Oceania Healthcare Limited (OCA) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen and fellow shareholders. I am Elizabeth Coutts, Chair of Oceania Healthcare. Thank you for joining us today for the fourth annual meeting of Oceania Healthcare. Today's meeting is being held online by Lumi platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and split votes. I would encourage you to send your questions through as early as possible as they will -- this will allow us to the questions at the appropriate time during the meeting. If you have any issues with voting or asking questions, please refer to the virtual meeting guide. I would like to start by thanking you all for your patience and flexibility. We have moved to a fully online annual meeting following the extension of the level 2.5 restrictions in Auckland last week and with the safety of our residents, our staff and our shareholders in mind. Before we formally begin the meeting, I would like to take this opportunity to introduce you to our other Directors and CEO. Here in Auckland, on my immediate left is Earl Gasparich, our Chief Executive Officer; alongside Earl is Alan Isaac, an independent Director, Chair of the Audit Committee and a member of the Remuneration Committee. Alongside Alan, is Dame Kerry Prendergast, an independent Director. Dame Kerry is the chair of the Clinical and Health and Safety Committee. Next to Kerry is Gregory Tomlinson, an independent Director. Greg is the Chair of the Development Committee. Our other 2 Directors are joining us today by Video Link, Sally Evans & Patrick McCawe, both live in Sydney, Australia. And due to current travel restrictions in place, they are unable to join us here in person today. Sally is an independent Director and is the chair of the Remuneration Committee and a member of the Clinical and Health and Safety Committee. Patrick is also an independent Director. He is a member of the Audit committee. Also in attendance today in Auckland are our members of our executive team. Brent Pattison, as our Chief Financial Officer; Mark Stockton as our General Manager Property; Jill Birch as our General Manager Operations; Dr. Frances Hughes as our General Manager Nursing and Clinical Strategy; Anna Thornburn is our General Counsel and Company Secretary. Voting today will be conducted by way of poll on all items of business in accordance with NZX and ASX listing rules. I would ask only shareholders and/or proxy holders to vote, please. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to press a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. I now declare voting open on all items of business. The polling icon will soon appear on your screens, please submit your votes at any time. I will let you know before I move to close voting. The results of the meeting will be published to the market later today. [Operator Instructions] Please note that while you can submit questions from now on, I will not address questions until the relevant time in the meeting. Please also note that your questions may be moderated and/or if we see multiple questions on one topic, those questions may be combined. Finally, due to time constraints, we may run out of time to answer all of your questions. If this happens, we will answer them in due course via e-mail or posting responses on our website. The notice of meeting was mailed or e-mailed to all shareholders and contains the business to be dealt with at this meeting. Apologies. We have received no apologies at this stage. The company's constitution prescribes a quorum of shareholders based on the information from the share register, I can confirm that we have a quorum present. A number of shareholders have appointed proxies to cast vote. 614 shareholders holding 183,569,111 shares, which represents 29.36% of the shares on issue are represented by valid proxies. The Board is holding 179,773,483 of these proxy votes. I will advise on the number of proxies held by the Board to be voted in favor of each resolution that will be put before the meeting today. The minutes of the previous annual meeting were reviewed at the first meeting of the Directors of the company following the annual meeting and were confirmed as a true and correct record of the meeting. The minutes are available for review on the company's website. The first item of business is to consider and receive the annual report and the financial statements for the year-ended 31st of May 2020 and the audit report thereon. The annual report containing the financial statements and the audit report for the year-ended 31st of May 2020 is available to shareholders on the company's website, and was circulated either electronically or in hard copy form to all shareholders on the register at the time of mailing. I shall take the annual report as having been read. Before seeking your comments on the annual report, I will provide you with an overview of your company. This will be followed by an address from Earl Gasparich, our Chief Executive Officer. 2020 has certainly been an extraordinary year. Our priority over the last 6 months has been on protecting and keeping our residents and our staff safe from the heightened risk of the COVID-19 pandemic. We recognize that our residents are some of the most vulnerable members of our community, and we, therefore, put appropriate measures in place early on in order to keep COVID-19 out of our aged care centers and retirement villages. I'm very proud of the achievements of our staff during this trying time and the Board thanks them for the outstanding efforts. Although, we have successfully managed the risks associated with COVID-19 to date, the global pandemic will be with us for some time, and we must, therefore, continue to be vigilant and maintain our robust safety standards across all our aged care centers and retirement villages. Given that the government lockdown interrupted some of our business activities in the final quarter of the financial year, the audited underlying EBITDA from continuing operations was $63.5 million for the year-ended 31st of May 2020, was in line with the prior corresponding period. This was, nonetheless, a pleasing result considering the inability to complete retirement village unit sales during the government lockdown, which coincided with our usual peak sales season and also given the increased costs that were incurred in our aged care centers in response to COVID-19 threat. In effect, we reported revenue for a period of less than a full year with more than a full year's worth of expenses. Earl will take you through more detail of the financial results for the year-ended 31st of May 2020 shortly, and also how we managed the COVID-19 risk in our business. I would now like to provide an update on the execution of our strategy of Oceania Healthcare. At the time of our IPO in 2017, we announced to the market that we intended to use the proceeds raised in