2
2 ANNUAL
REPORT
ABN 80 129 643 492
Contents
4
Chair’s
statement
14
Directors’
report
44
Statement of
financial position
47
Table of
contents
93
Independent
auditor’s report to
the members of
Virtus Health Limited
6
Chief Executive’s
overview
42
Auditor’s
independence
declaration
45
Statement of
changes in equity
48
Notes to the
financial statements
99
Shareholder
information
12
Board of
directors
43
Statement of
comprehensive
income
46
Statement of
cash flows
92
Directors’
declaration
101
Corporate
directory
Virtus Health is a team with a clear purpose: we work together
to continuously improve the care and services we provide.
Patient care, scientific and clinical leadership and a passion for
making a difference to people’s lives is always at the forefront of
our minds. Collaboration, agility and the curiosity to investigate
new ideas is how we will continue to grow as a market leader.
2020 Annual Report
120
FERTILITY SPECIALISTS
18,978
FRESH IVF CYCLES
251
SCIENTISTS
982
NURSE, COUNSELLOR AND
PATIENT SUPPORT
42
FERTILITY CLINICS
7
DAY HOSPITALS
General information
The financial report consists of the financial statements, notes to the financial statements and the directors’ declaration.
Virtus Health Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Level 3, 176 Pacific Highway, Greenwich NSW 2065
A description of the nature of the consolidated entity’s operations and its principal activities are included in the
directors’ report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 18 August 2020. The
directors have the power to amend and reissue the financial statements.
Chair’s
STATEMENT
“Although
our financial
performance has
been impacted by
clinic and facility
shutdowns there
were some notable
performances
during the
financial year.”
The financial year ended 30 June 2020 will be remembered for the incredible
disruption to the activities of many businesses, including Virtus Health, caused
by the world wide COVID-19 pandemic.
4
The year also represented a period of change and renewal
within Virtus with the appointment of our new Chief Executive
Officer and Managing Director, Kate Munnings, who joined the
Company on 18 March 2020. As Virtus Health is one of the top
five assisted fertility providers in the world, Kate’s leadership
style is well suited to enhancing Virtus’ culture of operational
excellence and clinical and scientific rigor.
The disruption caused by COVID-19 commenced in March
and impacted every part of our business. Such a dramatic
change to our business activities was met by an agile and
flexible approach across the company. The Board and
executive management implemented a range of measures
to protect the business, understand the degree of COVID-19
disruption and developed responses for different scenarios.
Further information on our response is provided in a
separate COVID-19 impact statement.
We are grateful that to date, there are no cases of people
testing positive to COVID-19 within our workforce.
The outstanding contributions of everybody associated
with Virtus Health during the initial period of clinic and
facility closures and business uncertainty are to be
commended. In particular, we recognize the difficult
decisions which resulted in temporary employee stand
downs. The global pandemic came at a time when our
employees, customers and the Australian economy was
just starting to emerge from devastating bushfires in
Australia. We recognize the impact this has on resilience.
For many employees who were stood down, we
acknowledge and thank you for the patience and good grace
you showed at a time of great difficulty for all of us. Several
members of the senior management team, including Board
members, accepted salary reductions and the Board is very
grateful to all employees for their flexibility.
During the periods of clinic shutdown, our fertility specialists
and clinic teams maintained close contact with our patients
through telehealth consulting. The efforts of our IT team
should be noted for their part in creating a digital consulting
environment in a matter of weeks.
The benefits of all these crisis management activities were
realized as the restrictions on each of our jurisdictions were
lifted progressively. Business operations resumed in all
jurisdictions and throughout May, June and July our teams
have treated significantly more patients than in the prior
corresponding period.
Although our financial performance has been impacted
by clinic and facility shutdowns there were some notable
performances during the financial year.
Our Queensland business achieved an increase in EBITDA,
several Day Hospitals improved EBITDA, including East
Melbourne, Alexandria and Hobart, and Complete Fertility
in the UK achieved strong growth in EBITDA after a weak
prior year result. Virtus TFC clinics in Australia achieved
cycle growth of 11.6% and we achieved cycle volume growth
in Singapore and the Aagaard clinic in Denmark.
Liquidity and long term sustainability has certainly been
in the forefront of the Board’s deliberations. Virtus and
its banking partners agreed to relevant normalisations to
covenant calculations that extend to the reporting period
ending 31 December 2020. Whilst this normalization
flexibility has not been needed to date, it has provided the
Board with confidence that we have adequate financial
capacity. Importantly, after analysis and consideration of
multiple scenarios, we determined that we did not need to
raise equity in a discounted market.
The arrival of our new CEO, Kate Munnings is an exciting
development for Virtus. Kate has led the Company since
late March and amidst a global pandemic worked with
the management team to develop a new strategic vision
and plan for future growth. Kate’s strong interest in digital
healthcare forms a key aspect of our strategic vision and
we will share more with our shareholders and stakeholders
over the next few months. Further development and
application of Artificial Intelligence to the field of Assisted
Reproductive Services, where Virtus has already had some
success with “Ivy”, and focused R&D will feature heavily in
our growth strategy.
BOARD CHANGES
At Board level, we welcomed Michael Stanford as an
independent non-executive Director in September 2019.
Michael reinforces the healthcare operating experience on
our Board. I also wish to recognise Peter Macourt’s service
to the Board as Chair over a six year period which included
the Virtus IPO in June 2013; Peter retired at the Annual
General Meeting. Of course we also thank Sue Channon,
former CEO, for her sixteen years of outstanding service to
Virtus Health and the business built under her leadership.
DIVIDENDS
Due to the impact of COVID-19 and the importance of
managing liquidity, the Board deferred payment of the
previously declared interim dividend; it is our intention
to pay this dividend on 30 November 2020 subject to
trading conditions remaining at satisfactory levels. As
a precautionary measure, and in the face of continued
economic uncertainty, the Board has resolved not to pay
a final dividend this year.
We will all continue to be challenged by the impact of
COVID-19, a slow growth economy, and a volatile one,
digitization, cautious behavior of customers, greater focus
on supply chains, and flexible and distributed working
arrangements for some time to come.
FINANCIAL IMPACTS
The financial impacts on the FY20 results of Virtus Health
are set out in the Operating and Financial Review.
I would again like to thank all our staff, fertility specialists
and management teams who responded in such an
outstanding manner to the challenges of the last twelve
months and our shareholders for their continuing support.
Sonia Petering
Chair
18 August 2020
5
Virtus Health2020 Annual Report Chief Executive’s
OVERVIEW
“I have been
delighted to
observe that
Virtus is a high
performing
organisation
committed
to operational
excellence and
clinical and
scientific rigor.“
FY20 was full of lessons and opportunities. Virtus has not only adjusted to
new leadership and a refreshed corporate structure, we have also navigated
a global pandemic and developed a new strategic direction that is focused on
technology enabled future growth.
It’s been a challenging year to say the least and our services
across fertility, diagnostics and day hospitals have come
out the other side in good shape. Although all parts of our
business were impacted by the COVID-19 crisis during the
period from mid-March to the end of the financial year, our
results show the resilience of assisted reproduction and
IVF. The desire to have a family endures well beyond a global
health crisis and if anything, our results show that COVID-19
was the inspiration many people needed to start their
journey to parenthood.
AN INVESTMENT IN PEOPLE
AND CULTURE
I am extremely proud of the way Virtus’ operational and
frontline teams responded to the events of FY20. When
the pandemic escalated in March, our staff demonstrated
their commitment to the sustainability of the company
by supporting the haste in which we moved to a state of
hibernation across four of our five geographies. During that
time, our team effectively planned for restart and were
well positioned to recommence services safely, with an
unwavering commitment to infection control.
As someone who is relatively new to Virtus, one of my
earliest observations was the incredible level of skill within
the organisation. I quickly prioritised harnessing this talent
and elevating the employee and clinician experience to
ensure we recruit and retain the highest calibre of staff and
specialists across all areas of the business.
We have now refreshed the executive team structure with
key appointments across a number of areas, replacing past
roles, expanding existing remits and removing external
consultant arrangements. We have a strong team with the
depth and breadth of experience to be able to deliver on the
new strategic direction for Virtus.
Multiple Sources of Revenue
FY12
13%
7%
80%
FY20
8%
9%
64%
19%
Australian ARS
Day Hospitals
International/other
Specialised Diagnostics
A POSITION OF LEADERSHIP
IN RESEARCH AND
INNOVATION
The journey of One Lab, developed by our Group Director
of ARS Scientific Innovation & Research, Professor David
Gardner, has continued throughout FY20. When this
program first launched in 2018, the focus was to consolidate
the technology we were using in our embryology
laboratories to ensure all our major facilities have access to
the most advanced equipment and tools.
The focus of One Lab is now on process harmonisation,
ensuring we operate at the highest standard consistently
across all our laboratories. Assisted Reproduction
Services (“ARS”) take an incredibly skilled embryologist
and an equally talented doctor and clinical team. This
reinforcement of teamwork has led us to the evolution of
the One Clinic philosophy, where we are working with our
doctors to also harmonise and continually optimise the key
processes and procedures across our clinics globally.
One Lab and One Clinic will become the conduit for
accelerating the introduction of new technologies and
enhanced research across our network, thereby improving
patient outcomes.
Our investment in Research and Development remains a
focus with approximately $2million invested in FY20 and
several exciting projects underway.
A trial in Victoria is investigating if a combination of
antioxidants can improve embryo development and
pregnancy outcomes in IVF. The study has seen promising
results for implantation and pregnancy rates for patients in
the 35 to 40 age bracket. A larger study is now commencing
for further evaluation that antioxidants can help to reduce
the age related decline in fertility – a positive impact on
clinical outcomes.
Following the development of the Ivy Artificial Intelligence
system in FY19, this technology has been further developed
with Vitrolife and Harrison.a.i. In 2020 Virtus launched
a Randomised Controlled Trial (“RCT”) to evaluate the
effectiveness of this embryo evaluation tool. The RCT is the
world’s biggest prospective clinical trial of AI and is enrolling
1,000 patients at seven sites across our fertility clinics in
Australia, Ireland and Denmark.
The next iteration of our artificial intelligence program (“AI”)
will focus on expanding our AI capability beyond embryo
evaluation into additional areas of the IVF treatment journey
and is explained in more detail below.
6
7
Virtus Health2020 Annual Report THE GLOBAL LEADER IN
PRECISION FERTILITY : OUR
STRATEGY FOR THE FUTURE
Having met the immediate challenges of commencing as
CEO during a pandemic, setting the strategic direction for
Virtus quickly became the priority. Virtus is an organisation
with significant potential, and we believe we have identified
strategic growth opportunities that will deliver on that
potential, and will redefine our value proposition for
patients, staff and specialists.
OPTIMISING THE CORE
Our strategy to be the global leader in Precision Fertility will
start by optimising our existing operations and leveraging
our current geographical footprint via our Virtual Clinic
strategy. The COVID-19 pandemic has accelerated our
ability to deliver many of the steps along the assisted
reproduction pathway remotely via a range of technologies.
Building on this will enhance our reach initially in Australia,
Asia and Scandinavia, reduce the need for “bricks and
mortar” investment and drive significant efficiencies, while
allowing our people to provide the value-adding support that
our patients require.
Delivering on the promise of Precision Fertility will also
be underpinned by the process design and data capture
requirements of our One Lab/One Clinic strategy. This will
build on our unique and significant datasets and will deliver
enhanced efficiencies within the organisation.
DEVELOP PRECISION FERTILITY
Our services will be differentiated through our increasing
ability to augment clinical and scientific expertise, with
insights from our datasets. To realise the true potential
of Precision Fertility, we are progressing our relationship
with our collaborators in building Ivy, Harrison.ai, with the
intent of co-creating ARS AI solutions that will enhance
many of the decisions along the assisted reproduction
pathway. From this work, patient outcomes will become
more predictable and success rates will increase as the
algorithms are applied to our datasets to help determine
the precise treatment that is optimal for a specific
individual or couple.
Ultimately, the aim of the strategic relationship will be to
develop, deliver and own ARS solutions, being franchisable
technology, processes, systems and IP, enabled by AI,
thereby providing a unique, capital light opportunity for
international expansion and new revenue.
GROW CAPABILITY IN GENETICS
Precision Fertility will also benefit from our continuing
investment in fertility-related genetic testing which is
an area of rapid innovation that also offers growth and
differentiation opportunities. Virtus’ existing capability
in genetics creates a strong position to also capture the
growth in ARS which will increasingly come as families
look to ARS in an effort to avoid passing potential genetic
diseases to their children. We will again leverage the
value of collaboration to grow our genetics capability by
partnering with start-ups and leading providers to bring
innovations to Australia early.
We recognise that our current footprint of day hospitals
offers key advantages, namely the proximity to our
embryology laboratories and security of access for
clinicians. We will improve the operating performance of
our day hospitals with enhanced capability and focus, while
exploring further partnerships and JVs with clinicians to
drive utilisation.
The outcome of this strategy work so far is pleasing
and I extend my gratitude to our Board of Directors, my
leadership team as well as our team of scientists, specialists
and many staff who made a valuable contribution to our
future.
The execution and investment in delivering on the strategy
will be phased over a three year period and as we enter this
exciting time in Virtus’ history, we are confident that we
have clear goals and objectives and extremely competent
leadership across all areas of the business.
A COMMITMENT TO
CONTINUOUS IMPROVEMENT
I have been delighted to observe that Virtus is a high
performing organisation committed to operational
excellence and clinical and scientific rigor across multiple
regulatory environments. Virtus is one of the top five
assisted fertility providers in the world. That is testament to
the skill of our workforce, and the quality of our services.
Our financial results, given the circumstances of a global
pandemic in the second half of FY20, are strong and
reinforce the importance of assisted reproductive services
within the community. The focus of our people from
the Board and leadership team through to operational
functions, clinicians, scientists and the frontline workforce
has been inspiring. It is a pleasure to work alongside each
and every member of the Virtus team.
We are in a coveted position to bolster and extend our
position globally in a relatively short timeframe, and
we’ll achieve this not only through the execution of our
strategy but also through adopting a mindset of continuous
improvement and empowering our employees.
Virtus is an organisation built around collaboration and
we will continue to strengthen this legacy well into the
future. Looking forward, opportunities abound. And while
there is significant work to be done, there is also a sense
of excitement as we improve our work practices, patient
services and people development, giving our employees –
at all levels – the opportunity to work together to achieve
change for the better.
Thank you to the Virtus Board, my team and all our
colleagues across Virtus for embracing my leadership in
2020. I am proud of what we stand for and how we help
people, and I look forward to the work ahead as we embark
on a new chapter of growth.
Kate Munnings
Group CEO and Managing Director
18 August 2020
8
9
Virtus Health2020 Annual Report COVID-19 IMPACT
STATEMENT
This statement provides an overview of how the COVID-19
pandemic has impacted Virtus Health and the actions
introduced by management and the Board to manage the
new commercial and operating environment:
BUSINESS CONTINUITY MANAGEMENT AND
SAFETY OF OUR PEOPLE
Management initiated COVID-19 response teams, meeting
daily at the peak of the crisis, to ensure patient, specialist,
visiting medical officer and employee welfare and safety
was given the highest priority, particularly during times of
facility closure. Response teams addressed all aspects of
business continuity including the management of service
delivery suspension in each geography. Simultaneously,
management were also focused on the plan to return
to work and a key aspect of this activity was the ability
to support patients through telehealth consulting when
physical clinic locations were closed. We have also provided
wellbeing resources and access to assistance to our staff to
help them manage the uncertainty that prevails.
In Australia, Virtus Health and other participants in the
assisted reproduction sector worked closely with federal
and state government health representatives to ensure that
the resumption of patient services could be effected within
a robust infection control framework for enhanced patient
and employee safety. We are proud of the real commitment
our staff and fertility specialists demonstrated to ensure
high levels of infection control.
LIQUIDITY MANAGEMENT/DEBT COVENANTS
Virtus and its banking partners agreed to relevant
normalisations to covenant calculations for the reporting
periods ending 30 June 2020 and 31 December 2020,
respectively. Virtus management demonstrated that
the liquidity and funding needs of the business could
be accommodated through its syndicated facility
arrangements, without the need for additional near term
funding. The Board and management continue to monitor
liquidity and funding on a regular basis.
L E A D I N G T H R O U G H
LOCKDOWN
PATIENT AND CUSTOMER DEMAND
Cycle and procedure volumes were impacted by
suspensions in activity to varying degrees across all Virtus
clinics worldwide. The suspension durations, initiated by
state and national governments often following the advice
of local regulatory bodies, lasted from four to eight weeks.
Following the lifting of regulatory suspensions, Virtus
Health clinics have returned to normal trading activity and
in June and July 2020, patient activity has exceeded prior
year comparative activity. Management believe that the
increased level of activity reflects the inherent demand for
Assisted Reproductive Services.
BUSINESS PROJECTS AND INITIATIVES
Management took immediate action in March 2020 to
suspend major project activity to protect financial liquidity.
Following the return to normal levels of activity these major
initiatives have re-commenced. Additionally management
has accelerated its strategic planning activity, preliminary
details of which are set out in the CEO’s review.
OPERATIONAL IMPACT
• Employees – unfortunately, many employees in all
our activities in Australia, Denmark, Ireland and UK
were stood down (or furloughed in UK/Ireland) during
periods of clinic closure. Management maintained a
regular flow of communication to employees which
included emails and video conference meetings.
The Australian Federal government’s Job Keeper
scheme was an important support to many of our
employees and Virtus also benefited from similar
support schemes in Singapore, Denmark, Ireland
and the UK. Several of our UK employees and Doctors
should be recognized for their flexibility in transferring
to work in the National Health Service during April
and May.
Virtus introduced restrictions on business travel in
March and the movement of directors, employees
and specialists between Virtus locations has been
restricted to minimize the potential risk of community
transmission. Non-patient facing employees are,
where possible, working remotely.
• Fertility specialists and other visiting medical officers
also received a regular flow of communication through
email and participation in video conferences. To maintain
patient contact during the periods of physical clinic
lockdown, Virtus established a full telehealth capability
for all specialists and this enabled regular support with
existing patients and consultation with new patients.
• Procurement – Virtus and the healthcare industry have
and continue to be particularly exposed to the reliance
on internationally manufactured consumables. Higher
demand and lower supply led to short-term difficulties
in sourcing enough Personal Protection Equipment to
allow Virtus to continue operations at the current rate
and has increased costs within our hospitals, labs and
clinics. However, extensive mitigation actions by the
Virtus procurement team, working with suppliers and
our own clinical teams has enabled Virtus to limit the
disruption to our daily operations.
11
2020 Annual Report Board of
DIRECTORS
SONIA PETERING
Chairperson
LLB; BComm; FAICD
“It is a privilege for me to be Chairman of the Board of Virtus
Health, one of the top five global fertility companies in the world,
helping to create one of the greatest experiences we can have
– that of being a parent. As a lawyer, chairman and company
director, I regard being a parent as my greatest achievement.
I am proud that we have world class fertility specialists, scientists,
embryologists, nurses, pathologists who apply their exceptional
skills, technology, and care to help more than 5000 people
become parents each year.
Our vision to be a global leader in Precision Fertility using
technology to give our patients the opportunity for personalised
fertility services and our staff and specialists an environment
to continually deliver the best outcomes outlines a clear path
ahead. Growing up on a family farm in regional Victoria, I learnt
the importance of values-based leadership. Working as a team,
continually innovating and respect will help us achieve success;
success for our people, our patients and our shareholders.
As Chairman, committing to excellence, investing in generating
knowledge and advancing the way we treat patients gives me
confidence we have an exciting future ahead.”
KATHRYN MUNNINGS
Group Chief Executive Officer & Managing Director
LLB, Bachelor of Health Science (Nursing)
“I have been the CEO of Virtus since March, and at the risk of
stating the obvious, my first 6 months did not go as planned.
COVID meant there was no 90 day plan, no meeting staff, no
touring of facilities. Despite the challenges, I have loved every
day of leading this company. I know we will excel because our
team shares knowledge, ideas and expertise freely. And we have
come together to embark on our ambitious strategy; to deliver
on the potential of Precision Fertility.
Virtus is already one of the top five assisted fertility providers
in the world. That is testament to the skill of our people and the
quality of our services.
We are in a coveted position to bolster and extend our position
globally in a relatively short timeframe, and we will achieve this
through adopting a mindset of continuous improvement, by
being customer focused and by empowering our people.
Looking forward, opportunities abound! I am excited to lead
Virtus towards its ambitious future.”
GREG COUTTAS
Non-Executive Director
B Com.; FCA; MAICD
DR LYNDON HALE
Executive Director
MBBS; FRACOG; CREI
“I feel great pride in being a director of Virtus Health, a purpose-
driven organisation that is focused on making a difference in
peoples’ lives by helping them realise their dreams of becoming
parents. We are a leading provider of assisted reproductive
services in Australia and a number of other locations around
the world. Our patients are at the centre of everything we do
as we bring together leading fertility specialists, scientists,
researchers, nurses and operational staff to provide the highest
quality of care to our patients. I am particularly excited about
the future for our organisation as we embark on a process of
innovation through the use of technology and data to deliver
enhanced outcomes for our patients.”
“As a practising fertility specialist of more than 30 years, I’m
proud to represent Virtus Health, a market-leader in every
sense. I’ve not only had the great privilege of being part of the
assisted reproductive services sector as it has progressed and
improved over the years, I’ve also had the opportunity to watch
and play a role in Virtus Health’s evolution as it has grown and
diversified. With a clear vision for the future, we have never been
better placed to accelerate improvements in success rates and
optimise the value we deliver to our patients, ensuring that they
have every chance of success. As a Director and as a Doctor, I’m
looking forward to what’s to come.”
SHANE SOLOMON
Non-Executive Director
BSW, MA (Public policy), Adjunct Professor UTS
Business School
“Virtus Health has ambitious plans and deservedly so. We’re a
market leader with a presence across five countries and three
continents, making us one of the largest and most advanced
fertility providers in the world. The outcome of the work that’s
ahead of us will see Virtus become a technology-enabled
organisation that’s driven by data to enhance clinical decision-
making and ultimately maximise success for our patients.”
DR MICHAEL STANFORD AM
Non-Executive Director
MBBS; MBA; FAICD
“Virtus is a world class service provider focused on its
patients and their needs, utilising technology and data to
drive improvement in clinical outcomes. Operating in five
countries means we are global in nature and intent, using the
best skills and approaches from around the world. Virtus is a
living demonstration of how Australian medical and scientific
excellence can change the world, one baby at a time.”
12
13
Virtus Health2020 Annual Report Directors’
REPORT
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter
as the ‘consolidated entity’) consisting of Virtus Health Limited (referred to hereafter as the ‘company’ or ‘parent entity’)
and the entities it controlled at the end of, or during, the year ended 30 June 2020.
DIRECTORS
The following persons were directors of Virtus Health Limited during the whole of the financial year and up to the date of
this report, unless otherwise stated:
Peter Macourt - (retired on 20 November 2019)
Susan Channon - (resigned on 29 February 2020)
Kate Munnings - (appointed on 18 March 2020)
Lyndon Hale
Sonia Petering - (appointed chairperson on 20 November 2019)
Greg Couttas
Shane Solomon
Michael Stanford - (appointed on 2 September 2019)
PRINCIPAL ACTIVITIES
During the financial year the principal continuing activities of the consolidated entity were the provision of healthcare
services in Australia, Denmark, UK, Ireland and Singapore, which included fertility services, medical day procedure services
and medical diagnostic services.
