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Edited Transcript of REG.AX earnings conference call or presentation 26-Feb-20 12:01am GMT

Half Year 2020 Regis Healthcare Ltd Earnings Call

Mar 26, 2020 (Thomson StreetEvents) -- Edited Transcript of Regis Healthcare Ltd earnings conference call or presentation Wednesday, February 26, 2020 at 12:01:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew Grayson;Acting Chief Financial Officer

* Linda Jane Mellors

Regis Healthcare Limited - CEO, MD & Director

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Conference Call Participants

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* Matthew Johnston

Macquarie Research - Analyst

* Peiting Liang

JP Morgan Chase & Co, Research Division - Analyst

* Ronan Barratt

Moelis Australia Securities Pty Ltd, Research Division - Analyst

* Thomas Godfrey

UBS Investment Bank, Research Division - Analyst

* Vanessa Thomson

Jefferies LLC, Research Division - Equity Analyst

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Presentation

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Operator [1]

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Thank you for standing by, and welcome to the Regis Healthcare Limited half-year results for the period ended December 31, 2019. (Operator Instructions)

I would now like to hand the conference over to Dr. Linda Mellors, Managing Director and CEO. Please go ahead.

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [2]

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Thank you, and good morning, everybody, and welcome to the Regis results presentation for the period ended 31 December, 2019. As the operator said, my name is Linda Mellors, and I'm pleased to be making my first presentation as Managing Director and Chief Executive Officer since taking on the role in September 2019. Joining me today, I have Andrew Grayson, our acting Chief Financial Officer; and Kirsty Nottle, our Executive General Manager of Investor Relations.

Our presentation today is in 3 parts, being business and financial highlights for the period, followed by an overview of our strategy, and finally, our outlook. I'll hand over to Andrew Grayson shortly to discuss the financial results. Before I do, I can reaffirm today our full year FY '20 guidance of underlying EBITDA, noting that's pre-AASB 16, of circa $92 million and underlying NPAT of circa $28 million. I'd just note that Andrew will explain the changes resulting from AASB 16 shortly.

I do want to note that this is a particularly difficult time for the aged care industry, with residential aged care providers operating in an uncertain government policy and funding environment. This has been compounded by cases of poor care and experience highlighted by the Aged Care Royal Commission and associated reporting.

Later in our presentation, I will share with you my first impressions of Regis and the business as the new CEO. I will also speak about the current industry climate and my key focus areas across financial performance, underlying business systems and processes, improving occupancy and, most importantly, ensuring we continue to provide excellent care and services to our consumers.

While the first half has been disappointing, there are good signs of recovery and I will speak to this later in the presentation.

I will hand over to Andrew Grayson at this point to discuss the financial results.

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Andrew Grayson;Acting Chief Financial Officer, [3]

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Thanks, Linda. Before I start with the financial and business results, I'd like to mention for clarity that in addition to our normal approach of presenting some financial information on an underlying basis, following our transition to the new lease standard, we refer to pre-AASB 16 results in this presentation and also in our release information. This is to ensure that all stakeholders have a clear and accurate like-for-like comparison with prior period results.

Broadly speaking, the impact of AASB 16 in the first half of the financial year 2020 is that revenue of $29.3 million is recognized on RAD and bonds' liabilities, with the corresponding increase in interest expense. Accordingly, post-AASB 16, EBITDA is $29.3 million higher. However, there is no net impact to net profit after tax. There is also a $600,000 increase to EBITDA post the transition to AASB 16 with respect to leases previously classified as operating leases. Once again, our half year results include these impacts.

Now turning to the first half of financial summary. Financial performance continue to be negatively impacted by lower occupancy and the ongoing effect of the rate of indexation of government funding not keeping up with inflation in care costs. Revenue of $332.2 million is 4.4% higher than in the first half of the 2019 financial year, with homes ramping up contributing to $19.3 million to this increase, while revenue from steady state homes was $4.7 million unfavorable to the prior period.