the IPO to reduce debt and provide financial flexibility to pursue future development projects. Just over 3 years on, we are well underway with the execution of the strategy. In doing so, we are enhancing returns in our aged care business through the completion and sale of our care suites as well as constructing new high-quality independent living units that meet the demands of the local markets in which our sites are located. Since our IPO in May 2017, we've completed 668 new independent living units and care suites. This has included the opening of 4 new premium aged care centers at Meadowbank, The Sands, both in Auckland, the BayView in Tauranga, Awatere in Hamilton and Green Gables in Nelson. We have also delivered new apartment developments at Meadowbank, The Sands and Green Gables, and new villas at Gracelands in Hastings, Elderslea in Upper Hutt, Woodlands in Motueka and Whitianga in the Coromandel. Together, these developments added significant incremental value to the company. Despite the challenges of COVID-19, we are continuing with the execution of our development pipeline. And during FY 2020, obtained resource consents to develop 229 independent living apartments and 100 care suites at our Elmwood Village in the Gardens, Manurewa, Auckland. This redevelopment will build upon Elmwood's strong reputation for delivering the highest quality care to its residents. Earl will provide a further update on our other development activity shortly. As we noted in our annual report, we've made good progress on our integrated reporting journey during the year. Immediately prior to lockdown, management conducted a deep dive into what matters the most in our businesses to our key stakeholders, our residents and the families of staff, our local communities, our suppliers, industry bodies and the government. The results were then used to form our materiality metrics that we have set out in the annual report. We also measured our carbon footprint for the first time and now putting emissions reduction programs in place across the business. To do this, we will be measuring our success against the base year emissions calculated for the 2019 financial year. We completed a waste audit of one of our aged care centers to better understand the composition of our waste and to identify opportunities for waste diversion from landfill. The key finding from the audit was that a significant portion of the waste could actually be diverted from landfill and most of this diverted into -- to be composted. The outcomes from the audit will be used to form waste reduction programs in all of our sites going forward. And finally, we are starting to look at the energy usage at a site level and exploring opportunities to reduce consumption. There has been a significant change in Oceania Healthcare's shareholding since last year's annual meeting. On the 3rd of February 2020, Oceania Healthcare Holdings Limited sold its entire 40.94% stake in Oceania Healthcare. This sale mark the end of the involvement of Macquarie Infrastructure and Real Assets division of Macquarie Group Limited with Oceania Healthcare, which started in 2005. Following the sale, Hugh FitzSimons resigned as a Director of Oceania Healthcare. He had been a Director since 2012 and made a significant contribution to Oceania Healthcare over his term, including being heavily involved in Oceania Healthcare's transition to a publicly listed company. The Board would like to thank you for service over many years. Patrick McCawe has remained as an independent Director at Oceania Healthcare. Patrick brings a range of key skills to the board, including broad experience with equity and debt markets, capital restructuring and investment analysis. The Board decided not to replace Hugh Fitzsimons, given there were no skill gaps amongst the remaining Directors and to reduce governance costs. During the year and before lockdown, our Directors visited many of our sites around the country, either as a Board or individually, meeting with our staff and observing culture and day-to-day operations at our sites. It is great to see the enthusiasm, energy and passion of our staff and the commitment that they had to providing top-quality care to our residents. The Directors also had the pleasure of meeting with some of our village residents at Hutt Gables in Upper Hutts, The Sands and Eden, and discussing the experiences at our village. We heard of how our residents are enjoying living in our villages, and we welcome the feedback, which has been incorporated into our continuous improvement processes. We are looking forward to resuming these visits in the coming months, providing it is safe to do so. We were pleased to declare and pay a final dividend of $0.012 per share, which takes full year dividends nonimputed to $0.035 per share and represents 50% of underlying net profit after tax. The dividend reinvestment plan for New Zealand and Australian shareholders also apply to this dividend and what was well received by many of our shareholders. As we noted in our annual report, we've received approval from the commissioner of inland revenue to change our balance date going forward to 31st of March. The reason for this change was to align our balance date with some of our industry peers and also to obtain a bit market coverage from the investment community outside of the usual school holiday season. Looking ahead, we will be releasing our financial results for the 6 months to November 30, 2020 and late January 2021 and then report the full year result to 31st of March and late May 2021. In closing, I would like to thank our team of talented staff across all of our sites. Without the expertise, enthusiasm and commitment, we would not be able to deliver outstanding care and service to our residents and continue to keep them safe during these turbulent times. I would also like to thank the Board. They bring a wealth of expertise and experience and the input is much appreciated. Finally, I would like to thank you, our shareholders, for investing in Oceania Healthcare and attending this afternoon. The effects of COVID-19 and the resulting economic conditions will continue to create uncertainty over the medium-term in New Zealand. However, with New Zealand's population continuing to age and with this demand increasing for aged care services, we consider Oceania Healthcare will continue to be resilient to economic uncertainty and grow irrespective of the current global pandemic. We, therefore, remain fully committed to our brownfields redevelopment strategy, creating a superior portfolio of fully integrated retirement village and aged care centers around New Zealand. And within them, delivering the highest level of quality care and service to our residents. I'd now like to hand over to Earl Gasparich, our CEO, who'll present our financial results in more detail and talk about the year from his perspective. Earl.

