Eureka Group Holdings Limited AGM Presentation For personal use only November 2016
Overview of Eureka Group Eureka aims to provide the highest level of low cost rental accommodation and associated • For personal use only care to independent retirees who are either completely or primarily reliant on the Australian Government Pension and Rent Assistance In Australia 77% of single people (over age 65) rely on pensions as their primary source of income � • Through 2014 to 2015, retirement villages accounted for 18% of the A$17bn revenue spent on aged care accommodation • Eureka sources almost all of its revenue indirectly from the Federal Government with rent and associated weekly costs coinciding with the social security and rental assistance payments • As of October 2016, Eureka has 35 villages under management with a total of 2,073 units owned and/or managed Source: Third party source 2
Company Snapshot Capital Structure¹ Share Price Performance For personal use only Volume (m) Price (A$) $0.80 8.00 Share Price A$0.73 6.00 Share Price (A$) Shares Outstanding (m) 231.0 Volume (m) $0.60 4.00 Market Capitalisation A$168.7M $0.40 2.00 Cash (30-Jun-16) A$6.8M $0.20 - Debt (30-Jun-16) A$42.5M Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Directors & Senior Management Major Shareholders Tribeca Investment Partners Pty Ltd. 5.92% Robin Levison Executive Chairman Robin Levison¹ 5.48% Lachlan McIntosh Non-Executive Director Hunter Hall Investment Mgmt 5.39% Nirmal Hansra Non-Executive Director Lachlan McIntosh¹ 5.16% Greg Rekers Executive Director / Head of Real Estate Cooper Investors Pty Ltd. 5.03% Kerry Potter Executive Director / Chief Operating Officer Pie Funds Management Ltd. 4.62% Oliver Schweizer Company Secretary Glenn Molloy 3.43% 22 Resolution Pty Ltd. 2.26% Ryan Maddock Chief Financial Officer Mews, Richard Ewan Bromley 2.11% 1. Market data as of 29 November 2016 3
Market Primer: The Australian Retirement Industry Eureka’s model caters to the 65+ year olds whose primary source of income is the full aged • For personal use only pension and requires no upfront capital 77% of single people (over age 65) rely on pensions as their primary source of income � High Demand for Affordable Rental Solutions Ageing Australian Population • Recent trends have seen service providers move to the • The ABS forecasts the number of Australians aged over 65 DMF and MHE models, significantly reducing the will increase from 3.6 million today to 4.2 million in 2020 amount of affordable housing available in the market • Will increase to 8.8 million by 2050 • Has driven high demand and placed greater importance on Eureka to continue providing affordable rental 5.0 solutions Total Population Aged 65-74 Aged 75-84 Aged 85+ Cumulative Population Growth 4.0 Privately funded High net worth five-star retirement self-funded retirees Retirement Solution Market Sector 3.0 Self funded retirees DMF / home care Pensions <$300K Limited DMF / superannuation 2.0 relocatable options Long-term rental w Rental as the little/no assets only option 1.0 2015 2020 2025 2030 2035 2040 2045 2050 Source: Third party research 4
Market Primer: The Australian Retirement Industry (cont’d) • Through 2014 to 2015, retirement villages accounted for 18% of the A$17bn revenue spent For personal use only on aged care accommodation Growth in Demand Anticipated Across Cities Low Penetration of Retirement Living in Australia • Knight Frank estimates 31,035 new independent living • According to the ABS, less than 6% of Australians reside units will be required across Australia’s cities by 2020 in in retirement villages, compared to 12% of seniors in order to meet expected consumer demand the U.S. Implied Demand, Retirement Living Community Residents Demand for Retirement Living By City 5.7% take up 7.5% take up 10.0% take up 600,000 35,000 Number of ILUs in 2011 Additional ILUs needed by 2020 30,000 500,000 7,202 25,000 6,802 400,000 20,000 # of People 6,757 6,813 ILUs 300,000 15,000 3,053 200,000 10,000 100,000 5,000 - - Sydney Melbourne Brisbane Adelaide Perth 2015 2020 2025 2030 Source: Third party research 5
