Q3 2019 Earnings Call
Oh, I guess it since he's done by your constraints is ready to begin.
Good morning, ladies and gentlemen, welcome to Extendicare Inc. third quarter Conference call. Please be advised that this call is being recorded I would now like to turn the meeting over to live Galeon Feldman. Please go ahead.
Casey writer.
Thank you and good morning, everybody welcome to Syndicate 2019 third quarter results Conference call with me today is extended <unk>, President and CEO , Michael Gray hair, and our CFO , David <unk>. Our 2018 third quarter results were disseminated yesterday and are available on our website along with the supplemental information package.
Webcast of today's call is also available on our website along with an accompanying slide presentation, which viewers made that's itself.
A replay of the call will be available later this afternoon until November 22nd the replay numbers and pass code have been provided in our press release and an archive recording of this call will also be available on our website.
Before we get started please be reminded that case called May include forward looking statements regarding our future operations.
Such statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today, we've identified such factors in our public filings with the Securities Commission. It suggests that you referred to those filings.
As we discussed our performance. Please bear in mind that all figures are in Canadian dollars unless otherwise noted.
With that I'd like to turn call over to Mike.
Thank you Joe in and good morning, everyone.
As you can see from our third quarter results, we're continuing to build and optimize extendicare as business.
Positioning the company for sustainable long term growth.
In the third quarter 2019, we recorded an increase in revenue drove growth in our retirement living operations and advance the implementation of our paramedic transformation.
Extendicare continues to enhance its operations to provide excellent care to the steadily growing number of Canadian seniors wherever they need it as they age and their care needs evolve.
Our growth is supported by a strong foundation in the market and continued investment in our people and technology.
During the quarter, we welcome to significant new S.G.P. client that brings 4000, new beds into the partnership and in the first week in October we opened a new 124 suite retirement living community. In addition to delivering solid financial results from our long term care and retirement.
Operations.
On slide three as we've discussed previously we're in the process of strengthening our pyramid business by moving to a new cloud based system supported by standard operating procedures and training processes that will enhance our ability to meet the increasing demand for home health care.
Services.
This transformation will improve scheduling automate work processes, and richer and reduce turnover and better support our valued stuff.
Our original estimate about 12 million dollar investment for the transformation remains unchanged.
We anticipate that the remaining costs associated with the completion of the transformation project will total approximately two point sixmillion, the majority of which will be incurred and 29 team.
The system implementation remains on track now with 20, 676% of our targeted volumes now supported by the new platform.
And we expect to be near 90% complete by the end of this year.
The project will complete in Q1 next year.
We anticipate that once implemented the new system, coupled with the ongoing training and optimization of our operations using the new platform will drive volume increases as we enter 2020.
Typically our volumes drop about 2% in the third quarter compared to the second quarter due to seasonal trends.
In the third quarter. This year, we experienced a volume decline of 1.4% compared to the second quarter 2019, representing some growth mitigating the seasonal trend.
We view this is the second consecutive quarter that our transformation efforts have had a positive impact on volumes.
The company continues to make progress with pyramids exit from the BC home health care market.
Final dates for the transfer of the operations to the BC health authorities are still being finalized but are expected to occur no later than the end of Q1 2020.
Moving to our long term care operations on the next slide long term care funding enhancements helped drive an increase in revenue in Q3.
As we announced last quarter, the Ontario government provided a funding increase for long term care providers of 1% effective April 129 team, which represents for Extendicare an increase in annual non flow through revenue of approximately $1 million.
At the same time, the government indicated plans to eliminate the structural compliance premium funding for eligible beds effective October 129 gene.
However, the government has since deferred that decision until its next fiscal year, beginning April 120 20.
We currently receive annual structural compliance premium funding of $1.3 million.
As we noted last quarter for our Alberta operations government funding changes that normally take effect April 129 team continued to be delayed well, Alberta health services assesses the impacted the recent Alberta government budget that included a four year funding freeze.
