Oceania Healthcare Ltd. · NZX:OCA
Oceania Healthcare — H1 FY2018 Earnings Presentation
45 slides from Oceania Healthcare's earnings presentation, Jan 25, 2018
Slide 1: Results Presentation for the Six Months Ended 30 November 2017
Results Presentation for the Six Months Ended 30 November 2017 25 January 2018
Slide 2: Agenda
Agenda SECTION PAGE 01 Highlights of the six months ended 30 November 2017 2 02 Business Overview and Strategy 7 03 Update on Developments 13 04 Financial Results 19 05 Appendices 33 1
Slide 3: Highlights of the six months ended 30 November 2017
1 Highlights of the six months ended 30 November 2017 SECTION 1 STRICTLY CONFIDENTIAL 2
Slide 4: 1HY2018 Highlights
1HY2018 Highlights We have delivered a strong interim financial result as well as continuing to execute our key developments and operational initiatives. We expect to achieve our IPO Forecasts for the year ending 31 May 2018 1 Reported NPAT and Pro forma Underlying1 EBITDA ahead of the previous corr
Slide 5: 1HY2018 Highlights (continued)
1HY2018 Highlights (continued) We have delivered a strong interim financial result as well as continuing to execute our key developments and operational initiatives. We expect to achieve our IPO Forecasts for the year ending 31 May 2018 3 Operational Excellence ● Supreme Winner Overall Excellence in
Slide 6: 1HY2018 Financial highlights
1HY2018 Financial highlights Reported NPAT and Pro Forma Underlying EBITDA are ahead of the pcp. Total assets as at 1HY2018 approximately $1.0b Reported NPAT Pro forma Underlying EBITDA 50.0 30.0 42.5 25.3 25.0 23.6 23.4 23.3 40.0 21.7 20.0 NZD $M’s 27.1 NZD $M's 30.0 21.6 22.0 22.9 15.0 20.0 10.0 1
Slide 7: Operational highlights
Operational highlights Enhancing our clinical care platform, receiving industry recognition and strong MoH certification results l Winner of the New Zealand Aged Care Association overall excellence in care award (third year in a row) l Continued our excellent MoH audit results with 25% of facilities
Slide 8: Business Overview and Strategy
2 Business Overview and Strategy SECTION 2 STRICTLY CONFIDENTIAL 7
Slide 9: Oceania at a glance
Oceania at a glance We are a large national operator with a portfolio of 51 sites Current and future portfolio composition4 – Remaining “needs” Oceania’s site locations focused Care Care Beds Suites Units Total North Island 1,976 170 741 2,887 South Island 593 118 295 1,006 Auckland Total Existing1
Slide 10: Summary of Oceania's investment proposition
Summary of Oceania’s investment proposition Our business model supports a combination of dividend yield with long term growth potential Aged care Stable revenue from “needs-based” …with growth through premium care service and government funding…. charging and care suite model …and resale margins fro
Slide 11: Oceania's strategic positioning
Oceania’s strategic positioning Our focus is aged care with a growing retirement village business Comparison to other listed operators Existing portfolio composition Future portfolio composition Oceania 66% 7% 27% 43% 18% 39% Arvida 50% 0.3% 19% 30% 39% 4% 15% 42% Ryman 35% 19% 45% 33% 19% 48% Summe
Slide 12: We have a clear growth strategy in aged care
We have a clear growth strategy in aged care The care suite model is integral to us meeting the needs of customers Estimated population growth1 Care Strategy ● Continuing growth and ageing of the New 800,000 Zealand population is expected to significantly increase demand for aged care over the next
Slide 13: Developing new care facilities
Developing new care facilities We are transforming our care offering as we execute our brownfields development pipeline. The current projects under construction will double our number of care suites over the next two years Trevellyn – Hamilton 10% 20% 30% Melrose – Tauranga construction under New ca
Slide 14: Developments
33 Developments SECTION 3 STRICTLY CONFIDENTIAL 13
Slide 15: Clear development pipeline
Clear development pipeline We will deliver our key developments during the IPO Forecast period on time and on forecast cost Meadowbank – Completed January 2018 (30 care suites, 62 apartments) Key changes since May-17 l 25 Villas completed at Elmwood in November 2017. 10 villas completed at Stoke in
Slide 16: Clear development pipeline
Clear development pipeline We have a pipeline of 1,782 units. Of this 1,057 units, or 59%, is either under construction or consented Gross Facility Location Status May 17 Nov 17 May 18 Nov 18 Future Residences Meadowbank Stage 3 Auckland Substantially Complete 92 Stage 4 Auckland Under Construction
Slide 17: Meadowbank Stage 3 practically complete
