REVENUE UP +10.7% VS. THE 1ST SEMESTER OF 2022: GROUP
OCCUPANCY RATE IMPROVING WITH THE EXCEPTION OF NURSING HOMES IN
FRANCE
LOWER OPERATING PERFORMANCE: EBITDAR OF €336 MILLION WITH A
MARGIN OF 13.2%, DOWN -5.4 POINTS ON H1 2022 AND -1.6 POINT ON H2
2022; BECAUSE OF A RISING PAYROLL TO MEET QUALITY REQUIREMENTS,
COUPLED WITH AN INFLATIONARY ENVIRONMENT
OPERATING INCOME -13 M€ AND NET INCOME -371 M€ INCLUDING -231
M€ OF FINANCE COST
EBITDAR FOR FULL-YEAR 2023 AT THE LOWER END OF THE RANGE
PUBLISHED IN JULY: (€705/750M), AND AN EXPECTED IMPROVEMENT IN S2
2023 COMPARED WITH S1 2023
CASH POSITION IN LINE WITH SAFEGUARD PLAN FORECASTS
Regulatory News:
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20231011505763/en/
The ORPEA Group (Paris:ORP) publishes its consolidated
results for the first half ended 30 June 20231.
Laurent Guillot, Chief Executive Officer, said:
“2023 marks the first year of the Group's entire overhaul, and
saw the operational implementation of the Refoundation plan.
Concrete steps forward have been made:
- To improve the quality of care and support,
with, for example, local teams strengthened around a managerial
trio in each facility, and an increase in the staff ratio of over
10%. - To rebuild social dialogue, build loyalty and train our
teams, I am thinking in particular of the two collective agreements
reached, the new profit-sharing agreement and the 10-million-euro
envelope devoted to training. - To engage ORPEA into a path towards
becoming a purpose-driven company by defining our core values,
exemplified on a daily basis by our employees. - To restructure the
company financially, clean up its balance sheet and enable
long-term investors such as Caisse des Dépôts, CNP, MAIF and MACSF
to acquire a majority stake, the Nanterre Commercial Court approved
the Accelerated Safeguard Plan last July.
However, although the Group's occupancy rate is up (excluding
retirement homes in France), the decision to invest in our teams
and the increase in our costs in an inflationary environment have
not been fully offset by price rises, leading to a reduction in our
operating margin in the first half. These choices will gradually
bear fruit. ORPEA is a company built on the strength of its 76,000
professionals, who are committed to working with our residents,
patients and beneficiaries on a daily basis. I would like to extend
my warmest thanks to all of them.”
Consolidated revenue for the first half of 2023 was up +10.7%
on 2022. This largely organic growth is the result of an overall
increase in occupancy rates, with the exception of nursing homes in
France, an increase in accommodation capacity, and the effects of
price increases, particularly marked in Central Europe. Despite
these favorable trends, the results published today show a decline
in profitability due to higher costs resulting from the high
inflation context and, in the short term, to the company's
determination to refocus on its fundamentals immediately. Thus, the
acceleration in recruitment and various initiatives to attract and
retain staff over the long term partly explain an EBITDAR of €336
million, down -21% on H1 2022 (margin on sales of 13.2%, down -538
bps on H1 2022 and around -160 bps on H2 2022).
Group Net income for the first half of 2023 came to - €371
million, with interest expenses well above those for the first half
of 2022, the increase being mainly due to the unfavorable trend in
interest rates and higher credit margins on the financing put in
place in June 2022. Thanks to the Accelerated Safeguard Plan, a
significant portion of these financial expenses, corresponding to
ORPEA SA's unsecured debt, will be converted into equity.
Furthermore, following the agreement reached with the main banking
partners on 17 March 2023, the margin on the financing put in place
in June 2022 will be significantly revised downwards (2.0% instead
of 4.75% on average).
With respect to the outlook for 2023 as a whole and for
2024-2025, the Company is currently carrying out internal reviews
at the level of all its operating entities, in order to be able to
produce and communicate to the market updated forecasts prior to
the launch of the Equitisation Capital Increase. For 2023, based on
work completed to date, the Company currently estimates EBITDAR at
the lower end of the estimate (€705 million - €750 million)
published in its July 13 press release.
