Vital Healthcare lifts annual earnings 4.6%, beating expectations; sees increased payout in 2016

Vital Healthcare Property Trust [NZX: VHP], the listed hospital owner and developer, increased annual earnings 4.6%, beating estimates, as it generated increased rents from an expanding Australian business, while flagging a bigger return for investors in 2016.

Distributable earnings, the preferred measure for property investors because it strips out unrealised movements in the value of property, rose to $36.4 million, or 10.6c per unit, in the 12 months ended June 30, from $34.7 million, or 10.4c, a year earlier, trust manager Vital Healthcare Management said in a statement. That was ahead of Forsyth Barr's forecast for a fall in annual earnings to $32.3 million.

Net profit more than doubled to $96.5 million, including an $84 million gain on the value of Vital's property portfolio. About 93% of that uplift came from the trust's Australian properties, and 70% was on sites that had recently undergone redevelopment.

"Vital has finished the 2015 financial year with solid financial results and a strong portfolio of properties," chief executive David Carr said. "The fundamental drivers of healthcare – an ageing population, growing private health insurance and high demand for outpatient and hospital services remain positive tailwinds in executing our strategy."

The property trust 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. About 47% of Australians have private health care cover for hospitals, compared to about 30% of New Zealanders.

Vital lifted net property income rose 2.5 percent to $59.4 million, with Australian rents up 4.5 percent to $46 million, offsetting a 4.3 percent decline in New Zealand income to $13.4 million.

The board declared a fourth quarter distribution of 2c per unit, with a September 10 record date and payable on September 24. That takes the annual return to 8c a unit, and the property investor intends to raise that to 8.1c in the 2016 financial year.

The units fell 1.8% to $1.64, and have gained 6.4% this year. The stock is rated an average 'sell' based on four analyst recommendations compiled by Reuters.

Vital's property portfolio consists of 25 sites in Australia and New Zealand, with more than 1600 hospital beds and 70 operating theatres. The portfolio was valued at $781.9 million as at June 30, compared to $613.1 million a year earlier, and had a weighted average lease term of 17.6 years, up from 15.1 years.

The trust incurred management fees of $4.9 million in the year, and an incentive fee of $3.8 million payable via 2.3 million units. That's up from a management fee of $4.6 million, plus incentives fees of $542,000 in 2014.

(BusinessDesk)