Things That Investors Need to Know Regis Healthcare’s 1HFY19 results: Stock Plunged by 5.33% on ASX

On 22 February 2019, Regis Healthcare Limited (ASX: REG), a Residential aged care provider company from the Health Care sector, announced its 1H FY2019 results and regarding the stepping down of its CEO.

During the period, the company generated revenue of approximately $318 million. The normalized EBITDA for the period was $56.7 million, and normalized NPAT was $ $24.7 million. The company reported an earnings per share of 8.12 cents. The company declared an interim fully franked dividend of 8.12 cents per share payable on 11 April 2019. The company generated a net operating cash flow of $109.1 million from EBITDA and net RAD receipts of $72.1 million. 

During the period, the key drivers of the earnings and cash flow result were the increase in the revenue per occupied bed day from $284 in 1H FY2018 to $287 1H FY2019, improved contribution as a result of facilities ramp up. The profile of residents’ choice remained consistent in terms of RAD/DAP (Refundable Accommodation Deposits/ Daily Accommodation Payment profile). 57% of the new residents opted to pay a RAD, 6% of the new residents chose for DAP, and the remaining 37% opted the combination of RAD/DAP payment during the period. The average income through RAD reached $478.7k in 1H FY2018 which was $467.9k in FY2018.

During the period, the company delivered three new facilities. These were Lutwyche in Brisbane which was delivered in August 2018 with 130 operational places, Elermore Vale on Newcastle which was delivered in September 2018 with 120 operational places and Port Coogee which was delivered in September 2018 with 139 operational places.

Since May 2016, the company has delivered 1,247 new places which are high-quality Facilities. These Facilities have ramped up their operations and have focused on Care, Quality and Compliance, EBITDA, RAD and Occupancy. The position of occupancy as at 31 December 2018 stated that there were around 53% of total 1,247 which was occupied which generated a net RAD cashflow of $176 million. The company further expects that in the upcoming period, there will be a further net RAD cash inflow from the remaining new places.

Further, the company’s development plan includes four new Facilities along with two extension projects. On 1 August 2017, the integration activities associated with the Presbyterian Care Tasmania acquisition got completed which comprises of 287 places that progressed well, and it will continue to advance well in the upcoming period. With the completion of the refurbishment program for three facilities, the company expects that there will be a gradual increase in the EPS through these facilities in FY 2019.

FY2019 Outlook:

The normalized NPAT for FY2019 is expected to be in a range of $47 million to $51 million. In the remaining part of FY2019, the company expects its EBITDA to be in line with 1H FY2019 which will be driven by income from the Significant Refurbishment program, increased contribution through the facility ramp up. The PresCare Tasmania Facilities have gradually started generating earnings. The company expects capital expenditure of Aged Care to be around $60 million. The company further expects that those facilities which are ramping up will contribute EBITDA of about $25m per annum when other new development reaches a steady position by FY2021. In the duration between the second half of FY2019 to FY2021, a net RAD cashflow is expected to be in the range of $155 million and $205 million, following the completion of the ramp-up of the new Facilities comprising of 1,247 new places.

The company also made an announcement that Ross Johnston who is the Managing Director and CEO of Regis Healthcare will be stepping down on 3 September 2019 after 11 years in this role. He will continue to lead the experienced leadership team till September 2019. He joined the company when it was a privately-owned aged care operator and has helped the business to grow and reached a position where Regis has become one of Australia’s leading aged care providers.

In the last six months, the stock has generated a negative return of 3.98%. By the closure of the trading session on 22 February 2019, the closing price of the share was $3.200, down by 5.325% as compared to the previous trading day’s closing price. The company has a market capitalization of A$1.02 billion with approximately 300.65 million outstanding shares and a PE ratio of 18.85x.


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