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Metlifecare reports stronger underlying profit in 2018, lifts dividend

Monday 27th August 2018

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Metlifecare, New Zealand's second-largest listed retirement village operator, reported a stronger underlying profit on improved revenue in 2018, though its headline profit weakened as its property portfolio made smaller revaluation gains as the housing market moderated.

In the year to June 30, Metlifecare reported underlying profit before tax of $87.5 million, from $82.1 million a year earlier. Revenue rose 7 percent to $115 million. Net profit dropped to $125.1 million from $251.5 million in 2017, as the change in fair value of its property portfolio fell to $134.9 million from $258.7 million a year earlier. The value of Metlifecare's investment properties lifted 10 percent to $3.18 billion.

Chief executive Glen Sowry told BusinessDesk the company expects current housing market conditions, which have driven lower revaluation gains in the latest year, will remain. 

"We believe the market conditions that have now established themselves, which are more reflective of long-term averages after a period of strong growth, are likely to remain like this for a year or two," Sowry said.

He said the company was pleased with the result and had made improvements in the things it can control, including gains from re-selling units of $62.3 million, up 13 percent from the prior year. The company's margin for resales was 34 percent in the year, the same as 2017, with an average price of $544,600 per unit. Its margin for new units was 27 percent, up from 23 percent, with an average price of $645,000. 

Total sales volume for the year was 441, with 343 coming from resales - up from 322 in 2017- and 98 from new sales, from 130 the year earlier. In 2019, Metlifecare expects higher sales volumes for new units and resales, weighted to the second half. They include a number of new sales which were contracted by the end of 2018 but won't be settled until the first half of 2019.

Metlifecare plans to complete 145 new homes and 70 new care beds in the year, down from 2018's 254 new homes and beds. Sowry said the company had made a conscious decision to defer construction and completion of one care home beyond the current financial year "because we didn't want to be opening three care homes simultaneously. That's a pretty heavy workload, and we need to be very careful to ensure standards are maintained."

In the 2020 financial year, Sowry said the pipeline for new homes and beds was "comfortably north of 300." It is targeting another 300-plus new homes and care beds in 2021, and has four villages currently in the planning and design phase, all in Auckland.

Like many New Zealand building owners, Metlifecare has been hurt by the country's leaky building crisis and expects to spend $44 million to remediate five of its villages, with the bulk of the work to be done between the current financial year and FY21.

In the latest year, it spent $13 million on buying back units for regeneration and remediation. It bought back 12 units in 2017 and 44 in 2018, and plans to buy back three more in 2019, before it begins returning units into circulation in 2020. Metlifecare said holding buyback stock had depressed its resale gains in 2018 but it will catch up when the units are sold.

The board declared a 6.75 cent final dividend, payable on Sept. 21 with a Sept. 14 record date. That lifts the full-year payout to 10 cents per share, from 8.05 cents in 2017.

The shares rose 1.6 percent to $6.35 and have gained 2.5 percent this year.


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