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New South Wales
Registered Office
Level 9, 227 Elizabeth Street
Sydney NSW 2000
T +61 2 9265 7900
E info@estiahealth.com.au
Victoria Office
Level 2, 1155 Toorak Road
Camberwell VIC 3124
T +61 3 9811 9777
F +61 3 8657 0899
E info@estiahealth.com.au
Investor Relations
T +61 2 9265 7900
E investor@estiahealth.com.au
Shareholder Enquiries
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estiahealth.com.au
Estia Health Bannockburn
ANNUAL REPORT
2019-20
Estia Health Innovation
Award winners
Contents
Chairman and CEO’s Message
Industry Trends
Our Response to COVID-19
Key Highlights
Our Executive Team
Vision, Purpose, Strategy
Our Approach to Sustainability
Tax Transparency Report
Corporate Governance
Our Board
Shareholder Information
Annual Financial Report
Directory of Estia Health homes
4
8
10
14
16
18
32
38
44
45
48
53
164
Thank you to all the residents and employees who feature in this report.
Many of the photographs featured in this report were taken prior to the need for
social distancing, wearing of masks and other Personal Protective Equipment (PPE).
2019-20 Annual Report | Estia Health 3
Chairman and Ceo’s message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability
Chairman and
CEO’s Message
We have invested, built capacity and enhanced our processes to
manage COVID-19 into the future so we can welcome new residents,
provide safe visits and protect those who already live with us.
The 12 months under review
were significantly impacted from
February 2020 by the effects of
the COVID-19 pandemic on the
Australian community generally,
and the residential aged care sector
in particular. The performance
we have delivered reflects our
fundamental commitment to our
residents and our team members,
and the position of your Company
as a strong, well-capitalised
residential aged care provider.
During the pandemic we have
focused on three key areas:
frequent communication with our
residents, their families and our
team members; strengthened
mandatory education and training
in infection prevention and
control under the guidance of
infection control experts; and the
immediate implementation of our
COVID-19 Positive Test Response
Plan at those of our homes with a
suspected or confirmed positive
case of COVID-19.
During this period the Board
established a separate COVID-19
Risk Sub-Committee which met at
least weekly to provide oversight
over the actions being taken by the
Company to meet the challenges
presented by the pandemic.
Notwithstanding our planning and
increased vigilance, subsequent
to balance date, we experienced
substantial numbers of positive
COVID-19 cases at our homes at
Ardeer and Heidelberg West in
Victoria. Smaller outbreaks were
4 Estia Health | 2019-20 Annual Report
experienced at Keysborough and
Keilor Downs in Victoria and a
number of other homes.
COVID-19 has created significant
anxiety for our residents and their
families, being unable to engage
with their loved ones on a personal
basis due to measures taken to
manage outbreaks of COVID-19
and the restrictions on visiting
imposed by State Government
Directions. We also feel for those
families who have lost loved
ones during this time and our
condolences go out to each and
every one. We have spoken with
the families of those residents to
convey our deeply felt sympathies
and our commitment to provide
any support they may require.
Our team members have
demonstrated an extraordinary
level of commitment and
dedication. They have risen to
the challenges presented by the
pandemic, making substantial
personal sacrifices and adopting
new ways of working in very
difficult circumstances.
The unpredictable effects of
COVID-19 required us to develop
new approaches in responding to
the complex issues presented. We
have invested in new technologies,
specialist infection control
resources and enhanced our care
processes to manage COVID-19
into the future to ensure the safety
and wellbeing of our residents and
our team.
RefoRm
The aged care sector in Australia
continues to undergo significant
change, and this was further
amplified by the COVID-19 pandemic.
Policy settings and funding for the
sector are not keeping pace with
evolving community expectations
and the increased costs of providing
high quality and safe residential
aged care.
We continue to advocate for and
support many of the multiple
reforms and recommendations put
forward to Government over past
years. As the Aged Care Financing
Authority and the Royal Commission
into Aged Care Quality and Safety
have indicated, sector reform is
long overdue and is essential for the
sector to continue to attract capital,
provide secure returns and deliver
the highest quality care and services
to residents.
Estia Health welcomes the
increased scrutiny of the aged
care sector and is committed to
co-operation with the Government
and regulators to ensure the
sustainable delivery of high quality,
safe and affordable care for older
Australians. We look forward to
the final report from the Royal
Commission due in February 2021.
We support a package of reforms
that will enhance the sustainability
of aged care including: greater
prudential oversight, increased
funding, people contributing
to their care according to their
Dr Gary Weiss, AM
Chairman
Ian Thorley
Chief Executive Officer
capacity to pay, and the freeing
up of restrictive licencing
arrangements that limit consumer
choice and restrict competition and
investment. We also support more
transparency on the publication
of quality outcomes and other
performance indicators to support
and facilitate consumers to make
informed choices about aged care.
PeRfoRmanCe foR the
yeaR to June 2020
As a result of ongoing uncertainty
regarding sector funding and
reform, exacerbated by the required
response to the COVID-19 pandemic,
the Company recorded a full year
loss after tax of $116.9 million after
non-cash impairment charges for the
year to 30 June 2020. Profit after
tax before the non-cash impairment
charge was $25.2 million.
Operational revenue (excluding the
impact of AASB 16) increased by
1.3% to $593.5 million, with average
occupancy for the year of 93.2 per
cent, closing at 92.7 per cent at 30
June 2020.
We experienced net RAD inflows of
$33.2 million, of which $25.8 million
was achieved from our new homes
in Southport and Maroochydore.
During the year we continued to
invest for the future. We spent
$80.6 million in new homes,
refurbishments, sustainability,
asset replacement and
improvements, including $15.7
million in completing and
progressing our greenfield sites
at Maroochydore in Queensland,
Aberglasslyn and St Ives in New
South Wales, and Mt Barker in South
Australia; $18.3 million on brownfield
sites at Blakehurst in New South
Wales and Burton in South Australia;
and $40.7 million in refurbishing and
investing in a number of initiatives
across our existing homes.
The financial performance of our
two new homes at Southport and
Maroochydore in Queensland was
strong, together delivering a net
positive EBITDA contribution of
$0.5 million during first year ramp up.
As a result of the net loss for the
year and as a prudent measure
during these uncertain times, the
Board determined not to declare
a final dividend for the year to 30
June 2020. Total dividends for
the year were 5.4 cents per share,
fully franked.
While COVID-19 has
impacted our financial
performance in the
2020 financial year, the
Company’s underlying
fundamentals are sound
and provide a strong
platform to manage
future uncertainty,
opportunities and
challenges.
Estia Health’s balance sheet is solid
with net bank debt of $99.4 million
at 30 June 2020 under our $330.0
million Syndicated Financing
Facility. We are well capitalised
and have capacity and flexibility
to execute our growth plans and
respond to future uncertainties.
InvestIng In sustaInable
gRowth
We believe the future of residential
aged care in Australia will be driven
by well-governed, quality-focused
providers such as Estia Health,
who have the capacity to meet
the demands for customer choice,
in how we care for our elderly as
Australia’s population ages.
Estia Health’s focus is on
sustainable growth by continually
improving clinical governance,
quality management and
resident care systems through
employee education, technology
development and service
enhancement. This is supported
by disciplined investment in
the construction of new homes
and redevelopment of existing
properties to grow capacity
for new places and grow future
earnings.
Our strategic refurbishments
focus on delivering contemporary
environments aligned with the
needs and expectations of the local
community.
2019-20 Annual Report | Estia Health 5
Tax Transparency Report | Corporate Governance | Board | Shareholder Information | Annual Financial Report | Directory of Estia Health homes Chairman and Ceo’s message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability
Chairman and
CEO’s Message ...continued
The investment improves the
marketability of the homes and
generates higher incremental
earnings through Higher
Accommodation Supplements. Of
our 69 homes, 47 now qualify for
this supplement, an increase of 14
homes on last year.
The current refurbishment program
of our existing homes will continue
in FY21 and our new home at
Blakehurst in New South Wales is
expected to become operational in
early 2021.
We are assessing our portfolio
for expansion and redevelopment
opportunities with early planning
having commenced on a number
of key proposals. These are not
committed projects and tenders
will only be activated when sector
financing reforms become clearer
and longer-term investment
conditions are more favourable.
ClInICal goveRnanCe
People are increasingly entering
aged care with complex co-
morbidities, including dementia
and increased frailty. The delivery
of progressively complex clinical
care supported by emotional and
holistic support for wellbeing
underpins everything that we do.
Against the background of
increasing acuity and later age at
entry, the clinical requirements in
aged care homes are increasing.
Estia Health monitors these
requirements through our
clinical governance system. The
Clinical Governance Committee
is independently chaired by a
Professor of Primary Care and
assesses our practices and the
clinical outcomes of our residents.
6 Estia Health | 2019-20 Annual Report
This clinical governance system
has the objective of delivering care
outcomes across our 69 homes
and is supported by regional based
clinical training and quality teams.
and understanding. This has been
a very difficult time for them all,
yet families have not only been
concerned for their loved ones but
also for the other residents, as well
as our employees.
envIRonmental, soCIal
and goveRnanCe
We also thank our shareholders for
their continued support.
Estia Health has demonstrated a
resilient performance measured
by occupancy, financial, care and
COVID-19 responsiveness driven by
the quality of assets, the leadership
and our team.
As one of Australia’s leading
residential aged care providers, we
look forward to continuing to play
a critical role in delivering safe, high
quality and sustainable aged care
services for all Australians.
Yours sincerely,
dr. gary weiss, am
Chairman
Ian thorley
Chief Executive Officer
With a network of 69 homes
across four states, it is vital
that we maintain clear visibility
on the impact we have on the
communities and environments we
operate in.
The Estia Health Sustainability
Strategy and Framework was
completed through the year and
we will report on the social value
we create in our communities
against these benchmarks in
the future, as well as reporting
against our targets for reduced
energy consumption and waste
minimisation.
Our gender performance relative
to other ASX listed companies
remains strong.
estIa health Is a PeoPle
busIness
Estia Health has outstanding
leaders at all levels of the Company
who demonstrated exceptional
capacity to plan and execute new
ways of working in response to
the complex issues presented
by COVID-19. We have strong
teams in each of our homes and
we would like to thank our team
members and our leadership for
their extraordinary effort and
professionalism in meeting the
significant and complex challenges
presented by the pandemic.
We also wish to thank our residents
and their families for their support
Estia Health Bendigo
Tax Transparency Report | Corporate Governance | Board | Shareholder Information | Annual Financial Report | Directory of Estia Health homes Chairman and CEO’s Message | Industry trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability
Industry Trends
Influencing our Strategy
1. RegulatIon
2. seCtoR RefoRm
In July 2019, the Aged Care
Quality and Safety Commission
commenced assessing and
monitoring all aged care
services, including residential
aged care against eight newly
developed Aged Care Quality
and Safety Standards.
On 1 January 2020, the aged
care regulatory functions of the
Secretary of the Department of
Health were transferred to the
Aged Care Quality and Safety
Commission. This ensures that
the Commission has the full
suite of regulatory functions
from entry, quality monitoring
and compliance for providers of
aged care services.
Estia Health has strengthened
clinical governance by
participation in a program of
benchmarking clinical
indicators, enhancing audit
programs, and increased
specialist quality resources to
respond to the new regulatory
and compliance approaches of
the Commission.
The Royal Commission into Aged
Care Quality and Safety and
increased community attention
on the aged care sector has
again highlighted the
expectations of the Australian
community for higher quality
aged care. It has been identified
by the Royal Commission and
other investigations that policy
settings and funding for the
sector are not keeping pace with
evolving community
expectations.
In November 2019, the Royal
Commission released its Interim
Report with three key
recommendations relating to:
chemical restraint, reducing the
homecare waiting list and that
by 2022 no younger people
should be entering residential
aged care. Where relevant, Estia
Health has responded to these
recommendations.
We continue to advocate for and
support many of the multiple
reforms and recommendations
put forward to Government over
the past years.
3. ageIng PoPulatIon
and InCReasIng
ClInICal CaRe needs
There are clear demographic
trends for the Australian
population that will continue to
drive demand for aged care.
Over the next 20 years, the
number of Australians aged 85
and over will double to more
than one million1. At the same
time, older Australians want to
stay at home for as long as
possible and when entering
residential aged care are
increasingly frail with complex
needs. As people live longer,
the need for residential aged
care will likely increase,
including demand for
individualised dementia care,
which is expected to more than
double by 20502.
The need for increasingly
complex residential aged care
that meets community
expectations, will only be met
by well-capitalised scale
operators with well-qualified,
committed management and
skilled employees.
1. https://www.aihw.gov.au/reports/older-people/older-australia-at-a-glance/contents/summary
2. https://www.dementia.org.au/sites/default/files/NATIONAL/documents/The-economic-cost-of-dementia-in-Australia-2016-to-2056.pdf
8 Estia Health | 2019-20 Annual Report
4. IndustRy
ConsolIdatIon
The growing specialisation and
complexity of residential aged
care will only increase the
requirement for investment.
The residential aged care sector
includes a high number of
sub-scale operators, many of
which will not be able to meet
the requirements of a
specialised and sophisticated
part of Australia’s health
economy. Aged Care Financing
Authority (ACFA) has indicated
reforms may need to assist
such providers to leave the
sector, leading to consolidation.
Providers best placed to
succeed in delivering the
highest quality of care services
to residents, will be able to
secure a large, skilled workforce,
exhibit strong governance, be
well capitalised and possess a
demonstrated ability to operate
at scale and manage multiple
stakeholders. The COVID-19
pandemic has added another
layer of complexity and
demands on operators.
Estia Health, as a well-
governed, quality-focused
operator with both scale and
capital, has the ability to
respond to regulatory change
in a post Royal Commission
world, to invest in its people,
portfolio of homes and services
to grow capacity through
development and acquisitions
and sustain occupancy in a
more competitive consumer-
directed care environment.
5. CustomeR ChoICe
6. aged CaRe
To enable aged care customers,
residents and their families,
to have a greater degree of
choice in what type of aged
care services they access and
at what cost, the community
expects clear and transparent
information to assist in making
an informed choice and to help
potential residents and their
families better understand
their expectations of care and
comfort in aged care.
In 2019 we commissioned
customer research, which
showed among other matters:
• Increased intergenerational
decision-making: it is
now more common for
grandchildren to be involved
in aged care decisions for
loved ones
• Higher expectations of quality
of services provided
• Stronger focus on
rehabilitation and maintaining
function and enjoyment of
quality of life.
woRkfoRCe – skIlls
and demand
The aged care sector in
Australia now accounts for 1%
of GDP, provides services to
over 1.3 million Australians and
employs more than 360,000
people3. The ability to attract,
train and retain a large well-
qualified, well-motivated
workforce is crucial to delivering
high quality and safe care for
aged care residents.
It is critical that greater
investment is made at a
national level to support skills
improvement, and boost
attractiveness of the sector,
through appropriate training and
remuneration and by supporting
the creation of career pathways
to attract and retain the best
employees and meet their
professional aspirations.
Estia Health has demonstrated
strategies to advance aged
care as an attractive profession
for people who want to make
a real difference in people’s
lives. We support the review
by the Aged Care Workforce
Taskforce - A Matter of
Care: Australia’s Aged Care
Workforce Strategy4 - and
are part of the Aged Care
Workforce Industry Council,
the industry-led body
leading the implementation
of this Workforce Strategy.
The Council is tasked with
responding to 14 Strategic
Actions to ensure the
workforce can meet aged care
needs now and into the future.
2019-20 Annual Report | Estia Health 9
3. Aged Care Financing Authority and the 2020 Annual Industry Report
4. a-matter-of-care-australias-aged-care-workforce-strategy
Tax Transparency Report | Corporate Governance | Board | Shareholder Information | Annual Financial Report | Directory of Estia Health homes Chairman and CEO’s Message | Industry Trends | Response to CovId-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability
Our Response to COVID-19
Current impact, governance and future impact
Our response to COVID-19 was based around the
principles of strong governance and executing the
principles of good infection control procedures and
outbreak management in those homes where positive
COVID-19 cases were confirmed..
In February, a Board COVID-19 Risk Sub-Committee
was established to provide oversight of the Company’s
response to the pandemic. The operational planning
and pandemic management was undertaken by the
Critical Incident Management Team (CIMT) also set
up in February 2020. The CIMT has the objective of
ensuring Estia Health’s response is aligned with the
Australian Health Protection Principal Committee
guidelines, State Directions and other expert guidance,
to ensure the appropriate preventative measures are
in place. The first quarter of 2020 saw the CIMT review
our emergency response and business continuity plans
to ensure they reflected the expected challenges to be
posed by COVID-19.
Early in the pandemic, when it was evident that
the national supply chain may not cope with the
anticipated demand, Estia Health responded by
securing alternate suppliers ensuring our homes
had personal protective equipment (PPE) and other
inventory, should an outbreak occur.
We developed a COVID-19 Response Plan, in
preparation for an outbreak in one of our homes. This
plan was reviewed by independent infection control
experts. Our infection prevention control policies and
procedures are regularly reviewed and improved in line
with COVID-19 recommendations from Government
agencies and our own experience including refining our
mandatory infection prevention and control training.
Through transformational change, Estia Health has met
the various challenges raised during this pandemic and
highlights the depth and capability of both our people
and our systems.
One Family values in action
Estia Health Taree
demonstrate the One Family values in action
10 Estia Health | 2019-20 Annual Report
During the pandemic our focus is on three key areas:
1. Residents and their families:
• We provide frequent, open communication with our
hours of quarantine leave was granted in the period
March – June 2020
residents and their families
• Introduced an allowance for employees working in
• We appointed Resident Liaison Officers who are the first
point of contact for families seeking to communicate
with their loved ones. This role is an integral addition to
our homes and exists to focus on maintaining resident
and family connection and supporting resident well being
homes with COVID-19
• We secured strong supply chains for personal
protective equipment (PPE) to ensure that employees
would be confident in working should any outbreak
occur
• We introduced additional technology enabling
• We enhanced our Employee Assistance Program.
families to stay in touch particularly through times
where our homes are closed to visitors
• We provide regular updates on COVID-19 on our website
• We introduced specific infection control screening
processes for new admissions, visitors and contractors
• We provide a free and confidential counselling service
for residents and families.
2. Our employees:
3. At each home with a suspected or confirmed
positive case of COVID-19, we immediately
activated our COVID-19 Response Plan.
This includes:
• Closing the home to all visitors and non-essential
external contractors
• Requesting all residents to remain in their rooms
• Establishing counselling services for all residents and
• Our Central Services team transitioned to remote
their families
working in March
• We upgraded our information technology systems
• All employees were vaccinated for the 2020 influenza
season
• We strengthened mandatory education and training in
infection surveillance, prevention and control, in line with
the growing understanding of how COVID-19 is spread
• Full single use, personal protective equipment (PPE)
• Quarantining employees with a positive test result
and other employees who had close contact with
that employee
• Regular communications with families to provide
information and answer their questions
• Providing hotel accommodation for those employees
• We stepped up frequent communication with our team
who prefer not to go home after their shifts
of more than 7,500 employees to ensure they had
confidence in responding to any COVID-19 emergency
• In March 2020, we introduced paid quarantine leave
in addition to the regular sick leave allowance for
employees who were required to self-isolate. Over 8,500
• Frequent deep cleaning of the home
• Working closely with State and Federal health
authorities, including the program for regular rapid
testing of all residents and employees until no further
positive cases are detected.
Estia Health Bendigo
2019-20 Annual Report | Estia Health 11
Tax Transparency Report | Corporate Governance | Board | Shareholder Information | Annual Financial Report | Directory of Estia Health homes Chairman and CEO’s Message | Industry Trends | Response to CovId-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability
Our Response to
COVID-19 ...continued
How Resident Liaison Officers keep residents connected
Resident Liaison Officers were introduced into Estia Health homes during the escalation of the COVID-19 pandemic,
to help residents and their families and friends keep in contact. These new roles also provided an opportunity
for people who had lost their jobs to join the Estia Health team and apply their customer service expertise and
experience in residential aged care.
ResIdent lIaIson offICeRs
mental health and wellbeIng
Resident Liaison Officers are the link between residents
and their families and friends.
This role was introduced in each home to help residents
connect with family members through video and phone
calls, with their faith through live-streamed church
services and with loved ones through our safe visit
program.
At some of our homes where families were temporarily
unable to visit, mental health and social wellbeing of
residents was a priority. Teams in our homes focused on
helping residents maintain social connections and ease
fears during the pandemic. These connections included:
• Establishing safe visiting rooms on-site for families —
rooms near home entrances to minimise foot traffic
When the travel, events and hospitality sectors stood
down a large portion of their employees, Estia Health
saw an opportunity to apply their customer service
skills to care for our residents. Resident Liaison Officers
included pilots and flight attendants from Qantas and
Tigerair, who stepped up to help — residents had a
chance to interact with new people, hear some new
stories and share their own.
• Creating a new role for each home; Resident Liaison
Officers, to help residents with video and phone calls,
live streaming of church services and in-house prayer
groups — their key focus was resident connectivity
• Enabling window visits so residents could still
experience connection and joy with their loved ones
• Arranging bus trips so residents could have a change
of scenery without risk.
suPPoRtIng ResIdents duRIng CovId-19
The hospitality and lifestyle teams have worked
together to ensure residents receive high quality,
nutritious food together with the emotional and
physical support they need during the pandemic.
teChnology at woRk – aCCess to
telehealth
Since April residents have accessed telehealth
appointments to review medications and clinical
conditions, including appointments with specialists
they were previously unable to access.
Interstate employee transfer initiative – Our Family
Code in action
The impact of the COVID-19 pandemic in our Victorian
homes was significant, with several homes affected as
both residents and employees tested positive for the
virus and homes were put into lockdown to prevent
the transmission of the virus. During this, many, or all of
the home’s employees were placed on paid leave and
quarantined and while external agency staff offered
support, it was important to look at how we could
continue to provide high quality and consistent care
to our residents. A call was put out to the Estia Health
network, asking if any of our experienced carers and
nurses would go to the outbreak homes and support
during lockdown. We were overwhelmed by the response,
with more than 170 expressions of interest received
from across the network, offering to go and support
their colleagues and care for our residents in incredibly
challenging conditions. The first wave of interstate team
members arrived within a week, providing much needed
stability and support to our residents and we’re proud to
have seen our Family Code and values in action.
12 Estia Health | 2019-20 Annual Report
Aged care
all-rounder
Before COVID-19, Ethan
was a Corporate Services
Assistant with Cricket
Australia. From facilities and
contractor management to
events, Ethan loved his all-
rounder role.
As a Resident Liaison
Officer, Ethan applied
himself to the new task of
keeping residents involved
in their daily activities and
connected with their loved
ones through the safe visit
program: helping residents
with virtual visits, phone
calls or a window visit. It's
no surprise that residents
loved to stop him for a
cricket chat.
2019-20 Annual Report | Estia Health 13
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Key Highlights
Financial performance
oPeRatIonal PlaCes
aveRage oCCuPanCy¹
oPeRatIonal Revenue²
6,102
6,046
93.6%
93.2%
6,182
94.2%
$586.0m
$593.5m
$546.9m
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
PRofIt afteR tax
befoRe ImPaIRment
$41.5m
$41.6m
$25.2m
eaRnIngs PeR shaRe
dIvIdends PeR shaRe
15.8¢
15.8¢
15.8¢
15.8¢
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1. Mature homes only
2. Operational revenue excludes the impact of AASB 16 adopted with effect from 1 July 2019.
(44.8¢)
5.4¢
Health and safety
ltIfR1
Gender diversity
boaRd and exeCutIve
PosItIon ComPosItIon
Employees
emPloyee tuRnoveR
FY20
4.9
FY19
FY18
7.6
9.1
1. Lost Time to Injury Frequency Rate (LTIFR).
12 month rolling average.
60% Male
40% Female
14 Estia Health | 2019-20 Annual Report
18.3%
Key Highlights
Network of homes
Statistics are as at 16 August 2020 (except as noted)
Total number of
operational homes
— Metro
— Regional
Freehold sites
69
53
16
62
Total operational places
– 30 June 2020
6,182
Number of single rooms
5,092
Single rooms as
percentage of total rooms
Average number of
places per home
Number of homes
receiving significant
refurbishment supplement
91%
90
47
QLD
8 homes
851 places
NSW
17 homes
1,890 places
VIC
27 homes
2,093 places
SA
17 homes
1,348 places
Professional development
emPloyees tRaIned aCRoss PRofessIonal
develoPment PRogRams
Consumer Experience
Report (CER)
8,435 CeR suRveys ConduCted
FY20
2,825
FY19
4,959
FY18
3,092
tRaInIng delIveRed on PeRsonal
PRoteCtIve equIPment
93%²
Average 93%
satisfaction rating
across the network
FY20
6,756
2. Satisfaction defined as percentage of responses that report
experience as “most of the time” or “always”
2019-20 Annual Report | Estia Health 15
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Our Executive Team
Our Executive Team is responsible for setting and implementing our strategy for Estia Health to become Australia’s
most trusted residential aged care provider. Led by Chief Executive Officer Ian Thorley, the team brings a depth of
experience and expertise in the health care and aged care sectors, to ensure we provide consistently high quality
and safe residential aged care to the communities we serve.
Ian thoRley
Chief Executive Officer and
Managing Director
sean bIlton
Chief Operating Officer and
Deputy Chief Executive Officer
steve lemlIn
Chief Financial Officer
leanne laIdleR
Chief Quality and Risk Officer
damIan hIseR
Chief Customer Officer
fIona Caldwell
Chief Information Officer
RIta sheRIdan
General Manager
Development and Property
ashley van wInkel
Chief People Officer
maRk bRandon, oam
Chief Policy and
Regulatory Officer
16 Estia Health | 2019-20 Annual Report
Ian thoRley
Chief Executive Officer and Managing Director
Joining Estia Health in October 2016 and appointed
Chief Executive Officer in October 2018, Ian is focused
on consolidating Estia Health as a high quality residential
aged care provider and positioning the group through
the disciplined investment in new homes and systems
infrastructure, to be capable of being a leader in the next
phase of residential aged care growth. Ian has over 30
years’ health and aged care experience in both Australia
and overseas and has been at the forefront of major
developments that have shaped Australia’s healthcare sector.
sean bIlton
Chief Operating Officer and Deputy Chief Executive
Officer
Appointed as Estia Health’s Chief Operating Officer
and Deputy Chief Executive Officer in October 2018,
Sean is focused on ensuring the highest level of care
is delivered effectively to the 8,000 residents we care
for annually across our homes. Sean ensures that every
one of our 69 homes engage closely with their local
communities and deliver exceptional and compassionate
care for all our residents and their families.
steve lemlIn
Chief Financial Officer
Joining Estia Health in February 2017 as Chief
Financial Officer, Steve is responsible for planning,
implementation, managing and running all the finance
activities of Estia Health, including business planning,
budgeting, forecasting and capital management. Steve
also manages investor relations, external financial
reporting and prudential compliance within the Aged
Care Act.
leanne laIdleR
Chief Quality and Risk Officer
Appointed in May 2019, Leanne leads Estia Health’s clinical
governance strategies with the objective to ensure high
quality and safe clinical care is delivered for our residents.
Leanne’s role is focused on embedding a continuous
improvement culture, using quality indicator measurement
and a risk management framework that enables
transparent incident reporting, data analysis, trending and
benchmarking with validation of compliance via audit.
damIan hIseR
Chief Customer Officer
Since October 2017, Damian has led strategies and
programs to improve the experience for Estia Health’s
residents and their families and support the difficult and
emotional move into aged care. This includes developing
hospitality and lifestyle programs and activities to
enhance the quality of life and daily living requirement
of our residents. Damian has also led the development
of Estia Health’s Sustainability Strategy and continues to
build Estia Health’s brand as one of the most respected
and preferred within residential aged care.
fIona Caldwell
Chief Information Officer
Appointed in October 2017, Fiona has led the investment
in systems and technology to ensure that our business
and clinical systems are delivering productivity gains for
the network and are capable of upscaling to support
our future growth. This has seen the delivery of modern
and innovative technologies and services to advance
resident care, support employees and provide best-practice
solutions for our organisation and shared service functions.
RIta sheRIdan
General Manager Development and Property
Rita has led Estia Health’s capital development and
property maintenance programs since March 2018.
Throughout her career, Rita has successfully completed
major capital developments in aged care, retirement
living, residential construction and commercial interior
design. These diverse experiences have been brought
together to evolve the designs of our recent new
greenfield developments to reflect a more intimate
resident-focused design aesthetic.
ashley van wInkel
Chief People Officer
Joining Estia Health in May 2020, Ashley's team is
dedicated to attracting and developing the best talent in
the sector, maintaining a safe workplace and supporting
a motivated workforce to deliver high quality and safe
care and services for our residents and their families.
maRk bRandon, oam
Chief Policy and Regulatory Officer
Mark leads Estia Health’s government relations
activities and has oversight of regulatory compliance
and policy. He is an internationally recognised leader
on strategy, quality improvement and accreditation
systems. He is a member of the panels of experts for
the International Society for Quality in Healthcare and
the International Federation on Ageing.
Full biographies available on the Estia Health website:
https://www.estiahealth.com.au/who-is-estia-health/
our-executive-team
2019-20 Annual Report | Estia Health 17
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Vision, Purpose, Strategy
During FY19, we conducted extensive research with over 2,000 people including our residents, their families, our
employees, Board Directors and community members, to understand their perspective of Estia Health and what
they believe is important in the delivery of quality care. In FY20 the findings of this research were used to inform
a brand refresh, including our vision, purpose and family code and Estia Health’s Corporate Strategy and Strategic
Framework.
Our vision: trusted aged care is accessible to all
ouR PuRPose
ouR stRategIC PRIoRItIes
We exist to enrich and celebrate life together.
To enrich a life means every small action we take can
make a difference. As aged care professionals, we look
after people at the most important time of their lives.
We want to celebrate this time with our residents, their
families and our employees.
Achieving our strategic goals and objectives enables us
to bring our vision to life.
Our Strategic Framework, set out as pillars,
demonstrates focus areas for the organisation that
we believe will deliver the best care possible to our
residents and will create value for all our stakeholders.
ouR famIly Code
We achieve our purpose by living our family code -
A family where everyone belongs.
ouR PRInCIPles guIde ouR eveRyday
aCtIons
• Creating happiness – we make magical moments
happen, in small and special ways
• Always approachable – we make time to listen
because we care
• Taking responsibility – we own our decisions and
actions to improve ourselves and help others
• Embracing diversity – we acknowledge and respect
individual uniqueness
• Growing together – we bring out the best in each
other and are stronger together
ouR values undeRPIn ouR famIly Code:
• Compassion – we demonstrate care and
understanding with empathy
• Responsiveness – we are approachable, we listen and
we take action
• Care
• Customer
• People
• Community
• Growth
Value Creation – financial and non-financial
e
r
a
C
r
e
m
o
t
s
u
C
l
e
p
o
e
P
y
t
i
n
u
m
m
o
C
h
t
w
o
r
g
Pillars of value
Business capabilities
(Organisational structure, Roles & Responsibilities,
Standard Operating Model, Business Processes & Systems)
• Accountability – we are responsible and always act
with integrity
Risk and governance
(Quality Standards, Compliance Requirements, Ethics, Risk Appetite)
• Respect – we embrace individuality and choice
• Collaboration – we positively engage together to
deliver our purpose
Culture
18 Estia Health | 2019-20 Annual Report
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Our Strategy –
Care
goal: to be considered as the number one quality provider of residential aged care services.
what success looks like:
• 100% met outcomes from Aged Care Quality and Safety Commission assessment visits
• Government recognition of our support and partnerships with Primary Health Networks
• Reduce complaints by 50% year on year to the Aged Care Quality and Safety Commission
• Reduce procedures, guidelines and forms by at least 50%, to streamline clinical care processes
• Premium optimisation through insurer recognition as best in class for risk recognition, mitigation and
management.
InCReased CaRe needs
PeRson-CentRed CaRe fRamewoRk
Australia’s ageing population continues to steadily
increase the demand for aged care, with people
moving into residential aged care later in their lives.
With later entry into aged care, we continue to see an
increase in residents with a range of co-morbidities
including residents living with dementia, which requires
more specialised sub-acute clinical care and services to
deliver the best care outcomes for our residents.
We continue to evolve and grow our expertise. In
addition to every home having Registered Nurse/s
rostered seven days a week, 24 hours a day and our
education and development programs to support
nursing and care staff, we are well placed to provide
high quality clinical and personal care.
PeRson-CentRed aPPRoaCh
Our employees are committed to truly knowing
each resident. They understand that each resident
has their own individual story to tell, with different
experiences, preferences, identity, values, beliefs,
likes and dislikes. By taking the time to understand
each resident’s individual needs and preferences, our
teams are equipped to truly support them to feel safe,
comfortable and ensure they are treated with both
dignity and respect, while living in one of our homes.
This is strengthened by our brand principle Embracing
Diversity, which begins when a resident first enters
one of our homes. We work with both the resident and
the family to understand their unique story and offer
culturally diverse programs and activities.
The quality of care our residents receive, is guided by a
person-centred care and clinical governance framework.
Through the two key pillars of the framework, clinical
and risk management, we are able to deliver on our
vision of being the most trusted aged care provider.
ClInICal goveRnanCe CommIttee
Ensuring the organisation is guided by sound clinical
practices, our Clinical Governance Committee includes
highly experienced professionals with expertise across
a range of aged care specialties. This year, two new
external members were appointed to the Committee,
a Professor of Primary Care (Committee Chair) and
a Doctor of Pharmacy. They are able to provide an
external industry perspective to guide care and service
improvements. It also provides the opportunity to
strengthen our partnerships with general practitioners
and pharmaceutical providers.
ContInuous qualIty ImPRovement
Through a culture of continuous improvement our
teams reflect on how we can improve systems,
processes and procedures. Through critical reflection
our teams constantly review and improve, providing
for individual’s needs, quality clinical care and valued
resident experiences.
The application of these policies into the delivery of
consistent processes across our 69 homes is supported
by regional quality teams. Through various audit
and other predictive indictor insights, we are able to
highlight and address areas for improvement.
20 Estia Health | 2019-20 Annual Report
ResIdent voICe
Ensuring our residents have choice and a voice in their
care and overall experience helps retain our resident’s
autonomy and sense of self, a critical aspect in their
overall wellbeing, especially when they first move
into one of our homes. Every employee is focused
on treating residents with the respect and dignity
anyone would expect in their own home, which lays the
foundations for quality person-centred care.
Listening to our residents and providing various ways to
share their thoughts and ideas, in a timely, transparent
and open way is key to maintaining their confidence
and trust in us. One way in which we measure the
experience of residents is through internal surveying of
residents and their families using the Aged Care Quality
and Safety Commission’s original Consumer Experience
Rating survey (CER). This year, 8,435 surveys were
conducted with an average of 93% satisfaction1 across
our network of homes.
buIldIng ClInICal netwoRks
The quality of the care we provide is built on the
strength of our partnerships with allied health and
Primary Health Networks.
Through a combination of national and local
partnerships with allied health professionals, including
physiotherapy, dental, speech, podiatry and others, we
aim to ensure we provide holistic personalised care.
This year, our pharmacy partnership was strengthened
by the introduction of regular remote reviewing of the
use of medication, in line with guidance received in the
Royal Commission into Aged Care Quality and Safety’s
interim report.
In a direct response to COVID-19, we developed two
new national partnerships, one with a provider of
telehealth to ensure continued General Practitioner
support and the other with a national provider of
infection prevention and control.
CommItment to teChnology
Technology is one of the key foundations to improving
clinical care and this year, we continued to enhance
our electronic resident clinical records, seeing
improvements in clinical data capture, enabling
accurate analysis, industry benchmarking and overall
improvements in resident outcomes.
Earlier this year, two of our homes joined a Government
trial in medication management, involving the paperless
administration of medication leading to improved
management of medications and timely reporting.
This year, as part of our commitment to improving
resident care, we have partnered with a national
provider to benchmark our clinical data in three
key areas; pressure injuries, physical restraint and
unplanned weight loss. Results have shown we are
consistently in line with, or better than the industry
benchmark for each category. Engaging in this
partnership provides clinical support teams additional
tools to monitor and analyse clinical indictor data
remotely, supporting consistent quality of care for our
residents.
qualIty standaRds
In July 2019, the Aged Care Quality and Safety
Commission released the Aged Care Quality Standards
(Quality Standards), with all aged care organisations
who provide Commonwealth subsidised services
required to be assessed and provide evidence of
their compliance with and performance against these
Quality Standards.
The Quality Standards have eight individual Standards
with 42 requirements, which our individual 69 homes
are assessed against:
1.
Consumer dignity and choice
2. Ongoing assessment and planning with
consumers
3. Personal care and clinical care
4. Services and supports for daily living
5. Organisation’s service environment
6. Feedback and complaints
7. Human resources
8. Organisational governance
“Our person-centred framework
puts the resident at the centre of
every decision that we make. If we’re
designing a home or reviewing a
system, we must do it in partnership
with the people whose home it is.”
Leanne Laidler, Chief Quality and Risk Officer
1. Satisfaction defined as percentage of responses that report experience as “most of the time” or “always”
2019-20 Annual Report | Estia Health 21
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Our Strategy –
Customer
goal: to be the most customer-centric residential
aged care provider in the sector.
what success looks like:
• Consumer Experience Report scores greater than
93%1 satisfaction rating
• Recognised as a leading provider of personalised
and specialist residential aged care services
including dementia care
• Greater than 90% of residents and families likely
to recommend Estia Health
• Customer experience driving occupancy rates
higher than peers.
key research insights:
• Providing safe and personalised quality care are
the top motivations of potential customers when
selecting the right aged care home
• Potential customers want more clarity with
a simplified process and access to the right
information at the right time
• The Royal Commission into Aged Care Quality
and Safety and the sector’s response to
COVID-19 are shaping customer attitudes and
their decision-making process.
undeRstandIng ouR CustomeRs’ PRIoRItIes
When we refer to our customers, this includes our residents and their relatives. Often this includes children and
increasingly grandchildren, who are involved in the decision-making process for their loved one to enter residential
aged care. Understanding their unique needs and providing the right support and guidance when looking to make
this difficult decision, is a critical part of our commitment to be the most customer-centric aged care provider in
the sector.
In FY20, we conducted research with our customers and potential customers to better understand the journey they
must take and the challenging choices when looking at residential aged care for themselves or a loved one.
suPPoRtIng CustomeR ChoICe
• When looking for residential aged care, people on average visit 3.52 homes before making a decision
• 80% of people make their decision based on the emotional connection3 they make with employees at the
home during their visits.
Even though the decision for someone to move into
residential aged care is one of the most significant
moments in a person’s life; the need for aged care often
occurs following a sudden event or a rapid decline in
health, and as a result, a decision must be made quickly.
We understand this and our customer teams work to
provide information quickly and clearly. This is via face-
to-face meetings and phone calls when urgent care is
needed, but some people will want to investigate and
conduct their own research, often with the support of
the broader family. This is why digital channels like our
website and social media are critical touchpoints to
access clear and concise information that answers their
questions.
We also understand the importance of first impressions
and a core aspect in people’s decision-making process
is how they feel when they visit one of our homes and
1. Satisfaction defined as percentage of responses that report experience as “most of the time” or “always”
2. Customer segmentation research, Instinct & Reason, April 2020
3. Customer segmentation research, Instinct & Reason, April 2020
22 Estia Health | 2019-20 Annual Report
see our employees interacting and building meaningful
connections with our residents, demonstrating our
purpose to enrich and celebrate life together.
lIstenIng to ouR CustomeRs
We value and actively seek our customer’s feedback
to support a culture of continuous improvement and
a greater understanding of what is important to them
when receiving care in one of our homes.
Our processes and systems provide residents, their
families and the community with a range of ways to
provide feedback and include:
• Regular pulse surveys of residents and families that
can be completed on digital tablets in the home or
via email and are aligned to the Aged Care Quality
and Safety Commission’s (ACQSC) Consumer
Experience Reports (CERs)
• Immediate feedback to a Registered Nurse or carer at
the time of a positive or negative experience
• Regular resident and family forums in our homes, led
by our Executive Directors
• Accessible feedback forms both online and in our
homes, translated into various languages, which
once completed go through our formal feedback or
complaints process.
Consumer Experience Reports (CERs) surveys were
introduced by the Aged Care Quality and Safety
Commission (ACQSC) when assessing residential aged
care homes during FY19 and we are now regularly
‘pulsing’ residents and families with the same survey,
with 8,435 surveys completed this year. We are
continuing to look at ways to listen to our customers
and gather feedback and are expanding the use of
resident and customer surveys. These are aligned
with the ACQSC survey themes to establish our own
benchmarks for customer experience with the aim
of exceeding broader industry results and promoting
consumer choice.
Choice and variety
When residents and their families are choosing a residential aged care home, high-quality clinical care is an
expectation, however other aspects of daily life, including food and lifestyle activities also play a critical role in
supporting our residents’ overall wellbeing.
All of our homes have a lifestyle team, who program a range of daily events or activities based on residents’ input
and feedback. This includes; games, cooking, craft, arts, cultural activities, and spiritual and religious events. Prior
to COVID-19 restrictions, our lifestyle team would also schedule regular outings and visits to help our residents
remain connected to their community, family and friends. This includes local community groups and schools, giving
residents and school children the opportunity to build unique and special inter-generation connections.
We understand the importance of a well prepared, home cooked meal, with each home’s Chef and catering team
working to our food philosophy: ‘thoughtfully sourced, freshly prepared, served with love’. Each home’s menu is
developed based on residents’ preferences and includes recipes they have cooked and enjoyed themselves in the
past, while catering to unique medical or cultural dietary requirements. With this in mind, the continued training
of our Chefs and their teams is critical and we conduct a quarterly Masterclass series to upskill and educate
our teams.
“Customer and community
engagement provide insights
to continuously improve our
customer experience and
resident-centred framework.”
Damian Hiser, Chief Customer Officer
2019-20 Annual Report | Estia Health 23
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Our Strategy –
People
goal: to be the aged care employer of choice, attracting and retaining skilled and engaged employees.
what success looks like:
• Zero preventable lost time to injuries
• 15% or less employee turnover
• 70% uptake of employee wellbeing programs
• 60% of employees completing engagement surveys
• 70% of leadership roles recruited internally
Our people are at the heart of our organisation
The safety and care of our residents is achieved
through the skills, dedication and compassionate
care of our people. Attracting, training, retaining and
caring for a diverse team of skilled clinicians, carers
and hospitality employees is key for the aged care
sector. We seek to become the residential aged care
employer of choice, by offering a safe, caring and
supportive environment for our people to grow their
careers, develop skills and work collaboratively to feel
an important member of the Estia Health family.
Our People Strategy is based on a set of projects
and initiatives that connects our brand purpose,
principles and values to build a unique culture across
the organisation in line with our Family Code: a family
where everyone belongs. We continue to look beyond
traditional recruitment measures to attract the best
candidates, engage and retain our employees and
develop talent and upskill our existing workforce.
to work and obtain timely and required medical
intervention.
In FY20 we achieved our health, safety and wellbeing
performance targets, increased our focus on mental
health and wellbeing and continued to enhance our
robust workplace health and safety systems by:
• Starting to shift our culture from injury management
to injury prevention
• Implementing enhancements to our safety incident
reporting system
• Introducing paid quarantine leave in addition to the
regular sick leave allowance for employees who were
required to self-isolate due to COVID-19
• Boosting mandatory training in infection prevention
and control
• Securing supply chains and stock levels of personal
protective equipment (PPE)
health, safety and wellbeIng
stRategy
• Implementing wellbeing education and tools
• Commencing remote learning and onboarding
Estia Health has an uncompromised focus and
commitment to health, safety and wellbeing. Our
Health, Safety and Wellbeing Strategy sets out our
vision and targets to 2023. The Strategy integrates
leadership, risk management, support systems and
wellbeing to continue to improve on our existing
performance and enable us to address existing and
emerging risks.
We commenced the transition to workers
compensation self-insurance and secured our self-
insurance license in NSW, which enhances our ability
to intervene early, help our injured employees return
programs
• Introducing a pay supplement for employees working
in homes with COVID-19 cases.
tRaInIng and develoPment
Training and development remain central to retaining
and supporting our employees to ensure they can
confidently deliver high quality, safe care and the best
overall experience for our residents and their families.
We offer national hospitality and lifestyle training
programs for our Chefs, food services and lifestyle
24 Estia Health | 2019-20 Annual Report
employees, attracting a broader range of experienced
and passionate people to the organisation, while
continuing to build the skills and experience of our
existing teams in specialised areas including nutrition
and medically prescribed diets and meaningful
activities.
A key focus during the second half of FY20 was
infection prevention control for all employees based
in our homes. Addition to our mandatory training
of all employees in infection prevention and control,
specific learning modules, toolboxes and resources
were developed with 6,756 employees trained on
the effective use of personal protective equipment
(PPE) and a further 828 employees trained to collect
respiratory swabs, all of which form a core part of our
COVID-19 Response Plan.
key fy20 outComes:
4.9
Lost Time to Injury Frequency
Rate (LTIFR)
We have worked hard over the
last four years to significantly
reduce our LTIFR with
mandatory workplace safety
training and toolboxes and
awareness campaigns such
as Safety Awareness Month
in October. We continue to
strive to have zero preventable
injuries by mitigating risks with
protocols and training to help
keep employees safe.
18.3%
Employee turnover
Estia Health aims to reduce
turnover to less than 15% in
a sector where recruitment
and retention of employees is
a significant challenge. High
turnover impacts standards
of clinical care, and overall
delivery of the customer
experience. Our priority is
to retain and support our
employees, recruit future
leaders internally and increase
employee engagement.
10,429
Professional development programs
completed
2,825 employees accessed ongoing
professional development programs
across all aspects of care before our
response to COVID-19 necessitated our
training to focus on the critical areas
of education in infection surveillance,
prevention and control:
• 6,756 employees were trained on
effective use of infection prevention
control techniques
• 828 employees were trained to collect
respiratory swabs.
CultuRe
dIveRsIty
We understand the importance of listening to our
people to understand what matters most to them
while working for us. In FY20 we undertook our second
biannual Employee Experience Survey conducted
by Best Practice Australia. Completed by 66% of our
employees, this is both above the sector average and is
an increase on our 49% participation rate in 2017.
In addition, we also internally launched the refreshed
Estia Health brand, which followed research involving
asking our people what they believed was important
to deliver high-quality care to our residents and what
they believed was unique about working for Estia
Health. The results were fed into the brand refresh
including the vision, purpose and our Family Code,
consisting of principles and values. Launched internally
within the organisation, all employees were introduced
to the refreshed brand during FY20 and ongoing
employee engagement initiatives will continue. Having
a strong purpose that is brought to life everyday by our
employees living a set of values and principles, helps
build a strong and lasting culture that can support each
other during these difficult times.
We are committed to creating a diverse work
environment that reflects and celebrates the diversity
of each of the communities we operate in. One of our
key principles is Embracing Diversity, we welcome
residents from all walks of life and celebrate the
experience and diversity of our people. Estia Health
recognises that diversity honours core human
principles: inclusivity, equal opportunity, freedom of
expression and all people feeling comfortable and safe
to express themselves and be proud of their identity,
irrespective of gender, ethnic background, faith or
sexual identity.
In our biannual employee survey, 58% of employees
stated they were born outside of Australia, 2%
answered they were living with a disability, 2%
identified as being Aboriginal and/or Torres Strait
Islander and 3% identified as being part of the LGBTIQ
community.
2019-20 Annual Report | Estia Health 25
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Our Strategy –
Community
goal: to have a positive social impact in the
communities in which we operate.
what success looks like:
• All of our homes have active community
engagement plans identifying local social and
environmental initiatives
• Measuring outcomes using a Social Impact
Framework defining the causes that align with
the organisation and metrics to measure impact
• Volunteer programs with high satisfaction levels
for residents and volunteers.
CommunIty ConneCtIons
It is vital we continue to develop lasting and meaningful
relationships with our local communities to support
our purpose; to enrich and celebrate life together. By
inviting the broader community into our homes, our
residents can maintain their connections through local
clubs and cultural groups and by building relationships
with schools and youth organisations, helping create an
enriching multi-generational environment.
Prior to COVID-19, residents would frequently connect
with pre-school, primary and secondary school
students through local intergenerational programs.
These programs see students regularly visit homes
to engage with residents through activities, stories,
musical performance and more. During COVID-19,
instead of physically visiting, neighbours, local
preschools and schools write letters to our residents
and where possible conduct window visits to remain
connected.
CelebRatIng dIveRsIty
Our homes reflect the communities where they
are located, with residents from over 95 cultural
backgrounds, speaking 22 languages and enjoying a
range of hobbies and interests. Through our Family
Code, we are committed to ensuring our homes are
places where everyone belongs and this includes
developing lifestyle activities, events and celebrations
that reflect our residents' backgrounds, interests and
passions.
Estia Health Bendigo
26 Estia Health | 2019-20 Annual Report
Estia Health Bendigo
CommunIty PaRtneRshIPs
We understand that people want to stay at home for
as long as possible and when entering residential aged
care, have a strong preference to remain in their own
community. Our network of homes can often provide
communities with a choice of homes to match their
individual needs and preferences for accommodation
and services. As part of our Sustainability Strategy,
we are developing community engagement plans, as
well as working towards establishing long standing,
mutually beneficial national partnerships with not-for-
profit or social enterprises that support our key causes.
We support partnerships such as the Centenarian
Portrait Project for Teenagers, of which Estia Health
is the major corporate sponsor for the third year.
Matching 100 teenage artists with 100 centenarians,
the project connects two very different generations
encouraging storytelling, reminiscing, joy and laughter
as unique portraits of the centenarians are created.
We also focus on continued opportunities to train
a skilled workforce from the local community.
Partnerships with preferred state-based Registered
Training Organisations (RTOs) and TAFEs ensures
local students studying either a Bachelor of Nursing,
Diploma of Nursing or Certificate III in Individual
Support, have the opportunity to learn practical aged
care skills through hands-on experience. During the
COVID-19 pandemic, Estia Health continued to offer
student placements ensuring a future workforce for
the sector.
volunteeRIng foR good
Volunteers are a valued part of the Estia Health
team — providing a breadth of skills and support;
whether pairing volunteers with residents looking
for spiritual or cultural connections, through to
shared interests and hobbies; their energy and
compassion brings joy to our residents.
A refreshed national Volunteer Program will roll
out in stages in 2021 as part of Estia Health's
commitment to having a positive social impact in
our communities.
"I love being a volunteer at Estia Health Albany Creek. I love being around
the residents, having chats, helping them as much as I can. The environment
there is calm, and everyone is kind and helpful. It's such a nice place to come
to; everyone makes you feel very welcome. The nurses, carers and the lifestyle
team all do a wonderful job, and it's a pleasure to be part of the team."
Sarina, Volunteer
2019-20 Annual Report | Estia Health 27
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Our Strategy –
Growth
goal: to optimise shareholder returns by disciplined
capital investment to provide access to trusted
aged care services.
what success looks like:
key outcomes:
• Estia Health Southport, QLD: Opened in mid May
2019 providing 110 resident places
• Estia Health Maroochydore, QLD: Opened in late
• Enhancement of homes through significant and
August 2019 providing 126 resident places
strategic refurbishments
• Estia Health Blakehurst, NSW: Under development,
• Expansion through new or brownfield
will offer 105 resident places
developments and acquisitions
• Service development including access to allied
health services
• First stage development approval secured for
Toorak Gardens and Burton and being progressed
for Mt Barker, SA
• Environmentally friendly programs to improve
• Development Approval secured for Aberglasslyn,
climate resilience and reduce dependence
on non-renewable energy sources, as per our
Sustainability Strategy and Framework.
NSW
• Land acquisition completed at Aberglasslyn, NSW
and Mt Barker, SA
• Acquisition of adjoining neighbour properties at
Estia Health Lockleys and Estia Health Parkside, SA.
We aim to be the provider of choice in the communities in which we operate. Through our regional networks we
are able to provide a choice of home to meet the individual preferences. With an investment of $80.6m in FY20
our strategy involves sustainably growing earnings through measured, well-executed investments in new greenfield
sites, targeted acquisitions, and the expansion and refurbishment of our current homes to improve their amenity
and marketability.
Australia’s population is ageing and individuals are living longer. The increasing acuity of people entering residential
aged care, combined with evolving community expectations of residential aged care provides significant growth
opportunities for Estia Health as we have the capacity to respond to these changing needs.
Estia Health Maroochydore
28 Estia Health | 2019-20 Annual Report
The success of building new purpose-built homes to meet local community demand is demonstrated by the
performance of our new home in Southport, Queensland. The home opened in May 2019 and was 100 per cent
occupied by February 2020 performing strongly during its initial year of operation. Our new 126 resident home at
Maroochydore, Queensland opened in August 2019 and has also performed strongly reaching 81.7 per cent occupancy
within its first 12 months. These homes combined delivered a net positive EBITDA contribution of $0.5 million in FY20.
Our Maroochydore home was designed around a choice of living and activity centres to create individual and
intimate communities within the home. The ground floor also includes spaces for wellbeing services where
residents can access health care from visiting medical professionals and specialists such as physiotherapists and
rehabilitation services, and hair, beauty and massage treatments.
Looking ahead
gRowth oPPoRtunItIes
Development
Nature of
Development
Total
New
Places
Net
Additional
Places
Land
Held
Development
Approval
Licenses
Secured
Status
Opening
Completed 2019
Southport,
QLD
Maroochydore,
QLD
Total
Brownfield
110
110
Greenfield
126
236
Underway/InProgress
Blakehurst,
NSW
Total
Brownfield
108
226
Future/Uncommitted
St Ives,
NSW
Burton,
SA
Mt Barker,
SA
Aberglasslyn,
NSW
Greenfield
118
Expansion
24
Greenfield
Greenfield
116
115
118
Toorak Gardens,
SA
Brownfield
Open
May-19
Open
Aug-19
Expected
Under
Construction
H2 FY21
Partial
Planning
Approval
Submitted
Planning
Approval
Partial
126
236
108
226
118
24
86
115
82
Total
491
425
further development and redevelopment opportunities are being progressed with a number of projects
in the development application or advanced planning stage.
“Estia Health is well placed to meet the future needs of the increasing ageing
population, through our targeted approach to acquisitions, opening of new
homes, redevelopment and refurbishment of our existing homes”
Rita Sheridan, General Manager of Property and Development
2019-20 Annual Report | Estia Health 29
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Our Strategy –
Growth ...continued
Giving Estia Health Aberfoyle Park a new lease on life
ResIdent-fIRst RefuRbIshment
exCeedIng exPeCtatIons
Residents are appreciating their fresh, updated home
and are spending more time outdoors, with a number
of residents now enjoying their meals in the new dining
room, providing opportunities for socialising and
building connections.
With all refurbishments, we pay attention to designing
spaces to assist residents with orientation and
wayfinding, which can be particularly challenging
when living with a visual impairment or diagnosis of
dementia. By helping our residents navigate through
the home with ease, we support their independence
and dignity.
Estia Health Aberfoyle Park in South Australia is
home to 92 residents. The refurbishment focused
on improving the residents’ private rooms and
reconfiguring social and lifestyle activity spaces,
encouraging social gatherings and participation in
lifestyle activities.
ImPRovIng the ResIdent exPeRIenCe
Residents are now enjoying a more functional and
modern home. Upgrades to resident bedrooms
included new flooring and lighting, decorative wall
protection, wider doorways for ease of access and
co-ordinated new bedding and curtains, as well as new
furniture and individually controlled air-conditioning
systems.
Enhancements to communal areas included:
• Full renovation of outdoor courtyards and alfresco
areas with an integrated barbeque area
• New landscaping and potted plants for a relaxed and
shaded space connecting with nature
• New space for group physiotherapy, yoga and
exercise sessions
• A new servery with an island bench to provide a
homelike dining feel
• A new hair salon in a central location for easy
resident access
• New furniture, floor coverings and artwork
• Additional safety features including CCTV.
30 Estia Health | 2019-20 Annual Report
Development in progress: Estia Health Blakehurst
Due to open in early 2021, Estia Health Blakehurst shows the benefits of redeveloping within the existing portfolio
through the efficient recycling of older assets. The employees and residents of the original 42 place Blakehurst
home were given the opportunity to transfer to the nearby new Kogarah home when it was originally opened in
February 2018. This provided an efficient and ramp up of occupancy of the Kogarah home while maintaining the
continuity of care for these residents.
The new purpose-built Blakehurst home accommodating 105 residents will expand our Southern Sydney cluster
providing increased choice in this community where our brand and referrer networks are strong. The home will
incorporate the design trends expected of a contemporary residential aged care including a choice of pampering,
social and private areas on the top floor of the home.
Artist's impressions of
Blakehurst development.
Artist's impressions
of Blakehurst development
2019-20 Annual Report | Estia Health 31
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Our Approach to
Sustainability
Estia Health is committed to the creation of both financial and non-financial value for its stakeholders, including our
residents, their families, our employees, investors and the wider community. Achieving a continuous, positive impact
for each of these stakeholders is important for the long-term sustainability of the organisation.
During the previous period, we conducted a materiality assessment, asking our stakeholders what was important
to them, including environmental, social and governance areas we should prioritise. We also conducted an
Environmental and Social Impact Baseline from which to measure and monitor the environmental and social impact
of the organisation’s operations and supply chain.
We continued to drive performance across environmental, social and governance areas (see FY20 highlights)
and took a significant step forward in developing our first Sustainability Strategy. Developed by Estia Health’s
sustainability committee, the Strategy gives us a formal roadmap with associated targets for addressing key issues
and opportunities for the period 2020-2024.
Our Sustainability Framework
Estia Health Sustainability Framework (2020-24)
HOW WE WILL ENRICH & CELEBRATE LIFE TOGETHER BY 2024
H E A L T H &
S A F E T Y
DIVERSITY &
INCLUSION
Lost Time Injury
Frequency Rate
(LTIFR) = 3.0
Zero gender
pay gap for
equivalent roles
CIA L
IMPA C T
SO
Designed,
implemented
and annually
report against
a Social Impact
Framework
Y
T
I
N
U
M
M
O
C
N
O
I
T
C
E
N
N
O
C
100% of
homes have
an active
and bespoke
community
engagement
plan
R
U
G O
NIT Y
IN
U
C
M
N
M
A
O
H
C
N
E
100% of
assets have been
assessed for
vulnerability
to climate
change
R
C
E
L
S
I
I
M
L
I
A
E
W
E
L
L
B
E
I
N
G
5% reduction
in unplanned
personal
leave days
p.a.
S
O
U
U
P
R
P
O
P
E
R
T
O
I
N
G
P
L
E
50% of
recruitment
to leadership
roles is
internal
D
E
T
V
E
R
A
I
N
I
N
G
&
L
O
P
M
E
N
T
100% of ‘high
risk’ suppliers
have completed
an additional
screening for
modern
slavery risk
N
I
A
H
LY C
P
P
U
S
O
U
RESPE C T I N G
R ENVI R O N M E
T
N
50% of
generated waste
is diverted
from landfill
W
A
S
TE
20% reduction
in operational
emissions intensity
(scope 1 & 2)
ENERGY &
CARBON
Reduced
average water
consumption
intensity
by 20%
R
E
T
W A
T
N
E
C
E
32 Estia Health | 2019-20 Annual Report
Sustainability is a key principle in Estia Health’s corporate strategic framework, integrated within the five pillars of
value creation (People, Customer, Community, Care, Growth). We recognise the long-term viability and profitability
of our organisation depends on the wellbeing of our people, supporting and integrating within our local
communities and the continued health of the natural environments we rely upon.
Our 2020-2024 Sustainability Strategy provides focus areas and associated targets that will help us both mitigate
any negative impacts, as well as maximise any potential positive value that could result from the way we do
business.
What success looks like
1. suPPoRtIng ouR PeoPle:
3. ResPeCtIng ouR envIRonment:
a. health and safety: a culture exists where hazards
and risks are identified and mitigated before
injury
b. wellbeing: employees have access to and are
using our wellbeing support services to ensure
they bring their physical and mental best to work
every day
c. diversity and inclusion: diversity of our
employees and residents is promoted as an
outstanding characteristic that attracts people to
the Estia Health family
d. training and development: we attract, develop
and retain the best workforce in aged care.
2. enhanCIng ouR CommunItIes:
a. social impact: we have identified and support
core ‘shared value’ social causes
b. Community connection: our homes actively
support and add value back to the communities
in which they operate.
a. energy and carbon: our portfolio of homes has
optimised energy efficiency and are progressing
towards sourcing more energy from renewable
sources
b. Climate resilience: our portfolio of homes has
been assessed for their vulnerability to the
impacts of climate change and implemented risk
mitigation strategies where required
c. waste: we have implemented targeted programs,
understanding our waste composition and
focused on minimising waste generation and
maximising diversion
d. water: we have assessed where and how our
water is being used and are implementing
efficiency measures
e. supply chain: we actively engage key suppliers
to reduce their ecological footprint and ensure
they are screened for modern slavery risk.
FY20 highlights
PeoPle
Improved health and safety culture:
Refreshed purpose, values and family code:
We continued to strengthen our work health and
safety culture, resulting in Lost Time to Injury
Frequency Rate (LTIFR) improving from 7.6 in
FY19 to 4.9 in FY20. The focus of our workplace
health program continues to move toward an injury
prevention mindset and reaching our 2024 target of
a LTIFR of 3.0.
Research conducted with over 2,000 of our key
stakeholders in FY19 informed a refresh of our
brand, including the vision, purpose and our family
code, consisting of principles and values. Launched
internally within the organisation, Estia Health
employees were inducted to the refreshed brand
during FY20.
2019-20 Annual Report | Estia Health 33
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Our Approach to
Sustainability ...continued
Paid pandemic leave:
Strengthened Clinical Governance Committee:
With the onset of the COVID-19 pandemic, our
priority has been protecting the health, safety
and wellbeing of our residents and employees. In
addition to rigorous screening of all entrants to our
home, we focused on encouraging a culture of self-
reporting by our employees and introduced paid
pandemic quarantine leave with over 8,500 hours
being granted in the period March to June 2020.
High CEW ranking:
Diversity and inclusion remain a focus of the
organisation at all levels, from our home teams
through to our Executive team and Board. For the
third consecutive year, Estia Health was one of
the highest ranked ASX200 companies for gender
diversity, as reported in the CEW Senior Executives
Survey 2020.
Increased training and education:
Training and development is central to retaining and
supporting our employees to deliver quality care
and the best overall experience to our residents
and their families. During the year, 2,825 employees
were trained in professional development programs
and industry specific initiatives. With the onset of
COVID-19, training shifted to an increased focus
on infection prevention and control with 6,756
employees trained on effective use of infection
prevention control techniques and a further 828
employees trained to collect respiratory swabs.
goveRnanCe
Supply chain review:
A supply chain risk assessment conducted in FY19
identified higher risk suppliers and categories of
focus and in FY20 progress was made toward
compliance with the Modern Slavery Act 2018. This
included engagement with key suppliers as to their
own progress toward compliance. The impact of
COVID-19 lead to an extension for submission of the
Modern Slavery Statement from December 2020 to
March 2021, which Estia Health is working towards.
During the year an external pharmacist was
appointed to oversee medication management risk
and Professor Simon Wilcock was appointed as
independent Chair.
envIRonment
Climate change resilience review of our portfolio:
We undertook a climate change resilience review of
our portfolio of homes and a physical risk exposure
to climate change was completed during FY20. This
informed the next stage of the program currently
underway to assess the vulnerability of our portfolio
and develop mitigation plans for assets most at risk.
Waste reduction:
As part of our waste reduction program and to help
reach our 2024 target of 50% diversion of waste from
landfill, single use packaged pre-thickened water was
replaced with a process of thickening fluids manually
in our homes. This initiative eliminated 239,770 single-
use plastic units, diverted 60 tonnes of waste from
landfill and achieved savings of $318,000 per year.
Laundry asset upgrades:
Following a review of laundry assets, a program
was implemented to replace 40 laundry dryers. The
forecast annual reduction of carbon emissions is 230
tonnes, with a predicted saving of $134,000 per year.
Renewable energy projects:
During the year the implementation of renewable
energy projects progressed, with a total of 44 phase
2 energy projects completed, made up of 16 solar
energy and 28 LED projects. This brings a total of
65 of 69 homes that have had a renewable energy
project implemented (either solar panels, LED lighting
or solar pre-heat hot water or a combination), with
just one remaining project delayed by COVID-19 stage
4 lockdowns in Melbourne. The forecast saving from
the phase 2 energy projects is 3,367MWh of energy
and $589,000 annually.
34 Estia Health | 2019-20 Annual Report
Clean Laundry Lower Emissions
Each of Estia Health’s 69 aged care homes operates an
onsite laundry, servicing residents’ clothes and linen and
the home’s hospitality linen. Combined, our 69 homes
launder over 8,760 tonnes of clothes and linen a year.
During FY19, a full laundry audit was conducted across the
network, finding areas where we could be more energy
and cost efficient in our laundry processes. 22 laundry
dryers were identified as being greater than 25 years old
and 18 being greater than 15 years old. These older dryers
lacked the residual moisture control technology and axial
airflow which speeds up drying time, which makes drying
more efficient and eliminates overuse of energy.
Our commitment to sustainability saw the replacement of
these 40 dryers with new efficient and environmentally
friendly laundry dryers. Resulting in a reduction of carbon
emissions through energy savings by 230 tonnes per
annum and a reduction in operating costs by $134,000
annually.
Estia Health Maroochydore
2019-20 Annual Report | Estia Health 35
Tax Transparency Report | Corporate Governance | Board | Shareholder Information | Annual Financial Report | Directory of Estia Health homes Estia Health Epping NSW
Tax
Transparency
Report
For the year ended
30 June 2020
estIa health lImIted
ABN 37 160 986 201
Chief Financial Officer’s Introduction
A OUR APPROACH TO TAX
A1 Tax Governance and Strategy
A2 International Tax
B TAX RECONCILIATIONS AND CONTRIBUTIONS
B1
Income Tax Expense Reconciliation
B2 Reconciliation of Income Tax Expense
to Current Tax Liability/ (Receivable)
B3 Explanation of Material Temporary
and Non-Temporary Differences
B4 Summary of Tax Contributions
39
40
40
41
41
42
43
38 Estia Health | 2019-20 Annual Report
tax transparency Report | Corporate Governance | Board | Shareholder Information | Annual Financial Report | Directory of Estia Health homes
ChIef fInanCIal offICeR’s IntRoduCtIon
Estia Health Limited (“Group”) is one of Australia’s largest residential aged care providers caring for over 8,000
residents annually across 69 homes in New South Wales, Queensland, Victoria and South Australia.
The Group’s strategy remains to:
• Provide residents in our homes with the highest standards of aged care services in an innovative, supportive
and caring environment;
• Be a market leader in owning and developing high quality residential aged care homes in Australia; and
• Deliver earnings growth through sustained high occupancy rates across all homes, opening new homes, the
enhancement of current homes and acquisitions.
The Group is committed to having in place governance policies and practices that create a low tax risk environment
to support the execution of the Group’s strategy.
In creating a low tax risk environment, the Group:
• Maintains a framework that ensures compliance with all statutory tax obligations;
• Maintains a tax risk management framework including undertaking tax assessments before implementing
material transactions or arrangements that may lead to an increase in tax risk;
• Manages its tax affairs in a proactive manner in accordance with the relevant tax legislation; and
• Maintains appropriate relationships with the ATO and other relevant tax authorities.
In response to the COVID-19 pandemic, Governments at a Federal and State level announced tax relief measures
which included the option for taxpayers to defer the payment of various Federal and State taxes. The Group
elected to apply this option by deferring the payment of its monthly income tax, the payment of Pay As You Go
(“PAYG”) withholding tax and State payroll taxes for Queensland and New South Wales. The deferral applied to
taxes that would have been payable between April 2020 to the end of June 2020. The total amount deferred as at
the end of the period was $22.2 million and the majority of the deferral was for PAYG withholding tax. PAYG was
fully settled in July 2020 and the remaining taxes will be settled before December 2020 in accordance with the
requirements of the tax relief measures.
The information provided in this Report is released on a voluntary basis in accordance with the recommendations
contained in the Board of Taxation’s Voluntary Tax Transparency Code. The Report should be read in conjunction
with the Financial Statements on pages 53 to 162 of this Annual Report.
We are pleased to disclose our approach to managing our tax and the taxes we have contributed in Australia.
stephen lemlin
Chief Financial Officer
2019-20 Annual Report | Estia Health 39
PART A: OUR APPROACH TO TAX
A1
TAX GOVERNANCE AND STRATEGY
The Group’s tax governance is overseen by the Board’s Audit Committee and is guided by its Board Tax Policy and Tax Risk
Management Framework. These policies set out the Group’s approach to conducting its tax affairs and the management of tax
risk. The policies include internal escalation processes, including to the Board’s Audit Committee, dependent on the nature of the
risk and are reviewed on a periodic basis by the Group’s tax team with recommendations referred to the Audit Committee for
approval.
The Group’s philosophy on Tax Risk Management is to ensure that all tax related matters are treated responsibly in line with the
relevant tax laws. The Group has a commitment to transparency and providing accurate disclosures and to act with integrity in all
its dealings.
Where there is uncertainty around a tax position in relation to a transaction or category of transactions, the Group will perform an
analysis prior to adopting a tax position. No tax position will be taken unless the position taken is considered to be more likely than
not to be correct, as defined in the Taxation Administration Act 1953. All tax matters that are considered to be high risk are
reported to the Board’s Audit Committee. Where appropriate, the Group engages with its external advisers to receive tax advice.
The Group seeks to have appropriate relationships with the ATO and other relevant tax authorities. The Group adopts structures
and positions that align to its business outcomes and values and are not driven by tax outcomes.
A2
INTERNATIONAL TAX
The Group is a tax resident of Australia and does not own any foreign asset or have any foreign related party subsidiaries.
Therefore, the Group does not have any transfer pricing transactions or any international related party dealings.
40 Estia Health | 2019-20 Annual Report
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PART B: TAX RECONCILIATIONS & CONTRIBUTIONS
B1
INCOME TAX EXPENSE RECONCILIATION
A full reconciliation of the Group’s accounting loss for the period to its income tax expense is included in Note B7, on page 108 of
this Annual Report. The Group’s accounting loss has been determined in accordance with Australian Accounting Standards
(“Standards”). From this accounting loss, the Group applies Australian tax legislation to determine its taxable income or loss for the
period, by deducting allowable deductions from assessable income.
For the period, the Group has determined that it has taxable income to which it applied the Australian statutory income tax rate of
30% (“30%”) to calculate its tax expense.
Accounting loss before income tax
Add: Goodwill impairment expense *
Accounting profit before impairment and income tax expense
Tax at the Australian statutory income tax rate of 30% (2019: 30%)
Adjustments in respect of income tax of previous year
Permanent differences
Utilisation of unrecognised tax losses
Other
Income tax expense in the consolidated income statement
Effective Tax Rate
2020
$’000
2019
$’000
(108,845)
57,829
136,059
-
27,214
8,164
61
15
57,829
17,349
(632)
4
(176)
(182)
-
-
8,064
16,539
29.6%
28.6%
*also refer to Note C6, on page 120 of this Annual Report.
The Group’s Effective Tax Rate (“ETR”) for the current period is calculated as its income tax expense divided by accounting profit
before impairment and income tax expense. The Group incurred goodwill impairment expense of $136,059,000 in the period and in
accordance with current tax legislation, this expense is not an allowable tax deduction and has been excluded from the calculation
of the ETR in the current period. The calculated ETR for the period of 29.6% deviates from 30% due to differences between
accounting profit and taxable income as explained above.
