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Update: Oceania Healthcare full-year profit

Update: Oceania Healthcare full-year profit, underlying earnings ahead of IPO forecast

(Recasts lead and adds CEO comment throughout)

By Rebecca Howard

July 27 (BusinessDesk) - Oceania Healthcare, which listed in May, said full-year net profit and proforma underlying earnings exceeded its forecasts on the back of a lift in the valuation of its care and retirement village assets and it is on track to meet its forecast for the 2018 financial year.

The Auckland-based aged-care operator said its reported net profit was $44.9 million in the year to May 31, ahead of the $25.3 million forecast in its product disclosure statement when it carried out its initial public offering. Pro forma underlying earnings before interest, income tax, depreciation, and amortisation, were $45 million, ahead of the forecast $44.3 million. In the statement, it forecast this year's pro forma underlying earnings before interest, income tax, depreciation and amortisation to be $62.2 million.

"In terms of next year’s forecasts, we are on track with what we put into the market. We have delivered everything we said we would to date and we anticipate to be on track with those forecasts," said chief executive Earl Gasparich in an interview.

Gasparich underscored that while the FY17 result benefited from "significant growth" in the valuation of the assets, as property values rise, as well as developments brought to the market, the business "is not reliant on retirement village sales or correlated to the residential property market."

Around 73 percent of the company's business is in aged care and so "our earnings are quite resilient to property market fluctuations," he said.

Total assets increased by $135 million to $918 million following a material increase in development capital expenditure and acquisition of sites, it said. Net debt fell to $84 million from $274 million, giving it a low gearing of 15 percent.

The company said it had used proceeds from a $200 million capital raising to reduce debt and forge ahead with its development programme. According to Gasparich over the past year, a block of 44 new apartments was completed at its Milford, Auckland site and a further 316 units and care suites are currently under construction across five sites.

He said debt facilities have been resized there is sufficient capacity to build planned facilities and it's "very much a revolving facility" as the company draws on debt to build the facilities but then repays the debt as it sells them. Gearing started below 20 percent and he doesn't expect it to rise to a level much greater than that.

He said the underlying aged care business generates strong operating cash flows each year and those cash flows are then used to fund interest costs and the overheads of keeping the business going.

Oceania has a pipeline of 1,708 units and care suites of which 63 percent or 1,072 are currently consented, he said. It has a portfolio of 50 sites and while Gasparich said that it had sufficient land for the next seven years of development in New Zealand "Australia would certainly be on our horizon in the longer term."

Gasparich also said there is "good momentum" in existing businesses. He noted the care segment is ahead of its IPO forecast with an ebitda per bed (excluding its decommissioned sites) of $12,648 versus a forecast of $12,614. Also, its village segment resales margins were 27.4 percent, in line with forecasts, while resale volumes were 151, versus a forecast of 142.

The stock last traded at 96 cents and has gained 21.5 percent since listing.


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