Closing balance
Cost
Accumulated amortisation and impairment
Closing balance
IT SOFTWARE
LICENCES
INTANGIBLES
UNDER
CONSTRUCTION
64.5
4.2
0.3
7.2
–
(13.5)
62.7
156.5
(93.8)
62.7
9.0
–
–
–
–
(0.8)
8.2
40.4
(32.2)
8.2
2.8
7.9
–
(7.2)
0.8
–
4.3
4.3
–
4.3
IT SOFTWARE
LICENCES
INTANGIBLES
UNDER
CONSTRUCTION
63.1
4.0
11.1
(0.3)
(13.3)
(0.1)
64.5
146.9
(82.4)
64.5
9.9
–
–
(0.1)
(0.8)
–
9.0
40.3
(31.3)
9.0
6.3
8.2
(11.1)
(0.6)
–
–
2.8
2.8
–
2.8
TOTAL
76.3
12.1
0.3
–
0.8
(14.3)
75.2
201.2
(126.0)
75.2
TOTAL
79.3
12.2
–
(1.0)
(14.1)
(0.1)
76.3
190.0
(113.7)
76.3
Intangible assets acquired separately or developed internally are recognised initially at cost. Intangible assets acquired
in a business combination are initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition intangible assets are recognised at cost less amortisation and impairment (if any).
An internally-generated intangible asset arising from development is only recognised once the feasibility, intention and ability
to complete the intangible asset can be demonstrated. Any expenditure on research activities is recognised as an expense
when incurred.
All intangible assets have a finite life and are amortised on a straight-line basis over their estimated useful life. The estimated
useful lives and amortisation methods are reviewed at the end of each annual reporting period. Where, as a result of this review,
there is a change in the estimated remaining useful life of an asset, it is accounted for on a prospective basis with amortisation
in future periods based on the net written down value of the asset as at the date the change in useful life is determined.
The following estimated useful lives have been used for each class of asset:
CLASS OF OTHER INTANGIBLES
Licences
IT software
USEFUL LIFE
3–8 years
3–10 years
Intangible assets are reviewed at each reporting period to determine whether there is any indication that the assets may have
suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). The recoverable amount is the higher of fair value less costs of disposal and value
in use. An impairment loss is recognised in profit or loss for the amount by which an asset’s carrying amount exceeds its
recoverable amount.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount
of the cash generating unit (CGU) to which the asset belongs.
ACCOUNTING ESTIMATES AND JUDGEMENTS – OTHER INTANGIBLE ASSETS
Judgement must be exercised when determining whether it is appropriate to capitalise costs related to internally developed
intangible assets, in particular costs related to the development of IT software. Judgement is also required when estimating
the expected useful life of other intangible assets and the period over which these assets are amortised.
89
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022
B5. Lease liabilities
Opening balance
New leases and remeasurement of leases during the year
Interest
Payments
Transfer to assets held for sale
Closing balance
Presented as:
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
B6. Right of use assets
2022
Opening balance
New and remeasurement of leases during the year
Depreciation
Closing balance
2021
Opening balance
New leases and remeasurement of leases during the year
Depreciation
Transfer to assets held for sale
Closing balance
ACCOUNTING ESTIMATES AND JUDGEMENTS – LEASES
(a) The Group as lessee
2022
$M
1,177.6
208.8
35.0
(248.5)
–
1,172.9
223.7
949.2
1,172.9
PROPERTY
$M
1,019.2
214.1
(207.9)
1,025.4
EQUIPMENT
$M
68.0
(6.7)
(11.8)
49.5
PROPERTY
$M
EQUIPMENT
$M
793.5
415.1
(181.4)
(8.0)
1,019.2
83.4
(0.4)
(15.0)
–
68.0
2021
$M
937.8
439.8
34.4
(225.5)
(8.9)
1,177.6
224.4
953.2
1,177.6
TOTAL
$M
1,087.2
207.4
(219.7)
1,074.9
TOTAL
$M
876.9
414.7
(196.4)
(8.0)
1,087.2
The Group assesses whether a contract is (or contains) a lease at inception of the contract. The Group recognises a lease liability
and right of use asset arrangements in which it is the lessee, except for short-term leases (being leases with a lease term of less
than 12 months) and leases of low value items (generally small items of IT equipment). For these leases, the Group recognises the
lease payment as an operating expense on a straight-line basis over the term of the lease.
The lease liability is initially measured as the present value of the lease payments not paid at the commencement date.
Lease payments include:
•
•
•
Fixed lease payments less any lease incentives receivable
Variable lease payments that depend on an index (such as CPI) initially measured using the index at the commencement date
In relation to equipment leases the amount expected to be payable on the exercise of purchase options where it is reasonably
certain that the option will be exercised.
Lease payments are discounted using the rate implicit in the lease. If this rate cannot be readily determined (which is the case for
all property leases) the Group uses its incremental borrowing rate of 3.02% (30 June 2021: 3.11%).
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The right of use assets comprise the initial measurement of the corresponding lease liability less any lease incentives received.
They are subsequently measured at cost less accumulated depreciation and impairment losses. Right of use assets are
depreciated over the lease term unless the Group expects to exercise a purchase option (primarily in relation to Imaging
equipment leases) where the right of use asset is depreciated over the useful life of the underlying asset.
90
Notes to the financial statementsfor the year ended 30 June 2022 B6. Right of use assets (continued)
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right of use asset) whenever:
•
The lease term has changed, in which case the lease liability is remeasured by discounting the revised lease payments using
a revised discount rate.
The lease payments change due to changes in an index (such as CPI) in which case the lease liability is remeasured
by discounting the revised lease payments using an unchanged discount rate.
The lease contract is modified and the lease modification is not accounted for as a separate lease in which case the lease
liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised
discount rate effective at the date of the modification.
•
•
(b) The Group as lessor
The Group enters into lease agreements as lessor in respect of some property leases. In this situation, where the Group is an intermediate
lessor, it accounts for the head lease and the sub-lease as two separate contracts.
The sub-lease is a finance lease where it transfers substantially all the risks and rewards of ownership to the lessee.
All other sub-leases are operating leases. The determination of whether a sub-lease is classified as a finance or operating
lease is made by reference to the right of use asset arising from the head lease.
The majority of sub-leases have lease terms substantially shorter than the head lease and accordingly are classified as
operating leases. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.
B7. Payables
Current
Trade payables and accruals
Total payables
2022
$M
169.6
169.6
2021
$M
195.5
195.5
Trade payables and other accounts payable are recognised when the Group becomes obliged to make future payments resulting
from the purchase of goods and services.
B8. Deferred consideration
Current
Montserrat Day Hospitals
Other deferred consideration
Total current deferred consideration
2022
$M
–
5.7
5.7
2021
$M
36.0
2.9
38.9
Deferred consideration relates to businesses acquired and is initially measured at fair value as at the acquisition date.
Subsequent to initial recognition, deferred consideration continues to be measured at fair value with any changes in fair
value recognised in the profit or loss.
The Montserrat Day Hospitals deferred consideration, which comprised of $32.1 million payable under the terms of the earn-out
clause in the Montserrat/Healius share sale agreement, plus a $3.9 million settlement sum negotiated with the vendors regarding
other commercial matters, was paid in FY 2022.
ACCOUNTING ESTIMATES AND JUDGEMENTS – DEFERRED CONSIDERATION
The measurement of deferred consideration requires management to estimate the amount likely to be paid in the future. This requires
the exercise of judgement, in particular where the amount payable is dependent on the future financial performance of the business
that has been acquired.
91
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022
B9. Provisions
Current
Provision for employee benefits
Self-insurance provision
Make good provision
Other provisions
Total current provisions
Non-current
Provision for employee benefits
Self-insurance provision
Make good provision
Other provisions
Total non-current provisions
2022
Opening balance
Arising during the year
Utilised
Closing balance
2021
Opening balance
Arising during the year
Reclassification to right of use asset
Utilised
Closing balance
2022
$M
155.5
5.9
3.3
10.3
175.0
10.1
7.1
1.4
–
18.6
MAKE
GOOD
$M
4.7
0.1
(0.1)
4.7
MAKE
GOOD
$M
5.1
0.2
–
(0.6)
4.7
2021
$M
146.1
6.4
0.6
12.6
165.7
12.0
6.4
4.1
6.4
28.9
OTHER
$M
19.0
7.3
(16.0)
10.3
OTHER
$M
53.4
3.0
–
(37.4)
19.0
SELF-
INSURANCE
$M
12.8
3.9
(3.7)
13.0
SELF-
INSURANCE
$M
11.7
1.9
–
(0.8)
12.8
Provisions are recognised when:
•
•
• a reliable estimate can be made of the amount of the obligation.