B2
RECONCILIATION OF INCOME TAX EXPENSE TO CURRENT TAX LIABILITY/ (RECEIVABLE)
Income tax expense in the consolidated income statement
Add/(subtract):
Net timing differences*
Over/(under) provision in prior years
2020
$’000
8,064
8,090
294
2019
$’000
16,539
(642)
341
Current tax expense included in income tax expense
16,448
16,238
Add/(subtract):
Tax payments to tax authorities
Net opening balance
Net current tax (receivable)/ payable
*refer to Note B3 on page 104 of this Annual Report
(9,336)
(15,932)
(607)
6,505
(913)
(607)
2019-20 Annual Report | Estia Health 41
PART B: TAX RECONCILIATIONS & CONTRIBUTIONS
B3
EXPLANATION OF MATERIAL TEMPORARY AND NON-TEMPORARY DIFFERENCES
A detailed reconciliation of accounting profit or (loss) to income tax expense and material temporary and non-temporary differences
is disclosed n Note B7 on page 108 of this Annual Report.
The temporary difference of $8,090,000 in note B2 above is represented as follows:
• During the period, the Group recognised an impairment expense of $8,449,000 following the write down of the carrying value of
tangible assets (refer to Note C4 on page 117). Under tax legislation and in accordance with the standards, the tax deductibility
of the expense is deferred to the earlier of when the asset is disposed or the asset reaches the end of its effective tax life. The
amount of the difference was determined by applying 30% to the impairment expense.
• A binding and unconditional contract of sale of its Mona Vale property was entered into during the period with settlement
expected to be completed by November 2020 (refer to Note C3 on page 116). The estimated income tax on the expected profit
on sale has been brought to account as a deferred tax asset with a corresponding tax liability.
• The remaining balance is represented by changes in accrued expenses, payroll related liabilities such as annual leave and
differences in tax and accounting depreciation rates of buildings.
The temporary differences are as a result of different timing rules between tax and accounting, however the differences will
eventually align.
42 Estia Health | 2019-20 Annual Report
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PART B: TAX RECONCILIATIONS & CONTRIBUTIONS
B4
SUMMARY OF TAX CONTRIBUTIONS
Taxes paid by Estia
Income Tax
Payroll Tax
Fringe Benefits Tax
Council Rates
Land Tax
Stamp Duty
Total
Taxes collected by Estia
2020
$’000
9,336
2019
$’000
15,932
18,663
17,584
141
2,006
1,105
516
180
1,946
1,065
552
31,767
37,259
2020
$’000
2019
$’000
Pay As You Go (PAYG) withholding
67,866
63,730
GST (collected and remitted)
GST (paid and reclaimed)
Total
Recipients of these paid by the Group
Australian Federal Government
State Governments
Local Governments
Total
214
246
(15,671)
(17,795)
52,409
46,181
2020
$’000
2019
$’000
61,885
62,293
20,284
19,201
2,006
1,946
84,176
83,440
All taxes paid by the Group are to Australian Federal, State and Local Revenue authorities.
2019-20 Annual Report | Estia Health 43
Corporate Governance
CoRPoRate goveRnanCe statement
Under ASX Listing Rule 4.10.3, Estia Health is required to
benchmark its corporate governance practices against
the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations, 3rd edition.
Estia Health confirms that it has complied with all
the ASX Governance Recommendations for the
period 1 July 2019 to 30 June 2020 as outlined in our
Corporate Governance Statement and Appendix 4G.
The Corporate Governance Statement is current as
at 18 September 2020 and has been approved by the
Board on that date.
Our Corporate Governance Statement and Appendix 4G
are available on the Estia Health website at
estiahealth.com.au/investor-centre
The Board and management are committed to achieving
the highest standards of professional conduct across
all Estia Health operations. There is regular review and
enhancement of mechanisms to achieve these standards.
Some of the governance activities conducted during
the year include:
• Regularly scheduled meetings with external auditors.
• Engagement of an independent external/internal
auditor resource.
• Overseeing a review of the Company’s risk
management framework and practices and
endorsing the findings and actions.
• Engaging with key regulators.
• Inviting industry experts to Board meetings.
• Board visits to homes, annual leadership
conference and new home openings.
• Undertaking a Board performance review.
• Reviewing the Company’s strategy.
• Reviewing key Corporate Governance policies
and processes, including a review of the Board
and Board Committee Charters.
Risk Management Committee, Nomination and
Remuneration Committee, Royal Commission and
Regulatory Committee, Property and Investment
Committee comprise members who are independent
Directors and each Board Committee has an
independent Director as its Chairman.
All Board members are sent Board Committee papers
and may attend any Board Committee meeting.
Subsequent to each Board Committee meeting, the
Chair presents matters discussed and puts forward
recommendations to the Board.
The Directors’ Report includes the membership of each
Board Committee.
In February 2020, an additional Board Committee was
formed, a COVID-19 Risk Sub-Committee that met and
continues to meet one to three times per week during
the pandemic. The members of this Committee include:
the Chair of the Risk Committee, Chair of the Audit
Committee and Chair of the Board.
ResPonsIbIlItIes of management
The MD/CEO has been granted authority for matters
not reserved for the Board or a Board Committee.
The CEO, COO and CFO report to the Board at
each meeting. In addition to regular reporting from
management, the Board has unlimited access to senior
management and external advisers.
For further information on Corporate Governance at
Estia Health, refer to the Corporate Governance
Statement and the following documents, all found on the
Company website at estiahealth.com.au/investor-centre
• Board and Committee Charters
• Disclosure and Communication Policy
• Diversity Policy
• Trading Policy
• Code of Conduct
• Formation of an executive ESG Committee
• Minimum Shareholding Policy
with agreed focus areas.
• Formation of a COVID-19 Risk Sub-Committee to
provide governance oversight of the response to the
pandemic.
• Whistleblower Policy
• WEGA Report
• Investment Policy and
Liquidity Management Strategy
boaRd CommIttees
Estia Health’s five standing Board Committees assist
the Board in its oversight role. The Audit Committee,
Additional information on Environmental, Social and
Governance is available on the Company website at
estiahealth.com.au
44 Estia Health | 2019-20 Annual Report
Chairman and CEO’s Message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability Tax Transparency Report | Corporate governance | board | Shareholder Information | Annual Financial Report | Directory of Estia Health homes
Our Board
dR gaRy weIss, am
Non-executive Director and Chairman
LL.B (Hons), LL.M (with Dist), JSD
Gary holds the degrees of LL.B (Hons) and LL.M (with
dist.) from Victoria University of Wellington, as well
as a Doctor of Juridical Science (JSD) from Cornell
University, New York.
Gary has extensive international business experience
and has been involved in numerous cross-border
mergers and acquisitions.
Gary is Chairman of Ardent Leisure Group Limited,
Executive Director of Ariadne Australia Limited, and a
Director of several other public companies including
Thorney Opportunities Limited, Hearts and Minds
Investments Limited and The Straits Trading Company
Limited. Gary is also a Commissioner of the Australian
Rugby League Commission and a Director of the Victor
Chang Cardiac Research Institute.
Gary was Chairman of Clearview Wealth Ltd from 2013
to May 2016, Executive Director of Guinness Peat Group
plc from 1990 to April 2011 and has held directorships
of numerous companies, including Tag Pacific
Limited, Pro-Pac Packaging Limited, Coats Group
plc (Chairman), Premier Investments Ltd, Westfield
Group, Tower Australia Limited, Australian Wealth
Management Limited, Tyndall Australia Limited (Deputy
Chairman), Joe White Maltings Limited (Chairman), CIC
Limited, Whitlam Turnbull & Co Limited and Industrial
Equity Limited.
Gary has authored numerous articles on a variety of
legal and commercial topics.
Gary was awarded a Member of the Order of Australia
(AM) in recognition of his significant services to business
and to the community.
Committees: Nomination and Remuneration Committee,
Audit Committee, Property and Investment Committee,
Royal Commission and Regulatory Committee (Chair).
Listed Company Directorships (including those
in the last three years): Ariadne Australia Limited,
Ardent Leisure Group Limited, Thorney Opportunities
Ltd, Hearts and Minds Investments Limited, Ridley
Corporation Limited (resigned 26 August 2020), Tag
Pacific Limited (resigned 31 August 2017), Premier
Investments Limited (28 July 2018), Pro-Pac Packaging
Limited (resigned 27 November 2017).
From left to right
Dr Gary Weiss AM, Ian Thorley, Norah Barlow ONZM, Helen Kurincic, Paul Foster, The Hon. Warwick L Smith AO, Karen Penrose
2019-20 Annual Report | Estia Health 45
Ian thoRley
Chief Executive Officer and Managing Director
Ian has over 30 years’ health and aged care experience
in both Australia and overseas.
Appointed as Chief Executive Officer in October 2018,
Ian was previously Estia Health's Chief Operating
Officer from October 2016, where he was responsible
for leading Estia Health’s operations and care teams,
embedding key improvements resulting in revenue
growth and operational efficiencies, while delivering
consistently high standards of quality care to residents
across a growing portfolio of homes.
Ian’s executive experience includes CEO and COO
roles in large aged care groups, acute private hospital
groups and diagnostic services. Ian has been at
the forefront of major developments that have
shaped Australia’s healthcare sector, including the
privatisation of public hospitals, new reimbursement
and funding models, and a broad range of public/
private sector service models.
Ian has held the position of Non-executive Director in
private equity owned, and ASX listed companies and
has consulted to aged care operators, private hospital
groups, health insurers, health logistics and specialist
health recruitment businesses throughout Australia.
Ian is a Graduate of the Australian Institute of Company
Directors (GAICD) and holds a Master of Commerce
from the University of NSW.
noRah baRlow, onZm
Non-executive Director
BCA, ACA
Norah holds a Bachelor of Commerce and
Administration from Victoria University, and is a
Chartered Accountant.
Norah is amongst Australasia’s most experienced
and respected executives and directors, with an
in-depth knowledge of the aged and health care
sector. Norah also holds extensive experience as the
highly-respected former CEO and former Director of
Summerset Group, a NZX and ASX-listed company
named Australasia’s best retirement village operator
four years running.
Norah has a strong background across business
leadership and management, strategy, corporate
finance, governance, tax and accounting. Norah was
President of the Retirement Villages Association
(NZ) for seven years and made an Officer of the
New Zealand Order of Merit for services to business
in 2014.
Norah was also a Non-executive Director of Ingenia
Communities Group and chair of the Audit Committee
for Methven Limited.
46 Estia Health | 2019-20 Annual Report
Norah stepped down as CEO of Estia Health in
November 2018 and remains on the board as a Non-
executive Director. Norah is currently Chief Executive of
Heritage LifeCare NZ.
Listed Company Directorships (including those in
the last three years): Evolve Education Group Limited
(resigned 18 September 2019), Methven Limited
(resigned 11 October 2017).
Committees: Property and Investment Committee.
helen kuRInCIC
Non-executive Director
MBA, Grad Dip Wom Stud, PBC Crit Care, Cert Nsg, FAICD
Helen holds a Master of Business Administration from
Victoria University.
Helen has extensive executive and Non-executive
experience across the healthcare sector. Helen is
Chairman of Integral Diagnostics Limited, Non-executive
Director of HBF Health Limited, McMillan Shakespeare
Limited and the Victorian Clinical Genetics Service.
Helen was previously the Chief Operating Officer and
Director of Genesis Care for seven years from early
inception in 2007, creating Australia’s largest radiation
oncology and cardiology service business. Previous roles
also include Non-executive Director of Sirtex Medical
Limited, Non-executive Director of DCA Group Limited
which included residential aged care in Australia and
New Zealand, Non-executive Director of AMP Capital
Investor’s aged care business Domain Principal Group,
CEO and Executive Director of residential aged care
provider Benetas and Board member of Melbourne
Health and Orygen Research Centre.
Helen has also been actively involved in healthcare
government policy reform across various areas of the
healthcare sector.
Committees: Risk Management Committee (Chair),
Nomination and Remuneration Committee.
Listed Company Directorships (including those in
the last three years): Integral Diagnostics Ltd (Chair),
McMillan Shakespeare Limited, Sirtex Medical Limited
(resigned 19 September 2018).
Paul fosteR
Non-executive Director
B.Comm, MA, GAICD
Paul holds a Bachelor of Commerce from the University of
Wollongong and a Master of Arts from UNSW Australia.
Paul is an experienced financial services professional
and Company Director, with more than 20 years’
investment experience in the infrastructure, private
equity and real estate asset classes, including
substantial investments in the healthcare sector.
Chairman and CEO’s Message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability Tax Transparency Report | Corporate Governance | board | Shareholder Information | Annual Financial Report | Directory of Estia Health homes
Paul is a Managing Director at Pacific Equity Partners,
one of Australia’s largest alternative investment
management firms. He is also a Non-executive Director
of WINconnect Pty Ltd.
Listed Company Directorships (including those in
the last three years): Seven Group Holdings Limited,
Magnis Energy Technologies Limited (resigned January
2020), Coates Hire Limited (resigned January 2019).
kaRen PenRose
Non-executive Director
B.Com (UNSW), FAICD and CPA
Karen is an experienced Company Director who has
served as a Non-executive Director on the boards of ASX
listed companies in financial services, resources, aged
care and infrastructure sectors for the past seven years.
Karen's executive career was in leadership and CFO
roles, mainly in financial services including roles at
Commonwealth Bank Group and HSBC Bank Australia
for over 20 years. She is passionate about customer
outcomes, financial management and well-versed in
operating in a rapidly changing regulatory environment.
Karen is a Director and Chair of the Audit Committee of
Bank of Queensland, Ramsay Health Care and Vicinity
Centres. She is also Deputy Chairman of Marshall
Investments Pty Limited.
Karen is a member of Chief Executive Women.
Committees: Audit Committee (Chair),
Risk Management Committee, Royal Commission
& Regulatory Committee.
Listed Company Directorships (including those in the
last three years): Bank of Queensland Limited, Vicinity
Centres, Ramsay Health Care, Spark Infrastructure
Group (resigned May 2020), Future Generation
Investment Company Limited (resigned October 2018),
AWE Limited (resigned April 2018).
leanne RalPh
Company Secretary
Leanne is an experienced Company Secretary with
over 15 years in this field, and holds this position for
a number of ASX-listed entities. Leanne is a fellow of
the Governance Institute of Australia and a Graduate
Member of the Australian Institute of Directors.
Paul was a Director of the Opal Aged Care Group
(formerly Domain Principal Group) between 2010 and
2015 and was Chairman of the Group in 2011. Paul
was head of AMP Capital's Infrastructure investment
business in Australia and New Zealand until 2015.
Before AMP Capital, he was an investment professional
at Macquarie Group and Perpetual Investments.
Committees: Nomination and Remuneration
Committee (Chair), Risk Management Committee,
Property and Investment Committee.
the hon. waRwICk l. smIth, ao
Non-executive Director
LLB
Warwick is the Director of Seven Group Holdings
(SGH), a leading Australian diversified operating and
investment group with market-leading businesses with
investments in a range of industrial services, oil and
gas, and media businesses.
Chairman, Advisory Board of Australian Capital Equity,
which has significant investment interests through its
major shareholding in SGH.
Chairman of Ord Minnett, a leading private wealth
management group.
Chairman of Aitken Investment Management (AIM).
The AIM Global High Conviction fund focuses on
delivering high conviction investment solutions for
its investors.
Formerly, Chairman of E*TRADE, Senior Managing
Director of the Australia New Zealand Banking Group
Limited (ANZ), Chairman, ANZ Thailand and Director,
ANZ Greater China and Chairman, ANZ New South
Wales and Australian Capital Territory.
He was an Executive Director with Macquarie Bank
for 10 years and an Australian Federal Government
Minister, with a parliamentary career spanning 15 years,
including Minister for Family Services and Aged Care.
Global Trustee of the Asia Society and Chairman
Emeritus of the Asia Society in Australia.
Formerly, Chairman of the Australia–China Council and
its successor, the National Foundation for Australia-
China Relations, Australia's first Telecommunications
Ombudsman and has received a Centenary Medal and
twice been awarded an Order of Australia.
Committees: Property and Investment Committee
(Chair), Audit Committee, Royal Commission &
Regulatory Committee.
2019-20 Annual Report | Estia Health 47
Shareholder Information
Additional information required under ASX Listing Rule 4.10 and not shown elsewhere in this Annual Report is as
follows. This information is current as at 21 August 2020.
dIstRIbutIon of shaReholdeRs
The distribution of issued capital is as follows:
sIZe of holdIng
no. of shaReholdeRs
oRdInaRy shaRes
% of Issued CaPItal
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
68
1,110
1,275
3,335
1,907
7,695
214,407,603
27,276,657
9,650,721
9,018,482
941,506
261,294,969
82.06
10.44
3.69
3.45
0.36
100.00
dIstRIbutIon of PeRfoRmanCe RIghts holdeRs
The distribution of unquoted Performance Rights on issue are:
sIZe of holdIng
no. of holdeRs
unlIsted
PeRfoRmanCe RIghts
% of total
PeRfoRmanCe RIghts
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
5
6
0
0
0
11
1,288,033
215,427
0
0
0
85.67
14.33
0.00
0.00
0.00
1,503,460
100.00
less than maRketable PaRCels of oRdInaRy shaRes
There are 604 shareholders with unmarketable parcels totalling 73,043 shares.
unquoted equIty seCuRItIes
The Company had the following unquoted performance rights on issue:
11 holders of performance rights issued as part of an employee incentive scheme
1,503,460
100.0%
RestRICted seCuRItIes
The Company had no restricted securities on issue.
48 Estia Health | 2019-20 Annual Report
Chairman and CEO’s Message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability Tax Transparency Report | Corporate Governance | Board | shareholder Information | Annual Financial Report | Directory of Estia Health homes
20 laRgest shaReholdeRs
The twenty largest shareholders of quoted equity securities are as follows:
name
no. of fully PaId oRdInaRy shaRes
% of Issued CaPItal
J P Morgan Nominees Australia Pty Limited
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
Network Investment Holdings Pty Ltd
Argo Investments Limited
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
National Nominees Limited
3rd Wave Investors Pty Ltd
Emalyn Holdings Pty Limited
Network Investment Holdings Pty Ltd
Buttonwood Nominees Pty Ltd
Mr Mark Edward Kennedy
Custodial Services Limited
Mark Edward Kennedy
Kennbros Pty Limited
Riviera Health Pty Ltd
National Nominees Limited
Woodross Nominees Pty Ltd
SEP Super Pty Ltd
Total for top 20 shareholders
Total Quoted Equity Securities
48,573,684
48,494,223
29,342,977
24,665,858
11,809,250
10,163,523
4,900,143
4,364,029
4,250,000
4,102,766
2,580,000
1,966,253
1,910,678
1,890,035
1,277,438
1,156,834
936,278
818,109
688,000
480,920
204,370,998
261,294,969
18.59
18.56
11.23
9.44
4.52
3.89
1.88
1.67
1.63
1.57
0.99
0.75
0.73
0.72
0.49
0.44
0.36
0.31
0.26
0.18
78.21
substantIal shaReholdeRs
The names of the Substantial Shareholders listed as disclosed by notices submitted to the ASX:
name
no. of oRdInaRy fully PaId shaRes
% of Issued CaPItal
Perpetual Limited and Subsidiaries
Seven Group Holdings Limited, Network Investment
Holdings Pty Ltd & SGHs other subsidiaries
United Super Pty Ltd
Citigroup Global Markets Australia Pty Ltd
38,407,475
26,156,399
21,888,457
18,232,894
14.70
10.01
8.38
6.98
2019-20 Annual Report | Estia Health 49
Shareholder Information
...continued
votIng RIghts
In accordance with the Constitution each member present at a meeting whether in person, or by proxy, or by
power of attorney, or in a duly authorised representative in the case of a corporate member, shall have one vote on
a show of hands, and one vote for each fully paid ordinary share, on a poll.
Performance rights have no voting rights.
on-maRket buy-baCks
There is no current on-market buy-back in relation to the Company's securities.
50 Estia Health | 2019-20 Annual Report
Chairman and CEO’s Message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability Tax Transparency Report | Corporate Governance | Board | shareholder Information | Annual Financial Report | Directory of Estia Health homes
Estia Health Maroochydore
Estia Health Twin Waters
Annual
Financial
Report
For the year ended
30 June 2020
estIa health lImIted
ABN 37 160 986 201
Corporate information
Directors' report
Auditor's independence declaration
Consolidated statement of profit or loss
and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Section A: About this report
Section B: Our performance
Section C: Assets and liabilities
Section D: Capital, financing, RADs and risk
Section E: Other information
Directors' declaration
Auditor's report
54
55
93
94
95
96
97
98
101
114
128
142
154
155
2019-20 Annual Report | Estia Health 53
Corporate Information
ABN 37 160 986 201
dIReCtoRs
Dr. Gary Weiss AM
Chairman
Ian Thorley
Managing Director and CEO
Norah Barlow ONZM
Non-executive Director
Paul Foster
Nomination and Remuneration Committee Chair
Hon. Warwick L Smith AO
Property and Investment Committee Chair
Helen Kurincic
Risk Management Committee Chair
Karen Penrose
Audit Committee Chair
ComPany seCRetaRy
Leanne Ralph
RegIsteRed offICe
Level 9, 227 Elizabeth Street
Sydney NSW 2000
PRInCIPal PlaCe of busIness
Level 9, 227 Elizabeth Street
Sydney NSW 2000
solICItoRs
Minter Ellison
Governor Macquarie Tower
1 Farrer Place
Sydney NSW 2000
bankeRs
Westpac Banking Corporation
275 Kent Street
Sydney NSW 2000
audItoRs
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000
54 Estia Health | 2019-20 Annual Report
Chairman and CEO’s Message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability DIRECTORS' REPORT
Your Directors submit their report for the year ended 30 June 2020.
DIRECTORS
The names and qualifications of the Group’s Directors in office during the financial year and until the date of this
report are set out below. Directors were in office for the entire period unless otherwise stated. More information
relating to the Directors can be found in the investor centre section of the Group's website
(https://investors.estiahealth.com.au/investor-centre).
DR. GARY H WEISS AM (CHAIRMAN)
Gary was appointed as an Independent Non-executive Director in February 2016 and was appointed as
Chairman on 31 December 2016.
Gary holds the degrees of Bachelor of Laws (Hons) and Master of Laws (with distinction) from Victoria University
of Wellington, as well as a Doctor of Juridical Science (JSD) from Cornell University, New York.
IAN THORLEY (MANAGING DIRECTOR AND CEO)
Ian was appointed as the Managing Director and CEO on 23 November 2018. Ian previously held the roles of
Chief Operating Officer and Deputy CEO prior to the appointment.
Ian holds a Bachelor of Health Administration and a Masters of Commerce from the University of NSW.
NORAH BARLOW ONZM
Norah was appointed to the Board in November 2014 as an Independent Non-executive Director. Norah was
appointed Acting CEO from September 2016, and appointed permanently to the roles of Managing Director and
CEO in November 2016. Norah stepped down from the roles of Managing Director and CEO on 23 November
2018 and remains on the Board as a Non-executive Director.
Norah holds a Bachelor of Commerce and Administration from Victoria University of Wellington and is a
Chartered Accountant.
PAUL FOSTER (NOMINATION AND REMUNERATION COMMITTEE CHAIR)
Paul was appointed as an Independent Non-executive Director in February 2016.
Paul holds a Bachelor of Commerce from the University of Wollongong and a Master of Arts from the University
of NSW.
HON. WARWICK L SMITH AO (PROPERTY AND INVESTMENT COMMITTEE CHAIR)
Warwick was appointed as an Independent Non-executive Director in May 2017.
Warwick holds a Bachelor of Laws from the University of Tasmania.
HELEN KURINCIC (RISK MANAGEMENT COMMITTEE CHAIR)
Helen was appointed as an Independent Non-executive Director in July 2017.
Helen originally qualified as a Registered Nurse specialising in Intensive Care and holds the degrees of
Graduate Diploma in Women's Studies and an MBA from Victoria University, Melbourne and has also attended
Harvard Business School where she completed programs in Best Practice Leadership and Business Innovations
in Global Healthcare.
KAREN PENROSE (AUDIT COMMITTEE CHAIR)
Karen was appointed to the Board on 17 October 2018 as an Independent Non-executive Director.
Karen holds a Bachelor of Commerce from the University of NSW, CPA and FAICD.
Estia Health Annual Financial Report 2019 - 2020
4
2019-20 Annual Report | Estia Health 55
Tax Transparency Report | Corporate Governance | Board | Shareholder Information | Annual Financial Report | Directory of Estia Health homes DIRECTORS' REPORT
COMMITTEE MEMBERSHIP
During the financial year, the Group had the following committees:
Membership
Audit
Committee
Nomination &
Remuneration
Committee
Risk
Management
Committee
Property &
Investment
Committee
Chair
Member
Member
Member
Karen Penrose
Gary Weiss
Warwick Smith
Paul Foster
Gary Weiss
Helen Kurincic
Helen Kurincic Warwick Smith
Paul Foster
Karen Penrose
Gary Weiss
Paul Foster
Norah Barlow*
Royal
Commission &
Regulatory
Committee
Gary Weiss
Warwick Smith
Karen Penrose
* Norah Barlow was appointed to the Property and Investment Committee on 1 July 2020.
DIRECTORS' MEETINGS
The number of meetings of directors (including meetings of committees of directors) held during the year and the
number of meetings attended by each Director were as follows:
Directors’
meetings
Audit Committee
Nomination &
Remuneration
Committee
No. of meetings held:
15
Eligible Attended
9
Eligible Attended
7
Eligible Attended
Dr. Gary H Weiss AM
Ian Thorley
Norah Barlow ONZM
Paul Foster
Hon. Warwick L Smith AO
Helen Kurincic
Karen Penrose
15
15
15
15
15
15
15
15
14
15
14
15
15
15
9
-
-
-
9
-
9
9
-
-
-
9
-
9
7
-
-
7
-
7
-
7
-
-
7
-
7
-
Risk Management
Committee
Property &
Investment
Committee
Royal
Commission &
Regulatory
Committee
No. of meetings held:
11
Eligible Attended
4
Eligible Attended
3
Eligible Attended
Dr. Gary H Weiss AM
Ian Thorley
Norah Barlow ONZM
Paul Foster
Hon. Warwick L Smith AO
Helen Kurincic
Karen Penrose
-
-
-
11
-
11
11
-
-
-
11
-
11
11
4
-
-
4
4
-
-
4
-
-
4
4
-
-
3
-
-
-
3
-
3
3
-
-
-
3
-
3
Following the declaration by the Prime Minister of Australia, of COVID-19 as a national pandemic on 27 February
2020, the Group convened a COVID-19 Risk Sub-Committee to provide governance oversight of the response to
the pandemic. This Sub-Committee comprised the Chair of each of the Board, the Risk Management Committee
and the Audit Committee. The COVID-19 Risk Sub-Committee held 10 meetings between 27 February and 30
June and, in light of the rapid escalation in Victoria during July, is currently meeting multiple times per week.
Estia Health Annual Financial Report 2019 - 2020
5
56 Estia Health | 2019-20 Annual Report
Chairman and CEO’s Message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability DIRECTORS' REPORT
DIRECTORS' HOLDINGS
As at the date of this report, the interest of the directors in the ordinary shares of Estia Health Limited were:
Director
Number of ordinary shares
Dr. Gary H Weiss AM
Ian Thorley
Norah Barlow ONZM
Paul Foster
Hon. Warwick L Smith AO
Helen Kurincic
Karen Penrose
COMPANY SECRETARY
LEANNE RALPH
48,312
138,001
129,474
24,000
117,000
50,000
32,333
Leanne was appointed as Company Secretary on 3 April 2019. Leanne is an experienced Company Secretary
and is a Fellow of the Governance Institute of Australia and a graduate member of the Australian Institute of
Company Directors.
PRINCIPAL ACTIVITIES AND STRATEGY
The principal activities of the Estia Health Group during the year ended 30 June 2020 continued to be the
provision of services in residential aged care homes in Australia as an Approved Provider under the Aged Care
Act 1997.
The Group’s strategy remains to:
•
•
•
Provide residents in our homes with the highest standards of aged care services in an innovative,
supportive and caring environment;
Be a market leader in owning and developing high quality residential aged care homes in Australia; and
Deliver revenue earnings growth through sustained high occupancy rates across all homes, opening new
homes, the enhancement of current homes, and acquisitions.
THE MARKET IN WHICH ESTIA OPERATES
The Aged Care Funding Authority (“ACFA”) in its 2020 Report disclosed 213,397 operational places in the sector
at 30 June 2019, an increase of 3.0% from the prior year. Services were provided to 242,612 residents (an
increase of 0.5% compared to the prior year) with total revenues of $17.8 billion of which $13.0 billion was
provided by the Australian Government.
In order to access Government supported residential aged care services, potential residents must be assessed
as qualifying for such services by an Aged Care Assessment Team ("ACAT"), and may then select a residential
aged care home of their choice. Only Approved Providers, such as Estia, with approved bed licences in
accredited homes are eligible to provide services which qualify for Government funding support.
The ageing of the Australian population and in particular the ageing of the “baby boomers” is expected to see a
marked increase in the number of Australians likely to need aged care, including residential aged care in coming
years.
The Group’s growth strategy is to expand services to meet demand from this growing demographic trend.
ACFA has also reported in its submission to the Aged Care Royal Commission in April 2019, that there has been
a significant overall decline in the financial performance of the sector in the last two years as a result of
increases in Government funding not being at a sufficient rate to cover the rate of increase in operating costs,
principally staff costs.
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THE MARKET IN WHICH ESTIA OPERATES (CONTINUED)
The emergence of COVID-19 in 2020 presents a further considerable challenge to the sector, particularly in
areas where there are high community infection levels. The pre-existing ailments, co-morbidities and frailty of
residential aged care residents, some of whom are palliative, makes them amongst the most vulnerable to
developing serious illness and potentially accelerated death from the COVID-19 virus. Increased measures
designed to safeguard the health and well-being of staff and residents and to prevent COVID-19 infections
arising in homes will continue to be in place for the foreseeable future. The scale and duration of these conditions
remain uncertain and it is likely that the future earnings, cash flow and financial conditions of the Group will be
impacted. Any regulatory review of the sector’s response and operating model in relation to COVID-19 may result
in changes to the sector's funding, operating model and other requirements, the financial impact of which cannot
yet be quantified with any degree of certainty.
THE GROUP’S PORTFOLIO
The Group delivers services across 69 homes in Victoria (27 homes), South Australia (17 homes), New South
Wales (17 homes), and Queensland (8 homes), of which 62 are freehold sites. As at 30 June 2020, these homes
had 6,182 operational places, and the Group holds a further 408 non-operational and provisional licences
pending activation through future developments.
The Group employs in excess of 7,500 employees as nurses, care workers, catering staff, support and
administration staff and management.
COVID-19
The economic, health and social impacts of the COVID-19 pandemic continue to be experienced across Australia
at the date of this report. The COVID-19 pandemic is presenting enormous challenges, which are being acutely
felt across the aged care sector, particularly in Victoria.
At all times during the pandemic the Group's intense focus has continued to be on the safety and well-being of
residents and staff.
At 14 August 2020, nine of the Group’s 27 homes in Victoria have COVID-19 positive cases in residents or staff,
and no homes in other states had active COVID-19 positive cases.
MARCH TO JUNE 2020
Governance and Response Management
A Board COVID-19 Risk Sub-Committee was established in February and held 10 meetings between
27 February and 30 June. In light of the escalation in Victoria in July, the Committee has been meeting multiple
times per week.
Management established a dedicated Critical Incident Management Team ("CIMT") which works with our 69
homes in managing our response to Australian Health Protection Principal Committee (“AHPPC”) guidelines and
State Directions which are regularly revised. The CIMT closely monitored developments in other countries and
World Health Organisation (“WHO”) guidelines and announcements to learn from those experiences and
pro-actively initiate preventative measures in our homes.
The Group has regularly reviewed and revised its COVID-19 prevention and response plans, and its business
continuity plans in response to the specific challenges posed by COVID-19 as this unprecedented situation
continued to evolve.
Infection Control at Homes
All homes had Infection Prevention and Control (“IPC”) Procedures which were reviewed and revised in light of
COVID-19. Refresher training was undertaken at each home on updated procedures in response to AHPPC
guidelines and State Directions as they evolved during the pandemic.
Infection control processes in relation to new admissions and visitors were reviewed and revised across all
homes, including isolation, temperature testing, health checks and COVID-19 swab tests depending on local
community infection rates and AHPPC guidelines and State Directions.
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MARCH TO JUNE 2020 (CONTINUED)
Suspected cases of COVID-19 in residents or staff were regarded as positive until their status was resolved.
Residents stayed in their rooms and staff were required to self-isolate subject to a test being undertaken and
confirmed negative.
The Group pro-actively introduced paid Quarantine Leave in March 2020 in addition to regular sick leave
allowance for staff who fell within the Group’s isolation requirements, in order to support staff who were
self-isolating. In the period to 30 June 2020, 280 staff took 8,564 hours of paid Quarantine Leave.
These processes were continually monitored and evolved as the pandemic developed in Australia. The Group
introduced visitation limitations in response to local community infection levels, with the intention of reducing
transmission into the Group’s homes prior to the "Industry Code for Visiting Residential Aged Care Homes
during COVID-19" released in May which the Group has adopted. The Group has invested in technology and
additional staff to provide increased resident access and contact with families during this crisis.
Remote working was instigated for the Group's central services teams based in its Sydney and Melbourne
offices when the pandemic was declared. In addition, interstate travel and visitation to homes by those teams
ceased.
The Group enhanced its Employee Assistance Program to support staff as they adapted to the challenges
during the pandemic.
Supply Chain and Personal Protective Equipment
It became evident in early March that nationwide supply chains may not be able to cope with anticipated demand
and the Group moved quickly to secure increased inventories of Personal Protective Equipment (“PPE”). At the
time due to global shortages, PPE was acquired at historically higher prices, and although prices have fallen
from those levels, they are still well above historic levels. Increased PPE inventory levels continue to be held at
homes and regional hubs.
Impact on Estia Homes
During the period up to 30 June 2020, the Group experienced a case of one COVID-19 positive staff member at
its Tuncurry (NSW) home and two at its Kogarah (NSW) home. In each case, the Group’s COVID-19 Response
Plan was activated in conjunction with the relevant local Public Health Unit (“PHU”). Neither home experienced
further infections in residents or staff.
JULY TO AUGUST 2020
In July, an increase in community transmitted cases in Victoria became evident and whilst the Victorian
Government introduced progressively increasing community restrictions, the number of cases of COVID-19
continued to rapidly escalate. In July 2020 the Victorian Government extended the State of Emergency
previously declared and declared a State of Disaster on 2 August 2020.
Restrictions, AHPPC Guidelines and State Directions continued to be updated in relation to aged care services
as well as the broader community.
The COVID-19 pandemic is presenting enormous challenges, which are being acutely felt across the aged care
sector, particularly in Victoria. As of 14 August 2020, it was estimated that there were more than 1,144 residents
in more than 125 residential aged care homes in Victoria who had tested positive for COVID-19.
The Group has responded rapidly and comprehensively to the outbreak in Victoria working with the relevant
Government agencies in managing its response at a home level in accordance with guidelines. Measures taken
have included: restriction of visitors to homes, testing and isolation of new admissions, use of full PPE,
increased dedicated Infection Prevention & Control (“IPC”) personnel, and family/resident liaison staff. The
Group is adopting the recently released Victorian industry voluntary code with the intention of restricting staff to
working at one site. The Group continues to provide paid Quarantine Leave for staff who are symptomatic or
awaiting test results.
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JULY TO AUGUST 2020 (CONTINUED)
Notwithstanding these measures, the Group’s homes at Ardeer and Heidelberg West in Victoria experienced
high COVID-19 positive test rates amongst residents and staff. At Ardeer, as of 14 August 2020, a total of 49
residents and 61 staff had tested positive for COVID-19 since the first confirmed case on 9 July 2020. A total of
29 residents and 54 staff at Heidelberg West had tested positive for COVID-19 since the first confirmed case on
12 July 2020. Some residents were transferred to hospitals from each home and have subsequently returned to
their Estia home.
