Oceania Healthcare Ltd

I would now like to hand the conference over to Suzanne Dorvac, Chief Executive Officer, and Catherine Waugh, Chief Financial Officer. Please go ahead.

Thank you. Hello, everyone, and thank you for joining us today. Back in mid-September, we talked you through our longer-term strategy and the work underway to prepare the organisation for FY27 to FY31. At that time, we were clear that FY26 would be a stabilisation year centred on consistent execution across our priority areas. Today's interim result is about where we are right now and, importantly, the early progress we are seeing as we deliver the first phase of the strategy. When we met in September, we set out our three priority areas for the stabilisation phase of our strategy. First is sales performance. We have strengthened discipline and visibility across the sales process, tightened conversion pathways and improved how we manage applications and inquiry. This is about building repeatable systems that lift performance across the network. Second is business excellence. This includes workplace efficiencies, more disciplined procurement, improvements in rostering and using technology to support a more consistent operating model. These initiatives underpin the uplift you will see in today's results. The third is capital management. Our focus is on reducing debt, releasing capital from development stock, progressing investments and ensuring we pace development in a disciplined way. This strengthens the balance sheet and supports long-term value creation. These three priority areas remain the foundation of the work underway. Because our strategy update was launched in September, today's results reflect the very start of these initiatives. So building on these strategic priorities, I want to give you a brief summary of the half before we move into the detail. Across FY26, we are seeing promising momentum in each of our priority areas. In sales performance, applications and occupancy have lifted steadily with clear traction at our key developments. The helier has now reached nearly 55% occupancy and Franklin pre-sales have progressed to 35% for stage one. In business excellence, underlying EBITDA increased 23% to roughly $42 million, supported by improved care profitability and $4 million of cost savings realised. Care EBITDA per bed increased 45%, reflecting the strength of our care platform and the initial benefits of operational improvements. And in capital management, gearing has reduced to within our target range. Operating cash flow has increased 12% and we have released a net $40 million from development stock since March. We also have four divestments progressing through to due diligence, which will support further capital release. So overall, this half shows a steady uplift in performance and the initial impact of the work we've put in place. The early indications are encouraging as we continue to stabilise the business and position it for the next phase of the strategy. Turning to the financial summary, the key items I want to highlight here are total comprehensive income and underlying EBITDA because these reflect the impact of the operational improvements we have spoken about. Total comprehensive income increased to over $40 million driven by fair value movements across the property portfolio. This is a steady operating result in the current environment. Proforma underlying EBITDA increased 23% to roughly $42 million when allowing for the impact of the closure of the Wesley Institute of Nursing Education. This improvement was driven by stronger care profitability, initial cost savings and the lift in sales performance we saw through the second quarter. Total sales volumes reached 271 units, which is right in the middle of our guidance range, demonstrating improved execution and market traction. Operating cash flow increased 12%, net tangible assets increased to $1.57 per share and net debt decreased by 19 million. These are clear indicators that the stabilisation work underway is taking hold and that the business is now beginning to show more consistent performance across its four areas. Let me now turn to sales performance where we are seeing some of the clearest signs of momentum. I'll start with the Helia, a site I know many of you will be waiting to hear about. This is where the progress over the past few weeks has been most visible. At November 20th, occupancy stands at 54.5%. Since period end, we have seen a meaningful increase in applications and that uplift is the direct result of the work we put in six months ago. We refined the product fit, embedded learnings from our marketability project and ran successful campaigns to target our strongest customer segments. These insights are now part of our internal IP and we are applying them across to other villages. To give a sense of momentum, the range of sales applications has lifted from fewer than two per month between March and September to approximately four per month since the start of October. We're still targeting being able to reach the point of full development cash recovery by March 2026. That remains our clear focus. We're pleased to see this momentum building at one of our premier villages. Moving to Franklin, where we are seeing encouraging progress. For the first time, we have achieved meaningful pre-sales ahead of completion, with stage one now at 35%, including a further application this morning. This is a clear indication that we are building the right product in the right location and that there is strong market demand for what we are delivering. The opening of the lodge in the coming weeks is a critical milestone and an important catalyst. It gives prospective residents something tangible to walk through and we expect inquiry and conversion to strengthen once people can experience the community centre firsthand. The team has brought this stage in on time and within budget, demonstrating our development capability and our discipline. So in short, Franklin is tracking well and the trajectory is encouraging as we head towards first stage completion. Over at Meadowbank, which many of you visited during the Investor Day tour, we have also seen a very encouraging start. Occupancy in the new building has been tracking ahead of expectations since the final stage