Sienna Senior Living Inc. (“
Sienna” or the
“
Company”) (TSX: SIA) today announced its
financial results for the three months ended March 31, 2023.
The Consolidated Financial Statements and accompanying Management’s
Discussion and Analysis (“
MD&A”) are available
on the Company’s website at www.siennaliving.ca and on SEDAR at
www.sedar.com.
Sienna’s significant progress with respect to a
number of strategic initiatives and its effective cost management
resulted in strong year-over-year financial results in Q1 2023.
“As we move further into 2023, we have many
reasons to be encouraged,” said Nitin Jain, President and Chief
Executive Officer. “Strong demand for our retirement residences
supported significant year-over-year growth in our same-property
NOI, our long-term care communities continued to stabilize, and our
focus on cost management is showing early signs of success. In
addition, slowing inflation and a pause to interest rate hikes are
further adding to our optimistic outlook for the balance of the
year.”
Operating Highlights
-
Same-property Net Operating Income (“NOI”)
increased by 9.9% to $34.7 million in Q1 2023, compared to Q1 2022,
including
- a 11.0% increase
in the retirement segment and
- a 9.1% increase
in the long-term care segment
-
Retirement Occupancy Gains – Average same property
occupancy is up 300 basis points (“bps”) year over
year to 88.2% in Q1 2023, and 350 bps in the Company’s acquisition
portfolio to 85.7% since the acquisition of 12 retirement
residences in May 2022;
- Rising
Rates – Sienna continued to achieve average annual rate
increases of approximately 5% in the Company’s retirement segment
in Q1 2023;
-
Long-Term-Care (“LTC”) Occupancy – Average
occupancy increased to 96.8% in Q1 2023;
- Focused
Cost Management resulting in
- a reduction in
agency staffing cost of 35% year over year in Q1 2023, and 29%
quarter over quarter compared to Q4 2022; and
- a decrease in
general and administrative expenses through a workforce reduction
and not replacing vacant positions at the Company’s corporate
office, expected to result in annual savings of approximately $3.0
million.
Government Funding Updates
-
Funding Update on 3rd and 4th Beds in
Multi-Bed Rooms – Continued full funding of Other
Accommodations per diems until March 2025, with gradual reductions
of nursing and personal care funding for Sienna’s approximate 350
3rd and 4th beds in Ontario, which will not be reopened for
resident admissions;
-
Funding Increases for Resident Care, Programs & Food
and Other Accommodations - The Government of Ontario
announced a 2.7% increase in its flow-through funding, which covers
the cost of care, programs and food, and a 2.0% increase in Other
Accommodations funding.
Development Highlights
-
Construction Under Way in Brantford and North Bay
– Construction is progressing well at two projects, including
- a $140 million
campus of care in Brantford, Ontario, where Sienna is replacing 122
Class C long-term care beds with 160 Class A beds and adding 147
retirement suites with an estimated total development cost of
approximately $140 million, and projected development yield of
approximately 8.0%; and
- a $80
million long-term care redevelopment with an estimated 7.5%
development yield in North Bay, Ontario, replacing 148 older Class
C beds with 160 new beds.
-
Retirement Joint Venture in Niagara Falls Nearing
Completion – Construction of a 150-suite retirement
residence in Niagara Falls is scheduled to be completed in Q4 2023.
The estimated total capital investment for 100% of the project is
approximately $55 million. Pre-leasing indicators for the
retirement residence have been strong.
Financial performance - Q1
2023
- Total
Adjusted Revenue increased by 14.5% in Q1 2023 to $199.6
million, compared to Q1 2022. In the Retirement segment, the
increase is mainly driven by occupancy growth, annual rental rate
increases in line with market conditions and share of revenue from
joint venture. In the LTC segment, flow-through funding for
increased direct care and annual inflationary funding increases
contributed to the increase in total adjusted revenue.
