Regis Healthcare Limited (REG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Graham Hodges and I'm the Chairman of your company. On behalf of the board, I would like to welcome you to our Annual General Meeting, which is being held virtually for the first time. Our AGM is being held virtually rather than in person due to restrictions on public gathering as a result of the COVID-19 pandemic. Should we experience any technical issues during the course of the meeting, I will call a short recess to allow the issue to be addressed. If a longer recess is required, we will resume the meeting at 3:00 p.m. We've actually just recently experienced the line going down. We -- if we do that, if that happens again, we will look to restore it very quickly. I've been informed that a quorum is present. And as it is now a little after 10, I declare the 2020 Annual General Meeting of Regis Healthcare Limited open. A notice of the meeting has been distributed and will be taken as read. Details about how shareholders can participate have been set out in the notice of meeting and an online virtual AGM guide, which has been made available to all shareholders. Both documents are also available to be viewed and downloaded at the bottom of your screen. I appreciate that some shareholders may have to leave before the end of the meeting. I, therefore, formally open the poll on resolutions and encourage shareholders to submit their written questions online now. Voting in today's virtual AGM meeting will be conducted through a poll -- on a poll through the virtual meeting platform. As polls will remain open until 5 minutes after the conclusion of today's meeting, we will move through the items of business, and I'll respond to questions from shareholders and proxies. Before I proceed to the formal business of the meeting, I'm pleased to introduce your Board of Directors. Dr. Linda Mellors, our Managing Director and CEO; Professor Christine Bennett; Bryan Dorman, Sylvia Falzon, Matthew Quinn and Ian Roberts. Linda and Sylvia are present with me at Regis' national office in Melbourne, but are socially distanced from me and each other. My other colleagues on the Board are attending remotely via the online platform. I would also like to welcome our executive team who are attending via the online platform today. Finally, the company's auditor, Ernst & Young, is represented today by Brad Pollock, who is available to answer questions in relation to the conduct of the audit and the auditor's report. I would now like to outline the program for this morning. Shortly, I will present my address. This will be followed by an address from Linda Mellors, your Managing Director and CEO. I will then go through some procedural matters for the AGM. Finally, we'll move on to the formal business of the meeting, and there are 3 items of business today: the adoption of the 2020 financial statements and report; the Director election; and the adoption of the remuneration report. Please note, this is the shareholders meeting only, only shareholders, their attorneys, proxies and authorized company representatives are permitted to vote and ask questions at the meeting. Shareholders attending the meeting online will be able to cast their vote using the electronic voting button once online registration is validated. If you encounter any issues casting your vote using the online platform, please refer to the virtual annual meeting online platform guide, which is also includes a help line number. The item in relation to the adoption of the financial statements and the report and report will be your opportunity to ask questions relating to the management and operations of the company generally. I encourage shareholders attending online who have questions to send their questions through as soon as possible. Please click on the ask question button, type your question and submit click. Please ensure your questions are relevant to shareholders as a whole. The company will endeavor to address as many of the more frequently raised relevant questions as possible during the course of the meeting. However, there may not be sufficient time available at the meeting to address all of the questions raised. After the formal business is finished, the meeting will be closed. I'd now like to turn to my address to the meeting. First, I want to express my sympathies to the families and friends of the 12 Regis residents who died with COVID while in our care. They were all valued members of the Regis community and their deaths were deeply upsetting for all, including our staff and their fellow residents. Linda will have more to say about this, but the Board has nothing but praise and admiration for the courage, dedication and the care our staff have shown through this extraordinary stressful period. While many frontline health care workers have rightly been praised for the handling of COVID, at times, the aged care workforce has been subject to unfair criticism. While there have been instances of poor management, planning and decisions on the part of some operators with tragic consequences, going forward, it is important to recognize that successful management of the virus must involve providers, health officials and governments working effectively together. Despite the challenges the pandemic has created, our priority was and continues to be to keep our residents and staff safe. Consequently, significant funds have been invested in personal protective equipment, infection control, staff training and technology to ensure our residents stay connected with their loved ones. While Regis has done well in managing our clinical care responsibilities to our residents and their families, there is no doubt COVID has been detrimental to our business performance. COVID has driven up operating costs, created economy and sector-wide uncertainty, reduced occupancy and damaged public confidence. It has magnified sector risks and delayed the findings of the Royal Commission into aged care, thereby delaying its likely recommendations for major structural change and the critical decisions necessary to restore sustainable funding for the sector. Your Board has sought to manage these myriad of issues while keeping our business focused on our primary task: caring for older Australians with compassion and dignity in an environment they deserve, having contributed their whole lives to our communities. The appointment of Dr. Linda Mellors as our CEO and Managing Director in September 2019 was timely. We have greatly benefited from her strong leadership skills and significant experience in the hospital, subacute, aged care and outpatient health settings. Recognize...

