Oceania Healthcare Ltd. · NZX:OCA
Oceania Healthcare — H1 FY2019 Earnings Presentation
60 slides from Oceania Healthcare's earnings presentation, Jan 25, 2019
Slide 1: Results Presentation for the Financial Half Year Ended 30 November 2018
Results Presentation for the Financial Half Year Ended 30 November 2018 ‘ Vee —S 2 ij 25 January 2019 OCEANIA HEALTHCARE
Slide 2: Highlights of 1HY2019
Highlights of IHY2019 Aged Care Update Update on Developments Financial Results Appendices 16 25 43
Slide 3: Highlights
3 The BayView, STRICTLY CONFIDENTIAL 3
Slide 4: 1HY2019 Highlights
14HY2019 Highlights ED ocean We have delivered 8.7%! growth in continuing operations compared to IHY2018 4) Increases in Underlying NPAT? & Underlying NPAT - Continuing Operations? NZ$m 1HY 2019 1HY2018 Underlying NPAT! 20.9 19.9 Underlying NPAT - Continuing operations® 20.5 18.8 Total Comprehensive
Slide 5: 1HY2019 Highlights
14HY2019 Highlights ED ocean We have delivered and sold down our new developments on time and in line with expectations, and recorded strong resale margins, prices and volumes in our village business 2 ) Development pipeline completing as planned and on track All 62 apartments at Meadowbank Stage 3
Slide 6: 1HY2019 Highlights (continued)
1HY2019 Highlights (continued) ED ocean Our aged care strategy is progressing well with i) conversions of rooms to our premium care suites (resulting in increased occupancy); ii) highly competitive pay arrangements for our staff; and iii) healthy promoter scores from our residents. fa Progress in ex
Slide 7: 1HY2019 Financial highlights
1HY2019 Financial highlights @ocen’ Underlying NPAT for IHY2019 was 5.3% ahead of IHY2018. Total assets have increased by 20% since IHY 2018. Operating Revenue Underlying NPAT" NZ$m NZ$m 96.4 32.2 92.1 91.9 19.9 20.9 89.2 18.0 16.0 7 i 0 i THY 2017 2HY2017 1HY2018 2HY 2018 1HY2019 JHY2017 2HY2017 JH
Slide 8: Aged care update
3 STRICTLY CONFIDENTIAL 8
Slide 9: Aged care update
Aged care update Our Aged Care strategy is >ussed on Jignity. There are three components to 1g exceptional care to our residents reflecting their right to choice, respect an steg 2. Our People 1. Our Services 3. Our Product
Slide 10: Aged care update: Our Services
OCEANIA HEALTHCARE Aged care update Ensuring our residents receive the best levels of care and service at our homes is paramount 1. Our Services e e@ Hospitality model successfully introduced “Tt at Meadowbank and subsequently rolled out at The BayView’s new care facility. National Culinary Manager
Slide 11: Aged care update: Our People
1. Lost time injury frequency measures the average number of injuries for the workforce for every one million hours worked in the previous 12 month period 11
Slide 12: Aged care update: Our Product
Aged care update Gece We are optimising our existing portfolio of homes and redeveloping brownfields sites to increase our premium care offering 3. Our Product Mature Aged Care Business We have a mature aged care business with strong cashflow based returns Tobe enhanced by Upgrade and conversion of
Slide 13: Aged care update: Premium care suites
HEALTHCARE Aged care update @ecesn’ Our development of premium care suites has increased materially with 81 delivered during IHY2019 and 229 under construction Converting care beds into premium care suites is playing a key role in optimising our existing portfolio 1. Conversions 30 Conversions compl
Slide 14: Aged care occupancy
1. Average occupancy at care homes not affected by redevelopment activity in the period 14
Slide 15: Care suites and premium rooms portfolio mix
OCEANIA HEALTHCARE Aged care update Care suites and premium rooms will comprise 68% of our care portfolio once the pipeline and conversions are complete. 3. Our Product (cont'd) 2,825 2,655 2,652 Beds Beds Beds 145Beds 159Beds 37 Beds mE 20% 29% Za care 45% {im Suites PAC 7) Beds 66% .) 56% Tl 7% St
