Bright
from the
start
ANNUAL REPORT 2017
Contents
01 Letter from the Chair
04 Highlights
06 At a Glance
12 Chief Executive Officer’s
Report
16 Our Strategy
18 Our Values
20 Board of Directors
21 Consolidated Financial
Statements
28 Notes to the Financial
Statements
77 Corporate Governance
Statement
Welcome to our first
Annual Report.
With over 3,000 shareholders now firmly
part of our future, we have more people
to champion our endeavours in the ever-
growing aged care sector. The Directors,
management and our employees all
welcome you as shareholders and thank
you for putting your trust in us.
We are very pleased to be at this exciting
stage of our development as a company.
We are focused on creating sustainable,
long term value for you through strong
governance and excellent execution of
our strategy delivered by our exceptional
management team.
01
Oceania Healthcare | Annual Report 2017 LETTER FROM THE CHAIR
A MILESTONE YEAR
In this first Annual Report since Oceania
Healthcare became a listed company, I am
pleased to report that your Company has
successfully completed a milestone year.
From the listing on the New Zealand and
Australian stock exchanges, the completion
of 44 apartments at Lady Allum Village,
to the delivery of forecast returns for our
new shareholders, this has been a busy and
rewarding year.
We have harnessed our diverse portfolio
of residential care facilities and our
experienced management to deliver
financial results for the year ended May
2017 that are ahead of the Initial Public
Offering (‘IPO’) forecast published in the
Company’s March 2017 Product Disclosure
Statement (‘PDS’).
The Company has produced reported Net
Profit After Tax (‘NPAT’) ahead of the IPO
forecast for the year ended 31 May 2017 of
$44.9 million.
Pro forma underlying earnings before
interest, income tax, depreciation, and
amortisation* (‘Pro forma Underlying
EBITDA’) were $45.0 million, also ahead
of the IPO forecast.
Our primary purpose is to provide
healthcare and associated services to
our 3,800 residents. We are proud of the
quality of care and facilities that our 2,700
employees provide. Our dedicated focus on
aged care differentiates Oceania Healthcare
from its listed competitors which are
more weighted towards retirement village
independent and serviced units.
The capital raised by the IPO has enabled
us to reduce debt, take advantage of our
momentum and continue a broad range
of projects.
The intention of the IPO in May 2017
was to raise capital that would enable
the Company to implement its strategy
of being a leading provider of aged care
rooms while also developing our portfolio
of retirement village units. In the short
term, the Company is looking to double its
number of units and significantly enhance
its care rooms whilst maintaining a higher
weighting in aged care than our peers.
We are about to commence aboveground
development works at Maureen Plowman,
our Brown’s Bay beachfront development
village in Auckland and have acquired the
freehold title at Elderslea Care Facility in
Upper Hutt that was previously leased.
Further, we are about to commence Stage 4
of the development of Meadowbank Village
in Auckland. These initiatives, along with
many others that will be rolled out in the
years ahead, are intended to place Oceania
Healthcare in an excellent position to
meet the needs of New Zealand’s elderly,
particularly as 2021 approaches and the first
of the ‘baby boomer’ generation celebrate
their 75th birthdays.
Oceania Healthcare has two revenue
streams: aged care, and retirement villages.
A high share of revenue from the aged
care business is Government funded by
District Health Boards, providing certainty
of payment. The retirement village units
provide revenue from a weekly service fee
and a deferred management fee (‘DMF’),
* Pro forma Underlying EBITDA is a non-GAAP measure. Underlying NPAT and EBITDA are retirement village industry earnings measures that assist in the comparison
of Oceania’s performance with its peers. Oceania uses underlying NPAT to monitor financial performance and, in future to determine dividend distributions. It is
reported in the operating segment note of the audited consolidated financial statements. Underlying measures require a methodology and a number of estimations
to be approved by Directors in their preparation. Both the methodology and the estimations may differ among companies in the retirement village sector that report
underlying financial measures. Underlying NPAT is a measure of financial performance and does not represent business cash flow generated during the period.
A reconciliation of Underlying NPAT and EBITDA to reported NPAT is presented in section 2.1 of the audited Consolidated Financial Statements. The pro forma
adjustments made to reported Underlying EBITDA of Pro forma of $41.3 million relate to transaction and listed company costs of $3.7 million. Refer to page 77
of the Product Disclosure Statement ('PDS') dated 31 March 2017 for further details.
02
Oceania Healthcare | Annual Report 2017 LETTER FROM THE CHAIR
MOMENTUM DELIVERING
RETURNS
With funding now in place and construction
on track at all three of our current Auckland
development sites and in Tauranga, and
with resource consents in place at Hamilton,
Christchurch and Nelson, we expect the
business to perform strongly against the
2018 IPO forecast.
The public listing is now behind us and
has established a platform for growth.
The Board and management of Oceania
Healthcare are firmly focused on exceeding
our residents’ expectations and expanding
our business and operational processes to
meet the growing market. Above all, your
Board is determined to provide a consistent
and reliable return on your investment
in Oceania Healthcare. Thank you for
investing your trust with us.
Yours sincerely
Elizabeth Coutts
Chair, Oceania Healthcare Limited
deducted from the resale of units. In addition,
amounts are also received on issuance of
new occupation right agreements (‘ORA’)
which reflect the resale gain of the underlying
property portfolio held by us.
The new care suite hybrid combines the
benefit of a premium aged care room with
daily care fees and the retirement village unit
ORA. As well as being a superior product for
residents and their families, the care suite
funding model has a positive capital impact
for Oceania, as the Company can recover the
capital used in the construction of the suite.
Oceania has plans to complete a further 40
care suites by the end of FY2018 increasing
the total to 282 suites in the Company at
that date.
At the end of FY2017, Oceania had net
debt of $84.4 million which is below the
IPO forecast ($98.6 million). Total assets
at the end of May 2017 were valued at
$918.2 million compared to $886.2 million
in the IPO forecast.
SHAREHOLDER RETURNS
Oceania Healthcare has established a
dividend policy with a targeted pay out ratio
of 50% to 60% of annual underlying NPAT.
We intend to commence paying dividends
during the 2018 financial year, with an initial
interim dividend expected to be paid in
February 2018.
OUR PEOPLE
We asked a great deal of our people this
year to complete a successful Initial Public
Offering, and they certainly delivered.
I would like to thank my fellow Directors,
the Chief Executive and the management
team for their exemplary contribution to
the Company.
03
Oceania Healthcare | Annual Report 2017 Highlights
Oceania’s end of May 2017 financial result exceeded the
IPO forecast set out in the Product Disclosure Statement
when we listed on the NZX and ASX.
Financial
Total
Revenue
Reported Net
Profit after Tax
$174.8m
$44.9m
+1%: Ahead of IPO
forecast by $1.2m
+77%: Ahead of IPO
forecast of $25.3m
CBRE plus WIP
$647.9m
+4% Ahead of IPO
forecast of $625.6m
Operational
Pro forma Underlying
EBITDA
$45.0m
+2%: Ahead of IPO
forecast of $44.3m
Aged Care:
$31.9m
Retirement Village:
$26.8m
Corporate/Other:
($13.7m)
Units
1,296
Care Beds
2,797
90.4% occupancy
(average for the FY2017 year)
Unit Sales
New Units
Resale Units
New Care Suites
Resale Care Suites
37
89
15
62
Developments
Completed 44 Lady Allum apartments in Auckland in April 2017 with 20 units settling
within 6 weeks of completion.
Secured resource consents for Trevellyn (133 apartments, 90 care suites),
Melrose (7 villas, 209 apartments, 81 care suites) and Green Gables (27 apartments,
61 care suites).
Successful mediation for Windermere resource consent (68 apartments, 60 care suites).
04
Oceania Healthcare | Annual Report 2017 Delivering
“ I’m absolutely delighted with my
apartment and the marvellous interiors.
The people here have just clicked, it’s
honestly lovely.”
Resident
Oceania Healthcare | Annual Report 2017
05
At a Glance
We are an experienced developer
with a large brownfields land
bank in key urban locations
providing a strong growth
platform for aged care and
retirement villages.
Elmwood
Village
Manurewa
Under construction
Oceania site
locations
Locations with development
land bank
Locations with no
development land bank
Melrose
Tauranga
Under construction
06
Oceania Healthcare | Annual Report 2017 Meadowbank
Village
Meadowbank
Under construction
Maureen
Plowman Village
Browns Bay
Under construction
Trevellyn
Hamilton
Commencing February 2018
07
Oceania Healthcare | Annual Report 2017 We have a tangible growth path
We own sufficient land to build 1,708 new residences (1,282 net
of decommissions) with 1,072 of these units already consented.
Brownfield development pipeline
Gross
Residences
in stage
Net
Residences
in stage*
44
44
92
81
20
92
81
20
~40
~40
25
25
108
108
10
81
-7
81
216
107
90
133
88
75
53
87
27
45
75
36
1,072
777
36
36
LADY ALLUM
Auckland
MEADOWBANK
Auckland
STAGE 3
STAGE 4
STAGE 5
STAGE 6
ELMWOOD
Auckland
STAGE 3
STAGE 4-5
MAUREEN
PLOWMAN
Auckland
STOKE
Nelson
MELROSE
Tauranga
STAGE 1
STAGE 2-5
TREVELLYN
Hamilton
STAGE 1
STAGE 2-3
GREEN
GABLES
Nelson
WINDMERE
Christchurch
STAGE 1
STAGE 2-3
Total
consented/
under
construction
OTHER
Auckland
Hawke’s Bay
165
159
Christchurch
224
175
Nelson
Various
86
85
10
85
Total brownfield
development
pipeline
1,708
1,282
Nov 2015
May 2016
Nov 2016
May 2017
Nov 2017
May 2018
Future Years
PFI period
Construction
completed
April 17
Selldown
May 17
Construction
began Feb 16
Selldown
Feb 18
Construction
begins Sep 17
Construction
began Nov 16
Selldown
Nov 17
Construction
began Dec 16
Construction
begins Apr 17
Selldown
Dec 17
Construction
begins Jul 17
Construction
begins Feb 18
Consented
Planning
Planning
Selldown
May 19
Consented
Consented
Consented
Consented
Consented
Planning
Planning
Planning
Planning
Planning
* Net of decommissions and conversions that are removed to make way for brownfield development.
08
Oceania Healthcare | Annual Report 2017 Consented development pipeline
Approximately two thirds of our land bank is already
consented for redevelopment with all of our six key
strategic sites consented.
Proven track record of delivery
We have completed seven redevelopment projects
since 2011 many of which were in complex brownfield
locations.
Considerable embedded value
We have $183.1m embedded value within our existing
portfolio. In addition, our needs based care business
generates cash flows that will underpin dividends.
Aged care services are “needs based”
The growing demand for needs-based aged care services
is relentless. We have a higher portfolio weighting towards
aged care and a significantly larger proportion of higher
acuity care beds than the industry average, which provides
revenue streams that are resilient against any property
market volatility.
Stable regulatory environment
A high proportion of our care revenue is government
funded which increases via annual changes in District
Health Board aged residential care fees.
More recently the government has also funded the Equal
Pay settlement for healthcare workers. We are delighted
for our staff and we are very pleased that the government
has recognised its role in helping to attract and retain
healthcare workers as the demand for aged care services
in New Zealand grows.
New Zealand’s retirement village sector is widely
considered to be world leading with robust regulations
to protect residents.
Best practice clinical standards
We have a leading clinical care platform with a strong
clinical governance framework including a dedicated
clinical and quality team of senior registered nurses to
provide expert clinical leadership and support the
delivery of quality care.
09
Oceania Healthcare | Annual Report 2017
We are a recognised leader in clinical care and we have
a clear growth strategy.
We’re enhancing our care business by building new superior beds that can either be sold under
occupation right agreements or attract a premium charge. This business model leverages our expertise
in aged care and generates good commercial returns.
Portfolio composition (by Residences) – key competitors
BUPA
74.8%
OCEANIA*
66.8%
25.2%
6.1%
27.1%
We will remain focused on aged care to maximise the opportunities created by significantly growing demand from
New Zealand's ageing population.
ARVIDA
RYMAN
SUMMERSET
53.2%
36.7%
20.9%
0.3%
10.8%
68.0%
METLIFECARE
7.4%
11.0%
81.6%
20.3%
26.5%
19.7%
43.6%
Care Beds
Care Suites
Serviced Units
Independent Units
* Following completion of Oceania's brownfields development landbank.
10
Oceania Healthcare | Annual Report 2017 Growing
“ The successful public listing has
established a platform for growth.
We are now firmly focused on exceeding
our residents‘ expectations and
expanding our business to meet
the growing market.”
Elizabeth Coutts
Oceania Healthcare | Annual Report 2017
11
Keeping our
momentum going.
Following the IPO, the management team at
Oceania Healthcare is determined to activate
our strategies and accelerate the delivery of our
development land bank.
While we have a busy programme of capital works, with
brownfield site development and new builds underway
from Auckland to Christchurch, we have not lost sight of
our core purpose: to provide high quality aged care
services and retirement facilities in New Zealand.
We recognise that even though there is strong growth
forecast in the aged care sector, we are in a competitive
market. Our focus on development is not just on bricks
and mortar, we are always thinking about and improving
our core care and health services for our residents. At the
end of the day, occupancy levels will determine the future
success of Oceania Healthcare. Occupancy across our
care beds and suites during FY2017 was 90.4%, while
occupancy of our village units was 92.3% at the end of
the year.
Care
In the past financial year we completed the scoping of
a new clinical information system with implementation
planned in 2018. In preparation for this, and other
initiatives, we installed Wifi across all our sites during 2017.
Good quality and nutritious food is of critical importance
to our residents. Our chefs at each site are challenged
daily to manage complex dietary considerations for aged
care residents without compromising on taste, visual
appeal, and cultural requirements. In July 2016 we
competed and won the national Senior Lifestyle Cuisine
Award (for the second year in a row) against other top
aged care chefs from around the country. In 2015 and
2016 Oceania Healthcare was awarded the New Zealand
Aged Care Association’s Award for Overall Excellence
in Care.
1212
Oceania Healthcare | Annual Report 2017 CHIEF EXECUTIVE OFFICER’S REPORT
During 2017 we completed a national roll out of a new
Food Control Plan and all sites were audited, which is
significantly in advance of the Ministry of Primary
Industries requirement deadline.
Our people
Our team of 2,700 employees is passionate about
delivering great care to our 2,600 aged care residents
and I am very proud of their dedication to help create
Magic Moments each day for our residents.
I am thrilled that the Government’s Equal Pay settlement
with $2 billion funding over the next five years for
healthcare workers recognises the truly wonderful
contribution our people make to caring for our elderly.
In 2017 we launched a new learning and development
programme, Step Up. The programme will further
enhance our clinical capability and will help to develop
strong leaders within the business.
Caring for the safety of our team is just as important
to us as caring for our residents. We understand our
risk profile and with operating safely at the forefront of
our minds we track a range of indicators. During 2017
we redesigned our moving and handling training
programme, introduced new regional safety
representatives and trialled a new injury management
process that will now be delivered nationally.
Ageing population growth
drives development
Oceania Healthcare meets the needs of a rapidly growing
and ageing market in New Zealand. Our target market for
aged care, 85 years and older, is expected to triple in the
next 20 years and the 75 to 84 age group is expected to
double in the same time period.
This naturally growing market is expected to provide
significantly increased demand for aged care and
retirement village facilities.
Oceania will be able to continually fund the development
of our existing sites and, over time newly acquired
greenfield sites, through the ORA model for both aged
care beds and retirement village units which enables
capital to be recycled into new builds.
“We are confident of
meeting our targets
for the upcoming
financial year.”
Current development work
While Oceania Healthcare has underway an
unprecedented construction and development
programme, the management team is confident it
has the expertise, people and track record to deliver
the projects. In-house procurement and design
capability is allowing us to take greater control over
specification and procurement functions. We are
managing five development projects in construction
and overseeing planning and consenting for numerous
future projects.
Auckland
We recently completed construction of a block of 44
premium apartments at Lady Allum Village, including a
common area with a restaurant, cinema and large lounge
to complement the other facilities at this well-respected
village in Milford. Marketing efforts are in full swing and
we expect the new apartments to sell down by end of
May 2018. Further stages of redevelopment are now in
the pipeline for Lady Allum Village.
Construction is progressing well for Stage 3 at our
Meadowbank Village consisting of 62 independent living
apartments with a vast new village community centre
including bar and dining areas, a library, gymnasium, craft
room, hair salon and cinema. Very importantly, this stage
also brings care back to Meadowbank with 30 new care
suites also being built.
1313
Oceania Healthcare | Annual Report 2017 CHIEF EXECUTIVE OFFICER’S REPORT
Stage 3 is on track for completion by February 2018 with
strong pre-sales. We are finalising the fixed price contract
for Stage 4 consisting of 49 apartments and a further
32 care suites with construction commencing in
September 2017. Design has also commenced for
Stage 5 of Meadowbank. Once Stage 5 is complete the
village will consist of 187 apartments and 62 care suites.
region is Green Gables in the heart of Nelson City and
just a short stroll to the city centre. In January 2017 we
received resource consent to build 61 new care suites
and 27 independent living apartments. In February this
year we successfully relocated our Green Gables care
residents into two of our other care facilities in Nelson
and we have recently started demolition works on site.
We have started the earthworks stage on the beachfront
of Brown’s Bay at our Maureen Plowman site. This
unrivalled location will feature 64 independent living
apartments and 44 care suites and is expected to be
complete in April 2019.
Our third development in Auckland under construction
comprises 25 new villas at Elmwood Village in The
Gardens, Manurewa. These villas are being built on
adjoining land that was acquired in late 2016. Further
stages of redevelopment are also planned for this village.
Tauranga
In May 2017, we started site preparation works for Stage
1 construction of 80 new care suites at our Melrose
Village. The construction contract for this stage was
awarded in July 2017 and will take around 15 months to
build (September 2018). Stage 2 including 72 apartments
and a full community centre including bar, restaurant,
cinema and lounges will commence at the completion of
Stage 1. There are five development stages planned for
this hill-top site commanding panoramic views of
Tauranga’s harbour and Mt Maunganui.
Hamilton
A resource consent amendment was issued in February
2017 at Trevellyn which increased the number of care
suites as part of Stage 1 of this redevelopment site to 90
beds. We expect construction to begin by February 2018.
Nelson
Christchurch
We reached agreement with our neighbours at
Windermere Village for the construction of a boutique
development of 68 apartments and 60 care suites.
This project is planned to be constructed in two stages
with the first being the new care facility including café,
restaurant, salon, lounges and 15 apartments.
Outlook
Oceania Healthcare has significant commercial
advantages in a growing and competitive market.
Our nationwide footprint and established properties
with co-located aged care and retirement units provide
a strong platform for growth, we are diversified across the
aged care and retirement village sector with opportunities
for innovation being activated, and we have both an
experienced Board and management team. We have an
advantage in aged care through a long history of service
delivery and the IPO has helped us accelerate that further.
We have delivered a financial result that is ahead of our
IPO forecast. With significant progress being made at our
key development sites we are well placed to achieve our
forecast in 2018 and continue to create long term value
for our shareholders.
Yours sincerely
We have two redevelopment sites in the Nelson region
and construction has started on 10 villas at our Stoke
Retirement Village with completion on track for
December 2017. Our other redevelopment site in the
Earl Gasparich
Chief Executive Officer
14
Oceania Healthcare | Annual Report 2017 Focused
“ Our focus on development is not just on
bricks and mortar we are always thinking
about improving our core care and health
services for our residents.”
Earl Gasparich
Oceania Healthcare | Annual Report 2017
15
Our Strategy
Care
Industry supply and demand dynamics have led to
innovations in the funding model for aged care to
help address the required growth in bed capacity.
Oceania was the first New Zealand provider to
commercialise the care suite model in scale,
combining the benefits of premium aged care and
the retirement village ORA funding model. We have
rolled this model out over the last eight years in
Auckland and Christchurch, as well as in some
regional locations.
Private charging for aged care is now well-established
in the market, through either premium accommodation
charges or via the care suite model. With these
private charging options we can generate good
commercial returns from new care developments.
Eden, in Auckland, was our first 100% care suite
development and has proved its commercial viability.
The care suite model is an integral part of our care
development strategy to deliver enhanced returns.
As well as care suite development, our care business
strategies include maximising occupancy through
continuous improvement in service delivery and
quality of clinical care; optimising the bed mix
through needs assessment; increasing revenue
through premium accommodation charges; and
driving operational efficiency.
Estimated occupancy rate of funded care beds (fixed capacity)*
Actual
Projected
140%
130%
120%
110%
100%
90%
80%
Current Capacity
2013/14
2015/16
2017/18
2019/20
2021/22
2023/24
2025/26
Rest home and hospital
All
Dementia
* Source: Central TAS demand forecasts as at March 2017.
Retirement Village
We have an established and growing retirement
village operation with 1,054 units across 25 facilities.
Our growth strategy includes optimising DMF from
rolling legacy contracts onto new agreements,
increasing resale margins, providing additional
resident funded services, and continuing to
standardise refurbishments.
16
Retirement Village operation
1,054 units
across 25 facilities
Oceania Healthcare | Annual Report 2017 Developments
We intend to maintain an overall portfolio focus on
aged care, while optimising capital efficiency by
increasing the proportion of retirement village units
and care suites.
Our strategy is to activate our existing consented
brownfield development sites (1,072 units over the
next 5 years), develop our remaining brownfield
land bank (636 units), and supplement our building
strategy with opportunistic brownfield and
greenfield acquisition of sites in complementary
regions.