With regard to the financial restructuring process, the
Company points out that the Accelerated Safeguard Plan, which was
approved by the Nanterre Specialized Commercial Court on 24 July by
way of a cross-class cram down (link), provides for the
implementation - once the last condition precedent has been lifted2
- of three capital increases, which will result in a massive
dilution for existing shareholders. In the absence of reinvestment,
existing shareholders would hold around 0.04% of the share capital,
with a theoretical value of less than €0.02 per share. The next
steps leading to the implementation of this process include the
communication of the updated Business Plan, the ruling by the Paris
Court of Appeal on the appeals lodged against the waiver granted by
the AMF, and the publication of the prospectuses. Details of the
planned capital increases and how existing shareholders can
participate are available at the following link.
- & -
Context of the establishment of the
HY2023 consolidated financial statements
Following on from the Accelerated Safeguard procedure opened in
favor of ORPEA SA to implement all the agreements negotiated with
the stakeholders concerned by the financial restructuring project,
the Nanterre Specialized Commercial Court approved the Accelerated
Safeguard Plan on 24 July. The Plan is based on the lock-up
agreement signed on 14 February 2023 between the Company and a
group of long-term French investors comprising Caisse des Dépôts,
CNP Assurances, MAIF and MACSF (the "Groupement"), and five
institutions holding the Company's unsecured debt (the
"SteerCo"). It is also based on an agreement with the main
banking partners (the "G6") providing for the adjustment of
the documentation of the June 2022 Syndicated Credit Facility and
the provision of an additional financing of €400 million coupled
with an additional bridge financing of €200 million until the
projected second capital increase.
Taking into account:
- the Group's cash position of €630 million at 4 October 2023,
including drawdowns of €300m on the additional financing made
available by the Group's main banking partners after 30 June 2023
(D1B loan of €200 million in August and D2 loan of €100 million at
the end of September)
- The company’s cash flow forecasts, based on the following
structuring assumptions over the next 12 months : - successive
capital increases, including €1.55 billion in cash planned from the
fourth quarter onwards, - conversion into capital of unpaid
interest due and accrued on ORPEA SA's unsecured debt, - payment of
interest due and unpaid on completion of the Groupement Capital
Increase,
the Company considers, at the date of closing of the accounts,
that it has cash resources compatible with its projected
commitments and is thus in a position to meet its cash requirements
over the next 12 months.
Consequently, the financial statements have been established for
the six months ended 30 June 2023 on a going concern basis.
1. Half-year consolidated income
statement
(*) EBITDAR = Recurring EBITDA before rental expenses, including
provisions related to the “External costs” and “Personnel costs”
line items
(**) EBITDA = Recurring operating profit before depreciation and
amortization, including provisions relating to the “External costs”
and “Personnel costs” line items.
(***) EBITDA excl. ifrs 16 corresponds to EBITDA less lease
payments falling within the scope of IFRS 16. The amount of rents
not deducted from EBITDA under IFRS 16 amounted to €203 million in
the 1st half of 2022 and €219 million in the 1st half of 2023 (the
increase being mainly due to the Group's development). EBITDA
excluding the impact of IFRS 16 amounted to €212 million for the
1st half of 2022 and €102 million for the 1st half of 2023.
Revenue for the 1st semester of 2023 amounted to €2,539
million, an increase of +10.7%, of which +9.1% was organic. The
Group's overall level of activity has risen, with an average
occupancy rate of 82.7%, up +1.4 point on the first half of 2022.
Activity momentum was favorable internationally and at clinics in
France. Over the first half of 2023, the average occupancy rate for
retirement homes in France was down compared with the average level
recorded in 2022 (85.6%) and with the level recorded at the end of
2022 (84.6%).
EBITDAR came to €336 million in the first half of 2023,
giving a margin of 13.2%, compared with 18.6% for the same period
last year.
This decline, totaling -538 bps compared with the same period
last year and -157 bps compared with the second half of 2022, is
mainly due to the increase in payroll costs, with a view to
strengthening quality, and to the persistence of an inflationary
environment affecting other expense items (energy procurement, food
and medical products). Personnel costs as a proportion of revenues
rose from 63.3% in the first half of 2022 to 66.8% in the first
half of 2023, an increase of +351 bp.
