Oceania Healthcare Ltd. · NZX:OCA
Oceania Healthcare — FY2018 Earnings Presentation
54 slides from Oceania Healthcare's earnings presentation, Jul 26, 2018
Slide 1: Results Presentation for the Financial Year Ended 31 May 2018
Results Presentation for the Financial Year Ended 31 May 2018 26 July 2018
Slide 2: Agenda
Agenda 01 Highlights of the Financial Year ended 31 May 2018 2 02 Business Overview and Strategy 6 03 Update on Developments 10 04 Aged Care Strategy 22 04 Financial Results 27 05 Appendices 42 1
Slide 3: Highlights of the financial year ended 31 May 2018
13 The Sands, Auckland The Sands, Auckland Highlights of the financial year ended 31 May 2018 SECTION 1 STRICTLY CONFIDENTIAL 2
Slide 4: FY2018 Highlights
FY2018 Highlights We have exceeded the IPO Forecasts for FY2018, increased earnings by over 50%, and continued to execute our key developments and operational initiatives. 1 FY2018 IPO Forecasts exceeded and significant earnings growth delivered NZ$M FY2018 FY2017 Y.O.Y CHANGE (%) Reported NPAT 77.0
Slide 5: FY2018 Highlights (continued)
FY2018 Highlights (continued) 3 Operational excellence and clear growth strategy in aged care ● Supreme Winner Overall Excellence in Care Award for the third consecutive year for innovative “I Love Music” programme ● Continued strong MoH audit results with 28% of facilities at 4 years, all others at
Slide 6: FY2018 Financial highlights
FY2018 Financial highlights Reported NPAT and Underlying NPAT are ahead of FY2017 and the IPO Forecasts. Total assets as at FYE2018 approximately $1.15b Operating Revenue Underlying NPAT1 NZ$m NZ$m 184.0 51.4 52.1 173.6 174.8 175.3 34.01 n/a1 FY2016 FY2017 FY2018 (F) FY2018 FY2016 FY2017 FY2018 (F)
Slide 7: Business Overview and Strategy
2 Meadowbank Village, Auckland Business Overview and Strategy SECTION 2 STRICTLY CONFIDENTIAL 6
Slide 8: Overview of Oceania
Overview of Oceania We are a “care focused” operator and developer of aged care facilities and retirement villages Current & future portfolio composition – Remaining “needs” focused Portfolio and landbank overview Care Beds care suites3 Units Total North Island 1,954 220 797 2,971 27.7% Units 41.4%
Slide 9: Our key business strengths
Our key business strengths Our strength is our care focus and this will continue to differentiate Oceania moving forward AGED CARE DEVELOPMENT Highly cashflow and Recognised leader in value accretive 1 clinical care 4 brownfield development projects in key urban locations Clear growth strategy 2 in
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 Yield Growth Increase in portfolio from Total dividend of 4.70 cps for FY2018 – ~4,000 to 5,400 units as brownfields 4.20% yield (gross) based share price of sites redevelo
Slide 11: Developments
33 The Sands, Artist’s impression Developments SECTION 3 STRICTLY CONFIDENTIAL 10
Slide 12: Substantial progress executing developments
Substantial progress executing developments We delivered our key developments during the IPO Forecast period on time and on forecast cost Development progress in FY2018 Platform set for future development Development completed in FY2018 Development commenced in FY2018 25 villas completed at Elmwoo
Slide 13: Meadowbank Village
Meadowbank Village Stage 3 completed in February 2018 with 69% of apartments sold or under application as at June 2018. Stage 4 on track for completion in May 2019 Meadowbank Auckland Stage 3 Completed on time & under budget 62 30 Apartments Care Suites 69% sold / under 40% occupied application Stag
Slide 14: The Sands
The Sands Construction of The Sands is on track for completion in May 2019 The Sands Browns Bay, Auckland The Sands will provide 64 44 Apartments Care Suites Due for completion around May 2019 13
Slide 15: The BayView
The BayView Redevelopment of The BayView is on track and scheduled to complete in 1HY2019 with Stage 2 commencing in 2HY2019 Stage 1 Stage 2 Under construction will Scheduled to commence in 2H2019 The BayView provide Tauranga 81 74 Community Centre Care Suites Apartments Due for completion around Oc
