Virtus Health Limited
Appendix 4E
Preliminary final report
1. Company details
Name of entity:
Virtus Health Limited
ABN:
80 129 643 492
Reporting period:
For the year ended 30 June 2021
Previous period:
For the year ended 30 June 2020
2. Results for announcement to the market
*%/$’000
$'000
Revenues from ordinary activities
up
25.4% to
324,602
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
up
102.2% to
93,399
Earnings Before Interest and Tax (EBIT)
up
227.0% to
69,313
Profit from ordinary activities after tax attributable to the owners of Virtus
Health Limited ($’000)
up
42,666 to
43,135
Profit from ordinary activities after tax ($’000)
up
42,856 to
43,802
*% movements replaced with actual numbers where % movements were not considered meaningful.
Dividends
A final dividend of 12.00 cents per share, fully franked, will be paid on 29 October 2021 to the shareholders on the register
at 11 October 2021.
Comments
The profit for the consolidated entity after providing for income tax and non-controlling interest amounted to $43,135,000 (30
June 2020: $469,000).
A reconciliation of Segment EBITDA to statutory profit before tax for the financial year is as follows:
Consolidated
2021
2020
$'000
$'000
Segment EBITDA
112,909
84,043
Share-based payment expense
(1,899)
(1,252)
Information technology costs
(9,590)
(6,899)
Other non-trading expenses
(9,620)
(10,700)
Fair value adjustment to put liabilities and contingent consideration
1,599
5,995
Impairment of goodwill
-
(24,587)
Impairment of brand
-
(388)
EBITDA (reported)
93,399
46,212
Depreciation and amortisation
(24,086)
(25,017)
EBIT
69,313
21,195
Net financial Interest
(8,915)
(10,763)
Profit before income tax
60,398
10,432
Virtus Health Limited
Appendix 4E
Preliminary final report
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 increased by 25.4% to $324.6m;
●Group EBITDA increased by 102.2% to $93.4m;
●Segment EBITDA increased by 34.3% to $112.9m;
●Net profit after tax (“NPAT”) attributable to equity holders increased by $42.6m to $43.1m.
EBITDA and Profit before income tax for the period included $7.7m of COVID-19 related Government assistance that
assisted the consolidated entity to preserve employee relationships through the pandemic by minimising employee stand
downs and permanent job losses, providing a stable platform to allow the group to meet the deferred pent up patient demand
in FY2021. The other significant item reflected in profit before income tax was a fair value gain of $1.6m on finalisation of the
contingent consideration relating to the acquisition of Fertilitesklinikken Trianglen Aps.
A summary of significant income and expenditure items impacting reported EBITDA were as follows:
$Millions
FY21
FY20
Impairment of Intangible assets - note 1
-
(25.0)
Fair Value Adjustment to contingent consideration and put liabilities - note 2
1.6
6.0
Government assistance (COVID-19 related) - note 3
7.7
7.7
CEO transition and recruitment costs
-
(0.8)
Total
9.3
(12.1)
Notes
1. Non cash impairment charges in the prior period was in relation to Tasmania and the Denmark CGU reflecting changes in
competitive landscape, delays in doctor resourcing and the impact of COVID-19.
2. Non-cash fair value adjustments in relation to the contingent consideration reflecting final settlement.
3. Receipts from the Australian Federal Government’s JobKeeper Program and similar government programs in other
countries in response to the COVID-19 pandemic.
Operating and Financial Review (OFR)
The consolidated entity recorded strong cycle growth in all markets and correspondingly strong revenue in diagnostics and
day hospitals across the network. The environment remains challenging due to the ongoing COVID-19 pandemic however
the strong FY2021 results provide a strong base for investment in strategic platforms and future growth.
Comparable period results
When comparing to prior year performance it should be noted that 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 due to the COVID-19 pandemic, was previously estimated
to be approximately $14.6m. This estimate was determined by reference to activity levels in the prior corresponding months
of FY2019.
The impact in terms of volumes/revenues on the various segments of the business was estimated as follows:
4 Months to
June 2020
during
restrictions
%
Australian fresh cycles Australian fresh cycles
(15.3%)
International fresh cycles
(35.1%)
Diagnostic revenue
(11.9%)
Day Hospital revenue
(15.8%)
Virtus Health Limited
Appendix 4E
Preliminary final report
Australia
Virtus fresh cycle activity in Australia increased by 25.7% compared to pcp. Key aspects of the volume movements compared
to pcp were as follows:
●Premium service volumes increased by 28.4% with growth in all regions ; and
●TFC volumes increased by 15.6% driven by strong growth in New South Wales and Queensland that was partially offset
by a 2.1% reduction in Victorian cycles due to COVID-19 capacity restrictions during the extended lockdown in early
FY2021.
Overall, EBITDA in the Australian segment increased by approximately $22.7m (30.0% increase compared to pcp).There
were four main factors contributing to this increase:
●Doctor and staff availability and detailed planning for the restart of elective surgery enabled Virtus to leverage the buoyancy
in market activity in FY2021. Consumer behavioural shifts during the COVID-19 pandemic, to a focus on home and family,
have resulted in a higher proportion of new patients commencing ARS, contributing to the increased volumes over the past
12 months,
●Increased cycle activity in ARS clinics resulted in an improvement in EBITDA of $17.5m with improvements achieved by
all Australian ARS clinics,
●Specialist diagnostic revenue increased in FY2021 compared to pcp reflecting improved IVF volumes and PGT activity
from premium service cycles. This contributed to an increase in EBITDA of approximately $1.4m in FY2021 compared to
pcp; and
●In day hospitals, revenue increased by 41%, in part as a consequence of the increase in IVF activity mentioned above. Of
note, there was significant improvement in demand for non-IVF procedures which now accounts for 45% of total day
hospital revenue. Non-IVF revenue increased by 65% and revenue from IVF procedures increased by 26% across all day
hospitals. The management of day hospitals was also restructured during FY2021 contributing to improvements in
operating efficiency. Day Hospital EBITDA increased by $3.8m compared to pcp.
International
Overall, EBITDA in the International segment increased by approximately $6.2m (68.0% increase compared to pcp).
Ireland reported cycle volume increase of 24.6% over pcp and this resulted in EBITDA in local currency increasing by €1.8m
compared to pcp. This was despite the costs and business interruption associated with the Rotunda IVF clinic relocation that
was completed in December 2020 and continued constraints on the Ireland egg donation programme from travel restrictions
during FY2021.
Cycle volumes in Singapore increased by 55.3% over pcp and resulted in EBITDA in local currency increasing by SG$1.6m
compared to pcp.
Virtus Danish clinics reported a combined growth in cycle volume of 23.0% and this resulted in EBITDA in local currency
increasing by DKK3.0m compared to pcp.
In the UK, Complete Fertility reported cycle volume increase of 45.6% and this resulted in EBITDA growth in local currency
of ₤0.6m compared to pcp.
Operating expenses movement analysis (OPEX)
$Millions
FY21
FY20
Employee benefits expense
(117.3)
(100.1)
Occupancy expense
(6.6)
(6.0)
Advertising and marketing
(4.2)
(3.9)
Practice equipment expenses
(3.3)
(2.6)
Professional and consulting fees
(4.4)
(4.8)
Other expenses
(17.7)
(14.7)
Total OPEX
(153.5)
(132.1)
Virtus Health Limited
Appendix 4E
Preliminary final report
Group OPEX was approximately $21.4m higher compared to pcp. Significant movements are summarised below:
●
Employment costs increased by $17.2m (17.2%), driven mostly by higher cycle volumes (requiring higher FTEs) and
additional FTEs to support the group’s digital health strategy, reduced employee leave taken during FY2021 and, STI
accruals being included as compared to pcp where STI hurdles were not achieved;
●
Occupancy costs increased by $0.6m (10.0%) resulting from increase in outgoings arising from settlement of a land tax
dispute of $0.4m and additional cleaning costs of $0.2m in clinics and hospitals from increased throughput and COVID-
19 safety related precautions;
●
Practice equipment expenses increased by $0.7m (26.9%) because of repairs and maintenance to medical equipment
and premises, some of which were deferred from FY2020;
●
Professional and consulting costs decreased by $0.4m (8.3%) as FY2020 included fees relating to the Groups strategic
review and COVID-19 related legal and banking support;
●
Other expenses increased by $3.0m (20.4%) and was a result of increase of $1.5m in IT and Infrastructure expenses,
increase of $0.9m in insurance costs and the balance of $0.6m related to increased freight and laundry costs.
Operating cash flow
Net cash from operating activities decreased by $0.6m mostly by negative working capital movements and the payment of
income tax balances in respect of the year to June 2020 (most of these were deferred in FY2020 in accordance with
government mandated provisions in order to preserve cash and were settled during H1 FY2021 from operating cash inflows).
Capital Expenditure
Total expenditure on tangible and intangible assets was $14.9m in FY2021 (FY2020: $7.9m) and included $5.3m for
the relocation of the Rotunda IVF clinic to Swords Business Campus in Ireland.
Debt and interest expense
The decrease in finance costs over the prior period primarily relates to the decrease in the interest expense of $1.6m on
borrowings resulting from lower variable interest rates and lower debt levels. Non-cash interest on other financial liabilities
also decreased by $0.3m following the release of contingent consideration payable included in other financial liabilities – see
note on other financial liabilities below.
During December 2020, the consolidated entity successfully extended its existing three-year facilities, amounting to A$92m
maturing in October 2021 to October 2023, aligning with the maturity of its five-year facilities. At 30 June 2021, total bank
facilities drawn were $145m (FY2020: $165m) in borrowings and $5.0m (FY2020: $5.3m) in guarantees. Unused and
available debt facilities amounted to $111.8m. The consolidated entity complied with the financial covenants of its borrowing
facilities during the financial year ended 30 June 2021. Subject to the continued compliance with the debt covenants, the
bank facilities may be drawn at any time and the total facility of $262m expires in October 2023. Cash balances at 30 June
2021 were $37m.
The company continued to comply with the financial covenants of its facility agreement.
Other financial liabilities ($1.2m)
Other financial liabilities of $1.2m at 30 June 2021 represents a vendor loan note of $1.2m in relation to the acquisition of
Fertilitesklinikken Trianglen Aps. The reduction of Other financial liabilities from prior year reflects the write back of contingent
consideration relating to the acquisition of Fertilitesklinikken Trianglen Aps during the period resulting in a fair value gain of
$1.6m.
Amortisation of borrowing costs
Amortisation of borrowing cost expense for FY2021 was $550,000, (FY2020: $411,000). FY21 included a write-off of residual
borrowing costs in relation to the three year facility which was refinanced during December 2020.
Taxation
The effective tax rate on operating earnings for F2021 was 27.5% (FY2020: 26.9% excluding impairment charges).
Earnings per share
Basic earnings per share increased by more than 100% to 53.86 cents per share (FY2020: 0.59 cents per share). Diluted
earnings per share increased by more than 100% to 53.17 cents per share (FY2020: 0.59 cents per share).
Dividends
A final dividend of 12.00 cents per share fully franked will be paid on 29 October 2021 to shareholders on the register at 11
October 2021.
Virtus Health Limited
Appendix 4E
Preliminary final report
Outlook
The Australian ARS market demonstrated resilience in FY2021 from the severe disruptions of the COVID-19 pandemic
which impacted Q4 of FY2020. Detailed planning for the successful restart of services and a change in consumer focus on
the importance of home and family contributed to the positive performance. We expect demand for ARS to continue into
FY2022, however market conditions remain competitive and fragmented.
The most recent outbreak of the COVID-19 Delta variant has resulted in lockdowns of various magnitudes across most
Australian states since 26 June 2021. While access to ARS treatment and elective surgeries has continued in all states
during lockdowns; heightened infection control and safety protocols, including a strict requirement for our doctors and staff
to self-isolate when displaying symptoms or being identified as a casual or close contact; is contributing to some deferral of
certain treatments.
International ARS markets continue to operate in the context of high numbers of COVID-19 cases and border
closures. These conditions are delaying the commencement of our egg donation program in Ireland and our ARS “hub”
strategy in Denmark. We remain confident that both initiatives will commence in FY2022 and that any of the potential near
term impacts of COVID-19 on demand will likely be reflected as deferred, not lost, demand for ARS services.
Virtus continues to invest in state-of-the- art clinics & labs with new clinics under development in FY2022 to support growth
in Nepean, Brisbane & Copenhagen. Our One Lab also continues to be deployed to further improve success rates. The
Board has also approved the business case for the deployment of the Precision Fertility Digital Platform which will be a key
investment in FY2022/23 and thereafter will support growth & drive efficiencies.
The demand for ARS in FY2022 and beyond will be influenced by a number of factors including, in the near term, consumer
sentiment being focused on home and family, future pandemic lockdowns and vaccination rollout effectiveness. In the
medium term, ARS demand will continue to be influenced by trends in maternal age, greater fertility choices and
improvements in success rates. Virtus is well positioned to service the ongoing demand for ARS as well as to further diversify
revenue via growth in its Day Hospitals and its Fertility Diagnostic and Reproductive Genetics service.
3. Net tangible assets/(liabilities)
Reporting
period
Previous
period
Cents
Cents
Net tangible assets per ordinary security
(158.91)
(205.86)
Net assets per ordinary security
373.94
333.63
4. Loss or gain of control over entities
Not applicable.
5. Dividends
Current period
Amount per
security
Franked
amount per
security
Cents
Cents
Interim ordinary dividend paid for the year ended 30 June 2020 paid in November 2020
12.000
12.000
Interim ordinary dividend paid for the year ended 30 June 2021 paid in April 2021
12.000
12.000
Virtus Health Limited
Appendix 4E
Preliminary final report
Previous period
Amount per
security
Franked
amount per
security
Cents
Cents
Final ordinary dividend for the year ended 30 June 2019 of 12.0 cents per fully paid ordinary
share paid in October 2019
12.000
12.000
No final dividend was declared in June 2020
6. Dividend reinvestment plans
Not applicable.
7. Foreign entities
Details of origin of accounting standards used in compiling the report:
AIFRS has been applied to the foreign entities of Virtus Health.
8. Audit qualification or review
Details of audit/review dispute or qualification (if any):
The financial statements have been audited and an unmodified opinion has been issued.
9. Attachments
Details of attachments (if any):
The Annual Report of Virtus Health Limited for the year ended 30 June 2021 is attached.
10. Signed
Signed ___________________________
Date: 23 August 2021
Matthew Prior
Chief Financial Officer
Sydney
Virtus Health Limited
ABN 80 129 643 492
Annual Report - 30 June 2021
Virtus Health Limited
Contents
30 June 2021
1
Corporate directory
2
Directors' report
3
Auditor's independence declaration
33
Statement of comprehensive income
34
Statement of financial position
35
Statement of changes in equity
37
Statement of cash flows
38
Notes to the financial statements
39
Directors' declaration
83
Independent auditor's report to the members of Virtus Health Limited
84
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 23 August 2021. The
directors have the power to amend and reissue the financial statements.
Virtus Health Limited
Corporate directory
30 June 2021
2
Directors
Kate Munnings
Lyndon Hale
Sonia Petering
Greg Couttas
Shane Solomon
Michael Stanford (resigned on 19 February 2021)
Company secretaries
Glenn Powers (resigned 14 May 2021)
Ava Bentley (appointed 14 May 2021)
Notice of annual general meeting
The details of the annual general meeting of Virtus Health Limited are:
Thursday, 18 November 2021.
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
Gilbert + Tobin
Level 35
Two, International Towers, 200 Barangaroo Ave
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
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 23
August 2021 and can be found at https://www.virtushealth.com.au/investor-
centre/corporate-governance
Virtus Health Limited
Directors' report
30 June 2021
3
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 2021.
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:
Kate Munnings
Lyndon Hale
Sonia Petering
Greg Couttas
Shane Solomon
Michael Stanford - (resigned on 19 February 2021)
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.
In FY21 Virtus has progressed its refreshed strategy with:
i) The business case being approved, and the 18 month program of work commencing for the development of the Precision
Fertility Digital Platform which will enhance patient & clinician experience, improve clinical outcomes and deliver
operational efficiency;
ii) Investments in the growth of the Virtus ARS clinic network with approval of business cases for three new clinics that
incorporate the One Lab embryology & andrology laboratories, designed with world leading partners and;
iii)The restructuring of the Virtus Fertility Diagnosis & Reproductive Genetics Service with the recruitment of enhanced
genetic expertise with a Genetic Pathologist joining Virtus Genetics Service, and another offer pending, positioning Virtus
as the leading Reproductive Genetics service in Australia.