Well, thanks, Liz. And as Liz has already said, a warm welcome to everyone here today. Over the last 3 months of the financial year, we navigated our most extraordinary period of managing the challenges of the COVID-19 pandemic in New Zealand. The pandemic presented significant risks for Oceania Healthcare, both in terms of the well-being of our residents and staff as well as financially with the increased costs and keeping our residents and staff safe. And as Liz said, effectively not being able to sell a retirement village unit during the final quarter of the financial year. Of course, we have continued to manage the risk of COVID-19 in the period following our balance date with the most recent outbreak here in Auckland, once again, meaning that our aged care centers and retirement villages were closed to visitors for 2 weeks in August. But first, I'll take you through the financial results for the year-ended 31 May, 2020. And despite the challenges over the final quarter, we've delivered $63.5 million of underlying earnings before interest, tax, depreciation and amortization that is in line with the prior corresponding period, again, despite the government lockdown restricting sales of retirement village units in the final quarter of the financial year and the increased costs that we've incurred in managing the risk of COVID-19 throughout the business. Underlying net profit after tax of $42.9 million was lower than the prior corresponding period, and this was due to higher interest costs that we incurred to fund our development activity over the year and higher depreciation charges from completed developments. Over the last 18 months, we've completed 4 new aged care centers, and each of these is classified as property, plant and equipment in our financial statements, and hence, attract the depreciation charge once complete. Operating cash flow increased to $99.4 million as a result of strong sale proceeds received from the sale of developments that were completed in the previous financial year. Predominantly The Sands and Browns Bay in Auckland and Meadowbank Stage 4, also in Auckland. Total assets increased to $1.5 billion, which reflects the capital expenditure that we have invested in our redevelopment program over the year and completion of new aged care centers. This increase in asset value was despite changes to CBRE's valuation assumptions that led to a decrease in the value of our existing investment property assets. The property portfolio was independently valued by CBRE as at April 30, 2020, a time that you may recall when the country had only just exited Level 4 restrictions and New Zealand was still subject to stringent Level 3 restrictions. And accordingly, CBRE reassessed the number of their assumptions to reflect lower property price growth rates, in fact, negative rates for the first quarter, and also higher discount rates and increased discounts on unsold stock. But despite their CBRE assumptions with regards to negative property price movement, to date, we have not experienced any decline in prices for the sales that we've achieved since the lockdown. Restrictions were lifted in the middle of May. As at May 31, 2020, Oceania Healthcare had current drawn debt of $326.7 million and $17.6 million of cash, representing $110.9 million of undrawn net debt headroom. This includes the additional debt facility of $70 million that was put in place in early April for a period of 18 months with our bank lenders to provide even more headroom given the uncertainties in the near-term economic outlook at the time. As we inform shareholders at our interim results announcement in January and the full year results announcement in July, we intended to explore a domestic retail bond issue in 2020 to provide diversity of funding antenna and to help facilitate Oceania's future growth. We were in the final stages of preparing for this bond issue in March before COVID-19 caused significant volatility in global financial markets. We, therefore, paused that process and are now planning to proceed with the bond issue shortly, subject to market conditions. This remains a priority for the 2021 financial year. One of Oceania Healthcare's strengths is our aged care strategy. And as we've said before, our aged care business is needs-based, meaning that residents and their families make a decision to move into an aged care center or buy a care suite when a resident needs rest home or hospital-level care rather than for lifestyle reasons. Our aged care strategy is to redevelop our portfolio of well-located sites into new aged care centers that generate higher resident-funded premium revenue through the deferred management fees generated on occupation right agreements that we sell over care suites. At the time of our IPO, 29% of the portfolio was classified as premium, which includes care suites sold under ORA and bids for which we receive daily premium accommodation charges. Over the last 3 years, we've increased this proportion to 44% of the portfolio. And as we build out the remainder of the pipeline, this proportion will increase to 69% with the number of premium care beds more than doubling from their current levels. Our new age care centers