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Sonida Senior LivingANNUAL REPORT
2021-22
Acknowledgement of Country:
We acknowledge the Traditional Owners of Country throughout
Australia and recognise their continuing connection to lands on
which we operate our homes. We pay our respects to Elders
past, present and emerging, for they hold the memories, the
traditions, the culture and hopes of First Nations peoples.
Contents
About this Annual Report
Vision, Purpose and Values
Chairman’s Letter
Chief Executive Officer’s Report
Key Highlights
About Estia Health
The Aged Care Environment
Board and Governance
Corporate Governance
Executive Leadership Team
Business Value Drivers
Our Strategy
Technology
COVID-19
Sustainability
Risk Management
Tax Transparency Report
Annual Financial Report
4
6
8
10
12
14
16
18
21
24
26
28
38
39
40
44
47
53
Directory of Estia Health homes
170
Thank you to all the residents and employees who feature in this report.
2021-22 Annual Report | Estia Health 3
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
About this Annual Report
Report structure
This report is designed to be read in its entirety. The
required elements of the Directors’ Report, including
the Operating and Financial Review (OFR) as required
by ASIC Regulatory Guide 247, are covered on pages
55 to 107. Specific commentary on Estia Health’s
financial performance is contained on pages 109
to 159 and references information reported in the
Annual Financial Report (pages 53 to 167). The
Annual Financial Report includes Estia Health Limited
(the Company or Parent Entity) and the entities it
controlled (collectively the Group, the Consolidated
Entity or Estia Health) at the end of, or during, the
year ended 30 June 2022. Commentary on matters
relating to performance and leadership may extend
beyond 30 June 2022 where appropriate.
Throughout the report, the Consolidated Entity
is referred to as Estia Health or the Group. The
Directors’ Declaration forms part of the Financial
Report under the Corporations Act.
details how the Group considers governance, risk
management, strategy, metrics and targets in relation
to climate change.
Forward-looking statements and
materiality
This report includes information about Estia Health’s
performance for the period 1 July 2021 to 30 June
2022. Any forward-looking statements are based
on the Group’s current expectations, best estimates
and assumptions as at the date of preparation, many
of which are beyond the Group’s control. These
forward-looking statements are not guarantees or
predictions of future performance and involve known
and unknown risks, which may cause actual results to
differ materially from those expressed in the report.
A matter is considered material if management and
those charged with governance believe it could
significantly impact the value created and delivered in
the short, medium and long term.
Voluntary reporting frameworks
Reliance on third party information
Our 2021-22 Annual Report provides an overview of
the Group’s financial and non-financial performance.
The structure of the report has changed compared
to previous years and is guided by the International
Integrated Reporting Council’s (IIRC) International
Integrated Reporting Framework, providing a
useful basis for disclosing how value is created and
sustained for shareholders and other stakeholders
over time. The framework demonstrates consideration
of risks and opportunities (both those arising from
the Group’s business and those existing in a broader
operational context), as well as how purpose and
values drive strategy.
Estia Health follows the guidance provided by the
Financial Stability Board’s Task Force on Climate-
Related Financial Disclosures (TCFD) voluntary
disclosure framework. The financial year ending 30
June 2022 (FY22) TCFD report, comprised within,
This report may contain information that has been
derived from publicly available sources that have not
been independently verified.
No representation or warranty is made as to
the accuracy, completeness or reliability of the
information. No responsibility, warranty or liability
is accepted by Estia Health, its officers, employees,
agents or contractors for any errors, misstatements or
omissions from this report.
Not investment advice
This report is not intended and should not be
considered to be investment advice by Estia Health
or any of its shareholders, Directors, officers, agents,
employees or advisers. The information provided
in this report has been prepared without taking
into account the recipient’s investment objectives,
4 Estia Health | 2021-22 Annual Report
Our Strategy
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COVID-19
Sustainability
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financial circumstances or particular needs. Each
party to whom the report is made available must
make its own independent assessment of Estia Health
after making such investigations and taking such
advice as may be deemed necessary.
Reporting suite
See the documents that make up our reporting suite
at https://investors.estiahealth.com.au/investor-
centre/, including:
No offer of securities
Nothing in this report should be construed as either
an offer to sell or a solicitation of an offer to buy or
sell Estia Health securities in any jurisdiction.
Disclosure of non-IFRS financial
information
Throughout this report, there are occasions where
financial information is presented not in accordance
with accounting standards. Estia Health has done
this for various reasons including: to maintain a
consistency of disclosure across reporting periods; to
demonstrate key financial indicators in a comparable
way to how the market assesses performance; and
to demonstrate the impact that significant one-off
items have had on performance. Where Estia Health’s
earnings have been distorted by significant items,
management has used discretion in highlighting
these. These items are nonrecurring in nature and
considered to be outside the normal course of
business. Unaudited numbers used throughout are
labelled accordingly.
Report
Key Information
Annual Report
Financial
Statements
Corporate
Governance
Statement
Sustainability
Report
Investor
Presentation
The Annual Report sets out how
Estia Health creates sustainable
value. It describes the
governance and business model,
strategy operating context
and operational performance
and prospects. The report is
primarily intended for current
and prospective investors and
other providers of financial
capital, although it will be of
interest to other stakeholders.
It includes a detailed analysis of
the Group’s financial results and
audited financial statements,
prepared in accordance with
International Financial Reporting
Standards (IFRS).
The Financial Statements is an
audited report prepared with
reference to the International
Financial Reporting Standards
and applicable corporate
regulations in Australia.
The Corporate Governance
Statement outlines the principal
corporate governance practices
in place during the financial year
ended 30 June 2022.
The Sustainability Report is the
disclosure of environmental,
social and corporate governance
data relevant to the Group,
published later in 2022.
The Investor Information Pack
provides a summary and analysis
of operations during the financial
year ended 30 June 2022.
Workplace
Gender Equality
Agency (WGEA)
Report
The WGEA report details the
gender ratio of employees and
contractors in occupational
categories, including
apprentices and trainees.
Modern Slavery
Report
The Modern Slavery Statement,
prepared and delivered in
accordance with the Modern
Slavery Act 2018 (Cth), reports
on the risks of modern slavery
in the Group’s operations and
supply chains, and actions to
address those risks.
2021-22 Annual Report | Estia Health 5
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Vision, Purpose and Values
Our Vision
Estia Health value creation
Trusted aged care is accessible to all
Our Purpose
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.
Our Family Code
A family where everyone belongs
We achieve our purpose by living our family code.
Our Principles
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)
Risk and governance
(Quality Standards, Compliance Requirements, Ethics, Risk Appetite)
Culture
Creating
happiness
Always
approachable
Taking
responsibility
Embracing
diversity
Growing
together
We make magical
moments happen,
in small and
special ways
We make time to
listen because we
care
We own our
decisions and actions
to improve ourselves
and help others
We acknowledge
and respect
individual
uniqueness
We bring out the
best in each other
and are stronger
together
Our Values
Compassion
Responsiveness
Accountability
Respect
Collaboration
We demonstrate
care and
understanding
with empathy
We are
approachable, we
listen and we take
action
We are responsible
and always act with
integrity
We embrace
individuality and
choice
We positively
engage together
to deliver our
purpose
6 Estia Health | 2021-22 Annual Report
Our Strategy
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2021-22 Annual Report | Estia Health 7
Chair and CEO message Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Chairman’s Letter
Dr. Gary H Weiss, AM
Chairman
Dear Shareholders,
On behalf of the Estia Health Board of Directors, I am
pleased to present our 2022 Annual Report.
While the 2022 financial year was challenging, our strong
culture, focus on clinical governance and care, and our
organisation’s leadership and strength of balance sheet,
enabled us to meet the many demands that we faced.
We have remained committed to our Vision, ‘to provide
trusted aged care that is accessible to all’.
Throughout this period our key focus continued
to be the care, wellbeing, and safety of the 8,000
residents we support each year, together with the
approximately 7,500 dedicated employees across our
homes. The COVID-19 pandemic has been confronting
and created anxiety for our residents, their relatives
and our employees, all of whom have displayed
remarkable resilience in working collaboratively to
support each other, for which we are grateful.
Beyond the direct health impact of COVID-19, we
have navigated the impact on our occupancy and
financial outcomes, ongoing workforce challenges
and the aged care reform agenda.
Our financial and operational results for FY22 reflect
the ongoing challenging market and operating
conditions in the aged care sector, not least of which
is the ongoing pandemic. Amid these conditions, we
have remained focused on keeping our residents
and employees safe and to continue to advocate for
a sustainable aged care sector which will meet the
expectations of current and future generations.
Governance
Estia Health is committed to a robust and effective
corporate governance framework which underpins
our management approach and which supports
the organisation in creating value. Our approach
to corporate governance is set out on our website,
including our annual Corporate Governance
Statement and key Governance Policies.
8 Estia Health | 2021-22 Annual Report
Our care model is underpinned by our clinical
governance structure, vital given the high care needs
of our residents, including those with a diagnosis
of dementia. Our Clinical Governance Committee is
independently chaired by Professor Simon Willcock,
a respected aged care academic and practitioner, to
ensure our clinical outcomes and performance receive
appropriate oversight.
Our sustainability strategy showcases the Group’s
commitment to environmental, social and governance
(ESG) issues and conducting business in a manner
that is respectful to the environment and the
communities in which we operate. We believe that
integrating sustainability into our overall strategy,
procedures and practices is imperative to creating
value for all stakeholders.
Diversity plays a key role in fostering compassionate
and welcoming communities. In line with industry
norms, our overall workforce is predominantly female.
Our commitment to diversity is demonstrated in
the elimination of any material gender pay gap
and the strong representation of females in senior
management roles – 56% in the reporting period.
I am pleased to report our Board of Directors and
Executive both reflect gender parity.
CEO succession
This year we farewelled former Chief Executive
Officer and Managing Director, Ian Thorley, following
his decision to retire in July. Ian joined Estia Health in
2016 as Chief Operating Officer and has served in the
role of Chief Executive Officer and Managing Director
of Estia Health since October 2018.
The Board is grateful for the incredible contribution
Ian delivered during his tenure with Estia Health,
including successfully guiding the Group through the
significant challenges presented by the COVID-19
pandemic, the Royal Commission into Aged Care
Quality and Safety, and the ongoing operational and
financial pressures facing Australia’s aged care industry.
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Following Ian’s retirement, the Board appointed Sean
Bilton, Estia Health’s Chief Operating Officer and
Deputy CEO, as our new Chief Executive Officer and
Managing Director. Sean has more than two decades
experience in healthcare and finance prior to joining
Estia Health in 2018, and his appointment has ensured
a seamless transition.
The Board is also pleased to have appointed
Damian Hiser as Chief Operating Officer. Damian’s
30 years’ experience in the healthcare sector - the
last five years with Estia Health - brings a wealth of
experience and understanding of the complexities of
aged care operations.
A smooth transition to an experienced and aligned
leadership team in the current challenging
environment was a priority for the Board. Directors
are pleased that the Group’s executive development
and succession planning processes have supported
the appointment of such strong internal candidates.
Board leadership
In March of this year, Non-Executive Director, the Hon.
Warwick L. Smith AO, resigned as a Director of the
Company. During his almost five-year tenure, Warwick
made a significant contribution to the Group as Chair
of the Property and Investment Committee, as well
as a member of the Audit Committee and the Royal
Commission and Regulatory Committee. Warwick’s
counsel and advice was integral as we navigated
the Company through a difficult period. On behalf
of the board, I would like to thank Warwick for his
commitment and contribution.
From 1 September 2022, the Board formally
welcomed Professor Simon Willcock as a Non-
executive Director, following his ongoing involvement
as the independent chair of Estia Health’s Clinical
Governance Committee since 2019. More information
on Simon is available on page 20.
I would also like to particularly acknowledge the
resilience, dedication and empathy shown by my Board
colleagues and the entire executive leadership team
over the past year. COVID-19 and the Royal Commission
have had an enormous impact on the aged care
environment and these traits in our leadership team will
stand Estia Health in good stead as the sector returns to
more normal operating conditions.
Performance for the year to June 2022
Our net loss after tax of $52.4 million (FY21: profit after
tax of $5.6 million) has been significantly impacted by
the pre-tax bed licence amortisation charge of $60.3
million (FY21: nil) resulting from the proposed abolition
of the aged care licencing regime and COVID-19
incremental costs of $50.4 million (FY21: $24.3 million).
Revenue was supported by government grants in
the period of $8.1 million to partially offset COVID-19
outbreak costs incurred. Applications submitted and
pending review and approval by Government, which
relate to costs incurred during FY22, totalled $29.3
million as of 23 August 2022.
Estia Health is in a sound financial position, with net
bank debt of $79.6 million at year end, with total
debt facilities of $330 million, representing significant
undrawn capacity.
As a result of the after tax loss in the second half of
FY22, Directors determined that there would be no final
dividend declared and as a result the interim dividend of
2.35 cents remained the full dividend distributed for the
year. The intent remains to recommence dividends once
the Company returns to profit.
Remuneration approach
The Company’s remuneration framework, policies
and FY22 remuneration outcomes continue to be
focused on achieving an alignment between resident,
shareholder and employee interests, with a resident-
focused quality performance ‘gateway’ remaining a
pre-determining factor to the award and payment
of short-term incentive entitlements, irrespective of
operational and financial performance.
With recruitment hampered by reduced immigration
and competition from the broader economy, the
Group implemented strategies to attract and retain
staff and have invested in increased training and
development programs, career pathways, a sector
leading graduate nurse program and more broadly in
recruitment strategies, systems and resources.
Outlook
Our Board of Directors and leadership team are
confident we have the operational capabilities and
financial capacity to deliver on our ambition to respond
to the projected increased demand for residential aged
care into the future and further develop our service
offering to ensure the sector continues to build trust
with the communities where we operate.
We look forward to the opportunity to meet with
shareholders and discuss the Group’s performance
and future prospects at our 2022 Annual General
Meeting on 3 November 2022.
I would like to finish by acknowledging the efforts of
my fellow directors and leadership team and once
again thanking our employees, residents, families and
the communities to which Estia Health belongs.
Yours sincerely,
Dr. Gary Weiss, AM
Chairman
September 2022
2021-22 Annual Report | Estia Health 9
Contents entry
Chief Executive Officer’s Report
Chair and CEO message Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Chief Executive
Officer and Managing
Director’s Report
Sean Bilton
CEO and Managing Director
The 2022 financial year was another difficult period
for the aged care sector, with the continued impact
of COVID-19 and the ongoing Government reform
agenda shaping the context.
The rapid spread of the Omicron variant in early 2022
saw high levels of community transmission. Although
many of Estia Health’s homes were impacted, our
vaccination programs and other infection prevention
and control measures assisted in lowering the severity
of illness, shortening recovery periods and decreasing
mortality rates.
We expect the impact of COVID-19 to continue,
and are committed to ensuring our management
strategies and practices respond to the changing
nature of the pandemic to support our residents and
employees in remaining safe.
The Government’s aged care sector reform agenda
continues to be refined and will drive greater
transparency, governance and competition, leading to
better resident outcomes.
Estia Health has a robust operational platform, a
strong financial position and is well-placed to take
advantage of the growth opportunities likely to occur
as a result of the reforms.
Competitive markets will enable stronger, more agile
providers, such as Estia Health, to achieve better
financial returns through scale, higher occupancy and
an ability to attract and retain talented employees.
This should be facilitated by the following reforms:
• The abolition of bed licensing, which will open
previously protected areas to new supply and as
a result provide greater choice for consumers.
Transitional arrangements are already in place.
• The implementation of the Australian National
Aged Care Classification (AN-ACC), a case-mix
model, will come into effect in October this year.
• Government will commence the star rating system
from December 2022, providing an overall rating
based on four criteria – compliance performance,
10 Estia Health | 2021-22 Annual Report
customer experience, quality indicators and
average staff care minutes. This will provide greater
transparency and drive continuous improvement.
• Perhaps most importantly, the recently expanded
and renamed Independent Health and Aged Care
Pricing Authority (IHACPA) will have responsibility
for making recommendations to Government in
relation to the costs of providing care from July
2023, replacing the current indexation system,
which has traditionally delivered increases in
funding below the level of input cost inflation.
• IHACPA and Government will consider the
increased cost of mandated care minutes with
an appropriate funding response, to ensure the
financial sustainability of the sector.
Operational performance
The cornerstone of our strategy is to put residents
at the centre of everything we do. This is possible
through the dedication of our approximately 7,500
employees and healthcare partners working with
residents and families to deliver on our purpose, ‘to
enrich and celebrate life together’.
Registered nurses are rostered at all Estia Health
homes 24 hours a day, seven days a week, contributing
to our strong clinical results. There remains close
surveillance across the sector from the Aged Care
Quality and Safety Commission and we are pleased
that all our homes remained accredited during the
period, with no Notices of Non-compliance, Notices
to Agree or Sanctions issued.
Our employees are integral to everything we do. In a
challenging environment for workforce, exacerbated
by COVID-19 and record low unemployment, our
priority has been to invest in career pathways,
development opportunities via the EstiaAcademy,
central support for local teams and enhanced
recruitment and onboarding systems. Despite
remaining above pre-pandemic levels, it was pleasing
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to see our employee turnover level stabilise during
the second half of FY22.
Average occupancy for mature homes across the
Estia Health portfolio for the year was 91.6%, with
spot occupancy of 92% at 19 August 2022. We
achieved net Refundable Accommodation Deposit
(RAD) inflows of $22.8 million during the year,
bringing RAD balances to $884.1 million at the end of
the reporting period.
Preparations for the new AN-ACC funding model
are well progressed, with funding levels expected
to increase in FY23 ahead of the introduction of
mandated care minutes in FY24.
Our new home in Blakehurst in NSW (105 places),
which opened in February 2021, reached operational
maturity ahead of expectations and operates at
full occupancy. We are pleased with the success
of the innovative service models implemented
at Blakehurst, including our first Wellness Centre,
providing reablement services to residents as well as
the broader community.
Portfolio management
Construction of two new homes in NSW at Aberglasslyn
and St Ives is underway, with completion anticipated
early FY24. Both homes are designed with significant
amenity to support resident outcomes and the delivery
of contemporary operating models. A 24-place
expansion of Estia Health Burton in SA is also
underway, expected to complete in Q2 FY23.
Two homes, in Keilor and Prahran, Victoria, were
closed during CY21. These homes did not meet the
contemporary requirements of the aged care sector,
with all residents successfully re-settled at other
Estia Health and nearby homes. The Keilor property
was sold at a profit, with the proceeds deployed
elsewhere in the business and the Prahran property
lease was exited.
Our refurbishment program over recent years has
resulted in 62 homes qualifying for the Higher
Accommodation Supplement. Our program of home
upgrades and asset life-cycle replacements will
continue, ensuring our homes remain competitive.
Financial results FY22
While the reported financial performance is
disappointing, the underlying results are sound
considering the challenges that faced the sector
during the period, and further progress was made on
our strategic priorities.
In October 2021, Estia Health established a sector-
leading $330 million Sustainability Linked Financing
Facility with targets focusing on greenhouse gas
emissions, resident satisfaction, improved employee
wellbeing and portfolio building energy efficiency.
In November 2021, the Board established an on-
market buy-back scheme, reflecting a view that the
current share price did not appropriately reflect the
intrinsic value of the Group’s assets and business.
Estia Health acquired and cancelled 3.6m shares at
a total cost of $8m at an average price of $2.18 per
share during the period.
The share buy-back is part of the broader capital
management strategy which is focussed on maintaining
a strong balance sheet with flexibility to invest capital
for future value-accretive options, while also seeking
to provide shareholders a sustainable return through
regular dividends targeted at a payout ratio of 70-100%
of net profit after tax (prior to bed licence amortisation).
Outlook
We expect to see the industry benefit from higher
occupancy as the impact of COVID-19 lessens and a
reduction in new supply intersects with the ageing
population, which will see the number of people over
85 increase by 60% in the next decade.
For the first time in four years, the regulatory
landscape is nearing a point where we will have a
significant degree of certainty. The Group is well-
placed to benefit from opportunities created by a
more competitive and transparent sector. Nevertheless,
key challenges and uncertainties remain in the short
term in the form of the introduction of AN-ACC
and mandated care minutes, continued COVID-19
exposures and outbreaks, and the need to secure a
committed and skilled workforce for the sector.
I’d like to acknowledge the incredible commitment
and contribution made by my predecessor as
CEO, Ian Thorley, who has retired after a long and
distinguished career in healthcare, particularly the last
six years here at Estia Health. It’s been an honour to
work with Ian and I am excited by the opportunity to
build on his legacy.
I am grateful for the extraordinary commitment,
dedication, passion and care shown by all our
employees at Estia Health. They care for our residents
at a time of deepest need, put others before
themselves and over the last two years have been
at the forefront in the battle against the pandemic.
Their support and dedication is the key reason for the
ongoing success of Estia Health.
Yours sincerely,
Sean Bilton
CEO and Managing Director
September 2022
2021-22 Annual Report | Estia Health 11
Chair and CEO message Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Key Highlights
Financial performance
OPERATIONAL PLACES
AVERAGE OCCUPANCy¹
OPERATIONAL REVENUE²
6,289
6,182
6,163
6,102
93.6%
93.2%
91.2%
91.6%
$586.0m
$593.5m
$604.0m
$631.8m
FY19
FY20
FY21
FY22
FY19
FY20
FY21
FY22
FY19
FY20
FY21
FY22
PROFIT AFTER TAx
BEFORE CLASS ACTION,
IMPAIRMENT & BED LICENCE
AMORTISATION ExPENSE
$41.3m
$25.2m
$14.7m
EARNINGS PER SHARE
DIVIDENDS PER SHARE
15.8¢
15.8¢
2.2¢
(20.1¢)
5.4¢
($9.6m)
(44.8¢)
2.3¢
2.3¢
FY19
FY20
FY21
FY22
FY19
FY20
FY21
FY22
FY19
FY20
FY21
FY22
1 Mature homes only
2 Excludes AASB 16 imputed DAP and grant impacts
12 Estia Health | 2021-22 Annual Report
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Health and safety
Employees
Gender diversity
LTIFR3
FY22
FY21
8.8
11.9
FY20
4.9
FY19
7.6
EMPLOyEE TURNOVER
BOARD AND ExECUTIVE
POSITION COMPOSITION
29.6%
50% Male
50% Female
Compliance
Sustainability
Approximately
99%
Approximately
99% ACQSC
accreditation
requirements
fully met
18%
18% of waste was
diverted from
landfill despite
increased PPE
usage and disposal
(FY21: 17.6%)
Professional development
Consumer Experience Report (CER)
PROFESSIONAL DEVELOPMENT PROGRAMS
COMPLETED
8,112 CER SURVEyS CONDUCTED
38,823
14,884
FY22
FY21
FY20
2,825
FY19
4,959
HOURS OF TRAINING PER EMPLOyEE
FY22
FY21
FY20
FY19
3.3
2.7
7.6
5.3
93.2%
Average 93.2%
satisfaction rating
across the network4
(FY21: 93.7%)
3 Lost Time To Injury Frequency Rate (LTIFR) 12 month rolling average
4 Satisfaction defined as percentage of responses that report experience as “most of the time” or “always”
2021-22 Annual Report | Estia Health 13
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
About Estia Health
Estia Health is one of Australia’s largest providers of residential aged care, with
a footprint across four Australian states. The Group’s approach to aged care is
underpinned by ensuring a network of homes that reflect the resident-centred
services and needs valued within their local communities.
The team of approximately 7,500 nurses, carers and
support staff care for around 8,000 residents each
year across 68 homes.
Estia Health aims to create homes where everyone is
welcome and reflect the needs of residents, the local
communities and the people that support and work
with the Group.
Residents are welcomed from all walks of life, with the
Group’s purpose ‘to enrich and celebrate life together’.
A program of capital investment and re-investment
continues to increase capacity to care for ageing
Australians and continually improves asset quality.
A committed and skilled workforce, led by an
experienced management team, delivers care services
which focus on the needs of residents and those that
support them.
Homes
Places
68 operational homes
6,163 operational places
Freehold sites
62 freehold sites
Single rooms
5,114 or 91% single rooms
Employees
Approximately 7,500
employees
Compliance by
requirements
~99% ACQSC accreditation
requirements fully met
Residents cared for
annually
More than 8,000 residents
in FY22
Consumer experience
Over 8,000 consumer
experience surveys
conducted with 93.2%
satisfaction
14 Estia Health | 2021-22 Annual Report
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NEW SOUTH WALES
18 homes
Albury
Bankstown
Bexley
Blakehurst
Camden
Dalmeny
Epping
Figtree
Forster
Kilbride
Kogarah
Manly Vale
Merrylands
Ryde
Taree
Tea Gardens
Tuncurry
Willoughby
QUEENSLAND
8 homes
Albany Creek
Mudgeeraba
Gold Coast
Nambour
Maroochydore
Southport
Mount Coolum
Twin Waters
SOUTH AUSTRALIA
17 homes
Aberfoyle Park
Kadina
Aldgate
Burton
Craigmore
Daw Park
Encounter Bay
Flagstaff Hill
Golden Grove
Hope Valley
VICTORIA
25 homes
Altona
Meadows
Ardeer
Bannockburn
Benalla
Bendigo
Bentleigh
Coolaroo
Dandenong
Epping
Kensington
Gardens
Lockleys
Parkside
Salisbury
Salisbury East
Strathalbyn
Toorak
Gardens
Knoxfield
Leopold
Melton South
Oakleigh East
Plenty Valley
Ringwood
South Morang
Victoria
Heights
Wattle Glen
Glen Waverley
Werribee
Grovedale
Heidelberg
Keysborough
Wodonga
Yarra Valley
2021-22 Annual Report | Estia Health 15
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
The Aged Care Environment
Estia Health’s 68 homes have 6,163 operational places, providing residential aged
care along with respite, transition and reablement to approximately 8,000 people,
employing approximately 7,500 of the 370,000-strong aged care workforce.
The Group makes up around 3% of Australia’s residential aged care market.
Estia Health’s scale and capability, focus on clinical governance and care, combined with a strong culture and
leadership, ensures the Group is well placed to work towards achieving its vision to provide ‘trusted aged care
that is accessible to all’.
Aged care in Australia
More than one million people access aged care
services in Australia each year, primarily segmented
into three areas of delivery that ensure flexible care is
available:
• Home care, including the Commonwealth Home
Support Programme and Home Care Packages
• Short-term care, including short-term restorative
care, transition care and respite
• Residential care.
A range of services is available across these different
settings, from assistance with everyday living activities
and home modifications, to personal care, healthcare
and accommodation. Services are provided by not-for-
profit, private and government bodies.
The residential aged care sector comprises 2,704
homes operated by 830 approved providers (as of
30 June 2021).1
With the number of people aged over 85 expected
to grow by 60% in the coming decade, benefit from
higher occupancy is anticipated as the impact of
COVID-19 decreases and bed licensing ceases.
1 Department of Health 2020-21 Report on the Operation of the
Aged Care Act 1997
2021
Timeline of key reforms
July 2021
September 2021
April 2021
SIRS (Serious
Incident Response
Scheme)
commences
May 2021
Government
response
to Royal
Commission
Restrictive
practices changes
$10/day Daily
Fee supplement
payable (BDS)
Inreased Financial
Reporting (including
employee hours)
2022
October 2021
Reporting on
food and nutrition
expenditure
16 Estia Health | 2021-22 Annual Report
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Residential aged care accounts for
20% of support in Australia2
Continuum of care
Home care (840,000)
Residential aged care
(243,000)
Respite aged care
(67,000)
NO COGNITIVE
NO COGNITIVE
OR FUNCTIONAL
OR FUNCTIONAL
LIMITS
LIMITS
LIMITED
LIMITED
FUNCTION
FUNCTION
MORE
MORE
LIMITED
LIMITED
FUNCTION
FUNCTION
EVEN MORE
EVEN MORE
LIMITED
LIMITED
FUNCTION
FUNCTION
SIGNIFICANT
SIGNIFICANT
SIGNIFICANT
LIMITED
LIMITED
LIMITED
FUNCTION
FUNCTION
FUNCTION
Transition care (25,000)
LIVING
AT HOME
HOME WITH
ASSISTANCE
HOME WITH
MORE
ASSISTANCE
ASSISTED
LIVING
RESIDENTIAL
AGED CARE
Short-term restorative
care (4,500)
• Home care, providing entry-level services, enabling
people to remain independent at home and in the
community.
• Residential aged care, providing individualised
health and hotel services to people living
permanently in a facility
• Respite aged care, providing short-term stays in
residential aged care facilities
• Transition care
• Short-term restorative care
During 2020–21, Government spending on aged care
was more than $23.6 billion, of which approximately
$14.3 billion (60%) was spent on residential aged care.
Residential aged care supports senior Australians who
can no longer live in their own home and includes
accommodation and personal care 24 hours a day,
as well as access to nursing and general health
care services.
The remaining funds were spent on home care and
support (33%) and on other care, including flexible
care, workforce, service improvement, and assessment
and information services (8%).3
2 https://www.aihw.gov.au/reports/australias-welfare/aged-care
3 https://www.gen-agedcaredata.gov.au/Topics/Spending-on-aged-care
Regulatory environment
The Aged Care Act 1997 and the Aged Care Quality
and Safety Commission Act 2018 provide the regulatory
framework for the funding and regulation of aged
care services. The Department of Health and Aged
Care is responsible for policy and compliance with the
Aged Care Act, and the Aged Care Quality and Safety
Commission provides national end-to-end regulation
of services.
Legislative changes
The passing of the Aged Care and Other Legislation
Amendment (Royal Commission Response) Act 2022
on 2 August 2022 introduced a number of reforms
including the new funding model (AN-ACC), which
commences on 1 October 2022 and Independent
Health and Aged Care Pricing Authority, with more
changes still to be legislated, including a new aged
care act. The implementation of the reforms will
require considerable design, development and
stakeholder consultation, all of which will need to be
completed before the full impact to consumers and
operators can be known.
It is anticipated that these changes will lead to
a higher quality sector with greater choice and
transparency available to residents.
2023
2024
October 2022
AN-ACC
replaces ACFI
December 2022
New governance
obligations
July 2023
July 2024
IHACPA makes pricing
advice
October 2023
Abolition of ACAR
/ cessation of bed
licencing
Mandated minutes of care commence
2021-22 Annual Report | Estia Health 17
$0$$$$$$$$$$ Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Board and Governance
Estia Health’s Board comprises a majority of Independent Non-executive Directors
who, together with the Chief Executive Officer / Managing Director, have an
appropriate balance of skills, knowledge, experience, independence and diversity.
They each bring a wealth of experience to the Board’s deliberations to enable
optimal outcomes for residents, shareholders, employees, suppliers, government
regulators and members of the community in which Estia Health operates.
Board of Directors
Dr. Gary Weiss, AM
Non-executive Director and Chair
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 Chair of Cromwell Property Group Limited
and Ardent Leisure Group Limited, Executive Director
of Ariadne Australia Limited, and a Director of
Thorney Opportunities Limited and Hearts and Minds
Investments Limited. Gary is also a Commissioner of the
Australian Rugby League Commission and a Director of
the Victor Chang Cardiac Research Institute.
Gary was Chair of Coats Group plc from May 2004 to
April 2012, Chair of Clearview Wealth Ltd from 2013
to May 2016, Chair of Ridley Corporation from June
2015 to June 2020, Executive Director of Guinness
Peat Group plc from 1990 to April 2011 and has held
directorships of numerous companies, including
The Straits Trading Co Limited, Tag Pacific Limited,
Pro-Pac Packaging Limited, Premier Investments Ltd,
Westfield Group, Tower Australia Limited, Australian
Wealth Management Limited, Tyndall Australia
Limited (Deputy Chair), Joe White Maltings Limited
(Chair), CIC Limited, Whitlam Turnbull & Co Limited
and Industrial Equity Limited.
18 Estia Health | 2021-22 Annual Report
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.
Sean Bilton
Chief Executive Officer and
Managing Director
(appointed July 2022)
BEc (UNSW), F FIN
Appointed as Estia Health’s Chief
Executive Officer and Managing
Director from 11 July 2022, having joined as Chief
Operating Officer and Deputy CEO in October 2018,
Sean brings a breadth of experience from more than
a decade as a senior executive in the sector across a
diverse range of roles.
Prior to joining Estia Health, Sean was Head of
Commercial at Opal Aged Care and previous to
that was an Investment Manager with AMP Capital
Investors, responsible for managing assets in the aged
care, agriculture and resources sectors.
Sean commenced his career in the Financial Advisory
business of PricewaterhouseCoopers.
He holds a Bachelor of Economics from UNSW, is a
Fellow of the Financial Services Institute of Australia
and a graduate of the Advanced Management
Program at INSEAD.
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Norah Barlow, ONZM
Non-executive Director
BCA, ACA, ONZM
Norah holds a Bachelor of
Commerce and Administration
from Victoria University, NZ and is
a Chartered Accountant.
Helen Kurincic
Non-executive Director
MBA, Grad Dip Wom Stud, PBC
Crit Care, Cert Nsg, FAICD FGIA
Helen holds a Master of Business
Administration from Victoria
University.
Norah is a highly experienced and respected
executive and director, with an in-depth knowledge of
the aged and health care sector. Norah accumulated
extensive experience as the former CEO and
Director of Summerset Group, an 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, Evolve Education Group Limited, and Chair of
the Audit Committee for Methven Limited.
Norah was appointed to the role of CEO of Estia
Health in 2016 and remained on the board as a Non-
executive Director when she stepped down from
the role in November 2018. Norah is currently Chief
Executive of Heritage Lifecare Limited.
Paul Foster
Non-executive Director
B.Comm, MA, MAICD
Paul holds a Bachelor of
Commerce (with Merit) from the
University of Wollongong and a
Master of Arts from UNSW.
Paul is an experienced financial services professional
and company director, with more than 20 years of
investment experience in the infrastructure, private
equity and real estate asset classes, including
substantial investments in the healthcare sector.
Paul is a managing director at Pacific Equity Partners,
one of Australia’s largest alternative assets investment
management firms. He is also a Director of PEP
Services Pty Ltd and PEP Advisory Services Pty Ltd.
Paul was a Director of the Opal Aged Care Group
(formerly Domain Principal Group) between 2010
and 2015 and was Chair 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.
Helen has extensive executive and non-executive
experience across the healthcare sector. Helen is
Chair of Integral Diagnostics Limited and McMillan
Shakespeare Limited, and a Non-executive Director
of HBF Health Limited and Victorian Clinical Genetics
Service and CUA Health Pty Ltd.
Helen was previously the Chief Operating Officer
and Director of Genesis Care for seven years from
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 government
policy reform across various areas of the healthcare
sector.
Karen Penrose
Non-executive Director
B.Com (UNSW), FAICD and CPA
Karen is an experienced Company
Director who has served as a full-
time Non-executive Director since
2014 on the boards of ASX listed
companies.
Karen’s executive career was in leadership and CFO
roles, mainly in financial services. Karen worked with
CBA and HSBC for over 20 years. She is passionate
about consumer outcomes, financial management
and well-versed in operating in a rapidly changing
regulatory environment.
Karen is a Director of Bank of Queensland, Ramsay
Health Care, Cochlear Limited and Vicinity Centres.
(Karen’s resignation from Vicinity Centres is effective
15 September 2022). She is also Director of Marshall
Investments Pty Ltd, Rugby Australia Limited and
Ramsay Générale De Santé.
Karen was formally a director of Future Generation
Global Investment Company Limited, AWE Limited
and Spark Infrastructure Group Limited.
Karen is a member of Chief Executive Women.