Collectively, these strategic initiatives will provide for greater company growth opportunities and improve pregnancy success
rates for Virtus patients.
Dividends
Dividends paid during the financial year were as follows:
Consolidated
2021
2020
$'000
$'000
Interim ordinary dividend for the year ended 30 June 2020 of 12.0 cents (2019: 12.0 cents)
per fully paid ordinary share paid in November 2020
9,647
-
Interim ordinary dividend for the year ended 30 June 2021 of 12.0 cents (2020: nil) per fully
paid share paid in April 2021
9,647
-
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
-
9,647
19,294
9,647
November dividend paid was the FY2020 interim dividend that was deferred in H2 FY2020. Dividend paid in prior year was
the final dividend for FY2019 and no final dividend was declared in June 2020.
Recognition and measurement
Dividends are recognised when declared during the financial year.
Virtus Health Limited
Directors' report
30 June 2021
4
Operating and Financial Review
The profit for the consolidated entity after providing for income tax and non-controlling interest amounted to $43,135,000 (30
June 2020: $469,000).
The consolidated entity continued to engage in its principal activities, the results of which are disclosed in the attached
financial statements.
For a detailed review on the trading results refer to the operating and financial review section in Appendix 4E and to the
ASX market announcement on 23 August 2021.
Significant changes in the state of affairs
Glenn Powers resigned from his role as Group CFO of Virtus Health Limited on 14 May 2021. Matthew Prior commenced as
Group CFO of Virtus Health Limited on 28 June 2021.
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
An outbreak of the Delta variant of COVID-19 has put most of the Australian States into lockdowns of different magnitudes
since 26 June 2021. Whilst, COVID-19 case numbers have been the largest in New South Wales, other states in Australia
have also been affected by the Delta variant outbreak.
As evidenced from the above, the impact of the Coronavirus (COVID-19) pandemic is ongoing and while in the year to 30
June 2021 the consolidated entity experienced strong rebound in activity post the first wave of the virus in Q4 of FY2020, the
potential impact, positive or negative, after the reporting date will be a function of a number of factors including consumer
sentiment, availability of international travel, the length of the current lockdowns, future pandemic lockdowns, vaccination
rollout effectiveness and any economic stimulus that may be provided.
On 22 August 2021, the consolidated entity (Virtus) signed a Share Sale Agreement to acquire 100% of the issued share
capital of Adora Fertility Pty Limited, Craigie Day Hospital Pty Ltd, Darlinghurst Day Hospital Pty Ltd and Greensborough
Day Hospital Pty Ltd (“Adora Businesses”). The purchase price of $45 million will be funded through the combination of a
fully underwritten $35 million institutional placement and existing cash reserves. Note 37 provides further information about
this transaction.
No other matter or circumstance has arisen since 30 June 2021 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
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:
Virtus Health Limited
Directors' report
30 June 2021
5
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.
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.
Information security
The consolidated entity handles and stores personal information, including health information, for its customers and
employees. With expanding information privacy and security regulations, and an increasingly complex cyber environment,
the consolidated entity recognises information privacy and cyber security as an increasing risk.
The consolidated entity regularly assesses its information governance and cybersecurity controls considering emerging
technological threats and expanding privacy laws. These assessments are used to determine any appropriate corrective
actions and improvements. In addition to the ongoing assessment and remediation of operational privacy and security
activities, the consolidated entity maintains cyber insurance as part of its overall risk mitigation strategy for information privacy
and security risk.
(For further details refer to Corporate Governance Statement at www.virtushealth.com.au/corporategovernance).
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State
law.
Virtus Health Limited
Directors' report
30 June 2021
6
Information on directors
Name:
Sonia Petering
Title:
Independent Chairperson (appointed to the Board 1 September 2014, Chair
appointment November 2019)
Qualifications:
LLB; BComm; FAICD
Experience and expertise:
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 also an
experienced commercial lawyer who commenced her own legal practice in 2001 and
holds a current Victorian legal practicing certificate.
She continues to be engaged on advisory and recruitment panels including advising
the Minister for Water in relation to selection of board members for the 18 water
corporation boards across Victoria. 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 and
Qantm IP (ASX:QIP).
Other current directorships:
Qantm IP Limited
Former directorships (last 3 years): None
Special responsibilities:
Member of the Nomination and Remuneration Committee and member of the Risk
Committee
Interests in shares:
45,000 ordinary shares
Interests in options:
None
Name:
Kathryn Munnings
Title:
Group Chief Executive Officer & Managing Director (appointed 18 March 2020)
Qualifications:
LLB, Bachelor of Health Science (Nursing)
Experience and expertise:
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’s 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.
Other current directorships:
Director, Digital Health Co-operative Research Centre
Former directorships (last 3 years): None
Special responsibilities:
None
Interests in shares:
54,013 ordinary shares
Interests in options:
312,106 performance rights
Virtus Health Limited
Directors' report
30 June 2021
7
Name:
Greg Couttas
Title:
Independent Non-Executive Director (appointed 4 October 2016)
Qualifications:
B Com.; FCA; MAICD
Experience and expertise:
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.
Greg held a number of management roles at Deloitte including being the Managing
Partner for NSW from 2005 to 2008. He was a member of the Deloitte Australia Board
of Partners from 2005 to 2016 and was chair of the Audit and Risk Committee for eleven
years. Greg is also a director of Sydney Water Corporation, Hireup Pty Limited and is
a member of the Governance Board of The Salvation Army Australia Territory.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Chair of the Audit Committee, Acting Chair of the Nomination and Remuneration
Committee and a member of the Risk Committee.
Interests in shares:
10,000 ordinary shares
Interests in options:
None
Name:
Lyndon Hale
Title:
Executive Director
Qualifications:
MBBS; FRACOG; CREI
Experience and expertise:
Lyndon has been the Medical Director of Melbourne IVF Pty Ltd from 2008 - 2020.
Lyndon is highly regarded for his knowledge and proactive approach and brings
extensive experience in assisted reproduction treatments to the care of his patients.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Member of the Risk Committee
Interests in shares:
826,572 ordinary shares
Interests in options:
None
Name:
Shane Solomon
Title:
Independent Non-Executive Director (appointed 24 September 2018)
Qualifications:
BSW, MA (Public policy), Adjunct Professor UTS Business School
Experience and expertise:
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.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Chair of the Risk Committee and a member of the Audit Committee
Interests in shares:
None
Interests in options:
None
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'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.
Virtus Health Limited
Directors' report
30 June 2021
8
Company secretaries
Ava Bentley, Group General Manager, Legal and Risk, was appointed to the role of Company Secretary on 14 May 2021
following the resignation of Glenn Powers, Chief Financial Officer and Company Secretary. Ava is an experienced corporate
and litigation lawyer with a broad range of experience gained in private practice and in-house roles. Prior to joining Virtus
Health, Ava also held risk and leadership roles in the insurance and medical defence industries.
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 2021, and the number of meetings attended by each director were:
Full Board
Nomination and
Remuneration Committee
Attended
Held
Attended
Held
Sonia Petering - Chairperson
15
15
7
7
Kate Munnings
15
15
7
7
Greg Couttas
15
15
7
7
Lyndon Hale
15
15
-
-
Shane Solomon
15
15
-
-
Michael Stanford
11
11
4
4
Audit Committee
Risk Committee
Attended
Held
Attended
Held
Sonia Petering- Chairperson
4
4
-
-
Kate Munnings
4
4
4
4
Greg Couttas
4
4
4
4
Lyndon Hale
-
-
4
4
Shane Solomon
4
4
4
4
Michael Stanford
-
-
2
2
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
Virtus Health Limited
Directors' report
30 June 2021
9
Remuneration report (Audited)
Dear Shareholder,
On behalf of the Board, I am pleased to present the Remuneration Report for FY2021 for which we seek your support at our
Annual General Meeting (AGM) on 18 November 2021.
This letter covers the following areas we expect to be of key interest to shareholders and stakeholders:
-
How we are managing COVID-19;
-
Revitalisation of the Virtus Health executive leadership team;
-
Summary of FY2021 KMP Remuneration Outcomes;
-
Reinvigorated Remuneration Framework;
-
Non – Executive Director remuneration arrangements; and
-
Focus for FY2022
How we are managing COVID-19:
Whilst COVID-19 remained a constant challenge throughout the year, the manner in which Virtus navigated the disruption
caused by the pandemic is to be commended. Our strong financial performance is a result of consistently delivering safe
services, ensuring strict infection control, engagement and support of our people and maintaining the highest standard of
patient care. It is something to which each and every person within Virtus has made a contribution.
Revitalisation of the Virtus Health executive leadership team:
A key theme of the past year has been the revitalisation of the Virtus Health executive leadership team. With the launch of our
new organisational growth strategy in FY2020, we have attracted leaders of the highest calibre, all of whom will play an
important role in ensuring we deliver on our ambitious strategy.
Summary of FY2021 KMP Remuneration Outcomes:
There were no increases in fixed remuneration for any of the current executive KMP in FY2021. However, the former Chief
Financial Officer, Glenn Powers, did receive a 2% increase in the first half of FY2021, prior to his resignation in May 2021.
Short Term Incentive Plan (STI)
Despite the uncertainty and challenges posed by COVID-19, the company has delivered a very strong financial result allowing
Virtus to pay dividends in FY2021. Virtus achieved $93.4m in Group EBITDA, which was double that of the previous year. The
business recorded a net profit after tax of $43.1m attributable to Virtus shareholders, which was 40% better than any result
over the past five years. The European operations also delivered a significant improvement in EBITDA from the previous
year’s reported results, contributing to the exceptional group performance. These results meant STI financial targets were
exceeded.
The STI non-financial targets were partially achieved, and are summarised as follows:
•
Virtus achieved its COVID-19 Controls KPI – no Virtus facility was required to close because of an unavoidable COVID
-19 outbreak.
•
The Net Promotor Score has not increased as compared to the prior year, and this can in part be attributed to the
challenges arising from the sharp increase in patient volumes throughout FY2021. Consequently the threshold target
for that KPI has not been met.
•
The Chief Strategy Officer and European Managing Director, Richard Banks, was measured on the employee
engagement results for Europe, which saw improvement resulting in a partial achievement of this KPI.
•
Richard Banks was also to be measured on implementing One Lab compliance in Europe during the year. However,
throughout FY21, the focus of One Lab changed to ensure project requirements were properly defined for the design
of all existing and future Virtus labs. As a result, the Board redistributed the weighting for this KPI across the rest of
Richard Banks’ KPIs.
Given the strength of the results delivered in FY2021, achieved in alignment with our values and risk appetite, the Board has
approved an aggregate total STI payment of $424,385 to be paid in cash to the participating executive KMP in line with their
achievement of their financial and non-financial targets.
Long-Term Incentive Plan (LTI)
The LTI grants delivered in FY2018 were tested during FY2021 and did not meet the required Return on Equity (ROE) and
Relative Total Shareholder Return (rTSR) performance hurdles over the three-year performance period. As a result, 100% of
these grants have lapsed or were forfeited. There are no remaining unvested performance rights in respect of this grant.
Virtus Health Limited
Directors' report
30 June 2021
10
Reinvigorated Remuneration Framework
Our remuneration strategy and framework evolved over the past year, delivering fair, performance-based outcomes that align
with shareholder value.
In FY2021, we redefined our comparator group for the purpose of benchmarking executive KMP and NED remuneration. We
now make reference to S&P/ASX 300 organisations with similar revenues to Virtus as the primary reference group. This aligns
Virtus to organisations that are similar in size and complexity to the Virtus business.
The remuneration framework sets variable STI targets measured against threshold, target, and maximum target values. These
targets are based on the degree of difficulty the Committee perceives is inherent in each respective KPI and provides the
Committee with the scope to set STI outcomes that are challenging and which will deliver value for shareholders.
Non – Executive Director Remuneration Arrangements:
The Board has also revised our Non-Executive Director (NED) fee structure to better align with market practice using the
updated comparator group noted above. This review resulted in an increase in NED fees with effect from 1 April 2021.
Further, in recognition of stakeholder and market expectations, the Board has implemented a Minimum Shareholding policy
pursuant to which NEDs will be expected to acquire and hold shares equivalent to approximately one-year’s NED fees over a
three year period.
Focus for FY2022:
We continue to monitor and adjust how remuneration drives performance; to ensure our focus on sustainable performance
and alignment between executive and shareholder outcomes. Looking forward to FY2022, the Board has approved a number
of refinements to the remuneration framework, including:
•
Setting consistent STI financial measures for the CEO and the CFO based on reported statutory Group NPAT
attributable to Virtus shareholders;
•
Measuring the Chief Strategy Officer (CSO) & European Managing Director on both Group EBITDA and consolidated
EBITDA for the European operations. This approach is aligned with other operational senior executives of Virtus.
•
Non-financial KPIs continue to measure patient experience, employee engagement and the delivery of strategic
initiatives. For the FY2022 STI plan, the latter measurement will be a KPI designed to ensure the effective delivery of
our Precision Fertility Digital Platform project on schedule and on budget; and
•
For any non-financial KPIs to be achieved, the executive must first achieve the threshold for one of their financial
KPIs. This approach serves as a natural hurdle for non-financial targets.
On behalf of the Board, thank you for your support and to our people, thank you for your achievements during FY2021.
_____________________
Greg Couttas
Chair, Nomination and Remuneration Committee
Virtus Health Limited
Directors' report
30 June 2021
11
1. 2021 Remuneration at a Glance
1.1. Introduction
The Directors present the Remuneration Report for Virtus Health Limited and its controlled entities (“Virtus”) for the year ended
30 June 2021 (FY2021). The report has been prepared in accordance with the requirements of section 300A of the
Corporations Act 2001 and has been audited as required by section 308(3C) of the Corporations Act 2001.
The report sets out Virtus’ remuneration strategy, framework and the compensation arrangements in place for Key
Management Personnel (KMP), defined as those persons having authority and responsibility for planning, directing and
controlling the major activities of Virtus.
1.2. Key management personnel
The table below lists the KMP for the year ended 30 June 2021. All KMP held their positions for the full year, unless otherwise
noted.
1 Dr Michael Stanford ceased to be a Non-Executive Director when he resigned from the Board with effect from 19 February 2021.
2 Matthew Prior became a KMP on 28 June 2021 when he was appointed Group CFO.
3 Dr Lyndon Hale stepped down from his role as Medical Director for Victoria on 1 January 2021 and has remained engaged as a Medical Director for TasIVF.
4 Glenn Powers resigned and stepped down from his CFO duties on 14 May 2021 and ceased to be a KMP at that time. His employment terminated with the
company on 31 May 2021.
1.3. Governance
1.3.1.
Role of the Board
The Board oversees Virtus’ remuneration arrangements. It is accountable for the remuneration of executives and of Non –
Executive Directors, and the policies and processes governing remuneration. It reviews and considers the appropriateness
of recommendations from the Nomination and Remuneration Committee (the Committee) concerning remuneration policies
and practices and ultimately approves the remuneration of executive KMP and of NEDs.
The Board assesses the performance of the CEO and oversees executive KMP performance and approves all related reward
outcomes.
The Board retains absolute discretion to adjust Short Term and Long Term incentive components and outcomes.
Name
Position
Dates
Non-Executive Directors
Current
Sonia Petering
Chair
Full year
Greg Couttas
Non-Executive Director
Full year
Shane Solomon
Non-Executive Director
Full year
Former
Michael Stanford1
Non-Executive Director
Until 19 February 2021
Executives
Current
Kate Munnings
Managing Director and Chief Executive Officer (CEO)
Full year
Matthew Prior2
Group Chief Financial Officer (CFO)
From 28 June 2021
Richard Banks
Chief Strategy Officer (CSO) and European Managing Director
Full year
Lyndon Hale3
Executive Director and Medical Director TasIVF
Full year
Former
Glenn Powers4
Chief Financial Officer (CFO)
Until 14 May 2021
Virtus Health Limited
Directors' report
30 June 2021
12
1.3.2.
Role of the Nomination and Remuneration Committee
The Nomination and Remuneration Committee operates under its own charter and reports to the Board. The Committee is a
committee of the Board established in accordance with Virtus’ constitution and authorised by the Board to assist it in fulfilling
its statutory, fiduciary and regulatory responsibilities. It has the authority and power to exercise the role and responsibilities set
out in the charter and granted to it under any separate resolutions of the Board from time to time.