at Meadowbank, The Sands, the BayView and Awatere are now starting to mature in their operations and their beds are generating significantly higher returns than the older beds that they've replaced. Despite disruption to these sites as the redevelopment took place, our aged care earnings are accordingly now at a point of inflection and will increase going forward as we continue to execute our strategy. Overall, aged care occupancy was 93.7% over the year-ended May 31, 2020, compared to the prior corresponding period occupancy of 93.2%. Now I'm just going to turn to the impact of COVID-19 on our business and our response to it. And as we informed shareholders in mid-March, we were well prepared to manage the risk of COVID-19 at Oceania Healthcare. And we were already engaged with the Ministry of Health at the time to ensure that we had access to their support and DHB supplies and resources as required. The ministry acknowledged early on, the important part that aged residential care plays in the national health care system, providing residents with a safe living environment and reducing demand for public hospitals. We look over -- we look after over 3,600 residents in our business, and each of these residents were have heightened vulnerability to COVID-19. Hence, there is no doubt that the pandemic presented a high risk to their health. As an essential service, we continue to operate during the government lockdown with stable occupancy levels and regular cash flow received from both the government-funded daily care fee as well as additional resident-funded revenue. We also continue to take applications in our care suites and had residents settle or move into care suites during the lockdown period. None of Oceania Healthcare's residents living in its aged care centers or retirement villages have contracted COVID-19 to date and staff were also well protected throughout the pandemic. A number of actions were implemented early on to reduce this risk, including restricting visitor access to sites, taking declarations from staff and monitoring travel as well as enhancing infection control training and ensuring clear and regular communication to staff, residents and their families. Additional government funding was received in late May, which partially offset the increased cost to manage the pandemic risk. Aged care centers and retirement villages were a wonderful place for elderly people to live during alert levels 3 and 4 as our residents were very well looked after, and our team came up with many innovative ways to keep activities going and provide service and attention to our residents. One example of this was our team at Meadowbank, who coordinated morning exercise classes from the courtyard with loudhailers and music, while our residents participated enthusiastically from each of their apartment balconies. These initiatives went a long way towards overcoming social isolation and loneliness that other elderly people living in the community may have experienced during the lockdown. In our retirement village business, as Liz mentioned, although we had taken a good level of sales application in the weeks leading up to the government knockdown, restrictions imposed under Alert Level 4 meant that we were unable to show prospective residents through our villages or complete sales and had residents who had submitted applications before lockdown, unable to sell their own homes. Hence, we encountered a delay in being able to settle those transactions. Once the restrictions on sales eased in Alert Level 2, we recommenced sales activity and have recorded strong sales through June, July and August, in fact, 26% higher than the same month last year. We've seen particularly good level of sales at both Meadowbank and The Sands over the last few months. And we've now sold 54 independent living apartments and 29 care suites at The Sands with a further 12 care suite occupied by residents paying a premium accommodation charge. And at Meadowbank, we've sold 34 of the 64 independent living apartments in stage 4, and 7 of the 26 apartments at Stage 5 as well as 38 care suites with a further 3 occupied by residents paying a premium accommodation charge. Many new residents who have submitted ORA applications since lockdown, have commented to us about how the lockdown period gave them an opportunity to reflect on their well-being and security with the benefits of retirement villages, including stronger communities, security and peace of mind being more prevalent over this period. I'll now turn to how we're looking after our people here at Oceania Healthcare. And as we've said before, Oceania is very much a people business. Our dedicated team have a huge level of commitment to their roles and a real passion for doing a good job in delivering the highest level of care to our residents. There were significant pressures on our staff during the lockdown period, given the need to isolate residents who had recently entered the aged care center or returned from hospital as well as the screening of anyone entering the center and managing visits under Alert Level 2. We worked hard to maintain staffing levels throughout the alert levels and ensured that staff were