On 21 July 2020 and 26 July 2020 the Group was issued with Notices to Agree (“Notices”) from the Aged Care
Quality and Safety Commission ("ACQSC") in relation to the COVID-19 outbreaks at Heidelberg West and
Ardeer respectively. These Notices specified additional requirements relating to the monitoring and management
of the homes including:
•
•
•
not admitting new residents into the home until the Victorian Public Health Unit has declared the home
cleared of COVID-19;
the appointment of an independent adviser to assist with ensuring the health and well-being of residents;
providing daily and weekly reports to the ACQSC on managing the outbreak.
These requirements were complied with and Estia continued to have full management control and responsibility
for each of these homes at all times.
The COVID-19 outbreaks in Ardeer and Heidelberg West homes have caused great anxiety for residents, their
families and staff. This is a very difficult time for them all, yet families have expressed concern not only for their
loved ones but also for the other residents, as well as staff. The Group CEO has undertaken regular video
conferences with residents and families to provide support, information and address concerns. Families have
also received regular contact calls from the home.
The challenges at our Ardeer and Heidelberg West homes have demonstrated the compassion and dedication of
Estia staff - both those required to self-isolate and those continuing to work in caring for residents.
Where the Group has had positive cases in other homes in Melbourne, the COVID-19 Positive Response Plan
has been implemented immediately. As at 14 August 2020, the outbreaks have been limited to less than six
residents or staff in each home.
Across all its homes, the Group continues to work closely with each State’s Public Health Unit, the
Commonwealth Department of Health and the ACQSC to manage and monitor residents’ and staff health, safety
and well-being, including following guidelines and directions on restrictions on employees, hospital transfers of
residents on a case-by-case basis and the process for ongoing regular testing.
REGULATORY ENVIRONMENT, REFORM AND THE AGED CARE ROYAL COMMISSION
The residential aged care sector in which the Group operates is highly regulated within the provisions of the
Aged Care Act 1997 and Aged Care Quality and Safety Commission Act 2018. The Commission approves
providers and, monitors the quality of care and services delivered. The Department of Health issues bed
licences on a strictly controlled basis and governs the fees and services which are delivered and funded. As
such Government policy settings have a major impact on the financial performance of providers.
The Royal Commission into Aged Care was called by the Prime Minister in September 2018 amid growing
community concern about the quality of care in the sector. The Terms of Reference are broad, focusing on the
quality of care and future sustainability of the sector.
The Royal Commission handed down an Interim Report in October 2019 and is expected to deliver its final
report in February 2021. The Interim Report specified three recommendations:
•
•
•
To provide more Home Care Packages to reduce the waiting list for higher level care at home;
To respond to the significant over-reliance on chemical restraint in Aged Care; and
To stop the flow of younger people with a disability going into aged care and speed up the process of
transitioning out those young people who are already in Aged Care.
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REGULATORY ENVIRONMENT, REFORM AND THE AGED CARE ROYAL COMMISSION (CONTINUED)
The initial recommendations do not have a direct or significant impact on the Group’s strategy or operations. In
January 2020, the Group along with a significant number of other providers was asked to provide information in
relation to staff hours worked at all homes in the last five years. The Group complied by the requested date.
As at 14 August 2020, the Group has not been asked to appear before the Commission in relation to any
matters relating to its operations nor following any submissions including those made in relation to care in
January 2019, and to staffing hours in January 2020.
On 7 August the Royal Commission announced hearings to inquire into the response to the COVID-19 pandemic
in aged care and, secondly, to inquire into aged care accommodation. The hearings inquired into the response
to the COVID-19 pandemic in Aged Care, and the lessons that can be learned for responding to the current and
any future pandemics, infectious disease outbreaks or other emergencies.
Since the publication of the Aged Care Roadmap in 2016 there have been multiple significant reviews and
reports commissioned by Government into the operation of the Aged Care sector. Most of the recommendations
have not been implemented. The Group has contributed to a number of these reviews, and continues to
advocate for necessary sector reform to create a sustainable and high quality aged care sector where funding
and financing arrangements support the financial viability of efficient providers and provide investment returns
sufficient to attract the capital required to meet the increase in expected demand and quality.
QUALITY OF CARE AND SERVICES
Quality of care and services to residents is the foremost priority for the Group. The Group is committed to
delivering the highest quality care to people who choose to trust in Estia at an important time in their lives.
The Group provides permanent and respite care for people who are no longer able to live at home. A number of
homes have Memory Support Units, providing a safe and supportive environment for residents requiring
additional specialist dementia care. Estia also provides short-term respite care for people who require additional
support if they are being cared for at home by a loved one, or following a hospital stay when they are unable to
return home immediately.
In each home, Registered Nurses are rostered on all shifts, 24 hours a day, every day.
Clinical Care and Quality Standards protocols, policies and procedures are established centrally with oversight
by a Clinical Governance Committee which is chaired by an independent expert Professor of Primary Care, Dr
Simon Wilcock. The application of these policies and procedures at a home level is managed by the Executive
Director of each Estia home supported by the Estia Quality team comprising regional and local educators and
managers. Internal quality audit reviews and validations are regularly undertaken by the Group’s quality team
supported by independent audits. Quality of care is monitored by uniform clinical quality indicators, which are
measured and reviewed by our Quality Improvement Committee and are also assessed against external
benchmarks.
The Group’s transition to the introduction of the new Aged Care Quality Standards on 1 July 2019 involved
increased investment in clinical management and resident care systems, employee education, technology
development, and customer engagement and service programs.
When new residents are welcomed into an Estia home, their individual needs are assessed in order to develop
tailored clinical care plans. The plans are also developed with families included in the process to learn more
about each resident's needs and expectations. This ensures the identification of meaningful ways to assist
residents to feel comfortable and supported in their new home.
Food and nutrition is a critical part of the care and well-being of residents. Home menus are based on residents’
preferences, reviewed by nutritionists and food is prepared fresh each day on-site by Estia chefs. Wherever
possible, food is sourced from Australian producers with a focus on fresh high-quality ingredients. All Estia chefs
attend in-house master class workshops as part of their development and the Group’s commitment in delivering
nutritious, quality meals for all residents.
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CLIMATE CHANGE AND SUSTAINABILITY
Scientific consensus is indicating that climate change is increasingly likely to result in an increase in global
temperatures of 2°C or more relative to the pre-industrial period. Such a change in the global climate will likely
have wide-ranging impacts on society, that may result in consequences which potentially impact the Group in
two ways:
•
•
Transitional consequences relating to a shift to a low carbon and potentially a decarbonised economy
through a change in regulation, policy and technology; and
Physical consequences such as property damage relating to the physical change in climate conditions. For
example, rising temperatures, an increased frequency of droughts and bush fires and an increased severity
of severe weather events.
The Group acknowledges the financial risks relating to climate change and that it is affecting a wide range of
industries around the world. In response to the recommendations of the Task Force on Climate-related
Financial Disclosures ("TCFD"), the Group also acknowledge the need for greater transparency in disclosures
from businesses in industries that are being impacted by climate change. The Group has considered the
financial impact of climate-related risks and has updated where appropriate its disclosures on material
accounting judgements, estimates and assumptions throughout the following Financial Statements for the
period. In addition, the Group has now identified Climate Change as a new Key Business Risk on page 72.
At the current time, based on reasonable forward expectations, which by definition are uncertain, the Group has
not identified specific physical or transitional risks which have had or will have a future material financial impact
on the value of its assets or operations which has not been reflected in these Financial Statements.
OPERATING AND FINANCIAL REVIEW
REVIEW OF FINANCIAL PERFORMANCE
During the eight months to February 2020, the Group's occupancy averaged 93.6%, a decline of 0.2% from the
prior year, though a stronger performance than the sector average. Margin compression continued to be
experienced as a result of Government funding rate increases being below the level of increase in operating
costs, principally nursing and care staff pay rates. Notwithstanding the cost increase, the Group maintained its
staffing levels and rostering policies as a priority in maintaining care and quality standards which contributed to
the negative impact on margin in the period.
From March 2020, the financial impacts of COVID-19 included the following items:
Occupancy
Occupancy in mature homes, representing 5,946 operational beds fell during the early stages of the COVID-19
lock down from 93.8% on 17 March 2020 to 91.7% on 26 April 2020. This fall of 2.1% represented a reduction
of 125 residents, of which 80 comprised respite residents, and 45 being permanent residents. The cancellation
of travel, elective surgery and a slowdown in regular hospital activity during this time, combined with the
Group’s implementation of the AHPPC Guidelines and State Directions for admission of permanent and respite
residents, and heightened visitor restrictions, were major contributing factors to this reduction.
Operational Costs
The Group will continue its intense focus on the safety, care and well-being of its residents and staff at all times.
The Group has seen an increase in staff costs, PPE and other medical supply costs associated with the
management and response to COVID-19 in the period of $2.5 million. The increase in staffing costs includes
higher staffing levels to support residents, family interaction and engagement programs during this period of
reduced or limited visiting access, as well as paid quarantine leave for those staff required to self-isolate.
Government Support and Tax Relief Measures
The Government introduced several financial support measures for Approved Providers in the sector as part of
its response to COVID-19 of which the following impacted the Group in the period:
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OPERATING AND FINANCIAL REVIEW (CONTINUED)
REVIEW OF FINANCIAL PERFORMANCE (CONTINUED)
•
•
•
A temporary monthly funding increase announced for the period 1 March 2020 to 31 August 2020
contributed $1.6 million of revenue up to 30 June 2020.
A one-off payment in June 2020 of either $900 or $1,350 (depending on location of the home) for each
resident based on February census data contributed $5.8 million of revenue in the period.
Federal and State Governments announced various tax relief measures of which the Group participated in
by electing to defer the payment of monthly corporate tax instalments, PAYG remittances and some State
based payroll taxes. The total amount deferred as at 30 June 2020 was approximately $22.0 million.
The Government also announced it would fund Aged Care Workforce Retention Grants of up to $1,600 for each
direct care worker at a residential aged care home. The payments will be made in two payments of $800 in July
and September. Approximately 5,200 of the Group’s employees are eligible and will receive the payments. The
first payment was received in July and this was then paid to eligible employees. Nearly 2,000 home-based
employees engaged in food services, cleaning, administration support and other non-clinical roles were not
eligible for the grant however the Group elected to make a payment totaling $0.5 million in July on its own
account for these employees who have also played a key role in the homes during the pandemic.
Impairment
The ongoing uncertainty of future sector funding and financing, exacerbated by the future uncertainty and
impacts of COVID-19 is expected to have a detrimental effect on future operating cashflows for some time. As a
result of these impacts, the review of the carrying value of the Group’s assets identified a non-cash impairment
charge, primarily to goodwill, of $144.6 million in the period.
A range of assumptions including discount rates, business and industry operating performance, the economic
environment and regulatory conditions were considered in determining the amount of the impairment charge.
The impairment charge comprises $136.1 million of goodwill and $8.5 million across its homes and other
tangible assets.
These impairments are non-cash in nature, have no impact on the Group's existing debt facilities, compliance
with banking covenants or its ability to undertake capital management initiatives.
As a result of these factors, operating loss after tax for the year was $116.9 million.
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OPERATING AND FINANCIAL REVIEW (CONTINUED)
Government revenue (excluding temporary funding)
Government revenue (temporary funding)²
Resident and other revenue ³
Imputed revenue on RAD and bond balances (AASB 16)
Total operating revenue
Space
Employee benefits expenses
Non wage expenses
Royal Commission expenses
EBITDA⁴
Space
Depreciation and amortisation expense
Other (gains)
Impairment expense
(Loss)/ profit for the period
Space
Imputed interest cost on RAD and bond balances (AASB 16)
Net finance costs
(Loss)/ profit for the year before income tax
Income tax expense
(Loss)/ profit for the year after income tax
FY20
$'000
435,926
7,382
150,193
43,407
636,908
416,000
94,227
101
126,580
39,119
(214)
144,622
(56,947)
43,407
8,791
(108,845)
8,064
(116,909)
FY19¹
$'000
427,987
10,336
147,662
-
585,985
386,804
103,493
1,721
93,967
28,719
(36)
465
64,819
-
6,990
57,829
16,539
41,290
FY18¹
$'000
404,064
-
142,990
-
547,054
360,216
96,755
-
90,083
22,163
(363)
3,839
64,444
-
7,279
57,165
16,011
41,154
¹ Effective from 1 July 2019, the Group adopted the modified retrospective approach when transitioning to AASB 16. As a
result the comparative periods have not been adjusted.
² Government revenue for FY20 and FY19 includes the impact of the temporary funding increase (Including additional funding
for COVID-19).
³ Resident and other revenue for FY20 excludes the impact of the RAD/bond non-cash revenue arising as a result of the
adoption of AASB16.
⁴ EBITDA is categorised as non-IFRS financial information prepared in accordance with ASIC Regulatory Guide 230 -
Disclosing non-IFRS financial information, issued in December 2011. EBITDA is a measure consisting of earnings before
interest, tax, depreciation, amortisation and impairment expenses and gain/loss on sale of assets held for sale and has been
adjusted from the reported information to assist readers to better understand the financial performance of the business in each
financial period. This non-IFRS financial information, while not subject to audit, has been extracted from the financial report,
which has been subject to an audit by the external auditors.
REVIEW OF FINANCIAL POSITION AND CASH FLOWS
On 16 August 2019 the Group renewed its $330 million syndicated debt facility which will now expire in
November 2022. Net bank debt at 30 June 2020 was $99.4 million, which represents a bank debt gearing ratio
of 1.3X EBITDA (on a pre-AASB 16 basis).
Conversion of EBITDA to cash remained strong with a near 100% conversion of EBITDA for the period.
Total capital investment for the year ended 30 June 2020 was $80.6 million (2019: $93.8 million).
During the 8 months to the end of February 2020, overall RAD balances increased to $831.5 million, with net
RAD inflows of $26.5 million, of which $19.3 million came from new homes which opened in the preceding 12
months.
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OPERATING AND FINANCIAL REVIEW (CONTINUED)
REVIEW OF FINANCIAL POSITION AND CASH FLOWS (CONTINUED)
Subsequent to the declaration of the COVID-19 pandemic, overall RAD balances have increased to $836.3
million at 30 June 2020 and were $832.7 million at 14 August 2020 notwithstanding the fall in occupancy
experienced since that time.
DEVELOPMENTS AND ACQUISITIONS
$80.6 million of capital was invested in the continued development of new homes, refurbishment and
improvement of existing homes.
New Homes
The 110 bed home which the Group opened at Southport (Queensland) in May 2019 performed strongly during
the period reaching 100% occupancy by 9 February 2020 which has been sustained since that time. In August
2019 the Group opened a 126 bed home at Maroochydore (Queensland) which had reached an occupancy level
of 70.6% occupancy by 30 June 2020. Both homes deliver high quality of care in outstanding environments and
are delivering financial performance ahead of expectations. Notwithstanding the start-up nature of these two new
homes, the combined financial result in the period from both homes was a net positive EBITDA contribution of
$0.5 million in the period.
Estia completed significant refurbishment programs in 13 homes with 1,187 beds during the period, improving
the quality of amenities provided to residents, and bringing the total number of homes qualifying for the higher
accommodation supplements to 47.
Planned New Homes
In November 2019 the Group announced plans for three new projects:
•
•
•
Extension of our home in Burton, South Australia to increase capacity by 24 beds;
Construction of a new 118 bed home at Aberglasslyn, New South Wales; and
Construction of a new 116 bed home at Mount Barker in South Australia.
The Group has a development pipeline with the capacity to deliver approximately 600 new beds over the next
three to four years and once development plans are activated.
Divestments
In May 2019 the Estia home in Mona Vale (NSW) was closed after a review confirmed it would not meet future
community expectations for residential aged care homes. After detailed review it was decided that the best
option for the site was to sell the property. The Group entered a binding unconditional contract to sell the site for
$10.95 million with settlement due in the second half of FY20. The Group has subsequently agreed to defer
settlement to November 2020 upon receipt of payment of an additional $125,000 in June 2020. The book value
of the site at 30 June 2020 was $2.9 million.
Acquisitions
There were no business acquisitions completed during the period, though the Group continues to identify and
carefully consider single home or portfolio acquisition opportunities against the Group’s investment criteria.
DIVIDENDS
No final dividend has been declared for the year ended 30 June 2020
Dividends paid during the year were as follows:
Dividend
Date paid
Fully franked
dividend per
share
Total
Dividend
Final dividend for the year ended 30 June 2019
Interim dividend for the year ended 30 June 2020
2 October 2019
27 March 2020
7.8 cents
5.4 cents
$20,328,082
$14,098,838
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KEY BUSINESS RISKS
The following business risks are considered to be key risks to the Group’s performance and growth.
CHANGES TO REGULATORY OR FUNDING FRAMEWORK
Risk
Impact
The Australian residential aged care industry is highly regulated, with more than 70% of the total
revenue comprising funding from the Australian Government. Almost all of the Group’s revenues
were derived from services provided in accordance with the Aged Care Act 1997 and approximately
74% was paid to the Group from the Australian Government directly. Capital flows from Refundable
Accommodation Deposits ("RADs") are also governed by the same legislation.
Any regulatory change or changes in Government policies in relation to existing legislation for the
industry may have an adverse impact on the way the Group promotes, manages and operates its
homes, and its financial performance and the carrying value of its assets, including bed licences.
Changes to the regulatory framework could also impact on competition through deregulation or
changes to capital requirements. Regulatory restrictions may also become more burdensome in the
future, which may require the Group to dedicate more time and expenditure to ensuring that the
Group complies with such regulations. Additional accreditation and other requirements, including
changes in relation to accommodation and infection control emanating from COVID-19 may result
prior to or following the Aged Care Royal Commission report expected in February 2021.
Mitigant
Ageing demographics point to increasing demand for Residential Aged Care places and services in
the next decade, notwithstanding an expected increase in funding and take-up of Home Care. The
Group monitors demand, services and competitive market dynamics as well as RAD funding levels
and preferences and supports the Federal Government’s and Royal Commission's aspirations for
the provision of the highest quality residential aged care and value for money to the Government
and residents.
ESTIA MAY EXPERIENCE SHORTAGE OF EMPLOYEES AND/OR UPWARD WAGE PRESSURE
Risk
The Group’s business depends on a specialised health and aged care workforce. There is a risk
that the Group may not be able to retain or expand a workforce that is appropriately skilled and
trained to meet the existing or future demands of residents at its homes and/or a risk that a
shortage of employees leads to upward wage pressure. Competition from other health care
providers, such as the National Disability and Insurance Scheme ("NDIS"), hospitals, other
residential aged care homes and home care services, for appropriately skilled staff and a general
industry shortage of staff in key areas, such as nurses and other skilled staff may also increase the
bargaining power of healthcare professionals and can lead to upward pressure on wages and
salaries.
Impact
Increasing labour costs may adversely affect the Group’s business, financial performance and
position and future prospects. This may arise as a result of increases in wages which the Group is
unable to pass on to residents or is not recognised in full in the Aged Care Funding Instrument
("ACFI") consumer price index adjustments, and/or increase in the use of agency staff, which
typically results in higher staffing costs to the Group
Mitigant
The Group has a program to develop and deliver training for all staff in relation to specialised skills
required for quality aged care provision. Importantly the Group's training is provided to, and focused
on, both clinical and non-clinical staff.
The Group is also focused on optimising its existing workforce mix to offer secure long-term
opportunities to care employees, with extensive planning around leave and roster management to
reduce dependence on casual and agency employees.
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KEY BUSINESS RISKS (CONTINUED)
RAD BALANCES
Risk
Impact
Mitigant
The Group is exposed to risks associated with a decline in RAD balances due to a range of factors.
If a larger than expected number of RAD paying residents were to leave the Group’s aged care
homes, the Group might be required to repay a large sum of RADs, all of which may not be able to
be replaced immediately. The Group is also exposed to risks that may adversely affect the future
value of the Group’s total accommodation bonds/RADs, including specific issues arising in the
Group (such as a non- compliance or loss of certification at a home), a general reduction in the
price that can be achieved for new RADs, a shift away from RAD payments due to a preference for
other payment models by consumers, or demand for the Group’s aged care services changing over
time due to general economic factors.
There may be material impact on the Group’s cash flows and debt levels if a high number of
departing RAD payers are subsequently replaced by non-RAD paying residents, such as residents
who elect to make a daily accommodation payment or are concessional residents.
The Group regularly monitors and analyses RAD movements across the portfolio, maintains a
formal liquidity policy to ensure sufficient cash reserves are on-hand to refund RADs as and when
they fall due, supported by the Group’s bank debt facility that is available for use to fund future
developments and capital expenditure if RAD inflows reduce.
OCCUPANCY LEVELS MAY FALL
Risk
The Group's occupancy levels may fall below expectations as a result of numerous factors,
including but not limited to:
Increased competition
•
• Changing consumer trends
• Declining referrals from hospitals and other sources
• Growth of home care services
• Pandemic or epidemic with local, regional or national impact
Impact
Mitigant
Reduced occupancy levels may adversely affect the Group’s financial performance as it will lead
directly to reduced revenues, whilst costs may not be able to decrease in line with the negative
changes in occupancy. Reduced occupancy levels may also have adverse effects on the cash flow
of RADs.
The Group proactively manages its relationships with referrers as well as its standing in the
communities in which it operates. Due to the network structure of the homes, the Group is also able
to provide prospective residents of homes with a number of options if they are on a waiting list for a
home that may be at full capacity. The Group monitors demand, services and competitive market
dynamics in relation to each home.
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KEY BUSINESS RISKS (CONTINUED)
FAILURE TO MEET CLINICAL CARE STANDARDS
Risk
As an approved aged care provider, the Group maintains a documented system of clinical
governance to promote and support the health, safety and quality of care provision to residents,
with the objective of ensuring compliance with the applicable legislation and departmental policies.
Impact
Mitigant
The Group may experience a decline in its clinical outcomes in circumstances where incidents are
not identified, assessed or reported, employees do not follow policies and procedures, or external
health consultants do not provide the service, or the quality of service expected.
Failures to meet clinical care standards may lead to adverse impacts on the Group’s reputation in
the industry and community, leading to a reduction in occupancy. Serious failures may result in
adverse reports by the ACQSC, sanctions or in extreme circumstances, may lead to the loss of
accreditation as an Approved Provider. As a result, there may be an overall decline to profitability
due to decreased occupancy and/or additional costs required to ensure clinical care standards are
improved. Additionally, there may be an increase in medico-legal risk, regulator action and an
increase to medical indemnity and other costs.
The Group seeks to ensure that its clinical care standards are of the highest quality and any decline
in standards are addressed swiftly. The Risk and Quality Management Frameworks, systems and
processes, with diligent oversight provided by the executive leadership team, provides clinical
evaluation with corrective actions as need is identified. The Group employs a Chief Quality and Risk
Officer, who is primarily responsible for clinical governance strategies and in partnership with
People and Culture, the clinical education and development of the Group’s employees.
In addition, the Group has also established a Clinical Governance Committee to provide clinical
oversight and evaluation of clinical improvement strategy and performance. This Committee is
independently chaired by a Professor of Primary Care, Dr Simon Wilcock.
ESTIA'S REPUTATION MAY BE DAMAGED
Risk
Impact
Mitigant
The Group operates in an industry in which its reputation could be adversely impacted should it, or
the aged care sector generally, suffer from any adverse publicity. The Group may also suffer
reputational damage in the event of medical indemnity claims, litigation or coronial inquests.
Any such damage to the Group’s reputation could result in existing residents moving from Estia’s
homes to other competitor residential aged care homes or reduce Estia’s ability to attract new
residents to its homes, both of which could adversely impact the Group’s financial performance,
position and future prospects.
The Group has Risk and Quality Management Frameworks that seek to identify and profiles risk and
quality outcomes across the business. These Frameworks are driven at Executive level by the Chief
Quality and Risk Officer. Trends across the business are also tracked through frequent analysis of
the feedback, complaints and other data and are reviewed by the home leadership and also by
executive leadership. The focus is to respond rapidly to concerns and to resolve matters in the most
efficient and effective manner.
Incidents that may damage the Group's reputation at a home level are escalated to the Executive
as part of the quality and risk policy in order to ensure investigation is conducted and actions taken
as findings indicate.
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KEY BUSINESS RISKS (CONTINUED)
INFORMATION TECHNOLOGY (IT) SYSTEM BREACHES OR LOSS
Risk
Impact
Mitigant
Sensitive information is stored electronically, and there are risks of systems failure, cyber-attack,
data theft or other malicious actions that could cause business interruption or leakage of
information.
These systems failures or breaches could adversely affect the Group’s operations, reputation and
financial performance.
The Group has implemented a framework of appropriate security and back-up protocols, including
training of staff in relation to privacy and data security. The strength and effectiveness of this
framework are regularly assessed, tested and improved. The Group also continually reviews and
invests in its core IT systems. Reporting and management of IT risk is part of the Board Risk
Committee Charter.
GROWTH MAY BE CONSTRAINED BY ABILITY TO SECURE BED LICENCES
Risk
Impact
Mitigant
Approved Providers may only provide funded places to residents to the extent of bed licenses held.
Bed licenses are allocated by the Government under an allocation process known as the Aged
Care Approvals Round ("ACAR"). The process identifies geographical areas where it believes
increased supply is required, a number of provisional licenses are allocated to an area and
providers are able to apply for these. Past ACAR rounds have seen many more applications than
has been available, and not all providers receive the number of bed licenses they would like to
secure. Growth may also be constrained if limitations on multiple-bed rooms result from regulatory
or other assessment of COVID-19 IPC guidelines.
Estia may not be able to secure bed licenses to allow it to grow the capacity as quickly as it might
do if such a constraint did not exist
The Group applies for licences in ACAR rounds, will consider acquiring licences where they are
available for sale/transfer, and will consider applying to move licenses within its portfolio of homes
to maximise occupancy and development opportunities. The Group will not commit future significant
development funds unless licenses are substantially secured for a development.
INABILITY TO RECRUIT AND RETAIN KEY PERSONNEL
Risk
Impact
Mitigant
The Group may experience an inability to recruit and retain personnel to identified key positions at
home and or executive level. This may be due to approaches by recruitment professionals active in
the market or a decision to exit the sector due to the multiple challenges faced and or negative
media sentiment in response to the Aged Care Royal Commission and the impact of COVID-19.
The decision may be triggered by opportunities that have greater financial reward or other benefits.
High levels of turnover at the home and or executive level can affect occupancy, standards of
clinical care and operational efficiency and effectiveness. Replacement of key personnel is
expensive and can be destabilising to the business.
The Group’s People and Culture team works to develop an internal pipeline of management ready
candidates for key roles via bespoke Emerging Leader Programs. Group wide employee
engagement surveys are undertaken regularly to evaluate culture and the key personnel
experience. Strategies are developed to address issues identified. Communication strategies that
celebrate the resident life experience, recognise team initiatives and milestones and achievements
are key elements to ensure employees are recognised.
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KEY BUSINESS RISKS (CONTINUED)
PANDEMIC OR EPIDEMIC
Risk
Impact
A pandemic or epidemic, such as COVID-19 may have a local, regional or national impact on the
Group.
Local impact may result in resident and staff infection at an Estia home, which may cause a home
lock down, staff shortages and occupancy reduction. Cost increases may result from increased
infection control activity including PPE costs, cleaning costs, and additional support staff. Revenue
losses may result from occupancy reductions, and from the cessation of Additional Services billing.
Reputational damage resulting from the manner in which an outbreak was managed may be longer
lasting and may continue to impact occupancy and the ability to retain staff in the future.
Regional impact, even if an Estia home does not experience an outbreak, may result in reduced
occupancy arising from community concerns about safety or local authority restrictions on access to
homes. Staff shortages may result from illness, quarantining or movement restrictions. Staff
shortages may also arise if multiple homes in a region experience outbreaks and require additional
or “surge” staffing which may make it difficult for the Group to retain staff for its own homes.
National impact, such as that seen with COVID-19, may result in supply chain disruption,
restrictions on population movement, and wider economic, health and social impacts which may be
longer lasting.
Mitigant
Local risk mitigation is managed by the adoption of consistent and comprehensive infection control
procedures, cleaning and hygiene in the first instance, including staff training. Procedures are in
place for close monitoring of all resident and staff health for signs of infection, but especially during
high levels of community infection, whether or not during a pandemic or epidemic.
In the event of an outbreak, policies and procedures are in place designed to rapidly isolate and test
residents and staff, and to adopt the wearing of appropriate PPE. Established processes are in
place to escalate incidents to management. In the event of an outbreak during a pandemic, it is
standard procedure to establish a Critical Incident Management Team to oversee response at a
home level. Surge staffing plans have been designed to provide additional skilled resource from a
variety of sources at short notice if required, and homes have access to regional PPE stock in case
of shortages.
The extent of the financial impact associated from infection at a single home, or more than one
home are mitigated by the fact that the Group’s earnings are generated from 69 homes with a
geographic dispersion in Australia. The Group maintains bank credit facilities well in excess of its
normal day to day operational needs with the intention of maintaining solvency and liquidity during
abnormal events such as infection outbreaks which may impact home profitability and RAD
balances. No one home in the Group contributes more than 5% of Group operational cashflow, and
most are below 3%.
Regional risk mitigation is managed by the relevant Regional Managers supported by central
clinical and quality teams in adopting the Group’s pandemic response guidelines. Central and
regional management lead comprehensive liaison with local and state authorities to ensure
compliance with legislation and guidelines and to share relevant information pertaining to the extent
of infection in the area.
National risk mitigation is managed with Group-wide response guidelines and the declaration of a
pandemic is a trigger for the establishment of the national Critical Incident Management Team
(“CIMT”) which will then lead the emerging national response. The CIMT comprises Executive Team
members supported by internal and external technical experts and resource as required. Depending
on the extent of the impact of the pandemic, key Executives may be seconded full-time to the CIMT
and their operational roles backfilled.
Mitigant
Mitigant
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DIRECTORS'REPORTKEYBUSINESSRISKS(CONTINUED)PANDEMIC-COVID-19SPECIFICRiskOn18March2020theWHOdeclaredcoronaviruscausedbytheCOVID-19virusaglobalpandemic.Subsequenttothatdatetherehavebeenmorethan20millioninfectionsand725,000deathsworldwide.Australia’sresponseandinfectionrateswereinitiallyverylowcomparedtotherestoftheworldduringthis“firstwave”withaverylowrateofcommunityinfectionandtransmissionseen.Intheabsenceofavaccinethehighlycontagiousnatureofthevirus,andthehighconsequencesonthesick,elderly,andfrail,presentsanongoingrisktothecommunityandtotheelderlyinparticular.InlateJune2020casesbegantoincreaseinVictoriaandtheVictoriangovernmentsubsequentlyimplementedincreasingrestrictions,lockdownsandon2August2020declaredaStateofDisasterasaresultofwidespreadcommunitytransmission.Residentsofresidentialagedcarehomesaregenerallyfrail,sufferfromco-morbidities,dementia,arereliantonday-to-daypersonalandclinicalcare,andareapproachingtheendoftheirlives.TheseresidentsarethemostvulnerabletotheseriouseffectsofCOVID-19infection.Somehealthauthoritiesandadvisershaveindicatedthatintheabsenceofavaccineanongoingseriesoflockdownsandrestrictedoperationsmaycontinueforasignificantperiodoftime.ImpactThepotentialimpactoftheCOVID-19pandemiconthebusinessincludebutarenotrestrictedto:•reducedoccupancyasaresultoffamilieselectingnottoadmitto,ortoremovetheirlovedonesfromagedcare•reducedoccupancyasaresultofhomesbeingclosedtonewadmissionsduringeithercommunityorhomeoutbreaks•reducedoccupancyasaresultofreputationaldamageassociatedwithoutbreaksandconsequencesofoutbreaksatEstiahomesortheagedcaresectorasawhole•areducedabilitytosecuresufficientsuitablytrainedstafftoworkinhomes•changeinworkpracticestolimitcasualworkerstooneemployerand/orplaceofwork•potentiallegalclaimsbystaff,residents,residentfamilies,orvisitorswhomayhavebecomeexposedtotheviruswhichmaybelinkedtoanEstiahomeandanyresultantliabilities•increasedcostsofrespondingtoandmanagingcommunityandhomeoutbreakswhichincludePPE,staffcosts,medicalandsurgicalsupplies,cleaningandadvisorysupportservices•increasedcostsassociatedwithchangestotheoperationsandphysicaldesignofresidentialagedcarehomeswhichmayresultfromlegislativeorotherreviewsMitigantTheGrouphasrespondedtothepandemicwiththeestablishmentofaBoardRiskSub-Committeetoprovidegovernanceoversightoftheresponsetothepandemic.TheGrouphasestablishedaCriticalIncidentManagementTeamtaskedwithadoptingrevisedprotocolsandproceduresinlinewithAHPPCguidelinesandStateDirectionswiththeobjectiveofminimisingtheriskofintroducingCOVID-19infectionintoahomeandinfectionspreadsintheeventofaresidentorstaffmembertestingpositiveforCOVID-19.Specificmattersinclude:•Entryandaccessprotocolsandproceduresforstaff,residentsandvisitors•InfectionPreventionControlprocesses,protocols,training,monitoring,andexpertiseincludingPPEusageandtraining•COVID-19responseplansateachhome•WHSrequirementsforalltheGroup’shomesandpremises•BusinesscontinuityplanscontinuetoberevisedEstiaHealthAnnualFinancialReport2019-202020Tax Transparency Report | Corporate Governance | Board | Shareholder Information | Annual Financial Report | Directory of Estia Health homes DIRECTORS' REPORT
KEY BUSINESS RISKS (CONTINUED)
PANDEMIC - COVID-19 SPECIFIC (CONTINUED)
• Staff quarantine leave, rostering and single-home work requirements
• PPE supply chains, stock levels and logistics
• Insurance programs
• Applying for all applicable COVID-19 Government subsidy and grant assistance programs
available
CLIMATE RISK
Risk
Impact
Impact
Impact
Scientific consensus is indicating that climate change is increasingly likely to result in an increase in
global temperatures of 2°C or more relative to the pre-industrial period. Such a change in the global
climate will likely have wide-ranging impacts on society and businesses.
The current understanding of the potential financial risks posed by climate change to companies,
investors, and the financial system as a whole is still at an early stage. The Task Force on Climate
Related Financial Disclosures has identified climate related risks as falling into two major
categories: (1) risks related to the transition to a lower-carbon economy and (2) risks related to the
physical impacts of climate change.
Transition Risks
Transitioning to a lower-carbon economy may entail extensive policy, legal, technology, market, and
reputational risks resulting from changes to address mitigation and adaptation requirements related
to climate change. Depending on the nature, speed, and focus of these changes, transition risks
may pose varying levels of financial and reputational risk to organisations. These effects may also
result in second and third order effects on their supply and distribution chains.
Physical Risks
Physical risks resulting from climate change can be event driven (acute) or longer-term shifts
(chronic) in climate patterns. Physical risks may have financial implications for organisations, such
as direct damage to assets. Financial performance may also be affected by changes in water
availability, sourcing, and quality; food security; and extreme temperature changes affecting
organisations’ premises, operations, supply chain, transport needs, and employee safety. Acute
physical risks refer to those that are event-driven, including increased severity of extreme weather
events, such as bush fires, cyclones, hurricanes, or floods. Chronic physical risks refer to
longer-term shifts in climate patterns (e.g., sustained higher temperatures) that may cause sea level
rise or chronic heat waves.
Mitigant
The Group has established a Sustainability Committee, which reports to the Board Risk
Sub-Committee, which has responsibility for monitoring and providing advice to management and
the board on activities which should be undertaken to mitigate the Group’s exposure to climate
change derived risks, both transition and physical risks. The Committee engages external
consultants to conduct assessments and mitigation plans where appropriate, including climate
change impact assessments for each home in the Group’s portfolio including vulnerability to acute
and chronic climate change conditions or events. New homes and potential acquisitions are
assessed for climate change resilience as part of due diligence.
