Metlifecare profit halves as property value growth slows

Glen Sowry of Metlifecare. Photo/Warren Buckland

Retirement giant Metlifecare halved its bottom-line profit from $251.5 million net profit after tax last year to $125.1m this year.

However, revenue rose from $109.1m to $115.3 m and other financial measures pointed to a good performance.

Announcing the full-year result to June 30, 2018, accounts showed property values increased at a much slower rate this year.

The fair value movement in investment properties last year was a $258.8m gain, whereas this year that was only a $134.9m gain, taking a hit on the bottom line.

"All the other metrics are up except net profit after tax, which is a reflection of unrealised gains," said chief executive Glen Sowry.

"If we think back to FY16 and FY17, house price inflation was at high levels then and that was fuelled by high investment property gains. They have moderated, as one would expect, in the last year, reflective of the wider housing market."

Even at the slower growth rates, "those are very good gains but they have just tracked back to a more normalised level".

Sowry said the business was not at all concerned about property values rising at a slower rate, because revenue was up.

The company will pay a dividend of 10 cents a share in the June 30, 2018, financial year, up on the 8.05cps it paid last year. Metlifecare aims to pay out 30 per cent to 50 per cent of its underlying operating cash flow and is making no forecasts about the June 30, 2019, dividend.

But its outlook is upbeat, with the possibility of expansion into Australia and more development sites being purchased.

Sowry said Metlifecare was "clearly keeping a close eye on trends and what's occurring in Australia but our priority in the short term is to strengthen our existing development pipeline".

The business now has 19 Auckland villages and development sites and five Bay of Plenty villages and Sowry expressed satisfaction with the balance "but we're actively looking at other opportunities in New Zealand".

The company stressed in a press release that it had made "a strong financial result, highlighted by record underlying earnings and underlying operating cash flows. Net underlying profit before tax was $87.5m, 7 per cent higher than last year, and underlying operating cash flows increased by 6 per cent to $54.3m."

The company has a $1.3b market capitalisation on the NZX, its shares trading on Friday at around $6.25 each.

Asked about leaky building bills, Sowry said repairs were expected to cost $46.1m at five properties: Waitakere Gardens in Henderson, Dannemora at Botany Downs, Pinesong at Titirangi, Coastal Villas on the Kapiti Coast and Greenwood Park in Tauranga.

Some investment professionals say all retirement villages could be hit by huge bills, only now beginning to come to light, because many new retirement villages were built in the height of the leaky building era during the late 1990s through to early to mid-2000s.

But Sowry was resolute that the $46.1m was a correct sum. Asked if Metlifecare would sue parties over the defective building issues, he said: "We are looking at various options."

Shane Solly of Harbour Asset Management said this morning of the result: "Metlifecare is guiding to higher sales volumes in both development and resales, weighted to the second half [of the year]."

"The listed retirement village and aged care companies continue to see solid demand for their services even with parts of the residential market softening. This reinforces that New Zealanders are increasingly recognising the benefits retirement village living, particularly where supported by a strong core of care services."