DIVIDENDS
Dividends paid during the financial year were as follows:
Interim ordinary dividend for the year ended 30 June 2020 of 12.0 cents (2019: 12.0 cents)
per fully paid ordinary share deferred (2019: paid on April 2019)
Final ordinary dividend for the year ended 30 June 2019 of 12.0 cents (2018: 12.0 cents)
per fully paid ordinary share paid in October 2019
Consolidated
2020
$’000
2019
$’000
-
9,647
9,647
9,647
9,647
19,294
The payment of the interim dividend in respect of the 30 June 2020 financial year of $9,541,000 scheduled for 16 April 2020 was
deferred until 30 November 2020 subject to trading conditions and is currently recognised in other payables.
Recognition and measurement
Dividends are recognised when declared during the financial year.
OPERATING AND FINANCIAL REVIEW
The profit for the consolidated entity after providing for income tax and non-controlling interest amounted to $469,000 (30
June 2019: $28,426,000).
The financial result for the year ended 30 June 2020 is after recognising an impairment of intangibles of $24,975,000 (2019:
$5,800,000).
The implementation with effect from 1 July 2019 of the new accounting standard AASB 16 ‘Leases’ had a significant impact
on the EBITDA for the current period. The current EBITDA was increased by $14,856,000 resulting from a reduction in
other expenses (reclassification of lease expenses) that was replaced by a depreciation charge in respect of the right of use
assets of $11,826,000 (included in operating costs) and interest expense on the recognised lease liabilities of $3,440,000
(included in finance costs). The overall net impact on profit before income tax expense for the current period as a result of
the implementation of AASB 16 ‘Leases’ was a reduction of $410,000.
A reconciliation of Segment EBITDA to profit before tax for the year is as follows:
Segment EBITDA1
Transfer of Intellectual Property (IP)
Share-based payment expense
Other non-trading expenses
Fair value adjustment to put liabilities and contingent consideration
Impairment of goodwill
Impairment of brand
EBITDA (reported)
Depreciation and amortisation2
EBIT
Net financial Interest3
Consolidated
2020
$’000
84,043
-
(1,252)
(17,599)
5,995
(24,587)
(388)
46,212
(25,017)
21,195
(10,763)
2019
$’000
71,146
4,110
(1,161)
(13,045)
8,261
(5,800)
-
63,511
(13,628)
49,883
(9,709)
Profit before income tax from continuing activities
10,432
40,174
Notes
1. Segment EBITDA - Excluded $14.8m of lease payments reclassified to depreciation and interest charges on the adoption of AASB 16 ‘Leases’
2. Depreciation and amortisation - Includes $11.8m of depreciation on right-of-use assets arising from adoption of AASB 16 ‘Leases’
3. Net finance costs - Includes $3.4m of interest on lease liabilities arising from adoption of AASB 16 ‘Leases’
The new accounting standard AASB 16 ‘Leases’ was adopted with effect from 1 July 2019 using the modified retrospective
approach and as such the comparatives for the year ended 30 June 2019 have not been restated.
The consolidated entity continued to engage in its principal activities, the results of which are disclosed in the attached
financial statements.
Key features of the results are:
• Revenue decreased by 7.5% to $258.9m;
• Group EBITDA decreased by 27.2% to $46.2m (see earlier comments on the impact of the implementation of AASB 16
‘Leases’ on EBITDA and a summary of significant items included in the Group EBITDA below);
• Segment EBITDA increased by 18.1% to $84.0m (excludes $14.8m of lease payments reclassified to depreciation and
interest charges on the adoption of AASB 16 ‘Leases’);
• Australian segment EBITDA increased by 22.7% to $74.9m (excludes $11.8m of lease payments reclassified to
depreciation and interest charges on the adoption of AASB 16 ‘Leases’);
• International segment EBITDA decreased by 9.8% to $9.0m (excludes $3.0m of lease payments reclassified to
depreciation and interest charges on the adoption of AASB 16 ‘Leases’) and
• Net profit after tax (“NPAT”) attributable to equity holders decreased by 98.4% to $0.5m
14
15
Virtus Health2020 Annual Report
Singapore – Virtus Health’s Singapore clinic, the Virtus Fertility Centre, remained open during April 2020 but operated
under some restrictions introduced by the Singapore Government for elective treatments in May and June 2020. Except
for May, activity levels remained strong in the clinic and revenue was maintained at prior year levels.
Europe – After the introduction of restrictions on activity in the second week of March 2020, Virtus clinics in Denmark
resumed ARS procedures in the second week of April 2020. Virtus clinics in Ireland reopened on 4 May 2020 and our UK
clinic was reactivated during the week commencing 11 May 2020. In each of our three European markets, Denmark, Ireland
and the UK, Virtus Health’s clinics were the first in territory to reactivate. Fertility specialists in these regions continue to
utilise telehealth consultations where requested to facilitate the continuity of care and the clinics operate under increased
infection control and safety protocols. Our Ireland clinics continue to face restrictions relating to their international egg
donation activity.
KEY IMPACTS ON TRADING PERFORMANCE COMPARED TO PRIOR YEAR COMPARATIVE PERIOD:
Australian fresh cycles
International fresh cycles
Diagnostic revenue
Day Hospital revenue
6 months to
December 2020
8 months to
February 2020
Pre-COVID-19
4 months to
June 2020
during restrictions
+2.7%
(3.3%)
+0.2%
+2.1%
+1.4%
(2.3%)
+0.2%
+1.5%
(15.3%)
(35.1%)
(11.9%)
(15.8%)
The estimated loss of gross profit (revenue less variable cost of sales) as a result of the decline in revenue in the 4 months
to 30 June 2020 during which there were restrictions on elective surgery and clinic closures across the consolidated
entity amounted to approximately $14.6m. This estimate has been determined by reference to activity levels in the prior
corresponding months of FY19.
Government assistance - Governments around the world (including the countries in which Virtus operates in) have
reacted to the impact of COVID-19 with a variety of assistance packages, including tax deferrals, exemptions and in some
cases, specific support for ensuring employees remain employed. The most material Government assistance for Virtus was
via the Job Keeper Scheme in Australia which supported Virtus operations by $7.2m out of an overall sum of $7.7m received
across the group in various forms of government assistance.
These assistance packages across the consolidated entity enabled the group to preserve a large part of its existing
workforce and offset the impact on the results from the lost revenue.
Liquidity position - As at 30 June 2020, the consolidated entity was in compliance with its debt covenants. Due to the
significant uncertainty associated with COVID-19, the consolidated entity agreed, with its lender group, appropriate
normalisations to covenant calculations for reporting periods up to 31 December 2020. Virtus’ ongoing trading and cash
flow assumptions in the COVID-19 impacted business environment, demonstrates that the liquidity and funding needs of
the business can be accommodated through its syndicated facility arrangements, without the need for additional near
term funding.
SEGMENT EBITDA
$ Millions
Segment EBITDA
Impact on adoption of AASB 16 ‘Leases’
Segment EBITDA (excluding the impact of AASB 16 ‘Leases’)
FY20
FY19
84.0
(14.8)
69.2
71.1
-
71.1
Segment EBITDA (excluding the impact of AASB 16 ‘Leases’) decreased by $1.9m. This demonstrates the resilience of the
business as the EBITDA remains comparable to the prior corresponding period notwithstanding the impact of the COVID-19
related disruption to activity levels during the period March to June 2020 (refer to discussion below).
REPORTED EBITDA
Reported EBITDA for the year ended 30 June 2020 was $46.2m (2019: $63.5m). Significant income and expenditure items
impacting reported EBITDA were as follows:
$ Millions
FY20
FY19
Impairment of Intangible assets1
Fair Value Adjustment to contingent consideration and put liabilities2
Government assistance (COVID-19 related)3
Professional and consulting fees (legal and banking support COVID-19 related)
CEO transition and recruitment costs
Sale of IP4
Total
Notes
(25.0)
6.0
7.7
(0.4)
(0.8)
-
(12.5)
(5.8)
8.3
-
-
-
4.1
6.6
1. Non cash impairment charges in relation to Tasmania and the Denmark CGU reflecting changes in competitive landscape, delays in doctor resourcing and
business development activities and the impact of COVID-19 (refer to note 10 for details).
2. Non-cash fair value adjustments in relation to the put option liability and contingent consideration reflecting actual and expected settlements.
3. Receipts from the Australian Federal Government’s JobKeeper Program and similar government programs in other countries in response to the COVID-19
pandemic (see note on government assistance below in the COVID-19 section of OFR for details).
4. Profit on sale of Virtus’ IP in relation to its Artificial Intelligence software “Ivy” in the prior period.
OPERATING AND FINANCIAL REVIEW (OFR)
COVID-19
The following summary provides an overview of the impact and status of COVID-19 across Virtus Health businesses for the
financial year ended 30 June 2020.
Australia IVF – After the introduction of restrictions on activity in the third week of March 2020, Virtus Health clinics in
Australia resumed fertility services and ARS treatment from 27 April 2020 with increased infection control and safety
protocols. For social distancing reasons, fertility specialists will continue telehealth consulting via phone or online video
conferencing through our Fertility Link service. Face-to-face consultations and services are provided where clinically
required, with appropriate infection control measures in place.
Australian Day Hospitals – Following the restrictions introduced in the third week of March 2020, Virtus Health resumed
ARS procedures and non-IVF elective surgery including laparoscopic gynaecology procedures, endoscopy and other same-
day surgery across our seven day hospitals from 27 April 2020 in accordance with state capacity guidelines and increased
infection control and safety protocols.
Virtus continues to stand ready to assist in the Government response to the COVID-19 pandemic. However, Virtus did not
enter into any agreements with state governments under the viability guarantee for private hospitals, as they were not
suitable for the integrated day hospital model Virtus operates. Therefore, the lifting of the suspension of elective surgery,
including IVF, meant that Virtus returned to full operation and earnings generation from June 2020.
Australian Diagnostics – Diagnostics remained open throughout the pandemic although revenue was severely impacted
during April and May.
16
17
Directors’REPORTVirtus Health2020 Annual Report AUSTRALIA
Australian fresh cycle activity declined by 5.3% in the markets in which Virtus participates; Virtus fresh cycle activity in
Australia in FY20 fell by 4.4%. Volume growth summary by state is as follows:
• NSW down by 7.3%, Virtus down by 8.0%;
• VIC down by 3.6%, Virtus up by 2.4%;
• QLD down by 3.8%, Virtus down by 5.0%; and
• TAS down by 13.8%, Virtus down by 27.5%
Key aspects of the Virtus cycle movement compared to pcp were as follows:
• Premium service volumes reduced by 7.8%; and
• TFC volumes increased by 11.6%
Virtus volume growth was 1.4% as at the end of February 2020, ahead of available market volume decline of 0.6%. This
outperformance resulted from market share gains in Victoria in the low cost segment and growth in premium service
volumes in Queensland. These were offset by declines in NSW and TAS volumes.
Overall, EBITDA in the Australian segment increased by 22.7% to $74.9m compared to pcp with the following factors
contributing to this:
• AASB 16 Lease impact – EBITDA increase of $11.8m
The positive impact on Australian EBITDA as a result of $11.8m of lease payments being reclassified to depreciation and
interest charges on the adoption of AASB 16 ‘Leases’;
• Australian Job Keeper – EBITDA increase of $7.2m
This covers the three month period to June 2020.
• Diagnostics volume reduction – EBITDA decrease of $2.4m
$1.1m related to decreases in testing revenue driven by a softer cycle activity in the key states of NSW and VIC; and $1.3m
due to increase in supervision costs as a result of new regulatory requirements and the appointment of an additional
pathologist.
• Day Hospital volume reduction – EBITDA decrease of $0.3m
Procedure volumes were impacted by COVID-19 with all hospitals constrained by Federal and State restrictions on
elective procedures. However, underlying performance was much improved with three out of seven facilities increasing
EBITDA compared to pcp, and this included improvement at our newest facilities in Alexandria and Hobart.
INTERNATIONAL
AASB 16 ‘Leases’ had a positive impact on the international EBITDA of $3.0m compared to pcp. The analysis below does not
include this impact.
Cycle volumes in Ireland decreased by 20.1% from pcp and revenue was down by $7.9m primarily due to the impact of
COVID-19. EBITDA reduced by $3.5m. In the UK, Complete Fertility achieved growth in EBITDA of $0.4m in spite of COVID-19
related shutdowns.
The Danish clinics reported a decrease of $0.9m to EBITDA compared to pcp. Both clinics were impacted by COVID-19
closures, although volumes at Aagaard increased by 4.8% as a result of increased clinical resource.
Volumes in Singapore increased by 8.9% and EBITDA decreased by $0.02m over pcp. Results were impacted by slightly
higher OPEX for the year.
Overall, international revenue declined by 12.8% and EBITDA decreased by 9.8% to $9.0m compared to pcp, with COVID-19
having a significant impact on the international results.
OPERATING EXPENSES MOVEMENT ANALYSIS EXCLUDING IMPAIRMENT
CHARGES AND FAIR VALUE ADJUSTMENTS (OPEX)
$ Millions
Employee benefits expense
Occupancy expense
Advertising and marketing
Practice equipment expenses
Professional and consulting fees
Other expenses
Total OPEX
FY20
FY19
(100.1)
(6.0)
(3.9)
(2.6)
(4.8)
(14.7)
(132.1)
(98.9)
(19.9)
(4.3)
(2.6)
(3.6)
(14.5)
(143.8)
Group OPEX was approximately $12m lower compared to pcp and this included several significant movements.
• Excluded $14.8m of lease payments reclassified to depreciation and interest charges on the adoption of AASB 16
‘Leases’. There was an overall increase in facility costs of $0.9m, reflecting increased occupancy costs of the Diagnostic
laboratory facility relocation completed in April 2019;
• Costs associated with the separation and recruitment of the CEO, $0.8m;
• Employment costs (adjusted for CEO succession costs) were unchanged, although the expense included a higher than
normal level of employment termination costs ($1.5m);
• Professional and consulting costs increased by $1.2m and was a result of fees relating to a strategic review, process
improvement projects and legal and consulting (COVID-19 related).
Debt and interest expense
The increase in interest expense over the prior period relates to the $3.4m of interest on lease liabilities arising from
adoption of AASB 16 ‘Leases’, partially offset by decreases in the interest expense on borrowings ($1.3m) and non-cash
interest on other financial liabilities ($1.0m).
At 30 June 2020, total bank facilities drawn were $165m in borrowings and $5.3m in guarantees. Unused and available debt
facilities amounted to $92.3m. $92m of the debt facility expires in September 2021, whilst the remaining $170m expires
in September 2023. There has been no change in the facilities drawn since 31 December 2019 except for a voluntary debt
repayment of $8m during June 2020. Despite the debt repayment, cash balance at 30 June 2020 is $38m, an increase of
approximately $19m since 30 June 2019. Voluntary debt repayments of $11.0m were made during FY20. Accordingly, net
debt reduced by $29m in the financial year to $127m.
The company continued to comply with the financial covenants of its facility agreement.
Other financial liabilities ($3.6m)
The other financial liabilities relates to contingent consideration ($1.5m) and a vendor loan note ($2.1m) in relation to the
acquisition of Trianglen. Based on the most recent forecast trading outlook, the consolidated entity reduced the estimated
liability for the contingent consideration by $4.5m to $1.5m at 30 June 2020.
Impairment of intangible assets
Virtus undertakes impairment testing on the carrying value of goodwill and indefinite life intangibles on an annual basis, or
more frequently if there is a trigger of impairment. An impairment charge of $25m was recognised during the year and arose
in the following operating segments:
TAS IVF – In H1 of FY20, the Tasmanian business was restructured and streamlined in response to changes that had taken
place in the competitive landscape in that state. The consolidated entity as part of its budgeting process for the FY2021
financial year has undertaken a detailed reviewed of the Tasmanian business. Based on this review and in light of the
further impact on the economic environment of COVID-19 related uncertainties, an impairment charge of $15,049,000 was
recorded in the statement of comprehensive income for the year ended 30 June 2020.
Denmark - Following a detailed review of future cash flow projections of the Danish clinics, an impairment charge of
$9,926,000 million was recorded in the statement of comprehensive income for the year ended 30 June 2020. This was
primarily as a result of the uncertainties associated with COVID-19 and certain earn out related targets set at the time
of acquisition not being achieved. In addition to the impact of COVID-19, the achievement of these earn out targets was
impacted by the easing of regulatory restrictions in neighbouring countries that had a negative impact on inbound activity
levels into Denmark and delays in doctor recruitment and business developments activities.
Further details and sensitivities are provided in Note 10 of the financial report.
18
19
Directors’REPORTVirtus Health2020 Annual Report Amortisation of borrowing costs
Amortisation of borrowing cost expense for FY20 was $411,000, (FY19: $563,000). FY2019 included a write-off of residual
borrowing costs on the previous facility that was refinanced in September 2018.
Taxation
The effective tax rate on operating earnings (excluding impairment charges) for FY20 was 26.9% (FY19: 27.8%).
Earnings per share
Basic earnings per share decreased by 98.3% to 0.59 cents per share (FY19: 35.37 cents per share). In the current year the
options on issue are not dilutive and hence the diluted earnings per share is the same as the basic earnings per share. The
decline in earnings per share is primarily as a result of the non-cash impairment charge of $25m noted above. Underlying
basic earnings per share before the impairment charge is 31.77 cents per share.
Dividends
No final dividend is recommended for payment. The Board will review the resumption of interim dividend payments in FY21
based on cash flow and trading performance in the six month period to 31 December 2020.
Outlook
The disruption from COVID-19, has been significant. Furthermore, the Board recognises that although general economic
conditions have been less than favourable in certain markets in the last twelve months, growth opportunities exist for all
Virtus business activities.
During July 2020 all businesses were operating without significant regulatory constraint, subject to some exceptions in
our Ireland egg donation activity. Virtus experienced aggregate consolidated volume growth in June and July 2020 of 22.1%
compared to pcp.
In the two months ending 31 July 2020 the key movements on pcp in trading activity are as follows:
Australian fresh cycles
International fresh cycles
Diagnostic revenue
Day hospital revenue
%
+23.0%
+18.9%
+14.9%
+37.7%
Management are encouraged by the strong recovery in activity in each of its clinics immediately following the lifting of local
restrictions. However, during July 2020 new cases of COVID-19 increased rapidly in Victoria and this led to the reintroduction
of some restrictions on capacity for our Melbourne clinics.
Virtus acknowledges that there could be similar occurrences across its clinic network during FY21. However, management
are confident that the Company is well positioned to manage potential variations in regulatory conditions and is also
committed to an active program of business development and growth initiatives in all territories.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Sue Channon stepped down from her role as CEO of Virtus Health Limited on 29 February 2020. Kate Munnings commenced
as CEO of Virtus Health Limited on 18 March 2020.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Subsequent to year end, new cases of COVID-19 rose rapidly in Victoria to new record levels. The subsequent restrictions imposed
by the Victorian government have caused disruption to business and economic activity and are likely to negatively impact the
consolidated entity’s trading revenue and operations. At the same time there has been a rise in the number of clusters in NSW.
The operational and financial impacts of the COVID-19 pandemic to date have been reflected in the 30 June 2020 financial
statements and are discussed in the Operating and Financial Review section of the Directors Report. To the extent that
ongoing impacts have been estimated, we have considered the uncertainties arising from the COVID-19 pandemic in
preparation of our financial statements. However, the expected duration and magnitude of the COVID-19 pandemic and its
potential impacts on the economy are unclear. The financial impact going forward for the consolidated entity will depend on
evolving changes in government policy and business and customer reactions.
20
As at 30 June 2020, the group was in compliance with its debt covenants. This has been further bolstered by the support
of its lender group to allow for appropriate normalisations for COVID-19 impacts in covenant calculations extending out to
the reporting period to 31 December 2020. Virtus’ ongoing trading and cash flow assumptions in the COVID-19 impacted
environment demonstrate that liquidity and funding needs of the business can be accommodated through its syndicated
facility arrangements, without the need for additional near-term funding. At 30 June 2020, the consolidated entity had
$38million in cash and $92.3million in unused and available debt facilities.
The consolidated entity has managed, and continues to actively manage, the risks arising from COVID-19. This includes a
financial response plan that incorporates scenario and contingency planning at all clinics across the globe, stress testing of
cash flow forecasts and sensitivity analysis.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect
the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future
financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Based on the long term trend of women in Australia delaying the birth of children and the fertility rate among Australian
women aged over 30 continuing to decline as a consequence of a range of social and economic demographic factors, we
expect that demand for assisted reproductive services and the associated diagnostic testing and day hospital procedures
will continue to increase.
We will continue to invest in our network of fertility clinics and also the clinical and scientific services offered to patients to
enable the consolidated entity to meet the demand from the Australian market. Recognising that the demographic drivers
influencing the demand for fertility services are also prevalent internationally we will consider further investment in our
international network of fertility clinics.
As noted earlier in the report, the directors of Virtus Limited consider that the financial effects of the COVID-19 pandemic
cannot be reasonably estimated for future financial periods.
Business sustainability risks
The consolidated entity is faced with certain material business risks that could have an effect on the financial prospects of
the consolidated entity. These include but are not limited to:
The COVID-19 pandemic
The COVID-19 pandemic materially changed the markets in which the consolidated entity operates due to the overall
impact of government restrictions on the economy. Any significant increase or outbreaks in COVID-19 cases in countries the
consolidated entity operates in, could result in additional restrictions which limit operation of Virtus’ clinics, day hospitals
and laboratories for an extended period.
Change in Commonwealth Government funding/increasing patient out of pocket expenses
Australian patients receive partial reimbursement for the consolidated entity’s services through Commonwealth Government
programs, including the Medicare Benefits Schedule (‘MBS’) and the Extended Medicare Safety Net (‘EMSN’). A review of the
MBS has been undertaken by the Federal Health department and, to date, no changes to the MBS have been proposed.
If the level of reimbursement provided by these programs for the consolidated entity’s services were to change, the
consolidated entity’s patients may face higher out-of-pocket expenses for Assisted Reproductive Services. This may cause
the consolidated entity to experience reduced demand for its range of services, potentially leading to a reduction in the
consolidated entity’s revenue and profitability.
Availability of fertility specialists
The consolidated entity relies on maintaining its relationship with existing fertility specialists, as well as contracting with and
growing In-Vitro Fertilisation (‘IVF’) cycles for new fertility specialists to assist in capturing market growth, increasing market
share and replacing any retiring fertility specialists. If the consolidated entity cannot successfully maintain its relationship
with existing fertility specialists or contract and grow IVF cycles for new fertility specialists this may cause the consolidated
entity to experience reduced demand for its range of services, potentially leading to a reduction in the consolidated entity’s
revenue and profitability.
Variability of growth
The growth in patient demand and IVF cycles has historically experienced variability over short-term periods
notwithstanding the long-term social and demographic trends driving patient demand for Assisted Reproductive Services.
Variability in the historic growth in IVF cycles over short-term periods has been attributable to changes in local economic
conditions, natural disasters and regulatory changes. Whilst Virtus is diversified across regional and international markets,
the consolidated entity’s revenue generation and profitability can be positively and negatively affected in the short term by
variability in the growth in IVF cycles in the regional and international markets in which it operates.
21
Directors’REPORTVirtus Health2020 Annual Report Increased competition
The consolidated entity may face increased competition from new IVF providers and this may cause the consolidated
entity to experience reduced demand for its range of services, potentially leading to a reduction in the consolidated entity’s
revenue and profitability.
(For further details refer to Corporate Governance Statement at www.virtushealth.com.au/investor-centre/corporate-governance).
ENVIRONMENTAL REGULATION
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law.
