This article is from the Australian Property Journal archive
A TRANSITIONAL year for retirement village operator Eureka Group Holdings has seen profits fall by 37.5%, but occupancies increased across its portfolio.
It posted a full-year net profit of $6.538 million, down from $10.467 million, whilst revenue was up 9.6% to $26.473 million and EBITDA down by 24.5% to $9.415 million.
Whilst revenue increased with a larger portfolio, so did finance costs from resulting debt levels. Operating expenses included payments to departing directors and the impact of weak trading levels at its Adelaide care facility, including a $2.52 million write-down.
Occupancy levels jumped from 83% to 89.6%, which new chief executive officer Jeff Weigh said was driven by the company’s strategy to focus on improving occupancy rates.
He said the year had been one of fundamental change in the structure, operations and governance of the company since joining in early 2017.
“In the next financial year there will be a continued commitment to Eureka’s ‘Buy and Build’ strategy which has seen the company move away from its historical ownership of management rights only over low cost rental retirement villages, to a dominant and holistic bricks and mortar village ownership and management model, which has generated far superior returns to shareholders,” Weigh said.
He said there is robust growth in the market for affordable housing for seniors.
“Eureka operates on a low-cost rental basis rather than the expense of a buy in and high exit fees model,” he added. “Recent trends of villages and also low cost alternatives including caravan parks move to the DMF and MHE models, significantly reducing the amount of affordable housing available in the market.
“ABS figures suggest a significant percentage of our population will never own their own property and will always rent. As this market sector approach retirement age they will have little or no option but to rent.”
Eureka acquired four additional villages of $11.3 million over the financial year, taking its portfolio 36 throughout Victoria, New South Wales, South Australia and Queensland, and units owned or managed to more than 2,000.
Total assets increased by 16% $128.5 million.
Weigh said negotiations with Tweed Shire Council on receiving development approval for its Terranora site in northern New South Wales were proceeding well, but the process has “taken longer than we had originally expected”.
Eureka purchased in late 2015 for $7 million and has upgraded the existing property of 60 units with future development potential for the stage one vacant land of up to 240 townhouses or additional retirement village units. Eureka will then conduct a feasibility assessment for stage two, deciding on a 125-unit Eureka Village development or taking the undeveloped land to the market.
The group’s net tangible assets was up by 3.5 cents per security to 29.6cps. It has not declared a dividend for the financial year.
Australian Property Journal
