Earlier this week, aged care group, Estia Health gave itself a clean bill of health for its finances and experience with COVID-19. Yesterday another aged care operator, Japara Healthcare revealed a $300 million hit to its goodwill.
Japara told the ASX the non-cash impairment would be included in the June 30, 2019-20, annual accounts to be released in August.
The aged care operator says the impairment will have no impact on its debt facilities or covenants, cash flows, or normalised earnings. The impairment will reduce the value of the company’s goodwill.
In determining the expected impairment charge, Japara considered “a range of assumptions including discount rates, business, and industry operating performance, the economic environment, and regulatory conditions,” directors explained.
The impairment was made because the test revealed the assets involved would not produce the same amount of revenue and earnings as previously thought.
Despite that the shares rose 2.7% to 57 cents.
Japara’s financial performance weakened noticeably in the six months to last December.
That saw the company report a 28% drop in half-year profit to $5.42 million, on revenue of $207 million in its interim results released at the end of February.
None of its 4,060 residents have tested positive for COVID-19, although one staff member did in April.
That employee was isolated and has since recovered, the company said yesterday.
Japara says it has three development projects underway and is pausing all other construction projects in light of the uncertain economic outlook.
“Operational conditions in the aged care sector continue to be challenging with a moderate weakening in occupancy experienced from Easter onwards as a result of a reduction in demand, particularly from the hospital sector,” the company told the ASX on Wednesday.
The company said it received net Refundable Accommodation Deposit (RAD) and Independent Living Unit resident loan inflows of $18 million from January 1 to April 30, similar to levels in 2018-19.
Japara said it currently has 4,060 occupied places, an increase of five occupied places since December 31, reflecting an occupancy rate of 91.7%. That’s a performance similar to that reported on Monday by Estia.
