Japara Healthcare hit with $300m impairment charge

Japara Healthcare hit with $300m impairment charge

The COVID-19 pandemic and resulting financial crisis have forced residential aged care services provider Japara Healthcare (ASX: JHC) to write down the value of its assets.

Today Japara has announced its financial results for FY20 will include a non-cash impairment charge, primarily to goodwill, in the range of $270 million to $300 million.

In February the company said its net assets were worth $527 million, meaning that at the end of the financial year the company expects its assets to be worth around half of what they were at the end of 1H20.

"In determining the expected impairment charge, Japara considered a range of assumptions including discount rates, business and industry operating performance, the economic environment and regulatory conditions," Japara said.

"The expected adjustments arising from this non-cash impairment will have no impact on Japara's debt facilities or covenants, future cash flows, ability to undertake capital management initiatives or normalised earnings."

Today's announcement is just Japara's second since the COVID-19 pandemic hit the ASX in March.

The company says as at 30 April 2020 its net debt totalled $201 million with available liquidity in cash and undrawn debt of $144 million.

Japara currently has 4,060 occupied places, reflecting a reduced occupancy rate of 91.7 per cent.

No residents have tested positive for COVID-19, but one staff member was diagnosed with the coronavirus and was immediately isolated. They have has since recovered.

The company also announced today it expects to settle the sale of a property in Springvale, Victoria, for $13.3 million in mid-June.

The group's latest home, The Regent in Mount Waverly, Victoria, opened on 20 April and is currently home to 16 residents.

In March the company withdrew its FY20 guidance because of the uncertainty of the impact of COVID-19 on the aged care sector.

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