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Oceania Group returns to profit as owner forgives interest on loan

Tuesday 23rd November 2010

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Oceania Group, the retirement village operator owned by Australia's Macquarie Bank, returned to profit in its latest financial year after its shareholder wrote off outstanding interest on loans to the group.

Auckland-based Oceania, which has 59 villages, made a profit of $16.2 million in the 12 months ended May 31, from a year-earlier loss of $169.9 million a year earlier, according to holding company Retirement Care (NZ) Ltd.'s financial statements lodged with the Companies Office.

Macquarie forgave $58.9 million of interest on $238.1 million worth of loans to the group, helping cut its finance costs by almost $10 million to $54.4 million. Oceania's operating income rose 6.2% to $196.3 million.

The retirement village operator wrote off $23.5 million from its goodwill, adding to the $128.3 million charge it took in 2009 after deciding to hold off on some development projects. That reduction in value kept Oceania's balance sheet in the red for a second year in a row as it failed to make any noticeable dent in its $554.4 million worth of borrowings, of which $239.9 million is coming due before May 31 next year.

Unlike other large property owners, Oceania didn't bounce back on a rebound in the paper value of its property, plant and equipment assets, which were valued at $261.3 million as at May 31, nor did it say what impact the government's changes to claiming depreciation on buildings will have on its bottom line. Listed rival Metlifecare returned to profit in the year through June after a turnaround in the value of its $1.27 billion investment property portfolio.

The Macquarie vehicles funding Oceania have provided letters of support for the group which will let it call on the owners to provide funds to meet its financial obligations and operating expenses, the company said in a note entitled 'Going concern assumption'.

Oceania grew out of the merger between ElderCare, which Macquarie bought in 2005 from Abano Healthcare Group for $63.5 million, and QualCare, which cost it $380.2 million in 2008 from Australian private equity group Ironbridge Capital Holdings.

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