Retirement village & aged care operator Metlifecare Ltd said today its operating performance for the December half-year was solid.
In some aspects it was far more than that, and its future looks promising – but the company’s shareholders won’t care if they accept the takeover offer set down for a vote on 29 April.
The takeover position
In December, Metlifecare entered into a scheme implementation agreement with a subsidiary of the Swedish private equity investment fund EQT Infrastructure IV Fund, Asia Pacific Village Group Ltd, to acquire 100% of Metlifecare’s shares for $7/share, representing a 38% premium to the company’s closing price before the announcement of the initial approach in mid-November.
The Metlifecare board has unanimously recommended shareholders vote in favour of the scheme in the absence of a superior proposal.
Shareholders are scheduled to vote on the scheme at a special meeting on 29 April. KordaMentha is preparing a scheme booklet & independent advisor’s report. Assuming approval, the scheme will be implemented in May.
The half-year performance
Reported net profit rose 28%, but a lower development margin due to increased construction costs cut pretax profit by 5%.
Cashflows were well up – by 42% according to reporting requirements, 34% underlying. Net assets increased 6%.
Chief executive Glen Sowry said resale volumes improved, selling prices rose, and the company re-established its $940 million development programme.
Underlying profit before tax was 5% down at $39.3 million, primarily caused by a lower development margin due to increased construction costs.
“Our care expansion has continued, with 2 new care homes being opened in the Bay of Plenty and more flexible care & support on offer across our wider village portfolio.
“We settled 7% more occupation right agreements and, despite subdued local market conditions for most of the period in review, our average settlement prices were 3% higher – again outperforming both the market & the prices assumed in the CBRE valuation.”
- Reported net profit after tax, up 28.2% to $24.6 million ($19.2 million)
- Underlying profit before tax, down 5.3% to $39.3 million ($41.5 million)
- Statutory operating cashflows, up 41.6% to $67.1 million ($47.4 million)
- Total assets, up 6.2% to $3.6 billion ($3.4 billion)
- Basic earnings/share, up 28.2% to 11.6c (9c)
- Interim dividend/share, none (3.75c)
- Village occupancy, 97%
- Care occupancy, 96%
- Development margin, 13%
*The December 2018 half-year & comparative figures have been restated to reflect the adoption of the new IFRS 9, 15 & 16 and the restatement of changes in the fair value of investment properties relating to resident loans extended to help facilitate transfers from independent living units to serviced apartments.
Development button switched back on
Metlifecare invested $83 million in new & existing village developments during the half-year. It completed 81 new homes, including the first apartment building at Gulf Rise on Auckland’s Hibiscus Coast, 2 new apartment buildings at Greenwich Gardens on the North Shore, and 13 new villas at Titirangi’s Crestwood village.
Mr Sowry said the re-phasing of the development programme was complete, and the company had re-established its planning & construction activity.
“In mid-2019, facing increasing construction cost pressures, we deemed it prudent to slow the programme down for a short period while putting in place initiatives targeting future construction cost improvements.
“These initiatives have allowed us to ensure the robustness of Metlifecare’s construction & procurement models and to continue delivering high quality villages at acceptable development margins.
“The programme returned to full strength in October, and construction at our new village developments – Gulf Rise, Orion Point, Edgewater, Pohutukawa Landing & Fairway Gardens – is on track to deliver around 220 new homes & beds in the 2021 financial year.
“We are encouraged by the level of interest our new villages are receiving, with enquiries for Pohutukawa Landing (Beachlands) & Fairway Gardens (Botany) especially strong. This is a testament to the quality living environments we are creating, our unique emphasis on the design & placemaking of villages and their connectivity with their local communities, all of which are core to our design principles.”
Metlifecare raised $100 million in September through an oversubscribed retail bond issue capital and used the funds to retire bank debt. The company’s gearing was 16% at balance date, remaining the lowest in the listed retirement village sector and retaining ample capacity to fund future growth.