ORPEA 
INTERIM FINANCIAL REPORT
Six-month period from 1 January 2020 to 30 June 2020
This financial report has been prepared in accordance with Articles L.451-1-2 of the French Monetary and Financial Code and 222-4 to 222-6 of the AMF's General Regulation.
It will be distributed in line with the standards in force. It is available on the Company's website at www.orpea-corp.com.
CONTENTS
1 - INTERIM BUSINESS REPORT | page 2 |
- - Highlights
- - Business growth
- - H1 2020 financial results
- - Balance sheet, debt and real-estate portfolio
- - Cash flows
- - The ORPEA Group's short- and medium-term outlook
2 - FINANCIAL STATEMENTS | page 12 |
Income statement
Balance sheet
Cash flow statement
Statement of changes in equity
Notes to the financial statements
3 | - STATEMENT BY THE PERSON RESPONSIBLE FOR THE INTERIM REPORT | page 48 |
4 | - STATUTORY AUDITORS' REPORT | page 49 |
Société anonyme (public limited company) with a Board of Directors and €80,769,796.25 in share capital - Registered
office: 12 rue Jean Jaurès 92813 Puteaux Cedex, France
1. INTERIM BUSINESS REPORT
1.1 HIGHLIGHTS
Management of Covid-19
The end of Q1 and all of Q2 were affected by the Covid-19 pandemic which has had a major impact on the global economy as a whole, as well as on the operation of healthcare facilities.
During H1, the Group employed all of its human and financial means in the fight against Covid-19, across all the countries in which it operates, to protect its residents, patients and employees to the best of its ability:
- very early implementation of strong protection measures to avoid the virus entering facilities;
- close and permanent cooperation with the supervisory authorities, public and private facilities across all countries;
- restocking as of January of personal protective equipment (PPE) and real-time inventory management. ORPEA was thus able to meet the needs of its French facilities and optimise redistribution to its European sites;
- permanent adaptation of hygiene protocols, and dedicated training for all employees with a team of more than 40 doctors and nurses specialised in Hospital Hygiene;
- creation of a Group psychological support unit for employees worldwide;
- creation of a scientific committee dedicated to understanding this new virus and the daily scientific monitoring of its evolution;
- reinforcement of cooperation between nursing homes and post-acute and rehabilitation hospitals, with the creation of Covid units within these hospitals;
- appropriate and clear communication to families, employees and the supervisory authorities.
The Group has managed to limit the impact of this unprecedented crisis thanks, first and foremost, to the extraordinary commitment and solidarity of its 65,000 employees worldwide. To thank and support them, they were paid a recognition bonus.
The Group therefore dedicated all of its experience, contacts and means to ensure, when appropriate, according to the country and the local circulation of the virus, a very gradual easing of lockdown measures starting in May, with the priority remaining the safety and quality of care of its residents, patients and employees.
Development
During H1 2020, ORPEA continued to pursue its globalisation strategy via its five regional clusters coupled with the "premiumisation" of its offering and network. The Group thus completed the acquisition of the Sinoué group during H1 2020, a key player in mental healthcare in France. The Group also extended its presence to Ireland, with the acquisition of TLC, a major nursing home player in County Dublin. Moreover, ORPEA continued to grow its regional coverage in smaller countries, always targeting prime locations, in particular in Mexico and Latvia.
Acquisition of the Sinoué group in psychiatry
In line with its strategy to strengthen its premium positioning, ORPEA acquired the Sinoué group, a key player in mental healthcare in France.
2020 Interim financial report | Page 2 of 50 |
Founded in 1998 by a team of psychiatrists and led by its Chairman, Dr Philippe Cléry-Melin, the Sinoué group is recognised for its cutting-edge expertise in psychosocial care and rehabilitation, coupled with an excellent standard of accommodation services. It successfully manages a diverse and innovative mental healthcare offering, treating all types of psychiatric disorders such as depression, addiction, bipolar disorder and sleeping disorders.
The Sinoué group operates six psychiatric facilities (592 beds), located in prime locations and which were recently renovated or built, all of which enjoy a first-class reputation, in particular:
- a hospital in Meudon one of the best-known Parisian facilities of its kind, founded 150 years ago;
- a new 140-bed hospital in Grenoble;
- the prestigious hospital located in Garches, west of Paris;
- the Nightingale hospital in London, a private psychiatric facility located in the Marylebone district in the heart of London.
This transaction, which began eight years ago with a 40% stake, then 45%, perfectly highlights ORPEA's long-term development strategy.
In April 2020, ORPEA thus acquired the remaining 55% stake in the Sinoué group, which generated revenue of €65 million in 2018.
Acquisition of TLC in Ireland
As part of its selective expansion strategy, ORPEA extended its presence to Ireland, in County Dublin, with the acquisition of TLC Group, a major nursing home player in Ireland.
The long-term care sector in Ireland boasts healthy growth prospects:
- the Republic of Ireland has one of the strongest economic growth rates in the eurozone (GDP growth of +6.7% in 2018)1;
- the number of people over 80 should increase by +3% per year until 20462;
- the private nursing home sector is highly fragmented, with the top 10 representing just 25% of the market2;
- 7,500 beds must be added by 2026 to meet demand2.
Founded in 2004, TLC is one of the leading nursing home operators in Ireland and is recognised for the quality of its offering by the Health Authorities (HIQA). TLC owns a network of five facilities (674 beds) all of which are recent and located in County Dublin. The group owns 100% of its real estate and has an experienced management team. TLC posted revenue of €40 million in 2019.
This development is in line with ORPEA's premiumisation strategy which targets prime locations, as well as the quality of both its offering and accommodation.
Other developments
The Group also continued its targeted acquisition policy of independent facilities, notably with the acquisition of a nursing home in Mexico and in Riga, Latvia.
These targeted developments are part of the Group's strategy for creating value.
- Source: WorldHealthRankings
- Source: WorldHealthRankings, Cushman & Wakefield presentation, Bank of Ireland
2020 Interim financial report | Page 3 of 50 |
1.2 | BUSINESS GROWTH | |||||
H1 2020 | H1 2019 | Chg. | ||||
France Benelux | 1,136.6 | 1,093.2 | +4.0% | |||
Central Europe | 499.6 | 473.9 | +5.4% | |||
Eastern Europe | 170.0 | 175.7 | -3.2% | |||
Iberian peninsula and Latam | 96.4 | 96.5 | 0.0% | |||
Rest of the world | 1.5 | 1.4 | n/a | |||
Total revenue | 1,904.2 | 1,840.6 | +3.5% | |||
Of which organic growth3 | -0.9% | |||||
Clusters' composition:
- France Benelux: France, Belgium, the Netherlands, Ireland, the UK;
- Central Europe: Germany, Italy, Switzerland;
- Eastern Europe: Austria, Poland, the Czech Republic, Slovenia, Latvia;
- Iberian peninsula and Latam: Spain, Portugal, Brazil, Uruguay, Mexico;
- Rest of the world: China.
The ORPEA Group, the world leader in long-term care (nursing homes, post-acute and rehabilitation hospitals, psychiatric hospitals, and home care services), posted a 3.5% improvement in revenue during the H1 2020.
The Group's business was hit hard in H1 2020 by the Covid-19 pandemic. Faced with exceptional circumstances, ORPEA managed to achieve revenue growth of +3.5% thanks to strong external growth of +4.4% with the acquisitions, in particular, of TLC in Ireland, SIS in Latin America and Sinoué in France. The decline in organic growth remained limited at - 0.9%, thanks to the remarkable commitment of the Group's 65,000 employees. The Group's healthcare facilities (post-acute and rehabilitation hospitals and psychiatric hospitals) were particularly affected by closures for the whole of Q2 in Austria, and a marked slowdown in France and Germany due to the sudden suspension of surgery.
- FRANCE BENELUX REGION
The France Benelux region includes operations in France, Belgium, the Netherlands and Ireland. Revenue growth in this region reached +4.0% at €1,136.6 million. This improvement was due to the contribution of TLC in Ireland and of Sinoué in France, which have been
3 The Group's organic revenue growth includes: 1. The year-on-year change in the revenue of existing facilities as a result of changes in their occupancy rates and per diem rates; 2. The year-on-year change in the revenue of redeveloped facilities or those where capacity has been increased in the current or year- earlier period; 3. Revenue generated in the current period by facilities created during the current or year-earlier period, and the change in revenue of recently acquired facilities by comparison with the previous equivalent period.
2020 Interim financial report | Page 4 of 50 |
consolidated since 1 January 2020 and 1 April 2020 respectively. At the same time, the Group's healthcare facilities in France were particularly affected by the pandemic.
This cluster represents 60% of the Group's business.
- CENTRAL EUROPE REGION
The Central Europe region encompasses operations in Germany, Switzerland and Italy. This region saw a marked increase of +5.4% in revenue to €499.6 million, reflecting the resilience of its business, notably in Switzerland and Germany.
Central Europe is the Group's second-largest cluster in terms of revenue and represented 26% of the Group's business during H1 2020.
- EASTERN EUROPE REGION
The Eastern Europe region is made up of operations in Austria, Poland, the Czech Republic, Slovenia and Latvia. At €170.0 million, the -3.2% decline in revenue for this region was solely due to the closure of post-acute and rehabilitation hospitals in Austria. This cluster represents 9% of the Group's business.
- IBERIAN PENINSULA AND LATAM REGION
The Iberian Peninsula and Latam region includes business in Spain, Portugal, Brazil, Mexico and Uruguay. Revenue for this region remained stable at €96.4 million, despite the severe impact of Covid-19 on facilities in Madrid and Barcelona. This decline in business was offset in particular by the acquisition of joint ventures with SIS in Brazil and Portugal.
This cluster represents 5% of the Group's business at the end of H1 2020.
- REST OF THE WORLD REGION
Operations in China make up the Rest of the world region, with €1.5 million in revenue deriving from the facility in Nanjing.
2020 Interim financial report | Page 5 of 50 |
1.3 H1 2020 FINANCIAL RESULTS
Chg. | |||
In €m | H1 2020 | H1 2019 | H1 2020/ |
H1 2019 | |||
Revenue | 1,904.2 | 1,840.6 | +3.5% |
Purchases used and other external expenses | -342.7 | -323.7 | +5.9% |
Staff costs | -1,080.0 | -986.5 | +9.5% |
Taxes other than on income | -72.3 | -61.7 | +17.2% |
Other recurring operating income and expense | 44.3 | 11.0 | N/A |
EBITDAR | 453.4 | 479.7 | -5.5% |
Rental expenses | -14.4 | -15.2 | -5.3% |
EBITDA | 439.0 | 464.5 | -5.5% |
Depreciation, amortisation and charges to provisions | -242.3 | -220.4 | +9.9% |
Recurring operating profit | 196.8 | 244.1 | -19.4% |
Other non-recurring operating income and expense | 15.3 | 15.4 | N/A |
Operating profit | 212.1 | 259.5 | -18.3% |
Net interest expense | -113.3 | -106.3 | +6.5% |
Profit before tax | 98.8 | 153.2 | -35.5% |
Income tax expense | -28.3 | -42.6 | -33.5% |
Share in profit/(loss) of associates and joint ventures | 1.8 | 4.1 | N/A |
Attributable to non-controlling interest | -0.8 | 0.0 | N/A |
Net profit attributable to ORPEA's shareholders | 73.0 | 114.6 | -36.3% |
- RECURRING OPERATING PROFIT
H1 2020 | H1 2019 |
restated | |
Restated | |
for | |
for IFRS 16 | |
IFRS 16 | |
1,904.2 | 1,840.6 |
-342.7 | -323.7 |
-1,080.0 | -986.5 |
-72.3 | -61.7 |
- 11.0
-
479.7
-169.5-162.1
- 317.6
-112.6-98.8
- 218.8
- 15.0
186.6 233.8
-79.8-73.7
-
160.1
-30.2-44.1
- 4.1
-0.8 0.0
79.1 120.1
EBITDAR (EBITDA before rental expenses) was down -5.5% to €453.4 million, representing a margin of 23.8% of revenue. The decline of -230 basis points compared with H1 2019 was due to the impact of the Covid-19 pandemic which totalled a gross amount of €147 million (loss of activity, additional costs relating to personal protective equipment and staff bonuses). Taking into account compensation received, net cost stood at €53 million. This compensation is recognised as recurring profit, either under other income for compensation relating to loss of activity, or as a reduction in expenses for compensation for additional costs relating to personal protective equipment and payroll costs.