- Total
NOI increased by 13.0% to $36.3 million, compared to Q1
2022, resulting from a $3.9 million increase in the Retirement
segment, driven by same-property NOI growth as well as additional
NOI from the 12 retirement properties acquired in 2022, and a $0.3
million increase in the LTC segment, mainly due to lower net
pandemic and incremental agency expenses as a result of retroactive
funding of $3.0 million, compared to $2.2 million in Q1 2022.
- Same
Property NOI increased by 9.9% to $34.7 million, compared
to Q1 2022, including a 9.1% increase to $19.3 million in the LTC
segment, and a 11.0% increase to $15.3 million in the Retirement
segment.
-
OFFO per share increased by 5.9%
in Q1 2023, or $0.014, to $0.253. The increase was primarily due to
higher NOI and lower administrative expenses excluding
non-recurring restructuring costs, offset by higher interest
expense.
-
AFFO per share increased by 2.5%
in Q1 2023, or $0.006, to $0.249. The increase was primarily
related to higher OFFO, partially offset by higher maintenance
capital expenditures and a decrease in construction funding.
- AFFO
payout ratio was 94.0% for Q1 2023.
Financial position
The Company maintained a strong financial
position during Q1 2023:
- Increased
liquidity to $308 million as at March 31, 2023, representing an
increase of $21 million from December 31, 2022;
- Paid down $29
million of its Revolving Credit Facility, financing it with lower
cost CMHC insured mortgages; and
- Lowered Debt to
Adjusted EBITDA ratio to 8.4 for the three months ended March 31,
2023, compared to 8.7 for the three months ended March 31,
2022.
Financial and Operating
Results
|
Three Months Ended |
$000s except occupancy, per share and ratio data |
March 31, 2023 |
March 31, 2022 |
Retirement - Average same property occupancy |
88.2 |
% |
85.2 |
% |
LTC - Average total occupancy
(2) |
96.8 |
% |
93.8 |
% |
Total Adjusted Revenue (1) |
199,611 |
|
174,282 |
|
Same property NOI (1) |
34,659 |
|
31,529 |
|
Total NOI (1) |
36,309 |
|
32,138 |
|
OFFO per share (1) |
0.253 |
|
0.239 |
|
AFFO per share (1) |
0.249 |
|
0.243 |
|
AFFO payout ratio (1) |
94.0 |
% |
96.3 |
% |
(1) Total Adjusted Revenue, Same property NOI,
Total NOI, OFFO per share, AFFO per share, AFFO payout ratio are
non-IFRS measures. These measures do not have standardized meanings
prescribed by IFRS and, therefore, may not be comparable to similar
measures used by other issuers. These measures are used by
management in evaluating operating and financial performance.
Please refer to the heading "Non-IFRS Performance Measures” on page
2 of the MD&A. (2) Excludes the 3rd and 4th beds in multi-bed
rooms in Ontario
Outlook
Long-term demand fundamentals in Canadian
seniors living are stronger than ever. In addition, recent
macroeconomic developments, including slowing inflation and a pause
to interest rate hikes, coupled with Sienna's cost management
strategy, are further supporting Sienna’s optimistic outlook for
2023 and beyond.
Retirement - With the Company’s
successful marketing and sales initiatives, supported by strong
demographic trends, Sienna has been able to increase annual average
rates in the Aspira retirement segment by approximately 5%, and
expects occupancy to further strengthen during the reminder of the
year.
Sienna anticipates average same property
occupancy for the full year in 2023 to be approximately 90% and
average occupancy in our acquisition portfolio to exceed 87%. The
Company further expects the 2023 operating margin for the full year
to improve by approximately 150 bps - 200 bps compared to 2022.
Long-Term Care - In Sienna's
LTC portfolio, average same-property occupancy reached 96.8% during
the first quarter.
Some cost pressures are expected to remain for
some time due to labour shortages and inflation and Sienna has been
actively working with LTC associations and governments to have
funding adjusted to accommodate significant inflationary
pressures.
