Aged care operator Estia falls to loss as COVID-19 costs bite

Estia Health (ASX:EHE), an aged care operator with two homes in Melbourne’s 10 clusters in the sector, fell to a loss for the 2020 financial year.

The company fell to a full-year loss of $116.9m after writing off goodwill, a shorthand term for a company’s reputation and other intangible value, by $144.6m.

It made a $41.3m profit last year.

Estia has 69 homes, mostly in Victoria and South Australia.

Its Ardeer and Heidelberg homes in Melbourne are number three and seven on the list of worst hit aged care facilities in the city with 155 cases and 101 cases respectively, according to the Victoria Department of Health on Saturday.

Before the impairment charge, Estia made a profit of $25.2m, down 39.5 per cent on the year prior due to funding problems in the residential aged care sector.

Old people still need care

The company’s underlying results suggest that even as the aged care sector is battered by revelations from the Royal Commission into the industry, and by the ongoing problems in managing COVID-19 outbreaks within homes by some operators and by the federal government, demand is still high for these services.

Estia said average occupancy, a key metric for aged care operators, during the year was 93.2 per cent and closed at 92.7 per cent for the full year, due to lower occupancy of 86.8 per cent in Victoria.

It says RAD flows, or Refundable Accommodation Deposits, net debt, liquidity and balance sheet are “sound”.

Aged care operators require consistent inflows of RAD in order to pay out deposits to people leaving facilities. For the year these totalled $33.2m, of which $25.8m came from two new homes.

Net bank debt was $99.4m, representing a gearing ratio of 1.3x EBITDA (earnings before interest, tax, depreciation and amortisation).

The $372m company paid its executive director Ian Thorley a salary of $720,000 for the year, and with two other key executives the bill came to $1.7m. The six-member board cost another $890,000.

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