Japara Healthcare (ASX:JHC) announces $292 million loss at AGM

Aged care provider Japara Healthcare Ltd (ASX: JHC) has announced a loss of $292 million at its AGM this afternoon. The Japara share price is slightly up at the time of writing by 2.63% to 39 cents on light trading volume.

Highlights from Japara’s AGM this afternoon:

• The company says COVID-19 severely affected its business in the second half of FY20
• Although revenue was up by 7%, it reported net loss after tax of $292.1 million, compared to $16 million profit last year.
• The bulk of the loss is due to a one-off non-cash impairment of $292 million made in May.
• The 7% revenue increase was not due to more occupants, but rather from a government grant to help aged care providers. 
• Occupancy as at 25 October was at 87.6% reflecting the highest in the industry. 
• The company appointed new CEO Chris Price this year after Andrew Sudholz retired.
• No further property developments will commence until the outlook improves. 
• Earnings guidance for FY21 will not be released due to uncertain conditions ahead.

What does Japara Healthcare do?

Japara Healthcare owns, operates, and develops aged care facilities. One of Australia’s largest aged care providers, Japara has more around 4,000 people in its care, and more than 6,000 staff caring for them. The company’s aged care portfolio comprises 50 homes across five states.

Outlook for Japara after today’s AGM

CEO Chris Price mentioned during the AGM that Australia has a growing elderly population, a result of people living longer and the significant increase in births during the post-war era. As such, a large volume of aged care residences will have to be built over the next 10 years. 

However in the short term, the business operates in a precarious sector in which the elderly remain the most vulnerable group during the pandemic. As a result, short-term expenses are expected to rise as the company spends on protective equipment, cleaning staff, as well as staff training. 

Mr Price is counting on the Federal Government to provide not only guidance, but also the funding necessary to sustain the sector in the short term. He said:

Japara looks forward to the release of the final report from the Royal Commission into Aged Care Quality and Safety in February 2021 which we hope will provide the much needed direction, confidence and support for the sector, including recommendations as to appropriate funding to provide high quality care. 

How did Japara’s share price perform in 2020?

Japara’s share price has lost more than 60% YTD in a year headlined by coronavirus deaths at aged care facilities across Australia. As a comparison, the ASX Health Care Sector Index (ASX: XHJ) shows an increase of 6% YTD. At today’s valuation of 39 cents, Japara commands a market capitalisation of $105 million.

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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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