Thank you, Melanie, and good morning, everybody. Thank you for joining us today to discuss Regis Healthcare's full year results for 2023. As we begin, I would, of course, like to acknowledge the Wurundjeri Woi-wurrung people of the Kulin Nation, traditional custodians of the land on which we meet today, and pay my respects to their elders, past, present, and emerging. I extend that respect to any Aboriginal or Torres Strait Islander peoples joining us on the call. I'm joined today by Rick Rostolis, our Chief Financial Officer. As you're aware, Regis is one of Australia's largest and most geographically diverse providers of aged care. We have a team of more than 9,000 dedicated people delivering care and services to more than 7,000 residents and clients over the past year.
Regis owns and operates 63 residential aged care homes, comprising 6,960 operational places. More than 90% of rooms are single with a private ensuite, a prerequisite for many residents. All of our homes are freehold, with significant real estate value, as demonstrated by the average house price in the catchment area across our portfolio, exceeding AUD 1 million. Regis remains one of the few national providers of aged care, with residential aged care homes in every state of Australia and the Northern Territory. In addition to our existing portfolio, Regis also has a pipeline of greenfield developments, with Regis Camberwell in Victoria under construction, Toongabbie currently in the tendering phase, and two sites in Sydney to be tendered during FY 2024. Regis's occupancy continued to improve throughout the year and achieved spot occupancy of 93.7% at 30 June 2023.
Underlying earnings before interest, tax, depreciation, and amortization of AUD 83.3 million was 6.7% higher than the prior year. Moving to this morning's agenda, I'll provide an update on some of the key aged care industry changes and reforms, followed by an overview of our financial and operating results in the past year, an update on our strategic priorities and outlook, and then open the meeting up for questions. Moving to the aged care industry overview. Over the past 12 months, the sector has started to see meaningful action in relation to the government's reform agenda. There is improved shared understanding of the correlation between adequate funding, contemporary regulatory settings, and a supported workforce with care and service outcomes for our consumers.
There is still more work to be done to stabilize and support the sector into the future, but significant progress is being made. The most significant structural change, which impacts our workforce, is the largest-ever wage increase to the aged care modern awards rates. Eligible aged care workers have received up to a 15% pay increase, which was effective from 30 June 2023, and many workers have also received the 5.75% increase to the minimum award wage. Regis strongly supports higher wages for aged care workers to recognize the incredible hard work and skill of our frontline staff and to support further recruitment and retention. Regulatory and funding policy has become clearer, with the Aged Care Funding Instrument replaced by the new Australian National Aged Care Classification, or AN-ACC, and that funding model commenced on 1 October 2022.
From 1 July 2023, the government increased the AN-ACC starting price from AUD 206.80 to AUD 243.10, with the intention to cover the direct care minutes mandate, wage increases, and indexation. Like many providers, Regis has been undertaking an organizational redesign to refocus resources towards more eligible direct care, while seeking to preserve the holistic care and experience of our residents. The organization redesign includes the redeployment of some workers into eligible direct care roles and the recruitment of additional registered nurses to meet care minutes requirements from 1 October 2023. Separately, and pleasingly, more residents have chosen a Regis home for their residential aged care needs, requiring additional workforce to meet their care minutes requirements. Labor market pressures remain in terms of availability of key employee cohorts, particularly registered nurses, given the ongoing global shortage.
Regis has had registered nurses rostered 24/7 at each of our homes for a considerable period of time and years ahead of the mandate, effective from 1 July 2023. We have invested in additional internal recruitment capabilities and are recruiting at record numbers. The increased award rates are showing early signs of contributing to increased interest in aged care roles and reducing turnover, and we anticipate improved workforce availability during FY 2024. The recently formed Independent Health and Aged Care Pricing Authority has modeled the cost of care under the AN-ACC funding model and made recommendations to the government. The Pricing Authority's advice helped inform the government's AN-ACC price for FY 2024. It's our belief that the Pricing Authority will provide a fairer representation of the actual costs of delivering high-quality care in the residential aged care setting.
It will lead to additional funding in the medium to long term, including more reasonable levels of indexation. Deregulation of bed licenses from 1 July 2024 is expected to be a key advantage to larger providers with development ambitions and access to capital. As opposed to the AN-ACC scheme, where the government determined where new builds could be located, deregulation will give providers flexibility to build new aged care homes in desirable locations. Star ratings were a recommendation of the Royal Commission and were introduced in December 2022. Each residential aged care home is assigned an overall star rating, comprised of four subcategories, being resident experience, compliance, quality, and staffing. In evaluation of staffing, the star rating is based on actual eligible direct care minutes reported to the Department of Health and Aged Care on a quarterly basis, which are then compared to targets set by government.
Reporting of actuals commenced in December 2022, against targets that are not mandated until October 2023. While the sector has seen significant reform in recent years, there is more required to ensure funding is appropriate, there is an available well-trained workforce, and that all Australians have access to a high-quality, equitable, and innovative aged care system. Regis welcomes the new Aged Care Taskforce announced in the federal budget, which I'll discuss shortly. I do want to move now to the current state of bed stock in the sector against future demand. The growing number of older Australians means that additional aged care places will be required, notwithstanding increasing services in consumers' own homes. The Aged Care Financing Authority's ninth report on funding and financing forecast an extra 80,000 aged care beds would be needed by 2030 to meet the aging population demand.
