Investors ignored the 16% rise in June 30 profit reported yesterday by Estia Health (EHE), one of the country’s largest aged care operators, and instead focused on a number of guidance misses in earnings.
As a result of the weak figures, analysts tipped the shares to fall yesterday after the profit announcement was issued before trading started. And fall they did hitting an all time low in the process.
And investors duly fulfilled those forecasts, sending the shares down 16.6% to $4.10 (They were down more than 18% at one stage).
The shares are down 22% since August 17 there most recent peak at $5.28. The intraday low of $4.00 yesterday is an all time low for the company.
While Estia’s net profit was up 16% to $51.8 million it was well short of guidance. The group’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose 31% to $92.7 million, but fell shy of the group’s guidance target.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was 2.4% below the previous guidance guidance while underlying net profit and earnings per share were 8.9% and 5.7% below April guidance respectively.
Estia chief executive Paul Gregersen said that despite coming in below guidance the business performance was strong driven by improvements in the company’s existing and acquired assets.
“Clearly we are disappointed not to have reached our targets, but 31 per cent growth in earnings for the full year – with a noticeable step change in performance during the second half – demonstrates the successful delivery of our growth strategy,” he said yesterday.
It was clearly an argument the market didn’t hear or believe.
Estia’s growing strategy has been questioned in recent months as being too expansion orientated and ignoring Federal government charges to aged care.
The federal government has reduced the rate of funding in the sector and this led to downgrades to health care stocks investment analysts – and Estia hasn’t been spared.
In recognition of this the company yesterday revealed that it will replace current chief financial officer Joe Genova “as the company shifts to an organic-led growth strategy.”
It said Mr Genova will move to a position where he will oversee a cost reduction program which the company said was being undertaken in an effort to meet the changes in federal government aged care funding.
Estia’s fiscal 2017 guidance of at least 13% EBITDA growth also materially missed consensus that was expecting 29% growth, and that helped send the shares down to the all time low.
Estia declared a final dividend of 12.8 cents a share, making 15.6 cents for the year against 13.6 cents for 2014-15.
But that was the final. There was no interim for the 2014=15 year, so the final this year of 12.6 cents is a small reduction on that for the previous year.
