Regis Healthcare Limited (REG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Graham Hodges, and I'm 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 again this year due to restrictions on public gatherings as a result of the COVID-19 pandemic. Should we experience any technical issues during the course of the meeting, you'll be notified of the steps to be undertaken by the moderator while issues are addressed. If a longer recess is required, the ASX will be notified of any adjournment and new moving times. I've been informed that a quorum is present. And as it is now a little after 10 a.m., I declare the 2021 Annual General Meeting of Regis Healthcare Limited open. A notice of 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 online AGM guide, which has been made available to shareholders. Both documents are also available to view and download 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 meeting will be conducted on a poll through the online meeting platform. All polls will remain open until the conclusion of today's meeting. As we move through the items of business, I will 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. I would also like to welcome our executive team who are participating online. Finally, the company's auditor, Ernst & Young, is represented today by Mr. 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 a presentation from Linda Mellors, your Managing Director and CEO. I will then go through some procedural matters for the AGM. Finally, we will move to the formal business of the meeting, and there are 4 items of business today: number one, the adoption of the 2021 financial statements and report; number two, the director elections; number three, the adoption of the remuneration report; and four, the approval of grant of share rights to your Managing Director and CEO. Please note, this is a shareholders meeting only. Only shareholders, their attorneys, proxies and authorized company representatives are permitted to vote and to 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 online platform guide, which also is included -- it includes a helpline number. The item in relation to the adoption of the financial statements 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. [Operator Instructions] Please ensure your questions are relevant to shareholders as a whole. Shareholders and proxies wishing to ask questions via phone were required to register their unique PIN provided by Link Market Services. If you do not have your PIN and would like to ask a question by phone, please contact Link Market Services on 1 (800) 990-363 or +61 1 (800) 990-363 for outside Australia. If you are also watching the Annual General Meeting online, please mute your device. 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 the questions that have been raised. After the formal business is finished, the meeting will be closed. I'd now like to turn to my address to the meeting. 12 months ago, as I addressed last year's Regis AGM, Victoria was just emerging from its devastating second wave of infection. Other states had variously seen outbreaks and restrictions on our homes, our residents and their families while our staff across the country had worked tirelessly under very difficult circumstances to ensure residents and their work colleagues remained safe. At first glance, one could be forgiven to thinking not much has changed, with Regis and the aged care sector more generally, still managing lockdowns, outbreaks and restrictions. But much has changed and almost all for the better. While 2021 has been the most difficult year that Regis has experienced in decades, I believe the most difficult issues are largely behind us. And I am more positive about the outlook for Regis, its staff, residents, clients and their families. This should also benefit shareholders. My optimism reflects progress in important areas, including the rollout of the COVID vaccinations, the completion of the Aged Care Royal Commission, the Australian Government's response to the Commission's recommendations and the positive mindset Regis management and staff have brought to the many challenges thrown at the business in the past year. We now have over 87% of our residents who have had 1 COVID vaccination and over 83% who are fully vaccinated. 100% of Regis' residential aged care staff are compliant with the vaccination requirements. Sadly, Regis has had 3 COVID-related deaths since last year's AGM, all of which have been in Victoria's latest lockdown period. I would like to express our condolences to the families and friends of these residents. Despite continuing instances of COVID in homes across several states, our staff have learned to manage COVID as business as usual. This will be important as lockdown states and territories now open up and the number of infections in the community rise. I wish to acknowledge and thank all Regis staff for their dedication and courage in managing our COVID response and for their extraordinary efforts to keep our residents and clients safe over the past year. The twice-delayed final recommendations of the Royal Commission into Aged Care Quality and Safety delivered in February this year, while comprehensive, were inconclusive in some important areas. The key themes, however, came through loud and clear. Standards of care across the sector have to lift to better meet resident, client and family needs and the expectations of the community and the sector needs to be better funded by government to achieve this. Regis supports these key themes and much of the detailed analysis supporting them. The government's response in May recognized the immediate lift -- sorry, the immediate need to lift funding as part of an announced $17.7 billion commitment over 5 years but also detail a major sector reform program, which will take several years to implement. Regis is well placed to contribute to and benefit from this reform agenda, and we call for regular and detailed sector consultation to best effect these major reforms. Only through working with the sector will these initiatives deliver the full benefits older Australians are expecting. There are still important policy gaps that need to be detailed by government that impact the performance and sustainability of the sector. These include how the aged care sector can address critical workforce pressures, the establishment of baseline data and functioning of the independent pricing authority and greater disclosure and consultation around the detailed inputs and methodology behind