ORPEA: Another Year of Strong Earnings Growth in 2018
- REVENUE UP 9.0% TO €3,420 MILLION
- CONSOLIDATED NET PROFIT UP 11.4%1 TO €220 MILLION
- 11.6% INCREASE IN THE REAL-ESTATE PORTFOLIO TO €5.6 BILLION
ORPEA BECOMES LEADER IN
- ACQUISITION OF A 50% STAKE IN SENIOR SUITES, THE MARKET LEADER IN
CHILE - ACQUISITION OF A 20% STAKE IN BRASIL SENIOR LIVING, THE MARKET LEADER IN
BRAZIL - ACQUISITION OF THE LEADING FACILITY IN
URUGUAY
2019: MAJOR DEVELOPMENT AND STRONG PROFITABLE GROWTH
- REVENUE TARGET OF €3,700 MILLION (+8.2%) WITH STRONG PROFITABILITY
PUTEAUX,
The
“Our international expansion was very dynamic in 2018 with 10,000 additional beds across the network over the past 12 months and the reinforcement of our positioning in the premium segment, most notably in
Thanks to our new cluster-based organisation, we are now in a unique position with unrivalled value creation potential. We will continue to pursue our expansion strategy by focusing on the premium segment, both through the opening of new facilities and through acquisitions.
In 2019, we have achieved our strategic goal of becoming the leader in
With 80,000 opened beds, a pipeline of over 17,000 beds under construction and our acclaimed expertise in development, we benefit from strong growth levers and unrivalled visibility for the upcoming years.”
1 Excluding impact of ORNANE bonds and of discounting deferred taxes in 2017
2 The financial statements are currently being audited.
Strong HR commitment to equal opportunities
This year,
- personalised and tailored training courses and career management
- tools enhancing quality of life in the workplace and the well-being of its employees
- promoting diversity and equal opportunities
Training is a key priority for developing quality of service and care and for providing attractive career progression to employees. This is why the training policy of
Diversity and equal opportunities have always played a key role in the development of the HR development at
Strong earnings growth in 2018
(€ m)
(IFRS) |
2018 |
20173 |
% Chg. | |||
Revenue | 3,420 | 3,138 | +9.0% | |||
EBITDAR (EBITDA before rental expenses) | 912 | 846 | +7.8% | |||
EBITDA | 604 | 548 | +10.2% | |||
Recurring operating profit | 428 | 394 | +8.4% | |||
Net interest expense | -136 | -135 | +0.6% | |||
Profit before tax | 309 | 278 | +11.3% | |||
Net profit attributable to ORPEA’s shareholders | 220 | 90 | ||||
Net profit excluding impact of ORNANE bonds and of discounting deferred taxes | 220 | 198 | +11.4% |
2018 revenue grew by 9.0% to €3,419.8 million. It was supported by a strong organic growth of 5.0% and by a rapid pace of acquisitions outside
EBITDAR (EBITDA before rental expenses) increased by 7.8% to €911.8 million. Excluding the “Macron bonus” (€4m) and the reduction in the CICE tax credit (€6m), 2018 EBIDTAR margin came out at 27,0%. The margin at historical operations rose by 70 basis points, demonstrating the ability of
3 Excluding impact of ORNANE bonds and of discounting deferred taxes
Thanks to the strategy of increasing its real-estate ownership rate (up to 47% at year-end 2018 from 45% in 2017), rental expenses rose by only 3.2% to €308.1 million from €298.5 million in 2017.
EBITDA rose by 10.2% to €603.7 million, or 17.7% of revenue, a 20 basis points improvement on its 2017 level. Excluding the “Macron bonus” and reduction in the CICE tax credit, the EBITDA margin improved by 50 basis points to 18.0%.
After €175.9 million in depreciation, amortisation and charges to provisions (up 14.7% owing to increased real-estate portfolio), recurring operating profit came out to €427.7 million (up 8.4%).
Non-recurring items, which include the capital gain on the sale of facilities in
Net interest expense was almost stable at €136.2 million (up 0.6%) as a result of improvements to the debt structure.
