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Oceania Healthcare annual profit climbs 72%, signals higher future build rate

Thursday 26th July 2018

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Oceania Healthcare'a annual profit climbed 72 percent, largely on property revaluation gains, and the aged care operator plans to accelerate new developments as it benefits from strong resale margins and new retirement village unit sales. 

Net profit rose to $77 million in the year ended March 31 from $44.9 million in the prior period, the Auckland-based company said in a statement. Underlying earnings, which includes pro-forma adjustments, rose 53 percent to $52.1 million. Both figures beat forecasts in its 2017 initial public offering document, "due to a significant increase in the valuation of Oceania’s care and retirement village assets," said chief executive Earl Gasparich.

In May the company indicated it was on track to lift underlying earnings by at least 51 percent and meet forecasts in its IPO document. At the time that implied annual underlying earnings would rise to at least $51.4 million from the $34 million reported in 2017. 

The shares last traded at $1.09 and are up 14 percent so far this year. The company raised $200 million in last year's IPO, selling shares at 79 cents apiece. 

The result may heighten interest in the stock as a major stake may come into play tomorrow. Among the IPO conditions, a 57 percent stake in the company held by Macquarie Group managed funds and senior managers will be able to be sold from Friday when the escrow period ends.

The company's total assets increased by $229 million to $1.15 billion, following an increase in development capital expenditure and acquisition of new sites. It now has 3,982 care beds, care suites and units across the country. 

Oceania and other New Zealand retirement village operators are expanding their businesses to meet increased demand as people born in the country's post-war era reach the target age for operators.

"We currently have a further 451 beds and units under construction across five sites in four metropolitan locations and expect to deliver 272 of these within the next financial year, which is a significant step up from the forecast provided in the IPO," said Gasparich. The delivery rate is double the 131 unit and care suites it completed in the year to March 31. 

The company increased its forecast future build rate from 200 bed and units indicated at the time of the IPO to 250 per annum over the next three years to May 31, 2021, increasing further to at least 300 from 2022 onwards.

Gasparich said there are new bank facilities in place to fund this increased build rate based upon current projections.

"With a pipeline of over 2,100 units and beds across the country, we have approximately seven years of development ahead of us, and 61 percent of this pipeline is already consented," he said. 

Gearing was 22 percent as at May 31 with net debt of $150.8 million versus $84.4 million in the prior year. Debt facilities were refinanced in July 2018 with total facility limits increased to $350 million from $235 million. 

It will pay a final dividend of 2.6 cents per share with a record date of Aug. 13 and payment on Aug. 20. 


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