AT THE
HEART
OF IT
ANNUAL REPORT 2019
Pat Caspersen & son
Lives at Greenvalley
89-year-old Patricia Caspersen
moved into Greenvalley over
a year ago. “The first thing we
noticed about Greenvalley was
that the staff were extremely
approachable and friendly,”
says son Lex. “From the
managers, to the cleaners –
everyone we met had a smile
on their face.”
For Lex, it’s a relief to know
his Mum is in good hands.
“When Mum was living on her
own, she’d go days without
talking to anyone. Nowadays,
she’s a happier person – she’s
lost that loneliness. Her medical
needs are looked after, she gets
great food, and she’s the first to
sign up for van trips – she loves
to get out and about!”
Oceania Healthcare Limited | Annual Report 2019
Delight
It’s at the heart of Oceania Healthcare.
It’s what sets us apart. By taking the time
to know our residents, understand them
and personalise their care we make a huge
difference to their happiness, every day.
It's this care, and the care we show in all
aspects of our business, that creates value.
In this report, as we move towards an
integrated approach, we take a close up
look at how we do what we do, what this
means for our stakeholders, and why this
makes us strong today and in the long term.
Letter from the Chair
At a glance
Highlights
Working on what matters
How we create value
Letter from Chief Executive Officer
Chief Executive Officer’s Q+A
02
04
06
08
09
10
14
Our value outcomes
Residents love living in our
communities
– Our care suite strategy explained
– Developments and design
We delight our residents with
hospitality inspired, customer
led services
– Dining to delight
We are passionate about the
wellbeing of our residents, their
families and our teams of staff
– Developing great leaders
We lead the way in how we
do things
– Going digital to improve care
Board of Directors
Three Year Summary
Financial Statements
Corporate Governance
16
17
19
28
29
31
32
34
35
36
38
39
97
01
Letter from the Chair
I am pleased to report another strong
performance for Oceania Healthcare
in the year ending 31 May 2019, with
Underlying Net Profit after Tax from
continuing operations of $49.7m and
Total Comprehensive Income of $99.8m.
We have continued to successfully
execute our strategy of developing
our brownfield sites in major cities and
upgrading our other aged care sites
throughout New Zealand during the
past year. In doing so, we are able to
offer a superior product and service
for both our care and independent
living residents.
Our care strategy is to develop premium
rooms that are sold under occupation
right agreements (our care suites) as well
as transform our existing portfolio into
a mix of premium and standard rooms.
Oceania Healthcare not only receives
the daily care fee for our premium
rooms (for providing care services to
each resident), but also a return from
the deferred management fee (if the
resident is occupying a care suite) or the
daily premium accommodation charge.
We explain our care suite strategy in
more detail on page 17 and our CEO
expands on the success of this strategy
during the last financial year in his report.
Our strategy in our independent living
business is to redevelop our premium
locations with high quality independent
living accommodation and spacious,
well-appointed community facilities.
By doing this, we maximise value and
yield through the revenue generated
from the selling prices and the trail
deferred management income (being
the deferred management fees payable
on the ORA). We also continue to
purchase property adjoining existing
sites in order to expand our villages and
in the year ahead will identify more well-
located greenfield sites to support our
future growth. Further information on
our development philosophy is set out
on page 19.
During the year, the Directors have had
the pleasure of visiting many of our
sites, either as a Board or individually,
meeting with our staff and residents and
observing the culture and day-to-day
operations at our sites. It is great to see
our residents enjoying the services that
we deliver and the enthusiasm, passion
and capabilities of our team. We have
outstanding staff members and we
care about their wellbeing. During
these visits, the Directors welcomed
comments from residents and their
families which were incorporated
into Oceania Healthcare's continuous
improvement processes.
This year we have started the journey
towards preparing our Annual
Report using the integrated reporting
framework. We recognise that value
for Oceania Healthcare extends
beyond purely financial performance
and that it includes other dimensions,
such as our social and environmental
performance, that are important to us
and our stakeholders. We are currently
embedding the principles of integrated
thinking throughout the business so
that the reporting step will follow in
the years to come.
We are now well into the cycle of
decommissioning older sites and
replacing them with our new, premium
offering. For our key brownfields
locations, this redevelopment process
typically involves the construction of
new aged care buildings on our sites
as a first stage (adjacent to the existing
buildings), the transfer of residents from
the existing aged care centre to the new
centre once opened, and then the sale
(under ORA) of remaining premium beds
in the new centre.
There is a period at the beginning of
this cycle where earnings from our aged
care segment are negatively impacted,
and we have seen this in the 2019
financial year as we opened our new
care centre at The BayView in Tauranga
and neared completion of our new
care centre at Awatere in Hamilton.
We have also converted standard rooms
into 47 care suites within a number of
existing sites and in the process of this
conversion temporarily held rooms
vacant while construction works were
completed. This naturally reduces
earnings in the short term from the care
segment of our business until these
rooms are complete and sold under
ORA, in the process recovering the
capital costs of the conversion
and significantly enhancing aged
care earnings per bed.
As these new care suites at our
redevelopment sites, and rooms
converted into care suites at other
existing sites, are sold over the coming
year, earnings from our aged care
segment will increase materially due
to the enhanced earnings from the
care suite model.
We are about to commence the
redevelopment of our Lady Allum Village
in Milford, Auckland, with Stage One
comprising the new (replacement) care
centre located adjacent to the existing
care centre on the site. Again, this
redevelopment will cause a short term
negative impact to aged care earnings
as the existing site is impacted by this
construction, however considerable long
term value creation is unlocked through
the increased intensity of both aged care
and retirement village on the site, as
well as the enhanced earnings from
our new care suites.
02
Oceania Healthcare Limited | Annual Report 2019 Liz Coutts
Chair
Liz Coutts has been a
Director of Oceania Healthcare
since 5 November 2014 and
was appointed Chair in 2014.
Liz is also the Chair of Ports
of Auckland Limited and
Skellerup Holdings Limited,
and a director of EBOS
Group Limited.
Given Oceania Healthcare’s current
position in the redevelopment and
conversion cycle, our Underlying
Net Profit after Tax from continuing
operations was consistent with
the prior year at $49.7m. This was
largely a reflection of the timing for
completion of our two key development
sites (Meadowbank Stage Four and
The Sands) near the very end of our
financial year, which only allowed for a
small number of residents to move into
these sites before the end of May. We
are pleased to report that sales have
been very strong over these two sites
during June and July to date, and we
expect this to continue as both sites are
sold down over the coming year.
Reported Net Profit after Tax is $45.4m
and reflects the valuation of new
brownfields developments delivered
in the year. This is below last year due
to the valuation of our existing villages
remaining stable.
Total Comprehensive Income has
increased by 22.1% to $99.8m over the
year. This measure takes into account the
enhanced value that we are adding to our
aged care business as we bring new care
suites onto the market.
We have continued to increase our
total assets as a result of our ongoing
capital development programme and
revaluations with total assets valued at
$1.4bn as at 31 May 2019, an increase of
22.0% on prior year.
Operating cash flow of $89.3m was also
8.6% higher than the prior corresponding
period with sale proceeds from previously
completed developments contributing
$75.5m. We continue to maintain
sufficient headroom and flexibility
to accelerate the execution of our
development pipeline.
With net debt of $248.2m as at 31 May
2019, our gearing remains prudent with
net debt to net debt plus equity of 28.9%.
The Directors have declared a final
dividend of 2.6 cents per share, taking
full year dividends (non-imputed) to
4.7 cents per share, which represents
57% of Underlying Net Profit after Tax.
I am also pleased to advise that the
Board has approved the implementation
of a dividend reinvestment plan for
our New Zealand and Australian
shareholders, to take effect from the
dividend payable on 26 August 2019.
This provides a cost effective and
convenient way for our shareholders
to increase their investment in Oceania
Healthcare without any brokerage fees
by reinvesting all or part of any dividend
paid on their shares in additional
Oceania Healthcare shares instead of
receiving that distribution in cash.
On behalf of the Board, I would like
to thank our staff for their valuable
contribution again this year. The energy
and commitment that our staff bring
to our business is second to none and
we call upon the passion, skill and
experience of our staff every day to
continue to deliver high quality care
and services to our residents.
I am looking forward to the year ahead
as we continue to execute our strategy
to transform our product portfolio
and focus on delivering services which
exceed our residents’ expectations.
Yours sincerely,
Elizabeth Coutts
Chair, Oceania Healthcare Limited
INSIGHT:
Keeping a happy balance
I use some of my leisure time to stay fit
and active. I run 6km on the treadmill
most days and enjoy walking around
Auckland’s waterfront and tracks
around the Queenstown area. I enjoy
yoga - a personal instructor keeps me
on track with my fitness goals!
Tennis is my favourite sport. Recently
I have been fundraising for the
redevelopment of the Auckland
Tennis Centre and I am actively
involved with the governance of the
ASB Classic international tennis
tournament held in January each year.
When I’m not working, my husband
and I love to travel overseas and
experience new cultures and places.
03
At a glance
Oceania Healthcare is a leading provider
of premium healthcare services, with sites
located in metropolitan areas across
New Zealand. We are dedicated to delivering
exceptional and innovative hospitality services
that delight our residents.
04
Oceania Healthcare Limited | Annual Report 2019 We have a strong platform for growth
with a substantial development pipeline
and proven expertise and experience
in managing and delivering construction
projects.
We have sufficient land to build 1,995
new residences with 1,310 of these
already consented.
We pride ourselves in being a recognised
industry leader in the provision of clinical
care to our residents. Throughout the
year, we have continued to transform our
aged care offering and are continuously
innovating in both clinical care and
hospitality led service delivery.
As at 31 May 2019
Staff
2,600
Residents
3,500
Care beds and care suites
Units
2,654
1,202
Existing sites with
mature operations
Existing sites with
brownfield developments
(current and planned)
Undeveloped
sites
23
21
2
Total sites
46
05
Highlights
Financial
Underlying Net Profit after Tax – continuing operations1
$49.7m
1.8%
Behind 31 May 2018
underlying net profit
after tax – continuing
operations
Total Assets
$1.4b
Reported Total
Comprehensive Income
$99.8m
22.1%
Ahead of 31 May
2018 reported total
comprehensive
income of $81.7m
22.0% Higher than
31 May 2018 total
assets of $1.1b
Operating Cash Flow
$89.3m
8.6% Ahead of 31 May 2018
operating cash flow
of $82.2m
1 Underlying net profit after tax – continuing operations contains a
proforma adjustment to underlying net profit after tax of $50.2m
and $52.1m respectively for FY2019 and FY2018 that excludes the
earnings from sites divested in 1HY2019.
06
Oceania Healthcare Limited | Annual Report 2019 Operational
New Units
76
Resale Units
New Care Suites
Resale Care Suites
83
57
94
For the 12 months to 31 May 2019
Total Sales
310
Developments
10.7% Ahead of total sales
for the 12 months
to 31 May 2018
Units + Care Suites
Units + Care Suites
Units + Care Suites
Units + Care Suites
308
411
272
265
CONSENT SECURED
UNDER CONSTRUCTION
COMPLETED
TO COMPLETE IN FY2020
Resource consents
received during FY2019 for:
– Elmwood (142 care
suites in Auckland);
411 units and care suites
under construction as at
31 May 2019:
– Awatere (Hamilton);
272 units and care suites
completed in FY2019 at:
– The BayView (Tauranga);
– Meadowbank (Auckland);
– Eden (49 apartments
– Green Gables (Nelson);
and
in Auckland);
– Meadowbank (35 care
suites in Auckland);
– Eversley (61 care suites
in Hastings); and
– Eldon (21 villas on the
Kapiti Coast).
67.3%
of the total development
pipeline is now consented.
– Meadowbank (Auckland);
– The Sands (Auckland).
– Windermere (Christchurch);
– The BayView (Tauranga);
– Gracelands (Hastings);
– Whitianga (Coromandel);
and
– Elderslea (Upper Hutt).
265 units and care suites
to complete by the end of
FY2020 at:
– Awatere (90 care suites);
– Green Gables (89
apartments and care suites);
– Meadowbank
(26 apartments);
– Gracelands (32 villas);
– Woodlands (6 villas);
– Whitianga (10 villas); and
– Elderslea (12 villas).
07
Working on what matters
We have set our strategy by considering
what is important to our key stakeholders
and which risks and opportunities have
the greatest impact on our ability to
create value in the short and long term.
Our key stakeholders
– Residents and Families
– Staff
– DHBs
– Regulators
– Investors and Funders
– Communities
– Suppliers/Contractors
For the purposes of this report the
Board and Senior Management have
considered our key stakeholders and the
material risks in our internal risk register.
We have prioritised these to determine
four outcomes (or material matters) that
guide our strategy.
As we are at the early stages of
embedding the Integrated Reporting
framework, the material matters reflect
our customer and staff engagement
surveys, feedback from other
stakeholders and the views of Board and
Senior Management. We have reviewed
how we measure our performance of the
four material matters (set out on page 9
under Our Value Outcomes) and have
included some key performance
indicators in the subsequent sections
of this report, along with some examples
of our strategy in action.
We intend to build on this for future
reports, by conducting a formal
materiality review including interviews
with representatives of the various
stakeholder groups to refine what
matters most to them. This will enable
us to report on the matters that are
most relevant for our stakeholders.
08
Oceania Healthcare Limited | Annual Report 2019 How we create value
Ray and Vi
The BayView – 6 months
“Mum and Dad have been happily married for over
60 years, but when they needed rest home care, my goal
was to help them stay together. They moved into a large
care suite and it’s a relief to know they won’t ever have to
move again, even if one of them needs hospital care”.
How we create value
OUR DRIVERS
Our people
Highly motivated, passionate and safe staff
Our expertise
The capability of our people and quality of
our systems
Our villages
The quality of our villages and landbank
Our relationships
The strength of the relationships we have
with our key stakeholders and our brand
reputation
Our financial capital
The combination of shareholder funds,
banking facilities and operating cashflow
employed to maintain and grow our business
Our natural capital
The quality of the natural resources we
rely on to run our business today and in
the future
OUR VALUE OUTCOMES
Residents love living in
our communities
We delight our residents
with hospitality inspired,
customer led services
We are passionate about
the wellbeing of our
staff, residents and their
families
We lead the way in how
we do things
DEVELOP
SELL
DELIGHT
i
n
d
e
F
ro
$ YIE L D
e a
m superio r c a r
pendent living e x p e
d
n
c e s
n
r i e
+
$ GROW T H
Development of our l a n d b a n k b y
recycling capital fro m s a l e s
OUR PURPOSE
“We enhance the wellbeing of our residents and provide peace of mind to their families”
OUR VALUES
Kindness – Respect – Passion – Excellence
09
Letter from Chief Executive Officer
We have had another great year at Oceania
Healthcare as we go about delivering care and
services to our residents while diligently building,
selling and operating new sites. We are continuing
to push the boundaries by reinventing aged care
with more innovation than ever seen in New Zealand,
and delivering hospitality inspired services that
continue to delight our residents.
We were pleased to win both the
Innovative Service Delivery and the
Excellence in Food awards at the annual
New Zealand Aged Care Association
conference in September 2018.
Care suites are at the core of our
growth strategy in aged care. These
premium rooms are fully certified by
the Ministry of Health to provide rest
home through to hospital level care,
enabling residents to remain in the same
room throughout their care journey.
This full-service, round-the-clock care
capability sets care suites apart from
serviced apartments.
By selling premium rooms as care suites
under an occupation right agreement,
we not only generate aged care earnings
during the resident’s tenure by providing
care services, but we also realise a
deferred management fee at the end of
the tenure. These two revenue streams
provide the returns required to justify a
continued investment in aged care and
meet the significant expected increase
in demand as the population ages.
An important feature of our aged care
strategy is the enhancement of care and
hospitality service standards, that go
hand-in-hand with the redevelopment
of our premium care suite product.
We introduced our new superior service
delivery model to our Meadowbank
care suite residents last year, which
provides them personalised, resident-
centred services. Our residents enjoy
the benefits of having a guest service
manager (similar to a concierge at a
hotel), a choice of meals from a menu
in the dining room or from the in-room
menu, morning and afternoon tea
served in their suite or in the lounge,
a range of engaging leisure activities
on offer seven days a week and personal
laundry pressed and folded. Following
the success of this new model at
Meadowbank, we introduced the same
model at The BayView where it has
also been well received and sales of our
new suites that opened in January are
tracking ahead of expectation. We are
now looking forward to implementing
this model in our new care suites at
The Sands, Awatere (formerly Trevellyn in
Hamilton) and Green Gables (in Nelson)
when these sites open during FY2020.
The weighting of our portfolio in care
and superior financial returns from
our care suite product differentiate us
from other operators in the market and
provide resilience against downturns in
the property cycle. We have continued
to prove our capability to design, build,
sell and operate premium aged care and
retirement villages throughout the last
financial year and we are particularly
thrilled to have welcomed residents
into our brand new care suite building
at The BayView in Tauranga and our
first apartment residents to their brand
new waterfront village, The Sands, in
Auckland’s Browns Bay in May 2019.
Care
We have continued to transform our
aged care offering during the year
and are continuously innovating in
both clinical care and hospitality-led
service delivery. We have a significantly
higher weighting of aged care beds to
retirement village units in our portfolio
compared to our peers and this will
remain the case as we build out our
brownfields development pipeline.
We pride ourselves in delivering
excellent care to our residents and
in being a recognised industry
leader in the provision of clinical
outcomes.
10
Oceania Healthcare Limited | Annual Report 2019 During the year we appointed a National
Culinary Manager who has been working
with the Executive Chefs at our sites
to raise the standard of our dining
experience and ensure that our residents
are being served tasty and nutritious
meals. Our new winter 2019 menu was
rolled out across all of our aged care
sites in May 2019 and we have received
fantastic feedback from our residents.
We are also improving our clinical care
delivery with the necessary investment
in our IT platform. We are rolling out a
Resident Clinical Management System,
e-Case, across the country and, as at
31 May 2019, this has been implemented
at six of our sites. E-Case is revolutionising
the way that we manage resident
information.
In addition to building new care suites,
we have been transforming our aged
care portfolio by converting standard
rooms to premium rooms across a
number of sites around the country.
This process involves reconfiguring
internal layouts, enlarging room sizes,
and in some cases retrofitting ensuites
in order to bring the product up to a
superior standard. The new rooms are
certified as care suites and the capital
invested is recovered with the sale of
the occupation right agreement.
Aged care returns are also enhanced by
generating a deferred management fee
from the occupation right agreement.
Over the last year, we have completed
47 care suite conversions at Woodlands
(Motueka, Nelson), Holmwood (Rangiora,
Canterbury), St Johns Wood (Taupo),
Atawhai (Hawkes Bay), Middlepark
(Christchurch), Otumarama (Nelson)
and Addington Gardens (Christchurch).
Demand has been strong for these
premium rooms and we are now
planning the next stage of conversions
across nine sites.
Developments
We have made good progress on our
development sites during the year, with
all 272 retirement village units and
aged care beds completed as signalled
to investors last year. We are pleased
to have delivered the 81 care suites at
The BayView, 83 apartments and care
suites in Stage Four at Meadowbank
and 108 apartments and care suites at
The Sands, all on time and on budget.
As you will see from this Annual Report,
our new developments are meticulously
designed with their unique location
in mind. Residents at Meadowbank
enjoy spectacular views over the
neighbourhood and across the Orakei
Basin towards the Auckland CBD.
The Sands is a development right on the
waterfront at Browns Bay on Auckland’s
North Shore. Situated just across the
road from the beach, this boutique
village boasts stunning views across the
water looking out towards Rangitoto.
The apartments at Meadowbank and
The Sands are spacious and a significant
amount of care and planning has gone
into their design including enclosable
glass balconies, large showers and
wide corridors to make it easier for
our residents to enjoy their homes.
11
LETTER FROM CHIEF EXECUTIVE OFFICER
In addition to the completion of these
prominent Auckland projects, our
development team has been working
hard to complete 90 care suites at
Awatere (formerly Trevellyn) in July 2019.
In a similar approach to that taken at
The BayView in December, we intend
to move residents of the previous care
centre into the new care centre and then
sell the balance of the new care suites
under occupation right agreement. Later,
as rooms become available, we will sell
these under occupation right agreement.
We are also making good progress at
our Green Gables development in Nelson
(comprising 89 apartments and care
suites). This development is in a premium
location in central Nelson and we are
looking forward to completing this in the
second half of FY2020.
Construction is also well underway
on Stage Five at Meadowbank (26
apartments), Stage Two at The BayView
(74 apartments and community centre),
Gracelands (32 villas), Whitianga
(10 villas) and Windermere in
Christchurch (93 apartments and
care suites).
We are also skilled in the management
of our resource consent processes, with
several new consents achieved during
the past year that significantly de-risk
our future redevelopment plans. New
consents were obtained during the year
at Eden, Eldon, Elmwood, Eversley, Lady
Allum and for Stage Six at Meadowbank.
Of the 1,995 retirement village units and
aged care beds in our pipeline, 67.3%
now have planning approvals in place.