The overall increase in revenue was more than offset by a 9.4% increase in costs. This was principally driven by labor costs. Taxation applied to government revenue was 1.4%, whereas cost inflation of approximately 3% was mainly attributable to wage increases in accordance with our enterprise agreements. The increase also reflects higher labor in the homes ramping up, which is at a high percentage of revenue.

Staff costs as a proportion of revenue have increased by 3.3 percentage points. Staff costs now exceed government funding. Underlying EBITDA of $44.4 million is 21.7% lower than in the first half of the 2019 financial year. The company has invested $30.6 million in capital expenditure during the half on developments, including land, as well as refurbishment and replacement items.

Net RAD and Retirement Village entry contribution cash inflow was $46.1 million, which was predominantly driven by RAD cash inflows from homes in the ramp-up phase of $46.5 million. Net RAD cash inflow in steady homes of $1 million was offset by a net $1.4 million cash outflow in Retirement Village entry contributions.

Net operating cash flow was $74 million and excludes government funding for January 2020, which was received in advance in December 2019 of $37 million. Basic earnings per share was $0.0402 per share and is equal to the dividend declared, which is 50% franked.

Reported net profit after tax was $12.1 million, and that was 50.5% lower than in the first half of 2019. And we have outlined the key reasons for this decline in the chart on the following slide. Reported EBITDA contribution from steady homes was $17.6 million lower than the first half of 2019 financial year. Importantly, improved earnings from greenfield developments in the ramp-up phase supported business performance over the period and more than offset the increase in care, staff and depreciation expenses related to these greenfield homes. Overall, they made a favorable contribution.

Care requirements in residential aged care continues to increase without corresponding funding increases. By way of comparison, daily funding for different care types are less than $300 per resident for residential aged care, approximately $1,000 for sub-acute patients and around $2,000 for acute patients. The chart also shows that the revaluation gain on the investment property recognized in EBITDA in the first half of the financial year 2019 of $1.7 million was $1.6 million higher than the corresponding increase recognized in the first half of financial year 2020. Effective tax rate during the current period was 30%.

As is appropriate in the current environment, the company is taking a conservative and disciplined approach to managing debt. We have continued out with our strategy of using RAD cash flow from ramping up homes to repay debt. $46.1 million of net RAD cash inflow during the first half of financial year 2020 enabled repayments of $32 million of debt after investments of $30.6 million in capital expenditure. Total reduction in bank debt over the last 18 months is $141 million.

Total debt is comfortably within our current bank facility limit of $540 million, which includes the $15 million -- $25 million overdraft and covenants. Bank covenants includes that. The ratio of net debt-to-EBITDA cannot exceed 3.75x and the ratio of EBITDA to interest must be greater than 3x. Further, $50 million to $70 million of net RAD cash inflow is still expected in the period to 30 June, 2021, from homes in the ramp-up phase, which will be available to repay debt.

I'll now hand back to Linda.

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [4]

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Thanks, Andrew.

I'd like to spend some time now covering the operational statistic. There was minor movement in operational places during the period, mostly resulting from conversion of some multi-bed rooms to suites, which attracted higher room prices to offset the loss of a place. Effective from this half, we have updated the way we report on occupancy. Previously, with respect to the greenfield developments in the ramp-up phase, total available beds was assumed to equal occupied beds, with the ramp-ups now approaching steady state, the occupancy calculation now reflects occupied beds as a percentage of actual total available beds.

In addition, we have started, in this half, presenting occupancy broken down for you between our steady-state homes and those in the ramp-up phase. These changes serve to provide investors with greater insight into the performance across our portfolio. Disappointingly, average occupancy in our steady-state portfolio in the first half of financial year 2020 was 90.4% compared to 91.9% in the first half of financial year 2019. While we are focused on improving the occupancy in the steady-state homes, this result reflects the occupancy challenges impacting the sector, including those related to negative sentiment resulting from cases reviewed by the Royal Commission and associated reporting, as well as an overall increase in both residential aged care places and home care packages.

