Annual General Meeting, 23rd October 2019

I would like to thank all of my Team, everyone of them who have been the driving force of our success and accomplishments over the past year. In a customer orientated Company where wealth is derived from our residents, residents must come first all of the time and I believe that at Allambie Heights Village Ltd., we have a rich record and reputation for that. We will never be complacent, we cannot be. As I say to my staff often, strive to be better.

‘Residents must come first all of the time’

Continued Strong Financial Performance

We are reporting another strong financial performance for 2018-2019 on top of last year with an EBITDA of almost $2.3 million ($2,298,613), a Net Profit of almost 2.1 million ($2,098,669) and an increase in Equity of 15% to almost $16 million ($15,911,389).

In spite of global volatility in equity markets over a matter of months, our investment portfolios performed well with Evans and Partners reporting an 8.5% return and Morgan Stanley, a 9.5% return.

We came in within $50,000 of our forecasted multi-million dollar budget which represents another excellent year of planning, revenue optimisation and cost controls. In this regard, I thank Eddie Youil, Company Accountant for his pre-financial year budget planning with me and in particular, my operational managers for their performance.

We achieved revenue uplifts in ACFI Medicare of almost 20% (19.6%), Company operational revenues increased by almost 13% (12.8%) and cashflows from operating activities increased by 11%. These are significant financial results for successfully trading businesses.

To summarise further, we achieved strong numbers as follows:

• A Company EBITDA Return on Equity of 14.4%;
• A Residential Aged Care Facility EBITDA Return on Equity of 6%;
• A Retirement Villages EBITDA Return on Equity of 8.5%;
• Government ACFI Revenue represented only 47% of our residential aged care facility total revenue (47.4%);
• Total Assets were up almost 3% (2.9%, $43,382,685);
• Total Liabilities were down 3% ($27,471,296).

We plan to achieve greater operational uplifts during FY 2019-2020 as we claim for higher levels of resident dependency in our residential aged care facility.

As we did last year, we again project a decline in investment portfolio revenue and capital growth. We do not foresee high single figure returns but expect more realistic returns of 6-7% to reflect global market and world political challenges.

I report again as I did last year, our cash reserves, our strong and consistent financial performance, our assets, plant and equipment valuation and our management fundamentals have made us attractive to the banks who are supportive of our capital development plans. We are well placed as a Company in our ability to discuss best terms and conditions for debt to fund some of our plans and its repayment while continuing to protect residents’ funds.

We had strong occupancy levels overall and we are confident that this will continue as we preserve our reputation as a provider of quality care and quality accommodation.

I thank the Board Directors, my finance team and my entire staff team for your individual contribution to our financial performance this year.

‘A Company EBITDA Return on Equity of 14.4%’

Building Plans

Our development plans for building an additional retirement village progressed throughout the financial year hindered by the frustrating bureaucracies and excessive time delays of Council and Rural Fire Services’ (RFS) public servants.

There will be very few people who are satisfied with such poor service to us, the public. The time has come for the public service to be held to account, for us to shout loudly, ‘not good enough’, to demand that they declare a timeline for their work completion that they must adhere to under threat of penalty, as they demand that we as development applicants must.

It took 10 weeks to achieve landowners’ consent from Crown Lands to proceed with the development application which was lodged with the Northern Beaches Council the next working day on 11 October 2018. Development Consent is still awaited on Council and the RFS in spite of the Local Planning Panel on 12 June 2019 describing the building development as having ‘significant merit’. We are confident of achieving consent in early 2020.

‘Not good enough’

Government and Bureaucratic Red Tape, Stop It Please!

For a number of years, I have spoken consistently about the increasing levels of ‘red tape’ that add absolutely nothing to anyone apart from the generator which almost commonly is a Council, State or Federal bureaucratic team of departmental staff who grow richer on the backs of Australia’s home care, residential aged care facility and retirement village industries.

I have watched over the past 13 years, an exponential parasitic-like rise of auditors, assessors, inspectors, risk analysts, people who judge and observe and test and measure and criticise but don’t actually do, their supposed added value often marketed and lauded by themselves but achieving little measurable worth at all. It’s getting too much for the average operator, service provider, manager or staff member.

Stop it please! You are saturating the energy out of our great caring industries and of our great caring staff who just want to work with older persons and do it well. Better that you roll up your sleeves and join us!

‘An exponential paracitic-like rise of auditors’

Government getting it wrong again

If it was a tabloid journalist reporting it, you wouldn’t believe it necessarily. But is Australia and Australian Operators of our residential aged care facilities going to continue to take the total propaganda that is coming from Government about how much they fund our older Australians, that the funding is adequate and fair. And are we as Operators going to keep taking criticism for making a profit?

The climate is not good at the moment in the residential aged care facility Industry and

I warn that it may not settle country-wide for a further 2 years. We are losing small and large Operators, Chief Executives, Facility Managers, Registered Nurses and staff to other sectors. The Industry is finding the recruitment of the best harder to achieve. In this regard, I am thankful to be part of a group of staff at Allambie Heights Village Ltd. where almost 20% of our staff have 10 years’ service and more.

The Royal Commission into Aged Care Quality and Safety will provide an interim report of its findings in October 2019. It requested and received from Government an extension of 6 months and will provide a final report in November 2020. Some of its criticisms in early 2019 of the Australian Government’s Aged Care Quality Agency operations’, re-branded this year as the Australian Government’s Aged Care Quality and Safety Commission, will most probably lead to harder, more bureaucratic demands and outcomes within the 8 new Aged Care Quality Standards and 42 Requirements.