Sure H S.
Extendicare together with the Alberta, continuing care Association continues to be actively engaged in discussions with the Alberta government NHS to revise the existing funding model used for long term care.
In the meantime, we did receive a 1.6% resident accommodation rate increase that took effect July 1st 29 team representing approximately $500000 of additional revenue annually for extended care.
On the Ontario long term care redevelopment front the government remains committed to adding 15000, new long term care beds and 15000 redevelop beds over the next five years.
Extendicare as projects are in various stages of planning and approvals, but none are currently under construction.
Management is working closely with the Ontario government and the industry Association to advance the building program, including possible changes to the application or licensing process and the capital funding subsidy.
We believe that the Ontario government is well aware of the critical state of long term care and the pressing need for additional long term care beds.
The importance to the public in the impact this program will have on mitigating the hallway medicine problem faced by hospitals will keep this issue at the forefront of public policy agenda until the necessary changes are in place to get construction underway.
Now, let's turn to retirement living on slide five.
In the third quarter 29 team, we continued to drive growth from our retirement living operations with rising occupancy trends across our stabilized at lease up communities.
In 2019, we have added 236, new suites with the opening up new retirement communities in Bolton earlier, this year and Barrie, Ontario in October .
Average occupancy of the stabilized retirement living communities increased to 94.6% for the nine months ended September Thirtyth 29 team.
Compared to 90.5% for the same period last year.
In our lease up communities, we continued to experience sequential growth in occupancy to 78% as at September Thirtyth 2019 up from 72% on June Thirtyth.
In October we opened and welcome to our first residents to that Barry view, our new hundred 24 suite retirement living community in very Ontario.
Offering 78 independent living suites, 23, assisted living suites, and 23 memory care suites.
Pre lease activity at the very view is well ahead of schedule.
Current occupancy at 38% and strong pre sale deposits on the hand.
As a result of this initial response, we are projecting stabilized occupancy of 95% by the end of 2020 ahead of our original expectations.
We continue with expansion plans to almost double the size of our 63 bed Port Hope retirement community, which we hope to break ground on next spring.
On slide six Extendicare assist contract services and S.G.P. group purchasing services continued to be growth drivers for the company increasing revenues by 7.4% year to date.
Currently we provide contract services to 53 long term care centers and retirement living communities for third parties through Extendicare exists.
In the third quarter 2019, Extendicare that GP purchasing partner network welcomed West coast seniors housing management service provider to over 4000 residents in British Columbia to our growing number of highly respected clients.
Together with our partners as GP now provides cost effective products and services to more than 64000 seniors residents across Canada.
We continue to develop opportunities to expand SGP and assist through additional services in product offerings and by expanding the reach of our sales team into other geographies.
I'll now turn to David Bacon, our Chief financial officer to provide insight into our financial results from the third quarter.
Thanks, Michael.
Ill first provide an overview of our corporate financial performance for the third quarter, and then I'll get into some highlights of our individual business segments.
Turning first to slide eight.
Extendicare increased revenue by 0.9% to 282.7 million in the third quarter from Q3 of 2018, largely driven by long term care funding enhancements and growth in the retirements segment.
Net operating income declined by 600000 or 1.8% to $34.9 million in the third quarter and represented an annualized margin of 12.3% compared to 12.7% in Q3 of 2018.
Reflecting the revenue improvements offset by lower home health care volumes and increased back office operating costs and pyramid.
Adjusted EBITDA declined by 800000 to 23.6 million in Q3 of 2019 and represented an adjusted EBITDA margin of 8.3% compared to 8.2% for the prior year.
Electing to decline is that a wide and higher administrative costs.
For the three months ended September Thirtyth 2019, AFFO improved by 300000 to 13.7 million compared to the same prior year period, primarily driven by lower maintenance Capex in the third quarter 2019 compared to the prior year.
Our dividend remains an important way to return value to our shareholders and in the first nine months of 2019, the company declare dividends of 32 million, representing a payout ratio, 78% compared to the 70% for the same period last year.
