Annual Report
2016
FY2016 Highlights
Total revenue
$327.3m
up 16.4%
EBITDA
$56.1m
up 10.9%
Acquired
587 places
Profke Aged Care Group
Full year dividend of
11.5¢
per share
NPAT
$30.4m
up 5.6%, resulting in earnings
per share of 11.5 cents
Contents
02 Company Overview
04 Chairman’s Review
06 Managing Director and CEO’s Review
08 Environmental, Social and Governance Statement
11 Directors’ Report
24 Auditor’s Independence Declaration
25 Letter from the Chairman of the Remuneration and Nomination Committee
26 Remuneration Report – Audited
38 Statement of Profit or Loss and Other Comprehensive Income
39 Statement of Financial Position
40 Statement of Changes In Equity
41 Statement of Cash Flows
42 Notes to the Financial Statements
67 Directors’ Declaration
68 Independent Auditor’s Report
70 Additional Information
72 3 Year Summary
73 Corporate Information
Corporate Governance Statement
The Company’s Corporate Governance
Statement can be found on its website:
japarahealthcare.com.au under the
Investor section.
Japara Healthcare Limited ABN 54 168 631 052
Sustainable earnings
growth underpinned
by a focus on high
quality resident care
01 Japara Healthcare Annual Report 2016
Company Overview
Japara Healthcare is one of
Australia’s largest residential
aged care providers, with a growing
national footprint. We care for over
3,500 residents across 43 facilities
located throughout Victoria, New
South Wales, Queensland, South
Australia and Tasmania. We also
operate 180 independent living
units across five retirement villages
located adjacent to our aged
care facilities.
Our core objective is to provide the best
available quality of life for the elderly
population of Australia.
Our high-care focused model facilitates
‘ageing-in-place’ by supporting residents
with complex healthcare needs and providing
specialised services to residents with
dementia. Beyond our clinical healthcare
services, we strive to develop and deliver
new ways to meet our residents’ lifestyle,
wellbeing and social needs.
We have a diversified growth strategy,
which includes a greenfield and brownfield
development program. This program is on
track to deliver over 900 new places by the
end of FY2019, with a plan to deliver over
2,500 new places by 2025/26 to meet the
growing community need for residential aged
care. We also continually invest in our existing
facilities through a refurbishment works
program to maintain their lifecycle and
quality of accommodation.
Japara Healthcare was listed on the
Australian Securities Exchange in April 2014
and is ranked an ASX 200 company.
Key statistics as at 30 June 2016
43 across 5 states
Number of facilities
4,761
Total places
Total operational places 3,717
Independent living units 180
Number of staff
5,081
02 Japara Healthcare Annual Report 2016
Our core objective
is to provide the
best available quality
of life for the elderly
population of
Australia
Where we operate
1. Gympie
130 places
2. Noosa
180 places
3. Coffs Harbour
120 places
4. South West Rocks
80 places
5. Sydney
60 places
6. Albury
90 places
7. Gippsland
293 places
8. Metropolitan Melbourne
1,636 places
9. Victorian Goldfields
255 places
10. Greater Geelong
414 places
11. Adelaide
327 places
12. Launceston
132 places
1
2
3
4
11
5
9
10
8
6
7
12
02 Japara Healthcare Annual Report 2016
03 Japara Healthcare Annual Report 2016
Chairman’s Review
On behalf of the Directors,
I am pleased to present
the 2016 Annual Report for
Japara Healthcare Limited.
Dear Shareholders,
Our priority is delivering high-
quality care for our residents
Japara Healthcare’s commitment to care
remains the cornerstone of our strategy and
underpins our ability to deliver strong and
sustainable returns for our shareholders.
We are continuing to see people entering
residential aged care at a later age, with
greater care needs than they have had in the
past. Our high care-focused operating model
ensures that we can facilitate ‘ageing-in-
place’ by supporting residents with complex
healthcare needs and providing specialised
services to residents with dementia. We
have a team of registered nurses rostered
to work on every shift in every facility, who
are supported by a dedicated team of
enrolled nurses and carers.
Beyond our clinical healthcare services,
we are always developing and delivering
new ways to meet our residents’ lifestyle,
wellbeing and social needs. We want to
make it easier for families and friends to
spend quality time with residents in our
facilities, so we are introducing new features
such as living areas in residents’ private
rooms and communal playgrounds in some
of our new and refurbished homes. We are
also continuing to enhance the lifestyle and
wellbeing choices available for our residents.
A number of our in-house chefs have
completed training with Maggie Beer, leading
to fresh and innovative new menu options.
New technologies for the comfort
of dementia residents are being trialled
across a number of our homes.
Expanding our capacity to
cater to growing demand
Japara Healthcare’s strategy is to deliver
new and upgraded facilities progressively
by refurbishing older homes to meet
residents’ contemporary lifestyle and
clinical care needs; developing brownfield
extensions to existing facilities to add
required capacity; designing and
constructing greenfield projects in attractive,
under-serviced metropolitan locations;
and acquiring and integrating new
facilities into our network.
I am pleased to report that the Group’s
refurbishment and development projects
have strong momentum. Two facility
refurbishments were completed during the
year, and we are continuing to work hard to
upgrade and modernise older homes with
another five brownfield projects currently
underway. We have also added to our
greenfield development pipeline, with four
well-positioned metropolitan sites secured
during the year, enhancing our existing
networks in Victoria and New South Wales.
We remain on track to develop over 900 new
places by the end of FY2019. Importantly,
Japara Healthcare has already secured most
of the sites and licences needed to achieve
this target.
04 Japara Healthcare Annual Report 2016
“ Our high care-focused operating model
ensures that we can facilitate ‘ageing-
in-place’ by supporting residents with
complex healthcare needs.”
Japara Healthcare has continued its
strategic and disciplined approach to
acquisitions during the year. Our strategy is
focused on opportunities that enhance our
national footprint and present compelling
opportunities for value creation when
integrated with the Group’s broader portfolio.
In December 2015, we purchased the 587
place Profke Aged Care Group, which has
pleasingly performed ahead of our initial
expectations. We have now added 845
places to our portfolio through acquisitions
since our Initial Public Offering in 2014,
and will continue to assess acquisition
opportunities that create value for our
shareholders.
Solid financial performance,
100% dividend payout ratio
maintained
I am pleased to report that the Group
delivered another solid financial result in
FY2016, which again demonstrates our
management team’s ability to respond to the
evolving regulatory environment. Revenue
of $327.3 million was up by 16.4% over last
year and EBITDA of $56.1 million was up
10.9%, despite the impact of the removal of
the Payroll Tax and Dementia supplements
in FY2015.
The Board has determined an increase
in total dividends for the year to 11.5 cents
per share, up 4.5% on FY2015. The dividend
is in line with our stated policy of distributing
up to 100% of net profit after tax to
shareholders, reflecting the Board’s
confidence in the opportunities ahead.
As a highly cash generative business with
a strong and conservative balance sheet,
Japara Healthcare remains well placed to
deliver on our diversified growth strategy
and provide attractive and sustainable
returns to our shareholders.
Looking forward to the
opportunities ahead
As Australia continues to navigate the
challenges of an ageing population, we look
forward to working constructively with the
community, our peers and the government
to ensure that Australia continues to have a
high-quality and sustainable residential aged
care sector.
We believe there are a number of
opportunities for experienced operators
across the broader continuum of care to
help ensure our elderly population is well
cared for, and we look forward to exploring
strategic relationships in this area.
I would like to take this opportunity to thank
the management team, and our dedicated
team of over 5,000 nurses, carers and other
facility staff for their commitment to providing
excellent care for our residents over the
course of the year.
Finally, I would like to thank you, our
shareholders, for your support of Japara
Healthcare, and I look forward to meeting
with you at the Company’s Annual General
Meeting if you have the opportunity to attend.
Linda Bardo Nicholls AO
Chairman
22 August 2016
04 Japara Healthcare Annual Report 2016
05 Japara Healthcare Annual Report 2016
Managing Director and CEO’s Review
This year, Japara Healthcare
has delivered sound revenue
and earnings growth, while
remaining firmly focused on the
implementation of our growth
strategy to deliver new and
improved facilities to meet
the increasing demand from
Australia’s ageing population.
for our staff and innovation in our services
to support our capabilities in complex
healthcare delivery.
Opportunities continue
to emerge
Japara Healthcare’s strategy is focused
on growing and enhancing our existing
portfolio of residential aged care facilities,
together with the continuous improvement
of the product and service offering for our
residents.
This year we continued to roll out our
additional service offering across the
business. While this has been progressing
well, we have identified a number of
opportunities to improve our offer, and
are planning to reposition and expand
this program in FY2017.
The industry is continuing to evolve to offer
consumers more choice and control over the
services they receive and to better integrate
residential aged care with other healthcare
services provided across the broader
continuum of care. We remain well placed
to develop new products and services for
residents to capitalise on these opportunities
over the medium term.
Due to the high-quality and location of our
facilities, we see good opportunity for uplift
in capital from Refundable Accommodation
Deposits (RADs) and increasing revenue
from Daily Accommodation Payments
(DAPs) and additional services.
Expanding our capacity and
strengthening our development
pipeline
Japara Healthcare has continued to
implement its strategy to significantly expand
our portfolio through development of new
facilities to meet future demand (greenfields)
and through refurbishments and extensions
of a number of our existing facilities
(brownfields).
Our brownfield program continues to add
capacity and progressively modernise our
facilities to meet the contemporary needs
and expectations of today’s residents.
During the year, 54 new places were added
as we completed brownfield projects at
Trevu in South Australia and Bayview in
Victoria. Five further brownfields are currently
underway, with four of these to be completed
in FY2017.
Dear Shareholders,
Revenue and EBITDA growth
delivered, 100% dividend payout
ratio maintained
Total revenue of $327.3 million was up
16.4%, reflecting a moderate increase in
income from care and accommodation
over the year and an uplift from our recent
acquisitions. This was a pleasing result
given the impact of the removal of the Payroll
Tax and Dementia supplements in FY2015,
which contributed $5.2 million in revenue in
the prior year.
Occupancy remained steady on an
underlying basis at 94.4%, excluding the
impact of facilities undergoing refurbishment.
EBITDA increased by 10.9% to $56.1 million,
which included a $4.4 million contribution
from Profke, ahead of the guidance provided
at the time of acquisition. Staff costs as a
percentage of revenue increased marginally
to 67.1% (FY2015: 66.4%), reflecting our
high-care focus and the increasing acuity
profile of our residents.
Group net profit after tax increased to
$30.4 million, equating to earnings per share
of 11.5 cents. The Board has maintained a
dividend payout ratio of 100% in FY2016,
declaring total dividends of 11.5 cents per
share (FY2015: 11.0 cents per share).
Financial summary
FY16
$m
327.3
271.2
56.1
30.4
FY15
$m
281.3
230.7
50.6
28.8
Change
%
16.4
17.6
10.9
5.6
Total revenue
Total expenses
EBITDA
NPAT
High-care model meets growing
resident healthcare needs
The fundamentals of the residential aged
care industry remain favourable, with over
82,000 new places forecast to be required
over the next decade to meet the needs of
Australia’s ageing population. Additionally,
we are seeing people enter residential
aged care at a later age, with more chronic
and complex health conditions, and an
increasing prevalence of dementia.
Our strong care focus provides an important
foundation to ensure we can continue to
deliver sustainable growth, and we are
continuing to invest in training programs
06 Japara Healthcare Annual Report 2016
“ Japara Healthcare has continued
to implement its strategy to
significantly expand its portfolio
through development of new facilities
and refurbishments and extensions
of a number of existing facilities.”
The Company’s greenfield strategy is
focused on enhancing our existing portfolio
by building new high-quality facilities in
attractive metropolitan locations. Site
selection is supported by extensive internal
research on local demand dynamics, which
are expected to underpin strong occupancy
and pricing when new facilities are opened.
We have now secured most of the required
sites to deliver our current pipeline of over
900 places by the end of FY2019.
Japara Healthcare’s success in the
Department of Health’s 2015 Aged Care
Approvals Round (ACAR) saw the Company
awarded provisional licences for an
additional 313 places. Together with licences
already held, this means that we have
most of the licences to deliver the current
development pipeline.
The Company also expects to benefit from
an uplift in significant refurbishment income
as we continue to invest in our portfolio
to maintain asset lifecycle and quality
of accommodation.
Overall, our developments are self-funding
through RADs, with bank debt drawn to fund
the construction, which is then repaid with the
incoming RADs when facilities are opened.
Strong track record of
value-accretive acquisitions
The Company has continued its strong
track record of value-accretive acquisitions,
successfully completing its purchase of
the Profke portfolio in December 2015.
The acquisition added 587 places to our
portfolio, expanding our national presence
into Queensland and increasing our footprint
in New South Wales.
As highlighted at the time of acquisition,
we see significant potential to improve and
enhance the Profke business through the
implementation of Japara Healthcare’s
operating model and the upgrade and
reconfiguration of a number of facilities.
The Profke business is being successfully
integrated and we are pleased to confirm
our expectation that its annualised EBITDA
contribution will reach approximately
$9.5 million within 18 months.
Japara Healthcare will continue to assess
acquisition opportunities that meet our
strict acquisition criteria, with a focus on
targets with strong care fundamentals,
which expand our national footprint, offer
the potential for business improvement
under our ownership and, importantly,
are value accretive for our shareholders.
Outlook
Looking ahead, Japara Healthcare expects
to continue to deliver sustainable earnings
growth in FY2017, with EBITDA expected to
grow at a similar rate to FY2016.
The Company expects to benefit from
the full year contribution from recent
acquisitions, and a further contribution from
brownfield and greenfield developments in
FY2017. Due to the timing of the planned
delivery of the development pipeline over
the course of the year, contributions from
developments completed in FY2017 are
expected to increase further in FY2018
and beyond.
In the third year since the Living Longer
Living Better reforms were implemented,
the transition to post-reform income
(DAPs, additional services and significant
refurbishment) from pre-reform income
(such as bond retention and accommodation
charges) will continue, with the mix
of revenue continuing to skew towards
post-reform income streams.
Following moderate growth in income from
care and accommodation in FY2016, we are
anticipating low single-digit ACFI growth in
FY2017, reflecting our residents’ growing
clinical healthcare requirements. Additionally,
we expect to make further investments in
capability in the year ahead to support the
business’ development and growth strategy.
As the residential aged care sector continues
to change, Japara Healthcare is well placed
to deliver sustainable earnings growth
with a sound, diversified growth strategy
underpinned by a focus on high-quality
resident care. The Company has a prudent
approach to fiscal management, maintains
a conservative balance sheet, and has
diverse sources of capital to support the
exciting growth strategy ahead.
Thank you
The dedication and commitment of our
team of over 5,000 nurses, carers and
other staff across the country are central to
our ability to provide high-quality care and
wellbeing services to our residents. I would
like to thank each of you for your valued
contribution during the year.
To our shareholders, I would like to extend
my gratitude for your continued support of
Japara Healthcare in FY2016, and I look
forward to seeing you at our upcoming AGM.
Andrew Sudholz
Managing Director and CEO
22 August 2016
06 Japara Healthcare Annual Report 2016
07 Japara Healthcare Annual Report 2016
Environmental, Social and Governance Statement
This is Japara Healthcare’s inaugural
Environmental, Social and Governance
Statement. The purpose of this year’s
Statement is to report on our current
environmental, social and governance
practices and outline our intentions for
ongoing development for improved
sustainability and reporting.
As a major provider of residential aged
care services in Australia, we recognise
the importance of our contribution to the
sustainability of the environment and the
communities in which we operate. We
have dedicated policies and practices in
place that are underpinned by a robust
governance system and corporate and
socially responsible values that we strive
to live by. We recognise the importance of
continuing to develop sustainable practices
within our business. We also recognise
the need to be accountable to our various
stakeholders and provide informative
reporting. We continue to work to improve
our reporting in this area.
Environmental
Japara Healthcare understands that human
activity has a profound impact on the
environment and recognises its responsibility
to conduct business in an environmentally
sustainable manner.
The following areas of the business have
been identified as having an effect on the
environment in which Japara Healthcare
operates, and are managed with the
intention of reducing unnecessary waste
and minimising the consumption of
resources in a cost effective way:
• energy management;
• waste management; and
• water management.
Below are some of the initiatives we have
adopted to reduce the impact of the
business on the environment:
• utilising energy-efficient products;
• LED lighting replacement programs
at facilities and sensor lighting at
head office;
• Ozone Laundry Systems in facility
laundries to reduce water wastage
and pollution;
• incorporating high energy efficiency
designs and measures into our
development projects;
• identifying and containing asbestos
Health and safety
We understand and embrace our obligations
under health and safety legislation and
have a robust program in place to maintain
consistent delivery of high-quality care and
provide a safe environment for residents and
staff. This includes the following policies,
practices and initiatives:
• codes of conduct (covering matters
such as privacy, whistleblowing, equal
opportunity, non-discrimination, fair
dealings and other expected workplace
and community behaviours);
• workplace health and safety measures
(including an accredited process for
delivering care and wellbeing services,
regular ongoing employee training, and
quality and other audit assessments); and
• support and external assistance programs
for the wellbeing of our employees,
residents and their families at difficult
and eventful times.
Our main policies and codes outlined
above are available on our website:
japarahealthcare.com.au under the
Investor section.
As mentioned earlier, the Board has
established a Zero Harm Committee. Its
objectives are to ensure that a commitment
to safety is embedded across our Group
and policies, procedures and practices for
resident safety, clinical care and workplace
health and safety are in place and overseen.
Communities
We are connected at various levels across
a range of communities including:
• regulatory;
• industry and peers; and
• local communities we operate within.
A significant portion of our revenue is
sourced from Government through the
payment of contributions and supplements
for residents’ care and facility maintenance.
We have a responsibility to use these
monies in a socially responsible manner, as
governed by legislation, for the betterment of
the provision of care to the community.
at facilities under a continuous
audit program;
• piloting an energy consumption project
to develop energy efficiency strategies
for facilities;
• recycling and garbage disposal programs
at facilities and head office; and
• encouraging shareholders to use
electronic communications and electronic
media in dealings with us.
The Board has established a Zero Harm
Committee whose responsibilities include
overseeing environment and sustainability
matters and ensuring relevant policies,
procedures and practices are in place
and overseen.
Social
Japara Healthcare and the aged care
industry provide important services to the
community in caring for the aged. The
demand and requirement for these services
is increasing as the Australian population
continues to age. We are committed to
providing high-quality care and delivering
new places through our building and
development program. Community
interaction and support are important in
developing and delivering these products
and services for both the sustainability of the
business and community care.
Our people
Japara Healthcare’s employees are critical
to its success in achieving its core objective
of providing the best available quality of
life for the elderly population of Australia.
We are committed to supporting and
protecting our employees and promoting
diversity within our workplaces. We have
a diversity policy, governed by the Board,
which, amongst other things, supports
the promotion of women in senior roles
and a diverse workforce to reflect our
resident profiles and local communities.
We annually report information on our
workforce, including gender composition,
to the Workplace Gender Equality Agency,
the results of which are available on our
website: japarahealthcare.com.au under
the Investor section. We support the rights
of employees to join trade unions and work
collaboratively and fairly in negotiating
enterprise agreements.
08 Japara Healthcare Annual Report 2016
As a major provider in the residential aged
care sector, we have a responsibility to our
stakeholders and the broader community
to contribute on matters affecting the
industry including Government regulatory
reform. We are supportive of reform that
underpins the long-term sustainability of
a high-quality residential aged care sector.
We participate in sector-related matters
through direct submissions and
representations to Government, serving
on regulatory committees and active
participation as a member of the
Aged Care Guild.
We are a socially responsible taxpayer and
have adopted a tax risk management policy,
which provides a governance structure to
comply with our tax obligations.
We stay connected to our local communities
through active engagement. This includes
initiatives such as:
• marketing and open inspections;
• resident visits to local attractions;
• volunteer programs that bring the
community into the facilities;
• donations and local fundraising;
• unique designs of homes and amenities
to support and encourage visitors; and
• menu and lifestyle options designed
and offered with the ethnicity and culture
of residents and staff in mind.
