Caring state 'no safety net' for old

By DITA De BONI

By the year 2035 there will be about 150 per cent more Kiwi senior citizens, or 1.5 million, with sophisticated care requirements and a much reduced social safety net, says Alan Clarke, the new chief executive of ElderCare New Zealand.

Mr Clarke, in a position the company has created in part to provide more liaison with shareholders and investors, is encouraged by the Government's "more responsible" attitude to retirement.

But he is adamant New Zealanders should stop expecting the state to provide all their retirement needs.

"[With the new Government] there has been a fundamental recognition that the population is ageing, and that there is a need for funding for retirement ...

"But essentially, the Government will still have enormous difficulties funding this growth curve and the reality is that they need to look at people who can effectively partner them."

Mr Clarke is no stranger to the many incarnations the country's health system has endured over the last 15 years.

Formerly with the Australasian branch of Swiss multinational SGS, he was responsible for building a group of businesses involved in pathology and radiology across Australia and New Zealand.

He helped to increase SGS operating revenues from $A45 million ($58.4 million) in 1993 to $A450 million last year.

By hiring Mr Clarke, ElderCare hopes to complement a strong entrepreneurial growth spurt - buoyed by Eric Watson's 70 per cent share in the rest-home and healthcare provider - with a shift from the high-margin, stable-earning bias of the company's fee-based structure into property development.

Eldercare competes with Metlifecare and Ryman Healthcare for the larger chunk of pensioner subsidy, but the heavy emphasis on building retirement homes (as opposed to hospice care) by both Metlifecare and Ryman has proved difficult for them with the property market on a downward swing.

Ryman shares have only recently recovered from floundering below their issue price of 135c and Metlifecare has had difficulties after a period of over-rapid expansion.

But ElderCare has managed to avoid the dips of property developers.

Mr Clarke says both property and fees can be lucrative but "it depends; it's a mixture."

"Where you're building units and the market is very buoyant and you happen to have a good piece of real estate, then you can sell [those units] for a large capital gain," he says.

"But development can be quite cyclical and yields are heavily subject to the market. [Healthcare fees] are the cashflow engine structure for our business, but we will be shifting our bias."

ElderCare hired Mr Clarke just two weeks before releasing half-year profits of $2.2 million on revenues of $9.8 million, compared with a loss of $3.3 million on negative revenues of $2.3 million achieved in the same period last year by its shell company, NZ Petroleum.

On track for profits of $4.1 million this year, and holding fixed assets worth $60.9 million, ElderCare has more than just bullish acquisition to take advantage of the baby-boomer retirement bulge in about 10 years, says Mr Clarke.

Eldercare's "continuum of healthcare" distinguishes it from competitors. The company provides a range of services, from units for an independent lifestyle to fully serviced hospice-style care, and Mr Clarke says choosing the right areas for development will be the key to successful expansion.

"Clearly, Auckland is an important area. There is a huge demand for retirement villages."

In October, the company bought $2.5 million of property on the North Shore, and in February it said it would extend Auckland and Taupo facilities to bring the company's bed count to 950 and the workforce to 500.