Occupancy across our steady-state portfolio declined from March to a low point in November. Occupancy has improved from December and into this half. Spot occupancy yesterday was 90.7% for the steady-state portfolio. Average occupancy in the ramp-up home portfolio has continued to improve and was 75.1% in the first half of financial year 2020. Ramp-up homes in Western Australia experienced softer demand than in other states, however, this is now improving.

Spot occupancy yesterday was 83.2% for the ramp-up home portfolio. Government revenue per occupied bed day in the first half of financial year 2020 was $197, which was $1 lower than the first half of financial year 2019. Government revenue per occupied bed day in the second half of financial year 2019 was $203, and includes the one-off government funding boost of $10 million received last year. Resident revenue per occupied bed day was $85, which was $4 higher than the first half of financial year 2019. This is due to both indexation and take-up of additional services packages in the homes ramping up.

The number of RADs held increased during the period with 44.3% of residents having paid either a full or part lump sum payment. This reflects a higher proportion of RAD payers in the homes ramping up. The average RAD held per RAD paying resident increased to $414,000 for the half, which is up from $393,000 in the first half of financial year 2019. There was a modest increase in the average incoming RAD to $482,000. The average incoming debt rate has fallen to $43.2 per day, which reflects a reduction in the maximum permissible interest rate used to calculate debt.

The profile of our residents has not changed materially during the period. Further information about our resident profile is included in the appendices to support your modeling.

I'll move now to strategy and take you through some of the key elements of the company's strategy. I will include also some of my early impressions of the company as the new Managing Director and CEO.

I'd like to start with what's working well. The Regis philosophy is that by consistently providing excellent care in high-standard homes, we deliver great outcomes for residents and their families, have more engaged and capable staff, and therefore, create an environment where the business is able to innovate, invest and grow. This has been the Regis model which is proven to work over nearly 3 decades now. This year, more than 9,000 Regis employees will provide care and services to more than 8,000 older Australians.

Through our significant property and development capability, the company has grown through greenfield and brownfield developments, as well as acquisitions to reach the portfolio we have today. That's 63 residential aged care homes, 6 Retirement Villages, 5-day therapy centers and 6 home care business bases. This growth has been successfully funded in large part by the strategy of using RADs from homes ramping up to retire debt.

Regis' scale of operations means we are able to provide a range of on-site and off-site care and support services that contribute to quality and safety of care and services for our residents and clients. Some examples include -- every Regis aged care home has nurses and care workers on-site, 24/7. This includes an in-charge registered or senior enrolled nurse on every shift.

Regis also provides 24/7 senior registered nurse support to all of our homes across the country through an in-house nurse on-call service. We have dementia liaison specialists in our Club Services sites, and these staff provide extended support to our residents living with dementia and also their families. We have a clinical support team, which is a national support service, providing clinical support and coaching across all of our residential aged care homes.

I'd also like to speak about our national menu and food offering as an example of one of our national programs. Each of our homes serves nutritious meals that have been designed and planned with dietitians according to the needs and preferences of older people. Fresh produce, meat and dairy are delivered to our homes, and meals are prepared and cooked on-site by our chefs and cooks. Meal options are provided and special needs are catered for. A national catering team oversees this menu planning process, which means that quality and cost benefits are achieved as a result of our scale.

A significant event during the period was the introduction of the new Single Aged Care Quality Framework, which took effect from the 1st of July 2019. Regis welcomed this framework, which is designed to more actively involve consumers in decisions about their care, with a key focus on dignity and choice. This framework should improve the consistency of care standards across the sector.

The success of Regis' implementation of the framework has been demonstrated through the successful reaccreditation of all 7 homes that have so far been the subject of reaccreditation audits under the new standards. The Board Clinical Governance and Care Committee has oversight of Regis' care and services, and monitors performance and trends against key metrics. The company will remain focused on continuous improvement, and we'll continue to look for learnings and opportunities to stay at the forefront of care and services for our consumers.

