Sienna Senior Living Inc. (“
Sienna” or the
“
Company”) (TSX: SIA) today announced its
financial results for the three and six months ended June 30,
2023. The Consolidated Financial Statements and accompanying
Management’s Discussion and Analysis (“
MD&A”)
are available on the Company’s website at
www.siennaliving.ca and on SEDAR at www.sedar.com.
Sienna’s strong second quarter underscores an
improving operating environment in the senior living sector and
highlights the significant growth potential in the Company’s
business.
“Our second quarter results emphasize the
strength of our diversified portfolio, which is reflected in the
notable improvements of many key performance indicators, including
a 9.3% increase in our same property NOI,” said Nitin Jain,
President and Chief Executive Officer. “In addition, our effective
cost reduction strategy and the continued stabilization of the
operating environment further added to the strength of our
results.”
Operating Highlights
-
Same-property Net Operating Income (“NOI”)
increased by 9.3% to $37.1 million in Q2 2023, compared to Q2 2022,
including
- a 13.9% increase
in the long-term care segment and
- a 4.0% increase
in the retirement segment
-
Long-Term-Care (“LTC”) Occupancy – Average
occupancy increased by 330 basis points (“bps”)
year over year to 98.0% in Q2 2023;
-
Retirement Same Property
Occupancy – Average same property occupancy increased by
10 bps year over year to 86.9% in Q2 2023 as a result of high
levels of resident move-ins and the improved performance of 12
joint venture (“JV”) properties acquired in Q2 2022; quarter over
quarter, same property occupancy declined by 130 bps in Q2 2023
compared to Q1 2023:
- consistently
high levels of resident move-ins of approximately 96 move-ins on
average per month in the Company’s 100% owned portfolio in 2023
were offset by an elevated level of resident move-outs
predominantly to long-term care facilities of approximately 104
move-outs, representing an 18% year over year increase in average
monthly move-outs in 2023;
- resident
move-outs expected to stabilize in second half of 2023 as a result
of long-term care facilities returning to full occupancy
levels;
- Annual
Rate Increases – Average annual rate increases of
approximately 5% in the Company’s retirement segment in Q2 2023
continue to offset cost pressures;
- Focused
Cost Management resulting in
- a reduction in
agency staffing cost to $6.0 million in Q2 2023, compared to $10.3
million in Q1 2023 and $10.0 million Q2 2022; and
- a substantial
decrease in general and administrative expenses through a
restructuring at the Company’s corporate office in Q1 2023.
- Growth
in Key Performance Indicators including
- 24.1% increase
in Operating Funds from Operations (“OFFO”) per share and
- 13.6% increase
in Adjusted Funds from Operations (“AFFO”) per share resulting in
the continued improvement of the AFFO payout ratio to 87.3% in Q2
2023.
Sustainability Highlights
Today, Sienna released its 2022-2023
Environmental, Social and Governance (ESG) Report, providing
updates on how Sienna incorporates sustainable business practices
into its overall strategy and operations. Sienna’s ESG initiatives
and stories highlighted in this report are deeply aligned with the
Company’s key values to Act Positively, Be Accountable, Create
Community and Demonstrate Caring.
Financial performance - Q2
2023
- Total
Adjusted Revenue increased by 10.1% in Q2 2023 to $198.3
million, compared to Q2 2022. In the Retirement segment, the
increase is mainly driven by rental rate increases, and additional
revenue generated from a full quarter of contributions from the 12
JV properties acquired in Q2 2022. In the LTC segment, increased
flow-through funding for direct care and annual inflationary
funding increases contributed to the increase in total adjusted
revenue.
- Total
NOI increased by 13.7% to $38.9 million, compared to Q2
2022, resulting from a $1.8 million increase in the Retirement
segment, driven by same-property NOI growth, a full quarter of NOI
from the 12 JV properties acquired in Q2 2022, and the acquisition
of a new retirement property in Q1 2023. Total NOI increased by
$2.9 million in the LTC segment, mainly due to lower net pandemic
expenses which included retroactive funding of $1.4 million.
