Property devaluations push Radius Residential interim profit down from $2.1m to $1.3m

The Radius Elloughton Gardens property in Timaru. Photo / supplied

Newly-listed rest home specialist Radius Residential Care made $1.3 million net profit after tax in its latest half-year, down on the previous $2.1m due largely to falling revaluations.

Revenue rose from $59.4m in the September 30, 2020 half-year to $64.4m in the latest period to September 30, 2021.

But a $65,000 decrease in property revaluations, compared to a $716,000 gain previously, hit the bottom line.

Expenses were also up, from $58m previously to $64m in the latest half-year.

Radius listed in December when it said it operated 22 aged care places with around 1700 beds, of which it then owned three and leased the other 19. That has since changed because it has bought some of the sites it was then leasing.

The company issued 176 million shares at 80c each on December 10 when it came to market. It had $24.8m of debt and said its implied enterprise value was $351.1m.

Its shares are now trading below the listing price.

Asked about the devaluations, executive chairman Brien Cree said today: "Independent living units represent 5.4 per cent of our total care portfolio. We did not revalue our village or owned facility assets as at September 30, 2021. We had a $65,000 loss in 1HY21 relating to four units that we sold [licences to occupy for] in the start of the period at a price slightly below where CBRE had valued the unsold stock as at March 31, 2021."

Radius has a number of developments on the go.

It bought land and buildings it has previously leased at Kumeū, Ohaupo in Waikato, New Plymouth and Timaru.

It also bought Clare House in Invercargill.

Brownfields developments are under way or planned at four places.

At Taupaki Gables at Kumeū and Windsor Court at Ohaupo, 20 care beds will be added to each place.

Planning for Taupaki Gables is under way and initial works are due to start next May. Completion is expected by June 2023 for $5.2m.

Construction work will start at New Plymouth's Thornleigh Park to add 20 care beds.

Planning for the expansion of Windsor Court is under way.

A resource consent application will be lodged for Lexham Park at Katitaki in the Bay of Plenty in the second half of this current financial year.

Settlement of the purchase of land at Northwood, a greenfields development on 4.3ha at Belfast, Christchurch, is expected in 2023 for $5.5m and 70 care beds, 30 care suites and 94 units are planned, the company said today.

Cree said the business had seven properties in Northland, Auckland and the Waikato which operated under alert level 4 restrictions.

He cited the need to spend more to run businesses like Radius.

"We continue to see costs across the business rising, particularly for labour, food and consumables. Some of these cost increases are directly attributable to Covid-19 related border restrictions affecting labour supply and others to supply chain issues affecting food and consumable goods prices," he said.

Direct private revenue of $5.4m was earned for the half-year, down from $6.2m earned in the prior period.

Accommodation supplements revenue increased from $2.7m to $3.1m.

Underlying ebitda per care bed was $10,300, compared with $10,700 previously.

Wage costs represented the single largest financial outlay, taking 54.3 per cent of revenue compared with 53.2 per cent previously.

Radius raised $48.2m of new capital in the half-year, of which $31.4m was used to settle the Ohaupo acquisitions, around $8m was applied to debt reduction and $6.3m of cash is available for investment in growth.

Shareholders are to get a 0.7cps dividend on December 23.

The company expects to make underlying ebitda of $21.5m to $23m for the 2022 full year, slightly down on the $23.4m earned in the 2021 full year.

Shares are trading around 51c, giving a market cap of $137m, making this company the smallest in the listed retirement sector, whose two giants are Ryman Healthcare and Summerset Group.