Our people
Despite the substantial development
programme ahead of us, Oceania
Healthcare is very much a people
business. We have over 2,600 staff
caring for our residents and we
recognise that the passion of our staff is
the key to delivering outstanding care
to our residents. Two prominent features
of our culture at Oceania Healthcare are
leadership empowerment and teamwork,
and these are modelled on a daily basis
throughout our sites. I have personally
visited all 36 of our aged care sites
three times over the past year, both to
provide support and encouragement
to our site management, but also to
connect directly with our staff. I spend
three hours at every site visit, with half of
this dedicated to meeting with staff and
hearing their stories on a one-on-one or
group basis.
We have made a significant investment
again this year in learning and
development, with most of our Business
and Care Managers and Clinical
Managers now having completed the
Step-Up for Leaders training programme.
This upskilling enables them to lead
their people better than ever before.
We are also encouraged that 14% of
our healthcare assistants and 9% of our
cleaners completed the New Zealand
Certificate in Health and Wellbeing
qualification in the past year, enabling
them to move into higher pay bands,
with a further 32% of our healthcare
assistants and 28% of our cleaners
currently enrolled in these courses.
As well as providing our healthcare
assistants with substantial remuneration
increases through the Government’s
equal pay regime, in October 2018 we
increased our pay scales for registered
nurses to recognise the importance of
retaining these key employees in the
face of shortages across the health
sector. Our pay rates are now leading
the industry and new pathways have
been established for registered nurses
to progress through our pay scales with
high levels of professional development.
During the year we also achieved a
two year accreditation status with
Immigration New Zealand, which
enables Oceania Healthcare to
recruit internationally and provides a
faster turnaround for our employees’
work visas. This enhances Oceania
Healthcare’s employment brand and
builds on our reputation as a preferred
employer in the sector.
We are announcing the introduction
of an employee share scheme which
will be offered to all of our permanent
employees. This will give staff an
opportunity to own a stake in Oceania
Healthcare and share in our growth.
This year our staff will be invited to
participate in the scheme and receive
an allocation of $800 per annum (for
full-time employees) or $400 per annum
(for part-time employees) of Oceania
Healthcare shares. The shares will be held
in trust for three years before they are
transferred into the employee’s name. We
are delighted that our staff will be further
recognised for the crucial part that they
play in Oceania Healthcare’s success.
12
Oceania Healthcare Limited | Annual Report 2019 INSIGHT:
My passion away from work
My family owned a sailing yacht from
when I was about 7 years old, and
we spent holidays sailing around the
Hauraki Gulf, one of the most beautiful
harbours in the world. I used to love
coming into a bay at the end of a day
out of the wind, weaving amongst the
larger yachts and launches moored
further off the shore, and finding a
spot closer in because our boat was
smaller. As soon as we had dropped
anchor I would jump in our little
dinghy and row ashore, exploring
the beaches and rocks. When I was
9 years old, I got my own sailing
dinghy, which we towed behind our
boat and when we moored I’d put up
the mast and sail around on my own.
Sailing is a sport that, once you’ve
experienced it as a youngster, you
always have in your blood. I don’t get
a lot of opportunity to get out on the
water nowadays but when I do the
exhilaration of being powered only
by the wind, at the edge of control,
is very addictive. It’s great that I can
now experience this with my kids and
pass on the passion for this great
New Zealand pastime.
13
As well as working hard to deliver real
benefits for our staff, we have also
continued our focus on enhancing our
health and safety training and support
programmes across our sites. We
have developed a robust contractor
management process and training
programme and are rolling this out
nationwide. It is very pleasing to see
that our ongoing focus in this area has
had a positive impact on our business,
as we have made a further significant
reduction in our injury rates and in
doing so provided our staff with a safer
workplace than ever before.
We have a substantial development
pipeline at our brownfields sites for
the next six years and are in the financial
position to make further acquisitions of
development land should opportunities
arise during the next year. We are
looking forward to further executing
our development pipeline and care suite
conversion projects in order to deliver the
highest standards of care to our residents.
I am excited for the next year, with our
experienced and strong Board and
leadership team in place, a clear strategy
for growth, and our passionate staff who
are totally committed to their residents.
Outlook
Yours sincerely,
In the two years since our Initial Public
Offering we have been extremely busy
developing, selling and operating new
sites as well as transforming our care
offering – both in product and service
delivery.
Earl Gasparich
Chief Executive Officer
Q+A
It's been a busy two years for Oceania
Healthcare’s Chief Executive Officer,
Earl Gasparich, since Oceania Healthcare
listed on NZX and ASX in May 2017. We had
a chat with Earl about the challenges and
opportunities for Oceania Healthcare and
what makes him tick.
Q: It sounds as though you’ve had
a pretty busy time at work lately.
What do you like to do in your time
off to help you relax and recharge?
A: We’ve been incredibly busy over the
past two years executing our strategy
- there’s a lot going on and the team
are working very hard. Relaxing and
recharging is a very tough question –
my family would say that I don’t! I’ve
always been a bit of a workaholic but in
this role you have to intentionally create
time for family and friends or else it just
won’t happen. I did make a decision
several years ago that I wouldn’t work
on the weekends while the kids were
awake, and I’ve generally managed to
stick to that despite it meaning some
very late nights after they are asleep.
So I spend most of the time when not
at work with my wife and three children
doing a variety of sports, entertaining
and relaxing at home. We live on a
lifestyle block out in the western part
of Auckland which is a great haven.
I also make sure that I take time off
during school holidays which are good
times for making family memories.
Q: Oceania Healthcare has been listed
for two years now. What has been
achieved in that time?
A: The listing gave us the capital we
needed to execute our brownfields
development pipeline and transform
our existing aged care portfolio. From
a development perspective, we’ve
completed 364 units and care suites in
two years at The Sands, Meadowbank
Stages Three and Four and The BayView
care suites all on time and on budget.
We’ve also converted 114 standard rooms
and apartments into premium offerings
that are being sold under ORAs as care
suites at 12 sites. With our premium care
strategy we’ve launched our enhanced
care services at all sites with care suites,
and are now delivering unparalleled
levels of service in our new sites. We’ve
achieved an enormous amount in just
two years – the considerable investment
in our people is echoed in our staff
satisfaction, reduced injury rates and the
training that we’re providing at all levels.
We’ve lifted our culinary experience, our
activities on site, the list goes on and
on. I’m incredibly proud of our people
who are passionate and dedicated to
providing the best care and service to
our residents.
Q: How do you perceive the reported
slow down in the residential property
market in New Zealand and how is
Oceania Healthcare positioned to
respond to this?
A: There is no doubt that the growth in
residential property values has slowed
and in some parts of the country we
are seeing a slight easing in prices.
However, there is still a significant gap
in most regions between the average
house price and the asking price for
independent living units. For us at
Oceania Healthcare, we’ve been saying
for some time that, while Oceania
Healthcare is certainly not immune to the
effects of the slowing property market,
our business is a lot more resilient to it
than others. This is simply because of
the scale of our Care business, which
we describe as “needs-based”. What we
mean by this is that the decision to move
into an Oceania Healthcare aged care
site by an incoming care resident is not
driven by what the property market is
doing, it is driven by their need for care,
which is often urgent. These residents
are not factoring into their decision
how much they will sell their residential
properties for, that is the last thing on
their minds when their needs are such
that moving into aged residential care
is imperative. Even when looking to
purchase a care suite, the lower entry
price for these rooms means that
affordability is not compromised.
14
Oceania Healthcare Limited | Annual Report 2019 Q: Oceania Healthcare sold five of
its sites to Heritage Lifecare last year.
Are you intending to sell any other
sites over the next 12 months?
A: We undertook a portfolio review last
year that identified a small number of
sites that were not suitable for upgrade
or redevelopment and therefore did not
fit within our future aged care plans. As
a result of this review, we sold five of our
aged care sites to Heritage Lifecare last
year. At this stage we are not intending
to sell any other aged care sites.
Q: There has been a lot of discussion
recently about wage rates in the sector.
How is Oceania Healthcare rewarding
its people?
A: We have been investing a lot in
our people over the past two years.
We delivered a significant increase in the
pay rates for registered nurses last year,
as well as delivering the second year of
the Government’s equal pay settlement
for healthcare assistants. The starting
rate for other housekeeping staff also
increased significantly. Our pay rates for
registered nurses are now well aligned
to the recent DHB settlement and this
has certainly eased the pressure on
the retention of our registered nurses.
We provide direct support to our
registered nurses to complete their
professional development requirements
and for healthcare assistants to progress
through qualification levels, and have
also invested considerably in our
tailored leadership development
training programme, Step-Up.
On top of this, we have just launched
our employee share scheme which
all of our permanent staff will be
invited to participate in. Our staff
will be able to own a stake in Oceania
Healthcare and will be further
recognised for the vital role they
play in Oceania Healthcare’s success.
Q: Your development at The BayView
in Tauranga has been the first major
development out of Auckland for some
time. Now that some of the residents
have been living in the care suites there
for six months, what feedback are you
getting for this product?
A: The feedback at The BayView is
wonderful. We took 60 residents from
an older building on site and moved
them into their brand new care suites
with new furniture in every room, and a
completely new model of care service
delivery. We have also sold 17 care suites
to new residents, who are enjoying
fabulous food, leisure activities and
beautiful common areas. I’m also really
pleased with the feedback from staff,
who have told me how much of a lift
in wellbeing they have noticed in their
residents simply from the move into the
new environment. It's great to see how
well this new service model is going.
Q: Oceania Healthcare delivered 272
units and care suites during FY2019.
How confident are you that the team
will be able to deliver the 250+ units
and care suites promised from FY2020?
A: We are confident that Oceania
Healthcare will be able to deliver our
increased build rates of 250 units and
care suites in FY2021 and 300 units
and care suites each year thereafter,
starting with 265 units and care suites
due for completion in FY2020. With
the completion of The Sands and
Meadowbank Stage Four on programme
this past year, and the completion of
Awatere Village ahead of programme
in July 2019, we have proven our
development capability to the market.
All of our current developments are
progressing well according to plan
and therefore we’ve got high levels
of confidence in the team continuing
to deliver.
Q: What level of acquisitions will
Oceania Healthcare need to achieve
this level of growth?
A: We acquired the properties at
Waimarie Street in St Heliers, Auckland
last year and our team has been busy
consenting this development. In addition
to this, we have bought some properties
adjacent to our Elmwood, Lady Allum
and Eden sites (also in Auckland),
so we’ve got plenty of development
ahead of us. Having said that, if a good
opportunity came up, we would certainly
look to acquire this in the same way
that we acquired the properties in
St Heliers. The reality is that we’re a
good five years away from needing
to turn dirt on another site in order to
maintain our build rate.
15
OUR VALUE OUTCOMES
Residents love living in
our communities
We are creating premium aged care
and independent living environments by
executing our development pipeline of 1,995
suites and units and by converting standard
rooms to care suites. As a result our
portfolio will increase by 38% to over 5,000
suites and units, with 55% of these being
care beds and care suites. Our care portfolio
will comprise ~67% premium beds.
CARE PORTFOLIO COMPOSITION
INCREASING DEFERRED MANAGEMENT FEE
($M’S PER ANNUM)
2,593
Beds
2,654
Beds
2,724
Beds
2,902
Beds
13%
24%
63%
21%
23%
56%
30%
22%
48%
46%
21%
33%
3,500
3,000
2,500
2,000
1,500
1,000
500
s
t
i
n
u
e
r
a
C
15.0
13.3
3.0
3.6
17.1
5.1
FY20181
FY2019
FY2020
Fully Built Pipeline
FY2017
FY2018
FY2019
Standard beds
PAC beds
Care suites
Care suites
Independent living units
1 FY2018 portfolio restated for the sites that were divested in 1H2019.
16
Oceania Healthcare Limited | Annual Report 2019
Our care suite strategy explained
At Oceania Healthcare, we are changing the face
of premium aged residential care in New Zealand.
As baby-boomers retire and later require permanent
assisted living, they are demanding standards of
accommodation and service well beyond what
traditional rest homes are capable of providing.
In addition, it is well recognised that the Government’s
fixed daily care fee falls well short of what is required
to give operators anything like a reasonable return on
the capital investment needed for new aged care sites.
In response, the DHBs have for some
time recognised the ability of operators
to provide residents with premium
rooms, and charge residents additional
fees to stay in these types of superior
accommodation. These fees take the form
of premium accommodation charges
(PACs) or deferred management fees
(DMFs) on occupation right agreements
(ORAs). These two premium charging
models have strong similarities to the
Australian aged care accommodation
funding model of daily accommodation
payments (DAPs) and refundable
accommodation deposits (RADs).
We offer residents both types of
premium rooms at Oceania Healthcare
(PACs and ORAs). At our new aged
residential care sites these premium
rooms are called care suites and they
are all licensed under ORAs. Each care
suite has its own kitchenette and seating
area and most have a balcony, so it feels
more like an apartment than simply a
bedroom. Our focus on great design,
and our passion for creating delightful
customer experiences, ensures that our
care suite environments do not look
or feel anything like a traditional rest
home either. Our design ensures that
any medical equipment is hidden away,
and the café, dining area and lounges
look like an independent living area of
a retirement village.
Our executive chef prepares tailored
meals just the way our residents like it,
and residents can choose if they want
to eat in their own suite, or in the dining
room. We also have dedicated guest
services roles (like concierges within
hotels) to help coordinate a resident’s
diary, ensuring it is full of the things they
love to do. This guest services function
also provides an important role liaising
with friends and families so the resident
can stay socially connected with both
their families, and their local community.
Our care suites are all fully certified
by the Ministry of Health to provide
aged residential care services from rest
home to hospital level, meaning that
the resident does not need to move
out of the care suite as their needs
increase. This is a significant advantage
of the care suite model compared with
serviced apartments, which are generally
only certified, at best, to provide low
levels of care. When the resident within
a serviced apartment requires higher
levels of care, they are usually moved
into a more traditional aged residential
care centre and, if a premium room is
chosen, they will pay a PAC every day
for the remainder of their stay. In some
cases, the resident may even have to
move again – a third time – if their needs
increase from rest home to hospital level
of care. This is highly undesirable for
residents at the most vulnerable time
of their lives.
In contrast, when a resident moves into
an Oceania Healthcare care suite, they
have the peace of mind of having the
right to remain in their suite and can
stay in that suite for the duration of their
time in care without being required to
move again. Families also find it very
reassuring to know that there are more
care staff and registered nurses on hand
in a care suite environment compared
with serviced apartments.
Other operators generally offer
their retirement village residents a
“free” transfer from an independent
living unit to a serviced apartment
when the resident needs additional
living assistance. When that resident
subsequently requires a higher level
of care, the resident will usually be
moved into an aged care centre.
At that point, they will pay for a premium
room (by way of a PAC). In contrast,
Oceania Healthcare village residents
remain in their independent living unit
slightly longer, receiving some daily
assistance if required (provided by
the DHB or otherwise), and when their
needs increase to rest home level, they
move only once into their “forever” care
suite, enjoying the incredible living
environment and highest standards of
service seen anywhere in New Zealand.
17
OUR VALUE OUTCOMES
Thomas Kingham
New Meadowbank resident
“We looked around at so many
places, but Meadowbank’s Care
Suites stood out as the best
by a long way,” says resident
Thomas Kingham. “It doesn’t
feel like a hospital at all and the
standard of care and service
here are second to none.”
“Just after I moved into
Meadowbank, the Guest
Services Manager put on a
welcome event for me,” says
Thomas. “She invited my sister
and her family, as well as a few
friends, so they could meet
everyone.”
“The food is amazing and the
chef’s just great,” says Thomas.
“He makes a fantastic hotpot -
that’s my absolute favourite.”
And, Thomas knows all the little
things are taken care of. “It’s
great having the Guest Services
Manager to help me make the
most of my days. I feel better
than I have done in years.”
Thomas is delighted to continue
doing the things he loves. “The
Guest Services Manager even
arranged for my friends from
Remuera Bridge Club to come
to Meadowbank and play with
me,” he says. “There’s a lot to
keep me occupied and living
the way that I’m used to.”
18
Oceania Healthcare Limited | Annual Report 2019 Developments and design
Our development team knows the
importance of getting all of the design
detail right. It is often the attention we
give to the small things that make living
and working in the places we build
even more enjoyable for residents, their
families and our staff.
Residents in our care have told us that
they want their living spaces to feel
more like home. They told us that seeing
hoists and wheelchairs in the corridors
made them feel like they were living in
a hospital. Through close collaboration
with the nursing team, our designers
were able to build care suites where all
medical equipment is stored out of plain
sight, and yet is still handy for our staff.
The design team are key catalysts for us
to be able to delight our residents. As
an example, the designers helped create
a more social vibe in our dining rooms.
Traditionally care centre dining rooms
use vinyl on the floor, but this surface
tends to bounce noise around the room
making conversation difficult.
The design team researched many
flooring options and worked with
manufacturers globally to solve the
problem. We now specify a high-tech
carpet that is very easy to clean, to
create a warm and inviting space for
residents and their families to get
together over a meal.
Our apartment residents also appreciate
the value of good design - whether it
is the encloseable glass balconies, the
wide apartment corridors, the full height
bedroom windows, or simply wardrobes
that do not feel flimsy – these quality
details set us apart from other operators.
Our passion for getting it right drives us
to design and build products that are
stylish, suitable, and highly valued by our
residents. A focus on great design plays
a big part in enabling our residents to
enjoy living well, for longer.
UNIT DELIVERY (PER ANNUM)
254
67
113
159
101
30
Pre IPO
FY2018
FY2019
Care suites
Independent living units
TOTAL PORTFOLIO COMPOSITION
31.2%
44.9%
14.1%
54.7%
25.4%
29.7%
Current
Post Development
Care beds
Care suites
Units
Gareth Wright
Design Manager
Harpreet Sharma
Registered Nurse
Getting the small things right
is at the heart of creating
spaces that staff and residents
love to work and live in.
19
OUR VALUE OUTCOMES
The Sands
Browns Bay, Auckland
44
CARE SUITES
64
APARTMENTS
STATUS
COMPLETED MAY 2019
20
Oceania Healthcare Limited | Annual Report 2019 21
OUR VALUE OUTCOMES
Meadowbank, Stage 4
Meadowbank, Auckland
34
CARE SUITES
49
APARTMENTS
STATUS
COMPLETED MAY 2019
22
Oceania Healthcare Limited | Annual Report 2019 The BayView, Stage 2
Tauranga
74
APARTMENTS
COMMUNITY
CENTRE
STATUS
STAGE TWO UNDER CONSTRUCTION
23
OUR VALUE OUTCOMES
Awatere, Stage 1
Hamilton
90
CARE SUITES
STATUS
STAGE ONE SCHEDULED FOR COMPLETION JULY 2019
24
Oceania Healthcare Limited | Annual Report 2019 Green Gables
Nelson
61
CARE SUITES
28
APARTMENTS
STATUS
UNDER CONSTRUCTION
25
OUR VALUE OUTCOMES
Windermere
Christchurch
71
CARE SUITES
22
APARTMENTS
STATUS
UNDER CONSTRUCTION
26
Oceania Healthcare Limited | Annual Report 2019 Gracelands
Hastings
32
VILLAS
STATUS
UNDER CONSTRUCTION
27
OUR VALUE OUTCOMES
We delight our residents
with hospitality inspired,
customer led services
By listening to our residents and their
families and personalising our services, we
are delighting our residents with hospitality
inspired, customer led services. Our focus
is on the total wellbeing of our residents,
underpinned by high quality clinical care.
CARE CUSTOMER SATISFACTION
– NET PROMOTER SCORE
VILLAGE CUSTOMER SATISFACTION
– NET PROMOTER SCORE
OCCUPANCY AT NON DEVELOPMENT
OR CONVERSION SITES
FY2019
32
FY2018 – 33
FY2017 – 35
FY2019
56
FY2018 – 43
FY2017 – 53
91.3
90.1
92.8
FY2017
FY2018
FY2019
28
Oceania Healthcare Limited | Annual Report 2019 Dining to delight
We are incredibly passionate about creating
delightful dining experiences for our residents at
Oceania Healthcare. We know that when it comes to
dining, our residents look forward with anticipation
to one of the many highlights of their day. It is a way
for them to share time with friends and family, and it
fulfils and nourishes the body and soul.
Vincent Marshall
Chef
Vincent has been a chef for 25 years and has worked
around the world, even cooking for the Queen!
29
OUR VALUE OUTCOMES
Oceania Healthcare’s famous
lamb hotpot with crispy pastry
top and minted pea puree.
Similarly, everyone loved fish and chips
on a Friday, but it absolutely has to be
made with fresh fish! So we searched for
new suppliers who could deliver fresh
fish, just on time, across all our sites
nationwide. The extra effort we put into
getting this right was all worth it when
we saw just how delighted the residents
were to be served fresh, tasty beer
battered fish and chips each week”.
“I was very proud and humbled this
year when Oceania Healthcare received
the Excellence in Food award at the
New Zealand Aged Care Association
conference and was also a medallist at
the Senior Lifestyle Cuisine competition.
Winning these awards proves that
Oceania Healthcare is an innovator in
this industry and this helps to attract
executive chefs who may not have
previously thought of food in aged care
as being so exciting, challenging and
rewarding to create”.
Vincent spends most of his time
upskilling the culinary team across
Oceania Healthcare and working
with them to create warm and inviting
dining experiences. He also works
with our development team designing
kitchens for our new sites as we look to
reach even greater standards to delight
our residents.
