The Oceania Healthcare Limited half year results announcement for FY 2024. All participants are in a listen-only mode. There will be a question. First, we will hear from the presenters, followed by a question-and-answer session. If you're participating in the teleconference, please ensure your webcast audio is muted to avoid an echo. You can mute the sound in the lower corner of the video player. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. I would now like to hand the conference over to Brent Pattison, Chief Executive Officer, Kathryn Waugh, Chief Financial Officer, and Heath Milne, Head of Capital Markets and M&A. Please go ahead.
Yes, well, thank you for that introduction, and a very warm welcome to our investors, market commentators, our board, and the wonderful team at Oceania. The format of today's interim results briefing is an update on our strategy, our trading results, and please submit questions online throughout our presentation to inform the questions and answers at the conclusion of our presentation materials. This market update reflects the first six months of the full year, 2024, and it's certainly pleasing to see the constant progress that's been made. Moving far beyond the formation phase and now well into the execution phase of our strategy and the transformation of Oceania's portfolio, both in our built form and resident services.
It's a privilege also to see many, new Oceania residents joining our community of over 4,000, living the life they love and experiencing firsthand the personalized Oceania service and our model of care. Thinking about market conditions and our trading updates, what are the observations of the general market conditions and the macro environment? Well, it certainly remains tough out there, and we suspect that this will continue well into 2024. But it's not all bad news. New Zealand is turning the corner on peak inflation, and this will be beneficial for our business. Without exception, our input costs have seen material price increases, and this has eroded some short-term margin. So it's pleasing to see that these inflationary pressures are starting to ease.
We've watched with amazement the almost daily volatility of bond yields and note that interest costs will remain a challenging headwind for the sector over the medium term, with a higher-for-longer interest cost expectation. Having said that, ANZ are forecasting that the OCR stays at 5.5% at the 29 November NPS update, and further, ANZ are forecasting a possible OCR rate cut as early as February 2025. We are encouraged by the positive sentiment returning to the residential housing sector. Reserve Bank of New Zealand, Real Estate Institute of New Zealand, and major trading banks are all signaling a reversal of fortunes, with predicted increases in house price inflation into 2025 and 2026. The NZX 50, our local equity market, is near year-to-date lows when rebased from the preceding three years, and this has been tough on shareholders and investors.
The National, ACT, New Zealand First government is expected to implement a business-friendly policy, so let's hope that they get that all the deal organized shortly. Investors are aware of the compelling demographic change for our sector, with over 25% of the population being over the age of 65 years of age by 2030, and with improving market conditions, we may see the confluence of tailwinds versus headwinds for the retirement and aged care sector. If we think about Oceania as a business, we are very pleased with our sales volume on new and resale product, and this has been a highlight in the six months trading.
Despite having a more regional bias, our new sales of ILU were up 84% on the H2 of 2023, and our care suites, new and resales, were up 40% on the H2 2023. Our development and resale margins were down, but they were in line with our expected long run average at 23% and 21% respectively. We look forward to continuing strong sales volume and value, especially in this recovering property cycle. There are recently completed key major city site developments, such as The Helier, Bellevue, Bayview, all available for sale in the H2 of 2024 to complement the success we've had in our H1 with a more regional bias. Our key business has benefited from improving government funding awards.
Wage inflation and competition for labor, and we are a very large people business, is improving, with unemployment expected to lift to 5% by September 2024, up from 3.9% in September 2023. We expect to see improving care margin from the 9% trough levels experienced over the previous reporting period. Balance sheet, and more particularly cash management, cash recycling, and positive cash margin from first-time sales at new developments, has been a key focus, and Kathryn will touch on this a bit later, in terms of her slides. Oceania has been transforming its portfolio, and we are now NZD 1 billion of net assets and NZD 2.7 billion of total assets. We have signaled peak debt as we completed key investments such as The Helier, Bellevue, Bayview, and Awatere.
We've maintained good levels of headroom in our debt facilities, with gearing higher around 37.7%, but in compliance with target range and full compliance with our debt covenants. We have circa NZD 365 million of unsold stock available for sale in a recovering housing market... What is important is to highlight that 70% or NZD 255 million of this unsold stock is in brand new properties developed and delivered in the last 12 months, with the Helier Auckland opening on the 24th of August and the Bellevue opening on the 9th of October. In addition, due to our brownfield development approach for our care segment, we have care suites totaling NZD 57 million that are currently occupied with a transferred and packed resident. These care suites present first-time sales opportunities as they come on stream for sale from exiting residents.
The directors have resolved not to pay an interim dividend to provide for investment in Oceania's continued growth, and you'll see examples of the growth over the next few slides. The payments of dividends will be reconsidered at full year 2024, noting the payment dividend ratio of 30%-50% of underlying net profit after tax. Turning to the funds that we've deployed for growth and also the success that we've had with divestments. Since we last reported, Oceania has deployed just over NZD 20 million into further greenfield land banks. These strategic land parcels offer the replenishment of the pipeline with a total of 7.5 hectares of development land in Bream Bay, Northland, and half a hectare of aggregated adjacent land at the Helier in Auckland.
The 7.5 hectares of land acquisitions at Bream Bay comprise of two private purchases, Lot 60, which we did in the H2 of 2023, and Lot 61, which we did in the H1 of 2024, allowing us to complete the existing site with new villa product with no further community amenity required. Followed by 6.7 hectares of future master plan community living across the road from the existing site, and we plan to build around 115-135 villas on the site. The additional half a hectare of Helier land represents about a third of the total land acquired from the original development, and this future development connects both Waimarie Street and Glover Road precincts.
It also allows for future premium apartment or townhouse living on a site without the need for additional investment in common facilities and amenity. If we think about divestments, we've been actively repositioning the portfolio with six divestments and exits over the period. In addition, we are holding another seven sites for sale, representing around NZD 44 million of net ORA proceeds. Despite the tough market conditions and commentators' observations on property valuation, we've successfully divested two sites, AmberWood and Green Valley, at or around CBRE independent valuation. In addition, we've exited two leasehold sites, Wesley and Everall Orr, and closed two sites, Otamarama and Whareama. One of these has an unconditional contract, and the other, we are well advanced with negotiations. Our existing portfolio is currently comprised of 45% ILU and 55% care, with over 60% of the entire portfolio allocated to premium.