of the redevelopment was completed in June. This stage added 40 dementia suites, and occupancy has reached over 50% within the first four months. It is a strong initial response for a new dementia development of this scale. The clinical team has done an excellent job establishing a new service and supporting families through this transition. This redevelopment completes the sixth and final stage of our Meadowbank site, and it is pleasing to see such strong engagement from residents and from the community. Despite a challenging housing market, our new sales performance and development margins have remained solid. What matters here is the resilience in demand for our product, particularly in care suites, where we continue to see strong sales and improving occupancy across key sites. Turning to resales, which also performed well. Total resale activity reached 180 units with care suites making up the majority of the volume. That reflects the continued depth of demand in this part of the portfolio. Villa resales remain steady and we saw a lift in apartment resales as more recent developments move into their normal turnover cycle. What is notable this half is the balance across the resale mix. Our targeted marketing campaigns and strategic incentives have been effective in accelerating both resale and development stock turnover, which you can see reflected in these results. And finally, an update on development stock. In this half, we sold $65 million with $50 million of this from stock completed over 12 months ago. This is a solid step forward in clearing our order inventory. The progress was made. even after adding $25 million in new inventory during the period. What this demonstrates is real momentum in our settlements and sales thanks to stronger sales discipline and targeted marketing. Looking ahead to the development pipeline, our focus is on maintaining discipline, preserving optionality and sequencing projects in a way that supports the balance sheet. A key part of this discipline is pacing delivery. We're targeting a maximum of approximately 60 units at a single location at any one time. This keeps development aligned with demand, supports settlement flow and helps manage working capital. This keeps development aligned with demand. In short, we are progressing development in a measured and financially disciplined way that supports our capital positions. Alongside our development work, we are also progressing the business excellence program And I'll now hand over to Catherine to talk you through more of this.

Thanks, Suzanne, and good morning, everyone. When we spoke to you at the Investor Day, we discussed the broader cost-out program with a $20 million annualised impact from FY27. What we're focusing on today is what's already visible in the half-year results and what you can expect in the full year. We are seeing clear operational uplift through workplace efficiencies, early improvements in rostering, stronger procurement discipline, and the early benefits of the technology and process changes now embedded. The benefits of those shifts are already flowing through to the underlying result. So let me step you through that. On slide 14, we provide a normalised result. This has been adjusted for the impact of the closure of our Wesley Institute of Nursing Education and divestments. And it shows what's been happening in our core operations. The reconciliation to our statutory profit is in the appendices. While village earnings to date have remained steady, care profitability has improved materially, with care EBIT DARPA bed up over 40%. This demonstrates the strength and consistency of our care operations. In the corporate segment, we've completed the restructure and embedded the tighter operating disciplines, which positions the organisation well for our next phase of growth. 4 million of cost savings have been realised through this process during the half, and we remain on track to deliver 13.2 million during FY26. The corporate restructure was completed over July and August, so the first half captured only one to two months of the benefit. Together with occupancy, sales and revenue opportunities, These cost improvements contributed to pro forma underlying EBITDA increasing 23% to $41.9 million for the six months. While we won't go through this on the call today, further detail on our care and village earnings, including our premium revenue breakdown, is available in the appendix. Care is a core strength for Oceana, particularly our care suite model. We now have six sites running with workplace efficiency initiatives, including smarter rostering and streamlined shifts. As we roll out these improvements to another 20 sites, we expect further lift in EBITDA. As an example, at our Eversleigh site in the Hawke's Bay, we have reduced overtime and supported stronger resident outcomes, including higher satisfaction and greater continuity of care, which has set benchmarks for our other sites. Our mature villages are operating above 94% occupancy. Even small increases in our occupancy will mean a significant upside for the group. EBITDA upper bed is up strongly on last half, driven by occupancy growth, tighter cost management and the continued success of our care suite offer. Care suite development margins have also risen, reflecting the strong demand and the quality of our product. With the next wave of workplace efficiency initiatives underway, we're confident of even more progress in the second half. The corporate function is now right-sized and operating with much greater discipline, and the numbers show this. Corporate costs have reduced following the right-sizing completed in the first half, with full benefits flowing through in the second half. That streamlining, combined with automation and simplification, is positioning the function to support growth with greater discipline. During the half, we reduced these corporate staff costs by around 20%, supported by a combination of role consolidation and more efficient processes. What is important here is not just the cost reduction, but the capability and focus that the corporate team now has. The function is set up to support growth with clearer processes, stronger discipline and a more effective operating rhythm. Our team are now focused on execution, ensuring