Governance
The Board recognises Japara Healthcare’s
duties and obligations to stakeholders
to have a robust corporate governance
system. It has overseen the establishment
of systems that accord with the ASX
Corporate Governance Council’s
Corporate Governance Principles and
Recommendations, 3rd edition. This includes
adopting an appropriate risk management
framework, delegating appropriate authority
and responsibility to implement strategies
and policies approved by the Board to the
CEO and management and using Board
committees to assist the Board to discharge
its governance responsibilities.
We respect the privacy of our residents, staff
and other stakeholders and have policies
and systems in place to provide appropriate
protection, including as required by law.
Further details on our corporate governance
practices can be found in our Corporate
Governance Statement which is available
on our website: japarahealthcare.com.au
under the Investor section.
The future
As previously mentioned, we are working
on improving our sustainability reporting,
which should assist the Board with setting
and measuring sustainability objectives for
monitoring and reporting purposes moving
forward.
In FY2017, we seek to:
• review the material sustainable impacts
of the business;
• review the sustainability of our business
practices and opportunities to enhance
them;
• consider best practice approaches and
performance for sustainability;
• establish some baseline measures
against which to track progress in
future years; and
• formulate approaches for information
capture and reporting.
Japara Healthcare understands that
human activity has a profound impact
on the environment and recognises
its responsibility to conduct business
in an environmentally sustainable
manner.
08 Japara Healthcare Annual Report 2016
09 Japara Healthcare Annual Report 2016
Developing and
delivering new
ways to meet
lifestyle, wellbeing
and social needs
10 Japara Healthcare Annual Report 2016
Directors’ Report
The Directors present their report together with the consolidated financial statements of Japara Healthcare Limited (the Company) and
its controlled entities (the Group) for the financial year ended 30 June 2016 and the Independent Auditor’s Report thereon.
1. Directors
The Directors of the Company at any time during the financial year and up to the date of this report were:
Linda Bardo Nicholls AO
BA (Econ), MBA, FAICD (Life)
Non-Executive Chairman
Director since 19 March 2014
Linda is a senior executive and company director with more than 30 years’ experience across Australia,
New Zealand and the United States. Presently Linda has directorships with Fairfax Media, Medibank
Private and the Olivia Newton John Cancer Research Institute.
Previously she has held the position of chairman at some of Australia’s most well-regarded companies,
including Healthscope, Yarra Trams and Australia Post, and was a director of Pacific Brands Group,
St George Bank and Sigma Pharmaceuticals Group.
Linda holds a Masters of Business Administration from Harvard Business School and a Bachelor of Arts
in Economics from Cornell University and is a Life Fellow of the Australian Institute of Company Directors.
During the last three years she has also been a director of Keolis-Downer Group, Low Carbon Australia
Limited and the Walter and Eliza Hall Institute of Medical Research.
Other current Australian listed company directorships:
Medibank Private (appointed 31 March 2014), Fairfax Media (appointed 26 February 2010).
Former Australian listed company directorships in last three years:
Pacific Brands Group (resigned 15 July 2016), Sigma Pharmaceuticals Group (resigned 9 December 2015).
Andrew Sudholz
FPI, MAICD
Andrew is a founding shareholder and Executive Director of the Company. Andrew has more than 30
years’ experience in the real estate, healthcare and professional services industries.
Managing Director and
Chief Executive Officer (CEO)
Director since 19 March 2014
Prior to the establishment of the Group, Andrew was a global partner of the Arthur Andersen Group,
a national partner of Ernst & Young’s Real Estate Advisory Services Group and the state general manager
of the Triden Corporation.
He is also a Fellow of the Australian Property Institute, a former president of the Victorian division and
national board member of the Property Council of Australia and is currently a member of the Australian
Institute of Company Directors.
Andrew holds an Associate Diploma of Valuations from the Royal Melbourne Institution of Technology.
Andrew has not held any other directorships of listed companies in the last three years.
10 Japara Healthcare Annual Report 2016
11 Japara Healthcare Annual Report 2016
Directors’ Report continued
1. Directors continued
Richard England
FCA, MAICD
Chairman of the Audit, Risk and Compliance Committee and member of the Remuneration and
Nomination Committee and the Zero Harm Committee.
Non-Executive Director
Director since 19 March 2014
Richard has more than 20 years’ experience as a non-executive director and chairman of many ASX listed
and unlisted companies across the financial services, banking, healthcare and insurance industries.
Richard is currently the chairman of Ruralco Holdings and is a non-executive director of Nanosonics
and Macquarie Atlas Roads.
Prior to embarking on his career as a director, Richard was a Chartered Accountant in public practice
and a partner at Ernst & Young, where he was the national director of Corporate Recovery and Insolvency.
He is Chairman of Indigenous Art Code Limited, the company administering the Indigenous Australian
Art Commercial Code of Conduct.
Richard is a Fellow of Chartered Accountants Australia and New Zealand and a member of the Australian
Institute of Company Directors.
During the last three years Richard has also been a director of Chandler Macleod Group.
Other current Australian listed company directorships:
Ruralco Holdings (appointed 9 July 2002), Nanosonics (appointed 5 February 2010), Macquarie Atlas
Roads (appointed 1 June 2010).
Former Australian listed company directorships in last three years:
Chandler MacLeod Group (resigned 16 April 2015).
David Blight
BAppSc
Chairman of the Remuneration and Nomination Committee and member of the Audit, Risk and
Compliance Committee and the Zero Harm Committee.
Non-Executive Director
Director since 19 March 2014
David is currently managing director and CEO of ARA Australia Pty Ltd, the Australian business of the
Singapore listed ARA Group. ARA is an Asia Pacific real estate investment management firm with over
$30 billion in funds under management.
His previous roles include vice chairman of ING Real Estate and global chairman and CEO of ING Real
Estate Investment Management based in The Netherlands. He has also held senior executive positions
with Armstrong Jones, Mirvac Group and APN Property Group. David has more than 30 years’ experience
in the real estate industry across all major global markets and property sectors.
David holds a Bachelor of Applied Science in Property Resource Management (Valuation) from the
University of South Australia and is a board member of APREA (Australian Chapter).
David has not held any other directorships of listed companies in the last three years.
JoAnne Stephenson
BComm, LLB, CA, MAICD
Chairman of the Zero Harm Committee and member of the Audit, Risk and Compliance Committee and
the Remuneration and Nomination Committee.
Non-Executive Director
Appointed as a Director
on 1 September 2015
JoAnne holds a Bachelor of Commerce and Bachelor of Laws (Honours) from the University of Queensland
and is a member of Chartered Accountants Australia and New Zealand and a member of the Australian
Institute of Company Directors.
She has over 25 years of extensive experience in financial services having been a partner with KPMG
and has key strengths in finance, accounting, risk management and governance.
She is currently a non-executive director of ASX listed Asaleo Care Limited and Challenger Limited, Chair
of the Audit and Risk Committee of the Department of Health and Human Services (Victoria), Chair of the
Melbourne Chamber Orchestra and the Independent Chair of two Latitude Insurance entities in Australia.
JoAnne was also previously a non-executive director of the Peter MacCallum Cancer Institute.
Other current Australian listed company directorships:
Asaleo Care (appointed 30 May 2014), Challenger (appointed 8 October 2012).
12 Japara Healthcare Annual Report 2016
Tim Poole
BComm, CA
Non-Executive Director
Appointed as a Director on
19 March 2014 and retired as a
Director on 1 September 2015
Tim began his career in 1990 at Price Waterhouse before a long and successful period (1995 to 2007)
helping to build Hastings Funds Management, where he became managing director in 2005.
Tim is chairman of Aurizon Holdings Limited, Westbourne Credit Management Limited, McMillan
Shakespeare Limited and Lifestyle Communities Limited.
He was formerly chairman of Asciano Limited and a non-executive director of Newcrest Mining Limited
and Victoria Racing Club Limited.
Tim holds a Bachelor of Commerce from the University of Melbourne and is a member of Chartered
Accountants Australia and New Zealand.
Other current Australian listed company directorships:
Aurizon Holdings (appointed 1 July 2015), McMillan Shakespeare (appointed 17 December 2013) and
Lifestyle Communities (appointed 19 November 2007).
Former Australian listed company directorships in last three years:
Newcrest Mining (resigned 30 July 2015).
2. Company Secretaries
Bruce Paterson
Bruce has over 25 years’ corporate experience in senior roles with listed and unlisted companies. Prior to joining Japara Healthcare, he was
company secretary of a Top 200 ASX listed professional services company, Crowe Horwath Australasia Limited, for 14 years.
Bruce was appointed as lead Company Secretary of the Company in December 2015.
He has a Bachelor of Business in Accounting and a Graduate Diploma in Company Secretarial Practices. Bruce is a Fellow of the Governance
Institute of Australia, the Institute of Chartered Secretaries & Administrators and CPA Australia.
Chris Price
Chris was appointed as Chief Financial Officer of the Company in June 2015 and as a Company Secretary in July 2015.
Chris has over 25 years’ experience in the financial services, professional services and manufacturing sectors. Most recently he was managing
director of ASX listed professional services firm Crowe Horwath Australasia Limited, having previously served as the company’s chief financial
officer for seven years.
He is a member of Chartered Accountants Australia and New Zealand and has a Bachelor of Business from RMIT University.
3. Directors’ meetings
The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each of the Directors
during the financial year are:
Director
Linda Bardo Nicholls*
Andrew Sudholz*
Richard England
David Blight
JoAnne Stephenson
Tim Poole
Board meetings
B
A
12
12
12
12
12
12
12
12
10
9
2
2
Audit, Risk and
Compliance Committee
meetings
Remuneration and
Nomination Committee
meetings
Zero Harm Committee
meetings
A
6
6
6
6
4
2
B
6
6
6
6
4
2
A
4
4
4
4
3
1
B
4
4
4
4
3
1
A
2
2
2
2
2
n/a
B
2
2
2
2
2
n/a
A. Number of meetings attended.
B. Number of meetings held during the time the Director held office during the financial year.
* Attended committee meetings by invitation.
12 Japara Healthcare Annual Report 2016
13 Japara Healthcare Annual Report 2016
Directors’ Report continued
4. Principal activities
The principal activities of the Group during the financial year were that of owner, operator and developer of residential aged care facilities.
No significant change in the nature of these activities occurred during the financial year.
5. Operating and financial review
Overview of the Group
The Group is one of the largest private sector residential aged care operators in Australia with over 4,700 resident places and approvals for
places nationally across 43 facilities located in Victoria, New South Wales, Queensland, South Australia and Tasmania.
In conjunction with the business of providing aged care services, the Group also operates 180 independent living units (ILUs) across five
retirement villages, located adjacent to its aged care facilities. Retirement village revenue accounts for less than 1% of the Group’s operations
by revenue.
Since inception in 2005, the Group has successfully expanded its business and achieved significant growth in earnings by:
• development and expansion of facilities;
• selective acquisition of facilities; and
• implementation of the Group’s care and operating model.
In 2014 the Group was restructured resulting in an Initial Public Offering of ordinary shares (IPO). Japara Healthcare Limited was admitted to
the official list of ASX Limited on 17 April 2014.
The Group’s provision of care is underpinned by an operating model that is designed to facilitate ageing-in-place by servicing the full spectrum
of resident care needs. It specialises in high acuity care, including dementia. This operating model is aimed at achieving:
• above industry average occupancy levels through providing a high standard of resident care;
• eligible Government care funding matched to resident acuity; and
• cash flow generation to meet working capital requirements, facilitate future growth and provide returns to shareholders.
Funding sources
The Group derives funding from two main sources, being operating funding (Government funding, resident contributions and accommodation
charges) and capital funding (Refundable Accommodation Deposits (RADs)).
Government and resident contributions
As an Approved Provider of residential aged care services as determined by the Department of Health (Department), each of the Group’s
facilities is eligible to receive funding contributions from the Government. Funding is in the form of subsidies and supplements for approved
residents in funded places, on a per resident per day basis. It includes care and accommodation components. The Group derived circa 72%
(2015: 72%) of its revenue from Government care funding during the financial year.
The Group also receives contributions from residents for the provision of a full spectrum of aged care services, optional additional services and
Daily Accommodation Payments. Resident fees made up approximately 28% (2015: 28%) of the Group’s revenue for the 2016 financial year.
Refundable Accommodation Deposits (RADs)/accommodation bonds
RADs (which replaced acommodation bonds from 1 July 2014) account for a significant component of the Group’s capital funding. The Group
maintains a conservative RAD management regime with the average value of incoming RADs set with reference to the median house price in
the relevant Local Government Authority (LGA).
During the 2016 financial year the Group used capital funding received from RADs for the following purposes:
• financing capital works for aged care facilities in line with its brownfield and greenfield development strategy;
• financing the acquisition of the Profke Aged Care Group; and
• repaying bank debt used to finance both capital works for aged care facilities and the acquisition of the Profke Aged Care Group.
The Group maintains a disciplined approach to capital expenditure, with all key capital projects subject to strict approval protocols. Capital
expenditure comprises expenditure on asset enhancement and replacement programs and general maintenance projects. It also includes
growth capital expenditure comprising brownfield and greenfield development projects and acquisition of aged care facilities.
Residents have the option to either pay a RAD, a Daily Accommodation Payment (DAP) or a combination of both. The DAP is calculated on a
daily basis and charged monthly and recognised in revenue as a resident contribution. The value of a DAP is calculated with reference to the
room value using an interest rate set by the Government.
14 Japara Healthcare Annual Report 2016
Ongoing commitment
to delivering high-
quality resident care
14 Japara Healthcare Annual Report 2016
15 Japara Healthcare Annual Report 2016
Directors’ Report continued
5. Operating and financial review continued
Funding sources continued
Bank debt
The Group may borrow money from time to time in order to finance its activities. During the financial year the Group, together with its existing
bankers, executed a new Syndicated Facility Agreement and Multi-Option Facility Agreement (Bank Facilities). These new Bank Facilities were
negotiated to assist finance for planned short and medium-term brownfield and greenfield developments program of the Group.
Key costs
The Group’s key cost relates to labour, which is approximately 67% (2015: 66%) of total revenue for the financial year. Other costs include
medical supplies, catering, cleaning, consumables, repairs and maintenance, energy, utilities and corporate costs.
As one of the largest operators of residential aged care services in Australia, the Group leverages its ability to achieve cost advantages through
internalisation and centralisation of certain functions, economies of scale and Group buying power.
Review of operations
Revenue and other income
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
Net Profit After Tax (NPAT)
Net profit amounts have been calculated in accordance with Australian Accounting Standards (AASs).
Operational highlights
Increases in revenue, EBITDA and NPAT in the year were achieved through:
• a moderate year-on-year uplift in income from care and accommodation;
2016
$’000
327,266
56,102
30,375
2015
$’000
281,249
50,590
28,839
Change
%
16.4
10.9
5.3
• the acquisition of the Profke Aged Care Group, which contributed operating EBITDA of $4.4 million; and
• steady occupancy with average occupancy of 94.4%, excluding sites acquired in the financial year and sites under development
(2015: 94.8%), which was generally in line with expectations.
This is a pleasing result following the Government’s decision to cease the Dementia supplement and the Payroll Tax supplement effective
31 July 2014 and 1 January 2015 respectively, which contributed $0.6 million and $4.6 million respectively to revenue in FY2015.
The Group operates a care-centric business model as described earlier above. The vast majority of the Group’s workforce is unionised and
in FY2016 wage costs increased by approximately 3.25% in accordance with Enterprise Bargaining Agreements (EBAs). Staff costs as a
percentage of the Group’s revenue for the financial year were 67% (2015: 66%).
Review of financial position
A summary of the audited Statement of Financial Position is set out below:
Total assets
Total liabilities
Net assets
2016
$’000
1,069,994
537,689
532,305
2015
$’000
915,799
385,760
530,039
Change
%
16.8
39.4
0.4
The Group’s total assets increased by 16.8% during the financial year. This was primarily due to the acquisition of the Profke Aged Care Group,
which included four residential aged care facilities accommodating over 500 residents. Other material increases in assets resulted from the
Group’s capital expenditure on purchasing land, and brownfield and greenfield development expenditure in line with the Group’s growth
strategy.
Total liabilities increased by 39.4%, which was mainly due to:
• an increase in the RAD/accommodation bond liability of $80.6 million; and
• a bank loan balance at 30 June 2016 of $59.5 million.
Net RAD cash inflows for the financial year were $54.9 million, which represents an increase in both number of RAD payers and average RAD
value, and includes RADs received from 54 new places opened across two sites. The acquisition of the Profke Aged Care Group also increased
the RAD liability by a further $25.2 million.
16 Japara Healthcare Annual Report 2016
During the financial year $36.5 million of the Bank Facilities was drawn down to fund brownfield and greenfield developments, and $37.5 million
was drawn down to fund part of the purchase of the Profke Aged Care Group, $12.5 million of which was repaid within the year. A total of
$59.5 million was drawn down against the Bank Facilities as at the reporting date.
The Group’s current liabilities exceed current assets by $431.0 million (2015: $315.8 million) as at 30 June 2016. This mainly arises because
of the requirement to classify resident obligations relating to RADs/accommodation bonds and ILU resident loans as current liabilities, whereas
the property, plant and equipment, investment properties and intangible assets to which they relate are required to be classified as non-current
assets.
The Group maintains a minimum level of liquidity to ensure RADs/accommodation bonds are able to be refunded as required and its working
capital requirements are generally consistent throughout the course of a financial year with no significant variations. The Group’s cash position
is expected to provide sufficient liquidity to meet the Group’s current anticipated cash requirements.
Over time, the Group may seek additional funding from a range of sources to diversify its funding base to reduce reliance on the bank finance
market and to manage its exposure to interest rate risk.
Business strategies and prospects for future financial years
The Group is committed to maximising the value in its current portfolio through organic growth while maintaining a high level of resident care
in line with its care and operating model as described earlier in the overview of the Group.
In addition to organic growth, the Group has an expansion plan that centres on increasing the size of its aged care portfolio through brownfield
and greenfield developments and through the acquisition of existing aged care facilities.
The Group is a supporter of reform that appropriately balances the community need for high-quality residential aged care and the sector’s
financial sustainability. In FY2016 the Government highlighted the importance of the continuum of care model and the goal of enabling
a seamless transition between home and residential care. The Group will continue to build on current relationships with complementary
businesses and will look to develop relationships and opportunities across the care continuum in the medium term.
16 Japara Healthcare Annual Report 2016
17 Japara Healthcare Annual Report 2016
Directors’ Report continued
5. Operating and financial review continued
Business strategies and prospects for future financial years continued
Organic growth
(i) Additional services
In FY2015 the Group introduced a suite of additional services that are available to its residents. Revenue from additional services has grown
year-on-year and is expected to generate further revenue growth from resident contributions as they access these services. These services
include hairdressing, pay TV, superior room furnishings, concierge services and various non-clinical therapy services and are now offered to all
residents including those who occupy the pre-reform ‘high care’ places in the Group’s existing portfolio. In addition, the majority of the Group’s
brownfield and greenfield developments will include additional service offerings once these are completed.
(ii) Cost reduction initiatives
The Group reviews each of its major supplier and service contracts as they come to the end of their term. Further costs savings are expected
as these supply and service contracts are re-tendered.
(iii) Occupancy levels
The Group has historically maintained high occupancy levels, and continues to target incremental improvement in occupancy across its
portfolio. A dedicated client services team works with the facility managers on a daily basis to maintain a close relationship with the Group’s
resident consumer base and referral network. Benchmarking occupancy levels across the Group and amongst its competitors is used for
strategic direction and initiatives.
The Group continues to provide care and services that are closely aligned with consumer demands and is proactive in strategic marketing
activities to ensure the Group’s high occupancy objective is met. In addition, the Group’s growth strategy is targeted towards undersupplied
regions, as identified by its internal research team, which helps support high occupancy levels across the Group.
(iv) RAD/DAP funding
The Group has received strong net RAD inflows during the year totalling $54.9 million. Further new capital is anticipated to be received
from new RADs linked to newly delivered operational places, as well as RAD uplift emanating from the existing portfolio. Specifically, the
Group’s portfolio comprises a significant number of places that were previously licensed as ‘high care’ places and could not be charged an
accommodation bond. Since 1 July 2014, a large number of these places can now attract a RAD under the aged care reform. The capital
from RADs on these places was partly received in FY2015 and FY2016, and more is expected to be received over the next year.
