Estia Health share price tumbles after first-half profits fall

The Estia Health Ltd (ASX:EHE) share price is tumbling lower this morning after the ASX aged care provider released its 1HFY20 results.

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The Estia Health Ltd (ASX: EHE) share price is tumbling lower this morning after the ASX aged care provider released its half-year FY20 results.

Estia's earnings results sees significant falls

Estia came in with earnings before interest, tax, depreciation and amortisation (EBITDA) on mature homes (pre-AASB 16) of $40.9 million, which was a significant decline of 12.6% on the prior corresponding period (pcp) of H1 FY19. Estia was impacted by margin compression, a trend that occurred across the entire industry in which it operates.

The company record net profit after tax (NPAT) of $14.3 million which was an even more significant decline of 32.1% on the pcp. Estia pointed out, however, that this result does not include its expected gain on the sale of its Mona Vale property. This sale will see around $5.5 million after tax to be recognised in the second half of FY20.

Estia's operating cash flow came in at $35.7 million, which represents around 87% EBITDA to cash conversion.

$96.6 million of net debt was on the company's books at the end of December, with $211 million of undrawn facilities available.

An interim fully franked dividend of 5.4 cents per share was declared by Estia, which represented approximately 100% of the company's NPAT.

Commenting on the results, Chief Executive Officer, Ian Thorley said:

"As we look at the margin compression, and challenges in the sector, this is a solid result reflecting the quality of our services and portfolio and disciplined approach to costs and investment."

"This is the most difficult period for the sector I have seen, and we hope that the next stage of reform and change, will include changes to the funding and financing structure to create a financially sustainable sector," he added.

Estia maintains high occupancy rates

Estia's average occupancy rate for residents in its mature homes came in at 93.7%, while the company reported spot occupancy as at 21 February 2020 of 93.6%. Estia commented that its occupancy levels continue to exceed industry averages as it maintains focus on growing market share at a local and national level.

The company made $46.3 million worth of capital investments for new homes and for the enhancement of existing homes during the six-month period.

Net refundable accommodation deposit (RAD) inflows for the company amounted to $22.2 million during the six-month period, with a RAD balance at 31 December 2019 of $826.5 million.

Motley Fool contributor Phil Harpur 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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