Slide 16: Trevellyn
Trevellyn Construction of Trevellyn commenced in 2HY2018 with completion scheduled for FY2020 Trevellyn Hamilton Stage 1 Stage 2 Currently under construction1 will provide: Scheduled to commence in FY2020 Due for completion in FY2020 90 63 Community Centre Care Suites Apartments 1. Stage 1 site outl
Slide 17: Green Gables
Green Gables Redevelopment of Green Gables commenced in June 2018 Green Gables Nelson Green Gables will provide 28 61 Apartments Care Suites Due for completion in FY2020 16
Slide 18: Waimarie Street
Waimarie Street We have significantly enlarged the development area of the Waimarie Street site in the premium suburb of St Heliers, Auckland Waimarie St St Heliers, Auckland 13,464m2 116 Land Units & care acquisition suites planned Greenfield site in the Auckland suburb of St Heliers: ● Original la
Slide 19: Eden
Eden Additional land was acquired adjacent to the Eden Village Eden Auckland Development of the site1 will provide 47 Community Centre Apartments ● Under-croft carparks and a community centre to supplement the existing retirement village facility 1. Site to be developed is shaded red within the Eden
Slide 20: Windermere
Windermere Stage 1 development at Windermere is scheduled to commence in 2HY2019 Windermere Christchurch Stage 1 development will provide 22 60 Apartments Care Suites Scheduled to commence 2HY2019 ● Premium suburb close to centre of Christchurch with local median house prices of $0.9m1 1. Median hou
Slide 21: Track record of developments delivered
Track record of developments delivered We have delivered, and are currently constructing, a combined total of 903 care suites and units We have a highly experienced in-house development team Units delivered and currently under construction with a proven track record of delivering projects on time
Slide 22: Increased pipeline and build rate
Increased pipeline and build rate Our development pipeline and forecast build rate has increased since IPO. We have new debt facility limits in place to achieve this and our in-house development team has the capacity and capability to deliver Current development pipeline vs IPO development pipeline
Slide 23: Aged Care Strategy
43 Aged Care Strategy SECTION 4 STRICTLY CONFIDENTIAL 22
Slide 24: Benefits of a care-weighted portfolio
Benefits of a care-weighted portfolio Demand for aged care is underpinned by established demographic trends Barriers to entry Key benefits Aged care is a difficult business to replicate – A high proportion of care revenue is there are significant barriers to entry government funded (c.80%) which
Slide 25: Aged care strategy
Aged care strategy Optimising our existing portfolio of facilities and redeveloping brownfields sites to increase our premium care offering MATURE AGED CARE BUSINESS We have a mature aged care business with strong cashflow based returns To be enhanced by 1 2 Upgrade and Redevelopment of conversion o
Slide 26: Aged care strategy – Portfolio review
Aged care strategy – Portfolio review Our aged care portfolio generates stable returns with the opportunity to enhance these returns by continuing to increase the proportion of premium rooms through redevelopment and conversion Continuing to have a mix of metropolitan and regional sites is importa
Slide 27: Aged care portfolio – upon completion of proposed development plan
Aged care portfolio – upon completion of proposed development plan Upgraded aged care portfolio comprising balance of premium and standard offerings to meet residents’ expectations Our diversified portfolio of metropolitan and regional locations will meet the needs of both MoH subsidised residents
Slide 28: Financial results
Financial results 01 Income statement and segmental performance 02 Balance sheet and drivers of Investment Property valuation 03 Cashflow statement 04 Capital structure 27
Slide 29: Income statement