the AN-ACC or resident care funding model. This model is at the operational heart of residential aid care sector's capacity to provide quality care for residents while remaining financially sustainable. The funding model is expected to require more care hours and staff. Full government funding of these elements will be essential to support a sector already financially stretched. While lease funding reforms will not take full effect for another year, the commitment will be pivotal in signaling to the sector that it confidently can restart new investment after several years of poor returns and market uncertainty. Regis has used these recent years of policy and funding uncertainty to pay down debt and strengthen our balance sheet, giving us clear capacity to grow in residential or home care via new developments or acquisitions. Net cash flows from operations were $105 million in FY -- in financial year 2021, and we reduced debt by a further $94 million to $142.4 million as at 30 June. And in February this year, we renewed our $515 million syndicated debt facility. Net debt as at 30 September 2021, so the first quarter of this latest financial year, has fallen to $129 million with better-than-expected RAD cash flows of $32 million, more than offsetting payments of the $13.9 million in dividends and $15 million for a new residential aged care site during the quarter. This year saw us commit to the construction of new homes in Camberwell in Melbourne and Toowong in Brisbane and acquire a new residential site in Belmore in Sydney. Capital expenditure continued on maintenance and refurbishments and we also committed to system upgrades for our homes and to our core financial and clinical platforms. The core purpose of Regis is to provide high-quality care to older Australians. We have continued to invest in and improve our clinical governance and capability and to recognize the standards expected of aged care operators will increase further. Our Board Clinical and Care Governance Committee (sic) [ Clinical Governance and Care Committee ] first established in 2018 and chaired by Professor Christine Bennett has matured in its ability to guide our improved efforts, to critically review and monitor performance and to assess any early warning signs of clinical risk across the business. Regis can still improve our care delivery as evidenced by the regulatory penalties applied to 2 of our 64 homes in financial year 2021. Management has applied the lessons from these penalties across all our homes, and the Board has used the information to inform our future strategy. Continuous improvement in care outcomes is a key pillar of Regis' 3-year strategic plan. The funding pressures that have impacted residential aged care since 2017 continued to impact in financial year 2021, with core operating costs again growing faster than revenues. Additional costs related to COVID were largely covered by extra government funding. But higher care costs, which are largely labor, were not covered by annual indexation increases. Regis' net profit after tax in financial year '21 was $19.9 million, and the full year dividends were increased to $0.663 per share or 100% of profit as COVID concerns abated and occupancy recovered from the lows of late 2020. Despite a year of restrictions and lockdowns, net RAD cash flows were a healthy $38 million in the year. Your Board and management had to contend with a number of specific issues through the year. In September 2020, Regis received a confidential nonbinding indicative proposal to acquire your company at $1.65 per share, and a further public offer was received in November at $1.85 per share. The first proposal was considered by the Board, while the second proposal was considered by a subcommittee of independent directors. Both proposals were rejected on the grounds that they materially undervalued Regis, and the second proposal was withdrawn on the 20th of January 2021. A cyber ransomware attack on Regis in late July 2020 was effectively contained with no impact on resident care or services. Since this incident, your company has strengthened controls against such threats. Lastly, in August this year, Regis announced it had identified potential underpayments and employee entitlements to certain current and former employees under its enterprise agreements. Regis commenced a review to determine the extent of these underpayments and based on preliminary analysis, provided $35 million in our financial statements of which $7.1 million was for financial year 2021 with the remaining amounts recorded as a prior period restatement. Since that announcement, Regis has appointed a senior manager and external advisers to undertake the remediation. Your Board and management regret the impact this error has had on Regis' employees. While financial year 2021 has been an exceptionally challenging year, your Board believes Regis is well positioned to deliver an improved business performance over the period ahead. We have further strengthened our business leadership. Our focus continues to be on improvements in daily care and everyday living fees, on occupancy and management head office costs as COVID concerns abate. While there are still many challenges and uncertainties, we feel your company is well placed to shape and navigate the pending reforms and the sector opportunities over the next few years. Finally, I want to thank my fellow directors, the executive team and the many committed employees of Regis Healthcare for their contribution throughout the year. I would particularly like to acknowledge and to thank 2 directors who are retiring from the Board effective from this AGM. Sylvia Falzon has been on the Board since Regis' IPO and has made an enormous contribution to the success of your company over 7 years. She has been Chair of the People and Remuneration Committee and more recently the Audit and Risk Committee of the Board and has brought many valuable skills to our Board deliberations. Matthew Quinn's 3 years on the Board have been the hardest in the company's recent history, and his clear thinking and wide-ranging business experience has been invaluable. I want to thank him for his significant contribution as Chair of the People and Remuneration Committee and more generally to Board considerations. I expect to be able to announce new Board appointments shortly to replace our retiring directors. In closing, I want to thank you, our shareholders, for your support in the past year. I will now pass to our CEO, Dr. Linda Mellors, to address the meeting.

