Vital Healthcare lifts annual earnings 54%, looks for further acquisitions

It has been expanding and diversifying its portfolio since it raised $160 million in a rights issue last year.

Vital Healthcare Property Trust, the listed hospital owner and developer, increased annual earnings 54 percent as it saw rental income grow in a year when it made seven major acquisitions, with its outlook strong for 2018.

Distributable earnings, the preferred measure for property investors because it strips out unrealised movements in the value of property, rose to $61.8 million in the 12 months ended June 30, from $40.2 million a year earlier, trust manager Vital Healthcare Management said in a statement.

Net profit rose 86 percent to $217.6 million, including a $168.5 million gain on the value of Vital's property portfolio. Some 90 percent of that gain came from its Australian portfolio, with the remaining 10 percent from New Zealand assets.

"The 2017 financial year has been a positive and productive one for Vital. We have enhanced almost every aspect of the business with solid portfolio performance underpinning the financial position," chief executive David Carr said. "Population and ageing demographic drivers continue to support demand for healthcare services, and with a stable platform we look ahead to 2018 with confidence as we continue to execute on our long term strategy."

The hospital and healthcare property developer and investor has been expanding and diversifying its portfolio since it raised $160 million in a rights issue last year. It spent $190 million on the seven major acquisitions across Australasia in the year, and says five have future brownfield potential, while it has A$62.6 million in five brownfield projects currently underway.

Vital lifted net rental income 31 percent to $89.7 million in the year, which included $13.8 million for a lease termination receipt. Expenses rose 52 percent to $22.1 million, driven primarily by management and incentive fees on the back of strong revaluations. Incentive fees totalled $12.3 million in the year.

"Vital starts the 2018 financial year in a great position, with 2017 one of our busiest ever," Carr said. "Our scale and diversification strategy remains a core focus as we continue to execute on acquisition opportunities, complete the balance of the current brownfield development pipeline and aim to announce further projects through the year."

The board declared a fourth quarter distribution of 2.125 cents per unit, with a Sept. 7 record date and payable on Sept. 21. That takes the annual return to 8.5 cents per unit, and the property investor intends to maintain that in the 2018 financial year.

The units last traded at $2.28, and have gained 13 percent this year. The stock is rated an average 'hold' based on three analyst recommendations compiled by Reuters, with a mean target price of $2.18.