Steady Progress By Calan
Steady Progress By Calan
Statement made by Bruce Davidson, Chairman, Calan Healthcare Properties Limited
The 2004 financial year was a good one for the Trust as we made steady progress towards our goal of being a low risk, medium return investment that returns a growing yield to unit holders.
In the year we:
Recorded a 24% improvement in net profit after tax to $9.1 million. Distributed to unit holders a total of 8 cents a unit, delivering on our plan to maintain distributions during the construction of Epworth.
Our improved financial performance resulted from gains achieved in implementing our new strategic plan which places greater emphasis on being an investor, simplifying our structure, achieving cost reductions and contracting out the property acquisition and development function.
The operating surplus before income tax was up 11% to $10 million, primarily as a result of:
Other income of $388,000 (100%) was higher than the prior year due to the gain on sale of a business, and extension payments on a sale and purchase contract; Operating expenses were down $445,000 (16%) with the prior year incurring foreign exchange losses and a loss on an investment. Net borrowing costs were $1.3 million (50%) lower than the prior year. The sale proceeds from non-strategic and non-yielding assets were used to reduce debt which delivered a lower interest cost. This, in combination with a higher level of capitalised interest from Epworth Eastern resulted in a significantly lower net borrowing cost.
This was partially off set by:
Rental income down $1.2 million (7.8%) due to the sale of the three Hamilton aged care properties.
The Net Profit after Tax was up $1.7 million (24%) to $9.1 million due to the items listed above and:
Tax expense was $356,000 (20%) lower than the prior year due to a reversal of a deferred tax provision on the sale of assets in 2003. Unrealised returns on construction were $1.356 million higher than the prior year, with the Epworth Eastern project in Melbourne being 53.5% complete at 30 June 2004. The Directors have chosen to adopt a conservative view for Ascot Clinics, writing down the carrying value by $976,000 to an alternative use value of $2.7 million.
The Statement of Financial Position has been strengthened with an increase in total assets of $16.5 million (8.5%) as a result of additional spend on the Epworth Eastern Project and strong property revaluations of some $4 million (an increase of 2.8%). With the Epworth Eastern construction payments being funded by debt, the debt to total asset ratio has increased from 23.8% to 26.4%.
Given the new income stream from Epworth Eastern our operating result for the 2005 financial year should once again show an improvement. This result should more than support a pre-tax distribution of 8 cents per unit for the year.
We continue to aggressively move forward with the conversion of non-yielding assets into yielding assets, and will look to achieve growth through strategic acquisitions that are earnings positive.