The Baby Boomer generation is approaching the age band, where the sector expects to see a sharp uptick in the number of older people requiring aged care services. The oldest Baby Boomers are approaching 80 years of age, and the average age of entry into residential aged care is 84 years, with the range generally being 80-92. The high numbers of people in the Baby Boomer generation will impact the aged care sector for around 20 years. In addition, current stock of beds across the sector is of mixed quality. It's estimated that the sector needs to replace around 25% or 55,000 beds due to age and outdated layouts. This implies 135,000 new and refurbished beds are required to be built, costing the sector over AUD 50 billion over the next decade or so.
Regis has already removed three and four bedrooms from our portfolio, and the vast majority of our offering is single rooms with private ensuite to meet consumer expectations, along with a small proportion of double rooms to suit couples and companions. Providers also need to respond to higher expectations regarding accommodation services and amenities. With the baby boomer generation approaching residential aged care, the need to provide a more premium service offering to meet future resident requirements is expected. The sector has been on a capital strike for five or so years now, following years of inadequate funding, uncertainty around policy, regulatory, and funding settings, and future government reforms, as well as the COVID-19 pandemic. Most of the sector has been loss-making over the past four years.
The negative impact on the value of building work in the aged care sector coincided with the period when the government should have created conditions to accelerate building to allow the sector to prepare for the wave of baby boomers. As I mentioned earlier, at current cost of development, there is AUD 50 billion of capital required to be invested to build and replace beds. This provides a real opportunity for high-quality providers with desirable, fit-for-purpose, and well-managed homes to see improved occupancy, performance, and returns in the years to come. Moving now to our financial and operational performance for the year. Revenue from services was AUD 780.6 million, up 7.6% on the prior year. Underlying earnings before interest, tax, depreciation, and amortization was AUD 83.3 million, up 6.7%.
Net profit after tax, before amortization of operational places, or NPAT-A, as we'll refer to it, was AUD 28.5 million, a significant turnaround on the prior year. The improved underlying results were driven by higher occupied beds and additional government funding through AN-ACC and additional resident income. Average occupancy improved to 91.5%, up from 89.8% in the prior corresponding period, with an all-time high of 6,521 occupied beds, or 93.7%, achieved in June 2023. Importantly, net debt reduced by 94.2% to AUD 6 million, driven by strong operating cash flow generation and our strategy to release capital from non-income producing assets. The board has declared a final dividend of AUD 0.0748 per share, 50% franked.
The full year total dividends payout represents 100% of NPAT-A. In terms of star ratings, Regis saw improvement in our average overall star rating across the portfolio from 3.11 in quarter one, FY 2023, to 3.14 in quarter three, FY 2023, which is the most recently available data. Average care minutes across the portfolio increased from 165.3 minutes in quarter one to 178.8 minutes in quarter four, and we are well placed to complete our organization redesign by 1 October 2023. Recruitment effort is ongoing to complete the registered nurse minute requirements and as occupancy increases. I'll now hand over to Rick to discuss the det ails of our results.
Thanks, Linda. Good morning, everyone, and thanks for your time today on what we know is a busy period for all of us. Turning to slide eight, the financial summary. As Linda's already mentioned, revenue from services was AUD 780.6 million, up 7.6% on the prior year. The key drivers of revenue growth were: the increased occupied bed days, additional government funding through the AN-ACC model, which I'll come back to later, and additional resident revenue, mainly due to indexation and increased DAP income. Average occupancy for the period was 91.5%, significantly up on 89.8% in FY 2022, with improvements seen across most jurisdictions. This represents an additional 53 residents on average year-on-year. Notably, second half, average occupancy increased again, with an additional 29 residents up to 92% for the half.
Other income of AUD 117 million contained a number of non-cash and one-off items that I'll come back to shortly. While increased government revenue under the new AN-ACC model was welcome, the additional funding received was largely absorbed by increases to enterprise agreements and award wages. Significant overtime and agency costs in the face of ongoing workforce shortages, as well as the recruitment of additional frontline staff, mostly in the second half of the financial year, as the company continued to prepare for the government's care minute mandate from 1 October. Staff expenses, including the impact of COVID-19, were AUD 591.2 million, up 7.4% on last year.
With respect to the introduction of mandated care minutes, the company has made significant progress with the average care minutes per resident per day, increasing from 165 minutes in the first quarter to almost 179 minutes in the fourth quarter. This increase in care minutes included repurposing roles into direct care, decentralizing some support roles, and investing in additional direct care workers, such as registered nurses. Regis remains well placed to meet mandated targets for personal care workers within the FY 2023 cost envelope, and we've invested in a number of initiatives to continue to attract registered nurses, including expansion of our recruitment capability, providing enhanced career pathways, and working with various domestic and international partners to recruit candidates.