Ladies and gentlemen, it appears we've had some technical issues with our speaker line. Please stand by and we'll get connected as soon as possible. [Technical Difficulty]

I'm sorry, that line dropped out and I'm just resuming my address now. While Regis has done well in managing our clinical and care responsibilities to our residents and their families, there is no doubt COVID has been detrimental to our business performance. COVID has driven up operating costs, created economy and sector-wide uncertainty, reduced occupancy and damaged public confidence. This magnified sector risks and delayed the findings of the Royal Commission into aged care, thereby delaying its likely recommendations for major structural change and the critical decisions necessary to restore sustainable funding for the sector. Your Board has sought to manage these myriad of issues while keeping our business focused on our primary task: caring for older Australians with compassion and dignity in an environment they deserve, having contributed their whole lives to our communities. The appointment of Dr. Linda Mellors as our CEO and Managing Director in September 2019 was timely. We have greatly benefited from her strong leadership skills and significant experience in hospital, subacute, aged care and outpatient health settings. Recognizing that residential aged care has moved more into a subacute care environment, Linda recruited, pre-pandemic, further clinical and infection control expertise. The Board, Clinical and Governance Care -- Clinical, Governance and Care Committee, which was established in 2018 and is chaired by our Board colleague, Professor Christine Bennett, contained weekly meetings with the management team in the 3 months from mid-March to mid-June to monitor the impact of the pandemic and help guide key business decisions. Our facilities in Victoria, unsurprisingly, have experienced tougher operating conditions as a result of the second wave with lower occupancy, resulting in lower income and significantly higher costs. It is clear that Regis' FY '20 financial performance weakened further, largely in response to the ongoing government funding pressures and, in the June quarter, the impact of COVID. Underlying EBITDA of $85.1 million was 23.6% down on the prior year and was mainly impacted by lower occupancy across our mature homes, particularly in the last quarter of the financial year. In this uncertain environment, the Board made several key decisions to protect the business in the short-term and prepare it for the change we face in a post-Royal Commission world. We postponed the half year dividend of $0.04 in April, which was subsequently paid in September, and decided not to declare a full year dividend to preserve cash in an uncertain health and economic environment. The Board sees the reinstatement of dividends as a priority once conditions improve. We proactively canceled the FY '20 incentive awards for executives and managers. We have reviewed and delayed in-property developments until we have greater clarity that they will achieve our return on capital objectives. And we paid down our debt by $66 million in FY '20 and extended the term of a major tranche of our committed bank debt facilities with the support of our banks, and are looking with our banking syndicate to extend the term of our full facilities in the period ahead. In the first quarter of FY '21, we announced the $21 million sale of a Gold Coast block of land for settlement prior to Christmas with proceeds to be applied to debt reduction. As flagged in our FY '20 annual results, the Board has further options regarding material, non-income-producing assets that can be realized in full or part, which the Board will also direct towards debt reduction and preparedness for the industry change expected to come post the Royal Commission recommendations and anticipated government policy announcements. We have a strong focus on the levers we can control to lift business performance, including restoring occupancy to pre-COVID levels or better, lifting RAD inflows and strong cost control while ensuring care is at the highest level. Linda will provide a brief update of our Q1 performance and these initiatives shortly. And while we execute against these objectives, Regis will continue discussions with the federal government on the future of the sector. Regis has prepared and lodged 9 submissions to the Royal Commission, appearing at hearings and liaised with the Commission's Counsel Assisting. We support sector reform. And while it is still 4 months until the commission recommendations are delivered and a further period for the government's response, I believe public and political imperatives point to early action and announcements. Last week's submissions from the Counsel Assisting the commission included several key recommendations, which are expected to be at the forefront of the commission's consideration of its final recommendations. These include: the establishment of an independent pricing authority to ensure funding adequately reflects costs of care, delivery and prevents systemic underfunding by government; mandated minimum numbers of care staff or hours. Regis is well placed here on the basis of what we know today. A shift to make aged care provision more demand driven than supply constrained; stronger regulatory and financial scrutiny of providers' spending and their balance sheet strength; and improved governance arrangements for boards. Again, Regis is already well placed in this regard. Greater user pays for services by those with means while maintaining a strong safety net for those with low means. Home care will continue to receive funding priority to shrink wait lists. And Counsel Assisting explicitly called out the deliberate underfunding of residential aged care by the government in the last 3 to 4 years, with several recommendations for funding relief from mid next year. We have been clear that it is unsustainable to expect operators and, by default, in Regis' case, shareholders, to continue to subsidize what should and must be funded by the government. In our submissions and testimony to the Royal Commission, Regis also called for a clearer definition of what high quality care is. It's the precursor to establishing the true cost of delivering and funding that care. We are pleased this important step is being considered as part of the likely recommendations. It is too early for me or others to forecast which, if any, of these outcomes will be recommended by the commission or accepted by the government. It is for this reason and the ongoing COVID risks that we chose not to provide any forward earnings guidance at our full year results. Suffice to say, our focus will remain on running our core business as well as we can while we ready for change. Regis remains fundamentally strong, with high-quality and well-located facilities, qualified and dedicated staff, experienced leadership and an excellent track record for resident care. In closing, I would like to give my heartfelt thanks to our committed employees who have not only worked tirelessly but at times putting their own lives at risk caring for our residents and each other during the pandemic. Thank you to my board colleagues and the executive team under Linda's leadership for your support and contribution through this difficult year. Finally, I would like to thank you, our shareholders, for standing by us. I acknowledge it has been a very challenging year, with earnings and the share price down to their lowest level since listing. The Board and management will continue to make every endeavor to improve our business performance in the period ahead. I would now like to invite the company's Managing Director and CEO, Dr. Linda Mellors, to address the meeting.

