FY17 Results Presentation 28 August 2017
Contents FY17 Results highlights #1 3 Competitive positioning #2 11 Development and growth #3 16 #4 20 Commercial intensity Risk Management 27 #5 Summary #6 32 Please refer to the definitions section on page 44 of the Financial Performance #7 34 presentation for additional detail on the non-GAAP financial measures contained within this presentation. A glossary of terms used in this presentation is contained on page 46. Appendices #8 41 2
FY17 Results Highlights Section 1
FY17 Results highlights Record Net Profit After Tax (NPAT) $251.5m, up 10%. Underlying Profit 1 $82.1m, up 24%. Net Tangible Assets (NTA) per share $6.43, up 21%. Underlying operating cash flows 2 $51.3m, remain strong, up 2%. Improved Loan to Value ratio 3 (LVR) at 4.8%, providing capacity to grow and manage market changes. FY17 final dividend of 5.8 cps, up 45%. 1 Underlying profit removes the impact of unrealised fair value movements on investment properties, impairment of property, plant & equipment and excludes one-off gains & losses and taxation. It is a non-GAAP financial measure and is not prepared in accordance with NZ IFRS. 2 Underlying operating cash flows are statutory operating cash flow per the financial statements less the first time sale of occupation rights agreements (development sales). 4 3 Loan to Value Ratio is total debt (excluding cash on hand) to CBRE investment property valuation as at 30 June 2017 (excluding 50% of Palmerston North Village).
FY17 Results highlights Significant increase in realised development margin 1 23%, up from 13%. Delivered a record 235 units 2 and care beds 3 for the year, up 124%. On track to deliver 233 new units and care beds in FY18. Achieved a resource consent for Red Beach after balance date with a total of 320 units and care beds. Added to the land bank securing a site in Botany (East Auckland) adjacent to the Pakuranga Golf course. Opened the Greenwich Gardens care home showcasing the “homestead” model. 1 Realised development margin of $19.0m is included in the audited financial statements and the margin percentage is calculated using total developments sales of $82.5m (refer page 44 for additional details). 5 2 Units includes independent Living Units (ILUs), Independent Living Apartments (ILAs) and Care Apartments or Serviced Apartments. 3 Care Beds includes Hospital beds and or Rest home beds.
FY17 Disclosure The company is changing the way it reports performance and providing greater detail and breakdown in certain areas. Increased disclosure regarding the independent CBRE valuation of villages including providing a breakdown in the movement in that valuation as well as more detail surrounding individual village valuations and key assumptions. Clarified operating cash flows by introducing a new term, Underlying Operating Cash Flows 1 , which removes the impact of development sales cash flows from operating cash flows. Provided additional information on corporate costs and the level of capitalisation of those costs. Reducing the significance of the non-GAAP measure, Underlying Profit, in future periods due to the high level of judgment applied and difficulties with consistent reporting across the industry including: Judgments applied to the allocation of development costs associated with offices, common areas and care homes and therefore, likely differences in the way realised development margin is calculated; Differences in the recognition of resales and development sales (Metlifecare recognises on a cash basis, some operators measure on an accrued basis); Timing differences between accrued DMF (as reported in Underlying Profit) and cash DMF (as included in operating cash flows); and Differences between realised development margin and the full impact on future cash flows. 6 1 Underlying operating cash flows are a preferred indicator of operating performance as they include cash DMF, cash realised resale gains and cash tax paid.
Dividends paid from operating cash The Board is of the view that “underlying operating cash flows 1 ” is the measure the company will use to determine current and future dividend pay-outs. The company will aim to increase dividends yearly while maintaining a dividend payout ratio of 30 to 50% of underlying operating cash flows. Development sales are excluded on the basis they are utilised to repay development debt associated with the construction of new villages and are therefore not available for distribution to shareholders. On completion of development projects any surplus cash available to distribute will be considered at completion. 7 1 Underlying operating cash flows are statutory operating cash flow per the financial statements less the first time sale of occupation right agreements (development sales).
FY17 Final dividend FY17 FY16 Interim Dividend per share 2.25 1.75 Final Dividend per share 5.8 4.0 Total Dividend per share (cps) 8.05 5.75 The final dividend is un-imputed. The company will aim for final dividends to represent 60% of total dividends paid for future financial years. The record date for the final dividend is 15 September 2017 and the payment date is 29 September 2017. The Dividend Reinvestment Plan does not apply for this dividend. 8
FY17 Portfolio statistics Care apartments and care beds represent 18% of the portfolio. Seven villages are currently without a care offering and we have plans to build care at three of these.
FY17 Portfolio statistics 10
Competitive Positioning Section 2 11
Competitive positioning Strategic focus Diverse and unique villages underpinned by a high level of care and service Villages designed to integrate with their local communities and enhance resident experience. Highly engaged and qualified staff. Comprehensive understanding of existing and future resident needs. A significantly enhanced food and dining experience. Metlifecare residents engaging in 3D printing with The Resident- directed care which recognises everyone’s Mind Lab by Unitec needs are different. Asset management plans Focus on villages being competitive, marketable and able to meet future demands and expectations of residents. The long term village maintenance plan has been expanded to a ten year village regeneration programme - long-term asset plans in place by end 2017. 12 Newly refurbished home
Competitive positioning Village enhancement Village regeneration Pinesong Manukau apartment block – under construction, to be completed FY19. Pakuranga Village - in planning, first stage to be completed FY20. New care homes being planned at The Avenues, Papamoa Beach Village and Oakridge Villas. Crestwood regeneration being progressed. Village remediation Coastal Villas project delivering value with selling prices on completion of remediated units being approximately $100k higher. Initiating remediation work at Waitakere Gardens and Dannemora Gardens. Estimated remediation costs of $44.1m over seven years. 13 Pinesong Manukau - Artist impression only
Competitive positioning Outstanding resident experience Preference drives commercial value Increased High Excellent High customer occupancy + reputation referrals satisfaction sales growth Strengthening Metlifecare’s brand New branding launched November 2016, spearheaded by ‘More to Come’ proposition. Enhanced brand activity. Unprompted brand awareness up 15% to 52%. Overall resident satisfaction remains high at 90%, care satisfaction up 4% to 92%. Referrals up 2% at 24%. Village occupancy remains strong at 98%, care occupancy at 96%. 14
Competitive positioning Outstanding resident experience Care Strengthened care proposition with company-wide establishment of resident-directed care approach. Completion of new design ‘homestead model’ care home at Greenwich Gardens. Increased care resident satisfaction and occupancy (see page 14). Greenwich Gardens care home Food & dining Food is an essential ingredient of the customer experience and an opportunity to differentiate from our competitors, driving referrals and resales. Simon Gault partnership has enhanced our food offering; increased capability of our kitchen staff; provided a focal point with residents and prospects; increased use of offering and raised company profile and reputation. 15
Development & Growth Section 3
Development and growth Record development sales of $82.5m with an average price of $640k per settlement reflecting the investment in higher value villages. 88% increase in realised development margin. Sales volumes slightly lower than FY16 as a result of delivery timing. Total development units not contracted at 30 June 2017: 63 (1.3%). 17
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