The Committee assists and advises the Board on remuneration policies and practices for the Board, the MD and CEO, the
CFO, other executive KMP and other senior executives of Virtus. The responsibilities of the Committee are set out in the
Nomination and Remuneration Committee Charter, which was updated on 22 September, 2020. The Charter may be found
at the Investor Centre page of the Virtus website.
1.3.3.
Independent Remuneration Advisors
Where appropriate, the Board and the Committee consult independent external advisors concerning the appropriateness of
Virtus’ remuneration practices and arrangements including remuneration levels, independent benchmarking data and
incentive structures. The requirement for external remuneration advisor services is assessed on a needs basis and is used
as guidance for Directors to consider when deciding on relevant matters. The Committee and Board consider this input
amongst other factors when making decisions regarding remuneration.
While the Committee has relied on relevant market data from qualified independent remuneration surveys, in respect to
executive KMP, the Committee did not seek advice from remuneration advisors in respect of executive remuneration during
the financial year.
The Committee did receive advice from independent advisors regarding the remuneration of the Non-Executive directors (refer
Section 3.1).
Virtus Health Limited
Directors' report
30 June 2021
13
1.4. Remuneration Strategy and Framework
The Virtus remuneration strategy and framework is designed to support Virtus’ strategic priorities by rewarding executives for
successfully creating value for its patients, employees, and shareholders. It is structured to align executives and other
employees interests with the creation of long-term shareholder value, to recognise high-performance and to attract, motivate
and retain high calibre executives who can drive organisational performance in the short and long-term.
The Board assesses performance against short and long-term criteria and has discretion to determine award outcomes at the
end of the respective performance periods.
1.5 Remuneration Mix
The FY2021 remuneration mix for executive KMP is a balance between fixed and short and long-term variable remuneration.
There is a weighting towards at-risk, higher performance-based remuneration for outperformance. Short and long-term
incentive opportunities are expressed as a percentage of FAR.
While at-target performance levels are set for variable remuneration, the Board also sets threshold and maximum outcome
ranges for STI objectives. The threshold defines the minimum level of performance resulting in any payment, while the
maximum defines what level of performance is exceptional, resulting in a payment above the target weighting for the respective
STI objective. The LTI plan also sets threshold and target performance levels.
Below describes the range of these remuneration aggregates:
Alignment to
Philosophy and
Strategy
Competitive fixed pay to
attract and retain high-
calibre leaders capable of
delivering business
strategy
Payment
Delivery
Comprises cash salary,
superannuation and
benefits
Opportunity
Level
FAR levels are set in
relation to skills,
experience, level and
complexity of role. FAR is
benchmarked against
external market.
CEO and CFO
54% of FAR (at
maximum)
Other Senior
Executives
31% of FAR (at
maximum)
CEO
100% of FAR
(maximum face value)
CFO and CSO
60% of FAR (maximum
face value)
Remuneration Mix
LTI plans are designed to align executives with
shareholder interests, retain high-calibre leaders,
encourage long-term focus, and instil a sense of
ownership.
Granted annually as performance rights subject
to two equally weighted performance hurdles:
Relative Total Shareholder Return (rTSR) and
Return on Equity (ROE). Grants vest over 3
years and once vested can be exercised over 10
years.
Annual cash payment
STI annual targets align with the delivery of
business plans and strategic pillars. KPIs include
financial performance, customer experience,
employee engagement and strategic initiatives.
Short Term Incentive (STI)
Long term Incentive (LTI)
Variable - at risk
Fixed Annual
Remuneration (FAR)
Remuneration
Component
Virtus Health Limited
Directors' report
30 June 2021
14
The Remuneration at Threshold Level (RTL) comprises FAR, achievement of threshold levels for each of the STI objectives,
and the vesting of 50% of maximum face value of the LTI component, at the year of granting. The RTL is intended to be an
estimate of executive remuneration outcomes for variable remuneration components, with a reasonable likelihood of
achievement. Threshold levels are set at challenging levels deemed by the Board to align with the creation of shareholder
value.
The Total Maximum Remuneration (TMR) comprises FAR and the achievement of stretch “outperformance” STI targets,
and the vesting of 100% maximum face value of the LTI component, at the year of granting.
Remuneration at Threshold Level
Total Maximum Remuneration
Dr Lyndon Hale’s remuneration as a Director does not include eligibility to STI or LTI and is 100% Fixed Annual Remuneration.
However, as a practicing fertility specialist he has the opportunity to participate in the Fertility Specialist Loyalty Scheme (refer
Note 33 to the financial statements), as his remuneration is aligned with other Fertility Specialists within the Virtus Group.
Virtus Health Limited
Directors' report
30 June 2021
15
2. Our Performance and Remuneration Outcomes
The remuneration outcomes of executive KMP are aligned with short and long-term performance outcomes. The tables below
show the relationship between Virtus’ financial performance over the past five years and executive KMP short and long-term
variable remuneration outcomes. The FY2021 remuneration outcomes reflect the outstanding financial results for the current
financial year.
Group Five Year Financial Performance
Executive KMP Five Year Remuneration Outcomes
1 Glenn Powers (CFO) resigned from the company in May 2021 and hence was not entitled to any STI outcome for FY2021.
LTI Performance Rights are granted annually, vest over a three-year period and are assessed by reference to two equally
weighted performance hurdles: Relative Total Shareholder Return (rTSR) and Return on Equity (ROE). The percentages
detailed in the table above relevant to each date are for the rTSR hurdle assessed at 3 years from the date of grant and for
the ROE hurdle measured against the annual three-year average ROE as at 30 June of each respective year.
2.1. Fixed Annual Remuneration (FAR) Approach and Outcomes
The FAR strategy is designed to attract and retain high-calibre leaders with the skill and experience to deliver on short-term
performance while delivering on the business strategies that will grow and develop the organisation to its potential.
FAR comprises cash salary, employer contributions to superannuation (or pension contributions for overseas KMPs), vehicle
allowance, and salary sacrifice benefits.
Virtus’ approach is to set executives’ FAR at a level reflecting their skills and experience, allowing for progressive increases
to apply as the executive becomes more experienced in the role. There are no guaranteed increases to fixed remuneration in
employment contracts of executive KMP.
FY21
FY20
FY19
FY18
FY17
Revenue
($'000)
324,602
258,932
280,069
263,916
256,518
EBITDA
($'000)
93,399
46,212
63,511
65,027
64,834
EBIT
($'000)
69,313
21,195
49,883
52,531
50,799
Profit after income tax
($'000)
43,802
946
28,990
32,009
30,004
NPAT attributable to Virtus shareholders
($'000)
43,135
469
28,426
30,753
28,103
Share price at financal year end
($)
6.60
2.83
4.50
5.75
5.38
Total dividends paid
(cents per share)
24
12
24
26
28
Basic earnings per share
(cents per share)
53.86
0.59
35.37
38.26
35.00
Diluted earnings per share
(cents per share)
53.17
0.59
34.97
37.98
34.79
EPS Growth on prior year
(%)
>100%
-98.3%
-7.6%
9.3%
-15.0%
FY21
FY20
FY19
FY18
FY17
Managing Director & CEO STI outcomes
85%
0%
0%
51%
0%
(% of maximum)
CFO1 STI outcomes
0%
0%
0%
79%
0%
(% of maximum)
Other Executive KMP STI outcomes
87%
0%
0%
0% - 51%
0%-100%
(range of eligible KMPs % of maximum)
LTIP vesting outcomes
0%
0%
0%
0%
0%
(% vesting of maximum)
Virtus Health Limited
Directors' report
30 June 2021
16
Virtus benchmarks FAR to the median against its comparator group. Generally, Virtus seeks to offer FAR within 15% below
and 15% above the market median (i.e. 85% to 115% compa-ratio) depending on the level of experience, skills and
performance of the incumbent in the role.
Virtus has realigned its annual remuneration review process with the financial year. During FY2021, Glenn Powers, CFO,
received 2% increase in FAR. No increases in FAR were given to any other executive KMP.
Matthew Prior, who joined Virtus as its CFO on 28 June 2021, was the only new executive KMP to join Virtus during FY2021.
His remuneration package has been set at the market level required to attract candidates of the requisite skill and experience.
Comparator Group
Virtus has determined that the talent pool from which it employs high-calibre senior executives is drawn from a broad range
of organisations, within and outside the health sector. It seeks leaders who have experience working in large, complex
organisations, who can deliver on its growth strategy and transform Virtus to its future state. Virtus has adopted the view that
a revenue-based comparator group is appropriate, as revenue is a good indication of the level of operational complexity of an
organisation.
Accordingly, executive KMP’s remuneration is assessed against Australian Securities Exchange (ASX) listed organisations
with revenues between $200m and $500m and cross-referenced against organisations within the ASX 250-300 ranking as a
secondary benchmarking source (as referenced in the Aon and Governance Institute - Board & Executive Remuneration
Report 2020).
2.2. STI approach and outcomes
The Virtus STI plan puts a significant portion of the executive’s remuneration at risk based on overall financial and non-financial
objectives. The plan’s structure is designed as an integral part of the Virtus’ remuneration framework and intends to incentivise
executive KMP and other plan participants through the application of the following principles:
•
Reward for annual performance and over-performance;
•
Support the implementation of Virtus’ strategic initiatives;
•
Drive a strong sense of group and individual accountability;
•
Measure against simple and clearly understood key performance indicators; and
•
Set realistic and achievable threshold measures and ambitious over-performance targets.
Financial and non-financial KPIs are reviewed and amended annually by the Nomination and Remuneration Committee.
The STI plan provides for cash settlement where successful performance against KPIs is achieved. For the CEO & Managing
Director, performance is assessed by the Nomination and Remuneration Committee and recommended to the Board for
approval after completion of the external audit of the Group financial statements. For other executive KMP and senior
executives, the CEO & Managing Director assesses their performance after completion of the external audit of the Group
financial statements and the Nomination and Remuneration Committee reviews and recommends outcomes to the Board for
approval.
The Board has discretion to determine whether any performance conditions have been met and may determine to include or
exclude any items from its calculation assessment, based on any reasonable matters the Board considers relevant, such as
market conditions or if the Board deems that a STI participant has not demonstrated behaviours in accordance with the
company’s values or has breached the Virtus Code of Conduct.
Virtus Health Limited
Directors' report
30 June 2021
17
The following table summarises the performance of each KMP against their respective FY2021 STI targets:
The above table includes all STI measures for the eligible executive KMP. The performance measures for the CFO are not
included in the table above because the former CFO was not eligible for the STI due to his resignation during FY2021.
1 Of the participating executive KMP, only the CSO and European Managing Director was measured on Employee Engagement as an STI KPI for the
European entitles.
2 The CSO & European Managing Director’s weighting was revised during the FY2021. The One Lab performance measure was removed and the weighting
was redistributed across the other measures as detailed in Section 2.3.2.
Weighting at Target
for CEO
Weighting at Target
for CSO & European
Managing Director1,2
Performance
Measure
Outcome in
relation to
Target for
FY2021
Performance Outcome
Financial
70%
44%
FY21 Group EBITDA
110%
Financial performance measured by reference to Group
EBITDA exceeded the STI maximum target.
22%
FY21 EBITDA -
Consolidated
European entities
110%
Financial performance measured by reference to
consolidated European EBITDA exceeded the STI maximum
target.
Non-Financial
15%
11%
Net Promotor Score
0%
While there were improvements in the NPS scores within
some of the Virtus businesses, the group result reduced by
4% from the FY20 NPS results. This was primarily a result of
the high volume of activity Virtus clinics have experienced
over the past year. This will remain an area of focus for
Virtus in FY22 and beyond.
15%
11%
COVID-19 Infection
Control
100%
Virtus Health implemented strict COVID safety measures for
staff and patients at all its sites. Strict hygiene measures
were
implemented,
including
the
engagement
of
temperature checking staff and patients upon arrival at sites.
This objective was fully achieved because no Virtus facility
was required to close because of an unavoidable COVID -19
outbreak.
11%
Employee
Engagement -
Europe1
85.4%
The European operations increased their Employee
Engagement score by 3.5% from the baseline score
identified in 2020. This results in a partial achievement of
this objective.
Virtus Health Limited
Directors' report
30 June 2021
18
The STI outcomes for executive KMPs are detailed in the table below showing the proportion of the cash bonus paid/payable
or forfeited by reference to maximum possible achievement:
1 Sue Channon ceased employment in FY2020.
2 Matthew Prior was appointed CFO and became executive KMP on 28 June, 2021 and hence was not eligible for the FY2021 STI plan.
3 Due to Glenn Powers’ cessation of employment in May 2021, he is no longer eligible for a FY2021 STI award.
2.3. FY2021 STI Scorecards for Individual KMP
The Board has discretion over all elements of the STI plan including (but not limited to) the setting of KPI performance targets
and ranges, selection of KPIs weightings, and any assessed performance outcomes.
The Board considers the link between delivering on business performance and driving the right culture, behaviours and
capability is critical to the delivery of sustainable business performance. As such, all STI award outcomes are assessed on
how results were achieved including alignment to values, risk, compliance and leadership which can result in the application
of discretion as the Board deems appropriate.
2.3.1
CEO Scorecard
Executives have STI scorecards which establish the performance expectations across each metric. KPIs are set by the Board
for the CEO. For FY2021, the Board set the CEO’s KPIs to be focused on financial performance in the context of COVID-19,
patient experience (measured through Net Promotor Scores) and infection control in the context of COVID-19 as short-term
areas of focus that are also important for the medium to longer term.
The CEO’s FY2021 financial KPI was set to measure results against prior year performance. This decision reflected the fact
that at the time of setting these targets, there was significant uncertainty due to the impacts of the first wave of COVID-19 in
Australia. There had been significant disruption to the revenues and cash flow of the business and the focus was very much
on securing the survival of the business and meeting the covenants that had been agreed with our finance providers.
Achieving an equivalent or better EBITDA result than the prior year was considered an appropriate target.
The financial metrics used for FY2021 and the equivalent measures for the prior year exclude non-trading expenses and, in
particular exclude the impact of government assistance received in the form of the Job Keeper Scheme.
For FY2021, the CEO was measured against the following financial and non-financial STI Scorecard. In addition, the board
assessed the CEO on how results were achieved including alignment to values, risk, compliance, and leadership. The
resulting outcome was 85% of the maximum potential outcome.
2021
2020
2021
2020
Executive Directors:
Current
K Munnings
85%
-
15%
-
Former
Sue Channon1
-
-
-
100%
Other Key Management:
Current
M Prior2
-
-
-
-
R Banks
87%
-
13%
100%
Former
G Powers3
-
-
-
100%
Cash bonus forfeited
Cash Bonus Paid/Payable
Virtus Health Limited
Directors' report
30 June 2021
19
2.3.2
CSO & European Managing Director Scorecard
As the CSO & European Managing Director holds a group level responsibility as well as a European operational remit, the
STI scorecard includes two financial targets: Group EBITDA and a financial target measuring the achievement of the
Consolidated European entities EBITDA.
The financial metrics used for FY2021 and the equivalent measures for the prior year exclude non-trading expenses and in
particular exclude the impact of government assistance received in the form of the Job Keeper Scheme.
The CSO & European Managing Director also had four non-financial FY2021 STI objectives, one of which was to implement
One Lab protocols within the European operations.
Throughout FY2021, the strategy for One Lab has expanded to enable the capital light Virtus as a Service Strategy, therefore
the implementation of new work instructions and protocols is now only one component of the broader deliverables of One Lab.
The One Lab strategy has evolved to consist of One Lab Principle Project Requirements (PPR), One Lab process redesign
and work instruction development, One Lab optimisation and One Lab innovation.
The PPR provides an end-to-end ideal design template for the One Lab infrastructure, which can be easily adapted to suit the
architectural and structural differences for different laboratory environments.
Due to Virtus’ modification and redirection of the One Lab strategy, the Committee approved the redistribution of the weighting
for this metric equally across all the other STI objectives for the CSO & European Managing Director.
Below is a summary of the CSO & European Managing Director’s STI Scorecard for FY2021 including the revised weighting:
Weighting
Metric
Measure
70%
FY21 Group EBITDA
For each financial KPI the calculation method will be as follows:
o if FY21 EBITDA is less than the prior comparative period (‘pcp’), no STI will be paid; or
o if FY21 EBITDA is greater than or equal to FY20 EBITDA then 50% of the STI will vest; or
o if FY21 EBITDA is 105% or more of the FY20 EBITDA then 100% of the STI will vest; or
o if FY21 EBITDA is 110% or more of the FY20 EBITDA then 110% of the STI will vest.