The most affected geographical regions were:
- Eastern Europe, due to the temporary closure of Austrian clinics: the EBITDAR margin was 10.7% for H1 2020, compared with 16.8% for H1 2019;
- the Iberian peninsula and Latam region, due to the intensity of the Covid-19
pandemic in Madrid: the EBITDAR margin was 10.1% for H1 2020, compared with 25.3% for H1 2019.
Conversely, the France Benelux and Central Europe regions proved resilient, with limited declines:
- France Benelux: EBITDAR margin down -140 basis points at 27.0%;
- Central Europe: EBITDAR margin down -50 basis points at 23.9%.
EBITDA for H1 2020 declined by -5.5% to €439.0 million, representing a margin of 23.1% of revenue.
The EBITDA margin, restated for IFRS 16, stood at 14.9%- factoring in external rental expenses of €169.5 million - compared with 17.3% for H1 2019.
Recurring operating profit for H1 2020 stood at €196.8 million (down -19.4%) after depreciation, amortisation and charges to provisions of €242.3 million (+9.9%) reflecting the growth of the real-estate portfolio held by the Group.
2020 Interim financial report | Page 6 of 50 |
- OPERATING PROFIT
Net non-recurring gains were stable at €15.3 million, compared with €15.4 million in H1 2019. These notably included the impact of business combinations during the period in the amount of €29 million. Operating profit was €212.1 million, compared with €259.5 million in H1 2019, representing a decline of -18.3%.
- NET INTEREST EXPENSE
Net interest expense reached €113.3 million, representing a limited increase of +6.6% due to sustained investment.
- PROFIT BEFORE TAX
Profit before tax totalled €98.8 million, down -35.5% from €153.2 million in H1 2019.
- NET PROFIT
Consolidated companies' income tax expense came to €28.3 million.
Lastly, ORPEA's share in the profit/(loss) of associates contributed income of €1.8 million in H1, compared with €4.1 million in the previous half.
Net profit attributable to ORPEA's shareholders was down -36.3% compared with H1 2019 at €73.0 million.
2020 Interim financial report | Page 7 of 50 |
1.4 BALANCE SHEET, DEBT AND REAL-ESTATE PORTFOLIO
At 30 June 2020, Group equity attributable to ORPEA's shareholders was €3,009 million, compared with €3,014 million at 31 December 2019.
Net financial debt climbed +€423 million to €5,958 million4 compared with 31 December 2019, against a backdrop of strong growth with investments in both real estate and operations, notably TLC in Ireland and Sinoué in France.
At 30 June 2020, the Group's two principal debt ratios were below the authorised limits:
- financial leverage restated for real estate assets (restated for IFRS 16) = 2.8 versus 2.3 at 31 December 2019, with a cap at 5.5;
- restated gearing (restated for IFRS 16) = 1.7 versus 1.6 at 31 December 2019, with a cap at 2.0.
Ratios in the majority of loan agreements signed over the past two years are restated for IFRS 16. Both ratios, factoring in the impact of IFRS 16, stood at 1.4 for restated financial leverage and 1.8 for restated gearing and were therefore below the authorised cap.
The proportion of net debt accounted for by real estate debt now stands at close to 87%. That strengthens ORPEA's balance sheet, as this debt is backed by high-quality and low- volatility real-estate assets operated by the Group.
The average cost of financial debt stood at 2.40% over H1 2020, -30 basis points lower than at 31 December 2019. Net debt is still fully hedged against the risk of an increase in interest rates.
During H1 2020, ORPEA continued its strategy of holding real-estate assets in the best locations, notably with the acquisition of buildings in Dublin, Riga and the Netherlands.
At 30 June 2020, the real-estate portfolio was valued at €6,249 million5, i.e. an increase of +€232 million over H1 alone, and had a total surface area of 2.2 million sq m.
The real estate ownership rate was stable compared with 31 December 2019, at 49%.
The application of IFRS 16 led to the recognition on the balance sheet of rights-of-use relating to current leases in the amount of €2,387 million compared with €2,334 million at 31 December 2019, whereas on the liabilities side of the balance sheet, the discounted value of future rental expenses stood at €2,562 million, of which €2,320 million maturing in more than one year and €242 million in less than one year.
1.5 CASH FLOWS
In H1 2020, ORPEA's cash flow generated by operating activities came to €406 million, compared with €364 million in H1 2019.
Net cash used in investing activities, which includes investments in construction projects and maintenance, acquisitions of real-estate assets and intangible assets, net of real estate and intangible asset disposals, was negative and totalled €660 million, compared with €606 million in H1 2019. Real estate investments (construction projects or acquisitions of buildings) accounted for 55% of these investments.
- Excluding €475 million in liabilities associated with assets held for sale.
- Excluding the impact of €415 million in real-estate assets held for sale.
2020 Interim financial report | Page 8 of 50 |
Net cash generated by financing activities was positive at €317 million, compared with €421 million in H1 2019.
ORPEA held €902 million in cash at 30 June 2020, compared with €839 million at 31 December 2019.
1.6 THE ORPEA GROUP'S SHORT- AND MEDIUM-TERM OUTLOOK
- SUBSEQUENT EVENTS:
Further optimisation of the balance sheet
As every year, ORPEA went ahead with a Schuldschein issue in July 2020. The €184 million raised from the 5- to 7-year maturities will be devoted to funding future development and will help extend the maturity of its debt through the redemption of shorter maturities.
ORPEA also issued a €40 million private placement maturing in 12 years.
Acquisition of the Clinipsy Group
Clinipsy is a private independent group of psychiatric hospitals, founded in 2009 by Doctors Frédéric Lefebvre and Laurent Morasz.
In 12 years, the group has become a key mental healthcare player in France and enjoys leading expertise in the opening of new facilities, innovation, research and committed public-private partnerships.
At 1 July 2020, ORPEA had acquired nine facilities with a total of 907 beds and places, of which 50% have been opened recently or are scheduled to be opened during the next few years. All of the facilities are recent (average age of five years), are mainly located in large towns or cities in the North and East of France, and in regions that are in need of improved healthcare offerings.
In 2019, Clinipsy's nine facilities, which are consolidated from 1 July 2020, generated revenue of almost €40 million.
Acquisition of 50% of Brindley Healthcare
Following the acquisition of the TLC Group in January 2020, ORPEA has stepped up its presence in Ireland with the acquisition of 50% of the fourth largest national nursing home operator, Brindley Healthcare. ORPEA has an option to buy the remaining 50% by 2022.
Founded in 2000, Brindley Healthcare operates 10 facilities (574 beds) across six counties which are complementary to County Dublin where TLC operates. In 2019, the group generated revenue of almost €25 million. As ORPEA does not own a controlling stake, Brindley Healthcare will be consolidated using the equity method.
Management of Covid-19
The ORPEA Group and its teams remain extremely cautious in terms of its management of the Covid-19 public health crisis. Since the end of H1, ORPEA continues to apply strict barrier measures across all sites (wearing of masks, physical distancing, heightened hygiene measures etc.) while restarting social interactions within its facilities (meals in the restaurant, family visits, events and entertainment etc.).
In addition to barrier measures, the Group also applies its test policy in the event of any suspected cases or contact cases by testing everybody present within the facility (residents, patients and employees). In the event one person tests positive, certain temporary restrictions may be reintroduced as a precautionary measure, such as dividing mealtimes at the restaurant into small groups or limiting visits to patients' and residents' rooms.
2020 Interim financial report | Page 9 of 50 |
The Group's aim is to provide a graduated response, adapted to each facility, as close to the ground as possible, which focuses on safety and maintaining the social interaction of residents (families, employees, external service providers).
The public health situation within the network was under control at 15 September 2020: the number of positive cases remained low (0.4% of residents and patients at 15 September 2020) and more than 90% of these positive cases were asymptomatic. More than 97% of the Group's facilities therefore currently have no Covid-19 cases.
Cyber attack
The ORPEA Group detected the intrusion of malware on some of its servers during the night of 17 September. The IT security teams were fully mobilised and took immediate action to secure the systems, isolate the affected servers (less than 1% of all servers) and temporarily shut down the entire network, thus preventing the spread of the malware.
This voluntary shutdown caused disruptions to the IT systems but in no way affected the continuity of care and social interactions within the facilities.
Following analysis by recognised cybersecurity experts and thanks to the responsiveness and proper functioning of the security systems, all backups are intact and no data was destroyed or transferred. The Group's IT infrastructure, software and applications and all data have been secured and have not suffered any damage.
The IT teams and external cybersecurity experts actively worked to gradually restart all servers and applications. Executive management requested that this process be carried out step-by-step with extreme care and that all the necessary precautions were taken. The smooth running of both the facilities and administrative services was ensured.
The ORPEA Group informed the relevant authorities of this malicious act.
- STRATEGY AND OUTLOOK
The Group's strategy remains firmly focused on the quality of care and services provided to its residents and patients, as well as the safety and well-being of its employees. ORPEA therefore continues to develop in its five geographical regions, by favouring value-creating acquisitions and the opening of new facilities in prime locations in major European and Latin American towns and cities.
Since the beginning of H2, business across all facilities has picked up significantly:
- at post-acute and rehabilitation hospitals and at psychiatric hospitals, occupancy rates have almost returned to pre-Covid-19 levels;
- the momentum of new admissions for nursing homes is also strong and their occupancy rates in most countries are expected to return to almost pre-Covid-19 levels within the next six months, barring any deterioration in current public health conditions.
The Group will present its new 2020 revenue target, which it had temporarily suspended on 5 May 2020, during the publication of its Q3 revenue.
2020 Interim financial report | Page 10 of 50 |
- PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks remain identical to those presented on pages 69 to 86 in Chapter 3 of the 2019 Universal Registration Document filed with the Autorité des Marchés Financiers on 12 May 2020 under no. D.20-0455.
We are not aware of any significant disputes or litigation liable to affect the Group's financial position at the date of the financial statements.
- RELATED PARTIES
There have been no significant changes to the information presented on pages 196 to 198 in Chapter 5.8.3 of the Company's 2019 Universal Registration Document.
Please also refer to Note 3.25 to the interim consolidated financial statements in this report.
