Interim Results 31 December 2013 Da Davi vid C d Carr Chief ef - - PowerPoint PPT Presentation

Interim Results 31 December 2013

Da Davi vid C d Carr Chief ef E Execu ecutive e Of Officer cer Stua uart rt H Harri rrison Chief ef Finan anci cial al Of Officer cer 13 13 February 2014 2014

Agenda



Result highlights



VHP performance



Financial review



Healthcare update



Portfolio review



Looking forward

Agenda

3

Result highlights

Result lt h high ighligh lights

Earni ning ngs

Gross rent up 3.8%, Q2 cash distribution of 1.975 cpu



Gross rental income of $29.9m, +3.8% (1H13: $28.8m)



Operating profit before interest and tax of $25.7m, +3.6% (1H13: $24.8m)



Net profit after tax of $16.6m, +13.9% (1H13: $14.6m)



Net distributable income (NDI1) of $20.6m, +48.2% (1H13: $13.9m)



Q2 distribution brings total cash distribution per unit (DPU) to 3.950 cents

Portfoli lio

Capacity created, strong operator relationships enhance portfolio metrics



Medium term expiry resolved, leading operator retained on 30 year lease



Concluded developments totalling A$19.4m, creating capacity & returning ~10% p.a.



Extended WALT2 to 14.9 years, 99.4% occupancy, 2.4% increase on rents reviewed



Capital recycled into improving quality of earnings, started A$29.9m of new projects

Capital man anagem agemen ent

Capital and treasury management outcomes supporting operational activities



Ongoing prudent treasury management in low interest rate environment



Lower LVR3 of 33.9% through capital raising proceeds, proactive management

Heal ealthcar care e sect sector

• r

Positive, long term healthcare trends unchanged



Increased chronic disease & higher patient expectations compounded by ageing population



Private health insurance: growing in Australia and now New Zealand



Private sector integral to a balanced healthcare system

Notes: 1: NDI is calculated as profit before tax, adjusted for non-cash items including revaluation gains/losses on investment properties and construction and foreign exchange and interest rate swaps. Other items include Manager’s incentive fee and current tax. 2: WALT is Weighted Average Lease Term to expiry 3: LVR is Loan to Value ratio

5

Reaffirmed FY14 guidance for a cash distribution of 7.9 cents per unit

VHP Performance

Well executed strategy delivering strong total returns for investors

10 y year ear total al r ret etur urn p n perf erform rmance ance

Source: Bloomberg, Craigs’ Investment Partners. Returns as at 31 December 2013.

7

Financial Review

Fi Financi nancial al perf erform rmance ance

Strategy execution delivering revenue growth and stronger earnings

9

Note: Net Distributable Income is further adjusted for PIE compliance purposes with Current Income Tax on Other Comprehensive Income.

Rental growth despite currency influence

All ll NZD NZD$m Act ctual al Act ctual al Cha hang nge Cha hang nge 1H 1H14 14 1H 1H13 13 $m m %

Gross rental income 29.9 28.8 1.1 3.8% Net rental income 28.9 28.3 0.6 2.1% Operating profit before interest & tax 25.7 24.8 +0.9 +3.6% Gross distributable income 19.0 16.5 2.5 15.1% Current Tax - NZ & Australia 1.6

• 2.6

4.2

• 161.0%

Net distributable income 20.6 13.9 6.7 48.2% Gross distributable income (cpu) 5.8c 5.6c 0.2c 3.7% Net distributable income per unit (earned) (cpu) 6.3c 4.7c 1.6c 33.6% Units on issue (weighted average million) 328.5 296.1 Tax impacted by unrealised foreign currency losses and

• ne off foreign investment

fund credit

Gross r rent ental al inco ncome r e reco econci nciliat ation

Full year contributions from Sportsmed-SA acquisition and completed developments

• ffset by foreign exchange movement

10

Net t fin inancin ing c costs (All ll NZD NZD$m)

Act Actual al Act Actual al cha hang nge cha hang nge 1H 1H14 14 1H 1H13 13 $m $m %