The Group has a present obligation (legal or constructive) as a result of a past event
it is probable that the Group will be required to settle the obligation, and
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting
date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows
estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time
value of money is material).
92
Notes to the financial statementsfor the year ended 30 June 2022
B9. Provisions (continued)
EMPLOYEE BENEFITS
A liability is recognised for benefits accruing to employees in respect of annual leave and long service leave when it is probable
that settlement will be required and they are capable of being measured reliably.
Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the remuneration
rate expected to apply at the time of settlement. Liabilities recognised in respect of long-term employee benefits are measured
as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees
up to reporting date.
SELF-INSURANCE
The Group is self-insured for workers’ compensation in New South Wales, Victoria, Queensland and Western Australia.
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.
MAKE GOOD PROVISION
The Group recognises make good provisions where under certain lease agreements the Group has an obligation to restore the
leased premises to a specified condition at the end of the lease term.
93
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022 Financing and capital structure
C.
This section contains details of the way the business is financed including details around debt and equity, the key financial
risks that Healius faces and how they are managed, and accounting policies and key assumptions relevant to borrowings
and equity.
C1.
Interest-bearing liabilities
Non-current
Gross bank loans
Refinancing valuation adjustment
Unamortised borrowing costs
CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
2022
$M
610.0
0.1
(4.0)
606.1
2022
Opening balance
Cash draw down
Borrowing repayments
Borrowing cost on refinancing
Amortisation
Closing balance
2021
Opening balance
Borrowing repayments
Borrowing cost on refinancing
Borrowing cost written off
Amortisation
Closing balance
GROSS
BANK LOANS
$M
VALUATION
ADJUSTMENT
$M
BORROWING
COSTS
$M
260.0
515.0
(165.0)
–
–
610.0
0.5
–
–
–
(0.4)
0.1
(2.4)
–
–
(4.3)
2.7
(4.0)
GROSS
BANK LOANS
$M
VALUATION
ADJUSTMENT
$M
BORROWING
COSTS
$M
815.0
(555.0)
–
–
–
260.0
0.9
–
–
–
(0.4)
0.5
(5.8)
–
(0.7)
1.9
2.2
(2.4)
2021
$M
260.0
0.5
(2.4)
258.1
TOTAL
$M
258.1
515.0
(165.0)
(4.3)
2.3
606.1
TOTAL
$M
810.1
(555.0)
(0.7)
1.9
1.8
258.1
Interest-bearing liabilities are recorded initially at fair value (usually the amount of the proceeds received) less transaction costs.
Subsequent to initial recognition, interest-bearing liabilities are measured at amortised cost with any difference between the initial
recognised amount and the redemption value being recognised in profit and loss over the term of the interest-bearing liability
using the effective interest method.
Interest rate sensitivity and liquidity analysis disclosures relating to the Group’s interest-bearing liabilities are disclosed in Note C5.
94
Notes to the financial statementsfor the year ended 30 June 2022
C2. Issued capital
Opening balance
Shares issued via Short Term Incentive Plan
Shares issued via Non-executive Director (NED) Share Plan
Shares issued via Long Term Incentive Plan
Own shares acquired for 2019 LTIP
Own shares acquired during buyback
Own shares acquired during buyback
Closing balance
2022
NO. OF
SHARES
000’s
2021
NO. OF
SHARES
000’s
2022
$M
2021
$M
599,446
622,743
2,575.6
2,672.3
–
62
4,391
(4,391)
(29,529)
(772)
265
14
–
–
(23,576)
–
–
0.2
8.6
(22.1)
(135.8)
(3.6)
0.7
–
–
–
(97.4)
–
569,207
599,446
2,422.9
2,575.6
Issued capital consists of fully paid ordinary Shares carrying one vote per share and the right to dividends.
Transaction costs that are incurred directly in connection with the issue of equity instruments are recognised directly in equity
as a reduction of the proceeds of the equity instruments to which the costs relate.
SHARE OPTIONS ON ISSUE
As at 30 June 2022, the company has 36,394,239 (2021: 36,394,239) share options on issue, exercisable on a 1:1 basis for 36,394,239
(2021: 36,394,239) ordinary Shares of Healius at an Exercise Price of $3.05. The share options will vest between July 2022 and July 2024
subject to the satisfaction of applicable service and performance conditions and carry no rights to dividends and no voting rights.
RIGHTS ON ISSUE
As at 30 June 2022, the company had 228,341 (2021: nil) service rights on issue, exercisable on a 1:1 basis for 228,341 (2021: nil) ordinary
Shares of Healius at an Exercise Price of $nil.
As at 30 June 2022, the company has 5,549,056 (2021: 9,731,935) performance rights on issue, exercisable on a 1:1 basis for 5,549,056
(2021: 9,731,935) ordinary Shares of Healius at an Exercise Price of $nil. The performance rights will vest between July 2022 and
October 2023 subject to the satisfaction of applicable service and performance conditions and carry no rights to dividends and
no voting rights.
As at 30 June 2022, the company had 35,140 (2021: 22,257) Non-executive Director (NED) share rights on issue, exercisable on 1:1 basis
for 35,140 (2021: 22,257) ordinary Shares of Healius at an Exercise Price of $nil.
RESTRICTED SHARES ON ISSUE
As at 30 June 2022, the company had 76,024 (2021: 13,627) restricted shares on issue, exercisable on a 1:1 basis for 76,024 (2021: 13,627)
ordinary Shares of Healius at an Exercise Price of $nil.
C3. Treasury shares
Opening balance
Own shares acquired during buyback
Shares cancelled
Closing balance
2022
NO. OF
SHARES
000’s
772
–
(772)
–
2021
NO. OF
SHARES
000’s
–
772
–
772
2022
$M
3.6
–
(3.6)
–
2021
$M
–
3.6
–
3.6
On 9 December 2020 Healius announced an on-market share buyback of up to $200 million to be conducted between 29 December
2020 and 28 December 2021. The treasury shares purchased under the buyback and not cancelled prior to 30 June 2021 are disclosed
in the comparatives above. These shares were cancelled in July 2021.
95
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022
C4. Dividends on equity instruments
Recognised amounts
Final dividend – previous financial year
Interim dividend – this financial year
Unrecognised amounts
Final dividend – this financial year
2022
CENTS PER
SHARE
2021
CENTS PER
SHARE
6.75
10.00
16.75
6.00
–
6.50
6.50
6.75
2022
$M
40.2
57.9
98.1
34.2
2021
$M
–
40.2
40.2
40.2
In respect of FY 2022:
• A final dividend of 6.75 cents per share (100% franked) was paid with regards to the year ended 30 June 2021 on 8 October 2021
• an FY 2022 interim dividend of 10 cents per share (100% franked) was paid to the holders of fully paid ordinary Shares on 5 April 2022.
The Dividend Reinvestment Plan and Bonus Share Plan were suspended effective 16 February 2016 until further notice.
FRANKING ACCOUNT
Closing balance as at 30 June
2022
$M
194.4
2021
$M
125.6
The above amounts are calculated from the balance of the franking account as at the end of the reporting period, adjusted for
franking credits and debits that will arise from the settlement of liabilities or receivables recognised for income tax and dividends
as at the reporting date.
C5. Financial instruments
FINANCIAL RISK MANAGEMENT
Overview
The Group has exposure to the following risks from its use of financial instruments:
• Credit risk
•
• Market risk, including interest rate, currency and price risk.
Liquidity risk
This note presents information about the Group’s exposure to each of the above risks, its objectives, policies and procedures for measuring
and managing risk and the management of capital. Further quantitative disclosures are included throughout this financial report.
Risk Management Framework
The Board of Directors has overall responsibility for the establishment and oversight of risk management and this is delegated
through the Group’s:
• Risk Management Committee, which is responsible for developing and monitoring the Group’s risk management policies
(excluding financial reporting risks), and
• Audit Committee, which is responsible for developing and monitoring the Group’s financial risk management policies
and financial reporting risks.
These committees report regularly to the Board of Directors on their activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly
to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards
and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles
and obligations.
The Group’s Risk Management Committee (in relation to material business risks excluding financial reporting risks) and Audit
Committee (in relation to financial reporting risks) oversee how management monitors compliance with the Group’s risk management
policies and procedures, and reviews the adequacy of the Risk Management Framework in relation to the risks faced by the Group.
