Providers must adapt to thrive and survive: Colliers listed provider analysis

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With current and foreseeable demand underpinned by an ageing Australian population, operational costs known, and around 73% of revenue provided by Government, it’s hard to imagine a better sector to invest in, according to Shalain Singh, Colliers’ Head of Healthcare and Retirement Living Services.

However, he says the three listed players, Japara, Regis and Estia must face a number of obstacles, including:

  • Operation costs continue to outpace revenue
  • Despite diversification, profit margins are under pressure
  • Compliance scrutiny has increased, not least because of the uncertainty the Royal Commission has created with operators and consumers alike
  • DAP/RAD splits have stabilised with DAP revenue enhancing total revenue
  • RAD payments continue to allow further developments and the odd acquisition

The analysis shows all three players experienced a decline in operating year-on-year margins. The need to continue to develop is important particularly for Japara and Regis who have experienced a decline in RAD payments.

Estia has traditionally been behind in developments but is quickly catching up.

They are also the first of the three to develop primary care integrated facilities as a strategy to improve care outcomes and provide additional value for residents.

The analysis concludes the outlook for the residential care sector is:

  • Potential high operational and compliance costs
  • Emergency or specialised care models and diversified services
  • Acceleration of industry consolidation
  • Deregulation or modified licences
  • Return to normalised occupancy levels

​Shalain says it’s likely the sector will face turbulence for the near-term. How residential aged care has been used in the past is not how it will be used in the future.

Care requirements and consumer sentiment will underpin a longer-term outlook, with possible healthy returns for those in the industry that learn to adapt and quickly.

You can download the full report HERE.

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