EBITDA amounted to €321 million, representing a margin of
12.6% of revenue.
Pre-IFRS 16 EBITDA amounted to €102 million, giving a
margin of 4.0%, down 523 bps on the same period last year.
Operating income before non-recurring items came to a
negative -€13 million, compared with +€82 million in the first half
of 2022.
Net financial result came to -€231 million, compared with
-€96 million in the first half of 2022. This change reflects the
rise in interest rates and margins associated with the June 2022
refinancing, as well as the increase in gross financial debt.
Result before tax was -€329 million, and net result
group share for the first half of 2023 was -€371 million, in
the absence of deferred tax assets on losses recognized in the
first half of 2023.
2. Main aggregates of the consolidated
balance sheet at 30 June 2023
At 30 June 30 2023, the book value of net tangible assets
amounted to €5.2 billion. It should be reminded here that the
Company has changed the accounting method applied to property
assets accounted for under IAS 16, which are now excluded from the
scope of the standard. Secondly, in line with what was indicated
when the financial statements were published at the end of 2022 and
in its 2022 Universal Registration Document, at the end of 2023 the
Company will publish an estimate of the market value of the real
estate assets held, incorporating all the calculation parameters
(rate of return, risk-free rate, operating performance trajectory
of each facility). As an indication, an increase of +0.10% in the
rate of return on real estate assets, excluding any other factor,
would lead to a decrease of around -€95 million in the value of
real estate assets held as estimated at the end of 2022.
Intangible assets and goodwill amounted to €1.6
billion and €1.4 billion respectively.
Cash and cash equivalents at the end of June 2023 stood
at €518 million, and at 4 October 2023 at €630 million.
Net financial debt (IFRS view, excl. IFRS 16) amounted to
€9.3 billion (excluding IFRS 16 rental debt), up +€501 million over
the period.
For debts carried by subsidiaries of ORPEA SA subject to
financial covenants, the Company has obtained waivers from the
affected creditors to the effect that these covenants will not
apply from 31 December 31 2022, and will be removed once the
Accelerated Safeguard Plan has been implemented. As a result, a
single leverage covenant (net debt/EBITDA pre IFRS 16 < 9.0x)
will apply from June 2025.
At June 30, 2023, as the implementation of the Accelerated
Safeguard Plan remains subject to confirmation by the Paris Court
of Appeal of the exemption granted to the Groupement from the
obligation to launch a public offer for all ORPEA shares, gross
debt classified as current liabilities amounted to €8.3 billion,
including €6.5 billion of financial debt with a contractual
maturity of more than one year.
The contractual maturity schedule of gross financial debt
by type (excluding IFRS 16 rental debt and before accounting
reclassification of a portion of debt due in more than one year as
current debt3) at 30 June 2023 is summarized below:
Taking a pro-forma view of the implementation of the financial
restructuring, with the conversion into capital of the principal
amount of €3.8 billion and the drawdown of the Additional Financing
in the amount of €400 million maturing in 2026 (Loans D1A and D1B),
the maturity schedule of the principal amount of gross financial
debt at June 30, 2023 would be as follows:
This pro-forma schedule takes into account the impact of the
Agreement signed with the main banking partners (G6), which is
inherent to the Accelerated Safeguard Plan, and which will come
into force on the settlement-delivery date of the Groupement
Capital Increase.
Consolidated shareholders' equity stood at a negative
-€1.85 billion at 30 June 2023, mainly due to the net loss for
fiscal year 2022 and the impact of the change in accounting method
in 2022 applied to property developments accounted for under IAS
16.
3. H1 2023 statement of cash flow
(excl. IFRS impact)
Net current operating cash flow came to a negative -€13 million,
after deducting operating capex (maintenance and IT
investments).
Development capex, mainly real estate, amounted to €192
million.
With regard to other asset movements, real estate disposals
amounted to €54 million, while net financial investments (including
additional equity investments in the Netherlands) totaled -€18
million.
Non-current items mainly comprise costs associated with the
Group's financial restructuring and crisis management.
