Oceania Healthcare Ltd. · NZX:OCA
Oceania Healthcare — 1HY2020 Earnings Presentation
55 slides from Oceania Healthcare's earnings presentation, Jan 24, 2020
Slide 1: a E fo} By aw <5. < 1)
a E 2 fo} By aw 28 <5. < 1)
Slide 2: Goss Update on our Strategy Update on Developments 15
Goss 2 02 Update on our Strategy 5 03 Update on Developments 15 04 Financial Results 24 O5 Appendices 38
Slide 3: 1HY2020 Financial highlights
1HY2020 Financial highlights ty Tero Underlying EBITDA and NPAT from continuing activities were 27.6% and 17.6% ahead of IHY2019 respectively Total assets have increased by 23.8% since IHY 2019 Underlying NPAT from continuing operations’ Operating cash flow NZ$m 32.0 NZ$m 65.1 29.2 57.0 24.1 471 20.
Slide 4: 1HY2020 Highlights
1HY2020 Highlights ED ocean We are on track to deliver 265 units and care suites in line with build rate guidance and recorded strong volumes, prices and margins for both resales and new sales Development pipeline completing as planned and on track for FY2020 90 care suites delivered at Awatere in J
Slide 5: 1HY2020 Highlights (continued)
1HY2020 Highlights (continued) @ocen’ Our aged care strategy is progressing well with i) improved occupancy at sites not affected by development or conversion, and ii) new care suites from development and our conversion programme resulting in increased DMF and PAC revenue: Progress in executing our
Slide 6: Update on our Strategy
Update on our Strategy
Slide 7: Executing our Strategy
Executing our Strategy He) OCEANIA HEALTHCARE. We are creating a superior portfolio with: * Development margins from our brownfields pipeline (to deliver growth); and * Increased quality of recurring cashflows (that underpin our yield). Our Business Model Growth Developing our premium landbank a & r
Slide 8: Strategy - Creating Premium Environments
Strategy - Creating Premium Environments We have a mature business with strong recurring cashflow based returns Development of Upgrade and our well-located conversion of landbank to existing aged care replace older stock to premium facilities with care suites premium product
Slide 9: 4.6% FY2017 5.6% 9.1% FY2018 8.2% 14.1% FY2019 8.6% 17.2% 1HY2020 10.9% 18.0% FY2020
4.6% FY2017 5.6% 9.1% FY2018 8.2% 14.1% FY2019 8.6% 17.2% 1HY2020 10.9% 18.0% FY2020 30.4% 24.8% FULL PIPELINE OCEANIA BF icxcrHcare Premium Villas & Apartments Care Suites PAC Beds Standard Beds Standard Villas & Apartments
Slide 10: The impact of our Strategy on our asset base
The impact of our Strategy on our asset base GDocean Our net asset base will more than double! as well as provide dividends to shareholders f Net Tangible Assets (and dividends paid) NZ$m FY17 1H18 2H18 FY18 1H19 2H19 FY19 1H20 1H20 Pipeline Cumulative Completion Net tangible assets ™Change Dividend
Slide 11: The impact of our Strategy on our earnings
HEALTHCARE The impact of our Strategy on our earnings Goss Growth capital expenditure in prior periods has supported increases in both development margins and ongoing deferred management fees. Development Capital Expenditure (IP and PPE) NZDm Resulting Deferred Management Fees and Development Margin
Slide 12: Where we are in the execution of this strategy
Where we are in the execution of this strategy ED ocean 86.6% of the pipeline of 1,958 is consented or currently under construction. The sites under commission (operating for less than 12 months) and ramp up will drive the growth in our short to medium term earnings. Consent Construct Commission Ram
Slide 13: Care segment performance
● ● ● ● ● 1. Development margin & resale gains on care suites are included within the Village Segment for underlying profit and statutory reporting purposes as the ORAs are issued by Oceania Village Company Limited. As these margins are in lieu of daily premium charges under the traditional model, t