Thank you, Graham. I'd like to begin by acknowledging the Boon Wurrung people of the Kulin Nation, traditional custodians of the land on which we meet today and pay my respects to their elders past, present and emerging. And of course, I extend that respect to any Aboriginal and Torres Strait Islander peoples joining us on the call. Today, I'll provide shareholders with an overview of Regis' performance over the past year in the context of multiple industry headwinds. While the last year was again a difficult period for the sector, I share Graham’s sense of hope about the future. A number of industry-wide headwinds from the previous year continued, including responding to a global pandemic, the ongoing impacts of the extended Royal Commission and associated negative media coverage, insufficient funding to meet the needs and expectations of our consumers and worsening workforce shortages. On top of these ongoing challenges, as Graham mentioned, the company also responded to a cyberattack, regulatory interventions and 2 takeover bids. Regis welcomed the conclusion of the twice-extended Royal Commission and the Australian Government's budget and policy responses. It is noteworthy that the issues raised in the final report were largely the same issues raised in many reports beforehand but not addressed through wholesale reform, which has driven the industry to unsustainable returns. Regis strongly supports the need for reform of all parts of the sector and across all of the domains highlighted by the Royal Commission, including workforce, funding, governance, quality and safety, regulation and system design. It is critical for the sector and indeed the Australian community that the reforms are implemented properly with transparency and accountability back to the public. To this end, Regis is a founding member of the Aged Care Reform Network and is actively supporting the work of the Aged Care Workforce Industry Council. The Aged Care Reform Network is a collection of the largest providers of aged care, committed to leading our sector to achieve the reform intent and goals. I will come back to reform and a brief update on our first quarter later but would first like to address the ongoing challenges posed by COVID-19. Responding to COVID-19 has required ongoing close management, including operational changes, supporting our residents, clients and employees and coordinating the vaccination of our residents and workforce. Graham has spoken of the second wave in Melbourne last year and the terrible impact on aged care residents, families and employees. The sad reality is that broad community transmission of the virus puts our aged care homes at risk of an incursion. We know that broad community vaccination protects aged care residents and employees. The recent community transmission in Victoria and New South Wales has impacted multiple homes when there is an exposure from an employee, visitor or resident. Most of these events have not resulted in any transmission in the aged care home. However, we have had 2 homes in Melbourne with transmission since our last presentation and remain grateful for the ongoing support of our employees, residents, families and surrounding health providers. The 2 homes are in Fawkner and Dandenong North, both suburbs with high community transmission. There have been 2 resident deaths at Fawkner and 1 at Dandenong North, and we sent our sincere condolences to their loved ones. The protection and well-being of our residents, clients and employees remains the company's primary concern. The Regis' Pandemic Planning Committee continues to lead our response, and our Outbreak Management Plan is mature. The company continues to hold stocks of personal protective equipment in hubs across the country to ensure our workforce can access these essential safety equipment as required. Vaccination of our residents and workforce has required substantial effort and coordination. Regis has actively promoted vaccination options in line with the best evidence around the protection vaccination provides. Vaccination has been shown to be highly protective against death and serious illness from COVID-19. Residents have the option of vaccination, and most of our residents have taken this up with enthusiasm. Currently, over 87% of our residents have had 1 dose; and over 83%, 2 doses of a vaccine. New residents are increasingly entering our homes already vaccinated, consistent with the increasing levels of vaccination in the community. Regis residential aged care employees met the deadline to receive a first dose of the vaccine. And today, nearly 91% of our residential aged care employees are fully vaccinated. Our retirement living and support services employees are also vaccinated, and our home care workers are making good progress to full vaccination. It is evident that the community will be living with COVID-19 for an extended period, and the operational changes Regis has made are now effectively business as usual. The company remains grateful for the ongoing care and diligence of our workforce and the understanding of our residents, clients and families. Along with the rest of the community and businesses, Regis is working to reestablish normal patterns of living and working, which includes allowing visitors into our homes with appropriate safety precautions. Along with the human impact on our home communities, the pandemic has also impacted our operations, revenues and expenses. At a high level, Regis' financial year '21 expenses associated with COVID-19 outbreaks and single-site working requirements were offset by government funding and grants. In terms of our overall financial performance for the year ended 30 June 2021, revenue from services was $701.4 million, up 3.5% on the prior corresponding period. The company delivered full year earnings before interest, tax, depreciation and amortization of $137.8 million and net profit after tax of $19.9 million. This result is well below what we would expect to deliver in a properly funded environment but pleasing in the