Net profit after tax from Australasia's only listed hospital, healthcare and medical property specialist fell 37 per cent to $58 million due to less spectacular revaluation gains and the business which owns Melbourne real estate said the year had been "challenging".
Vital Healthcare Property Trust, the fourth-largest NZX-listed real estate vehicle, has released its full-year result for the year to June 30, 2020 showing total revenue rose 2.5 per cent.
But last year's $103m revaluation gains were matched by gains of only $45m this year, pushing down the bottom-line figure. Revenue rose from $101m to $103m and operating profit was up from $34m to $41m.
"Although the suspension of elective surgery due to Covid-19 resulted in temporary cashflow issues for operators, private hospitals quickly returned to operating at full or near full capacity when restrictions were eased," Vital said.
It expects that to be repeated when the recently re-imposed restrictions in Victoria are removed. Australian hospital operators are being financially supported by agreements with state governments and none of Vital's aged-care tenants have been materially impacted by covid "to date" and no requests for rent relief have been received from this subsector.
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FY20 rent abatements were under $300,000 out of a total rent roll of over $100m. Debt to total assets ratio was 38.7 per cent at June 30.
In its outlook, Vital said: "Healthcare property remains a defensive asset class underpinned by growing demand, high levels of government support in Australia and New Zealand and growing institutional interest. Vital is well positioned to take advantage of opportunities in this sector to continue to provide attractive risk-adjusted returns for unitholder."
While other companies have been hit from devaluations due to covid, Vital said it made a $45.7m net revaluation gain.
"The portfolio value increased by $249.9m over FY20 including $88.5m of capital expenditure, $75.4m of acquisitions and $45.7m valuation gains," Vital said.
Fund manager Aaron Hockly has invited people to a 10am conference call today for the company to say more about its result.
The business said this morning: "2020 has been a challenging year globally due to Covid-19. Notwithstanding these challenges, Vital's defensive portfolio helped Vital record a 5.1 per cent total return in FY20, outperforming the S&P/NZX REIT Index by 13.4 per cent."
Vital says it is the only specialist listed landlord of healthcare property in Australasia and currently has a portfolio valued at more than $2b and it has about $240m of development work on, spending about $100m on Wellington's Wakefield Hospital and $140m at pandemic-hit Melbourne where it has the Epworth Eastern Hospital.
Vital's manager, Canada's NorthWest Healthcare Properties Management, has faced strong investor criticism for the fees it has charged the business. Vital paid about $9m to investors in the last financial year but NorthWest charged nearly $30m in fees, a bone of contention for many.
However the manager last year proposed changes including a fee overhaul and plans for a dual ASX listing which did not eventually go ahead.
Vital's primary listing was to remain on the NZX but it said last spring it proposed to list on the ASX to remove some tax issues. Vital might be liable for less tax and the listing should remove double tax issues for Australians and other overseas investors, its management says.
The ASX listing also potentially provided another source of capital, important because 76 per cent of Vital's assets are now in Australia, the manager said.
But in April, Vital said it only got 66 per cent votes in favour of the change but it needed 75 per cent so couldn't proceed with the duel listing.