96
Notes to the financial statementsfor the year ended 30 June 2022
C5. Financial instruments (continued)
Credit risk
Credit risk is the risk of financial loss if a customer or counterparty to a financial asset held by the Group fails to meet its contractual
obligations under the terms of the financial asset (to deliver cash to the Group).
The Group’s exposure to credit risk arises principally from cash and derivatives held with financial institutions and trade receivables
due from external customers. The credit risk on cash and derivative financial instruments is limited because the counterparties
are banks with high credit-ratings assigned by international credit-ratings agencies. The Group’s maximum exposure to credit risk
from trade receivables is equal to the carrying amount of the Group’s trade receivables as at the reporting date of $199.5 million
(30 June 2021: $170.6 million). The ageing of the Group’s trade receivables and an analysis of the Group’s provision for expected
credit losses is provided in Note B1.
The Group’s exposure to credit risk is also influenced by the bulk-billing of services by medical practitioners to whom the Group
charges service fees for the use of imaging facilities. A large proportion of the Group’s receivables are due from Medicare Australia
(bulk-billed services), health funds and commercial contracts with public and private hospitals. The remaining trade receivables are
due from individuals. The concentration of credit risk relating to this remaining debt is limited due to the customer base being large
and unrelated.
Liquidity risk
Liquidity risk refers to the risk that the Group will encounter difficulties in meeting obligations associated with financial liabilities
that are settled by delivering cash or another financial liability.
The Group manages liquidity risk by continually monitoring forecast and actual cash flows, and by matching the maturity profiles of
financial assets and financial liabilities and ensuring that sufficient unused borrowing facilities are in place should they be required
to refinance any short-term financial liabilities.
The Group had access to the following financing facilities as at the end of the reporting period:
Financing facilities
Non-current
Unsecured Syndicated Debt Facilities
Amount used
Amount unused
Total financing facilities
2022
$M
2021
$M
610.0
390.0
1,000.0
260.0
340.0
600.0
The first tranche of the Syndicated Facility Agreement of $500 million matures on 11 March 2025 and the second tranche of $500 million
matures on 11 March 2027.
Amounts unused on non-current facilities are able to be drawn during the course of the ordinary working capital cycle of the Group.
The following tables detail the Group’s remaining contractual maturity for its non-derivative and derivative financial liabilities.
The tables include the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can
be required to pay. The tables include both interest and principal cash flows except for expected interest payments which
have already been recorded in trade and other payables. The cash flows for the interest rate swaps represent the net amounts
to be paid.
The repayment of contractual cash flows due in the period less than one year from 30 June 2022 will be met through the ordinary
working capital cycle of the Group, including the collection of trade receivables (30 June 2022: 199.5 million) and the unused
headroom in the Syndicated Debt Facility (30 June 2022: $390.0 million).
97
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022
C5. Financial instruments (continued)
2022
Consolidated
Non-derivative financial liabilities
Gross bank loan 1
Payables
Deferred consideration
Lease liabilities
2021
Consolidated
Non-derivative financial liabilities
Gross bank loan 1
Payables
Deferred consideration
Lease liabilities
CONTRACTUAL CASH FLOWS
CARRYING
AMOUNT
$M
TOTAL
$M
LESS THAN
1 YEAR
$M
1 TO 5
YEARS
$M
GREATER THAN
5 YEARS
$M
610.0
169.6
5.7
1,172.9
1,958.2
747.0
169.6
5.7
1,326.1
2,248.4
24.8
169.6
5.7
260.4
460.5
722.2
–
–
819.7
1,541.9
–
–
–
246.0
246.0
CONTRACTUAL CASH FLOWS
CARRYING
AMOUNT
$M
TOTAL
$M
LESS THAN
1 YEAR
$M
1 TO 5
YEARS
$M
GREATER THAN
5 YEARS
$M
260.0
195.5
38.9
1,177.6
1,672.0
275.6
195.5
38.9
1,317.8
1,827.8
4.2
195.5
38.9
256.3
494.9
271.4
–
–
686.0
957.4
–
–
–
375.5
375.5
1 Contractual cash flows include notional interest and assumes there is no change to the carrying amount.
Interest rate risk
The Group is exposed to interest rate risk as the Group borrows funds at floating interest rates plus a fixed margin. Interest rate
risk is managed by the Group by the use of interest rate swap contracts (cash flow hedges), executed by authorised representatives
of the Group within limits approved by the Risk Management Committee.
The following tables detail the Group’s exposure to interest rate risk on non-derivative financial assets and financial liabilities
as at 30 June. Lease liabilities below relate to financing arrangements for equipment with a variable interest component.
FIXED INTEREST RATE
AVERAGE
INTEREST
RATE
%
VARIABLE
INTEREST
RATE
$M
LESS THAN
1 YEAR
$M
0.57
1.56
2.18
81.3
(610.0)
(19.2)
(547.9)
–
–
(5.0)
(5.0)
1 TO 5
YEARS
$M
–
–
(24.0)
(24.0)
FIXED INTEREST RATE
AVERAGE
INTEREST
RATE
%
VARIABLE
INTEREST
RATE
$M
LESS THAN
1 YEAR
$M
0.55
1.71
2.28
70.1
(260.0)
(48.4)
(238.3)
–
–
(4.5)
(4.5)
1 TO 5
YEARS
$M
–
–
(14.5)
(14.5)
TOTAL
$M
81.3
(610.0)
(48.2)
(576.9)
TOTAL
$M
70.1
(260.0)
(67.4)
(257.3)
2022
Financial assets
Cash
Financial liabilities
Gross bank loans
Lease liabilities – equipment
2021
Financial assets
Cash
Financial liabilities
Gross bank loans
Lease liabilities – equipment
98
Notes to the financial statementsfor the year ended 30 June 2022
C5. Financial instruments (continued)
The Group uses interest rate swaps to hedge its interest rate risks. The following table details the notional principal amounts
and the remaining terms of interest rate swap contracts outstanding at the end of the reporting period. The average interest rate
disclosed in the table represents the average rate payable by the Group on the notional principal value hedged using cash flow
hedges plus the fixed margin on the underlying debt which reflects the cost of funds to the Group.
2022
Interest rate swaps
Less than 1 year
1 to 2 years
AVERAGE
CONTRACTED
FIXED INTEREST
RATE
%
2.37
2.73
NOTIONAL
PRINCIPAL
$M
FAIR VALUE
$M
200
30
230
(0.2)
(0.1)
(0.3)
The aggregate notional principal amount of the outstanding interest rate swap contracts as at 30 June 2022 was $230 million.
2021
Interest rate swaps
1 to 2 years
2 to 5 years
AVERAGE
CONTRACTED
FIXED INTEREST
RATE
%
NOTIONAL
PRINCIPAL
$M
FAIR VALUE
$M
2.37
2.73
200.0
30.0
230.0
(5.6)
(0.8)
(6.4)
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the Group’s exposure to variable interest rates during the financial
year, projecting a reasonably possible change taking place at the beginning of the financial year, held constant throughout the
financial year and applied to variable interest payments made throughout the financial year. A 100 basis point increase represents
management’s assessment of a reasonably possible change in interest rates. If interest rates had been 100 basis points higher
or lower and all other variables were held constant, the impact on the profit after tax and other comprehensive income would
have been as follows:
Consolidated
30 June 2022 – variable rate instruments
30 June 2021 – variable rate instruments
PROFIT AFTER TAX
OTHER COMPREHENSIVE INCOME
100BP
INCREASE
$M
100BP
DECREASE
$M
100BP
INCREASE
$M
100BP
DECREASE
$M
(1.8)
(0.4)
1.8
0.4
0.4
2.6
(0.4)
(2.6)
Cash flow hedges (Interest rate swap contracts)
The Group uses interest rate swap contracts to hedge its interest rate risks, predominantly arising from financing activities.
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts
calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the cash flow exposures on the
variable rate debt and are accounted for as cash flow hedges. The fair value of interest rate swaps at the end of the reporting
period is determined by discounting the future cash flows using the yield curves at the end of the reporting period and the credit
risk inherent in the contract, and is disclosed below.
The Group’s cash flow hedges settle on a monthly basis. The Group settles the difference between the fixed and floating interest
rate payable/(receivable) under each cash flow hedge on a net basis.
ACCOUNTING POLICY
All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are designated as cash
flow hedges as they reduce the Group’s cash flow exposure resulting from variable interest rates on its gross bank loans.