Income statement Reported net profit after tax of $77.0m was $32.1m (71%) ahead of the FY2017 result and $23.9m (45.0%) ahead of the IPO Forecast FY2018 Summary of Income Statement NZDm FY2017 FY20181 FY2018 (F) $184.0m operating revenue - includes care revenue Operating revenue 174.8 184.0 175.3
Slide 30: Underlying earnings
Underlying earnings Underlying NPAT was $18.1m (53.2%) ahead of the FY2017 result and $0.7m (1.3%) ahead of the IPO Forecast Reconciliation of Underlying Adjustments NZDm FY2017 FY2018 FY2018 (F) Underlying NPAT was $18.1m ahead of FY2017 and $0.7m Reported Net profit after tax 44.9 77.0 53.1 ahea
Slide 31: Care segment
Care segment Aged care EBITDA impacted by lower occupancy and the negative impact of the equal pay settlement Aged Care Underlying EBITDA NZ$m FY2017 FY2018 FY2018 (F) Occupancy averaged 88.1% for FY2018 Daily care fees 145.7 150.4 143.9 ̶ New aged care development at The BayView (Tauranga) and PA
Slide 32: Care segment – revenue from premium beds
Care segment – revenue from premium beds Revenue from premium beds (including PAC and DMF) has increased at a CAGR of 56.9% over the past 3 years Premium care revenue NZ$m CAGR of 56.9% over last 3 years 6.8 5.7 3.6 3.0 3.0 1.8 1.7 0.6 2.7 3.2 1.1 1.3 FY2015 FY2016 FY2017 FY2018 PAC Revenue Care Sui
Slide 33: Village segment
Village segment FY2018 Underlying EBITDA of $49.7m was $22.9m ahead of FY2017 and $5.0m ahead of the IPO Forecast due to stronger prices achieved at new developments Village Underlying EBITDA Resales volume and margin NZ$m FY2017 FY2018 FY2018 (F) 29.1% 27.4% 27.9% Villa and Apartment DMF 13.3 15.0
Slide 34: Village segment – key indicators
Village segment – key indicators Resale prices and margins were above FY2017 and the IPO Forecast, particularly for apartments and care suites Resales Prices NZ$000s Resales Prices vs CBRE Valuation Assumption 16.5% 509 499 378 379 381 12.0% 370 352 297 309 321 9.5% 287 256 239 7.3% 202 195 5.9% 6.5
Slide 35: Embedded value
Embedded value The embedded value in Oceania’s portfolio has increased significantly over the last four years to $210.7m and will underpin ongoing DMF cash flows and resale gains Embedded value per unit1 NZ$m 170.3 Embedded value in Oceania’s portfolio is $210.7m ($170.3k 141.3 per unit). Value pe
Slide 36: Developments – key indicators
Developments – key indicators FY2018 development margin of 33.5% was significantly above FY2017 and the IPO Forecast, with strong sales prices achieved at Meadowbank. Our developments will generate a considerable uplift in DMF in future periods Development Volumes and Margins Gross New Units Deliver
Slide 37: Balance sheet
Balance sheet Total assets increased by $229.0m (24.9%) from FY2017 due to significant development capital expenditure during the financial year and revaluations reflecting improved trading performance and the completion of key developments FY2018 Balance Sheet Net Adjusted Value NZ$m FY2017 FY2018
Slide 38: Balance sheet drivers
Balance sheet drivers Significant uplifts in IP and PPE through development capital expenditure and revaluations Investment Property Property, Plant and Equipment NZ$ms NZ$ms 21.5 8.7 0.3 7.7 26.9 21.5 2.3 755.6 17.3 303.6 100.0 34.6 23.4 10.3 3.5 1.7 611.0 268.0 FY2017 FV of MBK 3 FV of Capex Trans
Slide 39: Development capital expenditure
Development capital expenditure We have significantly increased our growth capital expenditure following the IPO Growth Capital Expenditure (IP and PPE) NZ$ms Our growth capital expenditure will create incremental 38.6 development cashflows as well as increased care earnings and deferred management
Slide 40: Cash flow
Cash flow Operating cash flows, ahead of the pcp, due to the higher new sales receipts and reduced gearing Statement of cash flows NZD$m FY2017 FY2018 FY2018 (F) Operating cashflow was above FY2017 due to higher new sale Receipts from customers 159.3 161.8 156.8 receipts and the new capital struct
Slide 41: Dividend
Dividend A final dividend of 2.6 cents per share has been declared. Total dividend of 4.7 cents per share for FY2018 A dividend of 2.6 cents per share (not imputed) has been declared This is in line with the IPO forecast Record date of 13 August 2018. Payment date of 20 August 2018 Subject t