Brownfield and greenfield developments
The Group’s current development program is to deliver over 900 new places to the market by the end of FY2019. In FY2016 the development of
30 new places and significant refurbishment of existing places at the Group’s Bayview facility in Carrum Downs, Victoria, was completed and
24 operational places were added to the portfolio upon the completion of the new 69 place facility at Trevu, South Australia. A further five
projects should be completed in FY2017.
The Group will utilise the 751 resident places that it was allocated during the Department’s 2014 and 2015 Aged Care Approvals Rounds to
meet its circa 900 place development program, with the balance to be obtained either transferred from its current facilities with non-operational
places (current non-operational places held: 228), from future Aged Care Approvals Rounds or by acquisition.
It is estimated that the brownfield and greenfield construction costs of future developments will be repaid by the RAD inflows received from
residents entering these facilities post completion.
During FY2016 and up to the date of signing this report, the Group has secured land for greenfield developments in Newport, Mt Waverley
and Rye in Victoria, and Belrose in New South Wales, and will continue to look for land in under-supplied areas in FY2017.
At the date of this report the following development projects are in the construction or planning phase:
• Kirralee, Ballarat, Victoria – 13 place extension and significant refurbishment, expected completion September 2016;
• George Vowell, Mt Eliza, Victoria – 34 place extension and significant refurbishment, expected completion October 2016;
• St Judes, Narre Warren, Victoria – 30 place extension and significant refurbishment, expected completion November 2016;
• Central Park, Windsor, Victoria – significant refurbishment of the entire facility, expected completion December 2016;
• Riverside, Launceston, Tasmania – 90 place new build expected to be completed May 2017;
• Kingston Gardens, Springvale South, Victoria – 56 place extension and significant refurbishment, expected to be completed in FY2018;
• Glen Waverley, Victoria – 60 place new build expected to be completed in FY2018;
• Rye, Victoria – 95 place new build expected to be completed in FY2018;
• Newport, Victoria – 120 place new build expected to be completed in FY2018;
18 Japara Healthcare Annual Report 2016
• Belrose, New South Wales – 110 place new build (45 net new places) expected to be completed in FY2019; and
• Mt Waverley, Victoria – 125 place new build (95 net new places) expected to be completed in FY2019.
As these projects are completed, the Group will also receive funding from the significant refurbishment accommodation supplement,
which provides a potential additional $19 per day for each concessional resident in newly built or significantly refurbished facilities.
The Group remains on track to deliver new places in line with its brownfield and greenfield program.
Acquisitions of existing aged care facilities
The Group continues to review acquisition opportunities of existing aged care facilities. The Group targets individual or groups of facilities
where shareholder value can be enhanced through operational improvements, specifically the implementation of the Group’s care and
operating model, Group buying power and removal of duplicated administration costs. This was demonstrated following the Group’s
acquisition and successful integration of the Profke Aged Care Group during FY2016 (see Note F1 of the financial statements), adding
587 resident places to the Group.
A disciplined and selective approach
The Group has established policies and procedures for the acquisition of additional aged care facilities. As part of the due diligence process,
pricing is confirmed by independent valuations undertaken by the Group’s panel of valuers for both the business and real estate components.
The Group undertakes formal legal, financial, property, operational and compliance due diligence on each facility before completing any
acquisition.
Typically, management targets facilities where expertise can be applied in the short term to improve the performance of the facility. The Group
utilises its existing infrastructure and compliance platform to successfully execute acquisitions including the application of strict investment
criteria to identify and filter acquisition opportunities, subject to market conditions and availability of capital.
The Group’s key acquisition investment criteria include:
• demand: facilities in locations that have unmet demand;
• network enhancement: facilities in locations that enhance the Group’s national presence;
• strong care fundamentals: facilities that have strong care fundamentals and accreditation histories, as well as strong governance around
care delivery and ACFI funding;
• growth: operational facilities that provide potential for long-term growth from income and RADs;
• cash flow: facilities that have a substantial income flow; and
• value creation: facilities that provide an opportunity for strategic value enhancement and asset management strategies to enhance returns
to investors through:
– purchasing undervalued assets that may be mispriced due to complexities of ownership, capital structure, planning controls or ineffective
management processes;
– asset management through asset repositioning, refurbishment, extension and redevelopment of existing assets; and
– effective deal sourcing including opportunities that are off-market or subject to capital constraints, utilising the Group’s network
of contacts and market intelligence.
The Group will consider the acquisition of single aged care facilities or multi-facility portfolios where the investment criteria are met.
Material business risks
Change of regulatory framework
The Australian aged care industry is highly regulated and significantly funded by the Federal Government. Regulatory and funding changes
may have an adverse impact on the way the Group promotes, manages and operates its facilities, and its financial performance.
In addition, there is a risk that other participants in the industry may, through their actions and business practices, cause future regulatory
changes that will have an adverse impact on the Group’s financial performance and future prospects.
The Group has limited control over this area of risk, but seeks to influence regulatory decision making through submissions and consultation
at senior Government levels including within Treasury, Health and Aged Care departments. The CEO has direct responsibility for managing
regulatory risk and is the Company’s delegate on the Aged Care Guild, which seeks to support ongoing investment in the industry to meet
future demand. The CEO develops strategies, with the support of the Board, in anticipation of and to mitigate risk in regulatory change.
18 Japara Healthcare Annual Report 2016
19 Japara Healthcare Annual Report 2016
Directors’ Report continued
5. Operating and financial review continued
Material business risks continued
Reduction in occupancy levels
In the ordinary course of its business, the Group faces the risk that occupancy levels may fall below expectations. Reduced occupancy
levels may adversely affect the Group’s financial performance as it would reduce the amount of Government care funding to which the Group
is entitled, resident contributions, accommodation payments and RADs. A decrease in occupancy levels may also result in an increase in
financing costs. Either of these occurrences would be likely to lead to a decline in the Group’s profitability.
Occupancy levels are monitored daily at a facility level and reported to line management weekly. Facility managers are responsible for their
facilities’ occupancy levels, which is a key performance indicator (KPI) for performance assessment purposes. Facilities are supported by
line management and a dedicated client services team, who have access to referrer networks and direct marketing resources. The Group
Executive of Operations has overall responsibility for occupancy levels and reports directly to the CEO. The Board is provided with occupancy
data on a monthly basis including trend analysis and action plans to address declines in occupancy. As a further strategy to counter reductions
in occupancy levels, the Group plans its greenfield developments by only building in undersupplied geographic markets supported by
independent research.
Health and safety
The wellbeing, health and safety of residents, facility staff and visitors are critical to the Group for its ongoing business operations. A poor or
unsafe workplace can lead to injuries and discontentment amongst residents, relatives and staff, resulting in adverse financial performance,
potential litigation and reputation issues for the Group.
The Group delivers care and services to its residents through a comprehensive and robust process, which is supported by policies and
procedures that comply with the Aged Care Act. Facility staff are under the control and supervision of qualified facility managers and receive
regular ongoing training to safeguard and promote the wellbeing, health and safety of both residents and themselves. Monthly audits and
post-incident investigations are conducted to identify and address risks of injury or illness. A head office team provides work, health and safety,
human resources and operational support to the facilities. The Group Executive of Aged Care Services has overall responsibility for resident
care services, whilst the Group General Manager of Human Resources has overall responsibility for staff wellbeing. Both executives report
directly to the CEO and provide monthly reports to the Board on the wellbeing, health and safety of residents and staff. The Board has recently
established a Zero Harm Committee with the objective to ensure that the Company’s commitment to zero harm is embedded across the Group,
and policies, procedures and practices for resident safety, clinical care and workplace health and safety are in place and overseen. Statistical
reports showing injury frequency rates, near misses and other care and wellbeing indicators are provided to the committee quarterly.
Loss of key personnel
The Group relies on a high-quality management team with significant aged care industry experience. The loss of key members of the Group’s
management team could adversely affect the Group’s ability to operate its facilities and its business to the current standard.
This could undermine the Group’s ability to effectively comply with regulations and may also result in a reduction in demand for the Group’s
aged care services from new and existing residents. Either of these occurrences may adversely impact on the Group’s financial performance
and position.
The Group has processes in place to manage the potential loss of key personnel. The Board has responsibility for CEO succession planning,
whilst the CEO has responsibility for succession planning of other key personnel with the support of the executive leadership team. The Board
is required to be immediately advised of any resignation or termination of a key person via the Company Secretary or CEO. The Company’s
short term incentive (STI) and long term incentive (LTI) arrangements for key personnel are overseen by the Remuneration and Nomination
Committee. These arrangements can assist with retention through the deferral of payment of cash STIs over a two-year period and the vesting
of LTIs over a three-year period. Key personnel also have extended termination of employment notice periods in their employment contracts
to allow for an orderly transition of the role.
Loss of approvals or accreditation
Aged care facilities are required to be operated by Approved Providers and accredited in various ways. These approvals are generally subject
to regular review and may be revoked in certain circumstances. Aged care facilities must be operated by an Approved Provider, certified and
accredited to attract Government care and accommodation funding. If the Group does not comply with regulation and is unable to secure
accreditation for the operation of its aged care facilities and resident places in the future, or if any of its existing accreditation or approvals
are adversely amended or revoked, this may affect Government funding, breach bank lending covenants and therefore adversely impact
the financial performance and position and future prospects of the Group.
The Group has robust policies and procedures in place covering all 44 accreditation standards. Facility staff are educated and regularly trained
to ensure these standards are upheld and are supported by a quality control team. When the Group acquires a new facility, it undertakes a
review of accreditation standards within three months using a gap analysis process to identify risks. New facilities are transitioned to Group
standards with the support of the quality control team. The Group Executive of Aged Care Services has overall responsibility for ensuring
20 Japara Healthcare Annual Report 2016
accreditation standards are maintained and reports directly to the CEO. The Board is provided with regular reports on the outcomes of periodic
Government accreditation audits with learning communicated across the Group. The STI and LTI arrangements for the executive leadership
team, which includes the Group Executive of Aged Care Services and the CEO, have a gateway hurdle that the Group must maintain ongoing
accreditation and compliance standards.
Reputational damage
The Group operates in a commercially sensitive industry in which its reputation could be adversely impacted should it, or the aged care industry
generally, suffer from any adverse publicity. Such publicity may lead to a reduction in the number of existing residents at the Group’s facilities or
the Group’s ability to attract new residents to its facilities, both of which occurrences may adversely impact the Group’s financial performance
and position and future prospects.
Robust controls and processes are in place around resident care, health and safety issues. The Group seeks to avoid reputational incidents
through a strong operating and control environment. When potential incidents are identified or become known they are promptly reported
through the Group Executive of Aged Care Services to the other executive leadership team members and to the Board in accordance with
standing policy. The executive leadership team, under the CEO’s direction, is responsible for developing appropriate strategy and response.
The CEO and Chief Financial Officer have authority under the Group’s Communication Strategy for commenting externally on reputational
related matters. The Group engages external public relations advisers and other experts as required to assist with strategy, response and
handling. From an industry perspective, the Company supports and is also supported by the Aged Care Guild, of which it is an active member.
The Guild is proactive in raising concerns and providing positions and responses to industry related matters.
6. Dividends
Dividends paid or determined for payment on ordinary shares are as follows:
Final dividend of 5.75 cents per share (2015: 5.5 cents)
Interim dividend of 5.75 cents per share (2015: 5.5 cents)
$15,162,000
$15,125,000
The interim dividend paid during FY2016 was fully franked (FY2015: unfranked). The final dividend for FY2016 will be fully franked (FY2015: fully
franked).
7. Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the year other than as disclosed elsewhere in this report.
8. Events subsequent to reporting date
No matters or circumstances have arisen since the end of the financial year that significantly affected or may significantly affect the operations
of the Group, the results of those operations or the state of the affairs of the Group in future financial years.
9. Likely developments
Information relating to the likely developments in the operations of the Group and the expected results of those operations in future financial
years are set out in Section 5 and elsewhere in this report.
10. Environmental regulation
The Group’s operations have a modest environmental impact and, accordingly, are not subject to any particular and significant environmental
regulation under either Commonwealth or State legislation.
11. Indemnification and insurance of officers
Indemnification
The Company has agreed to indemnify the current Directors and officers of the Company against all liabilities to another person (other than
the Company or a related body corporate) that may arise from their position as Directors and officers of the Company and its controlled entities,
to the full extent permitted by law. The Company has also agreed to meet the full amount of any such liabilities, including costs and expenses.
The Company has agreed to indemnify the current Directors of its controlled entities for all liabilities to another person (other than the Company
or a related body corporate) that may arise from their position, except where the liability arises out of conduct involving a lack of good faith.
The Company has also agreed to meet the full amount of any such liabilities, including costs and expenses.
Insurance premiums
During the financial year, the Group paid a premium in respect of a contract insuring current and former Directors and officers of the Group
against certain liabilities that may be incurred by such Directors and officers in the discharge of their duties to the extent permitted by the
Corporations Act 2001.
20 Japara Healthcare Annual Report 2016
21 Japara Healthcare Annual Report 2016
Directors’ Report continued
11. Indemnification and insurance of officers continued
Insurance premiums continued
Details of the nature of the liabilities covered or the amount of the premium paid in respect of the Directors’ and officers’ contract of insurance
have not been disclosed as this is prohibited under its terms.
The Company has not provided any indemnity or insurance for the auditor of the Company.
12. Non-audit services
During the year, KPMG, the Group’s auditor, has performed certain other services in addition to its statutory duties. Other services are
performed by KPMG where the Group considers that KPMG is best qualified or positioned to perform those services and that the performance
of those services would not compromise auditor independence requirements.
The Directors have considered the other services provided during the year by the auditor and, in accordance with written advice provided by
the Audit, Risk and Compliance Committee, are satisfied that the provision of those other services during the year is compatible with, and did
not compromise, the auditor independence requirements of the Corporations Act 2001 due to the following:
• the other services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision-
making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards.
Details of the amounts paid to the Group’s auditor for audit and non-audit services provided during the year are set out below:
Audit and review of financial statements
Acquisition and due diligence fees
Debt financing advisory fee
Taxation compliance fees
Other advisory services
2016
$’000
380
595
-
134
53
1,162
2015
$’000
335
-
190
57
33
615
13. Proceedings on behalf of the Group
No proceedings have been brought or intervened in on behalf of the Company with leave of Court under Section 237 of the Corporations Act 2001.
14. Lead Auditor’s Independence Declaration
The Lead Auditor’s Independence Declaration is set out on page 24 and forms part of this Directors’ Report for the financial year ended
30 June 2016.
15. Rounding off
The Group is of a kind referred to in ASIC Corporations Instrument 2016/191 dated 24 March 2016 and in accordance with that Class Order,
amounts in the Financial Report and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.
Remuneration Report
The Remuneration Report is set out in Section 16 and forms part of this Directors’ Report.
Signed in accordance with a resolution of the Directors:
Signed and dated at Melbourne on 22 August 2016
Linda Bardo Nicholls AO
Chairman
Andrew Sudholz
Managing Director and CEO
22 Japara Healthcare Annual Report 2016
Registered nurses
at every facility,
everyday on
every shift
22 Japara Healthcare Annual Report 2016
23 Japara Healthcare Annual Report 2016
Auditor’s Independence Declaration
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of Japara Healthcare Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2016 there have been:
(i)
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the audit.
KPM_INI_01
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
Darren Scammell
Partner
Melbourne
22 August 2016
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Profession Standards Legislation.
24 Japara Healthcare Annual Report 2016
Japara Healthcare Limited
PO Box 16082, Collins Street West VIC 8007
Q1 Building Level 4, 1 Southbank Boulevard, Southbank VIC 3006
Telephone 03 9649 2100 Facsimile 03 9649 2129
www.japarahealthcare.com.au ABN 54 168 631 052
Letter from the Chairman of the Remuneration and Nomination Committee
Dear Shareholders,
On behalf of the Board, we are pleased to present the Japara Healthcare Limited Remuneration Report for the year ended 30 June 2016.
As the Directors’ Report outlines, the Group produced a post tax profit of $30.4 million, reflecting a 5.6% increase on the prior year. This was a
particularly pleasing result achieved against a challenging backdrop, with a full period impact of the removal of the Payroll Tax and Dementia
supplements in the prior year.
The Group continued its focus on the provision of a high level of care across the portfolio. Nine facilities across the portfolio were re-accredited
for a further three years, and the Group continued to implement its growth strategy adding a further 54 resident places through the completion
of developments and a further 587 resident places from the acquisition of the Profke Aged Care Group on 1 December 2015. Pleasingly,
the Group has maintained a strong balance sheet and a structured care and operating model that enables it to adapt to the challenging
environment.
FY2016 remuneration performance outcomes
• On average, Executives earned 83% of their maximum short term incentive (STI).
• Under the FY2016 long term incentive (LTI) Plan, Executives were granted performance rights that are tested against gateway and
performance hurdles. The gateway hurdles set were met for FY2016 and the performance hurdles will be measured at the end of the
three-year period to 30 June 2018.
• No performance rights vested during FY2016.
FY2017 remuneration settings
The Board is committed to ensuring that the remuneration arrangements of the Group are directly linked to the results and objectives of the
business and that its employees are compensated fairly and competitively for their contributions. The 2017 remuneration settings have been
benchmarked against a comparator group comprising ASX 200 companies that have similar characteristics to Japara Healthcare not only in
industry sector, but also in scale and complexity. The relevant changes to remuneration settings for Executives for FY2017 are:
• an increase in salaries for selected Executives averaging 3.7%;
• no increase in the STI opportunity;
• the LTI EPS compound growth hurdle has been adjusted. We have maintained the minimum hurdle of 5% per annum EPS compound growth
however, full vesting will now occur when EPS compound growth of 10% per annum for the three years ending 30 June 2019 is reached.
The changes to the LTI conditions for the CEO are subject to shareholder approval at the Group’s AGM; and
• a 5% increase in base Non-Executive Directors’ fees for the year commencing 1 July 2016, and a 12.5% increase in the Chairman’s fees,
reflecting a market-based adjustment to levels agreed in 2014.
Nurses and other facility staff employed by the Group are covered under various Enterprise Bargaining Agreements, which stipulate wage
increases throughout FY2017 of up to 3.25%.
The Board has given extensive consideration to the altered LTI performance hurdles in light of the changing funding dynamics and regulatory
changes in the market. The Board is satisfied the KPIs set in both the STI and LTI for Executives are directly linked to the objectives of the
business and are structured to reward superior performance.
The Board recommends this Remuneration Report to you and asks that you support our remuneration policies and practices by voting
in favour of this report at our 2016 Annual General Meeting.
David Blight
Chairman, Remuneration and Nomination Committee
22 August 2016
24 Japara Healthcare Annual Report 2016
25 Japara Healthcare Annual Report 2016
Remuneration Report – Audited
16.1 Key management personnel
This remuneration report sets out the remuneration arrangements of key management personnel (KMP) in accordance with the Corporations
Act 2001 and Australian Accounting Standards for the year ended 30 June 2016 (FY2016). KMP are those people who have the authority and
responsibility for planning, directing and controlling the Group’s activities, either directly or indirectly.
Table 1 – Key management personnel for FY2016
Name
Senior Executives
Andrew Sudholz
Chris Price
Jerome Jordan
Julie Reed
Ashley van Winkel
Independent Non-Executive Directors
Linda Bardo Nicholls AO
Richard England
David Blight
JoAnne Stephenson (appointed 1 September 2015)
Tim Poole (resigned 1 September 2015)
Position
CEO and Managing Director (CEO)
Chief Financial Officer (CFO)
Group Executive of Operations
Group Executive of Aged Care Services
Group General Manager of Human Resources (became a KMP member
on 28 October 2015)
Chairman
Chairman of the Audit, Risk and Compliance Committee
Chairman of the Remuneration and Nomination Committee
Chairman of the Zero Harm Committee
16.2 Remuneration framework and governance
Board
The Board is responsible for determining the remuneration policy for executives and Non-Executive Directors and approving the amounts
for payments and equity-based awards.
The remuneration policy is designed to align Director and Executive objectives with business and shareholder objectives including offering
executives short term incentive (STI) and long term incentive (LTI) plans based on key performance areas linked to performance, growth and
financial results.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee (the Committee) assists the Board by considering remuneration-related matters including
the remuneration of the Non-Executive Directors, the CEO and other Senior Executives (Executives) as set out in the Committee’s Charter.
The Committee comprises only Non-Executive Directors, all of whom are independent from management.