2021-22 Annual Report | Estia Health 19
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Professor Simon Willcock
Non-executive Director
(appointed 1 September 2022)
MBBS (Hons 1), PhD, FRACGP,
GAICD
Simon is a General Practitioner
and the Director of Primary
Care and wellbeing at MQ Health (A Macquarie
University health entity). He was previously Head of
the Discipline of General Practice in the University of
Sydney Medical Program.
His education and research interests include the
health of doctors, generational change in the
medical workforce, aged care, men’s health and
musculoskeletal medicine. Simon trained as a rural
procedural GP and practiced in Inverell, NSW for
seven years. For the past thirty years he has worked
in academic and clinical practice in Sydney and has
had a number of educational leadership roles.
Simon was until recently an elected board member
and Chair of the Avant Mutual Group and is currently
an elected board member and Deputy Chair of the
Sydney North Health Network.
Ian Thorley and Warwick Smith resigned their Board
positions during the reporting period.
Ian Thorley
Chief Executive Officer and
Managing Director (Resigned
July 2022)
MCom (UNSW), GAICD
Ian has over 30 years’ health and
aged care experience in both
Australia and overseas.
Appointed as Chief Executive Officer in October 2018
until his retirement in July 2022, Ian was previously
Estia Health’s Chief Operating Officer from October
2016.
The Honourable
Warwick L. Smith, AO
Non-executive Director
(resigned March 2022)
AO LLB
Warwick serves on a number
of boards and was previously
an Australian Federal Government Minister, with a
parliamentary career spanning 15 years, including
Minister for Family Services and Aged Care. He was
Australia’s first Telecommunications Ombudsman
and has received a Centenary Medal and twice been
awarded an Order of Australia.
20 Estia Health | 2021-22 Annual Report
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Corporate Governance
Estia Health’s Corporate Governance Statement for 2022 (Statement) outlines
the Group’s principal corporate governance practices in place during the financial
year ended 30 June 2022. Copies of all governance documents referred to in this
Statement can be found at the Estia Health investor website.
Governance policies and practices are consistent with
the 4th edition of the ASX Corporate Governance
Council’s Corporate Governance Principles and
Recommendations (ASx Governance Principles).
These policies and practices are reflected in this
Statement as well as our Appendix 4G. The Statement
was approved by the Board on 23 August 2022.
The Board and executive leadership team maintain
high standards of corporate governance as part of the
Group’s commitment to create value for stakeholders
through effective strategic planning, risk management,
transparency and corporate responsibility.
Governance practices are reviewed regularly in light
of the growth in the Group and relevant emerging
corporate governance developments.
Board committees
The Board has delegated specific authority to four
Board committees, which assist the Board by examining
various issues and making recommendations. The
composition and effectiveness of the committees are
reviewed on an annual basis, with a description of
each committee and its responsibilities set out in the
Corporate Governance Statement.
• Audit Committee
• Risk Management Committee
• Nomination and Remuneration Committee
• Property and Investment Committee.
Each of these committees operate in accordance with
specific charters clarifying composition, functions and
responsibilities.
In addition, the Board may establish ad-hoc committees
or delegate authority to existing committees to
oversee specific activities. During FY20, the Board
established two additional committees which
operated through to 30 June 2022:
• Royal Commission and Regulatory Committee
• COVID-19 Committee.
In FY22, 40 formal Board and Board committee
meetings were held. Between formal meetings,
management provided the Board with material
business and other updates as well as information
in response to requests from Board meetings.
In addition, Board directors believe that informal
conversations with staff are important in assessing
the culture within Estia Health, resulting in visits to
homes being scheduled throughout the year, with
directors also attending the annual management
conference.
Details of the number of committee meetings held
during the year and individual directors’ attendance
at these meetings can be found in the 2022 Directors’
Report.
Committee membership
The composition of the committees which operated during the financial year was as follows:
Membership
Audit
Committee
Nomination &
Remuneration
Committee
Risk
Management
Committee
Property &
Investment
Committee
Royal
Commission
& Regulatory
Committee*
COVID-19
Committee*
Chair
Member
Member
Member
Karen Penrose
Paul Foster
Helen Kurincic
Norah Barlow1
Gary Weiss
Helen Kurincic
Gary Weiss
Gary Weiss
Paul Foster
Gary Weiss
Warwick Smith2 Gary Weiss
Warwick Smith2 Helen Kurincic
Karen Penrose
Paul Foster
Karen Penrose
Karen Penrose
Helen Kurincic3
Warwick Smith2
1 Appointed as Chair effective 21 April 2022
2 Resigned effective 31 March 2022
3 Appointed as member effective 21 April 2022
* These temporary committees ceased with effect from 1 July 2022.
2021-22 Annual Report | Estia Health 21
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Responsibilities of management
The Chief Executive Officer and Managing Director (CEO/MD) oversees the day-to-day management of the
business and, with the support of the executive leadership team, reports to the Board on the exercise of his
delegated authority. The CEO/MD has been delegated the authority to manage the Group in accordance with the
strategy, plans and policies approved by the Board. The delegations are reviewed by the Board from time to time.
The CEO/MD, Chief Operating Officer (COO) and Chief Financial Officer (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 advisors.
FY22 Areas of governance focus
Key areas of governance focus and activities undertaken by the Board, its committees and management during
FY22 included:
• Strategic and financial performance
• Governance
- A Board and executive strategy session was held
with a focus on reviewing the growth opportunities
of the core residential service opportunities and
broader aged care adjacencies. The major operational
pillars supporting this strategy were considered.
- The Board reviews the financial performance
of the business every month and approves an
annual budget.
• People
- The operation of the Group Employment
Remuneration and Payroll Compliance
Committee continued to ensure payroll queries
are investigated and communicated in a timely,
consistent, comprehensive and documented
basis through the organisation.
- Supportive and inclusive diversity-related
workplace policies, programs and practices
remained a focus.
- Additional activities included:
- Relevant governance policies, charters and
practices were reviewed in line with annual
review requirements.
- An internal audit program developed by
management was approved, with oversight
provided by the Audit Committee and the Risk
Management Committee.
- Ongoing engagement program with
shareholders, proxy advisors, and key regulators.
• Risk
The Risk Management Committee focused on
the following matters, in addition to its ongoing
responsibilities:
- COVID-19 and infection control program
management
- cybersecurity
- reports from the Clinical Governance Committee
- review and publication of the Company’s 2nd
◦ development of an employee value proposition
Modern Slavery Statement
◦ benefits program
◦ job level framework
◦ review of the performance of the Group’s
superannuation provider.
• Social and environment
- Environment, Social and Governance (ESG),
including Estia Health’s Sustainability Strategy,
was integrated into the corporate strategy with
resident care and human capital identified as the
short-term material non-financial risks.
- Further progress was made on integrated
reporting and increasing disclosure and
transparency on key sustainability issues.
- Opportunities to positively impact environmental
issues were reviewed and the roll out of various
high value projects commenced, including the
development of a Climate Resilience tool to assess
the physical risk of the portfolio as an initial step in
meeting the TCFD recommendations.
- workforce risks
- Person Centred Care Framework
- Sustainability Strategy review.
• Audit
The Audit Committee assessed the following
key operational impacts on the Group’s financial
results, in addition to its responsibilities under the
committee charter:
- bed licence abolishment
- impacts of COVID-19 on asset valuations
- COVID-19 cost recovery grant recognition
- internal audit on Accounts Payable and
Delegations, and Capital Expenditure
- validation of sustainability performance
- receipt of updates from the Employment
Remuneration and Payroll Compliance
Committee.
22 Estia Health | 2021-22 Annual Report
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Estia Health Board
Formally delegates certain functions to Board Committees and to management via the Board and
Committee Charters. Directly retains responsibility for a number of matters, including:
• overall strategic guidance, instilling of the Group’s values and approving the Code of Conduct
• oversight of management
• oversight of financial and capital management
• promotion of effective engagement with shareholders
• promoting ethical and responsible decision-making
• ensuring a robust risk management framework is in place
• establishing the Group’s risk appetite
• monitoring the systems of compliance, risk management and control
• oversight of the Group’s process for making timely and balanced disclosure of all material
information
• oversight of policies governing the Group’s relationship with other stakeholders and those
related to Environment, Social and Governance (ESG), Work Health and Safety (WHS) and other
regulatory and statutory requirements.
Board committees
Audit
Committee
Risk
Management
Committee
Nomination &
Remuneration
Committee
Property &
Investment
Committee
I
N
O
T
A
G
E
L
E
D
Y
T
I
L
I
B
A
T
N
U
O
C
C
A
CEO/Managing Director and other senior executives
Executive committees
Operations and line management
2021-22 Annual Report | Estia Health 23
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Executive Leadership Team
Sean Bilton
Chief Executive Officer and
Managing Director
(appointed July 2022)
Appointed as the CEO and
Managing Director at Estia Health
in July 2022, Sean was previously
in the roles of Chief Operating Officer and Deputy
CEO since October 2018.
Sean is focussed on stewarding the Company through
an unprecedented reform agenda following the Aged
Care Royal Commission, including the implications for
strategy and culture, focussed on further enhancing
the Company’s reputation for quality care and being
an employer of choice.
In his COO role, Sean managed the business through
an unprecedented period of complexity and change
including the ongoing COVID-19 pandemic.
Sean has worked for more than 15 years in the sector,
his involvement commencing when an asset manager
at AMP Capital, where he managed the integration
of multiple acquisitions which were the genesis of
the Opal Healthcare business, before joining Opal
as the Head of Commercial in 2010. At Opal he
oversaw the acquisition and development-led growth
of the business, as well as customer acquisition,
communications and marketing.
Fiona Caldwell
Chief Information Officer
Fiona has more than 25 years’
experience in IT strategic and
operational leadership capacities,
having worked in government
and commercial sectors,
including Village Roadshow, Cenitex and Tatts Group.
She brings to Estia Health a wealth of practised
knowledge and a sound background in managing
data, IT solutions and projects.
Appointed to the role of Chief Information Officer in
October 2017, Fiona leads Estia Health’s IT team in
the delivery of modern and innovative technologies
and seeks to improve services, experience and
engagement for residents, families and employees.
Fiona holds a Bachelor of Computing and Master
of Business Administration from Monash University.
She is also a Graduate and Member of the Australian
Institute of Company Directors.
24 Estia Health | 2021-22 Annual Report
Cath Gillard
Chief People Officer
Cath’s professional career spans
more than 25 years in human
resources and employee relations.
Prior to joining Estia Health
in May 2022 as Chief People
Officer, Cath was the Executive Director People and
Culture at Australian Red Cross Lifeblood, a role she
held for five years. Cath has also held senior human
resources positions within the General Electric group
of companies, Linfox and the Toll Group.
Earlier in her career, Cath practiced as an employment
and industrial relations lawyer for over a decade with
law firms Minter Ellison and Lander & Rogers. At
the time, she provided legal advice across multiple
industry sectors including health, state government,
financial services, manufacturing and construction.
As Chief People Officer, Cath leads a dedicated team
working to attract and develop the best available
talent in the sector, maintaining a safe workplace and
a motivated workforce capable of delivering excellent
care and service for residents and their families.
Cath holds a Bachelor of Laws (Honours) and a
Bachelor of Arts from The University of Melbourne
and a Masters of Management (Human Resources)
from Monash University. She is a Graduate of the
Australian Institute of Company Directors and is a
Certified Human Resources Practitioner (Australian
Human Resources Institute).
Damian Hiser
Chief Operating Officer
Appointed as Chief Operating
Officer of Estia Health in July 2022,
Damian Hiser is a senior healthcare
executive, with more than three
decades experience in the private
health care sector both overseas and in Australia and
most recently over ten years in aged care in Australia.
Prior to his appointment as the COO, Damian was Chief
Customer Officer from October 2017. Throughout the
past two years Damian was instrumental in leading
Estia Health’s response to COVID.
Damian brings a breadth of experience, financial
acumen and understanding of the complexities of
both health and aged care systems. With a unique
ability to look at opportunities to improve both
the customer and employee experience, Damian
embodies Estia Health’s purpose ‘To enrich and
celebrate life together’.
As Chief Operating Officer, Damian is responsible
for leading Estia Health’s operations teams, initiating
improvements to ensure the highest level of care
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is delivered to over 8,000 residents in our homes
annually. Damian ensures that every one of our 68
homes engage with their local communities and
delivers exceptional and compassionate care for all
our residents and their families.
Damian holds a Bachelor of Optometry (UNSW) and
a Master of Business Administration (UTS).
Leanne Laidler
Chief Quality and Risk Officer
Appointed in May 2019 as Chief
Quality and Risk Officer, Leanne is
a senior healthcare executive with
more than 40 years’ experience
in the hospital sector in Australia
and overseas.
Prior to her appointment with Estia Health, Leanne
held a number of senior executive roles inclusive
of hospital CEO and Director of Nursing positions.
Her experience spans a range of listed providers.
Leanne is responsible for leading Estia Health’s
delivery of high-quality care to residents in safe
and supportive environments. This involves the
development and implementation of a person-
centred care framework that combines quality and
risk management strategies. 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.
Leanne is a Registered Nurse with a post registration
Bachelor of Nursing awarded from Deakin University
and a Master of Business from Monash University.
Steve Lemlin
Chief Financial Officer
Steve holds 30 years’ experience
in senior financial and operational
leadership roles across a range of
professional services businesses
in Europe and Australasia.
Joining Estia Health in February 2017 as Chief
Financial Officer, Steve is responsible for corporate
finance and investor relations. He leads the broader
finance team in supporting homes to deliver the best
experience for residents through accurate and timely
management information.
Prior to joining Estia Health, Steve was finance
director at private equity owned Careers Training
Group, which followed his role as CFO and then
COO at leading digital advertising and engagement
company, the White Agency, part of STW Australia’s
largest listed communications group. Steve has held
senior financial leadership roles at MYOB/Solution 6,
Reckon and Ramsay Health Care as well as leading
a management buyout, turnaround and subsequent
sale of a corporate training business.
Steve is a Fellow of the ICAEW and holds an
Honours Degree in Accounting and Finance from the
University of Lancaster, UK.
Michael Lockwood
Chief Development and
Property Officer
Michael has worked in the
property and construction
industry for over 20 years,
with more than half this time
directly involved in the aged care and retirement
living sectors. He has held roles working closely with
developers, builders and not-for-profit operators.
Appointed to the role in April 2022, Michael is
responsible for executing Estia Health’s property
growth and renewal strategy, as well as asset
management across the portfolio.
Prior to joining Estia Health, Michael was the General
Manager, Property and Housing for Catholic Healthcare
and previously Construction Manager for Anglican
Retirement Villages where he led the property strategy,
new developments and property services.
Michael holds a Bachelor of Engineering (Civil)
from the University of Technology, Sydney as well
as a Master of Commerce (Property Investment &
Development) from the University of Western Sydney.
Suzy Watson
General Counsel
Suzy was appointed to the role of
General Counsel in October 2014
and in this role provides advice
on a full spectrum of legal and
compliance matters to support
corporate activity, operations and strategic growth.
Previously in-house counsel for the Bupa Group
both in Sydney and overseas, Suzy holds more
than 15 years’ experience in both private practice
and in-house roles across healthcare, commercial
and corporate law, and is a dual qualified lawyer in
Australia and the United Kingdom. Suzy was awarded
the 2016 Leonard Watson Chant Legacy scholarship
(Governance Institute of Australia) and the National
Industry Scholarship for Women in Leadership.
Suzy holds an LLM (Applied Law) majoring in
In-House Legal Practice, an LLM in International
Economic Law and a Bachelor of Arts (Hons) in Law
and Government from the University of Manchester.
She is currently enrolled in the Graduate Diploma of
Applied Corporate Governance and Risk Management
at the Governance Institute of Australia. Suzy is a
Fellow of the Governance Institute of Australia, a
member of the Law Institute of Victoria and the
Association of Corporate Counsel.
Full biographies available at www.estiahealth.com.au
2021-22 Annual Report | Estia Health 25
Footnote in white next to heading
(for table header row)
>>>>>>>>>>>>>>>>>>>>>>
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Business Value Drivers
Estia Health’s value creation strategy is expressed in five strategic pillars: Care,
Customer, People, Community and Growth, underpinned by a strong culture and a
focus on sustainability that are intrinsic to the creation of value via those pillars.
Success is measured by the value created within this framework over the long term, primarily for investors
but including other stakeholder groups, as an operator and developer of residential aged care services. This is
supported by an awareness of the Group’s comprehensive business capabilities and a disciplined approach to
governance and risk management.
Our 5 pillars value creation strategy 1
Strategic pillar
IIRC1 Capital alignment
Strategic pillar goal
How we deliver value
How we measure value
• Intellectual capital – Organisational,
knowledge-based intangibles, such as
intellectual property, knowledge, systems,
procedures and protocols
• Manufactured capital – physical objects
available for use in the provision of services,
such as our buildings and equipment
• Social and relationship capital – The
institutions and relationships within and
between communities and stakeholders and
the ability to share information to enhance
individual and collective well-being
To be considered a leader in the
provision of quality residential
aged care services in Australia
Our person-centred approach and strong clinical
governance drives all aspects of resident care. Initiatives
including working towards best in class accommodations,
systems and processes, expert partnerships, training,
simulations and reablement programs support our
residents
• Outcomes from the Aged Care Quality and
Safety Commission assessment visits
• Monitoring complaints
• Government recognition of our support and
partnerships with Primary Health Networks
To be a leader in the provision
of customer-centric residential
aged care services in
the sector
We embed a process of continuous improvement based
on customer insights and actions identified through
market research. This approach also measures customer
satisfaction and advocacy
• Consumer Experience Report ratings
• Net Promoter Score
• Occupancy
• Human capital – People’s competencies,
capabilities and experience and their
motivations to innovate
To be an employer of choice,
attracting and retaining skilled
and engaged employees
We attract, develop and retain our team members
through a culture of collaboration and continuous learning
• Employee turnover
where success is recognised. We invest in developing
• Engagement surveys
• Preventable lost time injuries
individuals and capabilities to drive our success
• Uptake of employee wellbeing programs
• Natural capital – renewable and non-
renewable environmental resources and
processes supporting our past, current or
future prosperity
To have a positive social impact
in the communities in which we
operate
We are focused on the implementation of environmental
programs which improve climate resilience and reduce
• Using the Social Impact Framework
dependence on non-renewable energy sources as per our
• Monitoring community engagement plans
Sustainability Strategy
• Financial Capital – Funds available used
in the provision of services and generated
through operations or investments or
obtained through financing
To optimise shareholder returns
by disciplined capital investment
to provide trusted aged care
services
We deliver returns to our shareholders and adopt a
• EPS growth
prudent approach to capital management
• Return on equity
• Enhancement of our Homes and service
provision
1 International Integrated Reporting Framework
26 Estia Health | 2021-22 Annual Report
Footnote in white next to heading
(for table header row)
>>>>>>>>>>>>>>>>>>>>>>
Our 5 pillars value creation strategy 1
Our Strategy
Technology
COVID-19
Sustainability
Risk Management
Tax Transparency Report
Annual Financial Report
Directory of homes
Estia Health value creation
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)
Risk and governance
(Quality Standards, Compliance Requirements, Ethics, Risk Appetite)
Culture
The International Integrated Reporting
Framework (“IIRF”) describes six forms
of capital (financial, manufactured,
intellectual, human, social and
relationship and natural). These forms
of capital are stocks of value that are
increased, decreased or transformed
through the activities and outputs of an
organisation.
In this report, Estia Health has illustrated
how each of these forms of capital is
created or preserved by the five distinct
business value drivers in the course
of the Group’s business activities, and
detailed on the following pages.
Strategic pillar
IIRC1 Capital alignment
Strategic pillar goal
How we deliver value
How we measure value
• Intellectual capital – Organisational,
knowledge-based intangibles, such as
intellectual property, knowledge, systems,
procedures and protocols
• Manufactured capital – physical objects
available for use in the provision of services,
such as our buildings and equipment
• Social and relationship capital – The
institutions and relationships within and
between communities and stakeholders and
the ability to share information to enhance
individual and collective well-being
To be considered a leader in the
provision of quality residential
aged care services in Australia
Our person-centred approach and strong clinical
governance drives all aspects of resident care. Initiatives
including working towards best in class accommodations,
systems and processes, expert partnerships, training,
simulations and reablement programs support our
residents
• Outcomes from the Aged Care Quality and
Safety Commission assessment visits
• Monitoring complaints
• Government recognition of our support and
partnerships with Primary Health Networks
To be a leader in the provision
of customer-centric residential
aged care services in
the sector
We embed a process of continuous improvement based
on customer insights and actions identified through
market research. This approach also measures customer
satisfaction and advocacy
• Consumer Experience Report ratings
• Net Promoter Score
• Occupancy
• Human capital – People’s competencies,
To be an employer of choice,
capabilities and experience and their
attracting and retaining skilled
motivations to innovate
and engaged employees
We attract, develop and retain our team members
through a culture of collaboration and continuous learning
where success is recognised. We invest in developing
individuals and capabilities to drive our success
• Preventable lost time injuries
• Employee turnover
• Engagement surveys
• Uptake of employee wellbeing programs
• Natural capital – renewable and non-
renewable environmental resources and
processes supporting our past, current or
future prosperity
To have a positive social impact
in the communities in which we
operate
We are focused on the implementation of environmental
programs which improve climate resilience and reduce
dependence on non-renewable energy sources as per our
Sustainability Strategy
• Financial Capital – Funds available used
To optimise shareholder returns
in the provision of services and generated
by disciplined capital investment
through operations or investments or
to provide trusted aged care
obtained through financing
services
We deliver returns to our shareholders and adopt a
prudent approach to capital management
• Using the Social Impact Framework
• Monitoring community engagement plans
• Return on equity
• EPS growth
• Enhancement of our Homes and service
provision
1 International Integrated Reporting Framework
2021-22 Annual Report | Estia Health 27
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Our Strategy
Our Performance –
Care
Evidence of quality through greater transparency of clinical outcomes and the
government proposed Star Rating system will empower consumers to make
informed choice of service type and provider. Strong clinical governance and
investment in workforce will be fundamental in underpinning quality and the trend
to more complex services.
Goal
To be considered a leader in the provision of quality residential aged care services
in Australia.
Highlights
home 100% homes fully accredited
Approximately 99% compliance with requirements of the Aged Care Quality Standards at
ACQSC reaccreditations
Independently-chaired Clinical Governance Committee provided oversight, leadership and
insight to best practice
Establishment of Estia Health’s Aged Care Nursing Community of Practice, open for all clinical
employees
Implementation of a centralised tracking system streamlining the recording and reporting of
COVID-19 related infections
Standardised medication packaging pilot program introduced to enhance medicine safety
Centralised electronic record management for residents, including individual care plans
Nutrition needs addressed through centralised menu and food planning management,
supported by expert nutrition advice and regular chef training
External complaints to ACQSC 28% below industry levels
28 Estia Health | 2021-22 Annual Report
Our Strategy
Technology
COVID-19
Sustainability
Risk Management
Tax Transparency Report
Annual Financial Report
Directory of homes
2024 Strategic plan
targets
2022 Outcomes
100% met outcomes from the
Aged Care Quality and Safety
Commission assessment visits
All homes remained fully accredited at all times during the year and at
the date of this report. During the year, no homes received a Sanction,
a Notice to Agree or a Notice of Non-compliance. Subsequent to the
year end, one home received a Notice of Non-compliance, which is
being addressed. An organisation-wide capability building program
for the group’s homes’ leaders on demonstrating compliance with the
Aged Care Quality Standards occurred in this reporting period.
Government recognition of
support and partnerships with
Primary Health Networks (PHNs)
Opportunities for active engagement with government services
continued, albeit at a lower level due to COVID-19 disruption,
including the involvement of Estia Health in a research project with SA
Government in post-hip fracture recovery.
Reduce complaints by 50% year
on year to the Aged Care Quality
and Safety Commission (ACQSC)
The group has remained below the sector’s complaints levels for the
year. External complaints to ASQSC were 28% below industry levels
reported in the most recent ASQSC published data.
Reduce procedures, guidelines
and forms by at least 50% to
streamline clinical care processes
Of the documents reviewed, a 26% reduction was achieved. The
streamlining of clinical workflows is ongoing, including the reduction
in the number of assessments, care plans and care worklogs, resulting
in increasing hours of direct care to residents.
2021-22 Annual Report | Estia Health 29
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Our Performance –
Customer
Differentiated services and products competitively priced and relevant to the
needs of each local community are fundamental to success and will underpin
the delivery of compassionate care, support and engagement for residents and
families. Highly developed sales and marketing skills, networks and links into local
community and referrers are key enablers.
Goal
To be a leader in the provision of customer-centric residential aged care services
to the sector.
Highlights
100% of chefs participated in educational masterclass series, focusing on innovation and
continuous improvement as well as emerging cultural backgrounds
100% of homes passed their regulatory food safety audit
57 lifestyle coordinators completed additional dementia training
Satisfaction rates of residents and families with Estia Health homes holding firm above 93%
Increased community engagement and communication support responding to the changing
nature of the COVID-19 pandemic
Launch of bespoke website to support potential residents and their families through the
process of choosing residential aged care
Resident wellbeing supported through targeted programs including visiting pets, music and art
activities
Occupancy sustained above sector averages, despite overall decline during COVID-19
30 Estia Health | 2021-22 Annual Report
Our Strategy
Technology
COVID-19
Sustainability
Risk Management
Tax Transparency Report
Annual Financial Report
Directory of homes
2024 Strategic plan targets
2022 Outcomes
Estia Health Consumer Experience Report (CER)
scores greater than 93% satisfaction rating
93.2%
Net Promoter Score (NPS) of 50 or more for
likelihood of residents and families to recommend
Estia Health
47
Customer experience driving occupancy rates
higher than peers
At 91.6%, occupancy remains higher than the sector
average (At 30 June 2021, the average occupancy
rate across all residential aged care places
was 86.8%)*
* https://www.gen-agedcaredata.gov.au/Topics/Providers,-services-and-places-in-aged-care
2021-22 Annual Report | Estia Health 31
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Our Performance –
People
Competition for talent is intensifying and a workforce strategy that differentiates
providers based on culture, career progression and a compelling value proposition
will be required to meet the increased demand for health care workers.
Goal
To be an employer of choice, attracting and retaining skilled and engaged
employees.
Highlights
Psychological first aid training delivered to 151 people across the organisation, including new
Care Directors
COVID-19 vaccination program ensuring 100% of eligible employees received their booster vaccine
In partnership with AssurePrograms, the launch of a Wellbeing app, providing timely and
enhanced accessibility to tools and counselling to support the health and wellbeing of employees
60 employees undertaking a formal qualification to cross-skill into roles including personal
carer, enrolled nurse, health administration, commercial cookery and front-line leadership
Training hours per person has continued to increase YOY, with 7.6 hours invested per staff
member in FY22
50% of Board and executive leadership team and 56% of senior leadership team positions held
by women, with females constituting 86% of participants in the 2022 Future Leader program
1,936 vocational student placements (1661 in FY21) with 59 employees hired as trainees and
being supported to gain a formal qualification in ‘Individual Support’ whilst working
74 graduate nurses completed an Aged Care Transition to Practice program
Stabilisation of employee turnover in the last quarter of FY22, despite remaining above pre-
pandemic levels. A new Recruitment Centre of Expertise, and ongoing staff development via
the EstiaAcademy are among strategies to improve attraction and retention
Strong employee engagement, with 72% overall response rates and engagement scores of 69%
32 Estia Health | 2021-22 Annual Report
Our Strategy
Technology
COVID-19
Sustainability
Risk Management
Tax Transparency Report
Annual Financial Report
Directory of homes
2024 Strategic plan
targets
2022 Outcomes
LTIFR 8.8 (FY21 11.9)
Zero preventable lost time injuries
LTIFR refers to Lost Time Injury Frequency Rate being the rolling
average of the number of lost time injury claims per 1 million hours
worked.
70% uptake of employee
wellbeing programs
3.8% of Estia Health employees utilised EAP services (FY21 4.5%),
reflective of consistent support provided to employees and positive
help-seeking behaviours.
Psychological first aid training commenced across the organisation,
providing tools and skills to support employees during challenging
times and reduce the likelihood of psychological injury. 151 people
have been trained so far with the program to continue through FY23.
In partnership with AssurePrograms, a Wellbeing App was launched,
providing more timely and enhanced accessibility to tools and
counselling to support the enhanced health and wellbeing of
employees.
50% of leadership roles recruited
internally
38% of leadership roles were recruited internally (FY21 28.5%),
demonstrating a strengthening internal talent pipeline.
15% or less employee turnover
Employee turnover was 29.6% (FY21 22.6%) at 30 June 2022.
Continued focus on de-casualisation of workforce: 6.3% of total
employee hours worked are by casuals (FY21: 7.5%).
60% of employees completing
engagement surveys
72% of employees shared their voice as part of the 2021 engagement
survey, with overall engagement at 69%.
In March 2022, a more frequent listening strategy commenced, initially
targeting onboarding and offboarding experiences.
2021-22 Annual Report | Estia Health 33
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Our Performance –
Community
Strong local professional health partnerships and networks to support the diverse
and changing health needs of older people and a demonstrated commitment to
maintaining local connections with the community.
Goal
To have a positive social impact in the communities in which we operate.
Highlights
100% of Estia Health homes have established community partnerships with organisations such
as health networks, local clubs, cultural groups and education providers, helping residents
maintain their connections
A continuing focus on multi-generational partnerships, with 35% of residents participating
in programs with day care, school, college and university connecting residents with younger
members of the community
88 centenarians and older in Estia Health homes as at 30 June 2022
99% of Estia Health homes offer a visiting pet, music or art program, with the majority of homes
offering a combination of these programs
hand-heart Volunteers provide assistance to residents at 82% of homes
Locally-based dedicated sales and service teams who are connected to their communities
34 Estia Health | 2021-22 Annual Report
Our Strategy
Technology
COVID-19
Sustainability
Risk Management
Tax Transparency Report
Annual Financial Report
Directory of homes
2024 Strategic plan
targets
2022 Outcomes
All homes have active community
engagement plans identifying
local social and environmental
initiatives
100% of homes have community connections and partnerships.
Community partnerships include health networks and local
community groups or organisations and education training
relationship.
Defining the causes that align
with Estia Health and measure
impact using the Social Impact
Framework
Community causes actively supported by homes included Dementia
Australia, Cancer Council’s Biggest Morning Tea and Pinktober
National Breast Cancer Month.
Volunteer programs with high
satisfaction levels
82% of homes have volunteers supporting residents with a range of
activities.
2021-22 Annual Report | Estia Health 35
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Our Performance –
Growth
Abolition of ACAR removes artificial barriers to competition in areas where capable
providers wish to operate. Operators with strong balance sheets and access to
capital will be able to leverage scale including central overhead efficiency. These
conditions will support consolidation within the sector subject to polices that
provide appropriate returns.
Goal
To optimise shareholder returns by disciplined capital investment to provide access
to trusted aged care services.
Highlights
Estia Health’s newest home at Blakehurst achieved 98% occupancy in June 2022 ahead of
schedule and is now part of the mature portfolio
Commenced construction of new homes in NSW and expansion in SA in early 2022, which will
add a further 260 places across the group / network
Total number of homes eligible for the Higher Accommodation Supplement (HAS) now at 62,
following significant refurbishment of eight more homes in FY22
Exchanged contracts to purchase a new site in Woodcroft (120 places) and progressed design
for two further development projects in Toorak Gardens and Mt Barker (242 places), all in SA
Completed rollout of CCTV enhancements in all homes
Invested $12.4M on capital upgrades across the year to increase service quality and resident
amenities
Introduction of home-like dining spaces supporting resident independence, outdoor areas and
Memory Support Unit gardens
36 Estia Health | 2021-22 Annual Report
Our Strategy
Technology
COVID-19
Sustainability
Risk Management
Tax Transparency Report
Annual Financial Report
Directory of homes
2024 Strategic plan
targets
2022 Outcomes
$23.6M invested across a wide range of areas:
• Significant refurbishment of 8 homes and 610 resident places with
improved amenity $2.1M
• Other refurbishment and home upgrades (servery and equipment
installation) $2.7M
• Nurse call and CCTV $4.7M
• Asset life-cycle replacements and improvements $12.4M (‘Stay in
Business’ Capex FY22 actuals)
• Information Technology (IT) and systems improvement $1.7M
Acquisitions - $0.1M invested
• Exchanged contracts for a new site in Woodcroft, SA for a new
approx. 120 place home
Greenfield developments - $4.8M invested
• Commenced construction in St Ives, NSW $2.3M
• Commenced construction in Aberglasslyn, NSW $1.7M
• Completed detailed design for Mt Barker, SA $0.8M
Brownfield developments - $5M invested
• Finalised Blakehurst project $0.3M
• Commenced construction in Burton, SA $2.6M
• Completed detailed design for Toorak Gardens, SA, Bentleigh, VIC,
and Lockeys, SA $2.1M
Completed environmental assessments across 10 existing homes +
4 new developments
Enhancements of homes
through significant and strategic
refurbishments
Expansion through new or
brownfield developments and
acquisitions
Environmentally friendly
programs to improve climate
resilience and reduce dependence
on non-renewable energy sources
as per Sustainability Strategy
2021-22 Annual Report | Estia Health 37
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Technology
New and innovative technologies provide opportunities to improve care, services
and experience for residents, families and employees; and to streamline processes
within homes to allow more time to focus on the provision of care.
Goals
Identify, trial and rollout solutions that support and enable the organisation to
deliver on the strategic goals and objectives.
Highlights
New visitor management system implemented, integrating temperature and visitor compliance
checking across homes
New CRM platform implemented to improve occupancy and customer acquisition
Increased investment and focus on cyber security
New website implemented providing better information about the organisation and its homes,
and for people seeking a career with Estia Health
Upgraded Nurse Call system in selected homes, with WiFi upgrades commencing
Standardised medication packaging pilot program introduced to enhance medicine safety
New processes, systems and data developed to support the new funding model (AN-ACC)
Increased investment in automation and data analytics to streamline internal processes
Ongoing trialling of new technologies to improve resident care
38 Estia Health | 2021-22 Annual Report
Our Strategy
Technology
COVID-19
Sustainability
Risk Management
Tax Transparency Report
Annual Financial Report
Directory of homes
COVID-19
Throughout the reporting period, COVID-19 continued to directly impact the
residential aged care sector, with that impact ongoing into FY23.
The response of governments to the pandemic
changed significantly during the year, from statewide
lockdowns and severe restrictions on movement, to
more risk assessed and targeted responses as state
and national borders reopened and vaccination
availability and requirements changed.
The high transmissibility of the Omicron variant,
which became dominant in late 2021, resulted in
rapidly increasing community infection rates which
directly impacted the sector. Immigration restrictions,
illness and quarantine requirements affected
workforce availability, with supply chain, infection
control measures and government mandates all
resulting in disruption to the sector.
At the present time, it is likely the impact of COVID-19
in the community and aged care sector will continue
for the foreseeable future. However, resident and
staff vaccinations, supported by the wider availability
of anti-viral medication, has resulted in significantly
lower levels of acute illness and deaths compared to
earlier periods of the pandemic.
In evolving its response to the pandemic, Estia
Health built on previous preparation and learnings,
with frequent communication with residents and
employees, strengthening of education to upskill staff
in infection prevention and control, and specialist
advice when required.
Support for residents, families and employees
continued with multiple vaccination clinics held at
each home, with an ongoing focus on protection and
safety, including psychological first aid training.