How this funding works
Oceania has sufficient capacity in its senior debt
facilities to fund our existing pipeline at a build rate
of approximately 200 units per annum.
We have a $175m Revolving Development Facility
and $60m General Corporate Facility currently drawn
down to $68.5m and $21.0m respectively. This is all
backed by development work in progress ('WIP')
and land.
We have sufficient capacity to fund the existing
pipeline of 1,708 units/beds at our target build
rate and also acquire new sites to increase our
development pipeline.
Construction is
funded by the
development
facility
ORA proceeds
used to repay
the development
facility
Existing
brownfields land
for ~1700 units/
beds
Development land
at sites not under
construction is ungeared
ORAs sold over
units/beds
Development WIP is fully
recovered from new ORA sales
1717
Oceania Healthcare | Annual Report 2017 Our Values
We’re proud of our brand and our people. They are one and the
same, embodying Oceania’s everyday values of kindness, passion,
respect, delivery and excellence. It’s a spirit and attitude that
characterises our caring culture.
Kindness: Show compassion and understanding.
Passion: Believe we make a difference.
Respect: Everyone matters.
Deliver: We will do what we say.
Excellence: Quality in everything we do.
Our Values in Action
Meet Elaine Dingle and Millie
who are the real life inspiration
for our ‘Magic Moments’ brand
campaign.
Elaine was one of a group of
residents who went to the
SPCA, along with Oceania
therapist Deborah Watts, to
choose a cat for one of
Oceania’s rest homes in
Hawkes Bay.
“I knew Elaine liked cats as she
used to have one called Pinkie
and she has Pinkie’s photograph
in her room,” says Deborah.
“When I suggested she come
and help us choose a cat, she
was the first to put her name on
the list for the trip.”
“Once we got there it was a
hard choice to make. We chose
Millie as she was gentle, and
Elaine particularly liked her, as
she looked like a cat Elaine
used to have, called Tiddlums.”
Elaine was in a wheelchair after
a fall at home, which led to a
hospital stay and then a move
to a rest home.
“She wasn’t very social or
inclined to join in,” says
Deborah. “Elaine wanted to
spend most of her time in
her wheelchair, in her room.”
Two days after adopting the cat,
Elaine got up and began to
learn to walk again. “Until then,
she simply didn’t want to,” says
Deborah. “Now, with the aid of
our physiotherapist, she’s
working hard and she’s really
motivated. It’s beautiful.”
18
It’s often the little things that make
a big diff erence to happiness.
At Oceania, we make it our business
to discover those little things.
0800 333 688
Magic
moments
happen
every day
A
_
3
_
0
7
4
0
N
A
E
C
O
Oceania Healthcare | Annual Report 2017 Kindness
“ …all I saw was kindness, sensitivity, reassurance and
real empathy, together with consummate professional
skills, in managing her symptoms. [Later] the nurse
spoke gently and kindly to Mum and put her arms
around her; she did not have to do that – it was a
gesture of empathy and compassion.”
Daughter of Resident
Oceania Healthcare | Annual Report 2017
19
Board of Directors
Oceania has an experienced Board with a diverse range of skills,
including industry and business knowledge, financial management
and corporate governance experience. The Board comprises
an independent Chair, two independent non-executive Directors
and two non-executive Directors.
Elizabeth Coutts
Chair and Independent Director
ONZM, BMS, FCA
Alan Isaac
Independent Director
CNZM, BCA, FCCA, FICS
Kerry Prendergast
Independent Director
CNZM, MBA (VUW), NZRN, NZM
Hugh FitzSimons
Non-Executive Director
BEc LLB (Hons) (Syd)
Patrick McCawe
Non-Executive Director
BCA (Hons), MBA, CA
20
Oceania Healthcare | Annual Report 2017 Consolidated
financial
statements
For the year ended 31 May 2017
Directors’
report
22
Consolidated cash
flow statement
26
Consolidated statement
of comprehensive income
Notes to the financial
statements
28
Independent
auditor's report
72
23
Consolidated balance
sheet
24
Consolidated statement
of changes in equity
25
21
1. KEY INFORMATION SUMMARYOceania Healthcare | Annual Report 2017 Directors’ report
31 May 2017
The Board has pleasure in presenting the consolidated
audited financial statements of Oceania Healthcare Limited
and its subsidiaries, incorporating the consolidated financial
statements and the independent auditor’s report, for the year
ended 31 May 2017.
The Board of Directors of the Company authorised these
consolidated financial statements for issue on 27 July 2017.
For and on behalf of the Board
Elizabeth Coutts
Chairman
Hugh William FitzSimons
Director
22
Oceania Healthcare | Annual Report 2017 Consolidated Statement of Comprehensive Income
For the year ended 31 May 2017
$’000
Operating revenue
Change in fair value of investment property
Change in fair value of interest rate swaps
Other income
Total income
Employee benefits
Depreciation and amortisation
Finance costs
Impairment of property, plant and equipment
Other expenses
Total expenses
Profit before income tax
Income tax (expense) / benefit
Profit for the year
Other comprehensive income
Items that will not be subsequently reclassified to profit and loss
Gain on revaluation for the year net of tax
Items that may be subsequently reclassified to profit and loss
Movement in interest rate swap net of tax
Other comprehensive income for the year net of tax
Total comprehensive income for the year attributable to shareholders
of the parent
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Notes
May 2017
2.2
3.1
5.6
2.3
3.3
171,883
57,161
4
2,959
May 2016
170,160
50,167
49
3,472
232,007
223,848
103,274
105,124
7,911
20,146
4,328
48,941
7,742
20,491
1,775
42,284
2.4
184,600
177,416
47,407
(2,525)
44,882
46,432
2,218
48,650
16,204
8,910
(182)
-
16,022
8,910
60,904
57,560
12.4
12.4
14.5
14.5
5.1
3.3
5.6
4.2
4.2
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
23
Oceania Healthcare | Annual Report 2017 Consolidated Balance Sheet
As at 31 May 2017
$’000
Assets
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Investment property
Intangible assets
Total assets
Liabilities
Trade and other payables
Derivative financial instruments
Deferred management fee
Refundable occupation right agreements
Borrowings
Deferred tax liabilities
Total liabilities
Net assets
Equity
Contributed equity
Retained deficit
Reserves
Total equity
Notes
May 2017
May 2016
5.3
3.3
3.1
5.2
5.4
5.6
3.2
3.2
4.4
5.1
10,861
11,302
267,972
611,016
17,053
4,104
12,145
253,139
495,871
17,622
918,204
782,881
27,480
23,975
283
19,534
282,904
95,242
24,808
34
17,400
261,117
259,135
21,176
450,251
582,837
467,953
200,044
4.1
579,498
372,633
(195,966)
(240,988)
84,421
68,399
467,953
200,044
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
24
Oceania Healthcare | Annual Report 2017 Consolidated Statement of Changes in Equity
For the year ended 31 May 2017
$’000
Notes
Contributed
equity
Retained
deficit
Asset
revaluation
reserve
Interest rate
swap reserve
Balance at 31 May 2015
371,583
(289,849)
59,489
Profit for the year
-
48,650
-
Other comprehensive income
Revaluation of assets net of tax
Total comprehensive income
Transactions with owners
Share capital issued
Employee share scheme
Total transactions with owners
3.3
4.1
4.1
-
-
107
48,757
8,910
8,910
1,050
-
1,050
-
104
104
-
-
-
Balance as at 31 May 2016
372,633
(240,988)
68,399
Profit for the year
-
44,882
Other comprehensive income
Revaluation of interest rate swaps
Revaluation of assets net of tax
Total comprehensive income
Transactions with owners
Share capital issued
Costs capitalised to equity
Employee share scheme
Total transactions with owners
3.3
4.1
4.1
4.3
-
-
-
-
-
44,882
214,398
(7,533)
-
206,865
-
-
140
140
-
-
16,204
16,204
-
-
-
-
Total
equity
141,223
48,650
9,017
57,667
1,050
104
1,154
200,044
44,882
-
-
-
-
-
-
-
-
-
(182)
-
(182)
(182)
16,204
60,904
-
-
-
-
214,398
(7,533)
140
207,005
Balance as at 31 May 2017
579,498
(195,966)
84,603
(182)
467,953
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
25
Oceania Healthcare | Annual Report 2017 Consolidated Cash Flow Statement
For the year ended 31 May 2017
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Receipts from new occupation right agreements
Payments for outgoing occupation right agreements
Interest received
Interest paid
Net cash inflow from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment and investment property
Payments for property, plant and equipment and intangible assets
Payments for investment property and investment property under development
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Transaction costs
Proceeds from share issue
Net cash inflow / (outflow) from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at end of year
May 2017
May 2016
159,289
163,830
(141,062)
(147,380)
68,763
(30,894)
133
(17,306)
38,923
78,384
(36,398)
231
(19,121)
39,546
7
(33,503)
(47,560)
1,856
(6,972)
(18,235)
(81,056)
(23,351)
144,994
15,800
(285,424)
(33,562)
(10,680)
200,000
48,890
-
1,050
(16,712)
6,757
4,104
10,861
(517)
4,621
4,104
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
26
Oceania Healthcare | Annual Report 2017 Reconciliation of profit after income tax to net cash inflow from operating activities
$’000
Profit after income tax for the year
Notes
May 2017
44,882
May 2016
48,650
Non cash items
Deferred management fee accrued but not settled
Depreciation and amortisation
Impairment of goodwill
Net loss / (gain) on disposal of property, plant and equipment
Fair value adjustment to investment property
Impairment of property, plant and equipment
Bad and doubtful debt expense / (benefit)
Interest charged but not paid
Residents share of resale gains
Fair value gain on derivatives
Movement in deferred tax
Other non cash items
Cash items
Receipts from new occupation right agreements
Payments for outgoing occupation right agreements
Transaction costs expensed and held in financing activities
Increase in operating assets and liabilities
Decrease in trade and other receivables
Increase / (decrease) in trade and other payables
Net cash inflow from operating activities
2.2
2.4
2.4
2.4
3.1
3.3
2.4
2.4
5.6
5.1
(16,330)
7,911
478
563
(10,955)
7,742
838
(12)
(57,161)
(50,167)
4,328
125
2,840
2,207
(4)
2,525
330
1,775
(1,973)
1,266
1,733
(49)
(2,218)
799
(52,188)
(51,221)
68,763
(30,894)
3,147
41,016
78,384
(36,398)
-
41,986
718
4,495
1,396
(1,265)
38,923
39,546
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
27
Oceania Healthcare | Annual Report 2017 Notes to the
financial
statements
For the year ended 31 May 2017
1. General Information
1.1
1.2
Basis of Preparation
Accounting Policies
2. Operating Performance
Operating Segments
Operating Revenue
Other Income
Expenses
2.1
2.2
2.3
2.4
3. Property Assets
3.1
3.2
3.3
Investment Property
Refundable Occupation Right Agreements
Property, Plant and Equipment
4. Shareholders’ Equity and Funding
4.1
4.2
4.3
4.4
Shareholder Equity and Reserves
Earnings Per Share
Employee Share Based Payments
Borrowings
5. Other Disclosures
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
Income Tax
Intangible Assets
Trade and Other Receivables
Trade and Other Payables
Related Party Transactions
Financial Risk Management
Changes in Accounting Policy and Disclosure
Contingencies and Commitments
Events After Balance Date
Comparison to Prospective Financial Statements
Page
29
29
30
31
31
36
36
37
39
39
43
45
49
49
50
51
52
54
54
58
59
60
61
62
65
66
66
67
28
Oceania Healthcare | Annual Report 2017
Notes to the Financial Statements
For the year ended 31 May 2017
1. General Information
1.1. Basis of Preparation
(i) Entities Reporting
The consolidated financial statements of the 'Consolidated' or 'Group' entity are for the economic entity
comprising Oceania Healthcare Limited and its subsidiaries, together 'the Group'. Refer to note 5.5 for details
of Group structure.
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of
Oceania Healthcare Limited as at 31 May 2017 and the results of all subsidiaries for the year then ended.
The Group owns and operates various rest homes and retirement villages around New Zealand. The Group's
registered office is Affinity House, 2 Hargreaves Street, St Mary's Bay, Auckland 1011, New Zealand.
The Consolidated entity is designated as a for profit entity for financial reporting purposes.
(ii) Statutory Base
Oceania Healthcare Limited is a limited liability company which is domiciled and incorporated in New Zealand.
It is registered under the Companies Act 1993 and is a FMC Reporting Entity in terms of Part 7 of the
Financial Markets Conduct Act 2013. The Company is also listed on the NZX Main Board (‘NZX’) and the
Australian Securities Exchange (‘ASX’) as a foreign exempt listing. The Group financial statements have been
prepared in accordance with the requirements of the NZX and ASX listing rules, and Part 7 of the Financial
Markets Conduct Act 2013.
The consolidated financial statements have been prepared in accordance with New Zealand Generally
Accepted Accounting Practice (‘GAAP’). They comply with New Zealand Equivalents to International
Financial Reporting Standards (‘NZ IFRS’), International Financial Reporting Standards (‘IFRS’) and other
applicable New Zealand Financial Reporting Standards, as appropriate for for-profit entities. The Group
is a Tier 1 for profit entity in accordance with XRB A1.
The financial statements have been prepared in accordance with the requirements of the Financial
Reporting Act 2013 and the Companies Act 1993. The Consolidated Balance Sheet has been prepared using
a liquidity format.
(iii) Measurement Basis
These financial statements have been prepared under the historical cost convention, as modified by the
revaluation of certain assets and liabilities, including investment properties, property, plant and equipment
and interest rate swaps.
(iv) Going Concern Assumption
These financial statements have been prepared on a going concern basis.
(v) Key Estimates and Judgements
The preparation of financial statements in conformity with NZ IFRS requires the use of certain critical
accounting estimates. It also requires Management to exercise their judgement in the process of applying
the Group’s accounting policies.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will,
by definition, seldom equal the related actual results. Estimates and judgements are continually evaluated
and are based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
29
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
1.1. Basis of Preparation (Continued)
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements are disclosed in the following notes:
– Fair value of investment property and investment property under development (note 3.1)
– Classification of accommodation with a care or service offering (notes 3.1 and 3.3)
– Fair value of freehold land and buildings (note 3.3)
– Revenue recognition of deferred management fee (note 3.2)
– Recognition of deferred tax (note 5.1)
– Capitalised costs associated with the issue of equity (note 4.1)
– Costs associated with the Long Term Incentive Plans (note 4.3)
1.2. Accounting Policies
Accounting policies that summarise the measurement basis used and are relevant to understanding the
financial statements are provided throughout the notes to these financial statements.
Other relevant policies are provided as follows:
(i) Principles of Consolidation
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated from the date that control ceases.
Intercompany transactions and balances between Group companies are eliminated. Accounting policies of
subsidiaries are consistent with the policies adopted by the Group.
(ii) Presentation Currency
These financial statements are presented in New Zealand Dollars which is the Group’s presentation currency.
The financial statements are presented in round thousands.
(iii) Goods and Services Tax (‘GST’)
The Statement of Comprehensive Income and Cash Flow Statements have been prepared so that all
components are stated exclusive of GST. All items in the Balance Sheet are stated net of GST, with the
exception of receivables and payables, which include GST invoiced.
(iv) Comparative Information
Where a change has been made to the presentation of the financial statements to that used in prior periods,
comparative figures have been restated accordingly.
The presentation of refundable occupation right agreements (‘ORA’) on the Balance Sheet has been revised
from the audited financial statements for the year ended 31 May 2016, to align with industry practice, by
presenting the refunds to residents net of the management fee receivable in accordance with the terms
of the ORA. The deferred management fee presented separately on the Balance Sheet represents the
difference between this contractual entitlement and the management fees accrued for revenue recognition
purposes. Refer to note 3.2 for further details.
Further, additional disclosure has been made, to that in the audited financial statements for the year ended
31 May 2016, in relation to the taxation expense and deferred tax liabilities due to a change in approach for
the recognition of deferred tax on investment properties and re-recognition of tax losses. Refer to note 5.1
for further details.
30
Oceania Healthcare | Annual Report 2017
(v) Measurement of Fair Value
The Group classifies its fair value measurement using the fair value hierarchy that reflects the significance of
the inputs used in making the measurements. The fair value hierarchy has the following levels.
Level 1: Quoted prices (unadjusted) in active markets for the identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Inputs for the asset or liabilities that are not based on observable market data (unobservable inputs).
The carrying amount of all financial assets and liabilities is considered to approximate to their fair value.
2. Operating Performance
2.1. Operating Segments
The Group's chief operating decision-maker is the Board of Directors.
The operating segments have been determined based on the information reviewed by the Board of Directors
for the purposes of allocating resources and assessing performance. The assets and liabilities of the Group
are reported to the chief operating decision-maker in total and are not allocated by operating segment.
Reporting Segment
Description
Care Operations
Village Operations
Other
Includes all revenue and facility-level expenses associated with the provision
of care and related services to Oceania’s aged care and retirement village
residents, including the deferred management fee ('DMF') and operating
expenses associated with care suites.
The Group derives care fee revenue in respect of eligible Government
subsidised aged care residents as well as private contributions from residents.
Aged care subsidies received from the Ministry of Health, included in rest home,
hospital and dementia fee revenue, amounted to $96.9m (2016:$101.1m).
Includes the DMF on the Group’s retirement village units, weekly service fees,
retirement village operating expenses, and, in respect of underlying measures,
the realised gains on resales and the development margins from the sale of
both units and care suites.
Includes Support Office and corporate expenses, operating lease costs
relating to the Group’s three leasehold sites, and the impacts of any
extraordinary or one-off transactions. In addition, income and expenditure
relating to the Wesley Training Institute is recognised in this segment.
There is a degree of integration between the care and village operations. This includes the provision of
services such as meals and care packages by care operations to village residents. Inter-segment pricing is
determined at arm’s length.
Information regarding the operations of each reportable segment is included below. Amongst other criteria,
performance is measured based on segmental underlying earnings before interest, tax, depreciation and
amortisation (‘underlying EBITDA’); being the most relevant measure in evaluating the performance of
segments relative to other entities that operate within the aged care and retirement village industries.
31
Oceania Healthcare | Annual Report 2017
Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
2.1. Operating Segments (Continued)
Additional segmental reporting information
Capital Expenditure: Refer to notes 3.1 and 3.3 for details on capital expenditure. Chattels, freehold land
and buildings, including related property held for development, classified as property, plant and
equipment principally relate to care operations. Investment property assets principally relate to village
operations. Capital expenditure on intangibles and other property, plant and equipment are unallocated
to these segments.
Goodwill: Goodwill is allocated to Care and Village Cash Generating Units. Refer to note 5.2 for
further details.
Underlying NPAT: Underlying NPAT is a non-GAAP measure used by the Group to monitor financial performance
and, in future, determine dividend distributions. It is reported in the operating segment note of the audited
consolidated financial statements. Underlying measures require a methodology and a number of estimations
to be approved by Directors in their preparation. Both the methodology and the estimations may differ among
companies in the retirement village sector that report underlying financial measures. Underlying NPAT is a
measure of financial performance and does not represent business cash flow generated during the period.
Oceania calculates Underlying NPAT by making the following adjustments to reported NPAT:
– Removing the change in fair value of investment properties and the impairment of property, plant and
equipment (from the Statement of Comprehensive Income);
– Removing any impairment of goodwill;
– Removing any loss on disposal of chattels from the decommissioning of development sites;
– Adding back the Directors’ estimate of realised gains on ORA units and care suites1;
– Adding back the Directors’ estimate of realised development margin on the cash settlement of the first
sale of new ORA units or care suites following the development, or conversion of an existing care bed
to a care site or conversion of a rental unit to an ORA unit; and
– Adding back the deferred taxation component of taxation expense so that only current tax expense
is reflected.
Resale Gain
The Directors’ estimate of realised gains on resales of ORA is calculated as the net cash flow received by the
Group on the cash settlement of the resale of pre-existing ORAs (i.e. the difference between the ORA licence
payment received from the incoming resident and the ORA licence payment previously received from the
outgoing resident).
1 Units and care suites sold under an occupation right agreement.
32
Oceania Healthcare | Annual Report 2017 Development Margin
The Directors’ estimate of realised development margin is calculated as the cash received on settlement of
the first sale of new ORA units and care suites less the development costs associated with developing the
ORA units and care suites. The development costs include:
– Construction costs directly attributable to the relevant project, including any required infrastructure
(e.g. roading) and amenities related to the units (e.g. landscaping) as well as any demolition and site
preparation costs associated with the project. The costs are apportioned between the ORA units and
care suites, in aggregate, using estimates provided by the project quantity surveyor. The construction
costs for the individual ORA units or care suites sold are determined on a pro rated basis using gross
floor areas of the ORA units and care suites;
– An apportionment of land valued based on the gross floor area of the ORA units and care suites
developed. The value for Brownfield2 development land is the estimated fair value of land at the time
a change of use occurred3 (from operating as a care facility or retirement village to a development site), as
assessed by an external independent valuer. Greenfield4 development land is valued at historical cost; and
– Capitalised interest costs to the date of project completion apportioned using the gross floor area of ORA
units and care suites developed.
Development costs do not include:
– Construction, land (apportioned on a gross floor area basis) and interest costs associated with common
areas and amenities or any operational or administrative areas.
