Home' Japara Healthcare Annual Report : Japara Healthcare Annual Report 2016 Contents • Belrose, New South Wales – 110 place new build (45 net new places) expected to be completed in FY2019; and
• Mt Waverley, Victoria – 125 place new build (95 net new places) expected to be completed in FY2019.
As these projects are completed, the Group will also receive funding from the significant refurbishment accommodation supplement,
which provides a potential additional $19 per day for each concessional resident in newly built or significantly refurbished facilities.
The Group remains on track to deliver new places in line with its brownfield and greenfield program.
Acquisitions of existing aged care facilities
The Group continues to review acquisition opportunities of existing aged care facilities. The Group targets individual or groups of facilities
where shareholder value can be enhanced through operational improvements, specifically the implementation of the Group’s care and
operating model, Group buying power and removal of duplicated administration costs. This was demonstrated following the Group’s
acquisition and successful integration of the Profke Aged Care Group during FY2016 (see Note F1 of the financial statements), adding
587 resident places to the Group.
A disciplined and selective approach
The Group has established policies and procedures for the acquisition of additional aged care facilities. As part of the due diligence process,
pricing is confirmed by independent valuations undertaken by the Group’s panel of valuers for both the business and real estate components.
The Group undertakes formal legal, financial, property, operational and compliance due diligence on each facility before completing any
Typically, management targets facilities where expertise can be applied in the short term to improve the performance of the facility. The Group
utilises its existing infrastructure and compliance platform to successfully execute acquisitions including the application of strict investment
criteria to identify and filter acquisition opportunities, subject to market conditions and availability of capital.
The Group’s key acquisition investment criteria include:
• demand: facilities in locations that have unmet demand;
• network enhancement: facilities in locations that enhance the Group’s national presence;
• strong care fundamentals: facilities that have strong care fundamentals and accreditation histories, as well as strong governance around
care delivery and ACFI funding;
• growth: operational facilities that provide potential for long-term growth from income and RADs;
• cash flow: facilities that have a substantial income flow; and
• value creation: facilities that provide an opportunity for strategic value enhancement and asset management strategies to enhance returns
to investors through:
purchasing undervalued assets that may be mispriced due to complexities of ownership, capital structure, planning controls or ineffective
asset management through asset repositioning, refurbishment, extension and redevelopment of existing assets; and
effective deal sourcing including opportunities that are off-market or subject to capital constraints, utilising the Group’s network
of contacts and market intelligence.
The Group will consider the acquisition of single aged care facilities or multi-facility portfolios where the investment criteria are met.
Material business risks
Change of regulatory framework
The Australian aged care industry is highly regulated and significantly funded by the Federal Government. Regulatory and funding changes
may have an adverse impact on the way the Group promotes, manages and operates its facilities, and its financial performance.
In addition, there is a risk that other participants in the industry may, through their actions and business practices, cause future regulatory
changes that will have an adverse impact on the Group’s financial performance and future prospects.
The Group has limited control over this area of risk, but seeks to influence regulatory decision making through submissions and consultation
at senior Government levels including within Treasury, Health and Aged Care departments. The CEO has direct responsibility for managing
regulatory risk and is the Company’s delegate on the Aged Care Guild, which seeks to support ongoing investment in the industry to meet
future demand. The CEO develops strategies, with the support of the Board, in anticipation of and to mitigate risk in regulatory change.
18 Japara Healthcare Annual Report 2016
19 Japara Healthcare Annual Report 2016
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