MANAGEMENT DISCUSSION AND ANALYSIS 2021 KEY CHALLENGES Al-`Aqar was not spared too from the effects of the pandemic. As the main sponsor, KPJ Group being the largest private healthcare provider in Malaysia was also financially affected during this pandemic period. Declining in Private Healthcare’s Financial Performance. Due to greater relaxation of restriction and better economic condition, the demand for private healthcare services has increased, contributed by the pent up demand accumulated over time. Thus, it has resulted for KPJ Group to record a higher revenue in 2021. However, higher fixed costs and the incremental cost for Standard Operating Procedure compliance has resulted in lower performance in KPJ Group’s EBITDA performance. In view of its long-term business relationship, Al-`Aqar has temporarily provided a relief to certain badly affected assets of KPJ under Al-`Aqar. Uncertainty in Australia Aged Care Industry. The financial performance and future of the aged care operators in Australia have been impacted by the following key factors: 1. Establishment of the Royal Commission into Aged Care Quality and Safety. Based on the Manager’ assessment of the aged care royal commission’s final report, it is expected for a stronger governance and higher regulation on the quality of care, which will result in a higher OPEX for the aged care operator. Besides, there is also the shifting of institutional care to the community and home care which will affect the revenue of the business segment in Australia. 2. Over-Reliance on the Australian Government’s Financial Support. TheAustralianGovernmenthadfundedthemajorityof aged care facilities in Australia through subsidies, supplements, capital grants, and funding through aged care programs. The residents have relied on government financial support for their aged care program. The changes in government policies will affect the financial support of residents and thus impact the demand for Jeta Garden’s facilities. 3. The Uncertainties Faced by the Aged Care Industry as a Result of the Ongoing COVID-19 Pandemic AL-`AQAR HEALTHCARE REIT ANNUAL REPORT 2021 048
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