Interest rate swap contracts are initially recognised at fair value on the date the contract is entered into and are subsequently
re-measured to their fair value at the end of each reporting period. The effective part of any gain or loss on the interest rate swap
is recognised directly in equity. Any gain or loss relating to the ineffective portion (if any) of the interest rate swap is recognised
immediately in the consolidated statement of profit or loss.
Payments under the interest rate swaps and the interest payments on the underlying financial liability occur simultaneously
and the amount accumulated in equity is reclassified to the statement of profit or loss over the period that the floating rate
interest payments on the underlying financial liability affect the statement of profit or loss.
99
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022
C5. Financial instruments (continued)
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship
but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and
is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected
to take place, then the cumulative unrealised gain or loss recognised in equity is immediately recognised in the consolidated
statement of profit or loss.
Fair value of financial instruments
Basis for determining fair value
The determination of fair values of the Group’s financial instruments that are not measured at cost or amortised cost in the financial
statements are summarised as follows:
(i) Cash flow hedges (interest rate swap contracts)
The fair value of the Group’s cash flow hedges are measured as the present value of future cash flows estimated and discounted
based on applicable yield curves derived from quoted interest rates at the end of the financial year.
Fair value measurement – valuation methods
The table below analyses the Group’s financial instruments carried at fair value, by valuation method. The definition of each “level”
below is as required by accounting standards as follows:
•
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets
or liabilities
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs).
•
•
Deferred consideration relates to business combinations. The fair value of deferred consideration is measured as the present
value of the estimated future cash outflows which are based on Board-approved budgets and earnings multiples as set out in the
relevant acquisition documentation.
Carrying amount
2022
$M
Financial liabilities
Interest rate swaps
Deferred consideration
2021
$M
Financial liabilities
Interest rate swaps
Deferred consideration
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
–
–
0.3
–
–
5.7
0.3
5.7
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
–
–
6.4
–
–
38.9
6.4
38.9
Fair value of other financial instruments
The fair value of cash, receivables, payables and lease liabilities approximates their carrying amount. The fair value of the non-current
interest-bearing liabilities approximates the carrying amount of the gross bank loans of $610.0 million (2021: $260.0 million).
Other risks
Currency risk
The Group transacts predominately in Australian dollars and has a relatively small exposure to offshore assets or liabilities.
The Group predominately uses the spot foreign currency market to service any foreign currency transactions. A sensitivity analysis
has not been performed on the currency risk as this is not considered material.
Capital management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising
the return to stakeholders through the optimisation of the debt and equity balance and providing a stable capital base from
which Healius can pursue its corporate strategic objectives.
The capital structure of the Group consists of debt, which includes the interest-bearing liabilities disclosed in Note C1, cash
and equity attributable to equity holders of the parent, comprising of issued capital, reserves and retained earnings as disclosed
in the consolidated statement of changes in equity. The Group’s policy is to borrow centrally on a long term basis from committed
long term revolving bank facilities and through recycling capital in order to meet anticipated funding requirements.
100
Notes to the financial statementsfor the year ended 30 June 2022 C6. Commitments for expenditure
Capital commitments
Commitments for the acquisition of plant and equipment contracted for at the reporting date
but not recognised as liabilities, payable:
Within 1 year
Later than 1 year but not later than 5 years
2022
$M
2021
$M
14.3
–
14.3
6.1
1.7
7.8
101
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022
D. Group structure
This section contains details of the way the business is structured including details of controlled entities and changes to the
group structure during the year and the financial impact of these changes.
D1. Subsidiaries
Details of the Group’s subsidiaries at the end of the reporting period are as follows:
NAME OF SUBSIDIARY
Healius Limited
Former AP Pty Ltd
Former SDS Pty Limited
The Sydney Diagnostic Services Unit Trust
Healius Nominees Pty Ltd
Healius Training Institute Pty Ltd
Idameneo (No. 124) Pty Ltd
Idameneo (No. 789) Ltd
ACN 063 535 884 Pty Ltd
ACN 063 535 955 Pty Ltd
ACN 138 935 403 Pty Ltd
Crystal Eye Clinic (WA) Pty Ltd 1
Digital Diagnostic Imaging Pty Ltd
Healius Health Care Institute Pty Ltd
HLS Camden Pty Ltd
Primary (Camden) Property Trust
HLS Healthcare Holdings Pty Ltd
HLS Imaging Holdings Pty Ltd
ACN 088 631 949 Pty Ltd
Orana Service Unit Trust
Amokka Java Pty Limited
Brystow Pty Ltd
Healthcare Imaging Services (SA) Pty Ltd
Healthcare Imaging Services (Victoria) Pty Ltd
Healthcare Imaging Services (WA) Pty Ltd
Healthcare Imaging Services Pty Ltd
Campbelltown MRI Pty Ltd
Queensland Diagnostic Imaging Pty Ltd
Axis Diagnostic Holdings Pty Ltd 2
Granite Belt Diagnostic Imaging Pty Ltd 2
Keperra Diagnostic Imaging Pty Ltd 2
Toowoomba Diagnostic Imaging Pty Ltd 2
Whitsunday Radiology Pty Ltd 2
Northcoast Nuclear Medicine (QLD) Pty Ltd
HLS Pathology Holdings Pty Ltd
102
PROPORTION OF OWNERSHIP
INTEREST AND VOTING POWER
HELD BY THE GROUP
PLACE OF INCORPORATION
AND OPERATION
2022
%
2021
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
0
0
0
0
0
100
100
Notes to the financial statementsfor the year ended 30 June 2022 D1. Subsidiaries (continued)
NAME OF SUBSIDIARY
PLACE OF INCORPORATION
AND OPERATION
Agilex Biolabs Pty Ltd 3
AME Medical Services Pty Ltd
HLS Pathology Holdings Asia Pty Ltd
SDS Pathology (Singapore) Private Limited
Healius Pathology India Private Limited 4,5
Healius Pathology Pty Ltd
Moaven & Partners Pathology Pty Ltd
Pathways Unit Trust
Queensland Medical Services Pty Ltd
SDS Healthcare Solutions Inc. 6
Jandale Pty Ltd
Integrated Health Care Pty Ltd
Queensland Specialist Services Pty Ltd
Specialist Haematology Oncology Services Pty Ltd
Specialist Veterinary Services Pty Ltd
HLS Millers Point Pty Ltd
Primary Millers Point Property Trust
HLS Richmond Pty Ltd
HLS PST Pty Ltd
Primary (Greensborough) Property Sub Trust
Primary (Richmond) Property Trust
Primary (Robina) Property Sub Trust
John R Elder Pty Ltd
Larches Pty Ltd
Kelldale Pty Ltd
MGSF Pty Ltd
HLS Employee Share Acquisition Plan Pty Ltd 7
Senior Executive Short Term Incentive Plan Trust
Symbion Employee Share Acquisition Plan Trust
Symbion Executive Short Term Incentive Plan Trust
PHC Finance (Australia) Pty Ltd
PSCP Holdings Pty Ltd
Saftsal Pty Ltd
Aksertel Pty Ltd
Onosas Pty Ltd
Sumbrella Pty Ltd
HLS Health Insurance Pty Ltd
The Ward Corporation Pty Ltd
Symbion International BV
Idameneo UK Ltd
PROPORTION OF OWNERSHIP
INTEREST AND VOTING POWER
HELD BY THE GROUP
2022
%
100
100
100
100
100
100
100
100
100
2021
%
0
100
100
100
100
100
100
100
100
Australia
Australia
Australia
Singapore
India
Australia
Australia
Australia
Australia
Philippines
99.98
99.98
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Netherlands
United Kingdom
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
103
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022 D1. Subsidiaries (continued)
NAME OF SUBSIDIARY
PLACE OF INCORPORATION
AND OPERATION
2022
%
2021
%
PROPORTION OF OWNERSHIP
INTEREST AND VOTING POWER
HELD BY THE GROUP
Mayne Nickless Incorporated
Symbion Holdings (UK) Ltd
Wellness Holdings Pty Ltd
MB Healthcare Pty Ltd
Albany Day Hospital Pty Ltd
Bendigo Day Hospital Pty Ltd 8
Bunbury Day Surgery Pty Ltd
Felpet Pty Ltd
Montserrat Healthcare Pty. Ltd
Montserrat Medical Services Pty Ltd
Murdoch Haematology & Oncology Clinic Pty Ltd 9
Western Breast Clinic Pty Ltd
Western Haematology & Oncology Clinics Pty Ltd
Murdoch Private Hospital Pty Ltd 10
North Lakes Day Hospital Pty Ltd
Oxford Medical Pty Ltd
The Oxford Unit Trust
Peel Private Development Pty Ltd
Windermere House Pty Ltd
Montserrat DH Pty Ltd
Brookvale Day Hospital Pty Ltd
PHC (No. 01) Pty Ltd
United States
United Kingdom
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Transport Security Insurance (Pte) Limited
Singapore
100
100
100
100
100
100
100
100
100
100
100
100
60
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
0
100
100
100
100
0
100
60
0
100
100
100
100
100
100
100
100
100
Entity acquired on 1 July 2021.