15%
Net Promotor Score
o If FY21 result is greater than or equal to FY20 then 50% of the at-risk STI will vest; or
o If FY21 result is 105% of FY20 then 100% of the at-risk STI will vest; or
o If FY21 result is 110% of FY20 then 110% of the at-risk STI will vest.
15%
COVID-19 Infection
Control
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.
FINANCIAL
NON-FINANCIAL
Virtus Health Limited
Directors' report
30 June 2021
20
1 Weighting is rounded to the nearest percentage point.
2.4 Changes to FY2022 STI
Plan Structure and KPIs
The STI plan for FY2022, established by the Nomination and Remuneration Committee, applicable to the executive KMP
(excluding Lyndon Hale)1, is set out below. The same structure is applicable to other senior executives in the company who
are not considered KMP.
The FY2022 STI financial target for Kate Munnings (Group CEO and Managing Director) and Matthew Prior (Group CFO) will
be based on reported statutory Group NPAT attributable to Virtus shareholders.
Richard Banks (CSO and European Managing Director) will be measured equally against two financial targets consisting of
the Group EBITDA and the consolidated European EBITDA.
“One-offs” or abnormal items of income or expenditure, including but not limited to such items as the impact from mergers,
acquisitions, divestments, or impairments, will be excluded from the calculation of the achievement of STI financial measures
at Board discretion.
All STI participants will also be measured against three non-financial targets, remaining consistent with the principle of
measuring success with Patient Experience (NPS measure), Employee Experience (Employee Engagement survey measure)
and assigning one KPI to the delivery of Virtus Strategic initiatives. For FY2022, this KPI is focussed on the effective delivery
of the Precision Fertility Digital Strategy.
For any non-financial KPIs to be achieved, the executive must first achieve the threshold for one of their financial KPIs. This
approach serves as a natural hurdle for non-financial targets.
Below is the FY2022 STI component weighting at maximum achievement and the relevant metrics for the executive KMP.
1 Dr Lyndon Hale remuneration does not include eligibility to STI or LTI and is 100% Fixed Annual Remuneration.
Original
Weighting
Revised
Weighting1
Metric
Scope
Measure
40%
44%
FY21 Group EBITDA
Group
20%
22%
FY21 EBITDA for
relevant area of
responsibility
Europe
10%
11%
Net Promotor Score
Group
o If FY21 result is greater than or equal to FY20 then 50% of the at risk STI will vest; or
o If FY21 result is 105% of FY20 then 100% of the at-risk STI will vest; or
o If FY21 result is 110% of FY20 then 110% of the at-risk STI will vest.
10%
11%
COVID-19 Infection
Control
Europe
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.
10%
11%
Staff Engagement
Score
Europe
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 (up to 5%) on subsequent surveys during the
year.
10%
One Lab Compliance
Europe
Compliance to Virtus Health One Lab program with 50% vesting for 80% compliance
and 100% vesting for 100% compliance.
FINANCIAL
o if FY21 EBITDA is less than the prior comparative period (‘pcp’), no STI will be paid;
or
o if FY21 EBITDA is greater than or equal to FY20 EBITDA then 50% of the STI will
vest; or
o if FY21 EBITDA is equal to the FY21 Board approved budget EBITDA then 100% of
the STI will vest; or
o if FY21 EBITDA is 110% or more of the FY21 Board approved budget EBITDA then
110% of the STI will vest.
NON-FINANCIAL
Virtus Health Limited
Directors' report
30 June 2021
21
All calculations of STI achievements and the payment of any STI are at Board discretion.
KPI Measures and Target Setting
The FY2022 STI KPIs are measured against Threshold, Target, and Maximum values, which are based on the degree of
difficulty the Committee believes is inherent in each respective KPI. This provides the Committee with the scope to set STI
outcomes that are challenging and which will deliver value for shareholders.
The achievement of Threshold value triggers a partial payment for each measure, increasing on a linear pro-rata basis to
nominal 100% payment value for 100% achievement at Target performance. In addition, for most metrics, there is an over-
performance, Maximum target, which enables the participant to achieve up to 110% of the weighted percentage for the
respective KPI.
The financial metrics and all the non-financial metrics (other than the Precision Fertility Digital Strategy KPI) include an over-
performance target and are measured as follows:
o
If the result reaches the Threshold value, the objective pays 50% of the weighted percentage amount of the KPI.
o
If the result is between the Threshold value and the Target value, the KPI pays on a linear pro-rata basis between 50%
and 100% of the weighted percentage for the KPI.
o
If the result is between the Target value and the Maximum value, the objective pays on a linear pro-rata basis an amount
between 100% and 110% of the weighted percentage for the objective.
o
If the result exceeds the Maximum value, the objective pays at 110% of the weighted percentage for the objective.
Precision Fertility Digital Strategy KPI
The Committee have set cost and schedule targets at tolerance levels that ensure that while the project budget and schedule
are adhered to, quality is not compromised. Measurement of the achievement of the Precision Fertility Digital Strategy will be
based on indices that assess performance against budget and schedule.
Achievement of these project indices will be assessed by an independent assessor, ensuring the integrity of the measures for
this objective.
CEO &
Managing
Director
10% (Net Promoter
Score)
10% (Employee
Engagement)
9% (Digital Strategy)
CFO
14% (Net Promoter
Score)
13% (Employee
Engagement)
12% (Digital Strategy)
CSO &
European
Managing
Director
41% (Group
EBITDA)
20% (EBITDA
for relevant
area of
responsibility)
14% (Net Promoter
Score)
13% (Employee
Engagement)
12% (Digital Strategy)
Functional
Executives
20% (Net Promoter
Score)
20% (Employee
Engagement)
19% (Digital Strategy)
41% (Group EBITDA)
Level
Component Weighting at Maximum & Metrics
Financial
Non-Financial
71% (Group NPAT)
61% (Group NPAT)
Virtus Health Limited
Directors' report
30 June 2021
22
Summary of FY2022 STI Plan for KMP
The below table summarises the FY2022 metrics and method of calculation:
The financial targets are set by reference to the Board approved financial budget for FY 2022.
2.5 Long Term Incentive (LTI)
The company has adopted a performance rights plan ('LTI Plan') for its senior executives to balance the following key factors
in its remuneration strategy:
•
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.
Virtus Health Limited
Directors' report
30 June 2021
23
Opportunity
The LTI award opportunity is based on a percentage of the participant’s FAR as at the grant date. The number of performance
rights granted is the LTI award opportunity divided by the volume weighted average share price (VWAP) over the fifteen-
trading day period commencing on the date on which Virtus releases its financial year results.
Performance Period
The Virtus LTI Plan objectives are aligned to market practice and provide participants with grants of performance rights that
vest over three-year performance periods. Performance rights are granted annually, and following vesting and exercise are
converted into shares. Holders of unvested performance rights do not receive dividends on those rights until the rights have
vested and are 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
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 granting and vesting of LTI awards. All
outstanding unvested performance rights or options automatically lapse upon the senior executive ceasing to be employed by
Virtus unless otherwise determined by the Board. The Board has discretion to adjust LTI outcomes, such as lapse or vest
awards, based on achievements which are consistent with the Group’s strategic priorities or for material misstatements of the
company’s financials or in the case of significant reputational damage.
Virtus Health Limited
Directors' report
30 June 2021
24
Below is a summary of the four senior executive performance grants in operation during FY2021:
1
Richard Banks retains performance rights for the 2019, 2020 and 2021 LTI plans and Kate Munnings retains performance grants for the 2021 LTI plan.
2
22,249 of the performance rights granted on 21 November 2018 were tested against the ROE performance hurdle on 30 June 2021, did not vest and
have lapsed. A further 60,147 rights were forfeited by executives who left employment. The remaining 50% of the performance rights are to be tested
against the relative TSR performance hurdle on 21 November 2021.
3
51,509 of the performance rights granted on 10 November 2017 were tested against the relative TSR performance hurdle on 22 November 2020 did not
vest and have lapsed. A further 10,048 rights were forfeited by executives who left employment. The other 50% of these performance rights were tested
by reference to the average ROE performance hurdle on 30 June 2020, did not vest and accordingly lapsed.
Virtus Health Limited
Directors' report
30 June 2021
25
2.6 Senior Executives – FY2022 LTI Plan
The Nomination and Remuneration Committee resolved to continue to apply a consistent approach for the FY2022 LTI Plan
as was applied in FY2021.
The FY2022 LTI Plan will retain 50% of the LTI grant to be linked to the rTSR measured over a three-year period against
constituents of a single comparator group, the S&P/ASX 300 Index.
Virtus will also retain the measure of 50% of the LTI grant assessed by reference to average annual Return on Equity (ROE)
and continue to measure the ROE hurdle as a margin over the Virtus Health Weighted Average Cost of Capital (WACC). The
hurdle target for the Average ROE for FY2022 to FY2024 will be 1.15 x WACC, and the maximum target will be 1.35 x WACC,
as agreed with the Audit Committee.
2.7 KMP – Foregone Incentives Awards
2.7.1
CEO – Foregone Incentive Award
In recognition of incentives foregone by Kate Munnings upon joining Virtus on 18 March 2020, a one-off Foregone Incentive
Award (‘FIA’) valued at $700,000, granted as performance rights was awarded to Ms Munnings under the LTI Plan. The award
vests equally over 3 years on the anniversary of the commencement of her employment. Vesting of the performance rights is
subject to the Board’s assessment of Ms Munning’s performance over each year of the 3-year vesting period.
The Board, in its assessment of the performance condition of the FIA, formed a view by considering a broad set of factors
aligned with the group’s long-term strategy, when measuring Ms Munnings’ performance for the purpose of this FIA and
approved the vesting of the first of the three tranches of this award for the period up to 18 March 2021.
2.7.2
CFO – Foregone Incentive Award
In recognition of incentives foregone by Matthew Prior as a result of leaving his former employment, a FIA was implemented
consisting of two elements:
•
A one-off cash payment of $100,000;
•
Performance rights valued at $65,000.
The cash payment has been accrued for in the FY2021 financial accounts and will be paid in FY2022. The performance rights
are to be granted in FY2022. Vesting will be subject to Mr Prior continuing to be employed and not serving a notice period, at
the first anniversary date of his commencement with Virtus.
2.8 Terms of Executive Service Agreements (ESA)
Remuneration and other terms of employment for executive KMP are formalised in service agreements that detail the
components of remuneration paid but do not prescribe any changes to remuneration from year to year. While none of the
agreements provide for a fixed term, they include provisions for terminating the agreements under specified notice periods.
Apart from Dr Hale, other KMP and senior executives are subject to restraint of trade provisions.
Below is a summary of the termination provisions for executive KMP:
Virtus Health Limited
Directors' report
30 June 2021
26
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
3 Non-Executive Directors’ Arrangements
3.1 Non-Executive Directors’ Remuneration Policy and Structure
Non-Executive Director (NED) fees are intended to align NEDs with the interests of public investors and should be set in order
for NEDs to retain their independence. The quantum of NED fees should attract and retain highly competent NEDs who will
define the direction of Virtus and ensure the organisation’s governance and compliance. NEDs are not eligible for performance
based or at-risk remuneration.
NED fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Committee may
consider feedback from stakeholders and may seek advice from independent remuneration consultants to ensure NED fees
are appropriate and in line with market and shareholder expectations. The Virtus Chair is not present at any discussions
relating to the determination of her own remuneration.
In FY2021, after considering feedback from stakeholders, the Committee redesigned the remuneration structure for NEDs.
The Committee benchmarked the Virtus NED fees against equivalent roles within the ASX 250 to 300 and within ASX listed
organisations with revenues ranging from $200m and $500m (as referenced in the Aon and Governance Institute - Board &
Executive Remuneration Report 2020). The Committee determined to utilise ASX companies in the $200m and $500m
revenue range as the primary reference group as this large comparator group reduces the impact of outliers in the data. The
Committee also considers revenue to be a less volatile indicator than market capitalisation as well as it being an effective
proxy for the complexity of an organisation.
The Committee received advice from independent advisors, Aon Executive Remuneration, who endorsed this approach. This
review highlighted that the Virtus NED Board and committee fees (and in particular the Board Chair fees) were significantly
misaligned with the comparator group. The below increases implemented with effect from 1 April 2021 will realign Board
member, committee chair and committee member fees to market practice. Despite these fee structure corrections, the Board
Chair remuneration continues to position the Virtus Chair at a level below the comparator group. The Committee has decided
to implement a partial correction in
FY2021 and will consider a further correction to the Board Chair fee in July 2022 to further realign with the market median.
Based on the advice from the independent advisors the Committee increased the following NED fees with effect from 1 April
2021:
•
Board Chair fee increased from $139,300 to $181,090 per annum;
•
Board member fees increased from $83,500 to $93,520 per annum;
•
Committee Chair fees increased as follows:
Given by
Executive
Given by
Company
Executive Director
and Medical Director
TasIVF
11-June-2013
3 months
3 months
N/A
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.
Chief Executive
Officer
18-March-2020
6 months
6 months
6 months
Chief Financial
Officer
28-June-2021
3 months
3 months
12 months
Chief Strategy Officer
and European
Managing Director
29-May-2017
3 months
3 months
6 months
The employment contract may be terminated by either the
Executive or the Company by giving notice in writing. The
company may terminate by giving 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. 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.
Conditions
Executive KMP
Commencement
Date
Notice Period
Restraint of
Trade
Restricted
Period
Virtus Health Limited
Directors' report
30 June 2021
27
o
Risk Committee and Audit Committee Chair fees: increased from $15,000 to $20,000;
o
Nomination and Remuneration Committee Chair fees: increased from $10,000 to $20,000;
•
Committee member fees increased as follows:
o
Risk Committee and Audit Committee member fees: increased from $7,500 to $10,000;
o
Nomination and Remuneration Committee member fees: increased from $5,000 to $10,000.
All fees above are inclusive of superannuation.
Pursuant to the ASX Listing Rules the total amount paid to all NEDs must not exceed in aggregate in any financial year the
amount approved by shareholders. Aggregate annual directors’ fees paid to NEDs for the financial year ended 30 June 2021
were $461,977 (30 June 2020: $467,252). The maximum authorised amount payable in aggregate to all NEDs for their
services (including superannuation) approved by shareholders at the 2015 Annual General Meeting is $600,000 per annum
(director fee pool).
Subject to Annual General Meeting approval in November 2021, the Board will seek to increase the director fee pool to
$850,000 per annum, to more closely align to equivalent market practice.
Aon Executive Remuneration have declared that its endorsement and recommendations were made free from undue influence
by the members of the Board to whom the recommendations relate.
On the basis of this declaration and the protocols and process governing the engagement of Aon Executive Remuneration
and receipt of its recommendations, the Board is satisfied that the recommendations and endorsement were free from undue
influence by such persons.
In FY2021, Aon Executive Remuneration was paid $3,182 (exclusive of GST) in relation to remuneration recommendations
provided as part of its engagement as a remuneration consultant.
Aon was paid $92,000 (excluding GST) for other services including insurance brokerage provided across the business during
FY2021.
3.2
Non-Executive Directors’ Minimum Shareholder Requirement
The Board implemented with effect from 1 April 2021 a minimum shareholder requirement (MSR) for NEDs. Virtus NEDs will
be required to hold a minimum shareholding in Virtus approximately equal to the value of one-year’s annual Director Board
Member’s fee.
This shareholding is to be established over a three-year period following a Non-Executive Director’s appointment. Further by
the first anniversary of the Non-Executive Director’s appointment, the Non-Executive Director (or related entity) must have
acquired shares equivalent to at least 10% of their Board Member’s fee. The remaining 90% can be acquired by the Non-
Executive Director (or related entity) anytime within the following two-year period.
Non-Executive Directors will acquire shares by open market share purchase during normal trading windows (as defined in the
Virtus Health Securities Trading Policy) or by salary sacrifice of Director Fees.
For Non-Executive Directors already engaged by Virtus, prior to the implementation of this requirement, they will be subject
to the same conditions and schedule to establish the MSR as a newly appointed Non-Executive Director.
These MSR conditions will form part of the next revision of the Nomination and Remuneration Committee Charter.
Details of the current shareholdings for NEDs as of 30 June 2021 are provided in section 4.2.
3.3
Other information about Director’s 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.
4 Other Statutory Disclosures
4.1
KMP Remuneration
The tables below set out the remuneration of KMP of the consolidated entity determined in accordance with Australian
Accounting Standard AASB 2 on an accruals basis and therefore include movements in leave accruals and provisions.
Virtus Health Limited
Directors' report
30 June 2021
28
Table 1: Statutory Remuneration Disclosure for Key Management Personnel: Financial Year 2021
1
Michael Stanford ceased to be a Non-Executive Director with effect from 19 February 2021, his director’s fees are shown up to the date of his
resignation.