After €95.3 million in income tax expense (up 12.7%), net profit group share rose 11.4% to €220.4 million4. This increase outpaced the growth in revenue, demonstrating the strength of the
Dividend payment of €1.20 per share proposed
At the Annual General Meeting on
Continued reinforcement of the real -estate portfolio to €5.6 billion5
Its valuation by independent appraisers implies an average capitalisation rate of 5.8%, down from 6.0% at year-end 2017. That still represents a moderate valuation by comparison with recent market transactions for the same type of assets, which were priced at a yield of 4.5%.
This real-estate strategy offers
Strengthening the financial structure
Net debt stood at €5,022 million6 at
Real-estate debt again accounted for 85% of the total, with debt ratios stable compared to
- the restated financial leverage ratio stood at 2.3x, stable compared with at
30 June 2018 (level of up to 5.5x authorised) - restated gearing was stable at 1.5x compared with
30 June 2018 (level of up to 2.0x authorised)
The average borrowing cost decreased to 2.9% from 3.1% in 2017. Net debt is fully hedged against the risk of an increase in interest rates.
4 Excluding impact of ORNANE bonds and of discounting deferred taxes in 2017
5 Excluding the €206 million in assets held for sale
6 Excluding €206 million in liabilities associated with assets held for sale
A new organisation structure primed for global expansion
The Group has switched from a country-based organisation to one based around clusters, each with their own management team and headquarters managing operations in several countries.
In parallel,
The Risk Management, Audit and Internal Control department has been considerably expanded, and it now includes 16 specialists at corporate level, backed up by correspondents in the clusters, specifically in the LATAM cluster.
This organisation provides greater decentralisation and also a superior level of control and security.
Thanks to this new structure,
Creation of a Latin American leading player in long-term care, set to have 7,000 beds within 5 years
In 2019,
- a 50% stake in Senior Suites, Chile’s leading operator of nursing homes, with a call option to buy out the remaining 50% interest within 5 years
- a 20% stake in Brasil Senior Living (BSL), the Brazilian market leader, with a call option to buy out the remaining share capital within 5 years
- acquisition of the leading facility in
Uruguay - the 2,752 beds in service or under construction in
Brazil already owned byORPEA and its joint venture withSIS Group .
In
Senior Suites, a group founded in 1995, now leads the country in terms of number of facilities and quality standards. It owns and operates four facilities recently opened (616 beds) and three additional facilities (350 beds) under construction. These facilities are built to an excellent standard of quality, with private rooms accounting for 95% of the total, and are located in Santiago’s most premium areas. For future developments,
In
- 9 facilities already open (1,283 beds)
- 13 facilities under construction or at the planning stage (1,800 beds)
The property strategy of BSL is similar to that of
BSL is a company owned by a fund managed by Patria Investments, a leading alternative investment manager in
The acquisition of this stake has made
Lastly,
Through these strategic transactions, the Group is establishing itself as a powerful leader in
Outlook for 2019
For 2019, the Group reiterates its revenue target of at least €3,700 million (up 8.2% compared with 2018) and solid profitability levels.
Having achieved a real-estate ownership rate of close to 50%, the Group plans to sell between €200-250 million in real-estate assets on attractive financial terms over the next 12 months.
Finally, in line with its strategy of upscaling its network,
Next press release: Q1 2019 revenue
About
Founded in 1989,
- 33,443 beds in
France (2,587 beds under construction) at 354 facilities - 63,134 beds outside
France (Austria ,Belgium ,Brazil ,China ,Czech Republic ,Germany ,Italy , Luxembourg,Netherlands ,Poland ,Portugal ,Spain andSwitzerland ) at 596 facilities (14,801 beds under construction)
Glossary:
Organic growth | Organic growth reflects the following factors:
1. The year-on-year change in the revenue of existing facilities as a result of changes in their occupancy rates and per diem rates 2. The year-on-year change in the revenue of redeveloped facilities or those where capacity has been increased in the current or year-earlier period 3. Revenue generated in the current period by facilities created in the current or year-earlier period, and the change in revenue at recently acquired facilities by comparison with the previous equivalent period |
|
EBITDAR |
EBITDA before rents, including provisions related to external charges and staff costs |
|
Recurring EBITDA | Recurring operating profit before net additions to depreciation and amortisation, including provisions related to external charges and staff costs | |
Pre-tax profit on ordinary activities | Recurring operating profit - Net financial expense | |
Net debt | Non-current borrowings + current borrowings - cash and short-term investments | |
Financial leverage restated for real estate assets | (Net debt - Real estate debt)/(EBITDA - (6% x Real estate debt)) | |
Restated gearing | Net debt/(Equity + Deferred taxes available indefinitely on intangible assets) |
Adoption of IFRS 16
IFRS 16 requires a lessee to recognise all leases on the balance sheet via:
- an asset representing its right to use the underlying leased asset in an amount equal to the current value of future lease payments
- a lease liability representing its obligation to make lease payments over the term of the lease.
