Like Estia, Regis has also been stung by the need to write down the value of its aged care beds – but has continued to show resilience in its financial performance with its future strategy to take in greenfield aged care and retirement living developments and aged care and home care acquisitions.
The ASX-listed provider announced a Net Profit after Tax before Amortisation (NPATA) of $10.6 million in its Half Yearly results yesterday, up from $8.5 million for the corresponding period in FY21.
But the need to amortise its operational places (which will take place between 1 October 2021 and 1 July 2024) – a cost of $20.3 million with no impact on cash flow – saw the group declare a statutory net loss after tax of $3.7 million.
This will provide the group with a $6 million reversal of deferred tax liability (and credit to tax expense), Regis added.
COVID-19 costs including staff expenses, PPE and other related costs of $3.1 million also contributed to the loss.
Greenfield developments to resume
But overall, Regis maintained the growth it demonstrated in FY21 – where it delivered a 19.9% EBITDA – recording $364.2 million in revenue, up 3.1% on the previous period, and an adjusted EBITDA of $44.1 million, up 13%.
Its net operating cash flow was $126.7 million including net RAD receipts of $47.1 million from its mature homes, with average occupancy also rising to 89.3%, from 88.3% at the same time last year.
Its board will pay an interim dividend of 3.52 cents per ordinary share (50% franked) to shareholders in April.
The company also repaid $42.5 million of its bank borrowings, reducing its net debt by 58% to $60.8 million.
Another $30.7 million was spent on maintenance and refurbishment of homes and the purchase of a parcel of land at Belrose, NSW, with plans to recommence its greenfield developments in late FY22 at an existing site in Camberwell, Victoria.
A focus on retirement living and home care
Regis is also continuing with its growth strategy, which is based on four levers:
- Greenfield aged care and retirement living developments;
- Aged care facility and home care acquisitions;
- Expansion and reconfiguration of existing facilities; and
- Aged care portfolio acquisition opportunities as they arise.
“The intended market deregulation of operational places presents new opportunities for Regis to invest in geographic areas previously not open to the Group,” it told the market.
“The removal of operational places will most likely increase competition around quality of care, service and accommodation, which presents an advantage to providers such as Regis who have a strong balance sheet and access to capital to further develop the sector.”
Financial and regulatory reform required
Regis’ Managing Director and Chief Executive Officer Dr Linda Mellors made it clear, however, that the sector will require a firmer financial and regulatory setting to expand, with no earnings guidance put forward because of the uncertainty around reforms and COVID.
“Regis has performed well despite the continued challenges of COVID-19 and underfunding of the sector, lack of detail from the Australian Government in relation to the future funding model, and the burden of additional compliance and reporting requirements. We have continued to maintain tight and conservative management of the business as we await urgently needed financial and policy reform of the sector,” she said.
“It is very disappointing that the most pressing policy and funding responses to address the aged care sector’s known challenges have not yet been addressed, leaving the most difficult environment the sector has witnessed in a generation.”
Should the Government and Opposition reach a bipartisan agreement to improve funding – and increase consumer contributions – to the sector, then it appears both Regis and Estia will be well set up to take advantage of the new marketplace.
