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Metlifecare looks to buy at least one new village in 2017 to meet rising demand

Wednesday 7th September 2016

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Metlifecare expects to buy at least one new site in the 2017 financial year to accelerate its development programme and make the most of growing demand in the retirement village sector.

In an investor update to the NZX this morning, chief executive Glen Sowry, who joined the company in April, said Metlifecare will deliver 229 new units and care beds in 2017, increasing to a minimum of 300 new units or beds by 2019.

"We serve New Zealand’s fastest-growing demographic, and we have a leading position in two of the country’s highest value-growth regions," Sowry said. "Our focus is on targeted growth and we have taken time to carefully consider where our offering currently fits in the market, as well as where it should fit in future.”

Last month, the retirement village operator reported annual net profit of $228.7 million in 2016, including a $237.2 million increase in the fair value of the Auckland-based company's property portfolio. Underlying earnings, which strip out unrealised movements in the value of that property portfolio, rose 26 percent to $66.1 million, driven by a 16 percent increase in sales of occupation rights agreements to a record 568.

Metlifecare's property portfolio spans 24 villages with 4,025 units and 354 care beds and it has three more villages under construction, with a land bank that can cater to another 1,386 units and 387 care beds. That portfolio was valued at $2.52 billion as at June 30, up from $2.18 billion a year earlier.

Sowry said the company intends to buy at least one new site in 2017 to add to its development pipeline, as it targets building villages in Auckland, Bay of Plenty, and Waikato, an area it has called the 'golden triangle', which it sees as having large and ageing populations in need of more retirement services. It's currently looking at six land opportunities with four strong contenders.

The retirement village operator will also look to make more from its developments having strengthened its design team, processes and supplier relationships, and expects its development margin to be at least 15 percent in 2017, Sowry said. Its realised development margin was $10.1 million in 2016, or 15.2 percent of underlying profit. 

Within its annual earnings, Metlifecare's wage bill rose 16 percent to $4.6 million from a year earlier as part of a plan to lift investment in care services, which are a key component of a potential resident's decision. 

Today, Sowry said Metlifecare was planning to more than double the amount of hospital-level care accommodation it offers and to "significantly raise the bar" on its food and dining offering. 

The shares last traded at $6.24 and have gained 34 percent this year. According to Reuters data, it's rated an average 'hold' by five analysts, with a median target price of $6.60.

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