Thank you for standing by, and welcome to the Regis Healthcare FY 2024 Results Presentation. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Dr. Linda Mellors, Managing Director and Chief Executive Officer. Please go ahead.
Thank you, and good morning, everybody, and thank you very much for joining us today to discuss Regis Healthcare's 2024 full-year results. I would like to begin by acknowledging 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 and present. I extend that respect to any Aboriginal or Torres Strait Islander peoples joining us on the call. I am again joined today by Rick Rostolis, Our Chief Financial Officer. Regis is one of the largest and most geographically diverse providers of aged care in Australia, operating residential aged care homes, home care service hubs, day therapy and respite centers, and retirement villages. Regis has a team now of more than 11,000 dedicated people, delivering care and services to more than 9,000 residents and clients on any given day.
Regis owns and operates 67 residential aged care homes in every state of Australia and the Northern Territory, with approximately 7,500 beds. All homes are freehold-owned with significant real estate value. Within our homes, we offer a diverse range of support options to cater for personalized care requirements and offer a range of additional services programs with distinct levels of personal services and comfort. Across the 67 homes, 93% of our beds are in single rooms, a key requirement for many current and future residents. Pleasingly, Regis's occupancy continued to trend higher across FY 2024, with spot occupancy of 95.3% at 30 June 2024. Underlying earnings before interest, tax, depreciation, and amortization, or underlying EBITDA, of AUD 107.2 million was 28.7% higher than the prior year.
Moving to this morning's agenda, I'll provide an update on the key aged care industry changes and reforms. We will then cover the financial results and operating highlights, provide an update on our strategic priorities and outlook, and then we will open the call for questions. So moving to the aged care industry overview. Aged care is an essential service, with almost 250,000 Australians accessing residential aged care and another 1 million accessing home care services each year. The aging population means demand for services will continue to grow. Government funding for residential aged care is forecast to increase 11% per annum and grow from AUD 16 billion in FY 2023 to AUD 41 billion in FY 2032.
The baby boomer generation is fast approaching the age where more residential aged care will be in demand, and we expect this cohort will impact the aged care sector for around 20 years. The baby boomer generation is wealthier and will expect modern facilities with single ensuite rooms and large suites. In recent years, the aged care sector has been on a capital strike due to underfunding, elevated construction costs, and uncertain regulatory environment, COVID-19, and inadequate returns on property developments. This has led to only 4,300 net new beds being built across the last three years, which is well below the rate required to meet expected demand. It is estimated that the aged care sector needs to build 135,000 new and refurbished beds over the next decade, and this is estimated to cost the sector circa AUD 55 billion-AUD 72 billion.
Sector viability has improved following the introduction of the Australian National Aged Care Classification funding model, which we refer to as AN-ACC, and this was introduced in October 2022. In the six months ending 31 December 2023, 65% of providers were profitable in terms of net profit before tax. This was up from 46% in the six months ending 31 December 2022. However, only 36% of homes were meeting their care minutes targets in the second quarter of FY 2024, which would be potentially overstating sector profitability. Further funding reform is needed to ensure the long-term financial viability of the sector and support the growing number of older Australians with high-quality care and services and fit-for-purpose accommodation. This slide outlines some of the key government reforms, which are having a meaningful impact on the sector.
The Fair Work Commission finalized its stage three decision on aged care wages in March 2024, with eligible care and support workers to receive an additional pay increase of up to 13.5%, to be phased in from 1 January 2025 and 1 October 2025. Regis strongly supports higher wages that reflects the value and the difficulty of the work performed by frontline aged care workers. We have seen better funding for care with the Independent Health and Aged Care Pricing Authority providing residential aged care pricing advice to government. The AN-ACC starting price increased at the start and during the financial year to cover worker wage increases and indexation. It is our belief that the pricing authority will provide a fairer representation of the actual cost of delivering high-quality care, with more reasonable levels of indexation over time.
Mandated care minutes will increase again in October 2024, with providers expected to achieve, on average, 215 minutes per resident per day, including 44 minutes from registered nurses. Pleasingly, the government has recognized the important work of enrolled nurses in the sector, with enrolled nurse minutes able to contribute up to 10% of the registered nurse minute requirement from October. The Royal Commission into Aged Care Quality and Safety found that the current Aged Care Act is no longer fit for purpose, and that a new act should focus on creating a simpler, safer system, strengthening the powers of the regulator, and creating more choice and control for residents. Subject to parliamentary processes, a new Aged Care Act is expected to commence from 1 July 2025, a delay of 12 months from what was earlier flagged.
This seems to now be dependent on the government introducing the legislation to Parliament in the next sitting period. The new legislative regime will include strengthened quality standards that are designed to improve outcomes for older people and set clear expectations for providers in delivering quality aged care. Despite the delay in commencement, Regis continues to roll out upgraded systems and processes to meet the proposed new standards. The establishment of the Aged Care Taskforce marked a significant step towards assessing and reforming the funding mechanisms within the aged care sector. This initiative, which was a key component of the government's plan to support the sector, was chaired by the Minister for Aged Care. In March 2024 , the taskforce's findings were made public, encompassing a set of 23 recommendations aimed at ensuring the sector's enduring viability. As yet, the government has not issued a public response to these recommendations.