From an employee perspective, paid quarantine leave
continued and was provided on top of personal (sick)
leave, together with additional supplements paid
during outbreak periods.
The COVID-19 Board sub-committee continued
to meet regularly throughout the year to provide
oversight of the actions needed to manage the
Group’s response. Throughout FY22, $50.4 million
of direct incremental costs associated with the
pandemic were committed across the workforce,
infection prevention and control (IPC), personal
protective equipment (PPE), cleaning, waste disposal,
welfare, communications and support.
After more than two years of the pandemic, the
Group’s frontline staff continue to demonstrate
extraordinary support and care for residents and
families at a time when many are also experiencing
the consequences of COVID-19 within their own
families and communities. Their dedication and
commitment to supporting residents in such difficult
circumstances is exceptional.
2021-22 Annual Report | Estia Health 39
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Sustainability
Estia Health cares for some of the most vulnerable members of society and
residents’ health and wellbeing in the 68 homes across Australia remains the over-
riding priority. The 2020-2024 Sustainability Strategy recognises the long-term
viability and profitability of the Group depends on the wellbeing of employees,
supporting and integrating within local communities and the continued health of
natural environments.
In FY22 Estia Health continued to progress key projects and initiatives to move towards achieving the priority
targets set within the Sustainability Strategy, with a dynamic approach. This involves continually assessing the
strategy, targets and reporting systems to consider the changing operating environment, impacts of COVID and
growing expectations of organisations in taking committed action towards sustainability across all aspects of
the business.
In November 2021, Estia Health refinanced its existing loans with an industry-first $330 million sustainability
linked Financing Facility to publicly demonstrate its environmental, social and governance commitment.
The agreement has embedded independently-assessed targets aligned to its existing sustainability and
organisational strategy and linked to goals including: reduced greenhouse gas emissions, improving resident
engagement and satisfaction, supporting employee wellbeing and improving environmental performance.
40 Estia Health | 2021-22 Annual Report
Our Strategy
Technology
COVID-19
Sustainability
Risk Management
Tax Transparency Report
Annual Financial Report
Directory of homes
2020-2024 Sustainability Framework
The 2020-2024 Sustainability Strategy has a framework of 11 focus areas and associated targets within the
strategic pillars of supporting our people, enhancing our community and respecting our environment. The
strategy is mapped against the United Nations’ 17 Sustainable Development Goals (SDGs), adopted by the
Member States of the UN in 2015, ensuring the approach is aligned with globally-recognised goals.
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
T
N
E
C
E
W
E
L
L
B
E
I
N
G
4% of
employees
have completed
psychological
first aid
training*
S
O
U
U
P
R
P
O
P
E
R
T
O
I
N
G
P
L
E
T
N
D
E
T
50% of
recruitment
to leadership
roles is
internal
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
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
*Under the focus area of Wellbeing, the 2024 target has been updated, recognising the impacts of COVID-19.
2021-22 Annual Report | Estia Health 41
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Approach to sustainability
Foundation
Focus
area
Alignment to
SDG
Health &
safety
Wellbeing
Diversity &
inclusion
Training &
development
Energy &
carbon
Climate
resilience
Waste
Water
Supply chain
Community
connection
Social impact
Supporting
our people
Respecting
our
environment
Enhancing
our
community
42 Estia Health | 2021-22 Annual Report
Headline 2024 target
Fy22 progress
Lost Time Injury Frequency Rate (LTIFR)
3.0
8.8
LTIFR reduction from HY122 of 10.75 despite COVID-19 impacts
Estia Health employees who have
completed psychological first aid training
4.0%
2.16%
first aid training
151 employees certified by Communicorp as completing psychological
Gender pay gap at 1.68% across corporate roles*
*corporate roles consist of Estia Health’s non-enterprise agreement-covered roles (4% of
total employees), with the above percentage based on a weighted average.
38% of leadership roles recruited internally* (HY22: 36%)
*Leadership roles include central services positions that report to an executive and/or have
people leadership responsibility, as well as Executive Directors and Care Directors.
Scope 1 & 2 emissions intensity reduced by 5% between FY21 and FY22
*FY21 emissions intensity reduction of 6%, has been recalculated to 7% in FY22 due to
improvements in data analysis.
Gender pay gap for equivalent roles
Zero
1.68%
Recruitment to leadership roles internally
50%
38%
Reduction in operational emissions intensity
(Scope 1 and 2)
20%
5%
(FY19-FY21: 7%)*
Assets assessed for vulnerability to
climate change
100%
100%
assets and future developments with further planning underway for
Climate vulnerability and exposure assessment completed on 100% of
required adaptation/mitigation activity
Generated waste diverted from landfill
50%
18%
18% of waste was diverted from landfill despite increased PPE usage
and disposal (FY21: 17.6%)
Average water consumption intensity
reduction
20%
Full impact will be
assessed in FY23
Water consumption reduction initiatives continue, with 50 sites
completing a microfibre rollout aimed at reducing water consumption
and modernising all washing machines to ensure efficiency
‘High risk’ suppliers that have completed
an additional screening for modern
slavery risk
13 potential high-
Identified ‘high risk’ suppliers screened in the reporting period and
100%
risk suppliers
progression of Estia Health’s Modern Slavery Roadmap underway,
completed a survey
including due diligence process
Homes that have an active and bespoke
community engagement plan updated
annually
100%
100%*
95.6% of homes offered nursing and student vocational placements
with 1,936 placements made (HY22: 90%)
All our homes have community connections and partnerships*
*Community partnerships include health networks and local community groups or
organisations and education training relationships
Designed, implemented, and annually
report against a Social Impact Framework
134,790 days of short-term respite care provided, supporting unpaid
careers in local communities (HY22: 67,900)
Our Strategy
Technology
COVID-19
Sustainability
Risk Management
Tax Transparency Report
Annual Financial Report
Directory of homes
Foundation
Focus
area
Alignment to
SDG
Headline 2024 target
Fy22 progress
Health &
safety
Wellbeing
Diversity &
inclusion
Training &
development
Energy &
carbon
Climate
resilience
Waste
Water
Supply chain
Community
connection
Social impact
Supporting
our people
Respecting
our
environment
Enhancing
our
community
Lost Time Injury Frequency Rate (LTIFR)
3.0
8.8
LTIFR reduction from HY122 of 10.75 despite COVID-19 impacts
Estia Health employees who have
completed psychological first aid training
4.0%
2.16%
151 employees certified by Communicorp as completing psychological
first aid training
Gender pay gap for equivalent roles
Zero
1.68%
Recruitment to leadership roles internally
50%
38%
Reduction in operational emissions intensity
(Scope 1 and 2)
20%
5%
Gender pay gap at 1.68% across corporate roles*
*corporate roles consist of Estia Health’s non-enterprise agreement-covered roles (4% of
total employees), with the above percentage based on a weighted average.
38% of leadership roles recruited internally* (HY22: 36%)
*Leadership roles include central services positions that report to an executive and/or have
people leadership responsibility, as well as Executive Directors and Care Directors.
Scope 1 & 2 emissions intensity reduced by 5% between FY21 and FY22
(FY19-FY21: 7%)*
*FY21 emissions intensity reduction of 6%, has been recalculated to 7% in FY22 due to
improvements in data analysis.
Assets assessed for vulnerability to
climate change
100%
100%
Climate vulnerability and exposure assessment completed on 100% of
assets and future developments with further planning underway for
required adaptation/mitigation activity
Generated waste diverted from landfill
50%
18%
18% of waste was diverted from landfill despite increased PPE usage
and disposal (FY21: 17.6%)
Average water consumption intensity
reduction
20%
Full impact will be
assessed in FY23
Water consumption reduction initiatives continue, with 50 sites
completing a microfibre rollout aimed at reducing water consumption
and modernising all washing machines to ensure efficiency
‘High risk’ suppliers that have completed
an additional screening for modern
slavery risk
100%
13 potential high-
risk suppliers
completed a survey
Identified ‘high risk’ suppliers screened in the reporting period and
progression of Estia Health’s Modern Slavery Roadmap underway,
including due diligence process
Homes that have an active and bespoke
community engagement plan updated
annually
100%
100%*
95.6% of homes offered nursing and student vocational placements
with 1,936 placements made (HY22: 90%)
All our homes have community connections and partnerships*
*Community partnerships include health networks and local community groups or
organisations and education training relationships
Designed, implemented, and annually
report against a Social Impact Framework
134,790 days of short-term respite care provided, supporting unpaid
careers in local communities (HY22: 67,900)
2021-22 Annual Report | Estia Health 43
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Risk Management
The Board, the Board Risk Management Committee and management level
committees are committed to the development and implementation, monitoring,
review and continuous improvement of Estia Health’s risk management approach
and framework.
The Group’s risk management approach is an
integrated, continuous process aimed at ensuring
strategic and operational objectives are achieved
and maintained, with internal control systems
encompassing all policies, processes, standard
operating procedures and practices established
by management and / or the Board to provide
reasonable assurance that:
• established corporate and business strategies and
objectives are achieved
• risk exposure is identified and adequately
monitored and managed
• resources are acquired economically, adequately
protected and managed efficiently and effectively
in carrying out the Group’s business
Risk Management Framework
• significant financial, managerial and operating
information is accurate, relevant, timely and reliable
• there is an adequate level of compliance with
policies, standards, procedures and applicable laws
and regulations.
The framework adopts a continuous improvement
approach ensuring supporting process and practices
continually evolve. While risk management is part
of the responsibility of all Estia Health employees,
managers, leaders and ultimately the Board, each risk
has an identified executive leadership team member
as an owner, with new and emerging risk reviewed
regularly within the framework.
Audit Committee
Line 3
Board
Risk Committee
Clinical Governance
Committee
Line 2
Line 1
Nomination and
Remuneration Committee
Executive Risk
Committee
e
t
i
t
e
p
p
A
d
n
a
e
c
n
a
r
e
o
T
l
Quality
Improvement
Committee
Clinical
Development
Steering
Committee
WHS and
People
Committees
Environmental,
Social and
Governance
(Sustainability)
Committee
LT.
Governance/
Security
Committee
g
n
i
t
r
o
p
e
R
d
n
a
n
o
i
t
a
l
a
c
s
E
Operations and Line Management
44 Estia Health | 2021-22 Annual Report
Our Strategy
Technology
COVID-19
Sustainability
Risk Management
Tax Transparency Report
Annual Financial Report
Directory of homes
Three lines of defence
1st Line Roles
2nd Line Roles
3rd Line Roles
• Front line employees and
• Executive Risk Committee
• Risk Committee (Board
Three Lines Model
l
s
e
o
R
management
• Operations and Executive
management
• Home-level Continuous
Improvement Committee
• Clinical Governance
Committee (CGC)
subcommittee)
• Internal & External Audit
Executive Management Team
Executive Risk Committee
Risk Committee
• Oversee the effectiveness of
risk management system and
controls
• Oversee compliance with
the legal and regulatory
requirements
• Make recommendations to the
Board regarding risks, actions
adequacy of risk framework
and disclosure on risk
Internal & External Audit
• Evaluates and tests internal
controls
• Sets and implements policy/
process requirements in
adherence to risk management
framework
• Provides non-clinical oversight
• Takes reports from committees
and Executive on risk matters
Clinical Governance Committee
(CGC)
• Reviews policies and
outcomes of clinical practice
and oversight of clinical
governance Quality and Risk
Team
• Independent oversight,
coaching, support, challenge
and monitoring of risk
awareness, identification and
management
• Coordinate responses to key
regulatory changes
s
e
i
t
i
l
i
b
i
s
n
o
p
s
e
R
• Consider risk within strategic,
operational and planning
reviews
• Understand and aware
of legislative / regulatory
obligations
• Collaborate with 2nd line to
effectively identify, measure
and report risk and compliance
breaches
• Create and maintain a culture
that proactively manages risk
and compliance
• Makes decisions being mindful
of creating and protecting
value
Line Management (Home,
Central Services)
• Primary responsibility for
effective day to day risk
treatment
• Ensures strong internal
controls
• Awareness of risk processes
and how and where to escalate
events
• Following guidance on risk or
risk events
Home Level – Continuous
Improvement Committee
• Oversee and report to QIC
and CDSC on effectiveness of
quality and risk activities at
home level
d
r
a
o
B
h
t
l
a
e
H
a
i
t
s
E
k
r
o
w
e
m
a
r
F
&
y
g
e
t
a
r
t
S
,
y
c
i
l
o
P
e
s
r
o
d
n
E
–
t
n
e
m
e
g
a
n
a
M
k
s
i
R
f
o
e
c
n
a
n
r
e
v
o
G
s
e
e
s
r
e
v
O
2021-22 Annual Report | Estia Health 45
46 Estia Health | 2021-22 Annual Report
Tax
Transparency
Report
For the year ended 30 June 2022
Estia Health Limited
ABN 37 160 986 201
Chief Financial Officer’s Introduction
Tax Governance and Strategy
Tax Reconciliations and Contributions
Income Tax Expense Reconciliation
Reconciliation of Income Tax Expense to
Current Tax Payable
Explanation of Current Tax Recoverable
Explanation of Material Temporary and Non-Temporary
Differences
Summary of Tax Contributions
48
49
49
49
50
50
50
51
2021-22 Annual Report | Estia Health 47
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Chief Financial Officer’s
Introduction
Estia Health Limited (the “Group”) is one of Australia’s largest residential aged care
providers with approximately 7,500 employees caring for over 8,000 residents
each year across 68 homes in New South Wales, Queensland, Victoria and South
Australia.
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 109 to 159 of this
Annual Report.
The Group is a tax resident of Australia and does
not currently operate in foreign jurisdictions, nor
has it entered into any international related party
transactions or structures.
We are pleased to disclose our approach to
managing our tax responsibilities and the extent of
our contribution to tax generation, collection and
remittance to the relevant tax authorities in Australia.
Steve Lemlin
Chief Financial Officer
September 2022
The Group’s strategy is to:
• Be a market leader in owning and developing high
quality residential aged care homes in Australia
• Provide residents in our homes with the highest
standards of aged care services in an innovative,
supportive and caring environment
• Deliver earnings growth through sustained high
occupancy rates, developing and commissioning
new homes, enhancing existing homes,
complementary acquisitions
• Develop additional earnings from related services
within the continuum of aged care.
The Group is committed to having governance
policies and practices that maintain 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
• Seeks to maintain constructive working
relationships with the Australian Taxation Office
(“ATO”) and other relevant tax authorities.
48 Estia Health | 2021-22 Annual Report
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Tax Transparency Report Annual Financial Report
Directory of homes
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 approach to Tax Risk Management is to treat tax related matters responsibly in line with the
relevant tax laws. The Group has a commitment to:
• transparency
• the provision of full and timely disclosures
• act with integrity in all its tax related matters.
Where there is uncertainty around a tax position in relation to a transaction or a category of transactions, the
Group will take into consideration the potential impact on shareholder value, its market reputation and the
impact of possible penalties imposed by the ATO and other relevant authorities. Tax positions are taken only
when it could be concluded in the circumstances, having regard to relevant authorities, that the position taken is
“more likely to be correct than incorrect”, as defined in the Taxation Administration Act 1953. Tax positions taken
in relation to significant items where this definition is considered as potentially open to challenge, are reported to
the Board’s Audit Committee. Where appropriate, the Group engages with its external advisers to receive advice.
The Group seeks to have professional working relationships with the ATO and other relevant tax authorities.
The Group adopts structures and positions that align to its business objectives and are not driven by the
objective of securing tax outcomes.
TAx RECONCILIATIONS AND CONTRIBUTIONS
INCOME TAx ExPENSE RECONCILIATION
A full reconciliation of the Group’s accounting profit for the period to its income tax expense is included
in Note B6 to the financial statement on page 122. The Group’s accounting profit has been determined in
accordance with Australian Accounting Standards (the “Standards”). From this accounting profit, the Group
applies Australian tax legislation to determine its taxable income or loss for the period, by deducting allowable
deductions from assessable income.
For FY22, the Group has determined that it has taxable income to which it applied the Australian statutory
income tax rate of 30% (2021: 30%) to calculate its tax expense.
Accounting (loss) / profit before income tax
2022
20211
$’000
$’000
(73,557)
8,502
At the Australian statutory income tax rate of 30% (2021: 30%)
(22,067)
2,551
Adjustments in respect of income tax of previous year
Permanent differences
Utilisation of unrecognised tax losses
Income tax (benefit) / expense
Effective tax rate
31
840
-
(21,196)
28.8%
79
280
(13)
2,897
34.1%
1 Refer to Note E4 to the financial statements on page 153 for details relating to the restatement of prior period comparative
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 calculated ETR for the period of 28.8%
deviates from the Australian statutory income tax rate of 30% due to differences between accounting profit and
taxable income as explained above.
2021-22 Annual Report | Estia Health 49
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
TAx RECONCILIATIONS AND CONTRIBUTIONS (Continued)
RECONCILIATION OF INCOME TAx ExPENSE TO CURRENT TAx PAYABLE
Income tax (benefit) / expense
Add / (subtract):
Net timing differences
(Under) / Over provision in prior years
Current tax (benefit) / expenses included in income tax expense
Add / (subtract):
Tax payments to tax authorities
Net opening balance
Net current tax (receivable) / payable
2022
$’000
(21,196)
17,795
(2,137)
(5,538)
20211
$’000
2,897
(1,663)
(512)
722
(7,584)
(6,064)
1,162
(11,960)
6,504
1,162
1 Refer to Note E4 to the Financial Statements on page 153 for details relating to the restatement of prior period comparative.
ExPLANATION OF CURRENT TAx RECOVERABLE
As at 30 June 2022, the Group has a current tax recoverable of $11,960,000.
An amount of $3,432,000, related to the tax loss arising in FY22, is expected to be refundable under the Loss
Carry-Back measure, subject to finalisation of the 2021-22 tax return. The measure allows entities to carry back
tax losses incurred during a fiscal year to claim a partial refund of income tax paid between 2019 and 2021.
An amount of $8,534,000 related to the monthly PAYG income tax instalments paid during the year. The Group
ceased making instalment payments once it became likely that the Group would not generate a taxable profit
for the year. This balance is expected to be fully refundable upon the finalisation of the 2021-22 tax return.
ExPLANATION OF MATERIAL TEMPORARY AND NON-TEMPORARY DIFFERENCES
A detailed reconciliation of accounting profit to income tax expense and material temporary and non-temporary
differences is disclosed in Note B6 on page 122 of this Annual Report.
Temporary differences result from differing recognition criteria between the tax and accounting treatment of
certain transactions which result in transactions being recognised in different periods for tax and accounting
periods.
The temporary difference of $17,795,000 is primarily related to the amortisation charge of $58,701,000 relating
to the bed licences that were acquired through historic business combinations. The amortisation of bed licences
commenced during FY22 as a result of the Government’s decision to abolish the Aged Care Approvals Round
(“ACAR”) which will be effective on 30 June 2024.
Under tax legislation, bed licences are classified as Capital Gain Tax (“CGT”) assets, therefore the related
depreciation is not deductible for tax purposes in the years when it occurs. However, a capital loss should
become available to carry forward when the abolition of bed licences becomes effective on 30 June 2024 which
could be utilised against future capital gains of the Group, subject to prevailing tax legislation and tax loss
recoupment tests.
The remaining balance is represented by movements in accrued expenses, payroll-related liabilities such as
annual leave and differences in tax and accounting depreciation rates of buildings.
50 Estia Health | 2021-22 Annual Report
Our Strategy
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Tax Transparency Report Annual Financial Report
Directory of homes
TAx RECONCILIATIONS AND CONTRIBUTIONS (Continued)
SUMMARY OF TAx CONTRIBUTIONS
Taxes paid / (refunded) by type
Income tax, net
Payroll tax1
Fringe benefits tax
Council rates
Land tax
Stamp duties, net2
Total taxes paid, net
Taxes collected and remitted by type
Employee PAYG withholding1
GST (collected and remitted)
GST (paid but reclaimed)
Total taxes collected and remitted, net
The above taxes were remitted to the following Australia revenue
authorities:
Australian Federal Government
State Governments
Local Governments
Total tax contributions, net
2022
$’000
7,584
20,715
70
2,077
653
(531)
2021
$’000
6,064
24,034
106
2,088
405
528
30,568
33,225
81,388
90,880
629
1,774
(15,670)
(14,892)
66,347
77,762
74,001
20,837
2,077
83,932
24,967
2,088
96,915
110,987
1 During the financial year ended 30 June 2021, the Group settled payments of PAYG remittances and state-based payroll taxes of $16,728,000
and $2,113,000, respectively, which were deferred in the previous financial year under various tax relief measures offered by the Australia
Federal and State Government.
2 Included in the current year was a refund of stamp duties of $977,000 from the NSW State Revenue Office.
2021-22 Annual Report | Estia Health 51
52 Estia Health | 2021-22 Annual Report
Annual
Financial
Report
For the year ended 30 June 2022
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
Notes to the Consolidated Financial Statements
A About this Report
B Our Performance
C Assets and Liabilities
D Capital, Financing, RADs and Risk
E Other Information
Directors’ Declaration
Independent Auditor’s Report
Additional Information
54
55
108
109
110
111
112
113
113
116
128
141
152
160
161
168
2021-22 Annual Report | Estia Health 53
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
Corporate Information
SOLICITORS
Minter Ellison
Governor Macquarie Tower
1 Farrer Place
Sydney NSW 2000
King Wood & Mallesons
Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Thomson Geer
Rialto South Tower
525 Collins Street
Melbourne VIC 3000
BANKERS
Westpac Banking Corporation
275 Kent Street
Sydney NSW 2000
Commonwealth Bank of Australia
201 Sussex Street
Sydney NSW 2000
Australia and New Zealand Bank
242 Pitt Street
Sydney NSW 2000
AUDITORS
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000
ABN 37 160 986 201
DIRECTORS
Dr. Gary H Weiss, AM
Chairman
Sean Bilton
Managing Director and CEO
(Appointed 11 July 2022)
Norah Barlow, ONZM
Property and Investment Committee Chair
(Appointed 21 April 2022)
Paul Foster
Nomination and Remuneration Committee Chair
Helen Kurincic
Risk Management Committee Chair
Karen Penrose
Audit Committee Chair
Professor Simon Willcock
(Commencing 1 September 2022)
Ian Thorley
Managing Director and CEO
(Resigned 11 July 2022)
Hon. Warwick L Smith, AO
(Resigned 31 March 2022)
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
54 Estia Health | 2021-22 Annual Report
Directors’ Report
Our Strategy
Technology
COVID-19
Sustainability
Risk Management
Tax Transparency Report Annual Financial Report
Directory of homes
DIRECTORS’ REPORT
Your Directors submit their report for the year ended 30 June 2022 for Estia Health Limited ("the Company") and
its subsidiaries (collectively the "Group" or "Estia Health").
DIRECTORS
The names and qualifications of the Group’s Directors who held office during the financial year and until the date
of this report are set out below. Directors were in office for the entire year 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 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.
SEAN BILTON (MANAGING DIRECTOR AND CEO)
Sean was appointed as the Managing Director and CEO on 11 July 2022. Sean held the roles of Chief Operating
Officer and Deputy CEO prior to the appointment.
Sean holds a Bachelor of Economics from UNSW, is a Fellow of the Financial Services Institute of Australia and a
graduate of the Advanced Management Program at INSEAD.
NORAH BARLOW, ONZM (PROPERTY AND INVESTMENT COMMITTEE CHAIR)
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 (with Merit) from the University of Wollongong and a Master of Arts from the
University of NSW.
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.
PROFESSOR SIMON WILLCOCK
Simon will commence as an Independent Non-executive Director on 1 September 2022.
Simon has been the independent chair of Estia Health’s Clinical Governance Committee since 2019 and has an
extensive academic and clinical career including a number of Commonwealth and State Ministerial appointments.
He is a Director of Sydney North Primary Health Network and was previously a Director and Chair of Avant Mutual
Group. Simon is currently Program Director for Primary Care and Wellbeing Services at MQ Health, a subsidiary
of Macquarie University.
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 resigned from the Board effective 11 July
2022.
Ian holds a Bachelor of Health Administration and a Masters of Commerce from the University of NSW.
HON. WARWICK L SMITH, AO
Warwick was appointed as an Independent Non-executive Director in May 2017. Warwick resigned from the
Board effective 31 March 2022.
Estia Health Limited
2021-22 Annual Report | Estia Health 55
4
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
DIRECTORS’ REPORT
COMMITTEE MEMBERSHIP
During the financial year, the Group had the following committees:
Membership
Chair
Audit
Committee
Karen Penrose
Royal
Commission &
Nomination &
Regulatory
Remuneration
Committee1
Committee
Paul Foster Helen Kurincic Norah Barlow2 Gary Weiss
Risk
Management
Committee
Property &
Investment
Committee
COVID-19
Committee1
Helen Kurincic
Gary Weiss
Member
Member Warwick Smith3 Helen Kurincic Karen Penrose Paul Foster Karen Penrose Karen Penrose
Member
Gary Weiss Warwick Smith3 Gary Weiss
Helen Kurincic4
Warwick Smith3
Gary Weiss
Paul Foster
1 The Royal Commission and Regulatory Committee and COVID-19 Committee were temporary committees
which ceased with effect from 1 July 2022.
2 Appointed as Chair effective 21 April 2022
3 Resigned effective 31 March 2022
4 Appointed as member effective 21 April 2022
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:
Board Meetings
Audit Committee
Nomination &
Remuneration
Committee
Risk
Management
Committee
Property &
Investment
Committee
(A)
(B)
(A)
(B)
(A)
(B)
(A)
(B)
(A)
(B)
Gary Weiss, AM
Ian Thorley
Norah Barlow, ONZM
Paul Foster
Warwick Smith1
Helen Kurincic
Karen Penrose
16
16
16
16
12
16
16
16
16
15
16
12
16
16
7
-
-
-
6
1
7
7
-
-
-
5
1
7
5
-
-
5
-
5
-
5
-
-
5
-
5
-
-
-
-
6
-
6
6
-
-
-
6
-
6
6
5
-
5
5
3
-
-
5
-
5
5
3
-
-
(A) Number of meetings eligible to attend.
(B) Number of meetings attended.
1 Warwick Smith resigned from the Board effective 31 March 2022
All Directors have a standing invitation to attend Committee meetings and regularly attend meetings of
Committees, particularly the COVID-19 Risk sub-committee. Such attendance is not reflected in the above tables.
The Board may establish other sub-committees, from time to time, as and when required.
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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:
Dr. Gary H Weiss, AM
Sean Bilton (commenced as Managing Director and CEO on 11 July 2022)
Norah Barlow, ONZM
Paul Foster
Helen Kurincic
Karen Penrose
Number of
ordinary
shares
78,312
29,774
129,474
24,000
50,000
36,833
On joining the Board from 1 September 2022, Professor Simon Willcock held nil shares.
COMPANY SECRETARY
LEANNE RALPH
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 Group during the year ended 30 June 2022 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 Act”).
The Group’s strategy is to:
•
•
•
•
be a market leader in owning and developing high quality residential aged care homes in Australia;
provide residents with the highest standards of aged care services in an innovative, supportive and
caring environment;
deliver earnings growth through sustained high occupancy rates, developing and commissioning new
homes, enhancing existing homes, complementary acquisitions; and
develop additional earnings from related services within the continuum of aged care.
This strategy is reflected in five pillars: Care, Customer, People, Community and Growth, underpinned by the
Group’s Sustainability Strategy.
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THE MARKET IN WHICH ESTIA HEALTH OPERATES
Services Provided
The Group provides permanent residential care in a safe and supportive environment for people who are no
longer able to live at their own home. Short-term respite and reablement care is also provided for older
Australians who normally live at their home, but temporarily require a higher level of support and care following a
hospital stay, an accident or medical event, or to allow their normal carers to take a break.
About the Sector
The Department of Health’s 2020-21 Report on the Operation of the Aged Care Act 1997 disclosed:
•
•
•
•
•
229,547 residential aged care operational places at 30 June 2021 (2020: 217,145), an increase of 5.7%
from the prior year.
there were 830 Approved Providers at 30 June 2021 (2020: 845) operating 2,704 separate homes
(2020: 2,722).
during the year ended 30 June 2021, services were provided to 243,117 permanent residents (2020:
244,363), and a further 67,775 people (2020: 66,873) received respite care, of whom more than half
were later admitted to permanent care.
183,894 permanent residents in residential aged care homes at 30 June 2021 (2020: 183,989).
total funding and subsidies provided to Approved Providers under the Act by the Australian Government
in the year ended 30 June 2021 was $14.1 billion.
The former Government’s May 2021 response to the Report into Aged Care Quality and Safety (“the Royal
Commission”) by the Royal Commission provides for $17.7 billion additional funding to the aged care sector over
four years, of which $8.7 billion is expected to be paid to residential aged care Approved Providers in relation to
the delivery of services to residents.
Access to services
Under the Act, 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 choose
a residential aged care home that best meets their needs. Only Approved Providers, are eligible to provide
services which qualify for Government funding support.
Regulatory Environment
The former Government’s response to the Royal Commission proposed multiple reforms to the Residential Aged
Care sector, many of which have now been legislated, including changes to funding models, introducing an
independent pricing authority, removing capacity constraints on bed licenses, mandating minimum care minutes
and increased transparency, reporting and governance. These reforms will change the financial and operational
environment in which Estia Health operates. This is referenced further in this report.
Ageing Demographic
The ageing of the Australian population and the influence of the “baby boomer” generation is generally expected
to result in a marked increase in Australia’s aged population.
The Department of Health’s 2020-21 Report on the Operation of the Aged Care Act 1997 reported:
•
at 30 June 2021 there were:
o
o
4.3 million people, or 16.2% of the Australian population aged 65 years and over, and
529,000 people, or 2.0% of the population aged 85 years and over
•
that by 30 June 2031 this would increase to:
o
o
5.5 million people, or 18.2% of the population aged 65 years and over, and
753,000 people, or 2.5% of the population aged 85 years and over.
This demographic shift is expected to increase the number of Australians likely to need aged care, including
residential aged care, in coming years. The Group’s growth strategy is to provide services to meet this growing
demand.
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THE GROUP'S PORTFOLIO
The Group is one of the largest Approved Providers in Australia with 68 homes operating across four states.
Number of
homes
18
Number of
places
1,975
Average
home size
110
Significantly
refurbished
homes
16
Number of
places in
single
rooms
1,303
Approximate
number of
staff
2,132
8
17
25
68
851
1,351
1,986
6,163
106
79
79
91
8
15
23
62
782
1,307
1,722
5,114
1,031
1,700
2,515
7,378
New South Wales
Queensland
South Australia
Victoria
Group
CARE AND SERVICES PROVIDED
The quality of care and services to residents is the foremost priority of the Group. The Group is committed to
delivering the highest quality care to people who choose to trust in Estia Health at an important time in their lives.
This is reflected in the Group’s intention to create for residents, families and staff: “a family where everyone
belongs”.
Each Estia Health home provides care, accommodation and hotel and lifestyle services, led by an Executive
Director who is supported by a team of nurses, clinical support staff, personal care assistants, lifestyle, allied
health, chefs, cleaning, laundry and maintenance staff. 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 under the
direction of the Clinical Governance Committee, chaired by an independent expert, Professor Simon Willcock,
who will join the Board of Directors on 1 September 2022.
The application of these policies and procedures at a home level is managed by the Executive Director and Care
Director of each home supported by regional teams. Quality of care is monitored against uniform clinical quality
indicators, which are measured and reviewed by the Quality Improvement Committee. Internal reviews of quality
of care are regularly undertaken by the Group’s Quality Team and key clinical performance data is assessed
against industry benchmarks.
Upon entry to a home, the specific needs of new residents are assessed, in conjunction with families or carers in
order to develop personalised clinical care, nutrition and lifestyle plans.
Food and nutrition form a critical part of the care and well-being of all residents. Menus are reviewed
by nutritionists and meals are prepared fresh on-site every day by Estia Health chefs. Wherever possible, food is
sourced from Australian producers with a focus on fresh, high-quality ingredients. All Estia Health chefs attend in-
house masterclass workshops as part of their development and the Group’s commitment to delivering nutritious,
high quality and enjoyable meals for all residents.
Lifestyle coordinators liaise with physiotherapists and other allied health support services to design and deliver
a wide range of activities to support the mental, social and welfare needs of residents. Cultural and community
engagement is further fostered with relationships with outside organisations including churches and schools.
Regular surveying of resident satisfaction levels is conducted using the same criteria originally
developed by the Aged Care Quality and Safety Commission (“ACQSC”) using Consumer Experience Reports
(“CER”) during inspection visits to homes, which ask residents to respond to a series of question on a five-point
scale. The Group achieved an overall average 93.2% (2021: 93.7%) satisfaction rating during the year to 30 June
2022, based on the number of responses that reported they were satisfied with services "most of the time" or
"always".
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REGULATORY ENVIRONMENT AND REFORM POST ROYAL COMMISSION
The former Government’s response to the Royal Commission recommendations in May 2021 was set out under 5
Pillars, which includes the provision of additional funding to the sector via a new model, offset by expectations of
higher costs and increased regulatory requirements for operators. The current Government has indicated its
support for the Royal Commission recommendations and proposed reforms, including the individual items set out
below, but many remain unlegislated at the date of this Report.
Pillar 1:
Home Care
Pillar 2:
Residential
aged care
services and
sustainability
Pillar 3:
Residential
aged care
quality and
safety
Pillar 4:
Workforce
Pillar 5:
Governance
2021
• Initial rollout of expanded
regional network to improve
local planning and
understanding of needs.
• Council of Elders
established to provide a
direct voice to Government.
• National Aged Care
Advisory Council established
to provide expert advice to
Government.
• Expanded capital
infrastructure grants
available to improve access
to better quality aged care
services for First Nations
people and those in rural and
remote locations, or who are
homeless or at risk of
homelessness.
• Improved services and
health outcomes for people
in remote and Indigenous
communities as a result of
additional aged care funding.
2022
• New workforce of trusted
First Nations people to assist
Older First Nations people
navigate and access aged
and disability care.
2023
• Introduction of a new,
values based Aged Care Act.
2025
• Strong and effective
governance of aged care is
in place with senior
Australians at the centre and
improved care outcomes
consistently delivered.
2021
• Up to 6,000 new personal
care workers in workplaces.
• Surge locum workforce
capacity in regional and rural
locations.
• Improved training in
dementia care and
minimising restraint
(restrictive practices).
2022
• Up to 7,000 new personal
care workers in workplaces.
• 33,800 additional training
places rolled out over two
years for personal care
workers to attain a Certificate
III in Individual Support
(Ageing).
• More registered nurses in
workplaces due to nurse
incentive and financial
support schemes.
• Single assessment
workforce in place to conduct
assessments across
residential and home care.
2023
• Additional training places
for personal care workers to
attain a Certificate III in
Individual Support (Ageing).
2024
• Continued growth of the
aged care workforce and a
demonstrable increase in
registered nurses choosing
aged care as their career
2025
• Tangible improvements
seen in staffing levels, skill
mix and training of the care
workforce.
• Workforce continues to
meet the demand for aged
care services, particularly in
home care.
2021
• 40,000 more home care
packages.
• Senior Australians able to
access assistance and
information about aged care
through 325 Services
Australia Service Centres,
and aged care specialists in
70 Service Australia centres.
• Extra support for informal
carers.
2022
• 40,000 more home care
packages.
• Respite services for 8,400
additional clients every year.
2023
• 500 local Community Care
Finders provide targeted,
specialist face-to-face
support to vulnerable senior
Australians to help them
access aged care and
connect with other health
and social supports.