Fabulous food experiences start
with a team of executive chefs across
New Zealand who are highly talented,
experienced and know about creating
food for our residents that not only
tastes great, but it looks good and is
served in a high quality environment that
you’d expect in any restaurant. Over 90%
of our culinary teams across Oceania
Healthcare’s care sites are now led by
qualified executive chefs, who show real
heart in serving their residents.
This year we appointed a National
Culinary Manager, who supports our
teams and champions them to deliver
dining experiences that create a real
point of difference for our business.
Vincent Marshall has been a chef for
25 years and has worked around the
world, even cooking for the Queen!
He has gathered our residents’
favourite recipes across the country,
held workshops with the culinary teams,
and created new menus that included
both old favourites as well as delightful
new dishes that make the most of fresh,
seasonal ingredients.
“This was a really fun process to lead.
Our residents were just great as they
shared stories and memories of why
recipes were special to them. For
example, our chefs knew that lamb stew
was an absolute favourite, so we put
together a lamb hotpot with a crispy
pastry top and a minted pea puree
recipe, which is a modern twist on it –
and our residents loved it.
30
Oceania Healthcare Limited | Annual Report 2019 We are passionate about the
wellbeing of our residents,
their families and our teams
of staff.
A culture of kindness and respect
leads to engaged staff who show great
empathy for our residents. We will
nurture and develop our leaders, provide
opportunities for our staff to learn and
grow, and maintain our focus on the
safety and welfare of our staff.
LOST TIME INJURY FREQUENCY RATE
(DAYS)
STAFF ENGAGEMENT
(%)1
22.03
52.7
57.0
61.4
11.66
11.65
FY2017
FY2018
FY2019
FY2017
FY2018
FY2019
1 Staff engagement is measured as the employees who 'agreed' or 'strongly agreed' with
the statement "I would recommend this as a great place to work".
31
OUR VALUE OUTCOMES
Developing great leaders
We are passionate about our people and support
their learning and development at all levels.
The many national awards we have won for our
in-house training programmes, and the quality of
our teams, is testimony to the investment we put
into helping our people reach their full potential.
Our Step-Up for Leaders programme,
launched in 2017, is designed to empower
our managers, clinical leaders and
registered nurses to be better leaders.
We know that when our people are well
led, teamwork is more effective, staff are
more engaged and aligned to our vision
and values, and delivery of services to
our residents is of a higher standard.
Step-Up for Leaders is an incredible
programme that takes people through
a six month journey of personal learning
experiences and group workshops.
To date, 75% of our managers, 86% of our
clinical leaders and our first four cohorts
of registered nurses have completed
the programme. The programme is
transforming the leadership capability
of our managers which is enabling them
to deliver strategy more effectively
within their sites through greater staff
engagement.
These testimonies show the
extraordinary impact that Step-Up has
had on participants, both within the
workplace and to their overall wellbeing:
“ The distinction between managing
and leading a team showed me that
I needed to be there to support and
coach my staff more frequently,
rather than step-in and do the job
myself. I learnt that leadership is a
mindset and that hard-wiring of my
brain from previous experiences
impacts my approach to problem
solving, motivating others and
collaboration. I now realise that a
growth mindset allows me greater
freedom in my role as Clinical
Manager, and this has facilitated
change and a new perspective
on my role as a leader. I found
my approach has become more
solution orientated and I now
encourage staff to contribute
solutions rather than them
frequently looking to me to solve
their problems. Since completing
the course, I have an easier
relationship with staff and a greater
confidence to lead.”
“ The programme has taught me so
much about myself, my leadership
style, and my approach to work.
I enjoy my job so much more
and have a better understanding
of people. Both my Clinical
Leaders have also benefited from
participating in the programme,
and one in particular, is a lot more
productive at work. She felt like
she didn't have enough time to get
everything done and now using the
tools she learnt on the programme,
she is better at prioritising her
work and can spend more time
with our residents. I have enjoyed
how our relationship has grown –
we now plan together, and have
more effective conversations. She
used to shy away from challenging
conversations with her staff, but
now she addresses these issues
in a confident and respectful way.
I'm so proud of how she has grown,
she’s doing an amazing job."
Jane Coles
Palm Grove
Sharon Blackbeard
Whareama
“ This programme has dramatically
changed the way I lead. I feel more
confident and calmer in my role.
It gave me the tools to focus on the
vision for Heretaunga and helped
me to prioritise my day to focus
on what is important. I used to get
pulled into a lot of ‘drama’, now I
have the skills to successfully coach
people to find their own solutions.
This has been empowering and
motivating for my team, who now
feel they have more control over
their work. It has also freed up a lot
of my time, which means I spend
more time with our residents and
their families.”
Micky Sahni
Heretaunga
32
Oceania Healthcare Limited | Annual Report 2019 Catherine Larsen
Business & Care Manager
Developing great leaders
is at the heart of building
engaged teams.
33
OUR VALUE OUTCOMES
We lead the way in how
we do things
By innovating, embracing technology
and making it easy to do business with
us, we will create sustainable profit and
deliver future growth.
6
SITES LIVE
AS AT 31 MAY 2019
343
PAPER RESIDENT
RECORDS MIGRATED
268
STAFF WHO HAVE
RECEIVED TRAINING
34
Oceania Healthcare Limited | Annual Report 2019
Going digital to improve care
We pride ourselves on the capability of our people
and the quality of care we provide our residents.
We understand that our residents, their families
and the DHBs place a lot of trust in us.
With these high expectations comes the
need to continuously innovate and seek
ways to improve the way that we deliver
care and services.
Over the past year we have commenced
the implementation of a new resident
management system, e-Case, with six
sites now “live” on the new system.
The benefits of moving to a digital
system over a traditional paper-based
system have been immediate with
improved visibility of clinical indicators
and performance for our clinical quality
teams, providing greater assurance that
our residents are receiving the very best
care at all times.
We piloted e-Case at Meadowbank in
Auckland where April Ladia is the Clinical
Manager. Her team was happy to be the
test site for this very important project.
“Having a clinical information system
has helped me manage my team of
nurses and healthcare assistants more
productively. Information is captured in
real time about the care that needs to be
provided and we spend less time at our
nurses’ station writing notes and more
time with our residents”.
“We had some staff who had very basic
computer skills in the beginning but they
are now glad they’ve learnt”.
“It has improved the wellbeing of our
residents by enabling our team to
spend more time with them. Tasks are
prompted including what is required
if there are any changes in the health
of our residents. The families are very
happy that our staff are closer to the
daily needs of our residents.”
These sentiments are echoed by
her team.
Joseph, a registered nurse at
Meadowbank, has recently joined our
dedicated project implementation team
to provide training and support as we
implement e-Case at our other sites
throughout the country.
“Nurses love the new system. Before
when we went about our daily tasks,
we had a single copy of each resident’s
notes. Now we don’t have to wait for
access to a paper file and instead can
check and measure a resident’s progress
while we are with them in their care suite.
Multiple staff can update the resident’s
record without having to wait. I’m
therefore now able to spend a lot more
time with my residents and their families.”
April Ladia
(and Meadowbank resident)
Clinical Manager
Our new resident
management system allows
staff to spend more time
focusing on the resident
rather than on paperwork.
35
Board of Directors
Oceania Healthcare has an experienced
Board with a diverse range of skills.
The Board comprises an independent Chair,
three independent non-executive Directors
and three non-executive Directors.
From left to right
Alan Isaac
Independent Director
Dame Kerry Prendergast
Independent Director
Elizabeth Coutts
Chair and Independent Director
Hugh FitzSimons
Non-Executive Director
CNZM, BCA, FCA
DNZM, CNZM, MBA (VUW), NZRN, NZM
ONZM, BMS, FCA
BEc LLB (Hons) (Syd)
Patrick McCawe
Non-Executive Director
Sally Evans
Independent Director
Greg Tomlinson
Non-Executive Director
BCA (Hons), MBA, CA
BHSc, MSc, FAICD, GAIST
AME
36
Oceania Healthcare Limited | Annual Report 2019 Our Board Skill Set
CORE STRENGTHS
Governance
Finance and accounting
Risk management
Capital markets and structure
6/7
7/7
7/7
Regulatory knowledge and experience
Human resources
Health and safety
6/7
MARKETS AND CUSTOMERS
Customer advocacy
Aged care
Clinical experience
4/7
7/7
7/7
7/7
7/7
PROPERTY AND CONSTRUCTION
Governance
– Commitment to the highest standard of
7/7
governance
– Board experience (NZX 50 or equivalent)
or experience as an adviser to Boards for
at least 5 years
– An ability to assess effectiveness of senior
management.
Finance and accounting
– Senior executive or board experience
in financial accounting and reporting,
corporate finance and internal controls
– Understanding of business and property
valuation principles and their implications
on the financial performance and position.
Risk management
– Developing and overseeing an appropriate
risk framework and culture
– Experience evaluating and managing
financial and non-financial risks.
Customer advocacy
Experience and understanding of sales,
marketing and brand strategy and practices.
Aged care, hospitality and customer
service market experience
Experience and understanding (either at
Board, leadership or senior consulting
level) the dynamics of the international
and domestic in either of the aged care,
hospitality and customer services markets,
and opportunities and challenges within
those markets.
Capital markets and structure
Experience with equity and debt markets,
capital structuring and investment analysis.
Regulatory knowledge and experience
An understanding of the regulatory
environment in which we operate and
the role that plays in ensuring sustainable
custodianship of our assets and providing
benefit to our customers.
Human resources
Familiarity with people and best practice
development and performance structures.
Health and safety
Experience and understanding of health
and safety and wellbeing requirements.
Clinical experience
Experience and understanding of the
clinical requirements of the heathcare
sector at a governance, leadership and/or
practitioner level.
3/7
– Experience as an investor, leader or adviser
– Experience as an investor, leader or adviser
in the property development market
in the construction industry.
DELIVERING SUSTAINABLE GROWTH
Growth
Strategy
Operational leverage
Business model and
technology disruption
7/7
7/7
7/7
7/7
Growth
A track record of developing and
implementing a successful and sustainable
strategy of growth in business.
Strategy
Ability to think strategically and assess
strategic options and business plans.
Operational leverage
Experience in leading or advising organisational
change and creating value for the benefit of
customers and shareholders.
Business model and technology disruption
– Understanding of differing business models
and the potential for disruptive models
and practices to impact customers and the
supply chain
– Understanding of the opportunity and risks
provided by technology development.
BUILDING AND MAINTAINING RELATIONSHIPS
Government relationships
Shareholder/investment
community relationships
5/7
5/7
Government relationships
An understanding of the functioning of
Government and experience developing and
maintaining a constructive relationship and
interactions with Government and regulators.
Shareholder/investment
community relationships
Experience in and understanding of
shareholder and investment community
concerns and developing constructive
relationships.
37
Three Year Summary
For the year ended 31 May 2019
Financial Metrics
$NZm
Underlying net profit after tax2
Underlying net profit after tax - continuing operations3
Profit for the year
Total comprehensive income
Total assets
Operating cashflow
Operating Metrics
Units
Care Suites
Care Beds
Total
New Sales
Resales
Total
Occupancy4
May 2019
May 2018
50.2
49.7
45.4
99.8
1,399.4
89.3
52.1
50.6
77.0
81.7
1,147.2
82.2
May 20171
Pro forma
34.0
32.3
44.9
60.9
918.2
39.0
May 2019
May 2018
May 2017
1,202
542
2,112
3,856
133
177
310
92.8%
1,102
340
2,540
3,982
100
180
280
90.1%
1,054
242
2,580
3,876
52
151
203
91.3%
1 Underlying net profit after tax for May 2017 has been adjusted to remove the impact of transaction and offer costs incurred for
the Initial Public Offering (“IPO”) and includes an estimate of listed company costs. Further, as the proceeds of the IPO were used
substantially to repay debt facilities an adjustment has also been made to reflect the interest expenses that would have been incurred
had a listed capital structure been in place from the start of the financial year.
2 This is a non-GAAP measure, see note 2.1 in the financial statements for further details.
3 Underlying net profit after tax - continuing operations contains a pro forma adjustment that excludes the earnings from sites divested
in 1HY2019.
4 Average annual occupancy in relation to sites not under development or conversion.
38
Oceania Healthcare Limited | Annual Report 2019
Consolidated
Financial
Statements
For the year ended 31 May 2019
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated Financial Statements
Independent Auditor's Report
40
4 1
42
43
45
90
3939
Consolidated Statement of Comprehensive Income
For the year ended 31 May 2019
$NZ000’s
Revenue
Change in fair value of investment property
Other income
Total income
Employee benefits and other staff costs
Depreciation and amortisation
Finance costs
Impairment / (reversal of impairment) of property, plant and equipment
Impairment of goodwill
Other expenses
Total expenses
Profit before income tax
Income tax benefit
Profit for the year
Notes
2.2
3.1
2.3
2.4
2.4
2.4
3.2
5.2
2.4
5.1
May 2019
186,977
46,604
2,377
May 2018
181,816
68,320
2,226
235,958
252,362
119,786
113,306
9,544
3,640
6,982
8,149
56,062
204,163
8,835
2,944
(1,142)
-
52,543
176,486
31,795
75,876
13,576
45,371
1,096
76,972
Other comprehensive income
Items that will not be subsequently reclassified to profit or loss
Gain on revaluation of property, plant and equipment for the year,
net of tax
3.2
56,103
4,676
Items that may be subsequently reclassified to profit or loss
(Loss) / gain on cash flow hedges, net of tax
5.6
(1,723)
79
Other comprehensive income for the year, net of tax
54,380
4,755
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)
99,751
81,727
4.2
4.2
7.5
7.5
12.7
12.7
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
40
Oceania Healthcare Limited | Annual Report 2019 Consolidated Balance Sheet
As at 31 May 2019
$NZ000’s
Assets
Cash and cash equivalents
Trade and other receivables
Investment property
Assets held for sale
Property, plant and equipment
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 2019
May 2018
5.3
3.1
3.2
3.2
5.2
5.4
5.6
3.3
3.3
4.4
5.1
4.1
22,762
43,541
881,674
-
442,709
8,668
18,288
32,693
755,561
19,653
303,561
17,398
1,399,354
1,147,154
38,565
2,443
27,002
436,481
270,159
14,825
789,475
37,592
283
21,923
358,213
168,711
23,335
610,057
609,879
537,097
580,794
(110,060)
139,145
609,879
579,498
(127,899)
85,498
537,097
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
41
Consolidated Statement of Changes in Equity
For the year ended 31 May 2019
$NZ000’s
Notes
Contributed
equity
Retained
deficit
Asset
revaluation
reserve
Cash flow
hedge
reserve
Total equity
Balance as at 31 May 2017
579,498
(195,966)
84,603
(182)
467,953
Profit for the year
Other comprehensive income
Revaluation of cash flow hedge
net of tax
Revaluation of assets net of tax
Total comprehensive income
Transfer of revaluation reserve for
assets held for sale
Transactions with owners
Dividends paid
Employee share scheme
Total transactions with owners
5.6
3.2
3.2
4.1
4.3
-
76,972
-
-
76,972
-
-
-
-
-
-
-
-
-
76,972
-
4,676
4,676
3,678
(3,678)
(12,692)
109
(12,583)
-
-
-
79
-
79
-
-
-
-
79
4,676
81,727
-
(12,692)
109
(12,583)
Balance as at 31 May 2018
579,498
(127,899)
85,601
(103)
537,097
Profit for the year
Other comprehensive income
Revaluation of cash flow hedge
net of tax
Revaluation of assets net of tax
Total comprehensive income
Transfer of interest rate swaps reserve
on maturity
Transfer of revaluation reserve for
assets held for sale
Transactions with owners
Dividends paid
Settlement of treasury shares
Employee share scheme
5.6
3.2
5.6
3.2
4.1
4.3
4.3
-
-
-
-
-
-
1,296
-
-
45,371
-
-
45,371
-
-
45,371
-
(1,723)
(1,723)
56,103
56,103
-
(1,723)
56,103
99,751
(40)
-
40
773
(773)
(28,405)
-
140
-
-
-
-
-
-
(28,405)
1,296
140
(26,969)
-
-
-
-
-
Total transactions with owners
1,296
(28,265)
Balance as at 31 May 2019
580,794
(110,060)
140,931
(1,786)
609,879
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
42
Oceania Healthcare Limited | Annual Report 2019 Consolidated Cash Flow Statement
For the year ended 31 May 2019
$NZ000’s
Cash flows from operating activities
Receipts from residents for village and care fees
Payments to suppliers and employees
Rental payments in relation to right to use asset
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
Dividends paid
Settlement of treasury shares
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at end of year
May 2019
May 2018
165,693
(164,829)
(5,510)
136,629
(39,656)
145
(3,151)
89,321
161,786
(147,439)
(7,790)
113,517
(35,421)
165
(2,588)
82,230
19,690
(72,895)
170
(33,389)
(100,569)
(153,774)
(98,172)
(131,391)
180,387
(84,351)
(28,405)
1,296
68,927
4,474
18,288
22,762
119,788
(50,508)
(12,692)
-
56,588
7,427
10,861
18,288
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
43
Consolidated Cash Flow Statement (continued)
For the year ended 31 May 2019
Reconciliation of profit after income tax to net cash inflow from operating activities
$NZ000’s
Profit for the year
Notes
May 2019
45,371
May 2018
76,972
Non cash items included in profit for the year
Deferred management fees accrued but not settled
Depreciation and amortisation
Impairment of goodwill
Net (gain) / loss on disposal of property, plant and equipment
Fair value adjustment to investment property
Impairment / (reversal of impairment) of property, plant and equipment
Loss allowance for trade and other receivables
Interest accrued but not paid
Fair value movement on residents’ share of resale gains
Fair value loss on cash flow hedges
Deferred tax benefit
Share based payments expense
Other non cash items
2.2
2.4
2.4
3.1
3.2
2.4
2.4
5.6
5.1
4.3
Cash items excluded from profit for the year
Receipts from new occupation right agreements
Payments for outgoing occupation right agreements
Capitalised costs associated with refinance
Increase in operating assets and liabilities
Decrease / (increase) in trade and other receivables
Increase in trade and other payables
Net cash inflow from operating activities
(23,805)
9,544
8,149
(70)
(46,604)
6,982
62
429
737
17
(18,748)
8,835
-
13
(68,320)
(1,142)
(156)
356
(26)
-
(13,576)
(1,096)
140
(13)
109
18
(58,008)
(80,157)
136,629
(39,656)
(645)
96,328
290
5,340
89,321
113,517
(35,421)
-
78,096
(3,222)
10,541
82,230
The Board of Directors of the Company authorised these consolidated financial statements for issue on
25 July 2019.
For and on behalf of the Board
Elizabeth Coutts
Chairman
Alan Isaac
Director
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
44
Oceania Healthcare Limited | Annual Report 2019 Notes to the
Consolidated
Financial
Statements
For the year ended 31 May 2019
1. General Information
1.1 Basis of Preparation
1.2 Accounting Policies
1.3 Significant Events and Transactions
2. Operating Performance
2.1 Operating Segments
2.2 Revenue
2.3 Other Income
2.4 Expenses
3. Property Assets
3.1 Village Assets: Investment Property
3.2 Care Assets: Property, Plant and
Equipment
3.3 Refundable Occupation Right
Agreements
4. Shareholder Equity and Funding
4.1 Shareholder Equity and Reserves
4.2 Earnings Per Share
4.3 Employee Share Based Payments
4.4 Borrowings
5. Other Disclosures
5.1
Income Tax
5.2 Intangible Assets
5.3 Trade and Other Receivables
5.4 Trade and Other Payables
5.5 Related Party Transactions
5.6 Financial Risk Management
5.7 New Accounting Standards
5.8 Contingencies and Commitments
5.9 Events After Balance Date
Independent Auditor's Report
46
46
47
47
48
48
54
55
56
57
59
63
68
71
71
72
72
73
76
76
80
82
83
83
84
87
88
89
90
45
45
Notes to the Consolidated Financial Statements
For the year ended 31 May 2019
1. General Information
1.1 Basis of Preparation
(i) Entities Reporting
The consolidated financial statements of the “Group” entity are for the economic entity comprising
Oceania Healthcare Limited (the “Company”) and its subsidiaries, together “the Group”. Refer to note 5.5
for details of the Group structure.
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of
Oceania Healthcare Limited as at 31 May 2019 and the results of all subsidiaries for the year then ended.
The Group owns and operates various care centres and retirement villages throughout New Zealand. The
Group's registered office is Affinity House, 2 Hargreaves Street, St Mary's Bay, Auckland 1011, New Zealand.
(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 consolidated 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 (“NZ 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 Consolidated Balance Sheet has been prepared using a liquidity format.
(iii) Measurement Basis
These consolidated 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, assets held for sale and cash flow hedges.
(iv) Going Concern Basis of Accounting
These consolidated financial statements have been prepared on a going concern basis.
(v) Key Estimates and Judgements
The preparation of the consolidated financial statements in conformity with NZ IFRS requires the use of
certain critical accounting estimates. It also requires management and Directors to exercise their judgement
in the process of applying the Group’s accounting policies.
The Group makes estimates and assumptions concerning the future. The accounting estimates may not
equal the actual results. Estimates and judgements are periodically evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates
are significant to the consolidated 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 (note 3)
– Fair value of freehold land and buildings (note 3.2)
– Revenue recognition of deferred management fees (note 3.3)
– Recognition of deferred tax (note 5.1)
46
Oceania Healthcare Limited | Annual Report 2019 1.2 Accounting Policies
Accounting policies that summarise the measurement basis used and which are relevant to understanding
the consolidated financial statements are provided throughout the notes to these consolidated 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) Functional and Presentational Currency
These consolidated financial statements are presented in New Zealand Dollars which is the Company’s
functional and the Group’s presentational currency. Unless otherwise stated the consolidated financial
statements are presented in round thousands of dollars. The use of $m signifies millions of dollars.
(iii) Goods and Services Tax (“GST”)
The Consolidated Statement of Comprehensive Income and Consolidated Cash Flow Statement have been
prepared so that all components are stated exclusive of any GST that can be claimed. GST is only deductible
by the Group to the extent that it relates to care operations. All items in the Consolidated 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 consolidated financial statements to that used
in prior periods, comparative figures have been restated accordingly.
(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 liability that are not based on observable market data (unobservable inputs).
The carrying amount of all financial assets and liabilities is considered to approximate their fair value.
1.3 Significant Events and Transactions
The financial position and performance of the Group were affected by the following events and transactions
during the year to 31 May 2019:
– Disposals – five facilities were sold during the year resulting in a gain of $0.6m within the care segment
(net of goodwill disposal of $1.6m) recognised in other income in the Consolidated Statement of
Comprehensive Income (note 3.2).
– Recognition of tax on deferred management fee (“DMF”) revenue – during the period there was a change
in the timing of recognition of DMF income for tax purposes (note 5.1).
47
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 not by operating segment.
The Group operates in New Zealand and comprises three segments; care operations, village operations
and other.
Product
Services
Recognition of
Operating Revenue
and Expenses
Recognition of Fair
Value movements
on New
Developments
Care
Village
Includes traditional care
beds and care suites.
Includes independent living
and rental properties.
Other
N/A
The provision of
accommodation and
related services to
independent residents
in the Group’s retirement
villages.
Provision of support
services to the Group
(includes administration,
marketing and operations).
In addition this segment
includes the provision of
training by Wesley Institute
of Learning.
The Group derives
Operating Revenue from
weekly service fees and
rental income. Operating
Revenue also includes DMF
accrued over the expected
occupancy period for the
relevant accommodation.
Operating Expenses
include village property
maintenance, sales
and marketing, and
administration related
expenses.
Includes support office
and corporate expenses
and operating lease costs
relating to the Group’s
three leasehold sites.
Finance costs relate to the
cost of bank debt acquired
for the purchase and
development of villages.
Income and expenditure
relating to the Wesley
Institute of Learning is
recognised in this segment.
Fair value movements
are recognised in
comprehensive income
(i.e. profit or loss).
N/A
The provision of
accommodation, care
and related services to
Oceania’s aged care
residents.
Includes the provision
of services such as
meals and care packages
to independent living
residents.
The Group derives
Operating Revenue from
the provision of care and
accommodation. The daily
fee is set annually by the
Ministry of Health.
In relation to the provision
of superior accommodation
above the Government
specification the Group
derives revenue from
Premium Accommodation
Charges (“PACs”) or, in
the case of care suites,
through DMF.
Operating Expenses
primarily include staff
costs, resident welfare
expenses and overheads.
Fair value increases or
decreases are recognised
in other comprehensive
income (i.e. not in profit
or loss) for the fair value
movement above historic
cost.
Impairments below
historic cost are recognised
in comprehensive income
(i.e. profit or loss).
48
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 Care
Village
Other
N/A
Fair value movements
are recognised in
comprehensive income
(i.e. profit or loss).
Recognition
of Fair Value
movements on
Existing Care
Centres and
Retirement
Villages
Recognition in
Underlying Profit
(refer note 2.1
overleaf)
Asset
Categorisation
Fair value movements are
treated the same as above.
When sites are
decommissioned for
development this results
in an impairment of the
buildings and chattels
which is recognised in
comprehensive income
(i.e. profit or loss).
Fair value movements
are removed
Assets used, or, in the
case of developments, to
be used, in the provision
of care are recognised
as property, plant and
equipment.
Fair value movements
are removed. Realised
gains on resales and the
development margins from
the sale of independent
living units and care suites
are included.
Assets used for village
operations are recognised
as investment property.
No material adjustments.
Support office assets are
recognised as property,
plant and equipment.
Assets include intangibles
(e.g. software).
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 (“EBITDA”), which is the most relevant measure in evaluating the performance of segments
relative to other entities that operate within the aged care and retirement village industries.
Additional segmental reporting information
Capital expenditure: Refer to notes 3.1 and 3.2 for details on capital expenditure.
Goodwill: Goodwill is allocated to care cash generating units.
What is Total Comprehensive Income?
Total comprehensive income is a measure of the total performance of all segments under NZ GAAP.
It includes fair value movements relating to the Group’s care centres and cash flow hedges.
49
2.1 Operating Segments (continued)
2019
$NZ000’s
Revenue
Change in fair value of investment property
Other income
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
Income tax benefit
Profit for the year attributable to shareholders
Other comprehensive income
Gain on revaluation of property, plant and
equipment for the year, net of tax
Loss on cash flow hedges, net of tax
Total comprehensive income for the year
attributable to shareholders of the parent
2018
$NZ000’s
Revenue
Change in fair value of investment property
Other income
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
Income tax benefit / (expense)
Profit for the year attributable to shareholders
Other comprehensive income
Gain on revaluation of land and buildings for
the year, net of tax
Gain on cash flow hedges, net of tax
Total comprehensive income for the year
attributable to shareholders of the parent
50
Care
Operations
161,068
-
591
161,659
Village
Operations
24,757
46,604
1,622
72,983
Other
1,152
-
19
Total
186,977
46,604
2,232
1,171
235,813
(136,350)
(20,343)
(19,155)
(175,848)
(8,149)
(6,982)
10,178
-
-
(9,042)
1,136
2,378
3,514
-
-
-
-
52,640
(17,984)
21
-
-
52,661
7,280
59,941
124
(3,640)
(502)
(22,002)
3,918
(18,084)
(8,149)
(6,982)
44,834
145
(3,640)
(9,544)
31,795
13,576
45,371
56,103
-
-
-
-
(1,723)
56,103
(1,723)
59,617
59,941
(19,807)
99,751
Care
Operations
159,083
-
512
Village
Operations
21,568
68,320
1,549
Other
1,165
-
-
Total
181,816
68,320
2,061
159,595
91,437
1,165
252,197
(130,658)
(19,095)
(16,096)
(165,849)
-
1,142
30,079
-
-
(8,307)
21,772
1,250
23,022
-
-
-
-
72,342
(14,931)
21
-
-
72,363
1,982
74,345
144
(2,944)
(528)
(18,259)
(2,136)
(20,395)
-
1,142
87,490
165
(2,944)
(8,835)
75,876
1,096
76,972
4,676
-
-
-
-
79
4,676
79
27,698
74,345
(20,316)
81,727
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 Underlying Net Profit after tax (“Underlying Profit”)
Underlying Profit is a non-GAAP measure of financial performance and considered in the determination
of dividends. The calculation of Underlying Profit requires a methodology and a number of estimates to
be approved by the Directors in their preparation. Both the methodology and the estimates may differ
among companies in the retirement village sector. Underlying Profit does not represent cash flow generated
during the period.
The Group calculates Underlying Profit by making the following adjustments to reported Net Profit after Tax:
Net Profit after Tax
Add back /
remove
Change in fair value of investment property (including right to use investment property
assets) and cash flow hedges and impairment / reversal of impairment of property, plant
and equipment
Add back
Impairment of goodwill
Remove
DMF income in relation to right to use investment property assets
Add back
Rental expenditure in relation to right to use investment property assets
Add back /
remove
Add back
Add back
Loss / gain on sale or decommissioning of assets
Directors’ estimate of realised gains on resale of occupation right agreement (“ORA”) units
and care suites1
Directors’ estimate of realised development margin on the first sale of new ORA units
or care suites following the development of an ORA unit or care suite, conversion of an
existing care bed to a care suite or conversion of a rental unit to an ORA unit
Add back
Deferred taxation component of taxation expense so that only the current tax expense
is reflected
=
Underlying Profit
Remove
Interest income
Add back
Finance cost
Add back
Depreciation and amortisation
=
Underlying EBITDA
Following the sale of certain assets during the 12 months to 31 May 2019 the definition of Underlying Profit
has been adjusted to exclude any gain or loss on the sale of assets.
Resale gain – underlying profit
The Directors’ estimate of realised gains on resales of ORA units and care suites (i.e. the difference between
the incoming resident’s ORA licence payment and the ORA licence payment previously received from the
outgoing resident) is calculated as the net cash flow received, and receivable at the point that the ORA
contract becomes unconditional and has either “cooled off” (the contractual period in which the resident can
cancel the contract) or where the resident is in occupation at balance date.
Development margin – underlying profit
The Directors’ estimate of realised development margin is calculated as the ORA licence payment received,
and receivable, in relation to the first sale of new ORA units and care suites, at the point that the ORA
contract becomes unconditional and has either “cooled off” or where the resident is in occupation at balance
date, less the development costs associated with developing the ORA units and care suites.
1 Units and care suites sold under an occupation right agreement.
51
2.1 Operating Segments (continued)
The Directors’ estimate of realised development margin for conversions is calculated based on the difference
between the ORA licence payment received, and receivable, in relation to sales of newly converted ORA
units and care suites, at the point that the ORA contract becomes unconditional and has either “cooled off”
or where the resident is in occupation at balance date, and the associated conversion costs.
The below table describes the composition of development and conversion costs.
Included
New builds:
– the construction costs directly attributable to the relevant project, including any required
infrastructure (e.g. roads) 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 prorated basis using gross floor areas of the
ORA units and care suites;
– an apportionment of land value 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 centre 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.
Conversions:
– of care beds to care suites - the actual refurbishment costs incurred; and
– of rental units to ORA units - the actual refurbishment costs incurred and the fair value
of the rental unit prior to conversion.
Excluded
– Construction, land (apportioned on a gross floor area basis) and interest
costs associated with common areas and amenities or any operational or
administrative areas.
2 Brownfield land refers to land previously utilised by, or part of, an operational aged care centre 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 centre). 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 centre or retirement village.
Greenfield land is typically bare (undeveloped) land at the time of purchase.
52
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 2019
$NZ000’s
Total comprehensive income for the year
attributable to shareholders of the parent
Care
Operations
Village
Operations
Other
Total
59,617
59,941
(19,807)
99,751
Adjusted for underlying profit items
(Less): Change in fair value of investment
property5 and cash flow hedges and impairment
of property, plant and equipment
Add: Impairment of goodwill
Less: DMF in relation to right to use asset
Add: Rental expenditure in relation to right to use
asset
Add: (Gain) / loss on sale or decommissioning
of assets
Add: Realised resale gain
Add: Realised development margin
Underlying net profit before tax
Add: Deferred tax benefit / (expense)
Underlying net profit after tax
Less: Interest income
Add: Finance costs
Add: Depreciation and amortisation
Underlying EBITDA
(49,121)
(46,604)
1,723
(94,002)
8,149
-
-
(380)
-
-
18,265
(2,378)
15,887
-
-
9,042
24,929
-
(727)
6,200
-
15,124
29,202
63,136
(7,280)
55,856
(21)
-
-
-
-
-
436
-
-
(17,648)
(3,918)
(21,566)
(124)
3,640
502
8,149
(727)
6,200
56
15,124
29,202
63,753
(13,576)
50,177
(145)
3,640
9,544
55,835
(17,548)
63,216
2018
$NZ000’s
Total comprehensive income for the year
attributable to shareholders of the parent
Care
Operations
Village
Operations
Other
Total
27,698
74,345
(20,316)
81,727
Adjusted for underlying profit items
(Less): Change in fair value of investment
property5 and swaps and reversal of property,
plant and equipment
Add: Impairment of goodwill
Less: DMF in relation to right to use asset
Add: Rental expenditure in relation to right
to use asset
Add: (Gain) / loss on sale or decommissioning
of assets
Add: Realised gain on resale
Add: Realised development margin
Underlying net profit before tax
Add: Deferred tax (benefit) / expense
Underlying net profit after tax
Less: Interest income
Add: Finance costs
Add: Depreciation and amortisation
Underlying EBITDA
5 Includes fair value change in fair value of right to use asset.
(5,818)
(68,320)
(79)
(74,217)
-
-
-
-
-
-
21,880
(1,250)
20,630
-
-
8,307
28,937
-
(123)
7,790
-
16,930
21,052
51,674
(1,982)
49,692
(21)
-
-
-
-
-
-
-
-
(20,395)
2,136
(18,259)
(144)
2,944
528
-
(123)
7,790
-
16,930
21,052
53,159
(1,096)
52,063
(165)
2,944
8,835
49,671
(14,931)
63,677
53
2.2 Revenue
How we earn revenue
Care
Village
Daily care fees for long term and
short term rest home, hospital and
dementia residents
Deferred management fees
– independent living
Premium accommodation charges Village service fees
– independent living
Other
Training income
Interest income
Deferred management fees
– care suites
Rental income – residents without
a long term occupation right
agreement
Accounting Policy
On 1 June 2018, the Group adopted NZ IFRS 15 Revenue from contracts with customers (“NZ IFRS 15”).
The Group has determined that the new accounting standard has not resulted in a change to either the
recognition or measurement of revenue and therefore there is no requirement to restate revenue reported in
prior periods. Deferred management fees and rental income are considered leases under NZ IAS 17 Leases
and NZ IFRS 16 Leases (“NZ IFRS 16”) after its adoption from 1 June 2019 and are therefore excluded from the
scope of NZ IFRS 15. None of the Group’s revenue, as defined by NZ IFRS 15, contains significant financing
components.
Rest Home and Hospital Service Fees
A contract is in place with all care residents by means of an admission agreement. The resident receives
the benefit as the care is administered and each resident incurs a contracted daily care fee set by the
Government each year. Rest home and hospital service fees are recognised at the point in time the services
are rendered which is specifically linked to the day the service is delivered. Where applicable these are
recognised net of any associated rebates to residents.
Aged care subsidies received from the Ministry of Health, included in rest home, hospital and dementia fee
revenue within the care segment, amounted to $101.0m (2018: $101.0m).
Premium Accommodation Charges
Premium accommodation charges are payable by residents who occupy a premium room above the level
specified by the Government. The charge is included in their admission agreement and the charge is
recognised when the accommodation is provided.
Deferred Management Fees
Deferred management fees are considered leases and are payable by residents of the Group's units,
apartments and care suites under the terms of their ORA or unit title rights. See note 3.3.
Management fees are typically payable on termination of the ORA 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 longer of the term specified in
a resident's ORA or the average expected occupancy for the relevant accommodation which is 7 years for
units, 5 years for apartments and 3 years for care suites from the date of occupation. Estimates of deferred
management fee tenure are reviewed periodically. Where a change is made, it is the Group’s policy to
recognise the aggregate impact of this change in the period in which the change in estimate occurs.
Deferred management fees are recognised with respect to the leased site as per note 3.1.
54
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 Village Service Fees
Village service fees are charged to residents to recover a portion of village operating costs associated with
services provided including staff wages, rates, and electricity. An ORA is in place with all village residents
who receive the benefit of services throughout their stay. Village service fees are recognised over time as
services are rendered.
Training Income
Training income is received from students attending short term training courses at the Wesley Institute of
Learning. Income is recognised when the course is provided.
Rental Income
Rental agreements are in place with all rental residents and set out the relevant weekly / monthly rental fee.
The resident receives the benefit throughout their stay and revenue is recognised as it is earned.
$NZ000’s
Rest home, hospital, dementia fees
Premium accommodation charge
Deferred management fees – independent living
Deferred management fees – care suites
Deferred management fees – leased site
Village service fees
Training income
Rental income
Other services provided to residents
May 2019
151,700
3,381
17,156
5,065
727
5,782
1,171
1,257
738
May 2018
151,660
3,205
15,000
3,625
123
5,341
1,193
1,093
576
186,977
181,816
2.3 Other Income
Interest Income
Interest income is recognised on an accruals basis using the effective interest method.
Other Income
Other income includes administration and legal income derived from the settlement of ORAs.
$NZ000’s
Interest income
Net gain on disposal of property assets
Movement of residents’ share of resale gains
Other income
May 2019
May 2018
145
-
-
2,232
2,377
165
95
26
1,940
2,226
55
2.4 Expenses
Accounting Policy
All operating expenses are recognised on an accrual basis.
$NZ000’s
Notes
May 2019
May 2018
Profit before income tax includes the following expenses:
Employee benefits and other staff costs
Wages and salaries
Termination benefits
Employee share scheme expense
Other staff costs1
Depreciation and amortisation
Depreciation of property, plant and equipment
Amortisation of software
Finance costs
Interest on senior debt facilities
Agency, commitment and line fees
Interest rate swaps
Capitalised interest and line fees
Amortisation of bank fees
Bank interest
Change in fair value of cash flow hedges
Interest on finance leases
Impairment / (reversal of impairment) of property, plant
and equipment
Impairment of goodwill
Other expenses
Fees paid to auditor
Audit and review of consolidated financial statements
Other assurance services – Trustee reporting
Other services2
Total fees paid to auditor
Repairs and maintenance of property, plant and equipment
Repairs and maintenance of investment property
Loss on disposal of property, plant and equipment
Donations
Loss allowance for trade and other receivables
Rental expense relating to operating leases
Rental expense relating to leased investment property
Resident consumables
Movement of residents’ share of resale gains
Insurance
Legal and professional services
Other expense (no items of individual significance)
4.3
3.2
5.2
3.2
5.2
5.3
3.1
116,854
111,009
323
140
2,469
206
149
1,942
119,786
113,306
9,435
109
9,544
6,583
2,883
217
(6,917)
213
1
17
643
3,640
8,694
141
8,835
3,490
1,673
411
(3,341)
214
-
-
497
2,944
6,982
(1,142)
8,149
-
405
6
48
459
3,220
741
56
14
62
1,341
6,200
15,388
737
2,318
2,883
22,643
56,062
436
6
-
442
2,966
933
-
6
(156)
1,266
7,790
15,394
-
1,710
2,343
19,849
52,543
Total Expenses
204,163
176,486
1 Other staff costs include costs such as staff training, uniforms and recruitment.
2 Other services relate to market research and a peer review of the tax treatment of Everil Orr.
56
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 3. Property Assets
The Group operates care centres and retirement villages. As outlined in section 2.1, village sites are typically
investment property and care sites are typically property, plant and equipment.
What is Investment Property?
Land and buildings are classified as investment property when they are held to generate revenue either
through capital appreciation or through rental income.
As residents occupying our retirement villages live independently, the level of services provided is
seen as secondary to the provision of accommodation. Accordingly, these buildings are classified as
investment property as they are held primarily to generate DMF income.
What is Property, Plant and Equipment?
Land, buildings and chattels are classified as property, plant and equipment when they are used to
generate revenue through the provision of goods and services or for administration purposes.
As residents occupying our care centres, including care suites, require services including nursing care,
meals and laundry the buildings in which they live are considered to be operated by the Group to
generate this revenue and are classified as property, plant and equipment.
What is a Care Suite?
Care suites are a premium offering for a resident requiring rest home or hospital level care. The care suite
is located within a care centre. Rather than pay a daily premium accommodation charge for the provision
of the premium room the residents enter into an ORA with a net management fee.
Classification of Serviced Apartments and Care Suites
Where services are provided to residents who occupy accommodation under an ORA, it is the Group’s policy
to assess their level of significance in the context of the overall income derived from the serviced apartment
or care suite in ascertaining whether the serviced apartment or care suite is freehold land and buildings
(referred to as property, plant and equipment) or investment property.
57
3. Property Assets (continued)
The Group applies the following principles when ascertaining the appropriate accounting treatment to
be applied:
CLASSIFICATION
Investment Property
Village Assets
Property, Plant and
Equipment Care Assets
Independent living (villa or apartment)
Care suite
Traditional care bed
SCENARIO
Additional Services
are optional
Services are
compulsory but an
insignificant portion
of total revenue
from the unit.
Services are
compulsory and a
significant portion
of the total revenue
from the unit.
Full ARRC1 funded
care is compulsory
for that unit/bed.
CONSIDERATION OF SIGNIFICANCE OF CASHFLOWS
Qualitatively the
business model is the
provision of retirement
accommodation
Quantitatively
insignificant (a
guideline of under
20% of total revenue
is adopted) and
qualitatively the
business model is the
provision of
retirement
accommodation
Quantitatively
significant.
Qualitatively the
business model is
the provision of
care
Qualitatively the
business model is
the provision of care.
Quantitative
assessment not
relevant as price of
accommodation
does not change
overall purpose of
the accommodation
1 ARRC refers to age-related residential care.
58
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 3.1 Village Assets: Investment Property
Accounting Policy
Investment property includes both freehold land and buildings and land and buildings under development,
comprising independent units, 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. Investment property is held at fair value.
The fair value of investment property is determined by the Directors having taken into consideration the
valuation conducted by CBRE Limited as an independent registered valuer and the cost of work undertaken
in relation to investment property under development, whereas previously the fair value of investment
property was held at the CBRE Limited valuation plus the cost of work undertaken in relation to investment
property under development.
