Good afternoon, ladies and gentlemen. I am Elizabeth Coutts, the Chair of Oceania Healthcare, and thank you very much for joining us today for the annual meeting of shareholders. Before we begin, a brief note on safety. We are not expecting any emergency today, but if the alarm sounds, please follow the directions of the Park Hyatt staff and leave by the nearest exit. You will find bathrooms outside and to the left down the corridor, and our staff can point you the way. Please also take a moment to ensure your mobile phone is on silent. Today's meeting is being held in person here at the Park Hyatt in Auckland and also online via Computershare's meeting platform. I am pleased to advise that this meeting has been properly convened and the notice of meeting duly given. There being a quorum of shareholders present, I declare the annual meeting open.
To begin with, I would like to take this opportunity to introduce those people alongside me today. On my far right is Independent Director, Dame Kerry Prendergast. Dame Kerry is the Chair of the Clinical and Health and Safety Committee and a member of the Audit and Risk Committee. Next to Dame Kerry is Sarah Ottrey. Sarah is standing today for election as an Independent Director of Oceania Healthcare. Sarah is a Member of the Clinical and Health and Safety Committee and the People and Culture Committee. Beside Sarah is Independent Director Greg Tomlinson. Greg is Chair of the Development Committee. On my far left is Independent Director Sally Evans. Sally is a Member of the Clinical and Health and Safety Committee. Sally will be retiring as a Director of Oceania at the end of this meeting. I will acknowledge Sally's valuable contribution later in my speech.
Next to Sally is Independent Director Rob Hamilton. Rob is Chair of the People and Culture Committee and a Member of the Audit and Risk Committee. An apology is Independent Director Alan Isaac, Chair of the Audit and Risk Committee and a Member of the People and Culture Committee. Also with us today is Suzanne Dvorak, our Chief Executive Officer. Joining Suzanne are members of our executive team. Here we have Kathryn Waugh, our Chief Financial Officer. Sarah Miller, our Chief Legal Corporate Services Officer and Company Secretary. Fiona Cameron, our Chief Sales and Marketing Officer. Gareth Wright, our General Manager of Property and Development. Michelle Baker, our Chief Customer and Services Officer. Shirley Ross, our Director of Clinical and Care Services and responsible for health and safety. Andrew Steele, our Chief Property Officer, and Hayden Brown, our General Manager of Strategy.
We also welcome representatives from our legal advisors, Chapman Tripp, and our external auditors, Ernst & Young. When we come to the formal business, I will move each resolution. We will then open each item for discussion before putting it to a vote. In accordance with the NZX Listing Rules, voting today will be conducted by poll. For those of you attending the meeting virtually, I will shortly open voting for all resolutions to provide you enough time to vote. At that time, if you are eligible to vote at this meeting, the voting options will appear on your screen. To vote, simply click on the vote icon and select your voting direction from the options shown on the screen. You can vote on all resolutions at once or one at a time. Your vote has been cast when the green tick appears.
To change your vote, select change your vote. You can change your vote at any time until I declare voting closed. I now declare voting open on all items of business. For those of you attending the meeting online, please submit your votes using the vote icon at any time. I will advise before I move to close voting. For those attending in person, you should have received a voting paper on arrival. If you have not received one, please raise your hand now and a member of the Computershare team will assist you. Computershare will act as scrutineer for today's poll. The results of the votes will be released to the NZX and the ASX later today. There will be opportunities to ask questions throughout the meeting, and I will address them at the relevant point on the agenda.
For those attending online, you can submit a question at any time by selecting the Q&A tab on your screen, typing your question into the box and pressing send. I encourage you to submit your questions as early as possible to help ensure they are addressed at the appropriate time. The Q&A tab remains open throughout the meeting. If you have any difficulty voting or asking questions, please use the Q&A tab to request help or refer to the virtual meeting guide and a member of the Computershare team will assist you. For those attending in person, if you wish to ask a question, please raise your hand and we will bring a microphone to you. When speaking, please clearly state your name and confirm whether you are a shareholder or you are a proxy holder and the name of the shareholder you represent.
The meeting runs in an orderly way, I will address questions at the relevant point in the agenda rather than as they arrive, and I ask that questions are held until I invite them on each item. I also ask that in the interest of fairness to all shareholders attending this meeting, anyone wishing to speak should be as concise as possible and be considerate to other shareholders wishing to ask questions. For the sake of good order, shareholders should speak once on a matter being put, and the questions raised should relate directly to the matter being considered. I may moderate or combine questions when we receive similar ones. If you were unable to respond to every question during the meeting due to time constraints, we will respond afterwards by email.
I would like to take this opportunity to remind everyone that as this meeting is being webcast, you will also be heard by an audience outside of this room. Are there any apologies that anyone would like to have recorded alongside independent director, Alan Isaac? Does not appear so. A number of shareholders have appointed proxies to cast their vote. Based on the first resolution, excluding shareholders who have abstained, 466 shareholders holding approximately 447.3 million shares are represented by valid proxies. This represents 61.77% of the shares on issue. I will advise on the number of proxies held by the board and how they are intended to be voted after each resolution that will be put before the meeting today. The first item of business is to consider and receive the annual report and the audited financial statements for the year ended 31st of March 2026.
We shall take the annual report as read. Before seeking your questions or comments on the annual report, I provide you with an update on the company's performance. This will be followed by an address from Suzanne Dvorak, our Chief Executive Officer. Before I turn to the year, I want to start with the people who make Oceania what it is. Every day, over 2,200 team members provide personal, high-quality care and services to more than 3,900 Oceania residents. It is demanding work. It takes real skill and dedication, and on behalf of the board, I thank them for that. My thanks also to the families who place their trust in us, to our partners, and to you, our shareholders, for your continued support. This year has been a year of disciplined progress, and the transformation we set out to deliver is taking hold across the business.
It starts with our residents and their families. Their experience is at the heart of everything we do, and we continue to invest in measuring and improving it. This year, 79.5% of our care residents maintained or improved their wellbeing. That result matters, because behind the number are thousands of residents living more comfortable and connected lives. A clear and consistent read on how our residents are doing is the best early signal of a healthy business, and it keeps the whole organization focused on what matters most. None of this is possible without our people. In our most recent climate survey, 70% of our people told us they are engaged in their work, engaged in well-supported teams to deliver better care, and listening to them and acting on what they tell us has become central to how we lead. Sustainability remains an important part of how we operate.
While the mandatory climate reporting standards will no longer apply to Oceania when the revised legislation is passed, we have not stepped back. Our sustainability practices are now well embedded across the business and overseen by the full board, and we remain committed to building and operating responsibly. Recently, Franklin Village became the first retirement village in New Zealand to achieve a four-star Green Star Communities rating, setting a new benchmark for the sector. We also met every environmental and social target in our sustainability-linked financing. For us, operating responsibly is simply part of running the business well. Over the past year, we have materially strengthened our financial position. We've reduced debt. Our gearing is at the lower end of our target range, and the executive team is firmly focused on generating free cash flow from operations.
More recently, we successfully raised NZD 125 million through the issue of a new corporate bond as part of reducing perceived financing risk and setting up our funding for the long term. The bond's six-year tenor better matches the long-dated nature of our assets and extends our debt maturities while continuing to ensure diversification of funding and sources and strengthening our resilience through the cycle. That stronger footing is what allows us to operate profitably and grow with discipline. We are refining our development pipeline and the timing of each project, working to a diversified and measured plan with an indicative build rate of approximately 150 units a year by FY 2031. The timing and sequencing of these projects is not yet determined. They will be set as conditions and demand allow. The pipeline is also deliberately mixed, which lets us match what we build to conditions and demand.
