Resilient Estia Health achieves 94% bed occupancy but makes just $1M in FY21

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Estia Health achieved a respectable 94% bed occupancy outside of COVID-19 hit Victoria, yet made just $1 million profit before the one off top-up of Federal Government ‘temporary funding and grants’ of $21 million.

The $612 million revenue Sydney-based provider revealed in its 2021 annual report how hard running aged care facilities is with COVID-19 lockdowns, insipid Government funding increases and expensive workforce strategies.

To put this in perspective, the $1 million profit is after 12 months provision of services by 7,900 employees and assets of 6,224 beds across 69 facilities.

With the $21 million Government money it reported a profit after tax of $16 million for the year ended 30 June 2021, which included an asset sale of $9.5 million.

11 of Estia Health’s 27 homes in Victoria experienced COVID-19 outbreaks, with 110 residents testing positive and 36 dying from the virus. There was around 9,800 work weeks of sick and/or quarantine leave during the financial year, which equates to 208 staff. Estia Health said the COVID-19 outbreak cost them $24.3 million.

A bright spot for Estia Health was its net RAD balance, which increased to $863.9 million, with net inflows of $30.6 million during the 2021 year.

However, the Federal Government is reviewing the role of the $33 billion Refundable Accommodation Deposits (RAD) scheme, which only clouds the future for an operator like Estia.

Estia Health said what many boards in the sector are well aware of: older lower quality assets do not perform as well as new homes. The Aged Care Financing Authority estimates 25% of homes in the sector are old, poor quality and requiring significant investment.

Estia commented: “Quality homes achieve good results: the Group’s new homes which opened in the last four years all perform at near full occupancy. Blakehurst opened 21 February 2021 and at 20 August 2021 was 71.4% occupied.”

Its 110-bed facility at Southport, Queensland, opened in May 2018, was at 100% occupancy at 20 August and the Maroochydore, Queensland, facility which opened in August 2019, was 99.2% occupancy at 20 August 2021.

Estia Health believes it will benefit from the abolition of the Aged Care Approvals Round (ACAR) to a system where residential care places will be allocated directly to care recipients from 1 July 2024.

“The abolition of ACAR removes anti-competitive supply constraints and opens up all areas with attractive demographics and poor quality of existing competitor supply,” it said.

The business, whose share price is still below its value of five years ago, is looking to spend $65 to $80 million on new capital after allocating $49 million in the 2021 financial year and $80.6 million in 2020.

It has a Greenfield site at Mount Barker, South Australia, with an existing pipeline of 339 licenced beds at three new sites already held. It is at an advanced stage of expanding its facility at Burton, South Australia, and Toorak Garden, South Australia.

It is also significantly refurbishing nine homes with 787 beds and looking to similar work with eight others.

“At this stage, it is too early to make any statements or guidance about the consequences or impacts on the FY22 financial performance,” said CEO Ian Thorley.

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