Funding Gap and Wage Pressures Challenge Regis’ Growth Ambitions
Regis Healthcare reveals a funding update amid government changes, projecting modest EBITDA growth despite a funding gap and rising wage costs.
- AN-ACC funding increase revised down to 2.6%, below industry headline of 4.7%
- Rising staff wages expected to absorb most funding gains
- Successful acquisition of 4 Rockpool aged care homes completed
- Occupancy remains strong at 96.5%, supporting cash flow
- FY26 underlying EBITDA forecast between $130m and $135m, up 3%-7%
Funding Update Amid Government Changes
Regis Healthcare has provided a detailed update on the recent Australian Government adjustments to residential aged care funding, effective from 1 October 2025. While the government announced a headline 4.7% increase to the AN-ACC (Australian National Aged Care Classification) industry starting price, Regis expects to receive a more modest 2.6% uplift. This discrepancy stems from the reweighting of the National Weighted Activity Unit (NWAU) across resident classifications, which has reduced funding for several key resident groups under the AN-ACC framework.
Rising Costs Offset Funding Gains
The funding shortfall is compounded by anticipated increases in staff costs. Recent wage decisions, including the Fair Work Commission’s Work Value Case and annual wage reviews, have pushed up direct care worker salaries. Regis notes that the increase in the Hotelling Supplement, another government funding component, will be fully absorbed by these higher staffing expenses, leaving little room for margin expansion.
Operational Highlights and Growth Initiatives
Despite these challenges, Regis continues to demonstrate operational strength. The company successfully completed the acquisition of four Rockpool aged care homes on 1 September 2025, expanding its footprint. Occupancy rates remain robust at 96.5%, underpinning steady net Refundable Accommodation Deposit (RAD) cash inflows. These inflows are critical for maintaining operating cash flow and funding ongoing growth initiatives.
Outlook and Development Timing
Looking ahead, Regis forecasts FY26 underlying EBITDA in the range of $130 million to $135 million, representing growth of 3% to 7% compared to FY25. However, the company signals potential delays in greenfield development projects due to uncertainties around sustainable sector funding following the recent government announcement. This cautious stance reflects the broader sector’s sensitivity to funding policy shifts.
Balancing Growth with Funding Realities
Regis’ update paints a picture of a company navigating a complex funding environment with measured optimism. While government funding changes fall short of expectations and wage pressures mount, the company’s strong occupancy and strategic acquisitions provide a foundation for modest growth. Investors will be watching closely to see how Regis balances these competing forces in the year ahead.
Bottom Line?
Regis faces a funding squeeze but aims to deliver steady EBITDA growth amid sector uncertainties.
Questions in the middle?
- How will Regis manage rising wage costs if government funding remains constrained?
- What impact will delayed greenfield developments have on long-term growth?
- Could further government funding revisions alter Regis’ financial outlook?