INFORMATION ON DIRECTORS
Sonia Petering
Chairperson
LLB; BComm; FAICD
Sonia has more than 15 years experience in non executive director and chair roles with listed and unlisted
companies and government authorities across financial services, payments, insurance, professional services
and healthcare. Sonia is an experienced commercial lawyer who commenced her legal practice in 2001. She
holds a current Victorian legal practicing certificate. Sonia previously served as a non executive director on the
boards of Transport Accident Commission of Victoria and Rural Finance Corporation of Victoria and as Chair of
the Board of Rural Finance Corporation from 2009 - 2016. Sonia is also a non executive director of TAL Dai - ichi
Australia Ltd, Qantm IP (ASX:QIP) and Cuscal Ltd.
Qantm IP Limited
None
Member of the Nomination and Remuneration Committee and member of the Risk Committee
45,000 ordinary shares
None
Kathryn Munnings
Group Chief Executive Officer & Managing Director
LLB, Bachelor of Health Science (Nursing)
Kate joined Virtus in March 2020. A qualified lawyer and registered nurse, Kate has a diverse breadth of
professional and operational experience spanning more than 30 years.
Most recently, Kate led strategy, hospital operations and a significant organisational change program as
Chief Operating Officer of Ramsay Health Care Australia. As Chief Executive, Operations at Transfield Services
(now Broadspectrum), Kate led a portfolio of large government contracts across Australia, New Zealand
and Melanesia.
Kate was a partner at law firms, Corrs Chambers Westgarth and Baker McKenzie; specialising in construction
law and also spent eight years as Chief Risk and Legal Officer/Company Secretary at Transfield Services,
focused on corporate law, risk management and commercial management. Early in her career Kate practiced
as a registered nurse and specialized in HIV/AIDS.
Director, Digital Health Co-operative Research Centre
None
None
None
162,037 performance rights
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships
(last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships
(last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
22
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships
(last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships
(last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships
(last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships
(last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Greg Couttas
Non-Executive Director
B Com.; FCA; MAICD
Greg spent 40 years with Deloitte including 28 years as partner. In his years at Deloitte he worked in audit across
various sectors, specialising in ASX100 clients. Greg’s expertise includes accounting, finance, auditing, risk
management, corporate governance, capital markets and due diligence.
Additionally, Greg held a number of management roles at Deloitte including being the Managing Partner for NSW
from 2005 to 2008, chairing the Audit and Risk Committee for eleven years, and was a member of the Board of
Partners for Deloitte Australia from 2005 to 2016. Greg is also a director of Sydney Water Corporation, Hireup
Pty Limited and a member of the Governance Board of The Salvation Army Australia Territory.
None
None
Chair of the Audit Committee and a member of the Risk and the Nomination and Remuneration Committees
5,000 ordinary shares
None
Dr Lyndon Hale
Executive Director
MBBS; FRACOG; CREI
Lyndon has been the Medical Director of Melbourne IVF Pty Ltd since 2008. He is also director of Reproductive
Surgery at The Women’s Hospital. Lyndon is highly regarded for his knowledge and proactive approach and
brings extensive experience in assisted reproduction treatments to the care of his patients.
None
None
Member of the Risk Committee
826,572 ordinary shares
None
Shane Solomon
Non-Executive Director
BSW, MA (Public policy), Adjunct Professor UTS Business School
Shane is a highly experienced healthcare professional having worked in numerous Executive and Board roles
across the public and private health sector over the past 34 years. Shane brings extensive health policy and
a strong understanding of operational and clinical governance gained from his roles in the Victorian public
health system including the role of Undersecretary for Health, and Chief Executive of the Hong Kong Hospital
Authority. Returning to Australia in 2010, Shane became a Partner at KPMG Australia, leading the National Health
practice and in 2013, he became founder and Managing Director of Telstra’s eHealth business, Telstra Health.
Shane was appointed in 2011 by the Commonwealth Government to be Chairman of the Independent Hospital
Pricing Authority he maintains this role and is on the Board of Silver Chain, one of the largest community based
health care service providers in Australia. Shane also chairs the SA Health EMR Project Board.
None
None
Chair of the Risk Committee and a member of the Audit Committee
None
None
Dr Michael Stanford AM
Non-Executive Director
MBBS; MBA; FAICD
Michael, a registered medical practitioner, has extensive experience in the Australia health services sector in
Group CEO roles of large healthcare organisations and as a Non Executive Director. Michael’s 23 years of Group
CEO roles included 16 years at St John of God HealthCare which he grew into being Australia’s third largest
private hospital operator, and one year at the ASX listed Australian Hospital Care Ltd . Michael’s NED career, in
addition to Virtus Health, includes current roles on the Board of the manager of the NZX listed Vital Healthcare
Property Trust (NorthWest Healthcare Property Management), Nucleus Networks (the world’s largest Phase
One clinical trial business) , and as Chair of Diabetes Australia. Michael previously served on the Boards of ASX
listed Healthscope and of private equity owned Australian Clinical Laboratories. Michael was awarded an AM in
2018 for services to health, higher education and the community of WA.
Director, Nucleus Network Pty Ltd
Healthscope Pty Ltd
Chair of the Virtus Health Remuneration Committee and member of the Risk Committee
20,000
None
23
Directors’REPORTVirtus Health2020 Annual Report
‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
The information provided in this remuneration report, which forms part of the Directors’ Report has been audited as
required by Section 308(3C) of the Corporations Act 2001.
‘Former directorships (in the last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
A. EXECUTIVE SUMMARY
REMUNERATION REPORT (AUDITED)
The directors present the 2020 remuneration report prepared in accordance with the requirements of the Corporations
Act 2001.
COMPANY SECRETARY
Glenn Powers joined Virtus as Chief Financial Officer (‘CFO’) and Company Secretary in August 2008. Prior to joining Virtus,
Glenn was CFO and Company Secretary of Tower Software Limited. Glenn has a broad range of experience in private equity
backed businesses, working in a range of engineering, electronics, software and service businesses. Glenn has also been a
Director for both main and AIM market listed businesses in the UK. Glenn is a Chartered Management Accountant (CMA).
MEETINGS OF DIRECTORS
The number of meetings of the company’s Board of Directors (‘the Board’) and of each Board committee held during the
year ended 30 June 2020, and the number of meetings attended by each director were:
Peter Macourt
Susan Channon
Kate Munnings
Greg Couttas
Lyndon Hale
Sonia Petering - Chairperson
Shane Solomon
Michael Stanford
Peter Macourt
Susan Channon
Kate Munnings
Greg Couttas
Lyndon Hale
Sonia Petering - Chairperson
Shane Solomon
Michael Stanford
Full Board
Nomination and
Remuneration Committee
Attended
Held
Attended
Held
5
8
10
19
19
19
18
17
5
8
10
19
19
19
19
17
3
3
1
5
-
5
-
4
3
3
1
5
-
5
-
4
Audit Committee
Risk Committee
Attended
Held
Attended
Held
3
3
1
5
-
4
3
-
3
3
1
5
-
4
4
-
-
2
1
4
4
-
4
4
-
2
1
4
4
-
4
4
Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
Key Changes in FY2020
There were no significant changes made to the remuneration framework in FY2020.
Virtus Health Group’s remuneration framework enables the organisation to attract and retain high calibre, talented Executives,
management and specialists while ensuring that pay outcomes are aligned to building long term shareholder value.
Following a review of the management and group decision making structure conducted by the new CEO, the Board has
determined that the Key Management Personnel (‘KMP’), as defined by Australian Accounting Standard AASB 124 ‘Related
Party Disclosures’ are as follows:
Non-Executive Directors
Sonia Petering – Chair, non-executive director
Peter Macourt – Retiring Chair, non-executive director (retired 20 November 2019)
Greg Couttas – Non-executive director
Shane Solomon – Non-executive director
Michael Stanford – Non-executive director (appointed 2 September 2019)
A profile of each current serving director is provided in the Directors’ Report.
Executive KMP
Kate Munnings – Managing Director and Chief Executive Officer (“CEO”) (appointed 18 March 2020)
Sue Channon – Managing Director and Chief Executive Officer (resigned 29 February 2020)
Glenn Powers – Chief Financial Officer (“CFO”)
Richard Banks – Chief Strategy Officer (“CSO”) and European Managing Director
Lyndon Hale – Executive Director and Medical Director, Victoria
Following the review of KMPs the remuneration disclosures have been amended to reflect the new group decision making
structure; accordingly the number of KMPs has been reduced from that disclosed in the prior year. Total KMP remuneration
for FY2020 increased from FY2019 by $549,983 (32.4%). Included in the net increase, $531,658 relates to payments in lieu
of notice to the previous CEO, Sue Channon. In view of the impact of the COVID-19 pandemic, the CEO and CFO voluntarily
reduced their fixed remuneration by 20% and the Board reduced their fees by 20% for the final quarter of the financial year.
Fixed KMP remuneration has returned to normal levels with effect from 1 July 2020.
The short term incentives (‘STI’) and long term incentives (‘LTI’) achieved in FY2020 are set out in further detail below. There
are no STI accruals for FY2020 as the EPS hurdle of 5% growth was not met.
The performance hurdles tested in FY2020 of the LTIs granted in November 2016 and November 2017 were not achieved and
accordingly 111,302 performance rights lapsed during the financial year.
The Board considered the impact of the COVID-19 pandemic on the financial performance of Virtus Health for the
year ended 30 June 2020 and whether discretionary awards should be made to recognise the negative impact on the
achievement of performance hurdles for current STI and LTI arrangements. The Board concluded that discretionary awards
should not be made recognising the following indicators:
• In relation to the achievement of the STI, in the eight months to February 2020, the period which was not impacted by
COVID-19, the actual NPAT growth (per unaudited management accounts) was 3.6% and the forecast NPAT growth for
FY2020 at that time was less than 5%, the Earnings Per Share (“EPS”) hurdle for the STI;
• In relation to the achievement of the LTI performance hurdles for the performance grant made in November 2017,
the return on equity hurdle would not have been met even if financial performance was normalised for the impact of
COVID-19; and
• There is no need to adjust the measurement of relative total shareholder return (‘RTSR’) for the November 2016 and
November 2017 performance grants for the impact of COVID-19 as by its nature RTSR is a measure of relative performance.
24
25
Directors’REPORTVirtus Health2020 Annual Report B. ROLE OF THE NOMINATION AND REMUNERATION COMMITTEE
The Board of Directors (‘the Board’) maintains a combined Nomination and Remuneration Committee (the ‘Committee’).
The members of the Committee are all independent non-executive Directors: Michael Stanford (Chair), Sonia Petering and
Greg Couttas. Details of the qualifications and experience of the members of the Committee are provided in the ‘information
on directors’ section of the Directors’ Report.
The Committee assists and advises the Board on remuneration policies and practices for the Board, the CEO, the CFO,
senior executives and key management personnel whose activities, individually or collectively, affect the financial soundness
of the consolidated entity. The responsibilities of the Committee are set out in the Nomination and Remuneration
Committee Charter which may be found on the Investor Centre page of the Virtus Health website.
The number of Committee meetings held and attended by each member is disclosed in the ‘meetings of directors’ section of
the directors’ report.
Use of remuneration consultants
When considered necessary, the Committee seeks external advice from independent consultants on the appropriateness of
the remuneration practices and arrangements including remuneration levels, independent benchmarking data and incentive
structures. The Committee and Board consider this input with several other factors when making decisions regarding
remuneration.
During FY2020, the Committee engaged KPMG to provide advice on a range of matters, including CEO remuneration and
FY2021 incentive arrangements.
KPMG provided a formal declaration confirming that its recommendations were made free from undue influence by
the members of KMP to whom the recommendations related. On the basis of this declaration and the protocols and
processes governing the engagement of KPMG and receipt of its recommendations, the Board is satisfied that each of the
recommendations were free from undue influence by such persons.
In FY2020, KPMG was paid $50,000 (excluding GST) in relation to remuneration recommendations provided as part of its
engagement as a remuneration consultant.
KPMG was paid $185,968 (excluding GST) for other services provided across the business during FY2020.
The remuneration package for the new CEO was considered in the context of a report prepared by KPMG and legal advice
from employment law specialists. The remuneration package also took account of a peer group benchmark agreed by the
Nomination and Remuneration Committee.
The Committee concluded that:
• CEO remuneration would comprise fixed remuneration, STI, LTI and an initial one-off grant of performance rights under
the LTI plan as compensation for the incentives foregone by the CEO as a result of leaving her previous employment
position.
In recognition of incentives Ms Munnings has foregone a one-off grant of performance rights was made under the LTI
plan valued at $700,000. Vesting of the performance rights is subject to the Board’s assessment of Ms Munning’s
performance over each year of a 3 year vesting period and will vest as follows:
~ 1/3rd in FY21 on the first anniversary of the date of commencement of employment;
~ 1/3rd in FY22 on the second anniversary of the date of commencement of employment; and
~ 1/3rd in FY23 on the third anniversary of the date of commencement of employment.
• Changes to the STI scheme for FY2021 for the CEO will be made as follows:
~ There will be three measures, a financial measure which will account for 70% of the STI and two non-financial
measures (15% each of the STI). The financial measure will be EBITDA. For FY21, vesting will be as follows:
~ if FY21 EBITDA is less than the prior comparative period (‘pcp’), no STI will be paid; or
~ if FY21 EBITDA is greater than or equal to FY20 EBITDA then 50% of the STI will vest (i.e. 50% of the 70% available); or
~ if FY21 EBITDA is 105% or more of the FY20 EBITDA then 100% of the STI will vest (i.e. 100% of the 70% available); or
~ if FY21 EBITDA is 110% or more of the FY20 EBITDA then 110% of the STI will vest (i.e. 110% of the 70% available).
EBITDA benchmark for FY20 and the equivalent measure for FY21 will exclude non-trading expenses. There will be no EPS
growth hurdle in FY2021.
The non-financial measures for the CEO will be:
~ Net Promoter Score will account for 15% of the STI. For FY21 vesting will be as follows:
~ If FY21 result is greater than or equal to FY20 then 50% of the at-risk STI will vest (i.e. 50% of the 15% available); or
~ If FY21 result is 105% of FY20 then 100% of the at-risk STI will vest (i.e. 100% of the 15% available); or
~ If FY21 result is 110% of FY20 then 110% of the at-risk STI will vest (i.e.110% of the 15% available).
~ A COVID-19 infection control measure, such that no closure occurs of a Virtus clinic or facility due to an avoidable
COVID-19 outbreak (based on data or review from a relevant State or National Health Department’s Root Cause
Analysis). If no closure is achieved 100% of the at-risk STI will vest (i.e. 100% of the 15% available).
• Changes to the STI scheme for FY2021 for the CFO will be made as follows:
~ There will be five measures, a financial measure which will account for 60% of the STI and four non-financial measures
(10% each of the STI). The financial measure will be NPAT. For FY21, vesting will be as follows:
~ if FY21 NPAT is less than the prior comparative period (‘pcp’), no STI will be paid; or
~ if FY21 NPAT is greater than or equal to FY20 NPAT then 50% of the STI will vest (i.e. 50% of the 60% available); or
~ if FY21 NPAT is equal to the FY21 Board approved budget NPAT then 100% of the STI will vest (i.e. 100% of the 60%
available); or
~ if FY21 NPAT is 110% or more of the FY21 Board approved budget NPAT then 110% of the STI will vest (i.e. 110% of the
60% available).
There will be no EPS growth hurdle in FY2021.
The financial measures for the CSO will account for 60% of the STI, 40% of which will be measured against Group EBITDA
and 20% will be measured against the EBITDA of the European businesses. For FY21 the vesting format will be as follows:
~ if FY21 EBITDA is less than the prior comparative period (‘pcp’), no STI will be paid; or
~ if FY21 EBITDA is greater than or equal to FY20 EBITDA then 50% of the STI will vest (i.e. 50% of the 60% available); or
~ if FY21 EBITDA is equal to the FY21 Board approved budget EBITDA then 100% of the STI will vest (i.e. 100% of the 60%
available); or
~ if FY21 EBITDA is 110% or more of the FY21 Board approved budget EBITDA then 110% of the STI will vest (i.e. 110% of the
60% available).
The non-financial measures for the CFO and CSO will be:
~ Net Promoter Score (as for the CEO)
~ COVID-19 Infection control measure (as for the CEO)
~ Staff engagement score trending – 50% vesting for the implementation of a staff engagement survey process
and improvement plans in place for each business unit and pro-rata vesting for the balance if positive trending in
engagement score on subsequent surveys during the year; and
~ Compliance to Virtus Health One Lab program with 50% vesting for 80% compliance and 100% vesting for 100%
compliance.
• It would retain the measure of 50% of the LTI grant to be linked to average annual Return on Equity (“ROE”). The
Committee noted that the ROE hurdle had previously been set at a fixed percentage. In light of the current uncertainty
and volatility created by the COVID-19 pandemic, the Committee determined to amend the average annual ROE hurdle
to one that is directly related to the Virtus Health weighted average cost of capital (“WACC”). Target average annual ROE
for FY21 to FY23 will be 1.35 times WACC, agreed with the Audit Committee.
• It would retain the measure of 50% of the LTI grant to be linked to RTSR measured over a three year period against the
constituents of a single comparator group, the ASX300, as this index appears to have the closest correlation to Virtus
Health share price volatility.
26
27
Directors’REPORTVirtus Health2020 Annual Report
C. EXECUTIVE REMUNERATION FRAMEWORK
Remuneration philosophy and principles
The objective of the executive remuneration framework is to ensure that reward for performance is competitive and
appropriate for the results delivered. The Board continually monitors the effectiveness of the remuneration framework in
terms of alignment with shareholder interests and market practice.
The framework aligns executive reward with the achievement of strategic objectives and the creation of value for
shareholders, and conforms to market best practice. The Board seeks to ensure that executive reward satisfies the following
key criteria for good governance practices:
• competitiveness and reasonableness;
• acceptability to shareholders;
• performance linkage / alignment of executive compensation; and
• transparency.
The executive remuneration and reward framework has four components:
• base pay and non-monetary benefits;
• STIs;
• LTIs; and
• other remuneration such as superannuation and long service leave.
The Nomination and Remuneration Committee has structured an executive remuneration framework that is market
competitive and complementary to the reward strategy of the consolidated entity. The key objective of the remuneration
framework is the alignment to shareholder interests and this is achieved by ensuring that:
• profit is a major component of the framework’s design;
• the framework focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and
delivering constant or increasing return on equity as well as focusing the executive on key non-financial drivers of value;
• the remuneration framework attracts and retains high calibre executives;
• the framework rewards capability and experience;
• the framework reflects competitive reward for contribution to growth in shareholder wealth; and
• the framework provides a clear structure for earning rewards.
Fixed remuneration
Fixed remuneration for Australian employees comprises base salary, superannuation and other benefits such as annual
leave and long service leave in accordance with the regulations in the Australian state in which they are employed. European
employees receive a base salary, superannuation and other benefits such as annual leave.
Short term incentive plan – STI
The STI plan is an annual individual target based scheme aligned to the targets of an individual executive’s respective
business units or responsibility. STI payments are granted to executives based on achievement of specific annual targets
and key performance indicators (‘KPIs’). Financial and non-financial KPIs are reviewed and amended annually by the
Nomination and Remuneration Committee to ensure STI payments are aligned with the short term objectives of the
business. STIs are not made available to the group’s Medical Directors.
The STI plan provides for cash settlement where successful performance against KPIs is achieved. Performance is assessed
by the immediate manager of the STI participant and for KMPs the cash settlements are approved by the Nomination and
Remuneration Committee after completion of the annual group audit. Hence, STI cash settlements are normally paid to
recipients in the month following the announcement of the group’s financial results.
28
The STI KPIs for FY2020, which were set by the Nomination and Remuneration Committee for the CEO and by the CEO for
Senior Executives, included:
• EPS growth target of 5% over prior year that acts as a financial gateway for the payment of STIs
• NPAT KPI for CEO and CFO;
• Cost reduction targets;
• EBIT margin improvement targets;
• Segment EBIT KPI for senior state and territory management; and
• Individual objectives for all STI participants which may be non-financial in nature. Such objectives could include:
~ Risk management;
~ Patient experience and improvement in net promoter score;
~ Corporate governance objectives; and
~ Other individual personal goals.
The STI KPI structure for FY2021, established by the Nomination and Remuneration Committee, applicable to three of the
KMP referred to above, namely Kate Munnings, Glenn Powers and Richard Banks is set out in section B above. A similarly
structured scheme is also applicable to other senior executives in the company who are not considered KMP.
The Nomination and Remuneration Committee has the discretion to apply variations to these targets after consideration of
local market conditions.
Long term incentive plan – LTI
The company has adopted a performance rights plan (‘LTI Plan’) to balance the following key factors in its design:
• Participant’s experience, reward, motivation and retention in response to challenging but achievable LTI measures;
• Recognise the abilities, efforts and contributions of participants to Virtus’ performance and success and provide the
participants with an opportunity to acquire or increase their ownership interest in the company;
• Shareholder expectations and alignment of executive reward outcomes to shareholder experience; and
• Appropriate cost to the business considering the affordability and quantum of awards for Participants.
The Virtus plan objectives are aligned to market practice and the LTI Plan provides participants with grants of performance
rights that vest over three year performance periods. Performance rights are granted annually and vested performance
rights convert into shares. Holders of unvested performance rights do not receive dividends on those rights until the rights
have vested and converted into shares.
Generally, vesting conditions attached to grants of options or performance rights made to senior executives will relate to the
performance of the consolidated entity over the prior performance period of three years, as well as continued employment.
Options or performance rights may also be granted to other employees from time to time subject to consideration by the
Board. There is no ability for the company to provide any cash equivalent on exercise.
In the event of a future change of control the Board has the discretion to allow for vesting of options or performance rights
and in the event of failure to meet vesting hurdles or objectives there is no facility to allow retesting of vesting conditions.
Eligibility to participate in the LTI Plan and the number of options or performance rights offered to each individual participant
is determined by the Board. The Board maintains full discretion in administering the grant and vesting of LTI awards. Virtus
provides for malus under Board discretion or approval to lapse/vest awards. Currently there are five executive performance
grants in operation as follows:
1. Senior executives - FY2017 grant
On 10 November 2016, performance rights were granted to several members of the executive management team. Following
employee resignations, only Sue Channon and Glenn Powers retain performance rights under this grant.
The performance rights vest subject to the following performance hurdles:
Relative TSR and average annual return on equity attributable to shareholders (‘ROE’). Each hurdle applies to 50% of the
grant. RTSR is measured on the company’s TSR relative to a peer group of companies in both the S&P ASX 200 Index and the
S&P ASX 200 Healthcare Index (weighted 50% each) over the three year performance period. TSR is a measure of the return
on investment in a company’s shares, including dividends and all other returns to shareholders notionally invested over the
relevant performance period. Calculations of the company’s RTSR and ROE are determined at the end of the three year
vesting period by the Board with verification performed by an external party.
29
Directors’REPORTVirtus Health2020 Annual Report FY2017 STI Grant
Performance Hurdle
Percentile less than
Percentile at
Percentile range
Relative TSR
S&P ASX 200
50
50
50-75
TSR Base share price
$8.05
% ROE less than
% ROE at
% ROE range
3 Year average ROE
15.0%
15.0%
15.0-17.5%
Relative TSR
Rights Vesting %
Notes
S&P ASX 200 Health
50
50
50-75
$8.05
0%
12.5%
12.5-25%
0%
25%
25-50%
For each hurdle
Progressive pro-rata
vesting for the range
for each hurdle
Progressive pro-rata
vesting for the range
The RTSR performance hurdle tested on 15 September, 2019 was not met and the ROE performance hurdle tested on
30 June 2019 was not met.
2. Senior executives - FY2018 grant
On 10 November 2017, performance rights were granted to several members of the executive management team. Following
employee resignations, only Sue Channon, Glenn Powers, Jade Phelan (Managing Director, Melbourne IVF) and Richard Banks
retain performance rights under this grant. The performance rights vest subject to the same performance hurdles as the
FY2017 grant, and the TSR base share price is $5.58.
