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Vital Healthcare 1H earnings drop 21% on bigger tax bill

Vital Healthcare Property Trust, the country's biggest listed healthcare property investor, reported a 21 percent drop in first-half earnings as it faced a bigger tax bill relating to a lease transaction, having benefited from a tax credit a year earlier.

Distributable income, the property investor's preferred measure of earnings which strips out fair value adjustments, fell to $16.3 million in the six months ended Dec. 31 from $20.6 million a year earlier, the unit trust's manager, Vital Healthcare Management, said in a statement. Vital reported a $1.65 million tax expense in the period relating to income received in advance of its Mercy Ascot 30-year lease renewal, compared to a $645,000 credit a year earlier when it benefited from tax adjustments. Net profit declined 16 percent to $13.9 million, while revenue advanced 3 percent to $30.8 million.

"Vital's portfolio metrics and financial position remain strong and we continue to leverage the favourable outlook in demand across the health sector, driven by an ageing population, strong private health insurance levels, particularly in Australia, and rising consumer demand for quality and timely provision of healthcare services," Vital chief executive David Carr said. "Portfolio diversification and enhancement remains a focus with opportunities being considered that align with Vital's core strategy and portfolio characteristics, including bed-based care, long-term leases, structured rent review profile and quality tenant covenants."

The property trust is investing in private hospital facilities in New Zealand and Australia as it expects demand to increase from an ageing population, a rise in chronic disease and higher patient expectations. About 47 percent of Australians have private health care cover for hospitals, compared to about 30 percent of New Zealanders.

The board declared a second quarter dividend of 2 cents per unit, and affirmed annual guidance for a cash distribution of 8 cents.

The units fell 1.2 percent to $1.64, and have gained 5.7 percent this year.

Vital extended its weighted average lease term to 15.2 years from 15.1 years, while improving its occupancy to 99.5 percent from 99.4 percent.

Its investment property portfolio was valued at $631.9 million as at Dec. 31 from $613.1 million six months earlier.