well supported in their roles, right down to the detail of arranging babysitting, so our aged care staff could continue to come to work. We also paid all site-based operational staff an additional $2 per hour during Alert Level 4 and recognition of the work they were doing under extreme circumstances. We recognized our registered nurses on International Nursers Day on May 12, 2020, with the launch of In Their Shoes, a celebration of dedicated and clinically skilled nurses, who work at the forefront of New Zealand's aged care sector. To mark International Nurses Day, each of our registered nurses were given a pair of bespoke Allbirds shoes to thank them for their hard work, not just over the recent COVID-19 lockdown period, but every day, when they're at work delivering exceptional care to our residents. We've also offered our employee share scheme to all permanent employees again this year. The scheme achieved a 70% uptake last year and 77% this year. And it's great for our staff to own a stake in Oceania HealthCare and further reward them for the vital role that they play in Oceania Healthcare's success. We made 2 senior appointments during the year. Dr. Frances Hughes joined Oceania Healthcare as General Manager Nursing and Clinical Strategy in October 2019. Dr. Hughes was at the forefront of Oceania's clinical response during Alert Levels 2, 3 and 4 with excellent leadership in emergency management, overstaffing protocols, PPE supply and usage and heightened infection control. She also chaired the New Zealand Ages Care Association's Nursing Leadership group, and was involved in the Director General's review of the aged care sector's preparedness for a COVID-19 outbreak. Brent Pattison was appointed as Chief Financial Officer in January 2020. Since joining Oceania, Brent has been involved in preparing the aged care sector's funding plan from the government for additional costs incurred by the industry as a result of COVID-19. And now I'll turn to our developments. And as we've said, a key feature of our growth strategy has been the construction of our brownfields development pipeline. Prior to a Alert Level 4, we were on track to deliver 265 units and bed in the 2020 financial year. In the first half of the 2020 year, we completed 90 new care suites at Awatere and 10 villas at Whitianga. We completed 26 new apartments at Meadowbank and 12 villas at Elderslea in the second half of 2020 before the lockdown restrictions were imposed. We slowed our build rate in mid-March and used contract measures to reduce capital expenditure on our 10 construction projects that were in progress at the time, and our ability to lower the monthly investment in our build program and effectively match that with future sales of retirement village units, meant that we were able to prudently manage cash flow and risk in these segments of the business. After coming out of Alert Level 4 at the end of April, we were able to restart most of our construction projects and the development of 32 villas at Gracelands and 6 villas and a new community center at Woodlands in Motueka were both completed prior to March 31, 2020. These 2 projects brought the total build rate for 2020 up to 176 retirement village units and care suites. The restrictions on construction during the lockdown caused a slight delay with the completion of one of our larger projects, being the construction of 28 apartments and 61 care suites at Green Gables and Nelson. However, this project is now completed as well with our first residents moving in next week. We have also now recommenced construction of our developments at Lady Allum Village and Eden in Auckland, the BayView Stage 2, the Bellevue in Christchurch and Awatere Stage 2 in Hamilton. The construction of 22 apartments and 71 care suites at Bellevue is expected to be complete during the 2021 financial year, along with Stage 2 at the BayView. So in summary, right now, we have 392 independent living units and care suites under construction across 5 sites and 4 geographical regions of New Zealand, and 128 of these are expected to be completed before March 31, 2021. We will also commence earth works on our Waimarie Street development in October this year. This site will be one of the highest quality retirement villages in New Zealand, offering a full continuum of care with 79 like serious independent living apartments and 31 care suites. Our remaining development pipeline of 1,764 units and care suites is 85.7% consented, which demonstrates the excellent capability of our in-house development team and the design and planning for new projects. We also have a well-proven ability to deliver projects on time and on budget, which provides the business with a very clear growth pathway over the coming years. So in conclusion, we believe that aged care certainly is a great business to be in during these uncertain times, and our growth strategy through the redevelopment of our portfolio into superior care suite and independent living accommodation has not changed in the light of a rapidly aging population. We look forward to continuing to deliver the best quality of care and service to our residents within these environments over the years ahead.