As at 30 June 2020, it is expected that the TSR performance hurdles, to be tested on 15 September 2020 will not be met.
The ROE performance hurdle, tested on 30 June 2020 was not met. The annual AASB 2 accounting charge of this scheme is
currently $23,888 and the maximum earnings dilution to existing shareholders is 0.08%.
3. Senior executives - FY2019 grant
On 21 November 2018, performance rights were granted to several members of the executive management team. Following
employee resignations, only Sue Channon, Glenn Powers Jade Phelan and Richard Banks retain performance rights under
this grant.
The Nomination and Remuneration Committee set the performance hurdles for the FY2019 grant as follows:
• Recognising the change in the S&P Index classification for the company, the RTSR performance hurdles were amended
to ASX 300 and ASX 300 Healthcare Index; and
• The ROE hurdle was set at 12% which in the view of the Nomination and Remuneration Committee maintained the
aspirational aspect of this hurdle given the company’s level of performance in the prior two years.
FY2019 STI Grant
Performance Hurdle
Percentile less than
Percentile at
Percentile range
Relative TSR
S&P ASX 300
50
50
50-75
TSR Base share price
$5.70
% ROE less than
% ROE at
% ROE range
3 Year average ROE
12.0%
12.0%
12.0-14.0%
Relative TSR
Rights Vesting %
Notes
S&P ASX 300 Health
50
50
50-75
$5.70
0%
12.5%
12.5-25%
0%
25%
25-50%
For each hurdle
Progressive pro-rata
vesting for the range
for each hurdle
Progressive pro-rata
vesting for the range
Calculations of the company’s TSR and ROE will be determined at the end of the three year vesting period by the Board with
verification performed by an external party. The annual AASB 2 accounting charge of this scheme is currently ($23,997) and
the maximum earnings dilution to existing shareholders is 0.13%.
4. Senior executives - FY2020 grant
On 20 November 2019, performance rights were granted to several members of the executive management team. Following
employee resignations, only Glenn Powers, Jade Phelan and Richard Banks retain performance rights under this grant.
The Nomination and Remuneration Committee changed the performance hurdles for the FY2020 grant as follows:
• The RTSR performance hurdles were amended to be measured on the company’s TSR relative to only one index, the
ASX 300 over the three year performance period; and
• The ROE hurdle remained unchanged from the 2019 grant. It should be noted that the minimum average annual ROE
remains above the level achieved in the previous two years and the Nomination and Remuneration Committee believes
this maintains the aspirational aspect of this hurdle.
FY2020 STI Grant
Relative TSR
Rights Vesting %
Notes
Performance Hurdle
S&P ASX 300
Percentile less than
Percentile at
Percentile range
TSR Base share price
% ROE less than
% ROE at
% ROE range
50
50
50-75
$4.11
3 Year average ROE
12.0%
12.0%
12.0-14.0%
0%
25%
25-50%
0%
25%
25-50%
Progressive pro-rata
vesting for the range
Progressive pro-rata
vesting for the range
Calculations of the company’s RTSR and ROE will be determined at the end of the three year vesting period by the Board
(2022) with verification performed by an external party. The annual AASB 2 accounting charge of this scheme is currently
$9,504 and the maximum earnings dilution to existing shareholders is 0.15%.
5. CEO - FY2020 grant in respect of incentives foregone
Details of the grants made under this arrangement are provided in section B of this report.
D. LINK BETWEEN REMUNERATION AND CONSOLIDATED ENTITY PERFORMANCE
Consolidated entity performance and link to remuneration
Remuneration for certain individuals is directly linked to performance of the consolidated entity. Non-executive Directors
receive only fixed remuneration. STI payments for FY20 were dependent on a defined earnings per share target being met.
Assuming that all performance conditions are met, the proportion of remuneration linked to performance and the fixed
proportion is as follows:
Name
2020
2019
2020
2019
2020
2019
Fixed remuneration
At risk - STI
At risk - LTI
Executive Directors:
K Munnings
S Channon
L Hale
Other Key Management
Personnel:
G Powers
R Banks
50%
48%
100%
-
48%
100%
47%
60%
48%
52%
-
24%
-
24%
16%
-
24%
-
24%
13%
50%
28%
-
29%
24%
-
28%
-
28%
35%
30
31
Directors’REPORTVirtus Health2020 Annual Report The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Executive Directors:
K Munnings
S Channon
Other Key Management
Personnel:
G Powers
R Banks
Cash bonus paid/payable
Cash bonus forfeited
2020
2019
2020
2019
-
-
-
-
-
-
-
-
-
100%
-
100%
100%
100%
100%
100%
Accordingly the actual proportion of remuneration linked to performance and the fixed proportion in FY2020 is as follows:
Name
2020
2019
2020
2019
2020
2019
Fixed remuneration
At risk - STI
At risk - LTI
Executive Directors:
K Munnings
S Channon
L Hale
Other Key Management
Personnel:
G Powers
R Banks
59%
100%
100%
-
86%
100%
93%
97%
85%
88%
-
-
-
-
-
-
-
-
-
9%
41%
-
-
7%
3%
-
14%
-
15%
3%
The earnings of the consolidated entity that are considered to affect total shareholders return (‘TSR’) for the five years to
30 June 2020 are summarised below:
Revenue
EBITDA
EBIT
Profit after income tax
NPAT attributable to Virtus shareholders
Share price at financial year end ($)
Total dividends paid (cents per share)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
EPS Growth on prior year
Remuneration outcomes for FY2020
2020
$’000
258,932
46,212
21,195
946
469
2020
2.83
12.00
0.59
0.59
(98.3%)
2019
$’000
280,069
63,511
49,883
28,990
28,426
2019
4.50
24.00
35.37
34.97
(7.6%)
2018
$’000
263,916
65,027
52,531
32,009
30,753
2018
5.75
26.00
38.26
37.98
9.3%
2017
$’000
256,518
64,834
50,799
30,004
28,103
2017
5.38
28.00
35.00
34.79
(15.0%)
2016
$’000
261,210
68,916
57,736
34,865
32,918
2016
6.87
28.00
41.18
40.79
11.7%
Total KMP remuneration for FY2020 increased by $549,983 (32.4%). Included in the net increase, $531,658 relates to
payments in lieu of notice to the previous CEO, Sue Channon.
STI Outcomes for FY2020
Based on the financial results of the consolidated entity the Committee determined that as a consequence of the decrease
in EPS, no STIs are payable to any KMP for FY20.
LTI outcomes for FY2020
In FY2020 the following performance hurdles were tested in respect of the performance rights grants dated 10 November
2016 and 10 November 2017:
• Performance rights grant dated 10 November 2017:
From a potential total of 50% of the performance rights available, 0% of available rights vested in respect of average ROE
over the three year performance period; accordingly 61,557 of the performance rights granted on 10 November 2017 did
not vest and have lapsed. A further 54,252 rights were forfeited by executives who left employment. The remaining 50%
of the performance rights which are to be tested against the RTSR performance hurdles on 15 September 2020 will not
vest; and
• Performance rights grant dated 10 November 2016:
From a potential total of 50% of the performance rights available, 0% of available rights vested in respect of relative TSR
over the three year performance period; accordingly 49,745 of the performance rights granted on 10 November 2016 did
not vest and have lapsed. The other 50% of these performance rights were tested by reference to the average ROE over
the three year performance period to 30 June 2019, did not vest and accordingly lapsed.
E. EXECUTIVE SERVICE AGREEMENTS
Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details
of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Lyndon Hale
Executive Director and Medical Director, Victoria
11 June 2013
No fixed end date
The Executive may terminate the fertility specialist contract by giving a minimum of 3 months’ notice in writing.
The company may terminate by giving 3 months’ notice in writing.
Kate Munnings
Chief Executive Officer
18 March 2020
No fixed end date
The employment contract may be terminated by either the Executive or the Company by giving 6 months’
notice in writing. The company may terminate by giving 6 months’ notice in writing or by making a payment in lieu
of notice. In the event of serious misconduct or other specific circumstances warranting summary dismissal,
the company may terminate the employment contract immediately by notice in writing and without payment
in lieu of notice. Upon the termination of the employment contract, the Executive will be subject to a restraint
of trade period of 6 months. The company may elect to reduce the restraint of trade period or eliminate the
period in its entirety. The enforceability of the restraint clause is subject to all usual legal requirements.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Glenn Powers
Chief Financial Officer and Company Secretary
11 June 2013
No fixed end date
The Executive’s contract is similar to that of Kate Munnings except the employee may terminate by giving 3
months’ notice in writing or by making a payment in lieu of notice.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Richard Banks
Chief Strategy Officer and European Managing Director
29 May 2017
No fixed end date
The Executive’s contract is similar to that of Glenn Powers.
32
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
33
Directors’REPORTVirtus Health2020 Annual Report F. REMUNERATION, SHARE AND OPTION DISCLOSURES FOR FY2020
Amounts of remuneration – accruals basis
Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables. The
first two tables are calculated in accordance with Australian accounting standard AASB 2 on an accruals basis and therefore
take account of movements in leave accruals and provisions.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-based
payments
Salary,
leave
and fees
$
Non-
monetary and
termination
$
STI
$
Super-
annuation
$
Long
Service
Leave
$
Equity-
settled
$
Total
$
53,362
113,832
96,301
91,963
71,256
161,056
877,072
160,011
360,965
63,655
2,049,473
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,069
10,814
9,149
8,737
6,769
5,874
37,669
6,882
-
-
-
-
-
-
-
-
-
-
-
12,728
-
116,028
(70,553)
58,431
124,646
105,450
100,700
78,025
282,958
856,916
166,893
21,003
4,013
(6,895)
-
29,631
2,098
404,704
69,766
115,979
5,833
77,204
2,248,489
2020
Non-Executive
Directors:
P Macourt
S Petering
G Couttas
S Solomon
M Stanford
Executive Directors:
K Munnings
S Channon
L Hale
Other Key
Management
Personnel:
G Powers
R Banks
Michael Stanford joined the Board in September 2019 so the total benefit in FY2020 does not represent a full year of fees.
Kate Munnings joined the Board in March 2020 so the total benefit in FY2020 does not represent a full year of remuneration.
Richard Banks assumed the role of Chief Strategy Officer in May 2020 so the total benefit in FY2020 does not represent
a full year remuneration. Peter Macourt retired from the Board in November 2019 and Sue Channon stood down from the
Board in February 2020 respectively so the total benefit in FY2020 does not represent a full year of remuneration. Sue
Channon’s Salary leave and fees includes payments in lieu of notice of $531,658. Negative adjustments in this table reflect
reductions in accruals.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-based
payments
2019
Non-Executive
Directors:
P Macourt
P Turner
S Petering
G Couttas
S Solomon
Executive Directors:
S Channon
L Hale
Other Key
Management
Personnel:
G Powers
Salary,
leave
and fees
$
135,803
42,743
91,001
91,477
65,525
504,348
163,171
344,870
1,438,938
STI
$
Non-
monetary
$
Super-
annuation
$
Long
Service
Leave
$
Equity-
settled
$
Total
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,901
4,061
8,645
8,690
6,225
-
-
-
-
-
-
-
-
-
-
148,704
46,804
99,646
100,167
71,750
20,531
7,103
10,815
-
89,584
-
625,278
170,274
20,531
88,687
6,895
17,710
63,587
435,883
153,171
1,698,506
Shane Solomon joined the Board in September 2018 so the total benefit in FY2019 does not represent a full year of fees.
Similarly, Peter Turner retired from the Board in November 2018 hence the total benefit in FY2019 does not represent a full
year of fees.
The value of share-based payments and the employee leave represents the accounting charge or accrual and not the cash
benefit received by the KMP. Long term leave benefits are the long service leave accruals calculated in accordance with state
entitlements. The value of share-based payments during the financial year also includes performance rights which lapsed
during the year.
STI represents the accrual in respect of a KMP’s performance in the financial year and this is normally paid in the month
following the publication of the consolidated entity’s financial statements.
Amounts of remuneration – cash basis
The next two tables show the actual cash payments made to KMPs in the relevant financial years:
34
35
Directors’REPORTVirtus Health2020 Annual Report
2020
Non-Executive Directors:
P Macourt
S Petering
G Couttas
S Solomon
M Stanford
Executive Directors:
K Munnings
S Channon
L Hale
Other Key Management Personnel:
G Powers
R Banks
2019
Non-Executive Directors:
P Macourt
P Turner
S Petering
G Couttas
S Solomon
Executive Directors:
S Channon
L Hale
Other Key Management Personnel:
G Powers
Salary,
leave
and fees
$
64,696
112,155
97,296
93,452
65,107
108,113
521,705
161,157
355,103
58,071
1,636,855
Salary,
leave
and fees
$
135,803
42,743
91,001
91,477
65,525
STI
$
Super-
annuation
$
-
-
-
-
-
12,901
4,061
8,645
8,690
6,225
Total
$
148,704
46,804
99,646
100,167
71,750
511,022
156,940
132,865
-
20,531
5,327
664,418
162,267
355,491
146,677
20,531
522,699
1,450,002
279,542
86,911
1,816,455
Additional disclosures relating to key management personnel:
Shareholding
The number of ordinary shares in the company held during the financial year by each director and other members of key
management personnel of the consolidated entity, including their personally related parties, is set out below:
Kate Munnings
Sonia Petering
Greg Couttas
Lyndon Hale
Shane Solomon
Michael Stanford
Glenn Powers
Balance at
the start of
the year
Received
as part of
remuneration
Additions
Disposals/
other
-
8,066
5,000
823,694
-
-
114,150
950,910
-
-
-
2,878
-
-
-
2,878
-
36,934
-
-
-
20,000
-
56,934
-
-
-
-
-
-
-
-
Balance at
the end of
the year
-
45,000
5,000
826,572
-
20,000
114,150
1,010,722
Total
$
70,842
122,810
106,539
102,330
71,292
112,179
542,707
168,148
21,003
4,013
376,106
62,085
98,183
1,735,038
Option holding
The number of options and performance rights over ordinary shares in the company held during the financial year by each
director and other members of key management personnel of the consolidated entity, including their personally related
parties, is set out below:
STI
$
Super-
annuation
$
6,146
10,655
9,243
8,878
6,185
4,066
21,003
6,991
-
-
-
-
-
-
-
-
-
-
-
Balance at
the start of
the year
Granted
Exercised/
cancelled
Expired/
forfeited/
other
Balance at
the end of
the year
-
93,823
41,888
162,037
56,671
29,678
135,711
248,386
-
-
-
-
-
(33,800)
(10,454)
162,037
116,694
61,112
(44,254)
339,843
Options over ordinary shares
Kate Munnings
Glenn Powers
Richard Banks
SHARE BASED COMPENSATION
Issue of shares
Lyndon Hale received 2,878 shares as part of compensation during the year ended 30 June 2020 under the terms of the
Fertility Specialist Loyalty Scheme.
Options or performance rights
The terms and conditions of each grant over ordinary shares affecting remuneration of Executive directors and other key
management personnel in this financial year or future reporting years are as follows:
Grant date
11 November 2016
22 November 2017
21 November 2018
20 November 2019
27 April 2020
Vesting date and
exercisable date
11 November 2019
22 November 2020
21 November 2021
20 November 2022
20 November 2022
Expiry date
11 November 2026
22 November 2027
21 November 2028
20 November 2029
20 November 2029
Exercise
price
$0.00
$0.00
$0.00
$0.00
$0.00
Fair value
per right
at grant date
$4.52
$3.79
$2.77
$1.49
$1.49
36
37
Directors’REPORTVirtus Health2020 Annual Report The Chair receives a base fee of $139,300. Non-executive director fees comprise a base director fee of $83,500 (including
superannuation), and an additional payment to reflect a director’s involvement in Board committees as follows:
• Chairman of Audit Committee receives an additional fee of $15,000;
• Chairman of Risk Committee receives an additional fee of $15,000;
• Chairman of Nomination and Remuneration Committee receives an additional fee of $10,000;
• Member of Audit or Risk Committee receives an additional fee of $7,500 per committee; and
• Member of Nomination and Remuneration Committee receives an additional fee of $5,000.
Other information about directors’ remuneration
Directors may be reimbursed for expenses reasonably incurred in attending to the company’s affairs. Non-executive directors
may be paid such additional or special remuneration as the directors decide is appropriate where a director performs extra
work or services which are not in the capacity as a director of the company or a subsidiary. There is no contractual redundancy
benefit for directors.
THIS CONCLUDES THE REMUNERATION REPORT WHICH HAS BEEN AUDITED.
Options or performance rights do not carry any voting or dividend rights. Shares issued or transferred to participants on
exercise of an option carry the same rights and entitlements as other issued shares, including dividend and voting rights.
The number of options or performance rights over ordinary shares granted to and vested by directors and other key
management personnel as part of compensation during the years ended 30 June 2020 and 30 June 2019 are set out below:
Name
Kate Munnings
Glenn Powers
Richard Banks
Number of
rights granted
during the year
2020
Number of
rights granted
during the year
2019
Number of
rights vested
during the year
2020
Number of
rights vested
during the year
2019
162,037
56,671
29,678
-
40,061
20,980
-
-
-
-
-
-
Fair values of options and performance rights over ordinary shares granted, exercised and lapsed for directors and other key
management personnel as part of compensation during the year ended 30 June 2020 are set out below:
Name
Kate Munnings
Glenn Powers
Richard Banks
Fair value of
rights granted
during the year
$
Net market
value of rights
exercised
during the year
$
Number of
rights lapsed
during
the year
241,435
84,440
44,220
-
-
-
-
33,800
10,454
Note: Of the options lapsing 13,837 were granted on 10 November 2016 and 30,417 were granted on 11 November 2017.
G. NON-EXECUTIVE DIRECTOR REMUNERATION
Overview of non-executive director remuneration
In accordance with best practice corporate governance, the structure of non-executive directors’ and executive
remuneration is different. Fees and payments to non-executive directors reflect the demands which are made on, and the
responsibilities of, the directors. Non-executive directors’ fees and payments are reviewed annually by the Nomination and
Remuneration Committee. The Nomination and Remuneration Committee may, from time to time, receive advice from
independent remuneration consultants to ensure non-executive directors’ fees and payments are appropriate and in line
with the market. The Chairman’s fees are determined independently to the fees of other non-executive directors based on
comparative roles in the external market. The Chairman is not present at any discussions relating to the determination of her
remuneration. Non-executive directors do not receive share options or other incentives.
In FY2020 the Committee elected to increase remuneration for non-executive directors by 2%. The Chairman of the
Committee is satisfied that the recommendation relating to non-executive director fees, including the fees for the Chairman,
has not been subject to any undue influence by the Chairman or other independent directors.
Under the Constitution, the directors decide the total amount paid to each director as remuneration for their services
as a director to the company. However, under the listing rules of the ASX (‘ASX Listing Rules’), the total amount paid to all
non-executive directors for their services must not exceed in aggregate in any financial year the amount approved by the
shareholders. Aggregate annual directors’ fees paid to non-executive directors for the financial year ended 30 June 2020
were $467,252. The maximum authorised amount payable including superannuation to all non-executive directors in total
for their services approved by the shareholders at the 2015 Annual General Meeting is $600,000 per annum.
38
39
Directors’REPORTVirtus Health2020 Annual Report SHARES UNDER OPTION
Unissued ordinary shares of Virtus Health Limited under option at the date of this report are as follows:
Grant date
Expiry date
21 August 2015*
28 October 2015*
16 December 2015*
21 September 2016*
21 September 2016*
21 June 2017*
24 October 2017*
24 October 2017*
24 October 2017*
24 October 2017*
22 November 2017*
22 November 2017*
10 October 2018*
10 October 2018*
10 October 2018*
10 October 2018*
21 November 2018*
20 November 2018*
09 December 2019*
09 December 2019*
27 April 2020*
21 August 2025
28 October 2025
16 December 2025
21 September 2026
21 September 2026
21 June 2027
24 October 2027
24 October 2027
24 October 2027
24 October 2027
22 November 2027
22 November 2027
10 October 2028
10 October 2028
10 October 2028
10 October 2028
21 November 2028
20 November 2028
09 December 2029
09 December 2029
27 April 2030
Number under
option or
shares to be
issued
Exercise or
base price
$5.67
$5.01
$6.07
$8.05
$8.05
$5.35
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
5,856
2,205
2,410
7,176
3,489
2,236
61,556
72,580
116,128
43,548
243,728
136,508
241,581
31,579
14,336
14,211
104,644
118,075
78,832
19,708
162,037
1,482,423
* The consolidated entity grants performance rights to fertility specialists as a dollar value; for the purpose of calculating the estimated number of shares
under option, estimates of the share price at the time of vesting are forecast to facilitate an estimate of the number of shares to be issued at vesting.
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the
company or of any other body corporate.
SHARES ISSUED ON THE EXERCISE OF OPTIONS
During the financial year nil ordinary shares were issued on the exercise of options. No share options were cancelled during
the financial year. There were no shares of Virtus Health Limited issued on the exercise of options from 1 July 2020 up to and
including the date of this report.
INDEMNITY AND INSURANCE OF OFFICERS
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the
company against a liability to the extent permitted by the Corporations Act 2001. 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.
INDEMNITY AND INSURANCE OF AUDITOR
The company has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the company or
any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company
or any related entity.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility
on behalf of the company for all or part of those proceedings.
NON-AUDIT SERVICES
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 41 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 41 to the financial statements do not compromise the
external auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company,
acting as advocate for the company or jointly sharing economic risks and rewards.
OFFICERS OF THE COMPANY WHO ARE FORMER PARTNERS OF PRICEWATERHOUSECOOPERS
There are no officers of the company who are former partners of PricewaterhouseCoopers.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191,
issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have
been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases,
the nearest dollar.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 follows
this report.
AUDITOR
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
Sonia Petering
Chairperson
18 August 2020
Sydney
40
41
Directors’REPORTVirtus Health2020 Annual Report Auditor’s
INDEPENDENCE
DECLARATION
Statement of
COMPREHENSIVE INCOME
For the year ended 30 June 2020
Consolidated
2020
$’000
2019
$’000
Note
Auditor’s Independence Declaration
As lead auditor for the audit of Virtus Health Limited for the year ended 30 June 2020, I declare that
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; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Virtus Health Limited and the entities it controlled during the period.