That flexibility is a strength, particularly in a market like this one. I want to turn now to how much this portfolio has changed since we listed in 2017, because the change runs far deeper than size. When we listed, Oceania was a portfolio of 50, mostly older, care-focused sites, with total assets of NZD 918 million. Today, we operate 30, mostly integrated communities, and total assets have grown to NZD 3.1 billion. The change in mix has been deliberate. At listing, nearly three quarters of the portfolio was aged care, and those villas and apartments and Care Suites under an Occupation Right Agreement made up just 32% of it. Today, care and village living are close to evenly balanced with 80% of the portfolio under our Occupation Right Agreement, the result of pioneering the Care Suites model and re-weighting towards integrated care and village communities.
To be clear, this rebalancing was not a retreat from care. Retirement living is exposed to house prices, care is exposed to government funding. Balancing both at a portfolio level is what steadies us through the cycle. Taking an early portfolio-wide view of where our capital worked hardest, we divested sites and focused on new development, building modern communities that now anchor the portfolio. The portfolio today is younger and carries far less of the deferred maintenance that weighs on older operators. We've also renewed where and what we build, concentrating in the higher value metropolitan markets where demand is strongest, and positioning us to respond as those markets shift. That pipeline sits on land we already own, and over time has the potential to add around NZD 1 billion to total assets once the pipeline is fully developed. None of this happened by chance.
This is substantial value created for you, the owners of the company, even if the share price has not yet to fully reflect it. While our share price has recovered somewhat over the past year, the board shares your wish to see the market better recognize the value we have built in Oceania. With the current strategic period coming to an end, we refreshed our strategic plan last September through a comprehensive board-led process that management is now delivering. Many of you will recognize this framework. We shared it at our Investor Day and have referred to it in our reporting since. This is what guides the business and our day-to-day decisions. The first phase is about strengthening our foundations. It is largely complete. We are now moving towards growth. What I want to focus on are the three things the plan asks for.
These are improving operating performance by undertaking a major cost reduction program, strengthening the balance sheet by reducing stock and divesting older sites that no longer meet our financial hurdles or fit our continuum of care strategy, and ensuring growth initiatives are considered, disciplined, and capital efficient. The board has considered, and continues to actively consider, various strategic options with a view to maximizing shareholder value. These include sector consolidation opportunities, organic and inorganic growth strategies, divestment of individual sites, capital structure, and capital management options. One of those options is buying back our own shares. Shareholders have rightly asked about it, and I will address it directly when we come to resolution four. Over the past two years, we've sold 13 sites at around carrying value and used the proceeds to reduce debt. Central to that plan is our focus on positive cash flow from operations.
Put simply, that is the cash the business generates from running homes, villages, after the cost of operating and maintaining them, and excludes development-related costs and profits. As the clearest measure of whether the business is paying its own way, rather than judging value add-on development alone, we determine that our existing assets earn a strong and dependable return in their own right. That matters because of what it gives us. A strong balance sheet and positive free cash flow from operations are what create options for us. We can grow by developing the pipeline we already own. We can grow by acquisition where the right opportunity is priced well.
Each of our options is tested against the capital we need to hold against the risks in front of us, including the change to residency payment law, which Suzanne will describe shortly, and which I will come back to at Resolution 4. We weigh these choices against market conditions, annual feedback, and we welcome your discussion on them today. Before I turn to risk, I want to say something about how we pay our executive team. A substantial part of executive pay is not guaranteed. It is at risk and is earned only against performance. The short-term component is tied directly to the things that build value for you, being underlying earnings, free cash flow from operations, resident and employee outcomes, and delivering of the strategy. A free cash flow from operations must turn positive before dividends resume.
The executive incentive is anchored to the very milestone you are waiting on. The long-term component is where the alignment is sharpest. Our executives are granted options with a fixed exercise price. If the share price does not exceed that price, they're worth nothing, and they cannot be exercised. These are not free shares. They are not share rights that convert one-for-one, regardless what the share price does, based solely on tenure. When they do vest, executives receive only the difference between the exercise price and the share price at the time, not the full value of the share. A large grant of options does not translate onto a large issue of shares. The number is far smaller than the headline suggests. I would add this. Very few incentives have actually vested for the current leadership team. The alignment we are describing is not theoretical.
It is cost management, real money to date. Where shares are issued on exercise, when it is appropriate to do so, we will endeavor to purchase equivalent number on market to offset dilution. In short, management is paid when the value of your shares grow and not before. Aligning incentives is one way the board protects your investment. Guarding against what could go wrong is the other. Underpinning all of it is a gate. In any given year, no short-term incentive is paid at all, at any level, unless health and safety and care standards have been met. In a business caring for older New Zealanders, that comes first, ahead of any financial result. The board keeps a close eye on risk in what remains a fast-changing environment.
Over the past year, we've continued to strengthen how we identify and manage the risks that matter most for a business like ours. The safety and quality of our care, regulatory change, cybersecurity, and the funding and delivery of care. As part of streamlining our committees, risk oversight now sits with our newly combined audit and risk committee, which sharpens our focus and accountability. We are also renewing your board through a deliberate and orderly succession, having assessed the mix of skills and experiences required. We welcome Sarah Ottrey, whose career has been built on marketing and customer-focused industries. As I said earlier, the experience of our residents and customers is the surest indicator of a healthy business, and Sarah brings the capability to help us better understand it and act on it.
Together with her commercial and people expertise, Sarah strengthens your board for the next phase of our growth. Today, we thank and farewell Sally Evans, who retires after eight years as an independent director. Sally brought to Oceania more than three decades of experience in health, aged care, and retirement. From her very first day, she governed with the safety and wellbeing of our residents at the heart of everything, every decision. She chaired our People and Culture Committee and then our Sustainability Committee, where she led the oversight of implementing Oceania's first comprehensive sustainability strategy. She also served on our Clinical and Health and Safety Committee during her entire tenure. Throughout, she's been a tireless and clear-eyed advocate for our residents. One small thing captures who Sally is.
When she joined, she asked just one thing of us, that we never call the places our residents live facilities, because a facility is not a home. That insistence that language matters, that the residents' experience must always come first, it is a standard she held us to and one we will carry forward long after today. On behalf of the whole board, thank you, Sally, for your wisdom, your warmth, your unwavering commitment to the people we are here to serve. Thank you. Finally, the need for what we do has never been greater. You may have seen recent public discussion about reform of the retirement village sector, including how and when residents' exit retirements are repaid. We welcome reform that gives residents greater certainty and improves the experience, and we are engaging constructively as it develops. Oceania already operates within the key parameters the government has proposed.
We buy back villas, apartments, and Care Suites within a 12-month period. We pay interest to residents from the six-month mark, and we charge no fees and accrue no deferred management fee from the time of vacant possession. A resident leaving an Oceania village is not waiting indefinitely on a market they cannot control. There is, however, a further proposal that would shorten that repayment window to three months. That is a different measure, and we are advocating alongside the Retirement Villages Association for the current settings to be maintained. We will return to what it means for your capital when we come to resolution four. Our concern with that is practical, and Suzanne will go through that in more detail shortly.
What I would like to say is that we are engaging on it constructively alongside the Retirement Villages Association to land settings that are generally workable and protect residents without unintended consequence for the people already living in our villages. Our interest, as it always has been, is in changes that are fair to residents and workable in practice. As New Zealand's population ages, Oceania's commitment to high-quality, person-centered care, increasingly supported by new tools and technology, is both our purpose and our opportunity. It is work that matters, and the board remains confident in the direction we are taking. I'd now like to invite Suzanne to present her report.
Thank you, Liz, good afternoon, everyone. Before I share an overview of our record financial results, I would like to recognize the teams who delivered our success. This was a demanding year, and our people rose to the challenge. The progress and achievements we are presenting today reflect their very hard work. We came into the financial year clear about what needed to be done. That work has now been delivered in a way we believe we can build and repeat. This result was no accident. Over the past two years, we have rebuilt this business deliberately, site by site, department by department, and across every cost and profit center. We have assessed every village and care center against consistent criteria with independent expert input, and that work has given us a clear and practical strategy and plan.
