Vital Healthcare posts 48％ gain in 1H earnings, signals further development potential
Vital Healthcare Property Trust [NZX: VHP], New Zealand's largest listed medical and healthcare property investor, posted a 48 percent gain in first-half earnings as it gleaned extra income from acquisitions, new developments, rental increases and a tax benefit.
Net distributable income, the earnings it uses for distributions to unitholders, rose to $20.6 million in the six months ended Dec. 31, from $13.9 million a year earlier, the Auckland-based company said in a statement. Gross rental income rose 3.8 percent to $29.9 million while administration and other expenses fell 8.5 percent to $3.2 million.
Vital Healthcare is investing in private hospital facilities in New Zealand and Australia as it expects demand to increase from an ageing population, a rise in chronic disease and higher patient expectations. Three quarters of its assets are in Australia, where 47 percent of the population has private health insurance for hospital care, compared with less than 30 percent in New Zealand, which showed its first quarterly growth in four years during the period.
"The healthcare sector continues to be supported by strong underlying trends, including an ageing population base with rising healthcare demands," David Carr, chief executive of the trust's management company, said in the statement.
Units in the trust rose 0.8 percent to $1.285.
Vital Healthcare's debt-to-total assets ratio dropped to 33.9 percent at Dec. 31, compared with 42.4 percent the year earlier, and below its bank and trust deed covenants of 50 percent.
"This provides additional head room to undertake brownfield developments and acquisition opportunities as they arise," it said.
In the first half of its financial year, the trust completed three development projects worth A$19.4 million, yielding 10 percent per annum, and it has a further A$30 million of developments underway with similar yields expected. Vital Healthcare has potential projects worth A$100 million over the next four years, it said.
Vital Healthcare gained average rent increases of 2.4 percent from reviews in the first half and its weighted average lease term increased to 14.9 years from 12.1 years in the year earlier period.
The trust is mulling alternative uses for its Allamanda Private Hospital facility in Southport, Australia, from November 2017 because the existing tenants are building a new private hospital.
"We have had good initial interest from potential healthcare operators across several sub-sectors including hospital and aged care providers," Carr said.
The trust will pay a second quarter distribution of 1.975 cents per unit on March 18 and reaffirmed its expectation for total distributions of 7.9 cents a unit for 2014.
Net profit after tax rose 14 percent to $16.6 million in the first half as the trust benefited from a $600,000 taxation credit, lower interest costs after it reduced debt following an equity raising and as earnings from Australia were crimped by a rise in the New Zealand currency.