RESALE MARGINS (%) 25% 20% 15%
19%
20%
23%
10% 5% 0
FY2017 FY2018 FY2019 relatively stable over the year. These included fixed increases to carer wage rates, a pay agreement for nurses in the public system that had flow on impacts for the aged care sector and a higher minimum wage rate. While increased funding rates this year partly addressed the funding gap that resulted from the pay equity settlement, a pay equity funding deficit remains. Our staff are qualified to a level that is on average higher than industry average and therefore attract higher average pay rates. Pay equity was referenced to industry average staff training levels, exacerbating the deficit as staff move to a higher level of qualification. We continue to be active with industry bodies to ensure government funding levels fairly contribute to the new cost structures. We also continue to invest in our employees, supporting them with career development. As a leading provider of aged care facilities and services in New Zealand, the government’s review of aged care funding is welcomed. The outcomes of that review are expected to be released later this year. An increase in property costs included higher property insurance costs, mainly attributable to continued structural changes in the insurance sector and the increase in asset base. Operating cash flow reached $69.1 million (2018: $53.9 million) for the year. The increase of $15.2 million reflected the higher resale
activity but also strong cash flows generated from our care operations. Care fees continue to represent a growing recurring cash flow to the business. Capital expenditure attributable to development works was $68.6 million for the year.
OUR FINANCIAL POSITION At the beginning of the year, an extension our banking facility and tenure was implemented. The $250.0 million facility was split evenly between three and five year tranches, with BNZ also being introduced to the syndicate alongside ANZ. Total drawn interest bearing debt was $190.5 million (2018: $122.5 million) at year end on increased development activity. Gearing of 25% (FY2018: 19%) remains conservative with headroom in our banking covenants to undertake our current development programme. We are currently in discussions with our banking syndicate to provide a further tranche of debt capacity. Total assets increased to $1.3 billion, up from $1.2 billion reported at half year. The lift since reporting our half year result reflects an increase in development activity and annual revaluations of our investment property undertaken by CBRE Limited (CBRE) and Jones Lang LaSalle Limited (JLL). Increased unit pricing and delivery of new units contributed to higher portfolio values. Embedded value in the portfolio, which calculates future cash that can be generated when a unit is re-licenced, grew to $263 million (2018: $222 million).
EMBEDDED VALUE ($M) 300
Resale Gains
250
DMF
200 150 100 50 0
153 82
222 107
263 138
61 51 115 125 22 16 71 34 39 FY2015 FY2016 FY2017 FY2018 FY2019
17