We set out and published our strategy last September, we have been delivering against that plan ever since. The financial results I would like to take you through today are the product of this strategic plan and of the people who executed it. This included our independent advisors, some of whom are with us here today. Against another year of subdued residential property conditions, Oceania produced a record result, with pro forma underlying EBITDA up 20% to NZD 97.7 million, on sales volumes up 16% to 603 settlements. At the same time, we strengthened our balance sheet and improved cash generation, I'd like to take you through what has driven that result. The clearest signal of our progress is sales, this was a record year. New sales reached over 200 settlements, up 9% year-on-year, with average pricing also up 9%, and a group development margin of 30%.
Resales were strong, up 20% to more than 400 units. 60% of these were Care Suites. Our care residents stay with us for an average of three years, which means the deferred management fees and capital gains are realized sooner in care than they are in independent living. In the case of new sales, that sales performance is the key to recovery of our initial capital outlay. The sooner those first sales come through, the sooner we recover the capital we invested in building them. At Franklin, which is our first Green Star community, stage 1 opened in January. As at the 30th of June, 84% of the 31 villas have already been sold or are under application. We have begun work on stage 2, where there will be a further 28 units delivered by the end of the financial year.
We have completed our master plan work at Meadowbank and delivered 40 new dementia suites as part of the Ōrākei building. As of the 30th of June, this stage is now 70% sold, under application, or occupied. Franklin and Meadowbank were the sites we needed to deliver against, and each is now tracking not only to plan, but ahead of it. Our sell down of these sites and others, including The Helier, released NZD 115 million of capital over the year. Net of new deliveries, this reduced unsold stock from NZD 342 million to NZD 227 million. The proceeds of these sales went directly to reduce our debt. The further reduction of unsold stock will continue to be a focus throughout FY 2027. We have addressed the fundamentals of our operating model. We have looked at our rosters, our occupancy, our procurement, and our pricing.
The result of this work is that we ended the financial year a much leaner and fitter business. We completed the first cycle of our transformation program and delivered over NZD 13 million of structural cost savings, building to NZD 20 million annualized in FY 2027, and we have increased our FY 2027 target to include cash savings to NZD 30 million. These reductions came largely out of our Auckland head office and the regional infrastructure that previously supported our divested sites. Our profitability has also improved this year, and our care business has led the way. Earnings per bed rose 40% to NZD 27,000, supported by occupancy and tighter cost management. After several challenging years, our care business is now well-positioned for sustained earnings growth. Free cash flow from operations improved by 64%, from a NZD 42 million outflow in FY 2025 to a NZD 15 million outflow in FY 2026.
Converting that into positive free cash flow from operations in FY 2027 is the goal that we are working towards. Importantly, the result of this transformation program is a materially stronger balance sheet. We have reduced net debt by more than NZD 120 million -NZD 507 million, and gearing fell to 30%, the lower end of our target range, with NZD 200 million of headroom and every metric comfortably sitting inside of our covenants. I'm confident that this year's financial results are repeatable. The changes are all structural improvements and not just one-offs. Although part of this year's debt reduction did come from divestments, the larger part came from things that recur, such as disciplined sell down, improved operating cash, and lower capital spend. These savings are now embedded in the business.
Setting the divested sites aside, the continuing business is materially stronger, with both earnings and free cash flow from operations up on the prior year. Oceania is a business built to perform in all market cycles, not one waiting for the market to turn. Today, Oceania is a smaller but more resilient business. We have deliberately reshaped the portfolio around integrated care and village communities, prioritizing cash generation. The same is true of the organization behind it. We are a smaller team than we were a year ago, but a more capable one, and we have invested in leadership and systems to help us keep it that way. At each of our sites, we have streamlined our structure so that one manager now leads both the care center and the village.
That gives residents and families a single point of contact as their needs change. It gives our teams much clearer leadership. In parallel, we have restructured our leadership team around clearer portfolios, priorities, and productivity. We launched a new set of values this year, built from what our people told us matters. These four values are: We are one team, we are committed to care, we're proud to deliver, and we are finding better ways. Values only mean something if you can see them in action. We have also defined the behaviors behind each value, and they are already shaping how we work. All of these initiatives over the past 12 months build a stronger foundation, and one we can improve upon and continue to grow over the next financial year. We plan to do exactly that.
Whilst we are maximizing our operational performance, development is how Oceania creates long-term value. Our pipeline gives us that substance. In FY 2027, we will deliver 81 units across three sites, comprising Green Bay, Franklin Stage 2, and a number of villa conversions at Elmwood. Over the medium term, we are progressing the design and consenting work needed to lift that build rate towards approximately 150 units a year by FY 2031. Behind our strategy sits a pipeline that is real land that we already own, located at villages that we already operate. This is a low-risk growth supported by the demographics from our strategy work, and in locations where we already have sites, communities, and infrastructure in place. The pipeline is also deliberately mixed, which gives us optionality in how we build.
Premium apartments at Lady Allum and The Helier, alongside the broad acre options at Franklin, Green Bay, and Gracelands, let us pace delivery amid a wider range of customer demand. As Liz mentioned, this pipeline provides the opportunity to add approximately NZD 1 billion to our total assets. We will not break ground on anything unless we are confident it will pay for itself and add premium earnings to our existing portfolio over time. This is growth which will add earnings and growth that we can pace. As mentioned by Liz, there is currently a proposal to reduce the period in which we repay a resident's capital after they leave from 12 months to three months. Let me be clear about where we stand. We agree residents should have certainty regarding the return of their capital, and our own practice already reflects this.
Our concern with three months is about who ends up paying for it. Requiring repayment within three months would mean operators hold materially more capital against that obligation permanently. That capital has to be funded, and in a village model, the cost of funding these buybacks does not fall to operators alone. It will fall to residents still living in the villages by way of fees and pricing uplifts. The risk is that a change designed to help residents leaving a village is paid for by the residents who remain within it. If this becomes law, Oceania does have the balance sheet to meet this requirement. That brings me to the year ahead. FY 2027 is about continuing to improve our performance and to generate positive cash earnings. We will keep selling down our unsold stock. We will continue to convert our operational gains into positive operating cash flow.
We will maintain our cost discipline. We will deliver those 81 villas and apartments I mentioned earlier, each contributing to growth in free operating cash flow. Longer term, we want Oceania Healthcare to continue to be known for the quality of its care and the experience of its residents, and to keep converting that reputation into dependable cash flow as we grow. There is still more to do, but the direction is clear. We carry real momentum into FY 2027. Many thanks again to our people who care for our residents every day, our residents and their families for the trust they place in us, to the board, and to you, our shareholders, for your continued support. I will now hand you back to Liz.
Thank you, Suzanne. Are there any questions arising from the annual report, from my address, or the presentation from Suzanne? If you wish to ask a question, please raise your hand and we will bring a microphone to you. Please advise your name, whether you are a shareholder or a proxy holder, and the name of the shareholder represented. Thank you. Microphone. Thank you.
Thanks. Bruce Parkes, I am a shareholder. You are doing well on most metrics, but your staff engagement is lower than the New Zealand standard. How do you plan to increase that?
Suzanne?
I think the slide says 63% against 70%.
We're actually just up against industry averages, which we're very happy about.
We do need to continue to increase that. As I said, we've relaunched our values, and we've also just relaunched behaviors that sit underneath that. We think that key to great resident experience is keeping the same team with us for the whole way through, and we are committed to continuing to increase that engagement. Andrew, who is here with us today, will help us to continue to do that. We're actually just above industry average.
Thank you.
Thank you, Bruce. Are there any other questions from the floor?
Is this the right time to address the chair of the audit committee on financials?
Sorry, have I?
Yeah. Is this the right time to address the chair of the audit committee on financials, or should I do that later?
Sorry, if you just say your name and who you're representing. Thank you.
My name's Rob Smith. I'm a shareholder.
Thank you. You can submit your question now, please, including the financial statement. Yes, please do.
Who's the audit?
Alan Isaac is the Audit Committee Chair, we have both the auditors here today, we also have Rob Hamilton here, who's a Member of the Audit Risk Committee.