Entity acquired on 31 January 2022.
1 Crystal Eye Clinic (WA) Pty Ltd changed ownership from Montserrat DH Pty Ltd to Idameneo (No.789) Limited on 10 May 2022.
2
3
4 Name changed from Specialist Diagnostic Services Pathology (India) Private Limited to Healius Pathology India Private Limited on 20 June 2022.
5
6
7 Name changed from PHC Employee Share Acquisition Plan Pty Ltd to HLS Employee Share Acquisition Plan Pty Ltd on 20 June 2022.
8
Entity incorporated on 10 May 2022.
9 Entity incorporated on 11 October 2021.
10 Entity incorporated on 16 September 2021.
Entity has a 31 March year end.
Entity has a 31 December year end.
Refer to Note E2 for the subsidiaries that the Group has ceased control of during the current and prior year.
All entities are domiciled in their country of incorporation. No controlled entities carry on material business operations other than
in their country of incorporation.
104
Notes to the financial statementsfor the year ended 30 June 2022 D2. Deed of cross guarantee
Pursuant to ASIC Corporations Instrument (Wholly-owned Companies) Instrument 2016/785, the wholly-owned subsidiaries
listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports,
and Directors’ reports.
It is a condition of the Instrument that the relevant holding entity and each of the relevant subsidiaries enter into a Deed of Cross
Guarantee. The effect of the Deed is that each holding entity guarantees to each creditor payment in full of any debt in the event
of winding up of any of the subsidiaries in each Group under certain provisions of the Corporations Act 2001. If a winding up occurs
under other provisions of the Corporations Act 2001, each holding entity will only be liable in the event that after six months any
creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that each holding entity
is wound up.
HEALIUS GROUP – DEED OF CROSS GUARANTEE
Healius Limited has entered into a Deed of Cross Guarantee with certain of its wholly-owned subsidiaries. The holding entity
and subsidiaries, subject to the Deed of Cross Guarantee as at 30 June 2022 are as follows:
ACN 138 935 403 Pty Ltd
Albany Day Hospital Pty Ltd
Brookvale Day Hospitals Pty Ltd
Bunbury Day Surgery Pty Ltd
Crystal Eye Clinic (WA) Pty Ltd
HLS Pathology Holdings Pty Ltd
Idameneo (No. 124) Pty Ltd
Idameneo (No.789) Limited
Integrated Health Care Pty Ltd
MB Healthcare Pty Ltd
Digital Diagnostic Imaging Pty Ltd
Moaven & Partners Pathology Pty Ltd
Felpet Pty Ltd
Former AP Pty Ltd
Former SDS Pty Ltd
Healius Limited (holding entity)
Healius Pathology Pty Ltd
Healius Training Institute Pty Ltd
Healthcare Imaging Services (SA) Pty Ltd
Montserrat DH Pty Ltd
Montserrat Healthcare Pty Ltd
Montserrat Medical Services Pty Ltd
North Lakes Day Hospital Pty Ltd
Oxford Medical Pty Ltd
Queensland Diagnostic Imaging Pty Ltd
Queensland Medical Services Pty Ltd
Healthcare Imaging Services (Victoria) Pty Ltd
Specialist Haematology Oncology Services Pty Ltd
Healthcare Imaging Services (WA) Pty Ltd
Specialist Veterinary Services Pty Ltd
Healthcare Imaging Services Pty Ltd
HLS Healthcare Holdings Pty Ltd
HLS Imaging Holdings Pty Ltd
Western Breast Clinic Pty Ltd
Windermere House Pty Ltd
Consolidated income statements and consolidated balance sheets, comprising holding entities and subsidiaries which are parties
to the above Deed, after eliminating all transactions between parties to the Deed, at 30 June 2022 are materially consistent with
the Group’s consolidated statement of profit or loss and consolidated statement of financial position disclosed elsewhere in this
financial report.
105
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022 D3. Parent entity disclosures
The accounting policies of the parent entity, Healius Limited, which have been applied in determining the information shown below,
are the same as those applied in the consolidated financial statements except in relation to investments in subsidiaries which are
accounted for at cost less any impairment losses in the financial statements of Healius Limited.
The summary statement of financial position of Healius Limited at the end of the financial year is as follows:
STATEMENT OF FINANCIAL POSITION
2022
$M
2021
$M
Assets
Current
Non-current
Total assets
Liabilities
Current
Non-current
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Other reserves
Total equity
The statement of comprehensive income of Healius Limited for the financial year is as follows:
STATEMENT OF COMPREHENSIVE INCOME
Profit for the year
Other comprehensive income
Total comprehensive income
–
2,287.2
2,287.2
1.5
605.8
607.3
1,679.9
2,442.8
(783.4)
20.5
1,679.9
2022
$M
15.9
4.3
20.2
–
2,208.2
2,208.2
36.9
263.7
300.6
1,907.6
2,591.9
(701.9)
17.6
1,907.6
2021
$M
103.6
11.7
115.3
Parent company guarantees
Healius Limited had previously provided parent company guarantees (PCGs) in relation to certain property leases entered into
by Healius Primary Care (HPC). As part of the sale of the HPC business the majority of these PCGs were extinguished. As at 30 June
2022 the value provided by Healius to certain landlords of Healius Primary Care in relation to property leases was $9.8 million.
Refer to Note E4 for further details.
106
Notes to the financial statementsfor the year ended 30 June 2022
E. Other disclosures
This section contains details of other items required to be disclosed in order to comply with accounting standards
and other pronouncements.
E1. Notes to the statement of cash flows
Reconciliation of cash
For the purpose of the statement of cash flows, cash includes cash on hand
and in banks.
Cash at the end of the financial year as shown in the statement of cash flows
is reconciled to the related items in the statement of financial position as follows:
Cash as disclosed in the statement of financial position
Cash classified as asset held for sale
Cash as disclosed in the Group statement of cash flows
Reconciliation of profit from ordinary activities after related income tax to net cash
flows from operating activities
Profit for the year
Finance costs
Depreciation of plant and equipment
Depreciation of right of use assets
Amortisation of HCP upfronts
Amortisation of intangibles
Gain on sale of Adora
Share-based payment expense
Deferred consideration
Loss on sale of Healius Primary Care
Gain on derecognition of right of use assets
Loss on sale of property plant and equipment and intangibles
Net exchange differences
Other non-cash items
Increase/(decrease) in:
Trade payables and accruals
Provisions
Deferred revenue
Income tax and deferred taxes
Decrease/(increase) in:
Consumables
Receivables and prepayments
Net cash provided by operating activities
NOTE
2022
$M
2021
$M
E2
E2
81.3
–
81.3
307.9
50.7
44.5
219.7
2.4
14.3
(16.5)
7.9
–
–
(0.5)
0.3
–
(1.3)
(36.4)
2.5
2.8
33.9
(12.4)
(33.0)
586.8
70.1
2.6
72.7
43.7
99.2
39.8
196.4
12.8
14.1
–
11.8
3.0
8.3
(5.2)
1.0
0.2
–
(56.8)
34.4
(0.8)
86.8
(8.9)
46.1
525.9
NON-CASH INVESTING AND FINANCING
During the financial year Nil (2021: 265,634) shares were issued pursuant to the Short-Term Incentive Plan. These transactions are not
reflected in the cash flow statement.
FINANCING FACILITIES
Details of financing facilities available to the Group are provided at Note C5.
107
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022
E2. Discontinued operations
(a) Healius Primary Care (HPC)
The Group sold HPC on 23 November 2020. The profit and loss impact of the disposal on the results to 30 June 2022 includes
the income and costs incurred in relation to the Transitional Services Agreement that the Group has with HPC.
(b) Adora IVF and Healius Day Surgeries Businesses (Adora)
In May 2021 Healius announced its intention to divest Adora and issued an Information Memorandum to interested parties.
Consequently, Adora was accounted for as a discontinued operation in the 2021 financial year.
On 24 March 2022, the Group entered into a binding sale agreement with Liverpool Partners to sell Adora. The sale completed
on 1 June 2022. The results of the business up until this date have been presented in the results from discontinued operations
in the 2022 financial year.
