The Regis Healthcare Ltd (ASX: REG) share price has come under heavy selling pressure on Friday.
At the time of writing the aged care provider’s shares are down a disappointing 14% to $2.74.
Why is the Regis Healthcare share price crashing lower?
Investors have been heading to the exits in their droves this morning following the release of a trading update.
In December Regis Healthcare’s year to date occupancy had fallen to 92%. And as of December 17 its spot occupancy rate was 91.5%, down from 92.4% at the end of June.
Management blamed this decline on the challenging industry conditions that the sector continues to experience. It notes that recent data shows that industry occupancy stood at 89.4% for FY 2019, which is the lowest in three years.
One small positive, though, is that Regis Healthcare has managed to keep its non-wage costs in line with its targets.
What impact will this have on its financial performance?
In light of this weaker occupancy and an expected increase in wage costs, Regis Healthcare has downgraded its earnings guidance for FY 2020.
Previously the company was expecting to deliver normalised EBITDA of around $105 million and normalised net profit after tax of ~$38 million in FY 2020. This was already going to be a decline from the $111.4 million and $47.2 million achieved in FY 2019.
However, it now expects normalised EBITDA of $92 million and normalised net profit after tax of $28 million. This represents a ~12.5% and ~26.5% downgrade, respectively, to its previous guidance.
Furthermore, management warned that its guidance assumes no further significant decline in occupancy during FY 2020. Which is far from guaranteed given current trading conditions.
This news, in conjunction with Estia Health’s update last week, has put pressure on the Japara Healthcare Ltd (ASX: JHC) share price today. Its shares are down a sizeable 7.5% in morning trade.
Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.
One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…
Another is a diversified conglomerate trading over 40% off its high, all while offering a fully franked dividend yield over 3%...
Plus 3 more cheap bets that could position you to profit over the next 12 months!
See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.
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.