There is a good reason the new government may have to hold off on a float of Medibank.
For it would appear the health insurer’s coffers were raided by a cash strapped outgoing federal government in the last financial year.
While the net earnings after tax jumped 83.8% to 232.74 million, suggesting the entity was in a healthy position for a sale, the balance sheet indicates a deterioration of the company’s financial position.
That is a result of a massive series of “dividends” paid to the “owner” in the past financial year.
Dividends, in fact, dwarfed earnings. The total dividend for the year amounted to a whopping $450.33 million, which included two separate special dividends, one of which totalled $300 million and was declared in mid May and paid on 15 August just a few weeks before the federal election.
The dividend grab was significantly up on the previous year’s $91.24 million, an amount that was less than the $126.59 million net profit.
Medibank has been a cash cow for the government in recent years, with reports indicating that upwards of $700 million flowing out of the organisation.
According to the accounts released this morning, the most recent cash grab has come from retained earnings.
Note 22 of the accounts show that retained earnings dropped to $1.29 billion from $1.52 billion last year.
That in turn saw a depletion in total equity to $1.4 billion from $1.6 billion last year despite this year’s much better operating performance which generated a return of more than 15% on equity.
The new government has been coy on the timing of any sale of the business despite committing to it in the lead up to the election and with the Greens even appearing to be open to the idea.
Valued at around $4 billion in 2010, some analysts in recent months have suggested the business now is worth far less despite its attempts to broaden its earnings base and a decision by the Rudd Government in 2009 to shift its focus from “not for profit” towards a commercial approach.
As a strategy, it has paid off in the form of handsome dividends. Perhaps the Abbott Government will continue the strategy.