Mark Dow
Partner
PricewaterhouseCoopers
Sydney
18 August 2020
Revenue
Share of profits of associates accounted for using the equity method
Other income
Expenses
Fertility specialists, consumables and associated costs
Employee benefits expense
Depreciation and amortisation expense
Impairment of goodwill
Impairment of brand
Occupancy expense
Advertising and marketing
Practice equipment expenses
Professional and consulting fees
Other expenses
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Net change in the fair value of cash flow hedges taken to equity, net of tax
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the year is attributable to:
Non-controlling interest
Owners of Virtus Health Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of Virtus Health Limited
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Basic earnings per share
Diluted earnings per share
The above statement of comprehensive income should be read in conjunction with the accompanying notes
42
4
4
5
5
5
6
25
26
3
3
258,932
280,069
403
15,040
510
8,890
(70,754)
(100,177)
(25,017)
(24,587)
(388)
(6,026)
(3,970)
(2,645)
(4,839)
(14,748)
(10,792)
10,432
(9,486)
(76,170)
(98,972)
(13,628)
(5,800)
-
(19,936)
(4,259)
(2,601)
(3,653)
(14,456)
(9,820)
40,174
(11,184)
946
28,990
(862)
1,394
532
1,478
477
469
946
524
954
1,478
Cents
0.59
0.59
(1,383)
2,561
1,178
30,168
564
28,426
28,990
456
29,712
30,168
Cents
35.37
34.97
43
Virtus Health2020 Annual Report
Statement of
FINANCIAL POSITION
As of 30 June 2020
Consolidated
2020
$’000
2019
$’000
Note
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Total current assets
Non-current assets
Investments accounted for using the equity method
Property, plant and equipment
Right-of-use assets
Intangibles
Deferred tax
Other
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Derivative financial instruments
Income tax
Provisions
Other financial liabilities
Unearned income
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Derivative financial instruments
Deferred tax
Provisions
Other financial liabilities
Other payables
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Equity attributable to the owners of Virtus Health Limited
Non-controlling interest
7
8
11
13
10
6
40
9
14
19
6
16
21
18
15
20
6
17
22
23
25
26
27
38,047
13,372
1,399
3,149
18,831
14,842
1,256
2,876
55,967
37,805
1,489
34,913
89,719
433,694
10,329
306
1,489
38,036
-
459,576
7,143
287
570,450
506,531
626,417
544,336
41,538
10,661
1,148
9,662
4,396
2,374
20,032
24,856
-
764
1,121
4,642
9,397
16,306
89,811
57,086
164,087
92,137
2,586
799
7,510
1,284
-
173,678
-
1,738
1,065
6,722
7,750
1,684
268,403
192,637
358,214
249,723
268,203
294,613
240,785
16,004
10,617
267,406
797
241,890
5,159
37,111
284,160
10,453
Statement of
CHANGES IN EQUITY
For the year ended 30 June 2020
Consolidated
Balance at 1 July 2018
Profit after income tax expense for the year
Other comprehensive income/(loss) for the
year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Dividends payable by subsidiaries to
non-controlling interests
Issue of shares pursuant to share based
payment schemes (note 23)
Share based payment expense
Settlement of partly paid shares (note 23)
Purchase of treasury shares (note 23)
Dividends paid (note 24)
Balance at 30 June 2019
Issued
capital
$’000
242,251
-
-
-
-
125
-
225
(711)
-
241,890
Reserves
$’000
2,837
-
1,286
1,286
-
(125)
1,161
-
-
-
5,159
Retained
profits
$’000
Non-
controlling
interest
$’000
Total equity
$’000
27,979
28,426
-
28,426
10,483
564
(108)
456
283,550
28,990
1,178
30,168
-
(486)
(486)
-
-
-
-
(19,294)
-
-
-
-
-
-
1,161
225
(711)
(19,294)
37,111
10,453
294,613
Consolidated
Issued
capital
$’000
Reserves
$’000
Retained
profits
$’000
Non-
controlling
interest
$’000
Total equity
$’000
Balance at 1 July 2019
Adjustment on adoption of AASB 16- net of tax
(note 12)
241,890
5,159
37,111
10,453
294,613
-
-
(7,775)
-
(7,775)
Balance at 1 July 2019 - restated
241,890
5,159
29,336
10,453
286,838
Profit after income tax expense for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Put option exercise
Dividends payable by subsidiary to non-
controlling interest
Issue of shares pursuant to share based
payment schemes (note 23)
Share based payment expense
Settlement of partly paid shares (note 23)
Purchase of treasury shares (note 23)
Dividends (note 24)
-
-
-
-
-
463
-
416
(1,984)
-
-
485
485
9,571
-
(463)
1,252
-
-
-
469
-
469
-
-
-
-
-
-
(19,188)
477
47
524
946
532
1,478
(9,571)
-
(609)
(609)
-
-
-
-
-
-
1,252
416
(1,984)
(19,188)
Balance at 30 June 2020
240,785
16,004
10,617
797
268,203
Total equity
268,203
294,613
The above statement of changes in equity should be read in conjunction with the accompanying notes
The above statement of financial position should be read in conjunction with the accompanying notes
44
45
Virtus Health2020 Annual Report
Statement of
CASH FLOWS
For the year ended 30 June 2020
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Other revenue
Interest and other finance costs paid
Lease interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payment of acquisition of non-controlling interest
Payments for property, plant and equipment and intangibles
Payment of security deposits
Proceeds from release of security deposits
Interest received
Associate distributions received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from partly paid shares
Payment of dividends
Dividend paid to non-controlling interest in subsidiaries
Repayment of borrowings
Proceeds from borrowings
Payment of finance facility fees in relation to refinancing
Repayment of lease liabilities
Purchase of treasury shares
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Consolidated
Note
2020
$’000
2019
$’000
262,820
(193,273)
273,095
(217,696)
69,547
55,399
8,258
(6,132)
(3,440)
(1,850)
6,481
(7,793)
-
(15,797)
36
66,383
38,290
(7,109)
(7,921)
(19)
-
28
382
-
(14,553)
-
243
111
665
(14,639)
(13,534)
416
(9,647)
(609)
(11,000)
1,000
-
(10,812)
(1,984)
225
(19,294)
(486)
(7,500)
1,500
(1,628)
-
(711)
(32,636)
(27,894)
19,108
18,831
108
(3,138)
21,713
256
23
23
Cash and cash equivalents at the end of the financial year
7
38,047
18,831
The above statement of cash flows should be read in conjunction with the accompanying notes
46
Table of
CONTENTS
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL REPORT
Notes to the financial report
FINANCIAL PERFORMANCE OVERVIEW
Operating segments
Earnings per share
Revenue
Expenses
Income Tax
BALANCE SHEET ITEMS
Current assets- cash and cash equivalents
Current assets- trade and other receivables
Current liabilities- trade and other payables
Non-current assets- intangibles
Non-current assets- property, plant and equipment
Leases
Non-current assets - right-of-use assets
Current liabilities - lease liabilities
Non-current liabilities - Lease liabilities
Current liabilities- provisions
Non-current liabilities- provisions
CAPITAL STRUCTURE AND RISK MANAGEMENT
Non- current liabilities- borrowings
Current liabilities- derivative financial instruments
Non- current liabilities- derivative financial instruments
Current liabilities- Other financial liabilities
Non- current liabilities- Other financial liabilities
Equity- issued capital
Equity- dividends
Equity- reserves
Equity- retained profits
Equity- non-controlling interest
Financial risk management
Fair value measurement
GROUP STRUCTURE
Interests in subsidiaries
Deed of cross guarantee
Parent entity information
OTHER NOTES TO THE FINANCIAL STATEMENTS
Share-based payments
Related party transactions
Key management personnel disclosures
Reconciliation of profit after income tax to net cash from operating activities
Events after the reporting period
Commitments
Contingent liabilities
Non-current assets- other
Remuneration of auditors
Other accounting policies
48
50
52
53
54
55
58
58
59
59
63
65
67
67
67
68
68
69
71
71
72
72
72
73
74
75
75
76
79
81
82
84
84
88
89
89
90
90
90
90
91
91
47
Virtus Health2020 Annual Report
Notes to the
FINANCIAL STATEMENTS
30 June 2020
NOTE 1. NOTES TO THE FINANCIAL REPORT
BASIS OF PREPARATION
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Virtus Heath Limited is
a for-profit entity for the purpose of preparing the financial statements. The consolidated financial statements of the Virtus
Health Limited group also comply with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB).
At 30 June 2020 the consolidated entity’s current liabilities exceeded its current assets by $33,844,000 (June 2019:
$19,281,000).The increase in this excess of current liabilities over current assets has arisen largely as a result of the inclusion
of current lease liabilities of $10,661,000 recognised for the first time as a result of adopting AASB 16 ‘Leases’.
The current liabilities also include unearned income of $20,032,000 as well as employee leave liabilities of $10,496,000.
Whilst the leave liabilities are required to be disclosed as a current liability, a large portion of this liability is expected not to
be settled within 12 months. The consolidated entity also has unused and available debt facilities of $92,348,000 which has
a combination of a 3 year and 5 year maturity period to September 2021 and September 2023.
The Directors continually monitor the group’s working capital position, including forecast working capital requirements
and have ensured that there are appropriate refinancing strategies and adequate committed funding facilities in place to
accommodate financial obligations as and when they fall due.
The financial report therefore has been prepared on a going concern basis.
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the
revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment
properties and derivative financial instruments.
PARENT ENTITY INFORMATION
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only.
Supplementary information about the parent entity is disclosed in note 32.
PRINCIPLES OF CONSOLIDATION
In preparing these financial statements, subsidiaries are consolidated from the date the Group gains control until the date on
which control ceases. The Group’s share of results of equity accounted investments is included in the consolidated financial
statements from the date that significant influence or joint control commences, until the date that significant influence or
joint control ceases. All intercompany transactions are eliminated.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of comprehensive
income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by
the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit balance.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in Australian dollars, which is Virtus Health Limited’s functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation
at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting
date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange
rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences
are recognised in other comprehensive income through the foreign currency translation reserve in equity.
48
ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191,
issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have
been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the
nearest dollar.
NEW OR REVISED ACCOUNTING STANDARDS
The Group adopted all relevant new and amended accounting standards and interpretations issued by the Australian
Accounting Standards Board which are effective for annual reporting periods beginning on or after 1 July 2019. Further
information on the impact of adopting AASB 16 Leases is contained in Note 12. Other adopted new and amended standards
and interpretations don’t have a material impact on the Group
NEW STANDARDS NOT YET APPLICABLE
Standards not yet applicable are not expected to have a material impact on the consolidated entity.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. These are based on historical experience and on other various
factors, including expectations of future events, management believes to be reasonable under the circumstances. The
judgements and estimates that have the most significant effect on the amounts recognised in the financial statements are
detailed in the notes below:
Judgement/Estimation
Goodwill and other indefinite life intangible assets
Share-based payments
NOTES TO THE FINANCIAL REPORTS
The notes are organised into the following sections.
Note
10
33
Financial performance overview: provides a breakdown of individual line items in the statement of financial performance,
and other information that is considered most relevant to users of the annual report.
Balance sheet items: provides a breakdown of individual line items in the statement of financial position that are
considered most relevant to users of the annual report.
Capital structure and risk management: provides information about the capital management practices of the
consolidated entity and shareholder returns for the year. This section also discusses the consolidated entity’s exposure to
various financial risks, explains how these affect the consolidated entity’s financial position and performance and what the
consolidated entity does to manage these risks.
Group structure: explains aspects of the Virtus group structure and the impact of this structure on the financial position
and performance of the consolidated entity.
Other:
• provide information on items which require disclosure to comply with Australian Accounting Standards and other
regulatory pronouncements; and
• provide information about items that are not recognised in the financial statements but could potentially have a
significant impact on the consolidated entity’s financial position and performance.
49
Virtus Health2020 Annual Report NOTE 2. OPERATING SEGMENTS
Identification of reportable operating segments
AASB 8 ‘Operating Segments’ requires operating segments to be identified on the basis of internal reports about components
of the consolidated entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the
segment and to assess its performance. The board of directors and senior management are identified as the chief operating
decision makers in assessing performance and in determining the allocation of resources. The consolidated entity currently
has six operating segments being New South Wales, Queensland, Victoria, Tasmania, Australian Diagnostics and International.
The consolidated entity has determined that the disclosure of two segments, being an Australian aggregated healthcare
services segment and an International healthcare services segment is most appropriate. Disclosure of an aggregated segment
for Australia is considered appropriate due to the similar economic characteristics faced by the operating segments and the
similar nature of the products and services being delivered to a similar customer base.
Segment revenue
Sales between segments are carried out at arm’s length and are eliminated on consolidation. The revenue from external parties
reported to the Board of Directors is measured in a manner consistent with that in the statement of comprehensive income.
Revenue from external customers is derived from the provision of healthcare services. A breakdown of revenue and results
is provided below:
Segment EBITDA
Segment performance is assessed on the basis of Segment EBITDA. Segment EBITDA comprises expenses which are incurred
in the normal trading activity of the segments and excludes the impact of corporate costs, depreciation, amortisation, goodwill
impairment, interest, share-based payments and other items which are determined to be outside of the control of the
respective segments.
Consolidated - 2020
Revenue
Sales to external customers
Other revenue
Interest revenue
Total revenue
Segment EBITDA
Share based payment expense
Corporate costs
Transaction costs
Fair value adjustments to put liabilities and contingent
consideration
Depreciation and amortisation expense
Impairment of goodwill
Impairment of brand
Foreign exchange
Net interest
Profit before income tax expense
Income tax expense
Profit after income tax expense
Total assets includes:
Investments in associates
Acquisition of non-current assets
50
Healthcare
Services
Australia
$’000
Healthcare
Services
International
$’000
Unallocated
$’000
Total
$’000
206,902
1,684
26
208,612
74,971
50,318
-
-
50,318
9,072
1,489
5,184
-
2,737
-
-
2
2
-
-
-
257,220
1,684
28
258,932
84,043
(1,252)
(17,388)
(4)
5,995
(25,017)
(24,587)
(388)
(207)
(10,763)
10,432
(9,486)
946
1,489
7,921
Segment EBITDA - Excluded $14.8m of lease payments reclassified to depreciation and interest charges on the adoption of
AASB 16 ‘Leases’.
Corporate costs include $760,000 of CEO transition and recruitment costs. Other significant increases from prior period
includes the following expenses:
• $1,800,000 in IT infrastructure and security related enhancements
• $1,200,000 in professional consulting fees that relate to strategic review, process improvement projects and legal and
consulting (COVID-19 related)
• $600,000 in termination costs
Consolidated - 2019
Revenue
Sales to external customers
Other revenue
Interest revenue
Total revenue
Segment EBITDA
Transfer of IP
Share based payment expense
Corporate costs
Transaction costs
Fair value adjustments to put liabilities and contingent
consideration
Depreciation and amortisation expense
Impairment of goodwill
Net interest
Foreign exchange
Profit before income tax expense
Income tax expense
Profit after income tax expense
Total assets includes:
Investments in associates
Acquisition of non-current assets
Healthcare
Services
Australia
$’000
Healthcare
Services
International
$’000
Unallocated
$’000
Total
$’000
216,429
5,853
108
222,390
57,676
-
-
57,676
61,091
10,055
1,489
12,580
-
1,973
-
-
3
3
-
-
-
274,105
5,853
111
280,069
71,146
4,110
(1,161)
(12,693)
(196)
8,261
(13,628)
(5,800)
(9,709)
(156)
40,174
(11,184)
28,990
1,489
14,553
Accounting policy for operating segments
Operating segments are presented using the ‘management approach’, where the information presented is on the same basis
as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation
of resources to operating segments and assessing their performance.
51
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report
NOTE 3. EARNINGS PER SHARE
NOTE 4. REVENUE
Profit after income tax
Non-controlling interest
Profit after income tax attributable to the owners of Virtus Health Limited
Add: interest savings on conversion of options
Consolidated
2020
$’000
946
(477)
469
-
2019
$’000
28,990
(564)
28,426
118
Profit after income tax attributable to the owners of Virtus Health Limited used in calculating
diluted earnings per share
469
28,544
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares that are dilutive
Number
Number
80,080,891
80,373,944
-
1,248,839
Weighted average number of ordinary shares used in calculating diluted earnings per share
80,080,891
81,622,783
Basic earnings per share
Diluted earnings per share
Cents
0.59
0.59
Cents
35.37
34.97
In the current year the options are not dilutive and hence the DPS is the same as the EPS.
Recognition and measurement
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Virtus Health Limited, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and
the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Revenue from contracts with customers
Rendering of services
Other revenue
Rent
Transfer of IP
Interest
Revenue
Other income
Fair value gain on put liabilities
Fair value gain on contingent consideration
Other income
Government grants
Other income
Consolidated
2020
$’000
2019
$’000
257,220
274,105
1,684
-
28
1,712
1,743
4,110
111
5,964
258,932
280,069
Consolidated
2020
$’000
1,500
4,495
1,307
7,738
15,040
2019
$’000
4,484
3,778
628
-
8,890
Recognition and measurement
From 1 July 2018, Virtus adopted AASB 15 Revenue from Contracts with Customers. The new standard is based on the
principle that revenue is recognised when control of a good or service transfers to a customer, that is, the ‘notion of control’
replaces the existing ‘notion of risks and rewards’. The impact of this change in accounting standard is not material to Virtus
as the ‘notion of control’ is closely aligned to the ‘notion of risks and rewards’ for Virtus revenue streams.
Rendering of services: revenue from the rendering of services is recognised upon the delivery of the service to a patient or
customer. Revenue is recognised on completion of a medical procedure, on supply of drugs, or on completion of an analytical
test. If payments received from patients exceed the revenue recognised the difference is disclosed as deferred revenue.
Unearned income: fees for fertility treatment cycles paid in advance are recognised as unearned revenue (recognised in
balance sheet) until the service has been provided whereupon the fees are recognised as revenue.
Transfer of IP: the transfer of IP was recognised at a point in time as the customer is able to direct the use of and obtain
substantially all of the benefits from the IP at the time that control of the IP was transferred to the customer.
Government grants: The receipts from the Federal Government’s JobKeeper Program and similar government programs in
other countries are accounted for as government grants and have been presented as other income.
52
53
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report
NOTE 5. EXPENSES
NOTE 6. INCOME TAX
Profit before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Right-of-use assets
Furniture and fittings
Office equipment
Medical equipment
Total depreciation
Amortisation
Software
Brand names
Total amortisation
Total depreciation and amortisation
Impairment
Impairment of goodwill
Impairment of brand
Total impairment
Finance costs
Interest and finance charges paid/payable on borrowings
Interest on lease liabilities
Interest on other financial liability - non-cash interest
Amortisation of bank facility fees
Consolidated
2020
$’000
2019
$’000
4,083
11,826
472
2,088
3,459
21,928
1,954
1,135
3,089
25,017
24,587
388
24,975
6,382
3,440
559
411
3,492
-
486
2,588
3,406
9,972
2,174
1,482
3,656
13,628
5,800
-
5,800
7,793
-
1,464
563
Finance costs expensed
10,792
9,820
Superannuation expense
Defined contribution superannuation expense
Research costs
Research costs
Share-based payments expense
Share-based payments expense - fertility specialists
Share-based payments expense - employee benefits
Total share-based payments expense
6,471
6,606
2,038
2,200
1,177
75
1,252
1,009
152
1,161
Income tax expense
Current tax
Deferred tax - origination and reversal of temporary differences
Adjustment recognised for prior periods
Write off of tax losses
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Increase in deferred tax assets
Decrease in deferred tax liabilities
Deferred tax - origination and reversal of temporary differences
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Impairment of goodwill
Impairment of brand
Fair value gain on Put Liabilities and Contingent Consideration
Other
Difference in overseas tax rates
Losses written off
Adjustment recognised for prior periods
Income tax expense
Amounts credited directly to equity
Deferred tax assets
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 17%
Consolidated
2020
$’000
2019
$’000
9,814
(884)
323
233
9,486
(725)
(159)
(884)
10,432
3,130
7,376
116
(1,560)
441
9,503
(573)
233
323
9,486
12,580
(1,234)
(162)
-
11,184
(1,082)
(152)
(1,234)
40,174
12,052
1,740
-
(2,421)
861
12,232
(886)
-
(162)
11,184
Consolidated
2020
$’000
2019
$’000
(369)
(593)
810
138
1,397
237
The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These tax
losses relate to Singapore and can be utilised in the future.
54
55
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report
NOTE 6. INCOME TAX (CONTINUED)
Deferred tax asset
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Employee benefits
Right-of-use assets
Tax losses
Intangible assets
Other
Amounts recognised in equity:
Other
Deferred tax asset
Amount expected to be recovered within 12 months
Amount expected to be recovered after more than 12 months
Movements:
Opening balance
Credited to profit or loss
Credited to equity
Opening adjustment - on transition of AASB 16 ‘Leases’
Closing balance
Consolidated
2020
$’000
2019
$’000
3,413
3,673
138
(144)
2,129
9,209
1,120
10,329
2,999
7,330
10,329
7,143
725
369
2,092
10,329
3,337
-
283
(165)
2,937
6,392
751
7,143
3,154
3,989
7,143
5,468
1,082
593
-
7,143
56
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Right-of-use assets
Intangible assets
Other
Deferred tax liability
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Movements:
Opening balance
Credited to profit or loss
Additions through business combinations
Opening adjustment - on transition of AASB 16 ‘Leases’
Closing balance
Provision for income tax
Provision for income tax
Recognition and measurement
Consolidated
2020
$’000
2019
$’000
(125)
920
4
799
153
646
799
1,065
(159)
-
(107)
799
-
1,079
(14)
1,065
151
914
1,065
866
(152)
351
-
1,065
Consolidated
2020
$’000
2019
$’000
9,662
1,121
Income tax is payable on profits after allowing for expenses assessable and deductions exempt under tax laws.
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences (at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted), except for:
• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction
that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or
• When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing
of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on
either the same taxable entity or different taxable entities which intend to settle simultaneously.
Virtus Health Limited (the ‘head entity’) and its wholly-owned Australian subsidiaries have formed an income tax consolidated
group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to
account for their own current and deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within
group’ approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax
consolidated group.
57
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report
NOTE 7. CURRENT ASSETS - CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Consolidated
2020
$’000
38,047
2019
$’000
18,831
Recognition and measurement
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
NOTE 8. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Allowance for expected credit losses
Other receivables
Consolidated
2020
$’000
11,172
(2,226)
8,946
4,426
2019
$’000
12,552
(1,859)
10,693
4,149
13,372
14,842
Allowance for expected credit losses
The consolidated entity has recognised an expense of $466,000 (2019: $546,000) in profit or loss in respect of impairment
of receivables for the year ended 30 June 2020.
The ageing of the impaired receivables provided for above is as follows:
3 to 6 months overdue
Over 6 months overdue
The nominal value of the impaired receivables is $2,818,621 (2019: $2,159,621).
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Closing balance
58
Consolidated
2020
$’000
592
1,634
2,226
2019
$’000
300
1,559
1,859
Consolidated
2020
$’000
1,859
466
(99)
2,226
2019
$’000
1,470
546
(157)
1,859
Recognition and measurement
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest
method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.
Virtus has adopted AASB 9 Financial instruments, which requires the use of an expected credit loss (‘ECL’) model. The ECL
model requires Virtus to account for expected credit losses and changes in those expected credit losses at each reporting
date to reflect changes in credit risk since initial recognition of the financial assets. Accordingly, Virtus allowance for doubtful
debts calculation applies the ECL model and takes into consideration the likely level of bad debts ( based on historical
experience) as well as any known ‘at risk’ receivables. Bad debts are written off against the allowance account and any other
changes in the allowance account is recognised in the statement of financial performance. Other receivables are recognised
at amortised cost, less any allowance for expected credit losses.
NOTE 9. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES
Trade payables
Dividends payable
Other payables
Consolidated
2020
$’000
12,343
9,541
19,654
41,538
2019
$’000
8,395
-
16,461
24,856
Refer to note 28 for further information on financial risk management.
Dividend payable represents the deferred interim dividend that was originally scheduled to be paid in April 2020.
Recognition and measurement
Trade and other payables are recognised when Virtus becomes obliged to make future payments resulting from purchase of
goods and services. Payables are stated at their amortised cost.