Slide 14: The BayView: Timeline of a brownfield development
1HY2020 Care Performance Cpocean The BayView: Timeline of a brownfield development 13
Slide 15: Care suite conversion process
1HY2020 Care Performance Cpocean The process of converting existing standard care beds into care suites sold under ORA. Holmwood
Slide 16: Meadowbank, Stage 5
Meadowbank, Stage 5 (Scheduled to complete FY2020) L a
Slide 17: On track to deliver our pipeline
On track to deliver our pipeline We are commencing and delivering developments in accordance with our pipeline. Development progress in 1HY2020 Developments completed in IHY2020 1 O ‘e) e Stage 1 new care facility (90 care suites) at Awatere (formerly Trevellyn, Hamilton) Units & care commissioned i
Slide 18: Awatere
OCEANIA HEALTHCARE The new care home at Awatere (formerly Trevellyn) was completed in July 2019. Stage 2 commenced in 1HY2020. Stage 1 Stage 2 Completed Commenced 1HY2020 July 2019 Community Centre 7
Slide 19: Green Gables, Nelson
OCEANIA 2 a HEALTHCARE Green Gables, Nelson Green Gables Nelson Scheduled to complete in © 61 Care Suites 18
Slide 20: Meadowbank
OCEANIA HEALTHCARE Stage 5 scheduled to complete FY2020. Stage 5 Scheduled to complete in FY2020
Slide 21: Gracelands
OCEANIA 2 a HEALTHCARE Gracelands Stages 1 and 2 are scheduled for completion in FY2020. Scheduled to complete in FY2020 32 Villas 20
Slide 22: The BayView, Tauranga
The BayView, Tauranga OCEANIA 2 a HEALTHCARE The BayView Tauranga Commenced December 2018 74 Apartments 21
Slide 23: Windermere, Christchurch
Windermere, Christchurch OCEANIA 2 a HEALTHCARE ad Windermere Christchurch Scheduled to complete in 6 71 Care Suites
Slide 24: Eden
OCEANIA HEALTHCARE Commenced 1HY2020 Additional land was acquired adjacent to the Eden Village in FY2018 and consented in IHY2019 Commenced FY2020 Community Centre
Slide 25: Financial results contents
Income statement and segmental performance Balance sheet and drivers of property valuations Cashflow statement Capital structure
Slide 26: Total Comprehensive Income
Total Comprehensive Income Total Comprehensive Income reflects the fair value movements of both the village and care segments Village Segment Investment Property (He) OCEANIA HEALTHCARE Care Segment Property Plant & Equipment Fair Value Movement of $11.4m reflected in Statutory NPAT Negative Fair Va
Slide 27: Income statement
⚫ ⚫ ➢ ➢ ➢ ⚫ ⚫ ⚫ ⚫ 1. The right to use asset (Everil Orr village) is a lease arrangement under which Oceania is the village operator. Everil Orr also contributed $0.6m to DMF. There is corresponding rental expense of $11.5m. Note these items are excluded from Underlying Profit. 2. Note that the depre
Slide 28: Underlying profit adjustments
⚫ ⚫ ⚫ ⚫ 1. Rental expense of $11.5m in 1HY2020 relates to the right to use asset at Everil Orr village. There is a corresponding credit in IP which is also removed as part of this adjustment. 2. “Other” is an aggregation of line items that are individually less than $2.0m and includes: Gain on Sale/
Slide 29: Care segment results
1. Development margin & resale gains on care suites are included within the Village Segment for underlying profit and statutory reporting purposes as the ORAs are issued by Oceania Village Company Limited. As these margins are in lieu of daily premium charges under the traditional model, these earni
Slide 30: Deferred management fees
⚫ ⚫ ⚫ 1. Note Care Suite DMF is included in the Care segment but is also presented here to provide an aggregate view of DMF for the Group. Villa and Apartment DMF of $10.3m in 1HY2020 excludes $0.6m of DMF revenue at Everil Orr.