- Same
Property NOI increased by 9.3% to $37.1 million, compared
to Q2 2022, including a 13.9% increase to $20.5 million in the LTC
segment, and a 4.0% increase to $16.6 million in the Retirement
segment.
-
OFFO per share
increased by 24.1% in Q2 2023, or $0.057, to $0.294. The increase
was primarily due to higher NOI, a favourable tax adjustment of
approximately $1.5 million relating to 2022, partially offset by
higher current income taxes, lower general and administrative
expenses, partially offset by higher interest expense.
-
AFFO per share increased by 13.6%
in Q2 2023, or $0.032, to $0.268. The increase was primarily
related to higher OFFO, partially offset by higher maintenance
capital expenditures and a decrease in construction funding.
- AFFO
payout ratio was 87.3% for Q2 2023.
Financial performance in the six months
ended June 30, 2023
- Total
Adjusted Revenue increased by 12.3% or $43.5 million to
$398.0 million, compared to the six months ended June 30, 2022
. In the Retirement segment, the increase is mainly driven by
rental rate increases, occupancy growth and additional revenue
generated from a full quarter of contributions from the 12 JV
properties acquired in Q2 2022. In the LTC segment, flow-through
funding for increased direct care and annual inflationary funding
increases contributed to the increase in total adjusted
revenue.
- Total
NOI increased by 13.3% to $75.2 million, compared to Q2
2022, resulting from a $5.7 million increase in the Retirement
segment, driven by same-property NOI growth, a full quarter of
contributions from the 12 JV properties acquired in Q2 2022, and
the acquisition of a retirement property in Q1 2023. Total NOI
increased by $3.2 million in the LTC segment, mainly due to lower
net pandemic expenses which included retroactive funding of $3.4
million.
- Same
Property NOI increased by 9.6% to $71.8 million, compared
to Q2 2022, including a 11.5% increase to $39.9 million in the LTC
segment, and a 7.3% increase to $31.9 million in the Retirement
segment.
-
OFFO per share increased by 14.9%
or $0.071, to $0.547, compared to the six months ended
June 30, 2022. The increase was primarily due to higher NOI, a
favourable tax adjustment of approximately $1.5 million relating to
2022, lower general and administrative expenses offset by higher
interest expense.
-
AFFO per share increased by 8.4%,
or $0.040, to $0.518, compared to the six months ended
June 30, 2022. The increase was primarily related to higher
OFFO, partially offset by higher maintenance capital expenditures
and a decrease in construction funding.
- AFFO
payout ratio was 90.3% for the six months ended June 30,
2023.
Financial position
The Company maintained a strong financial
position during Q2 2023:
- Paid off the
Unsecured Term Loan and entered into financings with lower cost
CMHC insured mortgages
- Maintained high
liquidity at $276 million as at June 30, 2023, compared to $271
million as at June 30, 2022; and
- Increased
Interest Coverage Ratio to 3.5 for the three months ended June 30,
2023, compared to 3.2 for the three months ended March 31,
2023.
