This article is from the Australian Property Journal archive
AGED care funding cutbacks, negative public sentiment due to the royal commission and lower occupancy rates have dented Regis Healthcare’s (ASX: REG) profits.
Regis reported a full year net profit of $47.2 million, a decrease of 17% from $56.9 million in the prior year. EBITDA declined 5% to $111.4 million, but revenue increased 9% to $647.1 million.
The result has been normalised for the Aged Care Royal Commission costs incurred during the period and a non cash fair value gain on two non operating retirement living sites.
Managing director Ross Johnston said EBITDA contributions from growth were more than offset by headwinds from a number of factors, including the gap between the annual indexation (COPE) of 1.2% in FY19 compared with wages growth resulting from Enterprise Agreement (EA) increases in the aged care business of circa 3%.
“The headwinds also included the continued impact of federal government cutbacks to residential aged care funding, which were implemented in FY17 and FY18 and have been grandfathering in. This was despite the $10.8m received in the second half of the period as a result of the federal government additional funding boost,”
Johnston said the sector is also experiencing occupancy headwinds due to negative public sentiment towards aged care due to the royal commission and an increase in the number of new home care places.
As at 30 June 2019, 850 or 68%, of the 1,247 places were occupied and $240 million of net RAD cashflow had been collected. It is anticipated that a further $90m-$140m of net RAD cashflow will come from the remaining new places.
Looking ahead to FY20, the company anticipates normalised EBITDA to be circa $105 million, which is below FY19.
“It is expected that FY20 will incur some non recurrent expenses including those relating to the implementation of regulatory changes (which include the adoption of the Single Aged Care Quality Framework, the introduction of the Quality Indicators reporting requirements and the implementation of the Charter of Aged Care Rights) coming into effect from 1 July 2019. The total of these expenses is estimated to be circa $3m.
“Normalised NPAT for FY20 is expected to be circa $38m, principally as a result of higher depreciation expense due to the continued ramp up of the facilities delivered from the development program,” he concluded.