Thank you, Earl. Are there any questions arising from the annual report or from my address or the presentation from Earl? We have a question. What progress has the Board made towards becoming a living wage employer this year? Earl, would you like to answer?

Sure. So our staff generally comprise registered nurses, health care assistants and housekeeping staff. Registered nurses base rates are now equal to or above the base rates in the district health boards, and certainly, at a starting level close to $30 an hour now. Healthcare assistants are taken care of by way of the equal pay settlement that was achieved in early 2017, and so therefore, are above the living wage already. And the housekeeping staff, depending on the level of qualification, range from above the minimum wage through to effectively what the living wage is now. So we cater for the relativity to the living wage quite well across our spectrum of staff.

Thank you, Earl. Second question. Can you tell us more about the aged care funding claim and what metrics that might mean for Oceania should the claim be successful? Earl?

So the -- there was a work done back in May in relation to the overall cost that the industry incurred during the COVID-19 outbreak. And the total claim was up over $80 million. We worked hard. And as I mentioned before, Brent Pattison, our CFO, was at the forefront of collating data from the industry and submitting it to the ministry and having several teams base calls to validate that claim. Unfortunately, the ministry saw fit only to provide a fraction of that, about $26 million and that was allocated by bed numbers. So effectively, our share was approximately $2 million. So we continue to lobby always for increases in aged care funding. The sector is underfunded, and industry reports over the years has -- in successive times have shown that. And it's an ongoing work stream, obviously, for the sector to pursue.

Okay. Thank you, Earl. Next question. The staff numbers have increased by 200 over 2019, resident numbers have only increased by 100, where are the extra staff being deployed? Earl?

So when we open a new aged care center, there are a base level of staff required even for one resident. So every center, we have a manager. We'll have a clinical manager and we'll, obviously, require nursing staff, health care assistance and cleaning stuff. So there is a front-loading of staff for residents that come, so to speak. So that's been the main driver of that impact over the year. And as I said before, we've opened 4 new aged care centers over the last 2 years, that's caused a significant drag on staff cost before the revenue has come.