The Directors’ estimate of development margin for conversions is calculated based on the difference
between the ORA licence payment received on the settlement of sales of newly converted ORA units and
care suites and the associated conversion costs. Conversion costs comprise:
– In the case of conversion of care beds to care suites, the actual refurbishment costs incurred; and
– In the case of conversions of rental units to ORA units, the actual refurbishment costs incurred and the
fair value of the rental unit prior to conversion.
2 Brownfield land refers to land previously utilised by, or part of, an operational aged care facility or retirement village.
3 The timing of a change of use is a Directors’ estimate. It is based on a range of factors including evidence of steps taken to secure a resource
consent and/or building consent for a particular development or stage of a development and the decommissioning of existing operations
(either through the buy-back of existing village ORA units or decommissioning of an existing care facility). Note the cost of buybacks is not
included in the development cost as an independent fair value of the land on an unencumbered basis is used as the value ascribed to the
development land.
4 Greenfield land refers to land not previously utilised by, or as part of, an operational aged care facility or retirement village. Greenfield land is
typically bare (undeveloped) land at the time of purchase.
33
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
2.1. Operating Segments (Continued)
$’000
2017
Operating revenue
Other income
Revaluation of investment property
Total income
Operating expenses
Impairment of goodwill
Impairment of property, plant and equipment
Segment EBITDA
Interest income
Finance costs
Depreciation and amortisation
Profit before income tax
Taxation expense
Care
Operations
Village
Operations
Other
Total
152,127
668
-
152,795
19,756
895
57,161
77,812
-
171,883
1,267
-
2,830
57,161
1,267
231,874
(121,384)
(11,709)
(18,644)
(151,737)
(478)
(4,328)
-
-
-
-
(478)
(4,328)
26,605
66,103
(17,377)
75,331
-
-
(7,362)
19,243
-
11
-
-
122
(20,146)
(549)
66,114
(37,950)
-
(2,525)
Profit for the year attributable to shareholders
19,243
66,114
(40,475)
Adjusted for underlying profit items
Add / (less): Change in fair value of investment property
and impairment of property, plant and equipment
Add: Impairment of goodwill
Add: Loss on disposal of chattels at
decommissioned sites
Add: Realised gain on resale
Add: Realised development margin
Underlying net profit before tax
Add: Deferred tax
4,328
478
495
-
-
24,544
-
(57,161)
-
-
12,653
5,222
26,828
-
-
-
-
-
(40,475)
-
2,525
Underlying net profit after tax
24,544
26,828
(37,950)
Less: Interest income
Add: Finance costs
Add: Depreciation and amortisation
Underlying EBITDA
-
-
7,362
31,906
(11)
-
-
(122)
20,146
549
26,817
(17,377)
34
133
(20,146)
(7,911)
47,407
(2,525)
44,882
(52,833)
478
495
12,653
5,222
10,897
2,525
13,422
(133)
20,146
7,911
41,346
Oceania Healthcare | Annual Report 2017 $’000
2016
Operating revenue
Other income
Revaluation of investment property
Total income
Operating expenses
Impairment of goodwill
Impairment of property, plant and equipment
Segment EBITDA
Interest income
Finance costs
Depreciation and amortisation
Profit before income tax
Taxation benefit
Care
Operations
Village
Operations
Other
Total
155,568
14,592
-
170,160
672
-
156,240
1,479
50,167
66,238
1,139
3,290
-
50,167
1,139
223,617
(120,216)
(10,518)
(15,836)
(146,570)
(838)
(1,775)
-
-
-
-
33,411
55,720
(14,697)
-
-
(6,710)
10
-
-
221
(20,491)
(1,032)
26,701
55,730
(35,999)
2,218
Profit for the year attributable to shareholders
26,701
55,730
(33,781)
Adjusted for underlying profit items
Add / (less): Change in fair value of investment property
and impairment of property, plant and equipment
Add: Impairment of goodwill
Add: Loss on disposal of chattels at
decommissioned sites
Add: Realised gain on resale
Add: Realised development margin
Underlying net profit before tax
Add: Deferred tax
1,775
838
-
-
-
29,314
(50,167)
-
-
14,071
4,472
24,106
-
-
-
-
-
(33,781)
(2,218)
Underlying net profit after tax
29,314
24,106
(35,999)
Less: Interest income
Add: Finance costs
Add: Depreciation and amortisation
Underlying EBITDA
-
-
6,710
36,024
(10)
-
-
(221)
20,491
1,032
24,096
(14,697)
(838)
(1,775)
74,434
231
(20,491)
(7,742)
46,432
2,218
48,650
(48,392)
838
-
14,071
4,472
19,639
(2,218)
17,421
(231)
20,491
7,742
45,423
35
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
2.2. Operating Revenue
Accounting Policy
Revenue is recognised to the extent that it is probable that future economic benefits will flow to the Group
and the amount can be measured reliably.
Deferred Management Fees
Deferred management fees are payable by residents of the Group's units, apartments and care suites under
the terms of their occupation rights agreement or unit title rights.
Management fees are typically payable up to a maximum percentage of a resident's occupation licence or
unit title rights deposit for the right to share in the use and enjoyment of common facilities.
The timing of the recognition of deferred management fees is a critical accounting estimate and judgement.
The deferred management fee is recognised on a straight-line basis over the greater of the term specified
in a resident's ORA or the average expected occupancy for the relevant accommodation. This has been
assessed as 7 years for units, 5 years for apartments and 3 years for care suites. Estimates applied for
deferred management fee tenure are reviewed periodically. Where a change in estimate is required it is
the Group’s policy to recognise the aggregate impact of this change in the period in which the change in
estimate occurs.
Rest Home, Hospital and Dementia Service Fees
Rest home, hospital and dementia service fees are recognised in the accounting period in which the services
are rendered. Where applicable these are recognised net of any associated rebates to residents.
Village Service Fees
Village service fees are charged to residents to recover village operating costs. These fees are recognised
as revenue when the associated services are provided to residents.
Rental Income
Rental income is recognised on an accruals basis in accordance with the substance of the relevant agreements.
$’000
Deferred management fees
Rest home, hospital, dementia fees
Village service fees
Rental income
2.3. Other Income
Interest Income
May 2017
16,330
May 2016
10,955
149,092
152,956
5,260
1,201
5,073
1,176
171,883
170,160
Interest income is recognised on an accruals basis using the effective interest method.
Other Income
Other income includes training income and income derived from additional services provided to residents
such as meals and laundry.
$’000
Interest income
Other income
May 2017
May 2016
133
2,826
2,959
231
3,241
3,472
36
Oceania Healthcare | Annual Report 2017 2.4. Expenses
Accounting Policy
All operating expenses are recognised on an accrual basis.
$’000
Notes
May 2017
May 2016
Profit before income tax includes the following expenses:
Employee benefits
Wages and salaries1
Termination benefits
Share based payment expense
Depreciation and amortisation
Depreciation of property, plant and equipment
Amortisation of software
Finance costs
Interest on senior debt facilities
Interest on swaps
Capitalised interest
Agency, commitment and line fees
Interest on shareholder loans
Amortisation of bank fees
Interest on other loans
Interest on finance lease
4.3
3.3
5.2
102,733
104,637
401
140
383
104
103,274
105,124
7,706
205
7,911
7,123
619
7,742
13,135
16,250
243
(517)
1,514
990
1,491
2,853
437
210
(37)
1,025
-
986
1,692
365
20,146
20,491
Impairment of property, plant and equipment
3.3
4,328
1,775
Auditor’s remuneration
Audit and review of financial statements
Other assurance services
Trustee reporting and external reporting to banks
Other services
Taxation compliance services
Transaction costs2
Total fees paid to auditor
Transaction costs paid to auditor capitalised2
Fees to auditor expensed
346
13
125
525
1,009
(193)
816
301
13
72
832
1,218
(308)
910
4.1
4.1
1 Wages and salaries include staff related costs such as staff training, uniforms and recruitment.
2
Transaction costs paid to auditor relate to due diligence work in relation to the initial public offering of Oceania Healthcare Limited.
Refer to note 4.1.
37
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
2.4. Expenses (Continued)
$’000
Transaction costs
Impairment of goodwill
Repairs and maintenance of property, plant and equipment
Repairs and maintenance of investment property
Loss on disposal of property, plant and equipment
Donations
Bad and doubtful debts expense / (release)
Rental expense relating to operating leases
Resident consumables
Residents share of resale gains
Insurance
Legal and professional services
Other expenses (no items of individual significance)
Notes
May 2017
May 2016
4.1
5.2
5.3
4,042
478
2,846
712
563
3
125
1,339
15,230
2,207
1,212
1,238
18,130
48,941
-
838
2,658
670
-
2
(1,973)
1,523
15,453
1,733
1,621
541
18,308
42,284
Total expenses
184,600
177,416
38
Oceania Healthcare | Annual Report 2017 3. Property Assets
3.1.
Investment Property
Accounting Policy
Investment property includes both freehold land and buildings and land and buildings under development,
comprising independent units, certain care suites, serviced apartments and common facilities, provided
for use by residents under the terms of an ORA. Investment property is held for long-term yields and is not
occupied by the Group.
The fair value of investment property is determined by a qualified independent external valuer using a
discounted cash flow model. As required by NZ IAS 40 ‘Investment Property‘, the fair value as determined
by the independent valuer is adjusted for assets and liabilities already recognised in the Balance Sheet which
are also reflected in the discounted cash flow model. The movement in the carrying value of investment
property, net of additions, transfers and disposals is recognised as a fair value movement in the Statement
of Comprehensive Income.
Fair value measurement on property under development is only applied if the fair value is considered to be
reliably measurable. Where the fair value of a property under development can be determined it is carried at
fair value. Where the fair value of investment property under construction cannot be reliably determined the
value is considered to be the fair value of the land plus the cost of work undertaken.
$’000
Notes
May 2017
May 2016
Investment property under development at fair value
Opening balance
Transfer from property, plant and equipment
Capitalised expenditure
Capitalised interest
Transfer within investment property
Change in fair value during the year
Closing balance
Completed investment property at fair value
Opening balance
Transfer within investment property
Transfer to property, plant and equipment
Capitalised expenditure
Capitalised interest
Disposals
Change in fair value during the year
Closing balance
Total investment property
3.3
3.3
48,311
12,944
29,131
230
(14,915)
3,785
79,486
33,033
-
7,914
24
-
7,340
48,311
447,560
395,660
14,915
(2,981)
18,429
232
(1)
-
-
9,299
13
(239)
53,376
42,827
531,530
447,560
611,016
495,871
39
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
3.1.
Investment Property (Continued)
Change in Fair Value Recognised in the Statement of Comprehensive Income
$’000
Increase in fair value of investment property
Less: Transfers during the year
Less: Capitalised expenditure including capitalised interest
Plus: Disposals
May 2017
115,145
May 2016
67,178
(9,964)
-
(48,021)
(17,250)
1
239
Change in fair value recognised in Statement of Comprehensive Income
57,161
50,167
Valuation Process and Key Inputs
The Group's interest in all completed investment property was valued on 31 May 2017 by CBRE Limited
(2016: CBRE Limited), independent registered valuers and associates of the New Zealand Institute of Valuers,
at a total of $252.7m (2016: $189.6m).
The fair value of completed investment property is based on an industry accepted valuation model applied
to the expected future cash flows to derive a net present value.
The valuation calculates the expected cash flows for a projected sequence of sales based on recycle
profiling using a Monte Carlo simulation and a stabilised occupancy term for residents. The analysis includes
significant unobservable inputs used to determine the fair value, as disclosed below.
The CBRE Limited valuation is reviewed by management for accuracy of inputs and reasonableness of
assumptions.
Investment Property under Development
The Group has applied the following methodology in relation to the measurement of investment property
under development:
Practical completion not achieved
Where the development still requires substantial work such that practical completion is not going to be
achieved, and a reliable estimate of fair value cannot be made, at or close to balance date, the fair value
recognised is the fair value of the development land per CBRE Limited valuation plus the cost of any work
in progress, an amount of $32.2m as at 31 May 2017 (2016: $12.9m), in relation to these development sites.
Where an individual development is of both investment property and freehold buildings in nature, the
fair value of land is apportioned between investment property under development and freehold land and
buildings under development, in line with the estimated gross floor area of the development as based on
information obtained from external Quantity Surveyors at the planning and design stages. Any work in
progress is allocated in line with the budgeted cost to build.
Practical completion achieved
Where a development is practically completed, or likely to be completed at, or close to, balance date the
investment property is transferred to completed investment property and measured at its completed fair
value per CBRE Limited with an adjustment made for any estimated costs, in accordance with the project
budget, to be incurred to complete the development.
Completed Investment Property
The Group's interest in all completed investment property was valued by CBRE Limited as at 31 May 2017.
CBRE Limited is an independent registered valuer and associate of the New Zealand Institute of Valuers and
is appropriately qualified with experience of valuing retirement village properties in New Zealand.
40
Oceania Healthcare | Annual Report 2017 Property Specific Assumptions
Seismic and Weather Tightness Assessments
The CBRE Limited valuation, and accordingly the fair value of investment property, incorporates the findings
of independent seismic strength engineering assessments conducted by MSC Consulting Group Ltd (‘MSC’),
based on visual inspections and by applying the guidelines recommended by the New Zealand Society
for Earthquake Engineering. The CBRE Limited valuation also incorporates the estimated costs to address
weather tightness at certain sites based on estimates provided by building condition reports completed by
CoveKinloch New Zealand Limited in February 2017.
Key Accounting Estimates and Judgements
Introduction
All investment properties have been determined to be Level 3 (2016: Level 3) in the fair value hierarchy as
the fair value is determined using inputs that are unobservable.
Classification of Accommodation with a Care or Service Offering
Where services are provided to residents who occupy accommodation under an ORA it is the Group’s policy
to look at how consequential, or significant, these are in the context of the overall revenue/income derived
from the accommodation in ascertaining whether the accommodation is land and buildings (referred to as
property, plant and equipment) or investment property. Whether the level of service provided is significant
is an area of judgement.
It is the Group’s policy to review sites that provide accommodation that is subject to an ORA and also
incorporates a provision to receive services on a case by case basis, where this type of accommodation
is significant in the context of the site’s overall capacity.
The Group applies the following principles when ascertaining the appropriate accounting treatment to
be applied:
Scenario
Consideration of Significance of Cashflows
Classification
Additional Services are optional (whether
or not the unit is certified for Aged Related
Residential Care (‘ARRC’)).
Services are compulsory but an insignificant
portion of total revenue from the unit.
Services are compulsory and a significant
portion of the total revenue derived from
the unit.
Full ARRC funded care is compulsory for that
unit/bed.
Qualitatively the business model is the provision
of retirement accommodation.
Investment
property
Quantitatively insignificant (a guideline of under
20% of total revenue is adopted) and qualitatively
the business model is the provision of retirement
accommodation.
Investment
property
Quantitatively significant. Qualitatively the
business model is the provision of care.
Property, plant
and equipment
Qualitatively the business model is the provision
of care. Quantitative assessment not relevant as
price of accommodation (and therefore deferred
management fee) does not change overall
purpose of the accommodation.
Property, plant
and equipment
41
Oceania Healthcare | Annual Report 2017
Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
3.1.
Investment Property (Continued)
Sensitivity
The significant unobservable inputs used in the fair value measurement of the Group's portfolio of investment
property are the discount rate and property price growth rate. The following assumptions have been used to
determine fair value:
Significant Input
Description
2017
2016
Discount rate
The pre-tax discount rate
14.0% – 22.0%
(median: 15.0%)
13.75% – 22.0%
(median: 15.0%)
Property price growth rate Anticipated annual property price growth over
0.0% – 3.0%
0.0% – 3.0%
the cash flow period 0-4 years
Property price growth rate Anticipated annual property price growth over
2.5% – 3.5%
2.5% – 3.5%
the cash flow period 5+ years
Stabilised Occupancy
Period
3.1yrs – 8.4yrs
(median: 7.2yrs)
3.1yrs – 8.7yrs
(median: 7.0yrs)
Completed Investment Property Sensitivity
$’000
2017
Valuation
Difference $’000
Difference %
$’000
2016
Valuation
Difference $’000
Difference %
Adopted Value
Discount Rate
+0.5%
Discount Rate
–0.5%
Property Growth
Rate +50 bp
Property Growth
Rate –50 bp
252,706
(8,720)
(3.5%)
9,288
3.7%
11,877
4.7%
(13,393)
(5.3%)
Adopted Value
Discount Rate
Discount Rate
+0.5%
–0.5%
Property Growth
Rate +50 bp
Property Growth
Rate –50 bp
188,933
(6,699)
(3.5%)
7,132
3.8%
9,636
5.1%
(9,447)
(5.0%)
The stabilised occupancy period is a key driver of the CBRE valuation. A significant increase/(decrease) in
the occupancy period would result in a significantly lower/(higher) fair value measurement.
Current ingoing price, for subsequent resales of ORAs, is a key driver of the CBRE valuation. A significant
increase/(decrease) in the ingoing price would result in a significantly higher/(lower) fair value measurement.
42
Oceania Healthcare | Annual Report 2017
Other Relevant Information
The valuation of investment property is adjusted for cashflows relating to refundable occupation licence
payments, residents' share of resale gains and management fee receivable recognised separately on the
Balance Sheet and also reflected in the valuation model.
A reconciliation between the valuation and the amount recognised on the Balance Sheet as investment
property is as follows:
$’000
Completed investment property
Valuation
Plus: Refundable occupation licence payments
Plus: Residents share of resale gains
Less: Management fee receivable
Less: Resident obligations for units not included in valuation
Investment property under development
Valuation
Total investment property at fair value
3.2. Refundable Occupation Right Agreements
Accounting Policy
May 2017
May 2016
252,706
315,425
9,770
188,933
290,142
8,690
(46,150)
(39,943)
(221)
(262)
531,530
447,560
79,486
79,486
48,311
48,311
611,016
495,871
A new resident is charged a refundable occupation licence payment in consideration for the right to occupy
one of the Group's units, apartments or care suites. On termination of the ORA the licence payment is repaid
to the exiting resident. The Group has a legal right to set-off any amounts owing to the Group by a resident
against that resident's licence payment. Such amounts include deferred management fees, recovery of village
operating costs and recovery of outstanding obligations to the village.
An amount equal to a capped percentage of the licence payment is charged by the Group as a management
fee for the right to use and enjoy the common areas of the village. The deferred management fee is payable
by the resident on termination of the ORA.
The management fee receivable is recognised in accordance with the terms of the resident’s occupation
right agreement.
The deferred management fee represents the difference between the management fees receivable under
the occupation right agreement and the portion of the management fee accrued which is recognised on a
straight-line basis over the greater of the term specified in a resident's occupation right agreement or the
average expected occupancy for the relevant accommodation i.e. 7 years for units, 5 years for apartments
and 3 years for care suites (2016: 7 years, 5 years, 3 years).
The management fee recognised in the Statement of Comprehensive Income represents income earned in
line with the average expected occupancy i.e. the net of the management fee receivable and the deferred
management fee for the period.
Included in the obligation to residents is an estimate of the amount expected to be paid to those residents
whose occupation licence or unit title right allows them to participate in the resale gain of the unit or
apartment they occupy.
As the refundable occupation licence payment is repayable to the resident upon termination (subject to a
new ORA being issued to an incoming resident), the fair value is equal to the face value, being the amount
that can be demanded.
43
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
3.2. Refundable Occupation Right Agreements (Continued)
$’000
Village
Refundable occupation licence payments
Residents share of resale gains
Less: Management fee receivable
Care Suites
Refundable occupation licence payments
Accommodation rebate
Less: Management fee receivable
Total refundable occupation right agreements
Reconciliation of Management Fees recognised under IFRS and per ORA
$’000
Village
Management fee receivable (per contract)
Deferred management fee
Management fee receivable (per IFRS)
Care Suites
Management fee receivable (per contract)
Deferred management fee
Management fee receivable (per IFRS)
Expected Maturity
May 2017
May 2016
315,425
290,142
9,770
8,690
(64,856)
(56,832)
260,339
242,000
28,285
22,780
575
(6,295)
22,565
506
(4,169)
19,177
282,904
261,117
May 2017
May 2016
(64,856)
18,706
(56,832)
16,889
(46,150)
(39,943)
(6,295)
828
(5,467)
(4,169)
511
(3,658)
Although the occupation licence payments are refundable to the residents on vacating the unit, apartment
or care suite or on termination of the licence to occupy or unit title right (subject to new licences or unit title
rights being issued) average occupancy is estimated to be 7 years for units, 5 years for apartments and 3
years for care suites based on observed tenure at the Group's villages. It is therefore not expected that the
full obligation to residents will fall due within one year.
Based on past experience the expected maturity of the net obligation to residents is as follows:
$’000
Within 12 months
Beyond 12 months from Balance Sheet date
Total refundable occupation right agreements
May 2017
May 2016
26,876
256,028
282,904
24,806
236,311
261,117
44
Oceania Healthcare | Annual Report 2017 3.3. Property, Plant and Equipment
Accounting Policy
Owner-occupied freehold land and buildings are classified as property, plant and equipment. This comprises
land and buildings operated by the Group for the provision of care services.
Land and buildings are stated at fair value based on annual valuations by external independent valuers. Any
accumulated depreciation at the date of valuation is eliminated against the gross carrying value of the asset,
and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment
is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to
the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to
the Statement of Comprehensive Income during the financial year in which they are incurred.
Increases in the carrying amount arising on revaluation of land and buildings are credited to asset revaluation
reserves in shareholder's equity; increases that offset previous decreases taken through the Statement of
Comprehensive Income are recognised in the Statement of Comprehensive Income. Decreases that offset
previous increases of the same asset are charged against other reserves directly in equity; all other decreases
are charged to the Statement of Comprehensive Income. When revalued assets are sold, the amounts
included in reserves are transferred to retained earnings.
Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate
their cost, net of their residual values, over their estimated useful lives, as follows:
Category
Freehold buildings
Chattels and leasehold improvements
Motor vehicles
Useful Life Range
10 - 50 years
2 - 50 years
5 years
Weighted Average
Depreciation Rate
3%
20%
22%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each Balance Date.
No depreciation is charged in the year of sale for all assets other than Buildings in which case depreciation is
charged to the date of sale.
A property under construction is classified as land and buildings within property, plant and equipment where
the completed development will be classified as such and as investment property where the completed
development will be classified as an investment property. Property under construction classified as land
and buildings under development is carried at fair value and is not depreciated. Fair value measurement on
property under construction is only applied if the fair value is considered to be reliably measurable. Where
the fair value of property under construction can not be reliably determinable the value is considered to be
the fair value of the land plus the cost of work undertaken.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with carrying amount. These are
included in the Statement of Comprehensive Income.
45
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
3.3. Property, Plant and Equipment (Continued)
$’000
At 31 May 2015
Cost
Valuation
Freehold
Land
Freehold
Buildings
Freehold
Land and
Buildings under
Development
Chattels and
Leasehold
Improvement
-
-
-
40,567
68,465
144,593
19,613
Total
40,567
232,671
(28,441)
244,797
-
(28,441)
12,126
Accumulated depreciation
-
-
-
Net book amount
68,465
144,593
19,613
Year ended 31 May 2016
Opening net book amount
68,465
144,593
19,613
12,126
244,797
Additions
Disposals
Depreciation
Reclassification within property,
plant and equipment
Net revaluation surplus
209
-
-
(2,800)
3,216
2,611
(17)
(4,436)
-
492
1,854
-
-
2,800
2,595
6,368
(1,863)
(2,687)
-
-
11,042
(1,880)
(7,123)
-
6,303
Closing net book amount
69,090
143,243
26,862
13,944
253,139
At 31 May 2016
Cost
Valuation
-
-
-
45,072
45,072
69,090
143,243
26,862
-
239,195
Accumulated depreciation
-
-
-
(31,128)
(31,128)
Net book amount
69,090
143,243
26,862
13,944
253,139
Year ended 31 May 2017
Opening net book amount
69,090
143,243
Additions
Capitalised interest
Disposals
Depreciation
Transfer from / (to) investment
property
Reclassification within property,
plant and equipment
26,862
7,841
56
-
-
360
7,364
-
-
(4,588)
-
-
-
-
-
2,081
(12,044)
113
5,255
(113)
5,204
13,944
4,397
-
(570)
(3,118)
-
-
-
253,139
19,962
56
(570)
(7,706)
(9,963)
-
13,054
Net revaluation surplus
2,595
Closing net book amount
72,045
153,468
27,806
14,653
267,972
At 31 May 2017
Cost
Valuation
-
-
-
46,750
46,750
72,045
153,468
27,806
-
253,319
Accumulated depreciation
-
-
-
(32,097)
(32,097)
Net book amount
72,045
153,468
27,806
14,653
267,972
46
Oceania Healthcare | Annual Report 2017
Key Accounting Estimates and Judgements
All land and buildings have been determined to be Level 3 (2016: Level 3) in the fair value hierarchy as the fair
value is determined using inputs that are unobservable.
Valuation Process and Key Inputs
The Group's land and buildings and land and buildings under development were revalued on 31 May 2017 by
independent registered valuers CBRE Limited (2016: CBRE Limited). CBRE Limited are appropriately qualified
with experience of valuing residential aged care and retirement village properties in New Zealand.
The valuation comprises land, improvements, chattels and goodwill. The fair value of land and buildings is
determined by CBRE Limited based on the level of rent able to be generated from the maintainable net cash
flow of the facility subject to average efficient management. Where a decrease in land and buildings has
been recognised below original cost this has been recognised directly to the Statement of Comprehensive
Income. The 31 May 2017 CBRE Limited valuation included $59.1m (2016: $51.6m) of goodwill. There is
$17.0m (2016: $17.3m) of goodwill recognised on acquisition included in these financial statements as an
intangible asset.
Total net revaluation gains of $13.0m have been recognised in the current year in respect of land and
buildings (2016: $6.3m gain). In the current year an impairment of $4.3m (2016: $1.8m) has been recognised
in the Statement of Comprehensive Income. The remaining gain of $17.3m (2016: $8.0m gain) has been
recognised in the revaluation reserve together with deferred tax of $1.2m (2016: $0.9m decrease). Refer to
note 5.1 for the tax effects of revaluation.
When the Group undertakes development of a new site the classification between freehold land buildings
and investment property is reviewed. For sites with a care facility, including those with care suites, these
properties are classified as freehold land and buildings. For sites with a retirement village the properties
are classified as investment property. Refer to note 3.1 for further information, including the principles
applied by the Group in determining the appropriate apportionment between freehold land, buildings
and investment property.
The CBRE Limited valuation incorporates the estimated costs to address weather tightness at certain sites
based on estimates provided by building condition reports completed by CoveKinloch New Zealand Limited
in February 2017.
Critical Judgements and Estimates in Applying Accounting Policies
(i) Classification of Care Suites
An area of significant judgement is determining the classification of those properties which are operated as
care suites. Refer note 3.1 for further information.
47
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
3.3. Property, Plant and Equipment (Continued)
(ii) Valuation of Freehold Land and Buildings
The valuation approach for the freehold land and buildings is an income capitalisation approach and/or
discounted cash flow analysis supplemented by the direct comparison approach. The valuation is determined
by the capitalisation of net cash flow profit/earnings before interest, tax, depreciation, amortisation and
rent (‘EBITDAR’) under the assumption a positive cash flow will be generated into perpetuity. Capitalisation
rates range from 10.0% to 18.5% (2016: 10.0% to 18.73%) with a median value of 13.5% (2016: 13.63%).
The valuation has been apportioned between land, buildings, chattels / plant and equipment and goodwill
to determine the fair value of the assets.
The significant unobservable input used in the fair value measurement of the Group's portfolio of land and
buildings is the capitalisation rate applied to earnings. A significant decrease/(increase) in the capitalisation
rate would result in significantly higher/(lower) fair value measurement.
Sensitivity
$’000
31 May 2017
Freehold land and buildings
(excluding property under development)
Valuation
Difference $
Difference %
$’000
31 May 2016
Freehold land and buildings
(excluding property under development)
Valuation
Difference $
Difference %
Finance leases
Adopted Value Capitalisation Rate
+50 bp
Capitalisation Rate
–50 bp
225,513
(12,403)
(5.5%)
13,531
6.0%
Adopted Value Capitalisation Rate
+50 bp
Capitalisation Rate
–50 bp
212,333
(11,678)
(5.5%)
11,891
5.6%
The Group leases various equipment and motor vehicles under finance lease agreements. The lease terms
are between 3 and 6 years and have a net book value as at 31 May 2017 of $7.3m (2016: $5.8m).
As at 31 May 2016 the Group leased one care facility (Elderslea) that included contractual rights and
obligations to purchase the property. At this time the site was recognised as freehold land and buildings
in property, plant and equipment with a corresponding secured obligation recognised in other borrowings.
On 31 May 2017 the Group exercised an option to purchase the freehold land and buildings at Elderslea.
At this time the lease liability was extinguished.
Carrying Value of Assets
The carrying amount at which both land and buildings would have been carried had the assets been
measured under historical cost is as follows:
$’000
Carrying amount
Historical cost 2017
Carrying amount
Historical cost 2016
Freehold
Land
Freehold
Buildings
Freehold Land and
Buildings under
Development
Total
43,931
150,974
5,919
200,824
45,480
145,673
5,536
196,689
48
Oceania Healthcare | Annual Report 2017
4. Shareholders’ Equity and Funding
4.1. Shareholder Equity and Reserves
Accounting Policy
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from the proceeds.
Share capital
Authorised, issued and fully paid up capital
610,254,535
340,213,420
Total contributed equity
610,254,535 340,213,420
579,480
579,480
372,633
372,633
May 2017
Shares
May 2016
Shares
May 2017
$’000
May 2016
$’000
Movements
Opening balance of ordinary shares issued
340,213,420
335,463,416
372,633
371,583
Subscription for shares (Oceania Healthcare
Holdings Limited)
13,712,002
2,019,232
14,398
1,050
Subscription for shares (IPO)
Capitalised costs on IPO
253,164,557
-
-
-
200,000
(7,533)
Shares issued for long term incentive plan
3,164,556
2,730,772
-
-
-
-
Closing balance of ordinary shares issued
610,254,535 340,213,420
579,498
372,633
On 27 January 2017, 13,712,002 ordinary shares were issued to Oceania Healthcare Holdings Limited,
at $1.05 per share. This was to settle a loan from Oceania Healthcare Holdings Limited to Oceania Healthcare
Limited of $13.4m, and its associated accrued interest, entered into by Oceania Healthcare Limited on
30 June 2016.
On 5 May 2017, Oceania Healthcare Limited issued 253,164,557 ordinary shares at $0.79 each by way of
an Initial Public Offering (‘IPO’).
The Company incurred transaction costs of $11.9m, of which $10.7m was paid in the financial year to
31 May 2017, in relation to the IPO. Of this, $7.5m related to the issue of new shares and has been netted
against new equity with the remaining balance expensed through the Statement of Comprehensive Income.
The treatment of transaction costs is a significant assumption. Costs which are directly attributable to the
issuing of new shares have been netted against equity, including fees paid to Joint Lead Managers and the
Investigating Accountant. Costs which relate to both the issuing of new shares and listing costs, such as
legal fees, are apportioned between equity and expense, through the Statement of Comprehensive Income,
in proportion to the new shares issued as a percentage of total shares.
Proceeds of $200m were raised pursuant to the IPO in accordance with the Product Disclosure Statement
dated 31 March 2017. The proceeds were applied by the Group as follows:
$'m
179.0
10.7
10.3
200.0
Application of Funds
To repay $179 million of external borrowings including all accrued interest and fees to 4 May 2017.
To fund costs related to the IPO incurred in the financial year to 31 May 2017. This includes all
capitalised IPO costs, listing costs and management bonuses expensed to the Statement of
Comprehensive Income in 2017.
Retained by the Group.
Gross proceeds
All ordinary shares are authorised and rank equally with one vote attached to each fully paid ordinary share.
The shares have no par value.
49
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
4.1. Shareholder Equity and Reserves (Continued)
Recognition and Measurement
None of the above issued shares are held by the Company or its subsidiaries with the exception of shares
issued to OCA Employees Trustee Limited, a subsidiary, on behalf of Oceania employees in relation to a
Long Term Incentive Plan (‘LTIP’).
The shares issued for the LTIP are classified as Treasury Shares as the Company has a beneficial interest
in the shares until the vesting conditions are met. Refer note 4.3.
Dividends
As outlined in the Product Disclosure Statement no dividend is to be declared for the year ended
31 May 2017 with the first dividend anticipated to be paid during the 2018 financial year in respect of
the first half of the 2018 financial year ending 30 November 2017.
Asset Revaluation Reserve
The asset revaluation reserve is used to record the revaluation of freehold land and buildings.
Interest Rate Swap Reserve
The interest rate swap reserve is used to record gains or losses on instruments used as cash flow hedges.
The amounts are recognised in the Statement of Comprehensive Income when the hedged transaction
affects profit and loss. Refer note 5.6.
4.2. Earnings per Share
Basic
Basic earnings per share is calculated by dividing the profit after tax of the Group by the weighted average
number of ordinary shares outstanding during the year.
Profit after tax ($’000)
Weighted average number of ordinary shares outstanding (’000s)
Basic earnings per share (cents per share)
Diluted
May 2017
44,882
360,868
12.4
May 2016
48,650
336,462
14.5
Diluted Earnings per share is calculated by adjusting the weighted average number of ordinary shares
outstanding to assume conversion of all dilutive potential ordinary shares. As at 31 May 2017 there were
910,257 shares with a dilutive effect (2016:nil).
Profit after tax ($’000)
Diluted weighted average number of ordinary shares outstanding (’000s)
Diluted earnings per share (cents per share)
May 2017
44,882
360,890
12.4
May 2016
48,650
336,462
14.5
50
Oceania Healthcare | Annual Report 2017 4.3. Employee Share Based Payments
(a) Long Term Incentive Plan
The Company operates two LTIPs for certain members of the Senior Management Team (‘the Participants’).
The vesting of shares depend upon the satisfaction of performance hurdles.
The Group has provided interest free limited recourse loans to fund the acquisition of shares by the
Participants. In substance the arrangement has been determined as an employee share option. The shares
are treated as Treasury Shares when issued due to the features of the scheme.
Combined, the two schemes consist of 5,895,329 fully allocated shares, which represents 0.97% of the total
shares on issue. Of these 3,164,556 are held by OCA Employees Trustee Limited on behalf of the Participants
with the balance held directly by employees.
The 2,730,772 shares in the 2015 share plan vest equally upon three vesting criteria being achieved as follows:
Vesting Date
First
Business day after an IPO
Vesting Criteria
IPO of the Company
Second
Business day after FY2017 accounts are released
Non-market earnings based performance hurdle
Third
Business day after FY2017 accounts are released
Total shareholder return hurdle
The 3,164,556 shares in the 2017 share plan vest on the business day after the financial statements for the
31 May 2020 financial year are released. The vesting criteria is a non-market earnings per share based
performance hurdle, being the achievement of a minimum Compound Annual Growth Rate of 35.0% per
annum in Underlying Earnings per Share over the three year period till vesting date.
The Participants are required to be employed by the Company at the vesting dates for the shares to vest.
A valuation of the schemes as at the grant dates has been performed by a qualified independent party using
a combination of the Black Scholes and Binomial Option Pricing models. The weighted average fair value of
each option within the 2015 plan was determined at $0.089 at grant date and $0.143 for the 2017 plan. The
expense is spread over the expected vesting period of the options and is recognised within retained earnings.
During the year to 31 May 2017, 910,257 shares (or 33.33%) of the 2015 plan have vested and are held directly
by employees, a portion of which are subject to escrow requirements. These shares were originally issued at
$0.52 per share during the 2016 financial year.
A reconciliation of the share rights on issue is provided below.
Opening balance
Granted during the year
Vested during the year
Forfeited during the year
Closing balance
May 2017
Shares
2,730,772
May 2016
Shares
-
3,164,556
2,730,772
(910,257)
-
-
-
4,985,071
2,730,772
51
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
4.3. Employee Share Based Payments (Continued)
(b) Key Estimates and Assumptions
The key inputs used in the determination of the fair value of the equity instruments by the binomial option
pricing are as follows:
Grant date
Volatility
Risk free rate
Loan repayment date
Issue / exercise price
2015 Share Plan
15 August 2015
20%
2.64%
31 May 2019
$0.52
2017 Share Plan
5 May 2017
30%
2.45%
15 August 2020
$0.79
Expected volatility was determined by assessing the historical volatility of comparable companies in
New Zealand and Australia.
As at 31 May 2017 it has been assumed that Participants will remain employed with the Group and that
the earnings based performance hurdles will be met. Dividend assumptions are based on forecast dividend
payments over the vesting period. Any dividend payments during the vesting period are applied to the
outstanding balance of the loan.
The combined cost for the year is $0.1m (2016: $0.1m) giving a total cost to date of $0.2m (2016: $0.1m).
4.4. Borrowings
Accounting Policy
Borrowings are initially recognised at fair value, including transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs)
and the redemption amount is recognised in the Statement of Comprehensive Income over the period of
the borrowings using the effective interest method.
Specific borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their intended
use or sale, are added to the cost of those assets, until such a time as the assets are substantially ready for
their intended use. Other borrowing costs are recognised in the Statement of Comprehensive Income in
the period in which they are incurred.
$’000
Secured
Bank loans
Other loans
Capitalised loan costs
Finance leases
Total borrowings
Current
Non current
Total borrowings excluding capitalised loan costs
May 2017
May 2016
89,430
240,996
-
14,578
(627)
6,439
(1,476)
5,037
95,242
259,135
2,201
93,668
95,869
12,150
248,461
260,611
52
Oceania Healthcare | Annual Report 2017 Recognition and Measurement
(i) Bank Loans
Under the Group’s senior debt facilities prior to the IPO, interest on loans and advances was charged using
the BKBM Bill rate plus a margin. Interest is now charged using the BKBM Bill rate plus a margin and line fees.
Interest rates applicable in the year to 31 May 2017 ranged from 3.61% to 5.97% (2016: 5.84% to 6.89%).
Contemporaneous with the IPO, the Group’s existing bank debt was refinanced. At this time new financing
arrangements were entered into with a maturity date of 5 May 2020.
Financing Arrangements
At 31 May, the Group held committed bank facilities with drawings as follows:
$’000
General Corporate Facility
Term Loan Facility
Development Facility
Capex Facility
Working Capital Facility
Total
May 2017
Committed
60,000
-
Drawn
20,965
May 2016
Committed
-
Drawn
-
-
221,043
221,043
175,000
68,465
-
-
-
-
43,000
17,000
8,000
2,575
14,728
2,650
235,000
89,430
289,043
240,996
The Group’s revolving Development Facility is utilised to cover costs associated with current development
projects. The revolving General Corporate Facility represents corporate debt supported by the cash flows of
the business as well as development land.
Interest on the General Corporate Facility is typically payable quarterly. Interest on the Development Facility
is capitalised and repaid together with principal using the ORA licence proceeds received upon settlement
of initial sales of newly developed units and care suites. Line fees are payable quarterly on the committed
General Corporate Facility and the Committed Development Facility.
The Financial Covenants that the Group must comply with, tested half yearly include:
a)
b)
Interest Cover Ratio – the ratio of Adjusted EBITDA to Net Interest Charges is not less than 1.75x; and
Loan to Value Ratio – the ratio of total bank debt shall not exceed 50% of the total property value
of all Group’s properties (including the ‘as-complete’ valuations for projects funded under the
Development Facility).
Assets Pledged as Security
The bank loans of the Group are secured by mortgages over the Group’s care facility freehold land and
buildings and rank second behind the Statutory Supervisors where the land and buildings are classified as
investment property and investment property under development. There was no material change to security
arrangements as a result of the refinance.
53
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
4.4. Borrowings (Continued)
(ii) Other Loans
As at 31 May 2016 other loans included the borrowings recognised in relation to the contractual property
rights and obligations for the Elderslea rest home. An option to purchase the freehold land and buildings at
this site was exercised on 31 May 2017 thereby extinguishing this liability.
(iii) Finance Lease
Finance lease liabilities relate to the lease of various equipment and motor vehicles and are effectively
secured as the rights to the leased asset revert to the lessor in the event of default.
$’000
Not later than 1 year
Later than 1 year and not later than 5 years
Minimum lease payments
Less: future finance charges
Present value of minimum lease payments
Included in the financial statements as:
Finance leases – current portion
Finance leases – non current portion
5. Other Disclosures
5.1.
Income Tax
Accounting Policy
Minimum Future Lease Payments
May 2017
May 2016
2,201
5,084
7,285
(846)
6,439
1,500
4,290
5,790
(753)
5,037
1,813
4,626
1,194
3,843
The tax expense or benefit for the year comprises current and deferred tax. Tax is recognised in the
calculation of profit for the year in the Statement of Comprehensive Income, except to the extent that
it relates to items recognised in Other Comprehensive Income. In this case the tax is also recognised in
Other Comprehensive Income.
The current income tax charge is calculated on the basis of the tax laws enacted at the year end.
The Directors periodically evaluate positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the
tax base of assets and liabilities and their carrying amounts in the financial statements. However, the deferred
income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction affects neither accounting nor taxable profit
or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially
enacted by the Balance Sheet date and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will
be available against which the temporary differences can be utilised.
54
Oceania Healthcare | Annual Report 2017
$’000
Income tax expense / (benefit)
Current tax
Deferred tax
Taxation expense / (benefit) is calculated as follows:
Profit before income tax
Tax at the New Zealand tax rate of 28%
Adjusted by the tax effect of:
Non-deductible impairment of goodwill
Non-deductible expenditure
Capitalised interest deductible for tax
May 2017
May 2016
-
2,525
2,525
-
(2,218)
(2,218)
47,407
13,274
46,432
13,001
134
1,425
(145)
235
340
(10)
Non assessable revaluation of investment property
(16,005)
(13,561)
Impact of change to held for use for investment property
Impact of movement in investment property valuation
Impact of movement in property, plant and equipment valuation
Shared Resale Gains
Other adjustments
Prior period adjustments
9,844
(817)
(2,427)
(1,663)
(6)
(631)
-
(900)
(3,619)
-
-
(394)
(10,291)
(17,909)
Subtotal adjusted income tax expense / (benefit)
2,983
(4,908)
(Recognition of previously unrecognised tax losses) / De-recognition of tax losses
Income tax expense / (benefit) in Statement of Comprehensive Income
(458)
2,525
2,690
(2,218)
55
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
5.1.