The government and opposition continue discussions, with both sides making public comments regarding constructive negotiations and the need for reform. We expect the bill to be introduced to Parliament to contain the negotiated position on the funding reform. I'd now like to make some observations with respect to the key taskforce funding recommendations, beginning with recommendation 9, which is government funding to be focused on care. On average, the government funds around 94% of the cost of delivering care through AN-ACC, with means tested care fees making up the balance. There is a strong safety net, such that those without means can still access quality aged care. The taskforce recommendation suggested that the government should continue to focus on funding care, with residents making greater contributions to non-care components, such as everyday living and accommodation costs. Recommendation 10 is better priced and more flexible everyday living co-contributions.
Providers currently receive two payments for everyday living activities, including the basic daily fee, which is set at 85% of the single basic age pension paid by the resident, and the Hotelling Supplement paid by government. The total payment is approximately AUD 73 per resident per day. On average, aged care providers are losing money providing these everyday living services. The taskforce recommendation is for funding to cover the full cost of providing these services through the basic daily fee and supplement, with those residents with means paying some or all of the cost. Regis agrees with the recommendation and remains hopeful that this recommendation will be adopted. Recommendation 12 was a move away from Refundable Accommodation Deposits, or RADs, in the longer term. Although the taskforce made this recommendation, there are several important caveats to discuss. An independent review of RADs has been recommended for 2030.
This review will consider the feasibility of transitioning the sector away from accepting RADs by 2035 , with a shift towards a rental-only model. Removal of RADs from the sector will only occur if financial sustainability is deemed to be in place and if there are alternative, diversified, and adequate sources of capital available to the sector while still remaining affordable for consumers. We understand there is strong opposition to this recommendation from lenders to the aged care sector. Recommendation 13 is RAD retention. The taskforce recognized that there is an immediate need to improve revenue from accommodation in the shorter term. Under a RAD retention scheme, providers would retain a small portion of each RAD paid. The amount would be based on length of stay, with a cap in place to protect longer stay residents.
The Taskforce sees this as rebalancing a current inequity between daily accommodation, or DAP payers, and RAD payers, with DAP payers effectively cross-subsidizing RAD payers. Regis, as a leading developer of residential aged care homes, supports the recommendation to reintroduce a RAD retention. Recommendation 14 is review the accommodation supplement for supported residents. An accommodation supplement is paid by government for concessional residents as a contribution towards their accommodation costs. . . . The supplement needs to incentivize providers to improve the quality of accommodation and refurbish homes. Sorry, I beg your pardon. To incentivize providers to improve the quality of accommodation and accept lower means residents. An increase in the accommodation supplement would further encourage providers to build and refurbish homes. Recommendation 15, additional short-term measures are required to improve accommodation funding. The Taskforce recommended additional measures to attract greater capital investments and improve financial viability of the sector.
For residents paying via DAP, they recommended replacing the maximum permissible interest rate with a rate that more closely reflects the cost of providing accommodation. Indexation of the DAP in line with the accommodation supplement, and pointed to the substantial increase to the maximum room price recommended in the 2017 Tune Review, from AUD 550,000 to AUD 750,000, without requiring regulatory approval from the pricing authority. Regis strongly supports the key recommendations of the Aged Care Taskforce, that seek to make aged care more sustainable, person-centered, and fair. Moving now to our financial and operational performance for the year. I'm pleased to report a strong set of results this year, with excellent growth in key metrics, including occupancy, revenue, underlying earnings, and cash flow.
Revenue from services exceeded AUD 1 billion for the first time and was up 30% on the prior year. Underlying EBITDA of AUD 107.2 million was up 29%, and net profit after tax, before amortization of operational places, or adjusted NPAT, of AUD 35.6 million, was up 25%. The improved financial results were driven by higher occupancy, additional government funding through AN-ACC increases, the CPSM acquisition, and increased resident income. Average occupancy increased to 94.1%, up from 91.5% in FY 2023. Net operating cash flow of AUD 252.3 million was up 140% on the prior year, and we ended the year in a net cash position of AUD 64.9 million.
The board has resolved to pay a final dividend of AUD 0.0664 per share, 50% franked, which represents 100% of adjusted NPAT, excluding one-off items. Regis was very pleased to acquire CPSM in December 2023, a premium residential aged care business in Southeast Queensland, with five homes and 644 beds. CPSM has been fully integrated with Regis's management structures and operating processes with our systems and technology in place. Our star ratings have continued to improve, increasing from 3.32 in quarter one of FY 2024 to 3.62 in quarter three, FY 2024.
Total average care minutes have also increased from 187.9 minutes in quarter one, FY 2024, to 210.5 minutes in quarter four, FY 2024, as Regis has continued to invest in our direct care workforce to meet government-mandated care minutes targets. I'll now hand over to Rick to discuss further details on the results.
Thanks, Linda, and good morning, everyone, and thanks for joining us today. Just turning to the financial summary on slide 10. As Linda's mentioned, FY 2024 revenue from services reached a new milestone of AUD 1 billion, up 30% on the prior year. The key drivers of the revenue increase were, firstly, a 12% increase in the AN-ACC starting price from 1 July 2023, followed by a further 4% from 1 December 2023. Including the contribution from increased resident acuity, AN-ACC increases contributed AUD 113 million to the revenue uplift. Importantly, a significant portion of these increases helped fund the Fair Work Commission's decision to increase modern award wage rates by 15% and the annual wage review of 5.75% from 1 July 2023.