2
Kate Munning’s equity settled remuneration includes $364,491 of expense relating to her incentives foregone (Foregone Incentive Award). The
remaining $210,657 relates to her FY2021 LTI grant.
3
Dr Lyndon Hale’s remuneration is in relation to his role as an Executive Director and as Medical Director for Tasmania and for part of the year as
Medical Director for Victoria.
4
Matthew Prior commenced employment as Group Chief Financial Officer on 28 June 2021 and became a KMP on that date. The remuneration
reflected represents his remuneration from his commencement date and the cash portion of his Foregone Incentive Arrangement.
5
Glenn Powers resigned and stepped down from his CFO duties on 14 May 2021 and ceased his employment on 31 May 2021. Negative adjustments
under long service leave and equity settled remuneration represent the reversal of accounting accruals for leave and the write back of amounts
accrued in respect of unvested performance rights following the cessation of Mr Powers employment.
6
The value of equity settled amounts 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.
7
STI represents the accrual in respect of a KMP’s performance in the financial year and this is generally paid in the month following the publication
of the consolidated entity’s audited financial statements.
Table 2: Statutory Remuneration Disclosure for Key Management Personnel: Financial Year 2020
1
Negative adjustments in this table reflect reductions in accruals.
2
In view of the impact of the COVID-19 pandemic, Kate Munnings and Glenn Powers voluntarily reduced their fixed remuneration by 20% and the Board
reduced their fees by 20% for the final quarter of the financial year.
3
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.
4
Sue Channon’s salary, leave and fees includes payments in lieu of notice of $531,658.
5
Michael Stanford joined the Board in September 2019 so the total benefit in FY2020 did not represent a full year of fees.
6
Kate Munnings joined the Board in March 2020 so the total benefit in FY2020 did not represent a full year of remuneration.
Post- employment
benefits
Long-term
benefits
Share Based
Payments
2021
Salary, leave and
fees
STI7
Superannuation
or pension
Long Service
Leave6
Equity settled6
Total
Non-Executive Directors
$
$
$
$
$
$
Current
S Petering
149,884
14,315
164,199
G Couttas
109,556
10,462
120,018
S Solomon
100,804
9,623
110,427
Former
M Stanford1
61,492
5,842
67,333
Total NED Remuneration
421,734
40,243
461,977
Executive Directors
Current
K Munnings2
688,002
322,000
25,523
727
575,148
1,611,400
L Hale3
160,615
7,276
167,891
Other Key Management Personnel
M Prior4
104,731
449
105,180
R Banks
365,462
102,385
23,484
81,955
573,287
Former
0
G Powers5
408,354
23,558
(57,501)
(23,621)
350,790
Total KMP Remuneration
2,148,899
424,385
120,534
(56,773)
633,482
3,270,526
Short -term Benefits
Post- employment
benefits
Long-term
benefits
Share Based
Payments
2020
Salary, leave and
fees
STI
Superannuation
or pension
Long Service
Leave
Equity settled
Total1
Non-Executive Directors
$
$
$
$
$
$
P Macourt3
53,362
5,069
58,431
S Petering2
113,832
10,814
124,646
G Couttas2
96,301
9,149
105,450
S Solomon2
91,963
8,737
100,700
M Stanford2,5
71,256
6,769
78,025
Total NED Remuneration
426,714
40,538
467,252
Executive Directors
K Munnings2,6
161,056
5,874
116,028
282,958
S Channon3,4
877,072
37,669
12,728
(70,553)
856,916
L Hale2
160,011
6,882
166,893
Other Key Management Personnel
G Powers2
360,965
21,003
(6,895)
29,631
404,704
R Banks7
63,655
4,013
2,098
69,766
Total KMP Remuneration
2,049,473
115,979
5,833
77,204
2,248,489
Short -term Benefits
Virtus Health Limited
Directors' report
30 June 2021
29
7
Richard Banks became a KMP on assumption of the role of Chief Strategy Officer in May 2020 so the total benefit in FY2020 did not represent a full year
remuneration.
4.2 KMP Shareholding
Below are additional disclosures relating to KMP in relation to their shareholding in the company as at 30 June 2021:
The number of ordinary shares in the company held during the financial year by each director and other members of KMP of
the consolidated entity, including their personally related parties, is set out below:
1.
Dr Michael Stanford ceased to be a Non-Executive Director when he resigned from the Board with effect from 19 February 2021.
2.
Glenn Powers resigned and stepped down from his CFO duties on 14 May 2021 and ceased to be a KMP at that time.
4.3 KMP 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 KMP of the consolidated entity, including their personally related parties, is set out below:
1.
Glenn Powers resigned and stepped down from his CFO duties on 14 May 2021 and ceased to be a KMP at that time.
4.4 Share Based Compensation
4.4.1
Issue of shares
Lyndon Hale did not receive any shares as part of compensation during the year ended 30 June 2021 under the terms of the
Fertility Specialist Loyalty Scheme (refer Note 33 to the financial statements). This scheme is designed as an incentive to
reward, retain and motivate Virtus’ fertility specialists and to recognise the sustained contribution of approximately the top
quartile of Australian specialists on an annual basis by granting them shares based on the number of fertility cycles they
deliver over the year.
4.4.2
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:
Balance at
the start of
the year
Received as
part of
remuneration
Additions
Disposals/
Other
Balance at
the end of
the year
Sonia Petering
45,000
-
-
-
45,000
Greg Couttas
5,000
-
5,000
-
10,000
Shane Solomon
-
-
-
-
-
Michael Stanford1
20,000
-
-
20,000
-
Lyndon Hale
826,572
-
-
-
826,572
Kate Munnings
-
54,013
-
-
54,013
Matt Prior
-
-
-
-
-
Glenn Powers2
114,150
-
-
-
114,150
Richard Banks
-
-
-
-
-
1,010,722
54,013
5,000
20,000
1,049,735
Balance at
the Start of
the year
Granted
Exercised/
cancelled
Expired/
forfeited/
other
Balance at
the end of
the Year
Kate Munnings
162,037
204,082
(54,013)
-
312,106
Matt Prior
-
-
-
-
-
Glenn Powers1
116,694
69,264
-
(185,958)
-
Richard Banks
61,112
63,443
(20,944)
-
103,611
339,843
336,789
(74,957)
(185,958)
415,717
Virtus Health Limited
Directors' report
30 June 2021
30
The grants dated 27 April 2020 represent the two remaining tranches granted to Kate Munnings upon her commencement
with Virtus in recognition of incentives foregone.
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 executive KMP as part of
compensation during the years ended 30 June 2021 and 30 June 2020 are set out below:
Fair values of options and performance rights over ordinary shares granted, exercised and lapsed for executive KMP as part
of compensation during the year ended 30 June 2021 are set out below:
1 Of the options lapsing, 30,417 were granted on 22 November 2017 and 50,551 were granted on 21 November 2018. In addition, 125,935 grants were
forfeited by Glenn Powers when he ceased his employment in May 2021.
This concludes the remuneration report which has been audited.
Grant date
Vesting and
exercisable date
Expiry date
Exercise
price
Fair value per
right at grant date
11 November 2016
11 November 2019
11 November 2026
$0.00
$4.52
22 November 2017
22 November 2020
22 November 2027
$0.00
$3.79
21 November 2018
21 November 2021
21 November 2028
$0.00
$2.77
20 November 2019
20 November 2022
20 November 2029
$0.00
$1.49
27 April 2020
22 March 2022
27 April 2030
$0.00
$4.32
27 April 2020
23 March 2023
27 April 2030
$0.00
$4.32
19 November 2020
19 November 2023
19 November 2030
$0.00
$3.51
Number of rights
granted
Number of rights vested
Number of rights
lapsed during the
year
Kate Munnings
FY2021
204,082
54,013
-
FY2020
162,037
-
-
Matt Prior
FY2021
-
-
-
Glenn Powers
FY2021
69,264
-
185,959
FY2020
56,671
-
33,800
Richard Banks
FY2021
63,443
-
20,944
FY2020
29,678
-
10,454
Fair Value of rights
granted
Net market value of
rights exercised
Number of rights
lapsed1
Kate Munnings
$715,307
$318,676
-
Matt Prior
-
-
-
Glenn Powers
$242,770
-
185,959
Richard Banks
$222,368
-
20,944
Virtus Health Limited
Director's report
30 June 2021
31
Shares under option
Unissued ordinary shares of Virtus Health Limited under option at the date of this report are as follows:
Exercise or
Number
under option
or
Grant date
Expiry date
base price
shares to be
issued
21 September 2016*
21 September 2026
$8.05
26,832
21 September 2016*
21 September 2026
$8.05
10,063
24 October 2017*
24 October 2027
$0.00
48,386
24 October 2017*
24 October 2027
$0.00
77,418
24 October 2017*
24 October 2027
$0.00
33,871
10 October 2018*
10 October 2028
$0.00
241,581
10 October 2018*
10 October 2028
$0.00
31,579
10 October 2018*
10 October 2028
$0.00
14,336
10 October 2018*
10 October 2028
$0.00
14,211
21 November 2018
21 November 2028
$0.00
22,248
20 November 2019
20 November 2029
$0.00
29,678
09 December 2019*
09 December 2029
$0.00
59,124
09 December 2019*
09 December 2029
$0.00
19,708
27 April 2020
27 April 2030
$0.00
108,025
20 October 2020*
20 October 2030
$0.00
165,305
19 November 2020
19 November 2030
$0.00
467,130
1,369,495
*
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 no shares were issued on the exercise of options except for those issued under the Fertility and
Executive Option plans (refer to note 23)
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.
Virtus Health Limited
Director's report
30 June 2021
32
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.
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
23 August 2021
Sydney
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, 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.
Auditor’s Independence Declaration
As lead auditor for the audit of Virtus Health Limited for the year ended 30 June 2021, I declare that to the
best of my knowledge and belief, there have been:
1.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2.
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
Sydney
Partner
PricewaterhouseCoopers
23 August 2021
33
Virtus Health Limited
Statement of comprehensive income
For the year ended 30 June 2021
Consolidated
Note
2021
2020
$'000
$'000
The above statement of comprehensive income should be read in conjunction with the accompanying notes
34
Revenue
4
324,602
258,932
Share of profits of associates accounted for using the equity method
1,060
403
Other income
4
10,915
15,040
Expenses
Fertility specialists, consumables and associated costs
(89,552)
(70,754)
Employee benefits expense
(117,328)
(100,177)
Depreciation and amortisation expense
5
(24,086)
(25,017)
Impairment of goodwill
5
-
(24,587)
Impairment of brand
5
-
(388)
Occupancy expense
(6,576)
(6,026)
Advertising and marketing
(4,214)
(3,970)
Practice equipment expenses
(3,349)
(2,645)
Professional and consulting fees
(4,452)
(4,839)
Other expenses
(17,668)
(14,748)
Finance costs
5
(8,954)
(10,792)
Profit before income tax expense
60,398
10,432
Income tax expense
6
(16,596)
(9,486)
Profit after income tax expense for the year
43,802
946
Other comprehensive income/(loss)
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
25
774
(862)
Foreign currency translation
(3,169)
1,394
Other comprehensive income/(loss) for the year, net of tax
(2,395)
532
Total comprehensive income for the year
41,407
1,478
Profit for the year is attributable to:
Non-controlling interest
667
477
Owners of Virtus Health Limited
26
43,135
469
43,802
946
Total comprehensive income for the year is attributable to:
Non-controlling interest
729
524
Owners of Virtus Health Limited
40,678
954
41,407
1,478
Cents
Cents
Basic earnings per share
3
53.86
0.59
Diluted earnings per share
3
53.17
0.59
Virtus Health Limited
Statement of financial position
As at 30 June 2021
Consolidated
Note
2021
2020
$'000
$'000
The above statement of financial position should be read in conjunction with the accompanying notes
35
Assets
Current assets
Cash and cash equivalents
7
37,008
38,047
Trade and other receivables
8
12,086
13,372
Inventories
1,313
1,399
Prepayments
4,563
3,149
Total current assets
54,970
55,967
Non-current assets
Investments accounted for using the equity method
1,489
1,489
Property, plant and equipment
11
39,914
34,913
Right-of-use assets
13
69,082
89,719
Intangibles
10
428,357
433,694
Deferred tax
6
11,188
10,329
Other
40
312
306
Total non-current assets
550,342
570,450
Total assets
605,312
626,417
Liabilities
Current liabilities
Trade and other payables
9
31,626
41,538
Lease liabilities
14
12,076
10,661
Derivative financial instruments
19
1,166
1,148
Income tax
6
7,603
9,662
Provisions
16
4,886
4,396
Other financial liabilities
21
823
2,374
Unearned income
21,098
20,032
Total current liabilities
79,278
89,811
Non-current liabilities
Borrowings
18
144,090
164,087
Lease liabilities
15
71,442
92,137
Derivative financial instruments
20
1,462
2,586
Deferred tax
6
599
799
Provisions
17
7,429
7,510
Other financial liabilities
22
399
1,284
Total non-current liabilities
225,421
268,403
Total liabilities
304,699
358,214
Net assets
300,613
268,203
Virtus Health Limited
Statement of financial position
As at 30 June 2021
Consolidated
Note
2021
2020
$'000
$'000
The above statement of financial position should be read in conjunction with the accompanying notes
36
Equity
Issued capital
23
242,342
240,785
Reserves
25
12,745
16,004
Retained profits
26
44,000
10,617
Equity attributable to the owners of Virtus Health Limited
299,087
267,406
Non-controlling interest
27
1,526
797
Total equity
300,613
268,203
Virtus Health Limited
Statement of changes in equity
For the year ended 30 June 2021
The above statement of changes in equity should be read in conjunction with the accompanying notes
37
Issued
Retained
Non-
controlling
Total equity
capital
Reserves
profits
interest
Consolidated
$'000
$'000
$'000
$'000
$'000
Balance at 1 July 2019
241,890
5,159
29,336
10,453
286,838
Profit after income tax expense for the year
-
-
469
477
946
Other comprehensive income for the year, net
of tax
-
485
-
47
532
Total comprehensive income for the year
-
485
469
524
1,478
Transactions with owners in their capacity as
owners:
Put option exercise
-
9,571
-
(9,571)
-
Dividends payable by subsidiary to non-
controlling interest
-
-
-
(609)
(609)
Transfer of shares to participants pursuant to
share based payment schemes
463
(463)
-
-
-
Share based payment expense
-
1,252
-
-
1,252
Settlement of partly paid shares (note 23)
416
-
-
-
416
Purchase of treasury shares
(1,984)
-
-
-
(1,984)
Dividends paid
-
-
(19,188)
-
(19,188)
Balance at 30 June 2020
240,785
16,004
10,617
797
268,203
Issued
Retained
Non-
controlling
Total equity
capital
Reserves
profits
interest
Consolidated
$'000
$'000
$'000
$'000
$'000
Balance at 1 July 2020
240,785
16,004
10,617
797
268,203
Profit after income tax expense for the year
-
-
43,135
667
43,802
Other comprehensive income/(loss) for the
year, net of tax
-
(2,457)
-
62
(2,395)
Total comprehensive income/(loss) for the year
-
(2,457)
43,135
729
41,407
Transactions with owners in their capacity as
owners:
Transfer of shares to participants pursuant to
share based payment schemes (note 23)
2,701
(2,701)
-
-
-
Share based payment expense
-
1,899
-
-
1,899
Settlement of partly paid shares (note 23)
1,135
-
-
-
1,135
Purchase of treasury shares (note 23)
(2,279)
-
-
-
(2,279)
Dividends paid
-
-
(9,752)
-
(9,752)
Balance at 30 June 2021
242,342
12,745
44,000
1,526
300,613
Virtus Health Limited
Statement of cash flows
For the year ended 30 June 2021
Consolidated
Note
2021
2020
$'000
$'000
The above statement of cash flows should be read in conjunction with the accompanying notes
38
Cash flows from operating activities
Receipts from customers (inclusive of GST)
323,972
262,820
Payments to suppliers (inclusive of GST)
(243,140)
(193,273)
80,832
69,547
Other revenue
13,317
8,258
Interest and other finance costs paid
(4,784)
(6,132)
Lease interest paid
(3,464)
(3,440)
Income taxes paid
(20,080)
(1,850)
Net cash from operating activities
36
65,821
66,383
Cash flows from investing activities
Payment of acquisition of non-controlling interest
-
(7,109)
Payments for property, plant and equipment and intangibles
(14,855)
(7,921)
Payment of security deposits
(17)
(19)
Proceeds from disposal of property, plant and equipment and intangibles
30
-
Interest received
39
28
Associate distributions received
750
382
Net cash used in investing activities
(14,053)
(14,639)
Cash flows from financing activities
Proceeds from partly paid shares
23
1,135
416
Payment of dividends
(19,293)
(9,647)
Dividend paid to non-controlling interest in subsidiaries
-
(609)
Repayment of borrowings
(20,000)
(11,000)
Proceeds from borrowings
-
1,000
Payment of finance facility fees in relation to refinancing
(545)
-
Repayment of lease liabilities
(11,554)
(10,812)
Purchase of treasury shares
23
(2,279)
(1,984)
Net cash used in financing activities
(52,536)
(32,636)
Net increase/(decrease) in cash and cash equivalents
(768)
19,108
Cash and cash equivalents at the beginning of the financial year
38,047
18,831
Effects of exchange rate changes on cash and cash equivalents
(271)
108
Cash and cash equivalents at the end of the financial year
7
37,008
38,047
Virtus Health Limited
Notes to the financial statements
30 June 2021
39
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 2021 the consolidated entity’s current liabilities exceeded its current assets by $24,308,000 (June 2020:
$33,844,000).The current liabilities include unearned income of $21,098,000 as well as employee leave liabilities of
$13,109,000. 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
$111,802,000 which matures in October 2023.
