Orpea - comment

All that waiting, and what did we actually receive. An acknowledgement that previous management weren’t really managing the business. Various examples of lack of regional or national controls, even so far as lack of property register for their holdings. And underinvestment in operations, shown by the level of CAPEX that is classified as maintenance CAPEX astounds us. c. €570m in maintenance and IT expenditure of €370m, totally €900m until FY25.

Expansion was key, but at a large price - EBITDA contributions from various countries deemed non-core, generated a negative EBITDA of €12m in FY22. Operationally, this business is in a difficult situation. Even in Germany, where operations are performing strongly, there is a staff shortage of 10%. It is staff shortage that is preventing intake of new residents.

On the balance sheet, apart from the headlines of full equitation of the Orpea SA unsecured debt, very little information was shared. There was no discussion on level of dilution and this afternoon’s meeting is the first meeting in the Conciliation Process. The timeframe is optimistic but that is similar to the overall tone of the presentation - "past performance blamed on others, and turnaround is achievable with new management”. We see nothing to change our sceptical viewpoint.