As I said earlier, it's been a difficult and disappointing first half for the company. The Board and management team have identified the following areas of particular focus for the second half of this year. Firstly, to optimize business performance. This starts with maintaining excellent resident care standards. New initiatives for the second half include the appointment of an executive general manager, clinical and care practice and a national manager of infection control. These new roles would supplement and enhance the clinical and care systems in place. The Board has approved a new clinical governance framework to bring together our work in quality, safety, compliance, open disclosure, feedback into improvement, and implementation will commence in the second half.

Occupancy is clearly a critical area, and we have a series of programs underway to improve occupancy. Strategies have been developed portfolio-wide and also for individual homes, taking into account location, demand and relationships with clinical care providers in the hospital primary care and community sectors.

Additional resources have been applied to the ramp-up sites in Western Australia to maximize the opportunities in that stage. Local activities are supported with national resources to implement initiatives such as an impending new tool to measure consumer satisfaction and monitor improvement activities.

Along with the initiative to improve revenue within the levers available to us, we continue to be disciplined around cost and efficiency. As the new CEO with an extensive background in the health care sector, I'm reviewing opportunities for process redesign and cost efficiency that do not, in any way, compromise care or service standards. We continue to review acquisition and development opportunities, the current market pressures driven by inadequate funding, lower occupancy, increasing compliance requirements and negative sentiment have resulted in more acquisition opportunities across the country. Regis continues to review each of these opportunities against our existing criteria, which are primarily quality of location, land and buildings.

Over the second half, we will be investigating further diversification opportunities, mainly in related service lines like co-located Retirement Village, aged care and community therapy centers and expansion of our home care business to include other services for older Australians.

Regis has been closely monitoring the Aged Care Royal Commission hearings and discussions. I note that we have not been called to appear to date, but have supported the Royal Commission's work through facilitating visits to some of their homes and supporting the National Aging Research Institute survey of residents, which was commissioned by the Royal Commission.

We have provided extensive written submissions regarding the aged care workforce and also in response to the Commission's consultation paper, program design in aged care. Along with our own submission to the Royal Commission, we are reviewing the submissions of others and contributing to conversations about the potential reforms that may arise.

This is a time to keep a conservative approach to management of our balance sheet and debt. We will continue with our strategy to pay down debt using RAD inflows. The contributions from the new developments are an important part of this process. We will also keep debt capacity in the event conditions improve and market opportunities are attractive. Support for our workforce is particularly important in the present environment, where aged care workers have faced unprecedented criticism following extensive coverage of the poor or criminal activity of a few that are subsequently being generalized to the conduct of the aged care workforce. Aged care workers have been described as untrained, unskilled and uncaring. Whilst most aged care workers do not hold a professional qualification, they are most certainly skilled, trained and caring, with few exceptions. I want to use the opportunity today to emphasize my support of and confidence in Regis' workforce.

My experience and feedback from our consumers tells me that these are people with great kindness, compassion, patience and skill, and I thank them for the important work they do in caring for older Australians.

Regis has a long-standing commitment to investing in our employees, their skills and abilities and recognizing their achievements in leadership and innovation. We provide extensive opportunities for career progression in aged care at Regis. Regis has a range of selection, training and professional development programs for care, clinical support and management staff. These programs ensure we recruit people who are well-suited for working with older people, who can be vulnerable; that we provide ongoing and contemporary training and development to our workforce; that our nursing staff have the right support and structures in place to allow them to focus on their clinical work; and that all of our staff have access to career opportunities throughout our large company.

It goes without saying that a relationship business is never perfect, but we will continue to seek and act on feedback from our consumers and their advocates.

I'll move now to our development program. In terms of our forward program, I note that there remains opportunity in the ramp-up sites, which at the end of the first half 2020, was 75% occupied and as of yesterday, was 83.2% occupied. I'd like to note that the company invested $411.3 million in developing the 1,247 places across 10 new homes, and at the end of the period, had collected $286.5 million in net RAD cash flow.

This shows you the importance of building high-quality homes that will attract the RADs to pay for the development dues. This is the way that Regis has been able to continue a strong building and development program.