The Directors continually monitor the group’s working capital position, including forecast working capital requirements and
have ensured that there are appropriate financing 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 financial
assets and liabilities at fair value through profit or loss, 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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 1. Notes to the financial report (continued)
40
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.
Non-monetary items
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part
of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities
held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation
differences on non-monetary assets such as equities classified as at fair value through other comprehensive income are
recognised in other comprehensive income.
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.
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 amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
Conceptual Framework for Financial Reporting (Conceptual Framework)
The consolidated entity has adopted the revised Conceptual Framework from 1 July 2020. The Conceptual Framework
contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting
Standards, but it has not had a material impact on the consolidated entity's financial statements
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
Note
Goodwill and other indefinite life intangible assets
10
Share-based payments
33
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 1. Notes to the financial report (continued)
41
Notes to the financial reports
The notes are organised into the following sections.
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.
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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 2. Operating segments (continued)
42
Healthcare
Healthcare
Services
Services
Australia
International
Unallocated
Total
Consolidated - 2021
$'000
$'000
$'000
$'000
Revenue
Sales to external customers
257,771
65,134
-
322,905
Other revenue
1,658
-
-
1,658
Interest revenue
39
-
-
39
Total revenue
259,468
65,134
-
324,602
Segment EBITDA
97,652
15,257
-
112,909
Share based payment expense
(1,899)
Corporate costs
(9,801)
Information technology costs*
(9,590)
Fair value adjustments to contingent consideration
1,599
Depreciation and amortisation expense
(24,086)
Foreign exchange
181
Net interest
(8,915)
Profit before income tax expense
60,398
Income tax expense
(16,596)
Profit after income tax expense
43,802
Total assets includes:
Investments in associates
1,489
-
-
1,489
Acquisition of non-current assets
8,130
6,725
-
14,855
*Increase from prior year is in relation to enhancing existing technologies, improving security and transformative investments
in creating our Digital platform
Healthcare Services International sales to external customers, comprised of revenue from Ireland $32.9m, Denmark $14.6m,
Singapore $9.3m and UK $8.3m.
Segment EBITDA for the period included $7.7m (FY2020: $7.7m) of COVID-19 related Government assistance that assisted
the consolidated entity to preserve employee relationships through the pandemic by minimising employee stand downs and
permanent job losses, providing a stable platform to allow the group to meet the deferred pent up patient demand in FY2021
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 2. Operating segments (continued)
43
Healthcare
Healthcare
Services
Services
Australia
International
Unallocated
Total
Consolidated - 2020
$'000
$'000
$'000
$'000
Revenue
Sales to external customers
206,902
50,318
-
257,220
Other revenue
1,684
-
-
1,684
Interest revenue
26
-
2
28
Total revenue
208,612
50,318
2
258,932
Segment EBITDA
74,971
9,072
-
84,043
Share based payment expense
(1,252)
Corporate costs
(10,489)
Information technology costs
(6,899)
Transaction costs
(4)
Fair value adjustments to put liabilities and contingent
consideration
5,995
Depreciation and amortisation expense
(25,017)
Impairment of goodwill
(24,587)
Impairment of brand
(388)
Foreign exchange
(207)
Net interest
(10,763)
Profit before income tax expense
10,432
Income tax expense
(9,486)
Profit after income tax expense
946
Total assets includes:
Investments in associates
1,489
-
-
1,489
Acquisition of non-current assets
5,184
2,737
-
7,921
Healthcare Services International sales to external customers, comprised of revenue from Ireland $27.0m, Denmark $11.0m,
Singapore $6.4m and UK $5.9m.
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.
Note 3. Earnings per share
Consolidated
2021
2020
$'000
$'000
Profit after income tax
43,802
946
Non-controlling interest
(667)
(477)
Profit after income tax attributable to the owners of Virtus Health Limited
43,135
469
Add: interest savings on conversion of options
54
-
Profit after income tax attributable to the owners of Virtus Health Limited used in calculating
diluted earnings per share
43,189
469
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 3. Earnings per share (continued)
44
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
80,086,597
80,080,891
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares that are dilutive
1,137,039
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
81,223,636
80,080,891
Cents
Cents
Basic earnings per share
53.86
0.59
Diluted earnings per share
53.17
0.59
In the prior year the options were not dilutive and hence the diluted EPS was the same as the basic 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.
Note 4. Revenue
Consolidated
2021
2020
$'000
$'000
Revenue from contracts with customers
Rendering of services
322,905
257,220
Other revenue
Rent
1,658
1,684
Interest
39
28
1,697
1,712
Revenue
324,602
258,932
Consolidated
2021
2020
$'000
$'000
Other income
Fair value gain on put liabilities
-
1,500
Fair value gain on contingent consideration
1,599
4,495
Other income
1,594
1,307
Government grants
7,722
7,738
Other income
10,915
15,040
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 4. Revenue (continued)
45
Recognition and measurement
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.
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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
46
Note 5. Expenses
Consolidated
2021
2020
$'000
$'000
Profit before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
3,370
4,083
Right-of-use assets
11,895
11,826
Furniture and fittings
382
472
Office equipment
2,040
2,088
Medical equipment
3,627
3,459
Total depreciation
21,314
21,928
Amortisation
Software
1,815
1,954
Brand names
957
1,135
Total amortisation
2,772
3,089
Total depreciation and amortisation
24,086
25,017
Impairment
Impairment of goodwill
-
24,587
Impairment of brand
-
388
Total impairment
-
24,975
Finance costs
Interest and finance charges paid/payable on borrowings
4,734
6,382
Interest on lease liabilities
3,464
3,440
Interest on other financial liability - non-cash interest
206
559
Amortisation of bank facility fees
550
411
Finance costs expensed
8,954
10,792
Superannuation expense
Defined contribution superannuation expense
7,805
6,471
Research costs
Research costs
2,140
2,038
Share-based payments expense
Share-based payments expense - fertility specialists
1,087
1,177
Share-based payments expense - employee benefits
812
75
Total share-based payments expense
1,899
1,252
Virtus Health Limited
Notes to the financial statements
30 June 2021
47
Note 6. Income tax
Consolidated
2021
2020
$'000
$'000
Income tax expense
Current tax
18,034
9,814
Deferred tax - origination and reversal of temporary differences
(1,391)
(884)
Adjustment recognised for prior periods
(47)
323
Write off of tax losses
-
233
Aggregate income tax expense
16,596
9,486
Deferred tax included in income tax expense comprises:
Increase in deferred tax assets
(1,191)
(725)
Decrease in deferred tax liabilities
(200)
(159)
Deferred tax - origination and reversal of temporary differences
(1,391)
(884)
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
60,398
10,432
Tax at the statutory tax rate of 30%
18,119
3,130
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Impairment of goodwill
-
7,376
Impairment of brand
-
116
Fair value gain on Put Liabilities and Contingent Consideration
(477)
(1,560)
Other
(264)
441
17,378
9,503
Difference in overseas tax rates
(735)
(573)
Losses written off
-
233
Adjustment recognised for prior periods
(47)
323
Income tax expense
16,596
9,486
Consolidated
2021
2020
$'000
$'000
Amounts charged/(credited) directly to equity
Deferred tax assets
332
(369)
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
675
810
Potential tax benefit at 17%
115
138
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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 6. Income tax (continued)
48
Consolidated
2021
2020
$'000
$'000
Deferred tax asset
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Employee benefits
4,346
3,413
Right-of-use assets
3,902
3,673
Tax losses
115
138
Intangible assets
-
(144)
Other
2,037
2,129
10,400
9,209
Amounts recognised in equity:
Other
788
1,120
Deferred tax asset
11,188
10,329
Amount expected to be recovered within 12 months
3,208
2,999
Amount expected to be recovered after more than 12 months
7,980
7,330
11,188
10,329
Movements:
Opening balance
10,329
7,143
Credited to profit or loss
1,191
725
Credited/(charged) to equity
(332)
369
Opening adjustment - on transition of AASB 16 'Leases'
-
2,092
Closing balance
11,188
10,329
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 6. Income tax (continued)
49
Consolidated
2021
2020
$'000
$'000
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Right-of-use assets
(224)
(125)
Intangible assets
754
920
Other
69
4
Deferred tax liability
599
799
Amount expected to be settled within 12 months
159
153
Amount expected to be settled after more than 12 months
440
646
599
799
Movements:
Opening balance
799
1,065
Credited to profit or loss
(200)
(159)
Opening adjustment - on transition of AASB 16 'Leases'
-
(107)
Closing balance
599
799
Consolidated
2021
2020
$'000
$'000
Provision for income tax
Provision for income tax
7,603
9,662
Recognition and measurement
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
Notes to the financial statements
30 June 2021
Note 6. Income tax (continued)
50
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.
Note 7. Current assets - cash and cash equivalents
Consolidated
2021
2020
$'000
$'000
Cash at bank and on hand
37,008
38,047
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
Consolidated
2021
2020
$'000
$'000
Trade receivables
11,026
11,172
Less: Allowance for expected credit losses
(1,561)
(2,226)
9,465
8,946
Other receivables
2,621
4,426
12,086
13,372
Allowance for expected credit losses
The consolidated entity has recognised a reversal of $30,000 (2020: $466,000 expense) in profit or loss in respect of
impairment of receivables for the year ended 30 June 2021.
The ageing of the impaired receivables provided for above is as follows:
Consolidated
2021
2020
$'000
$'000
3 to 6 months overdue
170
592
Over 6 months overdue
1,391
1,634
1,561
2,226
The nominal value of the impaired receivables is $1,731,441 (2020: $2,818,621).
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 8. Current assets - trade and other receivables (continued)
51
Movements in the allowance for expected credit losses are as follows:
Consolidated
2021
2020
$'000
$'000
Opening balance
2,226
1,859
Additional provisions recognised
-
466
Unwinding of excess provision
(30)
-
Receivables written off during the year as uncollectable
(635)
(99)
Closing balance
1,561
2,226
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
Consolidated
2021
2020
$'000
$'000
Trade payables
11,073
12,343
Dividends payable
-
9,541
Other payables
20,553
19,654
31,626
41,538
Refer to note 28 for further information on financial risk management.
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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
52
Note 10. Non-current assets - intangibles
Consolidated
2021
2020
$'000
$'000
Goodwill - at cost
422,088
424,791
Software - at cost
24,310
23,981
Less: Accumulated amortisation
(22,495)
(20,617)
1,815
3,364
Brand names - at cost
19,422
19,549
Less: Accumulated amortisation
(14,968)
(13,622)
Less: Impairment
-
(388)
4,454
5,539
428,357
433,694
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Brand
Goodwill
Software
names
Total
Consolidated
$'000
$'000
$'000
$'000
Balance at 1 July 2019
448,198
4,372
7,006
459,576
Additions
-
929
-
929
Exchange differences
1,180
17
56
1,253
Impairment
(24,587)
-
(388)
(24,975)
Amortisation expense
-
(1,954)
(1,135)
(3,089)
Balance at 30 June 2020
424,791
3,364
5,539
433,694
Additions
-
270
-
270
Exchange differences
(2,703)
(4)
(128)
(2,835)
Amortisation expense
-
(1,815)
(957)
(2,772)
Balance at 30 June 2021
422,088
1,815
4,454
428,357
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 7 years.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 10. Non-current assets - intangibles (continued)
53
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:
Consolidated
2021
2020
$'000
$'000
New South Wales
111,807
111,807
Victoria
122,294
122,294
Queensland
66,626
66,626
Australian Diagnostics
26,721
26,721
Ireland
40,078
41,358
Denmark
45,350
47,025
UK
9,212
8,960
422,088
424,791
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 overall margins 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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 10. Non-current assets - intangibles (continued)
54
Terminal Growth Rate
Pre-tax discount rate
2021
2020
2021
2020
New South Wales
2.5%
2.5%
10.4%
10.7%
Victoria
2.5%
2.5%
10.4%
10.7%
Queensland
2.5%
2.5%
10.4%
10.7%
Australia Diagnostics
2.5%
2.0%
10.5%
10.7%
Ireland
2.0%
2.0%
9.4%
9.9%
Denmark
2.0%
2.0%
10.2%
10.8%
UK
2.0%
2.0%
10.6%
10.5%
Denmark:
Due to changes in the competitive landscape, delays in doctor resourcing and the impact of COVID-19 an impairment charge
was recognised in respect of the Danish CGU in the prior period. Management believes that its post COVID-19 strategic
plans and growth initiatives which include expanding the clinics to increase capacity and to attract international patients and
leverage the growing wait list in the public system, and a fully resourced doctor group will help the business achieve its
revenue and growth targets for FY2022 and beyond. Should these future growth estimates not be achieved, the carrying
value of goodwill in relation to Denmark may become impaired. The key sensitivities for the Danish cash-generating unit are
as follows:
●
If forecast revenue decreases by 2.0%, an impairment charge of $368,000 would need to be recognised, with all other
assumptions remaining constant;
●
If the discount rate increases by 0.5%, an impairment charge of $1,020,000 would need to be recognised, with all other
assumptions remaining constant;
●
If the terminal growth rate decreases by 0.5%, an impairment charge of $27,000 would need to be recognised, with all
other assumptions remaining constant.
UK:
The economic uncertainties and disruption arising as a result of COVID-19 in 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 that include regional expansion and satellite clinics which will help the business achieve its
revenue and EBITDA growth targets for FY2022 and beyond. Should these future growth estimates not be achieved, the
carrying value of goodwill in relation to the UK may become impaired. The key sensitivities for the UK cash-generating unit
are as follows:
●
If forecast revenue decreases by 2.0%, an impairment charge of $249,000 will need to be recognised, with all other
assumptions remaining constant;
●
If the discount rate increases by 1.0%, an impairment charge of $202,000 would need to be recognised, with all other
assumptions remaining constant;
●
If the terminal growth rate decreases by 1.5%, an impairment charge of $263,000 would need to be recognised, 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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
55
Note 11. Non-current assets - property, plant and equipment
Consolidated
2021
2020
$'000
$'000
Leasehold improvements - at cost
57,976
53,102
Less: Accumulated depreciation
(37,506)
(34,354)
20,470
18,748
Furniture and fittings - at cost
4,432
4,067
Less: Accumulated depreciation
(3,331)
(2,980)
1,101
1,087
Office equipment - at cost
23,795
21,744
Less: Accumulated depreciation
(18,689)
(16,715)
5,106
5,029
Medical equipment - at cost
45,754
39,264
Less: Accumulated depreciation
(32,517)
(29,215)
13,237
10,049
39,914
34,913
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Leasehold
Furniture
Office
Medical
improvements
and fittings
equipment
equipment
Total
Consolidated
$'000
$'000
$'000
$'000
$'000
Balance at 1 July 2019
21,631
1,422
5,114
9,869
38,036
Additions
1,195
133
2,000
3,663
6,991
Exchange differences
5
4
3
(24)
(12)
Depreciation expense
(4,083)
(472)
(2,088)
(3,459)
(10,102)
Balance at 30 June 2020
18,748
1,087
5,029
10,049
34,913
Additions
5,255
403
2,136
6,791
14,585
Disposals
-
-
(3)
(7)
(10)
Exchange differences
(163)
(7)
(18)
33
(155)
Depreciation expense
(3,370)
(382)
(2,040)
(3,627)
(9,419)
Balance at 30 June 2021
20,470
1,101
5,104
13,239
39,914
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
Shorter of the useful and the expected life of the lease
Furniture and fittings
2 to 10 years
Office equipment
2 to 5 years
Medical equipment
2 to 5 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 11. Non-current assets - property, plant and equipment (continued)
56
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
consolidated entity.
