Metlifecare's half-year result out this morning has been hit by a 57 per cent bottom-line fall due to the softening housing market although the listed retirement company's underlying profit rose 15 per cent.
For some years, the retirement business with more than $3b of property has enjoyed increases in property valuations, taken into its bottom line and thereby inflating net profit after tax.
But today's result showed a sharp turnaround in that trend and deflated the results significantly, even though the value of total assets grew 11 per cent from $3b a year ago to $3.4b by December.
Glen Sowry, chief executive, said the fair value of the retirement business's investment properties grew by $29.6m in the December 31, 2018 half-year but that had eased compared to the previous year's revaluations due to moderating housing market price growth.
Underlying profit before tax removes the impact of unrealised fair value movement on investment properties, and that grew 15 per cent from $36.2m in the half-year to December 31, 2017 to $41.7m in the half-year to December 31, 2018.
Sowry described the result as "quality" saying that while the housing market had been moderating as the company had expected "our re-sale prices were seven per cent higher than the same period last year and we've been consistently outperforming the markets in which we operate."
Metlifecare has 24 villages and said its development programme was flexible to make sure the company could meet changing market conditions.
Shareholders will get an interim dividend of 3.75cps paid on March 22.
Metlifecare had initially estimated leaky building repair bills to cost it just over $20m.
In 2017, that jumped to $44m.
Today, Sowry said the issue was now estimated to cost $59m - a bill spread from 2017 through to 2023. The investor presentation showed repairs in 2017 cost $1m, followed by $7m in 2018, $17m in the 2019 year, a projected $17m next year, $9m in 2021, $7m in 2022 and $6m in 2023.
"The remediation programme is on track for completion in 2023," the presentation said.
Asked if the bill was likely to continue escalating at that rate, Sowry said: "Last year, we talked about it being in the high fifties. We've seen some additional costs in apartment-type buildings. We initially thought it would be in the high forties but that was a placeholder, subject to assessments."
Waitakere Gardens in Henderson, Dannemora at Botany Downs, Pinesong at Titirangi, Coastal Villas on the Kapiti Coast and Greenwood Park in Tauranga had leaky buildings. Sowry said apartments were affected at Dannemora and Waitakere, whereas it was villas at the other villages.
"We're not concerned because the overall the programme equates to 4 per cent of our net assets. You need to put it in perspective. It's bringing forward the long-term maintenance and resulting in betterment," Sowry said, defending the cost of repairs which also improved villages.
"For example, at Coastal Villas units that are reclad are selling for $100,000 more than they would previously."
As for getting the $59m back, Sowry said: "In the result, you will see there's a number which reflects that we were able to achieve a settlement on some aspect of this - $6.5m. I can't say who we got it from but it was settled and paid in January. It related to remediation generally. The likelihood of getting the $55m back is low but we are continuing to look at options available to us so that's something we're actively working on."
6 months to December 31
Revenue $68.6m $56.6m
Fair value movement in investment property $29.6m $59.8m
Net profit before tax $28.4m $63m
Net profit after tax $24.5m $56.3m