Turning now to slide nine.
To highlight.
Adam that impacted the comparability of our third quarter and year to date results. So similarly to how we presented these items in the second quarter.
We continue to track our spending on the Paramount transformation project and our cost estimates remain in line with our original forecast of $12 million.
Overall for the third quarter, the net impact of the pair of a transformation costs reduced adjusted EBITDA by 100000.
Also in the third quarter 2019, we incurred 1.1 million and severance costs related to changes in leadership in some of our head office support functions.
As compared to the net severance costs incurred in Q3 2018 of 1.7 million related to the departure of our former CEO .
Overall, the net impact of the change in severance costs increase adjusted EBITDA of 600000.
In addition, the ongoing impact as the implementation of IR for 16 reduced administrative costs by 700000.
Increasing our adjusted EBITDA over Q3 of 2018.
Recalling though that this is offset by an increase in depreciation and interest expense.
Turning now to the Slide 10, you will note that there was no impact on revenue as a result of these items in the current quarter and the impact on the change and NOI and adjusted EBITDA in Q3 2019 compared to the prior year is 400000 at 1.2 million respectively.
In addition, adjusting for these factors impacting comparability with third quarter for the third quarter of 2019, our payout ratio would be 73% as compared to the 78% as reported.
Turning now to our individual business segments, and first to our home health care operations on slide 11.
Adjusting for the factors impacting comparability I just mentioned.
So why from our home health care operations was 8.6 million for Q3 of 2019, representing a decrease of 1.2 million from 9.8 million for the prior year period, largely driven by lower volumes in the current quarter.
Hawaiian margin was 8.2% for the quarter compared to 9.2% in the third quarter 2018, as lower volumes and increased cost associated with added support staff lower profitability.
Volumes from our home health care operations for this quarter declined by 1.4% over the three months ended June Thirtyth 2019.
As Michael mentioned a decline in volume is typical during the summer months. However, this quarter sequential decline of 1.4% was below the 2.72% comparable decline we've experienced in both the third quarters of 2018 in 2017.
As we've previously indicated we continue to work towards exiting the low margin DC market in the first quarter of 2020.
In the third quarter VC contributed 13.1 million of revenue at breakeven operating income, which was bolstered in the quarter by retroactive funding received towards increased benefits costs.
For the nine months ended September Thirtyth 2019, BC contributed $37.3 million of revenue and net operating loss of 500000.
Our NOI margins in Q3 of 2019, excluding DC, which has been 9.3%.
Turning now to our long term care operations on slide 12 in the third quarter revenue grew by 1.7 million or 1.1% at our in Hawaii increased by 500000 or 2.2% from the same prior year period.
With an ally margin of 12.8% up slightly from 12.7% in the third quarter last year.
Funding enhancements timing of outflow spending a lower utility costs in the third quarter compared to the same period in the prior year contributed to the increase in NOI.
Turning to slide 13.
The NOI from our retirement living operations increased 200000, or 8% to 2.9 million in the third quarter as compared to Q3 2018.
This improvement was driven primarily by the growth that average occupancy from same store operations to 94.7% for the three months ended September 2019.
Compared with 86.8% for the same period and prior year.
This increase was partially offset by a decline in the contribution from our non same store operations of 500000.
Due to the Preopening and early lease up losses from our new communities of Bolton dairy and a decrease in the number of townhouse townhome resales at our increased village facility and higher labor costs due to personnel changes in the current quarter.
Looking at our final business segment on Slide 14, NOI from the contract services consulting a group purchasing operations declined by 500000 to 3.2 million in the third quarter compared to Q3 2018.
The drop in NOI was primarily related to the increase in back office staff added to support growth and the timing of nonrecurring revenue compared to the third quarter 2018.
Finally, turning to slide 15 in our financial position.
The company's consolidated cash and short term investments on hand, we're 96.8 million as of September Thirtyth 2019, representing an increase of $30.9 million from the beginning of year.
