Extendicare Announces Fourth Quarter and Year End 2019 Results
MARKHAM, Ontario, Feb. 27, 2020 (GLOBE NEWSWIRE) — Extendicare Inc. (“Extendicare” or the “Company”) (TSX: EXE) today reported results for the three and twelve months ended December 31, 2019. Results are presented in Canadian dollars unless otherwise noted.
“In 2019, we built a strong foundation for future growth and improved profitability,” said Chief Executive Officer, Dr. Michael Guerriere. “We invested in our ParaMed operations and with our transformation project now almost complete, along with our exit from the lower margin B.C. market, we expect to drive improved performance in 2020. We also expanded other areas of our operations, with 29% growth in our retirement living capacity and expansion in our contract services and group purchasing services. With an ongoing focus on improving the quality of our operations and operating efficiency, we are well-positioned to deliver best-in-class services for Canada’s growing seniors population, while also driving sustainable value creation for our shareholders.”Financial Highlights from Q4 2019 (all comparisons with Q4 2018)Revenue of $290.9 million, up 0.7% or $2.1 million; driven by long-term care (LTC) funding enhancements and growth in retirement living, partially offset by lower home health care volumes.Net operating income (NOI) (1) unchanged at $32.9 million; reflecting growth in the LTC and retirement living segments and year-end adjustments, offset by lower home health care volumes and increased back office operating costs.Adjusted EBITDA (1) of $23.0 million, up $0.5 million; impacted by lower administrative costs.Earnings from continuing operations of $4.9 million, up $13.9 million; impacted by changes in foreign exchange and fair value adjustments related to the Captive’s investments and interest rate swaps, and an $11.8 million net of tax impairment charge recorded in 2018.AFFO (1) of $11.4 million ($0.127 per basic share), down $1.2 million; resulting from higher maintenance capex and net interest costs partially offset by higher earnings and lower current taxes.Financial Highlights from Year ended 2019 (all comparisons with Year ended 2018)Revenue of $1,132.0 million, up 1.1% or $12.0 million; driven by LTC funding enhancements, growth in retirement living and incremental home health care funding of $2.2 million for 2018 related to Bill 148, partially offset by lower home health care volumes.NOI of $133.5 million, down $0.5 million; driven by growth in LTC and retirement living and year-end adjustments, offset by the impact of lower home health care volumes and higher back office operating costs.Adjusted EBITDA of $91.1 million, down $3.1 million; impacted by higher administrative costs, primarily due to increased compensation costs and professional fees.Earnings from continuing operations of $17.1 million, up $9.0 million from $8.1 million; impacted by changes in foreign exchange and fair value adjustments, higher depreciation and amortization and an impairment charge recorded in 2018. AFFO of $52.6 million ($0.590 per basic share) down $5.2 million; impacted by lower Adjusted EBITDA as noted above and higher net interest costs. Dividends declared of $42.7 million in 2019, representing approximately 81% of AFFO.Strong liquidity position as at December 31, 2019, with consolidated cash and short-term investments on hand of $94.5 million and available credit facilities with conservative leverage position of debt to gross book value of 49% and weighted average interest rate of 4.7%.
Business UpdatesLong-term CareLong-term care continued to provide a stable base for our operations in Q4 2019. Revenue increased to $166.6 million in Q4 2019, up 1.2% from Q4 2018 as a result of funding enhancements and timing of flow-through funding. NOI margins (1) increased in the current quarter to 12.3%, up from 11.4% in Q4 2018, partially driven by favourable labour accrual adjustments in the current quarter. Average occupancy remained stable at 97.8% in the current quarter, compared to 97.6% in the prior year quarter.ParaMed ProgressParaMed ceased providing services under its lower margin B.C. home health care contracts at the end of January 2020, removing its adverse impact on ParaMed’s future profitability.We continue to make good progress on our ParaMed transformation, with 89% of targeted business volumes transitioned to the new cloud-based platform at the end of 2019, and 95% transitioned to-date. The remaining Alberta-based volumes are expected to be completed by the end of Q1 2020. As we near the end of the system implementation stage, we added to our back-office staff in preparation for the planned increase in volumes and ongoing staff training and support needs. While this investment in our long-term infrastructure sets us up for future success, the associated costs were a drag on NOI margin in the current quarter.The ParaMed transformation project remains on budget at $12 million, with approximately $1.2 million remaining to be incurred in Q1 2020. Once complete, we expect this investment will lead to increased staff retention, increased revenue growth and ultimately improved margins in the business. We expect to begin to see volume increases in 2020, excluding the impact of the B.C. exit, with margin improvements coming later in the year.Retirement Living OperationsRetirement living continues to deliver strong financial results with new suites added in the quarter and future growth planned. In the Q4 2019, revenue from the retirement living segment increased to $11.4 million, up 25.6% from the same quarter last year and NOI margins strengthened to 26.4%, up from 25.2% in Q4 2018. Average occupancy of the stabilized portfolio grew to 94.9% in Q4 2019, up from 89.8% in Q4 2018.In October 2019, we opened The Barrieview Retirement Community in Barrie, Ontario, adding 124 new suites. Based on the strong pre-sale activity and initial occupancy experienced at this property, we expect to achieve stabilized occupancy of 95% by the end of 2020, earlier than originally anticipated. Expansion plans are advancing at our Empire Crossing Retirement Community in Port Hope, Ontario for a 59-suite addition scheduled to commence construction in Q2 2020. Other Canadian OperationsWithin our other Canadian Operations segment, SGP Purchasing Partner Network (SGP) continues to expand its market presence in offering cost-effective purchasing contracts to other senior care providers. At the end of 2019, SGP provided services to third parties representing approximately 64,800 senior residents across Canada, an increase of 26.8% from the end of 2018. In January 2020, SGP welcomed a number of highly respected new clients to its portfolio, including Amica Senior Lifestyles with over 4,100 senior residence suites. Together with its partners, SGP now provides cost effective products and services to third-party clients with approximately 71,600 senior residents across Canada.Select Financial InformationThe following is a summary of financial information for the three and twelve months ended December 31, 2019 and 2018.Summary of Factors Affecting Comparability of Results for 2019Certain factors impact the comparability of the consolidated financial results to the prior year. These factors included retroactive Bill 148 funding, the costs associated with the ParaMed transformation, favourable year-end accrual adjustments, severance costs and the adoption of IFRS 16.The net impact of these items was an increase of $0.9 million in NOI and an increase of $1.2 million in Adjusted EBITDA in Q4 2019 over Q4 2018 and an increase of $2.8 million in NOI and an increase of $3.7 million in Adjusted EBITDA for the 2019 year over 2018.Net Operating IncomeExcluding the impact of the previously noted factors, NOI declined by $0.9 million to $32.5 million for Q4 2019, and represented 11.2% of revenue as compared to $33.4 million, or 11.6% of revenue, for Q4 2018. For the 2019 year, NOI declined by $3.3 million to $133.0 million, or 11.8% of revenue, as compared to $136.3 million, or 12.2% of revenue, for 2018. Net operating income for Q4 and the year 2019 reflected funding enhancements and growth of the retirement living and other Canadian operations, offset by lower home health care volumes and increased back office operating costs.Adjusted EBITDA