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Japara Healthcare share price sinks lower after posting 30% decline in profits

In morning trade the Japara Healthcare Ltd (ASX: JHC) share price has sunk lower following the release of its full year results.

At the time of writing the aged care provider’s shares are down 5% to 99.5 cents.

What happened in FY 2019?

In FY 2019 Japara reported total revenue growth of 7.1% to $399.8 million, but a 2.2% decline in EBITDA to $49.6 million and a disappointing 29.6% fall in net profit after tax to $16.4 million.

Net Refundable Accommodation Deposit (RAD) and Independent Living Unit (ILU) cash inflows in FY 2019 came to $44.7 million.

Japara had net bank debt of $179 million at June 30 2019 ($44.5 million core net debt and $134.5 million development debt) with available liquidity of $166 million.

As a result of this weak profit result, Japara has declared a 50% franked final dividend of 3.35 cents per share, which brings its full year dividend to 6.15 cents per share. This is a 20.5% reduction on FY 2018’s 7.75 cents per share dividend.

Japara’s chief executive officer, Andrew Sudholz, said: “We have continued to heavily invest in the business over the year for the benefit of our residents, particularly in new technology to support our care and business operations. We also made excellent progress with our development and refurbishment programs with three new greenfield developments completed and opened in Glen Waverley, Rye and Brighton-Le-Sands adding 219 new places to our portfolio. Additionally, two brownfield extensions at our Kingston Gardens and Mirridong homes were opened, providing a further 84 new places, and six homes underwent significant refurbishment.”

This led to the company finishing the period with a total of 4,235 places and an average occupancy rate of 93%.

Outlook.

Management advised that it expects FY 2020 EBITDA to be 5% to 10% lower than FY 2019.

This is due largely to the removal of the Federal Government’s temporary subsidy increase that applied from 20 March 2019 to 30 June 2019. In addition to this, management notes that the current funding environment continues to present challenges and occupancy remains below historic levels.

Also on the move today have been the shares of Fortescue Metals Group Limited (ASX: FMG) and IOOF Holdings Limited (ASX: IFL) following their results releases. The iron ore producer’s shares are down 3% and the IOOF share price is down 10%.

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Motley Fool contributor James Mickleboro 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 Scott Phillips.

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