In addition, the company has 65 million available to draw under its Parenthood credit facility and subsequent to the ended the quarter. We repatriated a further U.S. 10 million of cash from our captive for general corporate use.
The company's reported long term debt, including convertible debentures as at September Thirtyth 2019 was 558.9 million.
The increase in long term debt of approximately 20 529 million from year end remains relatively unchanged from the levels reported in Q2 that reflects the impact of the adoption of IR for a 16, the renewal of our head office lease in Q2, new mortgage on a retirement community and draws on our construction loan officer.
By debt repayments.
With that overview ill pass it back to Michael for his closing remarks, thanks, David.
This quarter, we have continued to make investments in our business to drive sustainable growth and profitability.
We're pleased with the progress we've made on this front.
Extendicare offers a unique breadth of services across the continuum of care to meet the rising demand of Canadians, who seek the best possible care for themselves in their loved ones.
Demand in the seniors care market increases at 4% annually due to demographic growth.
We are investing in the people systems and processes necessary to position extendicare to meet that opportunity.
Thanks to the dedication of our team of 23000 carrying employees, we are helping thousands of Canadians to live better every day.
And with that we'll be happy to take any questions you may have.
Bretaa.
Thank you.
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First question is from the one call more.
The Securities. Please proceed your line is open.
Thank you and good morning.
Morning.
Just a little bit of admit on the ERP implementation. It looks like you guys pushed out a little bit.
I was just wondering if you guys get maybe give a little bit of color on what was behind that.
Yeah, I think it is a little bit slower than we anticipated.
When we started a couple of years ago, its bleeding a little bit into the into the new year.
We're confident we'll be finished in Q1.
The main issue is really when we get outside of Ontario. Some of the work processes are a bit different we're taking care to make sure that the system is able to manage that so it's a minor a it's a minor delay has an increase the cost is just stretched out.
The timing of getting it done.
Okay and then.
Initially, adding the margin business were up around.
It's come down quite a bit but I was wondering where do you guys kind of see them settling settling.
Yes.
I think we're going to get back to our historical margins.
We've we've as we've talked about added quite a bit in the back office through this transition.
To be able to start driving volume growth, we're starting to see just the earliest.
Indications of that.
In the last couple of quarters, but.
We think that will start to see that in a significant way and 2020.
Got it.
Volume growth I think will come before the margin improvement. So I think the margin improvements will come in the later quarters of 2020.
And then we'll continue to improve.
Into 2021.
But at this point, we see no reason why we can get back to our historical margins.
Okay and just on the the captive you guys repatriated the $10 million I guess you missed sales now it's been four or five years ago.
Does that sort of wind down.
Yeah. It's.
We are the fifth anniversary would be June of 2020 of that so.
We're getting very much near the tail end of that so we took out the 10 million this year.
And the on next year at a minimum but probably take out another usfive million, but given given the strong progress we've seen in turns in terms of the wind down.
We are going as we are going to seek to look for some opportunities to maybe expedite the unwinding if left as it as it is probably could still go into 2020 to 20 to 23, but with very very little activity, but given where we're at we may look to expedite that in 2020.
Okay and then just lastly from me when do you guys.
Maybe talk to answer, but when do you guys thing.
Good start.
Evals and then make progress on the LTV.
Developments.
Yes, it's.
It's and it's an ongoing exercise.
For us.
As I mentioned in the opening remarks, the government is committed to a adding these additional beds.
But despite their their policy commitment the amendments that have been made to the construction funding subsidies earlier. This year are not enough to make the economics for these projects work.
So we've we've already received some approvals on on a couple of our homes, but we're in a wait until.
The economics are more favorable before proceeding on on those projects.
So all of our projects are in various stages of planning and approvals.
But as I said earlier, none of them are are currently under construction. So we're we're in active conversations with the government.
We're working closely with the Ontario long term care Association due to get the necessary changes to the program to get to get that moving forward.
