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4. Principal activities
The principal activities of the Group during the financial year were that of owner, operator and developer of residential aged care facilities.
No significant change in the nature of these activities occurred during the financial year.
5. Operating and financial review
Overview of the Group
The Group is one of the largest private sector residential aged care operators in Australia with over 4,700 resident places and approvals for
places nationally across 43 facilities located in Victoria, New South Wales, Queensland, South Australia and Tasmania.
In conjunction with the business of providing aged care services, the Group also operates 180 independent living units (ILUs) across five
retirement villages, located adjacent to its aged care facilities. Retirement village revenue accounts for less than 1% of the Group’s operations
Since inception in 2005, the Group has successfully expanded its business and achieved significant growth in earnings by:
• development and expansion of facilities;
• selective acquisition of facilities; and
• implementation of the Group’s care and operating model.
In 2014 the Group was restructured resulting in an Initial Public Offering of ordinary shares (IPO). Japara Healthcare Limited was admitted to
the official list of ASX Limited on 17 April 2014.
The Group’s provision of care is underpinned by an operating model that is designed to facilitate ageing-in-place by servicing the full spectrum
of resident care needs. It specialises in high acuity care, including dementia. This operating model is aimed at achieving:
• above industry average occupancy levels through providing a high standard of resident care;
• eligible Government care funding matched to resident acuity; and
• cash flow generation to meet working capital requirements, facilitate future growth and provide returns to shareholders.
The Group derives funding from two main sources, being operating funding (Government funding, resident contributions and accommodation
charges) and capital funding (Refundable Accommodation Deposits (RADs)).
Government and resident contributions
As an Approved Provider of residential aged care services as determined by the Department of Health (Department), each of the Group’s
facilities is eligible to receive funding contributions from the Government. Funding is in the form of subsidies and supplements for approved
residents in funded places, on a per resident per day basis. It includes care and accommodation components. The Group derived circa 72%
(2015: 72%) of its revenue from Government care funding during the financial year.
The Group also receives contributions from residents for the provision of a full spectrum of aged care services, optional additional services and
Daily Accommodation Payments. Resident fees made up approximately 28% (2015: 28%) of the Group’s revenue for the 2016 financial year.
Refundable Accommodation Deposits (RADs)/accommodation bonds
RADs (which replaced accommodation bonds from 1 July 2014) account for a significant component of the Group’s capital funding. The Group
maintains a conservative RAD management regime with the average value of incoming RADs set with reference to the median house price in
the relevant Local Government Authority (LGA).
During the 2016 financial year the Group used capital funding received from RADs for the following purposes:
• financing capital works for aged care facilities in line with its brownfield and greenfield development strategy;
• financing the acquisition of the Profke Aged Care Group; and
• repaying bank debt used to finance both capital works for aged care facilities and the acquisition of the Profke Aged Care Group.
The Group maintains a disciplined approach to capital expenditure, with all key capital projects subject to strict approval protocols. Capital
expenditure comprises expenditure on asset enhancement and replacement programs and general maintenance projects. It also includes
growth capital expenditure comprising brownfield and greenfield development projects and acquisition of aged care facilities.
Residents have the option to either pay a RAD, a Daily Accommodation Payment (DAP) or a combination of both. The DAP is calculated on a
daily basis and charged monthly and recognised in revenue as a resident contribution. The value of a DAP is calculated with reference to the
room value using an interest rate set by the Government.
14 Japara Healthcare Annual Report 2016
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