Eureka Group (ASX:EGH) used its half-year results call to highlight rapid portfolio expansion, accelerating acquisition activity, and what management described as supportive housing and rental market trends in regional Australia.
Strategy and portfolio growth
Chief executive officer Simon Owen said the half-year results represented a “strong set of numbers,” arguing the company’s strategy and portfolio construction are “all coming together.” He positioned Eureka as a scalable response to Australia’s housing affordability challenges and said the business looks “fundamentally… different” compared with his first reporting period 12 months earlier.
On operations, management said communities are operating at near full capacity, with trailing 12-month same-store rent growth of 5.7%. Owen also introduced a new reporting measure, Annualized Recurring Revenue, defined as point-in-time contracted recurring revenue (long-term rents and recurring funds management fees), excluding short-term site fees or tourism income. He said the company intends to report the metric every six months.
Macro backdrop: prices, rents, and regional drift
Management shared housing market data it believes supports Eureka’s focus on regional and employment-driven markets. Owen cited national home and apartment prices rising 9.4% over the last 12 months, and said combined regional markets were growing faster than capital cities. He gave Albury as an example, saying the median house price there is now over AUD 900,000.
On rents, Owen said national rents increased 5.4% over the last 12 months, with combined regional rent growth of 6.1% compared with 5.2% in capital cities. He attributed regional rental growth to “regional drift” driven by affordability pressures, infrastructure and renewables investment, changing work locations, and demographics.
Owen also pointed to data showing residential rents have increased at roughly two-and-a-half times wage growth over the past five years, compared with a period before 2020 when rents tracked wages. He said the shift began during COVID and has not reversed, citing drivers including immigration, Airbnb and holiday homes, lower building volumes, rising construction costs, and trade shortages. He said Cotality’s view is that, with rental demand and supply remaining disconnected, strong rent growth is likely to continue in the short to medium term.
Acquisitions and pipeline
Owen said the company moved quickly to deploy capital raised in November 2024, completing 10 acquisitions totaling just under AUD 90 million. He said the prior period’s deployment timing created a “significant drag” on earnings per share over the last 12 months, but that capital is now “fully deployed and then some.” Management expects acquisitions to be “strongly accretive” in the second half of FY26 as they contribute for a full six months.
Management also referenced a further AUD 90 million of acquisition opportunities under assessment (representing more than 1,000 sites). In Q&A, Owen said he would be “surprised” if Eureka didn’t convert at least two-thirds of the pipeline over the next six to nine months, and estimated roughly AUD 30 million could close in the remaining four months of the financial year, with the balance into the first half of FY27. He noted resourcing constraints in the capital transactions team and the launch of a new fund as limiting how quickly deals can close.
Discussing the second half skew in guidance, Owen said the step-up is expected to be driven by full-period contributions from acquisitions, including what he called the three largest deals: Hillside Village in Western Australia, plus Benalla and Nagambie in Victoria. He said all three have DA-approved sites, with homes under construction for Benalla and Hillside, expected to be installed and leased ahead of 30 June.
Funds strategy and capital position
Owen said Eureka does not plan to issue more equity “for the foreseeable future.” He outlined plans to launch a new all-age fund in the coming months, seeded with one to two assets from the balance sheet and supplemented by two to three acquisitions in progress. The target investor base is family offices and high-net-worth individuals, similar to the company’s WA unlisted fund.
Owen said the WA fund, launched in December 2023, has delivered an IRR above 15% and is “about to do a capital return.” He described the economics for Eureka from these partnerships as including development management fees, a percentage of rent collected, an outperformance fee above a pre-agreed IRR, and a first right of refusal to acquire assets at market value if a fund winds up. He said capital partnerships and funds are expected to be a key growth driver.
In Q&A, Owen said the new fund could be around AUD 50 million to AUD 60 million in enterprise value, with approximately 50% equity and 50% debt, and Eureka co-investing 20% to 25% of the equity. He also suggested Eureka could potentially launch a new AUD 50 million fund every six to 12 months based on deal flow visibility.
Financial results, balance sheet, and FY26 guidance
Chief financial officer Shiv Chetan reported revenue increased 19.7%, reflecting acquisitions and rent growth. Underlying EBITDA rose 11.2%, and underlying profit before tax increased 14.2%. Profit after tax was impacted by acquisition transaction cost write-downs and one-off GST adjustments.
Underlying EPS was AUD 0.0144, down from the prior comparative period, which Chetan attributed mainly to the full-period impact of shares issued in the November 2024 equity raise and the timing of acquisition deployment. He said EPS is expected to be stronger in the second half as acquisitions contribute for a full six months.
The underlying EBITDA margin was 33.6%, down from 36.2%, mainly due to integration and lease-up impacts. Chetan said the company’s focus is stabilization and cost normalization as the all-age segment matures, and said margin should stabilize around the mid-30% range in the second half.
On the balance sheet, Chetan said LVR was 33.5%, within the company’s internal ceiling of 40% and the bank covenant of 55%. Net tangible assets per share were AUD 0.556. He also cited an interest cover ratio of 4.24x versus a 2x covenant requirement.
Chetan said the company’s core debt facility is AUD 185 million with a documented AUD 200 million accordion, and undrawn headroom at first half FY26 was AUD 71.6 million. He said Eureka has a hedging and step-up strategy and will continue to build its hedge position as debt is deployed. In Q&A, management said all-in cost of debt was about 5% to 6%, including commitment fees.
Operating cash flow was reported at AUD 7.2 million for the period, with management citing high occupancy, recurring collections, and acquisition contributions.
For FY26, Eureka reaffirmed guidance for:
- Underlying EBITDA: AUD 20.2 million to AUD 21.1 million (20% to 25% growth on FY25)
- Underlying EPS: AUD 0.0337 to AUD 0.0344 (up 7.5% to 10% on FY25)
In closing remarks, Owen outlined near-term priorities including launching the new all-age fund, progressing acquisition opportunities (some in contracting), divesting remote or non-core communities, exiting low-profit management contracts, maintaining same-store rent growth expectations of 5% to 7%, delivering about 40 new prefab homes to communities in Western Australia, Victoria, and Queensland, progressing multiple development applications, and continuing cost discipline.
About Eureka Group (ASX:EGH)
Eureka Group Holdings Limited, together with its subsidiaries, owns and manages senior independent living communities in Australia. The company operates through two segments, Rental Villages and Property Management. It provides ownership of seniors' rental villages; specialist property management and caretaking services; catering; and managed services. The company was formerly known as SCV Group Limited and changed its name to Eureka Group Holdings Limited in October 2010. Eureka Group Holdings Limited was incorporated in 2001 and is headquartered in Brisbane, Australia.