Note 12. Leases
The consolidated entity leases various offices and medical centres, typically 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.
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) Amounts recognised in the statement of financial position
The balance sheet shows the following amounts relating to leases:
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 12. Leases (continued)
57
Consolidated
2021
2020
$'000
$'000
Right-of-use assets
Properties
69,082
89,719
Lease liabilities
Current
(12,076)
(10,661)
Non-current
(71,442)
(92,137)
Total lease liabilities
(83,518)
(102,798)
Additions to the right-of-use assets in FY2021 were $2,782,000 (FY2020: $6,157,000).
(ii) Amounts recognised in the statement of financial performance
The statement of financial performance contains the following amounts relating to leases:
Consolidated
2021
2020
$'000
$'000
Depreciation charge for right-of-use assets
11,895
11,826
Interest expense (included in finance costs)
3,464
3,440
15,359
15,266
The consolidated entity has recognised $1,120,000 (FY2020: $818,000) in the profit and loss in respect of short-term and
low-value lease payments for the year ending 30 June 2021.
The consolidated entity has made the decision to relocate a number of its facilities in the next few years and as a result has
reassessed the likelihood of renewal of a number of existing property lease options. This has resulted in the remeasurement
of the relevant Right of Use Assets and the lease liabilities associated with these assets as follows:
Consolidated
2021
$'000
Write down of right-of-use assets
1,665
Remeasurement of lease liabilities
(1,210)
Net loss
455
The net loss of $455,000 above, is included within other expenses in the statement of comprehensive income.
The statement of cash flows for 30 June 2021 includes cash outflows for lease payments of $11,554,000 (FY20:$10,812,000)
and lease interest of $3,464,000 ( FY20:$3,440,000) within ‘cash flows from financing activities’.
Note 13. Non-current assets - right-of-use assets
Consolidated
2021
2020
$'000
$'000
Right-of-use assets
92,812
101,235
Less: Accumulated depreciation and write down of right-of-use assets
(23,730)
(11,516)
69,082
89,719
Virtus Health Limited
Notes to the financial statements
30 June 2021
58
Note 14. Current liabilities - lease liabilities
Consolidated
2021
2020
$'000
$'000
Lease liabilities
12,076
10,661
Refer to note 28 for further information on financial risk management.
Note 15. Non-current liabilities - lease liabilities
Consolidated
2021
2020
$'000
$'000
Lease liabilities
71,442
92,137
Refer to note 28 for further information on financial risk management.
Note 16. Current liabilities - provisions
Consolidated
2021
2020
$'000
$'000
Employee benefits - long service leave
4,886
4,396
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
2021
2020
$'000
$'000
Long service leave obligation expected to be settled after 12 months
4,397
3,956
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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
59
Note 17. Non-current liabilities - provisions
Consolidated
2021
2020
$'000
$'000
Employee benefits - long service leave
1,524
1,635
Lease make good
5,905
5,875
7,429
7,510
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:
Lease
make good
Consolidated - 2021
$'000
Carrying amount at the start of the year
5,875
Additional provisions recognised
55
Provision utilised
(109)
Exchange differences
(51)
Unwinding of discount
135
Carrying amount at the end of the year
5,905
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
Consolidated
2021
2020
$'000
$'000
Bank loans (net of borrowing costs)
144,090
164,087
Refer to note 28 for further information on financial risk management.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 18. Non-current liabilities - borrowings (continued)
60
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.
The carrying amounts of assets pledged as security for current and non-current borrowings are:
Consolidated
2021
2020
$'000
$'000
Cash and cash equivalents
24,025
27,492
Receivables
9,039
10,012
Inventories
772
812
Right- of-use assets
48,272
65,264
Other current assets
3,663
2,439
Investments
81,465
81,465
Plant and equipment
26,811
26,132
Intangible assets (excluding goodwill)
1,416
2,834
Deferred tax assets
10,240
9,326
Other financial assets
84
66
205,787
225,842
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Consolidated
2021
2020
$'000
$'000
Total facilities
Bank loans (excluding capitalised borrowing costs)
251,825
252,660
Working capital facilities
10,000
10,000
261,825
262,660
Used at the reporting date
Bank loans (excluding capitalised borrowing costs)
145,000
165,000
Working capital facilities
5,023
5,312
150,023
170,312
Unused at the reporting date
Bank loans (excluding capitalised borrowing costs)
106,825
87,660
Working capital facilities
4,977
4,688
111,802
92,348
Borrowings-Financial Arrangements
The consolidated entity has total commitments of $261,825,000 through its syndicated debt facilities. At 30 June 2021, total
facilities drawn were $145,000,000 (FY20: $165,000,000) in borrowings and $5,023,000 (FY20: $5,311,000) in guarantees.
Unused and available facilities amounted to $111,802,000. The consolidated entity complied with the financial covenants of
its borrowing facilities during the financial year ended 30 June 2021. Subject to the continued compliance with debt
covenants, the bank facilities may be drawn at any time and the total facility of $261,825,000 expires in October 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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 18. Non-current liabilities - borrowings (continued)
61
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
Note 19. Current liabilities - derivative financial instruments
Consolidated
2021
2020
$'000
$'000
Interest rate swap contracts - cash flow hedges
1,166
1,148
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
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
Consolidated
2021
2020
$'000
$'000
Interest rate swap contracts - cash flow hedges
1,462
2,586
Refer to note 28 for further information on financial risk management.
Refer to note 29 for further information on fair value measurement.
Virtus Health Limited
Notes to the financial statements
30 June 2021
62
Note 21. Current liabilities - other financial liabilities
Consolidated
2021
2020
$'000
$'000
Other financial liability
-
1,546
Loan note
823
828
823
2,374
Loan note reflects the current portion of a loan owing to the vendors of Trianglen.
Note 22. Non-current liabilities - Other financial liabilities
Consolidated
2021
2020
$'000
$'000
Loan note
399
1,284
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
Consolidated
2021
2020
2021
2020
Shares
Shares
$'000
$'000
Ordinary shares - fully paid
80,389,938
80,389,938
244,027
242,892
Treasury Shares
(276,484)
(470,141)
(1,685)
(2,107)
80,113,454
79,919,797
242,342
240,785
Movements in ordinary share capital
Details
Date
Shares
Issue price
$'000
Balance
1 July 2019
80,389,938
242,476
Settlement of partly paid shares
25 October 2019
-
$0.00
110
Settlement of partly paid shares
30 March 2020
-
$0.00
306
Balance
30 June 2020
80,389,938
242,892
Settlement of partly paid shares
24 November 2020
-
$0.00
97
Settlement of partly paid shares
20 December 2020
-
$0.00
43
Settlement of partly paid shares
27 January 2021
-
$0.00
405
Settlement of partly paid shares
05 March 2021
-
$0.00
405
Settlement of partly paid shares
05 March 2021
-
$0.00
113
Settlement of partly paid shares
30 April 2021
-
$0.00
63
Settlement of partly paid shares
11 May 2021
-
$0.00
9
Balance
30 June 2021
80,389,938
244,027
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 23. Equity - issued capital (continued)
63
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 1,268,309 shares which are partly paid. The 1,268,309 shares were issued at
$4.71 per share and are unpaid up to the extent of $2.40 per share at 30 June 2021
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.
Number of
Shares
$
Balance at 01 July 2019
146,768
586,128
On market acquisitions during the period
439,462
1,984,187
Distribution of shares during the period to fertility specialists and executives
(116,089)
(463,610)
Balance at 1 July 2020
470,141
2,106,705
On market acquisitions during the period
377,857
2,279,093
Distribution of shares during the period to fertility specialists and executives
(571,514)
(2,701,099)
Balance at 30 June 2021
276,484
1,684,699
Share buy-back
There is no current on-market share buy-back.
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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
64
Note 24. Equity - dividends
Dividend type
Cents per
share
Franking
$'000
Date paid
2020 Interim
12.0
100%
9,647 30/11/2020
2021 Interim
12.0
100%
9,647 15/04/2021
Recognition and measurement
Dividends are recognised when declared during the financial year.
Consolidated
2021
2020
$'000
$'000
Franking account balance
27,216
29,672
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
Consolidated
2021
2020
$'000
$'000
Foreign currency translation reserve
4,334
7,565
Cash flow hedges reserve
(1,843)
(2,617)
Share-based payments reserve
14,491
15,293
Business combination reserve
(4,237)
(4,237)
12,745
16,004
Nature and purpose of reserves
●
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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 25. Equity - reserves (continued)
65
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Foreign
currency
Cash flow
Share-based
Business
translation
reserve
hedges
reserve
payments
reserve
combination
reserve
Total
Consolidated
$'000
$'000
$'000
$'000
$'000
Balance at 1 July 2019
6,218
(1,755)
14,504
(13,808)
5,159
Revaluation - net
-
(862)
-
-
(862)
Foreign currency translation
1,347
-
-
-
1,347
Option expense
-
-
1,252
-
1,252
Put option exercise
-
-
-
9,571
9,571
Issue of shares pursuant to share based
payment schemes
-
-
(463)
-
(463)
Balance at 30 June 2020
7,565
(2,617)
15,293
(4,237)
16,004
Revaluation - net
-
774
-
-
774
Foreign currency translation
(3,231)
-
-
-
(3,231)
Option expense
-
-
1,899
-
1,899
Issue of shares pursuant to share based
payment schemes
-
-
(2,701)
-
(2,701)
Balance at 30 June 2021
4,334
(1,843)
14,491
(4,237)
12,745
Note 26. Equity - retained profits
Consolidated
2021
2020
$'000
$'000
Retained profits at the beginning of the financial year
10,617
37,111
Profit after income tax expense for the year
43,135
469
Dividends paid
(9,752)
(19,188)
Adjustment on adoption of AASB 16 - net of tax
-
(7,775)
Retained profits at the end of the financial year
44,000
10,617
Note 27. Equity - non-controlling interest
Consolidated
2021
2020
$'000
$'000
Issued capital
1,842
1,842
Reserves
(4,144)
(4,207)
Retained profits
3,828
3,162
1,526
797
Virtus Health Limited
Notes to the financial statements
30 June 2021
66
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:
2021
2020
Weighted
average
interest rate
Balance
Weighted
average
interest rate
Balance
Consolidated
%
$'000
%
$'000
Bank loans
1.70%
145,000
2.76%
165,000
Interest rate swaps (notional principal amount)
-
(60,000)
-
(60,000)
Net exposure to cash flow interest rate risk
85,000
105,000
An analysis by remaining contractual maturities is shown in the 'liquidity and interest rate risk management' section below.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 28. Financial risk management (continued)
67
The interest rate sensitivities on the bank loans are as follows:
Basis points increase
Basis points decrease
Consolidated - 2021
Basis points
change
Profit after
tax
$'000
Equity
$'000
Basis points
change
Profit after
tax
$'000
Equity
$'000
Bank loans
100
(595)
(595)
(100)
595
595
Basis points increase
Basis points decrease
Consolidated - 2020
Basis points
change
Profit after
tax
$'000
Equity
$'000
Basis points
change
Profit after
tax
$'000
Equity
$'000
Bank loans
100
(735)
(735)
(100)
735
735
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:
Consolidated
2021
2020
$'000
$'000
Bank loans (excluding capitalised borrowing costs)
107,735
88,573
Working capital facilities
4,977
4,688
112,712
93,261
The consolidated entity has borrowing facilities totalling $261,825,000. The total facility expires in October 2023.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 28. Financial risk management (continued)
68
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.
Weighted
average
interest rate 1 year or less
Between 1
and less than
2 years
Between 2
and 5 years
Over 5 years
Remaining
contractual
maturities
Consolidated - 2021
%
$'000
$'000
$'000
$'000
$'000
Non-derivatives
Non-interest bearing
Trade payables
-
11,073
-
-
-
11,073
Other payables
-
20,553
-
-
-
20,553
Interest-bearing - variable
Bank loans
1.70%
2,459
2,459
145,647
-
150,565
Lease liabilities
-
15,320
14,061
34,001
36,368
99,750
Loan note
4.00%
839
407
-
-
1,246
Total non-derivatives
50,244
16,927
179,648
36,368
283,187
Derivatives
Derivative financial instruments
-
1,166
1,166
296
-
2,628
Total derivatives
1,166
1,166
296
-
2,628
Weighted
average
interest rate 1 year or less
Between 1
and less than
2 years
Between 2
and 5 years
Over 5 years
Remaining
contractual
maturities
Consolidated - 2020
%
$'000
$'000
$'000
$'000
$'000
Non-derivatives
Non-interest bearing
Trade payables
-
12,343
-
-
-
12,343
Other payables
-
29,195
-
-
-
29,195
Interest-bearing - variable
Bank loans
2.76%
4,550
53,864
129,419
-
187,833
Lease liabilities
-
13,981
13,934
36,958
56,568
121,441
Other financial liabilities
2.76%
1,546
-
-
-
1,546
Loan note
4.00%
903
870
422
-
2,195
Total non-derivatives
62,518
68,668
166,799
56,568
354,553
Derivatives
Derivative financial instruments
-
1,148
1,148
1,438
-
3,734
Total derivatives
1,148
1,148
1,438
-
3,734
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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
69
Note 29. Fair value measurement
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.
Level 1
Level 2
Level 3
Total
Consolidated - 2021
$'000
$'000
$'000
$'000
Liabilities
Derivative financial liabilities
-
2,628
-
2,628
Total liabilities
-
2,628
-
2,628
Level 1
Level 2
Level 3
Total
Consolidated - 2020
$'000
$'000
$'000
$'000
Liabilities
Derivative financial liabilities
-
3,734
-
3,734
Other financial liabilities
-
-
1,546
1,546
Total liabilities
-
3,734
1,546
5,280
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.
Level 3 assets and liabilities
Movements in level 3 assets and liabilities during the current and previous financial year are set out below:
Contingent
Put Option
Consideration
Total
Consolidated
$'000
$'000
$'000
Balance at 1 July 2019
5,656
8,582
14,238
Foreign exchange impact
141
27
168
Amounts paid in exercise of put option
-
(7,109)
(7,109)
Interest on unwinding
244
-
244
Fair value adjustment
(4,495)
(1,500)
(5,995)
Balance at 30 June 2020
1,546
-
1,546
Foreign exchange impact
38
-
38
Interest on unwinding
15
-
15
Fair value adjustment
(1,599)
-
(1,599)
Balance at 30 June 2021
-
-
-
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 29. Fair value measurement (continued)
70
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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
71
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
Principal place of business /
2021
2020
Name
Country of incorporation
%
%
IVF Finance Pty Limited
Australia
100.00%
100.00%
IVFA Sub-Holdings Pty Ltd
Australia
100.00%
100.00%
IVF Australia Pty Ltd
Australia
100.00%
100.00%
Melbourne IVF Holdings Pty Ltd
Australia
100.00%
100.00%
Melbourne I.V.F. Pty. Ltd.
Australia
100.00%
100.00%
The Heptarchy Trust
Australia
100.00%
100.00%
North Shore Specialist Day Hospital Pty Ltd
Australia
100.00%
100.00%
Queensland Fertility Group Pty. Ltd.
