2021 AGM - Chairman and CEO Addresses

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only11 November 2021

2021 Annual General Meeting - Chairman & CEO Addresses

useEstia Health Limited (Estia Health) (ASX:EHE) provides the attached Chairman's Address and CEO's Address to be delivered at today's Annual General Meeting commencing at 1.00pm AEDT.

The webcast of the AGM can be joined at: www.agmlive.link/EHE21.

Approved for release by the Chairman and Chief Executive Officer of Estia Health Limited.

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Estia Health Limited

Annual General Meeting

11 November 2021

Chairman's Address - Dr Gary Weiss AM

Last year I said that 2020 had been an extraordinarily challenging year.

At that time Australia was emerging from the second wave of the COVID-19 pandemic and we remember the significant impact that had on the community and particularly the residential aged care sector in Victoria.

Although our operations in other States had been affected, the second wave in Victoria in from July 2020 onwards was particularly serious for the entire residential aged care sector, with over 150 homes experiencing outbreaks across the State. 11 Estia homes in Victoria experienced outbreaks impacting residents and staff. Sadly, 36 of our residents died after testing positive for COVID-19. Our thoughts then and now are with the families and friends of all who have been impacted.

That period saw the Estia family come together as residents, their friends and families and our staff were called upon to do quite extraordinary things in circumstances not previously envisaged or experienced.

COVID-19 has been just one of the significant issues the Board and management of Estia have been navigating in an unforgiving business environment over recent times. Margin compression has persisted for several years resulting from Government funding levels not keeping pace with increased input costs. This has impacted operating metrics and investment returns in the sector. The Royal Commission into the aged care sector - which cast a pall over the sector generally - lasted more than two years and delivered its final report in February 2021 with 148 recommendations for change.

While much still needs to be done it does appear that we may have weathered the worst of these challenges.

Although we will be required to deal with COVID-19 related issues well into the future, it does appear that the most difficult phase of the pandemic may be behind us, due to different policy settings as well as the positive impact of Australia's high vaccination rates. This does not mean that we can afford to be complacent as we seek to find new ways of managing our homes in what will become a "COVID normal" operating environment. Ian will talk more about what this may mean for our business.

Importantly, the Government's initial responses to the Royal Commission into Aged Care Quality and Safety are encouraging. Although there remains detail to be worked through in

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several key areas, it is apparent that the Commonwealth is already implementing a broad reform agenda within a tight timeframe.

For a number of years, Estia has advocated for many of the signature reforms recommended by the Royal Commission. We believe that when implemented, the reforms will result in a higher quality aged care sector, better able to meet the expectations of residents and the community. However, in order to deliver a sustainable sector, the key uncertainties surrounding funding and financing need to be resolved in order to support the investment required to meet the considerable demands that will be placed on the sector in coming years as the population of older people in Australia increases.

Reform

In May 2021, the Australian Government published its initial response to the Royal Commission's report, accepting 126 of the 148 recommendations made in the report, with the 2021 Federal Budget including $17.7 billion of additional funding for the sector over four years.

The most significant impact of the Government response to date is the move to more competitive markets with the abolition of the Aged Care Approvals Round licencing system, or ACAR, and with that, the current restrictions on the number and location of residential aged care places.

The removal of the bed licencing regime will create a more competitive environment where providers will have the opportunity to invest in previously protected markets and to attract residents by providing high quality care in locations preferred by consumers.

Overall we would expect the new arrangements to see a reduction in the number of poor- quality homes and services in the sector, and an increase in the supply of new, higher quality homes and services delivering real choice to consumers. Competing in such an environment and being able to meet higher levels of governance, financial reporting and prudential standards will be challenging for a number of providers in the sector.

Senior Australians will benefit from increased competition in the sector which we believe will positively impact the quality of accommodation and service offerings. Residential aged care providers will have the ability to adjust and expand services to better meet demand. This reform could prove to be a major catalyst for sector consolidation and the creation of a stronger, more competitive residential aged care sector driven by consumer choice.

Well-resourced residential aged care providers like Estia Health, with robust governance systems, committed management, skilled employees and strong balance sheets are well placed to play a leading role in the significant restructuring of the sector likely to eventuate.

