The Motley Fool

Japara Healthcare Ltd downgrades FY18 guidance

Japara Healthcare Ltd (ASX: JHC) is one of the largest aged care providers in Australia.

The company made a late announcement regarding its status of capital refurbishment and also updated its FY18 guidance.

In 2015 Japara introduced a ‘capital refurbishment deduction’ following legal advice from its solicitor and subsequently supported by a senior barrister’s opinion. Japara decided that the capital refurbishment deduction was supported by relevant legislation and provided a direct benefit to residents.

However, a recent Federal Court found that the asset replacement charge implemented by Regis Healthcare Ltd (ASX: REG) was not consistent with relevant legislation. Japara has reviewed its position and decided to refund all capital refurbishment deductions, including any accrued interest.

Revenue from capital refurbishment deductions totalled $1.84 million in the 8 months to the end of February and totalled $2.82 million in previous financial years.

After the non-recurring refund of the capital refurbishment deductions, Japara anticipates that FY18 earnings before interest, tax, depreciation and amortisation (EBITDA) is likely to be 14% to 19% below FY17’s.

Foolish takeaway

Obviously, this isn’t good for Japara and impacts the FY18 result. However, it doesn’t affect the long-term outlook for Japara so any short-term negative effects should finish by the end of FY18. It could be a long-term opportunity if the share price falls tomorrow.

NEW. The Motley Fool AU Releases Five Cheap and Good Stocks to Buy for 2020 and beyond!….

Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading over 40% off its high, all while offering a fully franked dividend yield over 3%...

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!

Motley Fool contributor Tristan Harrison owns shares of JAPARA DEF SET and Regis Healthcare Limited. 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 Scott Phillips.