As we build out the pipeline, the post-developed portfolio will be 50% ILU and 50% care, with 80% of the total portfolio premium. Recent greenfield land acquisitions included the previously reported 8 hectares at Franklin, allow for future development phase and to move more into a villa product, providing easier built form, targeted deployment of development capital, and a faster recycle of cash from first-time sales proceeds. If we think about the developments that we've completed in the H1 of 2024, we've completed all the stages of our planned development at the Bellevue Village, with the recently completed 46 apartments, which you can see in the image on the left-hand side. This provides a fully integrated site comprising of 68 apartments and 71 care suites in a key location in Christchurch.
We have now sold 100% of all prior stages of apartments and achieved significant presale success, around 35%, for this new and final stage of apartments. A blessing, a karakia, was conducted by Ngāi Tahu iwi, local councilors, executive, and management on the ninth of October, 2023. Of the 16 applications we have received, five settled in the H1 of 2024, with the remaining 11 expected to settle in the H2 of 2024. We've completed the remaining 17 apartments at the Helier in the period, bringing total apartments to 79. These final apartments are sleeved above our 32 beautiful care residences.
In our H1 2024 trading result, we recorded one sale, and following our official residence launch on the 24th of August, we have secured a further six applications, which we expect will settle through to the H2 of 2024, bringing total sales and applications to around 15% of the total apartments available. We've observed significant interest in the Helier, with widespread media coverage. The Helier has been cited as a recent example of the evolution of the retirement and aged care living, with a focus on intelligent design, premium amenity, and of course, a tailored resident service experience. If we think about the developments that we have under construction, we have 382 units and care suites currently under construction.
The composition of this development is 193 care suites across three locations, 40 dementia suites, and this completes our total investment at the Meadowbank site, and 149 apartments across three locations, with one greenfield master plan community in Franklin. This represents around NZD 97 million of our development work in progress, which will be recovered post-completion and in future periods.... The Franklin site on the bottom left-hand corner, it's around 8 hectares, made this slide, but it's important to note that this development is at the earthworks phase, so we've not included the number of villas, apartments, and care suites in our 382 under construction.
In the near term, the Helier Care Residence, stage three of the Bayview Apartments, and care suites at Redwood and Blenheim are scheduled to be completed in the H2 of 2024, and this development capital was around NZD 60 million, and will be recovered from pre-sales and new sales in future periods. If we turn to my last slide, around strategy and portfolio transformation. Since IPO, we've added over 1,400 premium units and care suites, and this has truly transformed Oceania's portfolio into a modern, market-leading, and high-quality portfolio.
Over this time, we have observed significant sales price growth, from 2017 to today, with apartment pricing up 2.25 times to an average sales price of NZD 847,000, and care suites up 1.7 times to an average sales price of NZD 336,000, and that's been in a tough housing market. Oceania now has 43 villages and care properties nationwide. Importantly, however, 85% of our total independent property valuation is represented in 20 of these village and care properties. From a product mix perspective, these properties have had a significant rebalancing, of our overall product mix, with recent developments making up 58% of the portfolio, accented to independent living, and 42% accented to care.
These 20 village and care suites are either brand new or have had major development within the last 5-6 years and have an average building age of three years or less. These are new, modern, and well-designed buildings with minimal ongoing maintenance capital required. More importantly, they deliver exceptional resident service and quality outcomes. They've been built with a 50+ year expected life. There's been a disciplined approach to the development of our capital allocation as we have repositioned the entire portfolio. Most Oceania sites are integrated villages, offering both independent living and care.
We have a focus on obtaining positive cash margin out of every dollar spent from our developments from first-time sales, and we recognize that the cost of building care is more expensive than traditional villa or apartment properties, and Kathryn will touch on the actual observed cash margin across a number of sites in more detail later. The nine villages shown on the slide represent a cross-section of new product delivery and acquisitions, with most offering further stages of development opportunity. These all include developments in major key cities like Auckland, Hamilton, Tauranga, and Christchurch, as well as urban and rapidly growing regional locations like Ruakaka in Northland and Blenheim. Our sites are bespoke, they are boutique, and we have smaller resident numbers. Our villages have an eye to sustainability, and we build on smaller land parcels.
Examples include the less than 2 hectares at Remuera Rise, which is a 7-story vertical apartment. The Helier has been built with exceptional views on 1.6 hectares in a residential street, and the multi-stage, but now fully complete, Bellevue is also on 1.6 hectares at our Christchurch site. On average, the site size is about 3.1 hectares, and this includes our larger villa format sites and our higher density apartments and care suites. As we continue with our successful divestment of non-core assets, our continued investment in new and premium properties, our portfolio will truly be one of the best in market. I'm gonna now hand over to Kathryn Waugh, our Chief Financial Officer.
Thank you, Brent, and thank you everyone for dialing in today. It's been encouraging to see the progress we've made over the interim period, with strong sales momentum, solid progress on divestment of non-core sites, and a continued focus on cash recycling. We have included additional disclosures in this presentation in relation to unsold development stock. The stock on hand presents plenty of opportunity for us in a recovering housing market. Debt levels, they've currently plateaued. Each of the positive trajectories that I will touch on today will see debt come down and gearing levels come down in future periods as we further unlock cash in our business. I will walk you through the rest of the slides, and you will note that we have also provided the usual financial information in the appendices. Also in the appendices is a pro forma for analysts, which I'll touch on later.
This records the impact of divested and exited sites to allow for a like-for-like comparison of earnings. On my first slide, we note the trading position of the Oceania Group for this interim period, the six months to 30 September 2023. Underlying earnings of NZD 37.6 million and underlying NPAT of NZD 27.4 million are both flat when compared to the prior corresponding period. This is largely a result of lower development and resale gains, which we will come to later, and the continued, albeit muted, cost pressures from the beginning of this year. We have seen a clear improvement in both village and care trading, with continued increases in village deferred management fees and a significant increase in premium care revenue from the prior corresponding periods....
Sales volumes have improved significantly to the best levels Oceania has ever seen from a volumes perspective, with 84 new sales in the period, up from 61 in the last half of financial year 2023, and from 67 in the H1 of that year. Resales have also recovered to significant levels, with 171 resales in the period, again, up from 115 in the last half of the financial year, and up from 165 from the H1 of the financial year. From a balance sheet perspective, our diligent and disciplined approach around intentional capital allocation has assisted in reaching the NZD 1 billion mark for our net assets and NZD 2.7 billion total assets, while at the same time complying with all covenants and preserving debt headroom in our banking facilities of NZD 114 million.