The movement in the carrying value of investment property, net of additions, transfers and disposals is
recognised as a fair value movement in the Consolidated Statement of Comprehensive Income.
Fair value measurement on investment 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 development cannot
be reliably determined, the carrying amount is considered to be the fair value of the land plus the cost of
work undertaken.
$NZ000’s
Notes
May 2019
May 2018
Investment property under development at fair value
Opening balance
Transfer to property, plant and equipment
3.2
Capitalised expenditure
Capitalised interest and line fees
Transfer to completed investment property
Disposals
Change in fair value during the year – developments as at balance date
Change in fair value during the year – developments completed during
the year
Closing balance
Completed investment property at fair value
Opening balance
Transfer from investment property under development
Transfer to property, plant and equipment
3.2
Transfer to held for sale
Capitalised expenditure
Capitalised interest and line fees
Change in fair value during the year – existing villages
Change in fair value during the year – recently completed developments1
Closing balance
Total investment property
108,204
(6,626)
89,396
4,910
79,486
(2,801)
83,259
1,070
(105,532)
(56,970)
-
8,015
3,093
(57)
4,217
-
101,460
108,204
647,357
105,532
(12,101)
-
3,930
-
(6,100)
41,596
531,530
56,970
(18,686)
(2,338)
14,132
1,646
32,788
31,315
780,214
647,357
881,674
755,561
1 Recently completed developments refers to those developments which were being sold down during the period.
59
3.1 Village Assets: Investment Property (continued)
Change in Fair Value Recognised in the Consolidated Statement of Comprehensive Income
$NZ000’s
Increase in fair value of investment property
Add: Transfers to property, plant and equipment during the year
Less: Capitalised expenditure including capitalised interest
Add: Disposals
Change in fair value recognised in
Consolidated Statement of Comprehensive Income
May 2019
126,113
18,727
May 2018
144,545
23,825
(98,236)
(100,107)
-
57
46,604
68,320
A reconciliation between the valuation and the amount recognised on the Consolidated Balance Sheet as
investment property is as follows:
$NZ000’s
Investment property under development
Valuation
Completed Investment Property
Valuation
Add: Refundable occupation licence payments
Add: Resident’s share of resale gains
Less: Management fee receivable
Less: Resident obligations for units not included in valuation
May 2019
May 2018
101,460
101,460
108,204
108,204
380,229
456,349
6,900
(61,745)
(1,519)
780,214
312,109
383,323
7,562
(52,665)
(2,972)
647,357
Total investment property at fair value
881,674
755,561
Where an incoming resident has an unconditional ORA in respect of a retirement village unit and the
corresponding outgoing resident for that same accommodation has not yet been refunded, the CBRE
Limited valuation is adjusted for the incoming resident balances only. An adjustment of $1.5m (2018: $3.0m)
is included in the above reconciliation to reflect this.
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
Consolidated Balance Sheet and also reflected in the valuation model.
Why do we adjust for the liability to residents?
In the CBRE Limited valuation the fair value of investment property includes an allowance for the
amount that is payable by the Group to residents already in occupation within the property. However,
this liability to existing residents is recognised in the Group’s Consolidated Balance Sheet (referred to as
refundable occupation right agreements – see note 3.3). Accordingly, the Group adds this net liability
to residents to the CBRE Limited valuation to “gross up” the fair value of investment property and avoid
double counting the liability to residents.
Valuation Process and Key Inputs
Investment Property under Development
CBRE Limited provided valuations of development land in respect of investment property under
development as at 30 April 2019.
The Directors do not judge there to have been a material movement in the adopted land value between
30 April 2019 and 31 May 2019 and therefore no adjustment has been made to this value. Any costs incurred
to 31 May 2019 on the developments are included in arriving at the 31 May 2019 fair value.
60
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 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 the Directors’ valuation plus the cost of any work
in progress. An amount of $33.5m as at 31 May 2019 (2018: $31.1m) has been recognised 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 and work in progress is apportioned between investment property under development
and freehold land and buildings under development, by applying the estimated gross floor area for these
respective areas of the development based on information obtained from the project quantity surveyors at
the planning and design stages.
Practical completion achieved
Where a development is practically completed, or likely to be completed at, or close to, balance date the
investment property is measured at its completed fair value per the Directors’ valuation with an adjustment
made for any estimated costs, in accordance with the project budget, to be incurred to complete the
development, and is then transferred to completed investment property.
Completed Investment Property
The fair value of completed investment property includes the right to use asset under a finance lease
(Everil Orr per below).
As required by NZ IAS 40 Investment Property, the valuation of investment property is adjusted for cash
flows relating to refundable occupation licence payments, residents’ share of resale gains and management
fees receivable recognised separately on the Consolidated Balance Sheet and also reflected in the valuation
model.
The Group's interest in all completed investment property was valued on 30 April 2019 by CBRE Limited
(2018: 30 April 2018 by CBRE Limited), at a total of $403.2m (2018: $332.1m). The CBRE Limited valuation
has been adjusted downwards by management for the impact of any sale, resale and repurchase of
ORAs between 1 May 2019 and 31 May 2019 of $23.0m (2018: adjusted downwards by $20.0m), with a
corresponding increase in refundable occupation licence payments of $34.0m (2018: $23.9m), to arrive
at the fair value of completed investment properties at 31 May 2019.
Property Specific Assumptions
Seismic and Weather Tightness Assessments
The CBRE Limited valuation, and accordingly the fair value of investment property, incorporates an
allowance in relation to remediation to properties where seismic strength testing has been carried out in prior
years. The 30 April 2018 valuation incorporated the estimated costs to address weather tightness at certain
sites based on estimates provided in building condition reports completed by CoveKinloch New Zealand
Limited in February 2017. As at 31 May 2019 all weather tightness issues have been addressed and as such
no allowance has been made in the 30 April 2019 valuation (2018: allowance of $1.1m).
Lease of Investment Property
The Group leases one site, Everil Orr, which meets the definition of investment property. The site comprises
both apartments and common facilities provided for use by residents under the terms of an ORA. Payments
to the lessor under this lease are made as ORAs are sold. Subsequent cash flows upon the sale and resale of
the units are shared between the lessor and the Group.
Due to the variability of these payments both the right to use asset and the corresponding lease liability
were initially recognised at nil value. Rental payments are recognised as a rental expense through the
Consolidated Statement of Comprehensive Income (note 2.4). The right to use asset is held
at fair value in accordance with NZ IAS 40 Investment Property and has been valued by CBRE Limited at
30 April 2019. The valuation has been adjusted by management for the impact of any sale of ORAs between
1 May 2019 and 31 May 2019 to arrive at the fair value as at 31 May 2019 and any changes in fair value are
taken to the Consolidated Statement of Comprehensive Income.
The carrying value of the right to use asset as at 31 May 2019 in respect of this leased site is $14.0m
(2018: $7.7m). It is included within completed investment property above.
61
3.1 Village Assets: Investment Property (continued)
Assets Held for Sale
Investment property assets are classified as held for sale when their carrying amount is to be recovered
principally through a sale transaction and a sale is considered highly probable. They are stated at their
fair value. Refer note 3.2 for details of assets held for sale as at 31 May 2018 but settled during the year
to 31 May 2019.
Key Accounting Estimates and Judgements
All investment properties have been determined to be Level 3 (2018: Level 3) in the fair value hierarchy as
the fair value is determined using inputs that are unobservable.
Significant Unobservable Inputs
The significant unobservable input used in the fair value measurement of the Group’s development land is
the value per m2 assumption. Increases in the value per m2 rate result in corresponding increases in the
total valuation.
The significant unobservable inputs used in the fair value measurement of the Group's portfolio of completed
investment property are the discount rate and property price growth rate.
The following assumptions have been used to determine fair value:
Significant Input
Description
2019
2018
Discount rate
The pre-tax discount rate
14.0% - 20.0%
14.0% - 22.0%
Anticipated annual property price
growth over the cash flow period
0-4 years
Anticipated annual property price
growth over the cash flow period
5+ years
(median: 15.0%)
(median: 15.0%)
0.5% - 3.0%
0.0% - 3.0%
2.5% - 3.5%
2.5% - 3.5%
Adopted
Value
Discount Rate
+0.5%
Discount Rate
-0.5%
Property
Growth Rate
+50 bp
Property
Growth Rate
-50 bp
Property price
growth rate
Property price
growth rate
Sensitivities
At 31 May 2019
Completed investment
property
Valuation $NZ000’s
380,229
Difference $NZ000’s
Difference %
(14,168)
(3.7%)
15,082
4.0%
22,006
5.8%
(18,546)
(4.9%)
At 31 May 2018
Completed investment
property
Adopted
Value
Discount Rate
+0.5%
Discount Rate
-0.5%
Property
Growth Rate
+50 bp
Property
Growth Rate
-50 bp
Valuation $NZ000’s
312,109
Difference $NZ000’s
Difference %
(11,105)
(3.6%)
11,888
3.8%
15,605
5.0%
(14,981)
(4.8%)
62
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 The stabilised occupancy period is a key driver of the CBRE Limited valuation. A significant increase/
(decrease) in the occupancy period would result in a significantly lower/ (higher) fair value measurement.
Significant Input
Description
2019
2018
Stabilised
occupancy period
3.6yrs – 8.3yrs
3.1yrs – 8.4yrs
(median: 7.7yrs)
(median: 7.2yrs)
Current ingoing price, for subsequent resales of ORAs, is a key driver of the CBRE Limited valuation.
A significant increase/ (decrease) in the ingoing price (as driven by the property growth rates) would
result in a significantly higher/ (lower) fair value measurement.
3.2 Care Assets: Property, Plant and Equipment
Accounting Policy
Property, plant and equipment comprises owner-occupied freehold land and buildings and plant and
equipment operated by the Group for the provision of care services, care suites and land and buildings that
are to be developed into care centres in the future.
Following initial recognition at cost, completed owner occupied freehold land and buildings and land and
buildings under development are carried at fair value. Independent valuations are performed with sufficient
regularity to ensure that the carrying amount does not differ materially from the assets’ fair value at balance
date. Any depreciation at the date of valuation is deducted from the gross carrying value of the asset, and
the net amount is restated to the revalued amount of the asset. In periods where no valuation is carried out,
the asset is carried at its revalued amount plus any additions, less any impairment and less any depreciation
incurred since the date of the last valuation.
All other plant and equipment is stated at historical cost less depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
In relation to land and buildings under development, fair value is determined by the Directors having
taken into consideration the valuation conducted by CBRE Limited as an independent registered valuer and
the cost of work undertaken, whereas previously the fair value was held at CBRE Limited valuation plus the
cost of work undertaken in relation to land and buildings under development.
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. Fair value measurement on property
under construction is only applied if the fair value is reliably measurable. Where the fair value of property
under construction cannot be reliably determined the value is the fair value of the land plus the cost of work
undertaken. Property under construction classified as land and buildings under development is revalued
annually and is not depreciated.
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 expensed to
the Consolidated 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 above cost are credited to the
asset revaluation reserve in other comprehensive income; increases that offset previous decreases taken
through profit or loss are recognised in profit or loss. Decreases that offset previous increases of the same
asset are charged against the asset revaluation reserve in other comprehensive income; all other decreases
are charged to profit or loss. When revalued assets are sold, or held for sale, the amounts included in the
reserve are transferred to retained earnings.
63
3.2 Care Assets: Property, Plant and Equipment (continued)
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
Useful Life Range
– Freehold buildings
10 - 50 years
– Chattels and leasehold improvements
2 - 50 years
– Motor vehicles
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 earlier of the date of classification to held for sale or the date of sale.
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 net disposal proceeds with the carrying
amount of the asset. These are included in the Consolidated Statement of Comprehensive Income.
NZ$000’s
Notes
Freehold
Land and
Buildings
Under
Development
Freehold
Land
Freehold
Buildings
Chattels and
Leasehold
Improvements
Total
Year ended 31 May 2019
Opening net book amount
Additions
Capitalised interest and line fees
Disposals
Depreciation
Transfer to assets held for sale
Transfer from / (to) investment
property
Reclassification within property,
plant and equipment
Revaluation surplus
Comprehensive income
– Existing care centres
– Care centres recently developed
/ under development
Other comprehensive income1
– Existing care centres
– Care centres recently developed
/ under development
44,363
67,124
177,697
14,377
303,561
57,665
2,858
-
-
-
4
-
-
-
-
7,485
7,351
72,505
-
(3)
-
2,858
(295)
(298)
(5,797)
(3,638)
(9,435)
-
-
-
3.1
10,666
(2,194)
10,255
-
18,727
(61,727)
(2,180)
62,369
1,538
-
-
-
443
(7,498)
-
73
1,930
7,465
30,390
14,542
-
7,446
-
-
-
-
(7,055)
73
39,785
21,988
Closing net book amount
70,297
70,662
282,417
19,333
442,709
At 31 May 2019
Cost
Valuation
Accumulated depreciation
Net book amount
-
-
-
48,304
48,304
70,297
70,662
282,417
-
423,376
-
-
-
(28,971)
(28,971)
70,297
70,662
282,417
19,333
442,709
1 The revaluation noted in the Statement of Comprehensive Income differs from the above due to deferred tax, refer note 5.1.
64
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 NZ$000’s
Notes
Freehold
Land and
Buildings
Under
Development
Freehold
Land
Freehold
Buildings
Chattels and
Leasehold
Improvements
Total
Year ended 31 May 2018
Opening net book amount
Additions
Capitalised interest and line fees
Disposals
Depreciation
Transfer to assets held for sale
Transfer from / (to) investment
property
Reclassification within property,
plant and equipment
Revaluation surplus
Comprehensive income
– Existing care centres
– Care centres recently developed
/ under development
Other comprehensive income1
– Existing care centres
– Care centres recently developed
/ under development
27,806
72,045
153,468
14,653
267,972
23,659
251
-
-
-
-
-
-
-
6,531
3,794
33,984
375
(12)
-
(6)
626
(18)
(5,375)
(3,319)
(8,694)
(5,860)
(10,710)
(745)
(17,315)
3.1
2,987
(350)
18,850
(12,087)
1,612
10,475
-
-
1,747
-
45
1,530
(433)
-
65
-
149
2,416
-
-
21,487
-
-
-
-
-
1,575
(433)
1,961
2,416
Closing net book amount
44,363
67,124
177,697
14,377
303,561
At 31 May 2018
Cost
Valuation
-
-
-
46,526
46,526
44,363
67,124
177,697
-
289,184
Accumulated depreciation
-
-
-
(32,149)
(32,149)
Net book amount
44,363
67,124
177,697
14,377
303,561
Land and Buildings Under Development
A valuation in respect of development land was provided by CBRE Limited as at 30 April 2019. The Directors
do not judge there to have been material movement in the land value between 30 April 2019 and 31 May
2019 and therefore no adjustment has been made to this value. Any costs incurred to 31 May 2019 on the
developments are included in arriving at the 31 May 2019 fair value.
The Group has applied the following methodology in relation to the measurement of land and buildings
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 the Directors’ valuation plus the cost of any work in
progress. An amount of $13.5m as at 31 May 2019 (2018: $26.0m) has been recognised 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 and work in progress is apportioned between investment property under development
and freehold land and buildings under development, by applying the estimated gross floor area for these
respective areas of the development based on information obtained from the project quantity surveyors at
the planning and design stages.
65
3.2 Care Assets: Property, Plant and Equipment (continued)
Practical completion achieved
Where a development is practically completed, or likely to be completed at, or close to, balance date the land
and buildings are measured at its completed fair value per the Directors’ valuation with an adjustment made
for any estimated costs, in accordance with the project budget, to be incurred to complete the development,
and is then transferred to completed land and buildings.
Completed Land and Buildings
Independent valuations are performed with sufficient regularity to ensure that the carrying amount does not
differ materially from the asset’s fair value at the balance date. The Group’s previous valuation was completed
on 31 May 2017 and therefore the Directors determined an independent valuation should be sought as at
30 April 2019.
This valuation was undertaken by independent registered valuer CBRE Limited (2018: No independent
valuation). The valuation of the Group’s care centres was apportioned to land, improvements, chattels and
goodwill. The fair value of land and buildings as calculated by CBRE Limited is based on the level of rent able
to be generated from the maintainable net cash flow of the site subject to average efficient management. The
fair value of the Group’s land and buildings as determined by the Directors is based on these apportionments.
However, chattels are carried at historic cost less depreciation and the amount apportioned to goodwill by
CBRE Limited is not recorded in the consolidated financial statements. The CBRE Limited valuation included
$20.6m of goodwill (2018: $48.0m) in respect of completed land and buildings.
In arriving at fair value of freehold land and buildings as at 31 May 2019, the 30 April 2019 valuation has been
adjusted, in the case of freehold land and buildings under development, for any work in progress incurred
between 1 May and 31 May 2019 (2018: 31 May 2017 valuation adjusted for amounts recognised between
1 June 2017 and 31 May 2018).
The CBRE Limited valuation used in the determination of the fair value of freehold buildings, incorporates an
allowance in relation to remediation to properties where seismic strength testing has been carried out in prior
years. Further, the CBRE Limited valuation as at 31 May 2017 incorporated the estimated costs to address
weather tightness at certain sites based on building condition reports completed by CoveKinloch New
Zealand Limited in February 2017. As at 31 May 2019 all weather tightness issues have been addressed and as
such no allowance has been made in the 30 April 2019 valuation.
Care Suites and Serviced Apartments
As discussed earlier in note 3, where services are provided to residents who occupy accommodation
under an ORA, it is the Group’s policy to look at the significance of these services in the context of the
overall revenue derived from the care suite or serviced apartment in ascertaining whether the care suite or
serviced apartment is property, plant and equipment or investment property. Care suite residents occupying
accommodation under an ORA receive a significant level of services. Hence they are included in property,
plant and equipment. Care suite land and buildings are held at fair value.
Now that care suites are an established product, the valuer has performed a review of the valuation
methodology with the outcome that the value of all cash flows associated with the ORA have been allocated
to freehold land and buildings. This has resulted in a reduction in the level of goodwill in CBRE Limited’s
apportionment relating to care suites, see note 5.2. The treatment of the cashflows under the daily care fees
remain unchanged. These continue to be apportioned to land, buildings, chattels and goodwill in the same
manner as traditional care beds.
Where a site is in its first year of operation, the Directors assess the appropriateness of the fair value
of care suites by taking into consideration the CBRE Limited valuation and also more conservative
operating assumptions.
The CBRE Limited valuation includes $0.4m of goodwill (2018: $13.6m). This goodwill is not recognised in the
consolidated financial statements.
Key Accounting Estimates and Judgements
All land and buildings have been determined to be Level 3 (2018: Level 3) in the fair value hierarchy as the fair
value is determined using inputs that are unobservable.
Critical Judgements and Estimates in Applying Accounting Policies
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 for further information.
66
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 Valuation of Freehold Land and Buildings
The valuation approach for the freehold land and buildings as at 30 April 2019 was 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 used for the 30 April 2019 valuation range from 11.0% to 17.8% with
a median value of 13.4% (31 May 2017: 10.0% to 18.5% with median value of $13.5%). The valuation was
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 development land
is the value per m2 assumption. Increases in the value per m2 rate result in corresponding increases in the
total valuation.
The significant unobservable input used in the fair value measurement of the Group's portfolio of completed
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.
Sensitivities
At 31 May 2019
Freehold land and buildings
Valuation $NZ000’s
Difference $NZ000’s
Difference %
Adopted value
Capitalisation rate +50 bp
Capitalisation rate -50 bp
353,079
(19,922)
(5.6%)
23,951
6.8%
At 31 May 2018
Adopted value
Capitalisation rate +50 bp
Capitalisation rate -50 bp
Freehold land and buildings
Valuation $NZ000’s
Difference $NZ000’s
Difference %
At 31 May 2019
Completed Care Suite
Property Sensitivity
244,821
(13,465)
(5.5%)
14,689
6.0%
Adopted
Value
Discount Rate
+0.5%
Discount Rate
-0.5%
Property
Growth Rate
+50 bp
Property
Growth Rate
-50 bp
Valuation $NZ000’s
196,602
Difference $NZ000’s
Difference %
(7,326)
(3.7%)
7,798
4.0%
11,379
5.8%
(9,589)
(4.9%)
At 31 May 2018
Completed Care Suite
Property Sensitivity
Adopted
Value
Discount Rate
+0.5%
Discount Rate
-0.5%
Property
Growth Rate
+50 bp
Property
Growth Rate
-50 bp
Valuation $NZ000’s
70,052
Difference $NZ000’s
Difference %
(2,493)
(3.6%)
2,668
3.8%
3,503
5.0%
(3,362)
(4.8%)
67
3.2 Care Assets: Property, Plant and Equipment (continued)
Assets Held for Sale
Assets are classified as held for sale when their carrying amount is to be recovered principally through a sale
transaction and a sale is considered highly probable. They are measured at the lower of carrying amount and
fair value less costs to sell, except for investment property assets held for sale which are carried at fair value.
As at 31 May 2018, five facilities met the definition of held for sale. These facilities and their respective land,
buildings, investment property and plant and equipment were reclassified for reporting purposes and held
on the Consolidated Balance Sheet at $19.7m which was the lower of their fair value less costs to sell and
their carrying amount at that time. The revaluation reserve totalling $3.7m in respect of the properties held
for sale was reclassified to retained earnings on reclassification of the properties to held for sale.
