Negative Points

• Government funding (AN-ACC) indexation did not include a margin uplift, negatively impacting earnings.

• Staff costs increased 19% to over $1 billion, driven by wage increases and acquisitions, putting pressure on margins.

• RAD retention earnings in FY26 were only $1.3 million, below initial expectations due to delayed uptake and timing of RAD payments.

• Higher Everyday Living Fee (HELF) uptake is still below peers, with a transition year expected to be a revenue headwind.

• One-off costs of $13.7 million related to acquisitions, including $10 million in stamp duty, and $4.3 million for clinical system rollout.

• Effective tax rate was over 33% on statutory profit, reflecting non-deductible acquisition costs.

• CapEx increased significantly to $143 million, with further increases expected, potentially impacting near-term cash flows.

• Occupancy in shared rooms is only around 90%, indicating limited upside and potential for portfolio renewal costs.

• The sale of Ayr and Home Hill homes, while generating a gain, reduced the portfolio size and may impact future revenue.

• Uncertainty around future AN-ACC indexation and government funding settings remains a risk to cost recovery.

Q & A Highlights

Q: Can you provide an update on the ramp-up of RAD retention earnings, given the FY26 contribution of $1.3 million was below initial expectations, and how will this progress to the $50 million per annum target? A: Rick Rostolis (CFO) explained that the lower-than-expected FY26 contribution was due to two factors: the delay of the new Aged Care Act from June to November 2025, and an influx of residents in October 2025 before the 2% retention came into effect, which weakened uptake in November and December. Additionally, residents are taking up to six months to pay their RADs, and the 2% retention can only be taken once cash is received. The company still expects the $50 million per annum run-rate to be fully phased in by FY29, with a decent step-up in FY27 and a larger increase in FY28.

Q: What is the potential for further accommodation price increases, given the recent 10% uplift on 70% of rooms, and how many rooms remain below the $750,000 threshold? A: Rick Rostolis (CFO) stated that the proportion of rooms priced below $750,000 is now well under 50%, down from around 55% a year ago, and is currently in the 30%-40% range. There is still scope to increase prices on these rooms, as well as potential to go above the $750,000 threshold through the IHACPA process, which, while not easy, can be completed within three months if all required data is provided.

Q: How should we think about the FY27 outlook for occupancy, and is there room for it to increase from current levels? A: Andrew Kinkade (CEO) noted that the "hard work" on occupancy has largely been done, with single-room occupancy at circa 97% and shared-room occupancy at circa 90%. While there is some upside in shared rooms, the bigger opportunity lies in pricing and mix rather than occupancy. The company will place more emphasis on pricing optimization going forward.

Q: What are your expectations for staff expenses as a percentage of revenue in FY27, and will there be margin expansion? A: Rick Rostolis (CFO) indicated that staff costs have risen to 78% of revenue. Assuming a neutral impact from the upcoming AN-ACC indexation, the company expects to maintain staff costs at around that 78% level, supported by operational efficiency programs. This suggests a focus on cost control rather than significant margin expansion in the near term.

Q: Can you provide metrics on your Higher Everyday Living Fee (HELF) uptake versus peers, and what would achieving peer-level uptake mean for earnings? A: Andrew Kinkade (CEO) acknowledged that FY26 was a transition year for HELF and that the company is still learning. He noted that peer uptake for new residents taking the full package is around 60%, a level Regis is working towards but has not yet achieved. HELF is seen as a key way to mitigate the gap between government funding and cost inflation, and to deliver more personalized care. The company is confident it will build on this over the next 12 months.

Q: What is the expected capital expenditure for FY27, and how will it be allocated? A: Rick Rostolis (CFO) guided that CapEx should be north of $150 million in FY27, with less allocated to land acquisitions and more to construction activity. This includes finishing Toowong, ramping up Carlingford, and starting construction on other sites like Coburg. Maintenance and refurbishment spending is expected to remain at similar levels to FY26.

Q: Why has the timing for the Belrose greenfield development changed, and what is the company's appetite for greenfield projects? A: Andrew Kinkade (CEO) explained that the Belrose project was put on hold due to site-specific factors and that it is not as compelling as other opportunities in the pipeline when measured against the company's investment hurdles. Regis maintains a strong appetite for growth via both greenfields and M&A, but remains disciplined in capital allocation.

Q: Do you have any concerns about the long-term future of RADs, given the government's review of the sector? A: Rick Rostolis (CFO) expressed confidence that RADs are here to stay, citing the government's recognition of the need for 10,000 new beds per annum and the lack of a viable alternative funding source. He noted that the government is exploring other mechanisms like interest-free loans, which acknowledges the value of RADs as a source of capital. Andrew Kinkade (CEO) added that the government's recent comments on the need for capital to meet future demand support the continued role of RADs.

Q: What is the expected impact of the AN-ACC indexation on cost recovery, and will it cover wage increases? A: Rick Rostolis (CFO) stated that the AN-ACC indexation is expected to cover direct care costs, including EBA increases of 3%-4% and the annual wage review of 4.75%. However, he noted that costs related to care are rising above CPI, and the expectation is that the indexation will keep the company "whole" on a neutral basis, though he did not provide a specific percentage.

Q: What was the financial impact of the divestment of the Ayr and Home Hill homes, and does it provide a tailwind for FY27? A: Rick Rostolis (CFO) described the impact of the Ayr and Home Hill divestment as "immaterial" and "not worth even discussing" in the context of the overall portfolio. The sale generated a one-off gain of $25 million in FY26, but the ongoing earnings impact is negligible, so it does not provide a significant tailwind for FY27.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .