Oceania Healthcare Ltd. · NZX:OCA
Oceania Healthcare — FY2019 Earnings Presentation
56 slides from Oceania Healthcare's earnings presentation, Jul 25, 2019
Slide 1: Results Presentation for the Financial Year Ended 31 May 2019
+ U-2'Results Presentation - ee al ~ ae ' for the Financial Year Ended 31 May 2019 * ae . The Sands H EALTHCARE : (completed in FY2019)
Slide 2: Agenda
Agenda 01 Highlights of FY2019 2 02 Update on our Strategy 6 03 Update on Developments 1 04 Financial Results 21 O05 Appendices 36 View from Stage 4 at Meadowbank Village (completed in.FY2019)
Slide 3: Creating a superior portfolio: growth and yield
He) OCEANIA HEALTHCARE. We are creating a superior portfolio with: * Strong development margins from our brownfields pipeline (to deliver growth); and * Increased quality of recurring cashflows (that underpin our yield of 4.4%'). Growth Developing our premium landbank & recycling capital q 2S DEVELO
Slide 4: FY2019 Financial highlights
FY2019 Financial highlights Desens Total Comprehensive Income for FY2019 was 22.1% ahead of FY2018. Total assets have increased by 22.0% since FY2018 Total Comprehensive Income Underlying NPAT from continuing NZ$m operations’ NZ$m 99.8 50.6 49.7 81.7 a FY2016 FY2017 FY2018 FY2019 FY2017 FY2018 FY201
Slide 5: FY2019 Highlights
FY2019 Highlights GDocean ery of units and care suites (from 131 in FY2018 to 272 in FY2019) in line with guidanc le margins and prices in our village business We more than doubled our de continued to record strong re nd Development pipeline completing as planned and on track into FY2020 e 83 apartm
Slide 6: FY2019 Highlights (continued)
FY2019 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 A
Slide 7: Update on our Strategy
Slide 8: Strategy - Creating Premium Environments
fc) Strategy - Creating Premium Environments We have a mature business with strong recurring cashflow based returns Development of our well-located landbank to replace older facilities with premium product Upgrade and conversion of existing aged care stock to premium care suites
Slide 9: Portfolio mix shift to premium
#] OCEANIA HEALTHCARE Premium Villas & Apartments D> 30.1% 8.2% 10.4% 4.6% 5.6% 7.0% 9.1% 14.1% YN. Care 20.2% 25.4% [z=] Suites PAC Beds 32.2% © Standard 18.0% Beds Standard Villas & Apartments FY2017 FY2018 FY2019 FY2020 FULL PIPELINE
Slide 10: Where we are in the execution of this strategy - overall picture
Where we are inthe execution of = @}ocean this strategy - overall picture 67.3% of the pipeline of 1,995 is consented or currently under construction. The sites under sell down and commission will drive the growth in our short to medium term earnings Consent Construct Commission Sell Down Maturity a
Slide 11: Outcomes of this strategy - higher proportion of recurring earnings
° . ED ocean Outcomes of this strategy - higher neatricare proportion of recurring earnings Development margin realised from recent and Capital Expenditure on development & conversion - current developments. has almost tripled over the last 3 years and will Increasing Resale gains realised increase
Slide 12: Update on our Developments
xs \= aa == Ss PS z _ a —— Bayon ee zs =< Ve. ao ae — a = aio Ss . ‘ «a 2a lata <<: > a a oes > ee > os Update on our Developments
Slide 13: The BayView, Tauranga
HEALTHCARE The BayView, Tauranga @ OCEANIA 13¢ cognised in FY A further 4 car The BayView Tauranga Completed in October 2018
Slide 14: The BayView, Tauranga
OCEANIA 2 a HEALTHCARE The BayView, Tauranga The BayView Tauranga Commenced December 2018 13
Slide 15: Meadowbank Stage 4
OCEANIA 2 a HEALTHCARE Stage 4 was completed in May 2019. 8 apartment sales and 6 care suites sales recognised in FY2019. A further 5 apartments have been sold or are under contract. i . ’ Stage 4 Completed in May 2019
Slide 16: Meadowbank Stage 5
OCEANIA HEALTHCARE 2 Stage 5 commenced construction in January 2019. 3 Stage 5 Commenced January 2019
Slide 17: The Sands, Auckland
OCEANIA 2 a HEALTHCARE The Sands, Auckland ognised in FY2019 n. A further 15 apartments he The Sands B ns Bay, Auckland Apartments Care Suites
Slide 18: Awatere, Hamilton
Awatere, Hamilton OCEANIA HEALTHCARE The new care home at Awatere (formerly Trevellyn) was completed in July 2019. a Stage 2 will commence in FY2020. Awatere Hamilton Stage 1 Completed July 2019 6 90 Care Suites Stage 2 Scheduled to commence FY2020 © 63 Apartments Community Centre
Slide 19: Green Gables, Nelson
HEALTHCARE Green Gables, Nelson @ OCEANIA Green Gables Nelson Scheduled to complete in FY2020 Apartments Care Suites 18
Slide 20: Windermere, Christchurch
HEALTHCARE Windermere, Christchurch Gp ocenns Windermere Christchurch Scheduled to complete in 6 71 Care Suites
Slide 21: Gracelands