Thank you, Graham. I'd like to start today by acknowledging the traditional owners of the land upon which we meet today, the Boon Wurrung and Wurundjeri people of the Kulin Nation, and to pay my respects to elders past and present and any indigenous people joining us today. Today, I'll provide shareholders with an overview of Regis' performance over the past year against financial, clinical care and strategic metrics. It's appropriate to commence by providing you with a COVID-19 update including its impact on Regis. The COVID-19 pandemic has had a significant effect on all Regis residents, clients, families and staff. This has been a time of fear and uncertainty for older people as the virus proved quickly to be more dangerous to people of advanced age and those with comorbidities. The fear and uncertainty were compounded by the frequent negative commentary about the preparedness and response of aged care providers and the language of blame used by public figures and especially in Victoria following the second wave. This blame was harmful to residents, clients, families and aged care workers and failed, for an extended period, to address the underlying issues that increased the vulnerability of aged care homes, particularly in Victoria. Regis had no outbreaks in the first wave of the pandemic in Australia. Several of our Melbourne homes suffered a COVID-19 outbreak in the second wave of the pandemic in Victoria. I would like to note that an outbreak in aged care is defined as any home that has 1 or more residents or staff members with a positive diagnosis. Regis had a number of homes where a staff member was diagnosed with COVID-19, resulting from community transmission. These homes were classified as outbreak homes despite no transmission within the home. On the 15th of July 2020, we experienced our first and most serious outbreak at our Regis Brighton home after an employee returned a positive COVID-19 test. This employee followed all requirements, but unfortunately transmitted the virus during the presymptomatic phase of the illness. The outbreak was contained to one wing of the home. We subsequently had a small outbreak at our Regis Fawkner home, which was contained very quickly. Both of these outbreaks occurred in the context of increased community transmission in Victoria. Given our preparation, we were able to immediately implement our outbreak management plan, and I'm proud of the way our team rose to the challenge to provide compassionate care and support to residents at the homes and to their loved ones. Sadly, 12 residents died following a diagnosis of COVID-19 and my sincere sympathies go to their families and friends. Our residents, families and employees have felt deeply the loss of these valued members at our Regis Brighton and Regis Fawkner communities. The importance of ongoing vigilance was again highlighted by 2 Regis Macleod staff members, linked to the cluster in the northern suburbs of Melbourne, testing positive in the last few days. Again, our outbreak management plan was swiftly implemented. I would also like to acknowledge the broader impact of the illness, recovery and isolation on other residents, families and staff and the ongoing support the company is providing to address their physical, mental and emotional needs. The pandemic has again highlighted the need for increased prioritization of older people in our communities, regardless of where they live. I would like to express my thanks to all of our employees who willingly continued to work and prioritize care, kindness and compassion. Our communications with residents, families and staff of impacted homes was at least daily and this was well received. There were numerous challenges faced by the business, particularly early in the second wave in Melbourne, including the well-publicized limitations of the public health response including delays in access to testing, result notification and contact tracing. The expectations on aged care homes to function as hospital wards with hospital...

Ladies and gentlemen, apologies again, it appears the speaker line has dropped from the conference. Please stand by and we'll get them reconnected. [Technical Difficulty]