Income Tax (Continued)
Movement in the Deferred Tax Balance
$’000
Investment property
Property, plant and equipment
Provisions and other assets / liabilities
Tax losses
Deferred tax liabilities
$’000
Investment property
Property, plant and equipment
Provisions and other assets / liabilities
Tax losses
Deferred tax liabilities
Recognition and Measurement
Balance
1 June 2016
Recognised
in Income
(2,083)
(21,357)
2,264
-
(10,096)
3,409
1,894
2,268
Recognised
in Other
Comprehensive
Income
-
(1,178)
-
71
Balance
31 May 2017
(12,179)
(19,126)
4,158
2,339
(21,176)
(2,525)
(1,107)
(24,808)
Balance
1 June 2015
Recognised
in Income
Recognised
in Other
Comprehensive
Income
(3,077)
(24,477)
3,223
-
(24,331)
994
2,183
(959)
-
2,218
Balance
31 May 2016
(2,083)
(21,357)
2,264
-
-
937
-
-
937
(21,176)
No income tax was paid or payable during the period (2016: nil).
Key Accounting Judgements
(i) Deferred Tax on Investment Property
A change in the approach for the recognition of deferred tax on investment property has been applied
from 1 June 2016. Previously, deferred tax in relation to investment property assets has been recognised on
the basis of the asset value being realised through sale (‘Held for Sale’). From 1 June 2016 deferred tax on
investment property is assessed on the basis that the asset value will be realised through use (‘Held for Use’).
This is a key area of judgement and represents a change in estimate from 1 June 2016.
NZ IAS 12 ‘Income Taxes’ provides that there is a rebuttable presumption that investment property measured
at fair value under NZ IAS 40 is recovered entirely through sale. This presumption is rebutted if:
• the investment property is depreciable (e.g. buildings and land under a lease); and
• the investment property is held within a business model whose objective is to consume substantially all
of the economic benefits embodied in the investment property over time, rather than through sale.
Due to changes in the objectives of the Group’s business model, the Group has rebutted the presumption
as the Held for Use methodology more appropriately represents the Group’s current business model.
The Group’s current business model is to be a long term operator of a large scale portfolio of integrated
care facilities and villages and consume substantially all of the economic benefits of its investment property
through operating the existing villages and/or redeveloping these villages over time. Furthermore, the
objective of the current business model is not to sell investment property sites.
In calculating deferred tax under the Held for Use methodology, the Group has made significant judgements
to determine taxable temporary differences. The carrying value of the Group’s investment property is
determined on a discounted cash flow basis and includes cash flows that are both taxable and non-taxable
in the future. The Group has recognised deferred tax on the cash flows with a future tax consequence being
DMF as provided by CBRE Limited, to the extent that it arises from depreciable components (i.e. buildings)
of the investment property. The Group uses the council rateable valuations to estimate the apportionment
of cash flows arising from the depreciable (i.e. buildings) and non-depreciable components (i.e. land).
An initial recognition exemption has been applied to newly developed village sites in accordance with NZ IAS 12.
56
Oceania Healthcare | Annual Report 2017 As a result of applying the Held for Use methodology, the deferred tax liability recognised on investment
property as at 31 May 2017 has increased to $12.2m. This compares to $2.4m, had the Held for Sale
methodology continued to be applied.
The Group considered whether deferred tax should be recognised on the basis that the DMF is received at
the end of the ORA period (i.e. upon refund of the ORA deposit by way of set off on exit by a resident) or
at the beginning of the ORA period (i.e. at time of the receipt of the ORA deposit). The Group has carefully
evaluated all the available information and considers it appropriate to recognise and measure deferred
tax based on the DMF being receivable at the end of the ORA period as this best represents the Group’s
contractual entitlement.
The Group’s ORA comprises two gross cash flows (being an ORA deposit upon entering the unit and the
refund of this deposit upon exit) that are non-taxable and need to be excluded to determine the taxable
temporary differences arising on investment properties. Contractually, management fees are received
upon refund of the ORA deposit by way of set off on exit of a unit by a resident.
Should the DMF be treated as received at the beginning of the ORA period an additional deferred tax
liability of $3.1m (2016: $1.8m) would be recognised on the Balance Sheet. An additional current year tax
expense of $3.1m (2016: $1.8m) and a corresponding reduction in net profit after tax of $3.1m (2016: $1.8m)
would also be recognised.
(ii) Recognition of Tax Losses
Up until 31 May 2015 the Company and its subsidiaries were members of a Tax Consolidated Group together
with the Company’s parent company, Oceania Healthcare Holdings Limited ('OHHL'). The issuance of shares
to the executive members participating in the Long Term Incentive Plan in November 2015 triggered the
Company and its subsidiaries’ exit from the tax consolidated group as the Company, and its subsidiaries,
no longer met the Tax Consolidated Group eligibility criteria of being in a wholly-owned group. The impact
of this is that all tax losses incurred by the Company and its subsidiaries until 31 May 2015 remain within the
Tax Consolidated Group (of which OHHL is the sole member). These losses can be utilised by the Company
and its subsidiaries by way of a group loss offset so long as a minimum of 66% common shareholding is
maintained in Oceania Healthcare Limited.
The Group had not recognised any tax losses since the year ended 31 May 2014 in the Balance Sheet as, in
prior reporting periods, the Directors considered it would not be probable that the Group would utilise the
tax losses prior to any change of shareholding continuity. Relevant disclosures were made in the respective
financial statements.
After completing the IPO and following consideration of the Group’s capital structure and profitability
forecasts, the Directors consider it appropriate to recognise a portion of the Group’s available tax losses to
the extent that these are expected to be utilised before any breach of shareholding continuity, from a change
in shareholding or other means of restructure, in accordance with NZ IAS 12.
The Group entered into a tax loss offset agreement with its parent company, OHHL, to offset the taxable
income generated by Oceania Village Company Limited ('OVCL'), a subsidiary of the Company, for the
year ended 31 May 2016 for $27.5m. Following the loss offset of the OVCL taxable income with OHHL
losses, and losses generated in the May 2017 year, the Group will have $42.5m (31 May 2016: $34.0m) of
available tax losses at 31 May 2017. Based on the Group’s forecast profit prior to any breach of shareholding
continuity, $8.4m of these losses are expected to be utilised against the future taxable profits of the Group.
Accordingly, $2.3m (28% of the $8.4m) has been recognised as a deferred tax asset in respect of the
available tax losses as at 31 May 2017.
(iii) Shared Resale Gains
The Group has revisited the tax filing position to recognise a deduction on a realisation basis for the capital
gains paid out to residents on exit. This has resulted in a deferred tax asset of $1.9m.
(iv) Update of 30 November 2016 Comparatives
In estimating the income tax expense and deferred tax liability in the interim period to 30 November 2016,
certain assets were classified incorrectly as depreciable for tax purposes. As a result the deferred tax
liability as at 30 November 2016 and, consequently, the income tax expense for the interim period
ended 30 November 2016 were understated by $4.1m. There is no cash impact in the interim period
to 30 November 2016. There was also no impact on the annual financial statements for the year ended
31 May 2016. The classification has been corrected in the estimation of the income tax expense and
deferred tax liability in the annual financial statements for the year ended 31 May 2017.
57
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
5.2.
Intangible Assets
Accounting Policy
Goodwill
Goodwill represents the excess of cost of an acquisition over the fair value of the Group's share of the net
identifiable assets of the acquired subsidiary or business at the date of acquisition. Goodwill is not amortised.
Instead, goodwill is tested two times each financial year for impairment, at 30 November and at 31 May, and
carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity or cash
generating unit (‘CGU’) include the carrying amount of goodwill relating to the entity or CGU sold. Goodwill
is allocated to CGUs and these CGUs are grouped where appropriate for the purpose of impairment testing.
The allocation is made to those CGUs or groups of CGUs that are expected to benefit from the business
combination in which the goodwill arose.
Computer Software
Costs associated with maintaining computer software programmes are recognised as an expense as incurred.
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to
use the specified software. These costs are amortised on a straight line basis over their estimated useful lives
(2.5 years).
$’000
Year ended 31 May 2016
Opening net book amount
Additions
Amortisation and impairment charge
Closing net book amount
As at 31 May 2016
At cost
Goodwill
Software
Total
18,133
-
(838)
17,295
714
232
(619)
327
18,847
232
(1,457)
17,622
216,203
3,080
219,283
Accumulated amortisation and impairment
(198,908)
(2,753)
(201,661)
Net book amount
17,295
327
17,622
Year ended 31 May 2017
Opening net book amount
Additions
Amortisation and impairment charge
Closing net book amount
As at 31 May 2017
At cost
17,295
-
(478)
16,817
327
114
(205)
236
17,622
114
(683)
17,053
216,203
3,194
219,397
Accumulated amortisation and impairment
(199,386)
(2,958)
(202,344)
Net book amount
16,817
236
17,053
58
Oceania Healthcare | Annual Report 2017
Impairment Test for Goodwill
The carrying value of goodwill has been assessed on a site by site basis taking into account the site's results
as a whole for both the care and village CGUs.
The carrying amount of goodwill at each site is not significant in comparison to the total amount of goodwill.
All goodwill is allocated to the care CGUs.
Key Judgements in Applying the Accounting Policies
Care CGU's Recoverable Amount
The recoverable amount of the individual care sites has been determined based on an external valuation
of fair value less costs to sell by CBRE Limited as an external valuer. The fair value less costs to sell is
considered level 3 in the fair value hierarchy. This has been used for comparison to current carrying value.
The assumptions used in determining the fair value for care facilities are disclosed in note 3.3. Reasonable
possible movements in the capitalisation rates have been considered to have no material impact on the
carrying value of goodwill.
5.3. Trade and Other Receivables
Accounting Policy
Trade receivables are amounts due from customers in the ordinary course of business. Trade receivables are
recognised initially at fair value plus transaction costs and subsequently measured at amortised cost, less
a provision for impairment.
$’000
Net trade and other receivables
Trade receivables
Less: Provision for impairment
Occupation right agreements receivable
Prepayments
Related party receivables
Trade and other receivables
Movement in the provision for impairment of trade receivables is as follows:
$’000
Opening provision for doubtful debts
Balances recovered
Increase in provision
Bad debts written off
Closing provision for doubtful debts
May 2017
May 2016
10,281
(669)
9,612
883
807
-
10,541
(649)
9,892
387
1,844
22
11,302
12,145
May 2017
May 2016
649
(352)
537
(165)
669
4,250
(2,157)
254
(1,698)
649
59
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
5.3. Trade and Other Receivables (Continued)
Recognition, Measurement and Critical Judgements in Applying Accounting Policies
Collectability of trade receivables is reviewed on an on-going basis. Debts which are known to be
uncollectable are written off to the Statement of Comprehensive Income within other expenses. A provision
for doubtful receivables is established where there is objective evidence that the Group will not be able
to collect all amounts due according to the original terms of the receivables. In making this judgement,
significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments are considered indicators that the trade receivable is
impaired. The amount of the provision is the difference between the asset’s carrying amount and the present
value of estimated future cash flows, discounted at the effective interest rate.
When a trade receivable is uncollectable it is written off against the provision for trade receivables.
Subsequent recoveries of amounts previously written off are credited against other expenses in the
Statement of Comprehensive Income.
The ageing of these receivables is as follows:
$’000
May 2017
May 2016
Past due and impaired receivables (by invoice date)
0 to 3 months
Over 3 months
Past due but not impaired receivables (by invoice date)
0 to 3 months
Over 3 months
467
202
669
765
678
152
497
649
681
699
1,443
1,380
Trade receivables past due but not impaired are considered to be fully collectible in the ordinary course
of business.
5.4. Trade and Other Payables
Accounting Policy
Trade and other payables represent liabilities for goods and services provided to the Group prior to the
end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of
recognition and as such are presented as current in the Balance Sheet.
Trade payables are recognised initially at fair value less transaction costs and subsequently measured at
amortised cost using the effective interest method.
Sundry payables include $0.1m (2016: $0.3m) relating to cash held on behalf of residents.
Wages and Salaries, Annual Leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave are recognised in other
payables in respect of employees’ services up to the reporting date and are measured at the amounts
expected to be paid when the liabilities are settled.
The liability for employee entitlements is carried at the present value of the estimated future cash flow.
60
Oceania Healthcare | Annual Report 2017 Long Service Leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the
present value of expected future payments to be made in respect of services provided by employees up to
the reporting date. Consideration is given to expected future wage and salary levels, experience of employee
departures and periods of service.
$’000
Trade payables
Sundry payables and accruals
Accrued interest on external borrowings and derivatives
Employee entitlements
Trade and other payables
May 2017
May 2016
3,518
11,272
35
12,655
27,480
2,872
6,955
4
14,144
23,975
5.5. Related Party Transactions
Parent and Subsidiary Entities
The Group's parent entity is Oceania Healthcare Holdings Limited, owning 57.22% of the Group. The ultimate
owners are The Trust Company Limited (interest 98.8%) and Ngakuta Trust Company Limited (interest 1.2%).
The below entities are subsidiaries of Oceania Healthcare Limited.
Name of Entity
Principal Activities
Oceania Group (NZ) Limited
Support office functions
Oceania Care Company Limited Operation of aged care facilities
Oceania Village Company
Limited
Ownership and operation of
retirement villages
OCA Employees Trustee Limited Hold LTIP shares on behalf of
employees
2017
100%
100%
100%
100%
2016
Class of Shares
100%
100%
Ordinary
Ordinary
100%
Ordinary
-
Ordinary
All subsidiaries are incorporated in New Zealand and have a balance date of 31 May. There are no significant
restrictions on subsidiaries.
Key Management Personnel Compensation
Key management personnel are all executives with the authority for the strategic direction and management
of the Group.
$’000
Directors’ fees
Salaries and other short term employee benefits
Termination benefits
May 2017
May 2016
370
3,282
-
3,652
208
2,189
114
2,511
61
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
5.5. Related Party Transactions (Continued)
Transactions with Related Parties
The following transactions occurred with related parties:
$’000
Transactions with shareholders
Notes
May 2017
May 2016
Shares issued to Oceania Healthcare Holdings Limited
4.1
14,398
-
During the year the Directors of Oceania Healthcare Limited implemented the 2017 share plan (refer note 4.3).
Outstanding Balances
$’000
May 2017
May 2016
Amount owing from Oceania Healthcare Holdings Limited for central treasury function
-
22
5.6. Financial Risk Management
The Group's activities expose it to a variety of financial risks: market risks (including cash flow interest
rate risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of the Group. The Group uses derivative financial instruments such as interest rate swap
contracts to hedge certain interest rate risk exposures. Derivatives are exclusively used for hedging purposes,
i.e. not as trading or other speculative instruments. The Group uses different methods to measure different
types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rates to
determine market risk and aging analysis for credit risk.
Risk management is carried out centrally by Management under policies approved by the Board of
Directors. The Board provides written principles for overall risk management, as well as policies covering
specific areas, such as interest rate risk, credit risk, use of derivative financial instruments and non-derivative
financial instruments.
(a) Market Risk
Market risk is the risk that changes in market prices such as interest rates will affect the Group’s income.
The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return on risk.
(b) Cash Flow and Fair Value Interest Rate Risk
The Group has no significant interest-bearing assets, as such the Group's income is substantially independent
of changes in market interest rates.
The Group's interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose
the Group to cash flow interest rate risk. The cash flow and interest rate risks are monitored by the Board
on a monthly basis. The Board monitors the existing interest rate profile with reference to the Group’s
Treasury Policy and the Group’s underlying interest rate exposure. Management present interest rate
hedging analysis and strategies to the Board for consideration and seek Board approval prior to entering
into any interest rate swaps.
62
Oceania Healthcare | Annual Report 2017
The following table shows the sensitivity of the Group's after tax loss and equity to a movement in interest
rates of +/-1%. This assumes all other variables remain constant.
$’000
2017
Interest expense
Change in fair value of interest rate swaps
+1%
–1%
Profit / Loss
Equity
Profit / Loss
Equity
(520)
9
(520)
1,966
520
(35)
520
(1,388)
2016
Interest expense
(2,581)
(2,581)
Change in fair value of interest rate swaps
436
436
2,581
(441)
2,581
(441)
Interest Rate Swaps
The Group’s exposure to interest rate risk is managed by seeking to obtain the most competitive rate of
interest at all times. It is the Group's policy to manage the cash flow interest rate risk through the use of
interest rate swaps to reduce the impact of changes in interest rates on its floating rate long term debt.
The objective of the interest rate swaps is to protect the Group from the impact to cash flows which arises
out of variability in floating interest rates.
Interest rate swaps are initially recognised at fair value on the date a contract is entered into and are
subsequently measured at fair value on each reporting date. The fair values of the interest rate swaps are
determined based on cash flows discounted to present value using current market interest rates.
When interest rate swaps meet the criteria for cash flow hedge accounting, the effective portion of the
gain or loss on the hedging instrument is recognised in Other Comprehensive Income, while the ineffective
portion is recognised in other expenses in the Statement of Comprehensive Income. Amounts taken to
reserves are transferred out of reserves and included in the measurement of the hedged transaction when
the forecast transaction occurs. When interest rate swaps do not meet the criteria for cash flow hedge
accounting, all movements in fair value of the hedging instruments are recognised in the Statement of
Comprehensive Income.
Under the interest rate swap agreements, the Group has a right to receive interest at variable rates and an
obligation to pay interest at fixed rates. At 31 May 2017, the Group had interest rate swap agreements in
place with a total notional principal amount of $100.0 million (2016: $178.5 million). Of the interest rate swaps
in place, at 31 May 2017, $100.0 million (2016: $178.5 million) are being used to cover approximately 111%
(2016: 74%) of the loan principal outstanding. The current swaps were entered into on 29 November 2016
prior to the IPO and the repayment of debt that occurred at this time. The notional principal of $100.0m was
determined in accordance with the Group's Treasury Policy based on the Group's forecast medium term debt
exposure. The ratio of notional principal to drawn bank debt as at 31 May 2017, i.e. over 100%, will reduce
below 100% over the course of the 2018 financial year as drawings on the Development Facility increase to
fund work in progress. These agreements effectively change the Group’s interest exposure on the principal
covered by the interest rate swaps from a floating rate to fixed rate. Bank loans of the Group currently bear
an average fixed interest rate (including margin and line fees) of 4.1% (2016: 5.97%). The fair value of these
agreements at 31 May 2017 is $0.3m liability. The agreements cover notional amounts for a term of 2.5 years.
The notional principal amounts and the period of expiry of the interest rate swap contracts are as follows:
$’000
Less than 1 year
Between 1 and 2 years
Between 2 and 3 years
Average contracted fixed
interest rate
Notional principal
amount
May 2017
May 2016
May 2017
May 2016
4.10
4.10
4.10
5.97
-
-
100,000
100,000
100,000
178,500
-
-
63
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
5.6.
Financial Risk Management (Continued)
(c) Credit Risk
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks
and financial institutions, as well as credit exposure from trade and other receivables.
In the normal course of business, the Group has no significant concentrations of credit risk. The Group
requires settlement of the ORA before allowing occupation of its villas or apartments. Therefore, the Group
does not face significant credit risk. The values attached to each financial asset in the Balance Sheet represent
the maximum credit risk. Except as disclosed in the financial statements, no collateral is held with respect to
any financial assets. The Group enters into financial instruments with various counterparties in accordance
with established limits as to credit rating and dollar limits and does not require collateral or other security to
support the financial instruments.
Concentrations
Cash and cash equivalents of the Group are deposited with one of the major trading banks.
Non-performance of obligations by the bank is not expected due to the credit rating of the counter party
considered. The Standard and Poors credit rating of the counter party as at 31 May 2017 is AA-.
The Group receivables represent distinct trading relationships with each of the residents. There are no
concentrations of credit risk with residents. The only large receivables relate to the residential care subsidies
which are received in aggregate via the various District Health Boards and Work and Income New Zealand.
Neither of these entities has demonstrated, or is considered, a credit risk.
(d) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the
availability of funding through an adequate amount of committed credit facilities and the ability to close-out
market positions. Due to the dynamic nature of the underlying businesses, the Directors aim at maintaining
flexibility in funding by keeping committed credit lines available.
Cash flow forecasting is regularly performed by management. Management monitors rolling forecasts of the
Group's liquidity requirements to ensure it has sufficient cash to meet operational needs, while maintaining
headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach
borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the
Group's debt financing plans and covenant compliance.
The table below shows the maturity analysis of the Group's contractual undiscounted cash flows.
$’000
2017
Trade and other payables
Borrowings
Interest rate swaps
Refundable occupation right agreements
2016
Trade and other payables
Borrowings
Refundable occupation right agreements
Less than
1 Year
Between
1 and 2 Years
Between
2 and 5 Years
Over
5 Years
14,790
6,273
159
282,904
9,916
29,014
260,962
-
6,045
159
-
-
-
96,133
-
-
-
240,874
18,376
-
-
-
-
-
-
-
-
-
The refundable occupation right agreements are repayable to the resident on vacation of the unit, apartment,
care suite or on the termination of the occupation right agreement. The expected maturity of the refundable
occupation right agreements is shown in note 3.2.
64
Oceania Healthcare | Annual Report 2017
(e) Capital Risk Management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain
an optimal capital structure to reduce the cost of capital. The financial statements are prepared on a going
concern basis.
5.7.
Changes in Accounting Policy and Disclosures
(a) New and amended standards adopted by the Group
No new standards effective as at 1 June 2016 have had a material impact on the financial statements.
(b)
Standards, amendments and interpretations to existing standards that are not yet effective and
have not been early adopted by the Group
The following relevant standards, amendments and interpretations to existing standards have been published
and are mandatory for the Group's accounting periods beginning on or after 1 June 2017 or later periods, but
the Group has not early adopted them.
NZ IFRS 9, ‘Financial instruments’ (effective for annual periods beginning on or after 1 January 2018).