Pleasingly, underlying EBITDA, which excludes RAD imputation and the impact of net one-off gains, was AUD 83.3 million, up 6.7% on FY 2022. A full reconciliation of underlying EBITDA to the company's statutory result is contained in an appendix to the investor pack. Depreciation was AUD 45.1 million, up AUD 3 million, mainly due to technology investments that we have made in recent years, including the enterprise-grade Wi-Fi rollout program, clinical care system enhancements, new electronic medication management system, and core ERP upgrade. It holds us in good stead going forward. This year saw the full year impact of the government's decision to discontinue operational places or bed licenses on 1 July 2024. Whilst the prior year only included the P&L impact for nine months, the operational places intangible asset will be fully amortized by 30 June 2024.
Finance costs were AUD 73.6 million and included AUD 62.9 million of non-cash imputed interest under A ASB 16. The effective interest rate attached to net debt increased from 4.9% to 6.7% in FY 2023. Excluding the after-tax impact of non-cash amortization of operational places of AUD 57 million, adjusted net profit after tax, or NPAT-A, was AUD 28.5 million, up 631% on the prior year. Including the amortization of operational places, the company reported a statutory net loss after tax of AUD 28.5 million, an improvement of 26.5% on the prior year. From a cash perspective, Regis generated AUD 105.2 million of net operating cash flow.
Net cash flows from operating activities before RADs increased 145% to AUD 60.2 million, as receipts from customers and government subsidies improved in line with the performance of the underlying business. Capital expenditure increased by ten, by 10% to AUD 53.5 million as the company continued to invest in the refurbishment of homes, as well as in scalable technology platforms. Following the purchase of a development site in Belrose, New South Wales, in FY 2022, the company's acquired another greenfield development site in Carlingford, New South Wales, to support the future growth agenda. Strong cash generation and rationalization of non-income producing assets led the company to reduce net debt by 94% to AUD 6 million at 30 June. Now turning to Slide nine.
During the year, the average available operational places across all homes reduced by 77 to 6,980, mainly due to the closure of the Belmore, New South Wales, 60-bed home in January 2023. Operational places now stand at 6,960, and we expect this to be around the mark throughout FY 2024, subject to any M&A activity. Average occupancy steadily improved across each quarter and is well above the sector average, and Regis's low point during COVID of 87%. Higher occupancy mainly reflects a number of management-driven initiatives, including quality of care and service offering, established referral relationships, and concentrated sales and marketing efforts.
The company has continued to see occupancy improvement across the business, with spot occupancy of 93.7% at 30 June and 93.5%, or 6,512 residents, at 18 August 2023. Based on current available operational places of 6,960, occupancy levels of 93% and above are maintainable and in line with management's previous advice that this level of occupancy could be achieved in a post-COVID-19 environment. Aged care government revenue per occupied bed day averaged AUD 230.70, up 5.2% on the prior year. This improvement included a combination of increased government funding through the introduction of AN-ACC in Q2, and resident reassessments.
I note that the company averaged AUD 242.20 of government revenue per occupied bed day in Q4, with this increase primarily made up of AN-ACC uplifts. Aged care resident revenue per occupied bed day averaged AUD 96.10, up 11% on FY 2022. This increase reflects the basic daily fee indexation of 4% and 3.7% in September and March, respectively, and higher DAP income due to the MPIR, which increased from an average of 4% to over 6% in FY 2023. Q4 average resident revenue was AUD 102.20 per occupied bed day. Aged care staff expenses per occupied bed day averaged AUD 228.40, up 6.5% on the prior year, excluding the impact of COVID.
The increase in staff expenses included EBA uplifts and significant agency and overtime costs, combined with additional care minutes per resident per day through the recruitment of additional direct care workers during the second half of the year. Q4 staff expenses per occupied bed day averaged AUD 234.40. Pleasingly, the average RAD held by 100% RAD payers increased by 3.9% from AUD 461,000 to AUD 479,000, whilst the average incoming RAD increased to AUD 491,000. Probate liability reduced from AUD 199.7 million to AUD 177.5 million at 30 June, and now represents 13.6%, previously 15.8%, of the total RAD liability of AUD 1.3 billion.
The historically high probate liability at 30 June 2022 led to a net RAD cash outflow in Q1. However, this improved significantly during the remainder of the year, resulting in a net RAD cash inflow of AUD 43.6 million, of which AUD 34.9 million was generated in the second half. So moving on to Slide 10, one-off non-recurring items, and there are a number of items in here that I'll touch on. Of the AUD 32.5 million of government grant income, AUD 31.4 million represents COVID-19 income. At 30 June, AUD 12.8 million of this amount was approved by the government, with a further AUD 10.4 million approved since year-end.
We have now received in cash over 50% of the outstanding claims, with an average success rate of 97% of all claims made. As previously mentioned, the government has a significant backlog and volume of claims to process across the aged care sector. We expect to have all outstanding claims approved and settled during FY 2024. In FY 2023, the impact of COVID-19 on incremental staff expenses was greatly reduced following a substantial reduction in the number of outbreaks. COVID-19 outbreak-related expenses fell from AUD 13 million in the first half to AUD 3.5 million in the second half. During the year, the company generated a gain of AUD 11.7 million on the disposal of non-income producing property assets, including the Hollywood Retirement Village and vacant land in WA, and the sale of the Belmore land in New South Wales.