difficult operating context. Highlights of the results include: increased occupancy compared with financial year 2020, even with the lower occupancy in Victoria due to the COVID-19 second wave; net RAD cash flow of $37.7 million was a strong result across our entire portfolio of homes and noting that Victoria ended the year with a negative result; net debt at year-end sat at $142.4 million, reflecting a reduction of nearly 40% compared to the end of financial year 2020; and our debt refinancing was completed in February, giving the company headroom to take advantage of market opportunities. As at 30 September 2021, average occupancy was 89.4% across the entire portfolio, which is consistent with the spot rate advised at 30 June. We consider this to be a reasonable result considering the COVID situation in New South Wales and Victoria, where restrictions to tours and visitation have significantly impacted our opportunities. Pleasingly, RAD cash flow continued to remain positive over the first quarter. Over the financial year just closed, the polls on development and acquisitions continued due to the uncertainty around future funding and return on capital. In the background, we continue to plan for future developments and have projects ready to commence as conditions improve. This includes our new land acquisition in Belrose, New South Wales. Looking forward, Regis will play an important role in providing new and contemporary homes that are attractive to our market. This is a good time to now move to an update on our strategic plan and sector reform. The Australian Government has released the high-level sector reform plan, and there is substantial work underway on the detailed policy and funding changes. Regis has assessed the available information on the timetable for reform, and this has been factored into our 3-year strategic plan, our annual business plan and our assessment of enterprise risk. Our data intelligence continues to support strong growth for the sector with an aging demographic, the reform outcomes including additional requirements and funding, a substantial increase in the workforce and a likely reduction in the number of approved providers as providers themselves and regulatory requirements continue to raise the bar. Notably, at $17.7 billion, the government's response is the largest funding package since the Living Longer Living Better reform in 2013. There is still much detail to be worked through, but the narrative of system reform is encouraging. As one of the largest providers in Australia, Regis is well placed against many of the intended reforms, including corporate governance, clinical governance, prudential controls, food and nutrition standards, registered nurses on site 24/7 and career pathways across all roles. Regis has a strong purpose, and our nearly 30-year-old company remains dedicated to the care and service of older people. Our current 3-year strategic plan groups our priorities and goals under 3 pillars, being: The Regis Culture of Care; Positive People and Practice; and Ensuring our Future. The Regis Culture of Care pillar uses our clinical governance framework as the base. ensuring that the care and services we provide are personal, safe, effective and integrated. Regis will further our existing programs with key focus areas being teaching, training and research, safety, confidence and inclusion. I particularly want to draw out a number of our existing programs and where we already meet or exceed recommendations from the Royal Commission. Our Board invests significant time in clinical governance both at Board meetings and through our Board Committee for Clinical Governance and Care, chaired by Independent Director Professor Christine Bennett AO, a medical practitioner with deep expertise in the management and governance of clinical services, tertiary education and technology. Along with health professionals on our Board and executive, Regis has registered nurses rostered at all homes 24/7 as well as expert clinical support teams and senior registered nurses available for support and advice around the clock. Our quality and safety processes and reports provide insights into our performance, and we have strong processes and requirements to meet our open disclosure, whistleblower and transparency obligations. Our frontline teams have used electronic clinical management software since 2013, ensuring all information about a resident or client is available at the point of care. Our seasonal menus meet the nutrition requirements of older people with regular resident input as well as a long-standing process of professional review by catering experts and a dietitian. Our teams work with each resident and client to ensure that our care and lifestyle programs meet their personal needs and preferences. Regis also has a mature additional services program that provides our residents with choice and control and is a key differentiator from our competitors. We have a range of improvements underway to enhance consumer engagement, add to our clinical care and research partnerships and progress our research strategy. Our model of care reviews will ensure our programs are matched to changing consumer expectations and needs, especially as the increase in resident acuity is expected to continue with the aging population and later entry into residential aged care. Work to reduce administration workload for frontline employees continues, allowing our workforce to spend more time providing care and companionship to our residents and clients. In a key safety improvement, we plan to implement an electronic medication system that will interface with our existing clinical management system with a pilot underway. We are also enhancing the number and timeliness of quality and safety indicators that the Board and executive monitor. A resident or client's experience of Regis is at the point of care or service. And to this end, Regis invest heavily in teaching training and support programs for our workforce. The company has a range of programs in place to provide key