Half Year 2020 Regis Healthcare Ltd Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

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

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

Question: Thomas Godfrey - UBS Investment Bank, Research Division - Analyst : If I could just start, firstly, on your government revenue per occupied bed day. Can you just sort of step us through what the moving pieces were

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

Question: Thomas Godfrey - UBS Investment Bank, Research Division - Analyst : But it wasn't in the first half of financial year '19, was it? Andrew Grayson;Acting Chief Financial Officer That's correct.

Question: Thomas Godfrey - UBS Investment Bank, Research Division - Analyst : Okay. So lower acuity residents entering in the first half. Just in terms of your steady-state facilities, though, are you seeing any level of acuity creep in your acuity scoring? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 26, 2020 / 12:01AM, REG.AX - Half Year 2020 Regis Healthcare Ltd Earnings Call

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

Question: Thomas Godfrey - UBS Investment Bank, Research Division - Analyst : Okay. Understood. And then maybe just one last one to just sort of close out. I think, initially, when you said fiscal '20 guidance, you were speaking to around $3 million of nonrecurring sort of project team costs. I'm just wondering how that tracked to those expectations in the first half. Andrew Grayson;Acting Chief Financial Officer So principally, the -- I guess those costs will be incurred in the second half and that relates to the acquisition of the 2 homes in here and Queensland. And so there will be an increase in those costs in the second half relative to the first half.

Question: Matthew Johnston - Macquarie Research - Analyst : Maybe just first up on expectations of where you think net debt might land for the full year '20. Andrew Grayson;Acting Chief Financial Officer So it is -- I think that principal factor there is our net RAD cash flows. So we don't actually provide a forecast of our net debt, but we set out that in the period up to 30 June, 2021, we're expecting $50 million to $70 million of additional RAD cash flow. So that will be used, or what's available at least, to repay debt.

Question: Matthew Johnston - Macquarie Research - Analyst : Okay. Previously, you have because it was sort of $60 million for aged care and then another $10 million for retirement. So I'm just trying to think second half cash flow from residential aged care providers sort of declines. You've got a $12 million cash dividend. I'm just trying to understand without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 26, 2020 / 12:01AM, REG.AX - Half Year 2020 Regis Healthcare Ltd Earnings Call where you guys think you might land because on the 18-month view, it might look okay, but still, there's probably some sensitivities in the next 6 months.

Question: Matthew Johnston - Macquarie Research - Analyst : Okay, understood. I'll leave it there. Just on in -- my next question then on -- if you look at the interest rates, the interest cash costs in your notes for the RADs it tops 16%. I'm just trying to get an understanding on the RADs held for residents who have left. I'm assuming that is reflective that it's going up. Andrew Grayson;Acting Chief Financial Officer Yes, that's correct.

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

Question: Matthew Johnston - Macquarie Research - Analyst : So I think -- I'm just talking around the spread. So previously, it was $90 million to $140 million, so $50 million -- now it's only $20 million, $50 million to $70 million. So looks like it's the bottom end of expectations now. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 26, 2020 / 12:01AM, REG.AX - Half Year 2020 Regis Healthcare Ltd Earnings Call

Question: Peiting Liang - JP Morgan Chase & Co, Research Division - Analyst : I just had another question around your nonstaff costs. So it seems, such as administrative and resident care expenses, it rose about 9% in the half. Can you just give us a little bit more color around what drove this increase? Andrew Grayson;Acting Chief Financial Officer Yes, it's generally across the board in various costs, including direct cost of care and indirect cost such as things like utilities and insurance costs and things like that. So it is a general increase we are seeing.

Question: Ronan Barratt - Moelis Australia Securities Pty Ltd, Research Division - Analyst : Look, just interested in whether there have been many home closures nearby to Regis facilities across FY '20 to date and whether you have gained any residents as a result.