And you know as I as I said in his remarks earlier.
There's no question that public hospitals are feeling the pressure.
Of the lack of supply on the long term care front. So we're quite confident in the coming months that this will be sorted out.
Is there just quick follow up is there any sort of.
Hi, good that you guys are waiting on or anything.
Transpired.
Maybe just like a one off.
Yeah.
Trying to push things into right direction or is there a whole lot of.
Differently.
Well I think the government has to make make some decisions you may recall that.
The government a in in the reorganization that occurred.
Over the summer separated the long term care.
Side of of how from the Ministry of Health and created a separate ministry of long term care, there's a new minister there's a new deputy Minister we've met with them. So they they've only been in place for a few months. So I think that event was important in.
Setting up the appropriate.
Departments to be able to shepherd this along and I think signals the government seriousness with moving it ahead.
As to when some of those decisions will come down where we're not clear on that.
I expect it will be.
You know in the next couple of quarters, but that's that's just to guess on my part.
Okay that was actually really helpful color. Thanks, so much I'll turn it back.
Thank you.
Next question is from that could go free.
CBC. Please proceed.
Good morning, or.
Good afternoon, just wanted to.
I just wanted to go flush out Paramount a little bit more.
If you look at the sequential decline.
By geography.
That.
Any color you can provide there.
Yeah. It's.
It is quite different district to district.
We have 18 different districts.
That run as essentially divisions of the business.
And there at varying stages of implementation and optimization around.
Around the project what we're finding is that it takes about six months.
For a.
A district to.
Fully absorb the benefits of changing the.
The systems out and to start getting growth. We've also got a match that with.
With recruiting so we still have the challenges on the labor front to get the people that we need in place to deliver the services. So some of our offices are fully staffed and others are still recruiting to get to that full staff complement so that that's another factor in delaying.
The the impact of the new system going in but Fortunately, we've seen a mark drop in our attrition over the last 12 to 18 months were about a third.
The attrition we were at at the beginning of 2018.
So that that's really helping us to start to build a you know build our teams up to take advantage of of the software. So it is variable.
But.
Certainly the.
Offices that are earliest in the implementation.
We're seeing some very robust growth.
That is offset by some of the other offices that are still.
In the implementation process.
So we're seeing the early indications are from the perspective of the entire business at this point and I think that will gain momentum in future quarters.
Okay. So yes, I think you said, you're 76% complete the transformation I'm going to assume that's pretty much all Ontario.
Can you comment any at all on the year over year decline in Ontario, this quarter versus the prior quarters.
Doesn't look like there has been very much year over year improvement in that province.
And then that's where most of the implementation has taken place yeah. We had we had some pretty significant declines occurring quarter over quarter in 2018 still.
And so we're still working through that now.
But I think the thing that that they were looking at is the trend from Q1 to Q2 Q3, I think you'll continue to see that going into the future there were in they have.
And increasing growth profile as these offices get up to up to speed.
So what's the what's the critical item.
To get the volume to recover it staff or is it.
Is that this is it.
Yeah, just what's the critical path Act yeah right now.
Theres a couple of factors that are really important in driving the volumes. So.
One of course is having the staff, but the other is to fully utilize the staff you have with optimized scheduling.
So we're moving from a largely manual scheduling process too.
An optimized scheduling process with a software is guiding the up optimization of the scheduling.
So is that combination of things that that's important I referred to the attrition earlier one of the problems that was there is that if you hire somebody but don't use all of their hours it means that they're not.
Getting a.
You know full full time hours, which requires makes it hard to put food on the table. So that was driving some of the attrition because the scheduling wasn't optimize people weren't staying.
With the organization. So I think we turned that around where we're able to fully utilize the hours of the staff that we have which means that when we hire people they're staying.
And starting to drive some of the growth. So it's the relationship between that scheduling function and the recruiting that has to be in good balance in order to make sure that growth is sustainable.
Based on what you're seeing kind of quarter to date.