skills and updates to our employees, financial support for accredited study, in-house clinical and portfolio support teams and a confidential external employee assistance program. Regis places a high value on employee well-being and respect needed more in the past 2 years than ever, and we continue to expand the range of health, fairness, diversity and inclusion programs. Regis has comprehensive programs in place for performance review, development and talent mapping as well as a strong history of career planning and progression across all roles. A major focus is our workforce strategy and ensuring Regis is the employer of choice for our growing sector. This work is of high strategic importance and value in the context of existing and predictive skill shortages, changes in migration and high sector workforce turnover. Our final pillar is Ensuring our Future, and this group of work includes our digital transformation program, our land and property assets, a diversified portfolio, accurate and efficient systems and processes, partnerships and environmental sustainability. Keeping ahead of the coming reforms as far as possible will place the company in good stead from a competitive perspective. We are a key member of the Aged Care Reform Network and determined to play our part in systemic improvement across the industry. Our home care strategy sets out our plans to expand this part of our business, and we anticipate sector consolidation here, too. This is a key opportunity as government continues to increase funding to this part of the aged care sector. Regis has long been a leader in design standards for residential aged care, and we have added environmentally sustainable elements to all of our homes and offices. We have again reviewed our design standards to ensure that the now business-as-usual infection prevention and control changes are supported by good design and that the design enhances workplace efficiency. We are also increasing partnerships with local and sustainable suppliers to boost communities, support shared value creation and reduce our carbon footprint. We have significantly improved our cybersecurity capabilities and protections that respond to the increased risks to health and aged care providers. The team is led by a cybersecurity expert and works closely with external experts and organizations. Importantly, our future is very much led by the continuous improvement and learning philosophies driven from the Board and executives through to our frontline teams. The culture of Regis is very much led by the Board, and this is a real strength of the company. Our current work is focused on a range of necessary upgrades to various systems and infrastructure, to address our business requirements, efficiency opportunities and data and predictive analytics. One area of particular focus is the upcoming activity-based funding program, and we are well placed here with various executives holding extensive experience in activity-based funding models. With regard to our research and innovation partnerships, Regis is a desirable partner due to our scale and sophistication and our ability to deliver rapid translation from research and innovation to practice. Our residents enjoy contributing to research and development, and this is a key attractor for our workforce. I'm pleased with the progress Regis has made in the environmental, social and governance domains. The company is proud of our history and our work to create shared value in an essential industry for the Australian community. The company's environmental achievements across the year include our recycling and sustainable consumer initiatives and environmental upgrades to our homes and offices. Our social programs have been impacted by the changed environment associated with COVID-19 and finding new ways for our residents and clients to connect with their loved ones and communities as visitor restrictions have been applied by different state and territory governments. We are looking forward to restoring the full range of social programs as soon as it's safe to do so. We have introduced a range of new virtual forums and communications to increase interaction between the executive and management teams and to provide leadership, mental health and wellness in services. While these have been necessary and useful during COVID-19, the team is looking forward to borders reopening so we can return to valuable face-to-face interactions that are critical in our business while keeping the efficiencies of virtual meetings that meet our needs. Regis continues to prioritize our key drivers of quality care, service and accommodation. High performance in these areas will support the continued improvement in occupancy, which is a focus for us. Our key drivers are themselves supported by the workforce strategy and upgrade of our key business systems taking into account our own requirements and ambitions as well as those considered by the sector reform agenda. As I reflect on the financial year of 2021, I'm struck by how our executive team has balanced the external factors with our own ambitions for Regis. I'm very pleased with how the executive team has come together with a relentless consumer focus, combined with strong business acumen. Importantly, our executive team has the breadth and depth of expertise and experience to manage the increasing complexity of the aged care system in terms of the higher acuity and expectation of residents and clients, the clinical and corporate governance models for a maturing sector and to deliver improved business performance. The executive has worked hard over the past year to recruit additional skills into our management teams to deliver our planned program of work. I would like to commend the extraordinary efforts of our entire workforce and thank them for the important work they do in caring for older Australians with commitment, focus and kindness. I would also like to express my gratitude to our residents, clients and families for choosing Regis for their care and service needs. Thank you.