Similarly so, when the re-licencing of residential aged care facilities is needed every 3 years. It is taking time for everyone to familiarise themselves with the New Standards which came into operation on 1 July 2019 and according to the Commission’s assessors, they are still learning too.

Do we really need or want this environment and will the Industry be able to sustain challenges from Government, from the multitude of audits of every type, from residents’ and their relatives’ demands and higher expectations, from inaccurate and irresponsible media coverage, from competing employers, from decreasing funding from the Government?

I congratulate my team on achieving accreditation in September 2019 under the New Standards, and a licence to operate our residential aged care facility for a further 3 years. Very well done!

‘The clock is running and it is way past midnight. Past apathy is not a current or future option’

My colleagues across the Industry are acutely aware that the number of residential aged care facilities across Australia making a financial loss increased towards the end of FY 2018-2019 from 42% to 44%, that’s real. You can’t pay higher wages and achieve the high standards of presentation of buildings and all that goes along with it that we as an Industry want, if you don’t make a profit. And that is why our continued strong financial performance at Allambie Heights Village Ltd. accentuates that we are doing well because we are a good business doing right in all that we do.

The Government has been at pains to tell Australia that it provides approximately

65-70% of funding to residential aged care facilities by way of ACFI. Well for the record, Allambie Heights Village Residential Aged Care Facility received Government funded ACFI amounting to 59% of its budget for FY 2016; 54% in FY 2017; 55% in FY 2018 and for our FY 2019, 47%. Do you see a trend? That means that as an Operator, we must find revenues from elsewhere to achieve the rest of the budget. Is it any wonder that Operators are making financial losses and going out of business. Remember, as Operators, we provide the services that Government don’t want to build or provide, we take all the risks.

The greatest threat facing our Aged Care Industry and one of the greatest threats facing Australia is the uncertainty of funding our needs as we grow older and live longer.

The question, ‘How will I fund my own final years?’, has to be a focus of every person over 50 years or even younger. This might seem surprising to some. However, remember that we had a similar discussion a couple of decades ago regarding superannuation and retirement and yet, this has become a normal aspect of our future personal financial planning process.

But we must consider what might happen during that cycle of retirement. We are largely looking after and taking personal responsibility for how well we retire from work and how we wish to live well. But think of this, the system was never engineered to cater for people living the years that we are mostly living.

The number of working taxpayers is diminishing and will continue to do so unless changes to employment and immigration requirements change or unless people become more responsible for their own lives and futures.

‘The tank is limited and the tap has to slow or be turned off’.

With expected diminishing working taxpayers and an increasing number of dependents, children, people with disabilities, older persons, it is unfair and unreasonable to expect that fewer taxpayers will continue to subscribe to the tank.

So, it is my view that someone else needs to contribute. You may think that that leaves the Government. But the Government uses the funds that it is given or more accurately takes from working taxpayers.

And if a Government has not planned and saved and invested well over decades to fill the tank, which successive Governments have failed to do, then it can only respond in the short term.

This doesn’t look good. Would you invest in a Government that only lasts 4 years with leaders who are ousted and changed at a whim and at an increasing rate in recent years? They have demonstrated over the past Century an unenviable consistency in failing to plan for our future and for our older age.

‘One of the greatest threats facing Australia is the uncertainty of funding our needs as we grow older and live longer’

So, where does this leave us all as Australians?

Well, with poor Government planning and a diminishing number of working taxpayers contributing fewer dollars to the tank, there are 2 options. You and we will need to work longer and contribute to the communal tank and/or each of us has to plan for self-funding our care needs and our future accommodation needs in those final years.

It means taking personal responsibility, it means that in addition to planning for retirement, we need to plan for the final 3-5 years when greatest care and accommodation quality may be important, wished or be needed by you.

It means having discussions with younger people in their teens and early 20s about how they need to save for their education, mortgage, living and holiday costs, for their retirement years and yes, for their older and final years. It’s a continuum of planning.

To retirees and your children, the message is clear and it may be hard to hear. Don’t spend your retirement finances and your Super too quickly. You are going to need those funds in ways that you may have not thought of until now. You may have thought that the Government, the working taxpayer will provide. They won’t!

Look at the past 5 years of appalling cuts by Governments to the funding of our existing Aged Care Industry.

The existing rate of our Country’s RACFs, 44% of them operating at a financial loss cannot continue. Imagine half our banks operating at a loss or half our supermarkets and larger retailers. Our RACF Operators will not continue to make losses. They will close, services and quality will diminish, choices of quality Operators will reduce.

So, the message for me is clear. In the short term, the Government must inject and as a customer itself of services provided by Operators who take all financial risks in capital, labour and reputation, it must pay more. And as customers, older persons must pay more.

What price do you place on older Australians? If we want a world-class care system, we need to invest world-class funding. Around 1% of Australia’s GDP is currently spent on aged care. This compares with the OECD average of 1.5%.

What price do you, do we as people growing older, all of us want to pay for outstanding standards, top accommodation and the best of staff to care for you?

You decide. Decide well. It’s your life, it’s your future!

I thank our residents, relatives, corporate partners, contractors, volunteers, Members and Directors for all that you offer to our great Company.

To my staff team, I started thanking you and I conclude by thanking you. Be steadfast, be proud, be honest and accountable and hard working. Always protect our residents, their dignity and respect. And know that you are valued and respected by so many people.

‘Our business is protection’

Ciarán Foley
Chief Executive Officer