Ann: HALFYR: VHP: Vital on track to meet full yea

• Release Date: 23/02/12 11:37
• Summary: HALFYR: VHP: Vital on track to meet full year payout
• Price Sensitive: No
• Download Document  10.48KB

					

VHP
23/02/2012 09:37
HALFYR

REL: 0937 HRS Vital Healthcare Property Trust

HALFYR: VHP: Vital on track to meet full year payout

Leading Australasian healthcare property investor Vital Healthcare Property
Trust ("Trust"), (NZSX ticker: VHP), today announced an unaudited profit
before income tax of $5.87m for the six months ended 31 December 2011, and
confirmed its full year guidance of a net distributable income of 7.7 cents
per unit for the 12 months to 30 June 2012.

A second quarter cash distribution of 1.925 cents per unit will be paid to
unitholders.

Gross rental income for the period was $24.44m (2010: $13.51m), an increase
of 80.9% on the prior period, reflecting the positive contribution from the
Australian portfolio acquisition in December 2010.

David Carr, Chief Executive of the Trust's manager, Vital Healthcare
Management Limited, ("Manager") said the interim result reflected the
benefits of a diversified healthcare property portfolio supported by strong
underlying population growth, an ageing demographic and relatively stable
industry trends.

"Our 2010 Australian portfolio acquisition and subsequent development
commitments will continue to enhance the portfolio as projects are completed,
with an average forecast yield on cost of 10%. We continue to develop an
already strong working partnership with all our tenants, and in December
acquired Mayo Private Hospital in New South Wales in conjunction with Healthe
Care Australia Pty Ltd, who acquired the operating business of Mayo Private
Hospital. The hospital was acquired on a yield of approximately 10% after
costs."

"We also made good progress renegotiating lease renewals well before expiry
dates fell due which provides strong cash flow certainty over the medium
term. A great example of this was the early renewal of the lease at Epworth
Rehabilitation hospital in Melbourne which was due to expire in 2014, and has
now been extended for five years to expire in 2019," Mr Carr said.

Portfolio occupancy sits at 99.1%, having been maintained at greater than 99%
now for more than two years, with the Trust's weighted average lease term of
11.4 years more than double the listed property sector average in New
Zealand. Over the six months to 31 December 2011 70 rent reviews were
completed resulting in an average increase over passing rent of 4.0%.

Graeme Horsley, the new Chairman of the Manager and Independent Director
said: "I am delighted with the performance of the Trust's portfolio and was
pleased to see David and his team continue to further entrench the Trust's
leading position in the sector supported by strong relationships between the
management team and the Trust's tenants".

Operating profit
The Trust's operating profit before tax was up 62% to $11.29 million (2010:
$6.98m). As detailed in Appendix One, in calculating the operating profit
before tax, the impact of unrealised items including foreign exchange
gains/(losses), interest rate swaps movement and revaluation losses on
investment properties have been removed.

Mark-to-market adjustments on interest rate hedges gave rise to a loss of
$4.97m (2010: gain of $2.24m) and foreign currency exchange movements
principally on the unhedged portion of Australian dollar denominated
borrowings, gave rise to a loss of $0.38m (2010: gain of $0.61m). These
adjustments are made in accordance with International Financial Reporting
Standards and the accounting treatment of these unrealised items has no
effect on the Trust's cash distributions to unitholders.

Treasury and capital management
As a result of sales, development capital expenditure and the Mayo Private
Hospital acquisition the Trust's debt-to-total-assets ratio is 39.0% as at 31
December 2011 (taking into account financing costs offset against
borrowings), well below the Trust Deed covenant limit of 50% and bank
facility covenant of 45%.

Gearing as at 30 June 2012, not allowing for any further asset sales or
revaluation gains and making provision for the current development programme,
is forecast at 42.9%. Notwithstanding this headroom to Trust Deed and bank
facility covenants, the Board maintains the view that over the medium to long
term the Trust's gearing is targeted to remain below 40%. The Trust's bank
facility is secured until September 2013.

The Trust continues with its foreign exchange policy of seeking to minimise
the impact of movements in the Australian versus the New Zealand dollar.

Other events
In addition to the acquisition of the Mayo Private Hospital in December the
Trust also settled the sale of the Pt Chevalier property for $12.55m, in line
with the 2011 book value.

Subsequent to the end of the period under review, NorthWest
Value Partners Inc. ("NorthWest") completed the purchase of a 19.8% interest
in the Trust and acquired 100% of the shares in the Manager.

Following the sale of the management rights, Bill Thurston resigned as
Chairman and Independent Director and Peter Brook resigned as Non-independent
Director. Mr Horsley said "it has been a pleasure to work with Bill and Peter
over the last few years and I would like to thank them for their invaluable
contribution during their tenure whilst overseeing the activities of the
Trust".