Thank you, Linda. I will now open the -- sorry, I will now outline the question and voting procedure for today's meeting. As this is a shareholders' meeting, only shareholders, their attorneys, proxies and authorized company representatives are permitted to vote and speak at the meeting. The process today will be that I will introduce each item separately, consider questions and then, if applicable, invite voting on the item. We will address telephone questions first if any shareholders, proxies or their representatives who have dialed in wish to ask a question. [Operator Instructions] [Audio Gap] when we come to that item of business. Please ensure your questions are relevant to shareholders as a whole. The online questions will be moderated by our acting Company Secretary, Rebecca Dean. I will now explain the voting procedure. All votes to be conducted at the meeting will be by way of a poll, which means that each shareholder has one vote for every share held. Resolutions 2, 3 and 4 set out in the notice of meeting are to be considered as ordinary resolutions 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. 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 reports of the directors and auditors for the year ended 30 June 2021. While we do not put this item to vote -- 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 any questions in relation to the conduct of the audit and preparation of the content of the auditor's report. Are there any telephone items -- telephone questions on this item of business?

Chairman, there are no questions on the telephone at this time.

Okay. So Rebecca, are there any questions online regarding the financial reports and management of operations of the company?

Chairman, we've received the following question from [ Peter Ed ] of the Australian Shareholders Association. [ Mr. Ed ] has asked, following the Aged Care Royal Commission, the federal government's budget commitments and the passing of time, do you now have a clearer view of the way forward for large providers such as Regis Healthcare? And have you made changes to company strategy or policies as a result?