The main responsibilities of the Committee with respect to remuneration include:
• review and recommend to the Board of Directors (the Board) arrangements for the Executives, including contract terms, annual remuneration
and participation in the Company’s STI and LTI Plans;
• review and recommend to the Board STI strategy, performance targets and bonus payments;
• recommend to the Board whether offers are to be made under any or all of the Company’s employee equity incentive plans in respect
of a financial year; and
• review and recommend to the Board the remuneration, travel and reimbursement arrangements for Non-Executive Directors.
Services from remuneration consultants
The Committee considers the advice of independent remuneration consultants and other external providers as required. This advice is used for
informed decision-making purposes and is not a substitute for thorough consideration and debate of remuneration matters by the Committee.
During FY2016, KPMG was engaged by the Remuneration and Nomination Committee to provide benchmarking data for CEO and Non-
Executive Director remuneration, and to provide ad hoc advice in relation to market practice in various other areas.
The Board is satisfied that the services provided by KPMG were free from undue influence by members of the KMP, about whom the
recommendations may relate.
The work undertaken by KPMG in FY2016 did not constitute a remuneration recommendation for the purposes of the Corporations Act.
26 Japara Healthcare Annual Report 2016
16.3 FY2016 remuneration summary
Fixed remuneration outcomes
Details of the remuneration of Executives, prepared in accordance with statutory obligations and Accounting Standards, are set out in Table 10
in Section 16.4.3 of this report.
The Board recognises that the statutory table may not provide a clear indication of the actual value of remuneration earned by Executives
during the year. As such, Table 2 below summarises the actual amounts the Executives received in FY2016. This includes their fixed
remuneration for FY2016 and any other payments or entitlements received during the year.
The key difference between remuneration amounts presented in Table 2 below and Table 10 in Section 16.4.3 is that the former is based on
actual entitlements paid to the individual and the latter requires that the movement in leave provisions be recognised in the financial statements
as part of the employee benefit expense.
Table 2 – Fixed remuneration paid in FY2016
Cash salary1
$’000
Superannuation
$’000
Other
$’000
Reconciliation to statutory
total fixed remuneration
Total fixed
remuneration
statutory2
$’000
Movement
in leave
provisions
$’000
Total fixed
remuneration
paid
$’000
919
924
434
10
405
404
413
413
150
38
33
41
1
30
31
33
31
14
14
14
-
-
17
17
21
23
-
971
971
475
11
452
452
467
467
164
27
(65)
5
1
(26)
17
(27)
(6)
(4)
998
906
480
12
426
469
440
461
160
A Sudholz
FY2016
FY2015
C Price
FY2016
FY2015 (from 22 June 2015)
J Jordan
FY2016
FY2015
J Reed
FY2016
FY2015
A van Winkel
FY2016 (from 28 October 2015)
1. Cash salary includes salary and fees and leave entitlements paid in the year.
2. Total fixed remuneration – statutory is detailed in Table 10.
STI performance outcomes
The percentage of the maximum potential STI awarded to each Executive for FY2016 is as follows. Further detail on the STI bonus is included in
Section 16.4.2.
Table 3 – STI performance outcomes
Name
A Sudholz
C Price
J Jordan
J Reed
A van Winkel
LTI performance outcomes
Percentage of maximum potential STI awarded
%
95
90
70
70
90
A number of performance rights were granted to Executives during FY2016. Performance rights granted in FY2016 have not yet vested or
been forfeited as the performance rights only vest on satisfaction of performance conditions, which are to be tested in future financial periods.
Full details of LTI arrangements are included in Section 16.4.2.
26 Japara Healthcare Annual Report 2016
27 Japara Healthcare Annual Report 2016
Remuneration Report – Audited continued
16.4 Executive remuneration structure
16.4.1 Principles of Executive remuneration packages
The remuneration structures outlined below have been determined by the Board in accordance with its remuneration policy. These structures
are designed to attract and retain suitably skilled and experienced candidates, reward the achievement of stretch objectives, and help achieve
the broader outcome of creation of value for shareholders through alignment of objectives. The remuneration structures take into account:
• the capability and experience of the Executive;
• the Executive’s ability to influence performance;
• the Group’s performance including:
– Group Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) and Net Profit After Tax (NPAT);
– growth in earnings per share; and
– compliance with relevant legislation and regulation; and
• the remuneration of the comparator group.
The comparator group is made up of ASX 200 companies that have similar characteristics to Japara Healthcare, not only in industry sector but
also in the scale and complexity of the business.
Table 4 below represents the target remuneration mix for Executives. For ‘At risk’ components the target percentage is the maximum incentive
achievable. LTI performance rights are issued at face value at the beginning of the performance period. The amount presented in Table 4 below
is based on the fair value of the LTI performance rights granted in the period using the Black-Scholes valuation methodology.
Table 4 – Target mix of remuneration components
CEO
CFO
Other Senior Executives
At risk
Fixed
remuneration
40.0%
40.0%
58.8%
Short term
incentive
20.0%
20.0%
23.5%
Long term
incentive
40.0%
40.0%
17.7%
Total
100.0%
100.0%
100.0%
16.4.2 Executive remuneration and performance outcomes
(i) Fixed remuneration
Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any FBT charges related to employee
benefits), leave entitlements and employer contributions to superannuation. Remuneration levels are reviewed annually or on promotion by the
Remuneration and Nomination Committee.
(ii) Performance linked remuneration (at risk)
Performance linked remuneration includes both STIs and LTIs and is designed to reward Senior Executives for exceeding their targets. The STI
is an ‘at risk’ bonus provided in the form of cash. The LTI is in the form of a performance-based Equity Incentive Plan.
The Board has the discretion to vary the ‘at risk’ performance-based elements of remuneration, including STIs and LTIs, at any time where
it is considered appropriate.
Strategic objectives
The Group is committed to delivering the highest quality of clinical aged care for its residents and profitably increase its capacity to meet
the growing community need for residential aged care. To meet the growing need for residential aged care, the Group has five areas of growth
that it is focused on:
1. enhancing the existing portfolio;
2. brownfield and greenfield developments;
3. selective acquisitions;
4. strategic relationships; and
5. future services and products.
Performance hurdles are set by the Board to ensure that the strategic priorities outlined above are achieved. Each Executive is given
performance conditions depending upon their responsibilities.
28 Japara Healthcare Annual Report 2016
Group financial performance
Table 5 below shows indicators of the Group’s full year financial performances since listing on the Australian Securities Exchange in April 2014.
Table 5 – Group full year financial performance indicators
Financial measure
EBITDA ($’000)
NPAT ($’000)
EPS (cents)
Dividends per share (cents)
Year end share price ($)
2016
$’000
56,102
30,375
11.54
11.50
2.55
2015
$’000
50,590
28,839
10.97
11.00
2.57
The above indicators show the Group’s financial growth over the two full financial years since listing. A review of the Group’s operations
during FY2016 and of the results of those operations and financial position of the Group are contained in the Operating and Financial Review
in Section 5 of this Directors’ Report.
The Directors believe that the Company’s remuneration policy has positively contributed to its performance and growth as outlined above
and remains appropriate having regard to the Group’s strategy and operating environment.
STI bonus
The Remuneration and Nomination Committee sets financial and non-financial performance hurdles for each Executive. There are also
common gateway hurdles in place to ensure that threshold financial performance measures and compliance standards are met prior
to award of any STI bonus. Should performance hurdles be met, the STI bonus is paid subject to the Board’s final discretion.
The FY2016 STI bonus is payable over two periods: 50% following the end of the performance year, and the remaining 50% deferred for
a further 12 months (subject to the Executive’s continued employment during that period unless the Board otherwise determines). This deferred
payment arrangement provides the Group with a retention mechanism for its Executives.
The Remuneration and Nomination Committee annually reviews and makes a recommendation to the Board on STI bonus participation
by Executives.
STI performance conditions
STI gateway and performance hurdles are designed to drive successful financial and business outcomes, with reference to a combination
of objectives set by the Board for the year.
Gateway hurdles
The following common gateway hurdles were also set for each Executive:
• the Group maintaining ongoing aged care accreditation and compliance;
• no material breach with regulatory guidelines across the Group’s business; and
• the Group’s EBITDA for FY2016 must meet or exceed a threshold target (subject to any adjustments for abnormal or unusual profit items
that the Board, in its discretion, considers appropriate).
Where all gateway hurdles are met, the Remuneration and Nomination Committee assesses performance against the performance hurdles
set out below to determine the value of STI bonus payable.
Performance hurdles
The Board sets financial and non-financial KPIs that are aligned to the overall business strategy. The Board’s assessment of the Group’s
performance against these KPIs determines the quantum of the annual STI pool.
The KPIs for Executives for FY2016 comprised:
• Financial – being return on invested capital performance, revenue growth, capital management, cost control and RAD/DAP uplift.
• Growth – being the increase in operational places and improvement in acquired businesses and the execution of the development program.
• Organisational – being aged care accreditation and compliance outcomes, systems and staff development initiatives related to the Group’s
care model.
The value of the STI opportunity for each Executive is in line with the target mix remuneration components as set out in Section 16.4.1.
28 Japara Healthcare Annual Report 2016
29 Japara Healthcare Annual Report 2016
Remuneration Report – Audited continued
16.4 Executive remuneration structure continued
16.4.2 Executive remuneration and performance outcomes continued
STI bonus continued
Performance hurdles continued
The Remuneration and Nomination Committee and the Board assess the performance of the CEO against the gateway and performance
hurdles at year end.
The CEO assesses the performance of the other Executives throughout the year and presents a summary assessment against the gateway
and performance hurdles to the Remuneration and Nomination Committee for review at year end.
The Board considers the method of assessing STI performance conditions appropriate as the CEO has oversight of his direct reports and
the day to day operation of the Group, whilst the Board and the Remuneration and Nomination Committee have overall responsibility for
determining whether Executives have met the gateway and performance hurdles set for the year.
STI performance outcomes
In accordance with the procedure set out above, an assessment was undertaken of the performance of each Executive against their FY2016
gateway and performance hurdles.
Table 6 – FY2016 STI achieved by performance category
A Sudholz
B
25%
50%
20%
95%
A
25%
50%
25%
100%
C Price
J Jordan
J Reed
A
55%
25%
20%
100%
B
55%
25%
10%
90%
A
85%
15%
-
100%
B
55%
15%
-
70%
A
40%
30%
30%
100%
B
10%
30%
30%
70%
A van Winkel
B
15%
15%
60%
90%
A
25%
15%
60%
100%
Performance category
Financial
Growth
Organisational
Total
A. Maximum % of STI achievable.
B. Actual % of STI achieved.
Table 7 – FY2016 STI payment compared with the maximum potential STI payment
Name
A Sudholz
C Price
J Jordan
J Reed
A van Winkel
LTI Plan
STI payment
$’000
457
225
123
123
88
Maximum potential STI payment
$’000
481
250
176
176
97
The Group operates an Equity Incentive Plan (EIP) for LTI purposes. Performance rights are issued under the EIP to Executives for nil
consideration and each performance right entitles the holder to acquire one share in the Company for nil consideration at the end of the
performance period subject to the satisfaction of certain conditions.
The Board believes that participation in the EIP encourages Executives to focus on creating long-term value for shareholders and to remain
employed with the Group.
The key terms of the EIP are as follows:
• offers may be made at the Board’s discretion under the long term incentive plan;
• the Board has discretion to set individual terms and conditions on which it will offer performance rights;
• Executives must not sell, transfer, encumber, hedge or otherwise deal with the performance rights;
• Executives will be free to deal with any shares allocated on vesting of the performance rights, subject to the requirements of the Group’s
Policy for Dealing in Securities;
• if an Executive ceases employment for cause or due to resignation, unless the Board determines otherwise any unvested performance
rights will be automatically forfeited; and
• in the event of a takeover or change of control of the Company, any unvested performance rights may vest at the Board’s discretion.
30 Japara Healthcare Annual Report 2016
An EIP-based LTI arrangement assists to align the interest of Executives and shareholders through common share ownership. The Group has
adopted a policy requiring Executives to hold shares in the Company equivalent to one year’s prevailing base salary, which can be acquired
over a five-year period. It is the intention that the EIP be used for this purpose.
Performance rights granted in FY2016
Table 8 – Summary of performance rights granted in FY2016
Name
A Sudholz
C Price
J Jordan
J Reed
A van Winkel
Performance rights granted
No.
365,779
190,114
50,190
50,190
27,802
The number of rights granted to each Executive was based on the LTI portion of remuneration as set out in Table 4 divided by the volume
weighted average price of the Company’s shares over the 10 days ended 30 June 2015, being $2.63.
LTI performance conditions
The performance rights are subject to the same gateway hurdles as the STI bonus (as set out earlier above). An earnings per share (EPS)
based performance hurdle also applies (as set out below), which determines the proportion of performance rights eligible to vest where the
gateway hurdles have been achieved.
The performance rights are subject to a performance period of three years from 1 July 2015 to 30 June 2018 (performance period).
If the gateway hurdles are not met or the minimum performance hurdle is not satisfied, none of the performance rights will vest. Any
performance rights that remain will lapse.
EPS vesting condition
The vesting of performance rights to the Executives is subject to an EPS hurdle, which requires a minimum 5% compound annual growth in
EPS over the performance period. EPS is calculated using the Group’s NPAT in accordance with Australian Accounting Standards and the
weighted average number of shares on issue during the financial year (see Note B4 to the Company’s 2016 financial statements). The EPS
hurdle is measured by comparing Group EPS in the base year (in this case FY2015) to Group EPS in the final year of the performance period
(FY2018). The vesting schedule is set out below.
Table 9 – EPS hurdle summary
Compound annual growth rate of Group EPS
over the performance period
Below 5%
At 5%
Between 5% and 20%
At or in excess of 20%
% of performance rights
eligible to vest
Nil
20%
Between 20% and 100% increasing on a straight-line basis
100%
The EPS performance hurdle was set by the Board. The EPS growth bands reflect the minimum and stretch targets sought to be achieved over
the performance period, taking into account prevailing market conditions and outlook, as well as the performance achieved by the Company
for the 2015 financial year. In setting the EPS performance hurdles, the Board also sought to strike an appropriate balance between setting a
challenging yet achievable hurdle and motivating exceptional performance linked to creation of sustainable shareholder returns.
In the Board’s view, the potential value attaching to the rights upon vesting provides significant incentive to the Executives to achieve the
required hurdles, which in turn should generate superior growth in Group earnings and shareholder wealth.
LTI performance outcomes
As stated above, the gateway hurdles were met in FY2016. The EPS vesting condition for the FY2016 performance rights will be tested at the
end of the performance period (1 July 2015 to 30 June 2018).
30 Japara Healthcare Annual Report 2016
31 Japara Healthcare Annual Report 2016
Remuneration Report – Audited continued
16.4 Executive remuneration structure continued
16.4.3 Total Executive remuneration
Table 10 – Total Executive remuneration for FY2016 and FY2015
The remuneration of Executives calculated in accordance with applicable Accounting Standards for FY2016 was as follows:
Short term benefits
Post-employment
benefits
Salary and
fees paid
$’000
Non-monetary
benefits paid
$’000
Superannuation
benefits paid
$’000
Annual leave
entitlements
accrued
$’000
Long service leave
Total fixed
entitlements accrued
remuneration
$’000
$’000
STI – bonus
payable
in cash
$’000
At risk
STI – bonus
deferred for
12 months
$’000
LTI – share-based
payments
accrued
$’000
Total fixed
and at risk
remuneration
Andrew Sudholz
FY2016
FY2015
Chris Price (from 22 June 2015)
FY2016
FY2015
Jerome Jordan
FY2016
FY2015
Julie Reed
FY2016
FY2015
Ashley van Winkel (from 28 October 2015)
FY2016
FY2016
FY2015
864
777
406
10
342
384
349
370
133
2,094
1,541
14
14
-
-
17
17
21
23
-
52
54
38
33
41
1
30
31
33
31
14
156
96
67
67
33
1
30
30
30
30
11
171
128
In accordance with AASB 2 Share-based payments, the values provided in the shaded column have been calculated using the Black-Scholes
valuation methodology (see Note C3). The FY2015 comparative figures are negative as the FY2014 LTI performance rights were forfeited
in FY2015.
The Group’s policy in relation to the proportion of remuneration that is performance related is discussed in Section 16.4.1 and details
of the long term incentive plans are set out in Section 16.4.2.
32 Japara Healthcare Annual Report 2016
15
15
-
-
7
7
7
7
2
31
29
998
906
480
12
426
469
440
461
160
2,504
1,848
228
112
61
61
44
506
-
-
-
-
-
229
113
62
62
44
510
-
-
-
-
-
83
(25)
43
-
12
(6)
12
(6)
6
156
(37)
$’000
1,538
881
748
12
561
463
575
455
254
3,676
1,811
16.4 Executive remuneration structure continued
16.4.3 Total Executive remuneration
Table 10 – Total Executive remuneration for FY2016 and FY2015
The remuneration of Executives calculated in accordance with applicable Accounting Standards for FY2016 was as follows:
Short term benefits
Post-employment
benefits
Salary and
fees paid
$’000
Non-monetary
benefits paid
$’000
Superannuation
benefits paid
$’000
Annual leave
entitlements
accrued
$’000
Long service leave
entitlements accrued
$’000
Total fixed
remuneration
$’000
STI – bonus
payable
in cash
$’000
At risk
STI – bonus
deferred for
12 months
$’000
LTI – share-based
payments
accrued
$’000
Total fixed
and at risk
remuneration
$’000
864
777
406
10
342
384
349
370
133
2,094
1,541
14
14
-
-
17
17
21
23
-
52
54
38
33
41
1
30
31
33
31
14
156
96
67
67
33
1
30
30
30
30
11
171
128
15
15
-
-
7
7
7
7
2
31
29
998
906
480
12
426
469
440
461
160
2,504
1,848
228
-
112
-
61
-
61
-
44
506
-
229
-
113
-
62
-
62
-
44
510
-
83
(25)
43
-
12
(6)
12
(6)
6
156
(37)
1,538
881
748
12
561
463
575
455
254
3,676
1,811
Chris Price (from 22 June 2015)
Andrew Sudholz
Jerome Jordan
FY2016
FY2015
FY2016
FY2015
FY2016
FY2015
Julie Reed
FY2016
FY2015
FY2016
FY2016
FY2015
in FY2015.
Ashley van Winkel (from 28 October 2015)
In accordance with AASB 2 Share-based payments, the values provided in the shaded column have been calculated using the Black-Scholes
valuation methodology (see Note C3). The FY2015 comparative figures are negative as the FY2014 LTI performance rights were forfeited
The Group’s policy in relation to the proportion of remuneration that is performance related is discussed in Section 16.4.1 and details
of the long term incentive plans are set out in Section 16.4.2.
32 Japara Healthcare Annual Report 2016
33 Japara Healthcare Annual Report 2016
Remuneration Report – Audited continued
16.5 Executives’ employment arrangements
The Executives are employed under service agreements. These agreements outline the components of remuneration, but do not prescribe how
remuneration levels are modified year to year. The Remuneration and Nomination Committee reviews remuneration levels annually, taking into
account cost of living changes, changes in scope and responsibilities of roles and competitive market factors.
Details of the Executives’ employment termination notice periods are set out in Table 11 below. Notwithstanding these arrangements, the
Group may immediately terminate an Executive’s employment without notice and payment in lieu for serious misconduct. On termination of
employment, the Executives are entitled to receive their statutory entitlements of accrued annual and long service leave, together with any
superannuation benefits. Where the employment of an Executive (other than the CEO and CFO) is terminated due to redundancy, they will
be entitled to a severance payment equivalent to between six to 12 months’ gross salary.
Table 11 – Executives’ employment termination notice periods
Executive
A Sudholz
C Price
Other
Employee notice period
12 months
6 months
3 months
Employer notice period
12 months (or payment in lieu)
6 months (or payment in lieu)
3 months (or payment in lieu)
16.6 Non-Executive Directors Remuneration
Under the Company’s Constitution, the Board may decide the remuneration that each Non-Executive Director is entitled to receive from the
Group for services as a Non-Executive Director. However, the total amount provided to all Non-Executive Directors for their services must not
exceed, in aggregate in any financial year, the amount fixed by the shareholders of the Company. This amount was fixed at $1,000,000 at a
general meeting of the Company on 4 April 2014.