Meadowbank Stage 3 practically complete The care facility has been certified and 26 of the 62 apartments are under pre sale application Stage 3 practically complete delivering ● 30 care suites and studios (completed and certified), and ● 62 apartments (to be completed January 2018). Certificate for
Slide 18: The Sands progressing on programme
The Sands progressing on programme Construction of The Sands (formerly Maureen Plowman) is “out of the ground” with strong levels of presales interest ● The Sands (formerly Maureen Plowman) in Browns Bay, Auckland will provide 64 apartments and 44 care suites ● In-ground works were completed in Nove
Slide 19: Addition of premium site to our pipeline
Addition of premium site to our pipeline In December 2017 we entered into a contract for the purchase of a 8,945m2 site in the premium suburb of St Heliers, Auckland Greenfield site under contract in the Auckland suburb of St Heliers ● 8,945m2 with extensive harbour views ● Premium boutique aged car
Slide 20: Financial Results
Financial Results 01 Income statement and segmental performance 4 02 Balance sheet and drivers of Investment Property valuation 03 Cashflow statement and analysis of operating cashflow 04 Capital structure 19
Slide 21: Income statement
Income statement Reported net profit after tax of $42.5m was $20.5m (93%) above the pcp result and above the full year FY2017 result Summary of Income Statement for the six months ended 30 November Commentary NZDm 1HY2018 1HY20171 FY2017 l $92.1m operating revenue - includes care revenue Operating r
Slide 22: Underlying earnings
Underlying earnings Underlying NPAT was $10.9m ahead of the pcp due to increased development margins and the post IPO capital structure Reconciliation of Underlying Adjustments NZDm 1HY2018 1HY2017 FY2017 By segment 1HY2018 1HY2017 FY2017 Reported Net profit after tax 42.5 22.0 44.9 Aged Care 16.4 1
Slide 23: Care segment
Care segment EBITDA per occupied bed, excluding decommissioned and development sites, is broadly in line with pcp. Premium charges (care suite DMF and PAC revenue) increased 26% from the pcp Commentary NZ$m 1HY2018 1HY2017 FY2017 l Occupancy was ahead of the national Daily care fees 75.9 74.3 145.7
Slide 24: Village segment
Village segment Pro Forma Underlying EBITDA was $3.8m ahead of the pcp Resales Volume and Margin NZ$m 1HY2018 1HY2017 FY2017 28.4% Villa and Apartment DMF 7.8 6.6 13.3 100 30% 24.7% 25.4% Retirement village service fees 2.7 2.7 5.3 22.1% 25% 80 Other revenue 1.1 1.2 2.1 18.3% 20% Total retirement vi
Slide 25: Village segment – key indicators
Village segment – key indicators Resale prices and margins were above the pcp Resales Prices Resales Prices vs CBRE Valuation Assumption 500 18.0% 16.5% 16.0% 400 435 14.0% 12.0% 372 386 376 12.0% NZD $000’s 300 9.5% 313 314 326 318 331 10.0% 299 7.3% 246 252 250 263 250 8.0% 5.9% 200 188 6.0% 163 1
Slide 26: Embedded value
Embedded value The embedded value in Oceania’s portfolio has increased significantly over the last four years to $188.5m and will underpin ongoing DMF cash flows and resale gains Embedded value per unit1 Commentary 160 145.5 l Embedded value in Oceania’s portfolio is $188.5m 141.3 140 l This is an i
Slide 27: Developments – key indicators
Developments – key indicators Development margin of 36.4% was significantly above the pcp, with strong sales prices achieved at key developments. We are bringing to market a high quality product that will generate considerable uplift in DMF in future periods Development Volumes and Margins Gross Uni
Slide 28: Balance sheet
Balance sheet Total assets increased by $160.5m from 1HY2017 due to significant development capital expenditure during the 12 months to November 2017 and revaluations reflecting improved trading performance and the completion of key developments NZ$m 1HY2018 1HY2017 FY2017 ● Our net adjusted value p
Slide 29: Balance sheet drivers
Balance sheet drivers Significant uplifts in IP through development capital expenditure and revaluations Investment Property 710,000 690,000 681,261 7,266 35,723 376 670,000 NZD $000’s 650,000 5,185 9,761 630,000 11,748 611,016 186 610,000 590,000 570,000 550,000 May-17 Site remediation Meadowbank E
Slide 30: Development capital expenditure
Development capital expenditure We have significantly increased our growth capital expenditure following the IPO Growth Capital Expenditure (IP and PPE) 45.00 40.00 35.00 30.00 NZD $M's 25.00 20.00 15.00 10.00 5.00 Melrose - Tauranga 1HY2015 2HY2015 1HY2016 2HY2016 1HY2017 2HY2017 1HY2018 Growth Cap
Slide 31: Cash flow
Cash flow Operating cash flows, ahead of the pcp, due to the reduced gearing of the business Statement of cash flows Commentary NZD $m’s 1HY2018 1HY2017 FY2017 l Government funding of care fees Receipts from customers 78.5 81.5 159.3 (c.80% of aged care revenue, paid Payments to suppliers and employ