NOTE 10. NON-CURRENT ASSETS - INTANGIBLES
Goodwill - at cost
Software - at cost
Less: Accumulated amortisation
Brand names - at cost
Less: Accumulated amortisation
Less: Impairment
Consolidated
2020
$’000
2019
$’000
424,791
448,198
23,981
(20,617)
23,100
(18,728)
3,364
4,372
19,549
(13,622)
(388)
19,493
(12,487)
-
5,539
7,006
433,694
459,576
59
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report NOTE 10. NON-CURRENT ASSETS - INTANGIBLES (CONTINUED)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2018
Additions
Disposals
Exchange differences
Impairment
Transfers
Amortisation expense
Balance at 30 June 2019
Additions
Exchange differences
Impairment
Amortisation expense
Balance at 30 June 2020
Goodwill
$’000
Software
$’000
453,437
-
-
2,592
(5,800)
(2,031)
-
448,198
-
1,180
(24,587)
-
424,791
5,500
1,108
(83)
21
-
-
(2,174)
4,372
929
17
-
(1,954)
3,364
Brand
names
$’000
6,499
-
-
169
-
1,820
(1,482)
7,006
-
56
(388)
(1,135)
Total
$’000
465,436
1,108
(83)
2,782
(5,800)
(211)
(3,656)
459,576
929
1,253
(24,975)
(3,089)
5,539
433,694
Recognition and measurement
Intangible assets
Intangible assets including brand names acquired as part of a business combination, other than goodwill, are initially
measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at
cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment.
Goodwill
Goodwill arises on the acquisition of a business and represents the excess of the cost of acquisition over the fair value of the
identified assets and liabilities acquired. Goodwill is not amortised, but is tested for impairment annually and whenever there
is an indicator of impairment. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
Software
Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their
expected benefit, being their finite life of 3 to 5 years.
Brand names
Brand names are amortised over a defined useful life of 10-15 years and subsequently carried net of accumulated
amortisation.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other
non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and it’s value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Critical accounting estimates- impairment tests of goodwill
Goodwill is allocated to the group’s cash generating units (‘CGUs’) identified according to operating segment:
New South Wales
Victoria
Queensland
Tasmania
Australian Diagnostics
International
Consolidated
2020
$’000
111,807
122,294
66,626
-
26,721
97,343
2019
$’000
111,807
122,294
66,626
14,661
26,719
106,091
424,791
448,198
The recoverable amount of a CGU is determined based on value in use calculations. These calculations use cash flow
projections based on financial budgets approved by the board covering a one year period. Cash flows beyond the one year
period use management estimates covering a period not exceeding four years to determine income, expenses, capital
expenditure and cash flows for each CGU. In determining these forecasts senior management developed a view on the
future revenue growth, and the mix of the consolidated entities service offerings as well as margin per customer and the
capital and operational expenditure requirements. These determinations were based on past experience and expectations
of the future. Cash flows beyond the five year forecast period are extrapolated using estimated long-term growth rates
(“terminal growth rate”). The terminal growth rates used do not exceed the long term average growth rates for the business.
Each of the above factors is subject to significant judgement about future economic conditions and the ongoing structure
of the assisted reproductive services industry. Management have applied their best estimates to each of the variables and
cannot warrant their outcome.
New South Wales
Victoria
Queensland
Tasmania
International
Australia Diagnostics
Terminal Growth Rate
Pre-tax discount rate
2020
2019
2020
2.5%
2.5%
2.5%
1.0%
2.0%
2.5%
2.5%
2.5%
2.5%
1.0%
2.5%
2.0%
10.7%
10.7%
10.7%
11.6%
10.5%
10.7%
2019
10.6%
10.6%
10.6%
10.6%
9.3%
10.6%
TASMANIA:
In H1 of FY20, the Tasmanian business was restructured and streamlined in response to changes that had taken place in
the competitive landscape in that State. The consolidated entity as part of its budgeting process for the FY2021 financial
year has undertaken a detailed reviewed of the Tasmanian business. Based on this review and in light of the further impact
on the economic environment of COVID-19 related uncertainties, an impairment charge of $15,049,000 was recorded in
the statement of comprehensive income for the year ended 30 June 2020. This impairment charge has been allocated to
goodwill ($14,661,000) and other intangible assets ($388,000). This impairment charge has fully impaired all intangible
assets previously recognised in respect of the Tasmanian CGU.
If there are any further unfavourable changes in the assumptions on which the recoverable amount of Tasmania CGU is
based, this would result in a further impairment charge.
60
61
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report QUEENSLAND:
Queensland remains a price sensitive market and the recoverable amount of this business remains sensitive to annual
projected growth rates and discount rates used as disclosed above. These sensitivities are further exacerbated as a result
of the economic uncertainty resulting from COVID-19. Management believes that its review of pricing in conjunction with
targeted post COVID-19 growth initiatives and its efforts to manage costs will enable the business to achieve its revenue and
growth targets for FY2021 and beyond. Should the business be unable to achieve its forecast EBITDA, the carrying amount of
its goodwill may become impaired. The key sensitivities for the Queensland cash-generating unit are as follows:
• If forecast revenue decreases by 2.0%, an impairment charge of $2,952,000 would need to be recognised, with all other
assumptions remaining constant;
• If the discount rate increases by 0.5%, an impairment charge of $1,445,000 would need to be recognised, with all other
assumptions remaining constant;
• If the terminal growth rate decreases by 1.0%, an impairment charge of $4,280,000 would need to be recognised, with all
other assumptions remaining constant.
Reasonable possible changes in key assumptions on which the recoverable amount of the other cash generating units in
Australia are based will not cause the cash generating unit’s carrying amounts to exceed their recoverable amount.
INTERNATIONAL
International is a group of CGUs that includes goodwill allocated to our operations in Denmark, Ireland and the UK.
DENMARK:
Following a detailed review of future cash flow projections of the International CGUs, an impairment charge of $9,925,000
was recorded in the statement of comprehensive income for the year ended 30 June 2020. This impairment charge was
allocated to goodwill in respect of the Danish clinics and is primarily as a result of the uncertainties associated with COVID-19
and certain earnout related targets set at the time of acquisition not being achieved. In addition to the impact of COVID-19,
the achievement of these earnout targets was impacted by:
• the easing of regulatory restrictions in neighbouring countries that had a negative impact on inbound activity levels into
Denmark; and
• delays in doctor recruitment and business development activities
If there are any further unfavourable changes in the assumptions on which the recoverable amount of the Danish CGUs is
based, this would result in a further impairment charge.
The key sensitivities for the Danish cash-generating unit are as follows:
• If forecast revenue decreases by 2.0%, a further impairment charge of $2,681,000 would need to be recognised, with all
other assumptions remaining constant;
• If the discount rate increases by 0.5%, a further impairment charge of $3,267,000 would need to be recognised, with all
other assumptions remaining constant;
• If the terminal growth rate decreases by 0.5%, a further impairment charge of $2,428,000 would need to be recognised,
with all other assumptions remaining constant.
IRELAND AND UK:
The economic uncertainties and disruption arising as a result of COVID-19 in Ireland and the UK have increased the
sensitivity to annual projected growth rates and discount rates used as disclosed above. Management believes that its post
COVID-19 strategic plans and growth initiatives will help these businesses achieve their revenue and EBITDA growth targets
for FY2021 and beyond. Should these future growth estimates not be achieved, the carrying value of goodwill in relation to
Ireland and UK may become impaired. The key sensitivities for the UK and Irish cash-generating units are as follows:
• If forecast revenue decreases by 2.0% an impairment charge of $$4,040,000 and $736,000 would need to be
recognised for Irish and UK CGUs, respectively, with all other assumptions remaining constant;
• If the discount rate increases by 0.5%, an impairment charge of $1,703,000 and $293,000 would need to be recognised
for Irish and UK CGUs, respectively, with all other assumptions remaining constant;
• If the terminal growth rate decreases by 0.5% an impairment charge of $701,000 and $111,000 would need to be
recognised for Irish and UK CGUs, respectively, with all other assumptions remaining constant.
Each of the sensitivities above assumes that the specific assumption moves in isolation, whilst all other assumptions
are held constant. In reality, a change in one of the aforementioned assumptions may accompany a change in other
assumptions. Action is also usually taken to respond to adverse changes in economic assumptions that may mitigate the
impact of such changes.
NOTE 11. NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements - at cost
Less: Accumulated depreciation
Furniture and fittings - at cost
Less: Accumulated depreciation
Office equipment - at cost
Less: Accumulated depreciation
Medical equipment - at cost
Less: Accumulated depreciation
Consolidated
2020
$’000
53,102
(34,354)
2019
$’000
51,941
(30,310)
18,748
21,631
4,067
(2,980)
1,087
21,744
(16,715)
5,029
39,264
(29,215)
10,049
34,913
3,926
(2,505)
1,421
19,865
(14,751)
5,114
35,660
(25,790)
9,870
38,036
62
63
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report NOTE 11. NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
NOTE 12. LEASES
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set
out below:
Consolidated
Balance at 1 July 2018
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2019
Additions
Exchange differences
Depreciation expense
Balance at 30 June 2020
Leasehold
improvements
$’000
Furniture
and fittings
$’000
Office
equipment
$’000
Medical
equipment
$’000
19,288
5,833
(51)
53
(3,492)
21,631
1,195
5
(4,083)
18,748
1,503
394
-
11
(486)
1,422
133
4
(472)
1,087
5,444
2,237
-
21
(2,588)
5,114
2,000
3
(2,088)
8,242
4,981
(1)
53
(3,406)
9,869
3,663
(24)
(3,459)
5,029
10,049
34,913
Total
$’000
34,477
13,445
(52)
138
(9,972)
38,036
6,991
(12)
(10,102)
Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment over
their expected useful lives as follows:
Leasehold improvements
Furniture and fittings
Office equipment
Medical equipment
Shorter of the useful and the expected life of the lease
2 to 10 years
2 to 5 years
2 to 5 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
consolidated entity.
64
The consolidated entity leases various offices and medical centres, typically are for a period of 2 to 10 years with, in some cases,
options to extend. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
The consolidated entity has adopted AASB 16 with effect from 1 July 2019. The standard replaces AASB 117 ‘Leases’ and for
lessees eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of
low-value assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position.
Straight-line operating lease expense recognition is replaced with a depreciation charge in respect of the right-of-use assets
and an interest expense on the recognised lease liabilities. In the earlier periods of a lease, the expenses associated with the
lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before
Interest, Tax, Depreciation and Amortisation) results improve as the operating lease expense is now replaced by interest
expense and depreciation expense in profit or loss. For classification within the statement of cash flows, the interest portion
of the lease payments is disclosed in operating activities and the principal portion of the lease payments is separately
disclosed in financing activities.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost,
which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before
the commencement date net of any lease incentives received, any initial direct costs incurred, and an estimate of costs
expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at
the end of the lease term, the depreciation is over its estimated useful life. Right-of-use assets are subject to impairment or
adjusted for any remeasurement of lease liabilities
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term
leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit
or loss as incurred.
Leases Liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or,
if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise
of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is
reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on
an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if
there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee;
lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment
is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully
written down.
Extension and termination options are included in most of the property leases. All extension and termination options held are
exercisable only by Virtus and not by the respective lessor. In determining the lease term, management considered all facts
and circumstances that create an economic incentive to exercise an extension option. Extension options are only included
in the lease term if the lease is reasonably certain to be extended. The assessment is reviewed if a significant event or a
significant change in circumstances occurs which affects this assessment and that is within the control of Virtus as lessee.
(i) Impact of adoption on 1 July 2019
On adoption of AASB 16, the consolidated entity recognised lease liabilities and right-of-use assets in relation to leases which
had previously been classified as ‘operating leases’ under the principles of AASB 117 Leases. These liabilities were measured
at the present value of the remaining lease payments, discounted using the consolidated entities incremental borrowing
rate as at 1 July 2019. The weighted average incremental borrowing rate applied to the lease liabilities on 1 July 2019 was
3.5%. Right-of-use assets are calculated at the commencement date of a lease. In applying AASB 16 for the first time, the
consolidated entity has used the following practical expedients permitted by the standard:
• The use of a single discount rate to a portfolio of leases with reasonably similar characteristics
• The accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-term leases.
65
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report NOTE 12. LEASES (CONTINUED)
The impact on the consolidated entity ‘s statements of financial performance is set out below:
• The exclusion of initial direct costs for the measurement of the right-to-use asset at the date of initial application.
• Relying on previous assessments as to whether a lease is onerous.
• The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated.
The impact of adoption on opening retained profits as at 1 July 2019 was as follows:
Operating lease commitments as at 1 July 2019 (AASB 117)
Short term & low value leases (AASB 16)
New leases and option period increases
Discounting using the weighted average incremental borrowing rate of 3.5% (AASB 16)
Lease Liability recognised as at 1 July 2019 (AASB 16)
Net Right-of-use assets - Properties (AASB 16)
Write back of straight lining provision
Tax effect on the above adjustments
Reduction in opening retained profits as at 1 July 2019
(ii) Amounts recognised in the statement of financial position
The balance sheet shows the following amounts relating to leases:
Consolidated
1 July 2019
$’000
(85,642)
88
(37,541)
19,500
(103,595)
91,468
2,153
2,199
(7,775)
Increase in earnings before interest tax, depreciation and amortisation (EBITDA)
Increase in earnings before interest and tax (EBIT)
Decrease in net profit before tax (NPBT)
Consolidated
2020
$’000
14,856
3,030
(410)
2019
$’000
-
-
-
The statement of cash flows for 30 June 2020 includes cash outflows for lease payments of $10,812,000 and lease interest
of $3,440,000 within ‘cash flows from financing activities’. The cash flows for the year ended 30 June 2019 have not been
restated, with the cash outflow associated with lease payments included in ‘payments to suppliers and employees’ within
‘cash flows from operating activities’.
NOTE 13. NON-CURRENT ASSETS - RIGHT-OF-USE ASSETS
Right-of-use assets
Less: Accumulated depreciation
Consolidated
NOTE 14. CURRENT LIABILITIES - LEASE LIABILITIES
Right-of-use assets have arisen as a result of the adoption of AASB 16 ‘Leases’, refer to note 12.
Right-of-use assets
Properties
Lease liabilities
Current
Non-current
Total lease liabilities
(iii) Amounts recognised in the statement of financial performance
The statement of financial performance contains the following amounts relating to leases:
Depreciation charge for right-of-use assets
Interest expense (included in finance costs)
2020
$’000
89,719
(10,661)
(92,137)
(102,798)
2019
$’000
-
-
-
-
Consolidated
2020
$’000
11,826
3,440
15,266
2019
$’000
-
-
-
Lease liabilities
Refer to note 28 for further information on financial risk management.
Lease liabilities have arisen as a result of the adoption of AASB 16 ‘Leases’, refer to note 12.
NOTE 15. NON-CURRENT LIABILITIES - LEASE LIABILITIES
Lease liabilities
Refer to note 28 for further information on financial risk management.
Lease liabilities have arisen as a result of the adoption of AASB 16 ‘Leases’, refer to note 12.
Consolidated
2020
$’000
101,235
(11,516)
89,719
2019
$’000
-
-
-
Consolidated
2020
$’000
10,661
2019
$’000
-
Consolidated
2020
$’000
92,137
2019
$’000
-
66
67
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report NOTE 16. CURRENT LIABILITIES - PROVISIONS
Employee benefits - long service leave
Consolidated
2020
$’000
2019
$’000
4,396
4,642
Amounts not expected to be settled within the next 12 months
The current provision for long service leave includes all unconditional entitlements where employees have completed the
required period of service and also those where employees are entitled to pro-rata payments in certain circumstances.
The entire amount is presented as current, since the consolidated entity does not have an unconditional right to defer
settlement. However, based on past experience, the consolidated entity does not expect all employees to take the full
amount of accrued long service leave or require payment within the next 12 months.
The following amounts reflect leave that is not expected to be taken within the next 12 months:
Consolidated
2020
$’000
2019
$’000
Long service leave obligation expected to be settled after 12 months
3,956
4,178
Accounting policy for employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave where there is no
unconditional right to defer settlement of the liability are recognised in current liabilities in respect of employees’ services
up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities
for wages and salaries (including non-monetary benefits and annual leave) is included in Note 9 Current liabilities - trade and
other payables.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
NOTE 17. NON-CURRENT LIABILITIES - PROVISIONS
Employee benefits - long service leave
Lease make good
Consolidated
2020
$’000
1,635
5,875
7,510
2019
$’000
1,424
5,298
6,722
Lease make good
The provision represents the present value of the estimated costs to make good the premises leased by the consolidated
entity at the end of the respective lease terms.
Movements in provisions
Movements in each class of provision during the current financial year, other than employee benefits, are set out below:
Consolidated - 2020
Carrying amount at the start of the year
Additional provisions recognised
Provision utilised
Exchange differences
Unwinding of discount
Carrying amount at the end of the year
Lease
make good
$’000
5,298
377
(17)
7
210
5,875
Accounting policy for provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past
event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to
settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation.
If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The
increase in the provision resulting from the passage of time is recognised as a finance cost.
Accounting policy for other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured as the present value of expected future payments to be made in respect of services provided by employees up to
the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields
at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible,
the estimated future cash outflows.
NOTE 18. NON-CURRENT LIABILITIES - BORROWINGS
Bank loans (net of borrowing costs)
Refer to note 28 for further information on financial risk management.
Consolidated
2020
$’000
2019
$’000
164,087
173,678
Assets pledged as security
The bank loans above are secured by guarantees by all Australian group companies and fixed and floating charges over the
consolidated entity’s assets. Guarantees are not provided by subsidiaries which are not based in Australia and there are
no fixed or floating charges over the assets of the international subsidiaries of the consolidated entity. However, the shares
representing the ownership interest in the international subsidiaries are included in the charges over the consolidated entity.
68
69
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report NOTE 18. NON-CURRENT LIABILITIES - BORROWINGS (CONTINUED)
NOTE 19. CURRENT LIABILITIES - DERIVATIVE FINANCIAL INSTRUMENTS
The carrying amounts of assets pledged as security for current and non-current borrowings are:
Cash and cash equivalents
Receivables
Inventories
Right- of-use assets
Other current assets
Investments
Plant and equipment
Intangible assets (excluding goodwill)
Deferred tax assets
Other financial assets
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loans (excluding capitalised borrowing costs)
Working capital facilities
Used at the reporting date
Bank loans (excluding capitalised borrowing costs)
Working capital facilities
Unused at the reporting date
Bank loans (excluding capitalised borrowing costs)
Working capital facilities
Consolidated
2020
$’000
27,492
10,012
812
65,264
2,439
81,465
26,132
2,834
9,326
66
2019
$’000
7,992
7,313
790
-
2,245
81,465
29,761
3,804
6,456
64
225,842
139,890
Consolidated
2020
$’000
2019
$’000
252,660
10,000
252,403
10,000
262,660
262,403
165,000
5,312
175,000
5,001
170,312
180,001
87,660
4,688
77,403
4,999
92,348
82,402
Borrowings-Financial Arrangements
The consolidated entity has total commitments of $262,660,000 through its syndicated debt facilities. At 30 June 2020,
total facilities drawn were $165,000,000 in borrowings and $5,311,741 (FY19: $5,001,000) in guarantees. Unused and
available facilities amounted to $92,348,000. The consolidated entity complied with the financial covenants of its borrowing
liabilities during the financial year ended 30 June 2020. Subject to the continued compliance with debt covenants, the bank
facilities may be drawn at any time and have an average maturity of 2 years (30 June 2019: 3 year).
$92,660,000 of the facility expires in September 2021, while the remaining $170,000,000 expires in September 2023.
Recognition and measurement
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the
period in which they are incurred.
70
Interest rate swap contracts - cash flow hedges
Refer to note 28 for further information on financial risk management.
Refer to note 29 for further information on fair value measurement.
Recognition and measurement
Consolidated
2020
$’000
2019
$’000
1,148
764
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on
whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current depending on the expected period of realisation.
Cash flow hedges
Cash flow hedges are used to cover the consolidated entity’s exposure to variability in cash flows that is attributable to a
particular risk associated with a recognised asset or liability or a firm commitment which could affect profit or loss. The
effective portion of the gain or loss on the hedging instrument is recognised directly in equity, whilst the ineffective portion
is recognised in profit or loss. Amounts taken to equity are transferred out of equity and included in the measurement of the
hedged transaction when the forecast transaction occurs.
Cash flow hedges are tested for effectiveness on a regular basis both retrospectively and prospectively to ensure that
each hedge is highly effective and continues to be designated as a cash flow hedge. If the forecast transaction is no longer
expected to occur, the amounts recognised in equity are transferred to profit or loss.
If the hedging instrument is sold, terminated, expires, exercised without replacement or rollover, or if the hedge becomes
ineffective and is no longer a designated hedge, the amounts previously recognised in equity remain in equity until the
forecast transaction occurs.
NOTE 20. NON-CURRENT LIABILITIES - DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swap contracts - cash flow hedges
Refer to note 28 for further information on financial risk management.
Refer to note 29 for further information on fair value measurement.
Consolidated
2020
$’000
2019
$’000
2,586
1,738
71
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report
NOTE 21. CURRENT LIABILITIES - OTHER FINANCIAL LIABILITIES
Other financial liability
Loan note
Consolidated
2020
$’000
1,546
828
2,374
2019
$’000
8,582
815
9,397
The other current financial liabilities represent the fair value of the contingent consideration arising from the acquisition of
Fertilitesklinikken Trianglen Aps of $1,546,000. This liability is expected to be settled within the next 12 months.
Loan note reflects the current portion of a loan owing to the vendors of Trianglen.
NOTE 22. NON-CURRENT LIABILITIES - OTHER FINANCIAL LIABILITIES
Other financial liabilities
Loan note
Consolidated
2020
$’000
-
1,284
1,284
2019
$’000
5,656
2,094
7,750
Refer to note 29 for other information on financial instruments- including table explaining the movements on other financial
liabilities.
Loan note reflects the non-current portion of a loan owing to the vendors of Trianglen.
NOTE 23. EQUITY - ISSUED CAPITAL
Ordinary shares - fully paid
Treasury Shares
Consolidated
2020
Shares
2019
Shares
80,389,938
(470,141)
80,389,938
(146,768)
2020
$’000
242,892
(2,107)
2019
$’000
242,476
(586)
79,919,797
80,243,170
240,785
241,890
Movements in ordinary share capital
Details
Date
Shares
Issue price
$’000
Balance
Settlement of partly paid shares
Settlement of partly paid shares
Balance
Settlement of partly paid shares
Settlement of partly paid shares
Balance
72
1 July 2018
12 October 2018
18 April 2019
30 June 2019
25 October 2019
30 March 2020
80,389,938
-
-
80,389,938
-
-
30 June 2020
80,389,938
$0.00
$0.00
$0.00
$0.00
242,251
115
110
242,476
110
306
242,892
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
All shares on issue are fully paid apart from 1,620,741 shares which are partly paid. The 1,620,741 shares were issued at $4.71
per share and are unpaid up to the extent of $2.58 per share at 30 June 2020
Treasury Shares
Treasury shares are shares in Virtus Health Limited that are held by the Virtus Health Limited Employee Share Trust
(‘VHLEST’) for the purpose of providing shares under selected Group equity plans.
On market acquisitions during the period
Distribution of shares during the period to fertility specialists
Balance at 1 July 2019
On market acquisitions during the period
Distribution of shares during the period to fertility specialists
Balance at 30 June 2020
Share buy-back
There is no current on-market share buy-back.
Number of
shares
$
177,394
(30,626)
711,029
(124,901)
146,768
439,462
(116,089)
586,128
1,984,187
(463,610)
470,141
2,106,705
Capital risk management
The consolidated entity’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that
it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to
reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as value
adding relative to the current parent entity’s share price at the time of the investment.
