Why Eureka Holdings is falling into the red

A MAJOR Gold Coast company has slumped to a large first half loss from a $6.2 million profit the previous year. And it’s down to a number of factors.

Eureka Holdings has quit management rights of Couran Cove. Picture by Scott Fletcher

SOUTHPORT-based Eureka Holdings — which provides accommodation to independent retirees — has slumped to a $102,000 first half loss from a $6.2 million profit the previous year

It followed asset revaluations at South Australian villages, delays to sales at its Terranora project, and the failure of the Couran Cove operator to pay $2.9 million it owes Eureka.

Despite this, Eureka said its core business performed strongly, with EBITDA (excluding asset readjustments) up 48 per cent on the previous corresponding period to $3.4 million.

In addition revenue grew 7 per cent to $11.2 million, operating expenses fell 2.5 per cent, and occupancy rose to 92 per cent in December.

However, net debt grew 12.8 per cent to fund three acquisitions of villages in Gympie, Townsville and Ayr.

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Jeff Weigh, the CEO of Eureka Holdings.

Eureka’s two flagships projects at Couran Cove and Terranora have not yielded the results the company expected.

In July, 2016, the company unveiled plans to purchase and/or manage 310 additional residences on Couran Cove.

It would have been its largest village in Australia, but former chairman Robin Levison, who remains on the board, told the Gold Coast Bulletin last year that the plans “confused shareholders” and would have meant Eureka ended up running a tourism asset.

Eureka, which has quit management rights of the island, retains ownership of 29 cabins, and although marketing is underway, the response from buyers has been slow.

At the former Royal Terranora Resort the company is has yet to satisfy an extensive list of conditions attached when the project was approved by the Tweed Shire Council last year.

Eureka applied to strata title 60 units and also to develop a portion of the land into a village.

It said it now does not expect titles for the units to be issued in time to effect the results for FY18.

It said marketing for the units has resulted in 18 conditional sales.

The company plans to use proceeds from sales at both Terranora and Couran Cove to reinvest in the retirement village model and lift returns.

Eureka owns 27 villages and manages nine with a total of 2000 units.

It operates in four states: Queensland, NSW, Victoria, and South Australia.

Shares fell yesterday to close at 28c.