Slide 32: Dividend
Dividend An interim dividend of 2.1 cents per share has been declared l A maiden dividend of 2.1 cents per share (not imputed) has been declared l This is in line with the IPO forecast l Record date of 13 February 2018. Payment date of 20 February 2018 l Subject to a range of factors, including mark
Slide 33: Capital structure
Capital structure Gearing of 18.7% as at 30 November 2017 and headroom under our debt facilities provides the flexibility to accelerate our existing brownfield development pipeline and/or undertake further brownfield and greenfield acquisitions Net Debt Credit metrics Drawn Amount Debt Facilities Fa
Slide 34: Appendices
Appendices 01 Portfolio Summary 02 Development Pipeline 03 Reconciliation of Portfolio Movements 04 Summary of Unit Sales 05 Capital Expenditure 06 Adjusted Operating Cash Flow 07 Resales Cash Flow Reconciliation 08 Definition of Underlying NPAT 09 Pro Forma Adjustments 10 Glossary 11 Disclaimer 33
Slide 35: Portfolio summary (30 Nov 2017)
Portfolio summary (30 Nov 2017) Facility Region Category Care Beds Care Suites Village Units Totara Park Village Rodney Village - - 30 Greenvalley Rest Home North Shore Care Beds 50 - - Lady Allum Lifestyle Care & Village North Shore Care Beds, Care Suites, Village 128 15 129 Te Mana Rest Home North
Slide 36: Development pipeline
Development pipeline Site Stage Status Gross Units Net Units Notes: Meadowbank Stage 3 Under Construction 92 92 Construction complete in January 2018 Construction began in Oct-17. Expected Stage 4 Under Construction 81 81 completion May 2019 Stage 5 Consented 26 26 Stage 6 Planned 40 40 The Sands (f
Slide 37: Reconciliation of portfolio movements
Reconciliation of portfolio movements Movements in capacity and pipeline since May-17 Changes in Conversion of Conversion of Changes in Changes in New units May-17 existing beds to care units to care pipeline – gross pipeline - Nov-17 delivered capacity suites suites units added decommissions Existi
Slide 38: Summary of unit sales
Summary of unit sales New Sales 1HY2012 1HY2013 1HY2014 1HY2015 1HY2016 1HY2017 1HY2018 Care Suite 6 3 7 13 15 10 7 Apartment 1 8 17 14 14 0 7 Villa 11 10 6 27 12 15 9 Total 18 21 30 54 41 25 23 Development Margin 9.9% 7.5% 12.6% 10.3% 18.4% 15.1% 36.4% Resales 1HY2012 1HY2013 1HY2014 1HY2015 1HY201
Slide 39: Capital expenditure
Capital expenditure We increased our development capital expenditure significantly during 1HY2018 NZ$m 1HY2018 1HY2017 FY2017 l During 1HY2018 we completed the conversion of 7 care beds and 39 service apartments to care suites as well as continued Acquisitions 0.0 3.0 23.0 the remediation of Heretau
Slide 40: Adjusted operating cash flow
Adjusted operating cash flow We generated $13.3m of adjusted operating cash flow (excludes new sales proceeds, includes net development cashflow) in 1HY2018 Adjusted operating cash flow l Our steady operating cashflows fund our dividend 20.0 17.1 payments 15.0 12.8 13.3 l These cashflows are support
Slide 41: Reconciliation of resales cash flow
Reconciliation of resales cash flow Reconciliation of resales cash flow NZD $m’s 1HY2018 1HY2017 FY2017 Receipts from New ORAs 34.4 31.3 68.8 less: Payments for Outgoing ORAs (18.6) (16.7) (30.9) less: Cash Inflow From New Sales (11.2) (5.8) (22.8) Net Resales Cash flow 4.6 8.8 15.1 Made up of : Res
Slide 42: Underlying NPAT
Underlying NPAT Underlying Profit (or Underlying NPAT) Development Margin Underlying Profit is a non-GAAP measure used by the Group to monitor financial performance The Directors’ estimate of realised development margin is calculated as the cash received on and is consideration in determining divide
Slide 43: Pro forma adjustments
Pro forma adjustments Transaction and offer costs Total transaction and offer costs of $11.9m were incurred relating to joint lead manager fees, due diligence expenses, travel expenses, advertising, printing costs, and other costs associated with the IPO. Of these $4.4m million were expensed by Ocea
Slide 44: Glossary
Glossary l Care Suite: A room or studio certified for the provision of care by the Ministry of Health which has been licensed under an ORA l DMF: Deferred management fees, charged under an ORA, which accrue monthly to a specified maximum and are deducted from the refund paid to the departing residen
Slide 45: Important notice and disclaimer
Important notice and disclaimer This presentation has been prepared solely by Oceania Healthcare Limited ("Oceania"). You must read this disclaimer before making any use of this presentation and the accompanying material or any information contained in it ("Document"). The presentation includes non-