Secondly, an increase in average occupancy for the year from 91.5% to 94.1% contributed around AUD 11 million in improved revenue, excluding CPSM. Pleasingly, and consistent with trends observed across the financial year, occupancy improved across all states and the Northern Territory. Thirdly, we saw an uplift of AUD 40 million from the government hotelling supplement that was introduced from 1 July 2023, together with increased resident revenue due to improved occupancy and indexation. And lastly, the five CPSM homes acquired on 1 December 2023 contributed AUD 52 million for the seven months of ownership. Other income of AUD 104.3 million primarily consisted of AUD 81.5 million of RAD imputation under AASB 16 and AUD 13.7 million of one-off government grants.
In terms of expenses, staff costs increased by 30% on the prior year, with the main impacts being the pass-through of AN-ACC funding relating to the Fair Work, work value case and annual wage review increases of AUD 68 million, EBA uplifts and labor increases required to meet care minute requirements of AUD 73 million, and an additional 600 employees we welcomed from CPSM, which added AUD 38 million to the wages bill. As Linda's mentioned, the average care minutes per resident per day increased from 187.9 minutes in the first quarter of FY 2024, to 210.5 minutes in the fourth quarter. The increase in care minutes was assisted by the previously disclosed organizational redesign that occurred on 1 October 2023.
Regis' care minute targets will increase again from 1 October 2024, as the sector moves to an average of 215 minutes per resident per day, up from 200 minutes. The increase in care minute requirements is expected to be funded by the government as part of new AN-ACC price to be set from 1 October 2024. As a result of the revenue and expense changes mentioned, underlying EBITDA, which excludes the impact of one-off costs and ratification, increased 29% to AUD 107.2 million, with CPSM contributing AUD 7.5 million.
As previously flagged to the market, we expected our underlying EBITDA margin to remain stable year on year, as a substantial part of the 1 July 2023 AN-ACC uplift was passed through to staff, with other cost increases, including EBA wage rises and general CPI impulses, absorbing the additional revenue earned. Depreciation for the year was AUD 46.7 million and remained broadly in line with 2023. We should expect to see an increase in depreciation in the short to medium term as we open the Camberwell home later this calendar year and embark on further greenfield and refurbishment projects. EBITDA of AUD 61.5 million was up 55% on the prior year, and EBITDA will be a feature of our reporting going forward.
Setting aside imputed interest under AASB 16, finance costs were AUD 10 million for the year, a reduction of AUD 800,000 from FY 2023, with lower bank interest offset by increased RAD charges. Excluding the amortization of operational places, NPAT was AUD 35.6 million, up 25% on the prior year. FY 2024 underlying NPAT, which excludes one-off items, was AUD 38.9 million, up 91% from AUD 20.4 million in FY 2023. At the bottom line, Regis reported a statutory net loss of AUD 21.4 million. Again, this was impacted by the operational places amortization expense. And please note that this expense is now fully amortized at 30 June 2024.
The FY 2024 effective tax rate was 23.8%, primarily due to AUD 5.6 million of landholder duty on the CPSM acquisition being non-tax deductible. FY 2024 net operating cash flow of AUD 252.3 million reinforced the fact that the business is highly cash generative. Net RAD cash inflow increased 223% to AUD 141 million, as Regis continued to generate strong RAD sales, with all states and the Northern Territory recording positive results. Of this amount, the CPSM acquisition contributed AUD 18 million. Capital expenditure increased 25% to AUD 67 million, including AUD 34 million on the Camberwell Greenfield development. The company is now in a net cash position, with AUD 65 million in the bank at 30 June 2024.
A tremendous amount of work has been carried out across the business to get us into a position where we can aggressively pursue growth activities, including greenfield projects and acquisitions. Regis has an active greenfield pipeline and list of potential acquisition targets that will be pursued aggressively over the coming period. Please note that we'll be closing our 119-bed Weston home in Perth in October as part of a conditional and confidential sale process. Residents and staff have been notified of the closure, with Regis supporting residents to move to either a Regis or other aged care home in Perth. Given the sale remains confidential, no financial details can be disclosed at this time. There is no material impact on Regis' profitability as a result of the closure. Moving to slide 11, Drivers of Shareholder Value.
During the year, average available beds across the portfolio increased to 7,313, including the 644 CPSM beds acquired last December. Consistent with our strategy to divest non-income producing assets, in June 2024, we divested a subscale residential aged care home in Macleod, Victoria, with 63 beds, mostly double rooms. Average occupancy steadily improved across the financial year and sits above the sector average. Demand for residential aged care services has increased in an environment of general undersupply or fit-for-purpose accommodation. This, together with various management initiatives to continue to build reputation in local communities and nurture relationships with local healthcare providers, has assisted with average occupancy now comfortably sitting at or above 95%. We would expect this to continue throughout FY 2025.
Spot occupancy at 30 June 2024 was 95.3% and improved to 95.5% at 19 August 2024. Aged care government revenue per occupied bed day averaged AUD 291 and was up 26.1% on FY 2023. This increase reflects that a combination of improved government funding through an increase in AN-ACC of AUD 26.30, and the introduction of hoteling supplement of AUD 10.80 on 1 July 2023, a further increase in AN-ACC of approximately AUD 10 on 1 December 2023, as well as increased resident acuity. Aged care government revenue per occupied bed day for the month of June was approximately AUD 297. Aged care resident revenue per occupied bed day of AUD 104.30, was up 8.5% on FY 2023.