We have 7 aged care developments ready for progression, of which 5 are greenfield and 2 are extensions. This includes the new Toowong location. For each of these, we own the land, have sufficient licenses to commence mobilization and have either received development approval or are preparing for the application process. However, investment in new homes has now slowed due to the lack of certainty regarding federal government funding and policy, as well as uncertain outcomes from the Aged Care Royal Commission. After much consideration, Regis had supported several projects in the development program, although the commencement of a greenfield development in Camberwell, Victoria is planned for the second half financial year 2020.

We also have redevelopment projects at 2 retirement villages planned in Nedlands, Western Australia and Blackburn South, Victoria. Each of these is co-located with existing Regis aged care homes. This provides the company with the opportunity to expand our retirement living service line and harness opportunities from complementary and shared amenities and services on-site.

Moving now to our ESG achievements and plans. I note there has been significant environmental, social and governance achievements during the period, and we have clear objectives for the second half. Our environmental program continues to mature, we have significantly progressed our building initiatives, such as solar panels and LED lighting. We have 31 homes that have had solar panels installed and 22 homes have had their lighting replaced with LED lighting. We have residents around the country engaged in growing their own herbs and vegetables and actively participating in composting waste reduction and recycling programs. Our procurement team will be focusing on a waste management program in the second half in preparation for financial year 2021.

On the social front, we are pleased to see community discussion about the benefits of intergenerational programs. Regis has had intergenerational programs in place for many years. These are generally locally-driven initiatives, where visits from mothers' groups, daycare centers, kindergarten for schools bring great pleasure and are mutually beneficial to the children and older people.

We are pleased to have seen an improvement in employee engagement for the second consecutive year. This is underpinned by the Regis Spirit program for engagement and recognition as well as our work to ensure our workforce is well supported. Our focus on cultural diversity, mental health awareness and disability support for our residents and our workforce will continue.

From a governance perspective, our capable and experienced Board benefits from the contributions of our 2 founders. The Board's skill mix is strong and valued and strengthened by a medical clinician with expertise in systems planning and clinical governance. Gender diversity on the Board and executive has increased. Aged care is a predominantly female workforce, so it's important that our governance and leadership have representation across the genders.

Our Board Committee structure ensures that key issues are reviewed in depth, and this also provides executives with excellent opportunities to interact with our directors. The Board Clinical Governance and Care Committee has now been in operation for 12 months. This committee will oversee and monitor implementation of our new clinical governance framework. We're also excited to welcome a new senior clinical role to the executive team in the second half, who will provide leadership on clinical and care practice.

Now moving to our outlook. We expect improved EBITDA and NPAT in the second half through improved occupancy in both our steady-state and ramp-up homes, particularly in Western Australia for the ramp-up homes. There will be a favorable contribution from business performance savings initiated in the first half. We anticipate a further $50 million to $70 million net RAD cash flow from additional residents entering our ramp-up homes in the period to 30 June, 2021.

Consistent with the information provided earlier in the presentation, the company will have a slower development program until conditions improve. Balance sheet management will continue to be conservative, pending a more favorable operating environment.

So to summarize the key points from this morning's presentation, again, I can reaffirm our guidance that financial year 2020, EBITDA and NPAT are forecast to be circa $92 million pre-AASB 16 and $28 million, respectively, on an underlying basis. The company's financial results for the first half reflects the continuing challenging industry conditions. My review of the business fundamental shows that there is opportunity to improve our performance, but we also need certainty at our industry reform and sustainability. In the meantime, and of great importance, Regis will maintain our high-quality care and service, with a strong focus on care, clinical governance, transparency and occupancy.

In closing, I would like to extend my thanks to the Regis Board of Directors for their expert guidance and commitment; our acting Chief Financial Officer and his team for their excellent work in reviewing the financials; our executive team; and all of our employees for their individual and collective contributions to care services, stewardship and our results. Thank you.

I'll now hand back to the operator to open the meeting to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Peiting Liang with JPMorgan.

