Regis Disappointed Shareholders, Close To Swipe New Pay Policies

Regis Healthcare’s shareholders voted in favor of election and re-election of Directors but were not convinced to adopt the new pay policies.

Shareholders were too close to hit the ‘strike’ with 23.59% votes against the company’s remuneration report but just missed to touch the threshold line of 25%. This comes after the Regis Healthcare Limited (ASX:REG) concluded its 2018 Annual General Meeting today on Thursday, 25 October 2018.

Chairman Graham Hodges, who took the Regis’ chair on 1 July 2018, addressed the headwinds from cuts to Federal Government aged care funding and the changes to the aged care funding instrument that swept the Regis’ profit in FY18. The government funding cuts to residential aged care were such that Regis’ earnings before interest and tax (EBIT) declined to $117.1 million reflecting $11.9 million reduction in steady state sites.Â

But the profit downtrend was anticipated well in time as Regis’ FY18 normalised net profit after tax (NPAT) of $56.9 million was in line with company’s guidance.

However, funding cuts were not the only factor to report steep decline of 12% in group’s NPAT compared to FY17. The occupancy pressures from serious flu outbreak across the industry and mobilization cost associated with new facilities have underpinned the disappointing financial results for the year ended 30 June 2018.

To offset the dissatisfaction among shareholders the Board had declared the 100% of NPAT as FY18 dividend, which took full year dividend to 17.93 cents per share.

Further, in September the listed operators of aged care services came under the claws of newly formed Royal Commission into the sector.

On 16 September 2018, Prime Minister Scott Morrison announced the historical government decision of establishing a Royal Commission into the aged care sector to ensure the provision of quality care services. The regulator targets to investigate the malafide practices and mistreatment ongoing across residential and aged care industry.

The name of Regis Healthcare along with peers Estia Health and Japara Healthcare is under the check list of commission. Commenting on which, Chairman Mr. Hodges said Regis would give complete support to Commission in the scrutiny process.

Looking into FY19, Managing Director Ross Johnston told that NPAT is expected to range between $47 million and $51 million while EBITDA is anticipated to be broadly in line with normalised FY18.

Mr. Johnston stated that the effects of the 2016 Federal Government cuts to residential aged care funding are expected to be ‘substantially grandfathered’ into the portfolio by the end of Fiscal 2019.

As of the 18 October 2018, Regis year to date net RAD cash inflows are of $41 million.

On the release of 2018 AGM results, Regis’ stock price plunged 2.834% or $0.070 to trade at $2.40 on 26 October 2018 (1:48 PM AEST). Moreover, it is currently trading at a PE ratio of 13.780 x with market capitalization of $742.61 million. Over the past one year, the stock has seen a performance change of -34.66%.

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