This article is from the Australian Property Journal archive
Seniors living provider Eureka Group downgraded its full-year earnings guidance due to transactional delays in closing some acquisitions, the divestment of its Mount Gambier community last month and the impact of lowered and deferred rent increases, but still expects year-on-year growth, while its pipeline of acquisition opportunities now exceeds $100 million.
Revised FY25 underlying EBITDA growth is around 11% on FY24, and underlying earnings per security growth of around 2.6% on FY24
Eureka posted a 16% first-half increase in underlying EBITDA to $8.2 million. Statutory net profit came in slightly higher than the prior corresponding period, at $6.4 million, with the earnings growth offset by lower levels of property revaluations during the period.
During the period the group commenced a review into how increases in residential rent were calculated and communicated to residents.
“This resulted in some planned rent increases being lowered or deferred into the second half – this impacted both first half valuations and earnings,” it said.
The group will be targeting planned rent increases of 5% to 7% per annum through a combination of government increases to the pension and Commonwealth rent assistance, and assessing market rents at the time a unit is vacated and re-let.
As it completed a $70.4 million equity raising during the period, reports emerged that Eureka was being investigated by the Australian Competition & Consumer Commission over claims of excessive rent increases, reflecting rental increases of nearly 30%.
“The group is acutely aware of the cost-of-living pressures that our residents face and is seeking to carefully balance this with the high levels of cost increases that we have experienced over the last few years across difficult to control cost centres including council rates, insurances, energy and utility charges, food and trades,” it said yesterday.
The portfolio saw a $4.6 million valuation uplift, compared with $5.6 million in the prior period, with capitalisation rates remaining stable. Acquisitions, developments, capital improvements and revaluations during the year contributed to a $23 million, or 7% increase in assets under management.
Eureka CEO Simon Owen said, “Eureka is well positioned for a period of strong and sustainable growth underpinned by continuing demand for rental accommodation, heavily constrained new supply and a focus on delivering CPI+ rental growth.”
He said the group’s acquisition opportunities under contract or assessment now exceeds $100 million, and with “our recent expansion into the all-age affordable rental market through the acquisition of the Kin Kora residential home village, the addressable market which we can focus upon is significantly larger”.
“We expect to make further investments in the all-age affordable rental market in the coming months.”
Owen said the group is well-positioned to transact quickly on the accretive opportunities.
“We will also continue to actively manage our existing portfolio and have planned divestments for a further $25 million to $30 million of non-core or regionally isolated assets over the coming year. These will be replaced with more suitable assets from a yield and operational efficiency perspective.”
The group said it is experiencing “some softness” in occupancy in a small number of rental communities across regional Victoria, inland NSW and Tasmania. However, in Queensland, where the portfolio is strongly weighted, occupancy exceeds 99%.
Eureka has net debt of $35.8 million and “significant” headroom on interest cover and gearing ratios. Gearing was 13.5%, below the target gearing range of 30% to 40%.
The Board has determined an interim dividend of 0.73c per share unfranked, a 4.3% increase on the final dividend for FY24.
