“The succession plan has been in the works for a while,” Mair said, speaking after the announcement on Thursday morning to BusinessDesk.
‘Orders continue to be strong’
Mair’s retirement was announced alongside Skellerup’s earnings report for the six months to December 2023. The rubber and dairy equipment company reported a net profit after tax (Npat) of $21.6 million, down 6 per cent from a record-high profit of $23m in the first half of the 2022/23 financial year.
Positive numbers in Skellerup’s industrial division could not make up for a 19 per cent decline from $56.9m to $48.5m in agri division revenues caused by international customers reducing purchases to lower inventory.
However, Skellerup is confident the agri division will pick up in the second half of the financial year, based on positive performance in January.
“Dairy sales were softer than we anticipated,” Skellerup said. “Pleasingly, we have experienced a larger-than-normal uplift following Christmas, and forward orders continue to be strong.”
Despite the decline in revenues from $165.5m to $157.7m (-5 pe cent), Skellerup updated expectations for the 2023/24 season, forecasting growth in the second half of the year to bring profits up to 2022/23′s record annual result.
The company is particularly confident in its ability to boost profits over the next three years.
Where now, Mair?
Mair said he is “very proud” of his time at the firm.
“When I came in, it was a turnaround, [Skellerup] had way too much debt. It didn’t have a purpose. Yet it had a great history.”
Shareholders have significantly benefited from his time in the role, he said.
“It’s not linear, but almost year on year for seven years of 7 per cent compound annual growth rate leading to good cash flow management and increasing dividends.”
What he is most proud of, though, is looking after people at the “bottom end” through tough times.
“I get asked about the minimum wage,” he said. “We are way above the minimum wage in New Zealand, but also in other countries.”
The business is in good hands, according to Mair. Mair is “more than confident” in Leaming, who has been part of the business for 11 years.
Mair also mentioned the next generation – a 34-, 38- and 39-year-old – whom the company plans to present to shareholders in the coming months.
Mair will retain the board seat he has held since 2006, taking care to say he won’t be one of those former CEO directors who doesn’t respect executive autonomy.
“I’m not going to become just another board member. That’s not me; I’m a bit more hands-on.”
“Someone said I should join the Fletcher’s board... that’d be interesting,” he laughed.
Vital keeps earnings stable
Vital Healthcare Property Trust has kept its earnings relatively stable in the face of interest-rate increases with the strategic divestment of assets.
The company posted a net loss of $113m for the six months to December 31, 2023, compared with a loss of $30.1m for the same period the year before.
The investor report attributes this primarily to property revaluations.
Profits and losses Vital’s pre-tax and other income operating profit was $37.5m, up 4.4 per cent, on a net property income (NPI) of $73.4m, up 0.5 per cent.
NPI on a same-property, constant currency basis increased 4.1 per cent, or 1.8 per cent after divestments, primarily due to development income and rent reviews.
Distributions were 4.875 cents per unit, with full-year distribution guidance at 9.75cpu, maintaining a conservative payout ratio of less than 90%.
This was stable year over year as adjusted funds from operations (AFFO) fell 1.9% from $37.7m to $37m.
Fund manager Aaron Hockly said they remain committed to reaching the target of 2-3 per cent per unit growth in AFFO and distributions over the medium term.
“We have several strategies to return to growth in future periods. Our recent increase in interest-rate hedging to 78 per cent at 31 December 2023, in particular, is expected to reduce the impact of movements in interest rates.”
Divestments and acquisitions
Over the 2023 calendar year, $222m of non-core assets were sold. Hockly said the money was largely used to repay debt.
“Ultimately, these proceeds will be reinvested to fund Vital’s development pipeline, improving the quality, resilience and cash returns of the portfolio as Vital focuses on core and emerging healthcare precincts.
“With the majority of annual rent increases linked to CPI [consumers price index], weighted to the second half of FY24, Vital continues to generate strong and sustainable income growth to mitigate some of the impact of higher interest rates.”
Another $92m in assets are in due diligence for sale, and further assets are being considered.
There were also $21m worth of acquisitions during the half-year, which mainly consisted of land for the expansion of Ormiston Hospital in Flat Bush, South Auckland.
The value of Vital’s properties across Australia and New Zealand is now $3.2 billion, with an average building age of 9.7 years, down from 14.7 years in 2021.
Development opportunities
Vital now has a development-opportunities pipeline valued at $2.5b as part of its refocus from standalone real estate to investment in healthcare precincts.
The company’s single-tenant exposure is now 19 per cent, down from 41 per cent in 2021.
There are nine developments under way, with $170m expected to be spent over the next 12 months.
As the development of Ormiston Hospital and Wellington’s Wakefield Hospital is nearing completion, the firm is eyeing future projects.
Some potential developments are “shovel-ready” and can be quickly committed to when the conditions are right.