Thank you, Earl. Next question. Noting the increased focus on premium units and care beds with a resident-funded focus, does this mean that Oceania will become the leader when it comes to staff pay and conditions?

As I mentioned before, I'd consider Oceania already to be one of the highest paid -- highest paying employers in the sector when it comes to registered nurses in particular. We know that our base rates based on the published collective agreements are at the very top end. We are not adequately funded to meet DHB penal rates, unfortunately, and that has been a campaign of the sector-leading up to the election, again, that Dr. Frances Hughes was involved in. And we would certainly like to see more government funding in place to allow that gap to be achieved. So I would regard us as already being a leader in the sector.

Okay. Our next question. What is the motivation behind the Handled With Care campaign?

One of the key differentiating features of Oceania is that we're an aged care-focused business, so we talk, as we have just done around our aged care strategy, around our care suites. And we generally believe that we deliver care better than other providers do because it's our focus. It's not an adjunct to another part of our business. So we generally believe that we deliver it with kindness and compassion and respect, and we live by our values. And the investment that we've made in our clinical team, behind Frances, et cetera, is certainly testimony to that. And so the Handled With Care campaign effectively was a reference to the fact that we handled the COVID-19 risk well, and we looked after our residents and staff, as I said. And that goes down to the detail of some very, very direct intervention with staff being unable to come to work sometimes because they had family responsibilities, and we are able to provide baby sitting services and bring children into community centers of the village to enable them to be looked after. So I think we went above and beyond, and that's what was the motivation behind the Handled With Care campaign.

Thank you, Al. There appears to be no further questions at this stage. So I will now -- we will now move to the formal part of the meeting. Both items of business are ordinary resolutions to be passed, they require approval by a simple majority of more than 50% of the votes of shareholders entitled to vote in voting on resolutions. Voting will be by poll, each share held by a shareholder confers one vote. As I mentioned before, to vote, please select the polling icon. This will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to press submit or enter button as a vote is automatically recorded. The first item, election of Director. We now move to the next item, which is -- relates to the election of Directors. Under Rule 2.7.1 of the NZX listing rules, a Director must not hold office without being reelected past the third annual meeting following the Director's appointment or 3 years, whichever is longer. In this case, I'm offering myself for reelection as a Director of the company. I will now hand over to Alan Isaac to chair this part of the meeting.

Thank you, Liz. Good afternoon. As Liz just noted, in accordance with Rule 2.7.1 of the NZX listing rules, the Director must not hold office without being reelected past the third annual meeting following that Direct's appointment or 3 years, whichever is longer. In this case, Elizabeth Coutts is offering herself for reelection as a Director of the company. The Board has determined that, in its view, if reelected, Elizabeth Coutts will continue to be an independent Director for the purposes of the NZX listing rules. Elizabeth Coutts stands for reelection with the unanimous support of the other Directors of the company. A brief biography regarding Liz is included on the website and in the notice of meeting, and I'll now invite Liz to briefly talk in support of her reelection.

Thank you, Alan. Shareholders, fellow board members, thank you for this opportunity to introduce myself to those of you who do not know me and to present many of you who I've seen at annual meetings over the years. I last presented myself reelection 3 years ago soon after Oceania's IPO in May 2017. I was pleased to serve on the Board and be part of the Oceania story. 3 years on, I'm pleased that we are well underway with enhancing our aged care business and have made good progress with our development projects as both Earl and I have covered in our addresses this afternoon. We are growing the business as well as enhancing all aspects of the performance of the business. I believe our growth and performance demonstrates the company is doing the right things. I think my substantial governance experience, proven record backed by my approach, which has been described as careful but bold, will continue to be useful in adding value for you. I've always had the best interest of the company and the shareholders at heart. I would also like to give you my assurance, I have capacity to undertake the role. I have very good support and I do not undertake activities apart from my governance roles. I'm organized, I always make myself available. My experience demonstrates that I can manage this level of workload. I enjoy working with all members of your Board. I believe he will make a valuable contribution to your company's success. And on that basis, I ask for your support and endorsement. Thank you.