Financial and Operating
Results
|
Three Months Ended |
Six Months Ended |
$000s except occupancy, per share and ratio data |
June 30, 2023 |
June 30, 2022 |
June 30, 2023 |
June 30, 2022 |
Retirement - Average same property (1) |
86.9 |
% |
86.8 |
% |
87.5 |
% |
86.0 |
% |
Retirement - Acquisition, development and others - Average
occupancy (2) |
86.8 |
% |
82.2 |
% |
86.1 |
% |
72.2 |
% |
Retirement - Average total occupancy |
86.8 |
% |
86.6 |
% |
87.3 |
% |
85.7 |
% |
LTC - Average private occupancy |
88.6 |
% |
82.4 |
% |
87.0 |
% |
81.4 |
% |
LTC - Average total occupancy (3) |
98.0 |
% |
94.7 |
% |
97.4 |
% |
93.8 |
% |
Total Adjusted Revenue (4) |
198,343 |
|
180,151 |
|
397,954 |
|
354,433 |
|
Same property NOI (4) |
37,139 |
|
33,980 |
|
71,797 |
|
65,509 |
|
Total NOI (4) |
38,905 |
|
34,218 |
|
75,214 |
|
66,356 |
|
OFFO per share (4) |
0.294 |
|
0.237 |
|
0.547 |
|
0.476 |
|
AFFO per share (4) |
0.268 |
|
0.236 |
|
0.518 |
|
0.478 |
|
AFFO Payout ratio (4) |
87.3 |
% |
99.2 |
% |
90.3 |
% |
97.9 |
% |
(1) Effective June 1, 2023, the results of the
12 joint venture retirement residences acquired in Q2 2022
("Acquired Properties") were reclassified from "acquisitions" to
"same property" in the table above. Accordingly, "same property"
includes results of the Acquired Properties from June 1, 2023
onwards. (2) Includes results of the Acquired Properties from
January 1, 2023 to May 31, 2023. (3) Excludes the 3rd and 4th beds
in multi-bed rooms in Ontario.(4) Total Adjusted Revenue, Same
property NOI, Total NOI, OFFO per share, AFFO per share, AFFO
payout ratio are non-IFRS measures. These measures do not have
standardized meanings prescribed by IFRS and, therefore, may not be
comparable to similar measures used by other issuers. These
measures are used by management in evaluating operating and
financial performance. Please refer to the heading "Non-IFRS
Performance Measures” on page 2 of the MD&A.
Outlook
Long-term demand fundamentals in Canadian senior
living remain strong, driven by the rising needs of seniors, who
make up the fastest-growing demographic in Canada. Despite rising
interest rates, the Canadian economy remained resilient, with home
prices rising across Canada throughout the spring and inflation
continuing to slow. These positive factors in combination with
Sienna’s successful cost reduction strategy give reason for an
optimistic outlook for the balance of 2023 and beyond.
Retirement - Average occupancy
in the Company's same property portfolio was 86.9% in Q2 2023, up
marginally by 10 bps year over year compared to Q2 2022.
Consistently high resident move-ins and the improved performance of
the 12 joint venture retirement residences Sienna acquired in Q2
2022 were offset by an elevated level of resident move-outs
predominantly to long-term care since the beginning of the
year.
Lead indicators have strengthened significantly
in recent months and occupancy levels have stabilized. Our
community outreach efforts, combined with a robust sales platform,
will continue to support occupancy during the second half of the
year. Average same property occupancy growth in July, with further
growth anticipated in August, indicates an improving occupancy
trend for the balance of 2023.
Based on the Company’s updated occupancy
forecast, average same property occupancy is expected to reach
approximately 88% for the full year in 2023.
Considering all factors, Sienna anticipates an
approximate 100 bps - 150 bps growth in the 2023 operating margin
for the full year of 2023 compared to 2022, primarily driven by
increased average annual rates upon renewal, continued improvements
with respect to labour market conditions and the results of its
focused cost management.
Long-Term Care - A stable
post-pandemic operating environment supported the strong
performance of Sienna's LTC portfolio during Q2 2023. Average
same-property occupancy reached 98.0% during the second quarter and
supported year over year NOI growth in Q2 2023.
Although the operating environment has improved
significantly and we have made great strides in reducing costs
wherever possible, we are still facing funding shortfalls in our
long-term care segment as a result of high inflation in recent
years. Together with other sector participants, we continue to work
with the government to address these shortfalls.
For the balance of the year, we expect to
benefit from a stable operating environment, our focused cost
management and continued improvements with respect to staffing. We
anticipate that current occupancy trends will continue for the
balance of 2023, and expect LTC NOI growth for the second half of
2023 to be in the low single digit percent range compared to the
same period in 2022.
