Oceania Healthcare's first-half net profit plummeted 97 per cent, reflecting the demolition of a care facility in Tauranga, other property related costs and the impact of the pay equity deal for aged care workers on wages.
Net profit for the six months ended November 30 fell to $1.3 million from $44.5m in the same six months a year earlier. The year-earlier result included a $34.1m gain in the value of its investment properties, compared with a gain of just $1.6m in the latest six months.
Employee benefits rose 8.9 per cent to $59.3m in the latest period.
Nevertheless, the retirement village and aged care company is highlighting that its underlying operating earnings were up 7.5 per cent in the six months, underlying net profit from continuing operations was up 8.7 per cent and that operating cash flow rose almost threefold to $47.1m.
Chief executive Earl Gasparich says the company has delivered and that the underlying result reflects increases in deferred management fees from the village operations and realised development gains from sites completed earlier in the year.
"We have focused heavily on generating higher revenues in our care business through occupancy and premium room charges, given the increase in operating costs, particularly staff costs associated with the equal pay settlement and registered nurse pay rates," Gasparich says in a statement.
"Occupancy across our non-development sites has increased materially over the six-month period and across all sites is now 92 per cent. That's up from 89.9 per cent in the previous first half.
"This has been driven by site refurbishments, including conversion of standard beds to care suites, and our new operational structure put in place earlier this year," he says.
Sales from developments completed earlier in 2018 contributed $43.5m to cash flow.
"While our developments are funded from our bank facilities that we increased and extended earlier in the year to July 2023, our net debt of $197.3m as at November 30 represents a prudent gearing level of 26.7 per cent," Gasparich says.
The company will continue to complete developments in the second half and to convert standard rooms to care suites as it drives higher occupancy levels.
He noted the company already has pre-sale applications for 13 apartments at The Sands, which the firm is developing at Browns Bay on Auckland's North Shore. Strong pricing "reflects the high quality of the product," he said.
Oceania will also continue to roll out its new clinical information system after a successful pilot in Auckland.
The company will pay a non-imputed first-half dividend of 2.1 cents per share, unchanged from last year.
Oceania Health shares fell 2 cents this morning to $1.07, virtually unchanged from 12 months ago but comfortably above the May 2017 float price of 79 cents.