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Peiting Liang, JP Morgan Chase & Co, Research Division - Analyst [2]

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I just had a question on your full year outlook. You kept the outlook unchanged, and we can see that profits have historically been more weighted to the first half. So it looks like you'll need quite a strong second half in order to meet your guidance. Could you just give us a sense of what gives you confidence that the occupancy levels will improve in the second half? And secondly, can you just elaborate a little bit more on examples of what business performance savings or programs you have undertaken and how -- what you're expecting in the second half from these business performance savings?

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [3]

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Certainly. Thank you. So we can already see that occupancy is improving. So in my review of the data shows that there was a fairly steep decline between March and November. It bottomed out in November, it improved in December and we are seeing improvements through January and February, with a good pipeline to come. So we're certainly seeing the results of the strategies that we put in place in about October, actually rolling through the improved occupancy now. The ramp-up sites, particularly in WA, certainly give us great opportunity to improve occupancy there. In terms of the savings opportunities and the business performance opportunities, there is a few things there. So we are looking at a review of systems and processes, so some good process redesign-type reviews to make sure that we are as efficient as possible. There are some cost savings that we can make through a number of our contracts and just the way that we actually work back of house. I do want to say that we do not anticipate making any frontline starting reductions. So I do want to make that clear.

Andrew, is there anything you wanted to add?

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Andrew Grayson;Acting Chief Financial Officer, [4]

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No. Look, I think the only other thing is that -- I mean, obviously, there are some of the impacts of -- in the second half, that there are more public holidays. And we do obviously get full effect of our EA, enterprise agreements, increases in the second half. But the items that Linda have just called out more -- are expected to more than offset those impacts.

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Peiting Liang, JP Morgan Chase & Co, Research Division - Analyst [5]

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And just another question on your RAD inflows as well. (inaudible), you said -- you reported that they did see quite strong RAD inflows from their existing facilities, which they said was due to improved activity that they are seeing in the property market. Does Regis also see a benefit from improving property market conditions? And to what extent?

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [6]

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Thank you. So what we tend to see is the property market has an influence on how long it takes somebody to pay the RAD rather than whether a RAD is selected and paid. So it really just relates to how long it takes somebody to sell their home in the market.

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Operator [7]

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The next question comes from Tom Godfrey with UBS.

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Thomas Godfrey, UBS Investment Bank, Research Division - Analyst [8]

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If I could just start, firstly, on your government revenue per occupied bed day. Can you just sort of step us through what the moving pieces were that offset indexation there given you did see a decline year-on-year.

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [9]

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Sorry, Tom, could you repeat that question?

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Thomas Godfrey, UBS Investment Bank, Research Division - Analyst [10]

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Sorry. Yes. So it's just related to your government revenue per occupied bed day. Stepped down from $198 to $197 year-on-year. I'm just wondering, given you did have 1.4% indexation, what the key offsets were.

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [11]

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So part of the response to that will be the acuity of residents entering ramp-up homes. We often will extend the average acuity across the whole portfolio. So you will see a reduction in terms of [taxing]. The other part is that financial year 2019 includes the funding boost, so you probably want to correct for that.

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Thomas Godfrey, UBS Investment Bank, Research Division - Analyst [12]

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But it wasn't in the first half of financial year '19, was it?

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Andrew Grayson;Acting Chief Financial Officer, [13]

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That's correct.

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [14]

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Correct.

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Andrew Grayson;Acting Chief Financial Officer, [15]

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It was in the second half. Yes.

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Thomas Godfrey, UBS Investment Bank, Research Division - Analyst [16]

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Okay. So lower acuity residents entering in the first half.

Just in terms of your steady-state facilities, though, are you seeing any level of acuity creep in your acuity scoring?

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [17]

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Yes, we are.

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Thomas Godfrey, UBS Investment Bank, Research Division - Analyst [18]

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Okay. I'll leave that one there. Just turning to your greenfields in WA. I'm just wondering whether you could sort of step us through what you are seeing on the ground and why, I suppose, the ramp-up in occupancy has disappointed versus initial expectations?