2020 Interim financial report | Page 11 of 50 |
2. FINANCIAL STATEMENTS
ORPEA
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
30 June 2020
SA ORPEA Société Anonyme (public limited company) with share capital of
€80,769,796
Registered on the Nanterre Trade and Companies Registry under no. 401 251 566/APE
Code 853 D
Registered office: 12 rue Jean Jaurès - CS 10032 - 92813 Puteaux Cedex, France
2020 Interim financial report | Page 12 of 50 |
Consolidated income statement
(in thousands of euros) | Notes | 30-Jun-20 | 30-Jun-19 |
REVENUE | 1,904,154 | 1,840,585 | |
Purchases used and other external expenses | (357,126) | (338,873) | |
Staff costs | (1,079,957) | (986,506) | |
Taxes other than on income | (72,324) | (61,693) | |
Depreciation, amortisation and charges to provisions | (242,250) | (220,401) | |
Other recurring operating income | 47,670 | 15,581 | |
Other recurring operating expense | (3,407) | (4,629) | |
Recurring operating profit | 3.22 | 196,759 | 244,066 |
Other non-recurring operating income | 63,447 | 44,744 | |
Other non-recurring operating expense | (48,143) | (29,325) | |
OPERATING PROFIT | 3.23 | 212,063 | 259,485 |
Financial income | 7,478 | 7,109 | |
Financial expense | (120,734) | (113,431) | |
Net finance cost | 3.24 | (113,257) | (106,322) |
PROFIT BEFORE TAX | 98,806 | 153,162 | |
Income tax expense | 3.25 | (28,330) | (42,583) |
Share in profit/(loss) of associates and joint ventures | 3.6 | 1,775 | 4,067 |
CONSOLIDATED NET PROFIT | 72,251 | 114,646 | |
Attributable to non-controlling interest | (767) | 13 | |
Attributable to Orpea's shareholders | 73,018 | 114,633 | |
Number of shares | 64,615,837 | 64,615,837 | |
Basic earnings per share (€) | 1.13 | 1.77 | |
Diluted earnings per share (€) | 1.12 | 1.77 |
The accompanying notes are an integral part of the financial statements
2020 Interim financial report | Page 13 of 50 |
Statement of comprehensive income (in thousands of euros)
Net profit for the year Change in exchange differences Available-for-sale financial assets Cash flow hedges Extended income/(loss) from equity accounted entities Tax effect on items that may be reclassified as income Total items that may be reclassified as income Comprehensive income net of items that may be reclassified as income
Actuarial gains/(losses) Revaluation of property assets Tax effect on items that will not be reclassified as income Total items that will not be reclassified as income Comprehensive income after items that will not be reclassified as income
Other comprehensive income (net of tax)
Comprehensive income
30-Jun-20 | 30-Jun-19 | |
a | 73,018 | 114,633 |
(52,232) | 592 | |
(33,416) | (49,728) | |
8,630 | 12,842 | |
b | (77,018) | (36,293) |
a+b | -4,000 | 78,340 |
0 | 0 | |
c | 0 | 0 |
a+b+c | -4,000 | 78,340 |
b+c | (77,018) | (36,293) |
a+b+c | (4,000) | 78,340 |
2020 Interim financial report | Page 14 of 50 |
Consolidated balance sheet
(in thousands of euros) | Notes | 30-Jun-20 | 31-Dec-19 |
Assets | |||
Goodwill | 3.1 | 1,337,690 | 1,298,972 |
Intangible assets, net | 3.2 | 2,668,111 | 2,469,080 |
Property, plant and equipment, net | 3.4 | 5,550,091 | 5,421,534 |
Property under construction | 3.4 | 699,295 | 595,123 |
Right of use of assets | 3.5 | 2,406,749 | 2,334,315 |
Investments in associates and joint ventures | 3.6 | 193,252 | 166,853 |
Non-current financial assets | 3.7 | 85,231 | 60,365 |
Deferred tax assets | 3.25 | 101,867 | 93,983 |
Non-current assets | 13,042,286 | 12,440,225 | |
Inventories | 14,363 | 12,513 | |
Trade receivables | 3.8 | 254,219 | 263,482 |
Other assets, accruals and prepayments | 3.9 | 770,879 | 584,060 |
Cash and cash equivalents | 3.14 | 901,754 | 838,741 |
Current assets | 1,941,215 | 1,698,796 | |
Assets held for sale | 475,380 | 400,000 | |
TOTAL ASSETS | 15,458,880 | 14,539,021 | |
Liabilities and equity | |||
Share capital | 80,770 | 80,770 | |
Consolidated reserves | 2,327,542 | 2,147,260 | |
Revaluation reserves | 527,235 | 552,021 | |
Net profit for the year | 73,018 | 233,990 | |
Equity attributable to ORPEA's shareholders | 3.11 | 3,008,565 | 3,014,041 |
Non-controlling interests | -3,055 | -2,918 | |
Total consolidated equity | 3,005,510 | 3,011,123 | |
Non-current financial liabilities | 3.14 | 6,300,952 | 5,858,457 |
Long-term lease commitments | 3.16 | 2,328,001 | 2,262,279 |
Provisions | 3.13 | 114,451 | 111,760 |
Post-employment and related benefit obligations | 3.13 | 89,590 | 87,347 |
Deferred tax liabilities | 3.25 | 1,072,726 | 1,027,865 |
Non-current liabilities | 9,905,721 | 9,347,708 | |
Current financial liabilities | 3.14 | 558,230 | 514,945 |
Short-term lease commitments | 3.16 | 242,096 | 237,597 |
Provisions | 3.13 | 27,299 | 27,253 |
Trade payables | 3.17 | 291,590 | 253,782 |
Tax and payroll liabilities | 3.18 | 328,553 | 237,878 |
Current income tax liabilities | 12,361 | 22,988 | |
Other financial liabilities, accruals and prepayments | 3.19 | 612,139 | 485,747 |
Current liabilities | 2,072,268 | 1,780,190 | |
Liabilities associated with assets held for sale | 475,380 | 400,000 | |
TOTAL EQUITY AND LIABILITIES | 15,458,880 | 14,539,021 |
The accompanying notes are an integral part of the financial statements
2020 Interim financial report | Page 15 of 50 |
Consolidated cash flow statement | |||
30-Jun-20 | 30-Jun-19 | ||
(in thousands of euros) | Notes | ||
Cash flow from operating activities..................................................................................................................... | |||
• Net profit of consolidated companies...............................................................…………………………….. | 73,018 | 114,633 | |
• Elimination of non-cash income and expense related to operating activities (*)………………………………… | 202,640 | 188,072 | |
Net finance cost............................................................................................................................................ | 3.24 | 113,257 | 106,322 |
• Gains on asset disposals not related to operating activities, net of tax……………………………………… | 0 | 0 | |
Gross cash flow from operations generated by consolidated companies | 388,915 | 409,027 | |
• Change in the operating working capital requirement ...................................................................................... | |||
- Inventories.................................................................................................................................................. | (1,850) | (405) | |
- Trade receivables....................................................................................................................................... | 3.8 | 9,263 | (39,844) |
- Other receivables...................................................................................................................................... | 3.9 | (109,982) | 48,937 |
- Tax and payroll liabilities............................……………………………………………………………..… | 3.18 | 58,569 | 902 |
- Trade payables.......................................................................................................................................... | 3.17 | 28,937 | (2,975) |
- Other financial liabilities.............................................................................................................................. | 3.19 | 31,896 | (51,852) |
Net cash generated by/(used in) operating activities | 405,748 | 363,790 | |
Cash flow from investing and development activities ..................................................................................... | |||
• Real estate investments ………………………………………………………………………………..……. | (362,093) | (380,033) | |
• Disposals of real estate ……………………………………………………………………………………… | 1,123 | 0 | |
• Acquisition of other non-current assets used in operations …………………………………………………… | (293,144) | (225,702) | |
• Current accounts and other movements ……………………………………………………………………… | (5,971) | 116 | |
Net cash generated/(used by) investing activities | (660,085) | (605,619) | |
Net cash generated/(used by) financing activities ........................................................................................... | |||
• Net cash inflows/(outflows) related to bridging loans and bank overdrafts ……………………………… ........ | 3.14 | 260,965 | 53,606 |
• Proceeds from new finance leases...................................................................................................... ............. | 3.14 | 48,566 | 56,979 |
• Proceeds from other borrowings ……………………………………………………………………………… 3.14 | 679,721 | 1,090,959 | |
• Repayments of lease liabilities ....................................................................... ................................................ | (127,142) | (119,751) | |
• Repayments of other borrowings.................................................................................................................... | 3.14 | (355,640) | (434,453) |
• Repayments under finance leases ................................................................................................................... | 3.14 | (75,863) | (119,891) |
• Net finance cost and other changes................................................................................................................... | 3.24 | (113,257) | (106,322) |
Net cash generated/(used by) financing activities | 317,350 | 421,127 | |
Change in cash and cash equivalents | " " | 63,013 | 179,298 |
Cash and cash equivalents at beginning of period ………………………………………………………………… | 838,741 | 767,987 | |
Cash and cash equivalents at end of period ………………………………..………………………………… | 901,754 | 947,286 | |
Analysis of cash and cash equivalents at end of period ……………………………………………………… | 901,754 | 947,286 | |
• Cash equivalents............................................................................................................................................. | 3.14 | 12,260 | 123,946 |
• Cash ............................................................................................................................................................. | 3.14 | 889,494 | 823,340 |
The accompanying notes are an integral part of the financial statements |
- Of which mainly depreciation, amortisation and charges to provisions, deferred taxes, share in income of associates, excess of fair value of assets and liabilities acquired, redevelopment costs, non-recurring expenses arising from the acquisition of facilities, IFRS 16 income and expenses
2020 Interim financial report | Page 16 of 50 |
Statement of changes in consolidated equity
(in thousands of euros) except for the number of shares
31-Dec-18 Change in value of real estate Post-employment benefit obligations Financial instruments Exchange differences Impact of the measurement of deferred taxes Change in value recognised directly in equity
Revaluation | Total attributable | Non- | ||||||
Number of shares | Share capital | Share premiums | Other reserves | Profit (loss) | to Orpea's | controlling | Total | |
reserves | ||||||||
shareholders | interests | |||||||
64,586,323 | 80,733 | 950,642 | 557,720 | 1,159,796 | 220,391 | 2,969,283 | 1,392 | 2,970,675 |
58,973 | 58,973 | 58,973 | ||||||
233 | 233 | 233 | ||||||
(64,905) | (64,905) | (64,905) | ||||||
(3,515) | (3,515) | (3,515) | ||||||
0 | 0 | |||||||
0 | 0 | (5,699) | (3,515) | 0 | (9,214) | 0 | (9,214) |
Reclassifications | |||||||||
Appropriation of net profit | 142,852 | (220,391) | (77,539) | (77,539) | |||||
Profit or loss at 31 December 2019 | 233,990 | 233,990 | (1,222) | 232,768 | |||||
0 | 0 | ||||||||
OCEANE | 51,839 | 51,839 | 51,839 | ||||||
Other | (477) | (477) | (3,088) | (3,565) | |||||
Other | (7,664) | (7,664) | (7,664) | ||||||
Other (IFRS 16) | (145,582) | (145,582) | (145,582) | ||||||
Bonus share allotment plan | 29,514 | 37 | (37) | (596) | (596) | (596) | |||
Cancellation of treasury shares | 0 | 0 | |||||||
31-Dec-19 | 64,615,837 | 80,770 | 950,605 | 552,021 | 1,196,655 | 233,990 | 3,014,041 | (2,918) | 3,011,123 |
Change in value of real estate | 0 | 0 | |||||||
Post-employment benefit obligations | 0 | 0 | |||||||
Financial instruments | (24,786) | (24,786) | (24,786) | ||||||
Exchange differences | (52,232) | (52,232) | (52,232) | ||||||
Impact of the measurement of | |||||||||
deferred taxes | 0 | 0 | |||||||
Change in value recognised directly | |||||||||
in equity | 0 | 0 | (24,786) | (52,232) | 0 | (77,018) | 0 | (77,018) | |
Reclassifications | |||||||||
Appropriation of net profit | 233,990 | (233,990) | 0 | 0 | |||||
Profit or loss at 30 June 2020 | 73,018 | 73,018 | (767) | 72,251 | |||||
OCEANE | (2,573) | (2,573) | (2,573) | ||||||
Other | 3 | 3 | 630 | 633 | |||||
Bonus share allotment plan | 1,094 | 1,094 | 1,094 | ||||||
Cancellation of treasury shares | 0 | 0 | |||||||
30-Jun-20 | 64,615,837 | 80,770 | 950,605 | 527,235 | 1,376,937 | 73,018 | 3,008,565 | (3,055) | 3,005,510 |
2020 Interim financial report | Page 17 of 50 |
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
30 June 2020
Table of contents
2020 Interim financial report | Page 18 of 50 |
Notes to the condensed consolidated financial statements
Amounts are stated in thousands of euros unless otherwise stated
The ORPEA Group's interim condensed consolidated financial statements for H1 2020 were approved by the Board of Directors on 22 September 2020.
1. SIGNIFICANT ACCOUNTING POLICIES
ORPEA S.A. is a French company that has its registered office at 12 rue Jean Jaurès, 92800 Puteaux, France. It is the parent company of a group that operates in the temporary and permanent care sector, primarily through nursing homes for the elderly, post-acute and psychiatric hospitals, and home care.
1.1 - Accounting standards
In accordance with EC Regulation 1606/2002 of 19 July 2002, the ORPEA Group has prepared its 2020 interim condensed consolidated financial statements in accordance with the standards and interpretations published by the International Accounting Standards Board (IASB) as adopted by the European Union and mandatory at the reporting date of these financial statements.
They include International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), all of which are available on the European Commission's website (http://ec.europa.eu/internal_market/accounting/ias/index_en.htm).
The interim condensed consolidated financial statements for the six-month period ended 30 June 2020 have been prepared in accordance with IAS 34 - Interim Financial Reporting, which allows a selection of notes to the financial statements to be presented. These condensed consolidated financial statements must be read together with the consolidated financial statements for financial year 2019.
The accounting methods presented below have been applied consistently to all the periods presented in the consolidated financial statements.
The accounting principles used to prepare the interim condensed consolidated financial statements of the ORPEA Group are identical to those used to prepare the consolidated financial statements for the financial year ended 31 December 2019 and presented in the consolidated financial statements for that period.