OCEANIA HEALTHCARE Gracelands Stages 1 and 2 are scheduled for completion in FY2020. Scheduled to complete in FY2020 32 Villas
Slide 22: Financial Results
Income statement and segmental performance Balance sheet and drivers of property valuations Cashflow statement Capital structure
Slide 23: Total Comprehensive Income
e io Total Comprehensive Income Doce Total Comprehensive Income reflects the fair value movements of both the village and care segments Village Segment Care Segment Investment Property Property Plant & Equipment Negative Fair Value Positive Fair Value Fair Value Movement movements of -$7.0m movement
Slide 24: Income statement
⚫ ⚫ ➢ ➢ ⚫ ⚫ ⚫ 1. The fair value of investment property includes a fair value movement of $5.5m in relation to the right to use asset at Everil Orr. The contribution to DMF is $0.7m. This is offset by the rental expenses of $6.2m.
Slide 25: Underlying profit reconciliation
⚫ ⚫ ⚫ ⚫ 1. Rental expense of $6.2m in FY2019 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. Net nil effect. 2. “Other” is an aggregation of line items that are individually less than $2.0m and includes:
Slide 26: Oceania Occupancy Sites Unaffected by Development
Oceania Occupancy Sites Unaffected by Development
Slide 27: 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 $17.2m in FY2019 excludes $727k of DMF revenue at Everil Orr.
Slide 28: Village segment
Village segment Resale and development margin percentages were in line with FY2018 and remain at strong levels. Volumes were 10.7% higher Resales volume and margin FY2015 me Villa 27.7% FY2016 Mmmm Care Suite LU Resale Margin 29.8% 31.6% 30.2% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% FY2017 FY2
Slide 29: Village segment - key indicators
Village segment -— key indicators (He) OCEANIA HEALTHCARE. Resale prices for units and care suites were above FY2018. Closing villa and apartment stock at historically low levels. Resales Prices NZD$000s 700 600 500 400 592 FY2015 FY2016 FY2017 FY2018 FY2019 Villa Apartment Care Suite Resales Prices
Slide 30: Embedded value
⚫ ⚫ ⚫ ̶ ̶ ⚫ 495.4 604.8 (33.6) (91.8) (279.7) (312.4) equals: Embedded value 1. Calculated as the current/estimated sale or resale price of all units/care suites as determined by CBRE – note FY2019 as at 30 April 2019. The FY2018 and FY2017 figures have been adjusted for the divestment of Dunblane V
Slide 31: Villa, Apartment and Care Suite trends
⚫ ⚫ ⚫ ⚫ ⚫ ⚫ FY2015 FY2016 FY2017 FY2018 FY2019 Villa Apartment Care Suite
Slide 32: Balance sheet
Balance sheet (He) OCEANIA HEALTHCARE Total assets increased by $252.2m (22.0%) from FY2018. Capital expenditure of $173.5m in FY2019 was 31.8% above FY2018 and more than double FY2017 FY2019 Balance Sheet Net Adjusted Value (“NAV”) NZDm FY2019 FY2018 Var FY2017. NZDm FY2019 FY2018 Assets PPE and IP
Slide 33: Valuation drivers
NZ$m NZ$m 11.00% 17.80% 10.00% 18.50% $8.61 $19.23 $9.65 $18.34 $258,183 $209,906 $405,973 $819,535 ⚫ ⚫
Slide 34: Development capital expenditure
Development capital expenditure Doce HEALTHCARE Growth capital expenditure in prior periods has supported increases in both development margins and ongoing deferred management fees. Construction Capital Expenditure (IP and PPE) Resulting Deferred Management Fees and Development Margin NZDm NZDm 41.5
Slide 35: Cash flow
Cash flow OCEANIA BF icxcrHcare Operating cash flows of $89.3m for FY2019 were ahead of the $82.2m in FY2018 due to higher cash proceeds from sales at new developments. Statement of cash flows NZDm FY2019 FY2018 Var FY2017 e First time sales receipts at development Receipts from customers 165.7 1618
Slide 36: Capital structure
e OCEANIA Capital structure pecs Gearing of 28.9% as at 31 May 2019. Sufficient bank facilities in place to execute our development pipeline. Net Debt Credit metrics DEBT FACILITIES FACILITY LIMIT ROSS) PERIOD ENDING FY2019 FY2018 General / corporate $135.0m $102.0m Net debt $248.2m $150.8m Cash n/a
Slide 37: Appendices
Business & market 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 38: Portfolio overview
1. Comprising 44 operating villages and 2 undeveloped sites. Facility numbers as at 31 May 2019. 2. Current and planned developments as at 31 May 2019; 3. Includes 360 care studios which may be initially sold with a PAC, and may subsequently be sold under an ORA
Slide 39: Recognised leader in clinical care; clear growth strategy
Highly cashflow and Recognised leader in value accretive clinical care brownfield development projects in key urban locations Clear growth strategy in aged care Growing development track record and capability Attractive demographic trends and industry structure – especially in the Established corpor
Slide 40: Population Aged 85+
Population Aged 85+ 1. Statistics New Zealand population forecasts as at March 2017.