We are developing plans to improve or expand some of our existing homes and to establish new homes. We have renewed our committed $330 million banking facilities which enable us to fund this expansion. However, we remain in cautionary mode with the

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deployment of capital for these projects pending finalisation of ACAR transition arrangements and clarity over future funding and financing levels.

While the sector is transitioning to this new model, the ultimate outcome will be that real choice in residential aged care will be increasingly available for older Australians.

Changes ahead also include enhanced regulatory, governance and prudential requirements, but we do not expect these will require significant adjustment to our current reporting regimes given the governance and reporting standards required of an ASX listed company.

Performance for 12 months to 30 June 2021

Estia Health returned to profit and reinstated shareholder dividends in the period. I believe we have done well to preserve operating performance and balance sheet strength given the significant issues facing our business that I have described.

Net profit was $6 million on 4.4 per cent higher revenue and after settling the class action for $12 million. The class action dated back to 2016 and was settled without admission of liability.

Your Directors declared a fully franked final and total dividend for the year of 2.3 cents a share, representing a payout of 100% of NPAT for the period.

Your company is in a strong financial position with net bank debt of $81 million on 30 June 2021 and available liquidity at that date of $244 million.

As Ian will detail, Estia Health's financial and operating performance reflects the fundamental strength of your Company as a resilient, well-governed and well-capitalised residential aged care provider.

Our strategic priorities are to continually improve the quality of care for our residents, while actively managing our portfolio of homes, including seeking opportunities to redevelop and improve existing homes. The ACAR reforms also support our ability to renew, expand or retire older, less contemporary homes and build new homes to meet the future needs and increasing community expectations for residential aged care.

During the 2021 financial year we invested $49 million of capital in our portfolio.

We opened our new home in Blakehurst, Sydney in February. The home achieved strong occupancy growth reaching 71% at 20 August 2021, which it has increased to 77% as of yesterday despite the Greater Sydney lockdown and access restrictions. Blakehurst also includes our first Wellness Centre which provides reablement services to residents as well as the broader community.

We have also announced the closure of two older Victorian homes, Keilor Downs and more recently Prahran, and will continue to actively manage the portfolio and retire homes where we believe that redevelopment options will not provide appropriate returns.

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We will be commencing construction of two new homes at Aberglasslyn and St Ives both in New South Wales this financial year. Capital investment on these two new homes is expected to be $83 million.

Sustainability

Our corporate strategy is reflected in five strategic pillars: Care, Customer, People, Community and Growth, underpinned by our 2020-24 Sustainability Strategy that is value- creating and intrinsic to the achievement of the five pillars and the success of our business.

We recognise that the long-term viability and profitability of our organisation depends on the wellbeing of our people, supporting and integrating within our local communities and the continued health of the natural environments we rely upon.

We understand and are committed to fulfilling our responsibility to create social and economic value for our residents, their families, our employees and the communities in which we operate. The targets we have set ourselves for 2024 will create a lasting positive impact for all stakeholders in our business and in our communities and help us achieve our vision of making trusted residential aged care accessible to all.

Testament to our commitment to sustainability, we completed the refinancing of our existing loan facility with a new Sustainability Linked Syndicated Financing Agreement in October 2021. Independently assessed against the Sustainability Linked Loan Principles, this facility has ambitious and meaningful targets aligned with the core areas of Estia's existing Sustainability Strategy.

The loan targets are focused on improved resident engagement and satisfaction, employee wellbeing, reducing greenhouse gas emissions and reducing the impacts of our assets through the application of NABERS Residential Aged Care standards.

Our Residents

The care and wellbeing of our residents is central to all what we do.

The changing regulatory environment has required investment in additional resources and systems. This has included strengthening our administration of the Serious Incident Response Scheme. Our Clinical Governance Committee provides insights and advice on the important matters that strengthen our clinical performance and we greatly value the guidance provided by the Committee's independent Chair, Professor Simon Wilcock.

We are currently implementing electronic medication management and prescribing systems into our homes to further support the quality use of medicines and provide greater surveillance over the use of psychotropic drugs, anti-microbial stewardship and surveillance over prescribing practices.