Net financial expenses paid amount to €60m. It should be noted
that the financial restructuring plan includes the following
provisions:
- accrued interest on the ORPEA SA legal entity's unsecured debt,
i.e approximately €66 million in for the first half of 2023 will be
paid for €11 million (30% of the total amount of accrued interest
up to the day before the opening date of the accelerated safeguard
procedure) will be paid after settlement-delivery of the
Equitisation Capital Increase and the balance converted into
capital;
- interest payments in respect of drawings on tranches A, B and C
of the June 2022 syndicated loan, i.e. €115 million, will be paid
after settlement-delivery of the Groupement Capital Increase.
On this basis net cash flow before financing came to -€289
million.
After taking into account the effects of changes in the scope of
consolidation, net financial debt (excluding IFRS) stood at €9,161
million at June 30, 2023, up +€301 million on December 31,
2022.
At June 30, 2023, the cash position stood at 518 M€.
4. Financial agenda: update of
2023-2025 Business Plan and Q3 2023 sales
In order to be able to communicate updated 2023-2025 forecasts
to the market before the launch of the Equitisation Capital
Increase, the Company is currently carrying out internal reviews at
all its operating entities.
The updated outlook will be published in early November, at the
same time as the Company's 3rd-quarter sales figures.
With specific regard to the outlook for the full year 2023, the
Company currently estimates that EBITDAR should be at the lower end
of the €705 million - €750 million range it published in its July
13 press release.
About ORPEA
ORPEA is a leading global player, expert in providing care for
all types of frailty. The Group operates in 21 countries and covers
three core businesses: care for the elderly (nursing homes,
assisted living facilities, homecare and services), post-acute and
rehabilitation care and mental health care (specialized clinics).
It has more than 76,000 employees and welcomes more than 267,000
patients and residents each year.
https://www.orpea-group.com/en
ORPEA is listed on Euronext Paris (ISIN: FR0000184798) and is a
member of the SBF 120, MSCI Small Cap Europe and CAC Mid 60
indices.
DISCLAIMER This document contains forward-looking
statements that involve risks and uncertainties, including
information incorporated by reference, regarding the Group’s
expected growth and profitability in the future that may
significantly impact the expected performance indicated in the
forward-looking statements. These risks and uncertainties relate to
factors that the Company can neither control nor accurately
estimate, such as future market conditions. Any forward-looking
statements made in this document express expectations for the
future and should be regarded as such. Actual events or results may
differ from those described in this document due to a number of
risks or uncertainties described in Chapter 2 of the Company's 2022
Universal Registration Document, which is available on the
Company's website, on the website of the French financial markets
authority, AMF (www.amf-france.org).
DEFINITIONS
HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
AT END JUNE 2023
- Consolidated income statement
- Consolidated balance sheet
- Operating result
reconciliation
- Information about Alternative
Performance Measures excl. IFRS 16
- Cash Flow
reconciliation
1 The statutory auditors are currently carrying out a limited
review of the interim financial statements.
2 The final condition precedent is the clearing of the appeals
lodged against the waiver of the Caisse des Dépôts-led consortium's
obligation to launch a takeover bid for ORPEA shares, granted on
May 26, 2023. The decision, by the Paris Court of Appeal, is
expected by early November at the latest.
3 After accounting reclassification, current debt principal
amounts to €8.2bn, of which almost €6.5bn of debt with contractual
maturities in excess of one year, which would be in default and/or
cross-default at June 30, 2023 in the event of the R1/R2 waivers
signed during the first half of 2023 being called into question (in
the event that the financial restructuring is ultimately not
implemented due to an unsatisfied condition precedent).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231011505763/en/
Investor Relations ORPEA Benoit Lesieur Investor
Relations Director b.lesieur@orpea.net
Toll-free number for shareholders : 0 805 480 480
Investor Relations NewCap Dusan Oresansky Tel: 01
44 71 94 94 ORPEA@newcap.eu
Press Relations ORPEA Isabelle Herrier-Naufle
Press Relations Director Tel: 07 70 29 53 74 i.herrier-naufle@orpea.net Image7 Charlotte
Le Barbier // Laurence Heilbronn 06 78 37 27 60 - 06 89 87 61 37
clebarbier@image7.fr lheilbronn@image7.fr
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