Home' Japara Healthcare Annual Report : Japara Healthcare Annual Report 2017 Contents Directors' Report continued
5. Operating and financial review continued
Funding sources continued
Government and resident contributions
As a provider of residential aged care services, approved 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% (2016: 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 (DAPs). Resident fees made up approximately 28% (2016: 28%) of the Group's revenue for the 2017 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 2017 financial year, the Group used capital funding received from RADs for the following purposes:
• financing capital works at aged care facilities including brownfield and greenfield developments and significant refurbishments;
• financing the deferred settlement payment for the acquisition of the Profke Aged Care Group; and
• repaying bank debt used to finance capital works for aged care facilities.
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 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.
The Group may borrow money from time to time in order to finance its activities. The Group has banking facilities with a syndicate of lenders
which are principally used to finance the Group's brownfield and greenfield developments on a short to medium-term basis.
The Group's key cost relates to labour, which is approximately 68% (2016: 67%) of total revenue for the financial year. Other costs include
medical supplies, catering, cleaning, consumables, repairs and maintenance, energy, utilities and corporate costs.
As one of the largest operators of residential aged care services in Australia, the Group seeks to leverage its ability to achieve cost advantages
through internalisation and centralisation of certain functions, economies of scale and Group buying power.
Review of operations
Revenue and other income
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
Net Profit After Tax (NPAT)
Net profit amounts have been calculated in accordance with Australian Accounting Standards (AASs).
The Group delivered a solid financial result.
Increases in revenue and EBITDA in the year were achieved through:
• a moderate year-on-year uplift in income from care and accommodation;
• a full year's contribution from the Profke Aged Care Group, which was acquired in December 2015; and
• steady underlying occupancy averaging 94.6% (excluding facilities under development), which was generally in line with expectations.
16 | Japara Healthcare Limited | Annual Report 2017
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