Aged care provider Regis Healthcare (REG) has sparked a few surprised reactions over its decision to acquire the Masonic Care assets in Queensland. The net price is $163m, excluding a residential accommodation deposit (RAD) liability of $50m.
Aged care provider Regis Healthcare (REG) is gearing up to open a net 1,028 new places, expected to deliver a boost to earnings growth. The company updated the market on its development pipeline along with the first half results. The bulk of developments will be delivered from FY17 which resulted in modest guidance for FY16.
Regis Healthcare (REG) posted a solid maiden first half result as a listed company, well ahead of brokers’ forecasts. Revenues from the government were higher, reflecting a lift in payments for resident care.
Regis Healthcare (REG) is a company that prides itself on providing high quality aged care. The company recently listed on ASX and has invested heavily in standardised systems to improve compliance and create scalability for its operations. Brokers believe the company stands out in a sector where there is a large variation in efficiency, hence profitability. What stands out for Macquarie, too, is the fact the company has added more places through developing its own, rather than via acquisition, over the past five to six years, in contrast to many of its peers.
The company has reduced FY19 guidance, indicating net profit will now be at the lower end of $47-51m. New FY20 guidance, $105m in operating earnings (EBITDA) and $38m in net profit, is below UBS estimates.
The Department of Health has clarified the guidelines regarding capital refurbishment fees and asset replacement contributions, indicating these would not be supported by legislation where the fee does not provide a direct benefit to the resident.
The Dept of Health is now projecting aged care funding outlays to be 2.1% above forecast in FY16. History suggests that when outlays exceed forecasts, the government introduces measures to recoup some of that amount, Macquarie notes. Last year’s MYEFO included announced savings to come from as yet unknown changes to aged care funding.