Finance income 0.1 0.1 0.0 0% Capitalised interest (0.1) (0.5) 0.4

• 86.2%

Finance expense (7.9) (8.5) 0.7

• 7.7%

Fair value gain/(loss) on interest rate derivatives 3.1 1.0 2.0

• 197.3%

Net finance expense (4.8) (7.9) 3.1 39.0%

Net Net financi nancing ng ex expens enses es

A low interest rate environment and weaker AUD provides an attractive environment for further investment

11

5.24 5.24 years

ears wei eight hted ed av averag erage e term erm o

• f S

SWAPs

Lower interest due to equity raising and FEC receipts

6.58% 6.58% wei

eight hted ed av averag erage e co cost o

• f deb

ebt

All ll NZD NZD$m Act ctual al Act ctual al Cha hang nge Cha hang nge 1H 1H14 14 FY FY13 $m $m %

Net Tangible Assets 1.05 1.01 4.1% Investment properties 595.4 618.7

• 23.3
• 3.8%

Total assets 599.7 629.5

• 29.8
• 4.7%

Bank debt 201.6 266.7

• 65.0
• 24.4%

Unit holder funds 345.6 309.0 36.6 11.9% Units on issue (weighted average, millions) 328.5 296.1 10.9%

Fin inancial pos l posit ition ion

Prudent capital raising and deployment to value-add opportunities

12

Strategic acquisition and brownfield capacity expansion enhance portfolio quality Development capex spend

• ffset by strong NZD

Equity raising provides financial headroom Capital raising & FEC proceeds and higher NZD push overall bank debt lower

NTA uplift driven mainly via rights issue achieved at a premium to asset backing

1.01 0.03 0.03 0.01

• 0.03

1.05 0.90 0.92 0.94 0.96 0.98 1.00 1.02 1.04 1.06 1.08 1.10 FY13 13 N NTA TA DRP RP+Ri Rights Iss ssue FX t tran anslat ation hed edges es Der erivat atives es FX t tran anslat ation 1H14 N 4 NTA TA NZ$

Inv nves estment ent p propert erty reco econci nciliat ation

Capital additions offset by foreign currency translation

Note: Capital additions includes capitalised interest $0.1m

13

618.7 14.3

• 37.6

595.4

• 100.0

200.0 300.0 400.0 500.0 600.0 700.0

FY FY13 I Inv nvestment nt Proper erties es Cap apital al ad additions FX t tran anslat ation 1H14 I Inv nvestment nt Proper erties es

NZ$ millio ions

NZ portfolio in NZ$ Australian portfolio in A$ Australian portfolio translated into NZ$

LVR r recon

• ncili

iliation ion

Efficient capital management providing flexibility for new projects and acquisition opportunities

14

42.4%

• 5.7%
• 3.1%
• 1.5%

1.7% 33.9% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

FY FY13 LV LVR DRP RP + Ri Rights Iss ssue Real ealised ed F FX tran anslat ation hed edges es FX Tr Translation

• n Dev

evel elopmen ent Cap apex ex 1H 1H14 14 L LVR

LV LVR

All ll NZD$ D$ (unle less o

• therw

rwis ise s stated) Act ctual al Act ctual al 1H 1H14 14 FY FY13

Drawn debt at period end ($ million) 201.6 266.7 Facility size ($ million) 264.3 285.9 Weighted average cost of debt 6.58% 6.52% Weighted average facility term (years) 2.36 2.86 Hedged (interest) 100% 86.4% Interest coverage ratio (ICR) (times) 3.1x 2.8x ICR covenant > 2.0x > 2.0x Loan to value ratio 33.9% 42.4% Bank & Trust Deed covenant < 50.0% < 50.0%

Cap Capital al m manag anagem ement ent

Sound capital management delivers improved headroom and key ratios well within covenant levels

15

Slightly higher due to higher hedged position and repayment of floating debt with equity and FEC proceeds Improved covenant ratios underpinned by strong financial performance and capital management Lower drawn debt due to $39m equity raising and cash receipts under FEC’s1

1: FEC = foreign exchange contract

Facility consists of: Tranche 1: 5-year A$125m through to 31 March 2017 Tranche 2: 3-year A$100m & NZ$20m through to 31 March 2015