• Senior Australians can
access a new support at
home program.
• Single assessment
workforce will expand to the
new support at home
program.
2024
• New support at home
program supports senior
Australians to stay in their
homes and keep connected
to their communities.
• Single assessment
workforce will continue
assessments for the new
support at home program.
2021
• Immediate improvements to
the quality of care in
dementia, diversity, food and
nutrition services.
• Stronger clinical care
standards developed by the
Australian Commission on
Safety and Quality in Health
Care.
• Up to 120,000 additional
GP services through boosted
Aged Care Access Incentive.
• Increasing dementia care
capability delivers better
outcomes for people living
with dementia.
• Palliative care services
expanded to support end-of-
life care at home.
2022
• Residents access improved
care through Primary Health
Networks facilitating
telehealth and out-of-hours
triage services.
• Expansion of the Serious
Incident Response Scheme
gives 1 million senior
Australians receiving home
and community care greater
protection.
• Stronger presence of Aged
Care Quality and Safety
Commission in facilities with
an extra 1,500 site audits.
• Providers to report regularly
to residents and families on
care and commencement of
Star Rating system
2023
• Improved support and
training in dementia care and
minimising restraint
(restrictive practices).
2024
• National Aged Care Data
Strategy improves the
information that is available
to senior Australians about
the quality in aged care.
• New independent
regulatory authority
established following review
of the Aged Care Quality and
Safety Commission.
2025
• Senior Australians receive
high quality, compassionate
care.
• Confidence in aged care is
rebuilt.
2021
• Supplement of $10 per
resident per day.
• Continuation of the
increases to the homeless
and viability supplements.
• New prudential monitoring,
compliance and intervention
to help providers build
financial sustainability,
capability and resilience.
• Independent Hospital and
Aged Care Pricing Authority
established, extending role of
existing hospitals pricing
authority to include aged
care advisory function.
2022
• New funding model to
improve quality of care for
240,000 people using
residential care and 67,000
people using residential
respite care each year.
• Average care minutes for
each resident increased to
200 minutes per day,
including 40 minutes of
registered nurse time.
• Registered nurse on site for
a minimum of 16 hours per
day.
• Structural Adjustment
Program delivers increased
provider viability and a
strengthened aged care
market.
• Single assessment
workforce introduced to
improve the experience of
senior Australians in
residential care.
• Better reporting, including
through Star Ratings, to help
senior Australians make
easier comparisons and
improve choice of care.
2023
• Minimum care time
becomes mandatory.
• Annual funding increases
and price setting take into
account advice from the new
Independent Hospital and
Aged Care Pricing Authority.
2024
• Increased choice for senior
Australians receiving
residential care with care
packages assigned to
consumers, not providers.
• New residential aged care
accommodation framework
gives senior Australians
more choice and improves
accessibility and
dementiafriendly
accommodation.
• Aged Care Approval Round
discontinued.
2025
• Improved service suitability
that ensures the care needs
and preferences of senior
Australians in residential
aged care are met.
Source: https://www.health.gov.au/resources/publications/governance-pillar-5-of-the-royal-commission-response-a-new-aged-care-act
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REGULATORY ENVIRONMENT AND REFORM POST ROYAL COMMISSION (CONTINUED)
The passing of the Aged Care and Other Legislation Amendment (Royal Commission Response) Act 2022 on 2
August 2022 confirmed a number of reforms including the new funding model (“AN-ACC”) which commences on 1
October 2022 and the Independent Health and Aged Care Pricing Authority. Many changes are still to be
legislated, including a new Aged Care Act.
The Labor Government has indicated its intention to implement additional reforms outlined in the policies it took to
the May 2022 general election.
The implementation of many proposals requires considerable design, development and consultation, all of which
will need to be successfully completed before the full impact to consumers and operators can be known.
It is anticipated that these changes will lead to a higher quality sector with greater choice and transparency
available to residents, leading to a higher level of confidence in the use of taxpayer-funded Government subsidies
to the sector.
The Group already operates in accordance with many of the proposed changes to Governance, Quality and
Safety and does not currently expect to require further significant investment in order to meet the governance and
prudential requirements.
The most significant proposed changes which may impact future financial performance relate to:
the abolition of the Aged Care Approval Rounds (“ACAR”) restrictive licensing regime;
•
•
•
the replacement of the Aged Care Funding Instrument (“ACFI”) with an alternative case-mix model
(referred to as AN-ACC) in October 2022;
expansion of the role of the Independent Hospital Pricing Authority to provide cost and pricing
information to the Government in relation to aged care services from July 2023; and
• mandated minimum care minutes from October 2023.
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SECTOR FINANCIAL SUSTAINABILITY
The Group supports the views expressed in the UTS Discussion Paper “Sustainability of the Aged Care Sector”
published in June 2022:
For senior Australians to receive services, there must be viable providers and, to be sustainable, the
sector must be viable over the long-term. Efficient providers who deliver quality aged care services
should be funded (from taxpayers and consumer contributions) to a level that enables them to be viable
and prevent disruptive exits; funding should not be at a level that unnecessarily sustains poorly
performing providers.
It is important to recognise that the business models and managerial competence of providers vary
widely, as is shown by the differences in financial performance between the top and bottom quartiles of
providers.
Source: https://opus.lib.uts.edu.au/handle/10453/158194
In July 2022, the Department of Health and Aged Care issued a Fact Sheet “Ensuring AN-ACC funding remains
aligned with the cost of delivering residential aged care” which set out the role of the Independent Health and
Aged Care Pricing Authority (“IHACPA”) in relation to care funding as follows:
The Australian Government will be responsible for setting the aged care price under the AN-ACC
funding model. The Independent Health and Aged Care Pricing Authority (IHACPA) will provide an
annual AN-ACC price recommendation to the Government, commencing from 1 July 2023.
health.gov.au/aged-care-reforms
The role of the Independent Hospital Pricing Authority (IHPA) is being expanded to provide advice on
aged care, in addition to its current role in setting prices for public hospital services. In recognition of
this, the IHPA will be renamed to the IHACPA and it will provide publicly available pricing advice to
Government on an annual basis. This process responds to Recommendations 11 and 115 of the Royal
Commission into Aged Care Quality and Safety’s final report.
The IHACPA will provide advice to Government that considers all costs and revenues for items in the
Schedule of Specified Care and Services, ensuring that independent analysis of costs and changes in
costs in the sector are considered by Government in setting funding levels. The IHACPA will also
absorb the functions of the Aged Care Pricing Commissioner, giving it the power to regulate prices for
residential aged care accommodation and extra services.
Source:https://www.health.gov.au/resources/publications/ensuring-an-acc-funding-remains-aligned-with-the-cost-of-delivering-residential-aged-care)
The Government’s response to advice from IHACPA in relation to funding levels to meet costs, which is expected
to be made public, will be a key factor in establishing the financial sustainability of the sector in the future and the
opportunity to deliver appropriate levels of return which reflect operational risk, regulatory requirements and the
cost of capital. The extent to which the costs of delivering care and services are impacted by the ongoing impact
of COVID-19 would also need to be reflected in IHACPA’s advice.
The Group currently expects, based on material released by the Government, that total Government subsidies
received by the Group will be likely to increase under the new AN-ACC funding model, and that costs will increase
subsequent to October 2023 as a result of mandated minimum care minutes. It is not possible to predict the
overall outcome of these changes on the Group at the present time, due to many uncertainties, including but not
limited to, the final determination of the nature of work and workers whose time will be classified as mandated
care minutes, the resident cohort at each home, the work of IHACPA and the Government’s response to its
analyses in relation to funding increased costs and care needs.
The Group will continue to advocate for sector reform which will deliver 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.
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COVID-19
COVID-19 continued to heavily impact the sector in the period and whilst the early indications were that national
initiatives such as vaccination and the increased availability of testing were creating the circumstances for a
return to a more stable operating environment, the emergence of the Omicron variant highlighted the risks and
uncertainties which are expected to remain for the foreseeable future.
The Group continues to adopt a disciplined and carefully managed program of protective and preventative
measures in accordance with local health authorities and its own risk assessments. These measures have varied
throughout the year as external circumstances have evolved.
The Group has ensured that all staff without medical exemption were fully vaccinated in accordance with relevant
State Health Directions. After obtaining appropriate legal advice, the employment contracts of staff who chose
not to be vaccinated were terminated.
Residents are not required under State Health Directions to be vaccinated, however the Group has strongly
encouraged and facilitated vaccination of residents.
The early months of the year saw a small number of outbreaks at homes, largely in Victoria, arising from the Delta
variant. From mid-December 2021 onwards, the Omicron variant resulted in rapidly rising community infection
rates which caused immense pressure on Australia’s health system, with acute supply chain pressures, the
collapse of the PCR testing regimes and a shortage of rapid antigen test kits. The furloughing of close contact and
positive staff led to extreme workforce pressure, which eventually led to amended Health Directions reducing the
isolation period for health care workers deemed as close contacts which facilitated an earlier return to work for
some staff.
The rapid and widespread escalation of the Omicron variant in the community from December 2021 seriously
impacted the entire aged care sector, with more than 60 of the Group’s homes having experienced an outbreak
by the end of January 2022, despite high levels of vaccination in residents and staff and the application of the
Group’s COVID-19 prevention and response plans in line with public health requirements.
As seen in the wider community, it is extremely difficult to detect and prevent asymptomatic transmission of the
Omicron variant. However, resident and staff vaccinations, supported by anti-viral drugs, have resulted in
significantly lower levels of acute illness and deaths following a positive COVID-19 test compared to earlier
variants of COVID-19.
Since January 2022, the levels and frequency of positive cases in staff or residents has remained at a higher level
than previously seen during earlier waves, consistent with infection rates in the wider community. Homes continue
to see repeat outbreaks of shorter duration. Each instance causes disruption to the normal operating rhythm of
homes, residents and staff with potential impacts on costs and occupancy levels. In keeping with the aged care
visitor code, homes remain open to visitors, subject to appropriate infection prevention and control protocols.
Whilst infection rates associated with the most recent wave are currently declining, there is no indication that the
impact of COVID-19 in the community and aged care sector will materially reduce in the short-term.
After more than two years of the pandemic, the Group’s frontline staff continue to demonstrate extraordinary
support and care for residents and families at a time when many are also experiencing the consequences of
COVID-19 within their own families and communities. Their dedication and commitment to supporting residents in
such difficult circumstances has been remarkable.
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WORKFORCE
Workforce remains a key priority and risk for the sector. Recent estimates by the Committee for Economic
Development of Australia (“CEDA”) report that the sector faces a shortage of 35,000 workers in the current year.
CEDA has estimated that meeting Australia’s direct care workforce needs by 2030 will require a net increase of
around 170,000 workers1. The requirement for the sector to increase mandatory care minutes from current sector
average levels will likely further increase sector workforce shortages leading up to and beyond October 2023.
The creation of a sufficiently trained workforce was a key component of the former Government’s response to the
Royal Commission. Average pay and remuneration levels under Modern Aged Care Awards are significantly
below other parts of the broader healthcare sector, and in particular compared to NDIS Modern Awards. The
attractiveness of the sector has also been impacted by the effects of COVID-19, adverse media and negative
sentiment during the Royal Commission. The Fair Work Commission is presently hearing a ‘work value’ case
brought by the Health Services Union to increase average aged care pay rates by 25%. Although analysis of the
cost implications of such an increase would fall within the remit of IHACPA, the Government has made a
submission to the Fair Work Commission in August 2022 in support of the case, re-stating a commitment to
funding an increase.
Staff engagement at Estia Health was measured at 69.0% in a survey undertaken in October 2021, which was
considered a good result given the challenges being faced by the sector. Group staff turnover in the year
increased to 29.4% compared to 2021 but stabilised in the second half of FY22 and remains a key focus of
Management despite being less than commonly reported levels for the sector. Staff were supported throughout
the pandemic with paid quarantine leave, increased pay rates during COVID outbreaks and increased investment
in employee assistance programs. Nevertheless, vacancies and shortages exacerbated by COVID-19 resulted in
increased overtime and agency usage, often at premium rates, and on occasion impacted the ability to admit new
residents.
The Group has invested in a range of programs to increase attraction, retention, training and development of staff
to allow it to compete with other providers and attract new staff to the sector.
The Group now operates Workers Compensation programs on a self-insured basis in NSW and South Australia,
having passed the required quality and regulatory requirements. This has contributed to a reduction in costs,
accelerated recovery and return to work timeframes. Lost Time Injury Frequency Rates (“LTIFR”) reduced to 8.8
in the period from 11.8 in FY21.
Securing a sufficient, well-trained workforce will need ongoing and priority attention by providers, supported by
Government policy and training institutions in coming years.
ACCREDITATION CARE AND QUALITY
The Aged Care Quality and Safety Commission (“ACQSC”) increased its resources and activities in the period in
line with the former Government’s response to the Royal Commission recommendations and assumed
responsibility for prudential and regulatory oversight.
The Group has implemented and complied with increased reporting obligations for all Approved Providers during
the year including serious incident reporting, resident and staff vaccination levels and quarterly financial reporting.
All homes remained fully accredited at all times during the year and at the date of this report. During the year no
home received a Sanction, a Notice to Agree or a Notice of Non-compliance. Subsequent to the year end, one
home received a Notice of Non-compliance which is being addressed.
External complaints to ACQSC were 28% below industry levels reported in the most recent ACQSC published
data.
1 Source: “Duty of Care: Meeting the Aged Care Workforce Challenge” Published by CEDA
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DIRECTORS’ REPORT
ABOLITION OF ACAR AND IMPLICATIONS FOR BED LICENCE VALUATIONS
In September 2021, the Government affirmed its decision to abolish the ACAR and associated supply restrictions
on bed licences, which is expected to take full effect on 30 June 2024. The Directors support this move to more
competitive markets as one of the most significant items within the reform agenda to date.
It is expected to create an environment where senior Australians benefit from increased competition which should
positively impact the quality of accommodation and service offerings. Providers will have the opportunity to invest
in previously protected markets and to attract residents by providing high quality differentiated offerings in
locations matched to demand. This reform could prove to be a major catalyst for sector consolidation and the
creation of a stronger, more competitive residential aged care sector driven by consumer choice.
Overall, there are expectations that the new arrangements will see a reduction in the number of lower quality
homes and services in the sector, replaced by new better quality homes offering improved services. Competing in
such an environment and being able to meet higher levels of governance, financial reporting and prudential
standards will be challenging for a number of providers in the sector. Well-resourced residential aged care
providers like Estia Health, with robust governance systems, committed management, skilled staff and strong
balance sheets are well placed to play a leading role in the potential significant restructuring of the sector.
Importantly, the Government introduced transitional arrangements prior to June 2024 to allow Approved Providers
the ability to potentially secure access to subsidised fees under the Aged Care Act 1997 if they have beds ready
to operate but do not have existing licences.
Accounting Implications
These changes will require legislation as part of the proposed new Aged Care Act for which the Government has
indicated a target enactment date of 2023. Until such time, Approved Providers may only secure Government
subsidies and fees if they hold appropriate licences or have secured approval under the transitional
arrangements.
Prior to these changes, the Group’s balance sheet at 30 June 2021 included a value of $221.3 million relating to
bed licences and an associated deferred tax liability of $64.6 million. The majority of this balance was established
under fair value accounting rules on the purchase of businesses by the Group from 2014 to 2016, when an open
market value for bed licences existed with values varying over time and locations from $25,000 to $100,000 per
bed licence.
As a result of the former Government’s announcement and the transitional arrangement that allows providers to
apply directly to the Department of Health for an allocation of places, the secondary market for bed licences has
effectively ceased. The Group commissioned an independent assessment, which has supported its own analysis,
that the fair value of bed licences is now nil.
Notwithstanding the Directors’ view that the fair value of existing operational bed licences is nil, the directors have
determined that in order to comply with Accounting Standards and the Group’s accounting policy in relation to
Goodwill and Intangible Assets (as set out in Note C6 to the Financial Statements), bed licences are now
regarded as finite life intangible assets with the carrying value being amortised on a straight line basis over the
period from 1 October 2021 to 30 June 2024.
The Financial Statements in this Report include a bed licence amortisation charge of $42.7 million after tax. The
carrying value of bed licences in the Balance Sheet at 30 June 2022 was $160.9 million. Subject to no further
changes in Government policy, an amortisation charge of approximately $57.0 million (net of tax) is expected to
be incurred in FY23 and in FY24. Other than the potential future tax implications explained below, the
amortisation charge has no impact on the cash flows of the Group and nor does it impact the Group’s compliance
with its debt covenants or regulatory obligations.
Tax implications
Subject to further analysis, it is currently anticipated that the abolition of bed licences should result in a capital
loss of up to $200 million on 30 June 2024, available to be carried forward from that date which could be utilised
against future capital gains of the Group, subject to prevailing tax legislation and tax loss recoupment tests. It is
unlikely that the criteria to recognise an associated deferred tax asset in the Financial Statements will be met until
such time as future capital gains becomes probable.
Estia Health Limited
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DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
REVIEW OF FINANCIAL PERFORMANCE
The Group’s financial performance reflects ongoing margin erosion caused by successive years of Government
regulated fees and subsidies not keeping pace with input cost inflation. According to the accounting firm
StewartBrown “Between 2017 and 2021, there has been a cumulative increase in the sector of 22% in the costs
of providing ACFI care services, whereas ACFI revenues have only increased by 9%.”1
In the last two years the Group has also suffered the financial impacts of COVID-19, including lower occupancy
and the increased costs of prevention and response, only some of which have been recovered under temporary
funding support or re-imbursement under Government Grant schemes.
In FY22 the Group incurred estimated incremental costs relating to the prevention and response to COVID-19 of
$50.4 million. Of this amount the Group has, at the date of this report, submitted grant claims of $36.6 million
which it believes are eligible for recovery under the grant schemes.
However, due to lengthy delays within the Department of Health processing grant claims for the sector, only $7.1
million was either confirmed or paid during the year and as such was recognised as income of the year. This
significant impact resulted in the Group reporting a loss before income tax, class action settlement and bed
licence amortisation. Further details on grants are provided on page 68.
Four Year Summary Financial Performance2,3
Government revenues – excluding temporary funding
Government temporary funding and grants
Resident and other revenues
Total operating revenues and grants
Employee benefits expenses
Non-staff expenses
COVID-19 incremental costs6
EBITDA – Mature Homes7
Other income – asset disposals
Net impact of new homes / home closures
EBITDA – before class action settlement, goodwill
impairment and bed licence amortisation
Depreciation, amortisation and impairment (excluding bed
licence amortisation and goodwill impairment)
Net finance costs
(Loss) / Profit – before income tax, class action settlement,
goodwill impairment and bed licence amortisation
Associated income tax credit / (expense)
(Loss) / Profit for the year – before class action settlement,
goodwill impairment and bed licence amortisation
Bed licence amortisation
Class action settlement
Goodwill impairment
Associated income tax credit
(Loss) / Profit for the year
2022
$’000
472,525
7,888
149,004
629,417
(444,033)
(98,045)
(49,823)
37,516
912
455
20214
$’000
443,218
21,426
147,406
612,050
(431,355)
(95,033)
(24,309)
61,353
9,487
(625)
20205
$’000
426,188
7,382
146,310
579,880
(404,272)
(90,388)
(2,538)
82,682
214
491
20195
$’000
427,909
10,336
147,594
585,839
(385,703)
(104,947)
-
95,189
35
(1,222)
38,883
70,215
83,387
94,002
(45,122)
(6,970)
(42,808)
(6,496)
(39,119)
(8,491)
(29,184)
(6,990)
(13,209)
3,586
20,911
(6,169)
35,777
(10,599)
57,828
(16,539)
(9,623)
(60,349)
-
-
17,610
(52,362)
14,742
-
(12,409)
-
3,272
5,605
25,178
-
-
(144,622)
2,535
(116,909)
41,289
-
-
-
-
41,289
Page 71 “Reconciliation of Non-IFRS Information” contains a reconciliation of the above table to the Financial
Statements. EBITDA and other measures are categorised as non-IFRS financial information prepared in
accordance with ASIC Regulatory Guide 230 - Disclosing non-IFRS financial information, issued in December
2011.
1. StewartBrown (2021). Aged Care Sector Report (for the 12 months ended 30 June 2021). Sydney, p. 15, available at:
https://www.stewartbrown.com.au/images/documents/StewartBrown_-_ACFPS_Financial_Performance_Sector_Report_June_2021.pdf
2. EBITDA and other measures are a measure consisting of earnings before interest, tax, depreciation, amortisation and impairment expenses
and gain or 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 year. This non-IFRS financial information, while not subject to audit, has been extracted
from the financial records. These financial records have been used for the preparation of the financial report, which has been subject to an
audit by the external auditors.
3. All reported figures exclude Imputed DAP revenue on RADs and the equivalent Imputed Interest on RADs which have a net effect of nil on
reported profit. Note B1 of the Financial Statements provides further details.
4. In adopting the recently announced IFRIC changes for the accounting for SaaS arrangements the Group has re-stated certain previously
reported information for consistency purposes.
5. Information reported with no adjustment for the IFRIC changes for the accounting for SaaS Arrangements.
6. Refer to the section under “Incremental costs associated with COVID-19 prevention and response” for details.
7. “Mature Homes” (which exclude homes from the date of closure) are homes that have been opened for more than 12 months or if open for less
than 12 months have greater than 85% occupancy at the commencement of the financial year.
Estia Health Limited
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DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW (CONTINUED)
REVIEW OF FINANCIAL PERFORMANCE (CONTINUED)
Information as presented within the remainder of this Review of Financial Performance except for COVID-19
Costs Grant Recoveries – All homes on page 69 relates to the performance of the Group’s Mature Homes.
Occupancy
Average group occupancy levels during the year have remained low compared to prior years. Performance has
varied across the portfolio with the States most affected by COVID-19 during early waves, New South Wales and
Victoria, showing a steeper decline and a slower recovery.
New South Wales
Queensland
South Australia
Victoria
Total Group
Spot
19 August
2022
92.7%
96.2%
96.8%
86.3%
Average
2022
91.1%
97.4%
96.3%
86.4%
Average
2021
91.0%
96.1%
96.6%
85.9%
Average
2020
93.1%
95.0%
96.2%
90.7%
92.0%
91.6%
91.2%
93.2%
Total occupied bed days for the year were 2,030,143, representing a fall of 27,651 compared to the prior year, of
which a net decrease of 24,973 was derived from homes closed during the year.
Key Operating Metrics
The impact of margin erosion is evident in key operating metrics shown below. The increasing demands of higher
acuity residents and clinical care standards limit the Group’s ability to increase its cost efficiency while maintaining
high quality of care and services for residents.
Available Bed Days
Occupied Bed Days
Operating Revenues per occupied bed day
Increase
Staff costs per occupied bed day (excl COVID-19)
Increase / (Decrease)
Non-staff costs per occupied bed day (excl COVID-19)
Increase / (Decrease)
Annualised EBITDA on Mature Homes per occupied
bed (excl COVID-19)
2022
2021
2019
2,216,782 2,256,916 2,175,868 2,205,170
2,030,143 2,057,794 2,026,915 2,064,574
$279
2020
$306
6.7%
$200
4.8%
$44
5.0%
$287
1.6%
$191
2.9%
$42
1.4%
$283
1.3%
$186
(0.6%)
$42
(18.6%)1
$187
$51
$14,285
$11,394
$14,017
$16,613
1 Decrease in FY20 followed the adoption of AASB16 impacting leasing costs
Revenues
Government revenues excluding temporary funding increased by $29.3 million (6.6%) in the period of which $20.3
million was attributable to the additional $10/day Basic Daily Fee Supplement introduced by the Government with
effect from 1 July 2021. Excluding this increase, Government revenues increased by $9.0 million (2.0%), which
was mainly due to the indexation of Fees and Subsidies and increased acuity leading to higher care subsidies.
Resident revenues increased by $1.6 million (1.1%) in the period and were adversely impacted by the Maximum
Permissible Interest Rate (“MPIR”), which is used to calculate Daily Accommodation Payments (“DAPs”),
remaining at 4.0% in the period. The Group was also unable to deliver its full program of Additional Services to
residents at some homes during COVID-19 outbreaks which led to the temporary suspension of Additional
Services billings from time to time.
Estia Health Limited
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OPERATING AND FINANCIAL REVIEW (CONTINUED)
REVIEW OF FINANCIAL PERFORMANCE (CONTINUED)
The Group has sought to separately identify underlying costs from incremental costs relating to COVID-19
prevention and response, some of which were eligible for recovery under Government grant schemes, as set out
below.
Staff costs
Staff costs (excluding incremental costs associated with COVID-19) increased in the period by $12.7 million
(2.9%). This resulted from increase in pay rates under the relevant Enterprise Agreements, increased overtime
and agency usage. These increases were partly offset by the removal of costs associated with two homes closed
in the year.
Non-staff costs
Non-staff costs (excluding incremental costs associated with COVID-19) increased in the period by $3.0 million
(3.2%). Ongoing procurement and purchasing benefits partly offset CPI increases.
Incremental costs associated with COVID-19 prevention and response
The impact on financial performance from COVID-19 in the period was significant. In the early part of the year,
this was more evident in New South Wales and Victoria. As a result of the spread of the Omicron variant across
the whole country as travel restrictions were lifted, these increased costs became evident across all States and
homes in the latter part of the period.
Direct incremental costs related to COVID-19 protection and response at Mature Homes were approximately
$49.8 million (2021: $24.3 million), of which $35.9 million (2021: $9.6 million) is estimated to be eligible for
Government grants. Government grants are currently restricted to outbreak homes and do not cover preventative
costs, nor all outbreak response costs.
Of the $49.8 million (2021: $24.3 million), staff costs accounted for $36.5 million (2021: $11.2 million) primarily
from quarantine leave, agency costs, and higher over time and surge workforce supplements. Non-staff costs,
primarily Personal Protective Equipment (“PPE”), COVID-19 tests, cleaning and waste disposal accounted for
$13.3 million (2021: $13.1 million).
Non-staff costs are reducing as the severity and duration of outbreaks reduces, aided by high vaccination rates in
staff and residents. Staff costs remain high due to general workforce shortages across the economy and ongoing
higher levels of agency and overtime.
Staff expenses
Non-staff expenses
Total incremental costs associated with COVID-19
prevention and response
H2
2022
28,844
8,930
H1
2022
7,668
4,381
2022
36,512
13,311
2021
11,198
13,111
37,774
12,049
49,823
24,309
The Group expects to continue to incur incremental COVID-19 prevention and response costs for the foreseeable
future and whilst grant claims will be made for the proportion of costs which are eligible for reimbursement, it is
likely that COVID-19 related incremental costs will continue to exceed grant recoveries.
COVID-19 Costs Grant Recoveries - All homes
Total incremental cost associated with COVID-19 prevention and response for the FY22 was $50.4 million (2021:
24.3 million), of which $49.8 million relates to Mature Homes (2021: $24.3 million).
Approved Providers are able to apply for Government grants to recover some of the costs associated with
COVID-19 outbreaks. Government grants do not presently cover preventative measures taken by the Group
outside of outbreak periods in specific homes. Due to the volume of claims being processed across the sector, the
Government’s stated targets of confirming grants within 6-8 weeks of submission are not being met.
The grant scheme has been extended on three occasions to date, most recently to provide for cost re-
imbursement up to 31 December 2022.
The Group has determined that under Australian Accounting Standards, grant claims are not recognisable as
income until such time as the Group has been issued with a formal confirmation letter from the Government for
each grant claim. As a result of the delays with the Government’s processes, a significant number and amount of
grant claims relating to FY22 had not been confirmed by the Government at 30 June 2022 and as such are not
recognised as income of the period, although the associated costs are reported in FY22.
Based on previous experience and the processes adopted by the Company prior to submission of grant claims,
including the independent assurance of its submissions of claims exceeding $150,000, the Company believes that
its grant applications meet all eligibility criteria. However, approval of submitted claims is wholly managed by
Government and as such the Company does not control nor can predict the outcome of its claims.
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DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW (CONTINUED)
REVIEW OF FINANCIAL PERFORMANCE (CONTINUED)
COVID-19 Costs Grant Recoveries – All homes (Continued)
The status of grant claims submitted by the Group at the date of this report is shown below.
Grant submitted during the year
Confirmed and received before end of year
Confirmed but not received before end of year
Grant claims recognised as income during the year
Grant claims submitted before end of year
- Subsequently confirmed which will be recognised as income in subsequent
financial year
- Not yet confirmed at the date of this report
- Amounts of claims rejected
Total grant claims submitted during the year
Further grant claims submitted after end of year relating to current year’s costs
Total grant claims submitted relating to current year’s costs
Total grant claims relating to current year’s costs not recognised as income
for the year(a)
2022
$’000
7,049
23
7,072
1,361
21,362
233
30,028
6,575
36,603
29,298
2021
$’000
7,369
-
7,369
-
-
-
-
-
7,369
-
(a) These grants will be recognised as income of future periods upon approval by the Government of the
applications.
REVIEW OF FINANCIAL POSITION AND CASH FLOWS
The Group’s balance sheet has $541.7 million (2021: $613.0 million) of equity supporting $1,795.0 million (2021:
1,862.6 million) of total assets. The Group’s capital and funding position is a product of the efficiency of operating
profit to cash conversion, net RAD flows, capital investment and dividend distributions. At 30 June 2022, the
Group had net bank debt of $79.6 million (2021: $81.1 million). Net operating cash inflows prior to RAD flows
were $32.7 million (2021: $24.7 million) in the period.
There has been no significant change in the Group’s financial position subsequent to 30 June 2022.
BED LICENCES
Total assets include bed licences with a carrying value of $160.9 million (2021: $221.3 million) at 30 June 2022,
less an associated deferred tax liability of $47.0 million (2021: $64.6 million), resulting in a net carrying value of
$113.9 million (2021: $156.7 million). The Directors consider that the fair value less cost to dispose of bed
licences is nil. However, in accordance with Australian Accounting Standards, the licences are deemed to have a
remaining value in use which requires the carrying value to be amortised over the period until formal abolition of
licences on 30 June 2024.
GOODWILL
The carrying value of Goodwill in the Group Balance Sheet at 30 June 2022 was $681.0 million (2021: $681.0
million). Note C6 to the Financial Statements refers to the key assumptions relating to the assessment of this
value. A key assumption, consistent with the going concern concept and recent reform proposals, particularly in
relation to the operation of IHACPA, is that there will be a cessation of recent margin erosion in the sector caused
by successive years of Government regulated fees and subsidies not keeping pace with input cost inflation.
LAND VALUATIONS
In accordance with the Group’s accounting policy, land is accounted for at historical cost, with a carrying value of
$189.5 million (2021: $189.2 million).
CBRE, as an accredited external independent valuer, undertook an assessment of the market value at 30 June
2022 of the Group’s land holdings, which resulted in an assessed market value of approximately $365,000,000.
The valuation was performed by CBRE on a standalone basis without taking into consideration any relocation,
closure, or dismantling cost. The valuation exercise undertaken by CBRE has not been subject to audit by the
Group’s external auditor.
Estia Health Limited
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DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW (CONTINUED)
REVIEW OF FINANCIAL POSITION AND CASH FLOWS (CONTINUED)
RAD BALANCES
The balance of RADs (including amounts pending return to deceased resident estates, referred to as “probate
liability”) at 30 June 2022 was $884.1 million, compared to $863.9 million at 30 June 2021, representing an
increase of $20.2 million (2021: $27.6 million). As at 30 June 2022, RADs held on behalf of current residents
totalled $756.9 million (2021: $761.1 million), with probate liability relating to departed residents increasing from
$102.8 million to $127.2 million.
Average incoming RAD prices in the period were $452,983 (2021: $442,881) compared to outgoing RAD prices of
$405,621 (2021: $406,447) and average current RAD held of $339,896 (2021: $326,874). A recovery in
occupancy rates and the replacement of older RADs, including pre-June 2014 bonds, with higher-priced incoming
RADs represents a potential positive future cash inflow.
DEBT AND FINANCING FACILITIES
During the year, the Group’s existing syndicated loan was refinanced with a new $330.0 million Sustainability
Linked Syndicated Financing Agreement (“SLSFA”), financed by the Group’s existing lenders.
The SLSFA also has an accordion feature (“Accordion”) which allows for the facility limit to be increased (subject
to lender consent and approval) by an additional $170.0 million.
Of the total debt facility available, 50% will mature in March 2025 and March 2026, respectively.
In addition, the Group entered into a separate additional Guarantee Facility (“Guarantee Facility”) with Westpac
Banking Corporation during the year which permits bank guarantees to be issued up to the value of $8.0 million.
At 30 June 2022, $100.0 million of the SLSFA had been drawn (2021: $114.5 million) and Bank Guarantees on
issue totalled $7.7 million.
Under the SLSFA, the Group will be eligible for an interest rate margin reduction of up to 5 basis points per
annum dependent on the level of achievement of sustainability targets embedded in the agreement. A failure to
achieve any of the targets may result in a 5 basis points per annum increase in margins. These targets include:
-
-
-
-
improving resident engagement and satisfaction
supporting employee well-being
reducing greenhouse gas emissions
portfolio energy efficiency performance
The Group’s performance against these targets in the year, which was independently reviewed, will result in a
reduction of 3 basis points per annum over the next financial year.
Share Buy-Back
In November 2021 the Board considered that the Company’s current share price did not appropriately reflect the
intrinsic value of the Group’s assets and business and accordingly determined to establish an on-market Share
Buy-Back scheme (“Buy-Back”) to be conducted in accordance with the ASX rules.
The Buy-Back is also part of the Group’s capital management strategy in maintaining a balance between
operating a high quality and sustainable business and preserving flexibility to invest capital for future value-
accretive opportunities, while seeking to provide returns to shareholders through regular dividends and remain
within a target bank debt gearing ratio of 1.4 – 1.9X EBITDA, subject to prevailing circumstances.
The Buy-Back itself is not expected to impact the Group’s ability to progress a disciplined growth strategy as the
Government’s Aged Care reform package progresses, in particular the abolition of the ACAR licensing
restrictions, nor its ability to continue to pay dividends in line with the Group’s targeted payout ratio.
The Buy-Back is permitted within the Group’s debt facilities and has been funded from existing cash reserves and
undrawn debt capacity. The Buy-Back commenced on 26 November 2021 for up to a 12-month period. Under the
Corporations Act 2001, the Company may buy back up to 10% of issued capital in any 12-month period without
shareholder approval.
The timing and actual number of shares to be purchased will be subject to the prevailing share price, market
conditions, as well as any incremental capital requirements at the time and other considerations including any
unforeseen circumstances. As a result, shareholders should be aware that there is no certainty that the Company
will acquire any or all permitted shares under the Buy-Back and the Company reserves the right to suspend or
terminate the Buy-Back at any time.
As at 30 June 2022 the Company had acquired and cancelled 3.6 million shares, representing 1.39% of the
Issued Share Capital at a total cost of $7.9 million with an average price of $2.18 per share.
Estia Health Limited
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DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW (CONTINUED)
REVIEW OF FINANCIAL POSITION AND CASH FLOWS (CONTINUED)
Class Action Settlement February 2021
On 15 February 2021 the Company reached an agreement to settle the shareholder class action commenced
against it in July 2019 in the Federal Court of Australia, relating to market disclosures made between August 2015
and October 2016. The settlement was approved by the Federal Court on 7 May 2021, without admission of
liability and a total settlement sum of $38.4 million was paid in FY21. The Company contributed $12.4 million to
this settlement, with the balance being contributed by the Company’s insurers.
