Rising Costs and Regulatory Burdens Weigh Heavily on Australian Unity’s Profitability

Revenue Growth Amidst Sector Challenges

Australian Unity Limited has reported a 3.6% increase in revenue to $1.13 billion for the half-year ended 31 December 2025, reflecting steady demand across its health, wealth, and care platforms. However, this topline growth masks significant pressures beneath the surface, as earnings plunged by over 70% compared to the prior corresponding period.

The decline in profitability is largely attributed to rising operational costs driven by inflation, regulatory reforms, and substantial investments in transformation and integration activities. These factors have increased expenses across all business platforms, from Home Health to Residential Aged Care and Wealth & Capital Markets.

Transformation and Regulatory Impact

The company continues to navigate a complex regulatory environment, notably preparing for the Aged Care Act 2024, which has raised industry standards but also increased administrative burdens and costs. Australian Unity achieved system readiness for this legislation, a critical milestone given the sector’s evolving compliance landscape.

Additionally, the delayed rollout of the Support at Home Program and mandated wage increases under Fair Work have further squeezed margins, particularly in the Residential Aged Care segment. Despite expectations that new funding models would offset wage hikes, this has not materialised, adding to cost pressures.

Leadership and Capital Strengthening

Midway through the reporting period, Australian Unity completed a leadership transition with Kelly Bayer Rosmarin formally taking the helm as CEO in December 2025. This change signals a renewed focus on accelerating transformation and integration efforts for the remainder of the fiscal year.

Financially, the group bolstered its balance sheet by issuing $209.8 million in Mutual Capital Instruments and releasing capital following the transfer of its banking business to Bank Australia Limited. These moves have improved liquidity and gearing ratios, positioning the company to better manage ongoing investments and sector challenges.

Platform Performance Highlights

Each of Australian Unity’s core platforms faced earnings declines. Home Health saw revenue growth partly due to the acquisition of Plena Healthcare but experienced margin compression from regulatory reforms. The Insurances platform contended with rising private hospital costs and competitive pressures, leading to reduced gross margins. Residential Aged Care benefited from higher occupancy but absorbed increased wage and care costs. Wealth & Capital Markets faced lower revenues following strategic divestments and fund management changes.

Despite these challenges, operational improvements and integration activities continue, with the company delivering increased safe minutes of care and maintaining strong occupancy rates in aged care facilities.

Looking Ahead

Australian Unity’s focus for the remainder of FY2026 is clear: to advance its transformation agenda and integration programs while adapting to the evolving regulatory environment. The leadership team’s review of the operating model aims to ensure the business is resilient and well-positioned to capitalise on future opportunities in the health and aged care sectors.