Regis share price drops on poor FY20 results

The Regis Healthcare Ltd (ASX: REG) share price has dropped 3.7% today following the release of FY20 results.

Regis Healthcare is an aged care provider. Through its services and facilities, Regis provides residential, respite and dementia care to help residents and home care clients. The company operates 63 facilities with 7,078 aged care places across all states and the Northern Territory.

How did Regis perform in FY 2020?

The Regis share price was hit hard by the COVID-19 pandemic in the second half of FY 2020, suffering a number of coronavirus outbreaks in its aged care facilities. Notably, the second wave of cases in Melbourne has affected 5 Victorian homes, where 74 people were infected and 10 residents have died.

For the year ended 30 June 2020, the healthcare provider saw underlying net profit after tax (NPAT) drop to $21.5 million, a decline of 54.4% on pcp. Regis grew total revenue from services to $677.87 million but this was largely due to additional government funding in June.

The group faced employee and other cost increases in FY2020. In addition, Regis incurred direct COVID-19-related costs of approximately $3.465 million. These included purchase of  additional protective and cleaning equipment. The company said it had incurred more COVID-19 related expenses since 30 June 2020.

Occupancy rates across residential aged care homes have dropped from 91.7% last year to an average of 90.3%. This is a worrying sign for a company already battling with increased costs.

Net cash flow from operating activities were reported at $127 million, down a huge 42% from the year before. Net cash inflows were negatively impacted by reduced earnings, lower contribution from 2019 ramp up homes that have been approaching mature occupancy levels, and the pandemic impact.

During the year, Regis repaid $71.0 million of bank borrowings. In a small positive, the company’s net debt of $236.7 million is a 22% decrease on the previous corresponding period. The company has debt facilities of $520.0 million, of which approximately $278.2 million remains undrawn.

What now for the Regis share price?

Given the current economic environment and the ongoing impact of the Royal Commission into Aged Care Quality and Safety, the Regis board has declined to put forward earnings guidance at this stage. A business update will be provided at the annual general meeting on 27 October.

The Regis share price has tumbled in 2020, falling 48% so far this year. At the time of writing, the Regis share price is trading at $1.30, a 3.7% drop since the market opened today. 

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Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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