Oceania, trading profitably as it expands aged-care business, will still need more capital

Monday 16th November 2015

Oceania Healthcare, the aged-care operator managed by Macquarie Group, is trading profitably and has no immediate need for more capital but will have to consider raising funds in the short-to-medium term.

Chief executive Earl Gasparich said Oceania, which had contemplated an initial public offering this year, has no current constraints on capital and its focus is on developing "key strategy sites." The company formed through the merger of ElderCare and QualCare in 2008 is building on its Lady Allum rest home site on Auckland's North Shore, and has brownfield sites in Auckland, Tauranga, Nelson and Christchurch.

"We've had significant growth with some significant operational improvements over the last 12 months," Gasparich said. "We've got a large landbank in front of us which will keep us active for years in the future." Oceania has about 2,800 care beds, which include hospital, rest home and dementia level care, with a further 1,000 retirement village units, and is looking to add a further 1,400 retirement village units.

The company spent $24.7 million on development in the year ended May 2015, and had $33 million worth of property under development. It owned $428.7 million of investment property, up from $374.9 million in May 2014. Cash and equivalents stood at about $4.7 million as at May 31, down from $7.6 million a year earlier.

Gasparich told BusinessDesk that the company would go through another capital raising at some point, "probably in the short-to-medium term future", but there is no process for that at the moment. Earlier this year Gasparich said the company was considering listing on the NZX as it would need capital for larger future developments.

"The business will need to be recapitalised at some point, there's no doubt about that, but at the moment we don't have any constraints for capital," Gasparich said. "When the business is trading well, as you can expect the relative valuation metrics change as well. The reality is we're making a profit, we're on a very strong growth curve."

"At the moment we're just concentrating on getting the most we can operationally out of the business, particularly our care business where we've made a lot of advances in the last year," Gasparich said.

Profit for the year ended May 31 was $13.3 million, on operating revenue of $168.5 million. The fair value of Oceania's investment property increased $34.5 million.

BusinessDesk.co.nz

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