Radius Residential Care Limited Analysis

Overview

Radius Care is a New Zealand owned and operated company, established in 2003 to meet New Zealand’s growing demand for an aged care and associated health care services. Since then, Radius has become one of the leading specialist health care providers in New Zealand, with more than 20 locations nationwide.

Early in 2010, chief executive and director Brien Cree led a management buyout of the company, which brought it back into New Zealand ownership from foreign investors. Brien's vision was to “bring some good old fashioned Kiwi values and standards” back into the aged care sector, and to make Radius Care the best aged care provider in the country.

Performance

The following information has been extracted from Radius Care's Full Year Result, released on 29 May 2024:

Key financial highlights:

• Profit Before Tax of $3.6m, vs a loss of $(3.0m) in FY23.
• EBITDAR per occupied bed1 of $24.7k, 24% up on FY23.
• Underlying EBITDA* of $20.9m, 47% up on FY23.
• Operating Cashflow of $14.1m, 249% up on FY23.
• AFFO* of $7.4m, 87% up on FY23.
• Net debt reduced by 26.5% to $73.5m, with no short-term debt remaining.
• Cash dividend of 0.70cps, with full imputation credits resulting in a gross dividend of 0.97cps, paid on 16 May 2024.

“Radius Care provides essential and specialist healthcare services to the elderly across New Zealand. Our laser focus on our core business has delivered profitable growth, another year of industry leading results, and a strengthened balance sheet; enabling the business to resume dividends.” said Brien Cree, Radius Care’s Executive Chairman.

Financial Performance

Revenue increased 17% on the prior period to $171.2m.

Profit Before Tax was $3.6m, an improvement of $6.6m vs a Loss Before Tax of $(3.0m) in FY23.

Radius Care’s key performance measure, pre-NZ IFRS16 Underlying EBITDA was a record $20.9m compared to the previous record of $14.2m achieved for the comparative period. Underlying EBITDA growth was driven by direct private revenue paid by residents for non-government funded services and accommodation supplement income increasing to $9.8m, up 24% from $7.9m in the prior comparable period.

Underlying EBITDAR per bed was $24.7k in FY24 compared to $19.9k in FY23, and continues to be significantly higher than the remainder of the industry. This key performance metric demonstrates Radius Care’s ongoing ability to deliver profitable performance in the sector.

AFFO of $7.4m was generated, 87% above the comparative period as higher underlying income was partially offset by higher interest costs. Positive Cashflow from Operations was $14.1m, another industry leading result.

Borrowings reduced significantly during the year, with a $26.5m reduction in Net Debt as a result of the previously announced sale of Arran Court and increased operating cashflow visible in AFFO. Radius Care recently confirmed the successful refinancing of all remaining short-term debt, effective 28 March 2024. Following the refinancing, 100% of Group borrowings are held with the ASB Bank, with an average term of 2.8 years. This has reduced our overall financing costs, and we had $3.5m of undrawn debt facilities as at 31 March 2024.