Eureka share price climbs 5% on positive FY 20 results

Eureka Group Holdings Ltd (ASX: EGH) shares climbed higher today after the company announced strong full year results. At the close of trade, the Eureka share price was up 5.26% to 40 cents.

What does Eureka do?

Eureka is a property asset manager of senior independent living communities in Australia. The group focuses on flexible guest and care services with 30 owned villages and 9 villages under management representing 2,015 units.

The company, headquartered on the Gold Coast, is committed to providing quality and affordable rental accommodation for seniors and disability pensioners in safe and well managed environments.

What’s driving the Eureka share price?

The Eureka share price increased following the company’s release of strong end of year results. Particular highlights included net profit after tax (NPAT) up 19% to a total of $8.1 million. Adding to this result was the revaluation of properties net gain of $1.80 million. This included a $1.09 million boost from the company’s Tasmanian village portfolio. As a result, Eureka’s earnings before interest, taxes, depreciation and amortisation (EBITDA) was also up 24% to $12.2 million.

In terms of the property manager’s inventory, Eureka made a gain of $1.03 million on the sale of some of its Terranora units. This is ongoing with 31 units yet to be sold. Eureka also experienced an uplift in its joint venture investments.

The company’s cash flows were strong once again. Net cash from operating activities strengthened due to improved occupancy, new village acquisition and a GST refund. The new village acquisition was a 124-unit village in Bundaberg, Queensland. This was funded as a result of the sale of the Terranora units and debt drawdown. Eureka’s debt facility was increased from $55 million to $60 million to partly fund the acquisition. At balance date, the undrawn amount under the facility was $5.53 million. 

Dividend

A final dividend of 0.55 cents per share, amounting to $1.27 million, has been declared. The financial effect of this dividend has not been brought to account in the financial statements for FY 2020 and will be recognised in subsequent reports. Dividends of $3.57 million were paid out over the year.

Where to now for the Eureka share price?

Looking forward, Eureka aims to further expand its core business of providing rental accommodation for independent seniors through the active management of existing assets, the acquisition of additional villages and units, and the realisation of development opportunities, including an expansion of the group’s village in Wynnum, QLD. It also aims to improve the performance of the existing portfolio with continued focus on maintaining and improving occupancy.

As a result of the pandemic, Eureka will continue to implement operational efficiency and cost reduction measures as well as streamline support services through process and systems improvements across its villages. However, the company has noted that it is not able to commit to a specific number for its financial outlook at this time.

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Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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