I will speak to each of these points in more detail over the coming slides, and we'll have plenty of time for questions at the end. Financial year 2023 was a hard year for all New Zealand, and the retirement and aged care industry was no exception. FY 2023 saw labor pressures, inflationary pressures, and a softening housing market. This culminated in the six months to 31 March 2023 as being one of the hardest periods that Oceania, as a company, has been through. Since then, however, we've seen a positive rebound across the board, and we've seen a return to growth in many areas. On the left of Slide nine, we provide the headlines for our Village segment. Sales volumes, both new and resale, both care and independent, have not only returned to previous levels but have surpassed them.
On this slide, we provide half-on-half results, and it's clear to see that from a volumes perspective, we've experienced a strong H1 to the year. As you can see from the slide, we have had an increase in all categories. Despite only one sale from the Helier being captured in the interim period, new ILU sales have almost doubled, increasing from 26 in the last six months of 2023 to 48 in the H1 of 2024. On resales, Care Suites have been very strong, increasing from 69 in the last half of last year to 117 in this reporting period. These trends have continued, with October of this year seeing the highest level of applications that Oceania has ever seen. Margins from our resale stock are holding strong, particularly in the regions where our product is now established.
Development margins are dependent on the type and location of the stock which is being brought to market. We note a moderation in our development margin this interim period as a result of the large amount of stock being sold outside of premium Auckland sites. As we note in our interim report, our development margin has seen a moderation from the prior comparative period of 31.7% to 21% in ILU product, and 39% to 29.9% in the Care Suite product. We expect stronger development margins as we sell down other new apartment developments across New Zealand moving forward. On the right-hand side of this slide, we provide the headlines for our care segment. Since March 2023, we have seen a number of positive trends.
Wages to revenue are stabilizing, immigration has aided our workforce, and we're starting to see a reduced staff turnover. The cost of providing care continues to increase, but positively, New Zealand is starting to see core inflation start to ease. We remain confident with our premium care strategy. I have said many times that we have an aspiration to increase our care EBITDA per bed, excluding DMF, to over NZD 10,000 per bed. While we haven't quite made it there this period, we have seen a recovery when compared to the H2 of last financial year, with increases in both the EBITDA margin and the EBITDA per bed. We have now exited six care sites, two leasehold exits, two disposed, and two closed. As we continue our divestment program, we expect this to be a net positive contributor to increased margins.
Finally, for this slide, we continue to see growth in our premium care revenue, particularly Care Suite deferred management fees, as Care Suites are rolled off around the country and strong resale Care Suites continue. The heightened focus on cash recycling from developments for the sector continues. When we spoke to the financial year 2023 results, we noted that Oceania has always had a disciplined approach to capital management, and we continue to focus and build on this. Slide 10 provides an illustration of the historic cash recoveries we've received on three of our fully sold down developments. Gracelands in Hastings was a villa development on an existing mature site, a product which we were able to successfully sell down during the build phase. Meadowbank in Auckland was a multi-stage apartment and Care Suite development in an urban location.
We've commenced the final stage of this site, a purpose-built dementia facility. The Sands, another Auckland urban location in Browns Bay. Oceania has been a successful brownfield developer. The actual cash margins received are more than those on screen. However, in order that we can provide like-for-like comparisons of our sites, we've adopted a land value from the time that we began the development in each of these situations. As you will appreciate, the land values adopted are more than the actual land purchases, prices paid, plus any demolition costs incurred in removing the old sites. These numbers also relate to first-time sales only. Deferred management fees received on exit, capital gains on resale, and cash margins on care services are excluded from these calculations, but they are an important part of the model.
Both The Sands and Meadowbank are fully established and in resale cycles, and we continue to see solid cash margins on resale, which has been extremely pleasing. The next slide provides an insight as to a subset of our more recent developments outside of Auckland, those that are in various stages of sell-down, and each of which have a care component. Each of these are also brownfield developments, where we have had the benefit of holding the land for a period, and so consistent with the last slide, we have taken the land value from the point that the development commenced to allow like-for-like comparisons.
Although margins are lower than on the previous slide, you can see that despite increase in construction and funding costs, and despite these sites being outside of Auckland, in some cases, in areas where the high-density developments are untested, we are still achieving positive cash margins, a direct outworking of our disciplined approach to developments and cash management. As these sites are still in sell-down mode, the calculations for the all-in cash margin represent the portions that have sold down to date. As is demonstrated on the slide, despite increased funding costs, despite a softer housing market backdrop, and even in these previously untested markets in Tauranga, Christchurch, and Hamilton, to date, we have achieved positive cash returns on an all-in cost at all three developments. As with the previous page, these cash recoveries are on first-time sales only.
Deferred management fees received on exit, capital gains on resale, and cash margins on care services are again excluded, but again, they are a really important cash source. Being brownfield developments, the care buildings at all three of these sites currently home residents from previous care buildings. These residents are not subject to an occupation right agreement, but do provide ongoing operating revenue and cost recovery, which is not included in these numbers. As these residents depart, and as we achieve first-time sales on these care suites, we have been experiencing strong development margins, which will further enhance our cash recovery in future periods. Those of you that attended or dialed into our AGM in August will be familiar with the contents of this next slide. Since the IPO six years ago, significant strategic investment has been made to transform the Oceania portfolio.
Over 85% of the value of our portfolio relates to 20 sites, which have either been acquired or received significant investment over that time. That's over 85% of our NZD 2.6 billion total assets, which are of premium nature. The investment since IPO has been in brand-new developments, acquisitions, and new product transformation. This has occurred alongside the right sizing our portfolio, which has seen in recent months us exit six of our sites. Further sites are earmarked for held for sale. With a net carrying value of NZD 44 million and minimal earnings contribution, these sites are a small part of the portfolio, but a very important final step in the repositioning of Oceania to a best-in-class portfolio, one which integrates independent living and care in a premium, bespoke, and boutique resident population environment.
