February 26, 2019 / 10:57 PM / 2 months ago

Australia's Estia Health trims guidance as inquiry costs hit

* Sector-wide aged-care inquiry has hit industry stock prices

* Estia spent almost A$1 million preparing for inquiry

* Trimmed earnings outlook to reflect costs

SYDNEY, Feb 27 (Reuters) - Australian aged-care company Estia Health Ltd adjusted its full-year guidance lower on Wednesday, hit by costs for responding to a high-profile inquiry into mistreatment of the elderly in the sector.

The powerful Royal Commission, convened after a slew of reports of assaults on patients, predatory pricing and poor care, began hearing testimony two weeks ago from families of poorly treated patients.

It is expected to be similar to a probe that exposed widespread wrongdoing in Australia’s financial sector last year. Estia’s downgraded outlook is among the first financial effects to emerge from the inquiry, which has already pounded stocks in the industry.

Estia, which operates nursing homes across the country, said it had spent A$914,000 ($656,709) preparing for and responding to the inquiry over the six months to Dec. 31. That is about triple the figure its rival Regis Healthcare Ltd announced it had spent so far.

Estia also adjusted its full-year earnings-growth guidance lower. It now expects a low-to-mid-single-digit percentage increase on pretax earnings this year compared with the previous financial year. It previously forecast an increase in the mid-single digits.

Estia’s half-year profit rose 4.1 percent to A$21 million, as it opened new homes and lifted revenue by 6.6 percent.

Public pressure for an inquiry in the sector began in 2017 after media reported dementia patients were being bound in restraints, overdosed on medication and neglected at a since-closed home for the elderly in South Australia.

“We look forward to the outcomes ... which we believe will lead to a higher performing and more sustainable aged care sector that meets community expectations and provides safe and high-quality care for all consumers,” Estia’s chief executive officer, Ian Thorley, said in a statement.

Shares in Estia and the three other largest listed operators - Aveo Group, Japara Healthcare Ltd and Regis - have plunged since the probe was announced last September.

They were previously seen as an attractive exposure to Australia’s aging population.

They have each shed at least a fifth of their value, wiping almost A$1 billion from their cumulative market capitalisation. ($1 = 1.3918 Australian dollars) (Reporting by Tom Westbrook in Sydney Editing by Matthew Lewis)

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