For
- a lease liability of approximately €2.4 billion
- an increase in EBITDA of around €300 million reflecting the elimination of rental payments.
Lastly, the accounting standard will have no impact on the Group’s cash flow or on its bank covenants.
Consolidated income statement (Audit in progress)
In €m | |
|
||
Revenue | 3,419.8 | 3,138.2 | ||
Purchases used and other external expenses | -915.6 | -861.4 | ||
Staff costs | -1,802.3 | -1,639.5 | ||
Taxes other than on income | -119.3 | -104.4 | ||
Depreciation, amortisation and charges to provisions | -175.9 | -153.3 | ||
Other recurring operating income and expense | 21.0 | 14.8 | ||
Recurring operating profit | 427.7 | 394.4 | ||
Other non-recurring operating income and expense | 17.9 | 19.0 | ||
Operating profit | 445.6 | 413.4 | ||
Net interest expense | -136.2 | -135.4 | ||
Profit before tax1 | 309.4 | 278 | ||
Income tax expense1 | -95.3 | -84.6 | ||
Share in profit/(loss) of associates and joint ventures | 7.0 | 4.4 | ||
Impact of early redemption and fair-value of ORNANE bond | 0 | -160.9 | ||
Discounting deferred income taxes | 0 | 52.9 | ||
Consolidated net profit | 220.4 | 89.8 | ||
Net profit excluding impact of ORNANE and discounting deferred taxes1 |
220.4 | 197.8 |
Consolidated balance sheet (Audit in progress)
In €m | |
|
||
Non-current assets | 9,303 | 8,324 | ||
|
1,155 | 1,013 | ||
Intangible assets | 2,275 | 2,082 | ||
Property, plant and equipment and properties under development | 5,628 | 5,042 | ||
Other non-current assets | 244 | 187 | ||
Current assets | 1,526 | 1,308 | ||
Cash and short-term investments | 768 | 614 | ||
Assets held for sale | 206 | 64 | ||
TOTAL ASSETS | 11,034 | 9,696 | ||
Equity attributable to ORPEA’s shareholders and deferred taxes available indefinitely | 3,427 | 3,142 | ||
Equity attributable to ORPEA’s shareholders | 2,976 | 2,715 | ||
Deferred taxes available indefinitely on operating intangible assets | 451 | 427 | ||
Non-controlling interest | 1 | 0 | ||
Non-current liabilities | 5,703 | 5,248 | ||
Other deferred tax liabilities | 481 | 431 | ||
Provisions for liabilities and charges | 233 | 194 | ||
Non-current financial liabilities | 5,026 | 4,622 | ||
Change in the fair value of the conversion right embedded in the ORNANE bonds | - | - | ||
Current liabilities | 1,660 | 1,242 | ||
o/w current financial liabilities (bridge loans and real estate porting) | 764 | 405 | ||
Liabilities associated with assets held for sale | 206 | 64 | ||
TOTAL EQUITY AND LIABILITIES | 11,034 | 9,696 |
Cash flows (Audit in progress)
In €m | |
|
||
Net cash generated/(used) by operating activities | 415 | 398 | ||
Investments in construction projects | -382 | -303 | ||
Acquisitions of real estate | -336 | -631 | ||
Disposals of real estate | 23 | 31 | ||
Net investments in operating assets | -264 | -165 | ||
Net cash generated/(used) by investing activities | -959 | -1,068 | ||
Net cash generated/(used) by financing activities | 698 | 744 | ||
Change in cash over the period | 154 | 74 | ||
Cash at end of period | 768 | 614 |
1 Excluding the non-cash charge arising from the accounting treatment of the ORNANE bonds of €160.9m (fully offset by an increase in equity) and excluding the €52.9m gain from discounting deferred taxes in 2017.
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