THIRD-QUARTER REVENUE UP 11.1% VERSUS THIRD-QUARTER
2022
GROUP OCCUPANCY RATE UP 1.8 PERCENTAGE POINTS VERSUS
THIRD-QUARTER 2022, WITH ALL GEOGRAPHIC AREAS CONTRIBUTING TO THE
IMPROVEMENT
THIRD-QUARTER INCREASE IN THE OCCUPANCY RATE FOR NURSING
HOMES IN FRANCE, GAINING 1 PERCENTAGE POINT COMPARED WITH
FIRST-HALF 2023
FINANCIAL PROJECTIONS UPDATED FOR THE 2023-2025 PERIOD AND
EXTENDED TO 2026:
- EBITDAR FORECAST FOR FULL-YEAR 2023 EXPECTED TO COME IN AT
THE LOWER END OF THE €705-€750 MILLION RANGE ANNOUNCED IN
JULY
- EBITDAR (€1.2 BILLION) AND FINANCIAL LEVERAGE (5.5X)
TARGETS IN THE NOVEMBER 2022 BUSINESS PLAN SHIFTED BACK BY 12
MONTHS FROM 2025 TO 2026
IMPLEMENTATION OF THE ACCELERATED SAFEGUARD PLAN ON SCHEDULE,
WITH COMPLETION EXPECTED IN THE COMING WEEKS
AS PREVIOUSLY ANNOUNCED, RESTRUCTURING RESULTING IN A MASSIVE
DILUTION FOR EXISTING SHAREHOLDERS AND A POTENTIAL POST-TRANSACTION
PER-SHARE VALUE OF LESS THAN €0.02
Regulatory News:
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ORPEA S.A. (the "Company") (Paris:ORP) today announced its
consolidated revenue for the third quarter of 2023 and the first
nine months of the year, up 11.1% and 10.8% respectively, thanks to
an increase in the Group’s average occupancy rate and to price
increases.
As announced in the press release of 11 October, the Company
has also updated its financial projections. Internal reviews
carried out on operating entities have led to:
- for full-year 2023, an EBITDAR forecast at the lower end of
the €705-€750 million range communicated to the market on 13 July,
and an improved year-end cash flow forecast – before the impact of
the planned capital increases – compared with that presented in May
2023. The negative impact of the weaker-than-projected operating
performance is largely offset by precautionary measures implemented
such as reduced or postponed capital expenditure, and by the
receipt of proceeds from asset disposals;
- for the outlook beyond 2023, prepared on the basis of a
gradual improvement in occupancy rates for nursing homes in France
and a progressive weakening in the impacts of inflation, a delay of
around 12 months in the turnaround in the Group's operating
performance, with the €1.2 billion EBITDAR target level projected
for 2025 in the November 2022 Business Plan now to be achieved in
2026. On this basis, with continued strict discipline over
development capex, and assuming real estate asset disposals in 2026
comparable to the volumes projected for 2024 and 2025, the Group's
financial leverage would fall to 7.6x by end-2025 and to 5.5x
(i.e., the target level set out in the Updated November 2022
Business Plan) by end-2026, with Group net debt standing at around
€3.6 billion (excl. IFRS 16) at that same date.
With regard to the financial restructuring, the launch of the
first of the three successive capital increases, whose main
parameters are derived from the terms of the Accelerated Safeguard
Plan (Plan de Sauvegarde Accélérée) approved by the Nanterre
Specialised Commercial Court on 24 July (link), is scheduled to
take place in the coming days, subject to the Paris Court of Appeal
ruling regarding the appeals lodged against the decision by the
French financial markets authority (AMF) to grant the group of
investors (the "Groupement") led by Caisse des Dépôts a waiver from
the obligation to launch a public offer for all ORPEA
shares.
With the lifting of this condition precedent, the Accelerated
Safeguard Plan will enter its implementation phase, which will
result in a massive dilution for existing shareholders. Further to
these operations, and in the absence of reinvestment, existing
shareholders would hold around 0.04% of the share capital, with a
theoretical per-share value of less than €0.02. On 11 October, the
Company set out the terms and conditions of the capital increases,
including an estimate of the loss of value incurred by an Existing
Shareholder wishing to maintain their current percentage holding
further to the capital increases (link).
1. Revenue for the third quarter of
2023 and over the first nine months of the year
(unaudited)
Revenue for third-quarter 2023 amounted to €1,313
million, an increase of 11.1% on the same period in 2022, of which
10.2% was organic growth.