The annual base Director fees paid by the Group in FY2016 were $200,000 to the Non-Executive Chairman, $100,000 to each other
Non-Executive Director and an additional $20,000 to the Chair of each standing committee of the Board. Non-Executive Directors’ fees
have not been increased since the Company listed on the Australian Securities Exchange in 2014.
Non-Executive Directors did not receive nor are eligible for performance-related remuneration.
Remuneration benchmarking for Non-Executive Directors was conducted in FY2016. The comparator group used was made up of ASX 200
companies that have similar characteristics to Japara Healthcare not only in industry sector, but also in the scale and complexity
of the business.
The Board has adopted a policy requiring Non-Executive Directors to hold shares in the Company equivalent to one year’s Director’s fees
which can be acquired over a five-year period. This policy seeks to align Non-Executive interests with shareholders more generally.
During FY2016, a voluntary Non-Executive Director share purchase plan was established under which Non-Executive Directors can elect
to commit at least 20% of their after-tax fees to acquire shares in the Company on-market. This plan supports Non-Executive Directors
in building their shareholdings in the Company.
34 Japara Healthcare Annual Report 2016
The remuneration of Non-Executive Directors included within employee benefits expense in the Statement of Profit or Loss and Other
Comprehensive Income for FY2016 was as follows.
Table 12 – Non-Executive Directors’ remuneration for FY2016 and FY2015
Linda Bardo Nicholls AO (Chairman)
FY2016
FY2015
Richard England
FY2016
FY2015
David Blight
FY2016
FY2015
JoAnne Stephenson (appointed 1 September 2015)
FY2016
Tim Poole (resigned 1 September 2015)
FY2016
FY2015
Total Non-Executive Directors’ remuneration
FY2016
FY2015
16.7 Other benefits
Short term benefits
Non-monetary
benefits
$’000
Fees
$’000
Post-
employment
benefits
Superannuation
benefits
$’000
Total
fees paid
$’000
183
183
110
110
110
110
85
16
91
504
494
-
-
-
-
-
-
-
-
-
-
-
17
17
10
10
10
10
8
2
9
47
46
200
200
120
120
120
120
93
18
100
551
540
Key management personnel may be reimbursed for reasonable travel and other expenses incurred in attending to the Group’s affairs, including
attending and returning from meetings of Directors or Committees or general meetings. There are no retirement benefit schemes for Directors,
other than statutory superannuation contributions.
16.8 Key management personnel shareholdings in the Company
The movement during the year in the number of ordinary shares in the Company held directly, indirectly or beneficially by each key
management person, including their related parties, is as follows:
Table 13 – KMP shareholdings in the Company during the year
Non-Executive Directors
Linda Bardo Nicholls AO
Richard England
David Blight
JoAnne Stephenson
Managing Director and CEO
Andrew Sudholz
Other key management personnel
Chris Price
Jerome Jordan
Julie Reed
Ashley van Winkel
Held at
1 July 2015
No. of shares
Shares acquired
on exercise of
bonus rights
No. of shares
Other net change
No. of shares
Held at
30 June 2016
No. of shares
46,500
31,250
50,000
-
16,246,592
-
-
10,000
10,000
-
-
-
-
-
-
50,000
100,000
16,000
34,348
14,244
-
593
80,848
45,494
50,000
593
(546,591)
15,700,001
-
-
-
-
-
50,000
110,000
26,000
34 Japara Healthcare Annual Report 2016
35 Japara Healthcare Annual Report 2016
Remuneration Report – Audited continued
16.9 Other statutory disclosures – analysis of movements in equity instruments held
by key management personnel
The movement during the year in the number of rights over ordinary shares in the Company held directly, indirectly or beneficially by each key
management person, including their related parties, is as follows. Non-Executive Directors have not been included in the table as they are not
entitled to rights over ordinary shares in the Company:
Table 14 – Equity instruments held by KMPs during the year
Managing Director and CEO
Andrew Sudholz
Other key management personnel
Chris Price
Jerome Jordan
Julie Reed
Ashley van Winkel
Performance/
bonus rights
Date of
grant
Vesting
date
Performance
29/02/2016
30/06/2018
Performance
Performance
Bonus1
Performance
Bonus1
Performance
29/02/2016
29/02/2016
17/04/2014
29/02/2016
17/04/2014
29/02/2016
30/06/2018
30/06/2018
17/04/2016
30/06/2018
17/04/2016
30/06/2018
Held at
1 July 2015
No. of rights
-
-
-
50,000
-
100,000
16,000
1. Upon the successful listing of the Company on the Australian Securities Exchange, Jerome Jordan and Julie Reed received a one-off offer bonus
in recognition of their contribution to the success of the Japara Group as set out in the Prospectus dated 11 April 2014.
2. All rights are for ordinary shares of the Company, which are exercisable on a one-for-one basis.
Granted/(forfeited)
No. of rights
Exercised
No. of rights
Held at
30 June 2016
No. of rights
Vested during
FY2016
No. of rights2
365,779
190,114
50,190
-
-
50,190
27,802
-
-
-
-
(50,000)
(100,000)
(16,000)
365,779
190,114
50,190
-
-
50,190
27,802
-
-
-
-
50,000
100,000
16,000
Vested and
exercisable at
30 June 2016
No. of rights
-
-
-
-
-
-
-
36 Japara Healthcare Annual Report 2016
16.9 Other statutory disclosures – analysis of movements in equity instruments held
by key management personnel
The movement during the year in the number of rights over ordinary shares in the Company held directly, indirectly or beneficially by each key
management person, including their related parties, is as follows. Non-Executive Directors have not been included in the table as they are not
entitled to rights over ordinary shares in the Company:
Table 14 – Equity instruments held by KMPs during the year
Andrew Sudholz
Performance
29/02/2016
30/06/2018
Managing Director and CEO
Other key management personnel
Chris Price
Jerome Jordan
Julie Reed
Ashley van Winkel
Performance
Performance
Bonus1
Performance
Bonus1
Performance
29/02/2016
29/02/2016
17/04/2014
29/02/2016
17/04/2014
29/02/2016
30/06/2018
30/06/2018
17/04/2016
30/06/2018
17/04/2016
30/06/2018
1. Upon the successful listing of the Company on the Australian Securities Exchange, Jerome Jordan and Julie Reed received a one-off offer bonus
in recognition of their contribution to the success of the Japara Group as set out in the Prospectus dated 11 April 2014.
2. All rights are for ordinary shares of the Company, which are exercisable on a one-for-one basis.
Held at
1 July 2015
No. of rights
-
-
-
-
50,000
100,000
16,000
Performance/
bonus rights
Date of
grant
Vesting
date
Granted/(forfeited)
No. of rights
Exercised
No. of rights
Held at
30 June 2016
No. of rights
Vested during
FY2016
No. of rights2
365,779
190,114
50,190
-
50,190
-
27,802
-
-
-
(50,000)
-
(100,000)
(16,000)
365,779
190,114
50,190
-
50,190
-
27,802
-
-
-
50,000
-
100,000
16,000
Vested and
exercisable at
30 June 2016
No. of rights
-
-
-
-
-
-
-
36 Japara Healthcare Annual Report 2016
37 Japara Healthcare Annual Report 2016
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2016
Revenue
Other income
Total revenue and other income
Employee benefits expense
Resident costs
Occupancy costs
Depreciation and amortisation expense
Administrative expenses
Other expenses
Earnings before interest and tax
Finance income
Finance costs
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income, net of income tax
Total comprehensive income for the year
Note
B2
B2
C1
D1
B3
B3
B5
2016
$’000
325,276
1,990
327,266
(219,696)
(25,776)
(15,767)
(11,959)
(8,887)
(1,038)
44,143
844
(3,199)
41,788
(11,413)
30,375
-
30,375
2015
$’000
278,262
2,987
281,249
(186,742)
(22,860)
(13,384)
(9,718)
(7,315)
(358)
40,872
1,292
(2,825)
39,339
(10,500)
28,839
-
28,839
Profit attributable to members of the Group
30,375
28,839
Total comprehensive income attributable to members of the Group
30,375
28,839
Earnings Per Share
Basic earnings per share (cents)
Diluted earnings per share (cents)
The accompanying notes form part of these financial statements.
B4
B4
11.54
11.51
10.97
10.94
38 Japara Healthcare Annual Report 2016
Statement of Financial Position
As at 30 June 2016
ASSETS
Current assets
Cash
Trade and other receivables
Current tax receivable
Other assets
Total current assets
Non-current assets
Trade and other receivables
Other financial assets
Non-current assets held for sale
Property, plant and equipment
Investment property
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Other liabilities
Borrowings
Current tax payable
Other financial liabilities
Employee provisions
Total current liabilities
Non-current liabilities
Borrowings
Employee provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Retained earnings
Total equity
The accompanying notes form part of these financial statements.
Note
E4
D1
D3
B5
D2
E5
E6
C2
E5
C2
2016
$’000
2015
$’000
24,568
13,744
787
5,645
44,744
2,804
-
1,697
513,059
31,669
10,469
465,552
1,025,250
1,069,994
19,855
10,879
1,350
-
413,582
30,101
475,767
58,150
3,772
61,922
537,689
532,305
518,732
13,573
532,305
53,878
10,168
-
3,237
67,283
2,607
1,078
1,997
383,797
31,549
12,300
415,188
848,516
915,799
16,657
9,498
-
4,432
325,251
27,217
383,055
-
2,705
2,705
385,760
530,039
517,848
12,191
530,039
38 Japara Healthcare Annual Report 2016
39 Japara Healthcare Annual Report 2016
Statement of Changes in Equity
For the year ended 30 June 2016
2016
Balance at 1 July 2015
Comprehensive income
Profit attributable to members of the Group
Other comprehensive income
Total comprehensive income
Transactions with owners of the Company
Shares issued during the year
Dividends
Shares bought back during the year, net of tax
Equity settled share-based payment
Total transactions with owners of the Company
Balance at 30 June 2016
2015
Balance at 1 July 2014
Comprehensive income
Profit attributable to members of the Group
Other comprehensive income
Total comprehensive income
Transactions with owners of the Company
Issue of shares
Dividends
Equity settled share-based payment
Total transactions with owners of the Company
Balance at 30 June 2015
The accompanying notes form part of these financial statements.
Issued
capital
$’000
517,848
-
-
-
1,852
-
(968)
-
884
518,732
Issued
capital
$’000
516,755
-
-
-
1,093
-
-
1,093
517,848
Retained
earnings
$’000
12,191
30,375
-
30,375
-
(29,592)
-
599
(28,993)
13,573
Retained
earnings
$’000
(2,768)
28,839
-
28,839
-
(14,468)
588
(13,880)
12,191
Total
$’000
530,039
30,375
-
30,375
1,852
(29,592)
(968)
599
(28,109)
532,305
Total
$’000
513,987
28,839
-
28,839
1,093
(14,468)
588
(12,787)
530,039
40 Japara Healthcare Annual Report 2016
Statement of Cash Flows
For the year ended 30 June 2016
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income taxes refunded/(paid)
Interest received
Finance costs paid
Net cash provided by operating activities
Cash flows from investing activities
Purchase of land and buildings
Proceeds from sale of land
Purchase of plant and equipment
Capital works in progress
Purchase of resident places
Acquisition of aged care business, net of cash
Other acquisitions and acquisition-related costs
Net cash used by investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Equity raising costs
Shares bought back during the year
Dividends paid
Net proceeds/(repayments) of bank borrowings
Proceeds from RADs and ILU resident loans
Repayment of RADs/accommodation bonds and ILU resident loans
Proceeds from other financial assets
Net cash provided by financing activities
Net increase/(decrease) in cash and cash equivalents held
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
The accompanying notes form part of these financial statements.
Note
G5
E7(b)
E5(a)
E4
2016
$’000
318,019
(265,786)
(13,688)
864
(2,750)
36,659
(34,259)
1,089
(5,387)
(40,719)
(2,313)
(64,158)
(6,598)
(152,345)
1,852
-
(1,383)
(29,592)
59,500
162,347
(107,420)
1,072
86,376
(29,310)
53,878
24,568
2015
$’000
275,995
(234,918)
684
1,204
(2,782)
40,183
(9,796)
758
(4,040)
(18,224)
(493)
(23,879)
(6,326)
(62,000)
-
(1,291)
-
(14,468)
(14,000)
154,111
(76,779)
15
47,588
25,771
28,107
53,878
40 Japara Healthcare Annual Report 2016
41 Japara Healthcare Annual Report 2016
Notes to the Financial Statements
For the year ended 30 June 2016
A. About this report
A1. Reporting entity
Japara Healthcare Limited (the Company) is a company domiciled in Australia. The Company was incorporated on 19 March 2014. The
consolidated financial statements comprise the Company and its subsidiaries (collectively ‘the Group’ and individually ‘Group companies’).
The Company’s registered office is at Q1 Building, Level 4, 1 Southbank Boulevard, Southbank, Victoria, 3006, Australia.
The Group is a for profit entity and is primarily involved in the provision of residential aged care services throughout Australia (see Note B1).
A2. Basis of accounting
The consolidated financial statements are general purpose financial statements that have been prepared in accordance with Australian
Accounting Standards (AASs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated
financial statements comply with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards
Board (IASB).
The financial statements have been prepared on a going concern basis, which assumes that the Group will be able to meet its obligations
associated with all financial liabilities.
The Group’s current liabilities exceed current assets by $431,023,000 as at 30 June 2016 (2015: $315,722,000). This mainly arises because of
the requirement to classify obligations relating to Refundable Accommodation Deposits (RADs), accommodation bonds and independent living
unit (ILU) resident loans of $404,582,000 (2015: $325,251,000) as current liabilities (refer Note E6 for further details), whereas the investment
properties, property, plant and equipment, and intangible assets to which they relate are required to be classified as non-current assets.
Note E3(b) explains that liquidity risk is controlled through monitoring forecast cash flows and ensuring adequate access to financial
instruments that are readily convertible to cash. This is also achieved by maintaining a liquidity management strategy to ensure that the Group
has sufficient liquidity to enable it to refund accommodation bonds and RADs that are expected to fall due within the next 12 months.
The inancial statements were authorised for issue by the Board of Directors on 22 August 2016. Details of the Group’s accounting policies
are included in their respective notes.
A3. Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Group’s functional currency.
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 dated 24 March
2016 and in accordance with that Instrument, all financial information presented in Australian dollars has been rounded to the nearest thousand
unless otherwise stated.
A4. Use of estimates and judgements
In preparing these financial statements, management has made estimates, judgements and assumptions that affect the application of the
Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.
Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets
and liabilities.
The Group has an established control framework with respect to the measurement of fair values. The Chief Financial Officer has overall
responsibility for overseeing all significant fair value measurements, including Level 3 measurements.
The finance team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes
or pricing services, is used to measure fair values, then the finance team assesses the evidence obtained from the third parties to support the
conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should
be classified.
Significant valuation issues are reported to the Audit, Risk and Compliance Committee.
42 Japara Healthcare Annual Report 2016
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised
into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability are categorised in different levels of the fair value hierarchy, then the fair
value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the
entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has
occurred.
Information about estimates, judgements and assumptions that affect the application of the Group’s accounting policies within the year ended
30 June 2016 are included in the following notes:
• Note C3 – Share-based payment arrangements: Measurement of fair value;
• Note D2 – Impairment review: Calculation of value in use;
• Note D3 – Investment property: Measurement of fair values;
• Note E2 – Financial instruments: Measurement of fair values; and
• Note F1 – Assets and liabilities acquired from Profke Aged Care Group: Measurement of fair values.
B. Business performance
B1. Segment reporting
The consolidated group operates predominantly in one business and geographical segment being the provision of residential aged care
services throughout Australia. Segment information reported to KMP is substantially similar to information provided
in this Financial Report.
B2. Revenue and other income
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably
measured.
Revenue comprises daily Federal Government care funding and resident fees, the majority of which are determined in accordance with Federal
Government authorised rates. These fees are regulated by the Federal Government and are accrued by the Group during the resident’s period
of occupancy. Revenue from the rendering of a service or supply of a good is recognised upon the delivery of the service or good to the
resident.
Finance income is accrued daily, based on the principal amount and prevailing interest rate.
All revenue is stated net of the amount of GST.
(a) Reconciliation of revenue and other income
Revenue
Government care funding
Resident fees
Total revenue
Other income
Increase in fair value of investment property
Discount on acquisition
Other income
Total other income
Note
D3(a)
2016
$’000
235,682
89,594
325,276
91
920
979
1,990
2015
$’000
200,392
77,870
278,262
772
727
1,488
2,987
42 Japara Healthcare Annual Report 2016
43 Japara Healthcare Annual Report 2016
Notes to the Financial Statements continued
For the year ended 30 June 2016
B. Business performance continued
B3. Expenses
Expenses are recognised in accordance with the basis of accounting outlined in Note A2.
Finance costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time
to prepare for their intended use or sale are added to the cost of those assets, until such time as the assets are substantially ready for their
intended use of sale.
All other financing costs are recognised in profit or loss in the period in which they are incurred.
(a) Reconciliation of other expenses and finance costs
Other expenses
Acquisition and due diligence costs
Loss on disposal of non-current assets
Total other expenses
Finance costs
Loan establishment fees
Loan interest expense
RAD/accommodation bond settlement interest expense
Increase in fair value of ILU liability
Total finance costs
B4. Earnings per share
2016
$’000
809
229
1,038
386
1,336
1,444
33
3,199
2015
$’000
104
254
358
542
1,039
1,079
165
2,825
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or
loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares on issue during the period after
eliminating treasury shares.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary
shares on issue for the effect of dilutive ordinary shares.
(a) Calculation of earnings per share
(i) Profit attributable to ordinary shareholders
Profit for the period attributable to ordinary shareholders
(ii) Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS
2016
$’000
30,375
2015
$’000
28,839
Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS
Weighted average number of dilutive rights outstanding
Weighted average number of ordinary shares outstanding during the year used in calculating
dilutive EPS
2016
No.
263,127,389
684,075
2015
No.
262,962,730
682,000
263,811,464
263,644,730
44 Japara Healthcare Annual Report 2016
B5. Income tax expense
The charge for current income tax expense/(credit) is based on the profit or loss for the year adjusted for any non-assessable items.
It is calculated using tax rates that have been enacted or are substantively enacted by the reporting date.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax
deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled based on tax
rates that have been enacted or substantially enacted by the end of the reporting period. Deferred tax expense/(income) is charged/(credited)
in profit or loss except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against
equity.
Deferred tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary
differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur
in income tax legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised
and comply with the conditions of deductibility imposed by the law.
The Group and its wholly owned Australian subsidiaries have formed an income tax consolidated group under the Tax Consolidation Regime.
Each entity in the Group recognises its own current and deferred tax liabilities, except for any deferred tax assets resulting from unused tax
losses and tax credits, which are immediately assumed by the head of the tax consolidated group.
(a) The major components of tax expense/(income) comprise:
Current tax expense
Deferred tax expense
Under/(over) provision in respect of prior years
Income tax expense for continuing operations
(b) Deferred tax expense included in income tax expense comprise:
Deferred tax charge for the year
Deferred tax under provision in respect of prior years
Total deferred tax charge for the year
Note
B5(f)
B5(b)
B5(a)
2016
$’000
9,244
1,690
479
11,413
1,690
891
2,581
2015
$’000
6,670
4,049
(219)
10,500
4,049
-
4,049
44 Japara Healthcare Annual Report 2016
45 Japara Healthcare Annual Report 2016
Notes to the Financial Statements continued
For the year ended 30 June 2016
B. Business performance continued
B5. Income tax expense continued
(c) The prima facie taxable profit from ordinary activities before income tax is reconciled to the income tax expense
in the financial statements as follows:
Profit before income tax
Prima facie tax on profit at the statutory tax rate of 30% (2015: 30%)
Add/(less) tax effect of:
– non-deductible tax expenses
– under/(over) provision of income tax in prior year
– gain on acquisition of business non-taxable
– other non-taxable income
– other deductions
Income tax expense
Weighted average effective tax rate
(d) Income tax rate
2016
$’000
41,788
12,536
1,153
479
(2,173)
(178)
(404)
11,413
2015
$’000
39,339
11,802
496
(219)
(1,369)
(210)
-
10,500
27%
27%
The tax rate used in the above reconciliations is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under
the Australian tax law.
