07 November 2014
The 2014 results are in!
The findings of the 2014 Bentleys National Aged Care Survey found that:
Top operators are driving sector growth
The results of the 2014 Bentleys National Aged Care Survey have found that cost efficiencies, economies of scale and improvements to technology and administrative systems are amongst the key contributing factors driving performance and growth in the aged care sector.
The top performers in this year's Survey recorded lower average operating costs - such as cleaning, administration and laundry. In general, this group consists of larger providers who operate multiple facilities - so this also means that they can achieve better economies of scale.
Investment in technology and a focus on efficiency also enhances returns.
Bentleys Associate Director Peta Bourne commented that the Survey results indicated that "more profitable operators had invested in technology to improve resident health, as well as in administrative systems to better align rostering of carers to residents' needs."
BASELINE is NOW SET TO MEASURE IMPACT OF FUTURE REFORMS
New funding models and payment arrangements kicked off from 1 July 2014, so the data from this year's survey sets the “baseline” from which the industry can measure the impacts that the new model has on provider financial performance.
There was a net profit increase recorded in this year’s survey - this reflects Government funding currently injected into the sector. Reforms will shift the balance from Government funding to consumer funding. This will see an increase in the number of provider groups consolidating.
GOVERNMENT BACKED REVENUE STREAMS ARE DRIVING CAPITAL MARKET ATTRACTIVENESS
(As seen with recent capital market activity)
As an “asset”, aged care businesses offer relatively healthy long term potential, very strong demand levels, and low risk as Government regulation (and revenue stream) is very high compared to other industries.
This is resulting in increasing interest in capital market investment by equity investors.
CONSUMER CAPITAL FUNDING IS AN UNUSUAL SOURCE OF CAPITAL AND DRAMATICALLY INCREASES RETURN ON NET EQUITY
Reforms in aged care have increased the ‘user pays’ system where consumers (ie. aged care residents) are increasingly paying for aged care.
Where this contribution is in the form of Residential Accommodation Deposits, it represents an “upfront” payment for care – and offers an uplift to providers’ balance sheets and returns on equity.