In morning trade the Japara Healthcare Ltd (ASX: JHC) share price has dropped lower following the release of its half year results.
At the time of writing the aged care operator's shares are down 1.5% to $1.28.
Here's how Japara performed in the first half compared to the prior corresponding period:
- Total revenue up 6.8% to $193.5 million.
- Net Refundable Accommodation Deposit (RAD) cash inflows up 11.6% to $28.9 million.
- EBITDA down 3.5% to $22.1 million.
- Net profit after tax down 18.3% to $7.6 million.
- Interim dividend down to 2.8 cents per share unfranked.
- Average occupancy up 1.3 percentage points to 93.6%.
- Net bank debt of $131.9 million.
- Outlook: FY 2019 EBITDA in line with its FY 2018 result.
Whilst this was a very disappointing half from Japara, I think there were a few positives such as the increase in net RAD cash inflows and the opening of several new homes.
Japara's chief executive officer, Andrew Sudholz, advised that it was a challenging period, but appeared reasonably pleased with how the business performed.
He said: "The first half of FY2019 was a challenging period across the sector and also included the commencement of the Royal Commission into Aged Care Quality and Safety. Whilst occupancy was a little lower than we had wanted, underlying earnings were resilient and net RAD cash inflows met expectations."
Before adding: "It was pleasing to see our investment in the organic growth of the business become more tangible with the opening of our new Glen Waverley, Rye and Brighton-Le-Sands homes along with the completion of the brownfield extensions at Kingston Gardens and Mirridong. These developments will provide earnings growth as occupancy increases over the next twelve months."
Outlook.
Management has advised that it expects FY 2019 EBITDA to be in line with last year's result, subject to no material changes in market or regulatory conditions.
This is in line with the outlook provided in December when management downgraded its guidance from full year EBITDA growth of between 5% and 10% for FY 2019.
Should you invest?
As I mentioned here when covering the Regis Healthcare Ltd (ASX: REG) half year result, I think Japara, Regis, and Estia Health Ltd (ASX: EHE) could all have bright futures ahead of them due to the aged population tailwind. However, I intend to stay clear of them all until after the Royal Commission into Aged Care Quality and Safety has concluded and the recommendations are made.
Until then, Cochlear Limited (ASX: COH) shares might be a better way to gain exposure to the ageing population thematic.