The new mandatory standards and interpretations for periods beginning on or after 1 January 2020 and applicable to the ORPEA Group are:
- Amendment to IFRS 3: Definition of a Business;
- Amendments to References to the Conceptual Framework in IFRS Standards;
- Amendments to IAS 1 and IAS 8: Definition of Material;
- Amendments to IFRS 9 and IFRS 7: Interest Rate Benchmark Reform;
- Amendment to IFRS 16: Covid-19-Related Rent Concessions (applicable as of 1 June 2020).
These amendments did not have a material impact on the Group's consolidated financial statements.
The Group did not apply any of the new standards or interpretations that were not mandatory at 1 January 2020. These standards include:
Standards not yet adopted by the European Union (application date subject to adoption by the EU):
- Annual Improvements to IFRS Standards 2018-2020 Various provisions (1 January 2022);
- Amendments to IFRS 3: Business Combinations - Reference to the Conceptual Framework (1 January 2022);
2020 Interim financial report | Page 19 of 50 |
- Amendments to IAS 16: Property, Plant and Equipment - Proceeds before Intended Use (1 January 2022);
- Amendments to IAS 37: Provisions, contingent liabilities and contingent assets (1 January 2022);
- Amendments to IAS 1: Classification of Liabilities as Current or Non-Current (1 January 2022);
- IFRS 17: Insurance contracts.
A detailed analysis of these standards and amendments is under way, but it is not expected to have a material impact on the Group's financial statements.
The only seasonal effect is the number of business days, which is slightly lower in H1 of each calendar year than in H2.
The consolidated financial statements and notes thereto are presented in euros.
1.2 - Use of estimates
The preparation of Financial Statements in accordance with IFRS requires estimates and assumptions to be made which have an impact on the amounts appearing in these Financial Statements. These estimates are based on an assumption of going concern and are established according to the information available at the time. Estimates may be revised if the circumstances on which they were based change or in the event new information comes to light. Actual results may differ to these estimates.
The interim condensed consolidated financial statements for the period were prepared by reference to the current environment, notably in regard the estimates presented below:
- future cash flow and discount rate assumptions used for the impairment testing of goodwill, intangible assets, and property, plant and equipment (IAS 36);
- the valuation of share-based payments (IFRS 2);
- the measurement of provisions (IAS 37);
- the assessment of post-employment benefit obligations (IAS 19);
- the estimate of lease terms and the discount rate for future rent (IFRS 16);
- the valuation of certain financial instruments at fair value (IFRS 9);
- the remeasurement of real-estate assets at fair value (IAS 16).
Due to the current public health crisis, the Group has carried out an in-depth review of these assumptions and estimates.
2. HIGHLIGHTS OF THE PERIOD
2.1 - Covid-19 pandemic context
Despite the pandemic and thanks to its resilience, the Group has maintained its level of business on the whole (see 2.2 below).
Additional costs (personal protective equipment, staff bonuses etc.) were incurred and partly offset by the various financial support schemes implemented by local governments. (See 3.22 below).
Over the period, the most affected geographical regions were Eastern Europe (due to the temporary closure of Austrian clinics) and the Iberian Peninsula (and Madrid in Spain in particular) and Latam. Conversely, the France Benelux and Central Europe regions proved resilient, with limited declines in business.
2.2 - Scope of consolidation
ORPEA's H1 2020 revenue rose +3.5% compared with H1 2019, representing an increase of +€63.6 million.
Organic revenue growth stood at -0.9% for the period.
2020 Interim financial report | Page 20 of 50 |
During the first six months of the year, ORPEA opened several facilities after completing construction and redevelopment projects launched in prior financial years. It also pushed ahead with its strategy of expanding through acquisitions of facilities in operation or at the project development stage.
Lastly, the Group purchased, directly or via companies, specific assets necessary for its expansion, such as intangible rights and operating properties. It also sold a number of facilities and properties.
Based on provisional estimates of the fair value of assets acquired and liabilities assumed, the total investment at their acquisition date breaks down as follows:
Intangible assets | Contingent | Other assets & | Deferred | H12020 | H12020 | ||||||
H12020 | Goodwill | used in | Properties | other liabilities | Cost | ||||||
liabilities | taxes | revenue | income | ||||||||
operations | (1) | ||||||||||
(in €m) | (in €m) | (in €m) | (in €m) | (in €m) | (in €m) | (in €m) | |||||
France Benelux | 0 | 173 | 115 | -3 | 1 | -46 | 205 | 53 | 8 | ||
Central Europe | 37 | 12 | 0 | -1 | -22 | -2 | 24 | 13 | 1 | ||
Iberian peninsula, Latam | 6 | 0 | 7 | -1 | -1 | -1 | 11 | 1 | 0 | ||
Eastern Europe | 1 | 3 | 19 | -1 | -5 | -2 | 14 | 3 | 0 | ||
Other | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
T otal | 45 | 187 | 142 | - | 7 | - 27 | - 50 | 253 | 69 | 10 | |
(1) Of which intangible concession assets, where applicable |
The Group carries out regular acquisitions as part of its external growth strategy.
The Group completed the following transactions during the half year: acquisition of a 100% stake in psychiatric and post-acute hospitals in France (SINOUE Group), post-acute hospitals in Germany (Medaktiv), nursing homes in Mexico (Villazul), Latvia (Senior Baltic), Slovenia (Socni Dom) and Ireland (TLC Group).
The presentation of the geographical region for the France/Benelux operating segments now includes Ireland in addition to France, Belgium, Luxembourg and the Netherlands.
Other non-recurring income and expense relating to acquisitions as part of business combinations are presented in Note 3.23.
2020 Interim financial report | Page 21 of 50 |
In H1 2019, total investments at the date of their first-time consolidation were:
Other | |||||||
Intangible | Contingent | assets & | Deferred | ||||
H1 2019 | Goodwill | assets used in | Properties | other | Cost | ||
liabilities | taxes | ||||||
operations | liabilities | ||||||
(1) | |||||||
(in €m) | (in €m) | (in €m) | (in €m) | (in €m) | (in €m) | (in €m) | |
France Benelux | 29 | 99 | 30 | -2 | -46 | -24 | 78 |
Central Europe | 57 | 42 | 24 | -4 | -6 | -8 | 93 |
Iberian peninsula, Latam | 15 | 0 | 3 | 0 | 1 | 0 | 19 |
Eastern Europe | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Other | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Total | 100 | 141 | 57 | -6 | -51 | -31 | 190 |
(1) Of which intangible concession assets, where applicable |
3. COMMENTARY ON THE FINANCIAL STATEMENTS
3.1 Goodwill
The main movements during the period were as follows: | |
Total | |
Net goodwill at beginning of period | 1,298,972 |
Business combinations | 44,681 |
Previous goodwill adjustments and deconsolidations | 26 |
Exchange differences | (5,989) |
Goodwill on assets held for sale | 0 |
Net goodwill at end of period (*) | 1,337,690 |
(*) Excluding goodwill on assets held for sale €58,133 thousand |
Business combinations include the provisional allocation of the goodwill arising on the acquisition of the MEDAKTIV German sub-group.
The following groups of cash-generating units (CGUs) account for significant goodwill:
30-Jun-20 | 31-Dec-19 | |
MEDITER MIEUX VIVRE sub-group acquired in 2010 | 87,010 | 87,010 |
SENEVITA sub-group | 61,482 | 58,280 |
Existing operations in Germany | 341,649 | 341,649 |
DAGELIJKS LEVEN sub-group | 76,735 | 76,735 |
AXION sub-group | 83,084 | 83,084 |
Brazilian sub-group | 71,147 | 74,950 |
Other | 616,583 | 577,264 |
Net goodwill at end of period | 1,337,690 | 1,298,972 |
No other group of CGUs accounted for more than 5% of total goodwill at the end of the period.
2020 Interim financial report | Page 22 of 50 |
3.2 Intangible assets
Gross intangible assets and accumulated amortisation break down as follows:
6/30/2020 | 12/31/2019 | |||||
Dep. Amort. | Dep. Amort. | |||||
Gross | Prov. | Net | Gross | Prov. | Net | |
Operating intangible assets | 2,598,884 | 23,562 | 2,575,322 | 2,418,543 | 29,624 | 2,388,919 |
Advances and down payments | 5,970 | 15 | 5,955 | 303 | 303 | |
Other intangible assets | 225,824 | 135,155 | 90,669 | 205,389 | 121,696 | 83,693 |
Intangible assets held for sale | -3,835 | -3,835 | -3,835 | -3,835 | ||
Total | 2,826,843 | 158,732 | 2,668,111 | 2,620,400 | 151,320 | 2,469,080 |
At 30 June 2020, the intangible assets used in operations item includes non-amortisable operating licences as well as a brand acquired as part of the SINOUE Group business combination.
In the event of business acquisitions, operating licences which meet IAS 38 requirements are recognised at fair value at the acquisition date. The approach used to measure fair value is based on recent transactions and commonly used valuation models.
Intangible assets held for sale correspond to operating licences held for facilities earmarked for sale within 12 months.
Groups of CGUs with material operating licences are as follows: | ||
30-Jun-20 | 31-Dec-19 | |
MEDITER MIEUX VIVRE sub-group acquired in 2010 | 187,125 | 187,125 |
SINOUE sub-group | 128,325 | |
SENEVITA sub-group | 116,337 | 116,337 |
SENECURA sub-group | 123,989 | 123,989 |
Other | 2,019,545 | 1,961,467 |
Net operating licences at end of period | 2,575,322 | 2,388,919 |
No other group of CGUs accounted for more than 5% of the total for the operating licences item at the end of the period.
Amortisation of other intangible assets is recognised in the income statement under depreciation, amortisation and charges to provisions.
Any impairment losses are recognised in other non-recurring operating expense.
2020 Interim financial report | Page 23 of 50 |
The following table shows movements in intangible assets (net) by category:
Operating | Advances | Intangible | |||
and down | Other | assets held | Total | ||
licences | |||||
payments | for sale | ||||
At 31 December 2018 | 2,172,295 | 8,978 | 79,232 | (3,835) | 2,256,670 |
Increase | 4,853 | (1,342) | 4,287 | 7,798 | |
Decrease | (2,844) | (0) | 414 | (2,430) | |
Depreciation, amortisation and | |||||
charges to provisions | (2,803) | (6,762) | (9,566) | ||
Reclassifications and other | 1,926 | (7,333) | 4,754 | (652) | |
Changes in scope | 215,491 | 0 | 1,768 | 217,259 | |
At 31 December 2019 | 2,388,919 | 303 | 83,693 | (3,835) | 2,469,080 |
Increase | 6,839 | 5,429 | 4,262 | 16,530 | |
Decrease | 0 | ||||
Depreciation, amortisation and | |||||
charges to provisions | (762) | 1 | (4,273) | (5,033) | |
Reclassifications and other | (6,624) | 6,624 | 0 | ||
Changes in scope | 186,948 | 222 | 364 | 187,534 | |
At 30 June 2020 | 2,575,322 | 5,955 | 90,669 | (3,835) | 2,668,111 |
Changes in scope of consolidation are mainly related to acquisitions in France/Benelux (€173 million) and Central Europe (€12 million).
Advances and down payments recognised in intangible assets mainly comprise advances and down payments made in connection with contractually agreed acquisitions of operating licences.
Other intangible assets include €72 million in intangible concession assets in Spain.
3.3 Periodic impairment testing
In accordance with IAS 36, cash generating units are tested for impairment each financial year, including goodwill, intangible assets with an indefinite useful life and property, plant & equipment.
Due to the exceptional circumstances related to the Covid-19 pandemic, impairment tests carried out at 31 December 2019 were updated to take into account the decline in business observed over H1 2020 as well as the gradual recovery in occupancy rates which began across all facilities at the beginning of H2.
As a result, as long-term business forecasts remained unchanged for all CGUs, these tests did not identify any impairment losses at 30 June 2020.