Thank you, operator. And I apologize, again, for the dropout. We've just changed our technology. So we're hoping that this week is better. But I apologize for the interruption. And so I'll continue where I was speaking about the numerous challenges faced by the business, particularly early in the second wave of COVID-19 in Melbourne. And these included the well-publicized limitations of the public health response, including delays in access to testing, result notification and contact tracing; the expectations on aged care homes to function as hospital wards with hospital level equipment and in an environment that is not designed to care for acutely unwell patients; and the unfair public criticism of aged care providers and workers regarding COVID-19 outbreaks, and the stark differences in public commentary and reporting of similar outbreaks between aged care and other care settings, for example, hospitals or disability homes. Our Regis Outbreak Management Team, comprising an executive, infection control and clinical support nurses, provided exceptional leadership and direction to our impacted homes. They liaised with all authorities, arranged testing, conducted in-house and timely contact tracing and provided up-to-date and accurate information and advice. Their leadership and actions helped to counter the detriments in the system and compounded by constant negativity in the public space. Regis also benefited from the specialist expertise of a number of residential in-reach units provided by Victorian hospitals. The company invested heavily in preparing for COVID-19. We were able to build on our existing clinical governance systems and processes and dedicate specialists in nursing and infection control to our COVID-19 response. Our directors and executives met weekly during the intensive preparation phase, with the executives meeting daily. You can read more about our preparations in our annual report. Our front-line workers and leadership teams demonstrated their strong commitment to our residents, clients and families by rapidly undertaking all required training, adhering to temporary and ongoing new requirements, learning new technologies, and most importantly, providing care and services with kindness and compassion at a time of high stress. All these efforts were overwhelmingly appreciated by our residents and families, with internal surveying showing that more than 90% of surveyed residents and families supported the measures that we had taken. Survey responses from our employees has told us that they felt safe and supported at work. Before the COVID-19 travel restrictions came into effect this year, I had the opportunity to visit 55 of our homes, 3 retirement villages and 5 home care hubs and was able to meet our residents, clients, families and employees and hear first-hand what is important to them. These visits were extremely rewarding and gave me a strong sense of our aged care homes as communities within communities. There is no doubt that caring for older people is a partnership between the older person's families, friends and our skilled and caring employees. I'm very much looking forward to visiting our remaining homes when travel restrictions are lifted. I'll now summarize our FY '20 financial performance. For the year ended June 30, 2020, Regis reported a statutory net profit after tax of $3.8 million, including a noncash goodwill impairment charge of $20.6 million. Underlying net profit after tax was $21.5 million, down 54% compared to the prior corresponding period of $47.2 million. Underlying EBITDA of $85.1 million was 23.6% down on the prior year. This excluded a gain of $4.6 million on the acquisition of the business and assets of Lower Burdekin Homes for the Aged and the noncash goodwill impairment charge. The results reflect ongoing funding challenges, the impact of the extended Royal Commission and the COVID-19 pandemic. Revenue from services of $677.9 million was 4.8% up on the prior year. This includes $6.4 million of additional government funding received in June, $1.8 of temporary ACFI funding for the period March to June, and a $4.9 million contribution from the first of March acquisition of the Lower Burdekin business and assets. It is worth noting that the 2 additional amounts of government funding received during the FY '20 year totaling $8.2 million, while welcome, was $2.6 million down on the additional funding received in the prior year. Government revenue of $471.1 million was up 4.2% on the prior year and contributed 69% of revenue from services, while resident revenue of $195 million was up 6.4% year-on-year. Lower average occupancy of 90.3% was representative of the ongoing industry trend. In the main, we observed an occupancy decline in Victoria with Queensland, New South Wales and the Northern Territory relatively flat year-on-year. Staff expenses of $492.3 million accounted for more than 72% of revenue from services. This was up from 69.3% on the prior year. And was driven by annual increases in enterprise agreements, which averaged circa 2.5%, whereas indexation increase applied to government revenue was only 1.4%. In April 2020, the company restructured its back-office functions, resulting in approximately 50 roles being made redundant. The redundancy cost of $1.6 million was expensed in the second half of the financial year, and we will see an ongoing cost benefit as a result of this process. During the year, we grew our available operational places to 7,218. And pleasingly, we reduced our net debt by $66.5 million to $236.7 million. Now turning to care. Providing care and services to older Australians is an essential part of the health and social care system. Regis enjoys a reputation as a provider and employer of choice for good reason. A significant event during the period was the introduction of a new Single Aged Care Quality Framework, which took effect from the 1st of July 2019. Regis invested resources into education and communicating the new framework to employees, residents, clients and families. One of the key platforms of the Regis implementation is Knowing is Caring, a reminder to our staff to really know our residents in terms of their interests, past professions and hobbies and goals. This knowledge supports our staff to work with our residents to allow them to realize their well-being goals. All 8 Regis homes that were subject to accreditation under the new standards were successfully reaccredited. Demands on the sector continue to increase, with new regulatory standards and additional community expectations. I strongly support the increased standards and expectations for the sector and note there will need to be substantial additional funding to support these. Building on our strong base of clinical care and governance, we are currently focused on preparation of our company and workforce for large-scale sector reform post the Royal Commission. Aged Care is a relationship business. Regis is committed to investing in our employees and their skills and abilities to ensure they bring their best to the people in our care and accessing our services. Regis has a mature range of selection, training and professional development programs for our care, clinical support and management staff. Our size and reputation as one of Australia's largest aged care providers means we're uniquely placed to offer career opportunities and pathways to our team members. I'd now like to provide a quick summary on our industry -- a quick update on our industry. The company remains supportive of the Royal Commission and the critical importance of its work. We share with the community the concern and our -- and disappointment about those cases of poor and negligent care highlighted through the Royal Commission. We also know that Regis and others share a strong and sustained commitment to a high standard of care and service, notwithstanding the current constraints of the funding and policy arrangements. The company is hopeful of a clear and strong response from government that sets out a policy and funding platform that supports the provision of consistently high-quality care that is sustainable over the long term. This will require a substantial increase to the budget allocated to aged care as well as other changes. The community needs to support government committing greater resources to the care of older Australians, along with higher contributions from those with the means to do so. The community should hold the sector and government to account. Now turning to business strategy. The Regis philosophy remains that by consistently providing excellent care and high standard homes, we deliver great outcomes for residents and their families, have more engaged and capable staff and therefore, create an environment where the business is able to innovate, invest and grow. Regis' aim to deliver long-term sustainable growth has not changed, noting that the short-term is impacted by COVID-19, the extension to the Royal Commission and the ongoing uncertainty regarding government policy and funding direction. During the year, the company decided to place most of its residential aged care growth projects on hold, pending great uncertainty of investor returns. This follows a period of solid organic growth, but with investment returns substantially lower-than-anticipated or considered acceptable. In the nearer term, the company intends to invest in a growth strategy for our home care business. The company will continue its conservative approach to management of our balance sheet and debt. We have retained significant debt capacity in the event conditions improve and market opportunities are attractive. To these themes, the company continues to review acquisition and development opportunities against our existing criteria, primarily quality of location, land and buildings. Regis is focused on continuous improvement, and our scale of operations means we are able to provide a range of on-site and off-site care and support services that contribute to the quality and safety of care and services for our residents and clients. Some examples include: every Regis aged care home has nurses on-site 24/7. This includes an in-charge registered or senior-enrolled nurse on every shift. Regis provides additional 24/7 senior registered nurse support to all of our homes across the country through an in-house nurse-on-call service. Our dementia liaison specialists in our Club Services sites provide extended support to our residents living with dementia and their families. Our Clinical Support Team is a national Regis support service, providing clinical support and coaching across all of our residential aged care homes. Centralized infection control consultants and emergency management team is in place to support every home and setting across the country. And finally, our centralized catering and housekeeping functions plan and monitor the Regis standards across all of our homes. Of critical importance in preparing our business for the sector reform that we anticipate post the government's response to the final report of the Royal Commission, including the likely sector consolidation, is a key focus of management. The government has foreshadowed a funding response in the May 2021 budget announcement. Now turning to the FY '21 first quarter business update. Starting when Regis advised the ASX on the 3rd of August that it had been the subject of a cybersecurity attack. The company promptly implemented backup and business continuity systems, and the incident did not affect the delivery of care or services, nor did it materially impact our day-to-day operations. Following the Board's review of passive assets, the company entered into a contract of sale of a parcel of land in Palm Beach with settlement to occur by the 31st of December. The sale will provide the company with $21 million less cost of sale, which will be used to pay down debt. Given the current macroeconomic environment, including the ongoing impact of the COVID-19 pandemic and the extended Royal Commission, the company does not believe it's prudent to put forward any earnings guidance at this stage. What I can say is that average occupancy across the 65 residential aged care homes, including those previously classed as ramped up, was 87.9% for the first quarter of FY '21. This compares to an average occupancy of 88.3% in quarter 4 of FY '20. This was almost entirely due to the impact in Victoria. Pleasingly, all states and territories, with the exclusion of Victoria, averaged 89.6% occupancy across the first quarter of this financial year, up from an average of 89% in quarter 4 of FY '20. In Victoria, occupancy fell through July, August and into September during the second wave of COVID-19, but has since stabilized. We have in place detailed plans for each of our residential aged care homes to drive improved occupancy, and we are seeing the benefits of this through the first quarter occupancy rates outside of Victoria. With the worst of the second wave of the COVID-19 pandemic now well behind us, we remain confident that occupancy levels across our 18 Victoria homes -- Victorian homes and the overall portfolio will improve over the coming months. I note that as at the 23rd of October, spot occupancy across all homes is 88.5%, an improvement on the first quarter. Plans are in place to drive RAD cash flows up with occupancy and the company is keeping tight controls on costs and CapEx. The company has just experienced an extremely difficult 12 months between a global pandemic, Royal Commission, bushfires, floods and sustained negative commentary about the industry. I'm proud of the continued focus across our company on maintaining excellent care, standards and experience and the extraordinary focus and resilience of our workforce. The challenge of COVID-19 is likely to be with us for some time. I anticipate another year of significant competing external pressures, but Regis is a resilient company, has led from the front for nearly 30 years and will continue to do so. The executive team's focus on executing business performance improvements, including improved occupancy and revenue generation, along with disciplined cost management, will keep the business in a state of readiness and strength ahead of the pending sector reform. We are engaging in a range of government and industry forums to contribute to a positive future for aged care in Australia. I would like to extend my thanks to the Regis Board of Directors for their expert guidance and wisdom, our executive team and all of our employees for their individual and collective contributions to care, services and stewardship of the company. Finally, I would like to thank our residents, clients and families for choosing Regis. We recognize and respect the trust you've placed in us to care for you and your loved ones. Thank you. I'll now hand back to Graham.