Just on net tangible asset value, obviously the market disagrees with this value by a very large margin and has done for a very long time. As Benjamin Graham said, over the long term, the market is a weighing machine. The auditors have signed off on the net tangible asset value, which is based to a large degree on a black box DCF, which we're not allowed to see. They also use incredibly high discount rates. After nine years, not much cash has shown up, especially not in the quantities predicted by these models. Which of these is correct? Are the auditors confident in the value they've signed off on, and if so, why?
I just want to check with that question. Are you asking for The auditors are present here today. Are you wanting the auditors to make a statement, or would you like Rob Hamilton to comment on that?
The auditors have signed off on that net tangible asset value, which is what my question relates to, perhaps the auditors can answer. Thank you.
Brent Penrose is with us and very happy to answer that question. Can someone bring him a microphone, please? That's a good question.
Thank you for the question. I'm Brent Penrose. I'm the audit partner from EY. It is a question we get every now and again, particularly when you have a listed share, which is below the NTA. We see them as two different measures. From our perspective as auditors, we need to comply with auditing standards, and our role is to provide our opinion on the financial statements as a whole, as prepared under the required accounting standards. The market capitalization is a measure at a point in time based on investors' view on control or absence of control, future prospects, and other market dynamics. We do use the market capitalization, albeit it's not part of our overall audit responsibility when we look at the impairment or the valuation process.
As you'd expect in an asset-intensive business like Oceania, our key audit matter is the valuation and the carrying value of the investment properties and the PP&E. We interrogate the valuation, which is all of the valuations are externally valued by an ind or a third-party valuer. We use our specialists. We interrogate the methodology, the DCF model that you referred to, and we look at the disclosures across all of the properties and property plant and equipment. We look at the market cap, and that to see whether there are any indicators of impairment from that. It is certainly something that we consider, but it is not the overriding consideration. Unfortunately, this is not unique in the market at the moment. There are a number of not only retirement village entities but other property holding entities which market cap is lower than the NTA.
Ultimately, we're required to provide our opinion on the financial statements as a whole, and as such, we've issued our unqualified opinion. In the key audit matters is a description of the work that we do on the valuation of investment properties and PP&E. Very long answer to your question, but I'll take that as.
Thank you, Brent. Rob, would you like to add to that?
Yeah. Thanks, Brent. Agree entirely with what you said. I would say that the NTA is assessed by an independent expert appointed by the board, and that valuation is reviewed in detail by the board, including meeting with the valuers each year, and is also subject, as Brent has outlined, to quite a rigorous external audit review. I would say that the NTA per share and the share price don't measure the same thing. I think it's quite important to acknowledge that. That is a key reason why you see differences between NTA per share and share price over time. Two of the key differences are, firstly, NTA, as assessed by the independent expert, does not take into account overhead costs. At the same time, it also does not take into account future growth prospects within the business.
When thinking about share price, we need to take both of those elements into account, and they are key drivers of our share price performance. Not surprisingly, as Suzanne and Liz have already outlined, they are also key elements of our strategy. Suzanne has been through in detail the overhead cost savings that we have already put in place. We also have, as Suzanne has also outlined, quite a robust and focused growth strategy going forward.
Thank you, Rob. Are there any other questions? Yes, microphone here. Thank you.
Hi. Tommy Scrivener, shareholder. My question is, at the NZSA presentation, it was mentioned that the divestments were not sold to the highest bidder. As the optics are questionable, can the thought process be explained?
Thank you for that question. Suzanne or Kathryn, would you like to answer that?
Thanks, Tommy. Thanks for the question. When we talked about the divestments, we said there are a number of factors that we take into account. We've obviously done six over the last financial year. Price is one of the things we consider, but also one of the really strong things that we consider is terms and conditions for our employees and terms and conditions for our residents and any other kind of liability, implying things that the purchasers may bring in. In all of these processes end up with a range of prices. We obviously aim to get the highest, but some of them, there'll be other hidden things in the contracts that may mean that we go for one that is slightly lower. It is the one which is the most beneficial overall option for Oceania as a company.
Thank you, Kathryn. Are there any other questions? Thank you.
Hello, I'm Rob Chamberlain, and I'm a shareholder. I'm just wanting to ask how you see the village OpEx expenses growing over the next few years. They've been growing quite rapidly, obviously, as you've been adding more villages, but now everything's nice and steady for a while. The village was NZD 44 million OpEx last year. How do you see that traveling with the costs that you're costing out of? I'm going to ask the same question about the corporate expenses, which also grew quite rapidly and are at NZD 32 million now. How do you see that traveling over the next couple of predictable years as you have throttled back your building?
That's good questions. Thank you. Suzanne, did you want to answer those, or would you like Kathryn to?
No, I think Kathryn and I can probably do it together. Certainly in terms of village cost, our intent is to continue to reduce them. We did have a zero increase this year, and we are certainly hoping to keep it at that. It is difficult because we cannot pass on every inflationary cost to our residents, we need to work hard as to how we manage that. Yes, with increasing cost of living, there is increased costs, and I'll hand to Kathryn in a minute to talk to you about some of the things that we're doing with regards to that.
Thanks, Suzanne, and thanks, Rob. What Suzanne says for village, when we talked at the results time, we said there's a number of things that we're still working on. Procurement's a big one of them. We this year saw impact coming through care more than we did village. We'll start to see the impact of cost coming down in village moving forward. With corporate, what I would say is, you're right on the 32 number, of course. We obviously did a big restructuring corporate office in this last 12 months. We reduced our headcount by 20%. We reduced our professional services and overheads by that same amount as well. We are looking to reduce that further. What you will see, though, in the next 12 months is some investment.
We've got three systems in particular that we're investing in this year that will allow us to have long-term cost savings, but there is a cost that will come with them in the short term.
Are you able to actually put a number on [inaudible]
Sorry, if we get the mic so that the people on the webcast can hear.
Are you able to actually put a number on those two expenses over the next couple of years, plus or minus?
In terms of our corporate office costs, we're not expecting that to increase at all over the next few years. The village costs, we still need to do work, as Kathryn said, with regards to procurement and other activities, but we're not intending to increase our support office or central office costs.
Thank you.
Thank you. Thank you for the question. Are there any other questions we have? Thank you. There are no questions online. We will now move to the formal part of the meeting. All items of business are ordinary resolutions. To be passed, they require approval by a simple majority of more than 50% of the vote of shareholders entitled to vote and voting on the resolutions. Voting will be by poll. Each share held by a shareholder confers one vote. For those of you attending the meeting in person, to cast your vote, please complete your voting paper by ticking For, Against, or Abstain in the appropriate place for each resolution when I invite you to vote on the resolution. Voting papers will be collected at the end of the meeting by Computershare.
If you have any difficulty, please raise your hand and a member of the Computershare team will assist you. For those of you attending the meeting online, as I mentioned before, to vote, please select the Vote icon. This will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to press the Submit or Enter button as the whole vote is automatically recorded. I will now hand over to Greg Tomlinson, who will take us through the next item of business.
Thank you, Liz. We now move to the next item of business, which relates to the re-election of a director. Under Rule 2.7.1, NZX Listing Rule 2.7.1, a director must not hold office without being re-elected past the third annual meeting following that director's appointment or three years, whichever is longer. In this case, Elizabeth Coutts is offering herself for re-election as a director of the company. The board has determined that in its view, if re-elected, Elizabeth Coutts will continue to be an independent director for the purpose of the NZX Listing Rules. Elizabeth Coutts stands for re-election with the unanimous support of the other directors of the company. The board considers that her experience, objective oversight, and deep understanding of the business significantly strengthened the governance of Oceania Healthcare. I now invite Liz to speak in support of her re-election. Thank you.