This increase reflected increased occupancy, the basic daily fee indexation in September 2023 of 3.1%, and March 2024 of 1.8%, as well as higher DAP income due to the MPIR, which increased from 7.46% at 30 June 2023 to 8.34% at 30 June 2024. Aged care resident revenue per occupied bed day for the month of June was approximately AUD 107. Aged care staff expenses of AUD 287 per occupied bed day increased by 25.7% due to the items previously mentioned. The Fair Work, Work Value Case, annual wage review, enterprise agreement increases, and recruitment of staff to meet the care minutes mandate. Aged care staff expenses per occupied bed day for the month of June 2024 was approximately AUD 296.
Total RAD liabilities have increased from AUD 1.3 billion to AUD 1.6 billion, with the CPSM acquisition adding AUD 150 million of RADs during the year. Importantly, the average incoming RAD increased 5.4% during the year to AUD 517,000. Moving over to slide 12. This slide sets out the impact of one-offs or non-recurring items for the year that do not form part of underlying EBITDA. As disclosed at the half year, Regis incurred AUD 7.6 million of one-off acquisition and integration costs relating to CPSM. Regis also recognized AUD 13.7 million of government grant income, comprising AUD 10.3 million relating to COVID-19, and AUD 3.4 million of one-off funding for 50% of the cost of increased leave entitlements due to the Fair Work, Work Value Case.
The impact of COVID-19 outbreak costs has greatly reduced from AUD 16.5 million in FY 2023 to AUD 4.6 million in FY 2024. Although Regis continues to experience COVID-19 outbreaks, our homes are well prepared to manage these as part of business as usual activities. During the year, Regis recognized a net gain of AUD 5.1 million on the disposal of non-current assets, including the divestment of the McLeod home, four subscale retirement villages, and a parcel of vacant land in Queensland. Regis continues to identify and divest non-income producing assets and to redeploy funds into growing the core residential aged care business. The company has continued to invest in strategic, scalable technology platforms, with AUD 6.6 million invested into new and upgraded human resources software systems, including time and attendance, and recruitment, which will go live in FY 2025.
Importantly, we commenced our remediation payment process and paid AUD 28.6 million to current and former employees, inclusive of on costs and interest payments. These payments were made out of the AUD 37.7 million provision that had been established in previous periods. Due to the complexity involved in determining the amount and timing of final remediation costs, we continue to engage with our external advisors and with regulatory authorities, including the Fair Work Ombudsman. Moving on to slide 13. Strong cash flow generation, including net RAD inflow, has allowed Regis to improve its cash position to AUD 65 million of cash in the bank at 30 June 2024. There has been strong conversion of EBITDA to cash, with AUD 123.1 million of cash flows from operating activities before tax, interest, and RADs.
In terms of cash outflows, Regis paid a net AUD 75.2 million for the acquisition of CPSM in December 2023. The CPSM acquisition is a great example of the type of business Regis is looking to acquire. The business was well-run, profitable, and had an excellent compliance and quality track record. The homes are relatively new or recently refurbished and located in desirable locations. Regis has maintained significant debt capacity, with over AUD 400 million of undrawn bank facilities at 30 June 2024. The strong balance sheet and substantial undrawn debt facility provides Regis with considerable firepower to fund its growth program, including greenfield developments, major refurbishments, and strategic acquisitions. As Linda has already mentioned, the board of directors resolved to pay a final dividend of 6.64 cents per share, 50% franked, payable on 25 September 2024.
This takes total dividends for FY 2024 to 12.92 cents per share, which represents 100% payout of NPATA, excluding the impact of one-off costs. Over to capital expenditure. Development CapEx increased to AUD 33.9 million, primarily attributable to the Camberwell greenfield development. Regis has made considerable progress with its development site in Toowong, Brisbane, with construction soon to commence on a 123-bed residential aged care home. Maintenance and refurbishment CapEx increased markedly over the prior year. This increased investment includes some COVID catch-up, but importantly, provides a signal for higher levels of ongoing refurbishment spend to improve our overall resident experience. Regis will continue to invest heavily in the refurbishment of its homes to ensure that they remain desirable and meet the requirements of current and future residents. Moving on to the resident profile.
The increased number of RAD paying residents was a key driver of the AUD 141 million of net RAD cash inflow during the year. Excluding CPSM, the number of 100% RAD payers increased by 78 residents. The MPIR increased during the year, with no noticeable shift in consumer preferences away from DAPs to RADs. At this stage, we do not expect any material shift from DAPs to RADs during FY 2025. Lastly, the total number of residents at 30 June 2024 was impacted by the divestment of Regis McLeod in June 2024, with 48 residents transferring to the new owner. And with that, I'll hand you back to Linda.
Thanks very much, Rick, and I'll now move on to the strategy update and outlook. Starting with our strategy, where I'm pleased to confirm that the Regis Healthcare Board recently approved our next three-year strategy for financial years 2025-2027 , which will be launched over the coming months. Our strategic direction is informed by a deep understanding of the evolving needs and expectations of residents and clients, the opportunities within our sector, and the strengths that differentiate Regis from our competitors. Our new strategy sets a bold course for the next three years, focusing on three pillars of business excellence: being care and service excellence, a responsible business, and a future-ready company. These pillars will provide a structured approach to achieving and sustaining high performance across everything we do every day.
Our business excellence pillars are coupled with five targeted areas of growth, focused on bringing exceptional value to all of our stakeholders. Those five targeted areas are providing an exceptional concierge and dining experience, offering best-in-class lifestyle and additional services, building scalable home care hubs to meet continuing growing demand, expanding our residential aged care footprint through greenfield developments and acquisitions, and exploring innovative and new aged care models. All of this will be made possible through three key enablers that will support and underpin what we do over the next three years. We'll have an integrated model of care across all our care offerings, innovative education and training model to support our people, and digital innovation to enable and enhance all we do.
