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Japara Healthcare shares lower after delivering 1H20 results

The Japara Healthcare Ltd (ASX: JHC) share price is trading lower today (along with the broader ASX) after handing down its FY20 half-year results. Japara is one of Australia’s largest aged care operators with more than 4,000 people in its care across the country.

At the time of writing, Japara shares have slumped 6% lower to $0.86, while the S&P/ASX 200 Index (INDEXASX: XJO) is down 3.2%.

What did Japara Healthcare report?

Japara’s 1H20 result saw total revenue jump 9.9% over 1H19 to $212.6 million. Additional places from developments, portfolio management and funding increases were all cited for the jump.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was up 10% to $24.3 million, while recurring EBITDA was reported lower at $21.1 million. This was down 11% compared to 1H19, with the difference being attributed to an increase in non-recurring items in 1H20 over 1H19 of $1.5 million.

Net profit after tax (NPAT) was also down compared to 1H19, dropping 28% to $5.4 million. This decrease was due to reduced earnings from new homes ramping up whilst still recognising full depreciation and interest costs.

Japara’s balance sheet contained net debt of $185.3 million and available liquidity of $160 million. This debt is comprised of core debt of $31.5 million and development debt of $153.8 million.

An interim dividend of 2 cents per share was declared, to be paid on 30 April 2020. This dividend is to be franked at 50%.

Occupancy, homes and costs

Japara reported average occupancy levels of 92.6%. This was below 1H19 levels of 93.6% and the copmany’s expectations. Japara did, however, also note that since 31 December 2019, occupancy has increased beyond operational place increases and developments to sit at 93%.

The number of homes and operational places both increased over the prior corresponding period (pcp), with the number of places growing to 4,385 from 4,125. Average revenue per occupied bed day increased from $276.60 in the pcp to $284.40. The average government revenue per occupied bed day also increased from $201.10 in the pcp to $206.30. However, staff costs to revenue saw a rise from 69.7% in 1H19 to 72.4% in the current period. 

Strategic initiatives

Japara owns 47 homes freehold and leases three more to make a current portfolio of 50 homes with three further developments under construction. Also noted was an additional greenfield development portfolio. This portfolio contains four owned sites expected for completion in the next three years and two further regions where licences are held and sites being sourced.

Its near term development pipeline consists of 126 new brownfield development places and 718 greenfield developments. Through this pipeline, developments ramping up and refurbishments, Japara is expecting to reach a total of 5,366 operational places by June 2022.

Outlook

Japara is expecting FY20 EBITDA to be 10% lower than FY19, with the funding environment continuing to represent challenges and occupancy levels remaining below historic levels.

However, recently completed developments are expected to help against these headwinds. Japara will continue to focus on its development pipeline, projecting over 300 net new places to be opened in FY20.

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Motley Fool contributor Michael Tonon owns shares of JAPARA DEF SET. 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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