Our net tangible assets broke through the NZD 1 billion mark in September, over double the NTA position of NZD 451 million from the date that we listed on the NZX and ASX, and provides a twofold increase in net tangible assets per share from 74 cents to NZD 1.40 today. Importantly, the strategic investment into the transformation of the portfolio was made during the good times of a lower interest rate environment, utilizing fixed-rate bonds with fixed interests in the 2%-3%. We undertook to position the balance sheet with an attractive cost of debt. The bonds, coupled with hedging and the extension of our banking facilities, was all done ahead of the significant repricing of debt that has recently occurred in New Zealand.
Our effective capital management allocation continues to allow us to unlock future build-ready programs, despite the recent and current market headwinds. There is a lot on this next slide. This is all part of new disclosures that we will look to provide and build on moving forward. We see this information as helpful context in relation to what stock we are holding and the age of it. Our debt and our gearing has increased slightly since March. This is something that we have previously signaled and is a consequence of delays in high-density developments, coupled with the softer housing market that the industry has experienced. In my first slide, I gave you the headlines. We continue to meet all covenants, we have debt headroom of NZD 114 million, and we have gearing of 37.7%.
Brent and I have also talked about the positive trajectories that we are seeing in the trading results, particularly positive increase in sales volumes to both new and resale. Oceania's development pipeline will shape moving forward to include an emphasis towards villa developments, a product which we have historically achieved strong presales. These items all contribute towards a clear pathway to debt coming down. Oceania's debt is primarily development-related and supported by both current and future new sales stock. To the left of my slide, we provide a view of our current development debt drawn to the value of our underlying development assets. Our banking facilities are structured such that once developments are fully paid down, the proceeds from sales can be paid against current development drawings. As a result of this, as at 30 September, we have 1.25 times coverage of our development debt.
To the right of the slide, we have a key insight into how our current and future development stock will be used to repay development debt. NZD 97 million of our development work in progress. This will be recovered post-completion and in future periods. Unsold stock is a key focus for Oceania. This represents the cash recycling from the developments that I touched on earlier. The faster we release these funds through sales to pay down our development debt, the faster we will return to gearing levels in the mid-thirties.... Of the NZD 422 million unsold stock that we have as at 30 September 2023, with average sales price per unit of NZD 890,000, care suites totaling NZD 57 million are currently occupied with transferred and PAC residents.
These care suites represent sales for future periods, which are not readily realizable, but also provide an ongoing operating cash flow for us. Of the remaining NZD 365 million, 70%, or NZD 255 million, relates to unsold new stock, which was completed in the last 12 months. This includes key developments such as The Helier in Auckland and the Bellevue in Christchurch. Finally, the remaining 30%, or NZD 109 million of the unsold new stock, which is readily available for sale, relates to developments completed more than 12 months ago. This is a significant focus for the team over the coming months, and with positive changes in market, we look to the unlocking of this cash as we sell down. And finally, sustainability in action.
I've spoken previously to how sustainability is becoming integral to all that we do and how it underpins our strategic pillars. Over the last month, we've continued to develop our integrated thinking approach and embed sustainability to our strategic work plans. Before we move to questions, I will quickly touch on a few of the neat things that we have been working on and participating in. Many across New Zealand started this calendar year dealing with the impacts of the Auckland floods and Cyclone Gabrielle. At Oceania, we have now completed our detailed physical climate risk and opportunity assessment, working with the property and retirement village segment and the New Zealand Green Building Council prior to establishing the impact to Oceania specifically.
Ahead of March 2024, we will be refining our transition risks and opportunities across our value chain, and we will be publishing our first climate risk disclosures in quarter two of 2024. It's been really great to see our residents and staff immerse themselves into recent initiatives. The national theme for Mental Health Awareness Week in September was five ways to wellbeing. This was particularly relevant to Oceania, as we've been applying this framework to our resident experience offerings for the past 18 months. Step together, better together. This provided an opportunity for us to meet the give and keep active pillars. Together, we are walking the distance of Oceania, spanning over 1,200 kilometers from Ruakaka in the north to Addington in the south, and we're determined to do it by the first of December.
Today, we have exceeded our target and currently the number one team on the Move for Mental Health leaderboards. In relation to the concept of learning, we held several resident and staff awareness workshops with the National Foundations for the Deaf and Hard of Hearing. We are very proud that Oceania is now the first retirement village and aged care provider in New Zealand to become Workplace Hearing accredited by the foundation, and we look to working with them in partnership in promoting hearing inclusivity for our current and future residents. Our focus on waste, carbon, and resident wellbeing continues as we track our progress against our sustainable linked loan targets, a subset of our long-term aspirations to create long-term value for our stakeholders and partners, while we continue our desire to create sustainable retirement and aged care living experiences for today and for our people of tomorrow.
Thank you everyone for your time. We'll turn to questions now. I'm joined again by Brent and Heath in the studio.
Thank you. A reminder that if you are participating in the teleconference, please ensure your webcast audio is muted to avoid an echo. You can mute the sound in the lower corner of the video player. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on speakerphone, please pick up the handset to ask your question. Your first question comes from Bianca Velders from UBS. Please go ahead.
Hi, good morning. Thanks for the presentation, Brent and Kathryn. So my first question is just around your development. So as at FY 2023, your commentary suggests that you are on track to deliver 200-250 units in care suites during FY 2024. Today's presentation suggests sort of just over 180 units in care suites. So just wondering, what is the key driver of this lower number for the full year? And could you provide some color around what annual developments you will be targeting in the medium and long term, please?
Yeah, thanks, Bianca. It's Brent here. All that's happened is that Elmwood is gonna be delivered later than we had planned. So Elmwood's 106 care suites in Manurewa. It took us a bit of time to get underway with the build. We had some complications on site. And so as a consequence, that's probably gonna fall into a couple of months after our year-end period. We've certainly got the site under control as it relates to the building program, but that's the more material change in terms of development pipeline. Obviously, we indicated that we have an emphasis towards our villa product in the future, so we'll be coming out of large-scale apartment blocks. And so that will complement our pipeline going forward.
But our focus is obviously on ensuring that we're matching our sort of gearing expectations and our debt and our sales proceeds, as it relates to development. So we certainly haven't slowed down our intentions to grow the business. We're just gonna make sure that we allocate our capital to those projects that are gonna allow for more efficient recycling of our cash.
... Okay, great. Thanks, Brent. And then moving on to gearing and net debt. So gearing at 37.7%, just looking at the H2 of 2024, as you alluded to, on the call as well, we should see an improvement, with high-value units selling down during the H2. So my first question here is, could you share how much of your debt is development debt and what is core debt? And then secondly, is there any color you could provide around where you're expecting gearing on net debt to sit at the end of the financial year?