As we progress our strategy, we will build on our strengths and establish new capabilities so that we can meet the growing needs of our employees, residents, clients, their families, care partners, communities, and shareholders, and I look forward to providing you with a further update at our next investor presentation, so I'd now like to highlight a number of the FY 2024 operational accomplishments across the business. Within our clinical care and quality improvement domains, we introduced a continuity of carer model to ensure a consistent and person-centered approach to caring for residents. We continued to enhance our approach to clinical care through a number of targeted initiatives, resulting in significant improvements in care outcomes, including reductions across pressure injuries, restrictive practices, weight loss, falls with injury, and medication administration errors.
We continue to excel in customer experience, with 96% of residents responding that they were being treated with dignity and respect, and 94% responding that they were receiving service and supports for daily living that were important to their health and well-being. 98% of Aged Care Quality and Safety Commission accreditation requirements were met. In terms of our people, we implemented an early intervention program for injured employees to help them return to work earlier in a safe and supported way, which is supporting a substantial reduction in the number of lost time injury claims and claim costs. We achieved an industry-leading claims lost time injury frequency rate of six, significantly below the industry average of 24. We strengthened our business resilience framework, including training for our leaders in emergency management and crisis management.
Regis has made a significant investment in improving technology and systems, including the implementation of an electronic medication management system to improve medication safety. We matured our clinical governance systems through a broad range of strategies, including enhancing our incident management, feedback, and consumer engagement systems. More recently, we have designed a new people management system to improve the employee experience, increase efficiencies, and ensure accuracy and reporting compliance. This will be progressively rolled out in FY 2025. In growing our business, we acquired an integrated CPSM, comprising five premium homes in Southeast Queensland, to continue to grow our residential aged care portfolio. We progressed our greenfield developments, including Regis Camberwell, which is due to open to new residents in late 2024 . Finally, we increased our investment in refurbishment works across Regis homes to attract residents and future-proof the portfolio.
So moving to slide 19, Regis's sustainability program comprises five key pillars that support the United Nations Sustainable Development Goals. There are a few areas I would like to highlight on the ESG front. In terms of the environment, we are committed to responsibly managing the short and long-term impacts of our operations, including the use of natural resources, such as electricity and natural gas, and the production of waste. Regis is one of more than a thousand businesses that joined the Victorian Government Climate Change Pledge toward two targets by 20/50 : achieving zero net emissions and keeping global temperature rise to under two degrees. Regis offers comprehensive services to the local community across six home care hubs and nine day therapy and respite locations nationwide. These include personalized nursing and allied health care, meal preparation, social support, companionship, respite, and group therapy.
This closely links to a number of UN Sustainable Development Goals, including good health and well-being, gender equality, decent work and economic growth, and reduced inequalities. The annual Regis Employee Engagement Survey took place in March 2024 , and we are proud to report 86% sustainable engagement at a company level, which reinforces the work we are doing to create a positive career experience for our people. We are significantly outperforming the Australian benchmark by 6%, with strong results in employees feeling enabled to do their job effectively. 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 Regis board and management team 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 a quick update on our recent CPSM acquisition, which was our first acquisition since 2020. This transaction aligns with our strategy to broaden our residential aged care footprint in high-demand metropolitan locations with quality homes that have been recently built or refurbished, have an excellent accreditation history, and strong financial performance. We completed the acquisition on 1 December 2023, adding 800 staff and five homes in Southeast Queensland with 644 beds. The homes have performed strongly since acquisition, with average occupancy of 97%. Integration has been completed, with all homes operating under Regis's management structures, systems, and processes. So moving now to our development program.
After a pause in activity over COVID-19, where Regis and most of the aged care sector went on a capital strike due to underfunding and regulatory uncertainty, Regis resumed building activity in September 2022, with the greenfield development at Camberwell, Victoria. The construction of the new one hundred and twelve-bed Camberwell residential aged care home is nearing completion, with opening planned for late 2024. This four-story home will have one hundred and ten single ensuite rooms and one double room with ensuite, with a comprehensive range of care options, including permanent care, respite care, palliative care, and a memory support unit. Fit-out works are underway, and we have commenced our marketing campaign. In May, Regis concluded the construction tender process for Toowong, our latest greenfield development project in Brisbane.
This home will have one hundred and 23 beds across five levels, with many rooms having views of the city and nearby mountains. Construction is expected to commence in the coming months. In relation to our other pipeline greenfield developments, we are progressing our plans and project activities as construction costs moderate and investment returns improve. Regis has two additional development projects in Belrose and Carlingford, both located in Sydney, with land owned and development approval secured. These projects were tendered during FY 2024 and are currently undergoing assessment. With a solid track record in greenfield developments, Regis remains committed to constructing modern, purpose-built aged care homes that meet high standards of care and service for older Australians. With the tightening supply market, we expect that new developments will have strong consumer demand. We are also actively scouring the market for new development sites to add to our pipeline.
Moving to the outlook, Regis continues to adapt to a rapidly changing regulatory environment and expects to benefit over time from increased demand, improved workforce availability, additional government funding, and strategic growth initiatives. Regis's strong balance sheet, substantial debt facility, and disciplined management of the business support the active pursuit of further material acquisitions and greenfield developments to drive increased shareholder value and meet community need. The board and executive team are focused on improving the quality of care and services to our residents and clients, attracting and retaining the right people, investing in more efficient systems, improving work practices, and we continue to make significant investments in the refurbishments of our existing homes. I'd like to take this opportunity to thank each of our more than eleven thousand employees for their unwavering dedication, commitment, and compassionate care provided to our residents and clients day after day.