Thank you, Linda. I'll now outline the question and voting procedures for today's meeting. The resolutions for consideration today may only be voted on by shareholders, proxy holders and authorized company representatives. The process today will be that I will introduce each item separately, consider questions and then, if applicable, invite voting on the item. The questions will be moderated by our company Secretary, Martin Bede. All votes to be conducted at the meeting will be by way of a poll, which means that each shareholder has 1 vote for every share held. Each resolution set out in the notice of meeting is to be considered as an ordinary resolution and as such, must be approved by a simple majority of votes cast by shareholders entitled to vote and voting on the resolution. I will display the eligible proxy votes for each resolution prior to voting on the item. I confirm that I propose to vote any proxies left to my discretion as Chairman in favor of each resolution. The final results will be announced to the ASX after the meeting. An officer from the company's share registrar, Link Market Services, will act as returning officer in relation to the poll. So now to the formal business of the meeting. Item 1, the financial statements and report. Ladies and gentlemen, the first item of business is to receive and consider the financial statements and report of the company and its controlled entities and the reports of the directors and the auditor for the year ended June 30, 2020. While we do not put this item to a vote, this is an opportunity for shareholders to ask questions relating to the company's financial results and the management and operations of the company. Any questions in relation to remuneration policies and practices will be considered when we come to the item of business covering the adoption of the remuneration report. As I previously mentioned, Mr. Brad Pollock is representing the company's auditors, Ernst & Young, and is available to answer questions in relation to the conduct of the audit and the preparation of the content of the auditor's report. Martin, I know I've got 3 questions that were sent in ahead, which I will read, and then I'll pass you to read each question that we've got online.