As part of the Board changes, Australia-based Claire Higgins, has been
appointed as a Director of the Manager and Paul Dalla Lana and Bernard Crotty
have been appointed to the Board as representatives of NorthWest. In addition
to Mr Horsley, the Board of the Manager has determined that Andrew Evans and
Mrs Higgins are Independent Directors, in terms of the NZSX Listing Rules.

Outlook
Looking forward, the Manager continues to monitor private health insurance
trends in Australia and New Zealand as a leading indicator of tenant
performance.

Mr Carr said there was a clear divergence with hospital treatment insurance
having steadily increased in Australia over recent years, while there was an
opposing trend in New Zealand. Notwithstanding those indicators, it is
forecast that there will be a doubling of the over 65 age group population in
the next 20 years in both countries with that age group estimated to use
healthcare services at four times the rate of the rest of the population.

The Manager is closely following the debate in Australia on the proposed
means testing of private health insurance rebates, which was passed in the
lower house of the Australian Parliament in mid February and now requires the
support of the upper house to become law. While the Australian Treasury
expects any negative impact on levels of private health insurance to be
modest, industry participants remain divided on the extent of any impact. The
Manager will continue to watch this closely and update unitholders of any
developments in due course.

"Whilst we see some near term pressure in New Zealand, the current relative
strength of the Australian market continues to support our diversification
and growth strategy into that market where 80% per cent of our hospital
assets are now located," Mr Carr said.

The Manager's focus remains on delivering on core asset management activities
and extracting full value from the 2010 Australian acquisitions, including
the completion of a number of value-add development projects through the
remainder of 2012.

The Trust has 3.4% of leases expiring over the next two years with less than
1% of leases due to expire in the period to 30 June 2012. The Manager is in
discussions with a number of tenants around their longer term operational
requirements and actively seeks to secure tenants with strong covenants, on
long lease terms with a structured rent review profile. Of the 131 rent
reviews to complete in the 12 months to 30 June 2012 approximately 60 remain,
with the majority of these subject to review by reference to the consumer
price index.

The Board has re-confirmed its full year guidance for a net distributable
income of 7.7 cents per unit for the 12 months to 30 June 2012.

Distribution
The Trust will deliver a second quarter distribution of 1.925 cents per unit
to unitholders. This distribution is comprised entirely of cash and has no
imputation credits attached. The record date for the distribution will be 8
March 2012, and the payment date will be 22 March 2012.

As detailed in the first quarter distribution announcement, it is the view of
the Board of the Manager that costs incurred investigating the
internalisation proposals should not form part of the calculation of net
distributable income.

The Manager advises that participation in the Distribution Reinvestment Plan
("DRP") will be available to unitholders for the second quarter distribution
that will be paid on 22 March 2012. Unitholders who have previously elected
to participate in the DRP will automatically continue to participate in the
DRP. Unitholders are able to amend their instructions, or elect to
participate, prior to the record date of 8 March 2012. The discount
applicable to any units issued pursuant to the DRP will be 1%.

- ENDS -

Appendix One
Reconciliation of Operating Profit HY2012 $000s HY2011  $000s
Profit/(loss) before income tax       5,874 (2,483)
Add Back/(Deduct):
Unrealised foreign exchange loss/(gain)   377 (605)
Interest rate swaps loss/(gain) - held for trading 4,969 (2,244)
Revaluation losses on investment property 68 12,316
Operating Profit  11,288 6,984 61.6%
Realised (gain)/loss on sale of properties 2 (14)
Internalisation costs      528 -
Gross Distributable Income 11,818 6,970

Enquiries
David Carr
Chief Executive Officer
Vital Healthcare Management Ltd
Telephone: 09 357 1818
Email: [email protected]

Stuart Harrison
Chief Financial Officer
Vital Healthcare Management Ltd
Telephone: 09 362 2332
Email: [email protected]

Vital Healthcare Property Trust
With a portfolio value of over NZ$550m, Vital Healthcare Property Trust
(NZSX: VHP) is New Zealand's largest listed entity investing in medical and
healthcare properties in Australasia. With an expert understanding of the
needs of healthcare tenants on both sides of the Tasman, we actively select,
develop and manage quality properties to meet the growing demand for medical
and healthcare services. Our 124 tenants, in 25 properties, provide essential
healthcare services to thousands of patients while also undertaking research
and providing support services that will make a difference to many more lives
in the future.

The Manager of Vital Healthcare Property Trust, Vital Healthcare Management
Limited is owned by NorthWest Value Partners Inc, a private real estate
investment firm based in Canada with a healthcare real estate interests in
Canada, Australia, New Zealand, Brazil and Germany.
End CA:00219899 For:VHP    Type:HALFYR     Time:2012-02-23 09:37:50