RECONCILIATION OF NON-IFRS INFORMATION
The following tables provide a reconciliation of the non-IFRS financial information disclosed in the Four Year
Summary Financial Performance as disclosed within the Operating and Financial Overview presented on page 66
of this report to the Financial Statements per ASIC Regulatory Guide 230 Disclosing non-IFRS financial
information, issued in December 2011.
Revenue
Government revenues – excluding temporary funding
Government grants and temporary funding
Resident and other revenue
Total operating revenue and grants
Less: Government grants
Imputed DAP revenue on RAD and bond balances under AASB 16
Operating revenue from homes in ramp-up / closed homes
Total revenue
Employee benefit expenses
Employee benefit expenses – Mature Homes
COVID-19 incremental costs – Mature Homes
Employee benefit expenses – Homes in ramp-up / home closures
Total employee benefit expenses
Non-staff expenses2
Non-staff expenses – Mature Homes
COVID-19 incremental costs – Mature Homes
Non-staff expenses – Homes in ramp-up / home closures
Total non-staff expenses
2022
$’000
20211
$’000
2020
$’000
2019
$’000
472,525
7,888
149,004
629,417
(7,888)
39,328
10,210
671,067
443,218
21,426
147,406
612,050
(9,600)
42,316
1,539
646,305
426,188
7,382
146,310
579,880
-
43,407
13,621
636,908
427,909
10,336
147,594
585,839
-
-
146
585,985
444,033
36,512
8,228
488,773
431,355
11,198
1,555
444,108
404,272
931
10,797
416,000
385,703
-
1,101
386,804
98,045
13,311
1,693
113,049
95,033
13,111
609
108,753
90,388
1,607
2,334
94,329
104,947
-
267
105,214
Net finance costs
Net finance costs excluding imputed interest expense on RAD and bond balances under AASB 16
Imputed interest expense on RAD and bond balances under AASB 16
Total net finance costs
6,970
39,328
46,298
6,496
42,316
48,812
8,491
43,407
51,898
6,990
-
6,990
1. In adopting the recently announced IFRIC changes for the accounting for SaaS arrangements the Group has re-stated certain previously
reported information for consistency purposes.
2. Presented as administrative expenses, occupancy expenses and resident expenses in the Consolidated Statement of Profit or Loss and
Other Comprehensive Income.
Estia Health Limited
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DIRECTORS’ REPORT
DEVELOPMENTS AND ACQUISITIONS
Developments
As the COVID-19 pandemic and ACAR reforms were better understood, the Group re-commenced development
and expansion with the resumption of greenfield projects at St Ives and Aberglasslyn, both in NSW, and a
brownfield development at Burton in South Australia. These developments, with a total of 256 new beds, are
projected to open in 2023 and 2024. The land sites are already owned by the Group, and construction costs will
total approximately $88.7 million across the three sites, with in excess of 70% of the construction costs targeted to
be recovered by RAD receipts across the three homes.
The financial and operational results from the new homes opened by the Group from 2018 to 2021 at Twin
Waters, Southport, Maroochydore, Kogarah and Blakehurst have been in line with the Company’s internal
benchmarks and support the case for opening new homes, increasing the overall performance of the portfolio.
The Group is continuing to advance plans in a measured way including developing the Group’s existing land
portfolio, where expansion was previously more challenging under the ACAR regime.
Capital Investment Summary
Significant refurbishment of 5 homes with 455 beds
Upgrades and enhancements to the nurse call and CCTV systems
Asset life-cycle replacements, improvements and sustainability initiatives
IT and systems improvements
Planning, design/ tendering and construction of Greenfield development projects
Planning, design/ tendering and construction of Brownfield development projects
Trademark
Total
Divestments
$’000
2,077
4,688
15,138
1,276
4,922
4,954
400
33,455
As previously advised, the Group’s 46 bed home at Keilor Downs and 61 bed leased home in Prahran, both in
Victoria, were closed during the year as neither met community expectations for residential aged care homes nor
were they viable development sites for the Group.
All residents were assisted in finding new homes with Estia Health or other local providers. Staff were supported
with continued employment at other Estia Health homes, or redundancy packages with appropriate support. Costs
associated with the closures of $0.7 million were incurred in the period.
The Keilor Downs site was sold in December 2021 for $3.6 million, yielding a profit on sale of $0.8 million,
illustrating the strong underlying asset base of the Group’s operations.
Acquisitions
There were no acquisitions completed during the year, though the Group continues to identify and carefully
consider single home or portfolio acquisition opportunities within existing geographic networks against the
Group’s investment criteria.
DIVIDENDS
As a result of the reported Net loss after tax, excluding bed licence amortisation in the period, the directors
determined not to declare a final dividend for the year.
Dividends paid during the year were as follows:
Final dividend for the year ended 30 June 2021
Date paid
17 September 2021
Fully franked
dividend per
share
2.30 cents
Total
dividend
paid
$6,012,000
Interim dividend for the year ended 30 June 2022
18 March 2022
2.35 cents
$6,315,000
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SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than those explained in this report there were no significant changes in the state of affairs of the Group
during the financial year ended 30 June 2022.
SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE
COVID-19 Grant Recoveries
Subsequent to 30 June 2022, the Group submitted 104 claims for a total amount of $6.6m, and $1.4m of claims
submitted prior to 30 June 2022 were confirmed by the Government. These amounts are included in the table
shown on page 69 of this report.
Changes in Directors of the Company
On 11 July 2022, Sean Bilton was appointed Managing Director and CEO of the Company, replacing Ian Thorley
who stepped down on the same day.
On 22 July 2022, the Company announced that Professor Simon Willcock would join the Board with effect from 1
September 2022.
Passing of Government legislation
On 2 August 2022, the Aged Care and Other Legislation Amendment (Royal Commission Response) Bill 2022
(the “Bill”) was enacted into legislation. The Bill implements nine measures to improve aged care and responds to
17 recommendations of the Royal Commission into Aged Care Quality and Safety.
The Bill establishes the Australian National Aged Care Classification (AN-ACC) funding model, a new Code of
Conduct and banning orders, and extends the Serious Incident Response Scheme to all in-home care providers.
It also extends the functions of the Independent Health and Aged Care Pricing Authority.
Other measures enshrine transparency and accountability of Approved Providers and improve quality of care and
safety for older Australians receiving aged care services.
A second piece of aged care legislation, the Aged Care Amendment (Implementing Care Reform) Bill 2022, was
introduced on 27 July 2022 but has not yet been passed into legislation.
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LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The industry continues to grow in complexity and the acuity of residents is increasing as the incidence of
residents presenting with dementia and extensive co-morbidities escalates. This will see a need for a growing
sophistication of aged care providers with scale, systems, governance and leadership likely requirements in order
to adapt to these changes, which may be similar to the evolution that has occurred in other parts of Australia’s
health care system over the last two decades.
Notwithstanding increased availability of home care services in the future, the aging population and increasing
number of people aged over 85 in particular, is likely to lead to increased demand for residential aged care
services.
Financial impacts of COVID-19, including lower occupancy and the increased costs of prevention and response
are expected to continue for the foreseeable future and remain uncertain. The extent to which these costs will be
recovered under temporary funding support or re-imbursement under Government Grant schemes is also
uncertain.
Following the Royal Commission, the Government responded with a major reform package which is currently
being implemented and will impact future operations and performance of the sector and the Group.
The abolition of the ACAR’s anti-competitive supply constraints will underpin opportunities for large, high-quality
providers with strong balance sheets such as Estia Health to grow and benefit through scale, higher occupancy
and attraction of workforce. The Group’s financial and operational outcomes from its new homes demonstrates
this capability. The abolition of ACAR may also lead to increased competition in some areas where the Group
operates.
The competition for talent and the ability to attract, develop and retain a skilled workforce, remains one of the
greatest challenges facing the aged care sector and the Group which may also impact future financial
performance.
Whilst the operation of IHACPA and the impact on pricing and returns relative to input costs remain uncertain,
Directors believe that the framework from these key reforms is in place to facilitate the evolution to a financially
sustainable sector.
The UTS Discussion Paper “Sustainability of the Aged Care Sector” published in June 2022 notes:
“The consequences of having an unsustainable system are significant, particularly for senior Australians and
their families. Future scenarios could see a loss of the recent improvements made or announced for
implementation. An unsustainable system could also lead to a decline in the number of viable providers who
deliver services to the elderly and pose challenging consequences for current and future taxpayers.
“As the aged care sector becomes more consumer-driven and competitive, some providers will likely thrive and
grow while others struggle to remain viable. At a sector level, the withdrawal of inefficient and low-quality
providers improves overall service standards. These changes will increase overall efficiency and improve the
sustainability of aged care”
It is currently expected that daily Government subsidies received by the Group will likely increase in FY23 under
the new AN-ACC funding model, however there will be incremental costs including those associated with meeting
mandated minimum care minutes from 1 October 2023.
The Government reform mandates a minimum average of 200 minutes of care, including 40 minutes provided by
a Registered Nurse, will be required to be delivered by Approved Providers from 1 October 2023, followed by
further increases from 1 October 2024. The exact number of minutes required at each home will depend on the
average AN-ACC classifications at that time and cannot be determined at this stage with any degree of reliability.
The Government’s current proposal is that mandated minimum care minutes will not include allied health and
lifestyle staff.
It is not possible to predict the overall outcome of these changes on the sector or the Group with any great
certainty at the present time as it remains highly dependent on the finalisation of shadow assessments under the
AN-ACC model, the Group’s re-assessment submissions, the final determination of the nature of work and
workers whose time will be classified as mandated care minutes, the resident cohort at each home, the work of
IHACPA and the Government’s response to its analyses in relation to funding increased costs and care needs.
As a result, there remain a large number of uncertainties which may impact the financial performance of the
Group in the short to medium term until such time as the funding, pricing and mandated minimum care minute
reforms are fully operational, which is unlikely to be sooner than FY24. In particular, there is no certainty over the
level of financial returns or margin which IHACPA and the Government may factor into future pricing and
subsidies.
In the face of these uncertainties, the Group will deploy capital cautiously to take advantage of growth
opportunities with the objective of delivering earnings growth to shareholders.
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KEY BUSINESS RISKS
The following business risks are considered to be some of the more significant to the Group’s performance and
growth. Risks continue to evolve and as such these should not be regarded as exhaustive nor are they reported in
any order of relative importance or potential impact.
CHANGES TO REGULATORY OR FUNDING FRAMEWORK
Risk
Impact
The Australian residential aged care industry is highly regulated, with more than 66.2% 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 68.1% was paid to the Group from the Australian Government
directly. Capital flows from Refundable Accommodation Deposits ("RADs") are also
governed by the same legislation.
As referenced on page 60 of this Directors’ Report, the current and former Government
have put forward multiple reform proposals following the Royal Commission into Aged Care,
including, but not limited to a new funding model, mandated minimum care minutes, the
appointment of an Independent Pricing Authority, the abolition of bed licence supply
restrictions under ACAR and new capital and liquidity requirements.
Whilst some of these have now been enacted into legislation, many still require further
legislation to be passed and will require further design, development, and consultation.
Some of the proposals are likely to impact funding and subsidy levels, as well as resources
and costs.
The Group continues to incur significant costs associated with the prevention of and
response to COVID-19 outbreaks. As referenced earlier in this report, at present Approved
Providers are able to apply for Government grants to recover some of the costs, however
there is no certainty that the grant scheme will remain in place nor that grant applications
made to the date of this report or in future will be accepted by the Government.
As a result, there remains significant uncertainty over the financial and operational impacts
for the sector which will persist for some time to come.
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 manages and operates
its homes, its resultant financial performance and the carrying value of its tangible and
intangible assets.
Changes to the regulatory framework could also impact on competition through
deregulation or capital adequacy requirements.
Regulatory restrictions are becoming more burdensome, which required the Group to
dedicate more resources and expenditure to ensuring that the Group complies with such
regulations. Additional accreditation and other regulatory requirements, including changes
in relation to accommodation, work, health and safety and infection control emanating from
COVID-19 are also present.
Risk Strategy
Ageing demographics point to increasing demand for aged care services. The Group is
committed to the provision of residential aged care services which will continue to form an
essential part of the continuum of aged care. This is particularly the case at the higher
levels of complex care including needs which home care cannot fulfill.
With more than 95% of these services provided by private providers, whether “Not For
Profit” or “For Profit”, the Directors believe that future regulatory and funding changes will
need to ensure a strong and financially sustainable sector in order to meet community
expectations of caring for the elderly. The Group monitors and assesses changes to the
regulatory and funding environment which may require adapting and changing its
operations in order to continue to provide high quality services to residents and generate
appropriate returns on the capital provided by shareholders. This process of continual
review is undertaken with short, medium and long-term planning cycles. The Group seeks
to proactively engage with Government and the sector to advocate for a regulatory and
funding environment which supports a strong and financially sustainable sector.
The Group will continue to exercise caution over the deployment of capital until there is
greater visibility and certainty of future returns resulting from Government reforms.
Estia Health Limited
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KEY BUSINESS RISKS (CONTINUED)
WORKFORCE
Risk
The Group’s business is heavily reliant on a specialised health and aged care workforce.
There is a risk that the Group may not be able to recruit and retain a workforce that is
appropriately skilled and trained to meet the existing or future demands of residents at its
homes and that this shortage of staff or external industrial sector-wide decisions, may lead
to upward wage pressure.
The Royal Commission reported an estimated need for more than 130,000 additional, full-
time equivalent workers by 2050 - a 70% increase on current levels which will create further
competitive pressures on recruiting and retaining staff at all levels.
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, may
increase this risk.
The ageing global population will create increasing demand for staff providing care services
which may impact Australia’s ability to secure sufficient immigration to support its need for
an increased workforce in all sectors, including health and aged care.
The impact of COVID-19, the Royal Commission and increasing regulatory activities has
resulted in adverse media and negative community sentiment about the sector which may
reduce the attractiveness of the sector to potential and existing staff.
Impact
The relative attractiveness to potential staff of the sector may make it more difficult to recruit
and retain quality staff which could result in reduced quality of services provided, capacity
or capability.
Increasing labour costs and labour shortages may arise as a result which may adversely
affect the Group’s business, financial performance and future prospects. This may result in
increased costs, which the Group is unable to recover from residents’ fees or Government
subsidies. Staff shortages may result in increased overtime or use of agency staff, which
typically results in higher staffing costs to the Group.
At greater levels of staff shortages, the Group may have to reduce the capacity of homes it
operates in order to maintain service levels including delivering future minimum care staff
minutes per resident.
Risk Strategy
The Group has in place short, medium and long-term strategies and initiatives aiming to
mitigate the challenges of attracting and retaining workforce and positioning Estia Health as
an employer of choice. These include:
• Review and benchmarking of remuneration and benefits arrangements;
• Building a differentiated employee value proposition;
• Diversifying recruitment and sourcing strategies to improve access to a broader
network of potential staff;
• Developing effective career pathway and training and development programs; and
• Developing support programs, retention strategies, and non-financial benefits to
increase the relative attractiveness of the Group as an employer.
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KEY BUSINESS RISKS (CONTINUED)
INABILITY TO RECRUIT AND RETAIN KEY PERSONNEL
Risk
Impact
Risk Strategy
The Group may experience an inability to recruit and retain personnel to key leadership and
management positions at home, senior leadership or executive level. This may be
exacerbated if executives choose to leave the sector due to the multiple challenges faced
including reform, negative public sentiment and the impact of COVID-19. The decision may
be triggered by opportunities outside the sector which may offer greater financial reward or
other benefits.
The loss of key personnel at a home or executive level can affect occupancy, standards of
clinical care and operational efficiency and effectiveness. Replacement of key personnel is
expensive, time-consuming and can be disruptive and destabilising to the business,
possibly resulting in poorer clinical or financial performance.
The Group has a range of strategies, programs and procedures aimed at attracting and
retaining key personnel. This includes benchmarking of remuneration and benefits
packages designed to ensure the Group’s offerings remain competitive both within the aged
care sector and the general market. It also includes succession planning and development
initiatives, and engagement programs.
RAD BALANCES
Risk
Impact
Non-supported residents may choose to pay for accommodation by a RAD or a Daily
Accommodation Payment, known as a DAP. Prices are set by Approved Providers and,
subject to Aged Care Pricing Commissioner approval, can be in excess of $500,000.
However, Providers cannot determine whether a resident pays a RAD or a DAP. The Group
has $884.1 million of funding provided in the form of RADs from residents, most of which
have been deployed in accordance with the Aged Care Act in the acquisition, building or
redevelopment of residential aged care facilities and assets which are illiquid.
RADs are repayable within legislated timeframes after the departure of a resident. Overall
RAD balances are maintained by the replacement of outgoing RADs with commensurate
incoming RADs from new residents. Falls in occupancy (which may arise for many reasons),
changes in accommodation payment preferences by new residents, or legislated changes
may lead to declining RAD balances which will require replacing with alternative funding
sources.
Whilst the Royal Commission recommended the replacement of the sector’s $32bn of
residential aged care RADs by 2025, ACFA recommended, in its report to Government in
March 2021, that no change be made to RAD financing regulations. At the present time
there is no proposed legislation or indication from Government that RAD regulations will be
amended. Nevertheless, it is possible that future regulatory change may be made resulting
in the need to replace RADs with alternative sources of financing.
If a large number of departing RAD payers are subsequently replaced by non-RAD paying
residents, or not replaced at all, the Group may need to draw down higher levels of bank or
other debt, be required to reduce capital investment, reduce dividend payments or seek
additional capital.
Extreme events resulting in very large net outflows may cause severe liquidity or solvency
issues.
In the event that the Government replaces the RAD scheme, the Group would need to
replace RAD balances with alternative funding sources consistent with any transitional
arrangements.
Risk Strategy
The Group regularly monitors and analyses RAD movements and trends across its portfolio
of 68 homes. In accordance with the Aged Care Act, the Group maintains a formal liquidity
policy intended to keep sufficient cash or credit facilities reserved to refund RADs as and
when they fall due, should outgoing RADs not be replaced by an equivalent amount of
incoming RADs from new residents. Of the Group’s bank debt facility of $330.0 million
(2021: $330.0 million), $230.0 million (2021: $215.5 million) was undrawn at 30 June 2022.
The Group will monitor and contribute to any consultancy process, in the event the
Government proceeds with a review of RADs.
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KEY BUSINESS RISKS (CONTINUED)
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; and
• Shortage of skilled workers may necessitate capacity restrictions.
Impact
Reduced occupancy levels may adversely affect the Group’s financial performance as it
will lead directly to reduced revenues, but costs may not be able to be reduced in line with
the lower occupancy.
Risk Strategy
Reduced occupancy levels may also result in lower RAD balances requiring replacement
by alternative financing sources.
The Group operates a centrally led occupancy team supported by regional and home
specific customer service resources dedicated to assisting the process of securing new
residents across the Group’s 68 homes. Occupancy is pro-actively monitored and
managed by this team including ongoing market and competitor analysis, and monitoring
of customer satisfaction and preferences. The Group’s services and home offerings are
established, marketed and promoted to meet the needs of the local community, and staff
actively engage with referrers, hospitals, health clinics and General Practitioners within the
locale of each home.
Further, the Group invests in traditional and digital marketing to promote and encourage
enquiries and admission, including the use of respite as a precursor to permanent
admission.
The geographic and demographic spread of the Group’s homes mitigates against factors
which may impact one area, region, state or a specific demographic cohort of the aged
population.
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KEY BUSINESS RISKS (CONTINUED)
FAILURE TO MEET CLINICAL CARE STANDARDS
Risk
Impact
The Group may experience a decline in its clinical outcomes in circumstances where
incidents are not identified, assessed or reported, staff do not follow policies and
procedures, or external health agencies or providers 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 in profitability due to decreased occupancy and/or
additional costs required to ensure clinical care standards are improved. Additionally, there
may be an increase in legal or regulator action and an increase to medical indemnity and
other costs.
Risk Strategy
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 applicable legislation and departmental policies.
The Group seeks to ensure that its clinical care standards are maintained at the highest
levels and that any decline in standards are addressed swiftly. The Risk and Quality
Management Frameworks, systems and processes provide clinical evaluation and
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 staff.
The Group has a Clinical Governance Committee to provide clinical oversight and
evaluation of clinical improvement strategy and performance. The Committee is
independently chaired by Professor Simon Willcock, Director of Primary Care services at
Macquarie University Hospital and Health Sciences Centre, who will also join the Estia
Health board on 1 September 2022.
The Group continually reviews its Group’s clinical governance in light of evolving health
standards, guidelines, regulatory requirements and best practice.
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KEY BUSINESS RISKS (CONTINUED)
REPUTATIONAL DAMAGE
Risk
The Group operates in an industry in which its reputation could be adversely impacted
should it, or the aged care sector generally, suffer from adverse publicity. The Group may
also suffer reputational damage in the event of medical indemnity claims, litigation, or
coronial inquests. The Group may also suffer from adverse media coverage and
government and / or community sentiment towards the sector, particularly during events
such as the Royal Commission and impact of COVID-19. The Government plans to
introduce a star rating system from December 2022 for all residential aged care services
based on measurable indicators of quality and available data which may impact the
Group’s reputation.
Impact
Any such damage to the Group’s or the sector’s reputation could result in existing
residents moving out of the Group’s homes or reduce the Group’s ability to attract new
residents to its homes, both of which could adversely impact the Group’s financial
performance, position and future prospects.
Reputational damage, particularly associated with quality of care and star ratings, may
impact the ability to hire and retain staff, and increased regulatory supervision or action. In
extreme cases this may also adversely impact the willingness of lenders to continue
providing funding.
Risk Strategy
The Group’s Risk and Quality Management Framework monitors, analyses and reports
clinical and care outcomes across the Group’s 68 homes. Customer Experience Reports
are undertaken to provide detailed feedback on resident and family experience.
Complaints management procedures escalate matters to the Chief Quality and Risk Officer
as part of the quality and risk policy in order to ensure appropriate action is taken to
remedy failings and protect the Group’s reputation.
Central staff monitor and assess press, media and social media to identify areas where the
Company’s reputation may be reported in a way which may be damaging.
The Group maintains a professional and comprehensive flow of relevant information to its
lenders within the terms of its borrowing agreements.
INFORMATION TECHNOLOGY SECURITY AND CYBERSECURITY
Risk
Impact
Risk Strategy
The Group stores large quantities of data in electronic format, communicates data in
electronic format and is heavily reliant on information technology (“IT”) in the operation of
its business. Criminal activity is increasingly being observed and perpetrated against many
businesses with the intent of theft, blackmail, fraud, ransom or causing malicious damage.
Cybersecurity and IT security threats are constantly evolving and increasingly
sophisticated in targeting IT infrastructure.
Systems breaches could result in disruption, theft, misuse, ransom, fraud or blackmail of
the Group, its residents or staff. Rectification can be lengthy, expensive and in some cases
cause irretrievable damage, both financial and reputational.
The Group has a framework of access security controls, security monitoring, business
continuity management, disaster recovery processes and off-site back-up facilities,
including training of staff in relation to privacy and data security. The strength and
effectiveness of this framework are regularly assessed, including by external experts, with
a view to continuous testing and improvement. Reporting and management of IT and
cybersecurity risk is part of the Board Risk Committee Charter.
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KEY BUSINESS RISKS (CONTINUED)
PANDEMIC OR EPIDEMIC
Risk
Impact
Risk Strategy
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 Health home, which may
cause an increased level of restrictions in and to the home, 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 may result in reduced occupancy arising from community concerns about
safety or local authority restrictions on access to homes even if an Estia Health home does
not experience an outbreak. 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 secure staff for its own homes.
National impact may result in supply chain disruption, restrictions on population
movement, and wider economic, health and social impacts which may be longer lasting.
Local risk mitigation is managed by the adoption of consistent and comprehensive
infection control procedures including staff training. Procedures are in place for close
monitoring of all resident and staff health for signs of infection and all times but especially
during high levels of community infection, whether local, regional or national.
In the event of an outbreak, policies and procedures are in place designed to rapidly
isolate and test residents and staff and introduce 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
(“CIMT”) to oversee the home level response. Surge staffing plans have been designed to
provide additional skilled resource from a variety of sources at short notice, and homes
have access to regional PPE stock.
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 68
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 infection outbreaks which may impact home profitability and
RAD balances. No single 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 quality and risk teams in adopting the Group’s pandemic response guidelines.
Central and regional management lead liaison with local and state authorities to ensure
compliance with legislation and guidelines and to secure 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 CIMT which will
then lead the emerging national response. The CIMT comprises Executive Team members
supported by internal and external technical experts and resources as required.
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KEY BUSINESS RISKS (CONTINUED)
COVID-19
Risk
On 18 March 2020 the World Health Organisation declared coronavirus caused by the
COVID-19 virus a global pandemic. Continually emerging variants and sub-variants of the
virus, the potential severity of the illness on the sick, elderly and frail, present an ongoing
risk to the community and the Group.
Residents of residential aged care homes are generally frail, suffer from co-morbidities,
dementia, are reliant on day-to-day personal and clinical care and are approaching the end
of their lives. These residents are the most vulnerable to the serious effects of COVID-19
infection.
Impact
The potential impacts of the COVID-19 pandemic on the business include but are not
restricted to:
•
reduced occupancy due to: families electing not to admit to, or to remove their loved
ones from aged care; homes being closed to new admissions during outbreaks; and
reputational damage associated with outbreaks at Estia Health homes or the aged care
sector as a whole;
• a reduced ability to secure sufficient suitably trained staff to work in homes;
• change in work practices to limit workers to one employer and/or place of work;
• potential legal claims by staff, residents, resident families, or visitors who may have
become exposed to the virus which may be linked to an Estia Health home and any
resultant liabilities or regulatory action;
increased costs of responding to, and managing, community and home outbreaks which
include PPE, rapid antigen testing costs, staff costs, medical and surgical supplies,
cleaning and advisory support services; and
increased costs associated with changes to the operations and physical design of
residential aged care homes which may result from legislative or other reviews.
•
•
Risk Strategy
The Group has revised protocols and procedures in line with Australian Health Protection
Principle Committee (“AHPPC”) guidelines and State Directions with the objective of
minimising the risk of introducing COVID-19 infection into a home and infection spread in
the event of a resident or staff member testing positive for COVID-19. Specific matters
include:
• An in-house vaccination program for residents and staff;
• Entry and access protocols and procedures for staff, residents and visitors (including
•
Rapid Antigen Testing);
Infection Prevention Control processes, protocols, training, monitoring, and expertise
including PPE usage and training;
• COVID-19 response plans at each home;
• Work, Health and Safety requirements for all the Group’s homes and premises;
• Business continuity plans continue to be revised;
• Staff quarantine and pandemic leave;
• PPE supply chains, stock levels and logistics;
• Anti-viral treatment for residents infected with COVID-19, where possible; and
• Applying for all applicable COVID-19 Government subsidy and grant assistance
programs available.
COVID-19 vaccination became a mandatory condition of employment for residential aged
care workers on 17 September 2021. State and territory public health orders and directions
are in place for residential aged care workers which define who must be vaccinated and by
when, and limited exemptions that may apply. In a number of states and territories,
residential aged care workers are required to be up to date with their COVID-19
vaccinations. In accordance with health orders and directions, the Group has required all
staff without medical exemption to be vaccinated.
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KEY BUSINESS RISKS (CONTINUED)
CLIMATE RISK
Risk
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.
This Report contains a separate report in accordance with the Task Force on Climate-
Related Financial Disclosures (“TCFD”) on page 101 which references in more detail the
Group’s exposure and approach to managing Climate Risk.
GROWTH MAY BE CONSTRAINED BY ABILITY TO SECURE BED LICENCES
Risk
The Government has announced the abolition of bed licencing and the Aged Care
Approvals Rounds (“ACAR") from 30 June 2024. Under the transition rules in place,
Approved Providers may apply for funding approval for new builds or expansions as
required. The Group has secured conditional approval for a number of expansions under
the transition rules.
Despite the transition rules operating, it is still possible that this change may not ultimately
be legislated with the result that the Group may be constrained in its ability to increase
capacity and grow earnings.
Impact
If the proposed abolition of ACAR is not enacted, the Group may not be able to secure bed
licences to allow it to grow the capacity as quickly as it might do if such a constraint did not
exist.
Risk Strategy
The Group will apply for funding approvals within the transition rules as it progresses
developments to ensure Government funding will be secured for those developments.
Should legislation not be passed, the Group will continue to apply for licences in ACARs,
will consider acquiring licences where they are available for sale or transfer, and will
consider applying to move licences within its portfolio of homes to maximise occupancy
and development opportunities. The Group will not commit future significant development
funds unless licences are substantially secured for a development.
ENVIRONMENTAL REGULATION
The Group is not subject to significant environmental legislation under either Commonwealth or State legislation.
This Report contains the Group’s TCFD Report on pages 101 to 107, setting out the Group’s assessment of the
risks and opportunities posed by climate change.
The Group also publishes a separate annual ESG report detailing its approach to Environmental, Social and
Governance Issues. Directors recognise that the long-term viability and profitability of the Group depends on the
wellbeing of staff, residents, integrating its homes within their local communities and the continued health of the
natural environment. The Group’s 2020-2024 Sustainability Strategy and Framework provides focus areas and
associated targets to help mitigate any negative impacts, and to identify potential positive value creation activities
across three core areas:
•
•
•
supporting our people;
enhancing our community; and
respecting our environment.
PERFORMANCE RIGHTS
UNISSUED SHARES
As at the date of this report, there were 3,709,553 unissued ordinary shares under performance rights (2021:
3,220,383).
SHARES ISSUED AS A RESULT OF THE VESTING OF PERFORMANCE RIGHTS
A total of 146,673 performance rights were exercised during the year ended 30 June 2022 (2021: 23,055) and
were issued as shares on 1 July 2021. During the year ended 30 June 2022, 1,009,506 rights were granted
(2021: 2,268,751) and 1,003,603 rights were forfeited (2021: 551,828).
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INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
In accordance with provisions in its constitution, 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) liabilities incurred by the person in the capacity as an officer where permitted under section 199A(2) of the
Corporations Act 2001;
(b) legal costs incurred in relation to civil or criminal proceedings in which the officer becomes involved because
of that capacity;
(c)
legal costs incurred in connection with any investigation or inquiry of any nature because of that capacity;
and
(d) 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 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 Australia 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, which represents 19% (2021: 11%) of the total fees received by the firm.
Tax compliance services
Sustainability Linked Loan assurance
Other
Total Non-audit services
ROUNDING
2022
$’000
159
20
18
197
The amounts contained in this report and in the financial report have been rounded to the nearest thousand
dollars ($’000), under the option available to the Group under ASIC Corporations (Rounding in Financial or
Director’ Reports) Instrument 2016/191. Estia Health Limited is an entity to which the class order applies.
Signed in accordance with a resolution of Directors on 23 August 2022.
Dr. Gary H Weiss, AM
Chairman
Sydney
23 August 2022
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DIRECTORS’ REPORT
REMUNERATION REPORT
Dear Shareholders,
The Estia Health Limited (‘Estia’, the ‘Company’ or the ‘Group’) Board is pleased to present the Remuneration
Report for the year ended 30 June 2022 (‘FY22’).
The FY22 financial year continued to be characterised by a challenging operational, financial and clinical
landscape, largely associated with the ongoing COVID-19 pandemic and its impact upon the environment in
which our residents and staff live and work. The challenges faced by the Company to attract and retain the best
available talent at all levels of the organisation remain as acute as at any time in the history of the Residential
Aged Care sector, exacerbated by broader healthcare industry staffing pressures.
The Company’s remuneration framework, policies and FY22 remuneration outcomes continue to be focused on
achieving an alignment between resident, shareholder and staff interests, with a resident-focused quality performance
“gateway” remaining a pre-determining factor to the award and payment of short term incentive entitlements, irrespective
of operational and financial performance.
The strong executive leadership capability built by the Company over past years was reflected in an orderly and
successful succession planning process during FY22 that resulted in Sean Bilton, previously the Company’s
Deputy Chief Executive Officer and Chief Operating Officer (“COO”), being announced as the successor to Ian
Thorley as the Company’s Chief Executive Officer and Managing Director. This succession planning process and
announcement also resulted in Damian Hiser, previously the Company’s Chief Customer Officer, being
announced as the successor to Sean as COO. Damian will be included in the Company’s Key Management
Personnel (“KMP”) from FY23.
More broadly, the Company remains proudly at the forefront of gender-based leadership diversity, with the
composition of the Company’s senior executive team and non-executive Directors reflecting an equal split
between male and female members. Estia is committed to merit-based recruitment and fair remuneration
practices, especially when it comes to gender pay parity within its workforce. In addition to the development of a
structured compensation framework that has strengthened the objectivity of job classifications, benchmarking and
pay ranges the Company engaged its Remuneration Consultant, KPMG, to produce a Gender Pay Gap Report
during FY22. This report showed continued gender pay gap improvement across all levels of the organisation, to
1.7% for employees whose employment terms are not governed by an enterprise agreement.
FY22 Remuneration Outcomes
After no short-term incentive (STI) was offered to executive KMP in FY21, the STI plan was reinstated in FY22.
In order for the FY22 STI to be eligible to vest, a resident quality gateway hurdle must be successfully achieved.
This requires 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.
The Board is pleased to confirm that this gateway was achieved in FY22, and that FY22 STI vesting outcomes for
executives ranged from 45 - 65% of their respective STI opportunities.
The FY20 long-term incentive (“LTI”), which had a three-year performance period that ended on 30 June 2022,
did not vest as the respective Earnings Per Share (EPS) and relative Total Shareholder Return (TSR) targets
were not met.
Looking Forward
On 26 April 2022, the Chair of the Board, Dr Gary H Weiss, AM, announced Sean Bilton would assume the role of
Chief Executive Officer (“CEO”) and Managing Director on 11 July 2022, succeeding Ian Thorley who had
announced his intention to retire after almost four years in the role and nearly six years in senior executive
positions at the Company.
Ian remained with the Company until 29 July 2022 to ensure a comprehensive and smooth transition. The Board
thanks Ian for his significant contribution and commitment to Estia Health.
Upon his commencement in the role, Sean’s fixed remuneration was increased to $740,000 per annum, $40,000
less than his predecessor. Sean’s STI and LTI entitlements are equivalent to his arrangements as COO and that
of his CEO role predecessor, at 50% and 100% of Fixed Annual Remuneration respectively.
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REMUNERATION REPORT (continued)
The LTI opportunity for the Company’s KMP continues to be subject to two equally weighted performance
measures, relative total shareholder return (“TSR”) and earnings per share. Given the decreasing number of
directly comparable listed peer companies operating in the aged care industry, with the delisting of Japara
Healthcare and Aveo Group in recent years, from FY22 onwards LTI TSR performance measures reference the
performance of the ASX300 Index (excluding mining and energy). From FY23, in addition to these measures, the
Board will overlay a qualitative assessment, which will involve it reviewing whether the LTI vesting outcome is
appropriate having regard to a number of factors over the performance period, including the Group’s
environmental impact, quality of care, reputational impact and employee experience, further strengthening the link
between remuneration outcomes and Environmental, Social and Governance (“ESG”) performance.
On behalf of the Board, I am pleased to present to you the FY22 Remuneration Report for Estia Health and we
look forward to welcoming you at the 2022 AGM.
Yours sincerely
Paul Foster
Chair of the Nomination and Remuneration Committee
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DIRECTORS’ REPORT
REMUNERATION REPORT - audited
This report for the year ended 30 June 2022 (FY22) 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.
Introduction
2. Remuneration governance
3. Group performance
4. Remuneration principles and strategy
5. Executive remuneration
6. Executive remuneration outcomes
7. Executive employment contracts
8. Non-executive director fee arrangements
9. 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 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.
