ElderCare switch puts firm $7m in red

By DANIEL RIORDAN

ElderCare New Zealand's repositioning as a health services company will push its bottom line almost $7 million into the red for the six months to November 30.

The company told shareholders at its annual meeting yesterday that it would have to make writedowns on land it had planned to develop and forecast a half-year loss of $6.5 to $6.9 million.

But chairman Maurice Kidd said the company was trading profitably and earnings before interest, tax, depreciation and goodwill amortisation for the six months would be around $3 million.

The listed retirement village, nursing home and hospital operator said this year it would extend its operations into extra medical and health care growth opportunities - in New Zealand and possibly in Australia - and took its first step in June when it bought 67 per cent of Ranworth Healthcare, the country's largest brain injury assessment and rehabilitation services provider.

After the meeting, chief executive Alan Clarke said the company was investigating opportunities.

Mr Clarke, who before joining ElderCare in April was a senior executive with Sydney-based health sector company SGS Australia, said that although public companies in the Australian health sector had total market capitalisation of $17.5 billion, there were no listed companies in the sector here.

ElderCare operates 14 nursing homes and hospitals, and three retirement villages, all of which have increased occupancy levels steadily over the past eight months.

The company was formed 18 months ago when Eric Watson, who owns around 62 per cent, backed his Blue Cross Eldercare retirement home interests into the listed shell of unsuccessful oil explorer New Zealand Petroleum.

Although the company beat its full-year profit projections by 35 per cent, making $5.55 million over the year to May 31, its share price has performed poorly and closed unchanged yesterday at 20c, close to its 12-month low of 18c.

Mr Clarke said he appreciated there might be cynicism in the market about the change in the company's direction.

"It's the annual restructuring of ElderCare? I understand that view. But we are not throwing out the baby with the bathwater and saying 'We've got it all wrong and we are going in a completely new direction'."

He said the company's existing business of nursing homes and geriatric facilities, combined with Ranworth, formed an excellent core business with strong cashflows and operating profit.

Mr Kidd said the overall residential property market was depressed and this was affecting the retirement village sector.

Elderly people wanting to move into retirement villages and nursing homes were being prevented from doing so because they couldn't sell their homes.

The market was also becoming more competitive. For those reasons, one-off gains of $1.7 million from the sale of villas, apartments and land holdings during the last financial year could not be expected to continue at the present level.