(e) Tax consolidation
Relevance of tax consolidation to the consolidated group
The Group formed a tax consolidated group, which commenced on 16 April 2014.
Relevance of tax consolidation to the Company
The Company commenced operations in April 2014. It is the head entity of the tax consolidated group.
Nature of tax funding arrangements and tax sharing agreements
The tax consolidated group has entered into income tax sharing and funding agreements effective from 16 April 2014, whereby each company
in the group contributes to the income tax payable in proportion to their contribution to profit before tax of the consolidated group. The income
tax liability/receivable of the subsidiary is recorded in the books of account of Japara Healthcare Limited as an intercompany payable or
receivable with the subsidiary.
(f) Gross movements in current tax
The overall movement in current tax is as follows:
Opening balance
Balance acquired through a business combination
Income tax payable charged to profit or loss
Income tax receivable credited to equity
Income tax amounts paid during the period
Income tax amounts received during the period
Over provision of income tax paid in prior period
Closing balance
Note
B5(a)
2016
$’000
(4,432)
(52)
(9,244)
415
13,714
(26)
412
787
2015
$’000
2,702
-
(6,670)
-
2,797
(3,480)
219
(4,432)
46 Japara Healthcare Annual Report 2016
(g) Deferred tax assets/(liabilities)
2015
Provisions
Deferred borrowing costs
Deferred legal costs
Sundry creditors and accruals
ILU resident loans
Deferred equity raising costs
Property, plant and equipment
Capital works in progress (interest expense)
Deferred management fee receivable
2016
Provisions
Deferred borrowing costs
Deferred legal costs
Sundry creditors and accruals
ILU resident loans
Deferred equity raising costs
Property, plant and equipment
Capital works in progress (interest expense)
Deferred management fee receivable
C. Employee remuneration
C1. Employee benefits expense
Wages and leave expenses
Superannuation contributions
Payroll tax expense
Agency staff costs
WorkCover expense
Share-based payment expense
Other staff costs
Total employee benefits expense
Opening
balance
$’000
Charged to
income
$’000
Charged
directly to
equity
$’000
Business
combinations
$’000
Closing
balance
$’000
9,468
171
162
745
452
5,854
(439)
(140)
(589)
15,684
9,657
223
132
615
452
4,733
(2,391)
(140)
(981)
12,300
(476)
52
(30)
(130)
-
(1,121)
(1,952)
-
(392)
(4,049)
195
(111)
149
(10)
-
(1,638)
(1,150)
-
(16)
(2,581)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
-
-
-
2
665
-
-
-
-
-
-
-
-
665
748
-
-
-
-
-
-
-
-
748
2016
$’000
181,881
16,926
9,758
4,176
5,381
156
1,418
219,696
9,657
223
132
615
452
4,733
(2,391)
(140)
(981)
12,300
10,600
112
281
605
452
3,097
(3,541)
(140)
(997)
10,469
2015
$’000
154,447
14,285
8,293
3,653
5,161
(43)
946
186,742
46 Japara Healthcare Annual Report 2016
47 Japara Healthcare Annual Report 2016
Notes to the Financial Statements continued
For the year ended 30 June 2016
C. Employee remuneration continued
C2. Employee provisions
Provisions are recognised when the Group has a legal or constructive obligation as a result of past events, for which it is probable that an
outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the
amounts required to settle the obligation at reporting date.
Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to reporting date. Employee
benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled,
plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash
outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that
the employee may not satisfy any vesting requirements. Those cash flows are discounted using corporate bond yields with terms to maturity
that match the expected timing of cash flows.
(a) Reconciliation of employee provisions
Current
Provision for annual leave
Provision for long service leave
Non-current
Provision for long service leave
2016
$’000
20,386
9,715
30,101
2015
$’000
18,792
8,425
27,217
3,772
2,705
C3. Share-based payment arrangements
The grant date fair value of equity settled share-based payment awards granted to employees of the Group is generally recognised as an
expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted
to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the
amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the
vesting date.
(a) Description of equity-settled share option arrangements
During the year ended 30 June 2016, the Group had the following share-based payment arrangements:
(i) Rights Plan
The Company’s Rights Plan is a long term incentive (LTI) Plan under which eligible employees of the Group that are invited by the Board to
participate in the Rights Plan are provided with performance rights. There were no performance rights on issue at the beginning of the year
under the Rights Plan. During the year, 684,075 performance rights have been issued to Senior Executives under the Rights Plan.
(ii) Loan Plan
The Company’s Loan Plan is an LTI Plan under which the Chief Executive Officer (CEO) and any other employee as determined by the Board
are entitled to acquire loan shares in the Company. There are currently no loan shares on issue.
Previously granted loan shares had been forfeited in the year ended 30 June 2015. During the year ended 30 June 2016, the loan shares were
sold to the trustee of the Rights Plan by the CEO, with the proceeds from sale being applied to fully offset the outstanding loan. Loan shares
have the same rights as ordinary shares. Participants will be provided with a limited recourse loan from the Company for the sole purpose of
subscribing for loan shares in the Company. The loan is recognised as a financial asset in the financial statements of the Group when the loan
shares vest. Eligibility to participate in the Loan Plan and the number of loan shares (and the associated loan amount) to be acquired by each
participant will be determined by the Board.
(iii) Offer bonus
On 17 April 2014, following the successful listing of the Company on the Australian Securities Exchange, a number of employees of the Group
received a one-off offer bonus in recognition of their contribution to the IPO. The offer bonus was delivered partly as a cash payment in the
period ended 30 June 2014, and partly as performance rights under the Company’s Rights Plan. A total of 745,300 rights were issued, of
which 671,100 of these rights vested on 18 April 2016 under the terms of the issue. The remaining 74,200 did not vest and were cancelled.
The vesting rights were converted into an equivalent number of ordinary shares in the Company, which were acquired by the trustee of the
Rights Plan.
48 Japara Healthcare Annual Report 2016
(b) Reconciliation of outstanding rights
Rights Plan
Loan Plan
Offer bonus
Total
Number of
rights 2016
’000
Number of
rights 2015
’000
Number of
rights 2016
’000
Number of
rights 2015
’000
Number of
rights 2016
’000
Number of
rights 2015
’000
Number of
rights 2016
’000
Number of
rights 2015
’000
Outstanding at the
beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Total
-
684
-
-
684
198
-
(198)
-
-
-
-
-
-
-
547
-
(547)
-
-
682
-
(11)
(671)
-
712
-
(30)
-
682
682
684
(11)
(671)
684
1,457
-
(775)
-
682
No outstanding rights were exercisable at the reporting date (2015: Nil). The weighted average exercise price for rights outstanding
at 30 June 2016 was $Nil (2015: $Nil). All rights outstanding as at 30 June 2016 were granted to KMP.
Use of estimates and judgements
Share-based payment arrangements: Measurement of fair value
Rights Plan
During the year 684,075, rights were granted to KMP under the Rights Plan. The fair value of the performance rights was calculated by an
independent expert, Mercer Consulting, using a discounted cash flow methodology. The following inputs were used to estimate the fair value
of the share-based payment arrangements for the year:
Grant date
Share price at grant date
Exercise price
Dividend yield
The fair value of the rights granted under the Rights Plan on 29 February 2016 is $2.73 each.
C4. Key management personnel
Key management personnel remuneration included within the financial statements for the year is shown below:
Short-term employee benefits
Post-employment benefits
Other short-term benefits
Other long-term benefits
Share-based payments
Total
29 February 2016
$3.05
$nil
4.40%
2016
$’000
3,103
204
223
541
156
4,227
2015
$’000
2,337
117
165
30
(43)
2,606
(a) Key management personnel transactions
During the year, the CEO settled a loan receivable amounting to $1,078,000 relating to loan shares issued under the Group’s Loan Plan
(see Note C3(a)(ii)). The loan was settled in full exchange for the shares issued under the Loan Plan.
48 Japara Healthcare Annual Report 2016
49 Japara Healthcare Annual Report 2016
Notes to the Financial Statements continued
For the year ended 30 June 2016
D. Asset management
D1. Property, plant and equipment
Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment of losses.
The carrying amount of property, plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount
from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s
employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable
amounts.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All repairs and
maintenance costs are charged to the Statement of Profit or Loss and Other Comprehensive Income during the financial year in which they are
incurred.
Depreciation
The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, is depreciated on a
straight-line basis over their useful lives to the Group commencing from the time the asset is held ready for use. Leased plant and equipment
and leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the
equipment and improvements.
The depreciation rates used for each class of depreciable asset are shown below:
Fixed asset class
Freehold land
Buildings
Plant and equipment
Property improvements
Depreciation rate
0.0%
2.0%
4.0% to 25.0%
2.0% to 25.0%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in the
Statement of Profit or Loss and Other Comprehensive Income.
(a) Movements in carrying amounts of property, plant and equipment
Consolidated
Year ended 30 June 2016
Balance at the beginning of the year
Additions
Additions through business combinations
Disposals – written down value
Transfers
Depreciation expense
Balance at the end of the year
Year ended 30 June 2015
Balance at the beginning of the year
Additions
Additions through business combinations
Disposals – written down value
Transfers
Transfers to held for sale
Depreciation expense
Balance at the end of the year
Land and
buildings
$’000
Property
improvements
$’000
Plant and
equipment
$’000
Motor
vehicles
$’000
Capital
works in
progress
Note
Total
$’000
F1(a)(ii)
348,262
34,217
58,650
(650)
8,677
(7,365)
441,791
316,527
9,056
21,600
(550)
8,144
(600)
(5,915)
348,262
5,773
173
-
(30)
716
(371)
6,261
6,130
-
-
(2)
-
-
(355)
5,773
16,988
5,387
3,001
(188)
-
(4,140)
21,048
15,253
4,004
1,302
(254)
-
-
(3,317)
16,988
192
-
-
(17)
-
(83)
92
323
-
-
-
-
-
(131)
192
12,582
40,678
-
-
(9,393)
-
43,867
383,797
80,455
61,651
(885)
-
(11,959)
513,059
2,566
18,160
-
-
(8,144)
-
-
12,582
340,799
31,220
22,902
(806)
-
(600)
(9,718)
383,797
50 Japara Healthcare Annual Report 2016
(b) Property, plant and equipment under construction
Capital expenditure incurred in the course of development activities are carried at cost, less any recognised impairment loss. Cost includes
construction costs, professional fees, internal wage expenses directly attributable to the development activities and, for qualifying assets,
borrowing costs capitalised in accordance with the Group’s accounting policy. Upon completion the asset is reclassified as property, plant
and equipment or leasehold improvements.
During the year, the Group completed construction of an extension and significant refurbishment of the Bayview aged care facility. Costs
totalling $8,677,000 were reclassified from capital works in progress to land and buildings upon completion of construction.
D2. Intangible assets
Goodwill
Goodwill and goodwill on consolidation are initially recorded at the amount by which the fair value of the purchase price for a business
combination exceeds the fair value attributed to the interest in the net fair value of identifiable assets, liabilities and contingent liabilities at date
of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment and carried at
cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the
entity sold.
Resident places
Resident places are issued by the Government to Approved Providers and can also be purchased from third parties. Resident places are
stated at cost or fair value at acquisition less any accumulated impairment losses. The resident places are not amortised as the Directors
believe that they have a long indeterminate life and are not expected to diminish in value over time. Accordingly, no depreciable amount
exists that requires amortisation.
The carrying amounts of the resident places are reviewed at the end of each reporting period to ensure that they are not valued in excess
of their recoverable amounts.
Impairment review of non-financial assets
At each reporting date, the Group reviews the carrying amounts of its non-financial assets to determine whether there is any indication of
impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Impairment testing is performed annually for
goodwill and other intangible assets with indefinite useful lives including resident places.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows of other assets or Cash Generating Units (CGUs). Goodwill arising from a business combination
is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the
estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU,
and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment
loss had been recognised.
50 Japara Healthcare Annual Report 2016
51 Japara Healthcare Annual Report 2016
Notes to the Financial Statements continued
For the year ended 30 June 2016
D. Asset management continued
D2. Intangible assets continued
(a) Movements in carrying amounts of intangible assets
Year ended 30 June 2016
Balance at the beginning of the year
Additions at cost
Additions through business combinations
Closing value at 30 June 2016
Year ended 30 June 2015
Balance at the beginning of the year
Additions at cost
Additions through business combinations
Closing value at 30 June 2015
Use of estimates and judgements
Impairment review: Calculation of value in use
Goodwill
$’000
260,746
-
-
260,746
260,746
-
-
260,746
Resident
places
$’000
154,442
2,381
47,983
204,806
124,040
493
29,909
154,442
Total
$’000
415,188
2,381
47,983
465,552
384,786
493
29,909
415,188
For the purpose of impairment testing of intangible assets with an indefinite useful life, the Group has identified one CGU. This is consistent
with the operating segment identified in Note B1.
The recoverable amount of the CGU was based upon its value in use, determined by discounting the future cash flows to be generated from
the continuing use of the CGU. The recoverable amount was determined to be higher than the carrying amount and therefore no impairment
loss was recognised.
The post-tax discount rate of 8.85% (2015: 10.18%) was determined based on the cash rate target adjusted for a risk premium to reflect both
the increased risk of investing in equities generally and the systemic risk of the CGU.
Three years of cash flows were included in the discounted cash flow model. A long-term growth rate into perpetuity has been determined
at 2.5% (2015: 3.0%), consistent with an assumption a market participant would make.
Budgeted EBITDA was based upon expectation of future outcomes taking into account past experience, adjusted for anticipated revenue
growth and occupancy rates.
The estimated recoverable amount of the CGU exceeded its carrying amount. Management has identified that a reasonable possible change
in two key assumptions could cause the carrying amount to exceed the recoverable amount. The following table shows the amount by which
these two assumptions would need to change individually for the estimated recoverable amount to be equal to the carrying amount.
Change in discount rate
Change in long-term growth rate
D3. Investment property
2016
%
1.28
(1.66)
2015
%
1.06
(1.42)
Investment property is held to generate long-term rental yields and capital growth. Investment property is carried at fair value. Changes to fair
value are recorded in the Statement of Profit or Loss and Other Comprehensive Income as other income/expenses.
(a) Reconciliation of carrying amount
Investment property comprises independent living units (ILUs) located across five retirement villages. Four retirement villages are subject
to loan licence agreements, which confer the right to occupancy of the unit until such time as the resident’s occupancy terminates and the
occupancy rights are transferred to another resident. Upon entry a resident will loan the Group an amount equal to the fair value of the unit.
On termination the resident is entitled to repayment of the loan inclusive of any uplift in fair value since the agreement date less the deferred
management fee. The remaining retirement village is subject to 49 year lease agreements. With no loan agreement it is carried at fair value
with reference to external valuations.
52 Japara Healthcare Annual Report 2016
Balance at beginning of year
Additions resulting from capitalised expenditure
Additions through business combinations
Fair value adjustments
Balance at end of year
Use of estimates and judgements
Investment property: Measurement of fair values
Note
B2(a)
2016
$’000
31,549
29
-
91
31,669
2015
$’000
23,312
5
7,460
772
31,549
The fair value of investment property of $31,669,000 (2015: $31,549,000) has been categorised as Level 3 based on the inputs to the valuation
technique used (see Note A4).
Due to the frequency of residents entering and departing from a unit, the fair value of each unit within a retirement village under a loan licence
agreement is based upon the most recent loan received for a similar unit.
E. Capital structure and financing
E1. Capital management
The Group’s principal sources of funds are cash flows from operations and RADs. The Group may finance its ongoing operations with
operating cash flows or bank borrowings or a combination.
Over time, the Group may seek debt funding from a range of sources to diversify its funding base to reduce reliance on the bank finance
market and to manage its exposure to interest rate risk on long-term borrowings. Quantitative and qualitative disclosures about market risk
sensitive instruments are included in Note E3.
The Group’s working capital requirements are generally consistent throughout the course of the year and there are no significant variations.
The Group maintains a disciplined approach to capital expenditure, with all key capital projects subject to strict approval protocols. Capital
expenditure comprises expenditure on asset enhancement and replacement programs and general maintenance projects (maintenance
expenditure funded from operational cash flows) as well as growth capital expenditure comprising brownfields and greenfields development
projects and acquisition of aged care facilities (funded via equity, borrowings, RAD inflows, operating cash flows or any combination of these,
as appropriate).
The Group may borrow money from time to time in order to finance activities.
E2. Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions to the instrument.
For financial assets, this is equivalent to the date that the Group commits itself to either purchase or sell the asset (e.g. trade date accounting
is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through
profit or loss’, in which case transaction costs are expensed to profit or loss immediately.
Classification and subsequent measurement
Financial instruments are subsequently measured either at fair value, amortised cost using the effective interest rate method or at cost.
Fair value represents the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties. Where
available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.
Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal
repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and
the maturity amount calculated using the effective interest method.
The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that
exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through
the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of
the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with
a consequential recognition of an income or expense item in the Statement of Profit or Loss and Other Comprehensive Income.
52 Japara Healthcare Annual Report 2016
53 Japara Healthcare Annual Report 2016
Notes to the Financial Statements continued
For the year ended 30 June 2016
E. Capital structure and financing continued
E2. Financial instruments continued
Classification and subsequent measurement continued
The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements
of Accounting Standards specifically applicable to financial instruments.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are
subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the
financial asset is derecognised.
Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Gains or losses are
recognised in profit or loss through the amortisation process and when the financial liability is derecognised.
Impairment of financial assets
At the end of the reporting period the Group assesses whether there is any objective evidence that a financial asset or group of financial assets
is impaired.
Financial assets at amortised cost
If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss
is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted
at the financial asset’s original effective interest rate.
Impairment on loans and receivables is reduced through the use of a provision account; all other impairment losses on financial assets
at amortised cost are taken directly to the asset.
Subsequent recoveries of amounts previously written off are credited against the relevant expense in profit or loss.
Available-for-sale financial assets
A significant or prolonged decline in value of an available-for-sale asset below its cost is objective evidence of impairment; in this case the
cumulative loss that has been recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification
adjustment. Any subsequent increase in the value of the asset is taken directly to other comprehensive income.
Use of estimates and judgements
Financial instruments: Measurement of fair values
At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset has been impaired.
A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective evidence of impairment as a result
of one or more events (a ‘loss event’) having occurred, which has an impact on the estimated future cash flows of the financial asset(s).
In the case of financial assets carried at amortised cost, loss events may include indications that the debtors or a group of debtors are
experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy
or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults.
For financial assets carried at amortised cost (including loans and receivables), a separate provision account is used to reduce the carrying
amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the
carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the provision account or the carrying
amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the provision account.
When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Company recognises the
impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events
that have occurred are duly considered.
Derecognition of financial assets
Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another party
whereby the Group no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities
are derecognised where the related obligations are either discharged, cancelled or expired. The difference between the carrying value of the
financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets
or liabilities assumed, is recognised in profit or loss.
54 Japara Healthcare Annual Report 2016
(a) Financial instruments material to the financial statements
The following financial instruments are material to the financial statements:
• Note E4 Cash;
• Note E5 Borrowings; and
• Note E6 Other financial liabilities.
The carrying amounts of financial assets and financial liabilities are a reasonable approximation of fair value.
E3. Financial risk management
Inherent within the Group’s activities are the risks that arise from holding financial instruments. These are managed through a process
of ongoing identification, measuring and monitoring. The Group’s financial instruments consist mainly of deposits with banks, bank loans,
accounts receivable and payable, and RADs/accommodation bonds, which all arise directly from its operations. The main purpose of non
derivative financial instruments is to raise finance for the Group’s operations. The Group does not have any derivative financial instruments
at balance date.
The Directors of the Group are responsible for identifying and controlling risks that arise from these financial instruments. As such the Group
has identified that the key areas of risk are credit risk, liquidity risk and market risk (which can be analysed further into interest rate risk, currency
risk and price risk), with further information on each risk category disclosed below. The Directors of the consolidated group, amongst other
responsibilities, are tasked to identify, monitor, control and hence mitigate risk, within the framework of the Group’s operational mandate and
compliance with legislation and industry-specific regulations. Information is reported to all relevant parties within the Group on a regular basis
including key management, the Board of Directors and the Audit, Risk and Compliance Committee. All risk management policies are approved
and reviewed by the Audit, Risk and Compliance Committee under the authority of the Board on a regular basis.