With that, I'll now hand back to the operator, and we're happy to open the meeting to 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 Lowe with JP Morgan. Please go ahead.
Thank you very much. Thanks for taking my questions. Could we just start with the supply and demand dynamics? I mean, you mentioned it a number of times in the presentation, but is your assessment that over the next 12, 24 months, that supply will start to pick up and match demand, or do you think we're in for a period of very tight supply and demand dynamics for a few years yet, please?
Thanks very much, David. Linda here. It's the latter. It's going to be very tight over the coming years. Providers won't have sufficient time to actually ramp up and create new homes in time for the increases that we're expecting through the baby boomer generation.
Okay, great. Thanks. And the implications then, I mean, how high can occupancy go? And obviously, the other option is pricing. That's sort of what your expectations are, or how much opportunity there might be to extract or to, to charge higher prices for a premium product, please.
Yeah. Thanks, David. So, I think occupancy will go to being as close to full as the sector can be, because there just won't be sufficient beds. And I think that the sector in general has seen pretty rapid escalation in occupancy across this calendar year. So it'll be very interesting to see the numbers that come out from government on the industry as a whole. In terms of pricing, one of the things we are waiting for is the government's response to the task force recommendations, and particularly the increase in room pricing that was recommended through the 2017 Tune Review.
Okay. Thank you very much for that. Look, just the other question or topic I wanted to touch on was, the RADs certainly exceeded my expectations. And I heard clearly, and I've heard clearly for many years now, that you're not ever seeing any change in the RAD versus DAP preference. But what was the key or why was it so much a higher number this time around, and what are your expectations going into FY 2025, please?
G'day, David, it's Rick. How are you?
I'm well, thanks, Rick. How are you?
Good, good. So I think, David, if you go back to the half, we turned the half at AUD 43 million positive RADs, and my expectations were ex-CPSM, that we'd probably end up around AUD 100 million. The reality is that CPSMs in itself added AUD 18 million, so that's the reason for this year. Compared to last year, though, we're still coming out of COVID. So, the number last year, I think, was also about AUD 40 million to AUD 50 million. I've got it in front of me. I think it was 43. So the increase to AUD 141 million, yes, it did surprise to a certain extent, but given we were coming out of COVID, it shouldn't have been all unexpected.
And in terms of this year, we've got a ramp up that's occurring at Camberwell, so I'd like to see how that goes before we make too many comments. But, you know, we'd be expecting to be strongly positive again in 2025.
All right. Thanks. And if I could just squeeze in one more. I mean, when you say coming out of COVID, it's not surprising. I think I understand you, but can I get you to just be a bit clearer on what exactly you're saying was the obvious change in retrospect, please?
When you have an occupancy increase, as we've had during the year, I think in resident numbers, ex-CPSM, we're up 145 residents. Of that amount, I think I mentioned in the call, we have 78 of those residents providing RADs. When you're averaging AUD 500,000 a RAD, you can see how that improves.
Yeah, all clear. Thank you very much. I'll go back in the queue.
Your next question comes from David Stanton with Jefferies. Please go ahead.
Morning, team, and thanks very much for taking my questions, just stepping in for Vanessa here. Just to follow up on David's question. I mean, just for Regis itself, is about 95% occupancy about as good as it can be expected over the medium term than the near term? I get your call that you're talking about 95% for FY 2024, but I'm more interested over the medium term. Can it get higher than that?
Thanks very much, David. Yes, it can. So we have a range of homes that operate, you know, around the 98% mark. So it can go up. It is location specific, of course, and quality of home specific at this point in time. But again, I'd just take you back to the tightening supply market. I think even, sort of the lesser quality beds across the sector will end up filling.
Understood. Thank you. And lots of things going on in terms of revenue increase, but also staff expense increase. Just for 2025, any sort of color you can give us about staff expenses as a percentage of revenue? Should we expect that to sort of increase, decrease, or basically stay flat for 2025, please?
... So David, I mentioned a couple of numbers which was code for expect this. I think the existing average aged care staff cost per resident per day, I quoted as AUD 297.
Yep.
Now, I would expect if you're using that number as you go forward, you're gonna have some EBA increases, you're gonna have an annual wage review, et cetera. So if you added 5-6% to that, that's gonna give you a fair indication as to where that's gonna go. Revenue-wise, you know, it's difficult to predict, and I say this because we're expecting an AN-ACC boost come 1 October. That AN-ACC boost is meant to cover for the Care Minutes increase for 2025. It's meant to cover for AWR increases for 1 July, including a catch-up. So cut a long story short, I think we need to see where AN-ACC goes in October before we start talking about margin differentials between revenue and labor cost.
But from a labor perspective, it's AUD 2.97 in June, and we'd expect that to go up, you know, 4%-5% during the AN-ACC.
Understood. Very, very clear. And I guess then to that end, it's probably too early to call a, you know, percentage, EBITDA percentage margin change for 2025 on that basis?
Absolutely, too early to call. We really need to see the AN-ACC increase. We need to see the back pay, and I suspect we'll have more to say come the AGM.
Understood. And my final one, I promise. Can you give us some color around CapEx for FY 2025 , please?