3.4 Property, plant and equipment
3.4.1 - Change in property, plant and equipment and assets under construction
Gross property, plant and equipment, including property under construction, and accumulated amortisation break down as follows:
2020 Interim financial report | Page 24 of 50 |
6/30/2020 | 12/31/2019 | |||||
Dep. Amort. | Dep. Amort. | |||||
Gross | Prov. | Net | Gross | Prov. | Net | |
Land | 2,002,523 | 4,592 | 1,997,931 | 1,950,670 | 4,433 | 1,946,237 |
Buildings | 4,668,481 | 1,201,088 | 3,467,393 | 4,481,417 | 1,122,624 | 3,358,793 |
Technical installations | 747,204 | 427,836 | 319,368 | 678,619 | 388,650 | 289,969 |
Property under construction | 699,357 | 62 | 699,295 | 596,375 | 1,251 | 595,123 |
Other property, plant and equipment | 420,599 | 241,788 | 178,811 | 390,806 | 226,239 | 164,567 |
Assets held for sale | -413,412 | -413,412 | -338,032 | -338,032 | ||
Total | 8,124,752 | 1,875,366 | 6,249,386 | 7,759,855 | 1,743,197 | 6,016,657 |
Depreciation is recognised in the income statement under depreciation, amortisation and charges to provisions.
Any impairment losses are recognised in other non-recurring operating expense.
Movements in the net carrying amount of property, plant and equipment break down by category of asset as follows:
Property, | |||||||
Land | Buildings | Technical | Assets under | Other | plant and | Total | |
installations | construction | equipment | |||||
held for sale | |||||||
At 31 December 2018 | 1,704,802 | 3,336,867 | 193,562 | 445,627 | 176,960 | (144,525) | 5,713,294 |
Acquisitions | 127,462 | 195,935 | 126,128 | 185,827 | (4,484) | 630,864 | |
Change in value | 79,505 | 79,505 | |||||
Disposals and retirements | (7,655) | (1,539) | (7,037) | (2,440) | (18,672) | ||
Depreciation, amortisation and | |||||||
charges to provisions | (168) | (126,701) | (71,164) | 908 | (197,124) | ||
Reclassifications and other | 28,785 | (109,854) | 41,038 | (29,567) | (9,398) | (193,507) | (272,503) |
Changes in scope | 5,850 | 70,202 | 1,944 | 274 | 3,019 | 81,290 | |
At 31 December 2019 | 1,946,237 | 3,358,793 | 289,969 | 595,124 | 164,567 | (338,032) | 6,016,657 |
Acquisitions | 21,278 | 64,801 | 56,282 | 121,711 | 15,324 | 279,396 | |
Change in value | 0 | ||||||
Disposals and retirements | (722) | (4) | (2,643) | (56) | (3,426) | ||
Depreciation, amortisation and | |||||||
charges to provisions | (76) | (59,187) | (30,022) | 1,189 | (12,737) | (100,833) | |
Reclassifications and other | (10,298) | 3,045 | (431) | (18,919) | 10,731 | (75,380) | (91,251) |
Changes in scope | 40,790 | 100,663 | 3,576 | 2,833 | 982 | 148,843 | |
At 30 June 2020 | 1,997,931 | 3,467,393 | 319,368 | 699,295 | 178,811 | (413,412) | 6,249,386 |
The principal changes in H1 2020 include:
- Changes in scope of consolidation;
- Investments necessary for the continuing operation of the facilities, investments in new buildings or extensions, as well as properties and other items of property, plant and equipment acquired during the period through business combinations and those under construction.
At 30 June 2020, the amount of fixed assets financed through finance leases was €1,527,060 thousand, of which €270,325 thousand was for land and €1,256,735 thousand for buildings.
2020 Interim financial report | Page 25 of 50 |
3.4.2 - Revaluation of operating properties
The impact of the revaluation of operating properties in accordance with IAS 16 was as follows:
Impact of IAS 16 measurement at fair value | |||
30-Jun-20 | 31-Dec-19 | Change | |
Gross revaluation reserves | 941,384 | 941,384 | 0 |
Depreciation and amortisation | -17,439 | -17,439 | 0 |
Net revaluation reserves | 923,945 | 923,945 | 0 |
Fair value is measured for each facility based on the location of assets and their level of activity. Fair value is measured in accordance with the provisions set out in IFRS 13 based on operating data for each facility, market comparables and commonly used valuation models. This corresponds to level 3 fair value in the IFRS 13 hierarchy due to the use of non-published data such as operating data.
3.4.3 - Operating leases
Rental costs break down as follows:
30-Jun-20 | 30-Jun-19 | |
Rental expenses | 14,387 | 15,239 |
Total rental costs | 14,387 | 15,239 |
Pursuant to the application of IFRS 16, since 1 January 2019 rental payments now only include renewable leases with a duration of twelve months or less or on low-value assets.
2020 Interim financial report | Page 26 of 50 |
3.5 Right of use of assets
At 30 June 2020, pursuant to the application of IFRS 16, the Group recognised, under assets, rights of use relating to leases in the amount of €2,406,749 thousand.
3.6 Investments in associates and joint ventures
At 30 June 2020, investments in associates and joint ventures break down as follows:
Carrying | ||
Percentage | amount of | |
Associates and joint ventures | ownership at 30 | investments |
June 2020 | (in thousands | |
of euros) | ||
IDS (real estate company) | 49.9% | 13,210 |
DANUVIUS KLINIK (psychiatric care) | 49.0% | 6,941 |
BRAZIL SENIOR LIVING | 50.0% | 71,763 |
SENIOR SUITES | 50.0% | 16,624 |
EXELUS | 28.0% | 2,024 |
DAKI | 30.0% | 7,115 |
INTORP | 30.0% | 3,757 |
COTPT8 | 50.0% | 15,807 |
COMPARTIJN DL | 49.0% | 8,363 |
Other | 28%- to 49.9%- | 26,447 |
owned | ||
Total | 172,050 | |
Equity accounted income in previous financial years | 19,428 | |
Equity accounted income in current period | 1,775 | |
Investments in associates and joint ventures | 193,252 |
In light of the value of the individual investments, existing cash flows with these companies and the ORPEA Group's global strategy in and outside France, the Group's management considers that these interests are not significant taken individually.
2020 Interim financial report | Page 27 of 50 |
At 30 June 2020, the main aggregates related to associates and joint ventures, presented based on the Group's percentage ownership, break down as follows:
(in thousands | |
of euros) | |
Non-current assets | 207,742 |
Current assets | 52,246 |
Equity | 45,956 |
Non-current liabilities | 179,256 |
Current liabilities | 33,002 |
Revenue | 33,156 |
Equity accounted income | 1,775 |
Other comprehensive income | |
Net comprehensive income | 1,775 |
3.7 Non-current financial assets
Non-current financial assets break down as follows:
30-Jun-20 | 31-Dec-19 | |
Net | Net | |
Unconsolidated investments | 7,111 | 11,367 |
Loans | 36,675 | 34,560 |
Security deposits and guarantees | 41,445 | 14,437 |
Total | 85,231 | 60,365 |
Unconsolidated securities are made up of investments in companies over which the Group does not have significant influence as well as investments in mutual banks.
Loans mainly consist of current construction loans arranged by French subsidiaries.
The security deposits and guarantees item includes all types of security deposits and guarantees that the Group may be called upon to provide in the normal course of its business.
2020 Interim financial report | Page 28 of 50 |
3.8 Trade receivables
30-Jun-2031-Dec-19 | ||
Trade receivables | 254,219 | 263,482 |
Trade receivables | 254,219 | 263,482 |
The maturity of financial assets at 30 June 2020 breaks down as follows:
Receivables not | Receivables | Receivables | Receivables | Receivables | ||
30-Jun-20 | due between 0 | due between 7 due between 1 | due more than | |||
yet due | ||||||
and 6 months | and 12 months | and 2 years | 2 years | |||
Trade receivables | 305,312 | 95,525 | 152,378 | 3,815 | 36,908 | 16,686 |
Impairments | -51,093 | (75) | (4,139) | (2,259) | (32,339) | (12,281) |
Total | 254,219 | 95,450 | 148,239 | 1,556 | 4,569 | 4,405 |
The Group has not identified any major default risk among its customers and, in this regard, has not recognised any additional material impairment for expected losses on its trade receivables pursuant to the application of IFRS 9.
3.9 Other assets, accruals and prepayments
30-Jun-20 | 31-Dec-19 | |
Development-related receivables | 210,821 | 186,024 |
Receivables related to disposals of real estate | 37,702 | 20,339 |
VAT receivables | 98,370 | 74,456 |
Advances and down payments made | 7,339 | 3,061 |
Current accounts (associates and related parties) | 230,074 | 197,548 |
Interest rate derivatives | 2,673 | 5,292 |
Miscellaneous receivables | 94,155 | 35,952 |
Receivables from suppliers | 43,346 | 28,350 |
Prepaid operating expenses | 46,399 | 33,039 |
Total | 770,879 | 584,060 |
Development-related receivables mainly comprise amounts paid on acquisitions of companies, operating licences for hospital or nursing home beds, or during the construction of new properties.
VAT receivables arise mainly from real estate construction projects under the Group's growth strategy.
2020 Interim financial report | Page 29 of 50 |
3.10 Assets held for sale
Assets held for sale comprise €413 million in properties that the Group decided to sell in a block or in lots to investors.
3.11 Equity
3.11.1 - Share capital
30-Jun-20 | 31-Dec-19 | |
Total number of shares | 64,615,837 | 64,615,837 |
Number of shares in issue | 64,615,837 | 64,615,837 |
Nominal value of the share (€) | 1.25 | 1.25 |
Share capital (€) | 80,769,796 | 80,769,796 |
Treasury shares | 51,698 | 45,142 |
Since 31 December 2018, the exercise of stock options has had the following impact on share capital and share premiums:
(in thousands of euros) | Total number of | Share capital | Share |
shares | premiums | ||
Share capital at 31/12/2018 | 64,586,323 | 80,733 | 950,642 |
Appropriation of 2018 net | |||
profit | |||
OCEANE | |||
Capital increase | 29,514 | 37 | (37) |
Share capital at 31/12/2019 | 64,615,837 | 80,770 | 950,605 |
Appropriation of 2019 net | |||
profit | |||
Exercise of share warrants | |||
OCEANE | |||
Capital increase | 0 | 0 | |
Share capital at 30/06/2020 | 64,615,837 | 80,770 | 950,605 |
2020 Interim financial report | Page 30 of 50 |
3.11.2 - Earnings per share
Weighted average number of shares in issue
30-Jun-20 | 30-Jun-19 | |||
Basic | Diluted | Basic | Diluted | |
Ordinary shares | 64,615,837 | 64,615,837 | 64,595,781 | 64,595,781 |
Other shares | 211,484 | |||
Treasury shares | 6,556 | 6,556 | 6,774 | 6,774 |
Shares related to the conversion of OCEANE bonds | 3,450,512 | 848,528 | ||
Weighted average number of shares | 64,622,393 | 68,284,389 | 64,602,555 | 65,451,083 |
Basic earnings per share | ||||
(in euros) | 30-Jun-20 | 30-Jun-19 | ||
Basic | Diluted | Basic | Diluted | |
Net profit attributable to | ||||
ORPEA's shareholders | 1.13 | 1.12 | 1.77 | 1.77 |
3.11.3 - Treasury shares
The Annual General Meeting authorised a share repurchase programme.
This programme has a number of aims, including to allow ORPEA to maintain the liquidity of and stimulate trading in its shares, to optimise its capital management and to grant shares to employees including under bonus share allotment plans.
At 30 June 2020, the Group held 51,698 shares in treasury.
On 4 May 2017, the Board of Directors approved the introduction of a new bonus share allotment plan for corporate officers covering a total of 29,514 shares. The allotment vested definitively on 4 May 2019, subject to the satisfaction of performance criteria, and the shares will be covered by a two-yearlock-up period.
On 13 December 2017, the Board of Directors approved the introduction of two other bonus share allotment plans for certain employees of ORPEA or its affiliated companies covering a total of 26,000 shares. The allotment will vest definitively on 13 December 2020 for plan A employees and on 13 December 2021 for plan B employees, provided in both cases that the employees are still with the Group at those dates. A one-yearlock-up period will apply to both plans.
On 28 June 2018, the Board of Directors approved the introduction of a new bonus share allotment plan for corporate officers covering a total of 44,701 shares. The allotment will vest definitively on 28 June 2021 subject to the satisfaction of performance criteria.