The results of discontinued operations for the year are presented below:
Revenue and other gains
Expenses
Earnings before interest, tax and impairment
Finance costs
Loss before tax and impairment
Impairment loss recognised on the remeasurement to fair value less costs to sell
Profit/(loss) on sale
Profit/(loss) before tax from discontinued operations
Income tax expense
Profit/(loss) from discontinued operations
The net cash flows of discontinued operations are:
Operating
Investing
Financing
Net cash inflow
The profit/(loss) per share attributable to discontinued operations is as follows:
Basic profit/(loss) per share from discontinued operations
Diluted profit/(loss) per share from discontinued operations
2022
$M
27.6
(28.7)
(1.1)
(0.2)
(1.3)
–
16.5
15.2
(1.3)
13.9
2022
$M
4.7
28.0
(1.0)
31.7
2022
CENTS
2.4
2.3
2021
$M
134.8
(130.4)
4.4
(11.6)
(7.2)
(2.3)
(8.3)
(17.8)
(4.8)
(22.6)
2021
$M
28.8
(16.5)
5.3
17.6
2021
CENTS
(3.7)
(3.6)
108
Notes to the financial statementsfor the year ended 30 June 2022 E3. Taxation
CURRENT TAX BALANCES
INCOME TAX
Income tax payable is attributable to:
Entities in the tax consolidated group
Other
2022
$M
(65.5)
(1.8)
(67.3)
2021
$M
(45.2)
(1.6)
(46.8)
Current tax assets and liabilities for the current and prior year are measured at the amount expected to be paid to or recovered
from the taxation authorities based on the current year’s taxable income. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted by the reporting date.
DEFERRED TAXATION
2022
$M
Receivables
Consumables
Prepayments
Property, plant and equipment
Right of use assets
Intangibles and capitalised costs
Entitlement offer
Payables
Provisions
Lease liabilities
Other financial liabilities 1
Net temporary differences
Tax losses – revenue
Deferred tax asset
1 Other financial liabilities are credited to equity.
1 JULY 2021
OPENING
BALANCE
CREDITED/
(CHARGED)
TO INCOME
ACQUISITIONS
AND OTHER
ADJUSTMENTS
30 JUNE 2022
CLOSING
BALANCE
(3.8)
(10.4)
(1.2)
3.1
(326.1)
(1.1)
0.8
12.3
51.7
353.2
2.2
80.7
1.5
82.2
(0.9)
(3.9)
0.3
(6.9)
6.7
0.1
(0.4)
(4.6)
3.6
(4.7)
0.1
(10.6)
(1.9)
(12.5)
(0.9)
–
–
(0.9)
(3.1)
–
–
–
0.9
3.3
(1.8)
(2.5)
1.6
(0.9)
(5.6)
(14.3)
(0.9)
(4.7)
(322.5)
(1.0)
0.4
7.7
56.2
351.8
0.5
67.6
1.2
68.8
109
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022
E3. Taxation (continued)
2021
$M
Receivables
Consumables
Prepayments
Property, plant and equipment
Right of use assets
Intangibles and capitalised costs
Entitlement offer
Payables
Provisions
Lease liabilities
Other financial liabilities 1
Net temporary differences
Tax losses – revenue
Deferred tax asset
1 Other financial liabilities are credited to equity.
1 JULY 2020
OPENING
BALANCE
CREDITED/
(CHARGED)
TO INCOME
ACQUISITIONS
AND OTHER
ADJUSTMENTS
30 JUNE 2021
CLOSING
BALANCE
(13.8)
(7.8)
(1.1)
8.4
(263.1)
(7.0)
1.2
16.4
51.1
281.2
7.2
72.7
1.7
74.4
10.0
(2.6)
(0.1)
(2.5)
(63.0)
2.6
(0.4)
(4.0)
0.9
72.0
0.2
13.1
(0.2)
12.9
–
–
–
(2.8)
–
3.3
–
(0.1)
(0.3)
–
(5.2)
(5.1)
–
(5.1)
(3.8)
(10.4)
(1.2)
3.1
(326.1)
(1.1)
0.8
12.3
51.7
353.2
2.2
80.7
1.5
82.2
Deferred tax arises when there are temporary differences between the carrying amount of assets and liabilities and the
corresponding tax base of those items. Deferred taxes are not recognised for temporary differences relating to:
•
the initial recognition of assets and liabilities that is not a business combination which affects neither taxable income
nor accounting profit
the initial recognition of goodwill, and
investments in subsidiaries where the Group is able to control the timing of the reversal of the temporary difference
and it is probable that they will not reverse in the foreseeable future. Deferred tax assets are recognised to the extent
that it is probable that future taxable amounts will be available against which the assets can be utilised.
•
•
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the periods when the asset is realised
or the liability is settled based on tax rates and tax laws that have been enacted or substantively enacted by reporting date.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net basis.
TAX CONSOLIDATION
Healius Limited and its wholly-owned Australian entities elected to form an income tax consolidated group as of 1 July 2002.
The entities in the income tax consolidated group entered into a tax sharing agreement which, in the opinion of the Directors,
limits the entities’ joint and several liability in the case of an income tax payment default by the head entity, Healius Limited.
The entities continue to adopt the stand-alone taxpayer method in measuring current and deferred tax amounts for each entity,
as if it continued to be a taxable entity in its own right.
The entities have also entered into a tax funding agreement under which the entities fully compensate Healius Limited for any
current income tax payable assumed and are compensated by Healius Limited for any current tax receivable and deferred
tax assets relating to unused tax losses or unused tax credits that are transferred to Healius Limited under the income tax
consolidation legislation.
E4. Contingent liabilities
Guarantees
Workers compensation statutory requirement
Property related 1
1
$9.8 million (2021: $19.8 million) relates to parent company guarantees.
2022
$M
22.6
32.7
55.3
2021
$M
19.6
34.6
54.2
110
Notes to the financial statementsfor the year ended 30 June 2022
E5. Share-based payments
The Group uses Options, Performance Rights and Service Rights to remunerate senior executives.
Options and Performance Rights are subject to both service and performance conditions whilst Service Rights are subject
to service conditions only. Options and Rights will vest if the relevant conditions are met. Details of service conditions and
performance conditions for each share based payment plan are set out below.
Options and Rights carry no rights to dividends and no voting rights.
If a participant ceases employment, any unvested Options or Rights will lapse unless otherwise determined by the Board.
The Group operate the following share based payment plans:
(a) Transformation Long Term Incentive Plan (TLTIP) – Options Plan
The purpose of the TLTIP is to retain and motivate the executive team to deliver over the term of the strategic plan. The strategic
plan aims to deliver a sustainable increase in shareholder returns over time. The key components of the TLTIP are a close alignment
to cumulative shareholder returns and a measurement period of up to five years.
For members of the executive leadership team (that is the CEO and direct reports to the CEO) (ELT), the TLTIP was granted in the
form of Options, with a one-off grant of Options 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. The vesting of the Options is subject to continued employment throughout
the relevant measurement period and the following performance conditions:
•
For the CEO, CFO/COO and ELT members in functional roles, Earnings Per Share (EPS) growth and relative Total Shareholder
Return (rTSR), split 2/3 to 1/3 between EPS growth and rTSR, or
For ELT members who are Chief Executives of operational divisions, divisional Earnings Before Interest and Tax (EBIT) growth
as well as EPS growth and rTSR , split 40%/20%/40% between EPS growth, rTSR and EBIT growth.
•
The Options granted in FY 2020 are allocated evenly to three tranches with the measurement period being 1 July 2019 to 30 June 2022
(three years) for Tranche 1, 1 July 2019 to 30 June 2023 (four years) for Tranche 2 and 1 July 2019 to 30 June 2024 (five years) for Tranche 3.
Retesting of performance conditions will not occur under any of these awards.
The relevant Exercise Date for each tranche is:
•
•
•
Tranche 1: the day following the release of the FY 2022 results
Tranche 2: the day following the release of the FY 2023 results, and
Tranche 3: the day following the release of the FY 2024 results.
On vesting, an Option may be exercised by the participant on the relevant Exercise Date for the Exercise Price. On exercise, one fully
paid ordinary Share in the Company is issued for each exercised Option. For the FY 2020 Options Plan the Exercise Price for all
three tranches of Options is the standard volume weighted average price (VWAP) for the Company’s shares for the 10 trading days
following 1 July 2019 which was $3.05. The Options must be exercised on the relevant Exercise Date as set out above. The Board may
determine to allow a cashless exercise of Options.