Expect, expect a little bit more than what you have. So let's break this down. From a greenfields perspective, it's broken down this way in the presentation, where Camberwell is almost done, but now we're gearing up for Toowong. So leaving that aside, the refurbishment number you're seeing in the presentation, you should expect to see at least that plus some in FY 2025. We've made the comment that we are now coming out of COVID, playing a bit of COVID catch up, but also gearing up for the future residents of our homes. So you should expect to see an uplift in all our refurbishment going forward in the medium term.
Thank you. Very clear.
The next question comes from Craig Wong- Pan with RBC. Please go ahead.
Thanks. Just on that, staff cost of AUD 2.97, that exit rate, does that take into account the lower agency costs that you mentioned? I was just wondering if that provides a further tailwind to that number.
Our 297, Craig, includes all staff costs, so it would include agency that's come off in the second half.
Okay. So that... I was just trying to understand that kind of exit rate, though. Is that you've already, we're already experiencing lower agency costs then, or is that a further-
Yes.
Benefit to come to in?
No, it's already in that number because it's the number for June, so by definition, the agency's already come off.
Yep. Okay. And then just my last question on Camberwell, that's, you know, due to open late 2024. Given the tight supply, do you think the ramp up of that home will be quicker than usual? And can you remind us what the typical ramp up for a new home is?
Yeah, Craig. Hi, it's Linda here. Typical ramp up would be around eighteen months. We like to stage ramp ups carefully to make sure that we're not introducing unnecessary risk into a new home. We will ramp up the staffing according to the resident numbers that come through, but we'll also manage the number of admissions per week to make sure that there's no unnecessary risk. If we can do it faster, then we will. But yeah, on average, plan for eighteen months.
Okay. Thank you.
The 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?
Yep.
Yes. Thanks, Tom.
Great, and sorry, at the risk of flogging a dead horse, I was just gonna ask one more occupancy question. Just given-
Sure.
Just given the home closures, Rick, are you able to sort of help us with the average available beds or available beds going into FY 2025? Is it that 7,461 number? How should we be thinking about that?
Okay, so let's go back a step. So in FY 2023, we averaged 6,980 available beds. So this year you've had CPSM come on, and as you quite rightly point out, McLeod's gone and Western is decanting. So in terms of where we see it going forward, absent acquisitions, I'd be banking on a number around 7,400 for FY 2025 as your available beds.
Got it. That's clear. And then just in terms of sort of working back to occupancy, is noticing, you know, your spot rate's very strong. Is 95% plus on that denominator a fair way to sort of think about FY 2025?
Yes. As I pointed out in the call, Tom, we're sitting comfortably above 95%, 95.5% on that lower base, and we'll push towards 96% and see how we go in the next few months.
Got it. Thanks for that. Next one I sort of wanted to ask was just around staff costs, noting Dave's question earlier. You're at two hundred and ten, two hundred and eleven care minutes in Q4. The step-up's only to 215 , and you sort of noted before your AN-ACC pricing should include that step-up. So you're sort of already paying for, you know, staff costs you're investing in ahead of the curve there. Shouldn't that be, if it comes through in the AN-ACC, a tailwind to profit?
No, it doesn't quite work like that, Tom. So, there are two different things that I think you're conflating there. One is the sector average care minutes, and the other one is Regis' care minutes. So while the sector was expected on average to achieve two hundred minutes, coming out of Q4, the Regis target was actually two hundred and twelve minutes. So our two hundred and ten is against a target of two hundred and twelve on average. So then you've got to add fifteen minutes, on top of those numbers.
It's a little, it's a little confusing, Tom, because this is all driven by resident acuity. So in essence, the acuity of our residents is higher than what you would see elsewhere. Having said all that, when AN-ACC bumps up in... So we haven't invested ahead of the curve is the short answer. We will need to continue to invest come October, but we're yet to see our target for that quarter, and then our recruitment team will work behind the scenes to make sure we're close to that number for the quarter that ends December. So the reality is, for the sector, 215 is the target for the quarter end of December. Our target, I suspect, will be over 220.
I don't know, but I suspect it'll be over 220, given the acuity of our residents versus the sector.
Got it. Okay. No, understood, Linda. So you, you're at two twelve now, and adding fifteen to that, you're more like two two seven. So there is an incremental sort of headcount investment into 2025 .
The other comment I would make, Tom, and Linda may want to make a comment as well, is, you know, we hear that government isn't keen for providers to make margin out of care funding. So if AN-ACC was to increase by, say, 7.5%, which is a 200 going to 215, and then, say, our targets move by 7%-7.5%, I expect it'll be just an in-and-out revenue uplift and cost uplift with very little to no margin on that.
Yeah, agree.
Got it. No, that's clear. Just last one from me, and picking up on some of your sort of later comments there, Linda, just around build cost moderating and you guys searching aggressively for development sites. Has there sort of been a change in tone around brownfields and greenfields? I thought you were sort of waiting to see the detail of the task force recommendations before you push ahead there, but it sounds like you're sort of confident enough given what you're already seeing.
It's a bit of both, to be honest, Tom. So, Camberwell was obviously well in train. We had expected to know the government's response to the task force recommendations by now, which is why we tendered the two homes in Sydney, as well as Toowong in Queensland. So we have decided to go ahead with the build in Toowong. We are still just waiting for the task force response before we press go on Belrose and Carlingford. If the response is favorable, we're ready to move on those Sydney developments basically straight away. And again, given the lack of new supply coming into the market, from a community perspective, we would really want to see lots of providers pressing go on building developments to cater for the need that's coming.