In total, Regis received net cash proceeds of AUD 60 million on the disposal of non-income producing assets. In addition, partly due to decisions taken to dispose of non-income producing assets, Regis wrote off AUD 12.8 million of capital works in progress relating to development projects which are no longer expected to continue. This write-off accounts for the bulk of the increase in administration expenses seen on the face of the statutory profit and loss account. The company also realized a non-cash revaluation gain of AUD 7.2 million on the investment property portfolio, which is independently valued at the end of each financial year. And lastly, as a result of the Fair Work Commission's decision to increase aged care worker modern award rates by 15%, Regis incurred a one-off AUD 7.3 million uplift to employee leave entitlements.
The government has announced that it will be funding a grant program through which Regis expects to recover some of this one-off cost. The company is yet to see the details of the grant program. Moving on to slide 11. Regis's robust cash flow position this year has enabled net debt to reduce to AUD 6 million, down 94%. There has been strong conversion of EBITDA to cash, with AUD 71.5 million of cash flows from operating activities before tax, interest, and RADs. As mentioned, net RAD cash flows inflows are AUD 43.6 million, with AUD 60 million being generated from the disposal of non-income producing assets. In December 2022, the company refinanced Facilities B, C, and D of the syndicated debt facility through to March 2027, which followed the successful refinancing of Facility A in FY 2022.
Regis now has significant debt capacity, with well over AUD 350 million of undrawn bank facilities. Over the last five years, net debt has reduced by almost AUD 400 million, demonstrating the strong cash generation potential of the business, notwithstanding the challenging period for the company and the sector. With a materially stronger balance sheet, Regis now has additional capacity to fund its growth and broaden its residential aged care footprint through greenfield and brownfield developments and via material strategic acquisitions. As Linda has already mentioned, the board of directors resolved to pay a final dividend of AUD 0.0748 per share, 50% franked, payable on 27 September.
With the interim dividend of AUD 0.02 per share, Regis will pay out AUD 0.0948 per share or 100% of NPAT-A in FY 2023, up from AUD 0.0584 per share in FY 2022. On Slide 12, capital expenditure. As already mentioned, the company invested AUD 53.5 million, up 10% on the prior year. The company's greenfield development program recommenced earlier in the year, with construction well underway on our 112-bed residential aged care home in Camberwell, Victoria. This project remains on track and is expected to open to new residents in the second half of FY 2025. During the year, the company purchased a development site in Carlingford, New South Wales, for AUD 15 million, with a development approval in place for a 110-bed residential aged care development.
The intended deregulation of operational places on 1 July 2024 presents new market opportunities for Regis to invest in geographic areas previously not open to the business. Development CapEx increased to AUD 30 million, driven by Camberwell, as well as progressing designs and tendering process for pipeline sites in Belrose, Carlingford, and Toongabbie. Refurbishment CapEx is expected to trend higher in the short term as Regis invests in upgrading existing aged care homes and continues its investment in technology-based solutions, improving staff efficiency and resident quality of care, scalable for future growth. In line with our strategic plan, the company continues to invest heavily in technology with with various Wi-Fi-enabled initiatives put in place, together with an upgrade of the clinical care platform and rollout of an electronic medication management system.
These investments place Regis at the forefront of technology-enabled care initiatives aimed at improving both staff and resident experience. Onto resident profile on slide 13. As you can see on this slide, the proportion of non-concessional and concessional residents has remained consistent over the past year. The proportion of non-concessional residents paying a full RAD has also remained steady at just under 60%, while there has been a slight uptick in DAP payers and a decrease in combos. In line with interest rates, the MPIR has seen a rapid increase over the past 12 months, from 4.1% to 7.9% today. We are yet to see a meaningful shift in consumer preferences between RADs and DAPs, but we expect that with a high MPIR, there should be a shift towards RADs. And with that, I'll hand you back to Linda.
Thanks very much, Rick. So moving now to other matters. As we previously reported, Regis identified potential underpayments of employee liabilities to certain current and former employees under our enterprise agreements. There has been no change to the provision in the last six months, and we expect remediation to occur in the first half of FY 2024. As many of you may know, the government announced in the recent federal budget that it was establishing an Aged Care Taskforce to review and provide advice on funding arrangements for aged care. The outcomes of this Taskforce will be critical in establishing the short and longer-term funding and financing settings for the sector. There is now broad understanding that change is required to urgently support the viability of the sector and attract private investment to build and maintain the residential aged care homes needed for the aging Australian population.
Importantly, Regis agrees with the government's principles, that the system needs to provide quality and appropriate care delivered by a skilled workforce, and allows and encourages innovation. The sector needs access to sufficient and new capital to encourage the development of new accommodation and upgrades to existing accommodation. Regis continues to work with our industry peak body, the Aged and Community Care Providers Association, to support the development of an effective and sustainable aged care funding model and drive positive change. The Australian government commissioned an independent capability review of the aged care regulator, as recommended by the Royal Commission. The ensuing report was released on 21 July 2023, and included recommendations to improve the culture, leadership, structure, governance, capability, and performance of the regulator. The government looks forward to implementation of all of the recommendations.