On 2 February 2019, the Chief Executive Officer, duly empowered for this purpose by the Board of Directors in their meeting on 28 June 2018, approved the introduction of two other bonus share allotment plans for certain employees of ORPEA or its affiliated companies covering a total of 67,130 shares. The allotment will vest definitively on 02 May 2022 subject to the satisfaction of performance criteria.
On 27 June 2019, the Board of Directors approved the introduction of a new bonus share allotment plan for corporate officers covering a total of 45,279 shares. The allotment will vest definitively on 27 June 2022 subject to the satisfaction of performance criteria.
On 23 June 2020, the Board of Directors approved the introduction of a new bonus share allotment plan for executive corporate officers covering a total of 28,374 shares. The allotment will vest definitively on 23 June 2023 subject to the satisfaction of performance criteria.
2020 Interim financial report | Page 31 of 50 |
For each plan, the fair value of the benefits provided to the grantees under IFRS 2 was measured by an actuary. This takes into account the market value of the shares granted, less a discount to reflect the fact that no dividend is paid until the end of the vesting period and that shares may not be sold for two years following the vesting date. The total expense is then calculated taking into account the probability that grantees will remain with the Group and the probable number of shares that they will be granted according to whether the performance criteria are satisfied.
The fair value of the plans (excluding social security contributions) under IFRS 2 was €16 million. The amount expensed in H1 2020 was €1.1 million (excluding social security contributions).
3.12 Dividend payments
At the initiative of Executive Management, the ORPEA Group's Board of Directors, at its 23 April 2020 meeting, decided, on an exceptional basis, not to propose the payment of a dividend in respect of the 2019 financial year due to the current situation relating to the Covid-19 pandemic.
3.13 Provisions
Provisions break down as follows:
Changes in | Additions | Reversals during period | ||||||
(in thousands of euros) | 31-Dec-19 | scope and | Equity | Reclassification | during | Provisions | Provisions | 30-Jun-20 |
other | period | used | not used | |||||
Prov. for liabilities and | ||||||||
charges | 47,334 | 2,179 | 52 | (127) | 4,816 | (2,712) | (1,654) | 49,887 |
Prov. for restructuring | 91,679 | 4,357 | (685) | 127 | 70 | (3,660) | (26) | 91,863 |
Total | 139,012 | 6,535 | (633) | 0 | 4,886 | (6,372) | (1,680) | 141,750 |
Post-employ. benefit oblig. | 87,347 | 578 | 1,696 | (32) | 89,590 |
ORPEA and CLINEA, as well as some of the Group's subsidiaries, are undergoing tax audits. Most of the reassessments notified by the tax authorities have been challenged by these companies, and so no provisions have been set aside for these reassessments. Tax reassessments that are not challenged are recognised in the financial year in which they are received.
The current portion of provisions (i.e. due in less than one year) at 30 June 2020 totalled €27 million, breaking down into €19 million for labour disputes and €8 million for restructuring.
The provision for post-employment benefit obligations breaks down as follows:
(in thousands of euros) | 30-Jun-20 | 31-Dec-19 |
France | 40,809 | 40,739 |
International | 48,781 | 46,608 |
Total | 89,590 | 87,347 |
2020 Interim financial report | Page 32 of 50 |
The main actuarial assumptions adopted at 30 June 2020 are as follows:
30-Jun-20 | 31-Dec-19 | |||
France | International | France | International | |
Discount rate | 0.77% | between 0.85% | 0.77% | between 0.85% |
and 1.20% | and 1.20% | |||
Annual rate of salary increase taking account | 2.00% | between 1.25% | 2.00% | between 1.25% |
of inflation | and 1.75% | and 1.75% | ||
n/a | between 1% | n/a | between 1% | |
Expected rate of return on plan assets | and 1.20% | and 1.20% | ||
Retirement age | 65 years | 65 years | 65 years | 65 years |
Social security contribution rate | average actual rate | average actual rate |
3.14 Financial liabilities and cash ORPEA's net debt breaks down as follows:
Net | Net | |||||
(in thousands of euros) | 31 December | |||||
30 June 2020 | ||||||
2019 | ||||||
Bond issues | 1,285,387 | 1,273,121 | ||||
Finance lease liabilities | 911,803 | 928,109 | ||||
Bridging loans | 670,555 | 409,589 | ||||
Other borrowings and financial liabilities | 4,466,817 | 4,162,583 | ||||
Total gross debt (*) | 7,334,562 | 6,773,402 | ||||
Cash | (889,494) | (827,871) | ||||
Cash equivalents | (12,260) | (10,870) | ||||
Total net debt (*) | 6,432,808 | 5,934,661 | ||||
(*) o/w liabilities associated with assets held for sale | ||||||
Movements in financial liabilities in H1 2020 were as follows: | ||||||
(in thousands of euros) | 31-Dec-19 | Increase | Decrease | Changes in | 30-Jun-20 | |
scope | ||||||
Bond issues | 1,273,121 | 12,266 | 1,285,387 | |||
Finance lease liabilities | 928,109 | 48,566 | (75,863) | 10,992 | 911,803 | |
Bridging loans | 409,589 | 372,365 | (111,400) | 670,555 | ||
Other borrowings and financial liabilities | 4,162,583 | 617,088 | (355,640) | 42,787 | 4,466,817 | |
Total gross debt (*) | 6,773,402 | 1,050,285 | (542,903) | 53,779 | 7,334,562 | |
Cash and cash equivalents | (838,741) | (63,013) | (901,754) | |||
Total net debt (*) | 5,934,661 | 987,272 | (542,903) | 53,779 | 6,432,808 | |
Liabilities associated with assets held for sale | (400,000) | (75,380) | (475,380) | |||
Net debt excluding liabilities associated with assets held for sale | 5,534,661 | 911,892 | (542,903) | 53,779 | 5,957,428 |
(*) o/w liabilities associated with assets held for sale.
2020 Interim financial report | Page 33 of 50 |
Debt net of cash breaks down by maturity as follows:
30-Jun-20 | Less than 1 year | 1 to 5 years | Over 5 years | |
(*) | ||||
Bond issues | 1,285,387 | 17,283 | 730,960 | 537,145 |
Finance lease liabilities | 911,803 | 164,740 | 462,933 | 284,130 |
Bridging loans | 670,555 | 143,744 | 453,334 | 73,477 |
Other borrowings and financial liabilities | 4,466,817 | 707,843 | 2,661,036 | 1,097,938 |
Total gross debt (*) | 7,334,562 | 1,033,610 | 4,308,263 | 1,992,690 |
Cash and cash equivalents | (901,754) | (901,754) | ||
Total net debt (*) | 6,432,808 | 131,856 | 4,308,263 | 1,992,690 |
(*) o/w liabilities associated with assets held for sale. |
Debt maturing in more than one year and less than five breaks down as follows:
1 to 5 years | 2021-2022 | 2022-2023 | 2023-2024 | 2024-2025 | |
Bond issues | 730,960 | 0 | 70,000 | 0 | 660,960 |
Finance lease liabilities | 462,933 | 71,364 | 131,955 | 121,530 | 138,084 |
Bridging loans | 453,334 | 290,901 | 29,499 | 25,767 | 107,167 |
Other borrowings and financial liabilities | 2,661,036 | 572,139 | 761,165 | 665,585 | 662,147 |
Total gross debt per year | 4,308,263 | 934,404 | 992,619 | 812,882 | 1,568,358 |
The Group's financing policy
The Group's growth is driven by operating investments and real estate investments.
These investments are partly financed by diversified external resources:
- bilateral bank loans repayable over five, six or seven years, for the acquisition of facilities in service, operating licences, stakes in operating companies etc.;
- real estate bridging loans comprising financing lines dedicated to a specific project as well as general bank credit lines to pre-finance properties recently acquired or under redevelopment or construction while awaiting refinancing;
- real estate finance leases and mortgage loans repayable over 12 to 15 years to finance or refinance dedicated property transactions;
- public and private bonds, as well as Schuldscheindarlehen the proceeds of which are generally allocated to real estate investments.
To finance its growth, the Group also sells properties to investors including real estate companies and real estate funds.
Bank covenants
Since 31 December 2006, certain loans arranged by the Group are subject to the following contractually agreed covenants based on the following ratios:
R1 = consolidated net debt (excluding real-estatedebt)consolidated EBITDA - 6% of real estate debt
and
R2 = consolidated net debt
Equity + quasi equity (i.e. deferred tax liabilities linked to the measurement of intangible assets used in operations under IFRS in the consolidated financial statements)
At 30 June 2020, these two ratios were at 1.4 and 1.8 respectively, within the required limits of 5.5 for R1 and 2.0 for R2.
After the impact of IFRS 16 was neutralised, the R1 and R2 ratios stood at 2.8 and 1.7.
2020 Interim financial report | Page 34 of 50 |
Bond debt
In 2018, the Group completed an inaugural public seven-year bond issue of €400 million (due in March 2025), with an annual fixed-rate coupon of 2.625%.
In May 2019, ORPEA issued €500 million of bonds convertible into new or existing shares (OCEANEs) maturing in eight years (May 2027), with an annual fixed-rate coupon of 0.375%.
Mortgage debt
In 2019, the ORPEA Group took out mortgage loans in the amount of €308 million, maturing in 12 years and with an LTV of 75%.
Cash
At 30 June 2020, ORPEA's cash and cash equivalents consisted of €12,260 thousand in short-term investments in non-speculative time deposit accounts with prime financial institutions and €889,494 thousand in cash at bank.
3.15 Financial instruments
3.4.1 Interest rate risk
Interest rate risk management strategy:
Most of the Group's debt consists of domestic debt carrying floating rates of interest, and so it is exposed to the risk of an increase in short-term rates in the euro zone.
The Group's strategy is to hedge a very large proportion of its floating rate-consolidated net debt against the risk of fluctuations in interest rates. To do so, it uses financial instruments to hedge its floating-rate financial liabilities. These financial instruments include:
- interest rate swaps under which the counterparty receives mainly the three-month Euribor rate and pays a fixed rate specific to each contract; and
- interest rate options (caps, collars etc.)
The Group applies hedge accounting under IFRS 9, and these transactions qualify as future cash flow hedges. Unrealised capital gains or losses on the market value of these derivatives are recognised in equity at the end of the financial year, except for the original time value of the options which is amortised in the income statement across the effective lifetime of these instruments, in line with the "cost of hedging" approach set out in the standard.
The use of these hedges to curb interest rate risk exposes the Group to counterparty risk. Counterparty risk is the risk of having to replace a hedge at going market rates should a counterparty default. The Group's analysis did not identify any material impact arising from this risk given the first-rate counterparties with which the Group subscribed to these instruments.
2020 Interim financial report | Page 35 of 50 |
Interest rate derivatives:
At 30 June 2020, the derivatives portfolio included fixed for floating (mainly 3-month Euribor) interest rate swaps and interest rate options (caps). These derivatives have either a constant or decreasing nominal profile.
At the end of H1 2020, the maturity profile of the interest rate derivatives was as follows:
Maturity profile | |||||
2020-20212021-20222022-20232023-20242024-2025 | |||||
Average notional amount (in €m) | 3,261 | 3,517 | 3,507 | 3,507 | 3,239 |
Interest rate | 0.7% | 0.6% | 0.6% | 0.8% | 1.0% |
At the end of 2019, the maturity profile of the interest rate derivatives was as follows:
Maturity profile | |||||
2020 | 2021 | 2022 | 2023 | 2024 | |
Average notional amount (in €m) | 3,017 | 3,515 | 3,515 | 3,502 | 3,508 |
Interest rate | 0.7% | 0.6% | 0.6% | 0.7% | 0.9% |
Accumulated changes in the fair value of these hedging derivatives, which came to -€196.9 million at 30 June 2020, were recognised under interest rate hedging reserves in equity for an amount of - €197.2 million and in financial expense for an amount of -€0.3 million.
Accumulated changes in the fair value of these hedging derivatives, which came to -€164.8 million at 31 December 2019, were recognised under interest rate hedging reserves in equity for an amount of - €164.3 million and in financial expense for an amount of -€0.5 million.
Analysis of sensitivity of the Group's position to interest rates fluctuations:
The impact of an upward and downward shift in the yield curve would lead respectively to:
- an increase or decrease in interest flows related to the floating-rate debt;
- a correlated increase or decrease in the fair value of its derivatives.
The fair value of the derivatives is sensitive to changes in the yield curve and trends in volatility. Volatility is assumed to remain unchanged for the purposes of this analysis.
