Earnings call transcript: Care Property Invest Q2 2025 posts mixed results

Care Property Invest (CPINV) released its Q2 2025 earnings, showing a mixed performance. The company reported an earnings per share (EPS) of €0.61, below the forecast of €1.13, and revenue of €18.61 million, falling short of the €19.46 million forecast. The company’s stock experienced a slight decline of 0.81% in response to these results. According to InvestingPro data, the company maintains a strong gross profit margin of 98.32% and trades at a P/E ratio of 13.34, suggesting reasonable valuation metrics despite the earnings miss.

Key Takeaways

• Care Property Invest missed its EPS and revenue forecasts for Q2 2025.
• The company’s stock declined by 0.81% following the earnings release.
• The EPS guidance was upgraded to €1.11, signaling optimism for future performance.
• Strong rental income and a high occupancy rate of 100% were reported.
• The company continues to focus on innovation and operational efficiency.

Company Performance

Care Property Invest reported stable rental income and maintained a strong occupancy rate, reflecting effective management of its healthcare real estate portfolio. The company operates in Belgium, the Netherlands, Spain, and Ireland, where demographic trends support growth in healthcare real estate. However, the Q2 results showed a shortfall in expected revenue and EPS, indicating challenges in meeting market expectations.

Financial Highlights

• Revenue: €18.61 million (missed forecast of €19.46 million)
• Earnings per share: €0.61 (below forecast of €1.13)
• Rental Income: €36.5 million (73% of guidance)
• Dividend Per Share: €1.00
• Rent Collection Rate: 98%
• Occupancy Rate: 100%

Earnings vs. Forecast

Care Property Invest’s Q2 2025 earnings fell short of expectations, with an EPS of €0.61 compared to the forecasted €1.13. Revenue also missed the mark, coming in at €18.61 million against a forecast of €19.46 million, representing a 4.37% revenue surprise. This marks a deviation from the company’s previous performance trends, where it typically met or exceeded forecasts.

Market Reaction

Following the earnings announcement, Care Property Invest’s stock price decreased by 0.81%, closing at €12.30. This movement reflects investor concerns over the missed earnings and revenue targets. InvestingPro analysis indicates the stock is currently trading near its Fair Value, with a Financial Health Score rated as "GOOD." The stock remains within its 52-week range of €12.39 to €17.87, indicating that while the results were disappointing, they did not trigger a major sell-off. InvestingPro data shows the stock generally trades with low price volatility, which may appeal to stability-focused investors.

Outlook & Guidance

Despite the Q2 earnings miss, Care Property Invest upgraded its EPS guidance to €1.11, suggesting confidence in future performance. The company maintains a stable dividend guidance of €1.00 per share and is poised to capitalize on potential contract renewals and growth opportunities in its core markets.

Executive Commentary

CEO Patrick Koutineer emphasized the company’s commitment to value-driven investments and high-quality operator partnerships. "What you see is what you get," he stated, highlighting transparency in operations. He also noted, "We are consistently and opportunistically looking at investments that can bring value," underscoring a strategic focus on long-term growth.

Risks and Challenges

• Revenue and EPS shortfalls indicate potential operational challenges.
• Market volatility could affect stock performance and investor sentiment.
• Macroeconomic factors, such as interest rate changes, could impact financing costs.
• Competition in the healthcare real estate sector may pressure margins.
• Regulatory changes in core markets could pose compliance challenges.

The earnings call did not include a Q&A session, leaving some analyst questions unanswered. However, the company’s strategic focus on innovation and operational efficiency provides a roadmap for navigating future challenges.

Full transcript - Care Property Invest NV (CPINV) Q2 2025:

Patrick Koutineer, CEO, Care Property Invest: Good morning. My name is Patrick Koutineer. I’m the CEO of Care Property Invest, and I’m together with Filip Van Zebroek, the CFO of Care Property. We welcome you all to the earnings call on the occasion of the first half results of 2025. To start, I’ll show you the agenda of the earnings call.

We will try to be efficient and try to wrap it up in thirty minutes, leaving room for questions if you might have them at the end of the presentation. Let’s say that we want to start with the confirmation and the continuation of our story and strategy by reminding the key takeaways of our investment proposition. We still are a pure play health care Belgian REIT, and this will remain the case at least for the next period. We still are focused on the four core countries where we are active in. We will enter into details in the presentation later on.

We still think it’s very important to build an energy efficient portfolio along the way. We believe in the sustainability value of our portfolio and continue to put focus on that aspect. We are convinced that there is very nice growth potential in all of our core markets and that we can benefit from these in the future. We are committed as a management team. We have aligned interests with our investors and we are convinced that our profitability is in line with the risk profile of the company going forward.

As you know, we have stable cash flows. We have long term contracts in the legacy portfolio as well as in our investment portfolio. And we stick to financial discipline in terms of balance sheet structure and cost control. This is nothing new. This is a confirmation and a continuation of our story, strategy and belief.