Slide 31: Village segment
OCEANIA Village segment BA nen Resale and development margin percentages remain at strong levels. Volumes were 29.2% higher; particularly new sales and resales of care suites Resales volume and margin 120 30.5% 30.3% += 30.3% 35.0% 100 26.7% 28.4% 30.0% e Resales margins for ILUs were consistent at
Slide 32: Village segment - key indicators
Village segment - key indicators Goce Resale prices for villas and apartments were above IHY2019. Closing villa and apartment stock at historically low levels. Resales Prices NZD$000s 657 e Average resale prices increased for ILUs (5.1% for villas and 30.6% for apartments). Apartment resale price re
Slide 33: Unsold stock and valuation
⚫ ⚫ ̶ ̶ ⚫ 1. Calculated as the current/estimated sale or resale price of all units/care suites as determined by CBRE – note FY2020 as at 31 October 2019. The FY2018 figure has been adjusted for the divestment of Dunblane Village. 2. The value of unsold stock represents the sales prices of units/care
Slide 34: Developments - key indicators
Developments -— key indicators OCEANIA ia HEALTHCARE Development margin of 36.1% remained healthy with prices achieved at The Sands and Meadowbank in line with expectations and commensurate with their premium locations Development Volumes and Margins 90 36.4% 36.1% 40.0% 80 35.0% 70 30.0% 60 25.0% 5
Slide 35: Balance sheet
add: Adjustment for CBRE – Care Suites less: Adjustment for Right of Use Assets ● ● ●
Slide 36: Balance sheet - drivers
Balance sheet - drivers (He) OCEANIA HEALTHCARE Uplifts in IP and PPE through development capital expenditure and the increase in fair value of recently completed developments Investment Property (excl Right of Use Asset) NZ$m Freehold Land and Buildings (in PPE excl chattels) NZ$m 18.2 12.7 463.1 5
Slide 37: Cash flow
Cash flow developments. Statement of cash flows OCEANIA ia HEALTHCARE Operating cash flows of $57.0m for IHY2020 were ahead of the $47.1m in IHY2019 due to higher cash proceeds from sales at new e First time sales receipts at development sites of $65.5m (c.f. $43.5m. in IHY2019) drove a significant
Slide 38: Capital structure
e OCEANIA Capital structure pecs Gearing of 31.8% as at 30 November 2019. Sufficient bank facilities in place to execute our development pipeline. Preparation for retail bond to provide diversity of funding and tenor Net Debt Credit metrics DEBT FACILITIES FACILITY Limit DRAWN AMOeNT PERIOD ENDING 1
Slide 39: Appendices contents
Business overview Portfolio summary Development pipeline Reconciliation of portfolio movements Summary of unit sales Capital expenditure Reconciliation of resales cash flow Definition of Underlying NPAT Glossary Disclaimer
Slide 40: Business overview
1. Comprising 44 operating villages and 2 undeveloped sites. Facility numbers as at 30 November 2019. 2. Current and planned developments as at 30 November 2019; 3. Includes 325 care studios which may be initially sold with a PAC, and may subsequently be sold under an ORA
Slide 41: The impact on care earnings from Transformation Strategy
O01 The impact on care earnings from Goss Transformation Strategy Maturity Typical Care Earnings Cycle of a Brownfields Redevelopment. Consent construct H Commission TO T+S Cease admissions Hospitality staff recruited / care staff retained
Slide 42: Where we are at in the execution of this Strategy
HEALTHCARE O1 Where we are at in the execution of this Strategy ED ocean Our Care Pipeline within the Brownfields Earnings Cycle. Maturity Ramp Up s20% Consent Construct i fe Commission (sss T-4 T-3 T-2 0-04 TO TH T+2 T+3 T+4 THs Care sites currently at each stage of redevelopment Elmwood** Green Ga
Slide 43: Care fee structure