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [19]

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Sure. I'm very happy to talk that through. So -- and it hasn't been the same experience across all of the ramp-ups in WA. So it's very much around the local markets and making sure that we've actually provided sufficient information to the market around what the service offerings are. And WA doesn't have as many comparative products to the Regis product as some of the other states and territories do. So we are -- we certainly learned from that, and we are providing much more information just around cost and value. So we have 2 sites remaining in WA with the occupancy sitting much lower than what we would have expected by now. So the others have ramped up well, the other 2 in WA, so that means we've got targeted resources in those 2 homes.

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Thomas Godfrey, UBS Investment Bank, Research Division - Analyst [20]

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Okay. Understood. And then maybe just one last one to just sort of close out. I think, initially, when you said fiscal '20 guidance, you were speaking to around $3 million of nonrecurring sort of project team costs. I'm just wondering how that tracked to those expectations in the first half.

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Andrew Grayson;Acting Chief Financial Officer, [21]

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So principally, the -- I guess those costs will be incurred in the second half and that relates to the acquisition of the 2 homes in here and Queensland. And so there will be an increase in those costs in the second half relative to the first half.

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Operator [22]

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The next question comes from Vanessa Thomson with Jefferies.

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Vanessa Thomson, Jefferies LLC, Research Division - Equity Analyst [23]

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I just wondered if we could get a bit more color around the property development going forward in light of the ongoing decline in steady-state EBITDA and occupancy. And I see you've got 7 homes that are available. I'm wondering about future time lines.

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [24]

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So I think we've probably given you the information that we wish to share on that today, Vanessa, which I know doesn't really answer your question. But in the current environment, we really are waiting for some more certainties around government policy and funding and the outcomes of the Royal Commission. So we've committed to the Camberwell greenfield development, which is an exciting development for us, and we are just strategically reviewing everything else in the pipeline.

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Vanessa Thomson, Jefferies LLC, Research Division - Equity Analyst [25]

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Okay. I was wondering about Royal Commission costs in the second half. I wonder if you could give us any insight into what you were expecting there.

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [26]

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Certainly. So while it's always hard to predict what might happen with the Royal Commission, at this point, we anticipate being able to scale back the team that we have had working on the Royal Commission substantially now that the Royal Commission has moved towards consultation phase.

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Vanessa Thomson, Jefferies LLC, Research Division - Equity Analyst [27]

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Okay. And one more question. Occupied bed days, I wonder if that was something that you guys would talk to or is it as simple as dividing your revenue by revenue per occupied bed day.

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [28]

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Yes, and that would give you a close enough figure, Vanessa.

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Operator [29]

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The next question comes from Matt Johnston with Macquarie.

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Matthew Johnston, Macquarie Research - Analyst [30]

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Maybe just first up on expectations of where you think net debt might land for the full year '20.

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Andrew Grayson;Acting Chief Financial Officer, [31]

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So it is -- I think that principal factor there is our net RAD cash flows. So we don't actually provide a forecast of our net debt, but we set out that in the period up to 30 June, 2021, we're expecting $50 million to $70 million of additional RAD cash flow. So that will be used, or what's available at least, to repay debt.

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Matthew Johnston, Macquarie Research - Analyst [32]

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Okay. And maybe another way, just around CapEx guidance over those 18 months then.

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Andrew Grayson;Acting Chief Financial Officer, [33]

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No. We don't provide guidance on our CapEx forecast.

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Matthew Johnston, Macquarie Research - Analyst [34]

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Okay. Previously, you have because it was sort of $60 million for aged care and then another $10 million for retirement. So I'm just trying to think second half cash flow from residential aged care providers sort of declines. You've got a $12 million cash dividend. I'm just trying to understand where you guys think you might land because on the 18-month view, it might look okay, but still, there's probably some sensitivities in the next 6 months.

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [35]

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Yes. No, I understand. I mean, certainly, we are very focused on disciplined management at the balance sheet. As I said earlier, the Board has been reviewing -- strategically reviewing the pipeline. So we'll make sure that we balance that appropriately. And once conditions improve, we have projects ready to go.