Key Management Personnel
Dr. Gary H Weiss, AM
Non-Executive Chairman
Paul Foster
Helen Kurincic
Karen Penrose
Non-Executive Director
Non-Executive Director
Non-Executive Director
Norah Barlow, ONZM
Non-Executive Director
Full year
Full year
Full year
Full year
Full year
Hon. Warwick L Smith, AO1
Non-Executive Director
Until 31 March 2022
Ian Thorley2
Sean Bilton3
Chief Executive Officer (MD and CEO)
Chief Operating Officer and Deputy Chief
Executive Officer (COO and Deputy CEO)
Steve Lemlin
Chief Financial Officer (CFO)
Full year
Full year
Full year
1 Hon Warwick L Smith, AO resigned as a director of the Company, effective 31 March 2022.
2 On 26 April 2022 Ian Thorley announced his intention to retire. He resigned as a director and CEO on 11 July 2022.
3 Sean Bilton assumed the role of MD and CEO of the Company, succeeding Ian Thorley, on 11 July 2022. Damian Hiser (formerly Chief
Customer Officer) was appointed as the Chief Operating Officer with effect from 11 July 2022 and is considered as KMP from that date.
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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
(https://investors.estiahealth.com.au/investor-centre).
The Committee met five times in FY22. The managing director (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 2022, the Nomination and Remuneration Committee engaged KPMG to
provide advice regarding a range of remuneration related matters.
The services provided by KPMG did 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.
2.3 Minimum Shareholding Policy
The Board recognises the importance of ensuring that the interests of its leaders are aligned with the long-
term interests of shareholders.
In 2019, Estia’s Senior Executive and Board Minimum Shareholding Policy was introduced. The policy
requires that:
• Board members accumulate and maintain a minimum holding in Estia Health shares equivalent to at
least 50% of one year’s prevailing base Board fees (excluding Committee fees); and
• Senior Executives (comprising the CEO and direct reports to the CEO) accumulate and maintain a
minimum holding in Estia Health shares equivalent to at least 50% of one year’s fixed annual
remuneration.
Board members and the CEO are required to achieve the minimum target shareholding by the later of:
• The 3rd anniversary of the commencement of the policy; or
• The 3rd anniversary of the NED’s or CEO’s commencement date (the Measurement Date).
Other Senior Executives have five years from the above dates.
All members of KMP are in compliance with the policy as at 30 June 2022.
The full policy, including definitions and calculation methodology, can be viewed at:
http://www.estiahealth.com.au/investor-centre/corporate-governance.
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DIRECTORS’ REPORT
REMUNERATION REPORT – audited (continued)
3. Group performance
The table below illustrates Estia’s historic performance against the key metrics upon which the Group
performance is measured.
Revenue - $’000
Net (loss) / profit after tax - $’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
30 June
2022
$671,067
($52,362)
$2.47
$1.91
2.4
(20.10)
(20.10)
Restated
30 June
2021
$646,305
$5,605
$1.53
$2.47
0.0
2.15
2.12
Vesting outcomes – CEO incentives
Short term incentive vesting
Long term incentive vesting
45%
Nil
n/a
Nil
30 June
2020
$636,908
($116,909) $41,290
30 June
2019
$585,985
30 June
2018
$547,054
$41,154
$2.64
$1.53
13.2
(44.8)
(44.8)
Nil
Nil
$3.29
$2.64
16.0
15.8
15.8
Nil
Nil
$3.05
$3.29
15.8
15.8
15.7
22%
Nil
4. Remuneration principles and strategy
The remuneration strategy and framework set by the 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.
As stated in the Diversity and Inclusion Policy1, 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.
1 The full policy can be viewed at http://www.estiahealth.com.au/investor-centre/corporate-governance.
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REMUNERATION REPORT – audited (continued)
5. Executive remuneration
5.1 Remuneration Framework and Link to Strategy
In FY22, the executive remuneration framework comprised a mix of fixed annual remuneration, the short-term
incentive plan and the long-term incentive plan. 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.
Component
Approach
Fixed Annual
Remuneration
(FAR)
Short-Term
Incentive Plan
(STI)
FAR is set with reference to role, capability
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 FY22, the STI was measured against
group-wide targets comprising net profit after
tax (NPAT), occupancy, people and safety. A
resident quality gateway hurdle was in place,
requiring a range of ongoing compliance and
to be met as a
accreditation
precondition for any of the STI to be eligible to
vest, irrespective of financial and operational
performance.
targets
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 subject to 12-
month deferral.
Link to business and remuneration
strategy
remuneration packages
Competitive
that
attract and retain high calibre employees from
a diverse talent pool.
Short term incentives align the interests of
executives with achievement of business
strategic objectives over the short to medium
term.
Deferral of 25% of any STI award into equity
increases
shareholder
interests.
alignment with
Long-term
Incentive Plan
(LTI)
The FY22 LTI was delivered in the form of
performance rights subject to the following
performance condition, 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.
-
Total shareholder return (TSR) (50%) relative
to constituents of the ASX300 excluding
mining and energy companies; and
-
Earnings Per Share (EPS) (50%).
The combination of EPS and relative TSR
reflects internal and external performance
measures and provides alignment with
shareholder outcomes.
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. No such awards
were granted to KMP in FY22.
Once-off awards may be approved by the
Board in order to retain or attract key talent, to
ensure the achievement of Estia’s business
strategy, and
term
shareholder outcomes.
to maximise
long
Total
Remuneration
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.
A minimum shareholding policy is also in place to drive share ownership amongst NEDs and
Senior Executives.
Board discretion The Board also has a broad discretion to withdraw incentives in a range of circumstances where the
Board considers appropriate.
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REMUNERATION REPORT – audited (continued)
5.2 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.
The Committee regularly benchmarks the remuneration of the current KMP, and considers the skills and
experience of each individual, as well as the complexity and accountabilities associated with the role, in
setting FAR.
5.3 Short Term Incentive
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
All executive KMP participated in the FY22 STI plan.
STI value
Performance
conditions
Delivery of STI
In FY22, all executive KMP had an STI opportunity of 50% of FAR
Estia is committed to delivering safe, high-quality and sustainable aged care services for all
Australians.
Estia’s STI scorecard reflects this commitment.
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. This is a reflection of
the importance Estia places on quality of care.
The balance of the STI scorecard assesses performance against a balanced scorecard of
measures including financial, customer, people and safety.
The collective use of these performance measures highlights an appropriate balance on
shareholder, resident and workforce outcomes, all of which are inter-related.
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 performance rights granted is
determined using face value allocation methodology, using the volume weighted average
price (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.
Board discretion
The Board also has a broad discretion to withdraw incentives in a range of circumstances
where the Board considers appropriate
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REMUNERATION REPORT – audited (continued)
5.3.1 STI Outcomes
In FY22, Estia met the resident quality gateway hurdle, which created eligibility for STI payments to be made subject
to the achievement of STI scorecard measures. The gateway required:
1. No more than two notices of non-compliance in any State in which Estia operates;
2. Any Timetable for Improvement imposed upon an Estia facility to be fully met; and
3. No sanctions to be imposed on any Estia facility.
The table below outlines the vesting outcome of STI measures, including group-wide KPI’s and role specific
measures applied to KMP during FY21.
An overview of executive KMP performance under the FY22 STI scorecard is detailed in the table below.
Performance
measure
Resident
Quality
Weighting1
Outcome
Gateway
Resident quality gateway met
Financial
20% - 40%
Net Profit After Tax (“NPAT”) result of loss of $52,362 was below threshold –
nil vesting.
Customer
20%
FY22 occupancy of 91.6% was above target – partial vesting (75%)
People
20%
FY22 employee turnover rate did not exceed threshold – partial vesting (50%)
Safety
20%
FY22 Lost time injury frequency rates and Lost Time Injuries count both
exceeded the stretch targets set and were material improvements on prior
year performance – full vesting
Role specific
measures
0% - 20%
A variety of role specific measures were used for different members of the
executive KMP, including objectives related to roster efficiency, reporting
accuracy and managing the transition from the ACFI to the AN-ACC funding
system. These measures partially vested.
These outcomes resulted in STI vesting outcomes for the Group’s Executive KMP’s ranging from 45-65% of
target as shown below.
Executive
Ian Thorley
Sean Bilton
Steve Lemlin
STI opportunity
($)
STI awarded
($)
STI awarded
(%)
STI foregone
(%)
390,000
260,000
257,019
$175,500
$143,000
$167,063
45%
55%
65%
55%
45%
35%
1 Ian Thorley has a 40% weighting for the Financial component and no role-specific component. The other executive KMP have
20% weighting against all measures.
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DIRECTORS’ REPORT
REMUNERATION REPORT – audited (continued)
5.4 Long-Term Incentive
A long-term incentive is designed to drive sustainable value creation for shareholders, encourage retention
of key talent and promote a multi-year performance focus.
The LTI is delivered in performance rights, in order to further align the interests of executives with
shareholders over the long term.
Participation
LTI performance rights were offered to all members of executive KMP in FY22.
Delivery of LTI
LTIs are delivered in the form of performance rights. On vesting, performance rights
entitle the holders to ordinary shares.
LTI opportunity
In FY22, all executive KMP had an LTI opportunity of 100% of FAR.
Allocation
methodology
The quantity of instruments granted under the LTI is determined using face value
allocation methodology, using the volume weighted average price (‘VWAP’) for the 10
trading days immediately following (and not including) the date of release of annual
results (i.e. LTI opportunity divided by VWAP share price).
The FY22 LTI award is subject to two equally weighted performance measures: relative total
shareholder return (TSR) and earnings per share (EPS), as defined below:
•
•
50% relative to the ASX300 excluding mining and energy companies; and
50% relative to Earnings Per Share (EPS)
TSR vesting and EPS schedules are provided below:
Estia’s TSR relative to constituents of the ASX300
(excluding mining and energy companies)
Percentage of performance
rights that vest
Less than median of comparator group
At median of comparator group
Nil
50%
Performance
conditions
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 FY24 EPS ($)
Less than 0.083
Equal to 0.083
Greater than 0.083 up to 0.10
Percentage of performance
rights that vest
Nil
25%
Straight line pro-rata 25% to
100%
At or above 0.10
100%
Performance period The performance rights granted in FY22 have a performance period of three years.
Lapse of
performance rights
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
Unless the Board determines otherwise, if a participant’s employment with the Group is
terminated during the performance period as a ‘good leaver’ (i.e. as a result of genuine
redundancy, death, terminal illness, total and permanent disablement, or any other
reason as determined by the Board) they will be entitled to receive a pro-rata amount of
their FY22 LTI Incentive (based on the proportion of whole months they were employed
by the Group during the performance period). Any remaining unvested performance
rights will lapse.
If their employment with the Group is terminated in circumstances in which they are not
considered a good leaver (e.g. resignation, or termination of employment initiated by
the participant or the Group other than where such termination is as a good leaver),
their FY22 LTI Incentive will immediately lapse.
Notwithstanding the above, the Board may, subject to any requirement for shareholder
approval, determine to treat any of the FY22 LTI in a different manner to that set out
above upon participants ceasing to be an employee of the Group.
Estia Health Limited
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REMUNERATION REPORT – audited (continued)
Change of control
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.
Clawback policy
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.
5.4.1 LTI Vesting Outcomes
The FY20 LTI performance rights, which had a three-year performance period that ended on 30 June 2022, did
not vest, as the relevant earnings per share (EPS) and relative total shareholder return performance targets
were not achieved.
5.5 Once-off Awards
As previously disclosed at our 2020 Annual General Meeting (“AGM”) and in our 2021 annual report, no FY21 STI
was offered, given the challenges of setting meaningful targets in the height of the pandemic and a once-off
retention-based grant of performance rights (“FY21 Retention Incentive”) was granted to our KMP. These awards
vested on 1 July 2022 following the completion of the required two years’ service.
No such awards were granted to KMP in FY22.
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1
2021-22 Annual Report | Estia Health 95
T
R
O
P
E
R
’
S
R
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C
E
R
D
I
Chair and CEO message
Key Highlights About Us Aged Care Environment Board Corporate Governance
Executive Team Business Value Drivers
DIRECTORS’ REPORT
REMUNERATION REPORT – audited (continued)
7. Executive employment contracts
Remuneration arrangements for executives are formalised in employment agreements as follows:
Name
FY22 FAR
Agreement
commence
Agreement
Expire
Ian Thorley
$780,000
23 October 2018
Sean Bilton
$520,000
23 October 2018
Steve Lemlin
$514,038
1 February 2017
No expiry,
continuous
agreement
No expiry,
continuous
agreement
No expiry,
continuous
agreement
Employee
6 months
Notice of
termination by Notice
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)
6 months
3 months
7.1 Ian Thorley
Ian Thorley stepped down from the role of MD & CEO effective 11 July 2022 and remained with the Company
until 29 July 2022 to ensure a comprehensive and smooth transition to his successor Sean Bilton.
Ian’s unvested equity-based LTI incentives in connection with his role as MD and CEO will remain on foot on a
pro-rata basis and be subject to performance testing in line with the ordinary terms of the plan.
Ian is also eligible to receive payment in respect of his FY22 STI, having served the entire performance period.
The 25% deferred component issued as deferred shares remains subject to forfeiture in line with the ordinary
terms of the plan.
7.2 Sean Bilton
As announced on 26 April 2022, Sean Bilton formally assumed the role of MD & CEO of Estia Health on 11 July
2022.
From this date, his fixed remuneration was increased to $740,000 per annum, inclusive of superannuation. His
STI opportunity is now 50% of this amount, and his LTI opportunity has a face value of 100% of this amount.
Mr Bilton’s notice period was also increased to 6 months.
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DIRECTORS’ REPORT
REMUNERATION REPORT – audited (continued)
8. Non-Executive Director fee arrangements
The Board seeks to set Non-Executive Director (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.
The NED fee pool is currently $1,100,000 (last approved at 2019 AGM).
Effective 1 July 2021, the NED base member fees increased from $100,000 p.a. to $110,000 p.a. This
represents the first NED base fee increase since the Group's IPO in 2014 and was made following a detailed
NED fee benchmarking exercise.
8.1 Director’s FY22 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
Royal Commission & Regulatory
COVID-19 Committee
Description
Chair
Member
Chair
Member
Chair
Member
Chair
Member
Chair
Member
Chair
Member
Chair
Member
Fees
$250,000
$110,000
$15,000
$10,000
$15,000
$10,000
$15,000
$10,000
$15,000
$10,000
No additional fee
No additional fee
No additional fee
No additional fee
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 Limited
2021-22 Annual Report | Estia Health 97
46
Chair and CEO message
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DIRECTORS’ REPORT
REMUNERATION REPORT – audited (continued)
8.2 Non-Executive director remuneration
The table below outlines NED remuneration for FY22 in accordance with statutory rules and applicable
accounting standards.
Non-Executive Directors
Gary Weiss
Paul Foster
Warwick Smith
Helen Kurincic
Karen Penrose
Norah Barlow
Total
Year
Board fees
Superannuation
Total fees
$
$
$
2022
2021
2022
2021
20221
2021
2022
2021
2022
2021
2022
2021
2022
2021
256,432
258,306
131,818
135,000
98,182
114,155
125,000
114,155
122,727
114,155
121,250
110,000
855,409
845,772
23,568
21,694
13,182
-
3,068
10,845
12,500
10,845
12,273
10,845
-
-
64,591
54,228
280,000
280,000
145,000
135,000
101,250
125,000
137,500
125,000
135,000
125,000
121,250
110,000
920,000
900,000
1 Represents Warwick Smith’s remuneration for the year to the date of his resignation effective 31 March 2022.
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DIRECTORS’ REPORT
REMUNERATION REPORT – audited (continued)
9. Additional disclosures relating to performance rights and shares
9.1 Performance rights granted during the year
The table below discloses the number of performance rights granted 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 FY22.
Number of
rights
granted
during the
year
Fair value
per right at
grant date
Vesting
date
Exercise
price per
option
Grant date
Executive director
Ian Thorley
Senior Executives
Sean Bilton
Steve Lemlin
167,526
167,525
12/11/2021
12/11/2021
111,684
111,684
24/08/2021
24/08/2021
110,403
110,403
24/08/2021
24/08/2021
0.60
1.98
0.70
2.07
0.70
2.07
30/06/2024
30/06/2024
30/06/2024
30/06/2024
30/06/2024
30/06/2024
Nil
Nil
Nil
Nil
Nil
Nil
Expiry date
30/06/2024
30/06/2024
30/06/2024
30/06/2024
30/06/2024
30/06/2024
Total
779,224
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 as detailed
in the table below.
Rights forfeited represent 100% of those rights granted in FY20.
Vested at 30 June
2022
Number of
rights at
30-Jun-21
Granted as
remuneration
Rights
exercised
Rights
Forfeited
Number of
rights at
30-Jun-22
Exercise-
able
Not
exercise-
able
Executive director
Ian Thorley
886,686
335,051
-
(265,594)
956,143
Senior Executive
Sean Bilton
615,754
223,367
-
(184,441)
654,680
Steve Lemlin
631,623
220,806
(91,241)
(118,522)
642,666
Former Executive
Norah Barlow
103,882
-
-
(103,882)
-
Total
2,237,945
779,224
(91,241)
(672,439) 2,253,489
-
-
-
-
-
Estia Health Limited
-
-
-
-
-
48
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Executive Team Business Value Drivers
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
$
$
$
Remuneration
consisting of
rights for the
year
%
Executive director
Ian Thorley
432,528
Senior executive
Sean Bilton
Steve Lemlin
309,509
305,960
Total
1,047,997
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.
-
-
222,628
507,285
36%
352,282
226,377
34%
34%
222,628
1,085,944
There were no alterations to the terms and conditions of options awarded since their award date.
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
Granted as
remuneration
Exercise of
rights
On Market
trades
Number of
shares at
30 June
2022
Held
Nominally
1 July 2021
Non-executive directors
Gary Weiss
Paul Foster
Warwick Smith
Helen Kurincic
Karen Penrose
Norah Barlow
78,312
24,000
182,000
50,000
32,333
129,474
Executive director
Ian Thorley
138,001
Senior executives
Sean Bilton
Steve Lemlin
Total
29,774
43,663
707,557
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
91,241
-
-
-
-
4,500
-
-
-
-
78,312
24,000
78,312
-
182,00011
182,000
50,000
36,833
25,000
36,833
129,474
129,474
138,001
53,312
29,774
134,904
-
-
91,241
4,500
803,298
504,931
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.
1 represents balance as at the date of resignation as at 31 March 2022
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DIRECTORS’ REPORT
CLIMATE-RELATED FINANCIAL DISCLOSURES REPORT
Contents
1. Overview
About the Taskforce on Climate-related Financial Disclosures
Chief Executive Officer’s Message
FY22 – FY24 TCFD Roadmap
2. Governance
3. Strategy
4. Risk Management
5. Metrics and targets
1. OVERVIEW
About the Taskforce on Climate-related Financial Disclosures
This report is prepared in accordance with the recommendations of the Task
Force on Climate-Related Financial Disclosures (TCFD). The TCFD was created
in 2015 by the Financial Stability Board (FSB) to develop consistent climate-
related financial risk disclosures for use by companies, banks and investors in
providing information to investors, lenders and insurance underwriters in relation
to financial risks associated with climate change.
Figure 1: TCFD defined areas of governance, strategy, risk management, metrics and targets
Chief Executive Officer’s Message
Climate change represents one of the greatest challenges to the global community, creating risks for businesses,
as well as broader society. The impacts are already evident and will increase in coming years and decades. In
line with the Company’s commitment to operating ethically, sustainably and with a high level of governance we
have committed to understanding climate-related risks and opportunities facing our business and embedding
responses to these into our business strategy and operations.
The Company takes seriously its responsibility to reduce its own impact on climate change and to report to
investors and stakeholders the potential impact of climate change on our operations. We care for some of the
most vulnerable members of society and our residents’ health and wellbeing in our 68 homes across Australia will
always remain our over-riding priority. Within that framework, we are working to better understand climate-related
impacts and what we can do to minimise our footprint.
We have made commitments to reduce the impact that our own operations have on the environment, including
executing a Sustainability Linked Loan in October 2021. Whilst the impact of COVID-19 on the operations of our
homes has impacted our ability to achieve some of our ambitions in the last 2 years, I am proud of the progress
we have made and we will continue to collaborate with our suppliers, employees and residents to minimise our
impact on the environment.
To provide greater understanding and transparency regarding our work, we present our FY22 approach to
meeting the recommendations of the Taskforce on Climate-related Financial Disclosure (TCFD) and the planned
roadmap for continued disclosure over the coming years.
Sean Bilton
Chief Executive Officer
Estia Health Limited
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FY22 – FY24 TCFD Roadmap
Core element
Roadmap objective
Required activities
FY22
FY23
FY24
Governance
Disclose the
organisation’s
governance around
climate-related risks
and opportunities
Board has appropriate
oversight and
understanding of climate
risks and opportunities
through appropriate
governance structures,
education and
engagement.
Strengthen Board and management
oversight of climate-related risks
through appropriate Committees.
Establish cross-functional Steering
Committee with explicit ownership
and oversight of climate-related risks
and opportunities.
• Defining short, medium, long-term
timeframes
•
Identifying material risks and
opportunities
• Modelling to assess financial
Incorporate climate
scenario analysis into
strategy and financial
planning.
impact
-
Short-term
- Medium-term
-
Long-term
Having identified impacts and
opportunities, establish the impact on
strategy and financial planning,
including modelling resilience to
physical and transitional risk impacts
under different climate scenarios.
Climate-related risks integrated into
risk management processes to
assess significance of climate risks
alongside other risks.
Climate-related risk assessments are
integrated into Risk Committee and
Development Committee decisions
on investments and capital spending.
Integrate climate-related
risks within the existing
company-wide risk
management framework.
Disclose metrics and set
targets in line with TCFD
cross-industry standard
metrics.
Establish target and metrics for
managing climate-related risks and
opportunities.
Strategy
Disclose the actual
and potential impacts
of climate-related risks
and opportunities on
the organisation’s
business strategy and
financial planning
Risk management
Disclose how the
organisation
identifies, assesses
and manages
climate-related risks
Metrics and targets
Disclose metrics and
targets used to
assess and manage
climate-related risks
and opportunities
Commenced
Planned
Figure 2: Estia Health’s TCFD roadmap
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2. GOVERNANCE
TCFD recommendations - governance
Disclose the organization’s governance around climate-related risks and opportunities
Recommended disclosures:
a) Describe the board’s oversight of climate-related risks and opportunities.
b) Describe management’s role in assessing and managing climate-related risks and opportunities
.
Board oversight
In FY20, the Board endorsed the Sustainability
Strategy with 2024 targets to reduce the
organisation’s environmental impact as well as an
ongoing process to assess homes’ resilience to
physical climate-related risks.
The Board oversees progress against the targets
through the mechanism of the Board-level Risk
Committee with quarterly updates provided. Climate
risk has also been identified within the
organisation’s Risk Management Framework and
Risk Register.
Management’s role
Figure 3: Governance structure as of 1 July 2022
The following mechanisms and dedicated roles facilitate the continued assessment and management of climate-
related risks and opportunities within the business:
• Executive Sustainability Committee:
Meetings were held quarterly, increasing to monthly in FY23, with the Head of Sustainability providing
progress updates against the strategy and specific initiatives.
• Steering Committees and Working Groups:
Led by the Head of Sustainability, these Committees and Working Groups focus on specific areas of the
Sustainability Strategy, with the relevant subject matter experts.
The Group Head of Risk and Covid Response oversees climate risk as one of the operational risks to the
organisation and its embedding in the overall group-wide risk management framework.
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3. STRATEGY
TCFD recommendations - strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organisation’s businesses, strategy, and financial planning where such information is material.
Recommended disclosures
a) Describe the climate-related risks and opportunities the organisation has identified over the short, medium,
and long-term
b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and
financial planning
c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related
scenarios, including a 2°C or lower scenario
In assessing climate related risk, the Group determined the following time horizons.
.
Short-term (3 years) Medium-term (3-15 years) Long-term (more than 15 years)
A high-level assessment in FY22 identified the key focus areas for transition climate-related risks and
opportunities which could have a significant effect on the operations, strategy and financial planning of the Group
if not managed appropriately in the short-term. This exercise will be expanded to the medium and long-term in
FY23.
A separate specific assessment of each Estia Health home was undertaken to identify any short-term physical
risks to any home from extreme climate events. The results of both of these assessments are shown in figure 4, 6
and 7. In FY23 both assessments will be extended to consider medium- and long-term risks and opportunities.
Transition risks and opportunities
Category
Risk / opportunity
Risk: reduced supply and increased energy costs resulting in increased operating costs.
Energy
Opportunity: investment in purchased renewables and enhancement of onsite solar.
Opportunity to exceed existing carbon emissions and renewables targets working towards a
net zero strategy.
Carbon taxation Risk: increased costs purchasing services and products, impacting revenue.
Supply chain
Risk: climate change events disrupt food and other services production and supply routes,
impacting access to required products and services for resident care.
Opportunity: exploration of alternative sourcing pathways and sustainable purchasing
process and structure accounting for impacted sourcing and supply chains.
Litigation
Risk: risks of litigation and liabilities resulting from undisclosed exposure of the organisation
to transition and physical climate impact, impacting brand and reputation.
Policy and
regulation
Risk: change in regulation, impacting building and energy efficiency increasing capital
required to make required improvements.
Opportunity: ambitious sustainability strategy addressing climate risk and opportunity
ensuring a smooth transition to adapt to regulation and policy change.
Risk: in negative reputation resulting from Estia Health not taking positive action to reduce its
environmental impact and mitigate and adapt to climate change. This results in a shift in
consumer preferences, employee attraction and retention and investor preference. The result
is an impact in revenue, workforce availability and available investment capital.
Reputation
Opportunity: Estia Health’s action around climate-related risks results in positive reputation
influencing consumer decisions, employee attraction and capital from investors.
Figure 4: high-level assessment of identified potential transition risks and opportunities and impact in the short-term
Estia Health Limited
104 Estia Health | 2021-22 Annual Report
Impact in
short-term
3 years
Low
Low
Low
Low
Low
Low
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Physical risks
In FY21 external advisors completed a climate change exposure assessment across all 68 Estia Health sites and
new developments to identify the levels of exposure to potential climate hazards including temperature-related
impacts, storms, floods and sea level rise. A threshold-based scoring system was used and an exposure score
calculated for each climate variable, before being grouped to create an averaged exposure score for climate
categories against each site.
A climate vulnerability assessment was then undertaken to understand each sites resilience to climate hazards,
using the Füssel & Klein (2006) model defining “vulnerability” as an asset’s exposure and sensitivity to that
exposure minus its adaptative capacity.
Physical assets were assessed for vulnerability to
climate hazards, including rooftops, guttering,
windows, water supply, generators, heating/
ventilation, information systems, lifts, as well as
building access to deliver services and local
transport.
The findings indicate that although the portfolio
has exposure to climate-related risks, these are
managed onsite through operational processes
and resilience asset design (which is reflected by
the generally low vulnerability of most assets to
climate-related impacts). Sites assessed with
potential high exposure and vulnerability
combined, will be prioritised for further
assessment to determine an appropriate
response. The Group’s 68 sites are geographically
dispersed reducing the risk of one extreme climate
event substantially impacting the whole Group.
Figure 5: vulnerability definition adapted from Füssel & Klein
model, 2006
Group portfolio assessed exposure to physical climate risk
70
60
50
40
30
20
10
0
s
e
m
o
h
f
o
r
e
b
m
u
N
Figure 6: Group’s assessed current exposure to physical climate risk
Physical climate risk
Group portfolio assessed vulnerability to physical climate risk
70
60
50
40
30
20
10
0
s
e
m
o
h
f
o
r
e
b
m
u
N
Very low
Low
Medium
High
Very High
Very low
Low
Medium
High
Very High
Figure 7: Group’s assessed current vulnerability to physical climate risk. Risk rating scale is aligned to Estia Health’s risk
criteria
Physical climate risk
Estia Health Limited
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CLIMATE-RELATED FINANCIAL DISCLOSURES REPORT (continued)
4. RISK MANAGEMENT
TCFD recommendations – risk management
Disclose how the organisation identifies, assesses, and manages climate-related risks
Recommended disclosures
a) Describe the organisation’s processes for identifying and assessing climate-related risks
b) Describe the organisation’s processes for managing climate-related risks.
c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated
into the organisation’s overall risk management
a) Process for identifying climate-related risks and opportunities
.
In FY22 a high-level risk identification, assessment and analysis was completed to identify physical and transition
climate-related risks and opportunities understood to be relevant to the Group. In focusing on the short-term time
horizon (3 years) as a priority to assess the potential risk and opportunity on the organisation’s business strategy
and financial planning, the exercise took into account recent climate events in Australia, work completed to
assess the Group’s portfolio to physical climate-related risk, as well as broader recent macroeconomic issues to
best assess the relevant risk and opportunities to the business.
b) Process for managing climate-related risks
The analysis was attended by the Group’s key executives and managers, including representatives from finance,
property and development, hospitality, procurement and risk and sustainability, supported by external consultants.
Assessments were completed using Estia Health’s Risk Management Framework to determine the likelihood and
consequence of each risk in line with the Group’s risk appetite. This assessment will be undertaken each year
and from FY23 will include scenario modelling, advanced financial modelling over the medium and long-term.
c)
Integrating climate-related risk into Estia Health’s Risk Management Framework
Climate change has been assessed and reflected within
the Group’s corporate risk profile relative to other risks
that could prevent the achievement of strategic
objectives.
Priorities have been established based on ‘plausible’
events that could occur taking into consideration the
current operating and control environment.
Figure 6: Estia Health’s Risk Management Process
and Framework
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CLIMATE-RELATED FINANCIAL DISCLOSURES REPORT (continued)
5. METRICS AND TARGETS
TCFD recommendations – metrics and targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.
Recommended disclosures
a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with
its strategy and risk management process.
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related
risks.
c) Describe the targets used by the organisation to manage climate-related risks and opportunities and
performance against targets
The Group’s Sustainability Strategy will work towards establishing and regularly reviewing targets aligned with
each TCFD defined cross-industry, climate-related metric categories. Current relevant metrics in the strategy
include:
• Absolute carbon emissions (Scope 1 and 2) and intensity
• Onsite renewable energy generation
• Assessment of individual home resilience to physical risk.
TCFD Metric Category
Targets
Current Status
Greenhouse Gas (GHG) emissions
Absolute Scope 1, Scope 2 and Scope 3;
emissions intensity (MT of CO2e)
.
Transition risks
Amount and extent of assets of business
activities vulnerable to transition risks
(amount or percentage)
Physical risks
Amount or extent of assets or business
activities vulnerable to climate risks
(amount or percentage)
Climate-related opportunities
Proportion of revenue, assets or other
business activities aligned with climate-
related opportunities
(amount or percentage)
Capital deployment
Amount of capital expenditure, financing or
investment deployed to toward climate-
related risks and opportunities (reporting
currency)
Internal carbon prices
Prices on each ton of GHG emissions used
internally by an organisation
Remuneration
Proportion of executive management
remuneration linked to climate
considerations (percentage, weighting,
description or amount in reporting currency)
By FY24: 20%
reduction in
operational carbon
emissions intensity
(Scope 1 and 2)1
from FY19 baseline
FY22 total emissions (Scope 1 and 2): 24,989 tCO2e-
FY22: 5% reduction from 2019 baseline
FY21: 7% reduction from 2019 baseline2
Total 12% reduction against 2019 baseline
The Group is assessing the most appropriate
methodology for ongoing accurate measurement and
reporting of indirect Scope 3 emissions.
To be determined in
FY23
Initial high-level analysis to determine relevant
physical and transition risks to the Group in the short-
term.
By 2024: 100% of
portfolio assessed
for climate resilience
FY22: Initial high-level analysis to determine relevant
physical and transition risks. 100% of homes assessed
for exposure and vulnerability to physical climate
change with further risk screening and assessments
for specific homes planned.
To be determined in
FY23
Previously the group has significantly invested in
sustainability initiatives (onsite solar, efficiency of
assets) and continues to investigate responsible
investment options to support the strategy.
To be determined in
FY23
Capital investment of $4.1 million to install solar
panels, with 52 sites completed to date3
In October 2021, the Group established a new $330.0
million Sustainability Linked Loan with targets linked to
reduced greenhouse gas emissions.
Based on the industry and scale of the group, there are no immediate plans to
develop and disclose internal carbon pricing.
To be determined in
FY23
The Group determined that at present other critical
measures were of higher priority to management
remuneration. This position will be assessed annually.
1 Scope 1 and 2 emissions intensity calculated per occupied bed (kg CO2-e/occupied bed day). Emission Factors as per NGA 2021: Australian
National Greenhouse Account Factors (Measurement Determination) published 2021.
2 FY21 emissions intensity reduction of 6%, has been recalculated to 7% in FY22 due to improvements in data analysis.
3 Capital investment includes total costs identified in assigned business cases and does not include ongoing maintenance costs. A total of 59 Estia
Health sites have solar installations.
Estia Health Limited
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Auditor’s Independence Declaration
Chair and CEO message
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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 2022, 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;
b. No contraventions of any applicable code of professional conduct in relation to the audit; and
c. No non-audit services provided that contravene 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
23 August 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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Consolidated Statement of Profit or Loss and Other Comprehensive Income
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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2022
Revenue
Other income
Expenses
Employee benefits and agency staff expense
Administrative expenses
Occupancy expenses
Resident expenses
Depreciation, impairment and amortisation expense excluding bed licences
Amortisation of bed licences
Class action settlement
Operating (loss) / profit for the year
Net finance costs
(Loss) / Profit before income tax
Income tax (benefit) / expense
(Loss) / Profit for the year
Other comprehensive income, net of tax
Other comprehensive income to be reclassified to profit or loss in
subsequent periods, net of tax
Other comprehensive income to be reclassified to profit or loss in
subsequent periods, net of tax
Other comprehensive income for the year, net of tax
Notes
B1
B1
B2
B3
B4
C6
2022
$’000
671,067
Restated1
2021
$’000
646,305
8,966
19,087
488,773
444,108
27,729
21,087
64,233
45,122
60,349
-
(27,260)
23,318
21,054
64,381
42,808
-
12,409
57,314
B5
46,298
48,812
(73,558)
8,502
B6
(21,196)
(52,362)
2,897
5,605
-
-
-
-
-
-
Total comprehensive (loss) / profit for the year, net of tax
(52,362)
5,605
(Loss) / earnings per share
Basic
Diluted
1 Refer to Note E4 for details relating to the restatement of prior period comparative
Cents per
share
Restated1
Cents per
share
B7
B7
(20.10)
(20.10)
2.15
2.12
The accompanying notes form part of these Consolidated Financial Statements.