Slide 16: Update on developments
3 STRICTLY CONFIDENTIAL 16
Slide 17: Development update
⚫ Stage 1 new care facility (81 care suites) at ⚫ Stage 4 at Meadowbank (34 care suites, 49 The BayView (formerly Melrose) apartments) on track for completion in commissioned in December 2018. FY2019 ⚫ The Sands (44 care suites, 64 apartments) on track for completion in FY2019 ⚫ Green Gables (61 car
Slide 18: Completed developments
Completed developments Goss In IHY2019 we delivered 81 care suites at The BayView on time and on budget and have settled and taken applications on all 62 of the Meadowbank Stage 3 apartments in line with expected prices and timeline. Meadowbank Auckland Stage 3 Completed on time & under budget 6 6-
Slide 19: Meadowbank Village, Auckland
Meadowbank Village, Auckland Gece” 4 on track for completion in May 2019. In January 2019 we commer Auckland Under construction, due May 2019: Apartments Care Suites Commenced, due in late FY2020: a] 26 Apartments
Slide 20: The Sands, Auckland
OCEANIA HEALTHCARE The Sands, Auckland Construction of The Sands is on track and scheduled for completion in May The Sands Browns Bay, Auckland The Sands will provide Apartments Care Suites Due for completion in May 2019 Dr Our ar kland during 1H ality of the rent ma te in-l or 20
Slide 21: The BayView, Tauranga
The BayView, Tauranga Gpocens Stage 2 commenced construction in December 2018 care suites were completed at The BayVie The BayView Tauranga Commenced in 2HY2019 74 Apartments 2
Slide 22: Trevellyn
OCEANIA HEALTHCARE yn comme Stage 1 Under construction, due 2HY2019 / 1HY2020: Stage 2 Scheduled to commence in FY2020: Community Centre 22
Slide 23: Green Gables
OCEANIA HEALTHCARE Green Gables will provide Due for completion in FY2020 oe it, 23
Slide 24: Windermere
1. Median house price calculated using data from sales within 2.0km radius of the Windermere Village, 3+ bedrooms, over 150 square meters 24
Slide 25: Financial results
Income statement and segmental performance Balance sheet and drivers of Investment Property valuation Cashflow statement Capital structure
Slide 26: Comprehensive Income Explained
Comprehensive Income Explained (He) OCEANIA HEALTHCARE The different treatment of fair value movements for our care and village segments are critical to the understanding of Oceania’s JHY 2019 statutory financial result. Total Comprehensive Income reflects both the village and care segments Village
Slide 27: Income statement
⚫ ⚫ ⚫ ⚫ ⚫ ⚫ 1. The fair value of investment property includes a fair value movement of $4.5m in relation to the right to use asset at Everil Orr. The contribution to DMF is $0.3m.This is offset by the rental expenses of $4.8m. 27
Slide 28: Segmental performance
⚫ ⚫ ⚫ ⚫ ⚫ 1. Other is an aggregation of line items that are individually less than $2.0m and includes: Impairment of goodwill; Gain on Sale/Loss on disposal of chattels at decommissioned sites; DMF in relation to right to use asset; See note 2.1 of the interim financial statements for a further deta
Slide 29: Care segment
Care segment ocr’ Higher occupancy and premium revenues in IHY2019 reflect the transformation of our care portfolio toward a higher proportion of premium care beds. Aged Care Underlying EBITDA Occupancy rates NZ$m IHY2019 1HY2018 FY2018 20.3% 92.0% Daily care fees 779 759 150.4 90.0% ~~" ase% oo” 90
Slide 30: Care segment - premium revenue
OCEANIA HEALTHCARE Care segment - premium revenue Revenue from premium beds (including PAC and DMF) has increased at a CAGR of 30.5% over the past 3 Premiumcare revenue NZ$m CAGR of 30.5% over last 3 years e@ 18.1% increase in IHY2019 to $4.0m. e@ Care suite DMF revenue increased to $2.3m, up 31% fr