Mr. Chairman, we've got questions we got ahead of the meeting. First one is from shareholder [ Tim Yang ]. How did Regis ensure the business could continue admitting new residents during COVID?

The only time resident admissions were prohibited was in homes with outbreaks of COVID. And I think Linda explained what an outbreak was, where one or more residents or staff were infected with COVID, tested positive. This has been a really difficult period for the business and it needed to adapt quickly to the changing conditions. We adopted a risk-based approach, depending on the region and the level of community transmission in that region. Each new resident was assessed for risk, and most residents were low-risk, having come from -- into our home from their own home environment. Hospital transfers were classed as higher risk and COVID tests were requested. In the event of a higher risk, some residents were asked to remain in their rooms for up to 14 days before mixing with other residents in the home. Virtual tours of our homes were held for prospective residents and families, rather than the normal tour by family and prospective residents. All of this made for a more difficult environment, as did the broader community concern about safety in aged care. So as Linda mentioned earlier, occupancy levels did fall through the first wave of COVID and particularly in Victoria during the second wave.

Next question is from the same shareholder. What are the main hurdles to achieving occupancy above 95%?

Linda talked to what our current occupancy levels are. I guess I'd first note that we have a range of homes that are above 95% occupancy in our portfolio. As of yesterday, we had 18 homes sitting above 95% across all of the regions in which we operate. There was only 1 Victorian home in that group. In general terms, the main hurdles at present, which prevent us from increasing our occupancy above 95% would be, first of all, the COVID-19 impact that's happened and that's reduced our occupancy, particularly in the Victorian homes; still uncertainty about the aged care Royal Commission; and the restoration of confidence in the community about how aged care is looking after residents. In Victoria, particularly, there's now more competition with many more vacant beds. And then finally, the government is still giving prioritization to home care funding and we would expect that to happen over the next period as well. That is an important component of the government's aged care strategy. And it's appropriate because many people want to age in their home, but it does impact the number of residents coming in for a period.

Third question from [ Tim Yang ]. What are the avenues open to the management team to ensure Regis can outperform others in the industry?

Thank you, Martin, and I'll take this question. So in my view, the key avenues for any aged care business to outperform sits with a base of excellence in clinical care and a highly personalized experience for residents, mixed in with high-quality homes and qualified, competent and friendly employees. You also need to have tight business processes and cost control, assisted by technology and a very strong culture within your employee group. All of these things then support improvements in occupancy, our coding for funding and also proper cost allocation and control. So I'd also note that there's benchmarking information available to us. There are small number of quality indicators that the aged care quality and safety commission is now publishing, and this will be expanded over the coming period, which will be helpful. And we also benchmark ourselves on financial and activity metrics, of course. We have access to listed company information in aged care and also various sector reports.

Question from [ Stephen Mayne ]. Could you please disclose the proxy votes ahead of the debate on individual resolutions, and if there have been any material protest votes? Please explain which proxy advisers recommend against, what's the issue and how the company plans to address these issues. In relation to the first question, I would note that we will be explaining the proxy over ahead of each item that requires a vote.

We are not aware of any material protest vote. And in terms of the proxy advisers, there were no recommendations against the proposals before the AGM today.

Next question is from [ Stephen Mayne ]. Tragically, 800 Victorians have died during the second wave. Could you please advise how many of these were Regis residents and which of our facilities suffered the most infections?

Thank you, Martin. And I think I've covered this off in my speech. But just to reiterate, Regis Brighton was the site of our largest outbreak and 11 residents died with COVID in that particular home. Regis Fawkner, we had a small outbreak, but 1 resident died in that home.

Question from [ Robin Barratt ] of the ASA. We understand there have sadly been several COVID infection and deaths in Regis homes. Whilst you've detailed aspects of the response, please if the company could offer comment on expected future management and financial impacts.

Thank you, Martin. And again, I'll take this one. We have ongoing, very high vigilance around COVID-19. The impact on aged care has absolutely been tragic. And as the previous questioner raised, there have been more than 800 deaths. It's been a very difficult time. The changes that have been made in terms of infection prevention and control will absolutely be ongoing in aged care. As Graham mentioned, we recruited a national infection control manager before we heard about the pandemic, which has placed us in really good stead to have that level of in-house expertise and aged care experience to lead us through, as well as we established an executive nursing position. And Melissa McDonald has 30-odd years’ experience in senior and executive nursing roles and again, has led the infection control standard in the hospital sector. So we do expect ongoing impact, and we've changed many of our processes, policies and procedures with the knowledge that we will be living with COVID for some time yet. In terms of our finances, government has made available a range of grants and funding uplift to support us to manage the really significant costs that have been associated with preparing and responding to COVID.