Slide 42: Capital structure
Capital structure Gearing of 22.0% as at 31 May 2018. We recently increased and extended our bank facilities to provide us with sufficient headroom and flexibility to execute our existing development pipeline to FY2023 at an increased build rate Net Debt Credit metrics DRAWN AMOUNT DEBT FACILITIES F
Slide 43: Appendices
Appendices 01 Portfolio summary 02 Development pipeline 03 Reconciliation of portfolio movements 04 Summary of unit sales 05 Capital expenditure 06 Resales cash flow reconciliation 07 Definition of underlying NPAT 08 Pro forma adjustments 09 Glossary 10 Disclaimer 42
Slide 44: Portfolio summary (31 May 2018)
01 Portfolio summary (31 May 2018) FACILITY REGION CARE BEDS CARE SUITES VILLAGE TOTAL FACILITY REGION CARE BEDS CARE SUITES VILLAGE TOTAL UNITS UNITS NORTH ISLAND SOUTH ISLAND Totara Park Village Rodney - - 30 30 Marina Cove Village Picton - - 22 22 Greenvalley Rest Home North Shore 50 - - 50 Green
Slide 45: Development pipeline
02 Development pipeline SITE, STAGE STATUS GROSS UNITS NET UNITS NOTES Meadowbank Stage 4 Under Construction 83 83 Expected completion May 2019 Stage 5 Consented 26 26 Stage 6 Consented 36 36 Consent received July 18, not included in 1,303 consented units The Sands (formerly Maureen Plowman) Under C
Slide 46: Development pipeline
02 Development pipeline We have a pipeline of 2,129 units and care suites. Of this, 1,303 units and care suites are either under construction or consented (61% of pipeline). Details of sites under construction or consented are set out below FACILITY LOCATION STATUS GROSS RESIDENCES MAY-18 NOV-18 MAY
Slide 47: Reconciliation of portfolio movements
03 Reconciliation of portfolio movements Movements in capacity and pipeline since FY2017 CHANGES CONVERSION CONVERSION NEW UNITS CHANGES IN CHANGES IN FY2017 IN EXISTING OF BEDS TO OF UNITS TO DELIVERED PIPELINE – GROSS PIPELINE - FY2018 CAPACITY care suites care suites UNITS ADDED DECOMMISSIONS Exi
Slide 48: Summary of unit sales
04 Summary of unit sales New Sales FY2014 FY2015 FY2016 FY2017 FY2018 FY2018 PFI Villa 22 41 17 17 26 32 Apartment 39 23 20 20 47 52 Care Suite 21 29 23 15 27 11 Total 82 93 60 52 100 95 Development Margin 6.8% 8.9% 19.2% 22.9% 33.5% 26.8% Resales FY2014 FY2015 FY2016 FY2017 FY2018 FY2018 PFI Villa
Slide 49: Capital expenditure
05 Capital expenditure We increased our development capital expenditure significantly during FY2018 Breakdown of Capital Expenditure Spend NZ$m FY2017 FY2018 FY2018 (F) During FY2018 we completed the conversion of 18 care beds Acquisitions 23.0 38.6 0.0 and 51 service apartments to care suites Dev
Slide 50: Reconciliation of resales cash flow
06 Reconciliation of resales cash flow $2.9m of unit buybacks were completed in FY2018 to facilitate future development Reconciliation of resales cash flow NZD$m FY2017 FY2018 Receipts from New ORAs 68.8 113.5 Less: Payments for Outgoing ORAs (30.9) (35.4) Less: Cash Inflow From New Sales (22.8) (61
Slide 51: Underlying NPAT
07 Underlying NPAT Underlying Profit (or Underlying NPAT) Development Margin 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 dist
Slide 52: Pro forma adjustments
08 Pro forma adjustments The following adjustments relate to the FY2017 year only Transaction and offer costs Listed company capital structure Total transaction and offer costs of $11.9m were incurred relating to joint lead manager The proceeds of the IPO were used to substantially repay a portion o
Slide 53: Glossary
09 Glossary Care Suite MoH A room or studio certified for the provision of care by the Ministry of Health Ministry of Health which has been licensed under an ORA ORA DMF An occupation right agreement that confers on a resident the Deferred management fees, charged under an ORA, which right to occupa
Slide 54: Important notice and disclaimer
10 Important notice and 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 representati