Healthcare update

Heal Healthcar hcare o e overv erview ew

Strong sector fundamentals support positive long term outlook

17

• 1. Percentage of population with hospital treatment cover. PHIAC Quarterly Statistics, 30 Sep 2013. NZ data: Health Funds Association of New Zealand (HFANZ), 30 Dec 2013.
• 2. Australian Bureau of Statistics, Statistics NZ, Population projections 65+ year demographic (1950-2060).
• 3. AIHW Australia’s Hospitals 2010-2011 at a Glance.
• 4. IPD six years to June 2013

Dr Drive vers Austr tralia lia NZ NZ Comme mment

Private Health Insurance (PHI)1

47% < 30% More attractive model in Australia vs. New Zealand

New Zealand recorded its first quarterly increase since Jun-09 > 65 year demographic % of population2

28% 32%

Forecast doubling of this demographic over the next 40 years > 65's utilisation of services3

4x n/a

High utilisation vs. < 65 demographic adding demand pressure Investment Property Databank (IPD)4

n/a

Continued total return outperformance versus other property classes Opportunities Australia has a relatively larger pool of acquisition and redevelopment opportunities vs. New Zealand

Portfolio review

Por

• rtfolio
• lio div

diversif ification ion

19 SA SA NT NT WA WA

TAS AS

NS NSW NZ NZ VI VIC

74% of Vital’s assets are in Australia and mostly in the three eastern states of QLD, NSW and VIC

432 24 49 5 409 13 48 3 107 15

QLD LD

446 12

Key ey

Stab abilised ed p pro ropert erty Red Redevel eveloped ed p pro ropert erty Under d er devel evelopmen ent

Dev evel elopment ent’s cr creat eating ng cap capaci acity and a d addin dding g valu lue

Strong execution capability supporting enhanced asset and earnings quality

20 Prop

• perty

ty ( (Hos

• spita

tal) Dev evel elopmen ents r recen ecently co complet eted ed o

• r in progres

ess Proj

• ject c

t cos

• st

t (A$) $) Com

• mpleti

tion

• n d

due date te Toronto $1.9m  November 2013 Hurstville $28.0m Mid-2015 Total brownfield development pipeline $29.9m Potential brownfield opportunities over the next 3-4 years $80-100m

4

new theatres

58

new single beds

3

new inpatient wards Consult. suites new mental health unit

7

new beds

10 10 year le lease expir piry pr prof

• file

ile

Following the successful resolution

• f MercyAscot, Allamanda remains

a focus for management

21

0.6% 0.7% 0.1% 0.3% 12.5% 2.8% 1.8% 2.1% 0.7% 0.1%

0% 5% 10% 15% 20% 25% 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Lease expiry by income (%) Financial Year Vacant Total expiry Larges est s single e expiry Allamanda Private MercyAscot expiry resolved 2.1% p.a. average expiry

• ver the n

next 4 years

Nex ext 20 y year ears t total al ex expiries es o

• f ci

circa. ca. 66% 66% of

• f i

incom

• me

Looking forward

Look

• okin

ing f g for

• rwa

ward

Str trate tegy



Strategy entrenched, focus on core business delivering results



Continue to execute and build on strong momentum



Consider growth through wider healthcare real estate diversification

Heal ealthcar care e tr trends nds



Positive long term view on healthcare



Strong demographic and healthcare trends supportive



Constrained capacity and rising demand creating opportunities



Defensive characteristics attractive

Portfolio & & cap capital al man anagem agemen ent



Scale and diversification benefits supporting performance



Focus on medium term expiry event and strong portfolio metrics



Efficient capital management for organic and acquisition opportunities

Earni ning ngs



Focus is on tenure, quality and diversification of earnings



Attractive funding environment supports investment

Gu Guidance



Board reaffirms guidance for a FY14 cash DPU of 7.9 cents

23

This presentation has been prepared by Vital Healthcare Management Limited (the "Manager") as manager of the Vital Healthcare Property Trust (the "Trust"). The details in this presentation provide general information only. It is not intended as investment or financial advice and must not be relied on as such. You should

• btain independent professional advice prior to making any decision relating to

your investment or financial needs. The provision of this presentation does not constitute an offer, invitation or recommendation to subscribe for or purchase units in the Trust. Past performance is no indication of future performance. No money is currently being sought, and no applications for units will be accepted,

• r money received, unless the unitholders have received an investment statement

and a registered prospectus from the Trust. 13 February 2014

Dis iscla laim imer