Estia delivers 11% operating profit plus 24/7 registered nurses

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This week we look at the dynamics of Estia’s ‘tightly’ run residential aged care business as reflected in its results and reporting. A net profit after tax of 7.1% is a strong result with no apparent deficiency in resident care, while servicing 47% concessional beds:

  • $586 million revenue, up 7.1%
  • EBITDA per bed per year: $15,306, down 4.7%
  • operating profit: $64.8M – equals 11% of revenue
  • net profit after tax (NPAT) $41.3M, up just 0.3% on FY 18
  • NPAT equals 7.1% of revenue
  • 100% of NPAT distributed as dividends
  • average occupancy 93.6%
  • 1% change in bed occupancy impacts EBITDA by ~$5M
  • average new RAD $417,000
  • revenue per occupied bed day: Gov $207/Resident $72
  • 47% concessional beds, up 2%
  • staff 7,500
  • 42 of their 69 homes qualify for the Higher Accommodation Supplement
  • No new homes/beds effective in FY19
  • 101 accreditation reviews undertaken
  • registered nurses rostered 24/7
  • Staff turnover 21%
  • Royal Commission costs: $1.7M

Estia told the market: “Total operating revenue growth of 6%, (was) driven by ~17,000 more occupied bed days, partial reintroduction of ACFI indexation, and the impact of significant refurbishment programs”.

Estia’s net RAD inflows in the period were $14.6M and have been influenced by the continuation of trends emerging in FY 18, with lower sector wide RAD preferences and a higher level of concessional residents”.

CEO Ian Thorley said: “While funding is not keeping pace with rising operational costs and the need to continually improve resident care, we continue to increase revenue through ongoing refurbishments and measured, well executed growth in response to growing community demand”.

Here is what Estia desires from the Royal Commission:

  • enforce the registration of all aged care workers, including those in home support work
  • training opportunities for all workers seeking to be part of the aged care workforce should be enhanced, with nationwide standards for training and care workers introduced
  • ‘user pays’ should be extended to all who can afford to pay
  • uncapping bed supply would drive capital investment and provide greater local market competition
  • $27.5 billion of RAD in the sector needs to be supported by strong prudential requirements for ensuring financial viability of providers
  • the recommendation from the tune review for uncapping of the daily care fee should be implemented