Australia
100.00%
100.00%
Spring Hill Specialist Day Hospital Pty Limited
Australia
100.00%
100.00%
The QFG Day Theatres Unit Trust
Australia
100.00%
100.00%
Hunter Fertility Pty Limited
Australia
100.00%
100.00%
Hunter Fertility Unit Trust
Australia
100.00%
100.00%
Bremiera Pty Limited
Australia
100.00%
100.00%
Queensland Fertility Group Gold Coast Pty Ltd
Australia
100.00%
100.00%
Gold Coast Obstetrics & Gynaecology Specialist
Services Pty Ltd
Australia
100.00%
100.00%
Mackay Specialist Day Hospital Pty Limited
Australia
100.00%
100.00%
City East Specialist Day Hospital Trust
Australia
100.00%
100.00%
Virtus Health Singapore Pte Ltd
Singapore
100.00%
100.00%
Virtus Health Europe Limited
United Kingdom
100.00%
100.00%
Virtus Health Ireland Limited
Ireland
100.00%
100.00%
SIMS Clinic Limited
Ireland
100.00%
100.00%
Xentra Pharm Limited
Ireland
100.00%
100.00%
IVF Sunshine Coast Limited
Australia
100.00%
100.00%
Human Assisted Reproduction Ireland (HARI) Limited
Ireland
100.00%
100.00%
TAS IVF Pty Limited
Australia
100.00%
100.00%
Virtus Andrology Laboratory Singapore Pte. Ltd
Singapore
70.00%
70.00%
Virtus Fertility Centre Singapore Pte Limited
Singapore
70.00%
70.00%
Virtus Health Specialist Diagnostics Pty Limited
Australia
100.00%
100.00%
Lab Services Pty Limited
Australia
100.00%
100.00%
Lab Services Unit Trust
Australia
100.00%
100.00%
Aagaard Fertilitetsklinik Aps
Denmark
100.00%
100.00%
Complete Fertility Limited
United Kingdom
90.00%
90.00%
Fertilitesklinikken Trianglen Aps
Denmark
100.00%
100.00%
Virtus Innovation Pty Ltd
Australia
100.00%
100.00%
Virtus Health Limited Employee Share Trust
Australia
100.00%
100.00%
Hobart Specialist Day Hospital Pty Limited
Australia
100.00%
100.00%
Alexandria Specialist Day Hospital Pty Limited
Australia
100.00%
100.00%
Skejby Cryobank Aps
Denmark
100.00%
100.00%
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 30. Interests in subsidiaries (continued)
72
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:
Parent
Non-controlling interest
Principal place of
business /
Ownership
interest
Ownership
interest
Ownership
interest
Ownership
interest
Country of
2021
2020
2021
2020
Name
incorporation
Principal activities
%
%
%
%
Virtus Fertility
Centre Singapore
Pte Limited and its
controlled entities
Singapore
provision of
healthcare services
70.00%
70.00%
30.00%
30.00%
Complete Fertility
Limited
United Kingdom
provision of
healthcare services
90.00%
90.00%
10.00%
10.00%
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' reports 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'.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 31. Deed of cross guarantee (continued)
73
Set out below is a consolidated statement of comprehensive income and statement of financial position of the 'Closed Group'.
2021
2020
Statement of comprehensive income
$'000
$'000
Revenue
148,734
118,989
Share of profits of associates accounted for using the equity method
1,060
403
Trust distributions received
29,182
23,430
Other income
6,702
7,079
Fertility specialists, consumables and associated costs
(38,972)
(29,965)
Employee benefits expense
(60,967)
(52,448)
Depreciation and amortisation expense
(13,040)
(13,634)
Occupancy expense
(1,003)
(796)
Advertising and marketing
(3,144)
(2,944)
Practice equipment expenses
(1,548)
(1,050)
Professional and consulting fees
(1,902)
(2,626)
Other expenses
(9,713)
(7,162)
Finance costs
(7,158)
(8,951)
Impairment charge
-
(15,049)
Profit before income tax expense
48,231
15,276
Income tax expense
(14,220)
(7,291)
Profit after income tax expense
34,011
7,985
Other comprehensive income/(loss)
Net change in the fair value of cash flow hedges taken to equity, net of tax
764
(862)
Other comprehensive income/(loss) for the year, net of tax
764
(862)
Total comprehensive income for the year
34,775
7,123
2021
2020
Equity - retained profits
$'000
$'000
Retained profits at the beginning of the financial year
11,588
28,418
Profit after income tax expense
34,011
7,985
Dividends paid
(9,751)
(19,188)
Adjustment on adoption of AASB 16 - net of tax
-
(5,627)
Retained profits at the end of the financial year
35,848
11,588
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 31. Deed of cross guarantee (continued)
74
2021
2020
Statement of financial position
$'000
$'000
Current assets
Cash and cash equivalents
16,978
21,151
Trade and other receivables
10,349
20,124
Prepayments
3,342
2,244
30,669
43,519
Non-current assets
Investments accounted for using the equity method
1,489
1,489
Other financial assets
203,935
200,596
Property, plant and equipment
18,371
16,294
Right-of-use assets
36,926
51,720
Intangibles
202,575
203,990
Deferred tax
7,582
7,397
Other
113
153
470,991
481,639
Total assets
501,660
525,158
Current liabilities
Trade and other payables
12,655
20,811
Lease liabilities
6,649
6,065
Derivative financial instruments
1,166
1,148
Income tax
5,030
9,562
Provisions
2,826
2,765
Unearned income
7,239
6,926
35,565
47,277
Non-current liabilities
Borrowings
144,128
164,161
Lease liabilities
39,169
54,583
Derivative financial instruments
1,462
2,586
Provisions
3,718
3,699
188,477
225,029
Total liabilities
224,042
272,306
Net assets
277,618
252,852
Equity
Issued capital
242,342
240,786
Reserves
(572)
478
Retained profits
35,848
11,588
Total equity
277,618
252,852
Virtus Health Limited
Notes to the financial statements
30 June 2021
75
Note 32. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of comprehensive income
Parent
2021
2020
$'000
$'000
Profit after income tax
21,941
1,149
Total comprehensive income
21,941
1,149
Statement of financial position
Parent
2021
2020
$'000
$'000
Total current assets
49,120
55,131
Total assets
299,395
299,973
Total current liabilities
10,902
23,173
Total liabilities
11,165
23,442
Net assets
288,230
276,531
Equity
Issued capital
242,343
240,785
Share-based payments reserve
5,076
7,124
Retained profits
40,811
28,622
Total equity
288,230
276,531
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 2021 and 30 June 2020 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 2021 and 30 June 2020.
Capital commitments - property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2021 and 30 June 2020.
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 ('Plan') was adopted by the Board on 11 June 2013. The Plan was established
to reward, retain and motivate fertility specialists and senior executives. Participation in the Plan is at the Board's discretion
and no individual has a contracted right to participate in the Plan or to receive any guaranteed benefits. Further details are
provided in the remuneration report relating to Virtus Health Executives.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 33. Share-based payments (continued)
76
Set out below are summaries of options and performance rights granted under the plans:
2021
Balance at
Exercised/
Expired/
Balance at
Effective
Exercise or
the start of
cancelled/
forfeited/
the end of
grant date
Expiry date
base price
the year
Granted
other
other
the year
21/08/2015
21/08/2025
$5.67
5,856
-
-
(5,856)
-
28/10/2015
28/10/2025
$5.01
2,205
-
-
(2,205)
-
16/12/2015
16/12/2025
$6.17
2,410
-
-
(2,410)
-
21/09/2016
21/09/2026
$8.05
53,664
-
(26,832)
-
26,832
21/09/2016
21/09/2026
$8.05
23,479
-
(10,062)
(3,354)
10,063
24/10/2017
24/10/2027
$0.00
61,556
-
-
(61,556)
-
24/10/2017
24/10/2027
$0.00
72,580
-
(19,355)
(4,839)
48,386
24/10/2017
24/10/2027
$0.00
116,128
-
(29,032)
(9,677)
77,419
24/10/2017
24/10/2027
$0.00
43,548
-
(4,839)
(4,839)
33,870
22/11/2017
22/11/2027
$0.00
243,728
-
(164,875)
(78,853)
-
22/11/2017
22/11/2027
$0.00
45,503
-
(45,503)
-
-
10/10/2018
10/10/2028
$0.00
241,581
-
-
-
241,581
10/10/2018
10/10/2028
$0.00
31,579
-
-
-
31,579
10/10/2018
10/10/2028
$0.00
14,336
-
-
-
14,336
10/10/2018
10/10/2028
$0.00
14,211
-
-
-
14,211
21/11/2018
21/11/2028
$0.00
104,644
-
-
(82,396)
22,248
20/11/2019
20/11/2029
$0.00
118,075
-
-
(88,397)
29,678
09/12/2019
09/12/2029
$0.00
78,832
-
-
(19,708)
59,124
09/12/2019
09/12/2029
$0.00
19,708
-
-
-
19,708
27/04/2020
27/04/2030
$0.00
162,037
-
(54,012)
-
108,025
20/10/2020
20/10/2030
$0.00
-
165,305
-
-
165,305
19/11/2020
19/11/2030
$0.00
-
536,394
-
(69,264)
467,130
1,455,660
701,699
(354,510)
(433,354)
1,369,495
The weighted average exercise price is $0.22 (2020: $0.47).
The weighted average remaining contractual life of options and performance rights outstanding at the end of the financial
year was 8.3 years (2020: 8.2 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:
Share price Exercise price
Expected
Dividend
Risk-free
Fair value
Grant date
Expiry date
at grant date or base price
volatility
yield
interest rate
at grant date
20/10/2020
20/10/2030
$4.56
$0.00
40.00%
5.50%
0.18%
$3.72
19/11/2020
19/11/2030
$5.26
$0.00
40.00%
5.50%
0.11%
$3.51
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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 33. Share-based payments (continued)
77
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 in FY2020 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
iii. 1/3rd in FY23 on the third anniversary of the date of commencement of employment.
Fertility specialist performance rights and share incentives
Grants of performance rights - fertility specialists
The fertility specialist incentive schemes applicable for FY20 and FY21 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 2021 the potential number of unvested initial and performance rights subject to these grants is estimated to be
nil.
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.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 33. Share-based payments (continued)
78
At 30 June 2021 the potential number of unvested performance rights subject to these grants is estimated to be 710,835.
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.
In FY17, 11 fertility specialists qualified for HPSIS Issue three. In FY18, two fertility specialists qualified for HPSIS Issue four.
At 30 June 2021 the potential number of unvested performance rights subject to these grants is estimated to be 31,579.
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;
●
Awards are payable in shares; conversion from award dollar value to the number of shares 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 period 30 June.
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.
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.
Key management personnel
Disclosures relating to key management personnel are set out in note 35 and the remuneration report included in the
directors' report.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 34. Related party transactions (continued)
79
Transactions with related parties
The following transactions occurred with related parties:
Consolidated
2021
2020
$
$
Other revenue:
Rental income
47,520
47,520
Other transactions:
Provider fees
1,089,539
968,454
Share based payments
15,180
15,565
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Consolidated
2021
2020
$
$
Current receivables:
Trade receivables from associates
847,229
537,431
Other receivables
4,356
4,356
Current payables:
Other payables for provider fees
173,783
437,404
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
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
2021
2020
$
$
Short-term employee benefits
2,573,283
2,049,473
Post-employment benefits
120,534
115,979
Long-term benefits
(56,773)
5,833
Share-based payments
633,482
77,204
Total KMP compensation
3,270,526
2,248,489
Virtus Health Limited
Notes to the financial statements
30 June 2021
80
Note 36. Reconciliation of profit after income tax to net cash from operating activities
Consolidated
2021
2020
$'000
$'000
Profit after income tax expense for the year
43,802
946
Adjustments for:
Depreciation and amortisation
24,086
25,017
Impairment of intangibles
-
24,975
Share-based payments
1,899
1,252
Amortisation of bank facility fees
550
411
Net fair value gain on other financial liabilities
(1,599)
(5,995)
Other non-cash items
748
(263)
Net (gain)/loss in disposal of non-current assets
(20)
-
Interest on other financial liabilities - non-cash interest
206
559
Change in operating assets and liabilities:
Increase in trade and other receivables
(917)
(1,915)
Decrease/(increase) in inventories
86
(143)
Increase in deferred tax assets
(1,059)
(907)
Increase/(decrease) in trade and other payables
(543)
10,339
Increase/(decrease) in provision for income tax
(2,425)
8,543
Increase in other provisions
409
542
Increase in other operating liabilities
598
3,022
Net cash from operating activities
65,821
66,383
Note 37. Events after the reporting period
An outbreak of the Delta variant of COVID-19 has put most of the Australian States into lockdowns of different magnitudes
since 26 June 2021. Whilst COVID-19 case numbers have been the largest in New South Wales, other states in Australia
have also been affected by the Delta variant outbreak.
As evidenced from the above, the impact of the Coronavirus (COVID-19) pandemic is ongoing and while in the year to 30
June 2021 the consolidated entity experienced strong rebound in activity post the first wave of the virus in Q4 of FY2020, the
potential impact, positive or negative, after the reporting date will be a function of a number of factors including consumer
sentiment, availability of international travel, the length of the current lockdowns, future pandemic lockdowns, vaccination
rollout effectiveness and any economic stimulus that may be provided.
Virtus Health Limited
Notes to the financial statements
30 June 2021
Note 37. Events after the reporting period (continued)
81
Acquisition of Adora Fertility and Day Hospitals
On 22 August 2021 the consolidated entity (Virtus) signed a Share Sale Agreement to acquire 100% of the issued share
capital of Adora Fertility Pty Limited, Craigie Day Hospital Pty Ltd, Darlinghurst Day Hospital Pty Ltd and Greensborough
Day Hospital Pty Ltd (“Adora Businesses”) for a cash consideration of $45,000,000.
The Adora Businesses are complementary to Virtus’s existing ARS clinics and Day Hospitals in Australia, with four clinics in
WA, NSW, QLD, VIC (with Western Australia a new market for Virtus), and three day hospitals in WA, NSW and VIC. This
acquisition supports Virtus’s ambition to increase consumer choice by offering diverse models of care across new locations.
The acquisition will be funded through the combination of a fully underwritten $35,000,000 institutional placement and existing
cash reserves.
Institutional Placement
The fully underwritten Institutional Placement will comprise the issue of approximately 5.1 million new fully paid Virtus Health
Limited ordinary shares to certain eligible institutional investors to raise $35,000,000 at a fixed price of $6.80 per share. The
Institutional Placement price represents a 5.4% discount to the last traded price of the Virtus shares of $7.19 on Friday, 20
August 2021, and a 6.5% discount to the 5-day volume weighted average price (‘VWAP’) of $7.27 based on the last trading
day of Friday, 20 August 2021.
No other matter or circumstance has arisen since 30 June 2021 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 $1,750,000 (FY20:$4,604,000) in capital commitments for property, plant and equipment as at
30 June 2021.
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 range 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 largely by the consolidated entity’s insurance policies.
Guarantees
Drawdowns of $5,023,0000 (2020:$5,311,000) 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 2.3 years (2020:2 years).
Note 40. Non-current assets - other
Consolidated
2021
2020
$'000
$'000
Security deposits
312
306
Virtus Health Limited
Notes to the financial statements
30 June 2021
82
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:
Consolidated
2021
2020
$
$
Audit services - PricewaterhouseCoopers
Audit or review of the financial statements
491,014
493,000
Other services - PricewaterhouseCoopers
Tax compliance services
12,500
12,500
503,514
505,500
Audit services - network firms
Audit or review of the financial statements
127,445
147,729
Other services - network firms
Tax services
78,474
53,722
205,919
201,451
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.
Virtus Health Limited
Directors' declaration
30 June 2021
83
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 2021 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
23 August 2021
Sydney
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, 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.
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:
1.
giving a true and fair view of the Group's financial position as at 30 June 2021 and of its financial
performance for the year then ended
2.
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 2021
•
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 significant accounting policies and other
explanatory information
•
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.
84
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 & Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the
Code) that are relevant to our audit of the 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.
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 $3.0 million, which represents
approximately 5% of the Group’s profit before tax. 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
−
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.
85
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. We communicated the key audit matters to the Audit Committee.
86
Key audit matter
How our audit addressed the key audit
matter
Estimated recoverable amount of goodwill
assets
(Refer to note 10) $422m
Goodwill of $422 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 recoverable amount of goodwill was a key
audit matter given the:
•
financial significance of goodwill to the
statement of financial position; 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 with
reference to historical earnings and Board
approved forecasts;
•
testing the mathematical calculations
within the models;
•
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; and
•
assessing the related financial statement
disclosures for consistency with Australian
Accounting Standards requirements.
87
Key audit matter
How our audit addressed the key audit
matter
Revenue from contracts with customers
(Refer to note 4) $323m
Revenue from contracts with customers of $323
million is recognised on the consolidated
statement of comprehensive income.
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.
In obtaining sufficient, appropriate audit evidence,
our procedures included, amongst others:
•
consideration and assessment of the
Group’s accounting policy in line with the
requirements of AASB 15 Revenue from
Contracts with Customers
•
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.
•
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 2021, 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 Operating and Financial Review, Corporate directory and Directors' report. We
expect the remaining other information to be made available to us after the date of this auditor's report.
88
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 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.
89
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 9 to 30 of the directors’ report for the year
ended 30 June 2021.
In our opinion, the remuneration report of Virtus Health Limited for the year ended 30 June 2021
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
Sydney
Partner
23 August 2021
90