Thank you, Greg. I am standing for re-election today, and I'd like to say briefly why I believe my continued service is in your best interest. My commitment to Oceania Healthcare and to the people it serves remains as strong as ever, and there are three reasons in particular. My first reason is the orderly renewal of your board. It is deliberate and skills-led. Appointments and composition are guided by the skills matrix we've used to govern this business, and our re-election timing is staggered so that director rotation is spread evenly rather than clustered in any one year. Today, you are being asked to elect Sarah Ottrey, who brings the marketing commercial capability the board has prioritized while we farewell Sally Evans after more than eight years of outstanding service. This is succession working as it should, refreshing the board while preserving the knowledge that has served the company well.
My second reason is the transformation underway in our business. We are partway through a significant transformation of our operating model, our development pipeline, and the way we deliver care. The early results are encouraging in the experience of our residents, the engagement of our people, and a materially stronger balance sheet. Transformation of this kind is not a single event. It is delivered over several years, and it benefits from stability and a steady hand while the work is seen through. My third reason is the renewal of our management team. Over recent years, we have substantially renewed our executive leadership, including a new Chief Executive, Suzanne Dvorak, and changes across the senior team.
That renewal is bedding in well and is precisely at such times that continuity at board and chair level is most valuable, providing the corporate memory, oversight, and support that allow a new team to deliver. I would add one thing about my own commitment. I sit on each of the board's four standing committees: Audit and Risk, People and Culture, Clinical, Health, Safety, and Development. I'm across every part of the governance of this company, and I intend to stay that way. For these reasons, I'm standing for re-election and provide continuity while the transformation is seen through. Thank you very much for considering my re-election. I look forward to your support and ask for your vote.
I now move that Elizabeth Coutts, who retires by rotation and is eligible for re-election, be re-elected as a director of the company. I'll put it to the floor if there's any questions. There's a hand here.
Sorry, Liz. Rob Smith again, shareholder. Did you mention your shareholding in Oceania as part of that address?
No, you didn't, then.
No, I did not, but my husband and I hold over 2 million shares.
Well, it's actually the most important part of the address would be your shareholding. It's actually the only thing that makes Liz an independent shareholder in the opinion of myself and Warren Buffett.
Well, thank you for that. As I say, I am very passionate about this company and I am very keen on getting our share price up.
The other side of that coin is those of you that do not have material shareholdings are not and cannot be independent.
Thank you. All right. Look, are there any other questions from the floor? Right, I will just keep moving on. I now put the motion and invite you to vote by marking resolution one on your voting card or selecting one of the options in the vote icon. I advise that the board is holding a total of 943,027. That is which is 0.21% of discretionary proxies, which will be voted in favor of this resolution. I now invite back our chair, Liz Coutts, who will take us through the next items of business. Thank you.
Thank you, Greg. We will now move to the next item of business, which is the election of a director. Sarah Ottrey was appointed as an independent director by the board in February 2026, in accordance with NZX Listing Rule 2.7.1, and the company's constitution must not hold office without election past this year's annual meeting. Being eligible, Sarah offers herself for election. The board has determined that, in its view, if elected, Sarah will be an independent director for the purpose of the NZX Listing Rules. Sarah Ottrey stands for election with the unanimous support of other directors. The board considers that her marketing, customer-focused experience will bring valuable governance insight into the experience of our residents and future customers, and that with her commercial and people expertise, she strengthens the board for Oceania's next phase of growth.
A brief biography is included on the website and in the notice meeting. I now invite Sarah to speak in support of her election.
There we go. [Non-english content ] Sarah Ottrey [Non-english content]. Thank you, Liz. Good afternoon to all our shareholders here today and to those online. Liz, to you and our Oceania shareholders, for considering my election as your director. My career has been spent building companies and brands. From the SME, private companies through to the large multinationals. The key attribute that I look for when choosing an organization to work with is what that organization's competitive advantage is in the market, or what is its point of difference. Does it exist? More importantly, can it be grown? Total shareholder returns are maximized in these instances. Oceania meets that on both counts. It has recognized care leadership through an expert and dedicated group of employees. Plus, it enjoys a size and agility that can ensure growth.
The customer, or in our case, the resident, and their family are at the center of all that Oceania does. It is only when we put the customer at the center of decision-making that a business actually thrives. You can't take it out of the bottom unless you put it in the top. At Oceania, we really do want people to age well, and more importantly, to live well as they age well. I have spent my career, uninterrupted, in marketing and commercial leadership, including senior roles in New Zealand and internationally with Unilever and with Heineken and its subsidiary here in New Zealand, DB Breweries. I learned there the discipline of building brands and companies through understanding what matters most. The commercial discipline that I learned there, and that has been proven through subsequent years in governance, can be borne out in the brands that I'm responsible for.
I'm currently the Chair of Christchurch International Airport and Whitestone Cheese, and I serve as a director on New Zealand's largest international tourism operator, Skyline Enterprises, as well as Mount Cook Alpine Salmon. In addition, I'm New Zealand's representative on the APEC Business Advisory Council and run a number of trade missions for this country. Previous boards include the listed healthcare company, EBOS Group, Blue Sky Meats, the Inland Revenue Risk and Assurance Committee, and I've served for a number of years on the Institute of Directors as a volunteer. I will work hard to support Oceania as it grows through making the resident experience a genuine and lasting point of difference in this sector. It is my intention to be very useful in that regard. [Non-english content] Thank you.
Thank you, Sarah. I now move that Sarah Ottrey be elected as a director of the company. Is there any discussion?
No more questions?
Uh, I have.
There might be one right at the back over there, Liz.
Over the back. Yes, we have one over the back. Hard to see with that light.
Yeah, Rob Smith again. Are you going to buy any shares?
Good question.
I was anticipating that. Normally when I join a company, I give it the four-season test, I was going to joke that I'm looking after my elderly parents, so I can't afford to. Yes, my intention is to buy them, so there you go.
There you go.
Yeah.
I asked Sarah that question this morning. Well done. We have a question online. It says, "I realize that you are the only new board member not personally responsible for Oceania's share price. Question, if we vote for you, what would you change compared to the current board?" Yeah.
I think. [inaudible] Am I wrong?
Yeah, push it.
Yeah. No, I think it just picks up anyway. There's some work already underway that I've been instrumentally involved with around developing our brand and our recognition. When I first arrived here, I thought and observed that we actually weren't well-known enough. It's my view that we can become more famous so people will make more inquiries, and ultimately end up being part of our world here at Oceania. That's truly an initial focus. You might recognize from my accent that I come from the Deep South, and it's not lost on me that every dollar counts. I will obviously be applying that as well.
Thank you, Sarah. We have a question online. What recruitment firm was assisted in the search? Was there a competitive process? How many candidates did the board interview? Was there a full board interview? Were any of the directors or executive know Sarah? First of all, there was not a search firm involved in Sarah's appointment. I can say that I do not believe in any of the Oceania directors that it was necessary to use a search firm because in New Zealand, the market is relatively small and a lot of the directors with someone like Sarah's experience are well-known to many other colleagues, many other directors in New Zealand. There were a number of people considered for the role.
That is limited because the particular skills that we were looking for, which were Sarah's, which was her marketing customer-faced orientation, as well as commercial acumen. The next question, was anyone known to Sarah? None of the executive knew Sarah. Of all the board, I know Sarah, and Alan Isaac had met Sarah. I think he worked through Institute of Directors. Maybe some of the others may have met her through Institute of Directors, but apart from that, she was not known to anyone else. Thank you for that question. Are there any other questions? Does not appear to be so. I will now put the motion and invite you to vote by marking resolution two on your voting card or selecting one of the options on the vote icon.
I advise that the board is holding a total of 2,249,460 discretionary proxies, which will be voted in favor of this resolution. I'll just leave a moment for you to do your voting. Thank you. We will now move to the next resolution regarding the remuneration of the auditor. I now move that the directors be authorized to fix the auditor's remuneration for the ensuing year. As stated in the notice of meeting, the current auditor of the company, Ernst & Young, is automatically reappointed as the company's auditor under Section 207T of the Companies Act 1993. Under Section 207S of the Companies Act 1993, the auditor's fees and expenses must be fixed in the manner that is determined at the annual meeting. Shareholder approval is therefore sought for the directors to fix the auditor's remuneration for the following year. Is there any discussion?
