RAD - Radius Healthcare

[Maverick]

I only just saw this reply Ronaldson,
That’s a nice summary yourve laid out there as per your usual excellent posts. Particularly that RAD is the bell weather for basic rest-home financial health.

Not to keen on owning a piece of business that’s only saving grace is hoping the government won’t let it fold though.
We just had a 40yr old rest home close in Wanganui. It was fairly modern , good guy that runs it and yet still failed.

It will be VERY interesting to see how the actual bottom line is effected from the recent DHB fee increases. As you know I too am rather optimistic for the $ improvement for the big 4 players but I can’t see it being nearly enough for the mom and pop homes.

I’m also interested in what will happen to the now closed home I mentioned above. How do you repurpose a rest home of about 30 beds in a suburb in a small city….backpackers, emergency housing , or just a hay shed?

[ronaldson]

Announcement today that ASB's $23m bridge facility has been extended to 31 January to allow for settlement of the Arran Court facility sale ($19m net) begs quite a few questions.

First the Arran Court sale is only conditional.

Secondly there is no mention of the $10.5m vendor loan obligation (at 18%!) relating to the Matamata acquisition, due 23 October 2023 and the further $1m loan (also at 18%) borrowed from a related party to director Brien Cree also due on 23 October.

So clearly the fate of this company is now in the hands of others and hanging by the proverbial thread.

Cutting it a bit fine now for an announcement regarding the indebtedness due on 23 October.

[ronaldson]

It seems the debt referenced above has been part repaid and part refinanced, with no further announcement intended here until the release of the half year financials in November.

Paying 18% interest on $11.5m for most of that period won't have improved the result but given the trading update recently it seems likely overall to be turning a corner and default has been averted.

All the listed entities are keeping the outcome of any aged care facilities sales close to their chests, if indeed any have settled at all. The probable reality is that any sales achieved are at less than carry value in the accounts (in RAD's case the one small facility scheduled to settle in the half year was at a loss of $1.4m if it occurred) and will necessarily be treated as market evidence by valuers across the sector thereby reducing balance sheets and loan ratios.

[kiwimalayalee]

Buy more or wait for another dip..?

[winner69]

Buy more or wait for another dip..?

I’d wait ….say 30% discount to NTA ….that’s 12 cents

Seems fair price

[ronaldson]

Buy more or wait for another dip..?

This company literally scrambled to avoid defaulting on 23 October on $11.5m debt carried at 18% ( no aged care operator carries debt at that interest rate unless choices are limited/non existent ) and then chose to make no announcement as to what has replaced that obligation. The former CFO left at short notice not that long ago. There was a sale of one small facility scheduled to settle in the half year to 30 Sept and if it did RAD booked a loss of $1.4m on that transaction as per the last Annual Report.

18% interest on $11.5m for six months is over $1m so even if revenues have improved since the care subsidy increase effective 1 July there can't be much, if any, fat on the bone for the half year result to be reported later this month.

You should definitely wait for that and the associated commentary before committing any further in my view.

[ronaldson]

And now PHL has breached its interest covenant with its bank and is in talks for a waiver or amendment.

Dominos are close to falling here, just that no lender party wishes to precipitate anything in this industry because the publicity would make that an adverse reputational event and further all lenders know aged care facilities are barely marketable anyhow.

[kiwimalayalee]

This morning's results any good...??

[Sideshow Bob]

This morning's results any good...??

https://www.nzx.com/announcements/422378

Radius Care Delivers 50% Uplift in First Half Year Underlying EBITDA
Radius Residential Care Limited (NZX: RAD) today announced its results for the six months ended 30 September 2023, the first half of the FY24 year.
Highlights:
• Underlying EBITDA of $10.5m*, 50% up on comparative period and at the upper end of guidance issued to the market.
• AFFO of $2.9m, 16% up on comparative period.
• Occupancy 93.0% at period end, ahead of industry average.
• Execution of business improvement programme, delivering $1.3m annual savings.
• All facilities now fully staffed.
• Establishment of RConnect, Radius internal staffing bureau.

[ronaldson]

This company is only just deserving of "going concern " status.

If (and perhaps only if) it can sell the designated two of its 13 existing trophy freehold properties (we know Arran Court is one but the other is not named) and settle the transactions by end January it may continue to be supported by lenders. That will be a sacrifice most reluctantly conceded but interest costs alone for the half year to 30 Sept increased by $2.5m, a real drain on its minimalist profitability, and liquidity was helped by a $3m sell down of vacant/held for sale units such that only around $700k stock apparently remains in that category at 30 Sept so that success cannot be repeated just now.

Unfortunate that the listed company most involved in the "rest home and beyond" aged care service is itself on life support. No one will wish this entity to fail so I expect waivers and indulgences will be granted and it will sneak by to end FY24 but it really needs the green shoots listed above to be continued during that period.

Not investable in my opinion, even for the optimistic.