Ethical Investment Updates
We all know that we're not getting any younger! This special edition focuses on Australia's ageing population and related investment opportunities.
In this edition:
• Investments in the Spotlight
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We're all Getting Older
We all know that we're not getting any younger. In 2011, Australia's baby boomers will start to retire en masse as they reach 65 and with them will go not only their ability to produce, but a lot of expertise that they have accumulated over the past four decades. The number of baby boomers retiring will bring significant changes our way of life and the way that the government will have to deal with these issues... (Read the full article)
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Opportunities in Aged Care
Australia's aged population is growing and this brings the opportunity to both improve aged care and provide a range of business products and services to this generally well-to-do market. This long term demographic trend is opening opportunities for business to provide many of the products and services that assist with the ageing process - diagnostics, medical care, pharmaceuticals, specialized housing and, inevitably, funeral services... (Read the full article)
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Three ethical investments that are set to benefit from the ageing population, while operating ethically and sustainably are Sonic Healthcare Ltd, Australian Unity Healthcare Property Trust, and InvoCare Ltd.
· Sonic Healthcare Ltd
ASX listed Sonic Healthcare is a $4.2 billion international medical diagnostics company that provides pathology and radiology services in Australia, UK, US, New Zealand, Germany and Hong Kong.
The company grew through consolidating the domestic pathology market, but as the Australian pathology sector is largely a duopoly, it has expanded globally. Pathology accounts for 81 per cent of its revenue, and of this 25 per cent is from Europe, 23 per cent from the US, and 2 per cent from NZ. Revenue in financial year 2010-11 was $3.1 billion, and its net profit was $294 million. Dividend income is presently an attractive 5.3 per cent per annum.
Ethically, Sonic has a strong presence in medical research charities, a sound environment policy, good gender equity in management, and has been independently assessed as having good corporate governance practices. While the strong Australian dollar has reduced profits from its overseas businesses, the strong exchange rate has allowed it to continue to acquire offshore businesses at a lower cost.
· Australian Unity Healthcare Property Trust
As people age and their medical needs increase, many require the services of clinics, hospitals and other facilities. The medical and aged care sector utilizes a wide range of property types, and this gives choice and diversification to investors who like property. An established investor in healthcare properties is the Australian Unity Healthcare Property Trust. This is an unlisted fund with $423 million in capital under management and 20 healthcare properties in New South Wales, Victoria, Queensland and South Australia.
The fund owns the land and bricks and mortar of hospitals, medical clinics, nursing homes, day surgeries, consulting rooms, rehabilitation units, and radiology and pathology centres. Properties in its portfolio include the Brunswick Private Hospital in Melbourne, Constitution Hill Aged Care in Sydney, Peninsula Private Hospital in Melbourne, RPAH Medical Centre in Sydney, Ipswich Medical Centre and Day Surgery near Brisbane, Wakefield Private Hospital and Wakefield Medical Clinic in Adelaide, and Illawarra Private Hospital in Wollongong. Its major tenants are: Ramsay Health, Sonic Health, Vision Group, Calvary Health, and Healthscope.
The Fund has performed well. Its one year performance to August 2011 is 7.3 per cent. Its five year performance to August 2011 is 8.7 per cent. Lonsec research rates the Fund as Highly Recommended.
Its ethical investment credentials are also sound. Australian Unity retrofitted the Prince Alfred Medical Centre in Sydney between 2008-2010. The building's energy rating went from zero to four stars under the National Australia Built Environment Rating System (NABERS), and its water rating moved from one star to 2.5 stars. Australian Unity's environmental credentials increased further with the acquisition of Investa Funds Management, a property manager that specializes in retrofitting commercial properties to make them energy efficient and sustainable. From a social perspective, the Fund has centres in a variety of geographic locations, including regional areas such as Wollongong in NSW and Ipswich in Qld. It has strong community relations and good corporate governance.
· InvoCare Ltd
When death inevitably comes around, families will look for a good funeral company. The largest private funeral operator in the Asia Pacific region is ASX listed InvoCare. The $750 million company owns many of Australia's funeral companies, including some well-known brands such as Simplicity and White Lady. It also owns some of the cemeteries and crematoria around the country.
InvoCare arranges around 50,000 funerals a year and in Australia it has around 26 per cent of the market. Statistics show that currently around 150,000 people die in Australia each year, and the number should rise as more of the baby boomers reach old age. In its 2010 financial year the company had revenue of $272 million and made a profit of $27.5 million. Its latest 12 month yield is around 3.9 per cent fully franked.
InvoCare says it works to ensure the industry meets the highest ethical standards, including the professional development of its staff, who also own 25 per cent of the business. InvoCare supports a variety of community organizations with financial assistance, facilities and equipment.
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Overnight, the US and European share markets fell substantially. The S&P 500 dropped 3.19%, and the UK’s FTSE 100 slid 4.7% due to increasing concern about the European financial system and and slowing global economic prospects. The question on everyone’s minds is whether the US and European economies have the ability to encourage economic growth through further policy changes. The US Federal Reserve hopes their latest strategy, to flatten the yield curve, will help US households to refinance their mortgage to cheaper interest rates and encourage spending.
It is too early to tell how these offshore events will impact Australia. Fortunately, the RBA has the ability to drop interest rates, as required. The expectation is that this process will begin soon.
From an ethical investment perspective, we continue to invest in companies with strong balance sheets. In every downturn, the companies with the strongest balance sheets fair better. We are also focused on stocks which generate steady cash flow, good yields and potential income growth at an attractive price.
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· Organic Gardening Holds The Key To Longevity And Health
You don’t need a big backyard or a green thumb to benefit from gardening. Some experts now believe that gardening can lower blood pressure, boost immune function, and reduce stress. Digging, planting, weeding, and other repetitive tasks that require strength or stretching are excellent forms of exercise, especially for people who find more vigorous exercise a challenge, such as those who are older, have disabilities, or suffer from chronic pain. The best part is, you are actually accomplishing something wonderful on your way to becoming healthy and fit. The food you grow yourself is the freshest food you can eat. And because home gardens are filled with fruits, vegetables and herbs, it’s also among the healthiest food you can eat. There is enjoyment and satisfaction in making things grow, prosper, and produce from a patch of dirt!
· The Robin Hood Tax
The Robin Hood Tax proposes to charge a tiny 0.05% tax on financial speculation by investment banks, hedge funds and other finance institutions that would raise billions to tackle poverty and climate change, in Australia and overseas. This money can provide for vital investment in much needed and underfunded public services like health and education, resource efforts to conserve our environment, aid the fight against global poverty and climate change. To find out more, go to www.robinhoodtax.com.
· Beyond Zero Emissions
Beyond Zero Emissions is an Australian organization that has examined ALL renewable energy projects around the world and has come up with a plan to make Australia's base load requirements completely renewable in 10 years. www.beyondzeroemissions.org
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Office News
Luke Price of Ethical Investment Advisers has recently become an Authorised Representative. You may speak to Luke when you next call our Bulimba office. Karen McLeod is now back at work after having her second child, Adele.
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Disclaimer
The contents of this article are intended as general advice only. No specific person’s circumstances, financial situation or objectives have been taken into consideration. You should not act on the information provided without seeking personal advice from an appropriately qualified financial planner. While the source has been verified as reliable, the actual content has not been checked for accuracy. Consequently Ethical Investment Advisers does not warrant the accuracy of the information nor accept liability for any errors in the data.