Radius Care hits the spot with high needs care, minus property

Wednesday, 30 April 2025

Radius Residential Care is defying the retirement sector's gloomy results season, with stronger than expected growth in earnings and rising occupancy.

The listed aged care provider announced that its operating results for the year ending March 31, 2025, were materially ahead of the prior year, in a recent trading update to the NZX.

Underlying pre-tax earnings are projected to be between $23.3 million and $23.7m, compared to $20.9m in 2024, the company said.

The underlying growth in earnings in the second half of the year was about 23% higher than in the same period in 2024. And the bullish outlook is reflected in the company’s share price, which has grown over 114% in the past 12 months.

Radius Care chief executive Andrew Peskett said the strong operating performance was driven by several factors, including increased accommodation supplement revenue, strong occupancy with more higher-revenue hospital occupancy, and reduced debt and lower interest rate costs.

Challenging economic conditions have weighed on the listed retirement village operators, and they turned in mixed results during the recent reporting season.

But Peskett told The Post Radius had a different operating model to other listed operators such as Ryman and Oceania as its focus was on the provision of aged care rather than selling retirement units.

The company has 23 aged care facilities, including four retirement villages, and within the portfolio there are about 1800 beds, including 150 retirement village beds.

There was about a 50/50 split between owned and leased beds, and while village units that it owned did come up for sale, they tended to sell quite quickly, he said.

“As Radius does not have the same focus on developing, building and selling villages that other retirement operators do, we are not seeing an impact from the downturn in the housing market.”

Radius’ portfolio mainly targets high acuity hospital and end-of-life care, including dementia care, and Peskett said its focus was on delivering the best quality of care possible to its residents.

The company had increased the number of its care homes at maximum four year certification, an indicator of quality, to 17 from three several years ago, he said.

“People look at the level of certification a facility has when making decisions, and we have seen our occupancy picked up in recent months.”

Average occupancy across the 2025 year was 92.8% compared to 91.8% in 2024, according to the trading update.

More aged care funding from government would be good for everyone, and would allow smaller, rural operators to survive, he said.

“But we are doing pretty well with our current bed charges, and don’t think we should wait for the government to do what they have done in Australia and come to the rescue of the sector.”

Peskett said the company’s strong operating performance had given it a good foundation for growth.

It planned to increase the number of beds it operated, and was looking to do so either by way of leasing, or by procuring someone to develop a number of new care homes for it, he said.

“At about $28,000 per occupied bed each year we can provide a reasonable return to landlords providing homes to operate those beds.

“It’s part of the solution to New Zealand’s problem of not having enough aged care beds for the future.”

But Radius is also developing a wider presence as a care provider through different avenues, and was building a one stop shop for in-home care and other services in the community, he said.

In December the company signed a contract with ACC to take care of its clients in care homes, and it had also started providing home care to some private clients.

“Providing home care services is another way of dealing with the lack of beds in facilities, and along with the acquisition of Cibus Catering last year it allows us to grow through new revenue streams.”

Staff shortages were no longer a big issue, and staff turnover was about 20%, which was below the industry average of about 30%, Peskett said.

He was keeping an eye on the retirement village legislation reform, but was a strong advocate for the return of capital to residents or their families as quickly as possible after they exited a village unit.

“We have a laser focus when a unit is exited. We refurbish it in a few weeks, and sell it quickly. In my past employment, I’ve seen what happens when the process drags on. It is just not fair to families.”

Radius’ audited full year results were due to be released later in May, and they would mark an important stage in the company’s journey, he added.

In a report on the trading update, Forsyth Barr analysts said the company's performance was materially ahead of prior expectations.

Radius continued to deliver impressive improvements in per-bed profitability, underpinned by rising occupancy, a strategic tilt to high-acuity care, and disciplined cost management, they said.

“A modest development pipeline means strong operational momentum is flowing through to robust cash generation, supporting ongoing debt reduction and distributions to shareholders.”

The value of its differentiated care model was clear, they said.

“We view it as an attractive exposure to favourable demographic trends, with further upside potential from future improvements in government care funding and site expansion.”