One of Australia’s largest aged care providers has downgraded its profit outlook for the year, and revealed it has spent more than $1 million preparing for the Royal Commission.

Estia Health, which has 68 nursing homes and delivers care to more than 8,000 people across Australia, said net profit after tax for the six months to 31 December 2018 rose 4.1 per cent from the previous corresponding half to $21.1 million.

The company said that the costs associated with responding to the Royal Commission were $900,000 up until 31 December, but by 31 January 2019 had risen to $1.2 million.

Occupancy lower, profit outlook downgraded

Occupancy fell from 94.3 per cent as of 30 June 2018, to 93.9 per cent as of 31 December 2018, a decline of 0.4 percentage points.

The company downgraded its profit outlook for the full year to the low to mid-single digits. Previous guidance had been for growth in the mid single digits.

Ian Thorley, CEO of Estia, acknowledged the aged care sector was going through a difficult period.

“It was pleasing to sustain margins and profitability during a particularly challenging time for the sector, which has weighed on our occupancy and impacted costs compared to our expectations,” he said.

Royal Commission will lead to “higher performing” sector

Estia established a team of internal clinical experts and external advisers and consultants to manage its responses to the Royal Commission which was established on 8 October 2018.

Estia is one of Australia’s largest 100 providers, so it lodged a comprehensive response by the 7 January 2019 due date.

Despite the costs the Royal Commission is imposing on the industry, Mr Thorley said he sees it as a positive for the sector, and will ultimately result in delivery of care more in line with the standards community expects.

“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,” he said.

Meeting the demands of the ageing population

Considering Australia’s ageing population, it’s essential our nation is well established to cope with the rising numbers that will require aged care. The financial viability of the sector is crucial, and is of particular concern considering that profitability is already under pressure.

“We believe that the future will have a key role for well-governed, quality-focused operators like Estia with both scale and capital to meeting the demands for choice and for capacity needed to support the ageing demographics of Australia,” Mr Thorley said.

Estia shares are trading at $2.35 at the time of writing, down from a 52-week high of $3.70.

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