Oceania Healthcare Limited Analysis

Overview

Oceania operates in the New Zealand residential aged care and retirement village sectors, offering residents villas and apartments within its retirement villages, and also providing a full range of residential aged care services (including rest home, hospital and dementia level care) at its aged care facilities. Oceania is currently New Zealand's third largest provider of residential aged care, and New Zealand's sixth largest retirement village business. Oceania is the freehold owner of 47 of its 50 nationwide sites, comprising 48 aged care and retirement village facilities and two sites held for redevelopment purposes.

Oceania is also an experienced brownfields developer of aged care and retirement village facilities throughout New Zealand.

Oceania Healthcare Limited first listed on the New Zealand and Australian Stock Exchanges on 5 May 2017 under the code "OCA".

Performance

The following information was extracted from Oceania Healthcare's half year results, released on 22 November 2024:

Oceania Healthcare (NZX: OCA) reported underlying EBITDA1 of $38.6m up 2.7% for the six months ending 30 September 2024, as the company continues to focus on improving its sales capability, modernising and rebalancing its property portfolio, and lifting earnings and profitability from care services.

Financial Summary and Highlights2

• Reported Total Comprehensive Income of $11.8m (1HY24, $61.7m).
• Reported NPAT loss of $(17.1)m, (1HY24, $35.2m profit).
• Underlying EBITDA rose to $38.6m, 2.7% above 1HY24.
• Underlying NPAT was $24.0m, 12.5% lower than 1HY24
• Operating Cashflow increased to $70.4m, 23.1% above 1HY24,
• Total Assets increased to $2.82b, $38.9m increase above FY24.
• Net Tangible Assets increased to $1.03bn, or $1.43 per share,
• Four non core sites divested for $25.1m.
• Debt gearing reduced to 37.5% compared with FY24 38.3%. All banking covenants have been met.
• Realised capital gains rose to $38.2m, 34.9% higher than 1HY24.
• Premium care revenue was up 12.3% on 1HY24 to $12.4m.
• Unsold stock levels at $305m, 13.5% below FY24.
• Resales of independent living units (ILUs) (59 units sold) and care suites (110 suites sold).
• New care suite sales outperformed with 51 new care suites sales during the period.
• 224 independent living units and care suites to be delivered during FY25 including 106 care suites at Elmwood in Auckland delivered in 1HY24.

Financial Performance

Despite New Zealand’s economic downturn, Oceania achieved a solid first six months of FY25, lifting Underlying EBITDA by 2.7%, compared to the same period last year, to $38.6m. With increased sales volumes and prices, particularly in relation to care suite volumes, capital gains rose 34.9% period on period to $38.2m.

Underlying Net Profit After Tax (NPAT) was down 12.5% on 1HY24 to $24.0m, largely a result of increased interest expense in relation to completed developments.

Positive fair value movements in the care suite product are recognised in other comprehensive income, or in equity, rather than fair value movements in investment property in total income because of the classification of the care suite product as property, plant and equipment. Together with the recognition of an impairment in relation to the Elmwood care site in Auckland, as we partially closed the existing brownfield buildings and relocated residents to the newly commissioned care suite building, this resulted in a loss of $17.1m at the reported NPAT level.

Development stock continued to be sold down in the six months to 30 September 2024 with unsold new stock levels reducing by 13% to $305m. This contributed to the 23.0% increase in cash from operating activities from 1HY24, a net $70.4m cash inflow for the six months to 30 September 2024.