Would you kind of suggests that the the.
Rate of decline year over year.
It should improve sequentially.
Absolutely.
Okay, and then with respect to.
Margin.
So on a trailing 12 month basis, if you exclude B C. You've done about 9.4 million hours margin looks like it was like 9.19, 0.2% something like that so if you got to say 10 million hours. What does the margin look like maybe you can give you can give us <unk> and.
On.
Translating volume growth into margin expansion.
Yeah I think.
Chris as you said I think if you exclude VC this quarter.
We're at 9.3% from a a <unk> on an average basis I think going forward at $10 million I think I think.
If you think about to next year as Michael said, the volume will come first on the margin improvements will will follow after that so.
So I think Oh, I think I think as Mike said, we will return back to those historical levels I think trying to predict exactly when that will happen I think we're confident when we have the.
Optimization, and we're really leveraging the platform, we can turn our minds to the to the to the efficiency of of that back office functions. So.
Hard hard to say exactly when that looks like and when we do hit 10 million hours is difficult to say, where we will exactly beyond that spectrum bus between sort of a 9.3%.
Coming out of coming out of this quarter.
Over the course and next year, but.
You know that that those historical margin levels of that sort of 12% range are achievable system. It's just a.
Hard to say exactly when that will start to turn but we do feel like it's going to start progressing in the latter half of next year as we really optimize.
The scheduling capacity.
So what is it that gives you that that confidence.
Heading into next year.
You know it.
Certain volume level, you must have some idea of where margins could be.
I might not.
Yeah.
As you are I think the the thing that gives us confidence is the fact that we deliberately added significant back office staff.
Order too.
It.
Turning back to a growth trajectory.
Those back office staff are largely in place so we'll be able to increase our volumes without having to increase the back office very very much.
So from this point forward any volume increases are going to result in a you know an increase in that in the variable cost of sales, but it's not going to increase.
Back office staff component of this so that's why we're really in a we'll see volume increases and then you'll start to see.
The margin improving because we're not adding the the to the to the costs in the back office to David's point, I think we'll be able to actually reduce back office costs. In addition to that but we're not going to do that until we're on.
Growth path that is.
Sustainable and and and predictable as I mentioned in the opening remarks, the underlying market is growing at about 4%. We've also left some significant market share on the table over the last couple of years. So we're really looking for.
You know a growth.
In the 4% to 6% range, that's what we're shooting for.
And Thats our priority at this point.
And then as we're getting into those types of of growth rates will be looking to spend more of our energy on optimizing the back office costs.
I got to try asking is one last [laughter] last way.
What do you think the contribution margin is from a dollar an incremental dollar of revenue.
It's in that 20 425 were both up 24% range today.
Okay. Thanks, all right I'll get back in line. Thank you guys.
Thank you once again, please dial one and your telephone keypad. If you have his question. The next question is from wash.
Huh.
Please proceed.
Good afternoon.
Hi Ash.
Just focus on the home.
Okay.
Awesome.
<unk>.
And if I applaud that.
Yes.
No.
Moved up significantly in 27.
And.
<unk>.
Sure.
Oh.
And it has gone.
Hello.
So I'm trying to understand.
That is because.
Stuff.
<unk>.
Sorry, yes, we missed that last point, how much of it is staff and how much of it is what.
Sure.
You said that some of your offices to shooting and trying to optimize that using the soft with right calling.
Right.
If you are doing.
Look.
Above average.
And it would be.
Understood.
So a couple of things, yes were instrumental in in in the issues that that we've seen.
So.
Really as we got through 2015, 2016, 2017, the labor market significantly tightened up.
And if you remember there was also some changes in the in minimum wage legislation in Ontario in particular.
And the result was that the labor market tightened up quite a bit we started to see significant increases in attrition that we hadn't seen prior to that.
So where we were able to.
Get away with giving somebody 30 hours, a week or 35 hours a week as people had other alternatives.
In in the labor market.
They were they were leaving for better opportunities.