The standard addresses the classification, measurement and recognition of financial assets and financial
liabilities. NZ IFRS 9 requires financial assets to be classified into two measurement categories: those
measured as at fair value and those measured at amortised cost. The determination is made at initial
recognition. The classification depends on the entity's business model for managing its financial instruments
and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains
most of the NZ IAS 39 Financial Instruments: Recognition and Measurement requirements. The main change
is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due
to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement,
unless this creates an accounting mismatch. The Group is currently assessing the full impact of NZ IFRS 9
and has decided to not early adopt this standard.
NZ IFRS 15, ‘Revenue from contracts with customers’ (effective for annual periods beginning on or after 1
January 2018). NZ IFRS 15 addresses recognition of revenue from contracts with customers. It replaces the
current revenue recognition guidance in NZ IAS 18 ‘Revenue’ and NZ IAS 11 ‘Construction contracts’ and is
applicable to all entities with revenue. It sets out a 5 step model for revenue recognition to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The Group is currently assessing the full
impact of NZ IFRS 15 and has decided to not early adopt this standard.
NZ IFRS 16, ‘Leases’ (effective for annual periods beginning on or after 1 January 2019). NZ IFRS 16 sets
out the principles for the recognition, measurement, presentation and disclosure of leases. The objective
is to ensure that leases and lessors provide relevant information in a manner that faithfully represents those
transactions. It replaces the current lease guidance in NZ IAS 17 ‘Leases’, IFRIC 4 ‘Determining whether an
arrangement contains a lease’, SIC 15 ‘Operating leases – Incentives’ and SIC 27 ‘Evaluating the substance of
transactions involving the legal form of a lease’. The Group has decided not to early adopt NZ IFRS 16 and is
currently assessing its full impact. Should the Group decide to early adopt NZ IFRS 16 in a future period,
NZ IFRS 15 ‘Revenue from contracts with customers’ must also be adopted.
65
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
5.8.
Contingencies and Commitments
As at 31 May 2017 the Group had no contingent liabilities or assets (2016: nil).
(a) Capital Commitments
At 31 May 2017 the Group has a number of commitments to develop and construct certain facilities totalling
$41.6m (2016: $23.0m) of which $39.5m (2016: $23.0m) relates to development sites.
(b) Lease Commitments
Finance Leases
Leases where the Group has substantially all the risk and rewards of ownership are classified as finance
leases. Finance leases are capitalised at the lease's commencement at the lower of the fair value of the leased
property and the present value of the minimum lease payments. See note 4.4.
On 28 October 2015, subsidiaries of the Group entered into an agreement with a third party to develop
Everil Orr, an existing leasehold care site. The site will continue to operate as a leasehold care site and after
development will also perform village operations. This transaction does not impact on the 31 May 2017
financial statements as the practical completion date is not certain at this time. Accordingly the Group has
not valued this finance lease. There are two other sites that are also subject to a development deed with the
same landlord.
Operating Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under operating leases (net of any incentives received from
the lessor) are charged to the Statement of Comprehensive Income on a straight-line basis over the period
of the lease.
Commitments in relation to operating leases are payable as follows:
$’000
Within one year
Later than one year but not later than five years
Later than five years
May 2017
May 2016
1,535
3,809
8,577
13,921
1,843
5,880
10,033
17,756
The above mainly relates to land and buildings leased for the purpose of operating healthcare facilities for
the elderly. The leases vary from 5 year to 30 year terms. Lease rentals are subject to annual increases based
on Consumer Price Index (‘CPI’) movements.
(c) Repairs and Maintenance
There are no significant unrecognised contractual obligations entered into for future repairs and maintenance
at balance date.
5.9.
Events After Balance Date
On 13 July 2017 the Board approved the construction of a new care facility at the Melrose facility at an
estimated cost of $19.1m (excl GST).
There have been no other significant events after Balance Date.
66
Oceania Healthcare | Annual Report 2017 5.10. Comparison to Prospective Financial Statements
Consolidated Statement of Comprehensive Income
$’000
Operating revenue
Change in fair value of investment property
Change in fair value of interest rate swaps
Other income
Total income
Employee benefits
Depreciation and amortisation
Finance costs
Impairment of property, plant and equipment
Other expenses
Total expenses
Profit before income tax
Income tax expense
Profit for the Year
Other comprehensive income
Actual
May 2017
171,883
57,161
4
2,959
Prospective
May 2017
173,564
37,302
-
-
232,007
210,866
103,274
103,097
7,911
20,146
4,328
48,941
7,775
19,980
2,823
48,427
184,600
182,102
47,407
28,764
(2,525)
(3,487)
44,882
25,277
16,022
665
Total comprehensive income for the period
60,904
25,942
Commentary
Income was $21.1m ahead of the IPO forecast for the year ended 31 May 2017 due to a larger increase
in the fair value of investment property ('IP') than forecast ($19.9m). The IPO forecast reflected the half
year valuations as at 30 November 2016 and assumed no further increase in the current ingoing prices at
Oceania’s existing villages would be used in the CBRE valuations for 31 May 2017 that derive the fair value
movements. The actual fair value of Oceania’s IP as at 31 May 2017 was above that as at 30 November 2016
primarily due to increases in the current ingoing prices achieved by Oceania and, consequently, adopted by
CBRE Limited in their valuation.
Expenses were in line with the IPO forecast with the exception of the impairment of property, plant and
equipment ('PPE'). The IPO forecast reflected the impairment of PPE recorded in the interim accounts to
30 November 2016 but did not assume any subsequent impairment of PPE for the period to 31 May 2017.
The actual net revaluation of PPE was $13.0m incorporating a $17.3m increase through the revaluation
reserve ($16.2m net of tax) offset by an impairment of $4.3m. The principal cause of the variation of the
impairment of PPE to the IPO forecast was a reduction in the fair value of buildings at Lady Allum of
$1.8m due to a corresponding increase in the fair value of land (with the overall valuation of land and
buildings being constant).
Tax expense was $1.0m below the IPO forecast as a result of the change in the treatment of residents share
of resale gains ($1.9m), discussed in note 5.1, combined with the tax effect of the differences noted above.
67
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
5.10. Comparison to Prospective Financial Statements (Continued)
Consolidated Balance Sheet
$’000
Assets
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Investment property
Intangible assets
Total assets
Liabilities
Trade and other payables
Derivative financial instruments
Deferred management fee
Refundable occupation right agreements
Borrowings
Deferred tax liability
Total liabilities
Net Assets
Equity
Contributed equity
Retained deficit
Reserves
Total equity
Commentary
Actual
May 2017
Prospective
May 2017
10,861
11,302
267,972
611,016
17,053
4,357
11,636
234,839
618,354
16,990
918,204
886,176
27,480
283
19,534
282,904
95,242
24,808
23,550
-
-
302,608
103,004
23,767
450,251
452,929
467,953
433,247
579,498
587,030
(195,966)
(222,847)
84,421
69,064
467,953
433,247
Cash was $6.5m above the IPO forecast due to the higher number of new ORA sales at Lady Allum as well
as the timing of the repayment of the development debt facility (being on the 20th of June 2017 rather than
contemporaneous with the sale as forecast).
For the purposes of the modelling of the fair values of PPE and IP for the IPO forecast, all PPE under
development was aggregated with IP under development. Consequently the variation to the IPO forecast
for the PPE and IP balances is most appropriately considered collectively, i.e. $879.0m (actual) compared to
$853.2m (forecast). As outlined above, the variance principally relates to the revaluation of existing village
and care assets.
The IPO forecast also aggregated the deferred management fee and refundable occupation right agreements
consistent with the presentation of the FY2016 annual financial statements (refer to section 1.2 (iv)). On a
consolidated basis the actual balance as at 31 May 2017 of $302.4m is in line with the IPO forecast of $302.6m.
Borrowings of $95.2m was lower than the IPO forecast ($103.0m) due to a combination of lower development
capital expenditure than forecast as well as the timing of repayments as outlined above.
68
Oceania Healthcare | Annual Report 2017 Consolidated Statement of Changes in Equity
$’000
Assets
Contributed
Equity
Retained
Deficit
Reserve
Total
Equity
Balance at 1 June 2016
372,633
(240,988)
68,399
200,044
Profit for the year
Other comprehensive income
Revaluation of interest rate swaps
Revaluation of assets net of tax
Share capital issued
Costs capitalised to equity
Employee share scheme
-
-
-
214,398
(7,533)
206,865
44,882
-
44,882
-
44,882
-
-
140
140
(182)
16,204
16,022
-
-
-
-
(182)
16,204
60,904
214,398
(7,533)
140
207,005
Balance at 31 May 2017
579,498
(195,966)
84,421
467,953
Prospective Forecast
Balance at 1 June 2016
372,633
(240,988)
68,399
200,044
Profit for the year
Other comprehensive income
Revaluation of interest rate swaps
Revaluation of assets net of tax
Share capital issued
Costs capitalised to equity
Employee share scheme
-
-
-
-
214,398
(7,137)
-
207,261
25,277
-
25,277
-
-
-
-
-
-
665
665
-
-
-
-
25,277
-
665
25,942
214,398
(7,137)
-
207,261
Balance at 31 May 2017
579,894
(215,711)
69,064
433,247
Commentary
Equity was $34.7m above the IPO forecast due to the higher NPAT achieved and an increase in the asset
revaluation reserve due to the aforementioned revaluation of PPE (refer to Balance Sheet commentary above).
69
Oceania Healthcare | Annual Report 2017 Notes to the Financial Statements (Continued)
For the year ended 31 May 2017
5.10. Comparison to Prospective Financial Statements (Continued)
Consolidated Cash Flow Statement
$’000
Receipts from customers
Payments to suppliers and employees
Receipts from new occupation right agreements
Payments for outgoing occupation right agreements
Interest received
Interest paid
Net cash inflow from operating activities
Proceeds from sale of property, plant and equipment and investment property
Payments for property, plant and equipment and intangible assets
Payments for investment property and investment property under development
Actual
May 2017
Prospective
May 2017
159,289
158,315
(141,062)
(147,743)
68,763
(30,894)
133
(17,306)
38,923
7
(33,503)
(47,560)
66,775
(28,382)
64
(17,191)
31,838
-
(37,168)
(51,839)
Net cash outflow from investing activities
(81,056)
(89,007)
Proceeds from borrowings
Repayment of borrowings
Transaction costs
Proceeds from share issue
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
144,994
162,008
(285,424)
(294,133)
(10,680)
(10,453)
200,000
48,890
200,000
57,422
6,757
4,104
10,861
253
4,104
4,357
Changes to Presentation of IPO forecast cash flow statement
To assist with comparison with the IPO forecast, the following changes in the presentation of the cash flow
statement per the IPO forecast have been made to align with the audited cash flow statement:
1)
2)
3)
4)
Transaction costs of $10.5m have been reclassified from payments to suppliers and employees to
financing cashflows as a separate line item;
Acquisition of the freehold land and buildings at Elderslea of $16.1m has been reclassified from
repayment of borrowings to payments for PPE;
The proceeds from drawdowns and repayments has been presented on a gross basis, whereas the
IPO forecast presented the net repayment of borrowings made as a result of the IPO as the repayment
of borrowings; and
The IPO forecast presented the conversion of the $14.4m of shareholder loans from OHHL to equity
as a separate repayment of borrowings and proceeds from issue of shares. This was a non-cash
transaction. Accordingly the IPO forecast has been adjusted to align with the presentation of the
audited cash flow statement.
70
Oceania Healthcare | Annual Report 2017 These reclassifications are outlined in the table below:
$’000
IPO forecast
as issued
May 2017
Transaction
Costs
Elderslea
Acquisition
Gross
Borrowings
Shareholder
Loan
IPO forecast
as presented
above
May 2017
Receipts from customers
158,315
-
Payments to suppliers and
employees
Receipts from new occupation
right agreements
Payments for outgoing occupation
right agreements
Interest received
Interest paid
Net cash inflow from
operating activities
Proceeds from sale of property,
plant and equipment and
investment property
Payments for property, plant and
equipment and intangible assets
Payments for investment property
and investment property under
development
Net cash outflow from
investing activities
Proceeds from borrowings
Repayment of borrowings
(158,196)
10,453
66,775
(28,382)
64
(18,181)
-
-
-
-
20,395
10,453
-
(21,026)
(51,839)
(72,865)
68,327
(230,002)
-
-
-
-
-
-
-
-
-
-
-
-
-
(16,142)
-
(16,142)
-
-
-
-
-
-
-
-
-
-
-
93,681
-
-
-
-
-
158,315
(147,743)
66,775
(28,382)
64
990
(17,191)
990
31,838
-
-
-
-
-
-
(37,168)
(51,839)
(89,007)
162,008
16,142
(93,681)
13,408
(294,133)
Transaction costs
-
(10,453)
Proceeds from issue of shares
214,398
-
-
-
Net cash inflow from
financing activities
52,723
(10,453)
16,142
-
-
-
-
(10,453)
(14,398)
200,000
(990)
57,422
Net increase in cash and
cash equivalents
Cash and cash equivalents at
beginning of the year
Cash and cash equivalents at
end of the year
Commentary
253
4,104
4,357
253
4,104
4,357
Operating cashflow was above the IPO forecast due to lower payments to suppliers.
As outlined above, payments for PPE and IP were estimated in aggregate as payments for IP for the purposes
of the IPO forecast. The combined variance of $8.0m (note PPE and IP) is due to lower development capital
expenditure as this was modelled on a ‘straight line’ basis for the IPO forecast with expenditure apportioned
equally over the construction period.
The net cash inflow from financing is lower than the IPO forecast due to lower than forecast drawings on the
development debt facility.
71
Oceania Healthcare | Annual Report 2017
Independent Auditor's Report
To the shareholders of Oceania Healthcare Limited
The consolidated financial statements comprise:
•
•
•
•
•
the consolidated balance sheet as at 31 May 2017;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated cash flow statement for the year then ended; and
the notes to the financial statements, which include significant accounting policies.
Our opinion
In our opinion, the consolidated financial statements of Oceania Healthcare Limited (the Company), including its
subsidiaries (the Group), present fairly, in all material respects, the financial position of the Group as at 31 May 2017,
its financial performance and its cash flows for the year then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs NZ) and
International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics
for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and
we have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of other assurance services, tax compliance services
and due diligence work in relation to the initial public offering. The provision of these other services has not impaired
our independence as auditor of the Group.
72
Oceania Healthcare | Annual Report 2017 Our audit approach
Overview
Materiality
An audit is designed to obtain reasonable assurance whether the consolidated financial
statements are free from material misstatement.
Overall Group materiality is $1.7 million, which represents 1% of operating revenue.
Audit scope
We chose operating revenue as the benchmark because, in our view, it is a key financial metric
used in assessing the performance of the Group and is not as volatile as other profit
or loss measures.
Key audit
matters
We believe 1% of operating revenue provides a dollar value that would influence the users
of the consolidated financial statements in assessing the performance of the Group.
We have two key audit matters:
• Valuation of investment property and freehold land and buildings
• Change in deferred tax presumption for investment property
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the
overall Group materiality for the consolidated financial statements as a whole as set out above. These, together with
qualitative considerations, helped us to determine the scope of our audit, the nature, timing and extent of our audit
procedures and to evaluate the effect of misstatements, both individually and in aggregate on the consolidated
financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial statements and
our application of materiality. As in all of our audits, we also addressed the risk of management override of internal
controls including among other matters, consideration of whether there was evidence of bias that represented a risk
of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the
consolidated financial statements as a whole, taking into account the structure of the Group, the accounting
processes and controls, and the industry in which the Group operates. Given the nature or location of the entities
comprising the Group we have undertaken all the audit procedures with respect to the Group.
73
Oceania Healthcare | Annual Report 2017 Independent Auditor’s Report (Continued)
To the shareholders of Oceania Healthcare Limited
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current year. These matters were addressed in the context of our audit of
the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Valuation of investment property and freehold
land and buildings
The Group’s investment property at $611.0 million (refer
to note 3.1 of the consolidated financial statements)
and freehold land and buildings (including freehold
land and buildings under development) at $253.3 million
(refer to note 3.3 of the consolidated financial statements)
represent the majority of the Group’s assets as at
31 May 2017.
The valuations of individual properties were carried
out by third party valuer, CBRE Limited (the Valuer).
The valuation processes for investment property and
freehold land and buildings are described in notes 3.1
and 3.3 of the consolidated financial statements,
respectively.
Investment property is recorded in the consolidated
financial statements at the value determined by the
Valuer, adjusted for refundable occupation licence
payments, residents’ share of resale gains and
management fee receivable which are recognised
separately on the balance sheet and also reflected in
the Valuer’s cash flow model. The Group has adopted
the assessed value determined by the Valuer for
freehold land and buildings.
The valuation of the Group’s property portfolio is
inherently subjective due to, among other factors, the
individual nature of each property and the expected
future cash flows for that particular property.
The existence of significant estimation uncertainty,
coupled with the fact that only a small percentage
difference in assumptions on individual properties,
when aggregated, could result in material differences,
is why we have given specific audit focus and attention
to this area.
External valuations
We read the valuation report for a sample of properties
and discussed the report with the Valuer. We confirmed
that the valuation approach for each property was in
accordance with the relevant accounting standards.
It was evident from our discussions with management
and the Valuer, and from our review of the valuation
report that close attention had been paid to each
property’s individual characteristics, its overall quality,
geographic location and desirability as a whole.
We assessed the Valuer’s qualifications, expertise and
their objectivity and we found no evidence that
suggested that the objectivity of the Valuer in their
performance of the valuation was compromised.
We carried out procedures, on a sample basis, to test
whether property specific information supplied to the
Valuer by the Group reflected the underlying property
records held by the Group. For the items tested, the
information was materially consistent.
Assumptions and estimates
Our work over the assumptions focused on the largest
properties in the portfolio and those properties where
the assumptions used and/or year-on-year fair value
movement suggested a possible outlier compared
to the rest of the portfolio and the market data for
the sector.
We engaged our own in-house valuation expert to
challenge the work performed by the Valuer and assess
the reasonableness of the assumptions used based on
his knowledge gained from reviewing valuations of
similar properties and known transactions.
No matters arose from this assessment.
Overall valuation estimates
Because of the subjectivity involved in determining
valuations for individual properties and the existence of
alternative assumptions and valuation methods, we
determined a tolerable allowance of +/-5% of the
individual property value to evaluate the property
valuations used by management.
Our audit procedures did not identify any issues that
would indicate that the valuations adopted by the Group
were outside an acceptable range. We also considered
whether or not there was bias in determining individual
valuations and found no evidence of bias.
74
Oceania Healthcare | Annual Report 2017 Change in deferred tax presumption for
investment property
As disclosed in note 5.1 of the consolidated financial
statements, the basis for the recognition of deferred tax
on investment property has changed to “Held for Use”
due to a change in the objectives of the Group’s
business model from 1 June 2016.
In planning and executing the Initial Public Offering
in May this year, the Group reassessed their business
model and changed the objectives of holding investment
property to that of consuming all of the economic
benefits through use.
This is a significant judgement exercised by management
and resulted in a $9.8 million increase in the deferred tax
liability at 31 May 2017.
In applying the Held for Use presumption, management
have made three key assumptions which involve
significant judgement over:
1. Determining the amount of taxable cash flows;
2. Timing of taxable cash flows; and
3. Apportionment of investment property.
The mechanics of applying these assumptions are
described in note 5.1 of the consolidated financial
statements.
The change in the basis for recognising deferred tax
had a significant impact on the consolidated financial
statements and we have given specific audit focus and
attention to this area.
We have discussed with management and the directors
their assessment of the business model. The business
model is consistent with their strategic plan and has
been approved by the board. We have also observed
that it is consistent with the way the business has been
run over the past 12 months. The forecast over the
Prospective Financial Information period also supports
the change in the model.
Assumptions
With respect to the assumptions used in the calculation of
deferred tax, we engaged our own in-house tax specialist
and valuation expert to challenge the work performed
and assess the reasonableness of the assumptions based
on their knowledge of the tax legislation and other
accepted approaches in the industry.
1. Determining the amount of taxable cash flows
We confirmed that the amount of taxable cash flows of
investment property is based on the same assumptions
and estimates used in the valuation of investment
property described above.
2. Timing of taxable cash flows
We have tested a sample of Occupation Right
Agreements (ORAs) to check that the Deferred
Management Fees (DMF) is contractually earned at the
end of the ORA period. No exceptions were identified.
3. Apportionment of investment property
For a sample of properties, we agreed the council
rateable valuations to the council website and
recalculated the apportionment between land and
buildings. For the items tested no differences were
identified.
We also considered whether or not there was bias in
adopting these assumptions and found no evidence
of bias.
75
Oceania Healthcare | Annual Report 2017 Independent Auditor's Report (Continued)
To the shareholders of Oceania Healthcare Limited
Information other than the consolidated financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial statements does not
cover the other information included in the annual report and we do not express any form of assurance conclusion on
the other information.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If,
based on the work we have performed on the other information that we obtained prior to the date of this auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of the
consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the Directors
determine is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole,
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs NZ and ISAs will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so that we
might state those matters which we are required to state to them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company
and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Indumin Senaratne (Indy Sena).
For and on behalf of:
Chartered Accountants
27 July 2017
Auckland
76
Oceania Healthcare | Annual Report 2017
Corporate Governance Statement
Corporate Governance
Oceania is committed to maintaining the highest standards of governance by implementing best practice structures
and policies. This Corporate Governance Statement sets out the corporate governance policies, practices and
processes adopted or followed by Oceania (including the guiding principles, authority, responsibilities, membership
and operation of the Board of Directors of Oceania) as at 31 May 2017, and has been approved by the Board.
