FY18 Half Year Results Presentation Andrew Sudholz Chris Price Managing Director & CEO Chief Financial Officer
Contents Section One Business Performance 3 Section Two Japara Strategy 14 Section Three Outlook 22 Section Four Appendices 24 FY18 Half Year Results Presentation 2
Section One: Business Performance 3 FY18 Half Year Results Presentation
H1 FY18 – Financial overview Revenue and profit negatively impacted by government funding cuts and temporary fall in occupancy Total Revenue NPAT EBITDA $24.3m $182.5m $10.3m Down 16.5% and in line with previous guidance Down 29.5% due to lower Up 2.2% EBITDA No ACFI indexation in FY18 Government funding cuts and ACFI scoring changes offset by capacity Lower tax offset offset rising acuity expansion higher depreciation Abnormally severe influenza Growth from brownfield Interim dividend developments completed outbreaks caused temporary 4.0 cents per share in FY17 fall in occupancy (currently (franked to 65%) back to 93.5%) Wages growth of circa 5% from final year of former Victorian EBA (circa 2.5% going forward) FY18 Half Year Results Presentation 4
H1 FY18 – Financial overview Strong cash flows and capital structure support future growth Strong Net RAD Superior Capital Balance Sheet Inflows Structure Net bank debt $24.4m $25.9m Supported by circa $560m Funding in place for growth Supporting strong cash flows of property assets at cost & exceeding expectations FY18 Half Year Results Presentation 5
H1 FY18 – Operational overview Excellence in care maintained Care Bed Prices Operational Beds Occupancy 100% accreditation Consistent with previous Average underlying Bed numbers grow to record maintained in half at circa $351k occupancy of 92.3% 3,906 as developments increasingly regulated complete for H1 FY18 but now environment normalising High quality care Expected to increase Delivering on growth Recovering as remains fundamental with developments strategy expected and now at to our model program 93.5% FY18 Half Year Results Presentation 6
H1 FY18 – Development progress Excellent progress in line with strategy Brownfield Greenfield Significant Capital Developments Developments Refurbishment Expenditure Program Noosa (Qld) completed in Riverside Views (Tas) $51m spent primarily on Upgrading 14 homes by August 2017 opened in October 2017 and land and developments H2 FY19: • Now 177 bed fully ramping up as expected • in H1 FY18 2 completed refurbished home • 2 under construction • 4 in tender 10 greenfield projects 5 developments underway providing 1,055 underway providing 182 new places and 965 net new new places, 156 net new places places and refurbished homes Cornerstone of organic Excellent returns from Strong cash flows Reinvigorating existing growth strategy extending current underpin development homes homes program FY18 Half Year Results Presentation 7
H1 FY18 – Profit & loss summary EBITDA in line with updated guidance $ Millions H1 FY18 H1 FY17 Change % EBITDA from recurring operations 24.9 28.6 (12.9) EBITDA from property-related gains 1.7 1.3 30.8 Redundancy costs (1.6) (0.8) (100.0) Riverside Views start-up costs (0.7) n/a n/a EBITDA 24.3 29.1 (16.5) Total revenue (limited by occupancy pressure & current year ACFI freeze) 182.5 178.5 2.2 Total costs 158.2 149.4 5.9 24.3 29.1 EBITDA (16.5) 7.8 6.7 Depreciation (increased by new developments coming online) 16.4 16.5 EBIT 22.3 (26.0) 10.3 14.6 (29.5) NPAT EPS 3.9 cps 5.5 cps (29.1) Interim dividend 4.0 cps 5.5 cps (27.3) FY18 Half Year Results Presentation 8
H1 FY17 – H1 FY18 Significant movements EBITDA 45.0 Increases totalling circa 5% from final year of former 40.0 Victorian EBA impacting H1 FY18. Go forward rate of circa 2.5% EBITDA $ Millions $3m below Government 35.0 management funding cuts and expectations ACFI indexation freeze in FY18 (1.1) 2.1 30.0 (3.2) (1.5) 25.0 (1.1) 29.1 24.3 20.0 H1 FY17 EBITDA Completed Brownfields: Net change in: Wage increases Lower occupancy Other H1 FY18 EBITDA - Central Park - Property gains (ex brownfields and - Kirralee - Redundancies Riverside Views) - George Vowell - Riverside Views start-up - St Judes FY18 Half Year Results Presentation 9