Further details of the TLTIP Options Plan can be found in the Remuneration Report.
(b) Long Term Incentive Plan (LTIP) and previously Transformation Long Term Incentive Plan (TLTIP) – Performance
Rights Plans
In FY 2022 and FY 2021, Performance Rights were granted under the LTIP to senior executives other than members of the ELT
(the ELT held Options under the TLTIP as discussed above). In FY 2020, Performance Rights were granted under the TLTIP to senior
executives other than members of the executive leadership team, who were granted Options under the TLTIP as discussed above.
The Performance Rights are subject to continued employment throughout the measurement period and the following
performance conditions:
•
In FY 2022 the Performance Rights are subject to EPS growth and rTSR performance conditions (split 2/3 to 1/3 between EPS
growth and rTSR), and
In FY 2021 and FY 2020:
-
for executives in functional roles, the Performance Rights are subject to EPS growth and rTSR performance conditions
(split 2/3 to 1/3 between EPS growth and rTSR), or
for executives in operational divisions, the Performance Rights are subject to divisional EBIT growth, EPS growth and rTSR
performance conditions (split 40%/20%/40% between EPS growth, rTSR and EBIT growth).
-
•
The measurement period for Performance Rights granted under the FY 2022 award is three years: 1 July 2021 to 30 June 2024
(FY 2021 award: 1 July 2020 to 30 June 2023).
111
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022 E5. Share-based payments (continued)
Retesting of performance conditions will not occur under any of these awards.
Each Performance Right is an entitlement to one fully paid ordinary Share in Healius. On vesting, a Performance Right is exercised
automatically for nil consideration and one fully paid ordinary Share in the Company is allocated to the participant; this allocation
may be by way of issue or on-market purchase.
(c) Short Term Incentive Plan (STIP)
The purpose of the STIP is to motivate senior executives to achieve the short-term annual objectives linked to Company success
and shareholder value creation, and to create a strong link between performance and reward. Awards made under the STIP are
subject to various financial and non-financial performance conditions (KPIs) measured over a 12 month period ending 30 June.
In FY 2021, the ELT received two-thirds of any STIP award in cash and one-third in equity in the form of Service Rights subject
to a service period of 12 months following the end of the measurement period. Each Service Right is an entitlement to one fully
paid ordinary Share in Healius. On vesting, Service Rights are exercised automatically for nil consideration and convert to fully
paid ordinary Shares in the Company.
For all other participants in the STIP the nature of any award (cash or equity) was at the discretion of management.
Set out below are summaries of the equity instruments granted under each of the plans as at 30 June 2022:
DESCRIPTION
FY 2019 LTIP
GRANT DATE 1
1 March 2019
FY 2020 TLTIP – Options
28 February 2020
FY 2020 LTIP – Rights
20 March 2020
FY 2021 LTIP
26 October 2020
FY 2021 STIP – Rights
20 October 2021
FY 2022 LTIP
21 May 2022
BALANCE AS AT
1 JULY 2021
NUMBER
4,858,579
33,816,116
1,473,325
1,284,313
–
–
GRANTED
DURING
THE YEAR
NUMBER
–
–
–
178,590
228,341
2,024,047
EXERCISED
DURING
THE YEAR
NUMBER
4,390,678
FORFEITED
DURING
THE YEAR
NUMBER 2
467,901
–
–
–
–
–
–
–
–
–
–
BALANCE AS AT
30 JUNE 2022
NUMBER
–
33,816,116
1,473,325
1,462,903
228,341
2,024,047
1 Grant date has been determined in accordance with the requirements of AASB 2 Share based Payment. These dates may differ from the
dates on which notice was given to the ASX of the proposed issue of securities.
2 Options and Performance Rights forfeited will generally remain on the Company’s Options Register until the Exercise Date for the relevant
Options or Performance Rights tranche, at which time they will lapse. Unlisted securities may be treated as forfeited for the purpose
of calculating share based payments in the case of departed employees, whilst those securities remain on the Register until the relevant
Exercise Date, at which they are formally lapsed on the Register. As at 30 June 2022, there were 2,578,123 Options and 588,781 Rights forfeited
however still maintained on the Company’s Register. These forfeited securities are included in Note C2 (Issued Capital) but are not included
in the table above.
FAIR VALUE OF RIGHTS GRANTED
The fair value of the Options and Performance Rights granted under the FY 2022, FY 2021 and FY 2020 Plans were estimated at the
grant date using a Monte-Carlo simulation model taking into account the terms and conditions on which the Options and Performance
Rights were granted including the rTSR performance condition where applicable. As the EPS and EBIT performance conditions are non
market conditions they are not taken into account when determining the fair value of the Options and Performance Rights but rather
are considered when determining the number of Options and Performance Rights that will ultimately vest.
The fair values of Rights granted during the year are set out below:
DESCRIPTION
TRANCHE
GRANT DATE
MEASUREMENT PERIOD
FY 2022 TLIP – Performance Rights
FY 2022 TLIP – Performance Rights
EPS
rTSR
21 May 2022
1 July 2021 to 30 June 2024
21 May 2022
1 July 2021 to 30 June 2024
FY 2021 STIP – Service Rights
12 month service period
20 October 2021
N/A
GRANT DATE FAIR
VALUE PER RIGHT
$
3.87
1.67
4.79
ACCOUNTING POLICY
Options and Performance Rights granted to employees are measured at the fair value of the equity instruments at the grant date. The fair
value is recognised as an employee benefits expense on a straight-line basis over the vesting period with a corresponding increase in the
share based payments reserve. The fair value of the Rights granted includes any market performance conditions such as rTSR and the impact
of any non-vesting conditions, but excludes the impact of service and non market performance conditions such as EPS growth, EBIT growth
and ROIC.
At the end of each reporting period, in relation to service and non market performance conditions, the Group revises its estimate of the number
of Options and Rights that are expected to vest. The impact of the revision to the original estimate, if any, is recognised in profit or loss such that
the cumulative expense reflects the revised estimate, with a corresponding adjustment to the share based payments reserve.
112
Notes to the financial statementsfor the year ended 30 June 2022 E6. Related party disclosures
TRANSACTIONS WITHIN THE WHOLLY-OWNED GROUP
Loans between wholly-owned entities in the Group are repayable at call. If both parties to the loan are within the same tax consolidated
Group, no interest is charged on the loan. If this is not the case, interest is charged on the loan at normal commercial rates.
During the financial year rental of premises occurred between wholly-owned entities within the Group at commercial rates.
E7. Key Management Personnel disclosures
KEY MANAGEMENT PERSONNEL COMPENSATION
Key Management Personnel (KMP), including Non-executive Directors, compensation details are set out in the Remuneration Report
section of the Directors’ Report.
Short-term employee benefits
Post-employment benefits
Other long-term employee benefits
Termination payments
Share-based payments
2022
$000
5,410
156
74
–
4,729
10,369
2021
$000
6,553
150
103
–
5,391
12,197
TRANSACTIONS WITH PAUL JONES
In FY 2021 the Group provided medical centre management services (Services) to Dr Paul F Jones Pty Limited, a company
controlled by Dr Paul Jones, a Non-executive Director of Healius. The Services were provided to Dr Jones’ general medical practice,
which is conducted at one of Healius’ former medical centres, on ordinary arm’s length terms. These services ceased following the
sale of Healius Primary Care.
The Service fees received by the Group for FY 2021 was $44,831. This Service fee revenue was accounted for by Healius in the same
way as revenue from other healthcare practices.
There were no amounts payable or receivable as at 30 June 2022 (30 June 2021: $nil).
OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
From time to time, KMPs (and their personally-related entities) enter into transactions with entities in the Group, including the use
or provision of services under normal customer, supplier or employee relationships. These transactions:
• Occur within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those
which it is reasonable to expect the Group would have adopted if dealing with the KMP or their personally-related entity
at arm’s length in the same circumstances
• do not have the potential to adversely affect decisions about the allocation of scarce resources made by users of the financial
report, or the discharge of accountability by the KMP, and
• are trivial or domestic in nature.