Developments - Sienna’s three
projects currently under construction, including the redevelopment
of a long-term care community in North Bay, the development of a
campus of care in Brantford and the development of a joint venture
retirement residence in Niagara Falls, are expected to lower the
Company’s AFFO payout ratio by mid to high single digit percent,
once completed and fully operational.
Significant Potential for Growth in
NOI - Sienna sees significant growth potential in its
business over the next several years and is actively working on a
number initiatives which may contribute to the Company’s NOI
expansion including:
-
Continued occupancy growth in the Company’s retirement
segment, including incremental NOI should the Company’s
target for stabilized average occupancy of 92.5% in its
same-property portfolio be reached, which would represent a 430 bps
increase from the average occupancy of 88.2% in Q1 2023;
-
Contributions from acquisitions and new
developments, including incremental NOI from:
- The Company’s
acquisition of a 50% joint venture interest in 12 retirement
properties in 2022 for $189.8 million;
- The Company’s
acquisition of Woods Park in early 2023 for $26.3 million, which is
expected to generate an unlevered yield of 6.75%; and
- The completion
of the Company’s 70% joint venture interest in the development of a
150-suite retirement residence in Niagara Falls for $38.5 million,
which has an expected development yield of approximately 7.5%.
-
Substantial reduction of net pandemic expenses and
incremental agency costs, which were $8.2 million in 2022,
as the pandemic subsides and the Company actively manages
incremental agency costs, while working with governments to ensure
that operators are fully funded for all costs of resident care;
and
-
Catch-Up Funding from the Ontario government to
address funding shortfalls to offset the significant inflationary
and cost pressures operators have experienced over the past years.
Each percentage point in additional Other Accommodations funding
would represent an approximate annual funding increase of $1.2
million for Sienna.
These initiatives, individually and
collectively, could have a significant positive impact on the value
of the Company’s business, enhancing its financial performance with
growth in NOI and OFFO, and supporting Sienna’s AFFO payout
ratio.
Conference Call
Sienna will host a conference call on Friday,
May 12, 2023 at 10:30 a.m. (ET). The toll-free dial-in number for
participants is 1-800-715-9871, conference ID: 5537911. A webcast
of the call will be accessible via Sienna's website at
www.siennaliving.ca/investors/events-presentations. It will be
available for replay until May 11, 2024 and archived on Sienna’s
website.
About Sienna Senior Living
Sienna Senior Living Inc. (TSX:SIA) offers a
full range of seniors' living options, including independent
living, assisted living, long-term care, and specialized programs
and services. Sienna's approximately 12,000 employees are
passionate about cultivating happiness in daily life. For more
information, please visit www.siennaliving.ca.
Risk Factors
Refer to the risk factors disclosed in the
Company’s MD&A for the three months ended March 31, 2023,
and its most recent Annual Information Form for more
information.
Forward-Looking Statements
Certain of the statements contained in this news
release are forward-looking statements and are provided for the
purpose of presenting information about management’s current
expectations and plans relating to the future. Readers are
cautioned that such statements may not be appropriate for other
purposes. These statements generally use forward-looking words,
such as “anticipate,” “continue,” “could,” “expect,” “may,” “will,”
“estimate,” “believe,” “goals” or other similar words and are based
on the Company’s expectations, estimates, forecasts and
projections. These statements are subject to significant known and
unknown risks and uncertainties that may cause actual results or
events to differ materially from those expressed or implied by such
statements and, accordingly, should not be read as guarantees of
future performance or results and will not necessarily be accurate
indications of whether or not such results will be achieved. The
forward-looking statements in this news release are based on
information currently available and what management currently
believes are reasonable assumptions. The Company does not undertake
any obligation to publicly update or revise any forward-looking
statements except as may be required by applicable law.
FOR FURTHER INFORMATION, PLEASE CONTACT:
David HungChief Financial Officer and Executive Vice
President(905) 489-0258david.hung@siennaliving.ca
Nancy WebbSenior Vice President, Public Affairs and Marketing
(905) 489-0788nancy.webb@siennaliving.ca
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