VHP
26/02/2015 09:42
HALFYR
PRICE SENSITIVE
REL: 0942 HRS Vital Healthcare Property Trust
HALFYR: VHP: Vital announces interim result
Vital announces interim result
Vital Healthcare Property Trust ('Vital') today announced its interim results
for the six months ended 31 December 2014 and reaffirms its forecast cash
distribution guidance of 8.0 cents per unit for the 12 months to 30 June
2015. A second quarter cash distribution of 2.0 cents per unit will be paid
to unitholders on 26 March 2015.
Highlights
- Commenced A$40.8m of brownfield developments at five hospitals
- Divested a non-core asset at Whangaparaoa, Auckland for $4.2m
- Acquisition of key strategic sites adjacent existing strategic assets
- Strengthened portfolio WALT to 15.2 years (FY14: 15.1 years)
- Improved occupancy of 99.5% (FY14: 99.4%)
- Average increase in rents reviewed of 2.1%
- Completed 11 of 21 lease renewals or expiries and reduced income exposure
from 3.4% to 0.8%
Graeme Horsley, Independent Chairman of Vital Healthcare Management Limited
(the 'Manager') said "Vital has delivered another strong period of
performance. The result reflects the continuing drive by the management team
to execute on our well founded strategy, supported by the fundamental drivers
of the healthcare sector. The familiar themes of an ageing population and
rising demand for healthcare services continue to underpin our long term
positive outlook. We will continue to leverage these trends and the market
leading capability and credibility profile of the business to further enhance
the long term quality and sustainability of Vital's earnings."
Chief Executive of the Manager, David Carr said "We have had a solid start to
2015, providing a great platform for the remainder of the year. In the first
half we approved five value add development projects equating to
approximately A$41m, and moved closer to the mid-year completion of the A$28m
development at Hurstville Private in Sydney. The brownfield development
programme continues to be driven by robust business cases from Vital's
established hospital operators, who face increasing demand with many
facilities operating at capacity.
This continued organic growth coupled with our strong tenant relationships
and proactive portfolio management will see that Vital remains well
positioned to deliver on the low risk, medium return investment
characteristics investors have come to expect."
Financial performance
For the six months to 31 December 2014 Vital achieved gross rental of $30.8m,
a growth of 3.0% or $0.9m on the prior year period, driven by the combination
of a part period contribution from the Marian Centre acquisition in Perth,
brownfield development income and rental growth. Vital's operating profit
before interest and tax increased by $1.0m, or 4.0%, to $26.7m.
Vital's finance expense reduced by $1.8m, or 22.9%, to $6.1m. This reflected
the combination of lower net debt following the equity raising last financial
year, a higher New Zealand dollar over the period, lower floating interest
rates and the renewed banking facility on more attractive terms. Unrealised
marked to market movement on interest rate swaps resulted in a loss of $5.5m
at period end compared to a $3.1m gain in the comparable period.
Vital's net tangible asset value (NTA) per unit was $1.03 (FY14: $1.04).
Net distributable income was $16.3m for the six months, compared to $20.6m in
the prior period. This reduction is due to a current tax expense of $4.7m
versus a tax credit of $1.6m in the prior period. Part of the tax increase
related to tax payable on income received in advance in relation to the Mercy
Ascot lease transaction, with the comparative prior year period benefitting
from notable tax adjustments, including Inland Revenue binding rulings and
unrealised Forex loss.
Treasury and capital management
Vital's loan-to-value ratio (or LVR) at 31 December 2014 was 34.4% (FY14:
31.4%). The increase primarily reflected the acquisition of the Marian Centre
and funds utilised in developments offset in part from the sale of the
Hibiscus Coast Community Health Centre in Whangaparaoa and a stronger New
Zealand dollar. The LVR remains well below Bank and Trust Deed covenants,
which are both aligned at 50%. This headroom provides additional flexibility
to undertake value add developments and acquisition opportunities as they
arise.
The weighted average interest rate at period end including line and margin
fees was 5.52% (FY14: 5.66%). The lower rate reflects Vital being slightly
less hedged with more exposure to declining floating interest rates, than at
its year end position.
Vital has continued with its established foreign exchange policy framework to
manage the influence of currency fluctuations on the business.
In accordance with the policy, additional hedging is put in place through
foreign exchange contracts ('FEC's') and options to lift the effective
hedging position to manage Vital's financial position. As at 31 December 2014
there was an unrealised gain of $5.5m reflected within Other Comprehensive
Income, with a portion of this crystallising in early January 2015 with the
receipt of $7.6m.