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SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than those explained in this report relating to COVID-19, there were no significant changes in the state of
affairs of the Group during the financial year ended 30 June 2020.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
DIVIDENDS
On 18 August 2020, the Directors resolved to not pay a final dividend for the financial year ended 30 June 2020.
COVID-19
The impact of the COVID-19 pandemic after the Balance Date is explained on page 144 of this report.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Group will continue to prioritise the safety, care and well-being of both its residents and staff at all times.
The Group will continue to assess, monitor and manage the impacts of the COVID-19 pandemic on the
business. The Group has and continues to expect to see lower occupancy levels, an increase in staff costs, and
in Personal Protective Equipment and other medical supply costs associated with the management and
response to COVID-19. The increase in staffing costs includes higher clinical, Infection Prevention Controls,
personal care, and family/resident liaison staff to support residents and families at this time. Paid quarantine
leave continues to be available for those staff required to self-isolate. The future level and duration of this
increase in costs is highly dependent on uncertain future events driven by the COVID-19 pandemic.
The Federal Government has issued a number of schemes to provide additional financial support to assist
Approved Providers to offset the impact of cost increases arising from responding to COVID-19. The Group will
apply for such amounts for which it believes it is eligible but is not able to quantify total amounts with any degree
of certainty at the present time.
The Royal Commission into Aged Care commenced during FY19 and continues into FY21. The Commission
handed down its Interim Report in October 2019 and is expected to make its final report in February 2021. The
Commission has wide terms of reference including the financial sustainability of the sector and is likely to have
recommendations which will impact the sector, and the Group, both operationally and financially.
On 7 August 2020 the Royal Commission announced hearings to inquire into the response to the COVID-19
pandemic in aged care and, secondly, to inquire into aged care accommodation. The hearings inquired into the
response to the COVID-19 pandemic in aged care, and the lessons that can be learned for responding to the
ongoing and any future pandemics, infectious disease outbreaks or other emergencies.
The Group continues to advocate for necessary sector reform which will result in a sustainable and high quality
aged care sector where funding and financing arrangements support the financial viability of efficient providers
and provide investment returns sufficient to attract the capital required to meet the increase in expected demand
and quality.
Other than the likely developments disclosed above and elsewhere in this report, no matters or circumstances
have arisen which significantly affected or may significantly affect the operations of the Group, the results of
those operations, or the state of the affairs of the Group in future financial years.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group is not subject to significant environmental legislation under either Commonwealth or State legislation.
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PERFORMANCE RIGHTS
UNISSUED SHARES
As at the date of this report, there were 1,526,515 unissued ordinary shares under performance rights (2019:
1,522,703).
SHARES ISSUED AS A RESULT OF THE VESTING OF PERFORMANCE RIGHTS
A total of 13,693 performance rights were granted during the year ended 30 June 2020 (2019: nil) and were
issued as shares on 24 July 2020. During the year ended 30 June 2020, 994,018 rights were granted (2019:
628,712) and 106,584 rights were forfeited (2019: nil).
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
In accordance with provisions in its constitution, the Estia Health Limited (the 'Company') has executed deeds of
indemnity in favour of former and current directors and officers of the Company in relation to potential liabilities
including:
(a)
(b)
(c)
(d)
liabilities incurred by the person in the capacity as an officer where permitted under section 199A(2) of
the Corporations Act 2001;
legal costs incurred in relation to civil or criminal proceedings in which the officer becomes involved
because of that capacity;
legal costs incurred in connection with any investigation or inquiry of any nature because of that
capacity; and
legal costs incurred in good faith in obtaining legal advice on issues relevant to the performance of their
functions and discharge of their duties as an officer.
The terms of these indemnities require repayment of sums advanced by way of legal costs in the event that the
relevant officer is found to have committed wrongs of a nature the Company is prohibited from indemnifying
under section 199A(2) of the Corporations Act 2001.
In accordance with its Constitution the Company has paid a premium for a contract insuring all directors,
secretaries, executive officers, officers and senior managers of the Company against liabilities incurred by those
persons in that capacity, on terms and conditions commonly available in the insurance market.
In accordance with usual commercial practice, the insurance contract prohibits disclosure of details of the nature
of the liabilities covered and the premium payable.
The contract does not provide cover for the independent auditors.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Group has agreed to indemnify its auditors, Ernst & Young Australia, as part
of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an
unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year.
NON-AUDIT SERVICES
The following non-audit services were provided by the Group's auditor, Ernst & Young Australia. The directors
are satisfied that the provision of non-audit services is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service
provided means that auditor independence was not compromised.
Ernst & Young Australia received or are due to receive the following amounts for the provision of non-audit
services:
Tax compliance services
$
87,900
87,900
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ROUNDING
The amounts contained in this report and in the financial report have been rounded to the nearest thousand
dollars ($’000), under the option available to the Group under ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191. Estia Health Limited is an entity to which the class order
applies.
This report is made on 18 August 2020 in accordance with a resolution of Directors.
Dr. Gary H Weiss AM
Chairman
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Remuneration report – audited
Dear Shareholders,
The Estia Health Limited (‘Estia’ or the ‘Group’) Board is pleased to present the Remuneration Report for the year ended 30 June 2020
(‘FY20’). Whilst this report reflects the performance of the Group during FY20 it is delivered against the backdrop of the significant
escalation of the impact of COVID-19 upon residents, their families and staff working in the Australian residential aged care (‘RAC’) sector in
the period since 30 June 2020, including the substantial impact upon residents, their families and staff at a number of Estia’s RAC homes.
The combined uncertain impacts of COVID-19, the Aged Care Royal Commission and the ongoing failure of sector funding to keep pace
with resident care costs make this a time of unprecedented challenge for the aged care sector. Given this environment, the need to balance
requisite restraint in senior executive remuneration practices against the challenges of attracting, retaining and motivating industry leading
talent as a key input to delivering the best possible standard of care to Estia’s residents, for the benefit of all of the Group’s stakeholders,
remains an acute focus of the Group’s Board.
The Board regards the objective of maintaining stability in Estia’s Executive Key Management Personnel (‘KMP’) and broader senior
executive group as critical to ensuring that the Group remains optimally positioned to respond effectively to the current challenges facing the
RAC sector and continues to play an industry leading future role in the sector, for the benefit of shareholders.
Changes to FY20 Remuneration
The Board maintained a “Clinical Quality” gateway as a precondition to Executive KMP Short Term Incentive (‘STI’) eligibility in FY20 and
expanded the range of quality conditions required to be met for this gateway precondition to be achieved.
Whilst the STI scorecard against which Estia’s senior executives are measured continued to comprise a mix of shared and role-specific Key
Performance Indicator (‘KPI’) measures, in FY20 the weighting of role-specific KPI’s was increased from 40% to 50%. In addition, the
Group’s senior executive accountable for overseeing clinical quality and risk frameworks and processes had no financial performance
metrics included in their STI scorecard, to eliminate the perceived or actual risk of conflict between financial and clinical quality performance
objectives and outcomes.
Shareholders approved an increase in the maximum aggregate remuneration that may be paid to the Group’s Non-Executive Directors
(‘NEDs’) by $200,000, from $900,000 per annum to $1,100,000 per annum, at the Group’s 2019 Annual General Meeting (‘AGM’).
FY20 Remuneration Outcomes
The Group maintained tight discipline upon the Fixed Annual Remuneration (‘FAR’) paid to Estia’s Executive KMP’s during FY20, with the
CEO and COO/Deputy CEO’s levels of FAR remaining unchanged from FY19, at $720,000 and $500,000 respectively. The FAR of the
CFO increased by $20,000 to $470,000. This represents a FAR increase across Estia’s combined Executive KMP group of 1.2% between
FY19 and FY20. In addition, there were no increases in individual NED Board or Sub-committee fees during FY20.
The STI clinical quality gateway described above was met during FY20, making senior executives eligible for consideration to receive STI
payments for FY20 performance. Whilst financial KPI’s related to the achievement of EBITDA and Net Profit After Tax targets were not met,
other KPI targets related to clinical compliance, workforce health and safety, financing costs and organisational cultural engagement were
either fully or partially met, resulting in partial vesting entitlements under the FY20 STI plan.
However, in the context of the impact of COVID-19 upon residents, their families and staff since 30 June 2020, the Group’s Board and
Management have agreed that no FY20 STI entitlements will be paid, notwithstanding the strong performance and results generated across
a number of key operational and strategic KPI’s that resulted in partial vesting entitlements under the STI plan.
Previous LTI grants with a FY20 vesting date did not fulfil their vesting requirements and as such have lapsed. A retention-based tranche of
performance rights was granted to the CFO in FY20, in acknowledgement of strong performance since his appointment in February 2017
and to encourage retention and ongoing contribution to the Group’s success. This tranche of retention-based performance rights has a face
value of $125,000 and requires the CFO to be employed at 1 July 2021 for vesting to occur.
Looking Forward
Given the scale of previously detailed challenges facing the RAC sector and Group the Board has decided to maintain unchanged levels of
FAR of Estia’s senior executives, including Executive KMP’s, until the operational and financial impacts of the uncertainties facing the Group
become clearer. Board and Sub-Committee fees payable to individual NED’s in FY21 will remain unchanged from FY20 levels. FY21 STI
and LTI incentive arrangements for the Group’s senior executives are yet to be finalised, as the entire organisation continues to focus its
efforts on the health, safety and care of our residents and staff. Such arrangements will be disclosed subsequent to finalisation.
On behalf of the Board, I am pleased to present to you the FY20 Remuneration Report for Estia and we look forward to welcoming you at
the 2020 AGM
Yours sincerely
Paul Foster
Chair of the Nomination and Remuneration Committee
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Remuneration report – audited (continued)
This report for the year ended 30 June 2020 (FY20) outlines the remuneration arrangements of the Group in accordance with the
requirements of the Corporations Act 2001(Cth), as amended (the Act) and its regulations. This information has been audited as
required by section 308(3C) of the Act.
This report is presented under the following sections:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Introduction
Remuneration governance
Group performance
Remuneration principles and strategy
Executive remuneration
Executive remuneration outcomes (including link to performance)
Executive employment contracts
Non-executive director fee arrangements
Additional disclosures relating to performance rights and shares
10.
Other transactions and balances with KMP and their related parties
1. Introduction
This report details the remuneration arrangements for Key Management Personnel (KMP) who are defined as those persons having
authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly including any
director (whether executive or otherwise) of the parent.
There were no changes to KMP during FY20.
Key Management Personnel
Dr. Gary H Weiss AM
Non-Executive Chairman
Paul Foster
Non-Executive Director
Hon. Warwick L Smith AO Non-Executive Director
Helen Kurincic
Non-Executive Director
Karen Penrose
Non-Executive Director
Norah Barlow ONZM
Non-Executive Director
Ian Thorley
Sean Bilton
Chief Executive Officer (MD and CEO)
Deputy Chief Executive Officer and Chief
Operating Officer (Deputy CEO and COO)
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Steve Lemlin
Chief Financial Officer (CFO)
Full year
Estia Health Annual Financial Report 2019 – 2020
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Remuneration report – audited (continued)
2. Remuneration governance
2.1 Nomination and Remuneration Committee
The Nomination and Remuneration Committee (the Committee) was established to assist and advise the Board on a range of matters
including remuneration arrangements for KMP and ensuring the Board is of a size and composition conducive to making appropriate
decisions, with the benefit of a variety of perspectives and skills in the best interests of the Group as a whole.
The Committee comprises three independent Non-Executive Directors (NEDs): Paul Foster (Committee Chair), Dr. Gary H Weiss AM and
Helen Kurincic. Further information on the Committee’s role, responsibilities and membership, which is reviewed annually by the Board, can
be viewed at http://www.estiahealth.com.au/investor-centre/corporate-governance.
The Committee met seven times in FY20. The MD and CEO attends certain Committee meetings by invitation, where management input is
required. The MD and CEO is not present during any discussions related to their own remuneration arrangements.
2.2 Use of Independent Remuneration Consultants
The Committee seeks external remuneration advice to ensure it is fully informed when making remuneration decisions. Remuneration
advisors are engaged by, and report directly to, the Committee.
During the year ended 30 June 2020, the Nomination and Remuneration Committee engaged KPMG to provide advice regarding market
practice and trends, and assistance with other adhoc matters.
The services provided by KPMG do not constitute a ‘remuneration recommendation’ as defined in section 9B of the Corporations Act 2001.
The engagement with KPMG was based on an agreed set of protocols governing the manner in which the engagement would be carried
out. These protocols ensure that the remuneration advice received from KPMG is free from undue influence from management.
3. Group performance
The table below illustrates Estia’s historic performance against the key metrics upon which the Group performance is measured.
30 June
2020
30 June
2019
30 June
2018
30 June
2017
30 June
2016
Revenue - $’000
Net profit after tax - $’000
EBITDA* - $’000
Share price at start of the year
Share price at the end of the year
Dividends paid per share – cents
Basic earnings per share – cents
Diluted earnings per share – cents
Vesting outcomes – CEO incentives
Short term incentive vesting
Long term incentive vesting
$636,908
($116,909)
$126,580
$2.64
$1.53
5.544
13.2
(40.69)
(44.8)
(44.8)
$585,985
$41,290
$93,967
$3.29
$2.64
16.0
15.8
15.8
$547,054
$41,154
$90,083
$3.05
$3.29
15.8
15.8
15.7
$524,630
$40,698
$86,500
$4.37
$3.05
8.0
18.2
18.0
$442,821
$27,640
$89,059
$5.70
$4.36
25.6
15.1
15.1
Nil
Nil
Nil
Nil
22%
Nil
Nil
Nil
Nil
Nil
*The Group adopted AASB 16 Leases effective from 1 July 2019. EBITDA above is on a post AASB 16 basis. The comparative periods have not been adjusted. Refer to Note E9 for further
details.
4. Remuneration principles and strategy
The remuneration strategy and framework set by the Nomination and Remuneration Committee is designed to support and drive the
achievement of Estia’s business strategy, including effective governance and management of the Group’s risks. It aims to ensure that
remuneration outcomes are linked to the Group’s performance and aligned with shareholder outcomes.
78 Estia Health | 2019-20 Annual Report
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DIRECTORS’ REPORT
Remuneration report – audited (continued)
Estia is committed to creating and ensuring a diverse work environment in which everyone is treated fairly and with respect and where
everyone feels responsible for the reputation and performance of the Group. The Board believes that Estia’s commitment to this policy
contributes to achieving the Group’s corporate objectives and embeds the importance and value of diversity within the culture of the Group.
Diversity can broaden the pool for recruitment of high quality employees, enhance employee retention, improve the Group’s corporate
image and reputation and foster a closer connection with and better understanding of customers.
The Board regularly reviews the remuneration framework against the evolving business strategy and in the context of the commercial
environment to ensure that it remains relevant.
5. Executive remuneration
5.1 Remuneration Framework and link to strategy
In FY20, the executive remuneration framework comprised a mix of fixed annual remuneration, and short and long-term performance-linked
incentive plans. The Group aims to reward executives with a level and mix of remuneration appropriate to their position and responsibilities,
while being market competitive and delivering outcomes that are aligned to the experience of Estia's shareholders.
Link to business and remuneration strategy
Competitive remuneration packages that attract
and retain high calibre employees from a diverse
pool of talent
Short term incentives align the interests of
executives with achievement of business
strategic objectives over the short to medium
term.
The STI scorecard highlights Estia’s focus on
achieving key financial and operational targets,
while also continuing to deliver quality care.
Deferral of 25% of any STI award into equity
increases alignment with shareholder interests.
Component
Approach
Fixed Annual
Remuneration
(FAR
Short-Term
Incentive Plan
(STI)
FAR is set with reference to role, market and
experience of the employee with reference to external
benchmarking data, particularly looking at
competition in the same sector, both public and
private.
Group and individual performance are considered
during the annual remuneration review
In FY20, the STI was measured against common
targets comprising Group EBITDA (both on a post
AASB 16 basis) and NPAT as well as role specific
measures including organisational culture, resident
clinical outcomes, workplace health and safety,
funding costs, resident satisfaction and role-specific
projects over a 12-month period. A resident quality
gateway hurdle remained in place, requiring a range
of ongoing compliance and accreditation targets to be
met as a precondition for any of the STI to be eligible
to vest, irrespective of financial and operational
performance.
For executive KMP, the STI award is delivered in a
mix of cash and equity. 75% of the award is delivered
in cash, with the remaining 25% delivered in
performance rights, which require participants to
remain employed for an additional 12 months for the
performance rights to vest.
Long-term
Incentive Plan
(LTI)
The LTI is delivered in the form of performance rights
subject to the following performance conditions,
measured over a three-year period:
The LTI is designed to drive sustainable value
creation for shareholders, encourage retention
and encourage a multi-year performance focus
Estia Health Annual Financial Report 2019 – 2020 28
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DIRECTORS’ REPORT
Remuneration report – audited (continued)
Component
Approach
Link to business and remuneration strategy
Long-term
Incentive
Plan (LTI)
continued
• Total shareholder return (TSR) (70%) performance:
-
-
35% relative to the ASX200 excluding mining
and energy companies; and
35% relative to the weighted average
performance of a group of ASX-listed
(including dual-listed NZX/ASX entities)
companies involved in the provision of aged
care services.
• Earnings Per Share (EPS) (30%).
Relative TSR focuses executives on generating
returns for shareholders, while EPS challenges
management to increase profitability by growing
earnings over a long-term horizon.
A TSR comparator group of companies providing
aged care services was introduced in order to
assess performance against peers with which Estia
competes for shareholder capital.
The LTI is delivered in equity which aligns the
interests of executives with achievement of
increased shareholder wealth over the long-term.
Once-off
Awards
The Company may grant once-off incentive awards,
approved by the Board, where the circumstances
warrant it. This may include the grant of retention
incentives
Once-off awards may be appropriate in order to
retain or attract key talent, to ensure the
achievement of Estia’s business strategy, and to
maximise long term shareholder outcomes.
Total
Renumeration
The overall remuneration framework is designed to support and drive the achievement of Estia’s business
strategy:
•
•
•
to be the leader in providing high quality residential aged care homes in Australia;
to provide our residents with the highest standards of aged care services in an innovative, supportive
and caring environment; and
to deliver profitable growth through our robust development pipeline, significant refurbishment
opportunities and through maximising the performance of our core assets.
5.2 FY20 Remuneration Opportunity Mix
Estia Health Annual Financial Report 2019 – 2020 29
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DIRECTORS’ REPORT
Remuneration report – audited (continued)
5.3 Fixed Annual Remuneration
FAR includes base salary, non-cash benefits such as travelling allowances (including any fringe benefits tax), as well as leave entitlements
and superannuation contributions. Remuneration levels are reviewed annually by the Committee and the Board.
As part of the review, the Committee regularly benchmarks the remuneration of the current KMP against relevant roles from a comparator
group of ASX-listed companies. The comparator group is comprised of ASX-listed companies within the Health Care, Real Estate and
Consumer Discretionary sectors, with a market capitalization of 50% - 200% of Estia’s.
While having regard for the results of the benchmarking, the Committee considers the skills and experience of each individual, as well as
the complexity and accountabilities associated with the role, in setting FAR.
5.4 Short-Term Incentive Plan
The Group provides an annual STI to executives and awards a cash and deferred equity incentive subject to the attainment of clearly
defined Group measures.
Participation
STI value
Performance
conditions
All executive KMP participated in the FY20 STI plan.
In FY20, Ian Thorley and Sean Bilton had a maximum STI opportunity of 50% of FAR and Steve
Lemlin had a maximum STI opportunity of 30% of FAR.
The STI is subject to a resident quality gateway hurdle which requires ongoing compliance and
accreditation targets to be met in order for any STI awards to be made.
The FY20 group-wide performance measures for KMP were EBITDA (on a post AASB 16 basis) and
NPAT (50% combined), as well as other role specific measures for the remaining 50%. Other role
specific measures for KMP included LTIFR reduction targets, organisational culture measures, delivery
of efficiencies through management of external financing, and developments in connection with clinical
governance and risk management processes.
Delivery of STI
Performance against the measures is tested annually after the end of the financial year. All payments
under the STI plan are determined and approved by the Committee and the Board.
Once STI payments have been approved, they are delivered in cash and equity. For senior executives
(including all executive KMP) 25% of any payment is deferred for a period of 12 months in the form of
performance rights. The quantity of instruments granted in performance rights is determined using
face value allocation methodology, using the VWAP for the 10 trading days immediately following the
release of results (i.e. deferred STI amount divided by share price).
Cessation of
employment
For “Bad Leavers” (defined by the Group as resignation or termination for cause), any unpaid or
deferred STI is forfeited, unless otherwise determined by the Board.
For any other reason, the Board has discretion to award STI on a pro-rata basis taking into account time
and the current level of performance against performance hurdles.
Clawback policy
The Board has the discretion to reduce, cancel or clawback any unvested performance-based
remuneration (including deferred STI) in the event of serious misconduct or a material misstatement in
the Group’s financial statements.
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Remuneration report – audited (continued)
5.4.1 STI outcomes
In FY20 Estia met the resident quality gateway hurdle, which created eligibility for STI payments to be made subject to the achievement of STI
scorecard measures. This gateway required:
1.
2.
3.
no more than two notices of non-compliance in any State in which Estia operates;
any Timetable for Improvement imposed upon an Estia facility to be fully met; and
no sanctions to be imposed on any Estia facility.
FY20 group-wide KPI’s related to the achievement of EBITDA and Net Profit After Tax targets were not met.
Many of the other role specific measures applied to KMP were met during FY20. These included a reduction of >25% in Lost Time Injury
Frequency Rate (LTIFR) from FY19, improved workforce engagement scores, further developments in connection with clinical governance
and risk management processes and reducing external financing costs.
These outcomes would have ordinarily resulted in STI vesting outcomes for the Group’s Executive KMP’s ranging from 40-45% of target.
However, in the context of the impact of COVID-19 upon residents, staff and their families since 30 June 2020, the Board and Management
have agreed that FY20 STI entitlements will not be paid.
Senior Executive
STI opportunity
($)
STI vesting
outcome, per
scorecard $
STI vesting
outcome, per
scorecard %
STI awarded
($)
STI awarded
(%)
STI foregone
(%)
Ian Thorley
360,000
144,000
Sean Bilton
250,000
100,000
Steve Lemlin
141,000
63,450
40%
40%
45%
Nil
Nil
Nil
0%
0%
0%
100%
100%
100%
Estia Health Annual Financial Report 2019 – 2020 31
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DIRECTORS’ REPORT
Remuneration report – audited (continued)
5.5 Long-Term Incentive Plan
A longer-term incentive is offered to senior executives to assist in the reward, motivation and retention of personnel over the long-term and
to improve alignment between executive and shareholder wealth. The LTI is also designed to recognise the abilities, efforts and
contributions of participants to Estia’s performance and success and provide the participants with an opportunity to acquire or increase their
ownership interest in the Group.
Participation
LTI performance rights were offered to all members of executive KMP in FY20.
Delivery of LTI
LTIs are delivered in the form of performance rights. On exercise, performance rights entitle the
holders to ordinary shares.
LTI value
Allocation
methodology
Performance
conditions
In FY20, Ian Thorley had a LTI opportunity of 100% of FAR, both Sean Bilton and Steve Lemlin had a
LTI opportunity of 70% of FAR.
The quantity of instruments granted under the LTI is determined using face value allocation
methodology, using the VWAP for the 10 trading days immediately following the release of results (i.e.
LTI opportunity divided by share price).
The performance conditions for FY20 performance rights are as follows. 70% of award will be
subject to a relative TSR performance measure:
•
•
35% relative to the ASX200 excluding mining and energy companies; and
35% relative to the weighted average performance of a group of ASX-listed (including dual-
listed NZX/ASX entities) companies involved in the provision of aged care services comprised
of Regis Healthcare Limited (25%), Japara Healthcare Limited 25%, Aveo Healthcare Limited
(25%), Oceania (12.5%) and Summerset Group Holdings Limited (12.5%).
TSR vesting schedules are provided below.
Estia’s TSR relative to the ASX200 (excluding mining and
energy companies)
Percentage of performance
rights that vest
Less than median of comparator group
At median of comparator group
Nil
50%
Between median and 75th percentile of comparator group
Straight line pro rata vesting
between 50% and 100%
Greater than 75th percentile of comparator group
100%
Estia’s TSR relative to the weighted average performance
of aged care services per group
Percentage of performance
rights that vest
Below weighted average performance
At weighted average performance
Straight line vesting
0%
50%
50% - 100%
15 percentage points above weighted average performance
100%
30% of award subject to EPS performance measure, with the below vesting schedule:
Group’s compound annual growth of EPS from FY19
base
Percentage of performance
rights that vest
Below threshold rate (<1%)
At threshold rate (1%)
Nil
25%
Percentage of
performance rights
that vest
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Between threshold and target rate (1% to 3%)
At target rate or above (3% to 5%)
Straight line pro rata vesting
between 25% and 50%
Straight line pro rata vesting
between 50% and 100%
When assessing performance against targets, EPS will be adjusted to account for acquisitions
made during the performance period.
Performance period
Lapse of performance right
The performance rights granted in FY20 have a performance period of three years.
Any performance rights that remain unvested at the end of the performance period will
lapse immediately.
Total shares issued
The number of shares allocated on the vesting of all outstanding rights may not exceed 5%
of the total number of shares on issue at the time of the offer.
Cessation of employment
Change of control
Clawback policy
5.5.1 LTI Vesting Outcomes
For “bad leavers” (defined by the Group as resignation or termination for cause), all of the
performance rights held by that employee upon cessation will automatically lapse.
Where cessation of employment occurs for any other reason, a portion of the performance
rights held by that employee upon cessation will lapse according to a formula which takes
into account the length of time the participant has held the performance right and the
performance period for the performance right (i.e. pro-rata vesting), unless otherwise
determined by the Board.
The Board may exercise its discretion to allow all or some unvested rights to vest if a change
of control event occurs, having regard for the performance of the Group during the vesting
period up to the date of a change of control event.
The Board has the discretion to reduce, cancel or clawback any unvested performance-
based remuneration in the event of serious misconduct or a material misstatement in the
Group’s financial statements.
The FY18 LTI performance rights did not vest, as the relevant earnings per share (EPS) and relative total shareholder return
performance targets were not achieved.
5.6 Other Awards
During FY20, a retention incentive was granted to the CFO, Steve Lemlin, to recognise his contribution to Estia since his appointment
as CFO in February 2017 and to encourage his continued contribution over the coming period. The award was delivered in performance
rights, with a face value of $125,000 and will only vest subject to his continued employment with the Group until 1 July 2021.
Estia Health Annual Financial Report 2019 – 2020 33
84 Estia Health | 2019-20 Annual Report
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2019-20 Annual Report | Estia Health 85
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DIRECTORS’ REPORT
Remuneration report – audited (continued)
7. Executive employment contracts
Remuneration arrangements for executives are formalised in employment agreements as follows
Name
FAR
Ian Thorley
$720,000
Sean Bilton
$500,000
Steve Lemlin
$470,000
Agreement
commence
Agreement
Expire
23 October 2018 No expiry,
continuous
agreement
23 October 2018 No expiry,
continuous
agreement
1 February 2017 No expiry,
continuous
agreement
Notice of
termination by
Group
6 months (or
payment in lieu of
notice)
3 months (or
payment in lieu of
notice)
6 months (or
payment in lieu of
notice)
Employee
Notice
6 months
3 months
6 months
8. Non-executive director fee arrangements
The Board seeks to set NED fees at a level which provides the Group with the ability to attract and retain NEDs of the highest
calibre, whilst incurring a cost which is acceptable to shareholders.
In FY20, there were no increases to NED fees and will remain unchanged for FY21.
Following shareholder approval at the 2019 AGM, the NED fee pool at Estia increased to $1,100,000 (including superannuation
contributions as required by law).
Estia Health Annual Financial Report 2019 – 2020 35
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DIRECTORS’ REPORT
Remuneration report – audited (continued)
8.1 Director’s 2020 Fee Structure
The table below summarises the annual Base NED fees, inclusive of superannuation:
Board
Audit Committee
Nominations & Remuneration Committee
Risk Management Committee
Property & Investment Committee
Description
Fees
Chair
$250,000
Director
$100,000
Chair
$15,000
Member
$10,000
Chair
$15,000
Member
$10,000
Chair
$15,000
Member
$10,000
Chair
$15,000
Member
$10,000
Royal Commission & Regulatory Committee
Chair
No additional fee
Member
No additional fee
NEDs may elect to receive fees inclusive or exclusive of superannuation provided an election has been made directly with the
Australian Taxation Office to opt out of fees being paid inclusive of superannuation. This election is available to NEDs who have
multiple NED roles.
NEDs may be reimbursed for expenses reasonably incurred in attending to the Group’s affairs. NEDs do not participate in any
incentive programs.
Estia Health Annual Financial Report 2019 – 2020
2019-20 Annual Report | Estia Health 87
36
Tax Transparency Report | Corporate Governance | Board | Shareholder Information | Annual Financial Report | Directory of Estia Health homes DIRECTORS’ REPORT
Remuneration report – audited (continued)
8.2 Non-Executive director remuneration
The table below outlines NED remuneration for FY20 in accordance with statutory rules and applicable accounting standards.
Non-Executive Director
Gary Weiss
Paul Foster
Warwick Smith
Helen Kurincic
Karen Penrose5
Norah Barlow6
Former Non-Executive Director
Andrew Harrison7
Total
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Board fees
Superannuation
Total fees
$
$
$
258,997
259,469
126,216
123,288
114,155
114,155
114,155
114,155
114,155
79,597
100,000
58,333
-
38,052
827,679
787,049
21,003
20,531
8,784
11,712
10,845
10,845
10,845
10,845
10,845
7,562
-
-
-
3,615
62,321
65,110
280,000
280,000
135,000
135,000
125,000
125,000
125,000
125,000
125,000
87,159
100,000
58,333
-
41,667
890,000
852,159
5 Karen Penrose was appointed on 17 October 2018.
6 Remuneration received in respect of Norah Barlow’s role as executive is included in table 6.1 including the expense recognised for the year relating to the LTI performance rights
issued during her time as MD and CEO. Norah Barlow stepped down as Executive Director on 23 November 2018 to become a Non-Executive Director.
7 Andrew Harrison resigned on 17 October 2018.
Estia Health Annual Financial Report 2019 – 2020
88 Estia Health | 2019-20 Annual Report
37
Chairman and CEO’s Message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability DIRECTORS’ REPORT
Remuneration report – audited (continued)
9. Additional disclosures relating to performance rights and shares
9.1 Performance rights granted, vested and lapsed during the year
The table below discloses the number of performance rights granted, vested or lapsed during the year. Performance rights
do not carry any voting or dividend rights and can only be exercised once the vesting conditions have been met, until their
expiry date. No options were granted to members of KMP during FY20.
Number of
rights
granted
during the
year
Grant date
Fair value
per right
at grant
date
Vesting date
Exercise
price per
right
Expiry date
Number of
rights
vested
during the
year
Number of
rights
lapsed
during the
year
Executive
director
Ian Thorley8
Senior
executives
92,958
25/11/19
92,958
25/11/19
79,678
25/11/19
0.76
0.69
2.51
30/06/22
30/06/22
30/06/22
Sean Bilton
64,554
25/11/19
64,554
25/11/19
55,332
25/11/19
23,055
25/11/19
Steve Lemlin
41,483
25/11/19
41,483
25/11/19
35,557
25/11/19
91,241
27/04/20
0.76
0.69
2.51
2.71
0.76
0.69
2.51
1.37
Former
Executive
Norah Barlow9
Total
682,853
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
30/06/22
30/06/22
30/06/22
01/07/20
30/06/22
30/06/22
30/06/22
01/07/21
Nil
30/06/22
30/06/22
30/06/22
30/06/22
30/06/22
30/06/22
01/07/20
30/06/22
30/06/22
30/06/22
01/07/21
-
-
-
-
-
-
-
-
-
-
-
-
-
181,748
-
-
-
-
-
-
141,644
-
-
-
484,234
807,627
8 Shareholders approved the grant of performance rights to Ian Thorley, Sean Bilton and Steve Lemlin at the Group’s AGM on 6 November 2019.
9 Norah Barlow become a Non-Executive Director on 23 November 2018. Details of her rights are included in section 9.2.
Estia Health Annual Financial Report 2019 – 2020 38
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DIRECTORS’ REPORT
Remuneration report – audited (continued)
9.2 Performance rights holdings of KMP and related parties
KMP, or their related parties directly, indirectly or beneficially held a number of performance rights in the Estia Group as
detailed in the table below.
Number of
rights at
1 July 2019
Granted as
remuneration
Rights
exercised
Net change
other
Number of
rights at 30
June 2020
Exercisable
Not
exercisable
Vested at 30 June 2020
Executive
director
Ian Thorley
Senior executive
Sean Bilton
Steve Lemlin
Former Executive
387,086
265,594
4,016
181,748
466,916
81,454
251,191
207,495
209,764
-
-
3,303
141,644
288,949
316,008
Norah Barlow
594,490
-
6,374
484,234
103,882
Total
1,314,221
682,853
13,693
807,627
1,175,754
-
-
-
-
-
-
-
-
-
-
Estia Health Annual Financial Report 2019 – 2020
90 Estia Health | 2019-20 Annual Report
39
Chairman and CEO’s Message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability
DIRECTORS’ REPORT
Remuneration report – audited (continued)
9.3 Value of performance rights awarded, exercised and lapsed during the year
The table below discloses the value of performance rights granted, exercised or lapsed during the year.
Value of rights
granted during the
year a
$
Value of rights
exercised during
the year b
$
Value of rights
lapsed during the
year c
$
Renumeration of
rights for the year
%
Executive director
Ian Thorley
Senior executive
Sean Bilton
Steve Lemlin
154,811
11,908
291,269
170,009
194,085
-
9,793
-
202,585
4%
9%
3%
Total
518,905
21,701
493,853
a Determined at the time of grant per the AASB 2.
b Determined at the time of exercise.
c Determined at the time of lapse.
There were no alterations to the terms and conditions of options awarded as remuneration since their award
date.
Estia Health Annual Financial Report 2019 – 2020 40
2019-20 Annual Report | Estia Health 91
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DIRECTORS’ REPORT
Remuneration report – audited (continued)
9.4 Shareholdings of KMP and related parties
KMP or their related parties directly, indirectly or beneficially held a number of shares in Estia Group as detailed in the table
below.
Number of
shares at
1 July 201910
Granted as
remuneration
Exercise of rights
Net change
other
Number of
shares at
30 June 202011
Held nominally
Non-Executive
Director
Gary Weiss
Paul Foster
Warwick Smith
Helen Kurincic
Norah Barlow
Karen Penrose
Senior executive
Ian Thorley
Sean Bilton
Steve Lemlin
Total
45,312
24,000
90,000
25,000
123,100
18,833
78,518
-
16,500
421,263
-
-
-
-
-
-
-
-
-
-
-
-
-
6,374
-
4,016
-
3,303
3,000
-
27,000
25,000
-
13,500
55,467
6,719
23,860
48,312
24,000
117,000
50,000
129,474
32,333
138,001
6,719
43,663
48,312
24,000
117,000
50,000
129,474
32,333
138,001
6,719
43,663
13,693
154,546
589,502
589,502
All equity transactions with KMP have been entered into under terms and conditions no more favourable than those the
Group would have adopted if dealing at arm's length.
10. Other transactions and balances with KMP and their related parties
There were no other transactions with KMP or their related parties during the year
10 The number of shares held for KMP who were appointed during the year are as at the date of their respective appointments.
11 The number of shares held for KMP who have resigned during the year are as at the date of their respective resignation.
Estia Health Annual Financial Report 2019 – 2020 41
92 Estia Health | 2019-20 Annual Report
Chairman and CEO’s Message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Auditor’s Independence Declaration to the Directors of Estia Health
Limited
As lead auditor for the audit of the financial report of Estia Health Limited for the financial year ended
30 June 2020, I declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Estia Health Limited and the entities it controlled during the financial
year.