The Group's overall activity levels grew during the period, with
an average occupancy rate of 83.8% in third-quarter 2023, up 1.8
percentage points compared with the same year-ago period. Activity
momentum was positive, both internationally and in the French
hospitals segment. The revenue performance was also lifted by price
increases, particularly in Germany, and from the contribution of
facilities opened over the previous 12 months.
Revenue in the France-Benelux-UK-Ireland region totalled
€760 million in third-quarter 2023, up 9.2% year on year, of which
7.4% was organic growth.
The nursing home activity in France remained far from historical
levels. However, the average occupancy rate for retirement homes in
France during the period came out at 84.4%, up 100 basis points on
first-half 2023, marking a sharp recovery from the trough observed
at the beginning of the year. Medical care and rehabilitation
hospitals saw a sharp rise in activity levels, driven by the
diverse expertise developed within these regional facilities. The
other countries in the geographic area reported solid revenue
growth, especially the Netherlands and Ireland.
In Central Europe, revenue came to €346 million over the
quarter, an increase of 12.6% (up 12.1% on an organic basis).
Germany and Switzerland reported healthy activity momentum, with
occupancy rates up in both nursing homes and hospitals. Momentum in
Germany reflected both price increases and the Group's premium
positioning in this market.
In Eastern Europe, revenue for the quarter rose by 17.9%
to €133 million, benefiting from a sharp increase in occupancy at
facilities opened over the previous 12 months, as well as from
price increases.
In the Iberian Peninsula and Latin America region,
revenue for the quarter totalled €72 million, representing an
increase of 12.6% – most of which was organic growth – on the back
of the continued increase in occupancy rates in Spain, which is the
region's main contributor.
Over the first 9 months of the year, consolidated revenue
was up 10.8% to €3,852 million. All geographic regions posted good
organic revenue growth momentum (up 9.5%), driven by several
factors:
- in the France-Benelux-UK-Ireland region, higher occupancy
rates than the average recorded for 2022, despite the impact of the
crisis in France;
- positive revenue growth on average posted by all activities
and geographic areas;
- the ramp-up of facilities opened in previous quarters.
2. Cash and debt positions at 30
September 2023
Further to the drawdowns on the D1B and D2 loan tranches in
August and September respectively, the Group's cash position stood
at €740 million (unaudited) at 30 September 2023.
On this basis, the Group's net debt excluding the impact of IFRS
16 stood at €9,364 million (unaudited) as per the IFRS financial
statements (including accrued and unpaid interest). Net debt before
IFRS adjustments was €9,185 million, versus €9,161 million at 30
June 2023, increasing by just €23 million over the third
quarter.
3. Group forecasts for the year ending
31 December 2023 (unaudited figures)
As announced in its recent publications, the Group has carried
out more in-depth internal reviews of its operating entities, with
the aim of updating its forecasts for 2023 based on the data,
assumptions and estimates currently considered the most reasonable,
and updating the 2024-2025 outlook (see section 4 below).
The update to the full-year 2023 forecasts takes place amid a
macro-economic backdrop that continues to be characterised by high
inflation, with price adjustments that are broadly regulated and
lag behind the rise in costs.
As regards the intrinsic performance of ORPEA, the lag between
growth in revenue and expenses is especially pronounced in the
Group's French activities, with occupancy rates at nursing homes in
France remaining below industry norms, and higher-than-expected
personnel costs due to (i) salary increases aimed at attracting and
retaining staff and (ii) the planned increase in the staff ratio
designed to improve support and care for patients and
residents.
On this basis, for full-year 2023:
- Group revenue is expected to come in at around €5.2 billion,
with an occupancy rate of 84.0% (versus 81.6% in 2022).
- Personnel costs are expected to represent 61.2% of revenue,
versus 57.7% in the November 2022 Business Plan.
- Purchases and other costs are expected to represent 18.0% of
revenue, versus 18.7% in the November 2022 Business Plan.
- Head office costs are expected to represent 7.1% of revenue,
in line with the November 2022 Business Plan (updated to take
account of the accounting reclassification of IT expenditure to the
income statement).
- EBITDAR is expected to come out at around €710 million, at the
lower end of the €705-€750 million range announced on 13 July.
- Maintenance and IT capex is expected to amount to €161
million, a decrease of €54 million on the update presented in May
2023, due to the precautionary measures implemented to preserve the
Group's liquidity pending completion of the financial
restructuring.
- Development capex is expected to amount to €373 million, a
decrease of €105 million on the update presented in May 2023, due
to the precautionary measures implemented to preserve the Group's
liquidity pending completion of the financial restructuring.
