The Estia Health Ltd (ASX: EHE) share price is down close to 4% in reaction to the company’s half year result to December 2018.
Estia is one of the largest aged care providers in Australia, it has been operating for around 50 years. It has 68 operational homes and 6,046 operational places for residents with over 7,000 employed staff. The state that it has the biggest presence in is Victoria, with 27 homes and over 2,100 places.
Here’s What Estia Reported
Estia revealed that its revenue increased by 6.6% to $289.7 million. This was a achieved with average occupancy of 93.9% across the half year. Its occupancy as of today was 93.7%.
Its EBITDA grew by 3.1% to $46.9 million (click here to learn what EBITDA means) and the operational EBITDA margin was stable at 16.2%.
Net profit after tax (NPAT) went up by 4.1% to $21.1 million, it was also an increase of 0.9% compared to the second half of the 2018 financial year.
Estia said it has undertaken $43.4 million of capital investment to improve and expand the portfolio. However, there was net total RAD (refundable accommodation deposit) outflows of $1.2 million, which was impacted by a $16.4 million reduction in the probate liability.
Estia Dividend and Balance Sheet
Estia declared an interim fully franked dividend of 8 cents per share, which is an increase compared to the 7.8 cents per share payment made a year ago.
The aged care business said that its net bank debt was $64.8 million, with gearing reduced to 0.7x EBITDA and undrawn bank facilities of $250 million.
Estia Management Comments
Estia CEO Mr Ian Thorley said of the upcoming aged care Royal Commission, “We look forward to the outcomes from the Royal Commission into Aged Care which we believe will lead to a higher performing and more sustainable aged care sector that meets community expectations and provides safe and high-quality care for all consumers.”
Is Estia a buy?
Estia is now guiding that FY19 EBITDA will grow by low to mid single digits, excluding Royal Commission costs and initial opening costs of new homes.
I am wary of what effect the Royal Commission will have on aged care operator share prices and expenses. If more regulations and checks are brought in that could reduce the profitability of operators like Estia. However, it could be a benefit in the long run with the larger players able to make more acquisitions of small players who want to exit. Even so, I’m personally steering clear of aged care players for my own portfolio.
3 Proven ASX Shares To Consider Over Estia
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