Slide 31: Village segment - 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 $8.6m in 1HY2019 excludes $309k of DMF revenue at Everil Orr. 31
Slide 32: Village segment - development margin
⚫ ⚫ ⚫ ⚫ 70 40.0% 60 35.0% 50 30.0% 25.0% 40 20.0% 30 15.0% 20 10.0% 10 5.0% 0 0.0% 1HY2015 1HY2016 1HY2017 1HY2018 1HY2019 Villa Apartment Care Suite Development Margin 32
Slide 33: Village segment - key indicators: resale prices
Village segment -— key indicators ocr’ Resale prices were above IHY2018 and the prior CBRE valuation assumption. Resales Prices NZ$000s 299 318 250 156 158 188 IHY2015 IHY2016 1HY2017 IHY2018 Villa Apartment Care Suite Resales Prices us CBRE Valuation Assumption 16.5% 12.0% 9.5% 7.3% j [ 5.9% 6.5% I
Slide 34: Village segment - key indicators: closing stock
Village segment -— key indicators ocr’ Closing stock was in line with prior periods with 40% under application as at IHY2019. Closing Stock (incl stock under application) - Resales Units 37 36 ag e |LU stock levels (incl those under application) have reduced to 33 32 4.5% of available ILUs (4.8% as
Slide 35: Embedded value
⚫ ⚫ ⚫ ̶ ̶ ⚫ 495.4 604.8 (33.6) (91.8) (279.7) (312.4) equals: Embedded value 1. Calculated as the current/estimated sale or resale price of all units/care suites as determined by CBRE. The FY2018 and FY2017 have been adjusted for the divestment of Dunblane Village. 2. The value of unsold stock repre
Slide 36: Development and resale volumes and margins
70 36.4% 40.0% 60 35.0% 24 30.0% 50 13 29.5% 25.0% 40 18.4% 20.0% 14 15 30 15.1% 24 15.0% 20 10.3% 14 10 7 10.0% 27 7 10 17 5.0% 12 15 9 0 0.0% ⚫ 1HY2015 1HY2016 1HY2017 1HY2018 1HY2019 ⚫ Villa Apartment Care Suite Development Margin ⚫ ⚫ 943 ⚫ 772 683 504 440 341 368 311 286 263 188 211 186 154 1HY2
Slide 37: Balance sheet
● ● 1. Refer to Note 4.3 in the interim financial statements. Includes capitalised loan costs. 37
Slide 38: Drivers of investment property valuation
NZ$m NZ$m ⚫ ⚫ ⚫ 1. No independent valuation was undertaken with respect to the PPE as at 1HY2019 and FYFY2018. CBRE performed a valuation of our care suites as at 31 October 2018. Management performed a roll forward for settlements in the month of November. 38
Slide 39: Development capital expenditure
NZ$m 1HY2017 2HY2017 1HY2018 2HY2018 1HY2019 Development capital expenditure Land acquisitions 39
Slide 40: Cashflow statement
⚫ ⚫ ⚫ 1. The $73.7m of receipts from new ORAs comprises $43.5m of sales proceeds from first time sales 2. The $35.4m of payments for outgoing ORAs comprises $2.9m of development buybacks 40
Slide 41: Dividend
HEALTHCARE Dividend ocr’ An interim dividend of 2.1 cents per share has been declared with a record date of 11 February 2019 e A dividend of 2.1 cents per share (not imputed) has been declared This is the same as IHY2018 (2.1 cents per share) e Record date of 11 February 2019. Payment date of 18 Feb
Slide 42: Capital structure
Capital structure (He) OCEANIA HEALTHCARE Gearing of 26.7% as at 30 November 2019. Sufficient bank facilities in place to execute our development pipeline. Credit metrics Net Debt DEBT FACILITIES FACILITY LIMIT DRAWN AE NT PERIOD ENDING 1HY2019 1HY2018 General / corporate $135.0m $83.3m Net debt $19
Slide 43: Appendices
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 44: Business overview
783 2,728 305 940 1,088 3,668 1,259 2,065 (108) (648) - (21) 1,151 1,396 2,239 5,064 1. Comprising 43 operating villages and 3 undeveloped sites. Facility numbers as at 30 November 2018. 2. Current and planned developments 3. Includes 408 care studios which may be initially sold with a PAC, and may
Slide 45: Investment highlights
