(News Bulletin 247) – The operator of retirement homes saw its margin collapse last year, while its net income was weighed down by heavy property depreciation.

The 2022 financial year, or Orpea’s annus horribilis. The retirement home operator saw his reputation damaged by the publication of the investigative book The Gravediggersits share price has collapsed (nearly 90 euros in January 2022 against 2.6 euros currently) and its financial results have been swept away by soaring inflation.

The 2022 accounts, published this Friday, May 12, show this perfectly. Already communicated, revenues increased by 5.5% like-for-like, with an organic increase of 1.9% in France despite “the crisis context affecting the group’s retirement homes”, underlines the company.

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An operational loss

But it is obviously at the level of profitability that the wound is really visible. Operating profit before rental charges, depreciation, provisions, interest and taxes (Ebitdar) fell by 27.1% and the corresponding margin collapsed from 24.2% to 16.2%. Inflation in energy, food and wage costs – notably with an acceleration in recruitment in France towards the end of the year – reduced nearly 600 basis points (6 percentage points) of margin from one year to the year. ‘other.

Current operating profit fell into the red, with a loss of 49 million euros, compared to a profit of 396 million euros in 2021.

On the most “general public” line of account, the net result, the losses amount to 4.03 billion euros, this due to heavy depreciations of more than 4 billion euros, in particular on its portfolio of real estate assets.

The new management of Orpea, with its managing director Laurent Guillot, had castigated, during the presentation of the group’s strategic plan at the end of 2022, “an excessive and uncontrolled international real estate development” led by the former leaders of the group.

The company intends to reduce its holding of real estate assets, from a holding rate of 47% at the end of 2021 to a rate of between 20% and 25% in the medium term. The group had identified 1 billion euros of real estate assets ready to be sold “as soon as market conditions allow it” and intends to create in the medium term a dedicated property company in which a minority share of the capital would be open to external investors.

The group’s equity is now negative at 1.5 billion euros.

“The 2022 accounts reflect the profound reorganization and the scale of the change that had to be driven in the company. 2022 will have been a year of rupture for Orpea. Today, it is towards the future that we are shot,” said Laurent Guillot, the group’s general manager quoted in a press release.

A gigantic dilution to come

The group’s future will above all go through a herculean restructuring of its liabilities – Orpea crumbling under a net debt of 8.8 billion euros – with nearly 4 billion euros in debt wiped out, three capital increases and the taking control by a group of shareholders led by the Caisse des dépôts et consignations (CDC).

This project of recapitalization of the company must result in a gargantuan dilution for its current shareholders.

The current holders would hold “after the completion of the financial restructuring, and if they decide not to participate in the capital increases, approximately 0.4% of the capital of the company in the event of approval of the safeguard plan accelerated by each of the classes of affected parties, and approximately 0.04% in the event of non-approval of the accelerated safeguard plan by at least one of the classes of affected parties”, warns Orpea. That is a potential dilution of up to… 99.96%.

This plan must be submitted mid-June to the vote of the parties affected by this plan, including the existing shareholders.

Voices were raised against this project, in particular a group of minorities, Adamo. After having suffered a refusal from the company, this association of minority shareholders demanded in court the holding of a general meeting so that the shareholders could express themselves and compare the plan of the management vis-a-vis the alternative project of Concert’ O, which brings together two minority shareholders.

According to Yi Zhong, an analyst at the independent research firm AlphaValue, the holding of a general meeting wanted by these minorities “could obstruct the capital increase and related transformation plans carried out by the CDC”.

The management of Orpea, she considers that only the project with the CDC allows the continuity of operation of the company.

On the Paris Stock Exchange, the Orpea share fell by 1.5% around 10:20 a.m., an anecdotal variation given the plunge in the share price for more than a year and the dilution to come…