Fit-for-purpose regulation is necessary to deliver quality care and services and to support a maturing sector. Moving now to the strategic update and outlook. And just a reminder that Regis's strategic priorities are built on three fundamental principles, being a culture of care, having positive people and practice, and enhancing and ensuring our future. Over the last year, significant work has been done on stabilizing the business, harnessing efficiencies, and investing in technology, as Rick mentioned, to enhance the operating and financial performance. Some of the key achievements during FY 2023 include implementation of a new electronic medication management system that provides better accuracy and history of medication provided to our residents. Upgrading of our clinical management system to improve clinical and quality outcomes for our residents and efficiencies for our workforce. Finalizing the target operating model, including organization redesign, to refocus resources towards more eligible direct care.
Expanding our talent acquisition capability, particularly in relation to attracting registered nurses and carers. Commencing construction of the Greenfield Residential Aged Care Development in Camberwell, Victoria, and receiving net proceeds of AUD 60 million through the rationalization of non-income producing assets. The strategic technology investments we've made in recent years are readily scalable, which will support our endeavor to grow and expand our residential aged care footprint. In terms of our strategic priorities for FY 2024, and starting with the Regis culture of care, we continue to strengthen our clinical governance program and our market-leading additional services offering, together with participating in a number of strong research projects with leading universities and partners to pilot innovative new technologies. These important structures and platforms underpin the high-quality care and service experience for our residents and clients.
In terms of our people, we are rolling out a new people management system to improve the employee experience, increase efficiencies, and ensure accuracy in reporting compliance. As I mentioned earlier, we have been finalizing our new target operating model, including the organization redesign. While much of the preparation and work has been completed, the new operating model will be introduced in this first half, which will drive significant increase in Regis's direct care minutes in line with the government mandate. Regis remains focused on improving labor productivity and reducing overtime and agency costs, which will occur under the new operating model. Importantly, we're also motivated to further improve staff engagement to enhance resident and employee experience under our continuity of carer model. We expect that this will also improve our recruitment and retention outcomes.
In terms of ensuring our future, we are making significant investments this year in the ongoing refurbishment of our existing portfolio and progressing our pipeline of greenfield developments. Regis is also pursuing material strategic acquisitions to broaden our residential aged care footprint, whilst remaining disciplined and seeking high-quality portfolios that will provide adequate returns for our shareholders. We are also intending to rationalize other non-income producing assets to realize further proceeds to be invested into other higher returning core business opportunities. So moving now to Slide 18. The company is proud of our history to care for our people, local communities, broader society, and the environment. There are a few items I'd like to highlight today on ESG, starting with the substantial improvements that Regis achieved over the last year in a range of resident quality and safety indicators, including wounds, falls, and preventable errors.
From an employee perspective, the company is particularly pleased with the improvements in our work health and safety outcomes, with reductions in injuries, lost time, and claims. We introduced a new board-approved and monitored safety index, and our lost time injury frequency rate was well ahead of the sector. Using the Safe Work Australia method, Regis returned a lost time injury frequency rate of 6 for the year, against a benchmark performance of 24. The company continues to lead and participate in a range of robust research projects to improve consumer care and services, and workforce performance and well-being. The company conducted its fifth annual employee engagement survey during the period. Pleasingly, our engagement lifted by 5 basis points to 59% since the last survey in March 2021. Regis's metrics were better than the aged care for-profit benchmark and the broader residential aged care services group.
In terms of the environment, we are actively working to minimize our environmental footprint and the short-term and long-term impacts of our operations, including minimizing the use of natural resources, such as electricity and gas, and the production of waste. Regis is on target to reduce our energy consumption by 10% by 2024, as per our 2019 commitment. We are undertaking a pilot to redirect our organic food waste from landfill, reduce our greenhouse gas emissions, and save money on waste removal. The Regis board and management remain firmly committed to the highest standards of behavior, ethics, and operations for the benefit of our residents, clients, employees, shareholders, and stakeholders. Moving now to our growth program. As Rick mentioned, Regis recommenced building activity during the year with a greenfield development at Camberwell, Victoria.
For those of you not from Melbourne, Camberwell is an inner eastern suburb with an average house price of AUD 2.6 million. The Camberwell development will see a high-quality residential aged care home constructed with 112 beds across four levels. This is an investment of approximately AUD 40 million, excluding land, with all rooms being single with ensuite. The development is progressing as planned and remains on track to open to new residents in the second half of FY 2025. In terms of our other pipeline development projects, we continue to advance our plans and are ready to accelerate our program of works as investment returns improve. In January of this year, the company acquired a parcel of land in Carlingford, New South Wales. This site has been earmarked for a 110-bed residential aged care home with development approval in place.
We have two further development projects in Toowong, Queensland and Belrose, New South Wales. Regis will continue to build contemporary, fit-for-purpose, and desirable aged care homes for older Australians with high care and service standards. So moving now to some comments, on outlook. In the year ahead, we expect to benefit from improving occupancy, additional government and resident funding, while completing our organization redesign and recruitment program to meet care minute requirements. Regis has a materially stronger balance sheet and will continue to focus on releasing capital from non-income producing assets to reinvest into higher return core business opportunities. Our strong balance sheet, including significantly reduced net debt, will support Regis' active pursuit of strategic material acquisitions to broaden our residential aged care footprint.