Question from [ Stephen Mayne ]. Insecure work appears to be made a structural problem with the underfunded residential care sector plus increased spread of COVID-19 during the pandemic. Please outline our policies regarding work practices and what we would be changing in light of the recent Victorian experience.

Thank you, Martin, and thank you, [ Stephen ], for your question. So there are a number of things here. In terms of insecure work, our casual pool makes up only 6% of our workforce, and it's an in-house casual pool. So we're able to have Regis-trained staff working and obviously trained and supported by us working in a number of homes. In terms of the work practices, we have absolutely supported the single site working arrangements in Victoria. And I was one of the authors of that document, along with a couple of other experts in the sector. So we do support that. It does cause difficulties, there's no doubt about that. The levels of pay for personal care workers, in particular, needs to be lifted. And that needs to be supported with a funding increase by government. And again, that's coming through in terms of Counsel Assisting's recommendations through the Royal Commission. Our staffing group is very well supported. And I think one of the things that we have seen is that we've had a high level of willingness and support of staff to support our homes that have experienced an outbreak. And I think that tells you a lot about the culture.

From [ Robin Barrows ] from the ASA. In previous years, we have raised the topic of cyber risk management. Noting the August 2020 incident, would you please clarify who carries the Board responsibility and have any changes been made, post incident?

Thank you, Robin, for the question. Yes, as Linda mentioned, and we obviously issued a note to the ASX about the cyberattack. I was sort of in charge as Chair of the Board, and the whole of the Board were involved with this cyberattack, working with management to deal with it. We also involved the government regulatory authorities, the cybersecurity government authorities. Plus also, we lent on expertise from several local -- cyber, sort of, experts. Particularly we used Deloitte to support us on that. We've gone through, obviously, all of our systems. We've looked at where there may have been any weaknesses and we've corrected those. So it is an ongoing process for the Board and management to ensure that we're safe in today's world where cybercrime and cyberattacks are more common place than any of us would like. So it is something which we have ongoing vigil around, and we will continue to do that.

Question from [ Vincent O'Sullivan ]. Please let us know the position of our company's RAD balance and occupancy.

I think just on that question, Linda has given the occupancy numbers for the first quarter and the trends since the fourth quarter. We actually don't disclose out that one, except at the half year and full year results. Thank you.

From [ Stephen Mayne ]. I was speaking to a not-for-profit aged care [ chairman ] recently, who has vast experience as a public company Director and observed that Regis is the best to boost stock price when it comes to care, risk management and systems. Well done for this. Have you thought about buying some of your struggling competitors in this environment?

Thank you. [ Stephen ]. I don't think that's a question. But clearly, I think, as Linda mentioned, and as you appreciate, the Board obviously keeps track of what's happening across the sector and looks at any opportunities that come through. Thank you.

A further question from [ Stephen Mayne ]. Congratulations on providing excellent and comprehensive formal addresses this morning. But Linda, please outline what's considered to be the best and worst feature of Victoria's public health response once the virus got into the residential aged care sector during the second wave. Why did our sector get so heavily attacked when hospitals and the disability care sector were largely left [ behind ]?

Thank you, [ Stephen ]. So I think I've spoken about the difficulties, and they have been broadly publicized. Now note [ purposely ] Euan Wallace, who was the CEO of Safer Care Victoria and is now -- he's moved into the Department of Health and Human Services in Victoria and he's a Deputy Secretary now, looking at the contact tracing and the testing processes. And there have been improvements made in Victoria. But certainly, early on in the second wave, there were delays associated with testing, reporting of results and contact tracing, but have been improved. We've just had another outbreak over the weekend at Macleod associated with the Northern suburbs cluster. And we've seen a much higher level of response and support provided. I think the other thing is that Victoria and the Commonwealth Government set up the Victorian Aged Care Response Center. And that was really key in terms of bringing together a whole range of agencies across public and private sectors to make sure that aged care had the support that it needed. I've only recently come out of the hospital sector, and I have been absolutely staggered by the attacks on aged care and the lack of understanding of the environment in which we operate and also what aged care is set up for. So aged care is not an acute clinical environment. And some of the public commentary over this period have suggested that we should have been prepared for that. So the sector is neither designed nor funded to operate in that manner. So look, my personal view is the criticisms and the attacks were unwarranted and really failed to take into consideration, I think, the entire context of aged care.

Further question from [ Stephen Mayne ]. The record loans [ track ] have dealt a cruel blow to the aged care sector in recent years. Will Regis' support of reform of the government guarantee the 3% to 5% return on bonds bought by residents? There are prospects that is having to reduce interest rate risk and the temptation for our payers to invest in riskier assets chasing higher returns. Are we 100% in cash with our bonds?