Portfolio activity
"Ongoing delivery on core portfolio asset management activities has enhanced
Vital's market leading WALT to 15.2 years and seen a continuation of near
full occupancy of 99.5%. These strong portfolio metrics provide investors
with a defensive property income profile over an extended term.
In the 2015 financial year approximately 90% of total rent is subject to
review, with approximately 30% in the first six months, with an average
increase achieved to date of 2.1%. There were 21 leases due to expire over
the year equating to 3.4% of annual income. We have now renewed 2.6%, leaving
only 0.8% to address. The largest single lease expiry for the year has also
been resolved with that tenant committing to a new 5 year lease term at the
Gold Coast Surgical Centre in Southport, Queensland. For the two and a half
years to 30 June 2017 only 2.5% of total income is due to expire and we
continue to proactively address those expiries.
The November 2017 lease expiry at Allamanda Private Hospital remains a clear
priority and focus for management and we continue to actively consider
alternative users and uses for the property" said Mr Carr.
For the first six months Vital announced five new value add capital projects
further expanding on Vital's 'creating capacity to meet demand' theme. The
committed capex equates to A$40.8m and on completion is forecast to yield
approximately 9.0% per annum.
The hospitals include Belmont Private (A$9.5m for a new 30-bed extension,
additional consulting suites and carparks), Hurstville Private (A$6.0m
towards new coronary care and intensive care units), Maitland Private
(A$13.0m for a new psychiatric ward and extended rehabilitation services) and
Lingard Private (A$1.5m towards a new theatre and refurbishment). As part of
the acquisition of the Marian Centre in Perth last year A$10.8m was also
committed to the development of additional beds, consulting rooms and
carparks at the facility. The forecast completion dates for the above
projects range between February and December 2015.
"Vital also secured five-year lease extensions as part of the Belmont Private
and Maitland developments which reflects a strong tenant relationship and
helps deliver enhanced portfolio metrics. We expect these organic growth
opportunities to continue as part of our forward outlook due to rising demand
for healthcare services" said Mr Carr.
In December Vital also acquired property adjacent to the Epworth Eastern
Melbourne campus for A$3.5m. Mr Carr said "Strategically, the acquisition
was logical as it allows Vital to support the growth aspirations of one of
our largest tenants as the demand for services at Epworth Eastern escalates.
Strategic incremental acquisitions will likely continue across the portfolio
as we look to protect the significant long term investment both our hospital
operator partners and Vital have in these strategic assets."
During the period Vital also sold Hibiscus Coast Community Health Centre in
Whangaparaoa for $4.2m. Mr Carr said "Our on-going capital management
strategy is to appropriately recycle capital out of low value, lower growth
assets into more strategic long term opportunities as they arise."
Outlook
Mr Carr said "Vital's portfolio metrics and financial position remain strong
and we continue to leverage the favourable outlook in demand across the
health sector, driven by an ageing population, strong private health
insurance levels, particularly in Australia and rising consumer demand for
quality and timely provision of healthcare services.
Portfolio diversification and enhancement remains a focus with opportunities
being considered that align with Vital's core strategy and portfolio
characteristics including bed-based care, long term leases, structured rent
review profile and quality tenant covenants."
Guidance for the 2015 financial year
The Board has reaffirmed its previous cash distribution guidance for the year
ending 30 June 2015 of 8.0 cents per unit.
For the second quarter of the 2015 financial year, the Board are pleased to
confirm that investors will receive a cash distribution of 2.000 cents per
unit. This will be made up of a fully imputed distribution of 0.8207 cents
per unit with imputation credits of 0.2298 attached and an excluded
distribution of 1.4091 cents per unit.
The record date for the distribution is Thursday 12 March 2015 and payment
will be made on Thursday 26 March 2015. Vital's Distribution Reinvestment
Plan (DRP) will remain available to investors for this distribution with a
1.0% discount being applied when determining the strike price that will be
applied in the calculation of the issue price of units allotted to those
participating in the DRP.
- ENDS -
ENQUIRIES
David Carr, Chief Executive Officer
Vital Healthcare Management Ltd, Telephone 09 973 7301, Email
[email protected]
Stuart Harrison, Chief Financial Officer
Vital Healthcare Management Ltd, Telephone 09 973 7302, Email
[email protected]
End CA:00261162 For:VHP Type:HALFYR Time:2015-02-26 09:42:06