Key operational metrics Completed developments coming online H1 FY18 H2 FY17 H1 FY17 Number of homes 44 43 43 Operational places 3,906 3,841 3,840 Average underlying occupancy 1 92.3% 94.7% 94.4% Average revenue per occupied bed day ($) 2 276.9 275.3 276.1 Average Government revenue per occupied bed day ($) 197.7 196.6 198.4 Staff costs to revenue 2 70.2% 70.2% 68.4% Non-wage costs to revenue 2 16.5% 15.3% 15.9% Average concessional residents 3 38.2% 39.0% 37.9% Average incoming bed contract price ($’000) 350.6 351.7 339.7 Net RAD/Bond & ILU loan inflow ($’m) 25.9 26.7 29.0 Operational places movement Notes: 30 June 2017 3,841 1. Average underlying occupancy excluded homes undergoing development in the FY17 year. Homes undergoing development in H1 FY18 have not materially impacted occupancy and have been included for - Riverside Views 28 the purposes of calculating occupancy - Central Park 25 2. Metrics shown exclude property related gains and redundancy costs - Kirralee 12 3. Calculated as the number of concessional residents: operational places 31 December 2017 3,906 FY18 Half Year Results Presentation 10
Occupancy The fall in occupancy as a result of the influenza outbreaks is recovering Underlying occupancy % Occupancy forecast of 94% - 95% by 30 Jun 2018 95.0% 94.5% 94.0% 93.5% Occupancy currently 93.5% 93.0% 92.5% 92.0% H1 FY15 H2 FY15 H1 FY16 H2 FY16 H1 FY17 H2 FY17 H1 FY18 June 18 (estimated) • As previously highlighted, occupancy during the first half of FY18 has been impacted by unusually severe influenza outbreaks, both in terms of duration and number of residents affected • Occupancy has started to recover in the second half of FY18 and is anticipated to return to historic average levels of around 94% to 95% over the balance of FY18 FY18 Half Year Results Presentation 11
Balance sheet and cash generation Balance sheet strength and funding flexibility maintained Balance sheet as at 31 December 2017 $m Investing in expanding and enhancing operations Property, plant and 624.3 Cash Generation in H1 FY18 ($m) 70.0 equipment Intangibles 463.5 50.0 Other assets 27.9 (14.6) 20.7 30.0 RAD liabilities (457.9) (28.3) 25.9 10.0 Other liabilities (102.3) (3.1) Net bank debt (24.4) (4.9) -10.0 (19.6) 14.4 (24.4) (14.9) Net assets 531.1 -30.0 • Low net bank debt -50.0 • Available liquidity circa $196m Net Bank Debt at Cash from Operating Net RAD Inflows January Advance Land purchases Greenfield & Maintenance Capex IT Capex Dividend / DRP Net Bank Debt at 30/6/17 Activities Funding Brownfield 31/12/17 (undrawn credit lines plus cash) Development Capital Works FY18 Half Year Results Presentation 12
Room prices & RAD:DAP mix trends Slight trend up in RAD proportion in H1 FY18 Average Incoming Bed Contract Price ($’000) $360 • The RAD:DAP:Combination profile $350 provides an appropriate balance between $340 capital and income $330 $320 • Average bed price constant in H1 primarily $310 due to mix of rooms turned over $300 • Increase in average bed price expected as $290 development program progresses in $280 optimal metropolitan locations $270 $260 Total Portfolio H1 FY18 H1 FY15 H2 FY15 H1 FY16 H2 FY16 H1 FY17 H2 FY17 H1 FY18 Incoming Non-Concessional Residents (PCP in brackets) 60.0% 50.0% 17.3% (18.2%) 40.0% 56.5% 26.2% 30.0% (57.6%) (24.2%) 20.0% 10.0% RAD DAP Combo RAD DAP Combo 0.0% Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 FY18 Half Year Results Presentation 13
Section Two: Japara Strategy 14 FY18 Half Year Results Presentation
Executing strategy Operations & innovation Roster optimisation • A review of rosters is underway to ensure the highest standard of care in the current environment • Workforce management tool implemented in H2 FY17 is supporting improved efficiencies • Roster reviews were completed at 14 homes in H1 FY18 and 15 are scheduled for H2 FY18 Information technology • Workforce management system – Vic, NSW and Tas complete • Wi-Fi to every room – underway; complete by August 2018 • Finance / Resident / Customer Management system – underway; implemented by July 2018 • Clinical and Medication management system – FY19 Specialised dementia services • Trialling new technologies • Enhanced design in new development projects • Specialist skills employed FY18 Half Year Results Presentation 15
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