Yeah. Thanks, Bianca. It's Kathryn here. I'll get Heath to turn the pages on the stats to give you exact numbers of Facility A versus Facility B, but I think your point's correct. So, Facility B, which is our development debt, I spoke to, we see a really clear path to reduce that, and debt will come down for a number of reasons. As you've seen, sales volumes have improved significantly. Going into the H2, we've seen that continue. We have a lot of new sales stock on hand for us now, and divestments will also help us on our core debt. From a core debt perspective, and so that facility we've generally used over the years for a number of items.
There, there's around NZD 85 million in there that's from acquisitions that we've done over the last 18 months. We've also used the core debt facility for dividends in the past, so it's probably another NZD 25 million, and the rest of it's really working capital movement. So, for both of those facilities, we have a very clear pathway. I think we touched on, debt is kind of at a peak at the moment for all the reasons we talked during the presentation. It has plateaued. It'll be there a little while longer before it drops, but certainly we've seen the signs that both debt and gearing will come down over the next wee while.
Yeah, and I think, just adding to Kathryn's comments, I mean, the long run expectation for gearing for us and the board has really been 30%-35%. With the delays that we had, as we came out of the tail of COVID and some of the building programs, it meant that we had a bunch of apartments in particular that were all coming to market at the same time. That's why we're sitting on sort of NZD 255 million of unsold debt, that is less than 12 months old. I think the other important aspect, and we're showing some progress, is obviously repositioning the portfolio. So part of our debt reduction is obviously the continued success that we're having with divestments.
And we're hoping to, you know, make progress on the other seven sites that we have held for sale as part of that contribution, as Kathryn said, to bringing our debt down.
We have disclosure in our presentation and our financial statements as well, Bianca, around balances between our facilities. At September, it was NZD 112 million in our general corporate facility.
Okay, great. Thank you. And then last question from me, the commentary around the board reconsidering a resumption of the dividend at the full year, could you share if that decision will be based on anything in particular? So for example, is it mainly based on what gearing will fall to at the end of the year?
Yeah, that's a tough one for me to answer, 'cause the directors obviously set dividend. I think the first thing I'd to say is that the dividend policy was reduced to 30%-50% of underlying NPAT. We've had some great opportunities where we wanna further invest our capital, and you can see a couple of recent examples of that with the Helier land that we've purchased and also executing on the Bream Bay land. But I think, you know, the reality is that the directors will consider sort of the general market. We're seeing really strong confidence in terms of our new sale and resale volumes, so we hope that that continues. And we'll just be looking at the broader macroeconomic conditions as part of that consideration.
We're mindful that, as we sit here today, we're one of the higher geared in the sector, and we want to do something about that, obviously.
Great. Thanks very much. That's all for me.
Thank you. Your next question comes from Arie Dekker from Jarden. Please go ahead.
Oh, good morning. Yeah, just on the dividend, congratulations on persuading the board to suspend that. I mean, I guess market conditions and cash were cited as factors, as well as the growth opportunities when you review it at the end FY 2024 results. I mean, given underlying profit and your current policy would have allowed you to both pay a dividend and, you know, keep some over for growth, you know, if underlying profit really did represent cash. Can you just, like, confirm that you are going to look at a new basis for how you pay your dividend, going forward as well, when you resume? I mean, clearly, the current policy isn't working.
Is there going to be a move to looking at the cash the business is generating and then the allocation of that cash to dividends and growth?
Yeah, I think it's probably incorrect to say the current policy isn't working. I mean, it's a decision that the directors take, and we're balancing the needs of all of our investors and shareholders in the consideration of that. But I understand, Arie, the sentiment of your question. Underlying net profit after tax is a non-GAAP measure. I think the whole sector is focusing on cash and cash recycling in a recovering economy. So we're positive around that. And as we move forward, we are trying to, as we have in the past, ensure that we are providing good disclosure on the business. We've added some new information this time. We'll certainly be adding information and considerations around dividend and how we think about that, and what is the appropriate form for that to be paid from.
But we're also thinking about, you know, compliance with covenants and other measures that we can provide, you know, a look through for investors.
Yeah. So onto that one, and like I said, a bouquet on, you know, persuading the board on the dividend, but perhaps a brickbat. You know, market conditions and cash have, you know, been factors in the dividend suspension. Why aren't you providing visibility for investors on ICR in these quite tough market conditions?
Hi, Arie, it's Kathryn here. I'll probably start on this one. So, as you know, a couple of years ago, we did kind of state exactly what our ICR is, but we haven't for the last kind of two or three years. We have met all our covenants, and we've been quite open on that. There are a number of covenants in addition to the ICR, and so in our statutory accounts, within the realms of what we can disclose, we try to be as open and transparent as we can. I do appreciate that everyone wants to know exactly what the number is, and, and we haven't given that this time around.
What I would say is we will work with our board and our kind of banking partners ahead of March, just to kind of tie that in and ensure we can give additional disclosures in March for people. I've just tying it back to the dividend, though, you kind of touched on we could, we could have done both. The dividend, if we had have paid it, would have been around the NZD 6 million mark. The interest on that would have required about, you know, on today's numbers, about NZD 800,000 of interest. So from an ICR perspective, it's really lost in the roundings. We're talking about a 0.1 times coverage to cover a dividend, so that context may help.
Yeah. I mean, you alluded there to, to what you are able to provide in terms of color on covenants. I mean, could I, could I really just, you know, I'm sort of on a bit of a, bit of a crusade on this one, but, you know, the banks essentially sit there, you know, lending against LVR, LVR, and then, you know, with a suite of covenants that probably make it all work. You know, whereas investors are sort of sitting there, as, you know, we saw with Ryman, as recipients of, you know, poor, poor lending from the banks and, and too much lending.
So, you know, I do really think for equity investors to not be getting that visibility because of something the banks aren't allowing you to do is very problematic, and I really would suggest that you work on that. 2 quick ones for me, just to end. Visibility on stock. Just some comments around the timeframe you expect or hope to, you know, realize that NZD 255 million that was added in the last 12 months. I mean, obviously, a lot of it's going to be in The Helier and Bellevue. What are you currently sort of factoring in, and are you looking at price in terms of to sort of move that on more quickly?
