Japara Healthcare Ltd (ASX: JHC) has released its full-year earnings results today, revealing a strong lift in pro forma revenue and an even greater lift in overall earnings. The shares actually fell 2.9% after the result which could suggest investors expected a little more from the company, although the stock has risen nearly 29% since the beginning of the year.
So What: Japara Healthcare is one of Australia's largest residential aged care operators with 39 facilities and a total of 3,389 resident places nationally.
The company enjoyed reasonable operational success during the year with average occupancy rates up 0.7% to 94.6%, while the average aged care funding instrument, or ACFI, rose to $175.10 per day, up from $166.30 per day. With a focus on cost discipline, management also achieved a considerable improvement in operating efficiencies. More on that in a moment.
The strong performance was also reflected in the group's earnings results with Japara reporting a 14.8% lift in revenue to $281.3 million, while earnings before interest, tax, depreciation and amortisation (EBITDA) rose 26.5% to $50.6 million, which was slightly ahead of guidance.
Pleasingly, the EBITDA margin also improved considerably, hitting 18% compared to 16.3% in the prior year. This was predominantly driven by a focus on cost management which saw staff costs as a percentage of revenue fall from 68% in the 2014 financial year (FY14) to 66% in FY15. Given the nature of the industry, staff costs are the major expense for companies like Japara so a reduction of that size is certainly encouraging.
Meanwhile, net profit after tax (NPAT) hit $28.8 million – up from a $2.9 million loss in the 2014 financial year – representing earnings per share (EPS) of 11 cents.
Now What: Japara Healthcare ended the 12-month period in a solid financial position with $53.9 million cash on hand, no bank debt and $95 million in undrawn bank facilities, putting it in a strong position to continue aggregating the aged care market.
Of course, it faces stiff competition with rivals such as Estia Health Ltd (ASX: EHE) and Regis Healthcare Ltd (ASX: REG). In saying that however, estimates from a 2012 report conducted by the Aged Care Financing Authority suggest there are still 74,000 additional places required by 2022 to cope with the ageing population, so there's no reason all three companies can't continue to thrive in this growing industry.
Japara's Board has declared a fully franked 5.5 cent per share final dividend, which is the equivalent of the unfranked interim dividend also paid by the company. This puts Japara on a partially franked 4.2% dividend yield, making it an attractive option for investors looking for both income and growth.