On 27 September 2018 the sale of these properties was settled and funds of $19.7m received. These funds
were applied to the bank borrowings of the Group. A net gain of $0.6m has been recognised as other income
in the Consolidated Statement of Comprehensive Income (representing a gain on the carrying value of assets
held for sale of $2.2m, offset by the derecognition of goodwill associated with these assets of $1.6m). Further,
the remaining revaluation reserve in respect of these sites (of $0.7m) has been reclassified to retained earnings.
Finance Leases
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 2019 of $5.2m (2018: $6.6m). Refer to
note 5.7 for the impact of NZ IFRS 16 Leases which is to be adopted on 1 June 2019.
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:
$NZ000’s
Carrying amount
– Historical cost 2019
Carrying amount
Freehold
land
Freehold
buildings
Freehold land and
buildings under
development
Total
41,806
182,949
8,867
233,622
– Historical cost 2018
39,843
152,605
4,231
196,679
3.3 Refundable Occupation Right Agreements
What’s an ORA?
An ORA is a contract which sets out the terms and conditions of occupation of an independent living unit
or care suite. 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
occupation licence payment is repaid to the exiting resident.
What’s DMF?
An amount equal to a capped percentage of the occupation 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.
68
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 Accounting Policy
The occupation licence payment becomes payable when the ORA is unconditional and has either “cooled
off” or where the resident is in occupation. 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.
The management fee receivable is recognised in accordance with the terms of the resident’s ORA.
The deferred management fee represents the difference between the management fees receivable under
the ORA and the portion of the management fee accrued which is recognised on a straight-line basis over
the longer of the term specified in a resident's ORA 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 (2018: 7yrs, 5yrs, 3yrs).
The management fee recognised in the Consolidated Statement of Comprehensive Income represents
income earned in line with the average expected occupancy.
Included in the obligation to residents is an estimate of the amount expected to be paid to those residents
whose ORA or unit title arrangement 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.
$NZ000’s
Village
Refundable occupation licence payments
Residents’ share of resale gains
Less: Management fee receivable (per contract)
Care Suites
Refundable occupation licence payments
Accommodation rebate
Less: Management fee receivable (per contract)
Held for Sale
Refundable occupation licence payments
Residents’ share of resale gains
Less: Management fee receivable (per contract)
May 2019
May 2018
456,349
6,900
(85,178)
378,071
71,811
738
(14,139)
58,410
-
-
-
-
383,323
7,562
(72,269)
318,616
47,734
825
(10,763)
37,796
2,108
20
(327)
1,801
Total refundable occupation right agreements
436,481
358,213
69
3.3 Refundable Occupation Right Agreements (continued)
Reconciliation of Management Fees recognised under NZ IFRS and per ORA
$NZ000’s
Village
Management fee receivable (per contract)
Deferred management fee
Management fee receivable (per NZ IFRS)
Care Suites
Management fee receivable (per contract)
Deferred management fee
Management fee receivable (per NZ IFRS)
Held for Sale
Management fee receivable (per contract)
Deferred management fee
Management fee receivable (per NZ IFRS)
Expected Maturity
May 2019
May 2018
(85,178)
23,433
(61,745)
(72,269)
19,604
(52,665)
(14,139)
3,569
(10,570)
(10,763)
2,222
(8,541)
-
-
-
(327)
97
(230)
Although the occupation licence payments are refundable to the residents on vacating the unit / apartment
/ care suite or on termination of the licence to occupy / 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:
$NZ000’s
Within 12 months
Beyond 12 months from Consolidated Balance Sheet date
Total refundable occupation right agreements
May 2019
53,139
383,342
436,481
May 2018
34,030
324,183
358,213
70
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 4. Shareholder 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
Total contributed equity
Movements
Opening balance of ordinary shares issued
Shares issued for long term incentive plan
May 2019
Shares
May 2018
Shares
May 2019
$NZ000’s
May 2018
$NZ000’s
610,254,535
610,254,535
610,254,535
610,254,535
580,794
580,794
579,498
579,498
610,254,535
610,254,535
579,498
579,498
-
-
1,296
-
Closing balance of ordinary shares issued
610,254,535
610,254,535
580,794
579,498
All ordinary shares are authorised and rank equally with one vote attached to each fully paid ordinary share.
The shares have no par value. The Company incurred no transaction costs issuing shares during the year
(2018: nil).
During the year an amount of $1.3m was recognised in equity in respect of 2,730,772 shares which had
previously vested but for which the loan was repaid in accordance with the terms of the 2015 Long Term
Incentive Plan (“LTIP”), see note 4.3 for further details.
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.
The shares issued for the LTIP are classified as Treasury Shares as the Company has a beneficial interest in
the 3,164,556 shares until the vesting conditions are met. Refer note 4.3.
Dividends
On 25 July 2019, a full year dividend of 2.6 cents per share (not imputed) was declared and will be paid on
26 August 2019. The record date for entitlement is 12 August 2019.
Final dividend for the prior year
Interim dividend for period
Total dividends declared during the period1
2.6
2.1
15,867
12,815
28,682
-
2.1
-
12,815
12,815
May 2019
cents per share
May 2019
$NZ000’s
May 2018
cents per share
May 2018
$NZ000’s
Dividend Reinvestment Plan
Subsequent to 31 May 2019 the Group announced a dividend reinvestment plan. Refer to note 5.9 for details.
Asset Revaluation Reserve
The asset revaluation reserve is used to record the revaluation of freehold land and buildings and land and
buildings under development.
Cash Flow Hedge Reserve
The cash flow hedge reserve is used to record gains or losses on instruments used as cash flow hedges.
The amounts are recognised in the Consolidated Statement of Comprehensive Income when the hedged
transaction affects profit or loss. Refer note 5.6 for details of new swaps taken out during the year.
1 Total dividends declared during the period differs to dividends paid per the Consolidated Statement of Changes in Equity
as a result of dividends payable on LTIP shares which remain with the Group until vesting.
71
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.
$NZ000’s
Profit after tax ($’000)
Weighted average number of ordinary shares outstanding ('000s)
Basic earnings per share (cents per share)
May 2019
45,371
604,367
7.5
May 2018
76,972
604,359
12.7
Diluted
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 2019 there were no
shares with a dilutive effect (2018: 2,730,772).
Profit after tax ($’000)
Diluted weighted average number of ordinary shares outstanding ('000s)
Diluted earnings per share (cents per share)
May 2019
45,371
607,090
7.5
May 2018
76,972
605,411
12.7
4.3 Employee Share Based Payments
Long Term Incentive Plan
The Company operated two LTIPs for certain members of the Senior Management Team (“the Participants”)
during the year. The vesting of shares depends upon the satisfaction of performance hurdles.
Under both schemes the Group 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 stock 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.
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
2015 Share Plan
May 2019
May 2018
3,164,556
-
-
-
4,985,071
-
(1,820,515)
-
3,164,556
3,164,556
The 2015 share plan comprised of 2,730,772 shares. As at 31 May 2018 all shares were fully vested.
A non-recourse loan representing the amount payable by employees remained with a loan repayment date
of 31 May 2019. The amount owing of $1.3m was repaid during the period and has been recognised as an
increase in share capital.
2017 Share Plan
The 3,164,556 shares in the 2017 share plan are held by OCA Employees Trustee Limited on behalf of the
Participants and vest on the business day after the consolidated financial statements for the 31 May 2020
financial year are released. The vesting criterion is the achievement of a minimum Compound Annual Growth
Rate in Underlying net profit after tax per share of 35.0% per annum over the three year period until
31 May 2020.
72
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 The Participants are required to be employed by the Group at the vesting dates for the shares to vest.
A valuation of the scheme as at the grant date 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 2017 plan was determined at $0.143. The expense is spread over the expected vesting
period of the options and is recognised within retained earnings. For the year to 31 May 2019 the expense was
$0.1m (2018: $0.1m).
Employee Share Plan
Subsequent to 31 May 2019 the Group launched an Employee Share Plan. Refer to note 5.9.
Key Estimates and Assumptions
The combined cost for the year is $0.1m (2018: $0.1m) giving a total cost to date of $0.4m (2018: $0.3m).
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 Consolidated 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 Consolidated Statement of Comprehensive
Income in the period in which they are incurred.
$NZ000’s
Secured
Bank loans
Capitalised loan costs
Finance leases
Total borrowings
Current
Non current
Total borrowings excluding capitalised loan costs
Recognition and Measurement
Bank Loans
May 2019
May 2018
265,487
(845)
5,517
270,159
1,600
269,404
271,004
163,283
(413)
5,841
168,711
2,064
167,060
169,124
Interest is charged using the BKBM Bill rate plus a margin and line fee. Interest rates applicable in the year to
31 May 2019 ranged from 2.94% to 3.48% (2018: 2.99% to 3.94%).
Debt Financing
On 6 July 2018 an agreement was entered into with the banking syndicate to increase total debt facility limits
from $235m to $350m as follows:
(i) General Corporate Facility limit increased to $135m (formerly $75m); and
(ii) Development Facility limit increased to $215m (formerly $160m).
In addition to the above, the maturity of borrowings was extended to 31 July 2023.
73
4.4 Borrowings (continued)
Financing Arrangements
At 31 May 2019, the Group held committed bank facilities with drawings as follows:
$NZ000’s
General Corporate Facility
Development Facility
Total
May 2019
Committed
135,000
215,000
350,000
May 2019
Drawn
101,961
163,526
265,487
May 2018
Committed
75,000
160,000
235,000
May 2018
Drawn
62,157
101,126
163,283
The Group’s revolving Development Facility is utilised to cover costs associated with current development
projects. The revolving General Corporate Facility is used for general corporate purposes as well as
development land for projects not currently funded by the Development Facility.
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 in the Group’s senior debt facilities, with which the Group must comply include:
a) Interest Cover Ratio - the ratio of Adjusted EBITDA to Net Interest Charges is not less than 2.0x; and
b) 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.
The covenants are tested half yearly. All covenants have been complied with during the year. The Group
has agreed with its banks that the calculation of Adjusted EBITDA and Net Interest, for the purposes of the
financial covenants, shall be based on the accounting treatment in use before the introduction of NZ IFRS 16.
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.
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.
$NZ000’s
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 consolidated financial statements as:
Finance leases – current portion
Finance leases – non current portion
Minimum Future
Lease Payments
May 2019
Minimum Future
Lease Payments
May 2018
2,014
4,460
6,474
(957)
5,517
1,600
3,917
2,426
4,172
6,598
(757)
5,841
2,064
3,777
74
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019
Due to the variable payments with respect to the rental of the investment property site per note 3.1 no
liability is included in the finance lease balance above in respect of this right to use asset. The total assumed
lease payment in respect of stage one is $25.5m and for stage two is $27.2m. To date an amount of $14.0m
(note 2.4) has been paid (2018: $7.8m). The remaining $38.7m balance outstanding has been disclosed as a
commitment per note 5.8.
See note 5.7 for the impact of NZ IFRS 16 Leases which is to be adopted on 1 June 2019.
Net Debt Reconciliation
Cash and cash equivalents include cash on hand. The following provides an analysis of net debt and the
movements in net debt for the year.
$NZ000’s
Cash and cash equivalents
Borrowings – repayable within one year
Borrowings – repayable after one year
Cash and liquid investments
Gross debt – fixed interest rates
Gross debt – floating interest rates
May 2019
22,762
(1,600)
(269,404)
May 2018
18,288
(2,064)
(167,060)
(248,242)
(150,836)
22,762
(105,517)
(165,487)
18,288
(105,841)
(63,283)
(248,242)
(150,836)
NZ$000’s
Liabilities from Financing Activities
Finance
leases due
within 1 year
Finance
leases due
after 1 year
Borrowings
due within
1 year
Borrowings
due after
1 year
Cash
Total
Net Debt as at 31 May 2017
10,861
(1,813)
(4,626)
Cash flows
7,427
1,933
-
Acquisitions – finance leases
Other non-cash movements
-
-
(217)
(992)
(1,967)
1,841
Net debt as at 31 May 2018
18,288
(2,064)
(3,777)
Net Debt as at 31 May 2018
18,288
(2,064)
Cash flows
Acquisitions – finance leases
Terminations – finance leases
Other non-cash movements
4,474
-
-
-
593
1,007
(3,777)
1,585
2,332
(1,551)
(4,600)
415
543
Net debt as at 31 May 2019
22,762
(1,600)
(3,917)
-
-
-
-
-
-
-
-
-
-
-
(89,430)
(85,008)
(71,253)
(61,893)
-
(1,209)
(2,600)
(2,726)
(163,283)
(150,836)
(163,283)
(150,836)
(98,519)
(91,867)
-
-
3,339
(6,151)
(3,685)
(2,727)
(265,487)
(248,242)
75
5. Other Disclosures
5.1 Income Tax
What is Current Tax?
Current tax is an estimate of the tax that is payable to Inland Revenue for the current financial period.
What is Deferred Tax?
Deferred tax is an estimate of income tax that will be payable or recoverable in respect of temporary
differences relating to the accounting and tax values of the Group’s assets and liabilities. Deferred tax
also includes the value of tax losses that we consider we will use in the future to meet any income tax
obligation.
Accounting Policy
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 Consolidated 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 consolidated 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.
76
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 $NZ000’s
Income tax benefit
Current tax
Deferred tax
Taxation expense 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
Taxable deferred management fees
Non-assessable revaluation of investment property
Taxable depreciation
Accounting depreciation
Non-deductible impairment / (reversal of non-deductible impairment)
of fixed asset
Adjustment for timing difference of provisions
Other
Losses recognised / (utilised)
Current tax expense
Impact of movements in investment property
Impact of movements in property, plant and equipment
Other adjustments
Deferred management fee
Prior period adjustments: treatment of DMF income
Prior period adjustments: other
Losses utilised or (recognised) / derecognised
Deferred tax benefit
Income tax benefit
May 2019
May 2018
-
(13,576)
(13,576)
31,795
8,903
2,676
208
(1,937)
931
(13,049)
(2,856)
2,294
1,955
215
-
660
-
(170)
(1,354)
(185)
(931)
(6,138)
(1,047)
(3,751)
(13,576)
-
(1,096)
(1,096)
75,876
21,245
-
102
(936)
-
(19,129)
(3,397)
2,447
(320)
607
-
(619)
-
(2,602)
296
(577)
-
-
112
1,675
(1,096)
(13,576)
(1,096)
77
5.1 Income Tax (continued)
Movement in the Deferred Tax Balance:
$NZ000’s
Investment property
Property, plant and equipment
Provisions and other assets / liabilities
DMF revenue in advance
Tax losses
Deferred tax liabilities
Recognised in
Consolidated
Statement of
Comprehensive
Income
Recognised
in Other
Comprehensive
Income
360
1,636
760
7,069
3,751
-
(5,670)
604
-
-
Balance
1 June 2018
(9,624)
(18,470)
4,759
-
-
Balance
31 May 2019
(9,264)
(22,504)
6,123
7,069
3,751
(23,335)
13,576
(5,066)
(14,825)
Recognised in
Consolidated
Statement of
Comprehensive
Income
2,555
Recognised
in Other
Comprehensive
Income
-
$NZ000’s
Investment property
Property, plant and equipment
Provisions and other assets / liabilities
DMF revenue in advance
Tax losses
Deferred tax liabilities
Balance
1 June 2017
(12,179)
(19,126)
4,158
-
2,339
(24,808)
358
522
-
(2,339)
1,096
Balance
31 May 2018
(9,624)
(18,470)
4,759
-
-
298
79
-
-
377
(23,335)
Recognition and Measurement
No income tax was paid or payable during the period (2018: nil).
Key Accounting Judgements
Deferred Tax on Investment Property
Deferred tax on investment property is assessed on the basis that the asset value will be realised through use
(“Held for Use”).
An initial recognition exemption has been applied to newly developed village sites in accordance with NZ IAS 12.
The Group’s ORAs comprise two distinct cash flows (being an ORA deposit upon entering the unit and the
refund of this deposit upon exit). In determining the tax base of investment property, the Group considered
whether taxable cash flows are 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 the tax base and associated deferred tax based on the taxable cash flows being
receivable at the end of the ORA period as this best represents the Group’s contractual entitlement.
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).
Contractually, management fees are received upon refund of the ORA deposit by way of set off on exit of
a unit by a resident.
78
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 Recognition of Deferred Tax on Deferred Management Fee
The interpretation of NZ tax laws in relation to DMF involves significant judgements and uncertainty. As at
31 May 2018, the Group recognised DMF for tax purposes in a manner consistent with the Group’s revenue
recognition policy. As explained in the 31 May 2018 consolidated annual financial statements, Inland Revenue
was disputing the tax treatment adopted by the Group in respect of the 2016 income year.
During October 2018, the Group obtained a binding ruling from Inland Revenue, applicable for ORAs entered
into after 1 June 2018 with certain revisions to the terms and conditions relating to the DMF. Pursuant to this
ruling DMF revenue is recognised as derived on the exit of a unit or care suite by a resident. On 20 November
2018, as a result of the binding ruling and associated certainty of the tax position going forward, the Group
resolved the dispute with Inland Revenue. The Group have included an adjustment in the 31 May 2018 tax
return to recognise tax on DMF in accordance with the contractual term of the resident’s ORA.
This resulted in the recognition of a tax liability of $6.1m, being the tax effect of the cumulative difference
between the two treatments of $21.9m. This was fully met by the application of $21.9m of the $64.6m
available tax losses that had not previously been recognised on the Consolidated Balance Sheet.
A corresponding deferred tax asset of $6.1m was recognised at this point for tax paid on DMF revenue in
advance of its accounting recognition. A movement of $0.9m has been recognised in the year to 31 May 2019
resulting in a closing deferred tax asset of $7.1m in respect of DMF revenue.
Recognition of Deferred Tax on Tax Losses
The Company and its subsidiaries exited the former Oceania Healthcare Holdings Limited (”OHHL”) tax
consolidated group from 31 May 2015. All tax losses incurred by the Company and its subsidiaries until
31 May 2015 are tax losses of the OHHL consolidated tax group (of which the Group is no longer a member).
On 5 September 2018 the Group forfeited all losses generated prior to the IPO of the Company as a result
of the sale of 15.56% of OHHL’s shareholding (refer note 5.5). This resulted in the cessation of shareholder
continuity.
The Group also utilised $21.9m of losses to offset additional taxable income arising from the change in
recognition of DMF revenue as noted above.
After allowing for the utilisation of losses to offset additional taxable income arising from the change in
recognition of DMF revenue, the forfeiture of losses generated prior to IPO on 5 September 2018, and taking
into consideration the new losses generated in the year to 31 May 2019, the Group now has an estimated
$25.6m (2018: $64.6m) of available tax losses at 31 May 2019. Of these total available tax losses, $12.2m may
be forfeited in the event of a further sale of shares by OHHL.
A deferred tax asset totalling $3.8m has been recognised as at 31 May 2019, being the tax effect of the
remaining $13.4m of tax losses (2018:nil). These are effectively the tax losses generated after 5 September
2018 which will be retained by the Group in the event of any further sale of shares by OHHL provided there
are no other significant shareholding changes.
NZ$000’s
Opening balance
Prior period adjustments: treatment of DMF income
Prior period adjustments: other
Losses as at 31 May 2018 per Inland Revenue
Losses utilised for the period to 5 September 2018
Losses forfeited during the year
Losses generated post 5 September 2018
Closing balance
Tax
Losses
64,583
(21,923)
(3,743)
38,917
(11,039)
(15,684)
13,395
25,589
79
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 at least once annually for impairment at 31 May, and carried at cost less
accumulated impairment losses. Impairments are recognised in the Statement of Comprehensive Income.
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).
$NZ000’s
Year ended 31 May 2018
Opening net book amount
Additions
Amortisation
Impairment charge
Closing net book amount
As at 31 May 2018
At cost
Accumulated amortisation, disposal and impairment
Net book amount
Year ended 31 May 2019
Opening net book amount
Additions
Amortisation
Impairment charge
Disposal
Closing net book amount
Goodwill
Software
Total
16,817
-
-
-
16,817
236
486
(141)
-
581
17,053
486
(141)
-
17,398
207,387
(190,570)
16,817
3,680
(3,099)
581
211,067
(193,669)
17,398
16,817
-
-
(8,149)
(1,612)
7,056
581
1,140
(109)
-
-
1,612
17,398
1,140
(109)
(8,149)
(1,612)
8,668
As at 31 May 2019
At cost
Accumulated amortisation disposal and impairment
Net book amount
207,387
(200,331)
7,056
4,820
(3,208)
1,612
212,207
(203,539)
8,668
80
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 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.
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 CGUs 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 centres are disclosed in note 3.2.
The impairment of goodwill as at 31 May 2019 is predominantly due to increases in the fair value of land
and buildings at sites with care suites. This increase in fair value has resulted in a corresponding impairment
of goodwill.
See sensitivity analysis relating to freehold land and buildings in note 3.2.
81
5.3 Trade and Other Receivables
Accounting Policy
Trade receivables are amounts due from residents and various government agencies in the ordinary course
of business and are recognised initially at fair value, being its transaction price, plus transaction costs.