Understood. Thanks for taking my questions.
Thanks, Tom.
The next question comes from Steve Wheen with Jarden. Please go ahead.
Yeah, thanks. Pardon me. Sorry. Thanks for taking my questions. I just wanted to ask about some of the Aged Care Act reform items, in particular, the RAD retention. What sort of sensitivity do you think your RAD-paying residents would have to this initiative if there was some retention? And how do you sort of. What's your interpretation of that sensitivity, and could you ultimately end up with a situation where they all start switching to DAPs in an environment where you can take some amount of retention?
Thanks, Steve. I'll take that one. So the RAD retention, the first point to note is there used to be a RAD retention that was accepted by consumers. It was removed, so it's a reintroduction of something that used to be in place. All of the work that's been done in terms of surveying consumers by the consumer peaks in particular, and the Council of Older Australians, all shows that consumers are happy to pay more for better quality accommodation and services. So we're not anticipating any great shift from RADs to DAPs. It's still very much dependent on a person's individual circumstances, with you know, sort of good financial advice from a professional.
Yep, understood. Okay, second question I had was just in response to your occupancy percentages. Are you excluding Nedlands already, even though it's not yet closed?
Nedlands isn't closing. Nedlands is a home that we have on the same site as Western. Western is closing.
Okay.
Nedlands will remain.
Okay, so the question then-
Steve, when I quoted-
- applies to Western.
When I quoted the 7,400 earlier, that takes into account the closure of Western.
However, the occupancy numbers that we have quoted today for FY 2024, Western is included in those numbers.
... Yeah, okay, got it. Just a question now on the development pipeline and in particular, the cost to build. Are you able to give us some indication of what the cost to build per bed of Camberwell looks like relative to what Toowong now looks like? Is there any sort of metric that you can provide on that front, just to kind of give us an understanding of how construction costs may be moderating?
I'll give that a go, Steve. So with Camberwell, if you look at prior presentations, we called out the cost to build, so ex-land, and again, remembering these negotiations were all conducted pre-COVID. So the benefit of a lower cost that came in at less than 400,000 a bed, ex-land.
Yeah.
When you're now talking Toowong, you're talking in excess of AUD 500,000 per bed, cost to construct.
Yep. Excellent. Yep. Okay, thank you. That's helpful. Final question I just had is just with regards to your pipeline of non-income producing assets. You know, do you have many more to go, and what could we expect to see on that front, for FY 2025?
Look, there's potentially a little bit to go, Steve. These are, these things are difficult to call out because they don't just happen overnight, so maybe a little bit more to go, but we prefer to wait and see before we call anything out.
Fair enough. Okay. Thanks, guys.
The next question comes from David Bailey with Macquarie. Please go ahead.
Morning, Linda. Morning, Rick. Maybe just on the task force recommendation, slide seven. Just in terms of timing, does the Act need to be put through before some of these recommendations are enacted? And any sort of rough estimates of what these recommendations could look like from a dollar perspective or a dollar per resident per day perspective?
Thanks, David. So a couple of things there. We gather from communications coming out from government that they are waiting for the Aged Care Act, and will include the chapter on funding and finances in the Act. Technically, some of these could be implemented ahead of the Act through existing levers that government has available, but I think they are disinclined to do that. We are, and you will have read the same media reports that we will have read, over the last couple of weeks, that negotiations continue, that they're constructive, but they are looking for bipartisan support before they actually table the bill in Parliament. There's still discussion that that might be in the next sitting period, but it wouldn't come into effect until 1 July 2025.
I might let Rick talk about dollars, although I suspect that it's difficult for us to comment on until-
Yeah.
We see the detail.
Yeah, David, look, yeah, as Linda said, it's difficult to speculate, so, but if you go through some of the things on slide seven, probably the easiest one is the everyday living. And again, I always have guarded comments. With no strings attached, an AUD 1 increase in the basic daily fee would add about AUD 2.6 million to our bottom line. And again, remembering these are gonna be going, my understanding is these are gonna be phased in, so this is for new residents going forward as opposed to current residents. So when it's fully ramped up, an extra AUD 1 of BDF is AUD 2.6 million. Similar to any sort of RAD retention, whether it's 2% or 3%, based on an average rate of 517,000, at 2%, you're talking 10,000 retention.
We also understand it could be capped over a five-year period, but we're speculating.
Yes. Yep, no worries, and then just following up on some of the earlier questions, it sounds like build costs have sort of moderated, maybe slightly down, but is it the expectation for the industry that these task force recommendations need to come through before we'll see a material step change in the supply of places?
Yeah, good question, David. So when I use the word moderate, I didn't mean coming down. I just meant, they've stopped escalating as sharply as they have over the last five years. And to your second question, I think your assumption is correct that, providers will be waiting to see, the response to the task force recommendations before, you see sort of large scale, building across the sector.
Right. So we've got a while for recommendations to come through. It's gonna take a few years to build, therefore, that the earlier questions around occupancy rising is probably true-
Correct.
for the rest of the sector.
Absolutely, it is.
Yeah. Thank you.
There are no further questions at this time. I'll now hand back to Dr. Mellors for closing remarks.
Thanks very much to everybody on the call for your interest, and we very much look forward to speaking with many of you over the coming days, and for everybody else, we'll have our next update most likely at the AGM. Thanks very much.
That does conclude our conference for today. Thank you for participating. You may now disconnect.