Daily premium payment – ranges from $10- $70 a day. Average in NZ is ~$20 a day • All care beds (standard, PAC and care suite) attract a fixed daily payment prescribed by the Government dependent upon the level of care required (hospital, rest home or dementia). • The services funded by the daily fe
Slide 44: Portfolio summary
02 Portfolio summary (30 Nou 2019) OCEANIA HEALTHCARE FACILITY REGION CARE CARE VILLAGE TOTAL FACILITY REGION CARE —CARE_—-VILLAGE_-— TOTAL BEDS SUITES UNITS NORTH ISLAND SOUTH ISLAND Totara Park Rodne: - - 30 30 The Sands North shore - 44 64 108 Marina Cove Picton - - 22 22 Greenvalley Lodge North
Slide 45: Development pipeline
03 Development pipeline OCEANIA HEALTHCARE Development pipeline status as at 24 January 2020 SITEs STAGE STATUS ILUs Care Suites Gross NET UNITS NOTES Meadowbank Stage 5 Under Construction 26 - 26 26 Expected to complete 2HY2020 Stage 6 Consented - 35 35 35 Awatere (formerly Trevellyn) Stage 2 Under
Slide 46: Waimarie Street
O3 OCEANIA HEALTHCARE Resource consent was obtained for Waimarie Street in IHY2020 Sei ares 5 Greenfield site in the . > Auckland suburb of St Heliers: e Premium boutique 109 © ased care facility ana retirement village WM 4s’ planned suites planned e Strong forec demand in the catchment area ~13,500
Slide 47: Elmwood, Auckland
03 Elmwood, Auckland Gpocens Scheduled to commence in the near term Resource consent obtained 1HY2020 142 Care Suites
Slide 48: Reconciliation of portfolio movements
1. Changes in capacity and pipeline now includes forecast care suite conversions in the pipeline. Totals for 1HY2020 reconcile to both the total existing and future post development portfolios on slide 39.
Slide 49: Summary of unit sales
05 Summary of unit sales ocr’ New Sales THY2015 THY 2016 THY 2017 1HY2018 1HY2019 1HY2020 Villa 27 12 15 9 7 3 Apartment 4 4 to) 7 24 26 Care Suite 13 15 10 7 24 55 Total 54 41 25 23 65 84 Development margin 10.3% 18.4% 15.1% 36.4% 29.5% 36.1% Resales THY2015 THY 2016 THY 2017 1HY2018 1HY2019 1HY202
Slide 50: Capital expenditure
06 Capital expenditure (ga Osea" Development capital expenditure was consistent with IHY2019 Breakdown of Capital Expenditure NZDm 1HY2020_ 1HY2019 FY2019 Acquisitions 0.0 21.4 21.4 Development capital expenditure 61.3 65.6 135.2 Remediation expenditure 0.0 0.5 0.5 Upgrade capital expenditure - Care
Slide 51: Reconciliation of resales cash flow
1. Net Buybacks is the difference between the gross ORA payments made in relation to units bought back (and not resold) during the year and the gross ORA receipts from units resold during the year that were bought back in prior financial years
Slide 52: Definition of Underlying NPAT
Underlying Profit is a non-GAAP measure used by the Group to monitor financial The Directors’ estimate of realised development margin is calculated as the cash performance and is a consideration in determining dividend distributions. Underlying received, and receivable, in relation to the first sale
Slide 53: Glossary
A room or studio certified for the provision of care by the Ministry of Investment Property Health which has been licensed under an ORA Initial Public Offering (of shares in Oceania) Earnings from continuing operations excludes the earnings from sites divested in FY2019 in all reporting periods Mini
Slide 54: Glossary (continued)
Property Price Growth Rate Resale gain, as included in the definition of underlying profit, divided by the ORA licence payment previously received from the outgoing resident Registered Nurse Includes independent villas and apartments Work in progress
Slide 55: Disclaimer
This presentation has been prepared solely by Oceania Healthcare Limited The information contained in this presentation has been prepared in good faith by ("Oceania"). You must read this disclaimer before making any use of this presentation Oceania. No representation or warranty, expressed or implie