In answer to the last part of your question, are we 100% in cash with our bonds. No, our RADs are largely invested in our residential aged care facilities. And what we do, obviously, as a board, is manage very carefully our liquidity requirements, because as everyone would appreciate, there are residents who passed, and therefore, we refund those bonds, and we also receive new bonds from residents who come in. So Regis, it manages the liquidity aspects of each business by having substantial access to funding facilities, committed funding facilities from the banks, and also managing its forward cash flow and understanding where the -- both discharges and new RADs are going. And we also look to repay our debt over time, which we use to support our growth and development of our business through developing new facilities. So it is a core part of the way we need to manage our business. These bonds are quasi equity and they are treated that way on the balance sheet. And we remain cautious and conservative in the way we sort of manage those.

Question from shareholder, [ Christopher Lam ]. Is the Board comfortable with our somewhat high ratio of total assets to equity? It stands at approximately 12x at June 2020 versus approximately 8x a few years earlier. Can the Chairman speak a little bit more about the "further options regarding material nonincome-producing assets that can be realized?"

Look, yes, we are comfortable with our ratio of total assets to equity. I mean, in part, that's reflected the ability to grow our business without having to use new equity. And we've done that, as I just explained, through a process of utilizing the quasi equity that we get through RADs. I can talk a little bit a bit more about those nonincome-producing assets. But I think the example that we spoke of just through our speeches, which was the Palm Beach side, which was a valuable block of land, but not producing any income. We decided, in the current environment, it made more sense for us to sell that and use those funds to pay down debt. We also have other holdings of land, some of which has been earmarked for retirement living opportunities. And we also have other parts of our business, which have high-value but actually generate little income. And so the Board is considering those options. Hardly it tends to be -- retirement living tends to be a longer-term strategy with back-ended returns. And in normal times, this can be developed with a 10-year-plus time frame. In our current times, we've taken decisions to sell several of these assets because we believe that Regis benefits more by the sale of these assets and the reduction in debt than it does by the long-term development of those assets. And these issues, which obviously are a matter for board consideration, and we still have these under consideration.

There are no further questions around this item, Chairman.

Thank you, Martin. So we now shall move on to the next item of business. The next item of business is the election of Director. I have been nominated by the Board to stand for reelection at this Annual General Meeting. The Chair of the Audit, Risk and Compliance Committee, Sylvia Falzon, will act as the chair for this item of business. Following this item, I will resume my position as Chair for the remaining item of the business. Sylvia?

Thank you, Graham, and good morning, fellow shareholders. We now move to the election of Graham Hodges as a Director. Graham Hodges' credentials are detailed in the notice of meeting. The Board unanimously supports the reelection of Graham Hodges as a Director of your company. I now invite Graham to provide a brief address to the meeting regarding his reelection.

Thanks very much, Sylvia. So I offer myself a reelection as Director, having served just over 3 years on the Board and the last 2 as Chairman. I'm sure it's clear to all shareholders that aged care is a challenging and complex sector, which is facing into further change over the next few years. My experience as a Director and as a senior executive in large listed companies here and overseas and on the government's advisory aged care financing authority has equipped me well to understand and deal with the issues Regis and the sector are presently tackling. I have a long association with aged care and believe it is critical that the sector is successfully led by those who have passion and capability to drive positive change to support older Australians and create a lifestyle with dignity, a sense of community and respect. If reelected, I will work hard with my board colleagues to advance Regis' business performance and reputation. Thank you.

Thank you, Graham, and I have been advised by our company Secretary, Martin Bede, that there are no questions on your reelection. Thank you. And the proxy position for this resolution will now be shown. Thank you. If you have not yet voted, please now select either for, against or abstain for resolution 2. [Voting]

Graham Hodges will now resume as Chairman of the meeting.

Thank you, Sylvia. Item 3 is the adoption of the remuneration report. Ladies and gentlemen, the next item of business on the agenda is the adoption of this report. This report was included in the Director's report on Pages 64 to 67 of the company's annual report. This report sets out the company's remuneration arrangements for the executive and non-executive directors and key management personnel of the company. The vote on this resolution is advisory only and does not bind the company or directors. The resolution does, however, serve as an indication of shareholders' views regarding the company's remuneration practices. And the result will be taken into account -- into consideration by the Board. Are there any questions online regarding the adoption of this report?

No, Chairman, there are no questions.

As we have no questions, the proxy position was being shown on the screen. If you have not yet voted, please now select either for, against or abstain for Resolution 3. [Voting]

Shareholders are reminded that they can submit their vote online until 5 minutes after the meeting closes. Ladies and gentlemen, that concludes the formal business of the meeting. Martin, are there any other general questions that were submitted?

Yes, Chairman. A question from [ Stephen Mayne ]. In order to maximize access to your AGM, could you undertake to follow Crown Resort's lead and post a full transcript for the AGM on your website?

Thank you, Stephen, for the question. We already do that. So it will be up on our website, I presume, by the end of today. Are there any other questions, Martin? As there are no further questions, on behalf of the Board, I would like to thank you for your support, and I now declare the meeting closed. I do apologize for the several interruptions through the meeting. And obviously, we appreciate everyone's sort of attendance at the meeting on the online virtual world. The detailed results of the polls will be announced on the company's website and the ASX announcement platform later today. Thank you very much.