Promisia Healthcare Limited Analysis

Overview

Promisia Healthcare Ltd is a public company listed on the NZX. It was formed in August 1983 as Genestock NZ Ltd. and has remained as a listed company undertaking a number of diverse activities over the last 30 years. The company came under the control of the current major shareholders and directors in 2003/4 and for some years remained a listed shell company, i.e. the company remained listed on the NZX but it did not have any substantive trading activity. For a period of time the company researched and marketed a dietary supplement called Arthrem and then in October 2020 moved in to the current aged residential care business.

The business's principal activity is the provision of rest home and hospital level care. In addition, care is offered for dementia, respite, palliative and for younger people with lifelong disabilities (YPD).

Promisia Healthcare Ltd currently owns and operates four aged care facilities comprising of 404 care beds. In addition, Promisia operates two retirement villages comprising of sixteen villas. There are also a further 28 villas and 10 care suites in an advanced stage of construction.

Performance

The following information was extracted from Promisia Healthcare Limited's full year results, released 29 May 2024:

Promisia Healthcare Limited (NZX: PHL) has released its unaudited, preliminary results for the year ended 31 March 2024 (FY24), with the positive impact and momentum being created by the new leadership team evident in the stronger second half performance.

Chair of Promisia, Rhonda Sherriff, said: “The last year has been an important one for our business, as we continued to build on the work that has been done over the preceding years to create a strong foundation for growth. In particular, we saw positive traction in the second half of the year, with the new leadership team at the helm.”

FY24 Results Summary:

• 10% year on year increase in operating revenue, up to $26.3m
• Underlying EBITDAF of $3.8m, down 8% year on year
• Net profit after tax of $1.6m, up 236% year on year
• 18% increase in total assets to $84.3m
• 6% improvement in debt position as at 31 March, down to $29.2m, undrawn facilities and cash of $0.5m
• 37% increase in Net Tangible Assets per share to 0.126 cents

Promisia continues to make good progress on its four strategic pathways – to build a stronger business, maximise occupancy, create diverse revenue streams, and expand its network.

Chair of Promisia, Rhonda Sherriff, said: “The last year has been an important one for our business, as we continued to build on the work that has been done over the preceding years to create a strong foundation for growth. In particular, we saw positive traction in the second half of the year, with the new leadership team at the helm.”

Operating revenue was up 10% year on year, driven by increased government-funded bed rates from 1 July 2023, and an increase in deferred management fees from villa sales. Operating expenses were 8% higher, in an environment of inflationary pressure. Underlying EBITDAF, which is a key metric for the company, significantly improved in 2H 2024, and was up 27% on the first half. Year on year, underlying EBITDAF was down 8% to $3.8m, reflecting one-off costs incurred during the leadership transition period.

The company reported a net profit after tax of $1.6 million for the year ending 31 March 2024, an increase of $0.9 million year on year. There was a further fair value increase to properties, not classed as investment properties, of $3.1 million bringing comprehensive income for the year to $4.8 million. Following the rebuilding of the finance team in Q2 FY24, excellent progress has been made to strengthen Promisia’s financial footing, with a focus on lowering debt, enhancing cashflow and improved reporting. Of note, has been the successful extension of Promisia’s banking facilities with improved terms, which enabled the repayment of all second-tier lending on the Aldwins Road land acquisitions in 2023 and reduced interest costs.

At 31 March 2024, total assets increased by 18% to $84.3m, reflecting the completion of the Ranfurly Manor Village expansion and subsequent recognition of villas following the successful sale of newly created occupational rights agreements. In addition, valuations for the Group’s four facilities increased 13% overall. As a result, Net Tangible Assets per share increased by 37% to 0.126 cents.