Japara announces writedowns as Covid-19 spreads to four nursing homes

Japara writes down value of assets by $292m, ditches dividend, as coronavirus outbreak spreads to four Melbourne nursing homes.

An artist’s impression of a proposed Japara aged care centre.

Aged care provider Japara Healthcare says COVID-19 infections have spread to four of its nursing homes in Melbourne, as it writes down the value of its assets by $291.9m and ditches its final dividend.

The non-cash impairment pushed the company deep into the red, swinging from a $16.43m profit in 2019 to a $292.09m loss in the year to June 30.

The shortcomings of the aged care sector has been highlighted by the coronavirus pandemic.

Victoria’s fresh COVID-19 spike, which began in June, has ripped through nursing homes across Melbourne, killing hundreds of aged care residents.

Japara chief executive Chris Price said the Melbourne outbreak has spread to four of the company’s nursing homes.

“We acknowledge the deeply concerning outbreaks and the tremendous impact this has had and is having on residents, families and staff, particularly in Melbourne where community transmission of the virus increased in July and four of our homes have residents and staff greatly affected,” Mr Price said.

“Our top priority remains ensuring the safety and wellbeing of our residents and staff.

“Throughout the pandemic, Japara’s response has been informed by expert advice and strict with early application of biosecurity measures and initial outbreak planning helping minimise the impact of COVID-19 in our homes.”

Prime Minister Scott Morrison has defended Aged Care Minister Richard Colbeck, despite growing demands for his sacking as over his handling of coronavirus outbreaks in the sector.

Mr Colbeck faced hostile questioning in a Senate committee hearing on Friday over whether the federal government response had been adequate.

He also struggled for the answer to how many nursing home residents had so far died and how many were currently infected, before an official stepped in to provide the response.

The government has since pledged $170m in new federal funding to help aged care facilities combat COVID-19, bringing total support for the sector during the pandemic to over $1bn.

But Mr Price said the aged sector was still facing funding challenges.

“In addition to the COVID-19 pandemic, the sector continues to face ongoing margin compression combined with declining occupancy due to elevated levels of supply.

“Notwithstanding these industry pressures the business continues to demonstrate resilience with strong cash flows, above industry average occupancy and with our new homes and extensions attracting strong interest. We also maintain a solid financial position with $154m of available liquidity.”

Japara’s total revenue rose 6.9 per cent to $427.5m. Average occupancy for the year was 92.2 per cent and 89.4 per cent as of August 21.

Mr Price said the company had written down the value of its assets by $291.9m, citing the ongoing royal commission into aged care and the COVID-19 pandemic.

Japara’s shares dived 4.1 per cent to 46c on Wednesday compared with a 0.7 per cent fall across the broader share market.

“This non-cash impairment has no impact on Japara’s debt facilities or covenants, future cash flows, ability to undertake capital management initiatives or normalised earnings.”

Mr Price declined to give any earnings guidance for the current financial year.

“The cost and revenue implications from the COVID-19 pandemic remain unclear, the funding environment continues to present challenges and occupancy remains below historic levels. In this environment, with numerous uncertainties, it is difficult to provide reliable earnings guidance,” he said.