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Metlifecare 1H profit jumps 31% as housing boom bolsters property values, fattens sales margins

Monday 27th February 2017

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Metlifecare's first-half profit jumped by almost a third as the country's housing boom bolstered the value of the retirement village operator's property portfolio and fattened its margins for unit sales. 

Net profit rose to $164.1 million, or 77.1 cents per share, in the six months ended Dec. 31, from $125.7 million, or 59.2 cents, a year earlier, the Auckland-based company said in a statement. That included a $170.7 million gain on the value of its investment portfolio to $2.74 billion. Those rapid house price gains helped Metlifecare boost realised gains on resales 35 percent to $24.4 million and development margins 35 percent to $9.6 million, even as new unit sales dropped 14 percent to 89 in the half and resales fell 13 percent 175. 

Stripping out the effects of the housing market, Metlifecare said underlying earnings were up 15 percent to $38.6 million, beating Forsyth Barr analyst Jeremy Simpson's forecast of $37.2 million. 

"We have continued to experience strong sales price growth and market conditions in our stronghold of Auckland and the Bay of Plenty," chief executive Glen Sowry said in a statement. "We are on track to meet our 2017 development delivery targets and, looking further out, have also made excellent progress on a number of strategic initiatives that will drive accelerated growth and create a competitive edge in the markets we are targeting." 

Metlifecare has targeted villages in what it calls the 'golden triangle' of Auckland, Bay of Plenty and Hamilton where it sees large, ageing populations in need of its services. Those three areas have also gone through rapid house price inflation, with Bay of Plenty and Hamilton benefiting from lending restrictions placed on investors buying in Auckland, creating a halo-effect. 

The company's board declared an unimputed interim dividend of 2.25 cents per share, payable on March 31 with a record date of March 17. That's up from 1.75 cents a year earlier, and more than the 2 cents Forsyth Barr's Simpson was picking. 

The shares last traded at $5.60 and have gained 20 percent over the past 12 months. 

Metlifecare built 97 units in the six-month period and had 288 units and beds under construction as at Dec. 31, with a land bank catering for a further 1,647 units and beds in out years. As at Dec. 31, the company's portfolio spanned 24 villages with 4,122 units and 354 care beds.

The retirement village operator said it reviewed its at-risk villages during the period and expects remediation costs of $23.5 million on top of the $20.6 million estimated at June 30, 2016, which it anticipates will occur over the next seven years. 

Metlifecare took $3.7 million of impairment charges in the half after deciding to close the care home at its Pakuranga village by June 30 of this year, and due to escalating construction costs for its Greenwich Gardens village.

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