Ernst & Young
Paul Gower
Partner
18 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
2019-20 Annual Report | Estia Health 93
42
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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
Revenues
Other income
Expenses
Employee benefits expense
Administrative expenses
Occupancy expenses
Resident expenses
Depreciation and amortisation expense
Impairment expense
Impairment losses on trade receivables
Direct costs associated with the Royal Commission
Operating (loss) or profit for the year
Notes
B1
B1
B2
B3
B4
B5
B5
2020
$'000
2019
$'000*
636,908
585,985
214
36
416,000
18,033
24,186
51,276
39,119
144,622
732
101
(56,947)
386,804
19,782
31,297
51,613
28,719
465
801
1,721
64,819
Net finance costs
B6
51,898
6,990
(Loss) or profit before income tax
(108,845)
57,829
Income tax expense
(Loss) or profit for the year
B7
8,064
(116,909)
16,539
41,290
Other comprehensive income
Other comprehensive income to be reclassified to profit or loss in
subsequent periods, net of tax
Other comprehensive income not to be reclassified to profit or loss in
subsequent periods, net of tax
Blank
-
-
-
-
Total comprehensive (loss) or income for the year, net of tax
(116,909)
41,290
Earnings per share
Basic, (loss) or profit for the year attributable to ordinary equity holders of
the Parent
Diluted, (loss) or profit for the year attributable to ordinary equity holders
of the Parent
B8
B8
* Comparative period not restated for AASB 16.
cents
cents
(44.79)
(44.79)
15.84
15.77
The accompanying notes form part of these consolidated financial statements.
Estia Health Annual Financial Report 2019 - 2020
43
94 Estia Health | 2019-20 Annual Report
Chairman and CEO’s Message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
Cash and cash equivalents
Trade and other receivables
Income tax receivable
Prepayments and other assets
Assets held for sale
Total current assets
Property, plant and equipment
Investment properties
Goodwill
Other intangible assets
Right of Use Assets
Prepayments
Total non-current assets
Total assets
Trade and other payables
Other financial liabilities
Provisions
Income tax payable
Lease liabilities
Refundable accommodation deposits and bonds
Total current liabilities
Lease liabilities
Other payables
Provisions
Deferred tax liabilities
Loans and borrowings
Total non-current liabilities
Total liabilities
Net assets
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
Notes
C1
C2
C3
C4
C5
C6
C6
C7
C8
C9
C10
C7
D1
C7
C8
C10
B7
D2
D3
D4
2020
$'000
30,600
8,129
-
6,444
5,441
50,614
842,524
1,500
681,014
226,950
67,137
585
2019
$'000*
14,631
9,046
607
5,694
-
29,978
822,696
1,620
817,074
222,575
-
449
1,819,710
1,864,414
1,870,324
1,894,392
59,527
1,193
52,678
6,504
4,052
836,304
960,258
68,910
-
5,155
98,404
128,848
301,317
44,046
1,304
45,616
-
-
805,033
895,999
-
12
4,496
107,775
124,603
236,886
1,261,575
1,132,885
608,749
761,507
803,356
1,747
(196,354)
608,749
801,843
1,794
(42,130)
761,507
* Comparative period not restated for AASB 16. Prepayments has been reclassified between Current and Non Current Assets.
The accompanying notes form part of these consolidated financial statements.
Estia Health Annual Financial Report 2019 - 2020
44
2019-20 Annual Report | Estia Health 95
Tax Transparency Report | Corporate Governance | Board | Shareholder Information | Annual Financial Report | Directory of Estia Health homes CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
As at 1 July 2018
Adjustment on adoption of AASB 9 (net of tax)
Adjusted total equity at the beginning of the
financial year
Profit or (loss) for the year
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity
as owners:
Repayment of management equity plan
Dividends
Share-based payments
D3
D3
D4
Notes
Issued
capital
$'000
Share-based
payments
reserve
$'000
Accumulated
losses
$'000
Total
equity
$'000
801,836
-
1,136
-
(41,408)
(316)
761,564
(316)
801,836
1,136
(41,724)
761,248
-
-
-
7
-
-
-
-
-
41,290
-
41,290
41,290
-
41,290
-
-
658
-
(41,696)
-
7
(41,696)
658
As at 30 June 2019
801,843
1,794
(42,130)
761,507
Balance at 1 July 2019
Adjustment on adoption of AASB 16 (net of tax)
Adjusted total equity at the beginning of the
financial year
801,843
-
1,794
-
(42,130)
(2,889)
761,507
(2,889)
801,843
1,794
(45,019)
758,618
Profit or (loss) for the year
Other comprehensive income
Total comprehensive income
-
-
-
-
-
-
(116,909)
-
(116,909)
(116,909)
-
(116,909)
Transactions with owners in their capacity
as owners:
Issue of share capital
Repayment of management equity plan
Dividends
Share-based payments
As at 30 June 2020
D3
D3
D3
D4
1,507
6
-
-
803,356
-
-
-
(47)
1,747
-
-
(34,426)
-
(196,354)
1,507
6
(34,426)
(47)
608,749
The accompanying notes form part of these consolidated financial statements.
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96 Estia Health | 2019-20 Annual Report
Chairman and CEO’s Message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
Cash flows from operating activities
Receipts from residents
Receipts from government
Payments to suppliers and employees
Net operating cash flows before interest, income tax and RAD,
accommodation bond and ILU entry contributions
Interest received
Finance costs paid
Income taxes paid
Interest expense of lease liability
Net cash flows from operating activities excluding RAD,
accommodation bond and ILU entry contributions
RAD, accommodation bond and ILU entry contribution received
RAD, accommodation bond and ILU entry contribution refunded
Net cash flows from operating activities
Cash flows from investing activities
Payments for intangible assets
Proceeds from sale of property, plant and equipment
Proceeds from sale of assets held for sale
Purchase of property, plant and equipment
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from repayment of MEP loans
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Repayment of lease liabilities
Net cash flows from/(used in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
* Comparative period not restated for AASB 16.
Notes
2020
$'000
2019
$'000*
145,941
432,171
(466,936)
148,427
437,556
(489,880)
111,176
435
(7,473)
(9,086)
(2,171)
92,881
272,871
(239,690)
126,062
(5,911)
51
2,283
(74,718)
(78,295)
6
405,000
(400,000)
(32,920)
(3,884)
(31,798)
15,969
14,631
30,600
96,103
70
(6,878)
(15,932)
-
73,363
246,454
(231,888)
87,929
(4,850)
19
956
(88,932)
(92,807)
7
225,000
(175,000)
(41,696)
-
8,311
3,433
11,198
14,631
B9
C6
C4
D3
D3
C1
The accompanying notes form part of these consolidated financial statements.
Estia Health Annual Financial Report 2019 - 2020
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION A: ABOUT THIS REPORT
A1
CORPORATE INFORMATION
The consolidated financial statements of Estia Health Limited and its subsidiaries (collectively, the “Group”) for
the year ended 30 June 2020 were authorised for issue in accordance with a resolution of the directors on 18
August 2020.
Estia Health Limited (the “Company” or the “parent”) is a for-profit company limited by shares incorporated in
Australia, whose shares are publicly traded on the Australian Securities Exchange (ASX) under the code 'EHE'.
The nature of the operations and principal activities of the Group are described in the Directors’ Report.
A2
BASIS OF PREPARATION
The financial report is a general purpose financial report which has been prepared in accordance with the
requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board. The financial report has been prepared on a
historical cost basis, except for investment properties and derivative financial instruments which have been
measured at fair value.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand ($’000)
unless otherwise stated.
A3
STATEMENT OF COMPLIANCE
The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.
A4
BASIS OF CONSOLIDATION
The consolidated financial statements comprise the financial statements of the Group and its controlled
subsidiaries as at 30 June 2020 (refer to Note E6 for the group structure). Control is achieved when the Group is
exposed, or has rights, to the variable returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the
Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or
disposed of during the year are included in the statement of profit or loss and other comprehensive income from
the date the Group gains control until the date the Group ceases to control the subsidiary.
All intercompany balances and transactions, and any unrealised gains and losses arising from intra-group
transactions, are eliminated in preparing the Consolidated Financial Statements.
Estia Health Annual Financial Report 2019 - 2020
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION A: ABOUT THIS REPORT (CONTINUED)
A5
CURRENT/NON-CURRENT CLASSIFICATION
Assets are disclosed as current when they are expected to be converted to cash or receivable within 12 months
of 30 June 2020. Liabilities are disclosed as current when they are due within 12 months of 30 June 2020 or
when there is no unconditional right to defer settlement for at least 12 months after 30 June 2020.
A6
GOING CONCERN
The financial report has been prepared on a going concern basis which assumes that the Group will be able to
meet its obligations as and when they fall due. The potential impacts of COVID-19, as referenced in Note E4,
have been taken into consideration in preparing the financial report on a going concern basis. The Group’s
current liabilities exceed current assets by $909,644,000 as at 30 June 2020 (2019: $866,021,000) resulting in a
net deficiency of current assets. This mainly arises because of the requirement to classify Refundable
Accommodation Deposits ("RAD") and Independent Living Unit ("ILU") entry contributions of $837,497,000
(2019: $806,337,000) as current liabilities.
RADs and Bonds are classified as a current liability as the Group does not have an unconditional right to defer
settlement of any specific RAD or Bond for at least twelve months after the reporting date. The total RAD and
Bond liability represents the sum of separate payments from individual residents in different locations with
differing circumstances, and frequently a departing RAD and Bond paying resident is replaced shortly afterwards
with a new RAD paying resident. The repayment of individual balances that make up the total current balance
will be dependent upon the actual tenure of individual residents, which can be more than ten years but averages
approximately 2 - 2.5 years (refer Note D1 for further details).
The Group has a debt facility of $330,000,000 of which $197,152,028 remains undrawn as at 30 June 2020,
which excludes $4,000,000 of bank guarantees disclosed in Note E2. This debt facility can be drawn down to
re-pay RAD and Bond refunds should the Group experience significant RAD and Bond net outflows.
A7
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
The preparation of the Group’s consolidated financial statements requires management to make judgements,
estimates and assumptions that affect the reported amounts and are reviewed on an ongoing basis. In making
any judgement, estimate or assumption relating to reported amounts, management have also considered, where
appropriate the impact of COVID-19.
Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment
to the carrying amount of assets or liabilities affected in future periods.
Information about critical judgements, estimates and assumptions that affect the application of the Group's
accounting policies within the year ended 30 June 2020 are included in the following notes:
Significant accounting judgements, estimates and assumptions
Note B1
Revenue and other income
Note B6
Finance costs
Note B7
Income Taxes recognition of deferred tax assets
Estia Health Annual Financial Report 2019 - 2020
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2019-20 Annual Report | Estia Health 99
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION A: ABOUT THIS REPORT (CONTINUED)
A7
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS (CONTINUED)
Note C2
Allowance for expected credit losses
Note C3
Assets held for sale
Note C4
Property, plant and equipment impairment test
Note C5
Investment properties
Note C6
Intangible assets impairment test
Note C7
Right of use assets and lease liabilities
Note D4
Share-based payments
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION B: OUR PERFORMANCE
B1
REVENUE AND OTHER INCOME
Revenues
Government funded residential care subsidies & supplements
Resident daily care fees
Other resident fees
Imputed revenue on RAD and bond balances under AASB 16
Total revenues
Other income
Net gain on disposals of assets held for sale
Decrease in fair value of investment property
Net gain on disposals of property, plant and equipment
Total other income
2020
$'000
2019
$'000
443,308
107,092
43,101
43,407
636,908
438,323
104,253
43,409
-
585,985
283
(120)
51
214
17
-
19
36
The Group is in the business of providing residential aged care services to residents. The terms and conditions
for discretionary and non-discretionary services are agreed within a single customer contract with the resident,
which are enforceable primarily on a daily basis. Contracts with customers contain provision for accommodation,
use of common areas/facilities, provision of care and other services.
Total revenue includes the provision of accommodation, that is accounted for in accordance with AASB 16
Leases ("AASB 16"). This includes operating lease revenue which is recognised on a straight line basis over the
length of stay. In addition, revenue includes imputed revenue in relation to residents who have chosen to pay a
RAD or Bond. This is a non-cash amount. Note E9 includes full details on the Group's adoption and transition to
AASB 16 effective from 1 July 2019.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION B: OUR PERFORMANCE (CONTINUED)
B1
REVENUE AND OTHER INCOME (CONTINUED)
Disaggregation of Revenue
The Group has disaggregated revenue based on the source of the funding for the provision of residential aged
care.
(a) Government Funded Residential Care Subsidies & Supplements
The Australian Government determines the amount of subsidies and supplements in accordance with the
provisions of the Aged Care Act. In accordance with the Act the level of subsidy or supplement is dependent on
a range of factors, including a resident’s care needs, supported resident ratios in a particular home and whether
a home has been newly built or significantly refurbished on or after 20 April 2012. The subsidies and
supplements are calculated as a daily rate and is payable for each day that a resident is in a home.
The Government may require a resident to pay a proportion of that subsidy or supplement dependent on their
own financial circumstances. This is referred to as a Means Tested Care Fee ("MTCF"). The MTCF reduces the
amount the Government pays directly to the provider as a result. The total MTCF included within the total
Government Funded Residential Care Subsidies and Supplements was $16,920,642 in the period (2019:
$16,782,000).
(b) Resident Daily Care Fees
The Group receives Daily Fees in accordance with the Aged Care Act which are funded directly by the resident
as a Basic Daily Fee which is set by the Government. The Basic Daily Fee is calculated as a daily rate and is
payable by a resident for each day that a resident is in a home.
(c) Other Resident Fees
The Group provides additional services and accommodation to residents that are funded directly by the resident,
under mutually agreed terms and conditions.
(d) Imputed Revenue on RAD and Bond Balances under AASB 16
For residents who have chosen a RAD or Bond arrangement to receive residential aged care services, the
Group has determined that following the adoption of AASB 16, these are lease arrangements for accounting
purposes with the Group acting as the lessor. The Group has recognised as revenue an imputed non-cash
charge for accommodation representing the resident's right to occupy a room under the arrangement. The
accounting treatment required a non-cash increase in revenue for accommodation and a non-cash increase in
finance cost on the outstanding RAD and Bond balance, with no net impact on the result for the period.
Other Income
During the year, the Group sold two properties for $1,215,000 (2019: $956,000) and recognised a net gain on
sale of $283,000 (2019: net gain on sale $17,000).
The Group recognises gains and losses from the sale of assets held for sale at the point in time that control
transfers to the purchaser, which is when the legal title is transferred between the parties, typically upon
settlement.
Contract Assets and Liabilities
AASB 15 Revenue from contracts with customers ("AASB 15") requires presentation of the following items
separately in the statement of financial position:
(i) ‘contract asset’ for the right to consideration in exchange for services that have transferred to a customer;
(ii) ‘contract liability’ for the obligation to transfer services to a customer for which the entity has received
consideration (or an amount of consideration is due) from the customer; and
(iii) ‘receivable’ for the right to consideration that is unconditional (only the passage of time is required before
payment of that consideration is due).
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION B: OUR PERFORMANCE (CONTINUED)
B1
REVENUE AND OTHER INCOME (CONTINUED)
SIGNIFICANT ACCOUNTING POLICY
The Group recognises revenue under AASB 15 which applies to all revenue arising from contracts with
customers, unless those contracts are in the scope of other standards. The Group uses the five-step model as
set out in AASB 15 to account for revenue arising from contracts with customers.
The transaction price is allocated to performance obligations on the basis of their relative standalone selling
prices and recognised as revenue accordingly as those performance obligations are satisfied over time each day
as the customer simultaneously receives and consumes the benefits provided by the Group.
The provision of care to a resident is a single performance obligation. Other services, such as Additional
Services (including services such as in-room Foxtel and additional menu choices) and Accommodation charges
contain a number of different performance obligations.
The Group has applied the practical expedient not to disclose the transaction price allocation to unperformed
performance obligations because all performance obligations are considered to be met on a daily basis.
Therefore the Group does not have any outstanding performance obligations that have not been met at the
reporting date.
The Group recognised revenue under AASB 16, and in accordance with the Group's determination that it is
acting as a Lessor in respect of the right of a resident to occupy a room. Further details of the Group's adoption
and transition to AASB 16 is included in Note E9.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
Following the adoption of AASB 16, the Group has determined the use of the Maximum Permissible Interest
Rate ("MPIR") as the interest rate to be used in the calculation of the Imputed Revenue on RAD and Bond
Balances. The MPIR is a rate set by the Government and is used to calculate the Daily Accommodation
Payment to applicable residents.
Estia Health Annual Financial Report 2019 - 2020
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION B: OUR PERFORMANCE (CONTINUED)
B2
EMPLOYEE BENEFITS EXPENSES
Salaries and wages expense
Superannuation expense
Other employee expenses
Total employee benefits expenses
B3
ADMINISTRATIVE EXPENSES
Advertising and marketing expenses
Telephone and communication expenses
Travel expenses
Printing and stationery expenses
Professional services expenses
Other administrative expenses
Total administrative expenses
2020
$'000
344,904
32,091
39,005
416,000
2019
$'000
322,290
29,462
35,052
386,804
2020
$'000
1,417
2,353
1,594
1,642
3,943
7,084
18,033
2019
$'000
924
2,108
2,152
2,369
5,476
6,753
19,782
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION B: OUR PERFORMANCE (CONTINUED)
B4
OCCUPANCY EXPENSES
Rent expense
Repairs and maintenance expense
Other occupancy expenses
Total occupancy expenses
* Comparative period not restated for AASB 16.
2020
$'000
350
8,117
15,719
24,186
2019
$'000*
5,849
9,578
15,870
31,297
The Group has various leases for aged care homes, office space and minor office equipment. These leases
were previously classified as operating leases under AASB 117 and classified within Rent Expense. Following
the adoption of AASB 16 from 1 July 2019, these leases are now accounted for by recognising a depreciable
right of use asset and a corresponding lease liability subject to an interest cost, similar to accounting for finance
leases under AASB 17. Variable lease payments that do not depend on an index or a rate continue to be
recognised as an expense in the period. Further details of the Group's adoption and transition to AASB 16 is
included in Note E9.
B5
DEPRECIATION, AMORTISATION AND IMPAIRMENT EXPENSES
Depreciation expense
Accelerated depreciation due to home closures
Amortisation expense
Impairment expense
Total depreciation, amortisation and impairment expenses
* Comparative period not restated for AASB 16.
Notes
C4, C7
C4
C6
C4, C6
2020
$'000
37,674
-
1,445
144,622
183,741
2019
$'000*
26,432
1,298
989
465
29,184
The Group has various leases for aged care homes, office space and minor office equipment. These leases
were previously classified as operating leases under AASB 117 and classified within Rent Expense. Following
the adoption of AASB 16 from 1 July 2019, these leases are now accounted for by recognising a depreciable
right of use asset with an effective life equivalent to the term of the lease. Depreciation expense on right of use
assets for the period was $4,524,000. Further details of the Group's adoption and transition to AASB 16 is
included in Note E9.
The impairment expense comprises $136,059,000 of goodwill and $8,563,000 across the Group's homes and
tangible assets.
Estia Health Annual Financial Report 2019 - 2020
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION B: OUR PERFORMANCE (CONTINUED)
B6
NET FINANCE COSTS
Interest income from cash at banks
Total finance income
Imputed interest cost on RAD and bond balances¹
Interest expense on leases under AASB 16²
Interest expense on bank loans
Interest capitalised³
Interest expense on accommodation bonds for departed residents
Other finance costs
Total finance costs
Notes
E9
E9
2020
$'000
435
435
43,407
2,171
2,801
(597)
2,512
2,039
52,333
2019
$'000*
70
70
-
-
2,549
(960)
3,402
2,069
7,060
Net finance costs
51,898
6,990
* Comparative period not restated for AASB 16.
¹ Following the adoption of AASB 16 from 1 July 2019, the Group has determined that it is a lessor where a
resident has chosen a RAD or Bond arrangement under which to receive residential aged care services. The
Group has recognised an imputed non-cash interest cost on the outstanding RAD and Bond liability. Further
details on the Group's adoption and transition to AASB 16 is included in Note E9.
² The Group has various leases for aged care homes, office space and minor office equipment. These leases
were previously classified as operating leases under AASB 117 and classified within Rent Expense. Following
the adoption of AASB 16 from 1 July 2019, these leases are now accounted for by recognising a depreciable
right of use asset and a corresponding lease liability subject to an interest cost, similar to accounting for finance
leases under AASB 117. Further details of the Group's adoption and transition to AASB 16 is included in Note
E9.
³ Interest directly attributable to the construction of homes has been capitalised to construction in progress at a
weighted average rate of 2.46% (2019: 3.04%). Assets have been funded through general borrowings and the
capitalisation rate represents the average cost of interest on such borrowings.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION B: OUR PERFORMANCE (CONTINUED)
B6
NET FINANCE COSTS (CONTINUED)
SIGNIFICANT ACCOUNTING POLICY
Interest income
Interest income is recognised based on the effective interest method.
Borrowing costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of
funds. Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of
the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Refer to Note D2
for information relating to loans and borrowings.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The Group has determined the use of the Maximum Permissible Interest Rate ("MPIR") as the interest rate in the
calculation of the Imputed Interest Cost on RAD and Bond Balances. The MPIR is a rate set by the Government
and is used to calculate the Daily Accommodation Payment to applicable residents.
Where the Group, as a lessee, cannot readily determine the interest rate implicit in a lease, it uses an
Incremental Borrowing Rate ("IBR") to calculate interest expense on leases. The IBR is the interest rate that the
lessee would have to pay to borrow over a similar term of each lease. The Group estimates the IBR using
market interest rates and adjusts these rates to include the effect of the lessee's own stand alone credit rating.
Estia Health Annual Financial Report 2019 - 2020
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION B: OUR PERFORMANCE (CONTINUED)
B7
INCOME TAX
Current income tax
Current income tax expense
Adjustments in respect of income tax of previous year
Deferred income tax
Relating to origination and reversal of temporary differences
Adjustments in respect of income tax of previous year
Income tax expense reported in the consolidated statement of profit or
loss and other comprehensive income
Reconciliation of income tax expense and the accounting profit:
Accounting profit before income tax
At the Australian statutory income tax rate of 30% (2019: 30%)
Adjustments in respect of income tax of previous year
Utilisation of previously unrecognised tax losses
Expenditure not allowable for income tax purposes
- Goodwill impairment expense
- Other expenditure
Income tax expense
2020
$'000
2019
$'000
16,093
355
(8,090)
(294)
16,529
(290)
642
(342)
8,064
16,539
2020
$'000
(108,845)
(32,654)
61
(176)
40,818
15
8,064
2019
$'000
57,829
17,349
(632)
(182)
-
4
16,539
100,781
(74,368)
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108 Estia Health | 2019-20 Annual Report
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION B: OUR PERFORMANCE (CONTINUED)
B7
INCOME TAX (CONTINUED)
Consolidated statement of
profit or loss and other
comprehensive income
Consolidated statement of
financial position
2020
$'000
2,541
(8)
281
2,216
-
-
3,126
36
1,195
(1,003)
8,384
8,384
2019
$'000
1,003
(2,059)
(184)
(17)
-
(341)
1,298
-
-
-
(300)
(300)
Accelerated depreciation and impairment
IPO transaction fees
Other
Assets held for sale
Bed licences
Share-based payments
Provisions and accruals
Investment properties
Right of use assets
Lease liabilities
Deferred tax expense
Deferred tax assets/(liabilities), net
Reflected in the statement of financial position as follows
Deferred tax assets
Deferred tax liabilities
Deferred tax assets/(liabilities), net
Reconciliation of deferred tax liabilities, net:
Balance at 1 July 2018
Tax income during the year recognised in profit or loss
Balance at 1 July 2019
Adjustment due to AASB 16 adoption
Adjusted balance as of 1 July 2019
Tax expense during the year recognised in profit or loss
Adjustments in respect of income tax of previous year
As at 30 June 2020
2020
$'000
(57,307)
8
(545)
2,216
(64,571)
-
20,047
-
21,889
(20,141)
(98,404)
(98,404)
45,067
(143,471)
(98,404)
$'000
(107,475)
(300)
(107,775)
1,555
(106,220)
8,384
(568)
(98,404)
2019
$'000
(59,848)
16
(825)
-
(64,571)
-
17,489
(36)
-
-
(107,775)
(107,775)
17,672
(125,447)
(107,775)
-
-
-
1,555
(106,220)
8,384
(568)
(98,404)
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION B: OUR PERFORMANCE (CONTINUED)
B7
INCOME TAX (CONTINUED)
SIGNIFICANT ACCOUNTING POLICY
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted at the reporting date.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement
of profit or loss. Positions taken in the tax returns are evaluated with respect to situations in which applicable tax
regulations are subject to interpretation and establishes a tax asset or liability where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
• When the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability
in a transaction that is not a business combination and that, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
• In respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it
is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax
assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the
same taxation authority.
Tax consolidation legislation
Estia Health Limited and its wholly-owned controlled entities implemented the tax consolidation legislation as of
19 June 2013.
The head entity, Estia Health Limited and the controlled entities in the tax consolidated group continue to
account for their own current and deferred tax amounts. The Group has applied the Group allocation approach in
determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax
consolidated group.
In addition to its own current and deferred tax amounts, Estia Health Limited also recognises the current tax
liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed
from controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as
amounts receivable from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding
agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION B: OUR PERFORMANCE (CONTINUED)
B7
INCOME TAX (CONTINUED)
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses
can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be
utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the
extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
B8
EARNINGS PER SHARE
Basic Earnings Per Share (EPS) amounts are calculated by dividing the profit or (loss) for the year attributable to
ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the
year. Diluted EPS amounts are calculated by dividing the profit or (loss) attributable to ordinary equity holders of
the Parent by the weighted average number of ordinary shares outstanding during the year plus the weighted
average number of ordinary shares that would be issued on conversion of all the dilutive employee Performance
Rights into ordinary shares.
(Loss) or profit attributable to ordinary equity holders of the Parent for basic and
diluted earnings
2020
$'000
2019
$'000
(116,909)
41,290
2020
2019
Weighted average number of ordinary shares for basic EPS
261,014,726
260,602,749
Effect of dilution
1,538,291
1,270,857
Weighted average number of ordinary shares for the effect of dilution
262,553,017
261,873,606
Basic (loss) or earnings per share
Diluted (loss) or earnings per share
2020
cents
(44.79)
(44.79)
2019
cents
15.84
15.77
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION B: OUR PERFORMANCE (CONTINUED)
B9
CASH FLOW RECONCILIATION
(a) Reconciliation of net profit or (loss) after income tax to net cash flows from operations
(116,909)
(Loss)/Profit for the year
2020
$'000
Adjustments to reconcile profit or (loss) after income tax to net cash
flows:
Depreciation of property, plant and equipment
Depreciation on right of use assets
Imputed revenue on RAD and bond balances
Imputed interest cost on RAD and bond balances
Amortisation of intangibles
Impairment of property, plant and equipment
Net gain on disposal of property, plant and equipment
Net gain on sale of assets held for sale
Bond retention revenue
Movement in allowance for expected credit losses
Share-based payments
Stepped lease costs
Net (gain) or loss on fair value of investment properties
Changes in assets and liabilities
Decrease/ (increase) in trade and other receivables
Decrease/ (increase) in prepayments and other assets
Decrease/ (increase) in deferred tax assets
(Decrease)/ increase in deferred tax liabilities
(Decrease)/ increase in current tax payable
(Decrease)/ increase in trade and other payables
(Decrease)/ increase in provisions
(Decrease)/ increase in refundable accommodation deposits and bonds
Net cash flows from operating activities
33,150
4,524
43,407
(43,407)
1,445
144,622
(51)
(283)
(1,910)
440
(47)
-
120
(835)
(1,595)
(5,185)
(2,755)
7,111
22,260
8,779
33,181
126,062
2019
$'000
41,290
27,730
-
-
-
989
465
(19)
(17)
(1,041)
(387)
658
209
-
2,000
344
1,129
(828)
306
(3,306)
3,841
14,566
87,929
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION B: OUR PERFORMANCE (CONTINUED)
B9
CASH FLOW RECONCILIATION (CONTINUED)
SIGNIFICANT ACCOUNTING POLICY
Operating cash flow
Daily inflows and outflows of refundable accommodation deposits are considered by the Group to be a normal
part of the operations of the business and are utilised at the discretion of the Group within the guidelines set out
by the Prudential Compliance Standards and are therefore classified as an operating activity for the purposes of
cash flow reporting.
2019
$'000
AASB 16
Adoption
$'000
Net cash flows
$'000
Other
$'000
2020
$'000
(b) Reconciliation of liabilities
arising from financing activities
Non-current loans and borrowings
Lease liabilities
Dividends paid
Total liabilities from financing
activities
125,000
-
-
-
76,305
-
5,000
(3,884)
(32,920)
-
540
-
130,000
72,961
-
125,000
76,305
(31,804)
540
202,961
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES
C1
CASH AND CASH EQUIVALENTS
Cash at bank
Cash on hand
Total cash and cash equivalents
2020
$'000
30,522
78
30,600
2019
$'000
14,555
76
14,631
Cash at bank earns interest at floating rates based on daily bank deposit rates.
At 30 June 2020, the Group had available $197,152,028 (2019: $201,596,890) of undrawn committed borrowing
facilities, which excludes $4,000,000 (2019: $4,000,000) of bank guarantees disclosed in Note E2.
SIGNIFICANT ACCOUNTING POLICY
Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and
short-term deposits with an original maturity of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value.
For the purposes of the consolidated statement of cash flows, "cash and cash equivalents" are as defined
above, net of outstanding bank overdrafts.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES (CONTINUED)
C2
TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Allowance for expected credit losses
Total trade and other receivables
Allowance for expected credit loss
2020
$'000
8,593
1,549
(2,013)
8,129
2019
$'000
8,045
2,574
(1,573)
9,046
Set out below is the movement in the allowance for expected credit losses of trade receivables for the period.
As at 1 July
AASB 9 Adjustment
Provision for expected credit loss
Utilised
At 30 June
2020
$'000
1,573
-
732
(292)
2,013
2019
$'000
1,509
451
801
(1,188)
1,573
SIGNIFICANT ACCOUNTING POLICY
Trade receivables and other receivables are recognised and carried at original invoice amount less an allowance
for lifetime expected credit losses.
The Group uses a provision matrix based on days past due for groupings of customers with similar credit risk
characteristics, adjusted for any material expected changes to the future credit risk of that group to determine
the lifetime expected credit losses at the reporting date.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
In calculating the allowance for expected credit loss, the Group applies judgements when identifying customers
with similar risk characteristics to group together in the provision matrix. The Group is also required to estimate
the rate of allowance of expected credit loss for each group of customer, which requires the use of historical
rates of default and assumptions based on future economic conditions, for instance a downturn in the Australian
economy or adverse changes to the aged pension, that may materially impact on the ability to collect
outstanding customer balances.
The Group determined that the risk characteristics of its customers were not significantly impacted by COVID-19
during the period. The Group observed there to be no significant shift in customer payment patterns and
performance following the declaration of the COVID-19 pandemic in Australia from March 2020 that would
materially impact the ability to collect outstanding debtor balances.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES (CONTINUED)
C3
ASSETS HELD FOR SALE
Assets held for sale
Total assets held for sale
2020
$'000
5,441
5,441
2019
$'000
-
-
In May 2019, the Estia home in Mona Vale (NSW) was closed as it did not meet the community expectations for
residential aged care homes. Following a detailed review it was decided that the best use of the site was to sell
the property. During the period, the Group entered into a binding unconditional contract to sell this site for $10.95
million with settlement expected to be in June 2020. The purchaser requested and the Group agreed, to an
extension of the settlement to November 2020 for which the Group received a single incentive payment of
$125,000. A deposit of $1,095,000 has also been received during the period. The Group has not recognised any
profit on this sale during the period.
During the period, the Group considered the potential redevelopment into a residential aged care facility of a
property it owns in Wombarra, NSW. However, the Group decided in June 2020 to enter into a process for the
disposal of this site.
SIGNIFICANT ACCOUNTING POLICY
Non-current assets are classified as held-for-sale if it is highly probable that they will be recovered primarily
through sale in its current condition and rather than through continuing use.
Such assets are generally measured at the lower of their carrying amount and fair value less costs to sell.
Impairment losses on initial classification as held-for-sale or held-for-distribution and subsequent gains and
losses on re-measurement are recognised in profit or loss.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
For an asset held for sale for which fair value less cost of disposal cannot be referenced to a binding
unconditional contact of sale, the Group takes into consideration various external sources of information, such
as comparable sales history and guidance provided by independent external parties, to determine the likely fair
value less cost of disposal for the asset.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES (CONTINUED)
C4
PROPERTY, PLANT AND EQUIPMENT
Reconciliation of property, plant and equipment
Land
$'000
Buildings
$'000
Property
Improvements
$'000
Note
Furniture,
fixtures
&
equipment
$'000
Motor
vehicles
$'000
Construction
in progress
$'000
Total
$'000
Cost
Balance at 1 July 2018
Additions
Transfers
Disposals
Transfers to assets held
for sale
Balance at 30 June 2019
Additions
Transfers
Disposals
Transfers to assets held for
sale
Balance at 30 June 2020
Accumulated
depreciation
Balance at 1 July 2019
Depreciation expense
Impairment expense
Disposals
Balance at 30 June 2019
Depreciation expense
Impairment expense
Disposals
Balance at 30 June 2020
B5
B5
B5
B5
Net book value
As at 30 June 2019
As at 30 June 2020
193,213 481,734
-
23,868
(786)
99
-
(435)
(37)
-
192,840 504,816
-
26,653
(445)
3,148
3,960
(885)
49,354
2,521
14,215
(1,267)
-
64,823
2,783
15,129
(46)
68,310
13,140
13,574
(2,979)
-
92,045
9,884
19,143
(2,112)
(5,250)
-
193,813 531,024
-
82,689
(48)
118,912
-
-
-
-
-
-
-
-
-
28,832
11,884
-
(786)
39,930
11,498
4,844
(445)
55,826
2,174
3,306
-
(1,267)
4,213
4,148
858
(30)
25,947
12,438
-
(2,965)
35,420
17,431
589
(2,046)
9,189
51,395
945
87
-
(43)
-
989
65
-
(155)
-
899
788
102
-
(43)
847
72
-
(149)
770
21,295 814,851
94,471
78,624
-
(51,657)
(6,179)
(669)
-
(37)
47,593 903,106
67,861
51,981
-
(64,885)
(3,643)
-
(108)
(5,406)
34,581 961,918
-
-
465
(465)
-
-
2,213
-
57,741
27,730
465
(5,526)
80,410
33,149
8,504
(2,670)
2,213 119,393
192,840 464,887
193,813 475,198
60,610
73,500
56,624
67,516
142
129
47,593 822,696
32,368 842,524
The land and buildings predominately relate to aged care facilities. The provision of aged care includes
operating leases as described in Note E9.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES (CONTINUED)
C4
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
SIGNIFICANT ACCOUNTING POLICY
Construction in Progress, Plant and Equipment and Land and Buildings are stated at cost, net of accumulated
depreciation and accumulated impairment losses, if any. Land is not depreciated. Such cost includes the cost of
replacing part of the plant and equipment and borrowing costs for long-term construction projects if the
recognition criteria are met. When significant parts of plant and equipment are required to be replaced at
intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them
accordingly. All other repair and maintenance costs are recognised in profit or loss as incurred.
Property, plant and equipment transferred from vendors are initially measured at fair value at the date on which
control is obtained.
Depreciation is calculated on a straight-line or written down value basis over the estimated useful life of the
asset as follows:
Buildings and property improvements
Furniture, fittings and equipment
Motor vehicles
4 - 50 years
3 - 20 years
4 - 8 years
An item of property, plant and equipment and any significant part initially recognised is derecognised upon
disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the statement of profit or loss when the asset is derecognised.
Property, plant and equipment are tested for impairment at the lowest level Cash Generating Unit ("CGU"). Each
mature home is determined to be a separate CGU because it generates cash flows which are largely
independent of other assets.