Today people are looking for.
A reliable 40 hours a week.
And in order to do that you have to have quite off device scheduling.
And so in order you know for us to regain back to that to the.
Being able to take advantage of the volumes.
We have to.
Move to these modernize systems to be able to do.
Able that.
So those were that big sort of external environmental factors that that they caused that's a problem.
You may recall that that a lot of the other home care providers in the Canadian market are already on the system that we're implementing.
So we got a little bit behind the curve by not moving to that cloud based platform, where others in the market did and so thats why we had a more difficulty adapting to the tighter labor market, then perhaps others did.
Okay.
And.
Based on what you're seeing right now.
The system implementation and everything.
Thank you.
Volumes would be.
2020.
Well as I said, our target is to get.
To a growth rate that is in excess of the underlying market.
So you know we're looking at Oh wanting to be be a north of the 4% per year that the underlying market is growing so that's that's what we're shooting for.
I have a number of districts that are already growing in excess of bat rate. So.
It's a matter of how long it'll take us to get all of our offices.
Optimized so little bit hard to predict the exact timing of that.
I think we'll get the whole business due to that level of growth but.
Exactly how many quarters it'll take us to get to that point.
We're still.
We're still actively.
Working to get that implementation.
Completed two to two achieved that if you if you extrapolate from that from our observation that it takes about six months to optimize in office after.
Implementation I, you can start to get a sense of when.
We should see all of our offices operating at that level of efficiency.
Okay.
Hi.
Yeah.
Understood.
When do you called it just optimizing what do you look at and look at a number of.
I wish it services for what it Buddy.
The first thing that first the first thing that we're optimizing for is getting to growth.
Back.
Two.
To to be a in excess of the market. So.
So 4% growth rate annually and.
And then.
As David said earlier, a will focus on the back office efficiency.
To get the the margins back to historical levels. So it's a two to stage process.
Okay, and just one last question.
You had some severance costs.
<unk>.
Just wondering.
What changed and.
<unk>.
Anymore.
<unk>.
We made some leadership changes and particularly in our in our corporate functions.
And.
They were they were not necessarily planned. So we don't have anything planned for Q4, but that's not to say that.
That.
There will be anything there.
But yeah, we're continuing to.
To drive to higher levels of.
Performance and and we'll make changes accordingly to make sure that that we're meeting our objectives.
Okay.
Sorry, just one more.
What would be the NOI contribution of the new <unk>.
This is as GP contract.
Well I think that.
But if you sort of did a revenue.
Or revenue per bed.
Type calculation, I mean that contracts going to be in line with with our others. So you're going to be looking at revenues in the.
400000, 500000 range in the margins would be comparable to what were what we're just what we you see in the group.
<unk>.
Yeah.
400 to 5000, a year on revenue and yet the margins on that would be comparable to the margins that we have with our.
Business.
Okay.
Thank you.
That's it for me.
Thank you.
The next question is from tell me as National Bank Financial. Please proceed.
Hi, good morning.
Good morning so.
I just want to go back to one of your earlier comments you mentioned that.
You had a project approved redevelopment project approved but you're not proceeding.
At the time do like how about correct.
Yes, okay. So.
I'm just trying to understand how the so a little bit more about how the process works I would've thought like if you had an approval. So you said no prior to development agreement being signed or has been find already.
In this case, we have a development agreement signed.
Okay, and you're able at even at this point then to to.
Redraw the early wheat and redraw the terms I just would have thought one.
Robin find a development agree with you that they would have expected you to proceed like I'm just trying to understand how you can manage these things going forward to give you remember one of them to do.
Yeah.
Well the construction funding subsidy.
At the time of I've construction is what determines that subsidy for the 25 year period.
After the home opens.
So if that if that CFS is not a at a point that that that the project is viable economically and then we're not gonna proceed. So when we talk about.
You know very disciplined evaluation of the long term care redevelopment projects. That's what we mean is it the economic conditions have to be right. We thought that that project was was viable at that at that particular stage.