I’ll now hand over the word to Philippe, who will dive into the financials

Filip Van Zebroek, CFO, Care Property Invest: more in detail. Good morning, everyone. Also from my side, I will indeed present you our half year figures. We can present you a decent set of results and we have a rent collection rate of 98%, an average indexation in which was so all our contracts were indexed in full at three point o 8% and then, of course, occupancy rate of 100%. Our LTV came in at 47%, and we were able to increase our guidance, our EPS guidance to €1 and €11 cents and keeping, of course, our DPS guidance stable, which gives you an payout ratio of 90%.

If we go into further detail, that’s with the p and l statement, you can see that we have €36,500,000 of rental income and the guidance being at 73%. Our general expenses are under control and we’re at 15.5%. Of course, there is this one off effect, but aside from that or on top of that, we do have our costs under control. If we look at taxes, we can see the increase due to the abolishment of the Dutch FBI regime, which has an estimated cost of €800,000. So with with €61 cents EPS, of course, we are well on track to meet our increased guidance, which is to be considered as a minimum of 1.11 So here you can see the like for like change per country.

If you look at the balance sheet, nothing changed of course. We are at a stable and we have a stable valuation of our investment properties year to date 0.1% plus, you can see the evolution per quarter. Overall valuation yield is at 5.66%. And here you can split you can see the split by country. So this is the debt ratio and which has risen due to the seasonal effect of the dividend payout.

So if all things remain equal, this will decrease towards the end of the year. We’re at the at the level with where we are comfortable with the 47%. So this this gives you this slide gives you the overview of the headroom. And, of course, we have very limited cash out and very limited commitments for only €500,000 due to the completion of LCH, which we expect in the fourth quarter of this year. If we look at the maturity wall, so the first refinancing will take place at the very 2026 and so we’re comfortable there.

If we look at the weighted average interest rate, we could take advantage of the decrease in Euribor rates in the first half of the year. So we’re currently at a level of slightly above 3%. Here you can see the evolution of our hedge ratio. We added the 2028 bar to this graph where we’ve worked upon in the first half of this year. And so we’re now at at 82 in in 2028.

And also, as all in in this period, we have our hedge ratio in place. Our ICR has risen to 3.7 times and so well above the covenant level of two times and our net debt to EBITDA stands at 9.2. And as I mentioned, we increased our guidance, of course, on the back of of this this one off effect and especially the decreased interest expenses to 1.11 as an EPS guidance, the DPS guidance remaining at €1. And then we discuss our portfolio, and I hand over to Patrick.

Patrick Koutineer, CEO, Care Property Invest: Thank you, Philippe. Well, first, a word on our legacy portfolio of financial leases and the balance sheet, where traditionally there are some questions or some focus on. Actually, we are still the owners of a financial lease portfolio of contracts with the Belgian municipalities, of which the total book value as of June 30 is EUR 163,000,000 and the fair value is EUR $212,000,000. Actually, these are very stable income contracts, very profitable contracts. You see that 17% of the portfolio consists of this legacy contracts, whereas 23% of our income is also depending on this portfolio.

So there’s very low to no credit risk on this portfolio. We are quite convinced that the fair value is actually very conservative. And so this still is solid element in our balance sheet. This is also the reason why we are comfortable with a slightly higher debt ratio than our competitors. As you know, this portal is running down over the next seventeen years, and you have the schedule of the build down of the building rights fee.

And as you know, we are in discussions with municipalities to see if we can renew these contracts. These are taking quite some time and municipalities take time to make up their minds on the future of the service offered to the citizens. And I think we’ve always told by the end of the year, we will have somewhat a clearer view on the potential renewal. But we see that a lot of municipalities are really thinking whether they should still offer that service or not. In any case, if contracts cannot be renewed, we will actually recycle the building rights fees and reinvest in other projects activities in the core business.

The other investments we have on our balance sheet are actually spread over the four markets. You have an overview of the value per country of this portfolio. Of course, Belgium is still the dominant region where we have assets as well as The Netherlands and, to a lesser extent, Spain and Ireland. If you look at the demographics of the four countries, there is still a huge need and potential for new buildings in our core business. So we are convinced that in the coming years, there’s a huge need for new buildings, making us conclude that the potential for growth of care property is intact in these countries.

We also strive for operator diversification and spread of political risk. And actually, every market has its own merits and key strength. There is some detailed slides on these markets further on. But actually, we stick to these four countries because we are convinced that with the structure we have today, we can benefit from the growth potential of these markets in the future. Maybe, Philippe, you can give somewhat more insight on the distribution of our business over the operators and maybe give some flavor on how we see the market for the operators.

Filip Van Zebroek, CFO, Care Property Invest: Yes. So if you look at the rental income and the distribution based on this rental income, and we still see that this historical portfolio or legacy portfolio has a percentage of 23%. So this is gives us this risk averse profile in terms of collection risk. Our rent collection rates stands at 98%, so so a very high level. We will I will further on discuss this the occupancy rates per country, but they are all at a healthy stable level and they’re slightly increased in all countries except for The Netherlands.