Yeah, I think that's an excellent question. It'll be on people's minds, Arie. Yeah, I think we've got a lot of stock in brand-new products, so the Helier obviously is a flagship property for us. Like I said, we're 15% sold already. And that's before we consider the care residence. So we didn't mention that specifically in the presentation, but we're already receiving applications on our care, which will open February of next year. We're delighted by what we've seen at the Bellevue. 46 apartments. We had a karakia only on the eighth of October, and we're already 16 sales and applications on 46 apartments. So those are two examples that are giving us some confidence, but that's before we consider you know, other properties.
Awatere has turned the corner. We're more than 50% sold on that site. Eden, we're at the tail end of 100% sold on that site, so we're up around the 70%-80% mark on that site. You know, Bayview, et cetera, and Tauranga has been a key development for us with you know with the recent addition of 28 apartments. So, we are seeing our sales cadence lift. We're seeing price to sell declining from what was probably at its peak, about 183 days, and, you know, we want to get through that unsold stock as quickly as we can. We have considered price. Price in some of this new product hasn't really been a factor.
It hasn't influenced our ability to sell, but some of our older stock, we have, had some price initiatives in place, and we've been able to bring it down to about NZD 100 million of our NZD 400 million of, unsold stock as a consequence. So, let's all hope, that, we continue to see positive new sales, around this, product delivery. And it's gone, it's gone really well, would be, would, would be our view over this period.
Great. Thanks, Brent. And then just, on Franklin, when do you see yourself in a position to start delivering or, you know, producing villas at Franklin?
That's a good question. With the flooding, the earthworks took us a little bit longer than what we expected. So, we did some earthworks, and then it became a swimming pool, and then we did some more earthworks to sort of remediate that. But from our perspective, it's actually been just the allocation of capital into other projects, Arie, that's probably slowed that down a bit. It's a key delivery for us in the 2025, 2026 year, basically. We'll start with villas and a community center, and then build out from there.
It provides some higher density for us in the later periods, but, you know, our intention is to have a wonderful community center up and running, get, you know, 20, 30 villas underway, and then build out from there.
... So with the pivot you're making to, does that sort of suggest that we could sort of see the delivery in 2025, you know, a little bit below, lower than where it'll sort of, you know, get back to in 2026, 2027, you know, but and certainly below 200?
Yeah, I don't have all of that in front of me, Arie. But no, I'm sort of expecting that we continue on with you know pretty full developments in 2025, 2026. We probably take a bit of a dip in 2027. We're back up to those kind of levels.
Yeah, with the delay to Elmwood now into FY 2025, yeah, we expect FY 2025 deliveries will be higher than this year.
Great. Thanks. That's all from me.
Thank you. Your next question comes from Aaron Ibbotson from Forsyth Barr. Please go ahead.
Hi there. Good morning, Kathryn, Heath, and Brent, and thanks a lot for some of the extra disclosure, which I think is appreciated and, presumably part of a continuous improvement across the sector. A couple of quick ones from me. So first of all, maybe I got it wrong, Brent, but just on your Helier sales, just for clarity, you mentioned 15%, or I assume that's sort of 11, 12 units, but then I only heard you say six, or five or six or something. So I just want to make sure that I have that right for the Heliers.
Yeah. So, we had five in the March year-end period. We had 1 sale recorded in the H1, and we've got six applications underway. So you're exactly right. There's 12 total sales that have been made of the 79 apartments that are available.
Okay, and then if I look at your, maybe you've answered this before, but, the, your 422 inventory, but maybe we focus on the, non-care suites. So how are these valued? And could you give us an idea of, roughly the sales you're getting compared to whatever goes into this 422, if they're coming at par, below or above?
Yes. So these balances, Aaron, are based on independent valuations that we receive every six months. We have had disclosure in the past, have not, haven't got it in this time, but our numbers, in terms of what we sell at, tend to track slightly above CBRE valuations, and that's consistent with the sales that we've experienced in this half as well.
So, basically, if I, as an example, focus on The Helier, because you've talked to quite high development margins on The Helier. So, you know, if I look at this NZD 255 million, that will be, you know, you will have baked in a development margin quite significant into that number. Is that correct?
Yeah. Not a significant development margin, but certainly a margin that's well above our moderated average of 20%-23%. If we think about what we've achieved in some of those prior periods, you would have seen a spike in March on the earlier slides that Kathryn had, which would have showed some of the higher value product coming through. So, yes is the short answer to your question.
Okay, thank you. And secondly, just on, maybe Kathryn, I know, I know you sort of semi-answered it, but on this peak debt or plateauing debt, and, you know, I guess the full year, both, me and Arie, you know, asked about sort of peak debt. And I guess the suggestion then was that, you know, around May, we were at peak debt at the moment. At least that's what the transcript says. You know, do you think, you know, you talk about debt having plateaued, but it did increase by, you know, NZD 60 million or so, from the full year. But if we look over the coming six months, is your base case largely flat?
It could be better, it could be worse, depending on what sales do, but is the base case that it'll remain around this 600 level?
Yeah, I think that's a good way of looking at it, Aaron, and like you say, it kind of really depends on what's happening on a sales perspective. But, yes, given where the developments are at the moment, one of Brent's slides touched on there's still a number of apartment developments underway, including Elmwood.
Yeah.
So it will kind of bounce around that 600 level for a while before it comes down, but we're certainly forecasting the down, but as you say, sales is a really big contributor to that.
Yeah, and also, you know, we talked about NZD 44 million of net ORA proceeds from 7 sites as part of the final transformation of the portfolio. If we continue to see, you know, ready buyers for our non-core assets, you know, then that's part of it as well, in terms of the moderation of our debt.
We've also spent circa NZD 20 million-NZD 25 million on land acquisitions in this half, which were obviously part of the suspension of the dividend, is around maintaining flexibility to continue to pursue those sorts of opportunities. So that's obviously another factor that influences that.
Thank you. Just a very quick one, you know, which I don't know if you have the numbers on hand or are willing to share, but is there any chance you could just share a ballpark remaining CapEx to deliver those 382 units and care suites, just to get some sort of range? Not gonna hold you to it, but just to get an idea.
