METLIFECARE LIMITED Annual Report 2014 Crestwood This Annual Report is signed for and on behalf of the Board of the Company by: K.R. Ellis A.B. Ryan Chair Director 15 September 2014 15 September 2014 C over image: Ros from Pinesong was one of the first vets in New Zealand. One of her passions as a girl and young woman was sailing on the family launch with her father (a violinist) and mother. Ros still loves the ocean and her home is filled with landscapes of the sea and NZ beaches. The heart Ros is holding features a rope from a sailing boat with a sailing slip knot. 2 | METLIFECARE LIMITED ANNUAL REPORT 2014 1 & OVE HIG H LIG R VIEW H T S C ontents 2 S FIN T A A TEMENT N C I A Section 1 - Highlights & Overview L Our Business 6 S Our Five Year Transition 8 FY14 At a Glance 10 Chair’s Report 12 3 INFO S 15 T Chief Executive Officer’s Report A TUT ector Profiles 18 R Dir M O A R 20 TION Executive Team Profiles Y Y Overview of Financials 22 Family of Villages 24 Construction & Development Locations 25 Section 2 - Financial Statements Directors’ Report 28 Statements of Comprehensive Income 29 Statements of Movements in Equity 30 Balance Sheets 31 Cash Flow Statements 32 Notes to the Financial Statements 33 Independent Auditor’s Report 69 Section 3 - Statutory Information Corporate Governance Statement 74 Interests Register 83 Other Director Information 86 Other Statutory Information 88 Shareholder Information 90 Directory 92 ANNUAL REPORT 2014 METLIFECARE LIMITED | 3 Dannemora Gardens 4 | METLIFECARE LIMITED ANNUAL REPORT 2014 1 & OVE HIG & OVERVIEW H LIG R VIEW H TS T S Highlights 2 STATEMENTS S FIN F INANCIAL INANCIAL T A A TEMENT & Overview N C I A L L Our Business 6 S Our Five Year Transition 8 FY14 At a Glance 10 3 INFORMATION INFO S T ATUTORY ATUTORY A Chair’s Report 12 TUT R M O A R Chief Executive Officer’s Report 15 TION Y Y Director Profiles 18 Executive Team Profiles 20 Overview of Financials 22 Family of Villages 24 Construction & Development Locations 25 ANNUAL REPORT 2014 METLIFECARE LIMITED | 5 Our Business Metlifecare Limited is an aged care and retirement lifestyle company listed on the NZX and ASX. Established in 1984, the Company has a proven track record of successfully developing and operating retirement villages in New Zealand. Metlifecare currently owns and operates 23 retirement villages, incorporating eight care facilities, in prime locations throughout the North Island of New Zealand, plus two development villages. Many of our villages provide a continuum of care from independent villas and apartments through to serviced apartments, rest homes and hospitals. Our Core Purpose To continuously develop and grow Metlifecare whilst meeting or exceeding the expectations of our residents, staff and shareholders. At Metlifecare we want to see everyone rewarded for being part of the Metlifecare family. We want our residents to experience the best years of their lives, our shareholders to feel confident and be rewarded for their investment and our staff to view Metlifecare as their employer of choice. The achievement of these goals will ensure we are able to further grow and develop our” business. Our Vision To provide quality, innovative and sustainable solutions for the lifestyle and “ care needs of older people. At Metlifecare we want to be the best at meeting the lifestyle and care needs of our residents now and into the future. To do this, we aim to be innovative and creative in developing and maintaining a leadership position in the industry. To be the best of the best requires every individual in our organisation to be passionate, empowered and fully engaged in our team-based process of continuous improvement as we strive for excellence in our business” to ensure that we deliver against the requirements of our vision. 6 | METLIFECARE LIMITED ANNUAL REPORT 2014 1 & OVE HIG & OVERVIEW H LIG R VIEW H TS T S 2 STATEMENTS S FIN F INANCIAL INANCIAL T A A TEMENT N C I A L L S 3 As at 30 June 2014 INFORMATION INFO S T ATUTORY ATUTORY A TUT R M O A R TION Y Y 23 operating retirement villages Incorporating 8 care facilities Prime locations in the North Island of New Zealand 3,900 units and 359 care beds More than 5,000 residents More than 1,000 staff 90% rating in resident satisfaction survey Construction and development pipeline of 1,058 units and care beds of which 160 are currently under construction ANNUAL REPORT 2014 METLIFECARE LIMITED | 7 Our Five Year Transition Over the past five years, Metlifecare Limited has been transformed and has taken its place as one of New Zealand’s leading retirement village operators. We are providing our residents with a desirable place to live, building