David Di Pilla’s Aurrum delivers $10m dividend for rich banker mates

David Di Pilla with local MPs at his Erina Aurrum site. Picture: Peter Clark.

The rich and powerful backers of Aurrum Aged Care look to have found the silver lining in looking after our elderly amid the global coronavirus pandemic.

Actually, it’s more like the goose that laid the golden egg, with former UBS investment banker David Di Pilla and his band of investors, including former colleagues Matthew Grounds and Robbie Vanderzeil, paying themselves $10 million in dividends in the last financial year.

The private Aurrum operates eight residential aged care homes in NSW and Victoria, comprising about 870 places.

The group, in its just released financial results, has revealed the impact of Covid-19 “adversely affected financial performance” thanks to reduced occupancy and the cost of preventive measures, but that hasn’t stopped directors led by Di Pilla declaring interim and final dividends of $5 million each for the year ended June 30, 2020.

The handsome payment to investors came despite the company saying that tough trading conditions are continuing this year.

Other investors in the expanding operation – the group has plans to launch into the childcare and preschool space this year, with Di Pilla’s other baby, the listed HomeCo – include Stephen Di Pilla, HomeCo CFO William McMicking, Aurrum founders Mary and Alex Shaw and HomeCo director and veteran finance exec Greg Hayes and his wife Heather.

Di Pilla’s vehicle Mez Pty Ltd has the biggest stake of 10.7 million of 17.7 million shares on issue – about 60 per cent – with the Shaws and Hayes holding 2.8 million shares each, or about 15 per cent each.

Aurrum’s PwC-audited accounts show the group generated revenue in the year of $92.1 million, compared with $77.4 million the year before.

That drilled down to a $14.8 million operating profit, with the group receiving $64.3 million in government subsidies in the year.

The accounts also show that Aurrum owes $63.6 million to the Shayne Elliott-led ANZ via current and non-current loan facilities, which are subject to an EBITDA interest cover ratio and loan to value ratio.

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Poor start

It was the year’s biggest float to date but a rather disappointing one for Pepper Money on Tuesday.

Still, luckily for its largest shareholder, private equity outfit KKR and its local head Scott Bookmyer, it had already locked in some pretty hefty income streams.

Shares in the Mario Rehayem-led non-bank lender slipped by 10 per cent from its $2.89 offer price by the close on Tuesday.

That represents a market capitalisation of roughly $1.15bn.

Pepper Home Loans's head of sales and distribution, Mario Rehayem. Picture: Supplied.

That’s an on paper hit to KKR of about $81 million given its 65.6 per cent holding in the group. Regardless of its performance however, there’s still plenty of returns headed its way.

These include a share in as much as $15 million of fees and incentives for the joint managers and bookrunners, to be carved up between fellow bookrunners and joint lead managers RBC, Credit Suisse and Goldman Sachs.

On top of that, chairman Michael Culhane, and his broader Pepper Global group which is still controlled by KKR, have locked in a recurring $425,000 annual fee for use of the “Pepper” trademark, to be paid for 10 years followed by two successive automatic renewal periods of five years.

Those payments alone are not a bad dividend, even if the float doesn’t quite go as planned.

The group’s top brass, however, have a few more reasons for it to succeed.

Chief executive Rehayem is due to receive close to 2 million share rights in the next three months as part of an IPO grant and the company’s incentive schemes, while CFO Therese McGrath is headed for just over half that.

Both packages are worth $5.8 million and $2.9 million respectively if all rights vest over the next several years, subject to Pepper hitting its performance targets.

If the first day is anything to go by, they’ve got a fair task ahead of them.