Oceania half year: Company to boost sales to keep up with developments

Friday, 22 November 2024

Oceania Healthcare has announced declines in after tax profit and income in the six months to September 30, and will not be paying shareholders a dividend.

The NZX-listed retirement village operator reported a post-tax loss of $17.1 million, down from a $35.2m profit over the same period last year.

Classification of the care suite product as property, plant and equipment, which meant positive value movements were recognised in equity rather than total income, was part of the reason for the loss, it said.

Another factor was an impairment due to the partial closure of existing buildings, and relocation of residents to a new building at its Elmwood Village in Auckland.

Total comprehensive income dropped to $11.8m from $61.7m.

Revenue inched up 0.8% to $132.6m from $131.6m, with “robust’ care suite volumes, while new sales and resales increased on the second half of last year.

Oceania chief operating officer Suzanne Dvorak said the company had a clear view about its near term priorities and the elements of its operational execution it needed to fix or improve.

“Our focus for the near term will be on improving capability in sales, continuing to modernise the property portfolio, and lifting earnings and profitability from care services.”

But in a briefing on the results, Dvorak, who joined the company in July, focused on sales as its first priority.

The company had gone through an expansionary phase over the last five years, and sales had not kept up so gearing levels were high, she said.

“It is clear that sales volumes had to increase, and the company is laser focused on achieving that, focusing on unsold stock which will support debt reduction.

“The establishment of a new executive chief sales and marketing role recognises that improved performance in this area is a core issue that needs to be urgently and structurally addressed.”

The Helier, Oceania’s new luxury village in Auckland, would be a big focus for sales, and there would be a change in strategy in relation to it, she said.

“It’s been promoted as a high-end premium product, so people think it is not accessible to them. But it has different apartment sizes and price points, and we want to make people aware of all the offerings.”

The Helier’s occupancy rate is currently 31%, in contrast to Oceania’s 94% occupancy rate across villages not affected by development.

Dvorak said the company would be streamlining its development programme, completing its brownfield developments, and undertaking broadacre greenfield development, including its Franklin development, to support its portfolio rebalancing.

It also needed to get its delivery model right so that earnings and profitability were sustainable, something which was proving challenging right across the sector, she said.

Oceania chief financial officer Katherine Waugh said underlying profits and Ebitda remained solid, driven by a 34.9% increase to $38.2m in capital gains.

Village capital gains were strong while care costs reduced, and core earnings were steady despite the upfront costs for the period, she said.

“Debt is primarily tied up with developments, but current and future new sales stock will provide a clear path to debt repayment.”

Since March, debt had been reduced by $8m, she said. That was largely due to the sale of four villages - Takanini in Auckland, Middlepark and Holmwood in Christchurch, and Victoria Place in Tokoroa - over the period.

But Oceania’s board had decided to continue the pause on dividends for shareholders due to the current gearing levels.

Dividends would resume when there had been sufficient sales to reduce the new stock level and gearing ratio, it said.