Metlifecare on track for $60M full-year post-merger cashflows

Friday 22nd February 2013

Retirement village operator and aged care provider Metlifecare says it's on track to meet its primary guidance of $60 million full-year operating cashflow after reporting cashflow of $29.2 million excluding interest and acquisition costs in the six months to Dec. 31.

The results are heavily influenced by five months' revenue from the merger last July of Vision Senior Living and Private Life Care Holdings, and a one-off unrealised gain of $63.3 million on the acquisitions, reflecting the difference between the purchase price paid and subsequent valuations.

Stripping out one-off items, net profit after tax for the half year was $23.5 million, compared with $7.4 million for the same period a year earlier, largely thanks to a $28.31 million uplift in the failure value of investment properties. An increase of $11.4 million was recorded in the previous period, on what was then a smaller, pre-acquisitions portfolio.

The company is returning to paying dividends, declaring an interim payout of 1 cent per share and the introduction of a dividend reinvestment scheme.

Comparisons to previous performance are complicated not only by the acquisitions, but because retirement village operators' performance is tied up in metrics relating to the turnover of retirement units as residents die or move into intensive end of life care.

"The nature of the accounting in this sector is tricky," said Jeremy Simpson, an analyst at brokerage Forsyth Barr. "The guidance was $60 million operating cashflows for the full year and that's what they've confirmed. There's no upgrade, but they're tracking on what they thought they would be."

The company reported a "strong uplift in sales of new units and resales of existing units and significantly improved operating cashflows."

"While debt levels increased on settlement of the merger as expected, the property rationalisation programme undertaken and cash generation from operations in HY13 led to a reduction in debt of approximately $47.8 million," said chairman Peter Brown.

The group sold undeveloped property in Christchurch for $9.4 million and the Oakwoods village in Nelson for $29 million, booking a $1.5 million loss on the transaction. That took opening position debt of $196.2 million back to $149.7 million at the half year mark.

Total assets stood at $1.9 billion, compared with $1.2 billion at year-end balance date, while total liabilities were recorded at $1.2 billion, compared with $787.6 million at June 30.

During the six months, Metlifecare completed development of 42 new units, sold leases on 59 units at a slightly improved development margin of 18 percent. Some 78 units are currently under construction, with a development pipeline of 735 units and 108 care beds.

The company intends focusing more on specialised medical care.

"The ability to provide a continuum of care is becoming increasingly important," said managing director Alan Edwards. "Metlifecare already provides care to many residents in their village home, without requiring them to move to a care facility.

"We are seeking to increase our exposure to age related residential care services...across our retirement village portfolio."

The focus over the remainder of this year will be to drive cost savings and operating efficiencies from the enlarged post-merger entity, which added eight villages to give the group a total of 23 facilities. It entered the NZX50 Index of the largest listed stocks by market capitalisation in New Zealand in December.

Troubled Australian retirement care provider Retirement Villages Group also sold down its holding in Metlifecare to 43.2 percent at the time of the mergers.

The group reported occupancy of its resales stock sits at 95 percent, up from 89 percent at the same half year last year.

During the period, it reported 251 unit sales, compared with 165 in the previous comparable period, comprising 192 resales settlements and 59 new sales.

BusinessDesk.co.nz

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