Estia Health Limited
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Consolidated Statement of Financial Position
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments and other assets
Consumable supplies
Assets held for sale
Income tax receivable
Total current assets
Non-current assets
Property, plant, equipment
Investment properties
Goodwill
Bed licences and other intangible assets
Right of use assets
Prepayments
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Other financial liabilities
Provisions
Income tax payable
Lease liabilities
Refundable accommodation deposits and bonds
Total current liabilities
Non-current liabilities
Lease liabilities
Provisions
Loans and borrowings
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
1 Refer to Note E4 for details relating to the restatement of prior period comparative
Notes
C1
C2
C3
C4
C5
C6
C6
C7
C8
C9
C7
D1
C7
C9
D2
B6
D3
D4
2022
$’000
20,411
10,261
4,567
4,714
-
11,960
51,913
840,343
750
681,014
164,209
56,367
377
Restated1
2021
$’000
33,428
7,125
5,835
2,985
2,601
-
51,974
845,465
750
681,014
223,815
59,220
352
1,743,060
1,810,616
1,794,973
1,862,590
52,135
466
63,126
-
3,686
884,069
39,305
508
59,962
1,162
3,897
863,929
1,003,482
968,763
58,766
8,542
98,487
83,959
61,225
6,059
113,833
99,617
249,754
280,734
1,253,236
1,249,497
541,737
613,093
795,748
3,483
(257,494)
803,459
2,629
(192,995)
541,737
613,093
The accompanying notes form part of these Consolidated Financial Statements.
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Consolidated Statement of Changes in Equity
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
Notes
Issued
capital
$’000
Share-based
payments
reserve
$’000
Accumulated
losses
$’000
Total
equity
$’000
Balance at 1 July 2020, as previously reported
Effect of change in accounting policy (net of tax)
E4
Adjusted balance as at 1 July 2020
803,397
-
803,397
1,706
-
1,706
(196,354)
(2,246)
608,749
(2,246)
(198,600)
606,503
Profit for the year, as restated
Other comprehensive income
Total comprehensive income, as restated
Transactions with shareholders:
Transfer from share-based payments reserve
Repayment of management equity plan
Share-based payments
D3
D4
D4
-
-
-
62
-
-
-
-
-
(62)
12
973
5,605
-
5,605
-
-
-
5,605
-
5,605
-
12
973
Balance as at 30 June 2021, as restated
803,459
2,629
(192,995)
613,093
Balance as at 1 July 2021, as restated
803,459
2,629
(192,995)
613,093
Loss for the year
Other comprehensive income
Total comprehensive income
-
-
-
-
-
-
(52,362)
-
(52,362)
-
(52,362)
(52,362)
Transactions with shareholders:
Shares repurchased and incremental costs
Transfer from share-based payments reserve
Share-based payments
Repayment of management equity plan
Dividends
As at 30 June 2022
D3
D3
D4
D4
D3
(7,956)
244
-
1
-
795,748
-
(244)
1,086
12
-
3,483
-
-
-
-
(12,137)
(7,956)
-
1,086
13
(12,137)
(257,494)
541,737
The accompanying notes form part of these Consolidated Financial Statements.
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Consolidated Statement of Cash Flows
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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2022
Notes
2022
$’000
Restated1
2021
$’000
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
Income taxes paid
Finance costs paid
Interest expense on lease liabilities
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
Payments for shares repurchased on-market and incremental costs
Dividends paid
Repayment of lease liabilities
Net cash flows used in financing activities
B8
C6
C4
C5
D3
Net decrease 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
C1
1 Refer to Note E4 for details relating to the restatement of prior period comparative.
145,005
477,855
(575,983)
145,716
462,420
(569,768)
46,877
18
(7,584)
(4,669)
(1,911)
38,368
520
(6,065)
(6,153)
(1,943)
32,731
268,430
(245,629)
24,727
256,599
(226,007)
55,532
55,319
(1,676)
64
3,550
(31,780)
(939)
41
15,385
(47,098)
(29,842)
(32,611)
1
125,000
(139,500)
(7,956)
(12,137)
(4,115)
-
239,500
(255,000)
-
-
(4,380)
(38,707)
(19,880)
(13,017)
33,428
20,411
2,828
30,600
33,428
The accompanying notes form part of these Consolidated Financial Statements.
Estia Health Limited
112 Estia Health | 2021-22 Annual Report
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Notes to the Consolidated Financial Statements
A About this Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION A: ABOUT THIS REPORT
This section sets out the basis on which the Group’s financial report is prepared as a whole. Where a
significant accounting policy is specific to a note, the policy is described within that note.
A1
CORPORATE INFORMATION
The Consolidated Financial Statements of Estia Health Limited (the “Company” or the “Parent”) and its
subsidiaries (collectively, the “Group” or “Estia Health”) for the year ended 30 June 2022 were authorised for
issue in accordance with a resolution of the Directors on 23 August 2022.
The Company is a for-profit company limited by shares incorporated in Australia and whose shares are publicly
traded on the Australian Securities Exchange 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
This general purpose financial report:
• has been prepared in accordance with the Australian Accounting Standards, other authoritative
pronouncements of the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001;
• has been prepared on the basis of historical cost, except for investment properties which have been
measured at fair value;
• complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board;
• presents all values as rounded to the nearest thousand dollars unless otherwise stated under the option
available under ASIC Corporations (Rounding in Financial / Directors’ Reports) Instrument 2016/191;
• does not early adopt any Australian Accounting Standards and Interpretations issued or amended but are
not yet effective.
Refer to Note E4 for information related to the changes in the Group’s accounting policies.
A3
BASIS OF CONSOLIDATION
The Consolidated Financial Statements comprise the financial statements of the Company and its controlled
subsidiaries as at and for the year ended 30 June 2022 (refer to Note E7 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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION A: ABOUT THIS REPORT
A4
CURRENT OR NON-CURRENT CLASSIFICATION
The Group presents assets and liabilities in the Consolidated Statement of Financial Position based on current/
non-current classification. An asset is current when it is:
• Expected to be realised or intended to be sold or consumed in the normal operating cycle
• Expected to be realised within twelve months after the reporting period
• Held primarily for trading, or
• Cash and cash equivalent unless restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
It is expected to be settled in the normal operating cycle
It is due to be settled within twelve months after the reporting period
•
•
• Held primarily for trading, or
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the
reporting period.
The Group classified all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-
current assets and liabilities.
A5
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 Group’s current liabilities exceed current assets by
$951,569,000 as at 30 June 2022 (2021: $916,789,000) resulting in a net deficiency of current assets. This mainly
arises due to Refundable Accommodation Deposits (“RADs”) of $884,069,000 (2021: $863,929,000) as current
liabilities.
RADs and Bonds are classified as a current liability because 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 may be replaced quickly 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 to Note D1 for further details).
The Group has a syndicated financing facility of $330,000,000 of which $230,000,000 remains undrawn as at 30
June 2022 (2021: $215,500,000). This debt facility can be drawn down to repay RAD and bond refunds should
the Group experience significant RAD and bond net outflows. The Group also has a guarantee facility of
$8,000,000 (2021: nil) of which $326,000 remains unused as at 30 June 2022 (2021: nil).
The potential future impact of COVID-19 on the Group’s future cash flows has been taken into consideration in
preparing the financial report on a going concern basis – For the impact of COVID-19 subsequent to the reporting
period, please refer to Note E5 to the financial statements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION A: ABOUT THIS REPORT
A6
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 associated with these assumptions and estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities impacted in future periods.
Information about critical judgements, estimates and assumptions that are material to the financial statements
relate to the following areas:
Significant accounting judgements, estimates and assumptions
Note B1
Note B5
Note C2
Note C5
Note C6
Note C7
Note C9
Note D4
Revenue and other income
Finance costs
Allowance for expected credit losses
Property, plant and equipment impairment test
Intangible assets impairment test and bed licence amortisation
Leases
Provisions
Share-based payments
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION B: OUR PERFORMANCE
This section provides additional information on the Group results for the year, including detail on revenue,
expenses, earnings per share.
B1
REVENUE AND OTHER INCOME
Revenue
Government funded residential care subsidies & supplements1
Basic daily fee supplement
Resident daily care fees
Other resident fees2
Imputed DAP revenue on RAD and bond balances under AASB 162
Total revenue
Other income
Net gain on disposals of assets held for sale
Net gain on disposals of property, plant and equipment
Government grants3
Other income
Total other income
2022
$’000
2021
$’000
459,082
20,569
110,411
41,677
39,328
671,067
848
64
8,053
1
8,966
456,120
-
106,569
41,300
42,316
646,305
9,446
41
9,600
-
19,087
The Group recognises revenue from residential aged care services over time as performance obligations are
satisfied, which is as the services are rendered. Services provided by the Group include provision of
accommodation, use of common areas or facilities, and the ongoing daily delivery of care.
1. Government funded residential care subsidies & supplements includes temporary additional funding of
$11,826,000 for the year ended 30 June 2021 provided by the Australian Government to support additional
costs and workforce supply pressures resulting from COVID-19. No temporary additional funding was received
during the current financial year.
2. Other resident fees include operating lease revenue for the provision of accommodation, that is accounted for in
accordance with AASB 16 Leases ("AASB 16"). In addition, the amount includes imputed revenue in relation to
residents who have chosen to pay a RAD or bond which is a non-cash amount.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION B: OUR PERFORMANCE (CONTINUED)
B1
REVENUE AND OTHER INCOME (CONTINUED)
3. Monetary Government grants
During the year, the Group submitted claims to the Federal Government relating to expenses incurred in
managing the direct impacts of COVID-19 during the year as shown below:
Grant submitted during the year
Confirmed and received before end of year
Confirmed but not received before end of year
Grant claims recognised as income during the year
Grant claims submitted before end of year
- Subsequently confirmed which will be recognised as income in subsequent
financial year
- Not yet confirmed at the date of this report
- Amounts of claims rejected
Total grant claims submitted during the year
Further grant claims submitted after end of year relating to current year’s costs
Total grant claims submitted relating to current year’s costs
Total grant claims relating to current year’s costs not recognised as income
for the year(a)
2022
$’000
7,049
23
7,072
1,361
21,362
233
30,028
6,575
36,603
29,298
2021
$’000
7,369
-
7,369
-
-
-
-
-
7,369
-
(a) These grants will be recognised as income subsequently upon the approval of related grant applications.
Non-monetary Government grants
PPE totalling $980,000 (2021: $2,231,000) received from the Government was consumed during the year,
which supplemented its own purchases.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
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 1997 (the “Act”). The level of subsidy or supplement depends 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 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"). As a result, the MTCF
reduces the amount the Government pays directly to the provider. The total MTCF included within the total
Government Funded Residential Care Subsidies and Supplements was $16,808,000 for the year ended 30 June
2022 (2021: $15,478,000).
(b) Basic Daily Fee supplement
The Group receives Basic Daily Fee supplement in accordance with the provisions of the Aged Care Act 1997
which is introduced with effect from 1 July 2022 to support eligible aged care providers to deliver better care and
services to residents with a focus on food and nutrition. The supplement is calculated as $10 per day per resident.
(c) Resident Daily Care Fees
The Group receives Basic 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.
(d) 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.
(e) Imputed Revenue on RAD and Bond Balances under AASB 16 Leases (“AASB 16”)
Accommodation services provided to residents who have elected to pay a RAD or accommodation bond are
accounted for as a lease under AASB 16.
(f) Other Income
During the year, a facility in Keilor Downs, Victoria was closed, and later sold for a total of $3,550,000 (2021: two
properties sold for $16,450,000) and recognised a net gain on sale of $848,000 (2021: net gain on sale of
$9,446,000).
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.
(g) 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)
(ii)
‘contract asset’ for the right to consideration in exchange for services that have transferred to a
customer;
‘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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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION B: OUR PERFORMANCE (CONTINUED)
B1
REVENUE AND OTHER INCOME (CONTINUED)
SIGNIFICANT ACCOUNTING POLICY
The Group recognises revenue under AASB 15 Revenue from Contracts with Customers (“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.
Government grants are recognised where there is reasonable assurance that the grant will be received and all
attached conditions will be complied with. When the grant relates to compensation for expenses already incurred
or for the purpose of giving immediate financial support with no future related costs, it is recognised in profit or
loss of the period in which it becomes receivable. When the Group receives grants of non-monetary assets, the
replacement cost of the underlying assets received are initially recognised as inventory and deferred grant
income, which subsequently get released to profit or loss based on the pattern of consumption of the benefits of
the underlying asset. Government grants are considered as other income.
Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an
asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the
lease terms and is included in Other resident fees. Total revenue includes imputed revenue in relation to residents
who have chosen to pay a RAD or bond. Under AASB 16, the fair value of non-cash consideration (in the form of
an interest-free loan) received from a resident that has elected to pay a RAD or accommodation bond is required
to be recognised as income and correspondingly, interest expense with no net impact on profit or loss.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
Imputed Daily Accommodation Payment (“DAP") Revenue on RAD and Bond Balances
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 DAP Revenue on RAD and Bond Balances. The MPIR is a rate set by the
Government and is used to calculate the DAP to applicable residents.
COVID-19 related grant income
Based on previous experience and the processes adopted by the Group prior to submission of grant claims, the
Group believes that its grant applications meet all eligibility criteria. However, the approval of submitted claims is
wholly managed by and at the discretion of Government, and as such the outcome of the submissions cannot be
predicted with certainty until they are approved formally by the Government. Therefore, the Group considered
that the income associated with these grants shall be recognised in accordance with AASB 120 Accounting for
Government Grants and Disclosure of Government Assistance when the Group obtains reasonable assurance
that the grants will be received which is upon receipt of approval from the Government.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION B: OUR PERFORMANCE (CONTINUED)
B2
EMPLOYEE BENEFITS AND AGENCY STAFF EXPENSES
Salaries and wages expense
Superannuation expense
Other employee expenses including agency staff expenses
Total employee benefits and agency staff expenses
COVID-19 aged care retention bonuses
2022
$’000
382,129
34,651
71,993
488,773
Restated1
2021
$’000
366,133
33,014
44,961
444,108
The Group administered and disbursed COVID-19 aged care retention bonuses on behalf of the Australian
Government during the financial year and considered that it acted as an agent in making these payments on
behalf of the Australian Government. Total payments of $4,385,000 for the year ended 30 June 2022 (2021:
$9,104,000) were therefore treated as a disbursement and were presented as a pass-through with no impact on
the financial results.
B3
ADMINISTRATIVE EXPENSES
Advertising and marketing expenses
Telephone and communication expenses
Travelling expenses
Printing and stationery expenses
Professional services expenses
Insurance premiums
Other administrative expenses
Total administrative expenses
1 Refer to Note E4 for details relating to the restatement of prior period comparative
B4
OCCUPANCY EXPENSES
Repairs and maintenance expense
Other occupancy expenses
Total occupancy expenses
Estia Health Limited
120 Estia Health | 2021-22 Annual Report
2022
$’000
1,313
2,297
2,752
1,196
6,609
5,241
8,321
Restated1
2021
$’000
1,326
2,576
800
1,179
5,561
4,200
7,676
27,729
23,318
2022
$’000
8,199
12,888
21,087
2021
$’000
8,555
12,499
21,054
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION B: OUR PERFORMANCE (CONTINUED)
B5
NET FINANCE COSTS
Finance income
Interest income from cash at banks
Total finance income
Finance costs
Imputed interest expense on RAD and bond balances
Interest expense on accommodation bonds for departed residents
Interest expense on leases under AASB 16
Interest expense on bank loans
Other finance costs
Total finance costs
Net finance costs
SIGNIFICANT ACCOUNTING POLICY
Interest income
2022
$’000
19
19
39,328
2,654
1,911
469
1,955
46,317
2021
$’000
520
520
42,316
2,019
1,943
1,509
1,545
49,332
46,298
48,812
Interest income is recognised using the effective interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to the net carrying amount of the financial asset.
Borrowing costs
Borrowing costs comprise 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 C7
for Interest expenses under AASB 16 and D2 for information relating to loans and borrowings.
Imputed interest on RAD
Refer to Note B1 revenue and other income.
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 DAP 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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION B: OUR PERFORMANCE (CONTINUED)
B6
INCOME TAX
Major components of income tax expense
Current income tax
Current tax (benefit) / 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 (benefit) / expense
Reconciliation of income tax expense and accounting profit:
Accounting profit before income tax
At the Australian statutory income tax rate of 30% (2021: 30%)
Adjustments in respect of income tax of previous year
Utilisation of previously unrecognised tax losses
Expenditure not allowable for income tax purposes
- Other expenditure
Income tax (benefit) / expense
20222
$’000
(3,432)
(2,106)
(17,795)
2,137
(21,196)
Restated1
2021
$’000
1,155
(433)
1,663
512
2,897
2022
$’000
(73,558)
(22,067)
31
-
840
(21,196)
Restated1
2021
$’000
8,502
2,551
79
(13)
280
2,897
1 Refer to Note E4 for details relating to the restatement of prior period comparative
2 Under Government’s Loss Carry Back Tax Offset regime, the Group intends to carry back the tax loss incurred during the year
against its income tax paid in earlier years, which is expected to result in a tax refund in the following financial year. As such, a
current tax asset has been recognised.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION B: OUR PERFORMANCE (CONTINUED)
B6
INCOME TAX (CONTINUED)
Major components of deferred tax
Consolidated Statement
of Profit or Loss and
Comprehensive Income
Consolidated Statement
of Financial Position
Accelerated depreciation and impairment
Lease liabilities
Provisions and accruals
Assets held for sale
Right of use assets
Bed licences
Other1
Deferred tax expense / (credit)
Deferred tax liabilities, net
2022
$’000
(1,539)
(3,153)
1,876
-
987
17,610
(123)
15,658
Restated1
2021
$’000
(3,672)
2,244
2,028
(2,216)
-
-
(727)
(2,343)
Reflected in the Consolidated Statement of Financial Position as follows:
Deferred tax assets
Deferred tax liabilities
Deferred tax liabilities, net
1 Refer to Note E4 for details relating to the restatement of prior period comparative
Reconciliation of deferred tax liabilities, net:
Balance at 1 July 2020
Income tax expense during the year recognised in profit or loss
Adjustments in respect of income tax of previous year
Balance as at 1 July 2021, as previously reported
Effect of change in accounting policy (net of tax)
Balance as at 1 July 2021, as restated
Income tax credit during the year recognised in profit or loss
Adjustments in respect of income tax of previous year
Balance as at 30 June 2022
Notes
E4
2022
$’000
(61,388)
18,736
23,951
-
(16,910)
(46,961)
(1,387)
Restated1
2021
$’000
(59,849)
21,889
22,075
-
(17,897)
(64,571)
(1,264)
(83,959)
(99,617)
42,924
(126,883)
44,347
(143,964)
(83,959)
(99,617)
$’000
(98,404)
(1,831)
(512)
(100,747)
1,130
(99,617)
17,795
(2,137)
(83,959)
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION B: OUR PERFORMANCE (CONTINUED)
B6
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 Australian Taxation Office (“ATO”). 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, the Group 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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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION B: OUR PERFORMANCE (CONTINUED)
B7
EARNINGS PER SHARE
Basic (loss) / earnings per share
Diluted (loss) / earnings per share
2022
cents
(20.10)
(20.10)
Restated1
2021
cents
2.15
2.12
Basic Earnings Per Share (“EPS”) are calculated as net profit or loss after tax divided by the weighted average
number of ordinary shares outstanding during the year.
Diluted EPS is calculated on the same basis as basic EPS except that it reflects the impact of any potential
commitments the Group has to issue shares in the future, for example shares to be issued upon vesting of
performance rights.
Due to the loss for the year, the diluted earnings per share is the same as the basic earnings per share.
Earnings used in calculation of EPS
(Loss) / Profit attributable to owners of the Company
Weighted average number of shares used in calculating EPS
Weighted average number of ordinary shares used in calculating basic EPS
Adjustment for calculation of diluted EPS:
-
Performance rights2, 3
2022
$’000
(52,362)
Restated1
2021
$’000
5,605
2022
Number
2021
Number
260,519,150 261,294,969
2,559,858
3,013,807
Weighted average number of ordinary shares adjusted for the effect of dilution 263,079,008 264,308,776
1. Refer to Note E4 for details relating to the restatement of prior period comparative
2. Performance rights granted to participants are considered to be potential ordinary shares and have been included in the
determination of diluted EPS to the extent to which they are dilutive.
3. The shares that may dilute basic earnings per share in the future, were anti-dilutive for the year ended 30 June 2022 due to
the loss for the year and therefore they were not included in the calculation of diluted earnings per share.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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SECTION B: OUR PERFORMANCE (CONTINUED)
B8
CASH FLOW RECONCILIATION
(a) Reconciliation of net profit / (loss) or profit after income tax to net cash flows from operations
(Loss) / Profit for the year
Adjustments to reconcile profit after income tax to net cash flows:
Depreciation of property, plant and equipment
Depreciation on right of use assets
Amortisation of bed licences and other intangible assets
Impairment of property, plant and equipment
Net gain on disposal of property, plant and equipment
Net gain on sale of assets held for sale
Pre-FY14 accommodation bond retentions
Imputed revenue on RAD and bond balances
Imputed interest cost on RAD and bond balances
Income tax (benefit) / expense
Finance costs
Share-based payments
Movement in allowance for expected credit losses
(Increase) / Decrease in:
Trade and other receivables
Prepayments and other assets
(Decrease) / Increase in:
Trade and other payables
Provisions
Refundable accommodation deposits and bonds
Less: Income tax paid
Net cash flows from operating activities
1 Refer to Note E4 for details relating to the restatement of prior period comparative.
Estia Health Limited
126 Estia Health | 2021-22 Annual Report
2022
$’000
Restated1
2021
$’000
(52,362)
5,605
40,031
4,142
61,180
118
(64)
(848)
(2,661)
39,328
(39,328)
(21,196)
409
1,097
(328)
(2,864)
(1,447)
9,462
5,646
22,801
(7,584)
55,532
35,891
4,535
1,402
980
(41)
(9,446)
(2,968)
42,316
(42,316)
2,897
865
985
(718)
1,590
(2,397)
(16,577)
8,189
30,592
(6,065)
55,319
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION B: OUR PERFORMANCE (CONTINUED)
B8
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 by 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.
(b) Reconciliation of liabilities arising from financing activities
Non-current loans and borrowings
Lease liabilities
Dividends payable
2021
$’000
113,833
65,122
-
Net
cash flows
$’000
(14,500)
(5,987)
(12,137)
Total liabilities from financing activities
178,955
(32,624)
Other
$’000
(846)
3,317
12,137
14,608
2022
$’000
98,487
62,452
-
160,939
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C Assets and Liabilities
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION C: ASSETS AND LIABLITIES
This section outlines the assets and liabilities held by the Group as at 30 June each year.
C1
CASH AND CASH EQUIVALENTS
Cash at bank
Cash on hand
Total cash and cash equivalents
Cash at bank earns interest at floating rates based on daily bank deposit rates.
2022
$’000
20,357
54
20,411
2021
$’000
33,300
128
33,428
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 2022
SECTION C: ASSETS AND 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
As at 1 July
Net remeasurement of allowance for expected credit losses
Utilised
As at 30 June
2022
$’000
6,586
4,642
(967)
10,261
2022
$’000
1,295
(20)
(308)
967
2021
$’000
6,767
1,653
(1,295)
7,125
2021
$’000
2,013
(302)
(416)
1,295
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 categories of receivables with similar credit risk
characteristics, adjusted for any material expected changes to the future credit risk of that category 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
receivables with similar risk characteristics to group together in the provision matrix. The Group estimates the
rate of allowance of expected credit loss for each category of receivables, which requires the use of historical
rates of default and assumptions based on future economic conditions, such as a downturn in the Australian
economy or adverse changes to the aged pension, which may impact the ability to collect outstanding customer
balances. Note D5 contains additional information in relation to Credit Risk.
The Group determined that the risk characteristics of its customers were not significantly impacted by COVID-19
during the year. 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 debtors balances.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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SECTION C: ASSETS AND LIABILITIES (CONTINUED)
C3
CONSUMABLE SUPPLIES
Consumable supplies, at lower of cost or net realisable value
Total consumable supplies
2022
$’000
4,714
4,714
2021
$’000
2,985
2,985
During the year, the Group recognised the following expenses in resident expenses for consumable supplies
carried at lower of cost or net realisable value.
Consumption
Write-down of expired consumable supplies
Write-down of consumable supplies to net realisable value
Total consumable supplies expensed during the year
SIGNIFICANT ACCOUNTING POLICY
2022
$’000
4,966
298
28
5,292
2021
$’000
6,131
688
318
7,137
Consumable supplies are recorded using the First In First Out Method and are valued at the lower of cost and
net realisable value, which is the estimated replacement cost.
C4
ASSETS HELD FOR SALE
Assets held for sale
Total assets held for sale
2022
$’000
-
-
2021
$’000
2,601
2,601
The prior year balance represented a land site in Wombarra which has been subject to continued protracted
negotiations over its sale. The Group has assessed that a commercial transaction eventuating between the
parties within the next 12 months as being unlikely. As such, the carrying value of the land site was reclassified as
Property, Plant and Equipment with no impact on the results of operations for the current period and any prior
periods presented.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
FOR THE YEAR ENDED 30 JUNE 2022
SECTION C: ASSETS AND LIABILITIES (CONTINUED)
SECTION C: ASSETS AND LIABILITIES (CONTINUED)
C5
C5
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT
Reconciliation of property, plant and equipment
Reconciliation of property, plant and equipment
Note
Note
Cost
Cost
Balance at 1 July 2020
Balance at 1 July 2020
Additions
Additions
Transfers
Transfers
Disposals
Disposals
Transfer to assets held for sale
Transfer to assets held for sale
Land
$’000
Land
$’000
Buildings
Buildings
$’000
$’000
Property
Property
improve-
improve-
ments
ments
$’000
$’000
Furniture,
Furniture,
fixtures &
fixtures &
equipment
equipment
$’000
$’000
Motor
Motor
vehicles
vehicles
$’000
$’000
Construction
in progress
$’000
Construction
in progress
$’000
Total
$’000
Total
$’000
193,813
193,813
-
-
-
-
-
-
(3,748)
(3,748)
531,024
531,024
750
750
35,492
35,492
(28)
(28)
-
-
82,689
82,689
3,238
3,238
3,056
3,056
(131)
(131)
-
-
118,912
118,912
9,195
9,195
11,790
11,790
(2,232)
(2,232)
-
-
899
899
246
246
-
-
(153)
(153)
-
-
34,581 961,918
34,581 961,918
44,012
30,583
44,012
30,583
-
(50,338)
(50,338)
-
(4,878)
(2,334)
(4,878)
(2,334)
(3,748)
-
-
(3,748)
Balance at 30 June 2021
Balance at 30 June 2021
190,065
190,065
567,238
567,238
88,852
88,852
137,665
137,665
992
992
12,492 997,304
12,492 997,304
Additions
Additions
Transfers
Transfers
Disposals
Disposals
Net transfer to assets held for sale
Net transfer to assets held for sale
Balance at 30 June 2022
Balance at 30 June 2022
-
-
-
-
-
-
378
378
-
-
-
-
-
-
(3,323)
(3,323)
2,745
3,331
(631)
(737)
2,745
3,331
(631)
(737)
9,400
7,803
(2,455)
(787)
9,400
7,803
(2,455)
(787)
79
-
(89)
-
79
-
(89)
-
35,067
35,067
22,843
22,843
(11,134)
-
-
(11,134)
(5)
(3,180)
(3,180)
(5)
(4,469)
-
-
(4,469)
190,443
190,443
563,915
563,915
93,560
93,560
151,626
151,626
982
982
24,196 1,024,722
24,196 1,024,722
Accumulated depreciation and impairment
Accumulated depreciation and impairment
-
Balance at 1 July 2020
-
Balance at 1 July 2020
Depreciation expense
-
Depreciation expense
-
821
Impairment expense
821
Impairment expense
-
Disposals
-
Disposals
55,827
55,827
11,352
11,352
-
-
(31)
(31)
9,189
9,189
5,238
5,238
-
-
(131)
(131)
51,394
51,394
19,694
19,694
-
-
(2,174)
(2,174)
770
770
41
41
-
-
(151)
(151)
2,213 119,393
2,213 119,393
36,325
-
-
36,325
980
159
159
980
(4,859)
(2,372)
(4,859)
(2,372)
Balance at 30 June 2021
Balance at 30 June 2021
821
821
67,148
67,148
14,296
14,296
68,914
68,914
660
660
- 151,839
- 151,839
Depreciation expense
Depreciation expense
Impairment expense, net of
Impairment expense, net of
impairment reversals
impairment reversals
Disposals
Disposals
Transfer to assets held for sale
Transfer to assets held for sale
Balance at 30 June 2022
Balance at 30 June 2022
Net book value
Net book value
As at 30 June 2021
As at 30 June 2021
As at 30 June 2022
As at 30 June 2022
-
-
13,275
13,275
6,378
6,378
20,308
20,308
70
70
-
40,031
-
40,031
113
113
-
-
-
-
-
-
-
-
(3,154)
(3,154)
-
-
(603)
(603)
(694)
(694)
-
-
(2,384)
(2,384)
(679)
(679)
-
(90)
-
-
(90)
-
5
(5)
-
118
5
(3,082)
(5)
(4,527)
-
118
(3,082)
(4,527)
934
934
77,269
77,269
19,377
19,377
86,159
86,159
640
640
- 184,379
- 184,379
189,244
189,244
500,090
500,090
74,556
74,556
68,751
68,751
332
332
12,492 845,465
12,492 845,465
189,509
189,509
486,646
486,646
74,183
74,183
65,467
65,467
342
342
24,196 840,343
24,196 840,343
Estia Health Limited
Estia Health Limited
80
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION C: ASSETS AND LIABILITIES (CONTINUED)
C5
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
SIGNIFICANT ACCOUNTING POLICY
Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated
impairment losses. Land is not depreciated. Such cost includes the cost of replacing parts 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 acquired through business combination 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
Assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively, if
appropriate, at each financial year end.
De-recognition & Disposal
An item of property, plant and equipment and any significant part initially recognised is de-recognised 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 de-recognised.
Impairment
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
or 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.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The Group capitalises costs relating to the construction and refurbishment of aged care facilities. The initial
capitalisation of costs is based on the Group’s judgement that the project is expected to generate future
economic benefits. Subsequent to determining the initial eligibility for capitalisation the Group re-assesses on
a regular basis whether projects are still sufficiently probable of completion and expected to deliver desired
economic benefits.
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SECTION C: ASSETS AND LIABILITIES (CONTINUED)
C6
GOODWILL AND OTHER INTANGIBLE ASSETS
Cost
Balance at 1 July 2020, as reported
Effect of change in accounting policy
Balance at 1 July 2020, as restated
Additions, as restated
E4
E4
Notes
Goodwill
$’000
817,074
-
817,074
Bed
licences
$’000
221,281
-
221,281
Others
$’000
Total
$’000
11,530
(3,613)
1,049,885
(3,613)
7,917
1,046,272
-
-
1,040
1,040
Balance at 30 June 2021, as restated
817,074
221,281
8,957
1,047,312
Additions
Disposal
Transfer to assets held for sale
Balance at 30 June 2022
-
-
-
-
-
-
1,575
-
(10)
1,575
-
(10)
817,074
221,281
10,522
1,048,877
Accumulated amortisation and impairment
Balance at 1 July 2020, as reported
Effect of change in accounting policy
Balance at 1 July 2020, as restated
Amortisation expense, as restated
Balance at 30 June 2021, as restated
E4
E4
Amortisation expense
Disposal
Transfer to assets held for sale
Balance at 30 June 2022
Net book value
As at 1 July 2020, as restated
As at 30 June 2021, as restated
136,060
-
136,060
-
136,060
-
-
-
136,060
681,014
681,014
As at 30 June 2022
1 Refer to Note E4 for details relating to the restatement of prior period comparative
681,014
-
-
-
-
-
60,349
-
-
60,349
5,861
(405)
5,456
141,921
(405)
141,516
967
967
6,423
142,483
831
-
(9)
61,180
-
(9)
7,245
203,654
221,281
221,281
160,932
2,461
2,534
3,277
904,756
904,829
845,223
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION C: ASSETS AND LIABILITIES (CONTINUED)
C6
GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
SIGNIFICANT ACCOUNTING POLICY
Bed licences
Bed licences 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.
Subsequently, the Group’s bed licences, which were previously carried at cost less any accumulated impairment
losses, are now measured at cost less accumulated amortisation and any accumulated impairment losses
following the release of the discussion paper Improving Choice in Residential Aged Care – ACAR
Discontinuation on 30 September 2021 by the Australian Government. For details, refer to Significant
Accounting Judgements, Estimates and Assumptions for bed licences.
Bed licences are tested for impairment when circumstances indicate that the carrying value may be impaired.
Testing is performed in line with the procedures noted below in Goodwill.
Goodwill
Goodwill is initially measured at cost and represents the excess of the total 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
group of CGUs to which the goodwill relates. When the recoverable amount of the group of CGUs is less than
its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed
in future periods.
Other intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets
acquired in a business combination is its 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 recognised in profit or loss in the period in which the expenditure is incurred.
Refer to Note E4 for accounting policy in relation to configuration or customization costs in a cloud computing
arrangement.
The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives
are amortised over the useful life and assessed for impairment whenever there is an indication that the
intangible asset may be impaired.
Software costs are amortised over the estimated useful life of 3- 5 years.
The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed
at least at end of each financial year end. Changes in the expected useful life or the expected pattern of
consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation
period or method, as appropriate, which is a change in accounting estimates and are applied prospectively.
De-recognition and disposal
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 de-recognised.
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FOR THE YEAR ENDED 30 JUNE 2022
SECTION C: ASSETS AND LIABILITIES (CONTINUED)
C6
GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
(a)
Impairment of goodwill and other intangible assets
The Group performs impairment testing on goodwill and other intangible assets to ensure they are not carried
above their recoverable amounts at least annually (for goodwill and other intangible assets with an indefinite
useful life) and where there is an indication that assets maybe impaired, which is assessed at least at each
reporting date.
For impairment testing purposes, goodwill and other intangible assets are allocated to CGUs (aged care
facility) and a group of CGUs (Consistent with the operating segment identified in Note E6) that represent the
lowest level within the Group at which these assets are monitored. The carrying value of the CGUs or the
Group of CGUs was then compared against their recoverable amount. The recoverable amount 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 (2023 to 2027) 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.
The most sensitive assumptions used in the calculation of the value in use are the discount rate, long term growth
rate, and the assumption that Government policy will result in the cessation of margin erosion and profitability
experienced in recent years caused by a failure for Government funding increases to be consistent with input
cost inflation. Sensitivity analysis on reasonably likely changes to these assumptions did not result in an outcome
where impairment would be required.
Discount rate was applied to the cash flow forecasts, including the terminal value. This rate reflects the current
market assessments of the risks specific to the industry the Group operates in, and taking into consideration
the time value of money. The calculation of the rate is based on the specific circumstances of the asset and is
derived from its weighted average cost of capital.
Long term growth rate reflects an assessment of inflation and perpetual growth using market and economic
data.
The discount and growth rates used at 30 June 2022 in assessing the recoverable amount are as follows:
Post-tax discount rate
Pre-tax discount rate
Long term growth rate
2022
%
9.0
12.1
2.3
2021
%
9.3
12.5
2.3
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION C: ASSETS AND LIABILITIES (CONTINUED)
C6
GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
(b) Change in accounting estimates – Change in useful life assessment of bed licences
On 30 September 2021, the Australian Government released a discussion paper Improving Choice in
Residential Aged Care - ACAR Discontinuation. The discussion paper has confirmed the intention to abolish
the Aged Care Approvals Round (“ACAR”) and associated supply restrictions on bed licences which was first
announced in May 2021. The reforms will see the discontinuation of the bed licences from 1 July 2024. During
the transitional period providers can apply directly to the Australian Government confirmation of eligibility for
Government subsidies when they are ready to operate.