Thank you for your question, Peter. As I mentioned in my address and also Linda mentioned in hers, following the Royal Commission recommendations, which were announced in February this year and the government's response with the $17.7 billion funding program over 5 years and the announced major reform program, we do have a much clearer idea of the direction in which the industry is heading over the next few years. However, as I also mentioned, we still require some further clarity on some of the important key principles on how these reforms will operate. They include the way the Independent Pricing Authority will perform and also the role of that authority in guiding government funding to the sector, given its -- the government is not obliged to follow the recommendations of that authority. We also have the -- what's called, the AN-ACC or resident care funding model, which is a different model that has been used in the past, and that is still being calibrated and worked through by government department with some input from operators. We would welcome more input into that because this is the operational heart of the business, and -- but we do believe it is heading in the right direction, and it will continue to evolve over the next 12 months with that model not being introduced until October next year. And finally, we still have workforce challenges as many sectors across the economy do with the economy having been closed and with health care sector workers being in strong demand for things like vaccination programs. There has been shortages and pressures on our workforce. Notwithstanding those areas that we are still looking for greater clarity and resolving issues around, we are more positive about the sector. We feel the reform programs are in the right direction. Regis, as we said, has now got a very strong balance sheet. We've substantially paid down debt over the last couple of years, and we have a focus on increasing development and opportunities for investment should they occur, and we are keeping a focus on opportunities to grow in the sector. So in terms of the answer to your question, yes, the Board and management do have a clearer way forward. We have clear strategies in place, as Linda talked about the 3-year plan, and we're still working through some of the uncertainties with government to ensure that the sector is well supported and sustainable into the longer term.

Chairman, we have a second question from [ Mr. Ed ] of the Australian Shareholders Association. [ Mr. Ed ] has asked, given the recent agreed sale of Japara Healthcare to the not-for-profit sector, do you have any comments on the ongoing outlook for the publicly listed companies such as Regis Healthcare?

Thank you, Peter, for the question. Being publicly listed has advantages and some disadvantages. It gives us access to equity and capital markets. It underlines the confidence that investors can have in the disclosure and governance of the company, but it also comes with costs as well. Overall, I would say, whether we're listed or not is not a significant issue, but the more important issues are the strategic and the operating issues that we face as a business.

Chairman, we also have a question from [ Yin Yin Yang ]. Due to the impact of COVID-19 on the performance of the company, how can Regis ensure that the business can continue receiving new residents? And what are the main hurdles to achieving occupancy above 95%? What is management doing to ensure that the company can perform better than others in the industry?

Thank you for the question. Look, I might just give a brief answer and then I will -- because it's a really important question, I'll pass to Linda to just add a few thoughts to my comment. I mean, first of all, I would have to say that there is still strong fundamentals for our sector looking forward. We've been with aging demographics. There's been a pause on building investment over the last couple of years. And we know that existing stock of aged care facilities, There are many that are not fit for purpose. And with consumer choice now favoring better quality operators and stock, we believe Regis is well placed in that regard. We're yet to see the impact of deregulation of licenses, which will come through after 2024. But that will also favor those with strong balance sheets, and we think there are opportunities for us as a result of that. The third point is that the home care packages have increased significantly in recent years, which has slowed the flow into residential aged care. So the supply and demand factors were changed as a result of the government's significant investment in home care, but that's delayed rather than replaced the need for residential care. I'd say finally, Regis is confident that it can lift its current occupancy rate. COVID has certainly impacted occupancy and particularly in those states, which have been subject to the longest lockdowns. [Audio Gap]

In terms of the supply and demand, supply will actually drop over the coming years as many operators have actually not been investing due to the ongoing uncertainty in terms of returns. There's also an issue in terms of the quality of a lot of the build stock around the country, and I would expect to see some of those older, end-of-life homes closed over the coming period. And particularly as consumer expectations increase. The demand fundamentals are really strong. The population projections show that Australia has an aging demographic, and the baby boomers will hit our sector in the not-too-distant future. And the other thing that I would say is that in between lockdowns, the management initiatives that have been applied, we can see that they've been effective. The difficulty that we have is the lockdowns and particularly the restrictions on tours and visitation, and it's very difficult for residents and their families when they can't see one another. So I would certainly expect the lifting of those restrictions to help our occupancy as well.