Recognition and measurement
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
When the company reacquires its equity instruments (treasury shares) their cost is deducted from equity. No gain or loss is
recognised in the profit or loss on the purchase, sale, issue or cancellation of treasury shares. Any difference between the
cost of acquisition and the consideration when reissued is recognised in the Share based payments reserve.
NOTE 24. EQUITY - DIVIDENDS
Dividend type
2018 Final
2019 Interim
2019 Final
Cents per share
Franking
$’000
Date paid
12.0
12.0
12.0
100%
100%
100%
9,647
9,647
9,647
12/10/2018
18/04/2019
04/10/2019
The payment of the interim dividend in respect of the 30 June 2020 financial year of $9,541,000 scheduled for 16 April 2020
was deferred until 30 November 2020 subject to trading conditions and is currently recognised in other payables.
73
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report NOTE 24. EQUITY - DIVIDENDS (CONTINUED)
Recognition and measurement
Dividends are recognised when declared during the financial year.
Franking account balance
Consolidated
2020
$’000
2019
$’000
29,672
24,008
Recognition and measurement
The above amounts are calculated from the balance of the franking account as at the end of the reporting period, adjusted
for franking credits that will arise from the settlement of income tax liabilities after the end of the year and franking debits
that will arise from the payment of dividends recognised as a liability at the reporting date.
NOTE 25. EQUITY - RESERVES
Foreign currency translation reserve
Cash flow hedges reserve
Share-based payments reserve
Business combination reserve
Nature and purpose of reserves
Consolidated
2020
$’000
7,565
(2,617)
15,293
(4,237)
16,004
2019
$’000
6,218
(1,755)
14,504
(13,808)
5,159
• Foreign currency translation reserve: this reserve is used to recognise exchange differences arising from the translation
of the financial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on
hedges of the net investments in foreign operations.
• Cash flow hedge reserve: the reserve is used to recognise the effective portion of the gain or loss of cash flow hedge
instruments that are determined to be an effective hedge.
• Share-based payments reserve: the reserve is used to recognise the value of equity benefits provided to employees and
directors as part of their remuneration, and other parties as part of their compensation for services.
• Business combination reserve: the reserve is used to recognise the impact of the non-controlling interest put options
relating to the Sims Clinic Limited and Tas IVF Pty Limited acquisitions. The reduction is for the exercise of all put options
in relation to both these entities.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2018
Revaluation - net
Foreign currency translation
Option expense
Issue of shares pursuant to share
based payment schemes
Balance at 30 June 2019
Revaluation - net
Foreign currency translation
Option expense
Put option exercise
Issue of shares pursuant to share
based payment schemes
Foreign
currency
translation
reserve
$’000
Cash flow
hedges
reserve
$’000
Share-based
payments
reserve
$’000
Business
combination
reserve
$’000
3,549
-
2,669
-
-
6,218
-
1,347
-
-
-
(372)
(1,383)
-
-
-
(1,755)
(862)
-
-
-
-
13,468
-
-
1,161
(125)
14,504
-
-
1,252
-
(463)
Total
$’000
2,837
(1,383)
2,669
1,161
(13,808)
-
-
-
-
(125)
(13,808)
-
-
-
9,571
-
5,159
(862)
1,347
1,252
9,571
(463)
Balance at 30 June 2020
7,565
(2,617)
15,293
(4,237)
16,004
NOTE 26. EQUITY - RETAINED PROFITS
Retained profits at the beginning of the financial year
Profit after income tax expense for the year
Dividends (note 24)
Adjustment on adoption of AASB 16- net of tax (note 12)
Consolidated
2020
$’000
37,111
469
(19,188)
(7,775)
2019
$’000
27,979
28,426
(19,294)
-
Retained profits at the end of the financial year
10,617
37,111
NOTE 27. EQUITY - NON-CONTROLLING INTEREST
Issued capital
Reserves
Retained profits
Consolidated
2020
$’000
1,842
(4,207)
3,162
2019
$’000
1,842
5,315
3,296
797
10,453
74
75
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report NOTE 28. FINANCIAL RISK MANAGEMENT
FINANCIAL RISK MANAGEMENT OBJECTIVES
The group has exposure to the following risks in the course of its activities:
• Market risk;
• Credit risk; and
• 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 quantified disclosures are included
throughout this financial report.
The consolidated entity’s financial risk management program focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the financial performance of the consolidated entity. Derivative financial
instruments such as forward foreign exchange contracts are used to hedge certain risk exposures.
Risk management is carried out by senior finance executives (‘finance’) under policies approved by the Board of
Directors (‘the Board’). These policies include identification and analysis of the risk exposure of the consolidated entity
and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the
consolidated entity’s operating units. Finance reports to the Board on a monthly basis.
MARKET RISK
Foreign currency risk
The group operates internationally and is exposed to foreign currency risk from various currency exposures, primarily with
respect to the Euro, GBP, Singapore dollars and Danish Krone.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities
denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and
cash flow forecasting.
Price risk
The consolidated entity is exposed to changes in Commonwealth Government funding for the healthcare services the
consolidated entity provides which may impact patient out-of-pocket expenses and thus demand.
Interest rate risk
The consolidated entity’s main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates
expose the consolidated entity to interest rate risk. Borrowings issued at fixed rates expose the consolidated entity to fair
value interest rate risk. The policy is to maintain approximately 30% of borrowings at fixed rate using interest rate swaps to
achieve this when necessary.
As at the reporting date, the consolidated entity had the following variable rate borrowings and interest rate swap contracts
outstanding:
Consolidated
Bank loans
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
2020
2019
Weighted
average
interest rate
%
2.76%
-
Weighted
average
interest rate
%
Balance
$’000
3.46%
-
175,000
(110,000)
65,000
Balance
$’000
165,000
(60,000)
105,000
An analysis by remaining contractual maturities is shown in the ‘liquidity and interest rate risk management’ section below.
Consolidated - 2020
Basis points
change
Profit after
tax $’000
Equity
$’000
Basis points
change
Profit after
tax $’000
Basis points increase
Basis points decrease
Bank loans
100
(735)
(735)
(100)
735
Consolidated - 2019
Basis points
change
Profit after
tax $’000
Equity
$’000
Basis points
change
Profit after
tax $’000
Basis points increase
Basis points decrease
Bank loans
100
(455)
(455)
(100)
455
Equity
$’000
735
Equity
$’000
455
CREDIT RISK
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information,
confirming references and setting appropriate credit limits. The maximum exposure to credit risk at the reporting date to
recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the
statement of financial position and notes to the financial statements. The consolidated entity does not hold any collateral.
The consolidated entity has adopted an expected loss allowance in estimating expected credit losses to trade receivables
through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered
representative across all customers of the consolidated entity based on recent sales experience, historical collection rates
and forward-looking information that is available.
Receivables balances and ageing analysis are monitored on an on-going basis. In order to minimise the consolidated entity’s
exposure to bad debts, processes are in place to send reminder notices, demands for repayment and ultimately to refer to
debt collection agencies.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include
the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual
payments for a period greater than 1 year.
LIQUIDITY RISK
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Financing arrangements
Unused borrowing facilities at the reporting date:
Bank loans (excluding capitalised borrowing costs)
Working capital facilities
Consolidated
2020
$’000
88,573
4,688
2019
$’000
78,725
4,999
93,261
83,724
The consolidated entity has borrowing facilities totalling $262,660,000. $92,660,000 of the facility expires in September
2021,whilst the remaining $170,000,000 expires in September 2023
76
77
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report NOTE 28. FINANCIAL RISK MANAGEMENT (CONTINUED)
NOTE 29. FAIR VALUE MEASUREMENT
Remaining contractual maturities
The following tables detail the consolidated entity’s remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Consolidated - 2020
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Bank loans
Lease liabilities
Other financial liabilities
Loan note
Weighted
average
interest rate
%
Between
1 and less
than 2 years
$’000
1 year or less
$’000
Between 2
and 5 years
$’000
Over 5 years
$’000
Remaining
contractual
maturities
$’000
-
-
2.76%
-
2.76%
4.00%
12,343
29,195
4,550
13,981
1,546
903
-
-
53,864
13,934
-
870
-
-
129,419
36,958
-
422
-
-
12,343
29,195
-
56,568
-
-
187,833
121,441
1,546
2,195
Total non-derivatives
62,518
68,668
166,799
56,568
354,553
Derivatives
Derivative financial
instruments
Total derivatives
Consolidated - 2019
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Bank loans
Other financial liabilities
Loan note
-
1,148
1,148
1,148
1,148
1,438
1,438
-
-
3,734
3,734
Weighted
average
interest rate
%
Between
1 and less
than 2 years
$’000
1 year or less
$’000
Between 2
and 5 years
$’000
Over 5 years
$’000
Remaining
contractual
maturities
$’000
-
-
3.46%
3.46%
4.00%
8,395
16,461
6,060
8,582
921
-
-
6,060
5,983
888
-
-
185,353
-
1,271
Total non-derivatives
40,419
12,931
186,624
Derivatives
Derivative financial
instruments
Total derivatives
-
764
764
534
534
1,204
1,204
-
-
-
-
-
-
-
-
8,395
16,461
197,473
14,565
3,080
239,974
2,502
2,502
Fair value hierarchy
The following tables detail the consolidated entity’s assets and liabilities, measured or disclosed at fair value, using a three
level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date;
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly; and
Level 3: Unobservable inputs for the asset or liability.
Consolidated - 2020
Liabilities
Derivative financial liabilities
Other financial liabilities
Total liabilities
Consolidated - 2019
Liabilities
Derivative financial liabilities
Other financial liabilities
Total liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
-
3,734
-
3,734
-
1,546
1,546
3,734
1,546
5,280
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
-
2,502
-
2,502
-
14,238
14,238
2,502
14,238
16,740
There were no transfers between levels during the financial year.
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair
values due to their short-term nature.
The fair value of other financial liabilities is estimated by discounting the remaining contractual maturities at the current
market interest rate that is available for similar financial liabilities.
Valuation techniques for fair value measurements categorised within level 2 and level 3
Derivative financial instruments have been valued using quoted market rates. This valuation technique maximises the use
of observable market data where it is available and relies as little as possible on entity specific estimates. Other financial
liabilities have been valued using a forecast earnings model, discounted using specific borrowing rates.
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
78
79
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report NOTE 29. FAIR VALUE MEASUREMENT (CONTINUED)
Level 3 assets and liabilities
Movements in level 3 assets and liabilities during the current and previous financial year are set out below:
NOTE 30. INTERESTS IN SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1:
Ownership interest
Consolidated
Balance at 1 July 2018
Interest on unwinding
Foreign exchange impact
Fair value adjustment
Balance at 30 June 2019
Foreign exchange impact
Amounts paid in exercise of put option
Interest on unwinding
Fair value adjustment
Balance at 30 June 2020
Contingent
Consideration
$’000
Put Option
$’000
8,817
363
254
(3,778)
5,656
141
-
244
(4,495)
1,546
12,158
689
219
(4,484)
8,582
27
(7,109)
-
(1,500)
Total
$’000
20,975
1,052
473
(8,262)
14,238
168
(7,109)
244
(5,995)
-
1,546
Recognition and measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming
they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best
use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair
value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and
transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either
not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge
and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis
is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where
applicable, with external sources of data.
Name
Principal place of business /
Country of incorporation
2020
%
IVF Finance Pty Limited
IVFA Sub-Holdings Pty Ltd
IVF Australia Pty Ltd
Melbourne IVF Holdings Pty Ltd
Melbourne I.V.F. Pty. Ltd.
The Heptarchy Trust
North Shore Specialist Day Hospital Pty Ltd
Queensland Fertility Group Pty. Ltd.
Spring Hill Specialist Day Hospital Pty Limited
The QFG Day Theatres Unit Trust
Hunter Fertility Pty Limited
Hunter Fertility Unit Trust
Bremiera Pty Limited
Queensland Fertility Group Gold Coast Pty Ltd
Gold Coast Obstetrics & Gynaecology Specialist Services Pty Ltd
Mackay Specialist Day Hospital Pty Limited
City East Specialist Day Hospital Trust
Virtus Health Singapore Pte Ltd
Virtus Health Europe Limited
Virtus Health Ireland Limited
SIMS Clinic Limited
Xentra Pharm Limited
IVF Sunshine Coast Limited
Human Assisted Reproduction Ireland (HARI) Limited
TAS IVF Pty Limited
Virtus Andrology Laboratory Singapore Pte. Ltd
Virtus Fertility Centre Singapore Pte Limited
Virtus Health Specialist Diagnostics Pty Limited
Lab Services Pty Limited
Lab Services Unit Trust
Aagaard Fertilitetsklinik Aps
Complete Fertility Limited
Fertilitesklinikken Trianglen Aps
Virtus Innovation Pty Ltd
Virtus Health Limited Employee Share Trust
Hobart Specialist Day Hospital Pty Limited
Alexandria Specialist Day Hospital Pty Limited
Skejby Cryobank Aps
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
United Kingdom
Ireland
Ireland
Ireland
Australia
Ireland
Australia
Singapore
Singapore
Australia
Australia
Australia
Denmark
United Kingdom
Denmark
Australia
Australia
Australia
Australia
Denmark
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
70.00%
70.00%
100.00%
100.00%
100.00%
100.00%
90.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
2019
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
85.00%
85.00%
100.00%
85.00%
85.00%
70.00%
70.00%
100.00%
100.00%
100.00%
100.00%
90.00%
100.00%
100.00%
100.00%
85.00%
100.00%
100.00%
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries with
non-controlling interests in accordance with the accounting policy described in note 1:
Name
Principal place
of business /
Country of
incorporation
Virtus Fertility Centre
Singapore Pte Limited and
its controlled entities
Singapore
Complete Fertility Limited
United Kingdom
Principal activities
provision of
healthcare services
provision of
healthcare services
Parent
Non-controlling interest
Ownership
interest
2020
%
Ownership
interest
2019
%
Ownership
interest
2020
%
Ownership
interest
2019
%
70.00%
70.00%
30.00%
30.00%
90.00%
90.00%
10.00%
10.00%
80
81
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report NOTE 31. DEED OF CROSS GUARANTEE
The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others:
Virtus Health Limited
IVF Finance Pty Limited
IVFA Sub-Holdings Pty Ltd
IVF Australia Pty Ltd
Melbourne IVF Holdings Pty Ltd
Queensland Fertility Group Pty. Ltd.
Virtus Health Specialist Diagnostics Pty Limited
Lab Services Pty Limited
By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare audited financial
statements and directors’ report under Corporations Instrument 2016/785 issued by the Australian Securities and
Investments Commission.
The above companies represent a ‘Closed Group’ for the purposes of the Corporations Instrument, and as there are no
other parties to the deed of cross guarantee that are controlled by Virtus Health Limited, they also represent the ‘Extended
Closed Group’.
Set out below is a consolidated statement of comprehensive income and statement of financial position of the ‘Closed Group’.
Statement of comprehensive income
Revenue
Share of profits of associates accounted for using the equity method
Trust distributions received
Other income
Fertility specialists, consumables and associated costs
Employee benefits expense
Depreciation and amortisation expense
Occupancy expense
Advertising and marketing
Practice equipment expenses
Professional and consulting fees
Other expenses
Finance costs
Impairment charge
Profit before income tax expense
Income tax expense
Profit after income tax expense
Other comprehensive loss
Net change in the fair value of cash flow hedges taken to equity, net of tax
Other comprehensive loss for the year, net of tax
Total comprehensive income for the year
Equity - retained profits
Retained profits at the beginning of the financial year
Profit after income tax expense
Dividends paid
Adjustment on adoption of AASB 16- net of tax
2020
$’000
2019
$’000
118,989
403
23,430
7,079
(29,965)
(52,448)
(13,634)
(796)
(2,944)
(1,050)
(2,626)
(7,162)
(8,951)
(15,049)
15,276
(7,291)
126,083
510
22,561
5,678
(32,424)
(50,303)
(7,418)
(8,930)
(3,270)
(1,133)
(1,422)
(6,541)
(8,763)
(5,800)
28,828
(10,624)
7,985
18,204
(862)
(862)
7,123
2020
$’000
28,418
7,985
(19,188)
(5,627)
(1,383)
(1,383)
16,821
2019
$’000
29,508
18,204
(19,294)
-
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Non-current assets
Investments accounted for using the equity method
Other financial assets
Property, plant and equipment
Right-of-use assets
Intangibles
Deferred tax
Other
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Derivative financial instruments
Income tax
Provisions
Unearned income
Non-current liabilities
Borrowings
Lease liabilities
Derivative financial instruments
Provisions
Other financial liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
2020
$’000
2019
$’000
21,151
20,124
2,244
43,519
1,489
200,596
16,294
51,720
203,990
7,397
153
4,387
17,809
1,977
24,173
1,489
215,315
18,993
-
204,961
5,275
217
481,639
446,250
525,158
470,423
20,811
6,065
1,148
9,562
2,765
6,926
47,277
164,161
54,583
2,586
3,699
-
6,224
-
765
2,008
2,866
5,582
17,445
173,803
-
1,738
3,282
1,451
225,029
180,274
272,306
197,719
252,852
272,704
240,786
478
11,588
241,890
2,396
28,418
252,852
272,704
Retained profits at the end of the financial year
11,588
28,418
82
83
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report NOTE 32. PARENT ENTITY INFORMATION
Set out below is the supplementary information about the parent entity.
Statement of comprehensive income
Profit after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share-based payments reserve
Retained profits
Total equity
Parent
2020
$’000
1,149
1,149
2019
$’000
30,283
30,283
Parent
2020
$’000
55,131
2019
$’000
41,557
299,973
299,712
23,173
23,442
3,574
3,647
276,531
296,065
240,785
7,124
28,622
241,890
7,513
46,662
276,531
296,065
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2020 and 30 June 2019 apart
from being a party to the deed of cross guarantee as detailed in note 31.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
Capital commitments - property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019.
NOTE 33. SHARE-BASED PAYMENTS
Virtus Health Limited Executive Option Plan and Specialist Option Plan (‘Virtus Health Limited Share Option Plan’)
The Virtus Health Limited Share Option Plan was adopted by the Board on 11 June 2013. The Virtus Health Limited Share
Option Plan was established to reward, retain and motivate fertility specialists and senior executives. Participation in the
Virtus Health Limited Share Option Plan is at the Board’s discretion and no individual has a contracted right to participate
in the Virtus Health Limited Share Option Plan or to receive any guaranteed benefits. Further details are provided in the
remuneration report relating to Virtus Health Executives.
Set out below are summaries of options and performance rights granted under the plans:
2020
Effective
grant date
03/10/2014
13/05/2015
13/05/2015
13/05/2015
13/05/2015
21/08/2015
28/10/2015
16/12/2015
21/09/2016
21/09/2016
11/11/2016
21/06/2017
24/10/2017
24/10/2017
24/10/2017
24/10/2017
22/11/2017
22/11/2017
10/10/2018
10/10/2018
10/10/2018
10/10/2018
21/11/2018
20/11/2019
09/12/2019
09/12/2019
27/04/2020
Expiry date
03/10/2024
13/05/2025
13/05/2025
13/05/2025
13/05/2025
21/08/2025
28/10/2025
16/12/2025
21/09/2026
21/09/2026
11/11/2026
21/06/2027
24/10/2027
24/10/2027
24/10/2027
24/10/2027
22/11/2027
22/11/2027
10/10/2028
10/10/2028
10/10/2028
10/10/2028
21/11/2028
20/11/2029
09/12/2029
09/12/2029
27/04/2030
Exercise or
base price
Balance at
the start of
the year
$8.57
$7.16
$7.53
$7.94
$7.94
$5.67
$5.01
$6.17
$8.05
$8.05
$0.00
$5.35
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
45,415
1,536
617
712
329
7,434
8,231
4,236
8,616
3,969
49,745
3,129
177,365
72,580
116,128
43,548
243,728
136,508
241,581
31,579
14,336
14,211
177,740
-
-
-
-
Granted
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
146,506
78,832
19,708
162,037
1,403,273
407,083
Exercised/
cancelled/
other
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(45,415)
(1,536)
(617)
(712)
(329)
(1,578)
(6,026)
(1,826)
(1,440)
(480)
(49,745)
(893)
(115,809)
-
-
-
-
-
-
-
-
-
(73,096)
(28,431)
-
-
-
-
-
-
-
-
5,856
2,205
2,410
7,176
3,489
-
2,236
61,556
72,580
116,128
43,548
243,728
136,508
241,581
31,579
14,336
14,211
104,644
118,075
78,832
19,708
162,037
(327,933)
1,482,423
The weighted average exercise price is $0.11 (2019: $0.48).
The weighted average remaining contractual life of options and performance rights outstanding at the end of the financial
year was 8.2 years (2019: 8.5 years).
For the options and performance rights granted during the current financial year, the valuation model inputs used to
determine the fair value at the grant date, are as follows:
Grant date
Expiry date
20/11/2019
09/12/2019
09/12/2019
27/04/2020
20/11/2029
09/12/2029
09/12/2029
27/04/2030
Share price
at grant date
Exercise price
or base price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value
at grant date
$4.20
$4.46
$4.46
$2.95
$0.00
$0.00
$0.00
$0.00
28.00%
28.00%
28.00%
28.00%
4.85%
4.85%
4.85%
4.85%
1.07%
1.15%
1.15%
1.07%
$1.49
$2.13
$2.13
$1.49
Vesting Conditions
Options and performance rights will vest and become exercisable to the extent that the applicable performance, service, or
other vesting conditions specified at the time of the grant are satisfied. Vesting conditions may include conditions relating to
continuous employment or service, the individual performance of the participant in the Plan or the company’s performance.
The Board has the discretion to set the terms and conditions on which it will offer options and performance rights under the
Plan, including the vesting conditions and different terms and conditions which apply to different participants in the Plan.
Upon the satisfaction of the vesting conditions and any other conditions to exercise, each option and performance right will
be exercisable into a variable number of shares based on the terms of issue of the options or performance rights.
84
85
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report
NOTE 33. SHARE-BASED PAYMENTS (CONTINUED)
One off compensation for incentive forgone
In recognition of incentives Ms Munnings has forgone as a result of her leaving her former employment and accepting
employment with Virtus Health Limited , a grant of performance rights under the LTI Plan valued at $700,000 was granted
to Ms Munnings on commencing employment with Virtus. Vesting of the performance rights will be subject to the Board’s
assessment of Ms Munning’s performance over each year of a 3 year vesting period and will vest as follows:
i. 1/3rd in FY21 on the first anniversary of the date of commencement of employment;
ii. 1/3rd in FY22 on the second anniversary of the date of commencement of employment;and
High performance rights – fertility specialists
The Board recognises those fertility specialists that achieve a high level of fresh cycles over a defined period acknowledging
the value they generate for shareholders. The High Performer Share Incentive Scheme (‘HPSIS’) rewards fertility specialists
who consistently deliver more than 299 cycles per annum. There are two issues of HPSIS tranches outstanding, details of
which are as follows:
• HPSIS Issue three commenced on 1 July 2016 and runs for a four year period ending 30 June 2020 with the first year
being the qualifying period. There is no share price hurdle applicable to this grant; and
• HPSIS Issue four commenced on 1 July 2017 and runs for a four year period ending 30 June 2021 with the first year being
the qualifying period. There is no share price hurdle applicable to this grant.
iii. 1/3rd in FY23 on the third anniversary of the date of commencement of employment.