- Non-recurring items are expected to amount to an expense of
€139 million, with the difference versus the most recent update
presented in May 2023 (decrease of €165 million) due mainly to the
postponement to 2024 of expenses linked to the financial
restructuring (whose completion has been put back to early 2024,
see section 5 below).
- Taking all these factors into account, as well as an upward
revision to expected net proceeds from real estate disposals in the
amount of €125 million compared with the amount presented in May
2023, net cash flow before financing would amount to an outflow of
€720 million, a €222 million improvement on the figure presented in
the most recent update.
Accordingly, and based on the current projected timetable for
the various capital increases provided for in the Accelerated
Safeguard Plan (see section 5 below), the Group's net cash position
at 31 December 2023 is expected to be around €0.65 billion, further
to the completion of the Groupement Capital Increase (proceeds of
€1.15 billion) and the repayment in full of the D1A, D1B and D2
loan tranches (€0.5 billion at 30 September 2023). At that date,
net debt (excl. IFRS adjustments) is expected to stand at around
€4.65 billion, taking into account the impact of the Equitisation
Capital Increase (representing a €3.9 billion reduction in net
debt).
4. Update to the 2024-2025 outlook /
2026 outlook
The 2024-2025 outlook, as set out in the Restructuring Plan
presented on 15 November 2022, has been updated and extended to
2026 to incorporate new assumptions in occupancy rates, personnel
costs, cost inflation and prices applicable to patients and
residents, as well as the impacts of the reduction in development
capex.
Accordingly, over the 2024-2025 period:
- The Group's occupancy rate is expected to be 87.2% in 2024
(versus 84.0% in 2023) and 89.1% in 2025.
- Consolidated revenue would remain close to the amounts
projected in the November 2022 Business Plan, at around €5.8
billion in 2024 and €6.1 billion in 2025, but on the basis of
significantly different assumptions:
- steeper price increases applied by the Group, given the current
inflationary context. Against a baseline of 100 in 2022, prices
would reach 110.0 in 2024 and 113.6 in 2025, versus 102.8 and
104.7, respectively, in the November 2022 Business Plan;
- a reduction of around 3,000 of newly-created beds installed by
the end of 2025 as a result of the decrease in development
capex.
- As a result of decisions taken to improve the conditions of
care offered to patients and residents, notably by aiming to
increase the staff ratio, personnel costs would be almost 200 basis
points higher than the levels forecast in the November 2022
Business Plan, at 59.0% of revenue in 2024 and 58.4% in 2025.
- With the effects of inflation being gradually absorbed,
purchases and other costs are expected to represent 16.9% of
revenue in 2025, versus 17.3% in the November 2022 Business
Plan.
- Head office costs are expected to amount to 6.7% of revenue in
2025, versus 6.3% in the November 2022 Business Plan.
- EBITDAR is expected to come in at around €891 million in 2024,
close to the EBITDAR figure projected for 2023 in the November 2022
Business Plan (€881 million); and at €1,055 million in 2025, close
to the EBITDAR figure projected for 2024 in the November 2022
Business Plan (€1,053 million).
- Maintenance and IT capex is expected to total €768 million
over the 2022-2025 period, representing a €110 million decrease on
the figure presented in the November 2022 Business Plan (as
restated for the accounting reclassification of IT expenditure to
the income statement) further to the Group’s efforts to streamline
investment expenditure.
- Development capex is expected to total around €1.45 billion
cumulatively over the 2022-2025 period, representing a €135 million
decrease on the figure presented in the November 2022 Business Plan
(€1.6 billion) further to the Group’s efforts to streamline
investment expenditure.
- Group transformation and reorganisation costs are expected to
be around €0.1 billion higher over the period.
- Taking all these factors into account, and assuming a
virtually unchanged volume of property disposals over the period,
net cash flow before financing would amount to an inflow of around
€0.3 billion in 2025, i.e., the level targeted for 2024 in the
Updated November 2022 Business Plan.
On the basis of these projections, the completion of the
turnaround in the Group's operating and financial performance would
be postponed by 12 months, with the objectives set out in the
November 2022 Business Plan now expected to be achieved in 2026.
Accordingly, the outlook for 2026 is as follows:
- Revenue of €6.4 billion, with a Group occupancy rate of
90.8%.
- Personnel costs representing 57.8% of revenue, above the 2025
target of 56.4% set out in the November 2022 Business Plan.
- EBITDAR of around €1.2 billion, in line with the 2025 target
set out in the November 2022 Business Plan, with a margin of 19%.
The difference with the 20% target set out in the November 2022
Business Plan is mainly due to the higher ratio of personnel costs
to revenue.