So they are above breakeven level. And so we we, course, have parties with a proven track record. And so with this healthy occupancy rates at pre COVID levels, we expect them to to manage their operations in a professional way and and to to be able to do that. If we look at the countries, so Belgium slightly increased 93.6%. And the the other data on the on the slides are are the same as our annual results earnings call.

You see decrease in the Dutch health care market. As you know, we have smaller assets there, so frictional vacancy can have a larger impact. And so it’s at 94 84, excuse me, but still at a at a level above the breakeven level. And also in Spain and Ireland, we can see that the levels increased compared to the full year occupancy rates. And so these are all data on 06/30/2025.

I think we will conclude.

Patrick Koutineer, CEO, Care Property Invest: Yes. Well, maybe concluding, as as there is, let’s say, little to tell in terms of new projects, for the time being. Excuse me. We really want to stress again the strategic focus of care property. The focus on the four markets, have stressed that.

We also want to give the financial discipline in terms of profitability, in terms of risk, balance sheet risk and in terms of cost efficiency. This is really something that is very important for us. We also want to have a very sound hedging policy. I think we did quite well since late twenty twenty four in terms of hedging our interest rate risk. We try to diversify our borrower base as much as possible.

On the other hand, we look very much at the quality of the operator, the solid business plans and the effort rates in the business plans of the new potential deals that might come on our table. Sustainability is very important and not only the sustainability of the buildings. We try to strive for long term relationships with stakeholders, operators, investors, banks, personnel and also government by managing our company quite well and also having a culture of ethical behavior and good governance, which is very important for our company. And we also will provide dividend stability for the shareholders. That’s a key element in our strategy.

Let’s say we also manage our portfolio dynamically, which means that we perform energy audits on our buildings where there is most need to improve the energy efficiency. We are looking into ways how we can optimize the value of our building portfolio through these investments and also are in discussions with operators to maybe share benefits of these investments. This is a process that is ongoing, but that is a key of our strategy. In terms of the legacy portfolio, we are still keen to continue our exposure on the public sector. We offer multiple solutions to the municipalities to renew contracts or to find other ways of operations with them.

It’s still early days. We will come back on that later. But in the case there is no renewal, we recycle the capital. It’s actually our asset rotation program, if you want. So nothing really new.

And I would like to maybe conclude with some final comments. Actually, you have with CareProperty is what I would say, what you see is what you get. We consistently execute our focused strategy in current rather uncertain economic circumstances. You would all agree that macroeconomically, geopolitically, the world is not a real stable safe haven, but meanwhile, we continue our strategy, our geographic strategy, our financial strategy, our sustainability strategy and also our governance. We have quite positive new board dynamics with the new composition of our board, and we are very thankful with the new people joining our board.

We focus on cost efficient operations. We stick to the one team, single country team in Belgium. As long as the market circumstances and the geopolitical environment do not cater for structural changes to model, We need profitable structural acceleration of growth in order to increase our, let’s say, structure, our cost structure. If there is no clear view that it structurally is going to change, We will stick to cost efficiency and the single team single country team. Maybe some information.

We are also looking at improving our procedures and processes as we are in the phase of implementing an ERP system where we will also try to implement elements of artificial intelligence to increase efficiency in our administration and operations. Still early days, but we kicked off the program recently and we plan to finalize this towards METEO twenty twenty seven. Everybody is very committed to make this a success internally. We are also strongly committed to cyber risk management and secure ICT environment as we have as we are aware that the reputation risk for a listed company is very important. It’s also a point of attention for our company and our management.

We are consistently and opportunistically looking at investments that can bring value to the portfolio, company and the shareholders. But the metrics have to work. We look at the further build out of the company with a long term view on the value creation for the shareholders and for the company, which means that the future proof character of the buildings we would add to the portfolio is quite important. Either the buildings already are future proof, either we can improve through reasonable CapEx investments that bring value in the long term to the company. We also continue to improve the energy efficiency of the existing portfolio as we already meet criteria that other players in the market have as a target within five or more years.

We look very much at the solid operators solid business plans of the operators as it is very important that not only we can survive as a landlord, but also our customers, the operators can make a good business over the long term. So effort rates, quality of operations is very important. We are very much aware that the value of our buildings is also very much dependent on the value of the operator running their business in our buildings. We will recycle capital if no renewal can be made with municipalities. We’ve commented on that.

And actually, we are ready to accelerate growth and we can do it fast if financial and operational metrics work and buildings will add value to the portfolio. So this is in a nutshell the core of our strategy, the core of our operations, the focus. I think there’s not very much more to say today. The only thing is that I only want to invite you again to our party of thirty years care property. We have a celebration of the the thirty year history of the company.

We have a party on the September 24 in the Antwerp region. I’m sure you all have been invited. We would love to meet you there. It would be nice to talk in an informal way rather than the more formal earnings call discussions we have. And I propose to end the formal session here.

There is a thank you for your attention and hope to see you soon on the next occasion.

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