Call is at 11:30 a.m.    Another noisy quarter, and tricky to decipher due to ebb and flow of covid impact (costs vs reimbursements), but progress nonetheless. 

LTC Occupancy levels continued to recover in Q4 2021, with overall average occupancy up 110 bps in long-term care (“LTC”).   LTC NOI margin after adjusting for net positive impact of $3.5 million (covid costs less cost reimbursement) was 10%, with pressure coming from higher labour, utilities and repair costs.  Full funding requiring over 97% occupancy has been reinstated in Ontario, for period Feb 1 to Dec 31 2022.  EXE is now around 95.8% and expects further improvement, so will likely get most of the full funding in 2022.  Government staffing funding (for additional hours) likely to benefit EXE LTC rev by $40-45 million in 2022.   Still noisy due to Covid and impact on occupancy, especially Omicron late in quarter.  As Covid costs recede, and occupancy rises, getting NOI margin back to historical 12% levels not unachievable IMO. 

Home Healthcare saw another quarter of higher ADV, up 1.8% QoQ and 8% YoY.  NOI margins(adjusting for COVID net costs) were 8.8% for the quarter and 9.3% for the year.  Slight decrease in NOI margin in the Q due to additional stat holiday and increased staffing costs.

The net cost to the three LTC projects announced will be $178.9 million, over the next 2-3 years, so suggests company still has more than adequate liquidity for other steps (Dutch?  Special?) in the future.  To be frank, given that RETIREMENT is not reliant on government funding, not sure why there should be reticence about distributing some of the proceeds from this sale back to shareholders, but I recognize the political hot potato that the entire sector has been.    

Dividend remains well covered (reported payout ratio was 65% in the fourth quarter), balance sheet is significantly underlevered post ESPRIT transactions providing optionality, and a considerable amount of the inflation impact should be covered by government funding.   Demand for LTC beds remains robust in Ontario (>40,000 waitlist), likely to only get bigger due to demographic shifts with baby boomers.    IMO, a fairly safe investment in today’s turbulent world.