Yeah. I think in my slides, I'm just going back to my notes. I think of the, the sites that we have underway, we've got about NZD 97 million of development work in progress. If we think about the near term sites that we're delivering in the H2 of 2024, being Helier Care, Bayview Stage 3, and Redwood, that's about NZD 60 million. So you know, you know, that's sort of the better part of NZD 150 million that, we have given some, visibility on, I guess. That's before we start, you know, Franklin and, and, some of the other projects we have.
Okay, that's, that's good enough for me. Final questions. You know, if you manage to sell these seven sites, you know, Kathryn, could you give some sort of ballpark on, on P&L impact from, from that? You know, what are we looking at?
Yeah. So I think there's an appendix that we've added to the back of the investor presentation that shows you what the impact of the six that we've already closed. As you can see from that, it's quite negligible, and it's about NZD 105. I think the max we would absolutely get to is around the couple of million mark. One thing I would say that isn't included in the numbers is even from those six that we've already kind of exited or sold, they are currently having quite a drag on our care earnings. So from an EBITDA per bed perspective, even those six would see our EBITDA per bed number get up above the 10K.
We are expecting that with the divestment of the rest of them, it will be even more of a positive to our results.
Thank you. That's it for me.
Thank you. Your next question comes from Stephen Ridgewell, from Craigs Investment Partners. Please go ahead.
Thanks. That was Stephen Ridgewell. Look, first, I just wanted to just follow up on the reasons for the suspension of the dividend, kind of, at this point in time. Has been talked about a little bit already, but, I mean, I guess from where we sit, OCA is not at apparent risk of breaching either of its covenants on our calculations, based on what has been disclosed, and Kathryn, I think you seem to confirm that in answering Arie's question. And if the company is also expecting cash recycling to improve and net debt to, at, you know, moderate, you know, and this, you know, that NZD 114 million of headroom. I guess the question is why the decision to suspend now?
Just wondering if you could comment on perhaps on downside risks or concerns that might have helped drive that decision. I mean, is the concern, for example, that, you know, when, you know, OCA's got pretty low cost of debt at the moment, locked in for a few years there, but, you know, so is the concern that when that resets, that might create some problems? Just interested in the thought process.
Yeah, I think that's a really good question, Stephen. I think it's actually just been more a matter of keeping a bit of powder dry. The board obviously determined that they've certainly tried to signal that they're gonna consider a resumption of dividends at FY 2024. So we're certainly not concerned about where we're sitting as it relates to covenants. Kathryn touched on it. It's circa NZD 6 million cash outflow before we consider the, you know, dividend reinvestment plan that we've had operating. So it's actually more to do with what we see as some growth opportunities that exist in the market for us. But we've also been listening to the market.
You know, the market are wanting to reward us for disciplined capital allocation and growing the portfolio, as opposed to potentially, as has been commented, paying dividends out of debt. So from our perspective, you know, we feel very comfortable with where the business is trading. We don't feel under any pressure as it relates to any of our covenants. That hasn't been factored into the board's thinking around dividend. It's actually been listening to the market and signaling back to the market that, you know, we are here to invest over the longer term and, you know, and into growth opportunities. So Kathryn may have some other comments she wishes to make.
No, I agree with everything that Brent said. As is kind of stressed a few times, we have kind of made it clear that the board will reconsider this when we come to March.
Okay, thanks very much. And then just pivoting a little bit, thanks for the detailed disclosure on where sales and applications are at The Helier. I mean, that's clearly a stunning site, arguably one of the best in the country. But I guess just from where I sit, the applications seem to be tracking a little bit slower than perhaps from what I hoped for six months ago. Is there so much consideration going into, I guess perhaps rejigging the pricing or the fees or the offering more in the financial package, just to perhaps speed up, you know, demand and sell it down a little bit faster on the first go? Just any thoughts there, please?
Yeah, I think that's... I mean, we've had good success across new product deliveries. You know, you would have heard me talking about the Bellevue, but as it relates to the Helier, there's only 79 apartments, and we're already 12 in. There's already the emergence of a scarcity factor starting to emerge. We probably got to that building a bit later than we had hoped, Stephen. We only had a resident welcome on the 24th of August, and that brought about, you know, quite a slew of applications following that. So from my perspective, that type of product is probably gonna be lumpier. It's not your two sales a month.
It's, you know, it's four or five residents all moving in at once, then a bit of a pause and then, you know, another four or five residents. So, you know, we've got high hopes for the property. We appreciate the compliment around the quality of it, and, you know, we remain very, very optimistic in a recovering housing market that will be fit for purpose, and, you know, we'll have that fuller quicker than other new product deliveries we've done in the past.
... Cool, thanks, Brent. And then maybe just one last set of questions for me. Just on the new disclosure around the cash development margin, and certainly a good trend we're seeing across the sector. There's more discussion on that as opposed to accrual margin. I just had a couple of questions on the way it's calculated, and I did see the footnote, but, I guess, you know, first of all, you're using the estimated landing cost to calculate the cash margin. And I guess, sorry, just an aside, Oceania is obviously redeveloping on the sites as opposed to, say, a Summerset, which is acquiring, you know, new sites. So it's pretty identifiable what the cost is there for Oceania's redevelopments is a bit, perhaps, a bit trickier.
And so I guess I was looking, could you just to get some confirmation that the value you've used for land in those cash development margin calculations is lower than what the valuer was estimating the value of the completed sites, were that they then that year then demolished? Please, could you please confirm how that was, whether that's typically lower in those calculations for the value of the land or not?
I wouldn't be able to give that just straight off the top of the head. But, what we could say is, I guess, the point that we use, it's consistent with how we treat for development margin, is the point at which the development decision is made. So that's when the efforts go into, designing, consenting, that stage of development. So how it compares to the going concern on the site at the time, don't have that to hand, but, it's certainly not... I mean, in a lot of cases, if you think about our existing portfolio, CBRE will value a piece of land, which we currently have potentially bought back villas on. They'll start to value that as development land, and we often see an increase rather than a decrease, going that way.
Yeah, I guess the point I'm making is that, you know, if you've got an existing built asset on the site, they'll have a cash flow profile, which you're then demolishing to rebuild a completely new site. So you know that there's kind of an important consideration, you know, to calculate development margin, but I will move on. And then, I guess, sorry, just a follow-up question. You know, things like demolition costs, are they kind of put to one side in that calculation as well, please?
They're included.
They're included? Okay, thank you. And then the overhead, so head office overhead for development, is that allocated to the sites or is that, is that separate?
