Asset sale puts Radius Residential Care's debt headroom in focus

Management's release leads with a "50% uplift in Underlying EBITDA" — that comparison uses the prior period's pre-NZ IFRS 16 base of $7.0m rather than the $11.3m audited underlying EBITDA disclosed in the HY23 release. On a consistent IFRS 16 basis, EBITDA declined.

Operating cash inflow stepped up sharply to $5.6m from $0.4m. Net debt rose to $96.8m and net debt/EBITDA worsened to 9.3x from 8.5x. The prior comparable included acquisition effects, so reported revenue growth reflects acquisition contribution plus the 1 July 2023 funding step-up, not purely organic momentum.

Asset sale adds balance-sheet context, with NZ$19m disclosed value, but borrowings and gearing are the direct leverage evidence.

The "50% uplift" relies on the prior period's pre-NZ IFRS 16 underlying EBITDA of $7.0m. The consolidated EBITDA on the same basis as the prior result's primary disclosure fell 7.4%, and PBT fell 27.3%. This matters because anchoring to the headline overstates operating momentum during a period of cost and funding pressure across aged care.

Leverage moved the wrong way. Net debt/EBITDA climbed to 9.3x from 8.5x as gross borrowings rose $2.1m and equity contracted $1.1m. For aged care, where property revaluation can mask operating fragility, sustained leverage near 9x narrows the margin for funding-cost shocks or occupancy weakness.

No interim dividend was declared this period. The prior interim was 0.70 cps at a 109.4% payout against NPAT — already uncovered. Suspension is consistent with cash discipline but signals the board does not see headroom even after the operating cash rebound.

The seasonality shape is unusual: HY23 represented 79.5% of FY23 EBITDA, implying the FY23 second half delivered just $2.9m EBITDA and a $3.8m NPAT loss. If that shape repeats, FY24 H2 needs to be materially better than FY23 H2 simply to hold full-year EBITDA flat. The 1 July 2023 funding uplift is fully reflected only from Q2 onwards, which should support H2, but cost-base direction is not quantified in the release and nothing in the disclosures rules out a second-half repeat of last year's collapse.

OCF/EBITDA jumped to 53.6% from 3.5%, receivable days fell to 30.1 from 37.1, and capex dropped to $1.9m (2.2% of revenue) versus $53.1m in the prior comparable when acquisition-related capex dominated. FCF pre-lease swung to $3.7m from -$52.7m. Much of that swing is normalisation rather than structural improvement — HY23 cash was distorted by acquisition outflows — so the current conversion level should not be extrapolated as a new baseline without further evidence.

Operating earnings quality weakened. The tax line flattered NPAT: the effective rate fell to 13.6% from 21.2%, narrowing the reported decline from -27.3% at PBT to -17.6% at NPAT. PBT is the cleaner operating read here, and it points to margin compression on a like-for-like basis despite the 19.2% revenue lift. ROE fell to 1.9% from 2.3%.

This briefing cannot assess occupancy, ORA or resident-loan dynamics, bed-mix shifts, or development-pipeline economics from the supplied disclosures.