Bed licences were previously recognised as intangible assets with an indefinite useful life and therefore were
not amortised. Following the Government’s announcement and the information provided in the discussion
paper in September 2021, the Group expects that the remaining useful lives of the bed licences will not extend
beyond 1 July 2024, and have therefore determined that, notwithstanding the Directors’ view that the fair value
less cost to dispose of these bed licences is nil, amortisation of bed licences from 1 October 2021 to 30 June
2024 on a straight-line basis is required, in order to comply with the Australian Accounting Standards and the
Group’s accounting policy in relation to Goodwill and Intangible Assets,
The change in the useful life assessment was treated as a change in accounting estimates under AASB 108
Accounting Policies, Changes in Accounting Estimates and Errors and therefore was recognised prospectively
from 1 October 2021. As a result of the change, the amortisation expense recognised in the statement of profit
or loss is $60,349,000 (2021: nil) for the year ended 30 June 2022.
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SECTION C: ASSETS AND LIABILITIES (CONTINUED)
C7
LEASES
The Group has lease agreements for various aged care facilities, office space and office equipment with varying
lease terms.
Carrying amounts of right-of-use assets and associated lease liabilities and the movements during the year are
shown below:
As at 1 July 2020
Additions during the year
Depreciation expense
Interest expense
Lease payments
Remeasurement of leases
As at 30 June 2021
Additions
Depreciation expense
Interest expense
Lease payments
Remeasurement of leases
As at 30 June 2022
Note
Property
leases
$’000
66,992
-
(4,362)
-
-
(3,913)
58,717
-
(3,999)
-
-
1,111
55,829
Other
equipment
$’000
145
532
(174)
-
-
-
Total
right of use
assets
$’000
67,137
532
(4,536)
-
-
(3,913)
503
196
(143)
-
-
(18)
538
59,220
196
(4,142)
-
-
1,093
56,367
Lease
liabilities
$’000
72,962
532
-
2,080
(6,371)
(4,081)
65,122
196
-
1,911
(5,987)
1,210
62,452
The Group had low-value leases relating to office equipment such as printers and photocopiers. An amount of
$90,000 (2021: $121,000) was recognised as an expense during the year.
Under its lease agreements, the Group incurs payments in the form of expenditure in relation to insurance,
council and water rates, and water consumption. The Group recognised an amount of $447,000 (2021: $478,000)
as an expense during the year.
SIGNIFICANT ACCOUNTING POLICY
When a contract is entered into, the Group assesses whether a contract is, or contains, a lease. A lease
arises when 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.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease which is when 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 the estimated useful life of the
assets and the lease term. Right-of-use assets are subject to impairment testing.
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SECTION C: ASSETS AND LIABILITIES (CONTINUED)
C7
LEASES (CONTINUED)
SIGNIFICANT ACCOUNTING POLICY (Continued)
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 using the Group’s incremental borrowing rate (“IBR”) if the
rate implicit in the lease cannot be readily determined. 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.
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 to be 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.
Interest expense on lease liabilities
Interest expense on lease liabilities is reported as a component of total finance costs. It is paid to the lessor over
the duration of the lease for the right to use the leased assets which is calculated using IBR times the
outstanding lease obligation which equals to the previous period’s ending lease liability balance.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
In determining the lease term used to ascertain total future lease payments, the Group considers relevant facts
and circumstances that create an economic benefit to exercise an extension option. Option periods are only
included in determining the lease term when they are reasonably certain to be exercised. 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 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.
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FOR THE YEAR ENDED 30 JUNE 2022
SECTION C: ASSETS AND LIABILITIES (CONTINUED)
C8
TRADE AND OTHER PAYABLES
Trade creditors
Payroll liabilities
Sundry creditors and accruals
Total trade and other payables
C9
PROVISIONS
Current
Workcover provision
Annual leave provision
Long service leave provision
Total current provisions
Non-current
Workcover provision
Long service leave provision
Total non-current provisions
Total provisions
Movements of workcover provisions
At 1 July
Transfer during the year1
Net charge during the year
Utilised during the year
Balance at 30 June
2022
$’000
14,719
16,466
20,950
52,135
2021
$’000
13,692
15,723
9,890
39,305
2022
$’000
1,929
40,139
21,058
63,126
3,773
4,769
8,542
2021
$’000
600
39,001
20,361
59,962
800
5,259
6,059
71,668
66,021
2022
$’000
1,400
3,384
2,524
(1,606)
5,702
2021
$’000
-
-
2,062
(662)
1,400
1. In February the Group established self-insurance arrangements for workcover in South Australia, which involved a fully-funded transfer of pre-
existing potential workcover liabilities from Return To Work South Australia.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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SECTION C: ASSETS AND LIABILITIES (CONTINUED)
C9
PROVISIONS (CONTINUED)
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
Long service leave or annual leave entitlements are not expected to be settled fully within the next 12 months but are
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.
Workcover provision
The Group is self-insured for worker’s compensation and general liability claims for New South Wales and South
Australia regions. Provisions are recognised based on claims reported and estimate of claims incurred but not
reported. These provisions are determined on a discounted basis, using an actuary valuation performed at each
reporting date.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
Long service leave is measured based on the regulations of the states respectively. Management judgement is
required in determining the following key assumptions used in the calculation of long service leave at the balance
sheet date:
•
•
•
future increases in salaries and wages;
future probability of employee departures and period of service; and
discount rate
The workcover provision represents a self-insured risk liability based on a number of estimates and assumptions
including, but not limited to:
•
ultimate number of reported claims;
•
discount rate;
• wage inflation;
•
•
•
average claim size;
superimposed inflation (i.e. Inflation above wage inflation) and
claims administration expenses
These assumptions are reviewed periodically and any reassessment of these assumptions may impact the size of
the provision required.
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D Capital, Financing, RADs and Risk
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION D: CAPITAL, FINANCING, RADS AND RISK
This section provides additional information on the Group’s capital structure, including RADs, bank
borrowings and access to capital market and a summary of the Group’s exposure to key financial risks,
including interest rate, credit and liquidity risks, along with the Group’s policies and strategies to mitigate
these risks.
D1
REFUNDABLE ACCOMODATION DEPOSITS AND BONDS
Current residents
Departed residents
Total refundable accommodation deposits and bonds – amounts received
2022
$’000
756,894
127,175
884,069
2021
$’000
761,100
102,829
863,929
Terms and conditions relating to Refundable Accommodation Deposits and accommodation 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 Act. Providers must pay a Government set 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.
RADs 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 as or when they fall due.
To ensure that funds are readily available when required, the minimum level of funds chosen by the Group are
met by undrawn lines of credit.
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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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D2
LOANS AND BORROWINGS
Secured bank loans – Syndicated debt facility
Capitalised facility costs
Total loans and borrowings
2022
$’000
100,000
(1,513)
2021
$’000
114,500
(667)
98,487
113,833
At 30 June 2022, the Group had available $230,000,000 (2021: $215,500,000) of undrawn committed borrowing
facilities, and $326,000 (2021: nil) of unutilised guarantee facility.
Syndicated debt facility
During the year, the Group’s existing syndicated loan was refinanced with a new $330,000,000 Sustainability
Linked Syndicated Financing Agreement (“SLSFA”), financed by the Group’s existing lenders. The SLSFA also
has an accordion feature (“Accordion”) which allows for the facility limit to be increased (subject to lender consent
and approval) by an additional $170,000,000.
Of the total debt facility available, 50% will mature in March 2025 and 50% in March 2026.
Under the SLSFA, the Group will be eligible for an interest rate margin reduction of up to 5 basis points per
annum dependent on the level of achievement of sustainability targets embedded in the agreement. A lower level
of achievement may result in a similar sized increase in margins. These targets include:
- improving resident engagement and satisfaction
- supporting employee well-being
- reducing greenhouse gas emissions
- portfolio energy efficiency performance
The Group’s performance against these targets in the year, which was independently reviewed, will result in
reduction of 3 basis points per annum over the next financial year.
Bank guarantee facility
In addition, the Group entered into a separate additional Guarantee Facility (“Guarantee Facility”) with Westpac
Banking Corporation during the year which permits bank guarantees to be issued up the value of $8,000,000.
Refer to Note E2 for further details in relation to the amount of utilised bank guarantees.
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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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D3
ISSUED CAPITAL AND RESERVES
Issued and fully paid
Ordinary shares1
Total share capital
(a) Movements in ordinary shares on issue
Beginning of the financial period
Vesting of employee performance rights
Shares repurchased and incremental costs2
Movement in management equity plan
2022
$’000
2021
$’000
795,748
795,748
803,459
803,459
2022
2021
Numbers of
shares
$’000
261,294,969 803,459
244
(7,956)
1
146,673
(3,639,171)
-
Numbers of
shares
$’000
261,271,914 803,397
62
-
-
23,055
-
-
End of the financial period
257,802,471 795,748
261,294,969 803,459
1. Ordinary shares have no par value per share.
2. On 26 November 2021, the Group commenced an on-market share buy-back of up to 10% of Estia’s issued share capital for a period of up to
12 months. The equity instruments bought back as a result of the share buy-back have been deducted from the Group’s equity and the
associated shares have been cancelled.
(b) Share-based payments reserve
The share-based payments reserve arises from performance rights granted by Estia Health to its employees,
including key management personnel, as part of their remuneration. Upon vesting, the rights are equity settled
by the issuance of ordinary shares in the Group. Further information about share based payments is set out in
Note D4.
(c) Franking credits
The franking credit balance of Estia Health Limited as at 30 June 2022 is $26,162,000 (2021: $24,551,000
(restated)).
(d) Dividends paid and proposed
On 24 August 2021, the Directors declared a fully franked final dividend for the year end 30 June 2021 of 2.30
cents per share representing 100% of profit after tax for the period of $5,998,000. The dividend was paid to
shareholders for $6,013,000 on 17 September 2021.
On 22 February 2022, the Directors declared a fully franked interim dividend for the six months ended 31
December 2021 of 2.35 cents per share totalling $6,135,000 (December 2020: nil). The dividend was paid to
shareholders for $6,124,000.
On 23 August 2022, the Directors determined not to declare a final dividend for the year end 30 June 2022.
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SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D4
SHARE-BASED PAYMENTS
At 30 June 2022, the Group had the following share-based payments arrangements:
(a) Long-term Incentive Plan (“LTIP”)
Under the LTIP, awards are made to executives who make a significant contribution 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.
Details of performance rights granted prior to 1 July 2021 are disclosed in the relevant annual reports.
In the FY22 LTI award, 50% of the performance rights will vest subject to achieving the index Total Shareholder
Return (“TSR”) hurdle, which is based on a relative TSR against a defined comparator group of companies
comprising the ASX300 Index excluding mining and energy companies, and 50% of the performance rights will
vest subject to achieving an EPS hurdle in the year ending 30 June 2024
The Group granted a total of 1,009,506 rights (2021: 1,629,361) during the year.
(b) Short-term Incentive Plan (STIP)
Under STIP, awards are made to key managers and executives who have significant contributions 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 performance rights to vest.
The STIP is measured on a combined basis of Group’s financial and other specific measures. Other role specific
measures include Lost Time injury Frequency Rate reduction targets, organisational culture measures, delivery of
efficiencies through management of external financing, and developments in connection with clinical governance
an risk management process
No performance rights were granted under the STIP during the year (2021: nil).
(c) Retention Plan (RP)
Under the RP, awards in the form of performance rights, are made to key managers and executives to encourage
retention of their employment with the Group. The executive must remain employed with the Group from the date
the award is granted to the vesting date of the performance right. Upon successful vesting of the performance
rights, the executive is issued ordinary shares in the Group, equivalent to the number of performance rights
originally granted.
No performance rights were granted under the retention plan during the year ended 30 June 2022 (2021:
639,390). Retention performance rights issued in prior years vested during the year ended 30 June 2022 were
146,673 (2021: nil).
(d) 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 2022. 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
MEP
All MEP shares listed above were released from escrow on 11 December 2017.
50,000
100
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100%
5.95%
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SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D4
SHARE-BASED PAYMENTS (CONTINUED)
(e) Movements during the year
The following tables illustrate the number and movements in performance rights, of which the weighted average
exercise prices were nil (2021: nil), during the year:
Performance rights only
Outstanding as at 1 July
Granted during the year
Forfeited during the year
Exercised during the year
Exercisable as at 30 June
2022
2021
Numbers of
rights
3,220,383
1,009,506
(1,003,663)
(146,673)
Numbers
of rights
1,526,515
2,268,751
(551,828)
(23,055)
3,079,553
3,220,383
The weighted average fair value of performance rights granted during the year was $1.34 (2021: $0.67). The
weighted average share price at the exercise dates for the performance rights exercised during the year was
$2.44 (2021: $2.71).
(f) Expense recognised in profit or loss
The share-based payments expense recognised for employee services received during the year is shown in the
following table:
Long-term incentive plan reversal
Long-term incentive plan expense
Short-term incentive plan expense
MEP expense
Share-based payments and MEP expense
SIGNIFICANT ACCOUNTING POLICY
2022
$’000
(320)
1,315
90
12
1,097
2021
$’000
(143)
1,116
-
12
985
The cost of equity-settled transactions is measured by reference to the fair value at the date at which the grant is
made. The fair value is determined by an external valuer using the Monte Carlo simulation for the TSR
performance hurdles and the Binomial model for the EPS performance hurdles.
That cost is recognised in employee benefits expense, together with a corresponding increase in equity (Share-
based payments reserve), 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 movement in cumulative
expense is recognised in employee benefit expense.
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.
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SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D4
SHARE-BASED PAYMENTS (CONTINUED)
SIGNIFICANT ACCOUNTING POLICY (Continued)
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 grant date fair
value of the unmodified award, provided the original vesting terms of the award are met. An additional expense,
measured as at the date of modification, is recognised for any modification that increases the total fair value of
the share-based payment transaction, or is otherwise beneficial to the employee. 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 performance rights is reflected as additional share dilution in the computation of
diluted earnings per share.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
Recognition and measurement of fair value
Long-term Incentive Plan
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.
The following table list the inputs to the models used for the LTIPs:
Share price at grant date
Dividend yield
Volatility
Risk free rate
Fair value of right – TSR
Fair value of right – EPS
Fair value of right – RP
Short-term Incentive Plan
FY22 Plan
$2.20 and $2.32
4.0%
50%
0.2% - 1.0%
$0.60 - $0.70
$1.98 - $2.07
FY21 Plan
$1.29
4.0%
47%
0.8%
$0.35 - $0.70
N/A
$1.21
FY20 Plan
$2.71
3.0%
30%
0.7%
$0.68 - $0.76
$2.50
The fair value of the performance rights issued under the STIP is determined at grant date. The number of
shares issued are determined by the volume weight average share price of the Group in the 10 trading days
following the release of the Group's annual results. 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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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
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, equity risks or currency risk.
The sensitivity analyses in the following sections relate to the position as at 30 June 2022 and 30 June 2021.
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 2022 and 30 June 2021.
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 2022
and 30 June 2021.
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
Refundable accommodation deposits – departed residents
Bank loans
Weighted average
effective interest rates
2022
%
0.6
2.3
1.4
2021
%
0.6
2.3
1.5
Fixed or
Floating
Floating
Floating
Floating
Subsequent to the end of the financial year, the Group entered into forward starting interest rate swaps (the
“Contracts”) to effectively fix part of its future floating interest rate risk exposure associated with its syndicated
debt facility. The future financial benefit of the interest rate swaps will vary depending on the interest rate
movements, therefore an estimate of it cannot be made at the date of this Report.
The details of debt are disclosed in Note D2 to the financial statements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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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 reasonably likely changes in interest rates on that portion of
cash and cash equivalents and loans and borrowings, assuming all other variables remain constant, on Group’s
profit before tax and equity through the impact on floating rate financial instruments:
+ 100 basis points (2021: + 25 basis points)
+ 100 basis points (2021: + 25 basis points)
Credit risk
Effect on profit before tax
Higher / (Lower)
Effect on equity
Higher / (Lower)
2022
$’000
(547)
547
2021
$’000
(141)
141
2022
$’000
(383)
383
2021
$’000
(98)
98
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 77% (2021: 76%) of the revenue 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 Act.
Trade and other receivables
Customer credit risk is managed subject to an established Group policy, procedures and control relating to
customer credit risk management.
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 receivables.
Generally, trade and other receivables are written-off only if all reasonable avenues have been exhausted to
recover the balances.
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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D5
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Credit risk (continued)
The following table provides information about the expected credit losses for trade receivables, excluding the
Commonwealth Government balance of $5,060,000 as at 30 June 2022 (2021: $3,317,000):
As at 30 June 2022
Current (not past due)
<30 days past due
30-60 days past due
61-90 days past due
>90 days past due
Total
As at 30 June 2021
Current (not past due)
<30 days past due
30-60 days past due
61-90 days past due
>90 days past due
Total
Expected
credit loss
rate
%
Gross
carrying
amount
$’000
Allowance
for
expected
credit loss
$’000
7%
21%
28%
42%
78%
30%
1,593
412
239
132
835
3,211
108
85
68
56
650
967
Expected
credit loss
rate
%
Gross
carrying
amount
$’000
Allowance
for
expected
credit loss
$’000
6%
17%
27%
36%
85%
36%
1,603
453
229
144
1,191
3,620
99
76
62
52
1,008
1,297
During the year, the Group’s focus on the recovery of aged debtors has resulted in a reduction in the gross
carrying amount as well as a moderate change in the aging profile distribution. There has been no change to the
underlying methodology or approach to the calculation of expected credit loss.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
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 acquisitions,
capital investments 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.
As at 30 June 2022
Trade and other payables
Loans and borrowings (including future interest)
Refundable accommodation deposits and bonds
Other financial liabilities
Lease liabilities
Total
As at 30 June 2021
Trade and other payables
Loans and borrowings (including future interest)
Refundable accommodation deposits and bonds
Other financial liabilities
Lease liabilities
Total
Capital management
1,172
-
884,069
466
-
885,707
837
-
863,929
508
-
865,274
On
demand
$’000
Less than
12 months
$’000
1 to 5
years
$’000
More than
5 years
$’000
Total
$’000
52,135
106,220
884,069
466
81,478
50,963
1,691
-
-
5,497
-
104,529
-
-
20,193
-
-
-
-
55,788
58,151
124,722
55,788 1,124,368
36,960
-
-
-
6,005
-
114,500
-
-
20,335
-
-
-
-
59,950
37,797
114,500
863,929
508
86,290
42,965
134,835
59,950 1,103,024
The Group’s objectives when managing capital are to ensure the Group continues as a going concern while
providing optimal returns to shareholders and benefits for other stakeholders, and to maintain an appropriate
capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may
also adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.
No changes were made in the objectives, policies or processes for managing capital during the year ended 30
June 2022.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION D: CAPITAL, FINANCING, RADS AND RISK (CONTINUED)
D6
FAIR VALUE MEASUREMENT
Investment properties
Independent living units
Total investment properties
2022
$’000
750
750
2021
$’000
750
750
The Group's investment properties represent ILU’s which are occupied by residents who have contributed a non-
interest-bearing loan to occupy the ILU. The resident vacates the property based on the applicable State-based
Retirement Village Acts.
These investment properties are measured at fair value, which is determined based on a valuation model
recommended by the International Valuation Standards Committee that uses unobservable inputs (level 3 in fair
value hierarchy) at the reporting date:
Unobservable inputs
Discount rate
Growth rate
Cash flow term (years)
There were no transfers between levels during the financial year.
2022
2021
16.5%
2.46%
50
16.50%
2.50%
50
SIGNIFICANT ACCOUNTING POLICY
Financial instruments on the balance sheet are measured at amortised cost.
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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E Other Information
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION E: OTHER INFORMATION
This section includes information required to be disclosed under the Australian Accounting Standards and
other pronouncements, but that is not immediately related to the individual line items in the financial
statements.
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 (d) provides the information about the MEP loans, which was a legacy plan that
offered a 10 year limited recourse loan to subscribe for MEP shares to its participants including the former
Managing Directors and a number of senior employees of the Group. 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.
Share based payments include expenses recognised under the Retention Bonus scheme.
Short-term employee benefits
Post-employment benefits
Share-based payments
Total compensation of key management personnel
E2
COMMITMENTS AND CONTINGENCIES
Capital commitments
2022
$’000
2,963
135
820
3,918
2021
$’000
2,490
119
580
3,189
During the year, the Group entered into contracts relating to the development of aged care homes. As at 30 June
2022, the remaining capital commitments amounted to $60,331,000 (2021: $5,547,000).
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 and self-insurance arrangement, totaling $7,674,000 (2021: $4,559,000). These
are secured under the terms of the Facility as 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 bank guarantees to be presented or
redeemed.
Government grants
As at the end of the year, the Group had submitted applications to the Federal Government under the COVID-19
Aged Care Support Program Extension (also known as “ACPS” or “GO4863”), which is designed to minimise the
risk of infection to aged care workers, residents and other consumers of aged care services and provide funding
for out-of-pocket costs incurred as a result of COVID-19.
As at balance date, grant applications totalling $21,362,000 (2021: nil) submitted before the year end but not yet
approved by the Government have not been recognised as income for the year due to the considerations detailed
in Note B1 under Significant Accounting Judgement, Estimates and Assumptions.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION E: OTHER INFORMATION (CONTINUED)
E3
AUDITOR REMUNERATION
Audit or review of the financial report
Tax compliance services
Fees for assurance services that are not required by legislation to be provided by
the auditor
Total auditor remuneration
The auditor of Estia Health Limited and its subsidiaries is Ernst & Young.
E4
CHANGES IN ACCOUNTING POLICY
2022
$’000
810
159
38
1,007
2021
$’000
723
93
17
833
Changes in accounting policy, disclosures, standards and interpretations
The accounting policies adopted in preparation of the Consolidated Financial Statements are consistent with
those followed in the preparation of the Group’s Consolidated Financial Statements for the year ended 30 June
2021, except for the adoption of amendments to standards effective as of 1 July 2021. The Group has not early
adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
Changes in accounting policies - IFRIC agenda decision – Configuration or Customisation Costs in a Cloud
Computing Arrangement
In April 2021, the IFRS Interpretations Committee (“IFRIC”) published an agenda decision for configuration and
customisation costs incurred related to implementing Software as a Service (SaaS) (also known as “Cloud
Computing”) arrangements. The Group has changed its accounting policy in relation to configuration and
customisation costs incurred in implementing SaaS arrangements. The effect of the changes as a result of
changing this policy is described below.
Accounting policy - Software-as-a-Service (SaaS) arrangements
SaaS arrangements are arrangements in which the Group does not currently control the underlying software used
in the arrangement.
Where costs incurred to configure or customise SaaS arrangements result in the creation of a resource which is
identifiable, and where the company has the power to obtain the future economic benefits flowing from the
underlying resource and to restrict the access of others to those benefits, such costs are recognised as a
separate intangible software asset and amortised over the useful life of the software on a straight-line basis. The
amortisation is reviewed at least and any changes are treated as changes in accounting estimates which are
applied on a prospective basis.
Where costs incurred to configure or customise do not result in the recognition of an intangible software asset,
then those costs that provide the Group with a distinct service (in addition to the SaaS access) are now
recognised as expenses when the supplier provides the services. When such costs incurred do not provide a
distinct service, the costs are now recognised as expenses over the duration of the SaaS contract. Previously
some costs had been capitalised and amortised over its useful life.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION E: OTHER INFORMATION (CONTINUED)
E4
CHANGES IN ACCOUNTING POLICY (CONTINUED)
Impact of change in accounting policy
The change in policy has been retrospectively applied and comparative financial information has been restated,
as follows:
Consolidated Statement of Financial Position
Increase / (Decrease) in:
Assets
Other intangible assets
Total Assets
Deferred tax liabilities
Total Liabilities
Net assets
Retained earnings
Total equity
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Increase / (Decrease) in:
Employee benefits and agency staff expense
Administrative expenses
Depreciation and amortisation expense
Profit before tax
Income tax expense
Profit for the year
Earnings per share
Basic (cents per share)
Diluted (cents per share)
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154 Estia Health | 2021-22 Annual Report
2021
$’000
(3,769)
(3,769)
(1,130)
(1,130)
1 July
2020
$’000
(3,208)
(3,208)
(962)
(962)
(2,639)
(2,246)
(2,639)
(2,639)
(2,246)
(2,246)
2021
$’000
687
309
(435)
(561)
(168)
(393)
(0.15)
(0.15)
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION E: OTHER INFORMATION (CONTINUED)
E4
CHANGES IN ACCOUNTING POLICY (CONTINUED)
Impact of change in accounting policy (Continued)
Consolidated Statement of Cash Flows
(Increase) / Decrease in:
Payments to suppliers and employees
Net cash inflow from operating activities
Payments to acquire intangible assets
Net cash outflow from investing activities
2021
$’000
(996)
(996)
996
996
New and Amended Accounting Standards and Interpretations
Other than the change in accounting policy as a result of the IFRIC agenda decision in relation to Cloud
Computing costs disclosed above, the adoption of other amendments and interpretations which were applicable
from 1 July 2020 did not have a significant impact on the financial statements of the Group.
Standards issued but not yet effective
A number of other accounting standards and interpretations have been issued and will be applicable in future
periods. While these remain subject to ongoing assessment, no significant impacts have been identified to date.
These standards have not been applied in the preparation of these financial statements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION E: OTHER INFORMATION (CONTINUED)
E5
SUBSEQUENT EVENTS
COVID-19 Grant Recoveries
Subsequent to 30 June 2022, the Group submitted 104 claims for a total amount of $6,575,000, and $1,361,000
of claims submitted prior to 30 June 2022 were confirmed by the Government. These amounts are also disclosed
in Note B1.
Changes in Directors of the Company
On 11 July 2022 Sean Bilton was appointed Managing Director and CEO of the Company, replacing Ian Thorley
who resigned on the same day.
On 22 July the Company announced that Professor Simon Willcock would join the Board with effect from 1
September 2022.
Passing of Government legislation
On 2 August 2022, the Australian Government passed the Aged Care and Other Legislation Amendment (Royal
Commission Response) Bill 2022 (the “Bill”). the Bill implements nine measures to improve aged care and
responds to 17 recommendations of the Royal Commission into Aged Care Quality and Safety.
The Bill establishes the Australian National Aged Care Classification (“AN ACC”) funding model, a new Code of
Conduct and banning orders, and extends the Serious Incident Response Scheme to all in-home care providers.
It also extends the functions of the Independent Health and Aged Care Pricing Authority, which will lead to better
price-setting for aged care.
Other measures enshrine transparency and accountability of approved providers and improve quality of care and
safety for older Australians receiving aged care services.
A second piece of aged care legislation, the Aged Care Amendment (Implementing Care Reform) Bill 2022, was
introduced on 27 July and is before the House of Representatives.
Other than those mentioned above, no matters or circumstances have arisen since the end of the reporting period
which significantly affected, or may significantly affect, the operations of the Group, the results of those
operations, or the state of affairs of the Group in future financial years.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION E: OTHER INFORMATION (CONTINUED)
E6
SEGMENT REPORTING
For management reporting purposes, the Group has identified one reportable segment. Estia Health 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.
E7
INFORMATION RELATING TO SUBSIDIARIES
The ultimate parent entity within the Group is Estia Health Limited.
The Consolidated Financial Statements incorporate the assets, liabilities and results of Estia Health Limited and
the following controlled entities, that were held in both current and prior period unless otherwise stated:
100% owned Australian subsidiaries in a deed of cross guarantee with Estia Health Limited
Estia Finance Pty Limited
Estia Investments Pty Limited
Estia Health Residential Aged Care Pty Ltd (previously Kenna Investments Pty Ltd)
Hayville Pty Ltd
Camden Village Pty Ltd
Kilbride Village Pty Ltd
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION E: OTHER INFORMATION (CONTINUED)
E8
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
Accumulated losses
Total shareholders’ equity
Profit / (Loss) for the year
Total comprehensive profit / (loss) for the year
1. Comparative information has been restated to account for:
2022
$’000
Restated1
2021
$’000
331,667
570,398
553,054
570,398
902,065
1,123,452
-
223,634
223,634
1,163
455,670
456,833
678,431
666,619
795,748
3,483
(120,800)
803,459
2,629
(139,469)
678,431
666,619
30,806
30,806
(9,896)
(9,896)
(a) class action settlement costs of $12,410,000 and its tax effect of $3,723,000 which were previously recorded under a subsidiary within
the Estia Group resulting in an increase of $8,687,000 in loss for the year and a corresponding decrease in current assets, and
(b) share-based payment expense of $985,000 has now been recorded resulting in a decrease of $985,000 in current assets and a
corresponding increase in loss for the year and accumulated losses.
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 which are carried at cost.
Deed of cross guarantee
The parties to the deed of cross guarantee, as identified in Note E7, each guarantee the debts of the others. By
entering into the deed, the subsidiaries are relieved from the requires of preparation, audit and lodgement of a
financial report and a directors’ report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
Together with Estia Health Limited, the entities represent a ‘Closed Group’ for the purposes of the ASIC
lnstrument. 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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
SECTION E: OTHER INFORMATION (CONTINUED)
E9
TREATMENT OF GST
Revenue, expenses and assets are recognised net of the amount of GST, except:
• when the GST incurred on a purchase of goods or services is not recoverable from the Australian Taxation
Office, 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
receivables and payables, which are stated with the amount of GST included.
•
The net amount of GST recoverable from, or payable to, the Australian Taxation Office 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.
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Directors’ Declaration
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DIRECTORS' DECLARATION
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 2022
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 2022 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 Corporations (Wholly-owned Companies) Instrument 2016/785).
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 2022.
On behalf of the Board
Dr. Gary H Weiss, AM
Chairman
Sydney
23 August 2022
Estia Health Limited
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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 2022, the consolidated statement of profit or loss and other 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. Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2022
and of its consolidated financial performance for the year ended on that date; and
b.
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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Carrying value of goodwill and bed licences
Why significant
How our audit addressed the key audit matter
At 30 June 2022 the Group’s goodwill and bed licences
balance was $842 million which represents 47% of
total assets.
We assessed the appropriateness of the allocation of
goodwill and bed licences to the group of CGUs and
composition of its carrying amount.
The Group reviews the carrying amount of goodwill
annually, or more frequently, if impairment indicators
are present.
Involving our valuation specialists, we assessed the key
assumptions underlying the discounted cash flow
model. In doing so, we:
The group of cash generating units (CGUs) to which
goodwill and bed licences can be allocated is consistent
with the operating segment as identified and disclosed
in Note E6 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 as at 30 June 2022
and are developed on an underlying assumption that
adequate government funding will continue to be
provided to cover the rising costs of providing aged
care services.
The bed
licences were previously recognised as
intangible assets with an indefinite useful life and
therefore were not amortised. Following the release of
the discussion paper “Improving Choice in Residential
Aged Care – ACAR Discontinuation” on 30 September
2021 by the Australian Government, the Group
determined that the bed licences are finite life assets
and expects that the remaining useful lives of the bed
licences will not extend beyond 1 July 2024. As a
result, amortisation of these bed licences commenced
from 1 October 2021 and will continue on a straight-
line basis to 30 June 2024. The change in the useful
life assessment was treated as a change in accounting
estimate and therefore, was recognised prospectively
from 1 October 2021. The amortisation expense
recognised in the statement of profit or loss for the
year ended 30 June 2022 is $60,349,000 (2021: nil).
•
•
•
•
•
•
•
•
•
•
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
2022 on the 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
forecasting 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
maintenance capital expenditure with reference
to historical data;
Assessed the discount rate through comparing
the weighted average cost of capital of the Group
with comparable businesses including the impacts
of the government response to Royal Commission
recommendations and COVID-19;
Considered earnings multiples of comparable
businesses as a valuation cross check to the
Group’s determination of recoverable amount;
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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Why significant
How our audit addressed the key audit matter
in assessing the
Carrying value of goodwill and bed licences was
considered a key audit matter due to the complexity
impact of the ACAR
involved
discontinuation, the quantum of the impact and
significant judgement involved in determining future
cashflows including consideration of the continued
effects of COVID-19.
The Group has disclosed in Note C6 to the consolidated
financial report the assessment method, including the
significant underlying assumptions and the results of
the assessment.
We assessed the accounting
implications of the
discussion paper on ACAR Discontinuation and
estimation of the useful lives of the bed licences. We
also assessed management’s determination of when
amortisation should commence and checked the
calculation of the amortisation expense.
Construction in Progress
Why significant
How our audit addressed the key audit matter
Costs incurred during the year that were capitalised to
Construction in Progress amounted to $23 million.
This represents costs of development projects and
significant refurbishments of existing aged care
facilities.
The specific criteria to be met for capitalisation of
development costs in accordance with 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.
likely
therefore,
feasible and
In addition, as a result of COVID-19, the Group
continued to reassess whether ongoing projects
remained
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.
Our audit procedures included the following:
•
•
•
•
•
•
Agreed a sample of additions to supporting
evidence and assessed the nature of amounts
capitalised;
Evaluated key assumptions applied 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 the relevant
depreciation or amortisation rates were applied;
Considered whether there were any indicators of
impairment present for development projects by
taking into account the approved business case,
COVID-19 impacts, and costs incurred to date
compared to budget. We also made enquiries of
executives responsible for management of the
projects;
Assessed 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 and the deprecation rates applied to
each asset category.
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Why significant
How our audit addressed the key audit matter
Construction in Progress was considered a key audit
matter due to the quantum of the balance and
judgement required in applying the capitalisation
criteria and undertaking the impairment analysis. The
Group has disclosed in Note C5 to the consolidated
financial report the capitalisation policy.
Revenue Recognition
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.
From 1 July 2021, aged care providers (including
Estia) are receiving an additional $10 Basic Daily Fee
subsidy from the government as a result of one of the
recommendations
the Aged Care Royal
Commission. This subsidy contributed $20.6 million of
revenue (included in government subsidies) during the
year ended 30 June 2022.
from
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 from 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 Aged Care Funding Instrument
(“ACFI”) assessments were prepared by an
authorised person, and associated revenues 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 consistent with the approved fees;
Evaluated the operating effectiveness of
Information Technology (“IT”) general and
application controls relating to key revenue
systems.
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
year;
Tested cash entries that settled trade receivables
and inspected documents evidencing services
acceptance;
Recalculated the revenue recognised in relation
to the Basic Daily Fee by taking into account
occupied bed days during the period; and
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How our audit addressed the key audit matter
•
Assessed the appropriateness of the financial
statement disclosures in relation to the Group’s
revenue recognition and disaggregation policies.
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 2022 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.
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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.
► 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.
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Report on the audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 87 to 100 of the directors’ report for
the year ended 30 June 2022.
In our opinion, the Remuneration Report of Estia Health Limited for the year ended 30 June 2022,
complies with section 300A of the Corporations Act 2001.
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
23 August 2022
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Additional 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 7 September 2022.
(a) 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
61
763
881
2,241
1,683
5,629
225,779,781
18,543,650
6,693,900
6,031,316
753,824
257,802,471
87.58
7.19
2.60
2.34
0.29
100.00
(b) 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
6
7
0
0
0
13
2,379,407
342,857
0
0
0
87.41
12.59
0.00
0.00
0.00
2,722,264
100.00
(c) Less than marketable parcels of ordinary shares
There are 515 shareholders with unmarketable parcels totalling 41,609 shares.
(d) 20 Largest shareholders
The twenty largest shareholders of quoted equity securities are as follows:
NAME
1. Citicorp Nominees Pty Limited
2. HSBC Custody Nominees (Australia) Limited
3. J P Morgan Nominees Australia Pty Limited
4. National Nominees Limited
5. Network Investment Holdings Pty Ltd
6. Argo Investments Limited
7. BNP Paribas Noms Pty Ltd
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