At 30 June 2020, Group net debt amounted to €6,433 million, of which about 43% was originally contracted at fixed rates, and the remainder at floating rates.
Including the impact of hedging arrangements:
- the impact of a +1% (+100 basis point) rise in the yield curve would decrease the Group's financial expense (before tax and capitalisation of borrowing costs) by -€3.3 million;
- a -0.1%(-10 basis point) decrease would increase financial expense by +€1.4 million.
2020 Interim financial report | Page 36 of 50 |
Movements in the cash flow hedging reserve:
(in thousands of euros) | 30-Jun-20 |
Revaluation reserve at beginning of period | (143,389) |
New instruments | |
Impact on net profit | (1,244) |
Change in equity | (33,416) |
Revaluation reserve at end of period | (178,049) |
3.4.2 Currency risk
The Group uses forward currency purchases and sales to hedge its future transactions in foreign currencies. To this end, forward currency agreements were entered into with leading counterparties under which euro sums are swapped for an amount in a foreign currency (Swiss franc, Polish zloty or Czech koruna) at a pre-agreed rate and date.
The Group decided not to qualify these transactions as a hedging relationship.
The principal characteristics of these instruments are as follows:
Notional (in thousands of | Market value at | |
30/06/2020 (in thousands | ||
currency) | ||
of euros) | ||
Currency forwards (CHF) | 153,550 | (516) |
Currency forwards (CZK) | 1,343,170 | (407) |
Currency forwards (PLN) | 133,700 | (315) |
Currency forwards (RUB) | 40,000 | 13 |
Currency forwards (SGD) | 400 | 0 |
Total | (1,225) |
All these currency hedging instruments have a maturity date in Q4 2020.
3.4.3 Value of non-derivative financial instruments
(in thousands of euros) | 30-Jun-20 | 31-Dec-19 |
Investments in unconsolidated subsidiaries | 7,111 | 11,367 |
Other non-current financial assets | 36,675 | 34,560 |
Cash equivalents | 12,260 | 10,870 |
Non-derivative financial instruments | 56,046 | 56,797 |
2020 Interim financial report | Page 37 of 50 |
3.16 Lease commitments
The breakdown of lease commitments by maturity is as follows:
30-Jun-20 | Less than 1 year | 1 to 5 years | Over 5 years | ||
IFRS 16 lease commitments | 2,570,097 | 242,096 | 867,394 | 1,460,607 | |
Total | 2,570,097 | 242,096 | 867,394 | 1,460,607 | |
3.17 | Trade payables | ||||
30-Jun-20 | 31-Dec-19 | ||||
Trade payables | 291,590 | 253,782 | |||
Total | 291,590 | 253,782 | |||
3.18 | Tax and payroll liabilities |
The increase in tax and payroll liabilities reflects the Group's robust expansion.
3.19 Other financial liabilities, accruals and prepayments
30-Jun-20 | 31-Dec-19 | |
Development-related liabilities | 210,366 | 161,085 |
Security deposits | 55,397 | 58,795 |
Commitments to carry out work on buildings sold | 204 | 600 |
Customer accounts in credit | 14,012 | 7,723 |
Other prepaid income | 30,592 | 29,893 |
Interest rate derivatives | 208,898 | 170,050 |
Currency derivatives | 884 | 3,242 |
Advances and down payments received on orders in progress | 29,160 | 21,755 |
Current accounts (associates and related parties) | 663 | 3,233 |
Miscellaneous expenses | 61,962 | 29,371 |
Total | 612,139 | 485,747 |
Growth-related debt includes earn-outs on put options on the non-controlling interests of DAGELIJKS LEVEN and INOGES and additional sums on stakes in AXION, ALLERZORG and SEPTEMBER.
Security deposits mainly comprise the sums paid by residents at the beginning of their stay.
2020 Interim financial report | Page 38 of 50 |
3.20 Liabilities associated with assets held for sale
Liabilities associated with assets held for sale reflect the debt financing for these assets.
3.21 Segment reporting
30-Jun-20 | 30-Jun-19 | ||||
Revenue | |||||
France Benelux | " | 1,136,671 | 1,093,210 | ||
Central Europe | " | 499,569 | 473,881 | ||
Eastern Europe | 169,998 | 175,691 | |||
Iberian peninsula / Latam | 96,417 | 96,452 | |||
Other | 1,499 | 1,352 | |||
Total | 1,904,154 | 1,840,585 | |||
Recurring operating profit before rental income and charges for | |||||
depreciation, amortisation and provisions | |||||
France Benelux | 306,486 | 310,829 | |||
Central Europe | 119,470 | 115,718 | |||
Eastern Europe | 18,113 | 29,644 | |||
Iberian peninsula / Latam | 9,770 | 24,356 | |||
Other | (443) | (841) | |||
Total | " | 453,397 | 479,706 | ||
Assets | " | ||||
France Benelux | " | 12,112,586 | 9,825,196 | ||
" | |||||
Outside France Benelux | " | 3,346,294 | 4,495,451 | ||
" | |||||
Total | " | 15,458,880 | 14,320,647 | ||
Liabilities excluding equity | " | ||||
France Benelux | " | 9,305,695 | 7,180,329 | ||
" | |||||
Outside France Benelux | " | 3,147,675 | 4,228,567 | ||
" | |||||
Total | " | 12,453,370 | 11,408,896 | ||
" |
The costs of acquiring segment assets are disclosed in Note 2.
2020 Interim financial report | Page 39 of 50 |
3.22 Recurring operating profit
Recurring operating profit breaks down as follows:
(in thousands of euros) | 30-Jun-2030-Jun-19 | |
Revenue | 1,904,154 | 1,840,585 |
Purchases used and other external expenses before rental payments | (342,739) | (323,634) |
Staff costs | (1,079,957) | (986,506) |
Taxes other than on income | (72,324) | (61,693) |
Other recurring operating income | 47,670 | 15,581 |
Other recurring operating expense | (3,407) | (4,629) |
Recurring operating profit before rental payments and depreciation, | ||
amortisation and charges to provisions | 453,397 | 479,706 |
Rental expenses | (14,387) | (15,239) |
Depreciation, amortisation and charges to provisions | (242,250) | (220,401) |
Recurring operating profit | 196,759 | 244,066 |
Against the backdrop of the Covid-19 pandemic, the Group recognised compensation relating to a decline in business in the amount of €40,944 thousand.
This compensation was recognised as Other recurring operating income.
Compensation relating to the additional costs born was recognised under Purchases used and other external expenses and Staff costs in relation to said additional costs described below:
(in thousands of euros) | Additional | Compensation | Total |
costs | |||
Compensation for additional PPE costs | (22,020) | 15,107 | (6,913) |
Compensation for addition payroll and bonus costs | (58,017) | 38,062 | (19,955) |
Total | (80,037) | 53,169 | (26,868) |
3.23 Other non-recurring operating income and expense
(in thousands of euros) | 30-Jun-20 | 30-Jun-19 |
Income from real estate transactions | 14,065 | 912 |
Expenses on real estate transactions | (14,069) | (1,108) |
Reversals of provisions | 1,715 | 2,127 |
Charges to provisions | (740) | (3,211) |
Other income | 47,667 | 41,705 |
Other expenses | (33,334) | (25,006) |
Other non-recurring operating income and expense | 15,304 | 15,419 |
Other non-recurring income and expense mainly comprises €29 million in net gains and (losses) related to acquisitions as part of business combinations and -€15 million in expenses associated with the redevelopment of recently acquired facilities and other development costs, plus €1 million in miscellaneous income.
2020 Interim financial report | Page 40 of 50 |
3.24 Net finance cost
30-Jun-20 | 30-Jun-19 | |
Interest on bank debt and other financial liabilities | (73,166) | (66,443) |
Net losses on interest rate derivatives | (14,112) | (14,407) |
Financial expense on lease commitment | (33,456) | (32,581) |
Expense arising from early redemption of the ORNANE bonds | ||
Financial expense | (120,734) | (113,431) |
Interest income | 222 | 146 |
Capitalised financial expenses (*) | 7,256 | 6,963 |
Net income on interest rate derivatives | ||
Financial income | 7,478 | 7,109 |
Net finance cost | (113,257) | (106,322) |
(*) Based on a rate of 3.20% at 30 June 2020 as in 2019. |
3.25 Income tax expense
ORPEA SA has elected to form a tax consolidation group with its French subsidiaries that are held at more than 95%. All subsidiaries that meet this condition are included in the tax consolidation group except for those acquired during H1 2020.
(in thousands of euros) | 30-Jun-2030-Jun-19 | |
Current income tax | (24,885) | (37,781) |
Deferred taxes | (3,445) | (4,802) |
Total | (28,330) | (42,583) |
Deferred tax assets/(liabilities) break down by type of temporary difference as follows:
(in thousands of euros) | 30-Jun-20 | 31-Dec-19 |
Fair value of intangible assets | (537,477) | (499,187) |
Fair value of property, plant and equipment (*) | (436,131) | (428,914) |
Capitalisation of finance leases | (147,547) | (138,835) |
Temporary differences | (7,695) | (6,043) |
Tax loss carryforwards | 60,021 | 54,881 |
Deferral of capital gains on disposals | 117 | 135 |
Employee benefits | 10,927 | 10,927 |
CVAE deferred tax (**) | (4,002) | (4,002) |
Financial instruments and other | 90,928 | 77,156 |
Total | (970,859) | (933,882) |
- Of which €244 million in deferred taxes related to the revaluation of real estate (see 3.4.2)
- Deferred tax recognised in accordance with IAS 12 on property, plant and equipment and intangible assets with a finite useful life of French companies subject to the CVAE value-added levy on businesses with effect from 1 January 2010
2020 Interim financial report | Page 41 of 50 |
Deferred taxes calculated based on the IFRS measurement of intangible assets used in operations came to €537 million at 30 June 2020. These intangible assets are not held for sale.
The deferred taxes recognised on the balance sheet break down as follows:
(in thousands of euros) | 30-Jun-20 | 31-Dec-19 |
Assets | 101,867 | 93,983 |
Liabilities and equity | (1,072,726) | (1,027,865) |
Net | (970,859) | (933,882) |
The difference between the statutory tax rate, i.e. 32.02% in 2020, and the effective tax rate in the income statement breaks down as follows:
(in thousands of euros) | 30-Jun-2030-Jun-19 | |
Effective tax rate: | 28.17% | 27.08% |
- Permanent differences | -2.39% | -3.39% |
- Business combinations | 11.22% | 7.95% |
- Impact of the reduced rate | -1.44% | -0.32% |
- Impact of associates | 0.56% | 0.88% |
- Impact of foreign companies | 2.10% | 2.81% |
- Other | -0.27% | 0.66% |
- CVAE value-added levy on businesses | -5.93% | -3.65% |
Statutory rate | 32.02% | 32.02% |
3.26 Commitments and contingent liabilities
3.4.4 Off-balancesheet commitments Debt-relatedcommitments
(in thousands of euros) | 30-Jun-20 | 31-Dec-19 |
Contractual obligations | 2,239,313 | 2,069,900 |
Contractual obligations | 2,239,313 | 2,069,900 |
Pledges, mortgages, security deposits and other collateral account for most of the debt-related commitments.
Commitments relating to the Group's operating activities
Commitments on equity associates
The following respective commitments have been entered into concerning the potential acquisition of a 100% interest in 50%-held Brazil Senior Living:
- ORPEA has received a promise from the other shareholders to sell and has given a promise to buy out the other shareholders following the 2023 account closing and subject to conditions;
- ORPEA has received a promise from the other shareholders to sell and has given a promise to buy out the other shareholders following the 2024 account closing.
2020 Interim financial report | Page 42 of 50 |
The following respective commitments have been entered into concerning the potential acquisition of a 100% interest in 50%-held Senior Suites:
- ORPEA has received a promise from the other shareholders to sell, up until 31 July 2024;
- ORPEA has given a promise to buy out the other shareholders between 1 January and 31 July 2024;
- ORPEA has given a promise to buy out the other shareholders between 1 August 2024 and 31 July 2025.
ORPEA has granted Belgian company INTORP, a lease payment guarantee covering four properties leased by its Belgian subsidiaries.
