Metlifecare profit sinks 69% on lower property revaluation, pays back debt
By Paul McBeth
Aug. 23 (BusinessDesk) – Metlifecare Ltd., which sold its Merivale Retirement Village for $26 million in December, reported a 69% drop in full-year profit after booking a smaller gain in the value of its portfolio than in 2010.
Net profit was $20.8 million, or 17 cents per share, in the 12 months ended June 30, down from $67.5 million, or 55.1 cents, a year ago, the Auckland-based retirement village operator said in a statement. The slump in bottom line profit came as booked a $27.5 million gain in the unrealised value of its investment properties, compared to a $73.2 million gain a year earlier.
Operating revenue rose 3.6% to $65 million, though there was an outflow of cash from its operating activities, including interest payments, of $12.2 million, up from an outflow of $7 million in 2010. It blamed higher operating costs for the increase.
Total cash-flow was positive on the back of the Merivale sale, which netted $24.4 million and along with internally generated cash, was used to cut debt by $44.5 million. Metlifecare had bank loans of $124.3 million as at June 30, down from $168.1 million in 2010.
“Our strong cash flow result enabled a considerable reduction in debt and this together with our announced profit increased the company’s total equity,” chairman Greg Flood said in a statement. “This position has enabled the company to create additional debt headroom and the company is therefore well-placed as we enter 2012.”
Metlifecare’s previous chairman, Charles MacDonald, was an outspoken critic of the International Financial Reporting Standards, which became mandatory in 2007 and forced companies to recognise the changing value of assets, even if those assets were retained.
MacDonald called them a case of “form over substance” after the retirement village operator posted a loss of $115.7 million in 2009 as it wrote down the value of its investment portfolio, which has since bounced back.
The value of Metlifecare’s portfolio fell to $1.26 billion as at June 30 compared to $1.27 billion a year ago.
Metlifecare said its stronger balance sheet will help it reinvest in existing assets and complete brownfield development as well as begin greenfield plans.
The retirement village operator won’t pay a dividend to shareholders, though it is optimistic it can resume returns to investors from its stronger position.
The shares were unchanged at $1.95 in trading yesterday, and have dropped 15% this year.