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Matthew Johnston, Macquarie Research - Analyst [36]

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Okay, understood. I'll leave it there. Just on in -- my next question then on -- if you look at the interest rates, the interest cash costs in your notes for the RADs it tops 16%. I'm just trying to get an understanding on the RADs held for residents who have left. I'm assuming that is reflective that it's going up.

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Andrew Grayson;Acting Chief Financial Officer, [37]

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Yes, that's correct.

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Matthew Johnston, Macquarie Research - Analyst [38]

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And so just for our benefit, can you sort of split out what may be probate and what's, I guess, a timing issue over year-end?

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Andrew Grayson;Acting Chief Financial Officer, [39]

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No, we don't wish to share that information today.

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Matthew Johnston, Macquarie Research - Analyst [40]

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Okay. And then just the last one for me. It looks like on the development RAD intakes, I think, previously, it used to be $90 million to $140 million, obviously, you did $46.1 million with predominantly greenfield RADs, and now you're at $50 million to $70 million, it looks like you've narrowed the band to the bottom end. Is that the right assumption?

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [41]

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We've actually put the assumptions in the footnote. So certainly, our experience across most of the greenfields is that occupancy has been higher, but we do have the 2 in WA, so we've just taken a balanced approach to this. But you can see the calc in the footnote.

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Matthew Johnston, Macquarie Research - Analyst [42]

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So I think -- I'm just talking around the spread. So previously, it was $90 million to $140 million, so $50 million -- now it's only $20 million, $50 million to $70 million. So looks like it's the bottom end of expectations now.

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [43]

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So we -- certainly, we have narrowed that range because it made more sense on a much bigger base. I think as we get closer to the end, we actually should be better at predicting that range. So I would actually expect it to narrow.

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Operator [44]

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(Operator Instructions) The next question comes from Peiting Liang with JPMorgan.

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Peiting Liang, JP Morgan Chase & Co, Research Division - Analyst [45]

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I just had another question around your nonstaff costs. So it seems, such as administrative and resident care expenses, it rose about 9% in the half. Can you just give us a little bit more color around what drove this increase?

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Andrew Grayson;Acting Chief Financial Officer, [46]

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Yes, it's generally across the board in various costs, including direct cost of care and indirect cost such as things like utilities and insurance costs and things like that. So it is a general increase we are seeing.

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Peiting Liang, JP Morgan Chase & Co, Research Division - Analyst [47]

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And just lastly, I noticed your government revenue per occupied bed day, on Slide 6, has been restated in the prior year. It was $201 in the previous presentation, this presentation, it was $198. Can you just talk us through the restatement of that?

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Andrew Grayson;Acting Chief Financial Officer, [48]

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So in prior presentations, the metric was based off of total revenue. We have just changed it to reflect only the line items that related to aged care revenue, just to provide that detail. So...

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Operator [49]

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The next question comes from Ronan Barratt with Moelis Australia.

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Ronan Barratt, Moelis Australia Securities Pty Ltd, Research Division - Analyst [50]

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Look, just interested in whether there have been many home closures nearby to Regis facilities across FY '20 to date and whether you have gained any residents as a result.

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [51]

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Thanks, Ronan. So no, there hasn't been many closures near to us. Certainly, as we become aware of closures and other providers speak to us, we always offer to take residents wherever we can. And I would just extend that not only with closures, but also with the bushfires recently, there were a number of other providers' homes that were under threat. So we were speaking to a number of those providers about accommodating their residents. But we haven't seen a lot of impact in the areas where we have homes.

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Operator [52]

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Thank you. There no further questions at this time. I'll now hand back to Dr. Mellors for closing remarks.

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Linda Jane Mellors, Regis Healthcare Limited - CEO, MD & Director [53]

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Thanks very much, Jessie, and thanks, everybody, for attending today, and we look forward to seeing a lot of you over the remainder of this week and early into next week. Thank you.