Slide 41: Strategy pillars
Creating premium environments by developing our brownfield pipeline and converting standard beds to care suites. Delighting our Residents with a hospitality inspired, customer led model. Maintaining our passion for the wellbeing of our staff and residents. Nurture and develop our leaders. Continue t
Slide 42: The impact on care earnings from this strategy
HEALTHCARE O01 The impact on care earnings from this Strategy Gpocens Maturity Typical Care Earnings Cycle of a Brownfields Redevelopment. H Sell Down i 1 Consent ; Construct H Commission s5-15% 1 iy. 2 | - T+4 T+5 T+6 Cease admissions Hospitality staff recruited / care staff retained a1
Slide 43: Where we are at in the execution of care transformation strategy
O1 Where we are at in the execution of this Care ED ocean transformation strategy Maturity Our Care Pipeline within the Brownfields Earnings Cycle. H Sell Down t t Consent i Construct ! I t (50-09 Commission s5-15% $0-5k L T-3 T-2 T-1 TO T+ T+2 T+3 T+4 T+ T+6 ‘are sites currently at each stage of re
Slide 44: Demand for a premium care experience
01 Demand for a premium care experience We have been operating care suites for a decade. Residents want, and have the means to pay for, accommodation above the levels funded by the MoH. Further, current Government funding falls short of that required to incentivise new builds. New Zealand requires a
Slide 45: Care payment models: PAC and ORA
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 46: Portfolio summary (31 May 2019)
02 Portfolio summary (31 May 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 Nor
Slide 47: Development pipeline
03 Development pipeline opme 19 July OCEANIA HEALTHCARE SITEs STAGE STATUS ILUs Care Suites GROSS UNITS NETUNITS NOTES Meadowbank Stage 5 Under Construction 26 - 26 26 Expected to complete FY2020 Stage 6 Consented - 35 35 35 Awatere (formerly Trevellyn) Stage1 Under Construction - 90 90 87 Expected
Slide 48: Eden, Auckland
03 Eden, Auckland Gpocens Scheduled to commence FY2020. Additional land was acquired adjacent to the Eden Village in FY2018 and consented in IHY 2019. Eden Auckland Scheduled to commence FY2020
Slide 49: Waimarie St, St Heliers
O3 OCEANIA HEALTHCARE Waimarie St is a premium development location in Auckland Sait Neamt 5 Greenfield site in the . > Auckland suburb of St Heliers: e Premium boutique 109 © ased care facility an retirement village WM 4s’ planned suites planned e Strong forec demand in the catchment area ~13,500m2
Slide 50: Reconciliation of portfolio movements
1. Changes in capacity and pipeline now includes forecast care suite conversions in the pipeline. Totals for FY2019 reconcile to both the total existing and future post development portfolios on slide 37.
Slide 51: Summary of unit sales
Villa Apartment Care Suite Total Development Margin Villa Apartment Care Suite Total Resales Margin Villa Apartment Care Suite Total
Slide 52: Capital expenditure
06 Capital expenditure (ga Osea" We increased our development capital expenditure significantly during FY2019 Breakdown of Capital Expenditure NZDm FY2019 FY2018 Var FY2017 Acquisitions 21.4 38.6 (17.2) 23.0 Development capital expenditure 135.2 79.1 65.9 48.8 Remediation expenditure 0.5 41 (3.6) 1.
Slide 53: 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 54: 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 55: Glossary
A room or studio certified for the provision of care by the Ministry of Net Profit After Tax Health which has been licensed under an ORA A globally recognised metric for measuring customer satisfaction, the Net Earnings from continuing operations excludes the earnings from sites Promoter Score syste
Slide 56: 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