113
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022
E8. Remuneration of auditor
Fees to Ernst & Young (Australia)
Fees for auditing the statutory financial report of the Group
Fees for other assurance and agreed-upon-procedures services
Internal controls and compliance
Fees for other services
Tax consulting
Due diligence
Advisory
Total fees to Ernst & Young (Australia)
Fees to overseas member firms of Ernst & Young (Australia)
Fees for auditing the financial report of the Group’s controlled entities
Fees for other services
Tax consulting
Total fees to overseas member firms of Ernst & Young (Australia)
Total auditor’s remuneration
E9. Businesses acquired
2022
$000
745
5
142
413
–
2021
$000
789
27
56
300
27
1,305
1,199
37
18
55
1,360
46
6
52
1,251
AXIS DIAGNOSTIC HOLDINGS PTY LTD
On 1 July 2021 the Group acquired 100% of the issued capital of Axis Diagnostic Holdings Pty Ltd, the parent entity of the
Axis Group (Axis). Axis is a high-quality Queensland-based imaging business. The acquisition accounting for Axis has
been finalised. The fair values of the identifiable assets and liabilities, as at the date of acquisition, are presented below.
AGILEX BIOLABS PTY LTD
On 31 January 2022 the Group acquired 100% of the issued capital of Agilex Biolabs Pty Ltd (Agilex). Agilex is one of Australia’s
leading bioanalytical laboratories, with 25 years’ experience in providing bioanalysis services to meet the clinical trial needs
of biotech and pharmaceutical companies.
The provisional goodwill amount of $286.7 million is attributable to the expected benefits arising from the acquisition.
The initial accounting for the Agilex business combination has been performed on a provisional basis because the identification
and fair value measurement of the assets and liabilities remains ongoing. The provisional fair values of the identifiable assets
and liabilities, as at the date of acquisition, are presented below.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Total consideration
Less: Deferred consideration
Add: Purchase price adjustments
Cash paid to vendors on acquisition
Less: Cash acquired
Net cash transferred on acquisition
114
AXIS
$M
0.6
1.6
(0.8)
(0.1)
1.3
14.9
16.2
(3.3)
–
12.9
(0.3)
12.6
AGILEX
$M
10.4
19.2
(11.0)
(12.5)
6.1
286.7
292.8
–
0.2
293.0
(2.3)
290.7
Notes to the financial statementsfor the year ended 30 June 2022
E10. Adoption of new and revised standards
STANDARDS AFFECTING AMOUNTS REPORTED IN THE CURRENT PERIOD (AND/OR PRIOR PERIODS)
A number of amendments to Standards issued by the Australian Accounting Standards Board (AASB) and Interpretations are
applicable for the first time in the 2022 financial year, however adoption does not have a material impact on the disclosures
or amounts recognised in the consolidated financial statements of the Group.
STANDARDS ON ISSUE NOT YET ADOPTED
At the date of authorisation of the financial statements, a number of Standards and Interpretations were on issue but not yet
effective for the Group. In the Directors’ opinion, the Accounting Standards on issue but not yet effective, will not have a material
impact on the amounts reported by the Group in future financial periods.
E11. Subsequent events
Since the end of the reporting period the Group has decided to sell the Day Hospitals business in its entirety. The sale process was
initiated in July 2022 when an Information Memorandum was distributed to potential buyers, and is expected to be completed
in the 2023 financial year.
Other than the event described above, there has not been any matter or circumstance that has arisen since the end of the
financial year that 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.
115
FINANCE REPORTNotes to the financial statementsfor the year ended 30 June 2022HEALIUS — ANNUAL REPORT 2022 Number of shareholders
As at 31 August 2022, there were 569,435,248 fully paid ordinary Shares held by 15,096 shareholders.
Distribution of ordinary Shares as at 31 August 2022
NUMBER OF SHARES HELD
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001–999,999,999
Total
1,122 shareholders hold less than a marketable parcel of Shares.
Number of Rights holders
As at 31 August 2022, there were 4,960,275 Rights held by 58 persons.
Distribution of Rights as at 31 August 2022
NUMBER OF RIGHTS HELD
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001–999,999,999
Total
INDIVIDUALS
5,431
6,226
2,029
1,346
64
15,096
INDIVIDUALS
0
0
4
35
19
58
116
Shareholder information Number of Options holders
As at 31 August 2022, there were 33,816,116 Options held by eight persons.
Distribution of Options as at 31 August 2022
NUMBER OF OPTIONS HELD
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001–999,999,999
Total
INDIVIDUALS
0
0
0
0
8
8
Securities Exchange Listing
Healius Limited is a listed public company, incorporated and operating in Australia. The Shares of Healius Limited are listed
on the Australian Securities Exchange Limited (ASX) under the code “HLS”.
Voting Rights
Votes of members are governed by Healius’ Constitution. In summary, each member is entitled either personally or by proxy
or attorney or representative, to be present at any general meeting of Healius and to vote on any resolution on a show of hands
or upon a poll. Every member present in person, by proxy or attorney or representative, has one vote for every Share held.
Healius fully paid ordinary Shares carry voting rights of one vote per Share.
Healius Options carry no voting rights.
Healius Rights carry no voting rights.
117
OTHER INFORMATIONShareholder informationHEALIUS — ANNUAL REPORT 2022 Top 20 shareholders as at 31 August 2022
RANK
NAME
SHARES
% OF SHARES
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
Argo Investments Limited
BNP Paribas Nominees Pty Ltd
Warbont Nominees Pty Ltd
RinRim Pty Ltd
Citicorp Nominees Pty Ltd
Brispot Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd
Dr Malcolm Parmenter
Ecapital Nominees Pty Ltd
Joromada Pty Ltd
Merrill Lynch (Australia) Nominees Pty Ltd
Netwealth Investments Limited
Nulis Nominees (Australia) Limited
20.
Mr Gregory Anthony Thomas Bateman
Total
Substantial shareholders as at 31 August 2022
NAME
Perpetual Limited 1
Australian Retirement Trust Pty Ltd ATF Australian Retirement Trust 2
Dimensional Entities 3
Tanarra Capital Australia Pty Ltd and its related entities 4
State Street Corporation and its related entities 5
Vanguard Group 6
198,479,240
101,183,349
90,379,207
41,496,199
25,266,177
19,132,634
3,168,078
2,830,728
2,392,047
2,340,989
2,085,603
1,233,546
838,813
722,961
714,444
700,000
682,338
656,266
649,430
636,213
34.86
17.77
15.87
7.29
4.44
3.36
0.56
0.50
0.42
0.41
0.37
0.22
0.15
0.13
0.13
0.12
0.12
0.12
0.11
0.11
495,588,262
87.03
NUMBER OF FULLY
PAID ORDINARY
SHARES AS AT DATE
OF EACH NOTICE
% OF TOTAL ISSUED
CAPITAL AS AT
THE DATE OF EACH
NOTICE
53,696,389
42,908,937
30,485,918
29,816,008
29,319,794
29,004,002
9.27
7.41
6.04
5.15
5.06
5.00
1
2
3
4
5
6
Substantial shareholder notice received by the Company on 2 September 2022 (date of change 31 August 2022).
Substantial shareholder notice received by the Company on 8 August 2022.
Substantial shareholder notice received by the Company on 6 December 2013.
Substantial shareholder notice received by the Company on 8 June 2022.
Substantial shareholder notice received by the Company on 3 August 2022.
Substantial shareholder notice received by the Company on 27 July 2022.
Auditor
Ernst & Young
The EY Centre
200 George Street
SYDNEY NSW 2000
118
Shareholder information 2022
Half year results announcement
Record date for interim dividend
Interim dividend paid
Year end
Full year results announcement
Record date for final dividend
Final dividend payable
2023
Half year results announcement
Year end
Full year results announcement
23 February
25 March
5 April
30 June
30 August
8 September
21 September
22 February
30 June
30 August
119
OTHER INFORMATIONFinancial calendarHEALIUS — ANNUAL REPORT 2022 Corporate information
Company’s Registered Office
Level 22
161 Castlereagh Street
SYDNEY NSW 2000
(02) 9432 9400
Company’s Principal Administrative Office
(and location of Register of Option Holders)
Level 22
161 Castlereagh Street
SYDNEY NSW 2000
(02) 9432 9400
Share Registry
(and location of Register of Rights Holders)
Computershare Investor Services Pty Ltd
Level 3, 60 Carrington Street
SYDNEY NSW 2000
GPO Box 7045
SYDNEY NSW 1115
Sydney Office: (02) 8234 5000
Investor enquiries: 1300 855 080
Design Communication and Production by ARMSTRONG
Armstrong.Studio
120
Our brands
Healius’ businesses operate a number of brands across Australia representing quality, affordability and accessible care.
We are developing number of new brands with a shared aim of becoming the best customer-centric organisation
in healthcare in Australia. Our current brands are set out below:
Pathology
Imaging
Day Hospitals
www.healius.com.au
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