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Regis Healthcare Ltd share price falls on court decision

The Regis Healthcare Ltd (ASX: REG) share price has fallen after the initial positive start to the day. Regis Healthcare is one of Australia’s largest aged care operators.

Today, the company announced an update on the Federal Court Judgement on Aged Care Legislation.

On 2 March 2018 the Federal Court of Australia decided that Regis’ Asset Replacement Charge (ARC) was not consistent with the Aged Care Act 1997.

Following the judgement, Regis ceased charging the ARC effective 2 March 2018 and has now commenced a process to refund (with accrued interest) all residents who had previously paid the ARC.

Regis has previously advised that it made a provision in its FY17 financial accounts reducing profit by an amount equal to the amount of ARC revenue recognised. As a result, Regis said that there will be no impact on the net profit after tax (NPAT) and earnings before interest, tax, depreciation and amortisation (EBITDA) in FY18.

Ross Johnston, Regis’ managing director, said “Regis believed it was important to seek clarity in relation to the Department of Health’s guidance on these fees and charges and appreciates the Court’s consideration of our application. We are refunding the fee, plus accrued interest, to all affected residents. Regis is in the process of contacting residents and/or their representatives directly.”

Foolish takeaway

This judgement isn’t really a surprise, but I can understand why Regis wanted to recoup lost revenue another way somehow. If you believe in the aged care sector as a good investment then I don’t think this judgement changes the attractiveness of Regis as a long-term investment idea.

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Motley Fool contributor Tristan Harrison owns shares of Regis Healthcare Limited. 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.