Valuations, resales drive Metlifecare record profit

Metlifecare Pakuranga. Photo / Natalie Slad

The business of getting old is proving highly profitable.

High turnover of Metlifecare units and the booming Auckland and Bay of Plenty property markets boosted the profits of one of New Zealand's biggest retirement businesses.

Although the village residents enjoy none of the huge profits, chief executive Glen Sowry said profitability enabled the business to provide extremely high standards.

A record 86 per cent net after tax profit increase was due mainly to valuation uplifts but village unit re-sales also boosted the bottom line, he said.

Sowry of the $2.6 billion business said the revaluations were the biggest part of the increase in the bottom line. Metlifecare's assets grew from $2.2 billion to $2.6 billion in just one year, accounts showed.

"What is shows is the growth in Auckland values because 42 per cent of asset base is in Auckland. If you translate that into value of our company, it's 73 per cent. Metlifecare's concentration and stronghold in Auckland with 14 villages,

Auckland and Tauranga were driving Metlifecare's growth, he said: the business has five villages in Tauranga and Mt Maunganui.

But Metlifecare residents do not benefit from big valuation increases when they leave a village unit, he acknowledged.

"They don't participate in the capital gain as the structure works. But the resident avoids any liability or risk, paying for maintenance. We carry all the liability and risk and responsibility if there's a problem with a unit that requires significant remediation. All of that is borne by the company and the resident has no exposure to that," Sowry said.

"The real power of Metlifecare's business is the re-sales which were $46.5 million in the latest year, up from $31.3 million last year. The growth that we've had in profitability is not just valuations but also the amount of cash we've generated by reselling units and being able to reinvest that in the business," he said.

Residents sell their units "when they exit - either going into care or if they pass away."

Asked if the business growth was based on people either getting sick or dying, Sowry said he did not agree with that.

"Our business is based on providing people with care and a great lifestyle in their senior years," Sowry said.

People must be 65 years of age to buy into a Metlifecare village.

The business takes a 30 per cent deferred management fee after a resident has been in a village for three years, more than Ryman Healthcare and Summerset Group.

That is the amount of money which a resident loses from their initial purchase price.

"We are one of the high ones. We believe in the premium nature of the village offering we have. We allow residents to have a great deal more control of the village environment than some of our competitors do," he said.

Metlifecare's annual meeting is at 2pm on October 25 at Alexandra Park.

Shares were trading up 31c today, trading at $6.39.