In summary, the board and executive team are focused on improving the quality of care and services to our residents, attracting and retaining the right people, investing in more efficient systems and processes, upgrading the quality of our existing homes, and investing in growth through the additions of new internally developed homes or by acquisition. Finally, I would like to sincerely thank each of our 9,000 employees for their continued hard work, commitment, and care that they provide to our residents and clients day in and day out. With that, I will now hand back to our operator, Melanie, and we can take questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from David Low with JP Morgan. Please go ahead.
Thank you very much. If we could just sort of get to the heart of it. I know you haven't given guidance for the current year, but obviously, the, the variables are that occupancy is... the starting point's nicely higher. Funding has been increased, but of course, we've got the new care requirements as well. But just wondering, when, when we think about the earnings in, in the year finished and the earnings in the year ahead, I mean, it, it seems to me like there is room for further improvement in earnings. So just wondering, yeah, how you think we should think through those major variables, please.
Good day, David. It's Rick. How are you?
I'm well, thanks.
I think I've given you a heads up in the speech. I've given you all the Q4 numbers, the exit numbers on revenue and cost.
Yes.
To your point, each provider receives an extra AUD 37.10, effective 1 July, made up of the AUD 26.30 for AN-ACC and the AUD 10.80 hotel supplement. Of that AUD 37.10, to be clear, under the Fair Work case and the government's decision to fund the increase, of the AUD 37.10, we pass through and have started to pass through AUD 23.12 to workers to eligible workers.
So Again, we've seen an uplift in our staff expenses, partly due to the care minute mandate, mostly in Q4 of this year. So you'll see that ramp up. I mentioned, I think I mentioned that our staff expenses are up about AUD 234 for the quarter versus AUD 228 for the half, for the year on average. So that should give you some indication of where, where we're at. The point I want to make is, and I, I try to make it in the, in the speech. The bulk of the investment that we've been needed to make for personal care workers to meet the mandate is effectively now baked into our numbers. Linda has spoken about the organizational redesign, which is repurposing roles, which we're currently doing and have been doing for the last 12 months.
That should get us there in terms of the personal care worker piece. The piece around registered nurses is an issue for the whole sector, including us, but we are getting closer to the target. So again, to cut a long story short, and I don't want to put a number on it, of course, there's going to be growth next year. We started the year with 6,500 residents, when we've averaged 6,389 for the whole of 2023.
No, no, that's, that's very helpful. And, look, I, I just wanted. It's very useful to run through the key variables. My other question is, I mean, I, I see the commentary there about the, the plans for M&A. How progressed are you? So the, the few material strategic acquisitions, am I right in understanding that there's about AUD 400 million of undrawn facilities now? Yeah, could you talk a little bit about what we should expect in the year ahead, please?
Well, to talk about the year ahead, let's talk about the last couple of years. Look, leaving aside much larger organizations such as the Bain Capital, let's just leave that aside. That's naught to do with us. We've seen some poor quality homes come to market, but we are seeing in recent months, better quality homes. We have an expectation that a number of quality homes will come to market through FY 2024, and it's our intention to participate in that.
Are you in progress at the moment? I mean, when you say that there's some quality homes that have come, are there some obvious targets that, you know, you would think you'd be hoping to, you know, sign a deal with this year?
There are obvious targets, David, but, you know, it'd be silly of me to mention what they are over this forum. But the short answer is yes.
Okay, look, thank you very much for that.
Thank you. Your next question comes from Craig Wong-Pan with Royal Bank of Canada. Please go ahead.
Morning. Just wanted to understand the increase in the care minutes. Rick, you mentioned there that you're kind of well on track for the personal care workers, but just to understand, the registered nurses part is the kind of trickier or more difficult part to reach? Is that what you're saying?
I think it's not just for us, Craig, it's for the sector. There's a global shortage of registered nurses. But, the point I would make, without getting into all the detail, is we saw an increase in the worked hours of registered nurses through Q4, which means we are recruiting, which is positive, so it's opening up. The reality is, I think you're going to find that the bulk of providers are struggling with getting to the 40-odd minutes required for registered nurses, but we're pushing hard.
Okay. And then I saw there was a good increase in the residential income per occupied bed day of 11%. What was the kind of drivers there, or how'd you achieve that?
So there's, there's two things. I mentioned the indexation. So there's been two hefty indexation pieces. As you'd be aware, in September and March, the basic daily fee gets indexed, so we saw a 4% increase in September and a 3.7% increase in March. So that, that in itself is significant. And due to the fact that the MPIR increased year-on-year, we saw an uplift in DAP income. They're the, they're the two components that made up that 11% increase.
Okay, thanks. And then my last question, just on the occupancy rate, you know, really kind of good rate there that you're seeing in, FY 2024 year to date. I guess when I look back at your numbers in the past, I mean, I think, some of the high numbers, that you've achieved back into 2016 and 2017 were under a different definition. So my understanding is that you probably haven't, been at this kind of occupancy rate before. Just trying to understand, like, exactly how you got there. Like, why do you think that's, that is sustainable?
