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Oceania Healthcare's annual net profit slides

Oceania Healthcare's annual net profit slides amid development work


By Jenny Ruth

July 25 (BusinessDesk) - Oceania Healthcare’s annual net profit fell 41 percent as the value of its properties held steady while better development margins were offset by increased costs.

The retirement village operator’s net profit for the year ended May fell to $45.4 million from $77 million the previous year, which included $68.3 million of property revaluation gains.

Oceania says underlying net profit from continuing operations fell 1.8 percent to $49.7 million.

The company completed three development projects on time and on budget, adding $131.8 million to total assets of $1.4 billion, in the year just gone.

It says it is also on track to deliver 265 beds and units in the current year, slightly more than its previous guidance.

“While Oceania Healthcare’s reported profit includes the increase in fair value generated from the completion of our two Auckland investment property developments this year, it excludes the increase in value of property, plant and equipment from the care suites completed at these two Auckland sites as well as at The BayView in Tauranga,” says chief executive Earl Gasparich in a statement.

The two Auckland sites at Meadowbank and The Sands were completed near the end of the financial year so the results include only a small number of sales.

“Sales have been very strong at these two sites during June and July to date and we expect this to continue as they are sold down over the coming year,” Gasparich says.

Operating cash flow rose 8.6 percent to $89.3 million, reflecting sales in completed developments.

Occupancy at sites not impacted by redevelopment rose a little to 92.8 percent from 92 percent in the first half and 90.8 percent in May last year.

Gasparich says the rising occupancy reflects the investment Oceania has made in refurbishing its existing portfolio, particularly the conversion of older, standard aged care rooms into its premium care suite product which is sold under occupation right agreements.

Oceania’s care suite product “is popular with residents across the country who are increasingly demanding rooms and common areas that are of a significantly higher standard than the traditional rooms that are funded by government contributions alone,” he says.

Earnings from aged care fell 9.8 percent in the year due to rooms being unavailable during the refurbishment process, the impact of sector-wide wage cost increases and start-up costs associated with opening new aged care sites.

Oceania obtained resource consents for five redevelopment sites in the year just passed and its development pipeline of 1,995 retirement units and aged care beds is now 67.3 percent consented.

Oceania will pay a final unimputed dividend of 2.6 cents per share, maintaining the full-year’s payout at 4.7 cents which is 57 percent of underlying net profit.

The company has launched a dividend reinvestment plan which will allow participating shareholders to take shares instead of cash at a discount of 2.5 percent to the five-day, volume-weighted average share price after the shares shed the dividend on Aug. 11.

Oceania shares closed yesterday at $1.07 and are about 4 percent lower than a year ago.

(BusinessDesk)

ends

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