French care home company Orpea, which has a large presence in Ireland, warned on Monday that its financial performance is expected to worsen in the second half of the year owing to higher costs and a scandal over how it runs its homes, sending its shares down 19 per cent.
Orpea said that its operating profit margin on first-half earnings dropped to 18.5 per cent from 24.9 per cent a year earlier and is likely to fall further in the second half, amplified by soaring energy costs.
This margin decline was partly a result of a substantial reduction in compensation for Covid-19 received in the various countries in which the group operates.
Orpea also faced higher food, energy and wages costs while tariffs charged to patients and residents were little changed, a company statement said.
The company, which faces legal action in France over allegations of mistreatment of elderly residents and embezzlement of public funds, will announce fully audited first-half results on September 28th.
The debt-laden group’s refinancing plan is proceeding as planned, finance chief Laurent Lemaire told reporters without elaborating.
Orpea said in June that an independent audit had found evidence of financial wrongdoing — including inflated labour expenses and suspicious large payments to third parties — but did not support all allegations against the company.
The group, which overhauled its board of directors and replaced the chairman and chief executive in July, has since said it will reimburse €25.7 million in “unduly received” public money.
Orpea is a global player in the long-term care market, operating 104,234 beds in 1,014 care homes across 22 countries, of which 20,932 beds are currently under construction.
In Ireland, the company has acquired a number of nursing home groups. Its 2021 acquisition of the FirstCare portfolio of six nursing homes, with 552 beds, from businessman Mervyn Smith in a deal understood to be worth more than €100 million, made it the largest private player in the sector in the State.
The purchase came a little over a year after Orpea entered the Irish market by buying the TLC Nursing Home portfolio, made up of 674 beds, for €150 million from Michael Fetherston. It subsequently bought the Brindley Healthcare care home group in two stages, giving it another 574 rooms. Brindley subsequently acquired Belmont Care, a nursing home in Stillorgan, south Co Dublin, adding a further 161 beds.
All told, Orpea has 1,961 beds in a fast-consolidating sector in Ireland that has attracted a flood of European institutional investment in recent years.
Back in 2020, Orpea said it intended to “continue expanding its assets in this country where the current offering is insufficient and an additional 10,000-plus beds need to be built by 2031″.
— Reuters