The best practice principles (and underlying recommendations) which Oceania has had regard to in determining
its governance approach are the principles set out in the NZX Corporate Governance Code 2017 ('NZX Code').
The Board’s view is that Oceania’s corporate governance policies, practices and processes generally follow the
recommendations set by the NZX Code. This Corporate Governance Statement includes disclosure of the extent
to which Oceania has followed each of the recommendations in the NZX Code (or, if applicable, an explanation
of why a recommendation was not followed and any alternative practices followed in lieu of the recommendation).
Oceania also supports the ASX Corporate Governance Council’s Corporate Governance Principles and
Recommendations.
Further information about Oceania’s corporate governance framework (including Oceania’s constitution,
the Board and Board committee charters, and codes and policies referred to in this section) is available to
view at www.oceaniahealthcare.co.nz/investor-centre/governance.
Principle 1 – Code of Ethical Behaviour
Directors should set high standards of ethical behaviour, model this behaviour and hold management
accountable for these standards being followed throughout the organisation.
Code of Values and Conduct and Related Policies
Recommendation 1.1: The Board should document minimum standards of ethical behaviour to which the issuer’s
Directors and employees are expected to adhere (a code of ethics) and comply with the other requirements of
Recommendation 1.1 of the NZX Code.
Oceania expects its Directors, senior managers and employees to maintain the highest standards of honesty,
integrity and ethical conduct in day to day behaviour and decision making. The Board has adopted a Code of
Values and Conduct, a Whistleblowing Policy, a Confidentiality Policy, and a Trading in Company Securities Policy,
all of which are available on Oceania’s website.
The Code of Values and Conduct applies to all Directors, employees, contractors and consultants and outlines
Oceania’s expectations about behaviour (including the specific expectations prescribed in the NZX Code), as well
as the procedure for any breach of the Code. Every new Director, employee, contractor and consultant is required
to read and understand the Code of Values and Conduct and acknowledge that they have done so. As at the date
of this Corporate Governance Statement, regular training in respect of the Code of Values and Conduct has not
commenced but this will be implemented in the following financial year.
Trading in Company Securities Policy
Recommendation 1.2: An issuer should have a financial product dealing policy which applies to employees
and Directors.
The Trading in Company Securities Policy sets out Oceania’s requirements for all Directors and employees in
relation to trading Oceania’s shares. The policy incorporates all trading restraints. Directors and senior managers
are restricted from trading in shares during 'black out' periods around the balance date and the half year balance
date, and proposed transactions by Directors or senior managers at any other time require approval. The policy also
provides that no Directors or employees can trade shares if they are in possession of price sensitive information that
is not publicly available.
77
Oceania Healthcare | Annual Report 2017 Corporate Governance Statement (Continued)
Principle 2 – Board Composition and Performance
To ensure an effective Board, there should be a balance of independence, skills, knowledge, experience
and perspectives.
The Board is comprised of five Directors with a mix of qualifications, skills and experience appropriate to Oceania’s
business. The Chair of the Board is elected by the Board each year. The Board schedules a minimum of nine
meetings each year.
Board Charter
Recommendation 2.1: The Board of an issuer should operate under a written charter which sets out the roles and
responsibilities of the Board. The Board charter should clearly distinguish and disclose the respective roles and
responsibilities of the Board and management.
The Board has adopted a formal Board Charter which sets out the respective role, responsibilities, composition and
structure of the Board and senior management, and this is available on Oceania’s website. The Board is responsible
for the strategic direction of Oceania and for supervising the management of the business for the benefit of its
shareholders. Responsibility for the day to day management of Oceania has been delegated to the Chief Executive
Officer and the Senior Management Team. The General Counsel & Company Secretary provides company secretarial
services to the Board. The General Counsel & Company Secretary is accountable to the Board through the Chair.
Nomination and Appointment of Directors
Recommendation 2.2 and 2.3: Every issuer should have a procedure for the nomination and appointment of
Directors to the Board. An issuer should enter into written agreements with each newly appointed Director establishing
the terms of their appointment.
The Board is responsible for succession planning. The procedure for the nomination and appointment of Directors
is included in the Board Charter. When considering the appointment of a new Director, the Board will consider the
skills of the existing Board and any gaps and the Board will undertake appropriate checks as to the candidate’s
character and experience. Where Oceania determines that a person is an appropriate candidate, shareholders are
notified of that and are provided with all material information in Oceania’s possession that is relevant to their decision
on whether or not to elect or re-elect a Director. All new Directors enter into a written agreement with Oceania
setting out the terms of their appointment.
Directors
The Board currently comprises five Directors. All of the Directors are non-executive Directors. The Board has considered
which of its Directors are deemed to be independent for the purposes of the NZX Listing Rules and has determined
that, as at 31 May 2017, three Directors are independent Directors, including the Chair and the Chair of the Audit
Committee. As at the date of this Annual Report, the Directors are:
Elizabeth Coutts
Alan Isaac
Kerry Prendergast
Patrick McCawe
Hugh FitzSimons
Director Particulars
Chair, Independent Director
Appointed in November 2014
Independent Director
Independent Director
Non-Executive Director
Non-Executive Director
Appointed in October 2015
Appointed in December 2016
Appointed in February 2017
Appointed in October 2012
Recommendation 2.4: Every issuer should disclose information about each Director in its Annual Report
or on its website, including a profile of experience, length of service, independence and ownership interests.
A biography of each Director is available on Oceania’s website in accordance with this recommendation.
78
Oceania Healthcare | Annual Report 2017 Directors’ Interests in Shares
Directors disclosed the following relevant interests in shares as at 31 May 2017:
Director
Elizabeth Coutts
Alan Isaac
Patrick McCawe1
Hugh FitzSimons1
Number of shares in which a relevant interest is held
300,000 shares
30,000 shares
349,175,418 shares
349,175,418 shares
Note:
1 Oceania Healthcare Holdings Limited ('OHHL') is the majority shareholder of Oceania. OHHL is majority (98.83%) owned indirectly by
three institutional funds that are managed by specialist management companies within the Macquarie Infrastructure and Real Assets
division of Macquarie Group Limited. The fund investments are held through various sub trusts. The Trust Company Limited,
as custodian, holds OHHL shares on behalf of the sub trusts. As Directors of OHHL, each of Patrick McCawe and Hugh FitzSimons
have the power to control the exercise of the rights attaching to the shares held by OHHL, and the power to control the acquisition
or disposition of such shares.
Diversity
Recommendation 2.5: An issuer should have a written Diversity Policy which includes requirements for the Board
or a relevant committee of the Board to set measurable objectives for achieving diversity (which, at a minimum,
should address gender diversity) and to assess annually both the objectives and the entity’s progress in achieving
them. The issuer should disclose the policy or a summary of it.
Oceania has a Diversity Policy which aims to ensure that Oceania has a focus on diversity throughout the
organisation. This recognises that a diverse work force (including at Board and management levels) contributes
to business growth and performance, helping to drive an inclusive, high performance environment.
The Diversity Policy establishes the following measurable objectives for achieving diversity:
- Facilitating and promoting equal employment opportunities at all levels including assessment of diversity of skills,
experience, values, culture and gender wherever possible from the available candidates.
- Promoting a merit based environment in which employees have the opportunity to develop and perform to their
full potential in alignment with Oceania’s commitment to the ongoing training and wellbeing of its employees.
- Ensuring employees are treated fairly, evaluated objectively and promoted on the basis of their performance.
The Diversity Policy also sets out requirements for the Board to assess its progress in achieving the objectives and
the objectives themselves. The Diversity Policy is available on Oceania’s website.
The Board considers that the Diversity Policy has been successfully implemented across the business with an
excellent balance of gender and ethnicity at Director and officer levels. As at 31 May 2017 (and 31 May 2016 for the
prior comparative period), the gender breakdown of the Directors, officers (as that term is defined in the NZX Listing
Rules) and employees is as follows:
Gender
Directors
Officers
Employees
31 May 2017
31 May 2016
Male
3
4
340
Female
2
6
2370
Male
3
4
364
Female
1
6
2456
79
Oceania Healthcare | Annual Report 2017
Corporate Governance Statement (Continued)
Director Training
Recommendation 2.6: Directors should undertake appropriate training to remain current on how to best perform
their duties as Directors of an issuer.
The Board ensures that there is appropriate training for all Directors enabling them to remain current on how to best
discharge their responsibilities and keep abreast of changes and trends in economic, political, social, financial and
legal climates and governance practices. The Board also ensures that new Directors are appropriately introduced to
management and the business, that all Directors are acquainted with relevant industry knowledge and receive copies
of appropriate company documents to enable them to perform their role.
Evaluation of Performance of Directors
Recommendation 2.7: The Board should have a procedure to regularly assess Director, Board and committee
performance.
The Chair of the Board leads an annual performance review and evaluation of the Board as a whole, and of the Board
committees, against the Board Charter including seeking Director’s views relating to Board and Board committee
process, efficiency and effectiveness, for discussion by the full Board. The Chair of the Board also engages with
individual Directors to evaluate and discuss performance and professional development.
Separation of Board Chair and CEO
Recommendation 2.8: The Chair and the CEO should be different people.
The Board Charter requires the Board Chair to be an independent Director, and not be the same person as the Chief
Executive Officer or the Chair of the Audit Committee.
Principle 3 – Board Committees
The Board should use committees where this will enhance its effectiveness in key areas, while still retaining
Board responsibility.
Overview of Board Committees
The Board has three standing committees to assist in the execution of the Board’s duties, being the Audit Committee,
the Remuneration Committee and the Clinical and Health and Safety Committee.
Recommendation 3.5: All committees should operate under written charters. An issuer should identify the members
of each of its committees, and periodically report member attendance.
Each committee operates under a charter which is available on Oceania’s website. Committee members are
appointed from members of the Board and membership is reviewed on an annual basis. Any recommendations
made by committees are submitted to the full Board as recommendations for Board decision.
Attendance at Board and Committee Meetings for the Year Ended 31 May 2017
Board
Audit
Remuneration
Clinical and
Health and Safety
Eligible
Attended
Eligible
Attended
Eligible
Attended
Eligible
Attended
Elizabeth Coutts
Alan Isaac
Kerry
Prendergast
Patrick McCawe
Hugh FitzSimons
12
12
6
4
12
12
12
6
4
11
6
6
-
-
6
6
6
-
-
6
3
3
-
-
3
3
3
-
-
3
1
-
1
-
1
1
-
1
-
1
80
Oceania Healthcare | Annual Report 2017
Audit Committee
Recommendation 3.1: An issuer’s Audit Committee should operate under a written charter. Membership on the
Audit Committee should be majority independent and comprise solely of non-executive Directors of the issuer.
The chair of the Audit Committee should not also be the Chair of the Board.
The Audit Committee comprises Alan Isaac (Chair), Elizabeth Coutts and Hugh FitzSimons and met six times
during the year. The Audit Committee assists the Board in providing oversight of all matters relating to financial
management and controls, financial accounting, audit and the external reporting requirements of Oceania and
its subsidiary companies. The Audit Committee operates under the Audit Committee Charter.
Recommendation 3.2: Employees should only attend Audit Committee meetings at the invitation of the
Audit Committee.
The Chief Executive Officer, Chief Financial Officer, Financial Controller and General Counsel & Company Secretary
attend Audit Committee meetings at the invitation of the Audit Committee. Oceania’s external auditor attends
meetings as deemed necessary by the Audit Committee. The Audit Committee also meets and receives regular
reports from the external auditor without management present, concerning any matters that arise in connection
with the performance of their role.
Remuneration Committee
Recommendation 3.3: An issuer should have a Remuneration Committee which operates under a written charter
(unless this is carried out by the whole Board). At least a majority of the Remuneration Committee should be
independent Directors. Management should only attend Remuneration Committee meetings at the invitation of
the Remuneration Committee.
The Remuneration Committee comprises Hugh FitzSimons (Chair), Elizabeth Coutts and Alan Isaac and met three
times during the year. The Remuneration Committee assists the Board in the discharge of its responsibilities and
oversight relative to the remuneration and performance of the Chief Executive Officer and the Senior Management
Team, remuneration of Directors and human resources policy and strategy. The Remuneration Committee operates
under the Remuneration Committee Charter.
Management only attend Remuneration Committee meetings at the invitation of the Remuneration Committee.
Nomination Committee
Recommendation 3.4: An issuer should establish a Nomination Committee to recommend Director appointments
to the Board (unless this is carried out by the whole Board), which should operate under a written charter. At least
a majority of the Nomination Committee should be independent Directors.
The Board has decided not to have a separate Nomination Committee as Director appointments are considered
by the Board as a whole. The procedure for the nomination and appointment of Directors is included in the Board
Charter, and summarised in Principle 2 above (under the heading "Nomination and Appointment of Directors").
Clinical and Health and Safety Committee
Recommendation 3.5: An issuer should consider whether it is appropriate to have any other board committees
as standing Board committees.
The Clinical and Health and Safety Committee was formed in April 2017 and comprises Kerry Prendergast (Chair),
Elizabeth Coutts and Hugh FitzSimons. This Committee met once in the period from April to May 2017. Prior to
the establishment of the Clinical and Health and Safety Committee, the Board considered clinical risks and health
and safety policy.
The Clinical and Health and Safety Committee reviews clinical risks, health and safety policy and risks arising from
Oceania’s physical operations, and any other matters that may affect Oceania’s reputation outside of the financial
risks that are specifically addressed within the Audit Committee. The Clinical and Health and Safety Committee
operates under the Clinical and Health and Safety Committee Charter.
The Chief Executive Officer, the General Manager Aged Care, the General Manager Health and Safety and the
General Counsel & Company Secretary attend these meetings.
81
Oceania Healthcare | Annual Report 2017 Corporate Governance Statement (Continued)
Takeover Protocols
Recommendation 3.6: The Board should establish appropriate protocols that set out the procedure to be followed
if there is a takeover offer for the issuer (amongst other matters).
Given Oceania’s recent listing, it does not have formal takeover protocols in place as at the date of this
Corporate Governance Statement. Such formal protocols are in the process of being developed, and are
expected to be adopted shortly.
Principle 4 – Reporting and Disclosure
The Board should demand integrity in financial and non-financial reporting, and in the timeliness and balance
of corporate disclosures.
The Board is committed to providing timely, orderly, consistent, accurate and credible information to the market to
promote investor confidence.
Continuous Disclosure
Recommendation 4.1: An issuer’s Board should have a written Continuous Disclosure Policy.
All information received by Oceania is considered in the context of Oceania’s obligations as a listed company with
regard to continuous disclosure of material information. At each Board meeting, the Board considers whether there is
material information that is required to be disclosed to the market. Oceania has established a Market Disclosure
Policy to ensure compliance with the continuous disclosure requirements of the NZX Listing Rules and the ASX
Listing Rules. The Market Disclosure Policy is available on Oceania’s website.
Charters and Policies
Recommendation 4.2: An issuer should make its code of ethics, Board and committee charters and the policies
recommended in the NZX Code, together with any other key governance documents, available on its website.
Information about Oceania’s corporate governance framework (including the Code of Values and Conduct, Board
and Board committee charters, and other key governance codes and policies) are available to view on Oceania’s
website at www.oceaniahealthcare.co.nz/investor-centre/governance.
Financial Reporting
Recommendation 4.3: Financial reporting should be balanced, clear and objective.
The Audit Committee oversees the quality and integrity of external financial reporting including the accuracy,
completeness and timeliness of financial statements, and ensuring that financial reporting is balanced, clear and
objective. It reviews annual and half year financial statements and makes recommendations to the Board concerning
the application of accounting policies and practice, areas of judgement, compliance with accounting standards, stock
exchange and legal requirements, and the results of the external audit.
Management accountability for Oceania’s financial reporting is reinforced by the written certification from the Chief
Executive Officer and Chief Financial Officer that, in their opinion, financial records have been properly maintained
and that the financial statements comply with the appropriate accounting standards and give a true and fair view of
the financial position and performance of Oceania. Such representations are given on the basis of a sound system
of risk management and internal control which is operating effectively in all material respects in relation to financial
reporting risk.
Non-Financial Reporting – Sustainability
Recommendation 4.3: An issuer should provide non-financial disclosure at least annually, including considering
material exposure to environmental, economic and social sustainability risks and other key risks. It should explain
how it plans to manage those risks and how operational or non-financial targets are measured.
The Board and management consider the sustainability of Oceania’s buildings, particularly for new developments.
Oceania carefully considers the selection of materials for its developments and all timber used in developments
is sourced from sustainable forests. Oceania takes appropriate measures to reduce its impact on the environment,
including ensuring that waste from construction sites is separated on site before being transported to transfer
stations. Newer buildings that have been developed include more insulation than is required, double glazing,
water efficiency fittings, the use of energy efficient lighting and energy star rated appliances.
Given Oceania’s recent listing, the Board is in the process of developing a sustainability policy. It expects this
to be adopted shortly, with sustainability measures to be reported on in future years.
82
Oceania Healthcare | Annual Report 2017 Principle 5 – Remuneration
The remuneration of Directors and executives should be transparent, fair and reasonable.
Directors’ Remuneration
Recommendation 5.1: An issuer should recommend Director remuneration to shareholders for approval in
a transparent manner. Actual Director remuneration should be clearly disclosed in the issuer’s annual report.
Directors’ remuneration is paid in the form of fees. Additional fees are payable in respect of work carried out
on Board committees.
Where required in the future, the Board will ensure that recommendations to shareholders regarding approval
of Director remuneration is provided in a transparent manner.
Approved Director Remuneration for 2017/2018
Board of Directors
Audit Committee
Clinical and
Health and Safety Committee
Remuneration Committee
Position
Fees (per annum)
Chair
Member
Chair
Chair
Chair
$180,000
$90,000
$20,000
$15,000
$7,500
With effect from 1 June 2017, the total pool for fees and Board committee responsibilities is fixed at $582,500 per
annum. No additional fees will apply for Directors as members of Board Committees for the financial year ended
31 May 2018.
Director Remuneration Received in 2016/2017
Director
Elizabeth Coutts
(Chair)
Alan Isaac
Kerry Prendergast2
Patrick McCawe3
Hugh FitzSimons3
Board
Fees
Audit
Committee
Remuneration
Committee
$165,000
$82,500
$39,167
-
-
-
$5,000
-
-
-
-
-
-
-
-
Clinical
and Health
and Safety
Committee
-
-
$3,750
-
-
Other
payments/
benefits
Total
remuneration
$25,0001
$190,000
$25,0001
$25,0001
$112,500
$67,917
-
-
Nil
Nil
Notes:
1 Elizabeth Coutts, Alan Isaac and Kerry Prendergast were each paid additional Director fees of $25,000 in May 2017 to remunerate them
for additional work required in preparation for the IPO.
2 Kerry Prendergast was appointed to the Board on 22 December 2016 so her total remuneration for the year ended 31 May 2017 does
not represent fees for a full year.
3 Patrick McCawe and Hugh FitzSimons, as appointees of Oceania Healthcare Holdings Limited, did not receive any Director fees for
the year ending 31 May 2017. Patrick McCawe and Hugh FitzSimons will each receive Director fees for the year ending 31 May 2018.
The above fees exclude GST and expenses and represent a combination of the former fee rates and increased fee
rates that applied from 1 March 2017.
83
Oceania Healthcare | Annual Report 2017 Corporate Governance Statement (Continued)
Remuneration Policy
Recommendation 5.2: An issuer should have a Remuneration Policy for remuneration of Directors and officers,
which outlines the relative weightings of remuneration components and relevant performance criteria.
Oceania has adopted a Remuneration Policy which sets out the remuneration principles that apply to all Directors
and senior managers of Oceania to ensure that remuneration practices are fair and appropriate, and that there is a
clear link between remuneration and performance. Oceania is committed to applying fair and equitable
remuneration and reward practices in the workplace, taking into account internal and external relativity, the
commercial environment, the ability to achieve Oceania’s business objectives and the creation of shareholder value.
Under Oceania’s remuneration framework, individual performance and market relativity are key considerations in all
remuneration based decisions, balanced by the organisational context. Remuneration for senior managers includes
a mix of fixed and variable components. A copy of the Remuneration Policy is available on Oceania’s website.
Employees’ Remuneration
Oceania did not employ people directly in the year ended 31 May 2017. All employees are employed by the subsidiaries
of Oceania. The number of employees and former employees of Oceania’s subsidiaries, not being a Director, who
received remuneration and other benefits in excess of $100,000 for the financial year ended 31 May 2017 is set out
in the table of remuneration bands below.
The remuneration figures shown in the “Remuneration” column includes all monetary payments actually paid during
the course of the year ended 31 May 2017. The table does not include amounts paid after 31 May 2017 that relate to
the year ended 31 May 2017.
Remuneration
Number of Employees
$100,000 to $109,000
$110,000 to $119,000
$120,000 to $129,000
$130,000 to $139,000
$140,000 to $149,000
$150,000 to $159,000
$160,000 to $169,000
$180,000 to $189,000
$190,000 to $199,000
$260,000 to $269,000
$370,000 to $379,000
$380,000 to $389,000
$820,000 to $829,000
$1,080,000 to $1,089,000
10
9
7
4
3
6
1
1
1
1
1
1
11
11
Note:
1 The amounts payable to these employees include a transaction bonus that was paid on completion of the IPO, in recognition of the
employees' past services to Oceania.
Chief Executive Officer Remuneration
Recommendation 5.3: An issuer should disclose the remuneration arrangements in place for the CEO in its Annual
Report. This should include disclosure of the base salary, short term incentives and long term incentives and the
performance criteria used to determine performance based payments.