Trade receivables are held with the objective of collecting the contractual cash flows and therefore they
are subsequently measured at amortised cost using the effective interest method, less a provision for
impairment.
Occupation licence payment receivables are recognised at the point in time that an ORA becomes
unconditional and has either “cooled off” or where the resident is in occupation, and the resident has not
yet made all of the contractual licence payment to the Group.
$NZ000’s
Net trade and other receivables
Trade receivables
Less: Loss allowance
Occupation licence payment receivable
Prepayments
Trade and other receivables
May 2019
May 2018
11,317
(428)
10,889
31,282
1,370
43,541
11,678
(403)
11,275
19,658
1,760
32,693
Recognition, Measurement and Judgements in Applying Accounting Policies
The Group adopted NZ IFRS 9 Financial Instruments (“NZ IFRS 9”) on 1 June 2018. Subsequent to the
adoption of NZ IFRS 9 the Group has applied the simplified approach to measuring expected credit losses
which uses a lifetime expected loss allowance for all trade receivables and requires recognition from initial
recognition of the trade receivable. To measure expected credit losses, trade receivables have been grouped
and reviewed on the basis of the number of days since resident departure and the funding stream and type
of debtor. Judgement is used in selecting the inputs to the impairment calculation and is based on past
history and forward looking assumptions.
The Group has the following financial assets subject to the application of the expected credit loss model:
– Trade receivables from care operations for the provision of care fees revenue for rest home and hospital
fees. These are split between private amounts owed by residents and amounts due from agencies such as
the Ministry of Health and ACC.
– Trade receivables from village operations for the provision of weekly service fees and occupation licence
payment receivables. These are receivable from residents.
The model requires an estimate of the debt to be made on resident admission rather than at the point that
the debt turns “bad” or “doubtful”. The following details the expected loss rate adopted by the Group based
on historic impairments and any other known factors with respect to resident departure date.
Category of debt
Care residents
Ministry of Health / ACC
Village Residents
Expected Loss Rate
Current
1%
1%
-
Departure
<90 days
15%
1%
-
Departure
>90 days
75%
100%
-
Application of the NZ IFRS 9 impairment model has not had a material impact on the carrying value of
expected credit losses. No material impact was noted with respect to the opening provision therefore no
adjustments have been made to opening balances.
There is no significant concentration of credit risk as trade receivables relate to individual residents and
government agencies.
82
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 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.
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 (2018: $0.1m) relating to cash held on behalf of residents. The balance as
at 31 May 2018 included $7.0m in relation to the purchase of land which has now settled.
Wages and Salaries, Annual Leave and Long Service 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.
The liability for long service leave is recognised in the provision for employee entitlements 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.
$NZ000’s
Trade payables
Sundry payables and accruals
Payables in respect of unconditional land purchases
Accrued interest on external borrowings and derivatives
Employee entitlements
Trade and other payables
May 2019
May 2018
6,120
17,473
-
131
14,841
38,565
3,770
12,079
7,156
41
14,546
37,592
5.5 Related Party Transactions
The Group’s largest shareholder is Oceania Healthcare Holdings Limited (“OHHL”).
On 5 September 2018 OHHL sold 15.56% of its holding. On 22 May 2019 OHHL sold a further 0.49%
holding resulting in a remaining 41.16% shareholding as at 31 May 2019 (2018: 57.21%). 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 centres
Oceania Village Company Limited Ownership and operation of
2019
100%
100%
100%
2018
100%
100%
100%
Class of shares
Ordinary
Ordinary
Ordinary
OCA Employees Trustee Limited
retirement villages
Hold LTIP shares on behalf of
employees
100%
100%
Ordinary
All subsidiaries are incorporated in New Zealand and have a balance date of 31 May. There are no significant
restrictions on subsidiaries.
83
5.5 Related Party Transactions (continued)
Key Management Personnel Compensation
Key management personnel are all executives with the authority for the strategic direction and management
of the Group.
$NZ000’s
Directors’ remuneration and expenses1
Salaries and other short term employee benefits
Dividends paid to employees
Termination benefits
May 2019
May 2018
780
2,093
158
-
3,031
622
2,022
71
-
2,715
Dividends were also paid to Directors in their capacity as shareholders.
Transactions with Related Parties
There are no outstanding balances with related parties (2018: nil).
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.
Classification and measurement
Financial assets are required to be classified into three measurement categories: those measured at fair
value through profit and loss, those measured at fair value through other comprehensive income 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. Trade receivables are amounts due from residents and various government
agencies held to collect contractual cash flows in the ordinary course of business. These balances are held at
amortised cost less a provision for impairment.
Risk management is carried out centrally by management under policies approved by the Board of Directors.
The Directors provide 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 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 Directors
on a monthly basis. The Directors monitor 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 Directors for consideration and seek Director approval prior to entering into
any interest rate swaps.
1 Gregory Tomlinson and Sally Evans were appointed as Directors on 22 March 2018. Their remuneration in FY2018 is for a part
year only.
84
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 The following table shows the sensitivity of the Group's Profit / (Loss) and equity to a movement in interest
rates of +/-1%. This assumes all other variables remain constant.
NZ$000’s
2019
Interest expense
Change in fair value of cash flow hedges
2018
Interest expense
Change in fair value of cash flow hedges
Interest Rate Swaps
+1%
-1%
Profit / (Loss)
Equity
Profit / (Loss)
Equity
(677)
22
(189)
42
(677)
2,084
(189)
941
677
(22)
189
(43)
677
(2,084)
189
(952)
It is the Group's policy to manage 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 short to medium term 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 Consolidated Statement of Comprehensive Income. Amounts taken to
the interest rate reserve are transferred out of the reserve 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
Consolidated Statement of Comprehensive Income.
The Group adopted NZ IFRS 9 Financial Instruments (“NZ IFRS 9”) on 1 June 2018. For existing swaps the
Group applied the exemption to continue to apply NZ IAS 39 to swaps which matured on 31 May 2019. From
this point forward all swaps are accounted for under NZ IFRS 9. After the adoption of NZ IFRS 9 the rules on
hedge accounting have been amended to align accounting treatment with risk management practices of the
reporting entity.
NZ IFRS 9 requires several new disclosures with respect to credit risk, expected credit losses and hedge
accounting, from the point of time that new hedge arrangements are entered into.
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 2019, the Group’s interest rate swaps of $100.0m
had matured. New interest rate swaps of $175.0m have been put in place with an effective date of 1 June
2019 (with a trade date of 30 April 2019). Of the interest rate swaps in place at 1 June 2019, $175.0m (2018:
$100.0m) are being used to cover approximately 66% (2018: 61%) of the loan principal outstanding. These
agreements effectively change the Group’s interest exposure on the principal covered by the interest rate
swaps from a floating rate to a fixed rate. Bank loans of the Group currently bear an average fixed interest
rate (including margin and line fees) of 4.1% (2018: 4.1%). The fair value of these agreements at 31 May 2019
is a $2.4m liability. The agreements cover notional amounts for a period of 3 years, 5 years, and 7 years.
The notional principal amounts and the period of expiry of the interest rate swap contracts are as follows:
Less than 1 year
Between 1 and 3 years
Between 3 and 5 years
Over 5 years
Average contracted
fixed interest rate
Notional principal amount
May 2019
%
4.10
4.03
4.10
4.19
May 2018
%
4.10
-
-
-
May 2019
$NZ000’s
-
75,000
50,000
50,000
May 2018
$NZ000’s
100,000
-
-
-
85
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 Consolidated Balance
Sheet represent the maximum credit risk. 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 2019 is AA- (2018: AA-).
The Group’s receivables represent distinct trading relationships with each of the residents. There are no
concentrations of credit risk with residents. Large receivables generally 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.
NZ$000’s
2019
Trade and other payables
Borrowings
Cash flow hedge - interest rate swaps
Refundable occupation right agreements
2018
Trade and other payables
Borrowings
Cash flow hedge - interest rate swaps
Refundable occupation right agreements
Less than
1 year
Between
1 and 2 years
Between
2 and 5 years
Over
5 years
23,593
10,928
796
436,481
23,005
8,969
315
358,213
-
13,052
1,009
-
282,749
1,551
-
-
(210)
-
-
-
-
171,678
2,353
-
-
-
-
-
-
-
-
-
The refundable ORAs are repayable to the resident on vacation of the unit, apartment, care suite or on the
termination of the occupation right agreement and subsequent resale of the unit, apartment or care suite.
The expected maturity of the refundable ORAs is shown in note 3.3.
(e) Capital Risk Management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital. The consolidated financial statements are prepared on a going
concern basis.
86
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 5.7 New Accounting Standards
(a) New and amended standards adopted by the Group
In the current year, the Group adopted all mandatory new and amended standards and interpretations,
including:
NZ IFRS 9, Financial Instruments (“NZ IFRS 9”) (effective for the Group from 1 June 2018)
This standard addresses the classification, measurement and recognition of financial assets (cash, trade
receivables and sundry receivables) and financial liabilities, the impairment of financial assets and hedge
accounting. See notes 5.3 and 5.6 for further details on its application to the Group.
NZ IFRS 15, Revenue from contracts with customers (“NZ IFRS 15”) (effective for the Group from 1 June
2018)
This standard addresses the recognition of revenue from contracts with customers. The standard is based
on the principle that revenue is recognised when control of a good and service transfer to a customer and
establishes principles for reporting the nature, amount, timing and uncertainty of revenue and cash flows
arising from an entity’s contracts with customers. See note 2.2 for further details on its application to the
Group.
(b) Standards, amendments and interpretations to existing standards that are not effective for the year
ended 31 May 2019 and have not been early adopted by the Group
The following relevant standard has not been early adopted by the Group but is to be adopted from 1 June
2019 which is the Group’s mandatory adoption date.
NZ IFRS 16, Leases (“NZ IFRS 16”) (effective for the Group from 1 June 2019)
The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases.
The objective of the standard is to ensure that lessees and lessors provide relevant information in a manner
that faithfully represents those transactions.
The standard does not change the accounting treatment from the perspective of lessors and the Group
confirms that it does not expect a change in recognition of rental and DMF income.
The standard requires a lessee to recognise a lease liability on the balance sheet reflecting the future lease
payments and a right-of-use asset for all lease contracts, except those which are of low value or short
term. This standard will affect primarily the accounting of the Group’s operating leases. As at 31 May 2019
the Group had non-cancellable operating lease commitments of $13.1m under operating leases. Many of
the Group’s leases relate to leases of low value assets however the Group currently leases three care sites
and two administrative buildings. The leases will be revalued with the fair value being recognised in the
Consolidated Balance Sheet. The impact of recognising these properties on the Consolidated Balance Sheet
will be material to the Group.
The Group has established the impact of NZ IFRS 16 with respect to those lease contracts which extend
beyond 1 June 2019. Work has focused on the identification and understanding of the provisions of
the standard which will most impact the Group, discount rate determination and the review of system
requirements. As a result of this review, management have elected to apply the modified retrospective
approach on adoption. There will be no restatement of comparative amounts for the period prior to first
adoption. A lease management system was selected during the period and all current leases have been
loaded to establish the financial impact of adoption.
The following impacts are noted in the context of 31 May 2019 balances. The tax impact is yet to be assessed.
a) The straight-line operating lease expense of $1.2m will be removed and a depreciation charge of $2.2m
(currently $1.4m) and interest expense on lease liabilities of $1.0m (currently $0.5m) will be recognised;
b) The repayment of the principal portion of all lease liabilities will be classified as financing activities; and
c) The Consolidated Balance Sheet will be impacted by the recognition of additional right to use assets of
$5.7m and corresponding additional lease liabilities of $8.7m in respect of leases currently classified as
operating leases. Total right to use assets and corresponding lease liabilities will be $11.0m and $14.2m
respectively. This will result in a decrease in opening retained earnings as at 1 June 2019 or approximately
$3.2m.
The impact on each of these line items is significant, however management do not expect the overall effect
on net profit attributable to shareholders to be material in future periods. The adoption of NZ IFRS 16 will
have no impact on net cash flows of the Group.
87
5.8 Contingencies and Commitments
(a) Contingencies
At 31 May 2019, the Group had no contingent liabilities or assets (2018: nil).
(b) Capital commitments
At 31 May 2019, the Group has a number of commitments to develop and construct certain sites totalling
$106.7m (2018: $104.6m) of which $106.7m (2018: $104.1m) relates to development sites.
(c) 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 5.7 for the impact of NZ IFRS 16
Leases which is to be adopted on 1 June 2019.
Lease of Investment Property
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 the Group will
also perform village operations. Stage one of the village development was completed in February 2018 with
stage two completed in May 2019 and a right to use asset was recorded for both stages. A commitment of
$11.5m (2018: $17.7m) in relation to stage one of the development and $27.2m in relation to stage two in the
form of future lease payments exists. Lease payment obligations arise as ORAs are sold.
See note 3.1 for further details.
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 Consolidated Statement of Comprehensive Income on a straight-line basis over
the period of the lease.
See note 5.7 for the impact of NZ IFRS 16 Leases which is to be adopted on 1 June 2019.
Commitments in relation to operating leases are payable as follows:
$NZ000’s
Within one year
Later than one year but not later than five years
Later than five years
May 2019
May 2018
1,456
3,964
7,656
1,593
4,677
8,339
13,076
14,609
The above mainly relates to land and buildings leased for the purpose of operating healthcare sites 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.
(d) Repairs and Maintenance
There are no significant unrecognised contractual obligations entered into for future repairs and maintenance
at balance date.
88
Notes to the Consolidated Financial Statements (continued)For the year ended 31 May 2019Oceania Healthcare Limited | Annual Report 2019 5.9 Events After Balance Date
Dividends
On 25 July 2019 a full year dividend of 2.6 cents per share (not imputed) was declared and will be paid on
26 August 2019. The record date for entitlement is 12 August 2019.
Dividend Reinvestment Plan
On 25 July 2019, the Board approved the implementation of a dividend reinvestment plan, for New Zealand
and Australian shareholders, to take effect from the dividend payable on 26 August 2019.
Employee Share Scheme
On 25 July 2019, the Board approved the introduction of an employee share scheme. All permanent
employees will be invited to participate. Participants will receive an allocation of a specified amount of shares
at nominal cost. The shares will be held in trust and will be transferred to the employee if the employee
remains employed by Oceania (or any of its subsidiaries) for the following three years.
There have been no other significant events after balance date.
89
Independent Auditor's Report
To the shareholders of Oceania Healthcare Limited
Independent auditor’s report
Independent auditor’s report
To the shareholders of Oceania Healthcare Limited
To the shareholders of Oceania Healthcare Limited
We have audited the consolidated financial statements which comprise:
the consolidated balance sheet as at 31 May 2019;
the consolidated cash flow statement for the year then ended; and
the consolidated cash flow statement for the year then ended; and
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the notes to the consolidated financial statements, which include significant accounting policies.
the consolidated balance sheet as at 31 May 2019;
the consolidated statement of comprehensive income for the year then ended;
•
We have audited the consolidated financial statements which comprise:
•
•
•
•
•
•
•
•
Our opinion
•
the notes to the consolidated financial statements, which include significant accounting policies.
In our opinion, the accompanying consolidated financial statements of Oceania Healthcare Limited
Our opinion
(the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
In our opinion, the accompanying consolidated financial statements of Oceania Healthcare Limited
financial position of the Group as at 31 May 2019, its financial performance and its cash flows for the
(the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
financial position of the Group as at 31 May 2019, its financial performance and its cash flows for the
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Basis for opinion
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
Basis for opinion
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
further described in the Auditor’s responsibilities for the audit of the consolidated financial
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
statements section of our report.
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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
our opinion.
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
accordance with these requirements.
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 trustee reporting, tax advisory and
market research. The provision of these other services has not impaired our independence as auditor
of the Group.
Our firm carries out other services for the Group in the areas of trustee reporting, tax advisory and
market research. The provision of these other services has not impaired our independence as auditor
of the Group.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
90
Oceania Healthcare Limited | Annual Report 2019
Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall Group materiality: $1.9 million, which represents approximately 1% of
revenue.
We chose 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.
We have determined that there are two key audit matters:
• Valuation of investment property and freehold land and buildings
• Deferred tax on 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.
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.
PwC
91
66
Independent Auditor's Report (continued)
To the shareholders of Oceania Healthcare Limited
Key audit matter
Valuation of investment property
and freehold land and buildings
As disclosed in note 3.1 and 3.2 of the
consolidated financial statements:
•
the Group’s investment property
portfolio was valued at $881.7 million
at 31 May 2019 and included completed
investment property and investment
property under development.
the Group’s freehold land and buildings
were valued at $423.4 million at 31 May
2019. This included freehold land and
buildings operated by the Group for the
provision of care services, care suites,
and land and buildings to be developed
into care facilities in the future
(together referred to as freehold land
and buildings).
The Group’s accounting policy is to
measure these assets at fair value.
Independent valuations of all investment
property and freehold land and buildings
were carried out by a third party valuer,
CBRE Limited (the Valuer).
Completed investment property and care
suites are recorded in the consolidated
financial statements at a Directors’
valuation which is based on the value
determined by the Valuer as at 30 April
2019, adjusted by management for:
•
the impact of any sale, resale and
repurchase of Occupation Right
Agreements (ORAs) for investment
property between the date of the
valuation and 31 May 2019;
the estimated costs to be incurred to
complete development of any asset not
complete at the date of the valuation,
but valued by the Valuer as if it was
complete;
for completed investment property,
refundable occupation licence
payments, residents’ share of resale
gains and management fees receivable
which are recognised separately on the
•
•
•
How our audit addressed the key audit matter
Our audit procedures included the following:
External valuations
We read the valuation report and discussed it with
the Valuer. We assessed the valuation approach and
confirmed that this was in accordance with the
relevant accounting standards.
From our discussions with management and the
Valuer, and from our review of the valuation report,
assumptions (as detailed in the description of this
Key Audit Matter) were made for each individual
property to reflect its characteristics, its overall
quality, geographic location and desirability as a
whole.
On a sample basis, we tested whether property
specific information supplied to the Valuer by the
Group reflected the underlying property records held
by the Group.
Valuation adjustments
We tested, on a sample basis, the adjustments made
to the valuations determined by the Valuer as at 30
April as detailed in the description of this Key Audit
Matter. This testing included obtaining signed ORAs
for a sample of sales and resales and supporting
documentation for repurchases in May 2019 and
obtaining quantity surveyors reports to support the
estimated cost to complete developments at 31 May
2019. We also obtained supporting documentation
for a sample of transactions included in work in
progress at 31 May 2019. For sites in their first year
of operation, we considered the reasonableness of the
changes made by the Directors to the operating
assumptions.
Assumptions and estimates
Our work over the assumptions focused on the largest
properties within 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 in-house expert to challenge the
work performed by the Valuer and assess the
reasonableness of the assumptions used based on
their knowledge gained from reviewing valuations of
similar properties, known transactions and available
market data.
92
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Oceania Healthcare Limited | Annual Report 2019
Key audit matter
consolidated balance sheet and also
reflected in the Valuer’s cash flow
model;
changes to the operating assumptions
applied by the Valuer to sites in their
first year of operation.
•
For each completed investment property
and each care suite, assumptions and
estimates were made in respect of:
• property price growth rate;
• stabilised occupancy periods; and
• discount rate.
During the year, the Valuer performed a
review of the care suite valuation
methodology to more appropriately reflect
the apportionment of the overall value
between freehold land and buildings and
goodwill. This resulted in an increase in the
apportionment to freehold land and
buildings and a reduction in the level of
goodwill. Goodwill impairment of $8.1
million has been recognised as disclosed in
note 5.2 of the consolidated financial
statements.
Investment property under development
and land and buildings to be developed into
care facilities in the future are recorded in
the consolidated financial statements at a
Directors’ valuation which is based on a
range of values determined by the Valuer as
at 30 April 2019, adjusted by management
for the cost of any work in progress.
For each asset under development,
assumptions and estimates were made in
respect of the price per square metre of
land.
Freehold land and buildings operated by
the Group for the provision of care services
are recorded in the consolidated financial
statements at a Directors’ valuation which
is based on the value determined by the
Valuer as at 30 April 2019.
PwC
How our audit addressed the key audit matter
We understood the apportionment of the valuations
to each class of assets and assessed the
reasonableness of this, as well as the corresponding
impairment of goodwill, through discussions with the
Valuer and our in-house expert.
Valuation estimates
Because of the subjectivity involved in determining
valuations for individual properties and the existence
of alternative assumptions and valuation methods,
there is a range of values which can be considered
reasonable when evaluating the independent
property valuations used by the Group. If we
identified an error in a property valuation or
determined that the valuation was outside of a
reasonable range, we evaluated the error or
difference to determine if there was a material
misstatement in the consolidated financial
statements.
We considered whether there were any events
subsequent to the date of the Valuer’s report which
may have caused the valuation of investment
property and freehold land and buildings to be
materially different to those determined by the
Valuer.
93
66
Independent Auditor's Report (continued)
To the shareholders of Oceania Healthcare Limited
forecast earnings before interest, tax,
depreciation, amortisation, and rent;
and
forecast earnings before interest, tax,
depreciation, amortisation, and rent;
and
Key audit matter
For each property, assumptions and
estimates are made in respect of:
•
Key audit matter
For each property, assumptions and
estimates are made in respect of:
• capitalisation rate.
