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Why the Japara Healthcare Ltd share price is tumbling today

The Japara Healthcare Ltd (ASX: JHC) share price dropped 6% this morning after the aged-care provider warned that EBITDA (operating income) is now expected to be between 15% to 17% below the prior corresponding period due to lower-than-expected occupancy levels.

For the 5 month period ending 30 November 2017 occupancy rates sat at 92.5%, compared to 94.7% for the six-month period June 30 2017.

The sudden drop was attributed in part to “unusually severe influenza outbreaks”, with management expecting second half occupancy levels to recover in line with EBITDA.

However, for the full year Japara now expects EBITDA to be between 5%-10% below FY 2017 in a result that proves thematics like the “ageing population” mean nothing if an underlying business is struggling operationally.

Japara shares are now down around 10% over the past year, while rival Regis Healthcare Ltd (ASX: REG) has performed even worse in falling more than 15% over the past year.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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