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Regis Healthcare share price crashes 11% lower on disappointing trade update

One of the worst performers on the local market on Thursday has been the Regis Healthcare Ltd (ASX: REG) share price.

The aged care provider’s shares dropped as much as 11% to $2.44 in morning trade. They have since rebounded slightly, but are still down almost 8% at the time of writing.

Why did Regis Healthcare’s shares crash lower?

Investors have been hitting the sell button in a panic on Thursday after Regis Healthcare released a disappointing trading update.

According to the release, in March the company reaffirmed its full year guidance for normalised net profit after tax to be in the range of $47 million to $51 million and normalised EBITDA to be ~$113 million.

This morning the company revealed that full year normalised net profit after tax is now expected to be at the lower end of its guidance range.

And while its full year normalised EBITDA is still expected to be $113 million despite a decline in its occupancy rate to 91.6% from 92.8% in the first half, its EBITDA guidance for FY 2020 appears to have spooked investors.

Normalised EBITDA in FY 2020 is expected to be ~$105 million, which will be a 7% decline year on year.

Management advised that this reflects the benefits from the ramping up of its facilities being offset by the difference between the annual indexation (COPE) increase to government care income and annual expense increases. These are anticipated to be circa 1.4% and 3%, respectively.

On the bottom line, normalised net profit after tax for FY 2020 is expected to be ~$38 million, down over 19% from the low end of FY 2019’s guidance range.

This is the result of higher depreciation expenses due to the continued ramp up of the facilities delivered from the development program.

There has been a mixed reaction to the news from other aged care providers today. The Estia Health Ltd (ASX: EHE) share price has charged almost 3% higher on Thursday, whereas the Japara Healthcare Ltd (ASX: JHC) share price has tumbled 2.5% lower.

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Motley Fool contributor James Mickleboro 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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