The Group also assesses the indicators for impairment at each financial year end. If impairment indicators exist
an impairment test will be performed. The impairment test consists of comparing the recoverable amount of a
CGU against its carrying value. Recoverable amount is the higher of the CGU’s fair value less costs of disposal
and value in use. The carrying value is determined on a basis consistent with the way the recoverable amount of
the CGU is determined. The carrying value of the CGU represents those assets that can be attributed directly or
allocated on a reasonable and consistent basis.
Additionally, the Group assesses the residual values, useful lives and methods of depreciation of property, plant
and equipment and adjusts prospectively, if appropriate.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
During the period, the Group identified the existence of indicators of impairment at some of its aged care homes.
An impairment test on these homes determined that the long term financial returns of the homes are likely to be
compromised due to external factors such as new competition, changing consumer expectations and the
impacts of COVID-19. The Group determined the recoverable amount of these homes to be the higher of fair
value less costs of disposal and value in use. For value in use, the Group applied a discount rate of 9.5% to
financial forecasts of each home which covered a five year period (2021 to 2025) and a terminal value which
assumed a long term growth rate of between 0.0% to (5.0%). The recoverable amount was then compared to
the carrying value of each home and in accordance with AASB 136, the Group reduced the carrying value of
each home to equal its recoverable amount.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES (CONTINUED)
C5
INVESTMENT PROPERTIES
Balance at beginning of period
Fair value adjustments
Total investment properties
2020
$'000
1,620
(120)
1,500
2019
$'000
1,620
-
1,620
Investment properties comprise Independent Living Units ("ILUs") located in one retirement village in Bendigo.
The retirement village is subject to a loan licence agreement which confers the right to occupancy of the unit,
until such time as the resident’s occupancy terminates and the occupancy rights are transferred to another
resident. Upon entry, a resident will loan the Group an amount equal to the fair value of the unit. On termination
the resident is entitled to repayment of the loan inclusive of any uplift in fair value since the agreement date less
the deferred management fee.
SIGNIFICANT ACCOUNTING POLICY
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial
recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date.
Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in
the period in which they arise, including the corresponding tax effect. Fair values are determined based on an
annual evaluation performed by an accredited external independent valuer applying a valuation model
recommended by the International Valuation Standards Committee.
Investment properties are derecognised either when they have been disposed of or when they are permanently
withdrawn from use and no future economic benefit is expected from their disposal. The difference between the
net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of
derecognition.
Transfers are made to (or from) investment property only when there is a change in use. For a transfer from
investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at
the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for
such property in accordance with the policy stated under property, plant and equipment up to the date of change
in use.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The fair value of investment properties of $1,500,000 (2019: $1,620,000) has been categorised as Level 3 based
on the inputs to the valuation technique used (see Note D6).
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES (CONTINUED)
C6
GOODWILL AND OTHER INTANGIBLE ASSETS
Balance at 1 July 2018
Additions
Disposals
Balance at 30 June 2019
Additions
Disposals
Goodwill
$'000
Bed licences
$'000
Note
817,074
-
-
817,074
-
-
215,236
2,695
-
217,931
3,350
-
Software
costs
$'000
Total
$'000
7,029
2,155
(89)
9,095
1,039,339
4,850
(89)
1,044,100
2,529
(94)
5,879
(94)
Balance at 30 June 2020
817,074
221,281
11,530
1,049,885
Accumulated amortisation
Balance at 1 July 2018
Amortisation expense
Disposals
Balance at 30 June 2019
Amortisation expense
Impairment
Disposals
Balance at 30 June 2020
Net book value
As at 30 June 2019
As at 30 June 2020
B5
B5
B5
-
-
-
-
-
136,059
-
136,059
-
-
-
-
-
-
-
-
3,551
989
(89)
4,451
3,551
989
(89)
4,451
1,445
59
(94)
1,445
136,118
(94)
5,861
141,920
817,074
681,014
217,931
221,281
4,644
1,039,649
5,669
907,964
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES (CONTINUED)
C6
GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
SIGNIFICANT ACCOUNTING POLICY
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets
acquired in a business combination is their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
Internally generated intangibles, other than capitalised development and software costs, are not capitalised and
the related expenditure is reflected as a profit or loss in the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortisation period and the
amortisation method for an intangible asset with a finite useful life are reviewed at the end of each reporting
period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits
embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are
treated as changes in accounting estimates and adjusted on a prospective basis.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, at the
Cash Generating Unit (CGU) level. The CGU is consistent with the operating segment identified in Note E5. The
assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be
supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
Software costs are amortised over the estimated useful life of 5 years.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the
net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss
when the asset is derecognised.
Bed licences
Bed licences for the Group’s aged care homes are initially carried at cost or if acquired in a business
combination, at fair value at the date of acquisition in accordance with AASB 3 Business Combinations.
Following initial recognition, the licences are not amortised but are measured at cost less any accumulated
impairment losses. Bed licences are tested for impairment annually as at 30 June and when circumstances
indicate that the carrying value may be impaired. Testing is performed in line with the procedures noted below in
Goodwill.
Bed licences are assessed as having an indefinite useful life as they are issued for an unlimited period and
therefore are not amortised. The assessment of indefinite life is reviewed annually to determine whether the
indefinite life continues to be supportable.
Goodwill
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the
amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets
acquired and liabilities assumed.
Goodwill is tested for impairment annually as at 30 June and when circumstances indicate that the carrying
value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of the CGU
to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an
impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES (CONTINUED)
C6
GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The Group performs impairment testing on goodwill and intangible assets, such as bed licences, annually and
also when an impairment indicator(s) exist. The Group considers the relationship between its market
capitalisation and its net book value, among other factors, when reviewing for indicators of impairment. As at 30
June 2020, the market capitalisation of the Group was below its net book value, indicating that potentially these
assets could be impaired.
For impairment testing purposes, goodwill and bed licences are allocated to a group of CGUs that represent the
lowest level within the Group at which these assets are monitored. This is consistent with the Group’s operating
segment identified in Note E5. The carrying value of the CGU was then compared against its recoverable
amount. The recoverable amount of the CGU was determined on a value-in-use calculation basis by discounting
cash flow projections approved by the Board and senior management that cover a five year period (2021 to
2025) after which a terminal value is applied. The valuations used to test carrying values are based on forward
looking assumptions which are uncertain. The forecasts also considered the impacts of COVID-19, including
potential outbreaks, during the forecast period.
Discount rate of 9.3% was applied to the cash flow forecasts, including terminal value. The discount rate
incorporates adjustments resulting from the adoption of AASB 16 to include the impact of lease liabilities on debt
and equity assumptions. This rate reflects the current market assessments of the risks specific to the industry
the CGU operates in, and also taking into consideration the time value of money. The calculation of the rate is
based on the specific circumstances of the Group and is derived from its weighted average cost of capital.
Long term growth rate of 2.3% which reflects an assessment of inflation and perpetual growth using market
and economic data.
The result of the testing indicated that the recoverable amount of the CGU was less than its carrying value which
resulted in an impairment charge against goodwill of $136.1 million.
Sensitivities to change in assumptions:
As a result of the impairment charge noted above, the recoverable amount of the CGU is now in line with its
carrying value. The following sensitivity changes to the forward assumptions will have an impact of increasing or
decreasing the recoverable amount:
• A 10% increase or reduction in forecasted EBITDA across all future years, including the terminal year, will
result in an increase or decrease of $52.0 million.
• An increase or decrease of 50 basis points to the discount rate will result in an increase or decrease of
approximately $50.0 million
• An increase or decrease of 50 basis points in the long term growth rate will result in an increase or decrease of
approximately $40.0 million.
Post-tax discount rate
Pre-tax discount rate
Long term growth rate
Estia Health Annual Financial Report 2019 - 2020
122 Estia Health | 2019-20 Annual Report
2020
%
9.3
12.5
2.3
2019
%
9.5
11.8
2.1
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES (CONTINUED)
C7
RIGHT OF USE ASSETS AND LEASE LIABILITIES
The Group has lease agreements for various aged care facilities, office space and minor office equipment with
varying lease terms. Following the adoption of AASB 16 on 1 July 2019, the carrying amounts of the Group's
right of use assets and lease liabilities and the movement during the period are presented below. Refer to E9
paragraph (a) for full details on the adoption and transition to AASB 16.
As at 1 July 2019
Depreciation expense
Interest expense
Lease payments
Remeasurement of leases
As at 30 June 2020
Property
Leases
$'000
Other
Equipment
$'000
70,827
(4,375)
-
-
540
66,992
295
(149)
-
-
-
146
Total
$'000
71,122
(4,524)
-
-
540
67,138
Lease
Liabilities
$'000
76,305
-
2,171
(6,055)
540
72,961
Right of use assets of property leases predominately relates to aged care facilities. The provision of aged care
includes operating leases as described in Note E9.
The following table is provided to assist with the understanding of the impact of the adoption of AASB 16 on the
profit and loss for the period:
Depreciation expense of right-of-use assets, now recognised
Interest expense on lease liabilities, now recognised
Operating lease rentals, under AASB 117
Net impact on the Profit and Loss
$'000
4,524
2,171
(6,055)
640
As allowed by adopting a practical expedient under AASB 16, there is no change to the recognition and
measurement of short term, low asset value and variable leases. The Group had low value leases relating to
minor office equipment such as printers and photocopiers. An amount of $122,000 was recognised as an
expense during the period.
Under its lease agreements, the Group incurs variable lease payments in the form of expenditure in relation to
insurance, council and water rates, and water consumption. There has been no change in recognition of these
amounts under AASB 16 and the Group recognised an amount of $350,000 as an expense in the period.
SIGNIFICANT ACCOUNTING POLICY
In accordance with AASB 16, the Group assesses at contract inception whether a contract is, or contains, a
lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.
The Group applies a single recognition and measurement approach for all leases, except for short-term leases
and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use
assets representing the right to use the underlying assets.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES (CONTINUED)
C7
RIGHT OF USE ASSETS AND LEASE LIABILITIES (CONTINUED)
Right-of-use-assets
The Group recognises right-of-use assets at the commencement date of the lease (that is, the date the
underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred if any, and
lease payments made at or before the commencement date less any lease incentives received. Unless the
Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised
right-of use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the
lease term. Right-of-use assets are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of
lease payments to be made over the lease term. The lease payments include fixed payments (including
in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also
include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments
of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The
variable lease payments that do not depend on an index or a rate are recognised as expense in the period on
which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease
payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a
change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
Short term leases and leases of low value assets
The Group applies the short-term lease recognition exemption to its short-term leases of minor office equipment
(that is, those leases that have a lease term of 12 months or less from the commencement date and do not
contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office
equipment that are considered of low value. Lease payments on short-term leases and leases of low-value
assets are recognised as an expense on a straight-line basis over the lease term.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
In applying AASB 16, the Group has made the following judgements.
In determining the lease term used to ascertain total future lease payments, the Group considers all facts and
circumstances that create an economic benefit to exercise an extension option. Renewal options are only
considered to be part of the lease term if the lease is reasonably certain to be extended. The Group has included
renewal periods as part of the lease term for all leases as it is reasonably certain these will be extended. This
assessment is reviewed if a significant event or change in circumstances occurs which affects this assessment
and is also within the control of the Group.
Where the Group cannot readily determine the interest rate implicit in the lease, it uses its incremental borrowing
rate (IBR) to calculate the present value of future lease payments. The IBR is the interest rate that the lessee
would have to pay to borrow over a similar term of each lease. The Group estimates the IBR using market
interest rates and adjusts these rates to include the effect of the lessee's own stand alone credit rating.
Estia Health Annual Financial Report 2019 - 2020
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES (CONTINUED)
C8
TRADE AND OTHER PAYABLES
Current trade and other payables
Trade creditors
Payroll liabilities
Sundry creditors and accruals
Total current trade and other payables
Non-current other payables
Sundry creditors and accruals
Total non-current other payables
2020
$'000
9,643
36,297
13,587
59,527
-
-
2019
$'000
12,865
14,832
16,349
44,046
12
12
Total trade and other payables
59,527
44,058
Estia Health Annual Financial Report 2019 - 2020
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES (CONTINUED)
C9
OTHER FINANCIAL LIABILITIES
Independent living unit (ILU) entry contributions
Total other financial liabilities
2020
$'000
1,193
1,193
2019
$'000
1,304
1,304
Terms and conditions relating to independent living units (ILUs)
ILU entry contributions are non-interest bearing loans made by ILU residents to the Group upon entering into an
agreement to occupy the ILU and are settled after a resident vacates the property based on the applicable
State-based Retirement Village Acts.
SIGNIFICANT ACCOUNTING POLICY
ILU entry contributions are recognised at fair value through profit or loss with resulting fair value adjustments
recognised in profit or loss. Fair value is measured as the amount payable on demand and is measured as the
net of the principal amount at the point of entry, plus the resident's share in any increase or decrease in the
market value of the occupied ILU (for ILU contracts that contain a capital gain or loss share clause) and less any
deferred management fees that have accrued up to the reporting date.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION C: ASSETS & LIABILITIES (CONTINUED)
C10
PROVISIONS
Current provisions
Employee benefits
Stepped lease provision
Total current provisions
Non-current provisions
Employee benefits
Total non-current provisions
2020
$'000
52,678
-
52,678
5,155
5,155
2019
$'000
44,558
1,058
45,616
4,496
4,496
Total provisions
57,833
50,112
SIGNIFICANT ACCOUNTING POLICY
General
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation.
Long service leave and annual leave
The Group does not expect its long service leave or annual leave benefits to be settled wholly within 12 months
of each reporting date but is recognised as a current liability when the Group does not have an unconditional
right to defer settlement. The liability for long service leave and annual leave is recognised and measured as the
present value of expected future payments to be made in respect of services provided by employees up to the
reporting date using the projected unit credit method.
Consideration is given to expected future wage and salary levels, experience of employee departures, and
periods of service. Expected future payments are discounted using market yields at the reporting date on
national corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated
future cash outflows.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION D: CAPITAL, FINANCING, RADS AND RISK
D1
REFUNDABLE ACCOMMODATION DEPOSITS AND BONDS
Current residents
Departed residents
Total refundable accommodation deposits and bonds - amounts received
2020
$'000
759,479
76,825
836,304
2019
$'000
698,242
106,791
805,033
Terms and conditions relating to refundable accommodation deposits (RADs) and accommodation
bonds (Bonds)
The RADs and Bonds are paid by residents upon their admission to homes and are refunded after a resident
departs a home in accordance with the Aged Care Act 1997. Providers must pay a base interest rate on all
refunds of RADs and Bonds within legislated time frames and must pay a higher rate on refunds that are not
made within legislated time frames.
RAD and Bond refunds are guaranteed by the Government under the Accommodation Payment Guarantee
Scheme, in the event that a provider is unable to refund the amounts. Providers are required to maintain
sufficient liquidity to ensure that they can refund all amounts as they fall due. As required under legislation, the
Group maintains a Liquidity Management Policy, which is monitored on regular basis and a full review is
undertaken on an annual basis as a minimum, with the intention of ensuring it has sufficient liquidity, in the form
of cash or undrawn lines of credit, to meet its RAD and Bond refund and other financial obligations.
To ensure that funds are readily available when required, the minimum level of funds chosen by the Group are to
be held in cash (placed on deposit but readily available) or met by undrawn lines of credit from a bank or
financial institution.
RADs and Bonds are classified as a current liability as the Group does not have an unconditional right to defer
settlement for at least twelve months after the reporting date. The total RAD and Bond liability represents the
sum of separate payments from a significant number of individual residents in different locations with differing
circumstances. The repayment of individual balances that make up the total current balance will be dependent
upon the actual tenure of individual residents, which can be more than ten years but averages approximately 2 -
2.5 years.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D2
LOANS AND BORROWINGS
Non-current loans and borrowings
Bank loans, secured
Total non-current loans and borrowings
2020
$'000
2019
$'000*
128,848
128,848
124,603
124,603
* The comparative period has been restated to deduct directly attributable transaction costs from the carrying value of the loan.
The amount deducted in the current period was $1,152,000 and the prior period was $397,000.
Terms and conditions of loans
The Group has a syndicated debt facility ('Facility') with a number of major Australian banks. The Facility may be
used for general corporate purposes including funding acquisitions, capital expenditure, working capital
requirements and providing sufficient liquidity to redeem refundable accommodation deposits or bonds.
The Facility is secured by real property mortgages over all freehold property, security over material leases, cross
guarantees and indemnities from the Group and first ranking fixed and floating charges over the assets and
undertakings of the Group.
The total debt facility available to Estia at 30 June 2020 was $330,000,000. In addition, the facility now has an
accordian feature which allows for the facility to be increased by an additional $170,000,000, subject to various
terms and conditions of the accordian feature being satisfied. The Facility will mature in November 2022.
SIGNIFICANT ACCOUNTING POLICY
Borrowings are recognised initially at fair value. Directly attributable transaction costs are deducted from the
initial carrying value of the loan and these costs amortised over the term of the facility.
Subsequently, interest-bearing loans and borrowings are measured at amortised cost using the Effective Interest
Rate (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as
well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in
finance costs in the statement of profit or loss.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D3
SHARE CAPITAL AND RESERVES
Issued and fully paid
Ordinary shares
Total share capital
(a) Movements in ordinary shares on issue
Beginning of the financial year
Share issue – DRP
Movement in management equity plan
End of the financial year
Ordinary shares have no par value per share.
2020
$'000
2019
$'000
803,356
803,356
801,843
801,843
2020
Number of
shares
260,602,749
669,165
-
261,271,914
2019
Number of
shares
260,602,749
-
-
260,602,749
$'000
801,843
1,507
6
803,356
$'000
801,836
-
7
801,843
(b) Share-based payments reserve
The share-based payments reserve is used to recognise the value of equity-settled share-based payments
provided to employees, including key management personnel, as part of their remuneration. Refer to Note D4 for
further details of these plans.
(c) Franking credits
The franking credit balance of Estia Health Limited for the year ended 30 June 2020 is $19,087,406 (2019:
$23,917,303).
(d) Dividends paid
The final dividend for the year ended 30 June 2019 of $20,328,082 (7.8 cents per share) was paid on 2 October
2019. The interim dividend for the year ended 30 June 2020 of $14,098,838 (5.4 cents per share) (2019:
$20,848,220) was paid on 27 March 2020.
(e) Dividend reinvestment plan
The DRP has been reinstated which will allow eligible shareholders to reinvest all or part of their dividend
distribution into shares. The DRP was only applicable for the interim dividend paid on 27 March 2020 as no final
dividend will be paid in regards to the period ended 30 June 2020.
Estia Health Annual Financial Report 2019 - 2020
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D4
SHARE-BASED PAYMENTS
At 30 June 2020, the Group had the following share-based payments arrangements:
(a) Long-Term Incentive Plan (LTIP)
Under the LTIP, awards are made to executives who have a significant impact on the Group’s performance.
LTIP awards are delivered in the form of performance rights entitling the holder to shares which vest following a
period of three years subject to meeting performance measures.
For rights granted prior to 1 July 2018, the Group uses Total shareholder return (TSR) performance relative to
the ASX200 excluding mining and energy companies (70%) and Earnings Per Share (EPS) (30%) as
performance measures for the LTIP.
For rights granted post 1 July 2018, the TSR component is split into two components, half against the ASX200
excluding mining and energy companies and half against the market capitalisation weighted average
performance of a peer group of ASX listed and dual listed NZX/ASX companies operating in the provision of
aged care services. The TSR component remains at 70% with EPS remaining at 30% of the performance
measures of the LTIP.
During the year, the Group granted a total of 824,290 rights (2019: 615,019) to executives.
(b) Short-Term Incentive Plan (STIP)
Under the STIP, awards are made to executives who have an impact on the Group’s performance. STIP awards
are delivered in a mix of cash and equity. 75% of the award is delivered in cash, with the remaining 25%
delivered in performance rights, which require participants to remain employed for an additional 12 months for
the rights to vest.
For the year ended 30 June 2020, the STIP was measured against Earnings Before Interest, Tax and
Depreciation and Amortisation ('EBITDA') on a pre AASB 16 basis, Net Profit After Tax and Culture targets, as
well as other role specific measures over a 12-month period. A resident quality gateway hurdle is also used,
which requires ongoing compliance and accreditation targets to be met in order for any of the STIP to be eligible
to vest.
The number of performance rights granted under the STIP during the year ended 30 June 2020 relating to the
incentive payments earned in the year ended 30 June 2019 was 23,055 (2019: 13,693).
(c) Management Equity Plan (MEP)
The MEP is a legacy plan which was approved by the Board and implemented prior to listing and other than for
existing holders, it is no longer offered.
Under the plan, the former Managing Director and a number of senior employees of the Group were invited to
subscribe for shares on the terms specified in the MEP rules. Most MEP participants were also offered a 10 year
limited recourse loan to subscribe for MEP shares.
The following table details the MEP loans outstanding at 30 June 2020. There has been no change since 30
June 2019.
Number of MEP
shares
Total amount
subscribed ($’000)
% of MEP Shares
funded through MEP
loans
Interest rate on MEP
loan
Total
50,000
100
100%
5.95%
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D4
SHARE-BASED PAYMENTS (CONTINUED)
(c) Management Equity Plan (MEP) (continued)
All MEP shares listed above were released from escrow on 11 December 2017.
(d) Movements during the year
The following tables illustrate the number and weighted-average exercise prices (WAEP) of, and movements in,
MEP shares and performance rights during the year:
MEP shares only
Outstanding at 1 July
Outstanding at 30 June
Exercisable at 30 June
2020
2019
Number
WAEP
Number
WAEP
50,000
50,000
50,000
2.00
2.00
2.00
50,000
50,000
50,000
2.00
2.00
2.00
2020
2019
Performance rights only
Number
WAEP
Number
WAEP
Outstanding at 1 July
Granted during the year
Forfeited and cancelled during the year
Exercised during the year
Outstanding at 30 June
Exercisable at 30 June
1,536,396
994,018
(990,206)
(13,693)
1,526,515
-
-
-
-
-
-
-
907,684
628,712
-
-
1,536,396
13,693
-
-
-
-
-
-
The weighted average remaining contractual life for the MEP shares and performance rights outstanding as at
30 June 2020 was approximately 1.67 years (2019: 1.31).
The exercise price for MEPs outstanding at the end of the year was $2.00. There is no exercise price for
performance rights.
The weighted average fair value of performance rights granted during the year was $0.58 (2019: $0.61).
(e) Expense recognised in profit or loss
The share-based payments expense recognised in profit or loss as an employee benefit for each of the share
arrangements were as follows:
Long-term incentive plan
Short-term incentive plan
Management equity plan
Share-based payments expense recognised in profit or loss
Estia Health Annual Financial Report 2019 - 2020
132 Estia Health | 2019-20 Annual Report
2020
$'000
(121)
62
12
(47)
2019
$'000
605
41
12
658
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SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D4
SHARE-BASED PAYMENTS (CONTINUED)
SIGNIFICANT ACCOUNTING POLICY
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using
an appropriate valuation model.
That cost is recognised in employee benefits expense, together with a corresponding increase in equity (other
capital reserves), over the period in which the service and, where applicable, the performance conditions are
fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting
date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best
estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of
profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and
end of that period.
Service and non-market performance conditions are not taken into account when determining the grant date fair
value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate
of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within
the grant date fair value. Any other conditions attached to an award, but without an associated service
requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value
of an award and lead to an immediate expensing of an award unless there are also service and/or performance
conditions. No expense is recognised for awards that do not ultimately vest, except for equity-settled
transactions for which vesting is conditional upon a market or non-vesting condition. These are treated as
vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other
performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the expense had
the terms not been modified, if the original terms of the award are met. An additional expense is recognised for
any modification that increases the total fair value of the share-based payment transaction, or is otherwise
beneficial to the employee as measured at the date of modification. Where an award is cancelled by the entity or
by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit
or loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted
earnings per share.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D4
SHARE-BASED PAYMENTS (CONTINUED)
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
LTIP-Recognition and measurement of fair value
As the exercise price is zero upon vesting, the fair value of the performance rights issued under the LTIP are
determined by the fair value at grant date by utilising methodologies allowable under AASB 2, including the use
of a Monte Carlo simulation (TSR component) and the Binomial Model (EPS component). The contractual term
of the performance rights is three years and there are no cash settlement alternatives for the employees. The
Group does not have a past practice of cash settlement for these awards.
Assumption
FY20 Plan
FY19 Plan
Share price at grant date
Dividend yield
Volatility
Risk free rate
Probability of achieving EPS
$2.71
3.0%
30%
0.7%
10%
$2.19
5.0%
38%
2.0%
40%
FY18 Plan
$3.02 - $3.51
3.5%
40%
2.0%
50%
Fair value of right - TSR
$0.68 - $0.76
$0.46 - $0.47
$1.16 - $1.58
Fair value of right - EPS
$2.50
$1.92
$2.73 - $3.21
STIP-Recognition and measurement of fair value
The fair value of the performance rights issued under the STIP are determined by the volume weight average
share price of the Group in the 10 trading days prior to the release of the Group's annual results. The
performance rights issued under the STIP during the year had a fair value of $2.71 per right and related to the
prior year's performance. The performance rights are deferred for a 12 month period and are settled in the
Group's equity if the participants remains employed by the Group at the end of the 12 month period.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D4
SHARE-BASED PAYMENTS (CONTINUED)
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)
MEP-Recognition and measurement of fair value
In accordance with AASB 2, the granting of shares in exchange for a limited recourse loan is effectively the
same as granting a share option as it gives the MEP participant the right, but not the obligation, to subscribe to
Estia’s shares at a fixed price for a specified period of time. Even though Estia records the MEP shares as
issued for legal purposes, they are not considered to be issued for accounting purposes. When MEP shares are
granted, limited recourse loans to assist in the purchase of the shares are recognised in equity. As the MEP
holder repays the loan through the application of dividends and/or instalments, those payments are accounted
for as partly paid capital. Effectively, the grant of MEP shares and limited recourse loan are set off against each
other in equity.
The grants of MEP loans were accounted for as an option and the fair value at grant date is independently
determined using the binomial options pricing model that takes into account the discount to market price at grant
date, the expected life/term of the loan and its limited recourse nature, the vesting terms, the expected price
volatility, the expected dividend yield and the risk-free interest rate for the term.
The fair value of the shares granted is recognised to profit or loss on a straight-line basis over the expected
vesting period (i.e. 10 years) with a credit to the share-based payments reserve in equity. Loan payments
received are credited to issued capital.
In the case where MEP loans are not granted to assist in the purchase of MEP shares, the MEP shares are fully
self-funded and are therefore treated as issued for accounting purposes, which is no different to legal purposes.
The following table lists the inputs to the model used in the measurement of the fair value at grant date of the
MEP loans:
Share price at grant date
$1.00 - $5.75
2015
Exercise price
Volatility
Risk free rate
$1.80 - $5.75
30%
3.04% - 3.26%
Expected life of options
10 years
The expected life of the MEP shares are based on the assumption that these are exercised at the end of the
MEP loan term and is not necessarily indicative of exercise patterns that may occur. The expected volatility is
based on the historical volatility of the Group’s share since listing on 5 December 2014 and reflects the
assumption that this volatility is indicative of future trends, which may not necessarily be the actual outcome.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D5
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial liabilities consist of interest-bearing loans and borrowings, trade and other
payables, Refundable Accommodation Deposits and lease liabilities. The main purpose of these financial
liabilities is to finance the Group’s operations. The Group’s principal financial assets include trade and other
receivables and cash and short-term deposits that derive directly from its operations.
The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management oversees the
management of these risks. It is the Group’s policy that no trading in derivatives for speculative purposes may
be undertaken. Policies for managing each of these risks are summarised below.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in market prices. Market risk comprise three types of risk: interest rate risk, currency risk and other
price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include
loans and borrowings and deposits. The Group is not exposed to commodity or equity risks.
The sensitivity analyses in the following sections relate to the position as at 30 June 2020 and 30 June 2019.
The sensitivity analyses have been prepared on the basis that the amount of net debt and the ratio of fixed to
floating interest rates of the debt are all constant at 30 June 2020 and 30 June 2019.
The following assumption has been made in calculating the sensitivity analyses:
•
The sensitivity of the relevant statement of profit or loss item is the effect of the assumed changes in
respective market risks. This is based on the financial assets and financial liabilities held at 30 June 2020
and 30 June 2019.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates
primarily to the Group’s cash and cash equivalents and long-term debt obligations with floating interest rates.
The Group’s exposure to interest rate risk and the effective interest rate of financial assets and liabilities both
recognised and unrecognised at the reporting date are as follows:
All other financial assets and liabilities are non-interest bearing.
.
Cash and liquid assets
Bank loans
Refundable accommodation deposits – departed residents
Weighted average effective
interest rates
2020
%
1.1
1.4
2.9
2019
%
0.9
2.7
3.8
Fixed or
Floating
Floating
Floating
Floating
The details of debt are disclosed in Note D2 to the financial statements.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D5
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion
of cash and cash equivalents and loans and borrowings affected. With all other variables held constant, the
Group’s profit before tax and equity are affected through the impact on floating rate financial instruments existing
at the end of the respective period, as follows:
+ 0.25% (25 basis points)
- 0.25% (25 basis points)
Effect on profit before tax
Higher/(lower)
Effect on equity
Higher/(lower)
2020
$'000
(174)
174
2019
$'000
(193)
193
2020
$'000
(122)
122
2019
$'000
(135)
135
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer
contract, leading to a financial loss. The maximum loss is equal to the carrying amount of the asset. The Group
is exposed to credit risk from customer receivables and from its deposits with banks.
Approximately 75% (2019: 74%) of the revenue (excluding imputed non cash revenue on RAD and bond
balances following the adoption of AASB 16 from 1 July 2019) of the Group is obtained from Commonwealth
Government funding. This funding is maintained for providers as long as they continue to comply with
Accreditation standards and other requirements per the Aged Care Act 1997.
Trade and other receivables
Customer credit risk is managed subject to an established Group policy which requires the regular monitoring
and follow up of outstanding customer receivables.
The Group limits its exposure to credit risk by establishing a maximum payment period of 30 days, and where
possible, setting customers up to settle accounts via direct debit.
An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit
losses. The provision rates are based on days past due for groupings of customers with similar credit risk
characteristics, adjusted for any material expected changes to the future credit risk of that group. The Group
applies the simplified approach for measuring expected credit losses, using the lifetime expected loss allowance
for all trade and other receivables.
The Group considers a financial asset in default when contractual payments are past due. Generally, financial
assets are written-off when the Group have exhausted all reasonable avenues to recover the balances.
Generally, customer receivables are written-off when the Group have exhausted all reasonable avenues to
recover the balance.
The Group's other receivables are due from the Australian Government and other state based revenue offices.
The Group does not believe that there is a material credit risk for these receivables.
The following table provides information about the expected credit losses for trade receivables, excluding the
Commonwealth Government balance of $3,323,000 at 30 June 2020 (2019: $1,813,000):
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D5
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Credit risk (continued)
As at 30 June 2020
Current (not past due)
<30 days past due
30-60 days past due
61-90 days past due
>90 days past due
At 30 June 2019
Current
<30 days
30-60 days
61-90 days
>90 days
Total
Expected
credit loss
rate
%
Gross
carrying
amount
$'000
Allowance for
expected
credit loss
$'000
6%
16%
22%
20%
81%
38%
1,892
533
388
465
2,033
5,311
110
84
85
93
1,640
2,012
Expected
credit loss
rate
%
Gross
carrying
amount
$'000
Expected
credit loss
$'000
1%
8%
11%
17%
53%
25%
756
1,792
838
491
2,355
6,232
8
135
95
83
1,252
1,573
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D5
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Liquidity risk
The Group monitors its risk to a shortage of funds on a regular basis. The Group maintains a balance between
continuity of funding and flexibility through the use of bank loans that are available for potential business
acquisitions and working capital requirements. The Group assessed the concentration of risk with respect to
refinancing its debt and concluded it to be low.
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual
undiscounted payments.
Year ended 30 June 2020
Trade and other payables
Loans and borrowings
Refundable accommodation deposits
and bonds
Other financial liabilities
Lease liabilities
Year ended 30 June 2019
Trade and other payables
Loans and borrowings
Refundable accommodation deposits
and bonds
Other financial liabilities
Lease liabilities
On demand
Less than
12 months 1 to 5 years
More than 5
years
$'000
$'000
$'000
$'000
Total
$'000
926
-
836,304
1,193
-
838,423
1,382
-
805,033
1,304
-
807,719
58,601
-
-
-
6,123
64,724
42,664
3,375
-
-
-
46,039
-
130,000
-
-
22,102
152,102
12
125,499
-
-
-
125,511
-
-
59,527
130,000
-
-
67,225
67,225
836,304
1,193
95,450
1,122,474
-
-
-
-
-
-
44,058
128,874
805,033
1,304
-
979,269
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D5
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Capital management
For the purpose of the Group’s capital management, capital includes issued capital and all other equity reserves
attributable to the equity holders of the parent.
The Group manages its capital structure and considers adjustments in light of changes in economic conditions
and the requirements of the financial covenants. To maintain or adjust the capital structure, the Group may
adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. In order to
achieve this overall objective, the Group’s capital management, amongst other things, aims to ensure that it
meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure
requirements. Any unremedied breaches in meeting the financial covenants would permit the bank to
immediately call loans and borrowings. There have been no breaches of the financial covenants of any
interest-bearing loans and borrowings in the current period.
No changes were made in the objectives, policies or processes for managing capital during the year ended 30
June 2020.
D6
FAIR VALUE MEASUREMENT
The Group uses various methods in estimating the fair value of its financial assets and liabilities which are
categorised within the fair value hierarchy. The Group only uses fair value for Investment Properties, which are
valued using Level 3 inputs.
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable.
Date of Valuation
Investment properties
30 June 2020
30 June 2019
Total
$'000
1,500
1,620
Fair value measurement using
Level 1
Level 2
Level 3
$'000
-
$'000
-
$'000
1,500
1,620
Fair values of Investment Properties are determined based on an annual valuation performed by an accredited
external independent valuer applying a valuation model recommended by the International Valuation Standards
Committee.
At the reporting date, the key unobservable inputs used by the Group in determining the fair value of its
investment properties are summarised below:
Unobservable inputs
Discount rate
Growth rate
Cash flow term (years)
30 June 2020 30 June 2019
15.00%
2.63%
50
15.00%
2.85%
50
The carrying amounts of all financial assets and financial liabilities not measured at fair value are considered to
be a reasonable approximation of their fair values.
There were no transfers between levels during the financial year.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D6
FAIR VALUE MEASUREMENT (CONTINUED)
SIGNIFICANT ACCOUNTING POLICY
The Group measures its investment properties, at fair value at each balance sheet date.
Fair value is the price that would be received upon selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:
• In the principal market for the asset or liability; or
• In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a
liability is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable; and
• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group
determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each
reporting period.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION E: OTHER INFORMATION
E1
RELATED PARTY DISCLOSURES
Note E6 provides the information about the Group’s structure including the details of the subsidiaries and the
holding company. Note D4 provides the information about the loans to related parties. There were no other
transactions and outstanding balances that have been entered into with related parties for the relevant financial
year.
The table below discloses the compensation recognised as an expense during the reporting period related to
Key Management Personnel.
Short-term employee benefits
Post-employment benefits
Short-term incentive payments
Share-based payments
Termination payments
Total compensation of key management personnel
E2
COMMITMENTS AND CONTINGENCIES
2020
$'000
1,627
63
-
98
-
1,788
2019
$'000
1,697
66
188
581
-
2,532
Class action
On 16 July 2019 Phi Finney McDonald commenced a representative proceeding (shareholder class action) in
the Federal Court of Australia against the Group. The statement of claim includes allegations of contraventions
of the Corporations Act 2001 (Cth) in relation to continuous disclosure obligations and misleading or deceptive
conduct in 2015 and 2016. The claim has been filed on behalf of shareholders who, between 12 August 2015
and 6 October 2016: (i) acquired an interest in Estia shares; or (ii) acquired long exposure to Estia shares by
entering into equity swap confirmations in respect of Estia shares.
