Increased staffing costs dampen mid year results, share prices

Japara has reported an increase in staffing costs of $18 million in its mid year financial reports, which has been tipped as the reason why its share price dropped last week.

The ASX-listed company’s half-yearly results that showed sharply lower profits despite higher revenues, according to share market analysts at The Motley Fool.

While Japara’s revenue rose by 15 per cent to $177 million, net profit after tax was down 10 per cent at $14.6 million and staffing costs grew by $18 million.

The company is undertaking significant growth in land acquisitions and redevelopments, those of which have been completed this financial year grew the total beds by 1 per cent to 3,840 places.

A further 1,100 new greenfield places are on track for completion by mid 2020, which The Motley report notes that all things going to plan with full occupancy rates and accurate market growth forecasts, Japara’s growth will be at a much faster rate than the rest of the market.

CEO Andrew Sudholz said despite the poor performance EBITDA is still expected to grow at seven to 10 per cent.

“During FY17, we have further strengthened our business to grow earnings over the medium term with an increased focus on greenfield developments,” he said.

“We have continued to deliver high quality care to our residents, whilst making very good progress with land acquisitions to enhance our development program.”

“We have successfully completed four brownfield developments and secured four additional land sites in optimal metropolitan locations with strong demand profiles, targeted to deliver 445 new places.”

“Land has now been secured for 10 of our 11 greenfield projects which are targeted to provide over 1,100 places by FY20 to cater to the growing demand from Australia’s ageing population.”

“This is a key element of our growth strategy which will deliver significant revenue and EBITDA growth for the Company.”

“We are also continuing with our significant refurbishment program to upgrade 13 facilities over the next two years which is expected to provide progressive EBITDA uplift in excess of $4 million over this period.”

“We have maintained our conservative capital management strategy which is important in the current environment and we have a strong balance sheet with net bank debt of $7.8 million and available liquidity of circa $200 million.

“This supports our growth agenda and provides funding flexibility going forward.”

“The H1 FY17 EBITDA reflected moderate growth, however we experienced a temporary fall off in the performance of the Profke portfolio after these facilities had performed very well in the first 6 months of our ownership.”

“This fall off was mainly due to occupancy issues which have now been addressed. We expect this portfolio’s earnings will recover to the stronger levels achieved in FY16.”

Both Regis and Estia posted stronger results, with Regis’ share price rising by 2.5 per cent at the end of last week – before launching a strong online media campaign in response to the home care changes that came into effect on Monday.

Regis has been strongly promoting across Twitter, Linked In and via Google Adwords that it is now delivering home care services in eastern Melbourne and Cairns.


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