The Group’s exposure to financial risk at the reporting date is as follows:
2016
Financial assets
Cash and cash equivalents
Receivables
Total financial assets
Financial liabilities
Accruals
Trade and other payables
RADs/accommodation bonds and ILU loans
Bank loan
Other financial liabilities
Total financial liabilities
2015
Financial assets
Cash and cash equivalents
Receivables
Other financial assets
Total financial assets
Financial liabilities
Accruals
Trade and other payables
RADs/accommodation bonds
and ILU loans
Total financial liabilities
Weighted
average effective
interest rate
%
Floating
interest rate
$’000
Maturing
within one
year
$’000
Maturing
after one
year
$’000
Non-interest
bearing
$’000
1.87
-
-
-
-
0.40
3.42
-
-
2.24
-
-
-
-
-
0.40
-
24,568
-
24,568
-
-
-
-
-
-
53,878
-
-
53,878
-
-
-
-
-
-
-
-
-
(40,925)
(1,350)
-
(42,275)
-
-
-
-
-
-
(31,933)
(31,933)
-
-
-
-
-
-
(58,150)
-
(58,150)
-
16,548
16,548
(11,091)
(11,895)
(363,657)
-
(9,000)
(395,643)
Total
$’000
24,568
16,548
41,116
(11,091)
(11,895)
(404,582)
(59,500)
(9,000)
(496,068)
-
-
-
-
-
-
-
-
-
12,775
1,078
13,853
53,878
12,775
1,078
67,731
(10,276)
(9,331)
(10,276)
(9,331)
(293,318)
(312,925)
(325,251)
(344,858)
54 Japara Healthcare Annual Report 2016
55 Japara Healthcare Annual Report 2016
Notes to the Financial Statements continued
For the year ended 30 June 2016
E. Capital structure and financing continued
E3. Financial risk management continued
(a) Credit risk
Credit risk represents the risk that the counterparty to the financial instrument will fail to discharge an obligation and cause the Group to incur
a financial loss.
With respect to credit risk arising from the financial assets of the Group, the Group’s exposure to credit risk arises from default of the
counterparty, with the current exposure equal to the fair value of these instruments as disclosed in the Statement of Financial Position and
notes to the financial statements. This does not represent the maximum risk exposure that could arise in the future as a result of changes
in values, but best represents the current maximum exposure at the reporting date.
The Group has identified that it does not have any material credit risk exposure to any single non-related party receivable or group of non-
related party receivables under financial instruments entered into by the Group. The Group has identified that its single largest customer is the
Department of Health in respect of funding received. Such funding is received on a monthly basis, in advance at the start of each month and
any funding receivable at balance date is accrued based upon Department of Health calculations of balancing funding amounts. The Group
has determined that any credit risk associated with the Department of Health is insignificant. In respect of other customers, being aged care
facility residents, the Group monitors the level of receivables balances on an ongoing basis and any associated credit risk is mitigated by their
independence of each other and individual immateriality to the Group. As a result of the 1 July 2014 Federal Government reforms relating to
funding of the aged care industry, more residents are now contributing greater amounts towards their aged care costs. This is primarily as a
result of increases in the levels of means and assets testing of residents. There have been delays in the Federal Government’s assessments
of the amounts that are payable by individual residents due to the implementation of new Centrelink and Medicare IT systems used to calculate
fees using the new methodology. This has resulted in delays by some residents in paying their means tested care fees as they are querying the
Federal Government’s calculations of the amounts that they owe. The figures below take into account the fact that approximately $1,800,000
(2015: $1,000,000) of the aged debtors greater than 61+ days can be offset against RADs or accommodation bonds paid by a resident prior
to it being refunded to the relevant resident upon discharge. The Group’s overall exposure to bad debts is therefore largely mitigated because
of the ability to offset any outstanding receivable against the RAD/accommodation bond balance; however, a provision for doubtful debts has
been raised in the financial statements, which at reporting date is $357,000 (2015: $418,000).
At 30 June 2016, the ageing analysis of resident debtors is as follows:
Not yet
due
Current
31– 60
days
5,857
64
5,137
68
639
7
707
9
635
7
269
4
61+
days
2,336
26
1,853
25
Impaired
(357)
(4)
(418)
(6)
Total
9,110
100
7,548
100
Year
2016 ($’000)
2016 (%)
2015 ($’000)
2015 (%)
(b) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. This risk is controlled
through monitoring forecast cash flows and ensuring adequate access to financial instruments that are readily convertible to cash. In addition,
the Group maintains sufficient cash and cash equivalents to meet normal operating requirements. Also, as part of the Group’s compliance with
the User Rights Principles 1997, the Group maintains a liquidity management strategy to ensure that the Group has sufficient liquidity to enable
it to refund RAD and accommodation bond balances that are expected as and when they fall due.
Financial liabilities of the Group comprise trade and other payables, dividends payable, RADs, accommodation bonds and ILU resident loan
liabilities. Trade and other payables have no contractual maturities and are typically settled within 30 days or within the terms negotiated. RADs
and accommodation bonds are potentially repayable within 14 days of a resident leaving the aged care facility and are therefore classified
under ‘current liabilities’ in the Statement of Financial Position. However, on average, each resident occupies a place for approximately 26
months (2015: 29 months), resulting in approximately 46.2% (2015: 41.4%) of RADs and accommodation bonds being replaced in any 12
month period. In addition, any RAD or accommodation bond payable is typically replaced by an equivalent or higher RAD receivable from a
new incoming resident. ILU resident loan liabilities are subject to loan agreements and whilst repayable within the earlier of 14 days after a new
ILU resident replaces the departing ILU resident or six months after ILU resident departure, and therefore classified under ‘current liabilities’
in the Statement of Financial Position, are typically replaced by an equivalent or higher ILU resident loan receivable from a new incoming
ILU resident. It is also unlikely in practice that all ILU resident loan liabilities would be refundable within a 12 month period.
56 Japara Healthcare Annual Report 2016
(c) Market risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such
as interest rates, foreign exchange rates and prices. Financial instruments affected by market risk include cash, loans and borrowings and
RADs and accommodation bonds. Market risk is managed and monitored using sensitivity analysis, and minimised through ensuring that
all operational activities are undertaken in accordance with established internal and external guidelines, financing and investment strategies
of the Group.
Interest rate risk
The Group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market
interest rates and the effective weighted average interest rates on those financial assets and financial liabilities, primarily relates to the Group’s
bank debt. Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial
instruments. The Group reviews its bank borrowings on a monthly basis and monitors its position in respect of fixing interest rates or leaving
them as floating rates in accordance with its interest rate hedging policy. As at 30 June 2016, the Group has bank borrowings of $59,500,000
(2015: $Nil).
Interest rate risk sensitivity analysis
The Group has performed a sensitivity analysis on its Statement of Profit or Loss and Other Comprehensive Income and Statement of Financial
Position based upon a reasonably possible change in interest rates, with all other variables held constant. The sensitivity of the Statement of
Profit or Loss and Other Comprehensive Income and Statement of Financial Position is the effect of the assumed changes in interest rates on
the interest income and interest expense for the year, based on the floating rate financial assets held at 30 June 2016. The sensitivity has been
calculated using a change in interest rates of 100 basis points increase and decrease.
At reporting date, the effect on profit or loss after tax and equity as a result of changes in the interest rate, with all other variables remaining
constant, would be as follows:
Profit/(loss)
Equity
Price risk
2016
2015
+1.00%
$’000
(531)
(531)
–1.00%
$’000
531
531
+1.00%
$’000
154
154
–1.00%
$’000
(154)
(154)
The Group has assessed that it is materially exposed to the risk that the Federal Government, through the Department of Health, may alter
the rate of funding provided to Approved Providers of residential aged care services. As Government funding represents approximately 72%
(2015: 72%) of the Group’s revenue, a fluctuation in the rate of Government funding may have a direct impact on the revenue of the Group.
Whilst the Group is not able to influence Government policy directly, it and members of its senior management team participate in aged care
industry public awareness discussions and in aged care industry dialogue with the Government about its proposals for changes to funding
for the aged care industry.
Price risk sensitivity analysis
The Group has performed a sensitivity analysis on its Statement of Profit or Loss and Other Comprehensive Income and Statement of
Financial Position based upon reasonably possible changes in levels of Government funding, with all other variables held constant. The
sensitivity of the Statement of Profit or Loss and Other Comprehensive Income and Statement of Financial Position is the effect of the assumed
changes in levels of Government funding on the revenue of the Group, based on the amount of Government funding received for the year
ended 30 June 2016. The sensitivity has been calculated using a change in the level of Government funding of 1.00% increase and decrease.
At reporting date, the effect on profit or loss after tax and equity as a result of changes in the level of Government funding, with all other
variables remaining constant, would be as follows:
Profit/(loss)
Equity
2016
2015
+1.00%
$’000
1,650
1,650
–1.00%
$’000
(1,650)
(1,650)
+1.00%
$’000
1,403
1,403
–1.00%
$’000
(1,403)
(1,403)
56 Japara Healthcare Annual Report 2016
57 Japara Healthcare Annual Report 2016
Notes to the Financial Statements continued
For the year ended 30 June 2016
E. Capital structure and financing continued
E4. Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original
maturities of three months or less and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities in the
Statement of Financial Position.
Included within cash at bank and on hand is an amount that is reserved for the refund of RAD/accommodation bond liabilities in accordance
with the Aged Care Act 1997. For more information on RAD/accommodation bond liabilities see Note E6.
E5. Borrowings
Current
Bank loan
Total current borrowings
Non-current
Bank loan
Total non-current borrowings
Total borrowings
(a) Syndicated facility agreement
2016
$’000
1,350
1,350
58,150
58,150
59,500
2015
$’000
-
-
-
-
-
On 11 February 2016, the Group, together with its existing bankers, executed a new Syndicated Facility Agreement and Multi-Option Facility
Agreement (the ‘Bank Facilities’). These new Bank Facilities have been negotiated to allow for the planned short and medium-term brownfield
and greenfield developments strategy of the Group. The new Bank Facilities are an amendment and restatement of the pre-existing agreements
with the following key amendments:
• an increase in the expiry date of the Bank Facilities from 5 August 2017 to 30 September 2020;
• an increase in the total available facility amounts from $105,000,000 to $220,000,000;
• the increase in the total available facility amount of $115,000,000 is to assist in funding the Group’s accelerated brownfield and greenfield
development program;
• the addition of an accordion feature allowing the flexibility to increase the total available facility amounts during the term of the Bank
Facilities;
• a reduction in the margin; and
• several other changes to reflect the increase in size of the Group compared to the time when the pre-existing agreements were negotiated
in 2014.
The Bank Facilities are secured by first mortgages over the freehold properties owned by the Group.
During the year, $34,500,000 was drawn down to fund brownfield and greenfield developments and $37,500,000 was drawn down to fund
part of the purchase of the Profke Aged Care Group (see F1), $12,500,000 of which was repaid within the year. A total of $59,500,000 was
drawn down against the Bank Facilities as at the reporting date. Subsequent to this date, a further $6,000,000 has been drawn down to fund
brownfield and greenfield developments.
E6. Other financial liabilities
Refundable Accommodation Deposit (RAD)/accommodation Bond liabilities
RADs/accommodation bonds are non-interest bearing deposits made by some aged care facility residents to the Group upon admission.
These deposits are liabilities that fall due and payable when the resident leaves the facility. As there is no unconditional right to defer payment
for 12 months, these liabilities are recorded as current liabilities.
RAD/accommodation bond liabilities are recorded at an amount equal to the proceeds received, net of retention and any other amounts
deducted from the RAD/accommodation bond in accordance with the Aged Care Act 1997.
Independent Living Unit (ILU) resident loan liabilities
ILU resident loans are non-interest bearing payments made by retirement village residents to the Group upon signing of a licence agreement
to occupy an ILU. These payments are liabilities that fall due and payable upon termination of the licence less the deferred management fee
calculated in accordance with the licence. As there is no unconditional right to defer payment for 12 months, these liabilities are recorded as
current liabilities.
ILU resident loan liabilities are recorded at fair value.
58 Japara Healthcare Annual Report 2016
CURRENT
RADs/accommodation bonds
ILU resident loans
Other financial liabilities
Total
(a) RADs/accommodation bonds
Note
F1(a)(iv)
2016
$’000
383,521
21,061
9,000
413,582
2015
$’000
302,948
22,303
-
325,251
The Group has provided each resident that has entered into a RAD/accommodation bond agreement with the Group and/or paid a RAD/
accommodation bond to the Group with a written guarantee of future refund of the RAD/accommodation bond balance in accordance with
the RAD/accommodation bond agreement and in compliance with the prudential requirements set out under the Aged Care Act 1997.
E7. Issued capital
(a) Ordinary shares
At the beginning of the reporting period
Issued during the period
At the end of the reporting period
Ordinary shares
2016
No.
263,046,592
642,865
263,689,457
2015
No.
262,500,001
546,591
263,046,592
Holders of these shares are entitled to dividends as determined from time to time and are entitled to one vote per share at general meetings
of the Company.
The Company does not have authorised capital or par value in respect of its shares.
Issue of ordinary shares
In April 2016:
• the trustee of the Rights Plan received 546,591 ordinary shares from the CEO as settlement for a loan granted under the Group’s Loan Plan
(see Note C3(a)(ii));
• the trustee of the Rights Plan purchased a further 124,509 ordinary shares on market;
• the Group issued 671,100 ordinary shares to employees granted rights under the IPO bonus offer in April 2014 (see Note C3(a)(iii)).
In May 2016, the Group issued 642,865 ordinary shares under its Dividend Reinvestment Plan.
(b) Dividends
The following dividends were determined and paid:
Final 2015 fully franked ordinary dividend of 5.50 (2014: Nil) cents per share
Interim fully franked ordinary dividend of 5.75 (2015: 5.50) cents per share
Total
Proposed final 2016 fully franked ordinary dividend of 5.75 (2015: 5.50) cents per share
to be paid 31 October 2016
2016
$’000
14,468
15,124
29,592
15,162
2015
$’000
-
14,468
14,468
14,468
The proposed final dividend for 2016 was determined after the end of the reporting period and therefore has not been provided for in the
financial statements. There are no income tax consequences arising from this dividend at 30 June 2016.
58 Japara Healthcare Annual Report 2016
59 Japara Healthcare Annual Report 2016
Notes to the Financial Statements continued
For the year ended 30 June 2016
E. Capital structure and financing continued
E7. Issued capital continued
(b) Dividends continued
Franking account
The franking credits available for subsequent financial years at a tax rate of 30%
2016
$’000
3,341
2015
$’000
2,338
The ability to use the franking credits is dependent upon the ability to determine and pay dividends. In accordance with the tax consolidation
legislation, the Company as the head entity in the tax consolidated group has also assumed the benefit of $3,341,000 (2015: $2,338,000)
franking credits.
F. Group structure
F1. Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration
transferred in the acquisition is measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for
impairment (see Note D2). Any discount on acquisition purchase is recognised in profit or loss immediately. Transaction costs are expensed as
incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally
recognised in profit or loss.
(a) Profke Aged Care Group
On 1 December 2015, the Group acquired the Profke Aged Care Group, which consisted of:
• 100% of the shares and voting rights of Noosa Nursing Home Pty Ltd, a company that owns and operates an aged care facility in Noosa,
Queensland (230 resident places);
• the business and assets of another three aged care facilities, one in Queensland and two in New South Wales – Gympie (130 resident
places), Coffs Harbour (147 resident places) and South West Rocks (80 resident places); and
• the titles to all land and buildings on which each of the above mentioned businesses operate.
(i) Consideration transferred
The purchase price (net of RAD/accommodation bond liabilities) for the Profke Aged Care Group was $77,253,000 (excluding acquisition
costs and settlement adjustments). Settlement adjustments amounted to a net reduction in the purchase price of $4,095,000 resulting in a net
consideration of $73,158,000. Of this net consideration, $37,500,000 was drawn down under the Syndicated Facility Agreement to fund the
acquisition: settlement of $9,000,000 of the consideration is deferred until 1 June 2017 and the remaining $26,658,000 was funded from cash.
(ii) Identifiable assets and liabilities assumed
The following table summarises the recognised amounts of assets and liabilities assumed at the acquisition date:
Trade and other receivables
Property, plant and equipment
Deferred tax assets
Intangible assets resident places
Trade and other payables
Other financial liabilities RADs/accommodation bonds
Provisions
Total identifiable assets and liabilities assumed
1 December
2015
$’000
61
61,651
748
47,983
(2,358)
(25,247)
(2,440)
80,398
60 Japara Healthcare Annual Report 2016
Use of estimates and judgements
Assets and liabilities acquired from Profke Aged Care Group: Measurement of fair values
The valuation techniques used for measuring the fair value of material assets acquired were as follows:
Property, plant and equipment
Property, plant and equipment have been valued by an independent expert.
Land and buildings have been valued using a combination of the direct comparison and capitalisation approaches.
Plant and equipment has been valued at the depreciated replacement cost, which reflects adjustments for physical deterioration as well as
functional and economic obsolescence.
Intangible assets
Intangible assets represent resident places valued using a going concern market value of the Profke Aged Care Group to determine the value
of the resident places as at 1 December 2015. The valuation was based upon a discounted cash flow, with the value of the resident places
determined after the fair value of the tangible assets was deducted from the valuation. Five-year forecast cash flows generated by the Profke
Aged Care Group, a discount rate of 10.18% and a long-term growth rate into perpetuity of 3.0% were used in the discounted cash flow model.
Using this methodology, a going concern market value of the business of $84,495,000 was ascertained.
(iii) Discount on acquisition
A discount on acquisition, net of acquisition related costs, has been recognised in the Statement of Profit or Loss and Other Comprehensive
Income as part of ‘Other income’ as follows:
Fair value of identifiable assets
Consideration
Discount on acquisition
Less acquisition-related costs
Total
Note
F1(a)(ii)
F1(a)(i)
2016
$’000
80,398
(73,158)
7,240
(6,320)
920
Acquisition and integration-related costs include legal fees, due diligence, stamp duty and the costs incurred by the acquisition department
associated with the acquisition of the Profke Aged Care Group.
(iv) Acquisition of Profke Aged Care Group, net of cash acquired
Net consideration
Less deferred consideration
Total purchase price paid, net of cash acquired
2016
$’000
73,158
(9,000)
64,158
60 Japara Healthcare Annual Report 2016
61 Japara Healthcare Annual Report 2016
Notes to the Financial Statements continued
For the year ended 30 June 2016
F. Group structure continued
F2. Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries
are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated.