Developments – Sienna’s three
projects currently under construction, including the redevelopment
of a long-term care community in North Bay, the development of a
campus of care in Brantford and the development of a joint venture
retirement residence in Niagara Falls, are expected to lower the
Company’s AFFO payout ratio by mid to high single digit percent,
once completed and fully operational.
Significant Potential for Growth in
NOI - Sienna sees significant growth potential in its
business over the next several years and is actively working on a
number initiatives which may contribute to the Company’s NOI
expansion including:
-
Occupancy growth in the Company’s retirement
segment, including incremental NOI should the Company’s
target for stabilized average occupancy of 92.5% in its
same-property portfolio be reached, which would represent a 560 bps
increase from the average occupancy of 86.9% in Q2 2023;
-
Contributions from acquisitions and new
developments, including incremental NOI from:
- The Company’s
acquisition of a 50% joint venture interest in 12 retirement
properties in 2022 for $189.8 million;
- The Company’s
acquisition of Woods Park in early 2023 for $26.3 million, which is
expected to generate an unlevered yield of 6.75%; and
- The completion
of the Company’s 70% joint venture interest in the development of a
150-suite retirement residence in Niagara Falls for $38.5 million,
which has an expected development yield of approximately 7.5%.
-
Substantial reduction of net pandemic expenses and
incremental agency costs, which were $8.2 million in 2022,
as the pandemic subsides and the Company actively manages
incremental agency costs, while working with governments to ensure
that operators are fully funded for all costs of resident care;
and
-
Catch-Up Funding from the Ontario government to
address funding shortfalls to offset the significant inflationary
and cost pressures operators have experienced over the past years.
Each percentage point in additional Other Accommodations funding
would represent an approximate annual funding increase of $1.2
million for Sienna.
These initiatives, individually and
collectively, could have a significant positive impact on the value
of the Company’s business, enhancing its financial performance with
growth in NOI and OFFO, and supporting Sienna’s AFFO payout
ratio.
Conference Call
Sienna will host a conference call on Friday,
August 11, 2023 at 9:00 a.m. (ET). The toll-free dial-in number for
participants is 1-800-715-9871, conference ID: 4521527. A webcast
of the call will be accessible via Sienna's website at
www.siennaliving.ca/investors/events-presentations. It will be
available for replay until August 10, 2024 and archived on Sienna’s
website.
About Sienna Senior Living
Sienna Senior Living Inc. (TSX:SIA) offers a
full range of seniors' living options, including independent
living, assisted living, memory care, long-term care, and
specialized programs and services. Sienna's approximately 12,000
employees are passionate about cultivating happiness in daily life.
For more information, please visit www.siennaliving.ca.
Risk Factors
Refer to the risk factors disclosed in the
Company’s MD&A for the three and six months ended June 30,
2023, and its most recent Annual Information Form for more
information.
Forward-Looking Statements
Certain of the statements contained in this news
release are forward-looking statements and are provided for the
purpose of presenting information about management’s current
expectations and plans relating to the future. Readers are
cautioned that such statements may not be appropriate for other
purposes. These statements generally use forward-looking words,
such as “anticipate,” “continue,” “could,” “expect,” “may,” “will,”
“estimate,” “believe,” “goals” or other similar words and are based
on the Company’s expectations, estimates, forecasts and
projections. These statements are subject to significant known and
unknown risks and uncertainties that may cause actual results or
events to differ materially from those expressed or implied by such
statements and, accordingly, should not be read as guarantees of
future performance or results and will not necessarily be accurate
indications of whether or not such results will be achieved. The
forward-looking statements in this news release are based on
information currently available and what management currently
believes are reasonable assumptions. The Company does not undertake
any obligation to publicly update or revise any forward-looking
statements except as may be required by applicable law.
FOR FURTHER INFORMATION, PLEASE CONTACT:
David HungChief Financial Officer and Executive Vice
President(905) 489-0258david.hung@siennaliving.ca
Nancy WebbSenior Vice President, Public Affairs and Marketing
(905) 489-0788nancy.webb@siennaliving.ca
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