I now move that Elizabeth Coutts be reelected as a Director of the company. Can I have a seconder, please? Thank you, Kerry. Are there any questions for the Board or Liz concerning the motion from shareholders? So there is a question, and that is Mr. Coutts chair 3 large companies and has a number of other governance roles. At a time when many chairs are commenting on the extra workload, how can we have an assurance that she is committing sufficient time and energy to Oceania. I think Liz has addressed that, perhaps you'd like to reemphasize the points you made, Liz?

I will just reemphasize that I do give you my assurance that I have capacity to undertake the role. I have 4 large roles and my other governance or other roles I had ceased this year or in the process of. So as I said, I can give you my assurance that I give the -- all the companies all the time I have available, and I have very good support so that I can make myself available. And I have always worked very hard for my life, and I think that, that kind of experience means that you are well organized, and you can undertake these roles.

Thank you, Liz. I now put the motion and invite you to vote by selecting one of the options in the polling icon. [Voting]

I advise that the Board is holding a total of 159,276,577 directed and discretionary proxies, which will be voted in favor of this resolution. I now hand the chair back to Liz.

Thank you. We will now move to the next resolution regarding the remuneration of the auditor. I now move that the Directors be authorized to fix the remuneration of PricewaterhouseCoopers as the auditor of the company with ensuing year. Can I have a seconder, please? Thank you. Are there any questions for the Board concerning the motion from shareholders? There are no questions. I now put the motion and invite you to vote by selecting one of the options in the polling icon. I advise that the Board is holding a total of 179,530,130 directed and discretionary proxies, which will be voted in favor of this resolution. Thank you all. That concludes the meeting's formal resolutions. I will shortly close the voting system, please ensure that you have carved to votes on all resolutions. I will now pause to allow you time to finalize your votes. [Voting]

The results will be published to the market later today. We will now consider the questions that have been submitted to the meeting. Are there any questions? Yes, we have a question. And the first question. I understand that originally the Meadowbank Retirement village was going to incorporate a dementia award. Is this still going to proceed? If so, when will construction commence? And estimated completion date? Earl?

Yes, it is in our plans to construct a dementia unit, a building at Meadowbank. We have consent for that, resource consent in place. We're just finalizing our plans and putting out feasibilities together with a more research into the demand for dementia-level care in Auckland, which we're reasonably confident of. So that certainly is in our sort of near-term development thinking.

Thank you, Earl. The next question, I realize that the implementation of Oceania's strategy to move from mainly standard beds to premium beds has had a front-loaded cost. I note, however, that this impact is often poorly understood by shareholders, which well might explain the poor performance of the Oceania shares compared to its competitors. Does the Board plan to find a better way to explain the story? Earl?

Yes, that's a good question, actually. And we are very conscious of the fact that our earnings have been lumpy over the previous 3 years, particularly on the care side of the business. But as you note, I think if you take your time to understand our strategy, the increased proportion of premium units and beds in the portfolio under our brownfields redevelopment strategy requires disruption in the short term. So we have, indeed, decommissioned bids and undertaking construction activities on existing sites, which has disrupted operations. Going forward, as I said in my presentation, we'll see aged care earnings increase now as we've got beyond the majority of that disruption, particularly in our sort of premium sites throughout the country. And as we sell down our care suites and generate both upfront development margins as well as longer-term trail income, which is where the high-quality earnings in the business come from, you'll see far more linear growth in our earnings going forward. And I believe that, that will then underplay our strategy and be well understood by our shareholder base.

Next question. Based on your presentation, am I correct that The Sands has 10 units unsold in 3 care suites vacant?

As at today, that's correct in terms of units unsold. The care suite is vacant, that's correct as well. Obviously, we have residents coming in all the time. But as at the time we prepared for this presentation, that's the numbers.

Thank you. Are there any more questions? No, no. Right. Well, again, thank you very much for your attendance this afternoon. We really appreciate the questions. And I now declare the meeting closed.