So I'll take that one, Stephen. So, there's a portion. So, we have certain teams that support our clinical teams and operational teams, for example, where they would be directly allocated to our care and village segments. There are certain kind of more head office costs that come with being a listed company, though, that remain at a support office level.
Okay. Thanks, Kathryn. Then maybe just, sorry, one more just on development strategy, maybe one for Brent. I guess, like, if we look at the sort of unsold new stock at the moment, over 400 units, and the sales run rate, you know, around about that sort of mid-80s, you know, it's quickly suggests it's taking around about two years or a bit over to sell down products. I guess the question at a high level is, you know, is the build mix on site the right one? You know, and you did allude, Brent, to so perhaps more of a pivot towards retirement living.
But I just even wonder if you know, given we're seeing faster capital recycling at the operators, have got broader acre, you know, more retirement tilted stock, whether that's under consideration at Oceania for new sites.
Absolutely, Stephen. We've prided ourselves on bringing to market a really compelling integrated site. You know, if we think about apartment mix and care mix, ourselves and our peers are thinking about what the right balance of that is. You'll see us sort of moving to a higher weighting of apartment and a lesser weighting of care. And that's represented in Helier as an example. It's, you know, 79 apartments, 32 care residents. So that's the first part of it. The second part of it is that we have been certainly pushing into more greenfield acquisitions. And as a consequence of that, you know, those land parcels allow us to have a greater bias towards ILU and/or villa product.
I think I mentioned in my note of the developments that we've done recently, 58% of that development portfolio has been allocated towards independent living. So, we're still. Oceania is a care business, and we're very proud of our heritage and the service that we deliver in care. But we are absolutely pivoting towards, you know, apartment villa product as we build out the pipeline over the next kind of 3-5 years.
Cool. That's all from me. Thank you.
Thank you. Once again, if you wish to ask a question, please press star one and wait for your name to be announced. Your next question comes from Nick Maher, from Macquarie. Please go ahead.
Hi, guys. Just on the unsold stock, I was just wondering if you've got a view on sort of where a natural level sits. I guess, taking into account the fact that, you know, you've got the transfers which are sitting there, which hopefully won't be as big in the future, and then the sort of mix of units being sort of lower value once you work through The Helier, as well as the volume aspect, just how much do you think you can take out of the 422 over a couple of years?
As much as we can. That could be the short answer. I think the good news is that, and you've alluded to it, we've come out of the brownfield disruptive phase, you know, as we've converted product to the premium end, as we've decanted residents. So we've got a small rump there, NZD 60-odd million, or NZD 57 million to be exact. That is part of, you know, part of that. And Stephen and others have commented on it. If we are taking a couple of years on an integrated site, which includes both apartments and care, then that, you know, allows people to, you know, to have a look at that and figure out where we might sort of land on a completed stock basis.
... Oh, fine. And then in terms of head office costs, could you just talk about why those came down so much? From what I understood, you were sort of trying to recentralize some of the stuff from care, which was going to push it back into the head office, but, any details would be appreciated.
Yeah. So hi, Nick. We haven't, we haven't changed our allocations as such, but one thing that is kind of front of mind is we did a lot of investment a couple of years back that ticked up those care costs there, I think you're referring to. So when we first went into kind of establishing and integrating our model of care, there were a lot of kind of people costs and setup costs and, you know, legislative costs at that time, which have now come down. We obviously, in this environment, inflation has been really rife, so every single person at Oceania is keeping a good eye to costs and keeping them as low as we can.
So is that sort of a rate that we can annualize into the H2, or is it gonna step up, step back up?
Yeah, I think from a support office cost perspective, yeah, H2 will be very consistent with the first.
Okay, great. And then just lastly, from sort of the resale side of it, are there many more development buybacks that need to still go through the business?
No, I think we're sort of getting to the end of that, Nick, which is, you know, part of being able to signal kind of more consistent earnings going forward. And, you know, that's part of the consideration for, you know, how debt has got to, you know, sort of more elevated levels as well. So it's a good question, but, you know, we're pretty much through that now, and we can see a pathway where we have brownfield developments. You know, we've got those sites available for rapid development, so that's helpful for the CEO, and it's helpful for the CFO that we're kind of through that period now.
Great. Cool. Thank you.
Thank you. I have another question from Arie Dekker from Jarden. Please go ahead.
Oh, yeah, just a follow-up on Elmwood, just so I get the understanding right. So of the 106 Care Suites that are being developed there, how many of them will go into 2025, and will any be delivered in 2024? I just cl-
They're all, they're all gonna go into 25, Arie. Yeah, 'cause it's a complete building.
Okay, so that... Yeah, so that, that being the case, yeah, sort of, yeah, didn't quite get that from when Deanne asked either. So on that basis, yeah, clearly, 2025 delivery is gonna be higher than 2024. Can you sort of talk about what your delivery expectations are for 2025, inclusive of the 106 that are shifting from 2024?
Yeah, I think, from our perspective, Arie, and let's assume that we continue to see some, you know, recovering, you know, housing market, then we are sort of, you know, we're set up to deliver around that 200 units a year. And, with the variability in our product, then we can obviously push some of the boundaries of that to higher levels if, you know, if we wish, or we can moderate it back if we continue to have, you know, soft market conditions.
Sure. So, you know, taking all the comments together, delivery this year may be around 100 or so, and then 2025, 2026, no reason why there shouldn't be, you know, around 200, and then, as you sort of raised earlier, and with the potential dip then in 2027, as you start to transition to more of that villa stuff.
Yeah, I think that's perfect. You've got a better model than us.
Cool. Thank you.
Thank you. There are no further questions on the teleconference at this time. I'll now hand back to Brent, Kathryn, and Heath to answer any questions from the webcast.
Thank you. Yeah, there are a couple of questions on the webcast, but I think a bunch of those we've already covered. So one of the questions was around our pipeline and our development aspirations. One of the questions was around CapEx guidance for the full year, which we covered. One of the questions was around gearing range. You know, and our gearing range is expected to be in the 30%-35% on a long range average basis. So yeah, I'm not seeing anything on the online questions, and thank you for people putting online questions that we probably haven't already covered as part of this presentation today. Yeah, I think I think we might wrap it up there. Thank you for everyone's participation today.
Yeah, we look forward to seeing a newly formed government, and we look forward to continued market-improving market conditions, and we'll see you all again back in March.