There does not appear to be so. There's nothing coming through online. Rob, you don't have anything. You're under a light, so you're very hard to see. I'm saving mine for later. Oh, okay. I've got another one. Oh, good. Can't wait. Right. Okay. There does not appear to be any more questions, I now put the motion and invite you to vote by marking resolution three on your voting card or selecting one of the options in the vote icon. I advise that the board is holding a total of 999,688 discretionary proxies, which will be voted in favor of this resolution. Thank you. We will now move to the final item of business, resolution four. This resolution was proposed by shareholder Mr. Thomas Scrivener of 24 Bramber Street, Hamilton.
It is a non-binding proposal, which means that if it passes, it stands as a recommendation to the board rather than a direction. The resolution reads that shareholders recommend that the board commission an independent strategic review of Oceania Healthcare with the objective of identifying options to maximize shareholder value and to address the longstanding discount of the company share price to its net tangible assets backing, and that the board report the findings of that review to shareholders. The board welcomes shareholder feedback. We acknowledge Mr. Scrivener's proposal and share his objective that the market better recognize Oceania's value. What we differ on is whether a further review is the way to get there. Let me be direct about the board's view of value.
We believe the intrinsic value of this business, built on real assets, carry real book values, is greater than the price at which shares trade today, that delivering our strategy will narrow that gap over time. As a listed company, we are always open to any option that will realize that value for you sooner, we test those options constantly, continually with independent advice. The independent, rigorous work this resolution calls for has, in substance, already been done. In delivering and testing our strategy over the past two years, we drew on external and independent advisors alongside management and the board. The work modeled the alternatives and reviewed our capital structure, including the case for share buybacks, we weigh that range of options from sector consolidation to divestment to capital management on a continuing basis. The resolution also asked to publish those findings.
I want to address that squarely. Those reports set out what we believe our group and assets are worth, and what we would pay for others, and where the opportunities lie. Publishing would hand that to every party we negotiate with, and it would be very costly to you, our shareholders. What we can do, and have done, is act on them and show you the results. I want to briefly address the question I know sits behind this resolution, whether we should be buying back our own shares. The board has considered this on numerous occasions with advice, and consider it would not be prudent right now for two reasons. First is the NZSA meeting. The long-term returns from investing in this business are expected to outweigh the short-term impact of a buyback. Put plainly, your capital works harder in the business than buying back our own stock.
The second I'll add today, the law governing when we repay capital to departing residents is changing. We already meet the changes currently proposed, but the further proposal, which is part of the current Retirement Villages Act review, alongside a separate member's bill, would shorten that window to three months. It would require us to hold more working capital than we do today. We don't yet know where it will land. That is exactly the kind of uncertainty a strong balance sheet is there to absorb, and is why we're being deliberate about how we deploy capital until the position is clear. That is a judgment, but it's a considered one. This is not abstract for us. Your directors hold shares in Oceania, collectively, a substantial holding, of which I have stated mine today.
When the share price sits below its intrinsic value, we feel it as you do. Our interest and yours are absolutely aligned. Yet, there are things we can control and things we cannot. We cannot control the environment we've operated in. Inflation has been uncertain, interest rates have moved, house price growth remains subdued, and global events have kept markets cautious. The environment has weighed on the whole sector. Listed property and retirement stocks alike are trading below their asset backing. What we can control is how we run this business, and that is where we have delivered. We have taken cost out, reduced debt, and grown cash flow. Our share price reached a three-year high of NZD 0.93 in December 2025 on improving market sentiment and lower interest rates before retracing as rates rose in early 2026 and Middle East tensions unsettled markets.
Over the two years to 30th June 2026, our shares have outperformed both Summerset and Ryman on a relative basis. Take something too from our divestment track record. Over the past two years, we've sold 13 sites at around carrying value and used the proceeds to reduce debt. It's worth spending a moment on the sites we did sell. These are smaller sites with no growth options for Oceania. A different model, but a different business, at different markets from the integrated communities in the heart of this portfolio. This was discipline reshaping and not the start of a sell-down site by site. The sites we've kept are our value engine. Their value is realized by operating them well. Break that apart, we do not release the value. You destroy the very value that creates.
We believe that selling the company as it stands today would not capture that value either. We are partway through a transformation whose earnings are not yet fully reflected in our share price. With construction costs still rising, the cost to replace those assets like ours only goes up. Our task is to operate through the cycle, not to sell our core assets at the absolute bottom of it. Our task is not to dismantle this company, it is to make those 30 sites work harder, which is exactly what the plan we set out last September is doing. Net debt is down NZD 120 million in the past year. Gearing is down to 30.1%, and free cash flow from operations improved 64% in the 12 months and is on track to turn positive in FY 2027. The plan is working, and is working now.
A further review would duplicate work already done at cost, at shareholder expense, and divert the team from the very progress that is closing the gap. Accordingly, after careful consideration and considerable consideration, the board recommends that shareholders vote against the proposal. Mr. Scrivener, as the shareholder proposed this resolution, I now invite you to speak to it. Can someone bring him a microphone, please?
No. You can stand just here. Thank you.
I spoke with Sarah Miller earlier.
No. Just here. Thank you.
That's all right. Madam Chair, directors, executives, and most importantly, fellow shareholders, I thank you for the opportunity to address the meeting. My name is Tommy Scrivener. I am a shareholder, and I am the proposer of Resolution 4. I want to begin with an investment principle I am sure many here are familiar with. A bird in the hand is worth two in the bush. At Oceania today, the bird in the hand is our company's realizable value if the company were sold or villages otherwise sold down in totality. Resolution 4 aims to provide clarity on what this figure or range would be. There is evidence to believe it is substantially above the price at which the shares trade today. Over the last couple of years, Oceania has divested 14 sites at or around carrying value. Additionally, Arvida was taken over at 83% of book value.
In this light, it is not a far stretch to see a strategic review resulting in NZD 1.30 or NZD 1.40 per share in the hand. The two in the bush are the future returns we are asked to keep waiting for, and here is the trouble with those birds. We have been watching this bush for nine years. Oceania listed in 2017 at NZD 0.79 a share. Shareholders who backed the 2021 capital raise paid NZD 1.30. The shares trade today below the IPO price, I think just as of recent it was NZD 0.74. During this period, Oceania has earned each year, on average, about NZD 0.07 a share, with profits declining over this period without the housing boom the sector has historically done well in. For some simple math. Suppose a strategic review of the manner I have described resulted in NZD 1.40 a share.
If shareholders expect a 10% return on their capital, then for Oceania to earn its keep, it must earn NZD 0.14 per share or NZD 100 million every year, starting now, just to match taking the bird in the hand. Each year they under-earn this figure, the burden on future earnings increases. Last year, Oceania earned NZD 100,000 in net profit after tax. That is probably less than a large proportion of people in this room. Additionally, they generated negative NZD 15 million free cash flow from operations. If the board of directors genuinely believe the bush is better than taking the bird in the hand, why not properly articulate that vision to their shareholders by explaining exactly how that hurdle will be cleared? Eventual free cash flow generation is simply not enough, and the time value of money must be considered.
That is, how much, and when, and compared to the alternative of selling today. On May 22nd, 2025, Oceania's earnings call described an operating efficiency review that was being undertaken. An operating review is different from a strategic review. "How?" you may ask. An operational review looks inward. It asks, "How do we run the business we have better?" Every option it considers keeps the company intact and operating broadly as it is. It's a review that assumes the answer is keep going. A strategic review asks a wider, more fundamental question: What is the best structure for this company to deliver value to its shareholders, including options that change or end the company as it exists today? A sale, a merger, an orderly liquidation of the villages with proceeds returned. It puts every option on the table.
Excuse me.