- Maintenance and IT and renovation/development capex of the same
magnitude as set out in the updated 2025 outlook.
- Gross property disposals of €550 million, comparable to that
projected for 2024 and 2025 (€500 million) and in line with the
Group's long-term objective of reducing its real estate ownership
rate to 20%-25% of operated facilities.
- Net cash flow before financing of just over €0.45 billion, the
level targeted for 2025 in the Updated November 2022 Business
Plan.
- On the basis of net debt (excl. IFRS adjustments) reduced to
€3.6 billion by end-2026, the net debt to EBITDA (financial
leverage) ratio is expected to stand at 5.5x at that date, i.e.,
the target level projected at end-2025 in the Updated November 2022
Business Plan.
Overall, the update to the 2024-2025 outlook and the new 2026
outlook demonstrate that once the Accelerated Safeguard Plan has
been implemented and the Restructuring Plan completed, all of the
Group's management indicators will have improved significantly,
with Net Recurring Operating Cash Flow and Net Cash Flow before
Financing both sharply positive by 2025, at nearly €275 million,
and a restructured balance sheet with financial leverage lowered to
7.6x by end-2025 and to 5.5x by end-2026.
By 2025-2026, the Group's financing capacity should have been
restored, which should enable it to refinance the remainder of the
loans put in place in June 2022 with its main banking partners and
secure its viability and long-term future.
5. Planned capital increases and
indicative timetable
The last condition precedent to implementing the financial
restructuring concerns the ruling by the Paris Court of Appeal on
the appeals lodged against the waiver granted by the AMF to the
Groupement in connection with the obligation to launch a public
offer for all ORPEA shares arising from the financial
restructuring. The Paris Court of Appeal is due to issue its ruling
in the coming days.
Subject to the dismissal of these appeals by the Paris Court of
Appeal, the capital increases provided for in the Accelerated
Safeguard Plan will be implemented as follows:
1. A first capital increase with preferential
subscription rights, guaranteed by ORPEA S.A.'s unsecured financial
creditors subscribing, where applicable, by offsetting claims, in
an amount of around €3.9 billion, expected to be launched around 13
November 2023 with settlement-delivery in early December 2023 (the
"Equitisation Capital Increase"). Following this first
capital increase, the recovery rate for ORPEA S.A.'s unsecured
financial creditors whose unsecured receivables would be converted
into shares would be around 30% of the nominal value of their
receivables - this estimate being based on a theoretical value of
pre-money equity induced by the issue price of the second capital
increase of around €1.15 billion.
2. A second cash capital increase allowing
for an equity investment by the Groupement, of around €1.16
billion, with settlement-delivery expected in mid-December 2023
(the "Groupement Capital Increase").
3. A third cash capital increase with
pre-emption rights for an amount of approximately €0.4 billion, to
which the members of the Groupement have undertaken to subscribe up
to approximately €0.2 billion, with the balance backstopped by
SteerCo (the "Rights Issue"), scheduled to be launched in
early 2024.
The consequences of the capital increases on the situation of
existing shareholders (especially the massive dilution they entail
and the significant loss of market value to which shareholders
deciding to participate in the Equitisation Capital Increase would
be exposed), as well as the terms and conditions for participating
in the capital increases, were set out in full in the press release
published on 11 October, available on the Company's website
(link).
About ORPEA
ORPEA is a leading global player, expert in providing care for
all types of frailty and vulnerability. The Group operates in 21
countries and covers three core areas of expertise: care for the
elderly (nursing homes, assisted-living facilities, home care),
post-acute and rehabilitation care, and mental health care
(specialised hospitals). It has more than 76,000 employees and
welcomes more than 267,000 patients and residents to its facilities
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 press release contains forward-looking statements that
involve risks and uncertainties, including information incorporated
by reference, regarding the Group’s future growth and profitability
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) and in the
2023 Interim Financial Report published in French on 18 October
2023.
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Investor Relations ORPEA Benoit Lesieur Investor
Relations Director b.lesieur@orpea.net
Toll-free number for shareholders (from France only): 0
805 480 480
Investor Relations NewCap Dusan Oresansky Tel: +33
1 44 71 94 94 ORPEA@newcap.eu
Press Relations ORPEA Isabelle Herrier-Naufle -
Press Relations Director - +33 7 70 29 53 74
i.herrier-naufle@orpea.net
Image7 Charlotte Le Barbier // Laurence Heilbronn +33 6
78 37 27 60 – +33 6 89 87 61 37 clebarbier@image7.fr
lheilbronn@image7.fr
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