our reputation as an employer of choice in the industry and rewarding our shareholders with increasing returns on their investment. FY10 FY11 FY12 FINANCIAL YEAR FINANCIAL YEAR FINANCIAL YEAR 2010 2011 2012 Debt restructuring and Positioning for growth C apital raising and repayment major merger initiated • Five brownfield developments • Successfully completed identified • Successful capital raising Stage 2 of The Poynton in generated $45.5m to offset • Sale of Merivale village in Takapuna debt Christchurch assisted the Company to reduce debt by • Majority shareholder, $44.5m Retirement Villages New Zealand (RVNZ), sold down from 82% to 50% • Acquired development site in Glenfield Bank Debt 180,000 160,000 140,000 120,000 100,000 $’000 80,000 60,000 40,000 20,000 0 FY10 FY11 FY12 FY13 FY14 Total Assets 2.5 2.0 2 1.9 1.5 1.3 1.3 1.2 $ billion 1 FY14: Total Assets 0.5 surpass $2 billion 0 FY10 FY11 FY12 FY13 FY14 8 | METLIFECARE LIMITED ANNUAL REPORT 2014 1 & OVE HIG & OVERVIEW H LIG R VIEW H TS T S Our Five Year Transition 2 STATEMENTS S FIN F INANCIAL INANCIAL T A A TEMENT N C I A FY13 FY14 L S FINANCIAL YEAR FINANCIAL YEAR 2013 2014 3 INFORMATION INFO S T ATUTORY ATUTORY A TUT R Merger with Vision Senior Living Record underlying profit as benefits M O A R and Private Life Care Holdings, of growth strategy start to be TION Y Y positioning Metlifecare as one realised of the largest retirement village operators in New Zealand F ocus on consolidation following Growth continues with focus on merger development opportunities • Non-development debt substantially • Sell down by RVNZ with 38% stake sold to eliminated following $80m capital Infratil and New Zealand Superannuation raising Fund • Sale of Ilam land in Christchurch and • Commenced construction of The Orchards Oakwoods village in Nelson village in Glenfield in January 2014 • Acquisition of large site in Unsworth • Secured resource consent for Greenwich Heights Gardens village in Unsworth Heights • Completion of Forest Lake Gardens in • Completed construction of Stage 3 and Hamilton commenced construction of Stage 4 of The Poynton in Takapuna • Commenced construction of Stage 3 of The Poynton in Takapuna Number of Units and Care Beds Gross Resales & Sales Cash Flows 5,000 250,000 4,000 200,000 3,000 150,000 2,000 $’000 100,000 1,000 50,000 0 FY10 FY11 FY12 FY13 FY14 0 FY10 FY11 FY12 FY13 FY14 Independent Units Serviced Units Care Beds Sales Cash Resales Cash ANNUAL REPORT 2014 METLIFECARE LIMITED | 9 FY14 At a Glance F or the Year Ended 30 June 2014 Key Events • Secured resource consent for Greenwich Gardens village in Unsworth Heights with construction due to commence in September 2014 • Commenced construction of The Orchards village in Glenfield in January 2014 • Completed construction of Stage 3 and commenced construction of Stage 4 of The Poynton in Takapuna • Over-subscription for the share purchase plan, completing the $80 million capital raising initiated in FY13 • Secondary listing on the ASX completed in October 2013 • Sell down by RVNZ of its 38% stake to Infratil and New Zealand Superannuation Fund • Resignations of Geoff Grady, David Hunt, John Loughlin and Alan Edwards from the Metlifecare Board. Appointments of Kevin Baker, William Smales and Carolyn Steele as directors • Final dividend of 2.5 cents per share (cps); taking the full year dividend to 3.75 cps, a year on year increase of 25% Financial Results • Fair value uplift of investment properties of $65.7 million • Compared to the relevant FY13 period: - Net profit after tax $68.8 million - up 18% (excluding non-recurring items1 in FY13) - Underlying profit2 $46.0 million - up 38% - Finance costs $1.7 million - down 81% - Total assets $2,010 million - up 6% Operational Summary • Sales of 61 new units generating $34.4 million in gross cash flow • Resales of 397 existing units generating $140.3 million in gross cash flow • Total sales and resales cash flow of $174.7 million • Total occupancy remains strong at over 96% 1 Non-recurring items include items associated with the acquisition of Vision Senior Living and Private Life Care Holdings and the disposal of the Oakwoods village which occurred in the prior period and not in the current period. Net profit after tax excluding non-recurring items for FY14 was $68.8 million and for FY13 was $58.1 million. This is a non-GAAP financial measure and is not prepared in accordance with NZ IFRS. Metlifecare believes this assists readers to understand the operating performance of the business on a comparable basis. 2 Underlying profit removes the impact of unrealised gains on investment properties and excludes one-off gains and deferred taxation.