•
The valuation of the Group’s property
portfolio is inherently subjective. The
existence of significant estimation
• capitalisation rate.
uncertainty, coupled with the fact that only
a small percentage difference in
The valuation of the Group’s property
assumptions on individual properties, when
portfolio is inherently subjective. The
aggregated, could result in material
existence of significant estimation
differences, is why we have given specific
uncertainty, coupled with the fact that only
audit focus and attention to this area.
a small percentage difference in
assumptions on individual properties, when
Deferred tax on investment property
aggregated, could result in material
and care suites
differences, is why we have given specific
As disclosed in note 5.1 of the consolidated
audit focus and attention to this area.
financial statements, the Group assesses
Deferred tax on investment property
deferred tax on investment property and
and care suites
care suites on the basis that the asset value
will be realised through use (‘Held for Use’).
As disclosed in note 5.1 of the consolidated
financial statements, the Group assesses
In applying the Held for Use methodology,
deferred tax on investment property and
the Group makes three key assumptions
care suites on the basis that the asset value
which involve significant judgement:
will be realised through use (‘Held for Use’).
1. Determining the amount of taxable cash
In applying the Held for Use methodology,
the Group makes three key assumptions
2. Timing of taxable cash flows, being at
which involve significant judgement:
the end of the Occupation Right
1. Determining the amount of taxable cash
Agreement (ORA) period; and
flows;
3. Apportionment of the value of
2. Timing of taxable cash flows, being at
investment property between land and
the end of the Occupation Right
buildings.
Agreement (ORA) period; and
Due to the significant judgement exercised
3. Apportionment of the value of
by the Group in making and applying these
investment property between land and
assumptions to determine the deferred tax
buildings.
on investment property and care suites, we
Due to the significant judgement exercised
have given specific audit focus and
by the Group in making and applying these
attention to this area.
assumptions to determine the deferred tax
on investment property and care suites, we
have given specific audit focus and
attention to this area.
flows;
How our audit addressed the key audit matter
How our audit addressed the key audit matter
Assumptions
With respect to the assumptions used in the
calculation of deferred tax, we engaged our in-house
tax specialist and valuation expert to challenge the
Assumptions
work performed and assess the reasonableness of the
With respect to the assumptions used in the
assumptions based on their knowledge of the tax
legislation and other accepted approaches in the
calculation of deferred tax, we engaged our in-house
tax specialist and valuation expert to challenge the
industry.
work performed and assess the reasonableness of the
1. Determining the amount of taxable cash
assumptions based on their knowledge of the tax
flows
legislation and other accepted approaches in the
We agreed the amount of taxable cash flows of
industry.
investment property and care suites from the Valuer’s
1. Determining the amount of taxable cash
report, which is based on materially the same
flows
assumptions and estimates used in the valuation of
We agreed the amount of taxable cash flows of
investment property and care suites described above.
investment property and care suites from the Valuer’s
2. Timing of taxable cash flows
report, which is based on materially the same
We tested a sample of ORAs to confirm that the
assumptions and estimates used in the valuation of
Deferred Management Fees (DMF) are contractually
investment property and care suites described above.
earned at the end of the ORA period.
2. Timing of taxable cash flows
3. Apportionment of investment property
We tested a sample of ORAs to confirm that the
For a sample of investment properties, we agreed the
Deferred Management Fees (DMF) are contractually
council rateable valuations to the council website and
earned at the end of the ORA period.
recalculated the apportionment between land and
3. Apportionment of investment property
buildings.
For a sample of investment properties, we agreed the
council rateable valuations to the council website and
recalculated the apportionment between land and
buildings.
PwC
94
PwC
67
67
Oceania Healthcare Limited | Annual Report 2019
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.
PwC
95
68
Independent Auditor's Report (continued)
To the shareholders of Oceania Healthcare Limited
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 Leopino Foliaki.
For and on behalf of:
Chartered Accountants
25 July 2019
Auckland
96
PwC
69
Oceania Healthcare Limited | Annual Report 2019
Corporate Governance
This section of the Annual Report provides information on Directors’ independence, diversity and inclusion
policies, remuneration and statutory disclosures.
Oceania Healthcare’s governance framework is guided by the recommendations set by the NZX Corporate
Governance Code. Oceania Healthcare has prepared a statement on the extent to which it has followed the
recommendations in the NZX Corporate Governance Code. The Corporate Governance Statement is current as
at 31 May 2019. Oceania Healthcare considers that it has followed the recommendations in the NZX Corporate
Governance Code in all respects during FY2019.
For detailed information on Oceania Healthcare’s corporate governance policies, practices and processes
please refer to the Investors section on the Oceania Healthcare website –
www.oceaniahealthcare.co.nz/investor-centre/governance.
This contains the following documents:
Corporate Governance Statement
Constitution
Charters
– Board Charter
– Audit Committee Charter
– Remuneration Committee Charter
– Clinical and Health and Safety Committee Charter
– Development Committee Charter
Policies
– Code of Values and Conduct
– Health and Safety Policy
– Occupational Rehabilitation Policy
– Fraud Policy
– Whistleblowing Policy
– Diversity Policy
– Market Disclosure Policy
– Remuneration Policy
– Trading in Company Securities Policy
– External Auditor Independence Policy
– Privacy Policy
Director Independence
As at 31 May 2019, the Board comprised seven Directors. All of the Directors are non-executive Directors. The Board
has considered which of the Directors are independent Directors for the purposes of the NZX Listing Rules and has
determined that, as at 31 May 2019, four 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
Chair, Independent Director
Appointed in November 2014
Alan Isaac
Independent Director
Dame Kerry Prendergast
Independent Director
Sally Evans
Hugh FitzSimons
Patrick McCawe
Independent Director
Non-Executive Director
Non-Executive Director
Gregory Tomlinson
Non-Executive Director
Appointed in October 2015
Appointed in December 2016
Appointed in March 2018
Appointed in October 2012
Appointed in February 2017
Appointed in March 2018
97
Director Independence (continued)
The factors relevant to determining whether a Director is an independent Director are the criteria in the
NZX Listing Rules for Director independence, having regard to the factors described in the NZX Corporate
Governance Code that may impact Director independence.
Committee Membership
The Board has four standing committees to assist in the execution of the Board’s duties, being the Audit Committee,
the Remuneration Committee, the Clinical and Health and Safety Committee and the Development Committee.
As at 31 May 2019, membership of the committees was as follows:
Audit Committee – Alan Isaac (Chair), Elizabeth Coutts, Sally Evans
Remuneration Committee – Sally Evans (Chair), Elizabeth Coutts, Alan Isaac
Clinical and Health and Safety Committee – Dame Kerry Prendergast (Chair), Elizabeth Coutts, Sally Evans
Development Committee – Gregory Tomlinson (Chair), Elizabeth Coutts
Diversity
Oceania Healthcare’s Diversity Policy is available on its website. The Diversity Policy aims to ensure that Oceania
Healthcare has a focus on diversity throughout the organisation. This recognises that a diverse workforce
contributes to business growth and performance, helping to drive an inclusive, high performance environment.
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 2019 (and 31 May 2018 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 2019
31 May 2018
Male
4
5
344
Female
3
5
2,268
Male
4
6
349
Female
3
6
2,390
Oceania Healthcare is developing further internal systems and processes to allow regular and efficient monitoring
of policy objectives.
98
Corporate Governance (continued)Oceania Healthcare Limited | Annual Report 2019
Remuneration Report
Directors’ Fees
Directors’ remuneration is paid in the form of fees. A higher level of fees is paid to the Chair to reflect the
additional time and responsibilities that this position involves. Additional fees are payable in respect of work
carried out by the Chairs of the Audit Committee, Remuneration Committee and the Clinical and Health and
Safety Committee.
Director Remuneration paid in the year ended 31 May 2019
Director
Elizabeth Coutts (Chair)
Alan Isaac
Dame Kerry Prendergast
Sally Evans
Hugh FitzSimons
Patrick McCawe
Gregory Tomlinson
Board
Fees
$180,000
$90,000
$90,000
$90,000
$90,000
$90,000
$90,000
Audit
Committee
-
$20,000
-
-
-
-
-
Clinical and
Health and
Safety
Committee
-
-
$15,000
-
-
-
-
Remuneration
Committee
-
Total
Remuneration
$180,000
-
-
$7,500
-
-
-
$110,000
$105,000
$97,500
$90,000
$90,000
$90,000
The above fees exclude GST and expense reimbursements.
Employees’ Remuneration
Oceania Healthcare did not employ people directly in the year ended 31 May 2019. All employees are employed
by the subsidiaries of Oceania Healthcare. The number of employees and former employees of Oceania
Healthcare’s subsidiaries, not being a Director of Oceania Healthcare, who received remuneration and other
benefits the value of which was or exceeded $100,000 during the financial year ended 31 May 2019 is set out
in the table of remuneration bands below.
The remuneration figures shown in the “Remuneration” column include all monetary payments actually paid
during the course of the year ended 31 May 2019, which include performance incentive payments for the year
ended 31 May 2018. The table does not include amounts paid after 31 May 2019 that relate to the year ended
31 May 2019.
Remuneration
Number of Employees
$100,000 – $109,999
$110,000 – $119,999
$120,000 – $129,999
$130,000 – $139,999
$140,000 – $149,999
$150,000 – $159,999
$160,000 – $169,999
$170,000 – $179,999
$180,000 – $189,999
$190,000 – $199,999
$200,000 – $209,999
$210,000 – $219,999
$240,000 – $249,999
$260,000 – $269,999
$320,000 – $329,999
$420,000 – $429,999
$450,000 – $459,999
$510,000 – $519,999
$740,000 – $749,999
15
9
6
4
4
2
3
2
2
3
1
2
1
1
1
1
1
1
1
99
Chief Executive Officer’s Remuneration
The remuneration of the Chief Executive Officer (“CEO”) for the year ended 31 May 2019 is as follows:
Base
Salary
$507,001
Other
Benefits
$28,743
STI
$208,576
Subtotal
$744,320
LTIP
$36,827
Remuneration
Total
$781,147
Mr Gasparich received a short term incentive of $208,576. This was based on 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 2018.
The remuneration of the CEO for the year ended 31 May 2018 (being the prior comparative period) is as follows:
Base
Salary
$490,172
Other
Benefits
$27,510
STI
$75,938
Subtotal
$593,620
LTIP
$36,827
Remuneration
Total
$630,447
Mr Gasparich received a short term incentive of $75,938. This was based on 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 2017.
The remuneration of the CEO comprises a fixed remuneration and performance payments. Fixed remuneration
includes a base salary, the provision of a carpark and a vehicle allowance.
Mr Gasparich was invited to participate in a long term incentive plan which was established concurrent with the IPO
in 2017. As part of this, Earl Gasparich, Celia Gasparich and Carla 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
Healthcare. These shares are held by OCA Employees Trustee Limited on behalf of the participants. Further details
about this Long Term Incentive Plan (including the performance criteria relevant to participants’ entitlements) are
set out in Oceania Healthcare’s Corporate Governance Statement, which is available on its website.
Statutory Disclosures
Disclosure of Directors’ Interests
The following particulars were entered in the Interests Register kept for Oceania Healthcare and its subsidiaries
during the year ended 31 May 2019:
Elizabeth Coutts: Disclosed she ceased to hold the following position: Director of companies in the
Yellow Pages Group.
Alan Isaac: Disclosed he ceased to hold the following positions: Director of New Zealand Vault Limited,
Director of New Zealand Vault Depository Limited, Director of AKA Investments Limited.
Dame Kerry Prendergast: Disclosed she ceased to hold the following positions: Chair of Tourism
New Zealand, Chair of Environmental Protection Authority and Trustee of Compass Health Board.
Disclosed the following new positions: Member of KiwiRail Tourism Advisory Board, Trustee of Wellington
International Arts Foundation, Trustee of Capital Kiwi, Member of Anne Frank NZ Holocaust Advisory Board
and Member of the Centre for Women’s Health Research Advisory Board.
Sally Evans: Disclosed she ceased to hold the following positions: Director of Gateway Lifestyle Operations
Limited and Member of the Consumer and Industry Advisory Group for Australian Treasury on the proposed
framework for retirement incomes.
Disclosed the following new positions: Director of Rest (Australian Super Fund), Director of Healius Limited and
member of the Australian Aged Care Quality and Safety Advisory Council.
Gregory Tomlinson: Disclosed he ceased to hold the following position: Director of Oceania Healthcare
Holdings Limited.
100
Corporate Governance (continued)Oceania Healthcare Limited | Annual Report 2019 Specific Disclosures
There were no specific disclosures made by Directors during the year ended 31 May 2019 of any interests in
transactions with Oceania Healthcare or any of its subsidiaries.
Use of Company Information
During the year ended 31 May 2019, the Board did not receive any notices from Directors requesting use of
Oceania Healthcare’s or any of its subsidiaries’ information.
Securities Dealings of Directors
Dealings by Directors of Oceania Healthcare in relevant interests in Oceania Healthcare’s ordinary shares during
the year ended 31 May 2019 are entered in the Interests Register:
Director
Elizabeth Coutts
Number of
Ordinary Shares
350,000
Nature of
Relevant Interest
Beneficial interest
Acquisition
/ Disposal
Acquisition
Consideration
(Per Share)
$1.10
Date of
Transaction
6 September 2018
Gregory Tomlinson 2,000,000
Beneficial interest
Acquisition
Patrick McCawe
95,000,000
Shares held by OHHL1 Disposal
Hugh FitzSimons
95,000,000
Shares held by OHHL1 Disposal
Alan Isaac
50,000
Beneficial interest
Acquisition
Elizabeth Coutts
50,000
Beneficial interest
Acquisition
Kerry Prendergast
75,000
Sally Evans
20,000
Alan Isaac
40,000
Registered and
beneficial interest
Registered and
beneficial interest
Beneficial interest
Acquisition
Acquisition
Gregory Tomlinson 2,000,000
Beneficial interest
Acquisition
Elizabeth Coutts
50,000
Beneficial interest
Acquisition
Patrick McCawe
2,972,439
Shares held by OHHL1 Disposal
Hugh FitzSimons
2,972,439
Shares held by OHHL1 Disposal
Gregory Tomlinson 2,972,439
Beneficial interest
Acquisition
$1.10
$1.10
$1.10
$1.14
$1.04
$1.05
6 September 2018
6 September 2018
6 September 2018
30 October 2018
31 January 2019
31 January 2019
$1.04
$1.01
$1.02
N/A
N/A
N/A
13 March 2019
19 & 20 March 2019
15 April 2019
22 May 2019
22 May 2019
22 May 2019
Acquisition
$1.10
25 February 2019
1 Oceania Healthcare Holdings Limited (“OHHL”) holds shares in Oceania Healthcare. OHHL is 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.
Directors’ Interests in Shares
Directors of Oceania Healthcare have disclosed the following relevant interests in shares as at 31 May 2019:
Director
Elizabeth Coutts
Alan Isaac
Dame Kerry Prendergast
Sally Evans
Hugh FitzSimons
Patrick McCawe
Gregory Tomlinson
Number of shares in which a relevant interest is held
900,000 shares
200,000 shares
100,000 shares
20,000 shares
250,000 shares
251,202,979 shares held by Oceania Healthcare Holdings Limited2
250,000 shares
251,202,979 shares held by Oceania Healthcare Holdings Limited2
10,476,699 shares
2 Oceania Healthcare Holdings Limited (“OHHL”) holds 41.16% of shares in Oceania Healthcare. OHHL is 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.
101
Indemnity and Insurance
Oceania Healthcare 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 Healthcare also maintains Directors’ and Officers’
liability insurance for its Directors and officers.
Auditor’s Fees
Oceania Healthcare’s external auditor is PricewaterhouseCoopers. Total fees paid to PricewaterhouseCoopers
in its capacity as auditor during the financial year ended 31 May 2019 were $404,775. Total fees paid to
PricewaterhouseCoopers for other professional services (being trustee reporting, taxation services and research
on new markets) during the financial year ended 31 May 2019 were $53,550. No other fees were paid to
PricewaterhouseCoopers for other professional services.
Donations
During the year ended 31 May 2019, Oceania Healthcare paid a total of $13,657 in donations.
Stock Exchange Listings
Oceania Healthcare’s shares are listed on the NZX and the ASX. Oceania Healthcare is listed on ASX as a Foreign
Exempt Listing, which means that Oceania Healthcare 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
Healthcare confirms that it has complied with the NZX Listing Rules for the financial year ended 31 May 2019.
NZX Waivers
Oceania Healthcare does not have any waivers from the requirements of the NZX Listing Rules.
Credit Rating
Oceania Healthcare has no credit rating.
Former Directors
No Directors of Oceania Healthcare or any of its subsidiaries resigned (or otherwise ceased to hold office) during
the financial year ended 31 May 2019.
Subsidiary Company Directors
Earl Gasparich and Matthew Ward are the Directors of all Oceania Healthcare’s subsidiaries as at 31 May 2019,
with the exception of OCA Employees Trustee Limited (the Directors of which are Elizabeth Coutts and
Hugh FitzSimons).
No remuneration is payable, and there is no entitlement to other benefits, for any directorship of a subsidiary.
102
Corporate Governance (continued)Oceania Healthcare Limited | Annual Report 2019 SHAREHOLDER INFORMATION
Twenty Largest Shareholders
(as at 30 June 2019)
Registered Shareholder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Oceania Healthcare Holdings Limited
New Zealand Central Securities Depository Limited
FNZ Custodians Limited
Custodial Services Limited
Custodial Services Limited
Investment Custodial Services Limited
Tomlinson Group Investments Limited3
Custodial Services Limited
PT (Booster Investments) Nominees Limited
Custodial Services Limited
New Zealand Depository Nominee Limited
Harrogate Trustee Limited3
Custodial Services Limited
OCA Employees Trustee Limited
Custodial Services Limited
Philip George Lennon
FNZ Custodians Limited
Leveraged Equities Finance Limited
Earl Gasparich, Celia Gasparich and Carla Pearce
20
FNZ Custodians Limited
Total
Number of Shares
% Shares
251,202,979
76,371,537
33,047,184
13,349,461
13,165,842
12,693,122
6,972,439
6,554,906
5,913,925
4,015,026
3,765,917
3,504,260
3,171,002
3,164,557
3,025,059
3,000,000
2,736,283
2,385,300
2,023,078
1,786,096
41.16
12.51
5.41
2.18
2.15
2.07
1.14
1.07
0.96
0.65
0.61
0.57
0.51
0.51
0.49
0.49
0.44
0.39
0.33
0.29
451,847,973
73.93
3 Gregory Tomlinson's relevant interests are held by Tomlinson Group Investments Limited and Harrogate Trustee Limited.
103
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 shares are held on behalf of:
Name
Number of Shares
% Shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Citibank Nominees (New Zealand) Limited
HSBC Nominees (New Zealand) Limited
ANZ Wholesale Trans-Tasman Property Securities Fund
MFL Mutual Fund Limited
ANZ Wholesale Australasian Share Fund
Accident Compensation Corporation
BNP Paribas Nominees (NZ) Limited
Generate Kiwisaver Public Trust Nominees Limited
BNP Paribas Nominees (NZ) Limited
JP Morgan Chase Bank NA NZ Branch
HSBC Nominees A/C NZ Superannuation Fund Nominees Limited
HSBC Nominees (New Zealand) Limited
ANZ Wholesale Property Securities
Mint Nominees Limited
Tea Custodians Limited
ANZ Wholesale NZ Share Fund
Queen Street Nominees ACF Mint
New Zealand Permanent Trustees Limited
Public Trust RIF Nominees Limited
20
National Nominees New Zealand Limited
11,566,603
10,883,463
8,139,020
6,924,751
6,218,001
5,250,000
4,587,899
3,695,546
3,385,306
3,006,509
2,487,953
1,948,393
1,882,279
1,322,407
1,224,982
1,000,296
771,756
692,767
504,358
337,916
1.90%
1.78%
1.33%
1.13%
1.02%
0.86%
0.75%
0.61%
0.55%
0.49%
0.41%
0.32%
0.31%
0.22%
0.20%
0.16%
0.13%
0.11%
0.08%
0.06%
104
Corporate Governance (continued)Oceania Healthcare Limited | Annual Report 2019 Spread of Holdings
(as at 30 June 2019)
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
458
1,407
1,221
2,432
258
%
7.93
24.36
21.14
42.11
4.47
100
Number of
Shares
335,930
5,074,422
10,236,098
74,864,500
519,743,585
%
0.06
0.83
1.68
12.27
85.17
100
Substantial Product Holders
According to Oceania Healthcare’s records and notices given under the Financial Markets Conduct Act 2013,
the following were substantial product holders of Oceania Healthcare as at 31 May 2019:
Substantial Product Holder
Number of Shares
(out of 610,254,535,
being the total
number of Shares
as at 31 May 2019)
Oceania Healthcare Holdings Limited
251,202,979
%
41.16
Date of Notice
7 September 20181
1 Subsequent to Oceania Healthcare Holdings Limited (“OHHL”) releasing this notice, a subsequent movement of less than 1% in
OHHL’s substantial shareholding was disclosed by directors of OHHL (which is reflected in the figures for OHHL in the above
table). Oceania Healthcare understands that, in accordance with the Financial Markets Conduct Act 2013, this movement was
not required to be disclosed by OHHL itself.
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