The proceedings have, to date, mostly involved procedural issues including the discovery process. The Group
will continue to vigorously defend the proceedings. It is too early in the process of assessing the claims to
provide a reliable assessment of the quantum of any damages that may become payable if the Group's defence
is unsuccessful in whole or in part. As a result, the Group is not in a position to state whether the proceeding is
likely to have a material impact on its future financial position or performance.
Capital commitments
During the year, the Group entered into contracts relating to the development of aged care homes. As at 30
June 2020, the remaining capital commitments amounted to $20,238,000 (2019: $41,700,000).
Bank guarantees
The Group has entered into a number of bank guarantees with its bankers in relation to the Group's rental
agreements for leased properties, totalling $4,000,000 (2019: $4,000,000). These are secured against the
borrowing facilities disclosed in Note D2. As at the date of signing this report, the Directors are not aware of any
situations that have arisen that would require these bank guarantees to be presented.
Estia Health Annual Financial Report 2019 - 2020
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION E: OTHER INFORMATION (CONTINUED)
E3
AUDITOR REMUNERATION
Fees to the auditor for statutory financial report
Fees for assurance services that are required by legislation to be provided by
the auditor
Fees for other services
Total auditor remuneration
The auditor of Estia Health Limited and its subsidiaries is Ernst & Young.
2020
$'000
800
16
88
904
2019
$'000
688
14
193
895
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION E: OTHER INFORMATION (CONTINUED)
E4
SUBSEQUENT EVENTS
COVID-19
Subsequent to 30 June 2020 there was an outbreak in some Group homes in Victoria, with Ardeer (55 beds) and
Heidelberg West (45 beds) experiencing high COVID-19 positive test rates among residents and staff. At 14
August 2020, nine of the Group's 27 homes in Victoria have COVID-19 positives cases in residents or staff, and
no homes in other states had active COVID-19 positive cases.
In relation to the Ardeer and Heidelberg West COVID-19 outbreaks, the Group was issued with Notices to Agree
(“Notices”) from the Aged Care Quality and Safety Commission (“Commission”). These Notices specified
additional requirements relating to the monitoring and management of the homes including:
•
•
•
Not admitting new residents into the home until the Victorian Public Health Unit has declared the home
cleared of COVID-19;
The appointment of an independent advisor to assist with ensuring the health and well-being of residents;
and
Providing daily and weekly reports to the Commission on managing the outbreak.
The escalating COVID-19 pandemic is impacting all our operating locations and is impacting the financial results
of the Group subsequent to 30 June 2020. In particular, our Ardeer and Heidelberg West locations have been
significantly impacted as a result of falling revenues, and the increased cost of staffing and personal protective
equipment which are well above historical trends. The scale and duration of these conditions remain uncertain
and it is likely that the future earnings, cash flow and financial conditions of the Group will be impacted. This may
also result in the non-cash impairment of assets in the future. The Commonwealth Government has issued a
number of schemes to provide additional financial support to assist Approved Providers to offset the impact of
cost increases arising from responding to COVID-19. The Group will apply for such schemes and amounts for
which it believes it is eligible. Due to the uncertainty regarding the extent of declining revenues, increasing costs
and funding support from the Government schemes, the Group is not able to quantify the overall financial impact
of the COVID-19 outbreak with a degree of certainty at this stage.
The Group continued to have full management control for each of the affected homes at all times, and continues
to operate within the provisions of its Syndicated Financing Facility. The Group has total liquidity (being cash on
hand and undrawn debt facilities) totalling $222.6 million as at 14 August 2020. As a result and as also
mentioned in Note A6, the Financial Report has been prepared on a going concern basis.
E5
SEGMENT REPORTING
For management reporting purposes, the Group has identified one reportable segment. Estia operates
predominantly in one business and geographical segment being the provision of residential aged care services
in Australia. The Group’s operating performance is evaluated across the portfolio as a whole by the Chief
Executive Officer on a monthly basis and is measured consistently with the information provided in these
consolidated financial statements.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION E: OTHER INFORMATION (CONTINUED)
E6
INFORMATION RELATING TO SUBSIDIARIES
The consolidated financial statements of the Group include:
Name
Estia Finance Pty Ltd2
Estia Investments Pty Ltd3, 5
Kenna Investments Pty Ltd4, 5
Hayville Pty Ltd6
Camden Village Pty Ltd5
Kilbride Village Pty Ltd5
Subsidiaries that were dormant during the period and deregistered:
Estia Mezzco Pty Ltd6
Estia Midco Pty Ltd6
Spirytus Pty Ltd4, 6
Jaid Residential Services Pty Ltd4, 6
TGM Care Pty Ltd ATF the TGM Care Unit Trust1, 6
East Coast Senior Care Pty Ltd4, 6
William Kennedy Holdings Pty Ltd1, 5
Wollongong Nursing Home Pty Ltd4, 6
Ranesta Holdings Pty Ltd6
Eddystone Nursing Home Pty Ltd6
Merrylands Nursing Home Pty Ltd6
Kennedy Health Care Group Pty Ltd6
Camden Nursing Home Pty Ltd6
Camden House Pty Ltd6
Bankstown Aged Care Facility Pty Ltd6
Country of
% Equity Interest
Incorporation
2020
2019
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Principal activities
1.
Holding company
2.
3.
4.
5.
6.
Holder of financing facilities
Current accredited provider of aged care home
Accredited provider status transferred to Estia Investments Pty Ltd
Holder of assets
Dormant entity and was de-registered as at 30 June 2020
Estia Health Annual Financial Report 2019 - 2020
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION E: OTHER INFORMATION (CONTINUED)
E7
PARENT ENTITY INFORMATION
Information relating to Estia Health Limited
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Retained earnings
Total shareholders’ equity
(Loss)/ profit of the parent entity
Total comprehensive (loss)/ income of the parent entity
2020
$'000
2019
$'000
559,796
570,406
1,130,202
565,622
476,207
1,041,829
-
454,623
454,623
-
228,297
228,297
675,579
813,532
803,356
1,747
(129,524)
675,579
(104,992)
(104,992)
801,843
1,794
9,895
813,532
27,405
27,405
The goodwill impairment charge recognised in the period of $136,059,000 (refer to Note C6) was recognised by
Estia Investments Pty Ltd, a wholly owned subsidiary of Estia Health Ltd (the parent entity). The recognition of a
goodwill impairment charge by its subsidiary resulted in the parent entity recognising an impairment charge
against the carrying value of its investment in Estia Investments Pty Ltd of $132,247,000. In accordance with
Note A4 Basis of Consolidation, the impairment charge recognised by the parent entity is eliminated in preparing
the Consolidated Financial Statements.
The information presented above relating to the Parent is prepared using the same accounting policies that
apply to the Group, except for the recognition and measurement of investments in subsidiaries.
The Parent has issued the following guarantees in relation to the debts of its subsidiaries:
Pursuant to Class Order 98/1418, Estia Health Limited entered into a deed of cross guarantee on 13 May 2016
with the following entities:
•
•
•
•
•
•
Estia Finance Pty Ltd
Estia Investments Pty Ltd
Kenna Investments Pty Ltd
Hayville Pty Ltd
Camden Village Pty Ltd
Kilbride Village Pty Ltd
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION E: OTHER INFORMATION (CONTINUED)
E7
PARENT ENTITY INFORMATION (CONTINUED)
The effect of the deed is that Estia Health Limited has guaranteed to pay any deficiency in the event of winding
up of any controlled entity or if they do not meet their obligations under the terms of overdrafts, loans, leases or
other liabilities subject to the guarantee. The controlled entities have also given a similar guarantee in the event
that Estia Health Limited is wound up or if it does not meet its obligations under the terms of overdrafts, loans,
leases or other liabilities subject to the guarantee.
Pursuant to Class Order 98/1418, relief has been granted to these entities from the Corporations Act 2001
requirements for the preparation, audit and lodgement of their financial reports.
The Closed Group includes all entities listed in Note E6. The Statement of Financial Position and the Statement
of Profit or Loss and Other Comprehensive Income of the Closed Group are the same as the Estia consolidated
group.
E8
TREATMENT OF GST
Revenues, expenses and assets are recognised net of the amount of GST, except:
•
•
When the GST incurred on a purchase of assets or services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of
the expense item, as applicable; and
When receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables
or payables in the statement of financial position. Commitments and contingencies are disclosed net of the
amount of GST, where the GST is expected to be recoverable.
Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows
arising from investing and financing activities, are classified as part of operating cash flows.
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FOR THE YEAR ENDED 30 JUNE 2020
SECTION E: OTHER INFORMATION (CONTINUED)
E9
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
Changes in accounting policy, disclosures, standards and interpretations
New and amended standards and interpretations
The Group has adopted the following new or amended Australian Accounting Standards and AASB
Interpretations as of 1 July 2019:
AASB 16 Leases
The Group has adopted AASB 16 Leases with an application date of 1 July 2019. AASB 16 replaces AASB 117
Leases and AASB Interpretation 4 and sets out the principles for the recognition, measurement, presentation
and disclosure of leases. The adoption requires the Group to disclose leases as a lessor and as a lessee.
(a) Group as a Lessee
AASB 16 requires lessees to account for all leases similar to accounting for finance leases under AASB 117.
This results in the Group recognising a right of use ('ROU') asset and a corresponding lease liability for all leases
with a term greater than 12 months, excluding assets of low value when acquired new. The operating lease
expense is replaced by depreciation on the ROU assets and interest expense on the amortising lease liability.
The Group has also adopted the modified retrospective approach when transitioning to AASB 16. Under this
approach, the Group has not restated comparatives and has recognised the cumulative effect of AASB 16 as an
adjustment to the opening balance of retained earnings.
The Group elected to use a transition practical expedient to not reassess whether a contract is, or contains, a
lease at 1 July 2019. Instead the Group applied AASB 16 only to contracts that were previously identified as
leases applying AASB 117 and AASB Interpretation 4 at the date of initial application.
The adoption of AASB 16 has had the following increase or (decrease) affect on the Group’s balance sheet as at
1 July 2019:
Assets
Right-of-use assets
Deferred tax assets
Total
Liabilities
Interest bearing lease liabilities
Deferred tax liabilities
Reversal of Stepped Rental Provision
Total
$'000
71,122
22,891
94,013
$'000
(76,305)
(21,654)
1,057
(96,902)
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SECTION E: OTHER INFORMATION (CONTINUED)
E9
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONTINUED)
Changes in accounting policy, disclosures, standards and interpretations (continued)
AASB 16 Leases (continued)
Total adjustment on equity:
Retained earnings
Total
(i) Lease liabilities
$'000
2,889
2,889
The Group has various leases for aged care homes, office space and minor office equipment. These leases
were previously classified as operating leases under AASB 117. Upon adoption of AASB 16, the Group has now
recognised lease liabilities measured at the present value of the future remaining lease payments, discounted
using an incremental borrowing rate for each lease as at 1 July 2019.
Lease liabilities recognised on 1 July 2019 can be reconciled to the operating lease commitments as of 30 June
2019 as follows:
Lease commitments reported as at 30 June 2019
Add: Payments in optional extension period not recognised as at 30 June 2019
Less: Impact of discounting under AASB 16
Lease liabilities as at 1 July 2019
The weighted average incremental borrowing rate as at 1 July 2019 was 2.9%.
(ii) Right of use assets
$'000
24,482
77,563
(25,740)
76,305
ROU assets for leases were recognised based on the carrying amount as if the standard had always been
applied, apart from the use of the incremental borrowing rate at the date of initial application based on remaining
lease term. The ROU asset is then depreciated on a straight-line basis over the lease term determined in (i)
above.
For (i) and (ii), as permitted by AASB 16, the following practical expedients have been applied by the Group:
•
•
•
•
Reliance on previous assessments of whether leases are onerous as an alternative to performing an
impairment review;
Treating leases with a lease term of less than 12 months as at 1 July 2019 as short term leases;
Application of hindsight in determining the lease term where the lease agreement contains an option to
extend or terminate the lease; and
Exclusion of the initial direct costs from the measurement of the right of use asset at the date of initial
application.
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SECTION E: OTHER INFORMATION (CONTINUED)
E9
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONTINUED)
Changes in accounting policy, disclosures, standards and interpretations (continued)
AASB 16 Leases (continued)
(iii) Deferred Tax Asset and Liability
The Group recognises deferred tax on initial recognition by considering the right of use asset and the lease
liability separately. The resultant deferred tax asset and deferred tax liability are offset where a legally
enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred
taxes relate to the same taxable entity and the same taxation authority.
(iv) Stepped Rental Provision
The Group has four property leases which are subject to an annual fixed rental increase. The rental expense
was being recognised on a straight line basis each month over the term of the lease. As at 30 June 2019, the
amount of the accumulated expense was greater than the actual cost of the lease payments and the Group had
recognised a corresponding liability for future lease payments.
Following the adoption of AASB 16, future lease increases are now included in the measurement of the lease
liability. The stepped rental provision was reversed against retained earnings as a transition adjustment.
(b) Group as a Lessor
The Group classifies leases as an operating or finance lease based on whether substantially all the risks and
rewards are transferred to the lessee. For sub-leases, the classification is performed by reference to the head
lease ROU asset rather than the underlying asset. Leases with residents are classified as operating leases.
For residents who have chosen a RAD or Bond arrangement, the Group has determined that the adoption of
AASB 16 will define these arrangements to be a lease for accounting purposes with the Group acting as the
lessor. Where residents have opted to pay a Daily Accommodation Payment, the Group has determined that the
adoption of AASB 16 will not have a material change to the existing accounting treatment.
Under a RAD or Bond arrangement the Group has recognised an imputed non-cash charge for accommodation
representing the resident's right to occupy a room under the arrangement. The accounting treatment required a
non-cash increase in revenue for accommodation and a non-cash increase in finance cost on the outstanding
RAD liability, with no net impact on the result for the period.
The imputed non-cash charge for the year ended 30 June 2020 was calculated based on applying the Maximum
Permissible Interest Rate as at the date the RAD or Bond balance was received up to the date the balance was
refunded. If the balance remained outstanding as at 30 June 2020, then the calculation was completed up to this
date.
AASB 2018-1: Amendments to Australian Accounting Standards - Annual Improvements to IFRS Standards
2015-2017 Cycle
The amendments clarify certain requirements in:
•
•
•
AASB 3 Business Combinations
AASB 112 Income Taxes - income tax consequences of payments on financial instruments classified as
equity
AASB 123 Borrowing Costs - borrowing costs eligible for capitalisation.
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SECTION E: OTHER INFORMATION (CONTINUED)
E9
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONTINUED)
Changes in accounting policy, disclosures, standards and interpretations (continued)
AASB 2018-1: Amendments to Australian Accounting Standards - Annual Improvements to IFRS Standards
2015-2017 Cycle (continued)
The adoption of this interpretation did not have a significant impact on the disclosures or the amounts
recognised in the Group's consolidated financial statements.
AASB Interpretation 23, and relevant standards: Uncertainty over Income Tax Treatments
The interpretation clarifies the application of the recognition and measurement criteria in AASB 112 Income
Taxes when there is uncertainty over income tax treatments. The Interpretation specifically addresses the
following:
• Whether an entity considers uncertain tax treatments separately
•
•
•
The assumptions an entity makes about the examination of tax treatments by taxation authorities
How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax
rates
How an entity considers changes in facts and circumstances
The adoption of this interpretation did not have a significant impact on the disclosures or the amounts
recognised in the Group's consolidated financial statements.
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SECTION E: OTHER INFORMATION (CONTINUED)
E9
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONTINUED)
Accounting Standards and Interpretations issued but not yet effective
AASB 2018-6 Amendments to Australian Accounting Standards: Definition of a Business
Effective for the Group from 1 July 2020.
Clarifies the definition of a business to assist entities to determine whether a transaction should be accounted for
as a business combination or as an asset acquisition. The amendment specifically addresses:
•
•
•
The new business definition is narrower;
There is a new optional asset concentration test; and
New considerations have been incorporated to help identify when an acquired process is substantive.
The Group is in the process of evaluating the impact of the new standard with no material impact expected.
AASB 2018-7 Amendments to Australian Accounting Standards: Definition of Material
Effective for the Group from 1 July 2020.
Clarifies the definition of ‘material’ and its application across AASB Standards and other pronouncements. The
principal amendments are to AASB 101 Presentation of Financial Statements.
The Group is in the process of evaluating the impact of the new standard with no material impact expected.
The Conceptual Framework for Financial Reporting
Effective for the Group from 1 July 2020.
The revised Conceptual Framework for Financial Reporting is not standard, and none of the concepts override
those in any standard or any requirements in a standard. The purpose is to assist the International Accounting
Standards Board in developing standards, to help preparers develop consistent accounting policies if there is no
applicable standard in place and to assist all parties to understand and interpret the standards.
The changes in the Framework may affect the application of AASB in situations where no standard applies to a
particular transaction or event.
The Group is in the process of evaluating the impact of the new standard with no material impact expected.
The Group does not plan to early adopt the Conceptual Framework for Financial Reporting.
AASB 2019-3 Amendments to Australian Accounting Standards: Interest Rate Benchmark Reform
Effective for the Group from 1 July 2020.
There amendments were issued in response to the effects of Interbank Offered Rates reform on financial
reporting and provides hedge accounting to continue during a period of uncertainty before the replacement of an
existing interest rate benchmark with an alternative benchmark.
The Group is in the process of evaluating the impact of the new standard with no material impact expected.
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SECTION E: OTHER INFORMATION (CONTINUED)
E9
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONTINUED)
Accounting Standards and Interpretations issued but not yet effective (continued)
AASB 2019-5 Amendments to AASs - Disclosure of the Effect of New IFRS Standards Not Yet Issued in
Australia
Effective for the Group from 1 July 2020.
It may be possible for an entity that asserts to be complying with Australian Accounting Standards, may not be
able to assert it is complying with IFRS Standards if its reporting date falls between the issuance date of a new
IFRS Standard and a later release date of an Australian Accounting Standard. This Standard allows the entity to
disclose the possible impact of an initial application of a forthcoming IFRS Standard not yet adopted by the
Australian Accounting Standards Board.
The Group is in the process of evaluating the impact of the new standard with no material impact expected.
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In accordance with a resolution of the directors of Estia Health Limited, I state that:
1.
in the opinion of the directors:
(a)
the financial statements and notes of the consolidated entity for the financial year ended 30 June 2020
are in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of
its performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
(b)
(c)
(d)
the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in Note A3; and
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they
become due and payable; and
there are reasonable grounds to believe that the Company and the controlled entities identified in Note
E6 of the financial statements will be able to meet any obligations or liabilities to which they are or may
become subject to by virtue of the Deed of Cross Guarantee between the Company and those
controlled entities pursuant to ASIC Class Order 98/1418.
2. This declaration has been made after receiving the declarations required to be made to the directors by the
Chief Executive Officer and Chief Financial Officer in accordance with section 295A of the Corporations Act
2001 for the financial year ended 30 June 2020.
On behalf of the Board
Dr. Gary H Weiss AM
Chairman
18 August 2020
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8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent Auditor's Report to the Members of Estia Health Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Estia Health Limited (the Company) and its subsidiaries (collectively the
Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated
statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of
cash flows for the year then ended, notes to the financial statements, including a summary of significant
accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
a)
b)
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2020 and of its
consolidated financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code)
that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current year. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters.
For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report, including in relation to these matters. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement of the
financial report. The results of our audit procedures, including the procedures performed to address the matters
below, provide the basis for our audit opinion on the accompanying financial report.
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Subsequent events - COVID-19 Outbreaks
Why significant
How our audit addressed the key audit matter
In July 2020, there were outbreaks of COVID-19 in
two Estia facilities. As these outbreaks arose
subsequent to 30 June 2020, these are non-adjusting
subsequent events.
The Group is required to include adequate disclosures
in the financial
of material subsequent events
statements. The disclosures should
include a
description of the nature of the event and an estimate
of its financial effect, or a statement that such an
estimate cannot be made.
The COVID-19 outbreaks are expected to have
negative impacts on the financial performance of
these affected facilities, as well as potentially greater
levels of regulatory scrutiny on the operations of aged
care providers. There have also been further
outbreaks at other aged care providers which may
reduce overall consumer sentiment regarding the
Aged Care Sector.
Management has considered the potential impact of
these outbreaks on the going concern assessment,
which underpins the preparation of the financial
statements.
Subsequent Events
- COVID-19 Outbreaks was
considered a key audit matter due to the uncertainty
regarding the impact these events may have on the
future performance and financial position of the
Group.
The Group has disclosed in Note E4 of the financial
statements the impact of the COVID-19 outbreaks and
how this has been considered by the directors in the
preparation of the financial statements at 30 June
2020.
In assessing the impacts of the COVID-19 outbreaks
subsequent event, we:
• Enquired of management regarding the extent of
positive COVID-19 cases with residents and
employees;
• Enquired of management regarding any requests
from residents of the affected facilities to leave
the facilities, and how this may impact the Group’s
liquidity and recoverability of amounts owed from
the residents;
• Enquired of management regarding staff member’s
ability and willingness to continue working in the
affected facilities, and Group’s arrangements for
back up staff in the event of staff shortages due to
further confirmed COVID-19 cases;
• Enquired of management regarding the potential
impact on business and the Group’s response
regarding Government-imposed restrictions on
aged care staff members to work in multiple
facilities;
• Enquired of management regarding any actual or
potential claims from residents or employees
against Group in relation to the COVID-19
outbreaks;
• Enquired and assessed management’s response to
the potential impact on business viability and the
ability to continue as a going concern;
• Assessed the adequacy of the Group’s disclosures
in relation to the COVID-19 outbreaks included in
the financial report.
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Goodwill, intangible assets and related impairment loss
Why significant
How our audit addressed the key audit matter
At 30 June 2020 the Group’s goodwill and bed
licences balance was $902 million which represents
48% of total assets. This is after recognition of an
impairment loss of $136 million in FY20.
We assessed the appropriateness of the allocation of
goodwill and bed licenses to the Group, composition of
carrying amount of CGU and related impairment loss.
The Group reviews the carrying amount of goodwill
and bed licenses annually, or more frequently, if
impairment indicators are present.
The group of cash generating units (CGUs) to which
goodwill and bed licenses can be allocated is
consistent with the operating segment identified as
disclosed in Note E5, which is the whole Group.
The Group has used a discounted cash flow model to
estimate the value in use of the assets. The estimates
are based on conditions existing and emerging at 30
June 2020. In assessing discounted future cash flows
as at 30 June 2020, the expectation was that the
probability of a second Melbourne-wide lockdown was
relatively high. However, the estimates do not include
the effect of events indicative of conditions arising
after 30 June 2020.
The impairment analysis was considered a key audit
matter due to the process to estimate recoverable
amount being complex and requiring significant
judgment.
The Group has disclosed in note C6 to the consolidated
financial report the assessment method, including the
significant underlying assumptions, the results of the
assessment and impairment loss as well as the impact
of applying sensitivities.
Involving our valuation specialists, we assessed the key
assumptions underlying the discounted cash flow
valuation. In doing so, we:
• Tested the mathematical accuracy of the
discounted cash flow model;
• Assessed key assumptions such as Board-approved
forecast cash flows, including working capital
levels and cash flows related to refundable
accommodation deposits;
• Assessed the impact of COVID-19 based on
conditions existing and emerging at 30 June 2020
on cash flow forecast of revenues, operating costs
and the effect of changes in residency mix;
• Assessed the Group’s current year actual results in
comparison to prior year forecasts to assess
forecast accuracy;
• Assessed the Group’s assumptions for terminal
growth rates in the discounted cash flow model in
comparison to economic and industry forecasts;
• Assessed the adequacy of the estimated capital
expenditure;
• Assessed the discount rates through comparing
the weighted average cost of capital for the Group
with comparable businesses including the impact
of COVID-19;
• Considered earnings multiples of comparable
businesses as a valuation cross check to the
Group’s determination of recoverable amount. We
performed sensitivity analysis in respect of the
assumptions noted above to ascertain the extent
of changes in those assumptions which either
individually or collectively would materially impact
the recoverable amount of the CGU and we
assessed the likelihood of these changes in
assumptions arising;
• Assessed the adequacy of the Group’s disclosures
of the key assumptions to which the outcome of
the impairment test is most sensitive; that is, those
that have the most significant effect on the
determination of the recoverable amount of
goodwill and bed licences.
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Construction in Progress and related impairment loss
Why significant
How our audit addressed the key audit matter
to Construction
incurred during the year that were
Costs
capitalised
in Progress
amounted to $52 million. This represents costs
of development projects and significant
refurbishments of existing aged care facilities.
Costs of the projects impaired during the year
amounted to $2.2 million.
The specific criteria to be met for capitalisation
in accordance with
of development costs
Australian Accounting Standards
involves
judgement,
including the feasibility of the
project, intention and ability to complete the
construction, ability to use or sell the assets,
generation of future economic benefits and the
ability to measure the costs reliably.
In addition, as a result of COVID-19, the Group
reassessed whether ongoing projects remained
feasible and therefore, likely to be completed.
This resulted in further assessments of the
recoverability of costs already incurred and
capitalised. In the case of construction in
progress, determining the recoverable amounts
of projects under development
requires
additional judgement and use of assumptions
which are affected by future market conditions
or economic developments.
Costs are transferred to asset categories based
on management’s assessment of whether an
asset is ready for use. Depreciation rates are
applied based on the asset category.
and
related
in Progress
Construction
impairment loss was considered a key audit
matter due to the quantum of the balance and
judgement
the
capitalisation criteria and carrying out the
impairment analysis.
required
applying
in
Our audit procedures included the following:
• Agreed a sample of additions to supporting
evidence and assessed whether the amounts
capitalised were appropriate;
• Evaluated key assumptions used and estimates
made for amounts capitalised, including the
feasibility of the project, the stage of the projects
in the development phase and the measurement
and completeness of costs included;
• Assessed whether costs were transferred to
appropriate asset categories when ready for use on
a timely basis and that appropriate depreciation or
amortisation rates were applied;
• Assessed whether the capitalised costs of projects
that are less likely to proceed have been
appropriately impaired and reduced from the
balance;
• Considered whether there were any indicators of
impairment present after examining the business
case documentation of development projects,
enquiries of executives responsible for
management of the projects and comparing the
cost of development to forecasts;
• Assessed the appropriateness of the key inputs in
the determination of value in use of ongoing
projects under construction and performed
sensitivity analysis in respect of these inputs;
• Assessed the adequacy of the Group’s disclosures
regarding the timing that costs are recognised as
an asset, the deprecation rates applied to each
asset category and the impairment of projects that
are less likely to proceed.
The Group has disclosed in Note C4 to the
consolidated financial report the capitalisation
policy and the impact of impairment of costs for
the projects that are less likely to proceed.
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Revenue
Why significant
Revenue is generated primarily through two sources,
being Government Subsidies and Resident Billings. Both
sources are subject to strict legislation, detailing the
rates and charges that the Group receives for each
resident.
Income derived from resident billings is recognised as
billed within the relevant month. Subsidies received
from the Department of Health vary depending on a
number of factors, including the resident’s financial
means and level of care.
The Group also received a temporary funding increase
from March 2020 which resulted in an uplift in the
amount of revenue recognised.
In addition, the Group received a COVID-19 Support
Supplement for the month of February 2020. This has
also been recognised in the year ended 30 June 2020.
The Group raises a government revenue accrual at
year-end to recognise any differences between the
monies received by Medicare at the start of the month
(June) and additional monies the Group is entitled to
arising from variations in resident occupancy levels or
associated rates during June.
Revenue was considered a key audit matter given the
effect of strict legislation, adjustment in rates by
government time to time, and the volume of
transactions with residents and government.
The Group’s revenue recognition and disaggregation
policies have been disclosed
in note B1 to the
consolidated financial report.
How our audit addressed the key audit
matter
We evaluated the effectiveness of key controls in
relation to the capture and measurement of
revenue transactions across all material revenue
streams. In particular, we undertook the following
procedures:
• Assessed whether ACFI assessments were
prepared by an authorised person, and were
calculated based on resident care
assessments;
• Compared the government revenue
recognised to payments received;
• Tested whether resident revenue agreed to
agreements, legislated billing rates, and
payments received;
• Tested whether the application of the Daily
Care Fee incorporated rate increases;
• Assessed whether resident additional service
fees changes were approved and whether
billing rates were correct.
We performed the following other audit
procedures in relation to revenue:
• Compared the revenue accrual to actual
occupancy rates;
• Tested whether the revenue recognised
related to performance obligations satisfied
within the period;
• Assessed whether the COVID-19 support
supplement received by the Group during the
year related to performance obligations
already satisfied within the period;
• Assessed the appropriateness of the financial
statement disclosures in relation to the
Group’s revenue recognition and
disaggregation policies.
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Information Other than the Financial Report and Auditor’s Report
Thereon
The directors are responsible for the other information. The other information comprises the information
included in the Company’s 2020 Annual Report other than the financial report and our auditor’s report thereon.
We obtained the Directors’ Report that is to be included in the Annual Report, prior to the date of this auditor’s
report, and we expect to obtain the remaining sections of the Annual Report after the date of this auditor’s
report.
Our opinion on the financial report does not cover the other information and we do not and will not express any
form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance
opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a
going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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•
•
•
•
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards
applied.
From the matters communicated to the directors, we determine those matters that were of most significance in
the audit of the financial report of the current year and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 76 to 92 of the directors' report for the year ended
30 June 2020.
In our opinion, the Remuneration Report of Estia Health Limited for the year ended 30 June 2020, complies with
section 300A of the Corporations Act 2001.
A member firm of Ernst & Young Global Limited
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Liability limited by a scheme approved under Professional Standards Legislation
110
2019-20 Annual Report | Estia Health 161
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Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Ernst & Young
Paul Gower
Partner
Melbourne
18 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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Tax Transparency Report | Corporate Governance | Board | Shareholder Information | annual financial Report | Directory of Estia Health homes
Intentionally Left Blank
Estia Health Aberfoyle Park
Directory of Estia Health
homes
For all new resident enquiries call 1300 682 833
new south wales
Albury
Bankstown
Bexley
Camden
Dalmeny
Epping
Figtree
Forster
Kilbride
Kogarah
Manly Vale
Merrylands
Ryde
Taree
Tea Gardens
Tuncurry
Willoughby
south austRalIa
Aberfoyle Park
Aldgate
Burton
Craigmore
Daw Park
Encounter Bay
Flagstaff Hill
Golden Grove
Hope Valley
Kadina
Kensington Gardens
Lockleys
Parkside
Salisbury
Salisbury East
Strathalbyn
Toorak Gardens
289 Elizabeth Mitchell Drive, Thurgoona, 2640
74 Chiswick Road, Greenacre, 2190
3-5 Eddystone Road, 2207
82 Old Hume Highway, 2570
25-29 Noble Parade, 2546
64-66 Norfolk Road, 2121
12 Suttor Place, 2525
105 Southern Parkway, 2428
70 Glendower Street, Rosemeadow, 2560
74-76 Rocky Point Road, 2217
5-13 King Street, 2093
42 Cumberland Road, Greystanes, 2145
94 Bowden Street, 2112
424 Wingham Road, 2430
42 Spinifex Avenue, 2324
4 Bonventi Close, 2428
202 Mowbray Road, 2068
39 Campus Drive, 5159
4 Gibb Road, 5154
367-379 Waterloo Corner Road, 5110
150 Adams Road, 5114
7 Lancelot Drive, 5041
150 Bay Road, 5211
40 Skyline Drive, 5159
27-31 Capt Robertson Avenue, 5125
1099 Grand Junction Road, 5090
8 Mine Street, 5554
421 The Parade, 5068
8 Mellor Avenue, 5032
17 Robsart Street, 5063
7 Salisbury Highway, 5108
8 Oakmont Court, 5109
7 Langhorne Creek, 5255
401 Portrush Road, 5065
164 Estia Health | 2019-20 Annual Report
02 6057 4100
02 8709 9200
02 8318 1100
02 4655 2531
02 4476 8744
02 9877 4300
02 4271 6855
02 6555 5699
02 4633 1100
02 9053 1800
02 9951 0400
02 9631 1837
02 9809 3068
02 6539 3700
02 4919 7000
02 6554 7522
02 9958 8290
08 8370 5766
08 8370 9311
08 8280 2800
08 8256 8800
08 8397 2100
08 8552 5100
08 8296 3456
08 8251 9600
08 8396 3167
08 8821 2233
08 8331 8098
08 8128 8888
08 8271 5679
08 8182 6477
08 8285 4600
08 8536 3422
08 8431 5399
Chairman and CEO’s Message | Industry Trends | Response to COVID-19 | Key Highlights | Executive Team | Vision, Purpose, Strategy | Approach to Sustainability Tax Transparency Report | Corporate Governance | Board | Shareholder Information | Annual Financial Report | directory of estia health homes
queensland
Albany Creek
Gold Coast
Maroochydore
Mount Coolum
Mudgeeraba
Nambour
Southport
Twin Waters
vICtoRIa
Altona Meadows
Ardeer
Bannockburn
Benalla
Bendigo
Bentleigh
Coolaroo
Dandenong
Epping
Glen Waverley
Grovedale
Heidelberg
Keilor
Keysborough
Knoxfield
Leopold
Melton South
Oakleigh East
Plenty Valley
Prahran
Ringwood
South Morang
Victoria Heights
Wattle Glen
Werribee
Wodonga
Yarra Valley
55 Faheys Road West, 4035
34 Scarborough Street, Southport 4215
2-6 Amity Ave, 4558
15 Suncoast Beach Drive, 4573
21-25 Old Coach Road, 4213
27 Glenbrook Drive, 4560
40 William Street, 4215
190 Ocean Drive, 4564
297 Queen Street, 3028
30 North Street, 3022
71 McPhillips Road, 3331
73 Samaria Road, 3672
9 Brown Street, Long Gully, 3550
34-36 Clairmont Avenue, 3204
15 Mladen Court, 3048
151 David Street, 3175
30 Epping Road, 3076
2B Grace Street, 3150
6A Perrett Street, 3216
413-415 Waterdale Road, 3081
2-6 Copernicus Way, Keilor Downs, 3038
15 Stanley Road, 3173
428 Scoresby Road, 3180
52-60 Ash Road, 3224
34-42 Brooklyn Road, 3338
23A Elizabeth Street, 3166
806 Plenty Road, South Morang, 3752
241 Dandenong Road, Windsor, 3181
211-217 Wantirna Road, 3134
879 Plenty Road, 3752
41-47 Victoria Street, Ironbark, 3550
45 Silvan Road, 3096
8-10 Russell Street, 3030
240 Felltimber Creek Road, 3690
21 Hoddle Street, Yarra Junction, 3797
07 3264 4850
07 5551 0307
07 5391 4800
07 5343 0200
07 5565 0900
07 5459 3600
07 5646 4170
07 5646 4120
03 9369 4568
03 9360 4552
03 5281 1991
03 5762 6933
03 5449 2400
03 9557 2888
03 9309 0011
03 9792 4322
03 9408 8564
03 9562 5814
03 5247 2000
03 9455 0000
03 9367 1011
03 8788 2700
03 9763 1421
03 5250 2156
03 9747 5600
03 9544 8167
03 9404 8000
03 9533 7855
03 9879 5155
03 9404 8600
03 5443 2731
03 9718 2267
03 9749 8000
02 6043 5000
03 5967 5500
2019-20 Annual Report | Estia Health 165
New South Wales
Registered Office
Level 9, 227 Elizabeth Street
Sydney NSW 2000
T +61 2 9265 7900
E info@estiahealth.com.au
Victoria Office
Level 2, 1155 Toorak Road
Camberwell VIC 3124
T +61 3 9811 9777
F +61 3 8657 0899
E info@estiahealth.com.au
Investor Relations
T +61 2 9265 7900
E investor@estiahealth.com.au
Shareholder Enquiries
Link Market Services
T +61 1300 554 474
E registrars@linkmarketservices.com.au
estiahealth.com.au
Estia Health Bannockburn
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