In FY17, 11 fertility specialists qualified for HPSIS Issue three. In FY18, two fertility specialists qualified for HPSIS Issue four.
Fertility specialist performance rights and share incentives
Grants of performance rights - fertility specialists
The fertility specialist incentive schemes applicable for FY19 and FY20 are as follows:
•
•
initial and performance rights granted to specialists before 1 September 2016;
initial and performance rights granted to specialists after 1 September 2016;
• high performance rights granted to specialists up to 1 July 2018; and
• a loyalty share scheme
Performance rights are granted on an annual basis to existing fertility specialists who achieve a benchmark level of IVF cycles
above a base or adjusted base number of IVF cycles established in one of the financial years ending after June 2008 up to 30
June 2017. All incentive schemes are administered in accordance with the plan rules established in the Virtus Health Limited
Specialist Option Plan approved by the Board in June 2013.
Grants made before 1 September 2016
Vesting is dependent on achievement of performance and share price hurdles. Upon the satisfaction of the vesting
conditions and any other conditions to exercise, each performance right will be exercisable into a variable number of shares
based on the terms of issue of the performance rights. The number of shares to be issued will be calculated by multiplying
the applicable component of the grant offer value by the amount of the increase in the share price between the share price
at vesting compared to the share price at grant date all divided by the share price at vesting.
At 30 June 2020 the potential number of unvested initial and performance rights subject to these grants is estimated to be 10,471.
Grants made after 1 September 2016
Grants of rights are made as follows:
• Grants in March each year to new fertility specialists contracting in the six month period ending 31 December and grants
in September each year to new fertility specialists contracting in the 6 month period ending 30 June. These performance
rights vest equally in three tranches on the third, fourth and fifth anniversary of the grant of the performance rights, subject
to the fertility specialist achieving the relevant benchmark (currently 50 IVF cycles) in a twelve month period during the two
years post commencement of the contractual relationship with the consolidated entity;
• Grants in September each year of performance rights to existing fertility specialists in relation to achievement of
incremental increases in practice cycles in the 12 month period ending 30 June. These performance rights are awarded
for incremental increases in practice cycles of 50, up to a limit of 200 cycles and rights will generally vest equally in
three tranches on the third, fourth and fifth anniversary of the grant of the performance rights, conditional upon the
fertility specialist performing a number of IVF cycles in the immediately preceding year not less than 75% of the relevant
benchmark in the year pursuant to which the performance rights were awarded; and
• In all cases the number of performance rights granted to a fertility specialist is derived using the volume weighted
average closing share price for the 15 business days immediately following the announcement of the Company’s results
to the ASX for the financial periods ending 31 December and 30 June and accordingly the number of performance rights
granted is fixed at grant date.
At 30 June 2020 the potential number of unvested performance rights subject to these grants is estimated to be 750,333.
At 30 June 2020 the potential number of unvested performance rights subject to these grants is estimated to be 275,307.
High performance rights vest and become exercisable to the extent that the applicable performance, service, or other
vesting conditions specified at the time of the grant are satisfied. Vesting conditions may include conditions relating to
continuous service and the individual performance of the participant in the Plan. Participants are not required to pay cash to
receive performance rights under the Plan. No further grants are planned under this structure.
Loyalty share scheme – fertility specialists
The Loyalty Share Scheme (‘LSS’) is designed to recognise the sustained contribution of the top quartile of specialists on an
annual basis and replaced the High Performance Share Incentive Scheme in FY19. The key features of the LSS are as follows:
• Value of award is variable and dependent on individual number of personal cycles delivered adjusted by a loading factor
to recognise a higher award for specialists making a higher contribution to the business.
• Annual Qualifying hurdle is 200 cycles;
• Annual vesting, no waiting period, no escrow arrangements;
• Other considerations;
~ awards are payable in shares; conversion from award value is at the Virtus share price on the 15th business day following
the group’s annual result announcement (normally mid-September); and
~ annual pool value for FY20 is capped at $500,000 (assessed annually by the Nomination and Remuneration Committee).
Recognition and measurement
Equity settlement: the fair value determined at the grant date of the equity settled share-based payments is expensed on a
straight-line basis over the vesting period (with a corresponding increase to the share-based payments reserve), based on
the estimate of shares that will eventually vest.
Critical accounting estimate - valuation of share based payments
The consolidated entity measures the cost of equity-settled transactions by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using a hybrid option-pricing model
provided by Hoadley, taking into account the terms and conditions upon which the instruments were granted.
86
87
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report
NOTE 34. RELATED PARTY TRANSACTIONS
Parent entity
Virtus Health Limited is the parent entity and ultimate controlling party.
Subsidiaries
Interests in subsidiaries are set out in note 30.
NOTE 35. KEY MANAGEMENT PERSONNEL DISCLOSURES
Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated
entity is set out below:
Consolidated
2020
$’000
2019
$’000
2,049,473
115,979
5,833
77,204
3,052,929
197,662
30,280
159,588
2,248,489
3,440,459
Key management personnel
Disclosures relating to key management personnel are set out in note 35 and the remuneration report included in the
directors’ report.
Transactions with related parties
The following transactions occurred with related parties:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Other revenue:
Rental income (i)
Other transactions:
Provider fees (ii)
Share based payments (iii)
Consolidated
2019
2020
$’000
$’000
47,520
278,726
968,454
15,565
2,892,025
137,862
Aggregate compensation to key management personnel (KMP) for the year ended 30 June 2019 does not agree to the
Remuneration report as the disclosures in the Remuneration report have been amended following a reassessment of the
composition of KMP.
NOTE 36. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH
FROM OPERATING ACTIVITIES
(i) The following key management personnel paid rent for the use of leased space in Virtus : Lyndon Hale (30 June 2019:
Lyndon Hale, Peter Illingworth and David Molloy).
(ii) The following key management personnel received provider fees for IVF services delivered to patients: Lyndon Hale (30
June 2019: Lyndon Hale, Peter Illingworth, David Molloy and William Watkins).
(iii) The following key management personnel received performance rights for the provision of IVF services delivered to
patients: Lyndon Hale (30 June 2019: Lyndon Hale, Peter Illingworth, David Molloy and William Walkins).
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current receivables:
Trade receivables from associates
Other receivables
Current payables:
Other payables for provider fees
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Consolidated
2020
$’000
2019
$’000
537,431
4,356
517,025
17,821
437,404
358,808
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Impairment of intangibles
Write off of non-current assets
Share-based payments
Amortisation of bank facility fees
Net fair value gain on other financial liabilities
Other non-cash items
Interest on other financial liabilities - non-cash interest
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in inventories
Increase in deferred tax assets
Increase in trade and other payables
Increase/(decrease) in provision for income tax
Increase in other provisions
Increase in other operating liabilities
Consolidated
2020
$’000
2019
$’000
946
28,990
25,017
24,975
-
1,252
411
(5,995)
(263)
559
(1,915)
(143)
(907)
10,339
8,543
542
3,022
13,628
5,800
135
1,161
563
(8,261)
(30)
1,464
(2,963)
(504)
(1,476)
380
(3,137)
780
1,760
Net cash from operating activities
66,383
38,290
88
89
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report
NOTE 37. EVENTS AFTER THE REPORTING PERIOD
Subsequent to year end new cases of COVID-19 rose rapidly in Victoria to new record levels. The subsequent restrictions imposed
by the Victorian government have caused disruption to business and economic activity and are likely to negatively impact the
consolidated entity’s trading revenue and operations. At the same time there has been a rise in the number of clusters in NSW.
The operational and financial impacts of the COVID-19 pandemic to date have been reflected in the 30 June 2020 financial
statements and are discussed in the Operating and Financial Review section of the Directors Report. To the extent that ongoing
impacts have been estimated we have considered the uncertainties arising from the COVID-19 pandemic in preparation of our
financial statements. However, the expected duration and magnitude of the COVID-19 pandemic and its potential impacts on
the economy are unclear. The financial impact going forward for the consolidated entity will depend on evolving changes in
government policy and business and customer reactions.
As at 30 June 2020, the group was in compliance with its debt covenants. This has been further bolstered by the support
of its lender group to allow for appropriate normalisations for COVID-19 impacts in covenant calculations extending out to
the reporting period to 31 December 2020. Virtus’ ongoing trading and cash flow assumptions in the COVID-19 impacted
environment, demonstrate that liquidity and funding needs of the business can be accommodated through its syndicated
facility arrangements, without the need for additional near-term funding. At 30 June 2020, the consolidated entity had
$38million in cash and $92.3million in unused and available debt facilities.
The consolidated entity has managed, and continues to actively manage, the risks arising from COVID-19. This includes a
financial response plan that incorporates scenario and contingency planning at all clinics across the globe, stress testing of
cash flow forecasts and sensitivity analysis.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect the
consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years.
NOTE 38. COMMITMENTS
CAPITAL COMMITMENTS
The consolidated entity had $4,604,000 (FY19:$Nil) in capital commitments for property, plant and equipment as at
30 June 2020.
NOTE 39. CONTINGENT LIABILITIES
Claims
The consolidated entity is currently involved in litigations which may result in future liabilities and legal fees up to an
insurance excess of $25,000 to $250,000 per claim. The consolidated entity has disclaimed liability and is defending the
actions. It is not practical to estimate the potential effect of these claims but advice indicates that any liability that may
arise in the unlikely event that the claims are successful will not materially affect the financial position of the entity and it is
expected that the claims will be covered by the consolidated entity’s insurance policies.
Guarantees
Drawdowns of $5,312,000 (2019:$5,001,000) in the form of financial guarantees have been made against the working capital
facility. Subject to the continued compliance with debt covenants, the bank facilities may be drawn at any time and have an
average maturity of 2 years (2019:3 year).
NOTE 40. NON-CURRENT ASSETS - OTHER
Security deposits
90
Consolidated
2020
$’000
306
2019
$’000
287
NOTE 41. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by PricewaterhouseCoopers, the
auditor of the company, and its network firms:
Audit services - PricewaterhouseCoopers
Audit or review of the financial statements
Other services - PricewaterhouseCoopers
Due diligence
Tax compliance services
Audit services - network firms
Audit or review of the financial statements
Other services - network firms
Tax services
Other
Consolidated
2020
$’000
2019
$’000
493,000
480,000
-
12,500
20,000
-
12,500
20,000
505,500
500,000
147,729
141,513
53,722
-
52,584
103,991
53,722
156,575
201,451
298,088
It is the consolidated entity’s policy to utilise appropriate accounting and consulting resource for other services which may
include tax advice and due diligence reporting on acquisitions, and it is the consolidated entity’s policy to seek competitive
tenders for such assignments as appropriate.
NOTE 42. OTHER ACCOUNTING POLICIES
CURRENT AND NON-CURRENT CLASSIFICATION
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated
entity’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after
the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for
at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity’s normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right
to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
GOODS AND SERVICES TAX (‘GST’) AND OTHER SIMILAR TAXES
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable
from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
91
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)30 June 2020Virtus Health2020 Annual Report Director’s
DECLARATION
In the directors’ opinion:
• the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
• the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 1 to the financial statements;
• the attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as at
30 June 2020 and of its performance for the financial year ended on that date;
• there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and
payable; and
• at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group
will be able to meet any obligations or liabilities to which they are, or may become liable, subject by virtue of the deed of
cross guarantee described in note 31 to the financial statements.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
Sonia Petering
Chairperson
18 August 2020
Sydney
Independent auditor’s report to
THE MEMBER OF
VIRTUS HEALTH LIMITED
Independent auditor’s report
To the members of Virtus Health Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Virtus Health Limited (the Company) and its controlled entities (together
the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial
performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the statement of financial position as at 30 June 2020
the statement of comprehensive income for the year then ended
the statement of changes in equity for the year then ended
the statement of cash flows for the year then ended
the notes to the financial statements, which include a summary of significant accounting policies
the directors’ declaration.
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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
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 (the Code) that are relevant to our audit of the financial report in
Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from material
misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the
financial report.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
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VIRTUS HEALTH LIMITED
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial report as a whole, taking into account the geographic and management structure of the Group, its
accounting processes and controls and the industry in which it operates.
Materiality
•
For the purpose of our audit we used overall Group materiality of $2.0 million, which represents
approximately 5% of the Group’s profit before impairment of assets and before tax averaged over the
current and two previous reporting periods. We selected this threshold, based on our professional
judgement, noting that:
•
profit before tax is a key benchmark against which the performance of the Group is commonly
measured
• we adjusted for impairment as it is an infrequently occurring item impacting profit
• we applied a three-year average to address volatility in the calculation of materiality that arises
from fluctuations in profit from year to year
approximately 5% is within the range of commonly acceptable profit-based thresholds.
•
• We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
Audit Scope
• Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
•
The Group comprises businesses in New South Wales, Queensland, Victoria, Tasmania, Denmark, United
Kingdom, Ireland and Singapore, with the most financially significant operations being those in Australia
and Europe. Accordingly, we structured our audit as follows:
-
-
-
-
The Group audit was led by our team from the Australian PwC firm (“Group audit team”). The Group
audit team conducted an audit of the special purpose financial information of selected Australian
businesses used to prepare the consolidated financial statements.
The component auditor in Ireland, under instruction from the Group audit team, performed specified
audit procedures on the special purpose financial information for specified entities within that
country, used to prepare the consolidated financial statements.
The component auditor in Denmark, under instructions from the Group audit team, performed a
review of the special purpose financial information for a specified entity within that country, used to
prepare the consolidated financial statements.
The Group audit team decided on their level of involvement needed in the work performed by the
component auditors, to be satisfied that sufficient appropriate evidence had been obtained for the
purpose of our opinion. Review of the work undertaken by the component teams and regular dialogue
between the teams up to the reporting date supplemented the specific direct written instruction
provided by PwC Australia and augmented the reporting provided by the component auditors.
-
-
The Group audit team undertook the remaining audit procedures, including over significant financial
statement items controlled at the Group level, the Group consolidation and the audit of the financial
report and remuneration report.
The combination of all these procedures provided us with sufficient and appropriate audit evidence to
express an opinion on the Group’s financial report as a whole.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report for the current period. The key audit matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context.
Key audit matter
How our audit addressed the key audit
matter
Estimated recoverable amount of goodwill
assets (Refer to note 10)
Goodwill of $425 million is recognised on the
consolidated statement of financial position.
Under Australian Accounting Standards, the Group is
required to test the goodwill annually for impairment,
irrespective of whether there are indicators of
impairment. This assessment is inherently complex
and judgemental. It requires judgement by the Group
in forecasting the operational cash flows of its cash
generating units and determining discount rates and
terminal value growth rates to be used in the
discounted cash flow models used to assess
impairment (the models).
The current year assessment performed by the Group:
-
-
identified an impairment of $14.7 million
against the goodwill recognised in the
Tasmanian cash generating unit (CGU) and an
impairment of $9.9 million against the goodwill
recognised in the Danish CGUs; and
did not identify the need for an impairment in
any of the other CGUs.
The recoverable amount of goodwill was a key audit
matter given the:
-
financial significance of goodwill to the
statement of financial position
- magnitude of the impairments recognised in the
-
statement of comprehensive income; and
judgement applied by the Group in completing
and concluding upon the impairment
assessment.
We focused our efforts on developing an
understanding and testing the overall calculation and
methodology of the Group’s impairment assessment,
including identification of the cash generating units
(CGUs) of the Group for the purposes of impairment
testing, and the attribution of net assets, revenues and
costs to those CGUs.
In obtaining sufficient audit evidence, our procedures
included, amongst others:
-
-
-
-
-
-
-
assessing the reasonableness of the cash flow
forecasts included in the models;
testing the mathematical calculations within the
models including assessing the adoption of
AASB 16 Leases;
assessing the reasonableness of the terminal
value growth rates by comparing to external
information sources;
assessing if the discount rate assumptions were
reasonable by comparing them to market data
and comparable companies, with the assistance
of our valuation specialists;
performing sensitivity analyses over the key
assumptions used in the models;
considering the allocation and presentation of
the impairment charges recognised; and
assessing the related financial statement
disclosures for consistency with Australian
Accounting Standards requirements.
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Key audit matter
How our audit addressed the key audit
matter
Revenue (Refer to note 4)
Revenue of $259 million is recognised on the
consolidated statement of comprehensive income.
In obtaining sufficient, appropriate audit evidence,
our procedures included, amongst others:
The recognition of revenue from contracts with
customers was a key audit matter due to the financial
significance of revenue from contracts with customers
to the consolidated statement of comprehensive
income.
•
•
•
consideration and assessment of the Group’s
accounting policy in line with the
requirements of AASB 15 Revenue from
Contracts with Customers
analysing the expected flows of revenue
transactions and agreeing a sample of
transactions that deviated from our
expectations to supporting documentation
testing, for a sample of transactions, whether
revenue had been recorded at the correct
amount and in the correct financial period,
in accordance with the Group’s revenue
recognition policy. This included assessing
whether:
•
•
•
•
evidence of an underlying
arrangement with the customer
existed;
appropriate performance
obligations and consideration had
been identified;
amounts allocated to the
performance obligations were made
with reference to their standalone
selling prices , where relevant; and
the timing of revenue recognition
had been appropriately considered
and recognised at the appropriate
time.
materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to
be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, 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.
When we read the other information not yet received, if we conclude that there is a material misstatement therein,
we are required to communicate the matter to the directors and use our professional judgement to determine the
appropriate action to take.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the 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 financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related 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 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 the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf.
This description forms part of our auditor's report.
•
evaluating the related financial statement
disclosures for consistency with Australian
Accounting Standards requirements.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report for the year ended 30 June 2020, but does not include the financial report and our
auditor’s report thereon. Prior to the date of this auditor's report, the other information we obtained included the
Directors’ report, Chair’s Statement, Chief Executive’s Overview and the Corporate directory. We expect the
remaining other information to be made available to us after the date of this auditor's report.
Our opinion on the financial report does not cover the other information and we do not and will not express an
opinion or any form of assurance conclusion thereon. In connection with our audit of the financial report, our
responsibility is to read the other information and, in doing so, consider whether the other information is
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THE MEMBER OF
VIRTUS HEALTH LIMITED
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 25 to 39 of the directors’ report for the year ended 30
June 2020. In our opinion, the remuneration report of Virtus Health Limited for the year ended 30 June 2020
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company 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.
PricewaterhouseCoopers
Mark Dow
Partner
Sydney
18 August 2020
Shareholder
INFORMATION
The shareholder information set out below was applicable as at 11 September 2020.
DISTRIBUTION OF EQUITABLE SECURITIES
Analysis of number of equitable security holders by size of holding:
Size of Holding
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
DISTRIBUTION OF OPTIONS
The distribution of unquoted options on issue are:
Size of Holding
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number of
Shareholders
Ordinary
Shares
% of Issued
Capital
63
347
705
3,724
4,666
54,934,495
8,602,108
5,295,260
9,284,092
2,273,983
68.3
10.7
6.6
11.6
2.8
9,505
80,389,938
100.0
Number of
Holders
Unlisted
Options
% of Issued
Capital
3
40
-
2
5
448,448
1,026,391
-
4,188
3,396
30.3
69.2
-
0.3
0.2
50
1,482,423
100.0
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Virtus Health2020 Annual Report
Shareholder
INFORMATION
EQUITY SECURITY HOLDERS
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Number of Fully paid
Ordinary Shares
% of Issued
Capital
Allan Gray Investment Mgt
Dimensional Fund Advisors
Vinva Investment Mgt
Merlon Capital Partners
Renaissance Smaller Companies
Tribeca Investment Partners
BofA Securities
Realindex Investments
Norges Bank Investment Mgt
Vanguard Investments Australia
Wilson Asset Mgt
Vanguard Group
Acadian Asset Mgt (Australia)
Mr Lyndon G Hale
Citigroup Global Markets
Auscap Asset Mgt
JPMorgan Securities Australia
Mr Francis Quinn
LSV Asset Mgt
Segall Bryant Hamill Investment Coun
Total
UNQUOTED EQUITY SECURITIES
There are no unquoted equity securities.
9,097,150
4,196,212
3,727,912
3,035,750
2,418,323
2,126,483
1,973,408
1,856,866
1,719,024
1,436,492
1,303,691
1,255,208
995,532
826,572
820,476
767,720
702,079
689,375
686,255
655,825
11.3
5.2
4.6
3.8
3.0
2.6
2.5
2.3
2.1
1.8
1.6
1.6
1.2
1.0
1.0
1.0
0.9
0.9
0.9
0.8
40,290,353
50.1
SUBSTANTIAL HOLDERS
The names of the Substantial Shareholders listed in the Company’s Register as at 11 September 2020:
Allan Gray Investment Mgt
Dimensional Fund Advisors
VOTING RIGHTS
The voting rights attached to ordinary shares are set out below:
Number of Ordinary Fully
Paid Shares
% of Issued
Capital
9,097,150
4,196,212
11.3
5.2
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
7,382,041 shares are held under Escrow arrangements with variable release dates linked to the age and retirement dates of
the fertility specialists.
There are no other classes of equity securities.
CORPORATE GOVERNANCE STATEMENT
The Corporate Governance Statement was approved by the Board of Directors on 18 August 2020 and can be found at
www.virtushealth.com.au/investor-centre/corporate-governance
Corporate
DIRECTORY
DIRECTORS
Peter Macourt - (retired on 20 November 2019)
Susan Channon- (resigned on 29 February 2020)
Kate Munnings (appointed on 18 March 2020)
Lyndon Hale
Sonia Petering - (appointed chairperson on 20 November 2019)
Greg Couttas
Shane Solomon
Michael Stanford (appointed on 2 September 2019)
COMPANY SECRETARY
Glenn Powers
NOTICE OF ANNUAL GENERAL MEETING
The details of the annual general meeting of
Virtus Health Limited are:
Thursday, 19 November 2020.
The time and other details relating to the meeting will be
advised in the Notice of Meeting to be sent to all shareholders
and released to ASX immediately after despatch.
REGISTERED OFFICE
Level 3
176 Pacific Highway
Greenwich NSW 2065
Phone: (02) 9425 1722
Fax: (02) 9425 1633
PRINCIPAL PLACE OF BUSINESS
Level 3
176 Pacific Highway
Greenwich NSW 2065
SHARE REGISTER
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
Phone: 1300 554 474
AUDITOR
PricewaterhouseCoopers
One International Towers Sydney
Watermans Quay,Barangaroo
NSW 2000
SOLICITORS
King & Wood Mallesons
Level 61
Governor Phillip Tower, 1 Farrer Place
Sydney NSW 2000
BANKERS
Westpac Banking Corporation
Level 3,
275 Kent Street,
Sydney NSW 2000
Commonwealth Bank of Australia
Ground floor, Tower 1,
201 Sussex Street
Sydney NSW 2000
Siemens Financial Services Inc
170 Wood Avenue,
South Iselin New Jersey 08830,
United States of America
National Australia Bank
Level 19, NAB House,
255 George Street,
Sydney NSW 2000
HSBC UK Bank Plc
Sixth Floor,
71 Queen Street,
London, EC4V 4AY
STOCK EXCHANGE LISTING
Virtus Health Limited shares are listed on the Australian
Securities Exchange (ASX code: VRT)
WEBSITE
www.virtushealth.com.au
CORPORATE GOVERNANCE STATEMENT
The Corporate Governance Statement was approved by the
Board of Directors on 18 August 2020 and can be found at
www.virtushealth.com.au/investor-centre/corporate-governance
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r
o
p
e
R
l
a
u
n
n
A
Virtus Health Head Office
T +61 2 9425 1722
Level 3, 176 Pacific Highway
F +61 2 9425 1633
Greenwich NSW 2065
ABN 80 129 643 492
10-2020