Market misses Eldercare pulse

Friday 13th June 2003

What does Eldercare New Zealand have to do to convince investors it's on the right track?

The "multi-disciplined healthcare and medical services" company's share price has been a flatliner since late in 2000 when chief executive Alan Clarke took over, the board got a shake-up and a major restructuring got under way.

Mr Clarke has tackled the company's legacy vigorously. Before he came aboard Eldercare was basically a specialist property owner, having inherited a portfolio of retirement villages from its biggest shareholder, Eric Watson.

In 2001 earnings at the ebitda (earnings before interest, tax, depreciation, and amortisation) level were negative $1.6 million and restructuring costs took the bottom line to an $8.2 million loss.

Clarke has sold off properties the last went in May and built up four divisions; aged care, diagnostics, dental and rehabilitation. Last year the earnings improvement was already showing through with ebitda of $3.7 million but more restructuring costs pushed the company to a $2.4 million bottom-line loss. This year's results will be announced on July 31. Despite a softer May second half Eldercare says it will do better than its previously forecast $8.8 million of ebitda and $1.4 million of net profit.

ABN-Amro Craigs has an "add" recommendation on the shares and is picking net profits of $1.8 million this year, $3.6 million in 2004 and $4.5 million in 2005. With debt of $32 million at balance date the company is no longer highly geared and its careful acquisition strategy is being financed out of cash flows.

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