Craig, hi, it's Linda here. So I would really encourage you to have a look at occupied bed days along with the occupancy number, because that will actually give you the information that you're looking for. Importantly, we achieved the highest number of residents in our care, since forever. It's, it's the highest number on record for Regis, and we have maintained that, coming into this new financial year. So we're really pleased. We think that there's, more to go. And I, I think the other thing I would say to you is that everything that we've done to date has been through management effort. You saw the slide around demand versus supply. There won't be sufficient supply, so I would expect that there will be some pretty strong upward pressure on occupancy, coming over the next few years.
So do you think, so that those trends, like the baby boomer trends, that that's sort of starting to emerge now, and that's, that's kind of driving that? Or is it more kind of the, the marketing efforts and the, kind of internal things that you've been doing to, to drive that higher?
It's the internal things that we've been doing to drive it higher. We haven't seen the baby boomers coming in in any kind of numbers yet. As I said, sort of the oldest baby boomer is approaching 80. The average age of entry is 84. So we've got a couple of years, I think, before the really big numbers come, but we should start to see some increases with those, the oldest of the baby boomer generation.
Thank you. That's all my questions.
Thank you.
Thank you. Your next question comes from Tom Godfrey with Ord Minnett. Please go ahead.
Oh, good morning, Linda and Rick. Thanks for taking my questions. Can you hear me okay?
Yes. Thanks, Tom.
Great. Just first one from me, and it's already been touched on, but just on the occupancy side and, and noting your comment, Rick, in the prepared remarks, just around 93%+ for this year, that's obviously sort of implying a 150-200 basis point step up. My question's around incremental margins. I know historically, sort of getting to those occupancy levels, you did see really strong incremental margins and good operating leverage. Just with the mandated care minutes, how do you sort of see that changing your fixed versus variable cost mix and the incremental margins we can expect on those resident revenues?
Can you recall, I previously quoted Tom in terms of the margins? Back in the good old days of ACFI?
Yeah, no. Looking for, looking for the new numbers, not the old numbers.
Well, look, the reality is the game has changed, so ACFI uplift didn't necessarily mean staff increases. This is a very different ballgame. I hate to put a number on it, 'cause I know there's other numbers out in the market, but you're talking 20%-30% falls to the bottom line, not 50% or 60%.
Gotcha. Okay. No, that's helpful. And then just a follow-up from me, and it's touching on the acquisition question again, but just in terms of strategic material acquisitions, are you able to give us sort of any guide around quantum of beds or scale that might be referring in terms of those opportunities?
Anything, Tom. Look, there's. Look, we can't name names, right? But anything between 100 beds to 2,000 beds, that's probably the ballpark.
Got it. That's helpful. I'll jump back in queue.
Thank you. Your next question comes from Vanessa Thomson with Jefferies. Please go ahead.
Good morning, Linda and Rick, and thank you for taking my questions. I just wanted to talk a bit more about the expansion plans. You said that there's some assets out there. If you were, say, to buy an asset today, how long until you could transition that to being, you know, Regis beds? I know that's perhaps a moving feast, but thank you.
Sorry, Vanessa, that was if we bought one today?
Yes.
Yeah. Okay. So, very quickly.
So does that mean one month or six months, or, like, could we see that in FY 2024?
Okay, I'll try to answer it this way: if something was available as of tomorrow, it might, depending on the size of that organization, it could take us anywhere between a month to three months to get it completed. So the short answer would be yes, you would see income from that acquisition through FY 2024.
Okay. Thank you. And then when we look at the growth program, the Belrose, Carlingford, the Belrose and Carlingford are tendering in 2024, what kind of timeframe would that take from tender to having beds available for occupancy?
So a build, you would probably look at a good 18 months in terms of build time. So, and then you've got to furnish it and ramp it up. So you're probably looking at a couple of years from build start to opening.
And then from tender start to build start?
Look, it's not an enormous period of time, Vanessa. It really just depends on contract negotiations.
It does depend, Vanessa, but if, if you take 24-30 months, it's probably that's, that's the ballpark you're talking about.
Okay. And then just my last question, I just wanted to clarify the cost of debt. I think you said it'd gone from 4.9% to 6.7%. Is that what I Was that correct?
Yes, that is correct.
Thank you. That's all for now. Thanks.
Thank you. Your next question comes from Sebastian Clemens with Jarden. Please go ahead.
Morning, Linda and Rick. I just have one on the mix of residents and the payer profile. Just with the trends in or the rise of the MPIR rates, just how you're seeing that trend over the next 12-24 months, and if you think there'll be a material shift, you know, towards RAD payers, et cetera.
So I think I made the comment that we would expect to see a shift to RADs, but I think we need to understand the history of this business is we've always been what they call in the trade a RAD house. So we have got a high level of RAD payers, I think, when you compare us to other providers in the market of this sort of size. So it'll be home by home, and we've got strategies in place, home by home, whether we're pushing for RADs or pushing for DAPs, and that'll continue through FY 2024. But my sense is, and we're not seeing it yet, we're only, you know, two months into the year, I would expect we'll see a subtle shift towards RADs, but we'll wait and see.
