Healthcare, retirement home specialists watch shares slide

Friday 20th April 2001

By Peter V O'Brien

It is a paradox that companies operating in the growth market of healthcare and retirement villages/homes have seen their share prices erode steadily in the past year.

Prices for the four groups in the sector are in the table but it should be noted Calan Healthcare Property Trust does not operate the facilities it owns.

The trust builds and leases healthcare facilities to specialists in the health field and is therefore effectively a property company, although its facilities are highly specialised.

It is convenient to include the company in the table because its activities are health-related.

The sector was last considered in The National Business Review on August 25, 2000 with the latest share prices being taken at August 21.

At that time Calan had fallen 3.57% in six months, Eldercare 38.3%, Metlifecare 24% (figures for that company have been adjusted in the table for the current cash issue of 2:5 at 85c each) and Ryman Healthcare 4.3%.

Ryman reversed its previous price fall in the period from August 2000 to April 2001 but the other three continued their slide.

Calan and Ryman increased their profit in the latest reporting period, but Eldercare and Metlifecare were well down, a factor which would have had a heavy impact on their share prices.

Eldercare's result for the six months ended November 30 was a loss of $6.73 million. That figure included writedowns of $5.3 million on discontinued property developments and other assets and a realised loss of $1.3 million on the sale of the company's holding in another organisation.

Eldercare evolved out of the former New Zealand Petroleum Co and entered the retirement home field. Late last year it decided to move into what it termed "the wider healthcare market" to complement its core operating assets of hospitals, nursing homes and clinical rehabilitation facilities.

Eldercare said it aimed to expand its existing core cashflow medical businesses with other health and medical opportunities "to offer an attractive investment base for current and future shareholders."

It remains to be seen how that pans out but the market has discounted the shares in the meantime.

Metlifecare earned $474,000 for the year ended December 31, 2000 compared with $1.53 million in the previous year.

The year 2000 result include deductions of $2.26 million in unusual items, being restructuring and development costs, compared with $1.53 million in 1999.

Metlifecare said it had not achieved its potential in terms of margins and profitability, although the sales performance was encouraging.

The Metlifecare board had completed a strategic review of the business which focused on improving bottom-line performance.

A new business was produced targeting:

moving from a development to an operations focus;
achieving cost savings through implementing improved operating systems and "information technology platforms;"
continuing to "develop the valuable land bank," consistent with demand and profitability objectives and;
strengthening capital structure to fund new growth initiatives.

The last target resulted in the 2:5 cash issue at 85c for each new share. Rights to those shares traded at 7c when the Stock Exchange closed for Easter.

The other three targets would not have been fully quantifiable when the plan was formulated, so the market will have to wait for the concrete results.

Metlifecare's report said the company owned a "comprehensive portfolio of retirement villages, nursing homes and hospitals providing a continuum of care for more than 2000 residents."

It owns and operates 13 villages, 10 nursing homes and five hospitals at 15 locations. The reorganisation has so far done nothing for the share price.

Ryman Healthcare says it is "the leading retirement village developer and operator in New Zealand."

The company has developed the quirky habit of naming its villages after famous women from the arts' world: Ngaio Marsh, Rita Angus, Shona McFarlane and Malvina Major.

Ryman's financial performance may be a bit behind the artistic performance of such people but it has done well.

Net profit for the six months ended September 30 was $7 million compared with $6.3 million in the corresponding period of the previous year and $12.6 million for the year ended March 31, 2000.

The sector obviously has good long-term prospects, given the age profile of the population, but few people in the market think long term.

Sector share price (c)
Company	Price	Price	% change	2000/01	2000/01

	12.4.01	21.8.00	Aug/Apr	high	low
Calan	78	108	-30.3	117	75
Eldercare	14.4	37	-61.1	70	12
Metlifecare ⁽¹⁾	92	121	-24.0	194	90
Ryman	192	180	+6.6	226	150

(1) adj for cash issue

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