Take the board at its word and follow it to where it leads. Either their review examined a formal sales process and a realization of assets, in which case the work exists, the cost is already sunk, and the only thing missing is disclosure to shareholders of the findings. It did not, in which case the most direct routes to close the value gap have not been examined, and commissioning that work through a strategic review, as described by resolution four, is plainly warranted. I reiterate my two requests to the board today. One, release to shareholders the commercially non-sensitive parts of the review already completed, as the NZSA have also requested. Two, confirm whether that review examined a full sale of the company and an orderly wind down of the portfolio.
If it did not, commit to an independent strategic review, including these options, and report the results back to shareholders. A vote for resolution four simply records the shareholders' view that every option deserves proper examination and that the findings come back to us. Thank you.
Thank you, Mr. Scrivener. I will now open the floor for discussion on this resolution. If you wish to speak, please raise your hand and we'll bring a microphone to you. I will take any questions submitted online. Mr. Scrivener, you have a question. No one else seems to have one in the room.
I've just got three questions I'd like answered today. Will the board commit today to releasing the review completed in 2025?
As I've said before, no, because without the commercially sensitive information, it would not give a full picture.
Did the review already completed examine a full sale of the company and an orderly wind down of the portfolio as described by Resolution 4?
The review considered sector consolidation. It considered what the business was worth in the event that someone was interested. It considered divestments. It certainly considered which businesses we could acquire. It was wide-ranging.
The strategic review Oceania now points to was previously described as an operational efficiency review. Does the board accept this relabeling that it might make it harder for shareholders to judge what work has actually been done as they decide how to vote on Resolution 4?
Well, as a result of the strategic review, what was identified is that there were a number of operational improvements that could be made. If those operational improvements were made, the share price would get re-rated. That's the link between the two. With cash flow up, debt down, the rating, we would get re-rated, and that would increase the share price. That is the link between operational improvements and strategic review.
[inaudible]
Sorry. As it's people online, could you. We need the microphone.
Yeah, sorry. I was just asking about the relabeling of the review from an operational to a strategic.
Well, there was a strategic review, and we presented a strategic plan that was presented to investors last September. Out of the strategic review, it was recommended to make operational improvements, and those operational improvements will, when they are achieved, that will mean that the share price gets re-rated. Some of those, for example, reducing debt, improving free cash flow from the existing operations. Those were two key determinants that came out of that review. From strategic review, we then have to say, what does that mean from an operational perspective? Thank you for the question. Are there any other questions in the room, please?
Rob again over here, Liz.
Rob, great.
Just based on your speech, you stated that all of the board members consider that the share price doesn't reflect the true value of the company or it's way below the NAV. You said that was all board members, I find that difficult to believe if they don't own a lot of shares. If they believe the value of the company's double where the share price is, term deposits are 3.5% at the moment, they're looking at 100% gain, but they don't own any shares. That's a comment, not a question. Another comment just on the permanence of buybacks. There seems to be a misunderstanding about buybacks in general, that it's some sort of short-term notion to jack the share price.
To make it simple, if there's three people that own a business and two of them get together and buy the third person's share, that's the most permanent thing possible. You now own the business between two people instead of three. I guess I don't understand the comment on the short-termism of a buyback.
Okay. Two questions or two comments. First of all, just to acknowledge the first comment. Look, all directors, apart from Sarah, who's just joined the board, do own shares, and some of us quite substantial portion. I can confirm that it is unanimous with respect to the difference between NTA and share price. The second thing with respect to share buybacks, and I have absolute empathy for what you're saying, but when we look at share buybacks, there are six tests. The first one is the current share price. Yes, if we were to buy back, and this investment bank has given me these numbers, NZD 25 million at NZD 0.75 would be 2.6% accretive NTA. That's a tick. There's five other tests for us to get through, and even a majority of them. The next one is our gearing level.
As we stated, we are very comfortable now that we're at the lower end of our range at 30%, we're not below the gearing range. With our debt levels, we're just not there yet, and particularly with the risks we have in front of us. Free cash flow. Over the years, the cash flow has come from care, and it's come from development margins. What we've said with this cash flow, because we're at the stage now that we've done a lot of development, we're saying those fully developed sites, they've got to pay their way. We were unable to do that a few years ago because they were still under development. We had to grandparent or grandfather some moving residents across. We're in a far more stable state now to say they have to pay their way. Of course, we've got the caring.
We've stripped out the development margin. That needs to be achieved. That also needs to be achieved if we consider a dividend. The macro environment. Look, all of you read the media just like I do. We've got a New Zealand election this year. We've got the U.S. midterms. We've got no house price inflation. We have uncertainty with what's happening to the OCR. Everyone thought last year it would stay down and then went up. There may be two more rate increases. We have inflation. We don't know what's happening with fuel prices. We just have to keep some money there because there is so much uncertainty in that macro environment. While I accept that if we did a share buyback, it would provide a signal, until we actually get those operating improvements from, we just don't believe it could be sustained.
In terms of dividends, we have said when we've cash flow possible from existing operations from the core, we'll pay a dividend. At that time we will assess whether a buyback or a dividend is the most efficient for our shareholders and for the company. We're not there yet. We don't disagree with you. We agree, we're just not at that time. I hope that answers your question. Are there any other questions on? Mr. Scrivener.
You made a comment earlier about the intrinsic value of the company. Can you provide a figure on that and your assumptions behind that? Thank you.
No, that would be very brave of me to do that today. As I say, we have our audited figure, which is the NTA of individual sites. No, I won't. What I will say is it's above our share price today.
Is it above the liquidation value?
Well above.
Well above.
Just one more quickly, please from me, Liz.
Oh, good. Thank you.
Just tying back to.
It's a shame you're sitting right underneath that light, or else I'd be able to see you.
There you go.
Thank you.
There I am.
Great.
Yeah, just tying back to my earlier question to the audit chair with the net tangible asset value. In his reply, he spoke about the market cap being a point in time, but one of my points was the market cap's been very divergent for a very long time. The net tangible asset book value's been going up steadily, and the market value's been going down steadily for a long time. Yeah, it's not just a point in time. Also, we talked about the DCF being standalone, which didn't include corporate costs, which I think is a very important thing to note. Those cash flows might be there with the individual assets, but if that's the case, would that not add weight towards the fact that those assets might not be in the right vehicle?
If that DCF is correct on the cash that those assets can provide, but corporate costs are absorbing it all. If that was correct, then obviously, removing those assets from the vehicle would mean you guys losing your jobs. That's kind of in direct conflict of interest between potential shareholders' interest and that's not you personally, Liz, because you're actually independently wealthy, so I appreciate that. But for those that don't own many shares and their job is a very important cash flow to themselves, then yeah. How do you see that as chair? How do you see that conflict of interest, should I say?
Well, there's a lot packed into that question. First of all, Rob can add to this, and I think our auditors will comment about it. When we talk about the NTA, that's a CBRE evaluation, and we've been like you. We've thought, "Well, why is there such a big difference?" We have built our own model with the help of our advisors, West Coast Capital, who are here with us today. These independent strategic people are real. We test that, and then we have had it reviewed by Macquarie. We've had our own people, West Coast Capital, and Macquarie. We've absolutely gone into this in substantial detail. What actually happens is you've got the NTA at the individual sites, then you've got the overhead that's not in there.
What that NTA excludes is the future growth potential of it, and that pretty much more than compensates for that overhead. What we have said out of that strategic review, and as I said to Mr. Scrivener earlier, what was a great thing about that strategic review is when you look at the movers of the value, you then see what really affects the operational performance. Out of that, we identified some key operational things that management could work on to get that value up. Which was the timing of refurbishments, the cash flow, a whole lot of things that came out of that detailed analysis to look at where we could close that gap. To look at those two sort of in isolation is unfortunately the way we prepare our financial statements doesn't give you the full picture.
Rob is an ex-investment banker, probably still in his heart is still an investment banker. You are also an expert in this area. What would you like to add to that?