Business Units Overview The key to Eureka’s success is the discipline and coordination of the three key business For personal use only units: • Real Estate Acquisition Team – The key to our Growth Strategy Searches regional Australia for low cost retirement villages or assets suitable for re-purposing to low cost rental retirement accommodation • Infrastructure and Asset Management Team – The key to our Financial Strategy Concentrates on filling those assets with suitable residents and providing food and associated support services including those from the Blue Care partnership • Property Management, Finance and Compliance Team – The key to our Cost Savings and Performance Strategy Ensures all rents and other associated payments are collected, all local, state and federal regulations are complied with and all ASX, ATO and other report requirements are met and are creating significant shared back office services economies of scale 6
Key Operational Highlights Geographical Distribution of Villages For personal use only 35 villages under management 26 villages with freehold land and buildings owned NT 1,334 QLD units owned 19 Villages WA 2,073 units owned and/or managed SA 9 Villages 8-12 NSW villages to be acquired in next 12 months 4 Villages ACT VIC 584 Units 2 Villages 315 Units Clusters by State bring Scale & 599 Units TAS Scope Benefits 214 Units 361 Units Eureka’s “Buy & Build” strategy succeeding with a further 200 low-cost rental accommodation assets identified and preliminary due diligence completed 7
Eureka’s Steady Growth Trajectory For personal use only Units Owned/Managed • Eureka has grown over significantly the (in units) last three years, with owned properties Owned increasing 91% year-over-year in FY2016 Managed • 200 low-cost rental accommodation assets 2035 identified and preliminary due diligence 1938 completed • Targeting a further 8-12 acquisitions in the 1492 1419 next 12 months, with 6 villages under current due diligence or in clear line of 8% sight 91% 1296 1199 533% 627 99 FY2014 FY2015 FY2016 30-Sep-16 8
Eureka’s Ability to Improve Village Performance Post-Acquisition • Earnings for all villages have increased since acquisition by Eureka For personal use only • Operating efficiencies and economies of scale benefits continue to drive improved earnings Focus on increased rental rates, occupancy and back office consolidation creating cost savings and � margin growth Village EBITDA Purchase Price v. Book Value (in $000’s) (in $ millions) Acquisition EBITDA FY16 Actual EBITDA FY17 Budget EBITDA Purchase Price Book Value (June 2016) $7.5 917 24% 884 $6.1 633 $4.7 49% 511 500 $3.1 58% 365 $2.9 $1.9 227 143 117 Mackay (Apr-14) Cairns (Jul-14) Shepparton (Jun-15) Mackay (Apr-14) Cairns (Jul-14) Shepparton (Jun-15) 9
Key Financial Highlights Revenue, EBITDA and NPAT have continued to increase as a result of village acquisitions • For personal use only completed during the year • Cost control focus and scale benefits have flowed through to margins and bottom line results • Strong balance sheet – net assets of $64.9 million, up 104% • Investment property book value of $86.5 million, up 118% $43 million invested for 13 village acquisitions settled during the year � Revenue EBITDA NPAT EPS ($000’s) ($000’s) ($000’s) ($) 12,468 24,155 10,467 5.19 12,212 2.24 4,129 3,105 FY2015 FY2016 FY2015 FY2016 FY2015 FY2016 FY2015 FY2016 10
Pro Forma Annualised EBITDA For personal use only The nine village acquisitions announced since 1 July 2015 are expected to contribute an • additional $6.09 million to Eureka’s EBITDA on an annualised basis Pro Forma Annualised EBITDA ($000’s) FY2015 Acquisitions 12,092 FY2016 Acquisitions 150 720 800 550 700 480 530 700 470 200 6,002 450 340 FY15 PF Ann. Mt. Gambier Rockhampton Bowen Wynnum Terranora Rockhampton Mt. Gambier 2 Salisbury Amber Lodge Blue Care Orange Broken Hill PF Ann. EBITDA EBITDA 2 Villages 11
Growth Strategy For personal use only Acquisition Growth 1 Acquired 24 villages in last 28 months and is targeting a further 8-12 low-cost accommodation asset acquisitions in the next 12 months Organic Growth 2 Development on existing owned village sites will allow Eureka to develop more than 295 additional units (5 villages equivalent); also opportunity to develop 125-150 purpose-built retirement units Margin Growth 3 Increased rental rates, occupancy and back office economies of scale Services/Care Growth 4 Now offers government funded in-home care packages to residents that will make the villages initially more attractive, keep residents longer, and accordingly increase profitability 12
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