The remuneration of the Chief Executive Officer (CEO) for the year ended 31 May 2017 is as follows:
Base Salary
Other Benefits
STI
Subtotal
Transaction
Bonus
LTIP
Subtotal
Remuneration
Total
$482,071
$23,913
$232,000
$737,984
$370,000
$47,482
$417,482
$1,155,466
As this is the first annual report following Oceania’s listing, there are no comparable historic disclosures of CEO
remuneration. Comparable figures will be provided in future years.
84
Oceania Healthcare | Annual Report 2017 The remuneration of the CEO comprises of fixed remuneration and performance payments. Fixed remuneration includes
a base salary, the provision of a carpark and a vehicle allowance.
Mr Gasparich received a short term incentive of $232,000 in July 2016. This was based on an achievement of financial
performance (EBITDA performance against budget), health and safety performance (injury and reporting rates),
personal goals and a discretionary component for the year ended 31 May 2016, in which earnings increased
substantially over the previous year.
Mr Gasparich also received a transaction bonus of $370,000 on completion of the IPO, in recognition of his past
services to Oceania.
Mr Gasparich was invited to participate in a Long Term Incentive Plan which was established concurrent with the IPO.
As part of this, Earl Gasparich, Celia Gasparich and Carla Jane Pearce as trustees of the Gasparich Family Trust were
provided with an interest free loan of an amount of $550,000 to acquire 696,203 ordinary shares in Oceania. These
shares are held by OCA Employees Trustee Limited on behalf of the participants. Further detail about this Long Term
Incentive Plan is set out below.
In addition, 320,513 ordinary shares were vest in Earl Gasparich, Celia Gasparich and Carla Jane Pearce as
trustees of the Gasparich Family Trust on 9 May 2017 as the IPO target for the first long term incentive plan that
was implemented in August 2015 was met. An additional 641,026 ordinary shares vest on 28 July 2017, being the
business day after release of the financial statements for the year ended 31 May 2017, as the financial hurdles have
been met. Further detail about this Long Term Incentive Plan is set out below.
Senior Managers
Oceania’s senior managers are appointed by the CEO and their key performance indicators ('KPIs') contain specific
financial and other objectives. These KPIs are reviewed annually by the CEO and the Remuneration Committee,
which makes recommendations to the Board for approval. The performance of the senior managers against these
KPIs is evaluated annually.
Short Term Incentive Payments
Short term incentive ('STI') payments are at risk payments designed to motivate and reward for performance,
typically in that financial year. The target value of a STI payment is set as a percentage of the employee’s base salary.
The target areas for all employees who are entitled to a STI payment are set based on financial performance (EBITDA
performance against budget), health and safety performance (injury and reporting rates), personal goals, and there
is also a small discretionary component. The weightings applied to each of the target areas are consistent throughout
Oceania for all employees entitled to a STI payment.
The Board approves the STI payments to be made to senior managers at the end of each financial year, and approves
the senior manager targets for the following financial year.
Long Term Incentive Scheme
2015 LTIP Scheme
Certain Oceania senior managers participate in a Long Term Incentive Plan which was approved by the Board in
August 2015 ('2015 LTIP Scheme'). The senior managers were each provided with an interest free loan by Oceania
which was applied to acquiring shares. The amount of the loan for each senior manager was determined at the
Board’s discretion. As at 31 May 2017, the aggregate value of all outstanding loans made by Oceania to the senior
managers under the 2015 LTIP Scheme was $1,420,001.44.
The Board then approved the issue of, and subsequently issued, 2,730,772 shares under the 2015 LTIP Scheme which
vest to the participants as follows:
- One third of the participants’ shares on the business day after the IPO; and
- The remaining two thirds of the participants’ shares on the business day after release of the financial statements for
the year ended 31 May 2017 (subject to financial hurdles having been met).
The first third of the participants’ shares vested on 9 May 2017, being the business day after the IPO.
The remaining two thirds of the participants’ shares vest on 28 July 2017, being the business day after release of
the financial statements for the year ended 31 May 2017, as the financial hurdles have been met. The shares issued
to Earl Gasparich (through his family trust) and Matthew Ward (CFO) under the 2015 LTIP Scheme are subject to
escrow arrangements until the first Business Day after the date on which Oceania releases to NZX its preliminary
announcement of its financial results in respect of the financial year ended 31 May 2018.
85
Oceania Healthcare | Annual Report 2017 Corporate Governance Statement (Continued)
A participant will only benefit in respect of shares acquired under the 2015 LTIP Scheme if he or she remains
employed by Oceania at the vesting date for the relevant shares.
The loans must be repaid on or before 31 May 2019.
2017 LTIP Scheme
In addition, certain Oceania senior managers were invited to participate in another Long Term Incentive Plan which
was established concurrent with the IPO ('2017 LTIP Scheme'). The senior managers were each provided with an
interest free loan by Oceania which was applied to acquiring the shares. The amount of the loan for each senior
manager was determined at the Board’s discretion. There were 3,164,557 shares issued under the 2017 LTIP Scheme
on 4 May 2017 and these are held by OCA Employees Trustee Limited on behalf of the participants. As at 31 May
2017, the aggregate value of all outstanding loans made by Oceania to the senior managers under the 2017 LTIP
Scheme was $2,500,000.
Generally, the shares under the 2017 LTIP Scheme will be eligible to vest if, at the vesting date (which is the business
day after release of the financial statements for the year ended 31 May 2020), the participant remains employed
by Oceania and the performance hurdles are achieved. The performance hurdles require Oceania’s performance
to meet, or exceed, an underlying Earnings per Share Compound Annual Growth Rate ('EPS CAGR') of 35% per
annum or greater, over the three year vesting period. In calculating the underlying EPS CAGR, the Board will make
pro forma adjustments to the FY2017 underlying EPS depending on the timing of delivery of key development
projects. The Board may also adjust for the impact of items including significant one off gains or losses, acquisitions
or divestments and changes to accounting policy. The 2017 LTIP Scheme shares may not vest in the participants if
certain other conditions are not met.
The loans must be repaid after the 2017 LTIP Scheme shares have vested to each of the participants, or on such other
date determined in accordance with the rules of the 2017 LTIP Scheme.
Principle 6 – Risk Management
Directors should have a sound understanding of the material risks faced by the issuer and how to manage
them. The Board should regularly verify that the issuer has appropriate processes that identify and manage
potential and material risks.
Risk Management
Recommendation 6.1: An issuer should have a risk management framework for its business and the issuer’s Board
should receive and review regular reports. A framework should also be put in place to manage any existing risks and
to report the material risks facing the business and how these are being managed.
The Board is responsible for Oceania’s risk management and internal control. The Board monitors policies and
processes that identify significant business risks and implements procedures to monitor these risks.
The Chief Executive Officer and senior managers regularly identify the major risks affecting the business in an
organisational Risk Matrix, and develop strategies to mitigate these risks. Significant risks are discussed at Board
meetings, or as required. Oceania maintains insurance policies that it considers adequate to meet insurable risks.
Health and Safety
Recommendation 6.2: An issuer should disclose how it manages its health and safety risks and should report on
their health and safety risks, performance and management.
Oceania employs a General Manager Health and Safety and has established a Clinical and Health and Safety
Committee to assist the Board in meeting its responsibilities under the Health and Safety at Work Act 2015.
In particular, the Committee is responsible for ensuring that Health and Safety has appropriate focus within Oceania
by regularly engaging in assurance processes around risk assessment and mitigation, safety systems, staff capability,
staff competency, safety leadership and business safety culture.
Health and Safety review reports are a priority agenda item at all Board meetings and specific reviews are sought as
required. Oceania has developed a Health and Safety Risk Matrix to identify specific risks, assess their severity and
likelihood, document mitigation strategies and determine the level of residual risk. This matrix is reviewed annually by the
Board and annual Health and Safety objectives and KPI’s are set for the business based on the significant risks identified.
Detailed monthly reports are produced for the Board covering Health and Safety incidents, injury rates by severity,
local site Health and Safety committee meetings, sick leave and key initiatives undertaken.
86
Oceania Healthcare | Annual Report 2017 Oceania benchmarks its Health and Safety reporting rates against its peers, however, the methodology for
calculating such information is inconsistent in the industry. As part of an industry Health and Safety Working Group,
Oceania is working with other industry participants to agree on a consistent methodology for calculating Health and
Safety reporting rates.
Principle 7 – Auditors
The Board should ensure the quality and independence of the external audit process.
Relationship with Auditor
Recommendation 7.1 and 7.2: The Board should establish a framework for the issuer’s relationship with its external
auditor. This should include the procedures prescribed in the NZX Code. The external auditor should attend the
issuer’s annual meeting to answer questions from shareholders in relation to the audit.
The Audit Committee is responsible for the oversight of Oceania’s external audit arrangements. It is committed to
ensuring that Oceania’s external auditor is able to carry out its work independently so that financial reporting is
highly reliable and credible. Oceania has an External Auditor Independence policy, which is available on Oceania’s
website. The External Audit Independence Policy implements the procedures set out in the NZX Code.
The policy sets out the work that the external auditor is required to do and specifies the services that the external
auditor is not permitted to do, so that the ability of the auditor to carry out its work is not impaired and could not
reasonably be perceived to be impaired. All non-audit work that the external auditor performs must be approved
by the Chair of the Audit Committee.
Oceania’s external auditor is PricewaterhouseCoopers. Total fees paid to PricewaterhouseCoopers in its capacity
as auditor for FY2017 were $346,000. Total fees paid to PricewaterhouseCoopers for other professional services
for FY2017 were $663,000. The other service fees comprise other assurance services (trustee reporting and
external reporting to banks) ($13,000), taxation compliance services ($125,000) and transaction costs relating
to the IPO ($525,000).
PricewaterhouseCoopers has been invited to attend this year’s annual meeting and will be available to answer
questions about the audit process, Oceania’s accounting policies and the independence of the auditor.
Internal Audit Functions
Recommendation 7.3: Internal audit functions should be disclosed.
Oceania does not have an internal audit function other than the oversight of the Audit Committee. However,
Oceania appointed KPMG for the audit of its payroll system during the financial year ended 31 May 2017, and
specialist auditors are engaged for other areas for evaluating and continually improving the effectiveness of risk
management and internal processes, including:
- Oceania has successfully achieved ACC Workplace Safety Management Practices tertiary status since 2006.
The last audit was undertaken in December 2016, and Oceania passed the audit with no actions required.
In addition, Oceania engages external subject matter experts such as Site Safe to undertake regular contractor
management reviews of its site developments.
- Oceania’s clinical policies and processes are subject to an external audit via HealthCert. In addition, Technical
Advisory Services is Oceania’s designated auditing agency which conducts site audits of each care facility every
18 to 24 months. These site audits comprise both surveillance audits and certification audits.
- Oceania is audited for food safety by Quality Auditing Specialists Limited who are registered as approved
evaluators and verifiers for Food Control Plans by the Ministry for Primary Industries. Oceania’s Custom Food
Control Plan was evaluated by an MPI approved evaluator from Quality Auditing Specialists Limited and approved
on 28 October 2016. A verification audit was undertaken between 29 March and 20 June 2017 at each of the 39 of
Oceania’s sites that were registered. This is an annual registration, and verification audits are currently undertaken
every 12 months for each site.
- Oceania engages the DAA Group to undertake an audit of its retirement villages as is required under the
Retirement Villages Act 2003. DAA Group audits each registered village every three years.
87
Oceania Healthcare | Annual Report 2017 Corporate Governance Statement (Continued)
Principle 8 – Shareholder Rights And Relations
The Board should respect the rights of shareholders and foster constructive relationships with shareholders
that encourage them to engage with the issuer.
Information for Shareholders
Recommendation 8.1: An issuer should have a website where investors and interested stakeholders can access
financial and operational information and key corporate governance information about the issuer.
Oceania is committed to an open and transparent relationship with shareholders. The Board aims to ensure that all
shareholders are provided with all information necessary to assess Oceania’s direction and performance.
This is done through a range of communication methods including periodic and continuous disclosures to NZX and
ASX, half year and annual reports and the annual meeting. Oceania’s website provides financial and operational
information, and information about its Directors and senior managers and copies of its governance documents, for
investors and interested stakeholders to access at any time.
Communicating with Shareholders
Recommendation 8.2: An issuer should allow investors the ability to easily communicate with the issuer, including
providing the option to receive communications from the issuer electronically.
Shareholders have the option of receiving their communications electronically, including by email or through
Oceania’s investor centre. Oceania’s website also contains a section for electronic shareholder communications and
the Board encourages investors to make enquiries if they wish on environmental, social and governance issues.
Shareholder Voting Rights
Recommendation 8.3 and 8.4: Shareholders should have the right to vote on major decisions which may change the
nature of the company in which they are invested in. Each person who invests money in a company should have one
vote per share of the company they own equally with other shareholders.
The regulatory safeguards built into the NZX Listing Rules, ASX Listing Rules, the Companies Act 1993 and Oceania’s
constitution operate to preserve shareholders’ entitlement to vote on key decisions impacting Oceania, including
where votes are conducted by poll, each shareholder shall have one vote per share.
Notice of Annual Meeting
Recommendation 8.5: The Board should ensure that the annual shareholders notice of meeting is posted on the
issuer’s website as soon as possible and at least 28 days prior to the meeting.
Oceania encourages shareholder participation in meetings, and the Board aims to ensure that all relevant information
is provided to shareholders for consideration with sufficient notice in advance of shareholders’ meetings (and at least
28 days prior to Oceania’s annual meeting, including by posting the notice of annual meeting on Oceania’s website).
Principle 9 – Stakeholder Interests
The Board should respect the interests of stakeholders, taking into account the entity’s ownership type and
its fundamental purpose.
The Board carefully considers and respects the interests of Oceania’s stakeholders (in addition to its shareholders)
including, in particular, the residents and their families, its staff and the communities in which it operates.
In relation to residents, Oceania has a number of residential care and independent living policies that recognise the
rights of residents. Oceania also complies with the requirements of the Retirement Villages Code of Practice 2008
which further identifies obligations to residents and protects residents’ rights. Oceania has received external recognition
for service delivery in aged care, and was awarded the New Zealand Aged Care Association’s Award for Overall
Excellence in Care in 2015 and 2016.
In relation to staff, Oceania has a strong commitment to staff training and development. A dedicated learning and
development team focuses on the delivery of staff training and a Career Pathways Programme which includes a NZQA
recognised Healthcare Assistant Certificate in residential care. In addition, Oceania’s Wesley Institute of Learning
provides postgraduate nursing and healthcare assistant training to Oceania staff and the wider nursing and healthcare
industry, providing an important strategic avenue for recruitment by Oceania of well trained registered nurses.
88
Oceania Healthcare | Annual Report 2017
OTHER DISCLOSURES REQUIRED UNDER THE COMPANIES ACT 1993
Disclosure of Directors’ Interests
Directors disclosed, under section 140(2) of the Companies Act 1993, the following interests during the year ended
31 May 2017:
Director
Entity
Nature of Interest
Elizabeth Coutts
Ports of Auckland Limited
Skellerup Holdings Limited
Sanford Limited
EBOS Group Limited
Tennis Auckland Region Inc
Marsh Limited
Institute of Directors
Alan Isaac
New Zealand Community Trust
Kerry Prendergast
McGrathNicol & Partners
Companies in the Skellerup Group
Companies in the Opus Group
Fliway Group Limited
Companies in the Scales Corporation Group
Institute of Directors
Tourism New Zealand
Environmental Protection Authority
New Zealand Film Commission
Alzheimer’s New Zealand
New Zealand Community Trust
Wellington Free Ambulance
Compass Health Board
Patrick McCawe
Oceania Healthcare Holdings Limited
Retirement Finance Limited
RVU Investments Limited
Various companies associated with Macquarie Group
Hugh FitzSimons
Oceania Healthcare Holdings Limited
Retirement Finance Limited
RVU Investments Limited
RCNZ Properties 2008 Limited
Various companies associated with Macquarie Group
Chair
Chair
Director
Director
Director
Member of the Advisory Board
President
Chair
Chair
Director
Director
Director
Director
Vice-President
Chair
Chair
Chair
Ambassador
Trustee and Chair of Audit and Risk
Deputy Chair
Trustee
Director
Director
Director
Director
Director
Director
Director
Director
Director
Indemnity and Insurance
Oceania has granted indemnities, as permitted by the Companies Act 1993 and the Financial Markets Conduct Act
2013, in favour of each of its Directors. Oceania also maintains Directors’ and Officers’ liability insurance for its
Directors and officers.
Donations
For the year ended 31 May 2017, Oceania paid a total of $3,092.24 in donations.
89
Oceania Healthcare | Annual Report 2017 Corporate Governance Statement (Continued)
Stock Exchange Listings
Oceania’s shares are listed on the NZX and the ASX. Oceania is listed on ASX as a Foreign Exempt Listing, which
means that Oceania is required to comply with the NZX Listing Rules but it is exempt from the majority of the ASX
Listing Rules. In accordance with ASX Listing Rule 1.15.3, Oceania confirms that it has complied with the NZX Listing
Rules for the financial year ended 31 May 2017.
NZX Waivers
Oceania does not have any waivers from the requirements of the NZX Listing Rules.
Credit Rating
Oceania has no credit rating.
Former Directors
The following Directors resigned during the financial year ended 31 May 2017:
- Gregory Tomlinson (resigned on 28 October 2016)
- Grant Smith (resigned on 16 February 2017)
Subsidiary Company Directors
Earl Gasparich and Matthew Ward are Directors of all Oceania’s subsidiaries as at 31 May 2017, with the exception
of OCA Employees Trustee Limited (the Directors of which are Elizabeth Coutts and Hugh FitzSimons). No extra
remuneration is payable for any directorship of a subsidiary.
SHAREHOLDER INFORMATION
Twenty Largest Shareholders
(as at 30 June 2017)
Registered Shareholder
Oceania Healthcare Holdings Limited
New Zealand Central Securities Depository Limited
JP Morgan Nominees Australia Limited
Custodial Services Limited
Custodial Services Limited
FNZ Custodians Limited
National Nominees Limited
Investment Custodial Services Limited
Custodial Services Limited
Custodial Services Limited
Harrogate Trustee Limited
OCA Employees Trustee Limited
Custodial Services Limited
Custodial Services Limited
Leveraged Equities Finance Limited
BNP Paribas Noms Pty Limited
Earl Gasparich, Celia Gasparich & Carla Pearce
Forsyth Barr Custodians Limited
Walter Mick George Yovich & Jeanette Julia Yovich
Mark Stockton
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total
90
Number of Shares
% Shares
349,175,418
93,345,781
12,430,948
12,012,731
8,257,816
8,191,853
5,864,864
5,046,450
4,518,124
3,970,310
3,504,260
3,164,557
3,106,600
2,653,700
2,244,500
2,091,412
2,023,078
1,889,000
1,770,000
1,463,439
57.21
15.29
2.03
1.96
1.35
1.34
0.96
0.82
0.74
0.65
0.57
0.51
0.50
0.43
0.36
0.34
0.33
0.30
0.29
0.23
526,724,841
86.21
Oceania Healthcare | Annual Report 2017 New Zealand Central Securities Depository Limited provides a custodial depository service that allows electronic
trading of securities to its members. It does not have a beneficial interest in these shares. Its major holdings of
Oceania Healthcare Limited shares are:
Name
Number of Shares % Shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC Nominees (New Zealand) Limited
TEA Custodians Limited
ANZ Wholesale Trans-Tasman Property Securities Fund
ANZ Wholesale Australasian Share Fund
Generate Kiwisaver Public Trust Nominees Limited
MFL Mutual Fund Limited
Mint Nominees Limited
HSBC Nominees
Guardian Nominees
ANZ Wholesale Property Securities
Citibank Nominees (New Zealand) Limited
BNP Paribas Nominees (NZ) Limited
JP Morgan Chase Bank NA NZ Branch
BNP Paribas Nominees (NZ) Limited
Accident Compensation Corporation
Public Trust RIF Nominees Limited
ANZ Wholesale NZ Share Fund
BNP Paribas Nominees (NZ) Limited
National Nominees New Zealand Limited
ANZ New Zealand Investments Nominees Limited
Spread of Holdings
(as at 30 June 2017)
Size of Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Totals
Number of
Shareholders
110
804
749
1,365
171
%
3.44
25.13
23.41
42.67
5.35
100
18,940,338
16,176,521
8,947,420
6,778,768
6,700,000
6,386,469
4,642,807
4,126,193
3,059,341
3,004,972
2,880,918
2,685,192
2,657,544
1,564,129
1,561,646
1,114,893
538,345
425,000
409,375
283,427
3.10
2.65
1.47
1.11
1.10
1.05
0.76
0.68
0.50
0.49
0.47
0.44
0.44
0.26
0.26
0.18
0.09
0.07
0.07
0.05
Number of
Shares
91,581
3,243,123
6,163,047
39,250,514
561,506,270
%
0.02
0.53
1.01
6.43
92.01
100
Substantial Product Holders
According to notices given under the Financial Markets Conduct Act 2013, the following were substantial product
holders of Oceania as at 31 May 2017:
Substantial Product Holder
Shares
%
Oceania Healthcare Holdings Limited
349,175,418
57.22
Date of Notice
5 May 2017
The total number of shares on issue at 31 May 2017 was 610,254,535.
91
Oceania Healthcare | Annual Report 2017 Notes
92
Oceania Healthcare | Annual Report 2017 93
Oceania Healthcare | Annual Report 2017 oceaniahealthcare.co.nz