Highly cashflow and Recognised leader in value accretive 1 clinical care 4 brownfield development projects in key urban locations Clear growth strategy 2 in aged care Growing development 5 track record and capability Attractive demographic trends 3 and industry structure – especially in the Establis
Slide 46: Investment proposition
Increase in portfolio from ⚫ Total dividend declared of 2.10 cps for ~3,700 to 5,100 units as brownfields 1HY2019. 4.3% yield (gross) based on sites redeveloped over share price of $1.10 (as at 22 January approximately 7 years 2019) and dividends paid during FY2019 ⚫ Robust cash generation from: Tra
Slide 47: Aged care barriers to entry
⚫ Aged care is a difficult business to replicate – ⚫ Care revenue and cash flows are stable there are significant barriers to entry ⚫ Governments have funded increases to the ⚫ Residential aged care homes require MoH sector at greater than CPI over the last certification in order to receive governme
Slide 48: Portfolio summary (30 Nov 2018)
02 Portfolio summary (30 Nou 2018) OCEANIA HEALTHCARE FACILITY REGION CARE CARE VILLAGE TOTAL FACILITY REGION CARE CARE —-VILLAGE_—- TOTAL BEDS SUITES UNITS NORTH ISLAND SOUTH ISLAND Totara Park Rodney - - 30 30 Marina Cove Picton - - 22 22 Greenvalley Lodge North Shore 50 - - 50 Gyesn Gables Nelsen
Slide 49: Development pipeline
03 Development pipeline De velopment pip line status as at 25 January 2 HEALTHCARE OCEANIA SITE STAGE STATUS GROSS UNITS NET UNITS NOTES Meadowbank Stage 4 Under Construction 83 83 Expected completion May 2019 Stage 5 Under Construction 26 26 Construction commenced January 2019 Stage 6 Consented 36
Slide 50: 142 50
83 26 36 108 74 161 90 134 89 93 46 120 137 17 33 7 11 48 61 142 50
Slide 51: Experienced in-house development team
⚫ We have a highly experienced in-house development team with a proven track record of delivering projects on time and CY2018 budget ⚫ Our philosophy is based on “ownership” of what we do all the way from design, master planning, consenting, design management, procurement, construction management, q
Slide 52: Future pipeline - land acquisition
OCEANIA HEALTHCARE 13,464m2 116 Land acquisition Units & care suites planned ce Greenfield site in the Auckland suburb of St 52
Slide 53: Future pipeline - Eden
03 Future pipeline —- Eden Gece” Eden Auckland Development of the site! will provide ATI MA 53
Slide 54: Reconciliation of portfolio movements
04 Reconciliation of portfolio movements Goce” Movements in capacity and pipeline since FY2018 CHANGES CONVERSION CONVERSION NEW UNITS CHANGES IN CHANGES IN FY2018 IN EXISTING OF BEDS TO OF UNITS TO DELIVERED PIPELINE- GROSS __ PIPELINE - 1HY2019 CAPACITY care suites care suites UNITS ADDED DECOMMIS
Slide 55: Summary of unit sales
1HY2014 1HY2015 1HY2016 1HY2017 1HY2018 1HY2019 Villa 6 27 12 15 9 17 Apartment 17 14 14 0 7 24 Care Suite 7 13 15 10 7 24 Total 30 54 41 25 23 65 Development Margin 12.6% 10.3% 18.4% 15.1% 36.4% 29.5% 1HY2014 1HY2015 1HY2016 1HY2017 1HY2018 1HY2019 Villa 30 27 36 31 32 24 Apartment 14 16 28 20 12 8
Slide 56: Capital expenditure
06 Capital expenditure (ga Osea" We increased our development capital expenditure significantly during IHY2019 Breakdown of Capital Expenditure Spend NZ$m 1HY2019 1HY2018 FY2018 Acquisitions 21.4 0.0 38.6 Development capital expenditure 65.6 41.5 79.1 Remediation expenditure 0.5 2.0 41 Care conversi
Slide 57: 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 57
Slide 58: 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 59: Glossary
A room or studio certified for the provision of care by the Ministry of An occupation right agreement that confers on a resident the right to Health which has been licensed under an ORA occupy a unit or care suite subject to certain terms and conditions set out in the agreement Deferred management f
Slide 60: 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