Yeah. Okay. Yeah, I was just looking back to 2019, got down to, like, 6% for DAP payers, but that's not the expectation for the next 12 months at this stage.
Thank you. Your next question comes from David Bailey with Macquarie. Please go ahead.
Thanks. Morning, Linda. Morning, Rick. I know David and Tom asked this question. I just thought I'd just get it clear in my mind. Q4 EBITDA for operating bed days, probably higher than the average for 2023. We hold that over 2024 year-on-year improvement. Is that the right way to think about it?
Correct.
Yep. In terms of ACAR deregulation, just wondering if you've identified areas for potential new developments, and if so, you know, when we might start to see that coming through?
Hi, David, it's Linda here. Yes, we have. So we have quite a structured process to look at where we would like to build. I think I probably wouldn't go through that process with you other than to say that you can see that we've got pipeline projects. So we've bought two parcels of land in New South Wales, in Belrose and Carlingford. We've got the block in Toongabbie, and we're building in Camberwell. So look, we continue to focus on areas where there's an undersupply or where the current supply is of poor quality.
Okay, got it. Yeah, some of those have been around for a little while. I was thinking if there's other areas that popped up, but it sounds like there has. And just in terms of the task force, there's been a bit of thinking that co-residing co-contributions could be an option. Just your thinking around high-level thoughts around likelihood, and if so, potential mechanisms for that to be enacted.
Yeah. So look, I think, I think what you can see at the moment with the Aged Care Taskforce is that they are ventilating a whole range of options out with the community. I think all stakeholders are calling for more resident contributions. When you have a look at the cost to government against the aging population, a government can't continue to keep increasing the, the cost to government, well, to taxpayers, because there won't be sufficient working population to sustain it. So I think that resident increased resident contributions will come, and then we're just waiting to see really in what form. But there are very productive conversations happening within and around that Aged Care Taskforce. So I feel, I feel actually really positive about some really good quality recommendations coming out.
That's great. And then just finally, around market structure, increased regulations, requirements, care minutes. How do you see the market structure industry changing over the next sort of three to five years?
Yeah, I think it must be really hard to be a small provider at the moment. The pace of reform is quite extraordinary, and the changes in regulation, all of the new reporting and compliance requirements, it's burdensome for a group of our size. And we've got, you know, obviously a lot more resources to spread the burden through. I think we've seen for a long time that government wants consolidation in the sector. We are a highly, highly fragmented sector. And I think like we've seen in other industries, you've probably heard me say before, you know, we look particularly to private hospitals, to some of the diagnostic groups where you can see that they've all been through this same process, and you'll need to have scale to be able to compete in the future.
That's great. Thanks very much.
Thank you. Your next question is a follow-up from Tom Godfrey with Ord Minnett. Please go ahead.
Oh, thanks, guys. It was actually just a follow-up to Dave's question around the Aged Care Taskforce. I think we're due to get the interim report October, and then the final in December. Do you guys have a preference in terms of what the recommendations could look like around means testing, deregulating the basic daily care fee, RAD retentions, or does it not sort of really matter to you what format it takes, we just need co-contributions?
I think we have an interest in making sure that the recommendations are sensible and sustainable. So we absolutely do have views across all of those areas. I think it's really important that we get to see the recommendations as a group rather than considering individual recommendations, because you know, as you can imagine, there is interplay between various recommendations. So we'd be very keen to see the group.
Got it. I got it. Thanks for taking my questions.
Thank you.
Thank you. Your next question is a follow-up from Vanessa Thomson with Jefferies. Please go ahead.
Thank you, and thanks again. I just wanted to understand that jump in the administration expense in FY 2023. I think, Rick, you said that it was related to the write-off of capital work. Did I have that correct?
Yeah. So, Van-- so I did, I did check, Vanessa. I saw your, your early note where you, you, you called out the admin expenses. So the bulk of the write-offs that are one-off items that I, that I called out, are sitting in admin expenses. So the bulk of it is the, the AUD 12.8 million write-off of development costs, and also other costs associated, for example, with the underpayments program that we're continuing to run. So they're one-off, so you can basically back those out going forward.
And so if we back out the 12.8, that's kind of like the, the underlying admin expense, and so how much is-
No, no. It's more than 12.8. So you've got other numbers in the. It's more like AUD 16 million that you can back out.
Okay. So if we back that out, that should give us a guide to FY 2024?
That, that's correct.
Okay. And then I just had one last question. The increase of 15% to the award rate for aged care workers, how does that pass through for those who were already receiving an above award wage? Because, yeah. Thank you.
Hi, Vanessa. So the expectation from government was that we would pass on the dollar increase, the dollar and cents increase, for those relevant classifications under the award that map through to our enterprise agreements.
Thank you.
Thank you. There are no further questions at this time. I'll now hand back to Dr. Mellors for closing remarks.
Thanks very much, Melanie, and thanks, everyone, for joining us this morning, and we look forward to meeting up with many of you over the coming week. Hope you have a good day.