Firstly, I would say I am not the chair of the audit committee. I sit on the audit committee. Just to be clear, I am not the chair of the audit committee. As I said earlier, the NTA per share and the share price are different things. There are two key differences, as I said. One is the corporate overhead costs, and that is shared across all 30 of our villages. In terms of valuations, the valuations done by CBRE, they are effectively a point-in-time valuation, not the share price. The share price can move minute by minute and is ultimately determined by investors. The CBRE valuation is done twice yearly, and it is reviewed by EY as our auditor twice yearly. You would expect there to be some disconnect from time to time simply because of the fluctuations of the share market and the supply-demand issues that also affect share market valuations.
The biggest factor in my mind is the growth potential that sits in our portfolio. As Suzanne outlined, our growth comes not from sites that we do not own. It comes from our existing sites. This business has invested significantly in brownfields developments. We now have the opportunity to do a bit more greenfields, in terms of our existing sites. That is quite exciting, and I would argue that the market is giving us very little, if any credit for the development potential that we have in our existing portfolio. Finally, your comment about sort of us keeping our jobs. If ultimately the shareholders decide whether we are here or not, and second, if someone is prepared to put a compelling proposition on the table to take the company private, I would happily vote in favor of that and lose my job if it is the best thing for shareholders.
Thank you, Rob. Since we are talking about people shareholding, I would like to invite our Chair of Development Committee, Greg Tomlinson, just to comment on your outlook for the company. Greg.
Thank you, Liz, and thank you all. Sorry, can you hear me okay?
What do I see about the outlook? I think number one, I'm here, so that should give you a reasonable amount of comfort. Not only that, I have been accumulating shares over a number of years in this business. Not only that, I've had a 40-year relationship with the majority of this business. I'm very proud to say that we're starting to release the dream that I had close to 30+ years ago, acquiring basically the lion's share of this land bank. Now, at times it's been rocky, that's business. It's not a linear line. This is no easy feat. We've come from where we've tripled the actual capital of this business, well, the asset base is 3 x larger than it was at listing. Look, you got to appreciate, this business came from nothing 40 years ago.
We've also got another third we can put onto this business, which we believe has no value associated to it. That's business. You just got to keep on going. Now, I know Charlie Munger and co. have been mentioned quite often in the session. I know from Warren, if you read a lot of Warren's books, it's a compounded effect. You've got to keep your nerve, when the others are selling or they're selling below value, well, that's when you buy. I think Tommy and Rob, what a great buying opportunity you both have got.
I think we'll just leave it at that. Thank you.
Well, yes, it's a buyer's market, not a seller's market. Thank you, Greg. Thanks for those comments. I am conscious of time, and I know I'm keeping a few of you from sausage rolls. I really do want to thank you, Mr. Scrivener, and thank all of those who have spoken. It is great to have people who are interested in the company. We're passionate about this company. To have your interest, it's great. It makes us think again and go through things thoroughly, which we've done. What I would like to say is there isn't any disagreement about destination. We share the same vision. We want the same outcome. It's just about the route that we go on. Mr. Scrivener, you've raised a good question, fair question, in a proper way, and it won't end with this vote.
The board's recommendation stands. We ask you to vote against the resolution. I now move Resolution 4 as shown on the screen. I invite you to vote by marking Resolution 4 on your voting card or selecting one of the options on the vote icon. I advise that the board is holding a total of 6,604,631 discretionary proxies. Consistent with the board's recommendation, these will be voted against this resolution. Thank you, all. That concludes the meeting's formal resolutions. I will shortly close the voting system. Please ensure that you have cast your votes on all the resolutions. I will now pause to allow you time to finalize your votes. The results will be published to the market later today. Please put your completed voting papers in the ballot boxes as you leave the meeting, and please ensure that your voting paper has been signed.
For those of you attending the meeting online, I now declare voting closed. Are there any items of general business that haven't previously been covered within the meeting that you, as shareholders, now wish to raise? If you wish to ask a question, please raise your hand, and we will bring the microphone to you. Reminder, please advise your name, whether you're a shareholder or a proxy holder of the shareholder you represent. Are there any people in the room? I don't see anyone's raised their hand and no one under the lighting. I don't see anything coming through online. I see a Yes, please.
Liz, I've just got a message from a guy who did put a question online at 2:43.
Oh.
Maybe you want to answer it by email later. Just letting you know there is a question online that might not have been.
Okay.
Viewed.
Thank you for that. We will follow that up. No, that's great. We will definitely reply to that. Oh, I've got a question here that has come through now. "Thank you for offering shareholders a hybrid AGM today via the excellent Computershare platform. Will you continue doing this going forward? Also, could you please publish a full archived webcast on your website for the benefit of shareholders that aren't able to watch it live?" Well, yes, we will. As long as I'm chair, we always will do hybrid because I accept that it's not always easy for people to travel, and people have busy lives, but also, people also like to come in and chat to our management and us and have some afternoon tea. A little bit. We will continue to do both.
With respect to the webcast, it's not common practice, but we will have a look at that. Thank you for that question. I've got another question. "We have received a question on Oceania's dividend policy, how it is calculated, whether it includes cash flows from sale of occupational rights, and whether dividend payments are funded by debt." Well, first of all, it will be from cash flow from operations, which is a sale of occupational rights. Dividends will not be funded from our debt. That's what I've been emphasizing today. We have to get our cash flow positive, it will be funded from operations. Don't see. Oh, there's one for Sally. That's fantastic. It says, "Thank you to Sally Evans for her eight years of service on the board. It's always helpful if investors have to access to some exit perspectives from retiring independent directors.
In her final contribution as director, could Sally please comment on what she regards as the best decisions made during her time on the board, and if she had this time again, what different decisions would she have made?" Sally, this is lovely because Sally, it's your last opportunity to speak. Over to you, Sally.
Thank you, Liz, and thank you for the question. I should thank the shareholders for having given me this opportunity to be a director at Oceania. It's been a privilege, and one that I've always taken very seriously and have enjoyed greatly. Just going back to what the reflection is, I think when it comes to decisions, I think this board is very good at making decisions. There are a variety of opinions. Those opinions are all heard, decisions are agreed, and then we all get behind them. Perhaps the best decision, I think, over that eight years, if I think about over a period of time, was the repositioning of the portfolio so that we now have integrated modern contemporary communities of independent living and care. They're funded differently. They target different markets. They give us the diversification that we need. We have geographic diversification.
The decision to reposition the portfolio. Because I came from a care background, I really challenged that decision because I felt that care was a critically important part of this portfolio, and I still do. It was the re-weighting and rebalancing of the portfolio that has set up Oceania to be really differentiated in the market and successful. I think there is another decision that I think was a really, really important one, and that was to appoint Suzanne as CEO. I think the difference we've seen in having someone who had her experience and background at that point in our development cycle has been critically important, and that's reflected in the management team that she's brought on board. Is there a decision that I would make differently in hindsight?
I've been reflecting a lot coming to today's AGM. Nothing has come to my mind about, "Oh, I wish we had done this," or, "I wish we had done that." Because every decision was made at a time, in a context, and in an environment, and it was the best decision at that time. I strongly believe this business is in a very good place, and I have one regret, and that is that I'm not going to be working with these fantastic directors and management team as they execute what I think will be a very successful strategy. Thank you for the question.
Thank you, Sally. As I said at the board meeting this morning, while you might be physically present in the room, we will all think, "What would Sally have thought about this?" You will be there virtually. You will be in our thoughts. Of course, you're only ever a phone call away. Again, thank you for your contribution. Thank you everyone for your attendance today. It's greatly appreciated. In closing, the results from the proxy and online votes cast at today's meeting are displayed on screen for you. I now declare the meeting closed and invite those of you who are here in person to join the directors and management for afternoon tea and refreshments.
Again, thank you so much for coming. I would also like to remind you to ensure that you complete your voting forms, you sign them, and you put them in the ballot boxes on your way out before you partake in afternoon tea. Anyway, thank you very much, everyone.