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Chair's report

Peter Promnitz
Chair

Despite prevailing headwinds within the public policy environment, in the year under review the Group continued to progress its strategic agenda as an organisation providing products and services to meet the wellbeing needs of its members and customers, and delivering social infrastructure outcomes that benefit the broader community.

The external operating environment also continued to undergo significant scrutiny and change, including Royal Commissions and other inquiries arising from conduct and quality problems within the financial services, aged care and disability sectors—areas in which the Group has increasing exposure. Further, political and policy instability brought increased pressure on our private health insurance business.

Pleasingly, our organisation’s commitment to its members and customers assisted us in navigating these challenges and provided us with a solid platform from which to advocate on their behalf.

Mutual Reforms

Perhaps the most significant public policy occurrence for the Group in the year under review was the passage through the Australian Parliament of legislative reform for co-operatives and mutual organisations—reform that opens up future strategic opportunities while safeguarding mutuality.

The Treasury Laws Amendment (Mutual Reforms) Act 2019 formally recognises mutual organisations, such as Australian Unity, while allowing them to raise funds through the issue of a specific financial instrument called a Mutual Capital Instrument (MCI).

In the past, mutual organisations could generally only raise funds by increasing debt, which has restricted growth. MCIs will allow mutual organisations to raise permanent capital without relying solely on debt or compromising their member-owned status.

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Financial Performance

An important and necessary part of our strategic journey has been the diversification of the business into our three revenue platforms— Independent & Assisted Living, Retail and Wealth & Capital Markets. As a Group we are well-progressed with our portfolio strategy of reducing our overall reliance on our health insurance business, while expanding our exposure to the rapid growth in demand for person-centred human services and social infrastructure.

Important to realising the strategic ambitions of a recrafted organisation with a better balance of risk is the need to maintain a strong balance sheet position, while actively deploying capital in support of our growth aspirations. During the year, we strengthened the foundations of the Group’s balance sheet through a number of initiatives. Further, a focus on embedding sustained efficiencies and structural benefits from the prior year's transformation program underpinned a $45.0 million decrease in overall operating expenses.

Against this backdrop, the Group’s financial performance has been positive; net profit after tax for the period under review was $53.0 million and revenue was $1.61 billion, reflecting solid performance across our three operating platforms.

Delivering Value

While the Group operates with a strong commercial approach, as a mutual organisation we are afforded the opportunity to create value that extends beyond financial results - for our members, our customers and the broader community. Our structure allows us to consider longer-term opportunities without the short-term pressure of delivering immediate returns to shareholders. This was critical, for example, in our ability to create Remedy Healthcare and to invest significantly in building a Home Care business.

A major focus of the year under review saw the Group laying the foundations for renewed recognition and shared value to Australian Unity Limited members. The board eagerly anticipates the realisation of this work.

Further progress was also made on our community value strategy. We believe that a sound community value framework and practices translate to a stronger business that delivers for all stakeholders. We strengthened our partnerships with like-minded community partners by practically supporting education and assistance programs designed to empower the individual and grow community impact. Our ambitions in the area of social infrastructure were also progressed with major milestones reached in the development of Brisbane’s Herston Quarter health precinct on behalf of the Queensland Government—one of the leading pieces of hard social infrastructure currently under construction in Australia. When successfully delivered, this project could provide further opportunities in the social infrastructure development space.

Risk

The challenges and disruptions in the external operating environment present risk across our businesses in terms of their potential to precipitate deteriorating market sentiment, changes in government policy—or both.

The presence of inherent risk in the delivery of human services was anticipated when the Group embarked on its strategy of diversifying its business portfolio. As discussed earlier, these risks were highlighted in the year under review through the evidence and subsequent findings of Royal Commissions and other inquiries within the financial services, aged care and disability sectors.

The board continues to work closely with management on ensuring that the Group understands such risks, their impact, and the options for responding should the risk be realised.

Finally, on behalf of the board I would like to thank Group Managing Director Rohan Mead, his executive team and Australian Unity’s employees for their hard work during the year.

Peter Promnitz
Chair

"As a mutual organisation we are afforded the opportunity to create value that extends beyond financial results - for our members, our customers and the broader community."

Peter Promnitz
Chair

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