a minimum annualised 20 million cost out from FY27. Importantly, despite the reductions in streamlining, our recent engagement check-in shows the corporate team remains highly committed to the work ahead. The new employee value proposition is supporting that. helping us attract and retain purpose-driven talent as we move to the next phase. I'll move now to capital management. It's absolutely central to all that we do, ensuring appropriate capital management and working to the best return possible for our shareholders. So let's start this section with where we're positioned today. Moving to slide 18 for a view of our balance sheet. As you can see in the table on the top right-hand side of the slide, we have a strong headroom of 116 million available on current facilities. Moving to the bottom right, all of our covenants are met. In that bottom right table, you will see gearing is 34.8% within our target range and our ICR is at 2.5 times. Overall, our balance sheet is well positioned with further debt reduction planned, giving us the flexibility we need as development activity progresses. I'd like now to step through how we're planning to further reduce debt in the short to medium term and continue to strengthen our balance sheet. As I said, we finished the half with gearing at 34.8%, and this slide shows the levers that will help us reduce that further. Please note, this is an illustration rather than a forecast. It's intended to show the scale of the material reductions that are possible, not the timing. Our main lever is the sell-down of unsold development stock. which represents around 104 million of capital that can be released as settlements occur. Alongside this, we have two other sources of capital release, the sale of bought back stock and planned future divestments. Together, these could contribute a further 80 million. When you combine all of our levers, we demonstrate the magnitude of what can be achieved through disciplined execution. I want to emphasise that while we remain fully committed to our gearing target, We'll continue to operate responsibly and with discipline, ensuring capital management strengthens the balance sheet while still affording us plenty of room to grow. By maintaining a prudent gearing range, we put ourselves in the best position to invest sensibly and seize opportunities as they arise, supporting both stability and future growth. Divestments remain another important lever in strengthening the balance sheet and supporting the stabilisation plan. Across the half, we continue to progress a number of properties through due diligence and several are now moving through to final stages. We have been very clear that we will only divest non-core sites and that discipline has guided our discussions. We are targeting around 40 million of proceeds from the current subset of four sites and the timing will depend on completion of due diligence and meeting our return thresholds. I'm very much focused on being able to give you a meaningful update at the year end. These proceeds will further support debt reduction and give us additional flexibility as we move into FY27. Free cash flow is a new measure we introduced this year to give clearer visibility of the underlying cash generation of the business. You can see on the slide that the trajectory has improved since March as operating performance lifts, development stock reduces and capital discipline throws through the results. It's worth noting that around 30 million of AURA receivables from resales were outstanding at balance date, and a significant portion of that, just under 14 million, has already been collected since period end. Had all of that resale cash settled by 30 September, we would already be in a positive free cash position. The timing of these settlements can impact the measure in any given period, but the underlying trajectory remains positive and continues to strengthen. The improvement is putting us back on a path where over time and when the market turns, we will be in a position to resume dividend payments. The trend you see here is a clear indicator that our stabilisation phase is working and will provide a further update at the FY26 results. Moving to the financials, I'll now take you through the statutory gap position. These are high-level statutory positions and more detail is also contained within the appendices. Profit and loss. Looking at the profit and loss, the key movements reflect the themes we've already covered and they have resulted in an over three times increase in our total comprehensive income. Finance costs have increased this period due to interest in relation to completed developments. This will reduce as we sell down our development stock. This not only helps our cash position moving forward, but also our statutory profit and loss given the interest on debt associated with completed developments is expensed. Pleasingly, we have seen steady increases to our property portfolio, with a $61 million increase this period. Overall, the profit and loss show steady improvement across the core parts of the business, with further uplift expected as the second half initiatives land. Moving to the cash flow. Operating cash flow has increased this half. While there is a one-off GST refund relating to development expenditures, The underlying themes reflect stronger sales activity, higher care occupancy and the early benefits of the cost measures now in place. As the development stock reduces and as the settlements continue to flow, we expect operating cash generation to strengthen even further during the second half. On the investment side, the cash outflows have reduced sharply with Medibank now complete and only Franklin remaining under construction. This will decrease even further as we move to March. Overall, our cash flow performance is improving and we expect the trend to strengthen. And finally, our balance sheet. We remain in good shape with total assets over $3 billion. Gearing is mentioned earlier as 34.8% within our target range and we have $116 million of headroom. We are positioned well to continue reducing debt while maintaining flexibility to invest where it makes most sense for our growth. I'll now hand back to Suzanne, who will outline our priorities for the remainder of FY26. Thank you, Catherine.