Commitments on controlled companies
The following respective commitments have been entered into concerning the potential acquisition of the remaining 25% interest in 74.9%-held INOGES:
- ORPEA has received a promise from the other shareholders to sell between 30 August 2020 and 31 October 2020;
- ORPEA has given a promise to buy out the other shareholders between 30 April 2020 and 30 June 2020.
The following respective commitments have been entered into concerning the potential acquisition of the remaining 25% interest in 75%-held Dagelijks Leven:
- ORPEA has received a promise from the other shareholders to sell in instalments as of 2019;
- ORPEA has given a promise to buy out the other shareholders in instalments between 1 January and 15 February 2020 and 2021 if the minority shareholders have not exercised their right themselves, then as of 2022.
Commitments received
It also holds options to buy real-estate assets currently leased in Belgium.
3.4.5 Contingent liabilities
Overall, management believes that the provisions recognised in the balance sheet for disputes involving the Group of which it is aware should be sufficient to cover its exposure to risks.
2020 Interim financial report | Page 43 of 50 |
3.27 Analysis of financial assets and liabilities in accordance with IFRS 7
Financial assets and liabilities recognised under IFRS 7 break down as follows:
(in thousands of euros) | Classification | Level (*) |
HELD-TO MATURITY | ||
INVESTMENTS | ||
Bonds and negotiable debt | Cash and cash | |
securities | equivalents | |
LOANS AND RECEIVABLES | ||
Short-term loans | Short-term loans | |
Long-term loans | Non-current financial | 2 |
assets | ||
Receivables related to asset | Non-current financial | 2 |
disposals | assets | |
Receivables | ||
Security deposits and | related to asset | |
guarantees | disposals in the | |
short term | ||
Other receivables | Other receivables | 2 |
Trade receivables | Trade receivables | 2 |
AVAILABLE-FOR-SALE | ||
FINANCIAL ASSETS | ||
Investments in unconsolidated | Non-current financial | |
subsidiaries | assets | |
Other | ||
FINANCIAL ASSETS AT FAIR | ||
VALUE | ||
Interest rate derivatives | Other receivables | 2 |
Currency derivatives | Other receivables | 2 |
Open-ended investment | Cash and cash | 1 |
funds and mutual funds | equivalents | |
CASH | Cash and cash | 1 |
equivalents | ||
Carrying amount | Fair value | ||
30-Jun-20 | 31-Dec-19 | 30-Jun-20 | 31-Dec-19 |
0 | 0 | 0 | 0 |
1,100,545 | 891,247 | 1,100,545 | 891,247 |
36,675 | 34,560 | 36,675 | 34,560 |
37,702 | 20,339 | 37,702 | 20,339 |
41,445 | 14,437 | 41,445 | 14,437 |
730,504 | 558,429 | 730,504 | 558,429 |
254,219 | 263,482 | 254,219 | 263,482 |
0 | 0 | 0 | 0 |
904,427 | 844,033 | 904,427 | 844,033 |
2,673 | 5,292 | 2,673 | 5,292 |
0 | |||
12,260 | 10,870 | 12,260 | 10,870 |
889,494 | 827,871 | 889,494 | 827,871 |
FINANCIAL ASSETS | 2,894,466 | 1,735,280 | 2,894,466 | 1,735,280 |
- Level 1: for financial assets and liabilities quoted on an active market, where fair value is the listed price.
- Level 2: for financial assets and liabilities which are not quoted in an active market and for which observable market data exists which the Group can use to measure fair value.
- Level 3: for financial assets and liabilities quoted in an active market, for which observable market data to measure fair value does not exist.
2020 Interim financial report | Page 44 of 50 |
Carrying amount | Fair value | |||||
(in thousands of euros) | Classification | Level (*) | 30-Jun-20 | 31-Dec-19 | 30-Jun-20 | 31-Dec-19 |
FINANCIAL LIABILITIES AT FAIR VALUE | 209,782 | 173,292 | 209,782 | 173,292 |
Currency derivatives | Other liabilities |
Interest rate derivatives | Other liabilities |
Change in the fair value of the conversion right embedded | |
in the ORNANE bonds | |
Other bonds | Other liabilities |
884 | 3,242 | 884 | 3,242 | |
2 | 208,898 | 170,050 | 208,898 | 170,050 |
2 | 0 | 0 | 0 | 0 |
FINANCIAL LIABILITIES AT AMORTISED | 8,028,509 | 7,339,639 | 8,095,722 | 7,419,118 | ||
COST | ||||||
Bonds convertible into, | Non-current and | |||||
exchangeable for or redeemable in | current financial | 1 | 1,285,387 | 1,273,121 | 1,352,600 | 1,352,600 |
shares | liabilities | |||||
Non-current and | ||||||
Bank borrowings | current financial | 2 | 5,137,372 | 4,572,172 | 5,137,372 | 4,572,172 |
liabilities | ||||||
Non-current and | ||||||
Finance lease obligations | current financial | 2 | 911,803 | 928,109 | 911,803 | 928,109 |
liabilities | ||||||
Other liabilities | Current liabilities | 2 | 402,357 | 312,455 | 402,357 | 312,455 |
Trade payables | Trade payables | 2 | 291,590 | 253,782 | 291,590 | 253,782 |
FINANCIAL LIABILITIES | 8,238,291 | 7,512,931 | 8,305,504 | 7,592,410 |
- Level 1: for financial assets and liabilities quoted on an active market, where fair value is the listed price.
- Level 2: for financial assets and liabilities which are not quoted in an active market and for which observable market data exists which the Group can use to measure fair value.
- Level 3: for financial assets and liabilities quoted in an active market, for which observable market data to measure fair value does not exist.
3.28 Related-party transactions
Related-party transactions
In the normal course of its business, the ORPEA Group enters into various transactions with related parties as defined by IAS 24.
During the period, the main impacts were as follows:
- advances granted by the ORPEA Group to its associates and joint ventures and to related parties amounted to €230.1 million at 30 June 2020;
- advances received by the ORPEA Group from its associates and joint ventures and related parties amounted to €0.7 million at 30 June 2020;
- the ORPEA Group leases certain operating premises from related parties within the meaning of IAS 24 - Related Party Disclosures. Lease payments invoiced over the period amounted to €5 million.
2020 Interim financial report | Page 45 of 50 |
3.29 Subsequent events
Since 1 July 2020, the Group has continued its expansion with, in particular, the acquisition of the Clinipsy Group in France and of a 50% stake in Brindley Healthcare in Ireland.
- Clinipsy is a group of nine psychiatric hospitals which operates 907 beds, most of which are located in the North and East of France.
- Brindley Healthcare is a group of ten nursing homes which operates 574 beds in locations which are complementary to those of TLC.
On 21 July 2020, the Group and real estate company ICADE Santé signed promises to sell eight real- estate assets composed of nursing homes for the elderly in Germany and a nursing home in Marseilles, France, for a total amount of €145 million.
During the night of 17 September, the ORPEA Group detected a malware intrusion on some of its severs. The IT security teams were fully mobilised and took immediate action to secure the systems, isolate the affected servers (less than 1% of all servers) and temporarily shut down the entire network, thus preventing the spread of the malware.
This voluntary shutdown caused disruptions to the IT systems, but in no way affected the continuity of care and social interactions within the facilities, or the Group's accounting and finance systems.
At 22 September 2020, ORPEA continues, overall, across its network of facilities to manage the Covid- 19 pandemic.
Due to the uncertainty surrounding the length of the pandemic, it is nonetheless too early to measure its possible impact on the Group's future financial results.
Regardless of this, based on its estimates, ORPEA does not forecast a material impairment loss on its assets or a revaluation of its liabilities.
2020 Interim financial report | Page 46 of 50 |
3.30 Scope of consolidation at 30 June 2020
The main companies involved in the ORPEA Group's activities and management of its real-estate portfolio are:
Consolidated companies | Pourcentage | Pourcentage | Method of |
control | ownership | consolidation | |
SA ORPEA | 100% | 100% | Parent |
SAS CLINEA | 100% | 100% | Full |
SARL NIORT 94 | 100% | 100% | Full |
DOMIDOM - ADHAP | 100% | 100% | Full |
SA ORPEA BELGIUM | 100% | 100% | Full |
ORPIMMO | 100% | 100% | Full |
ORPEA ITALIA SRL | 100% | 100% | Full |
CASAMIA IMMOBILIARE | 100% | 100% | Full |
ORPEA IBERICA | 100% | 100% | Full |
SL DINMORPEA | 100% | 100% | Full |
SENEVITA AG | 100% | 100% | Full |
ORPEA DEUTSCHLAND | 100% | 100% | Full |
ORPEA NETHERLAND | 100% | 100% | Full |
CELENUS | 100% | 100% | Full |
SENECURA | 100% | 100% | Full |
MEDISYSTEM | 100% | 100% | Full |
CEESCH | 100% | 100% | Full |
GCSE | 100% | 100% | Full |
ORPEA LATAM | 100% | 100% | Full |
NIORPEA | 100% | 100% | Full |
ARTHOPODA LIMITED | 100% | 100% | Full |
SENIOR BALTIC | 100% | 100% | Full |
2020 Interim financial report | Page 47 of 50 |
3 - STATEMENT BY THE PERSON RESPONSIBLE
FOR THE INTERIM FINANCIAL REPORT
To the best of my knowledge, I certify that the condensed consolidated financial statements for the six-month period now ended have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, financial position and profit or loss of the Company and all consolidated companies, and that the interim business report presents a true and fair view of the major events that occurred during the first six months of the financial year, their impact on the financial statements, the main related-party transactions, and describes the main risks and uncertainties related to the remaining six months of the financial year.
Puteaux, 9 October 2020.
Yves Le Masne
Chief Executive Officer
2020 Interim financial report | Page 48 of 50 |
4 - STATUTORY AUDITORS' REPORT
This is a free translation into English of the statutory auditors' review report issued in the French language and is provided solely for the convenience of English speaking readers. The statutory auditors' review report also includes information relating to the specific verification of information in the group management report.
The statutory auditors' review report should be read in conjunction with, and is construed in accordance with French law and professional auditing standards applicable in France.
Saint-Honoré BK&A | Deloitte & Associés |
140 rue du Faubourg Saint-Honoré | 6 place de la Pyramide |
75008 Paris, France | 92908 Paris La Défense Cedex, France |
ORPEA
Société Anonyme (public limited company)
12 rue Jean Jaurès
92813 Puteaux Cedex, France
Statutory Auditors' report
on the interim financial reporting
Six-month period from 1 January 2020 to 30 June 2020
To ORPEA's shareholders,
In accordance with the assignment entrusted to us by the Annual General Meeting, and pursuant to Article L.451-1-2 III of the French Monetary and Financial Code, we have:
- conducted a review of the accompanying interim condensed consolidated financial statements of ORPEA for the period from 1 January 2020 to 30 June 2020;
- verified the information provided in the interim business report.
These interim consolidated financial statements were prepared under the responsibility of the Board of Directors on 22 September 2020 based on information available at this date against a backdrop of a changing crisis due to the Covid-19 pandemic and the resulting difficulties in measuring its impact and the outlook for the future. Our role is to express a conclusion on those financial statements based on our review.
2020 Interim financial report | Page 49 of 50 |
Conclusion on the financial statements
We conducted our review in accordance with the professional standards applicable in France. A review consists of making inquiries, primarily of the persons responsible for financial and accounting matters, and on applying analytical procedures. These tasks are less extensive than those required for an audit in accordance with the professional standards applicable in France. Accordingly, the assurance that the financial statements taken as a whole do not contain any material misstatements in connection with a review is a limited assurance. This level of assurance is lower than that obtained from an audit.
Based on our review, nothing has come to our attention that causes us to believe that these interim condensed consolidated financial statements have not been prepared in all material respects in accordance with IAS 34 under IFRS as adopted by the European Union applicable to interim financial reporting.
Specific verifications
We have also verified the information provided in the interim business report, prepared on 8 October 2020, commenting on the interim condensed consolidated financial statements covered by our review. We have nothing to report concerning the fairness and consistency of this information with the interim condensed consolidated financial statements.
Paris and Paris-La Défense, 8 October 2020
The Statutory Auditors
Saint-Honoré BK&A | Deloitte & Associés |
Xavier Groslin | Jean-Marie Le Guiner |
2020 Interim financial report | Page 50 of 50 |
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Orpéa SA published this content on 15 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 October 2020 16:34:00 UTC