(a) List of subsidiaries
Name of entity
Japara Holdings Pty Ltd
Japara Property Holdings Pty Ltd
Japara Aged Care Property Trust
Aged Care Services Australia Group Pty Ltd
Aged Care Services One (Central Park) Pty Ltd
Aged Care Services Two (Roccoco) Pty Ltd
Aged Care Services Three (Balmoral Grove) Pty Ltd
Aged Care Services Four (Park Group) Pty Ltd
Aged Care Services Five (Narracan Gardens) Pty Ltd
Aged Care Services Six (Mirridong) Pty Ltd
Aged Care Services Seven (Kelaston) Pty Ltd
Aged Care Services Eight (Elanora) Pty Ltd
Aged Care Services Nine (George Vowell) Pty Ltd
Aged Care Services 10 (Kingston Gardens) Pty Ltd
Aged Care Services 11 (View Hills) Pty Ltd
Aged Care Services 12 (Albury & District) Pty Ltd
Aged Care Services 13 (Lakes Entrance) Pty Ltd
Aged Care Services 14 (Lower Plenty Garden Views) Pty Ltd
Aged Care Services 15 (Rosanna Views) Pty Ltd
Aged Care Services 16 (Millward) Pty Ltd
Aged Care Services 17 (Bonbeach) Pty Ltd
Aged Care Services 18 (Hallam) Pty Ltd
Aged Care Services 19 (Goonawarra) Pty Ltd
Aged Care Services 20 (Bayview Gardens) Pty Ltd
Aged Care Services 21 (Barongarook Gardens) Pty Ltd
Aged Care Services 22 (Sandhurst) Pty Ltd
Aged Care Services 23 (Capel Sands) Pty Ltd
Aged Care Services 24 (St Judes) Pty Ltd
Aged Care Services 25 (Springvale) Pty Ltd
Aged Care Services 26 (Bayview) Pty Ltd
Aged Care Services 27 (Kirralee) Pty Ltd
Aged Care Services 28 (Elouera) Pty Ltd
Aged Care Services 29 (Mirboo North) Pty Ltd
Aged Care Services 30 (Brighton) Pty Ltd
Aged Care Services 31 (Vonlea Manor) Pty Ltd
Aged Care Services 32 (Scottvale) Pty Ltd
Aged Care Services 33 (Anglesea) Pty Ltd
Aged Care Services 34 (Yarra West) Pty Ltd
Aged Care Services 35 (The Homestead) Pty Ltd
Aged Care Services 36 (Trevu) Pty Ltd
Aged Care Services 37 (Oaklands) Pty Ltd
Aged Care Services 38 (Mitcham) Pty Ltd
62 Japara Healthcare Annual Report 2016
Ownership
Direct
Direct
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Equity
holding
2016
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Name of entity
Aged Care Services 39 (Noosa) Pty Ltd
Aged Care Services 40 (Coffs Harbour) Pty Ltd
Aged Care Services 41 (South West Rocks) Pty Ltd
Aged Care Services 42 (Gympie) Pty Ltd
Japara Developments Pty Ltd
Japara Retirement Living Pty Ltd
Japara Retirement Living 2 (Balmoral Mews) Pty Ltd
Japara Retirement Living 4 (Cosgrove Cottages) Pty Ltd
Japara Retirement Living 5 (Sydney Williams) Pty Ltd
Japara Retirement Living 6 (Barongarook) Pty Ltd
Japara Retirement Living 7 (The Homestead) Pty Ltd
JD No. 1 (Bundaberg) Pty Ltd
JD No. 2 (Balmoral Mews) Pty Ltd
JD No. 3 (Lakes Entrance) Pty Ltd
JD No. 5 (Albury & District) Pty Ltd
JD No. 8 (Yarra West) Pty Ltd
F3. Deed of Cross Guarantee
Ownership
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Equity
holding
2016
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly owned subsidiaries listed in Note F2 are relieved from
the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports and Directors’ reports as they are part of a
Closed Group as defined by the Corporations Act 2001.
As a condition of the Class Order, the Company and each of the subsidiaries entered into a Deed of Cross Guarantee on 12 June 2014 or have
been added as parties to the Deed of Cross Guarantee by way of Assumption Deeds dated 23 June 2015 or 24 June 2016. The effect of the
Deed of Cross Guarantee is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the
subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the Company will
only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the
event that the Company is wound up.
The Consolidated Statement of Profit or Loss and Other Comprehensive Income and Statement of Financial Position for the Closed Group
is the same as the financial statements for Japara Healthcare Limited and its controlled entities.
F4. Parent entity
As at, and throughout, the year ended 30 June 2016 the parent entity of the Group was Japara Healthcare Limited.
Statement of Financial Position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Equity
Issued capital
Retained earnings
Total equity
Statement of Profit or Loss and Other Comprehensive Income
Total profit or loss for the year
Total comprehensive income
2016
$’000
2015
$’000
2,617
614,178
616,795
2,920
2,920
518,732
36,993
555,725
86,104
86,104
7,652
490,644
498,296
1,597
1,597
517,848
(21,149)
496,699
(2,212)
(2,212)
62 Japara Healthcare Annual Report 2016
63 Japara Healthcare Annual Report 2016
Notes to the Financial Statements continued
For the year ended 30 June 2016
F. Group structure continued
F4. Parent entity continued
Guarantees
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in respect of its subsidiaries.
Further details of the Deed of Cross Guarantee and the entity subject to the deed are disclosed in Note F3.
G. Other information
G1. Commitments
As at the reporting date, the Group had entered into contracts relating to capital expenditure at the following facilities.
Aged care facility Nature of capital expenditure
Central Park
George Vowell
St Judes
Kirralee
Riverside
Significant refurbishment
34 place extension and significant refurbishment
30 place extension and significant refurbishment
13 place extension and significant refurbishment
90 place greenfield development
Contract
amount
$’000
13,369
7,856
8,398
4,307
16,600
Amount
incurred
$’000
10,214
6,970
6,936
4,041
3,165
Future
commitment
$’000
3,155
886
1,462
266
13,435
Expected
completion date
$’000
FY2017
FY2017
FY2017
FY2017
FY2017
As at the reporting date, the Group had also entered into contracts to purchase land in Rye Victoria, for an amount of $3,719,000. At the date
of signing this report, one contract totalling $569,000 has been settled and the second contract totalling $3,150,000 is expected to settle in
September 2016. The land will be used to develop a new 95 place facility.
G2. Operating leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the
periods in which they are incurred.
Lease incentives under operating leases are amortised on a straight-line basis over the life of the lease term.
(a) Operating lease commitments
Minimum lease payments under non-cancellable operating leases:
– not later than one year
– between one year and five years
– later than five years
2016
$’000
1,390
3,833
821
6,044
2015
$’000
1,429
4,578
1,527
7,534
The above amounts relate primarily to property leases for the business premises of the Group, which are non-cancellable leases with terms
between four and 10 years, with rent payable monthly in advance.
G3. Contingencies
Security deposit guarantees
The Group has entered into a number of security deposit guarantees with its bankers for security for the performance of the Group totalling
$892,000. This is secured against the Multi-Option Facility Agreement (see Note E5(a)). At the date of signing this Financial Report, the
Directors are not aware of any situations that have arisen that would require these security deposit guarantees to be presented to the bank.
G4. Subsequent events
Other than mentioned elsewhere in the financial statements, no matters or circumstances have arisen since the end of the reporting period
that significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of the affairs of the
Group in future financial years.
64 Japara Healthcare Annual Report 2016
G5. Cash flow information
Reconciliation of result for the year to cash flows from operating activities:
Profit for the year
Cash flows excluded from profit attributable to operating activities:
– acquisition-related costs
– net refund of equity raising costs
Non-cash flows in profit:
– depreciation
– discount on acquisition
– straight lining of rental expense
– net loss on disposal of property, plant and equipment
– accommodation bond retention revenue
– deferred management fee income
– increase in fair value of investment property
– ILU loan finance charge
– equity-settled share-based payment transactions
Changes in assets and liabilities:
– (increase)/decrease in trade and other receivables
– (increase)/decrease in other assets
– (increase)/decrease in deferred tax receivable
– increase/(decrease) in trade and other payables
– increase/(decrease) in current tax liabilities
– increase/(decrease) in provisions
Net cash provided from operating activities
G6. Remuneration of auditors
Audit and review services:
– auditing or reviewing the financial statements
Other services:
– other services
Total
Note
D1
2016
$’000
30,375
7,131
(533)
11,959
(7,242)
20
97
(1,858)
(872)
(91)
145
156
(3,752)
(1,412)
2,580
3,300
(4,855)
1,511
36,659
2016
$’000
380
782
1,162
2015
$’000
28,839
3,871
(734)
9,718
(4,555)
20
88
(2,621)
(853)
(772)
69
(43)
(2,718)
961
4,733
(4,938)
6,451
2,667
40,183
2015
$’000
335
280
615
The majority of the fees relating to other advisory services were fees incurred relating to financial due diligence for business acquisitions
(2015: the majority of other advisory services related to debt re-financing advisory fees).
G7. New Accounting Standards adopted during the year
During the year, the following standards have been adopted by the Group and it is noted that they do not represent a material impact on the
consolidated financial statements:
• AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments
(December 2013) – Part B – Materiality); and
• AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements 2012 –2014 Cycle – Part H.
64 Japara Healthcare Annual Report 2016
65 Japara Healthcare Annual Report 2016
Notes to the Financial Statements continued
For the year ended 30 June 2016
G. Other Information continued
G8. New Accounting Standards for application in future periods
A number of new standards and amendments to the standards are effective for annual periods beginning after 1 July 2016 (unless otherwise
stated). The Group has considered the impact of these changes and their application in the preparation of these consolidated financial
statements.
New/amended standard
Summary of requirements
AASB 15 Revenue from contracts
with customers
AASB 2014–5 Amendments to
Australian Accounting Standards
arising from AASB 15
AASB 15 (effective on or after 1 January 2018) introduces a five-
step process for revenue recognition with the core principle of the
new standard being for entities to recognise revenue to depict the
transfer of goods or services to customers in amounts that reflect
the consideration (that is, payment) to which the entity expects
to be entitled in exchange for those goods or services.
Possible impact in consolidated
financial statements
The Group is considering the impact
of AASB 15 on the consolidated
financial statements and has chosen
not to early adopt this standard.
Accounting policy changes will arise in timing of revenue
recognition, treatment of contracts costs and contracts that
contain a financing element.
AASB 15 will also result in enhanced disclosures about revenue,
provide guidance for transactions that were not previously
addressed comprehensively (for example, service revenue and
contract modifications) and improve guidance for multiple element
arrangements.
The changes in revenue recognition requirements in AASB 15 may
cause changes to the timing and amount of revenue recorded in
the financial statements as well as additional disclosures.
AASB 16 (effective on or after 1 January 2019) reforms are to
be implemented around the change in accounting for leases
whereby operating leases will be recorded on the balance
sheet, where historically the expense relating to them have only
been recognised in the Statement of Profit or Loss and Other
Comprehensive Income. There is an opportunity to early adopt
on the provision that the entity has also early adopted the
changes associated with AASB 15.
The Group is in the process of
considering the impact on the
consolidated financial statements
and is not expecting to early adopt
this standard.
In AASB 9 (December 2010), the AASB added requirements for
the classification and measurement of financial liabilities that are
generally consistent with the equivalent requirements in AASB 139
except in respect of the fair value option, and certain derivatives
linked to unquoted equity instruments.
The Group is considering the
potential impact of AASB 9 and
has chosen not to early adopt.
The AASB also added the requirements in AASB 139 in relation
to the derecognition of financial assets and financial liabilities to
AASB 9. AASB 9 retains but simplifies the mixed measurement
model and establishes two primary measurement categories
for financial assets – amortised cost and fair value. The basis of
classification depends on the entity’s business model and the
contractual cash flow characteristics of the financial asset.
AASB 16 Leases
AASB 9 Financial Instruments
(December 2010) (includes
financial assets and financial
liability requirements)
AASB 2010 –7 Amendments
to Australian Accounting
Standards arising from AASB 9
(December 2010)
AASB 9 Financial Instruments
(December 2009) (Financial asset
requirements only)
AASB 2009–11 Amendments to
Australian Accounting Standards
arising from AASB
The guidance on hedge accounting in AASB 139 on impairment of
financial assets continues to apply as long as hedge accounting
provisions in AASB 2013–9 are not applied.
66 Japara Healthcare Annual Report 2016
Directors’ Declaration
1. In the opinion of the Directors of Japara Healthcare Limited (‘the Company’):
(a) the consolidated financial statements and notes to the consolidated financial statements, set out on pages 38 to 66 and the
Remuneration Report contained in Section 16 in the Directors’ Report, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s financial position as at 30 June 2016 and of its performance for the year ended on that
date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. There are reasonable grounds to believe that the Company and the Company entities identified in Note F2 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 Company entities pursuant to ASIC Class Order 98/1418.
3. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and
Chief Financial Officer for the period ended 30 June 2016.
4. The Directors draw attention to Note A2 to the consolidated financial statements, which includes a statement of compliance with International
Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Signed and dated at Melbourne on 22 August 2016
Linda Bardo Nicholls AO
Chairman
Andrew Sudholz
Managing Director and CEO
66 Japara Healthcare Annual Report 2016
67 Japara Healthcare Annual Report 2016
Independent Auditor’s Report
Independent auditor’s report to the members of Japara Healthcare Limited
Report on the financial report
We have audited the accompanying financial report of Japara Healthcare Limited (the company),
which comprises the statement of financial position as at 30 June 2016, statement of profit or loss
and other comprehensive income, statement of changes in equity and statement of cash flows for
the year ended on that date, notes A1 to G8 comprising significant accounting policies and other
explanatory information and the directors’ declaration of the Group comprising the company and
the entities it controlled at the year’s end or from time to time during the year.
Directors’ responsibility 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 is free from material misstatement whether due to fraud or
error.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that
we comply with relevant ethical requirements relating to audit engagements and plan and perform
the audit to obtain reasonable assurance whether the financial report is free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation of the financial report that gives a true and fair view 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 entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents
fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true
and fair view which is consistent with our understanding of the Group’s financial position and of
its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Profession Standards Legislation.
68 Japara Healthcare Annual Report 2016
Auditor’s opinion
In our opinion:
(a)
the financial report of the Group is in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2016 and
of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
(b)
the financial report also complies with International Financial Reporting Standards as
disclosed in note A2.
Report on the remuneration report
We have audited the Remuneration Report included at section 16 of the directors’ report for the
year ended 30 June 2016. 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 auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Japara Healthcare Limited for the year ended 30 June
2016, complies with Section 300A of the Corporations Act 2001.
KPMG
Darren Scammell
Partner
Melbourne
22 August 2016
68 Japara Healthcare Annual Report 2016
69 Japara Healthcare Annual Report 2016
Additional Information
Additional information required under ASX Listing Rule 4.10 and not shown elsewhere in this Annual Report follows. This information is current
as at 12 August 2016.
(a) Distribution of shareholders – ordinary shares
Range
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Ordinary
shares
213,683,499
28,643,856
12,035,544
8,635,827
690,731
263,689,457
%
81.04
10.86
4.56
3.28
0.26
100.00
No. of
holders
101
1,260
1,540
2,896
1,224
7,021
(b) Less than marketable parcels of ordinary shares
There are 153 shareholders holding less than a marketable parcel of ordinary shares (i.e. less than $500 per parcel of shares).
(c) 20 Largest shareholders – ordinary shares
Name
HSBC Custody Nominees (Australia) Limited
1
J P Morgan Nominees Australia Limited
2
National Nominees Limited
3
Citicorp Nominees Pty Limited
4
Ashens Properties Pty Ltd (Sudholz Family Discretionary Trust A/C)
5
Australian Foundation Investment Company Limited
6
BNP Paribas Noms Pty Ltd (DRP)
7
Australian Shareholder Nominees Pty Ltd
8
Wanganui Pty Ltd (Peck Von Hartel S/Fund A/C)
9
Samraj Pty Ltd (Reid Family No 2 A/C)
10
11
Djerriwarrh Investments Limited
12 Mirrabooka Investments Limited
13
14
15 Warbont Nominees Pty Ltd (Accumulation Entrepot A/C)
16
17
18
19
20
BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)
CS Fourth Nominees Pty Limited (HSBC Cust Nom AU Ltd 11 A/C)
Naze Nominees Pty Ltd
AMP Life Limited
Colman Foundation Limited (Colman Foundation A/C)
Total
Amcil Limited
The Trust Company Superannuation Limited (GPMSF2 - Future Super A/C)
Number of
fully paid
ordinary
shares
46,707,649
33,429,313
24,168,500
16,991,062
15,127,179
14,007,499
7,975,442
6,808,650
3,312,307
3,200,000
2,482,690
2,452,105
1,915,196
1,835,000
1,697,006
1,617,571
1,558,635
1,489,195
1,344,176
1,108,711
189,227,886
%
1.44
17.95
21.93
41.25
17.43
100.00
% of
issued
capital
17.71
12.68
9.17
6.44
5.74
5.31
3.02
2.58
1.26
1.21
0.94
0.93
0.73
0.70
0.64
0.61
0.59
0.56
0.51
0.42
71.75
70 Japara Healthcare Annual Report 2016
(d) Substantial shareholders
A substantial shareholder is one who has a relevant interest in 5% or more of the total issued shares in the Company. Following are
the substantial shareholders in the Company based on notifications provided to the Company under the Corporations Act 2001:
Shareholder
BT Investment Management Limited
Ashens Properties Pty Ltd (Sudholz Family Discretionary Trust A/C)
Australian Foundation Investment Company Limited
(e) Distribution of unquoted securities – performance rights
Number of fully
paid ordinary
shares
22,476,138
15,700,000
13,534,092
% of issued
capital
8.52
5.95
5.13
Performance
rights
555,893
128,812
-
-
-
684,075
No. of
holders of
performance
rights
2
3
-
-
-
5
%
81.26
18.74
-
-
-
100.00
%
60.00
40.00
-
-
-
100.00
Range
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
(f) Securities subject to voluntary escrow
There are no securities on issue subject to voluntary escrow.
(g) Voting rights
In accordance with the Company’s Constitution, each member present at a meeting, whether in person, by proxy, by power of attorney
or by a duly authorised representative in the case of a corporate member, shall have one vote on a show of hands and one vote for each
fully paid ordinary share on a poll.
Holders of unquoted performance rights do not have voting rights.
(h) On-market buy-backs
There is no current on-market-buy-back in relation to the Company’s securities.
(i) On-market share acquisitions
The Company operates an Equity Incentive Plan (Plan) for Group employees. 124,509 ordinary shares were acquired on-market during
the financial year ended 30 June 2016 by the Plan trustee for allocation under the Plan. The average purchase price of these shares was
$2.8061 each. A further 546,591 ordinary shares were also acquired off-market at an average price of $1.89 each.
70 Japara Healthcare Annual Report 2016
71 Japara Healthcare Annual Report 2016
3 Year Summary
Financial results
Operating revenue ($million)
Earnings before interest, tax, deprectiation and amortisation ($million)
Net profit (loss) after tax ($million)
Operating cash flow ($million)
Net RADs and bonds1 inflow ($million)
Earnings per share (cents)
Dividend per share (cents)
Dividend payout rate (%)
Dividend yield (%)
Franking rate (%)
Other statistics – at financial year end
Total assets ($million)
RADs and bonds1 ($million)
Shares on issue (million)
Share price ($)
Share market capitalisation ($million)
Shareholders
Staff
Average underlying occupancy 3 (%)
Operational places
Total places
Residential facilities
Average facility age (years)
Independent living units
1. Redundable accommodation deposits, accommodation bonds and ILU resident loans.
2. For the period 22 April 2014 to 30 June 2014.
3. Excludes brownfield developments which temporarily reduce occupancy while under construction.
2015/16
2014/15
2013/14
327.3
56.1
30.4
36.7
54.9
11.5
11.5
100
4.5
100
1,070.0
404.6
263.7
2.55
672.4
7,021
5,081
94.4
3,717
4,761
43
13
180
281.2
50.6
28.8
40.2
77.3
11.0
11.0
100
4.3
50
915.8
325.3
263.0
2.57
676.0
3,553
4,419
94.8
3,207
3,854
39
13
180
48.9 2
(1.3)2
(2.9)2
1.42
14.42
(0.01)2
0.0
0
0.0
n/a
807.3
220.9
263.0
2.35
618.2
2,427
4,199
95.2
2,899
3,131
35
10
139
72 Japara Healthcare Annual Report 2016
Securities Exchange listing
The Company’s shares are listed on the Australian Securities
Exchange (ASX). The Home Exchange is Melbourne.
ASX code: JHC
Share/security registers
Link Market Services Limited
Tower 4
727 Collins Street
Melbourne
Victoria 3008
Australia
Postal address
Locked Bag A14
Sydney South
New South Wales 1235
Australia
Shareholder enquiries
Telephone: +61 1300 554 474
Facsimile: +61 2 9287 0303
+61 2 9287 0309 (for proxy voting)
Email:
registrar@linkmarketservices.com.au
Investor Centre
investorcentre.linkmarketservices.com.au
Corporate Information
Registered and head office
Japara Healthcare Limited
Q1 Building, Level 4
1 Southbank Boulevard
Southbank
Victoria 3006
Australia
Postal address
PO Box 16082
Collins Street West
Victoria 8007
Australia
Telephone: +61 3 9649 2100
Facsimile: +61 3 9649 2129
Email: info@japara.com.au
Company website
japarahealthcare.com.au
Company numbers
ACN 168 631 052
ABN 54 168 631 052
Board of Directors
Linda Bardo Nicholls AO – Non-Executive Chairman
Andrew Sudholz – Managing Director and CEO
Richard England – Non-Executive Director
David Blight – Non-Executive Director
JoAnne Stephenson – Non-Executive Director
Chief Financial Officer and Company Secretary
Chris Price
Company Secretary
Bruce Paterson
Auditor
KPMG
147 Collins Street
Melbourne
Victoria 3000
Australia
72 Japara Healthcare Annual Report 2016
73 Japara Healthcare Annual Report 2016