WARNING - Contains speculative far reaching thoughts about the very distant future for this company. DYOR.
If they make circa $55m in underlying profit for FY20 (requires $31m in the second half which will be a tough ask considering the way sales of the Sands appear to have slowed down) that's not much of an increase from FY18 two years earlier when they made $52.1m.
Shareholders might be interested to note that although the underlying profit is up 17% in the period compared to the previous comparable one the rate at which NAV has increased has slowed from the last interim result of 2 cents increase http://nzx-prod-s7fsd7f98s.s3-websit...805/294060.pdf to 1 cent increase in the current period.
This indicates to me that total catch everything value accretion during the current half just gone has slowed, despite the creation of just on $8m of deferred tax credits, itself worth 1.3 cents per share.
Without the creation of this deferred tax credit it is important to note that NAV would have in fact gone backwards in the period just reported. All this despite selling many of the premium and most expensive units at two of the most premium facilities during the period at the Sands and Meadowbank. Go figure and work that out ???
Talking to Couta1 yesterday the multi year caregiver wage settlement still has some way to go with staggered and significant annual caregiver increases still to come.
What is clear (to me anyway), is the lions share of the gains from the gradual transformation of their business model are being eaten by staff. To the best of my knowledge there's about another 4 years to go before they finish their transformation program announced at the time of listing to getting this to 60/40 new occupation right agreement model v old care model.
The best analogy I can come up with is being invested in this company is analogous to driving a car with the handbrake on, (with that handbrake quite clearly being the intensity of the care services provided and the rapidly increasing cost of doing so). Eventually the very gradual transformation to the new model will reap dividends. I think we start to see this in a meaningful way, (and this is just a guess, in FY22 or FY23) After the initial six year transformation to 60/40 is achieved, about FY24 I would then expect them to push on with gradually converting the rest of their facilities to ORA model, or those that can't will be disposed of. This might take another 4-5 years, or approx 8-9 years hence.
There's no question in my mind that the services OCA provide are going to be in extremely high demand in the years ahead so in the very long run, provided the charges are levied in an appropriate manner, (and it may be with ongoing rampant human resource cost increases over the next decade that their 10% per annum with a maximum of 30% change against the occupation licence purchase price needs to go up, perhaps to as much as 12.5% per year and a maximum of 50%), OCA are well positioned to have a very viable business. (This would require commercially minded directors and management who realise that they have a very strong obligation to shareholders to deliver an appropriate return on risk capital...probably a new CEO would be required as Earl Gasparich is simply too nice).
In the meantime in the near term however, I expect staff to continue eat up the lions share of any gains the company makes from its very gradual transformation program.
Investors can either invest in a company that specialises in very late stage care, (with all the implications about costs that has) or choose a company with a balanced business model that's considerably less care intensive. Plenty have chosen this one at $1.20 so maybe they foresee something I don't...who knows...