But when we took the project a tender.
We found that the costs had escalated so much that the project just didn't work anymore. So were.
Were essentially back to the drawing board in terms of the financials before we can proceed.
And then if I again, just back to your comment you're saying you think that the subsidy question could be addressed within the next couple of quarters. I. Appreciate you said that that we would guess phone to yes, it's a guess, but but the fact is very very limited construction happening in the long term care sector anywhere in the.
Province of Ontario.
And given given the the urgency.
Needing supply on the long term care front, we don't think that that can be sustained for any length of time. So that's the basis for my prediction that I will see some changes. Okay. That's helpful. And then just any other segment you made reference to.
The increase in support costs.
Segment.
This quarter I'm, just wondering where the was that sort of like a one time investment or was this like you're stepping up like labor and we should see an ongoing.
An ongoing investment cost going forward.
It's house David here. They the increase is really a year over year, we added those resources.
Historically last half of sort of 2018.
Our really the big builds up on the on the back office costs. There on SGP assess so it's really just coming through this quarter on a year over year. They came in towards the back end of last year.
Okay. So we should start to annualize that impact yes, we ended the year, yes, okay perfect. Thank you very much gentlemen.
Thanks.
Thank you.
Next question is found that pardon me yeah of RBC capital markets. Please proceed.
Thanks, and good afternoon, just on paramedic I don't want to belabor. It because we've obviously covered a fair amount on the call, but what is normal industry sort of staff turnover in this business and you know how does that compare to what what Paramount is seeing a at this stage.
Yeah.
It's hard to say what normal is because I think it depends on the underlying conditions in the labor market. It's also very different in different geographies across the province, So world situations are very different from urban ones.
So theres a lot of local kind of variability in conditions.
But typically in this in this type of business.
You'd expect that turnover to be around 20% year. So it's still a significant turnover.
In this space.
Just as a comparison, our long term care a turnover is closer to 15% year.
So this is tends to be a little bit little bit higher than that or last year in.
For most of 2018, we were seeing turnover rates in the 30% range.
Right now it's it's it's variable, but we have some offices that are are running below 20% and we still have some offices that are closer to 30%. So it's it's it's variable just depending on on that on the geography and their stage and.
In the scheduling optimization.
Thats very helpful. I guess and then maybe just doesn't extension you know once.
Fully implemented.
Across your districts.
What would sort of be you're targeting what would you aim to achieve or perhaps we'd be a realistic expectation.
Once it's all said and done in terms of the turnover.
I'd be happy with anything less than 20%.
Okay. Thanks, very much the that's all for me.
Thanks.
Thank you once again, please press star one on the capital in keep that if you have a question would you will have a follow up question from Chris co pay ups BC. Please proceed.
Hi, guys just a quick one from me so your cash.
On the balance sheet continues to grow.
Repatriation coming in any update in terms of some of the strategic things you guys are thinking about I know you referenced I think there's a last quarter about booking other verticals for.
SGP I'm, just any anything any color there.
Yeah, I would I would say at this point Chris that.
Our our view is that until we have some visibility on.
And the timing of the long term care redevelopment.
We're we're keeping our powder dry and and and being a little bit conservative on that front.
So I I think I think I'd like to see and because I do think we're going to see something you know by first or second quarter 2020 in terms of an indication of.
Where government policy is headed on this we're we're in a wait until we understand that before.
Making any any real decisions about you use of cash.
Thanks.
Thank you.
So the question magistrate I guess turn I'd like to return the meeting back over to Mr. Johnson. Please proceed.
Thank you Adam that concludes our call for today. This presentation is available on our website as are the Collin numbers for an archived Mccartney. Please do not hesitate to give us a coffee at any further questions.
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No there she's promoted said coffeehouse it does that.
Office depot.
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Okay.
Okay.
She was spending.
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Uh huh.
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Yes.
Okay.
She was pending.
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Okay. So she was funny.