Thank you, Linda. Rebecca, are there any further online questions?

We have no further online questions regarding this item, Chairman.

Thank you. We shall now move to the next item of business, which is the election of Directors. Bryan Dorman and Christine Bennett's terms come to an end at today's meeting. Being eligible, both Bryan and Christine are standing for reelection at this AGM. Both Bryan and Christine's credentials are detailed in the notice of meeting. The Board supports the reelection of Bryan Dorman as a Director of the company. I now invite Bryan to provide a brief address to the meeting regarding his reelection.

Thank you, Graham, and good morning, everyone. I have over 30 years' experience in the aged care sector, including founding this company in 1991 and establishing its character of quality care, which we still cherish today. I have over 45 years' experience in business and commerce and considerable understanding of the daily challenges of a changing operating environment. I was Director and National President of the Aged Care Association of Australia, the peak aged care body for 10 years. During that time, I acted on an industry and government appointed advisory body shaping the industry and sector in the areas of prudential governance, financial and care management. In my capacity as a Director of Regis, I'm strongly committed to enhancing and improving the clinical and care regimes in Regis, such that we meet the increasing needs of our aging residents and their acuity. I'm alert to the changing dynamics of the sector, subsequent to the recent Royal Commission and the threats, challenges and opportunities that presents. I'm committed to the successful conduct of the Regis Company and its business and alert to the opportunities in aged care within the industry and the environment. I'm cognizant of my responsibilities as a Director of this company and the risks and challenges that we face in an ever-increasing, regulated environment both from a corporate and aged care perspective. Thank you.

Thank you, Bryan. Are there any telephone questions regarding the reelection of Bryan Dorman as a Director?

Chairman, there are no telephone questions on this item.

Okay. Thank you. Are there any further questions online?

Chairman, we've received no questions on this item.

Yes. As there are no questions in regard to this resolution, we'll proceed to vote. The proxy position for this resolution will now be shown. If you have not yet voted, please now select either for, against or abstain for resolution 2.1. [Voting]

Thank you. We will now move to the reelection of Christine Bennett as a Director. The Board supports the reelection of Christine Bennett as Director of the company. I now invite Christine to provide a brief address to the meeting.

Thank you, Graham. Good morning, everyone. I'm very pleased to offer myself for reelection as a Director of Regis having served on the Board for just over 3 years. And what a 3 years it has been for our whole community and very particularly for aged care, fires, floods dealing with the COVID pandemic, the Royal Commission and more, an active environment of change and challenge. When I joined the Regis Board in 2018, a specific area of priority was the establishment of our Clinical Governance and Care Committee, and an enhanced focus on safety, clinical management and building the structures and processes to support and extend on an embedded culture of quality improvement. In conjunction with a world-class management team established by our MD, Dr. Linda Mellors, these early developments prove critical to Regis in our approach to the response and management of these challenging times. We are well prepared for the evolving circumstances ahead and I believe I'm making an important contribution to the leadership of this vital sector. The well-being of our residents, clients and families is central to our thinking, along with valuing and supporting our people, who are doing such important work. From a personal perspective, over the last 5 years, I've been caring for my dear parents and a beloved aunt at home and then in residential care. I understand how difficult the pandemic has been for our residents and their families. I want to particularly commend and thank our dedicated frontline staff, who've been committed to the older Australians in our care during these difficult times while often facing their own challenges. It has been a privilege to work alongside such a dedicated Board and capable executive team over the last 3 years. If reelected, I am passionately committed to contributing with my Board colleagues to advancing Regis as a business, as a leader of positive change in this evolving sector and to support the older Australians in our care to live their best lives with dignity, respect and a meaningful sense of community. Thank you.

Thank you, Christine. Are there any telephone questions regarding the reelection of Christine Bennett as a Director?

Chairman, there are no telephone questions on this item.

Thank you. Rebecca, are there any online questions?

Chairman, there are no online questions for this item.

Okay. As there are no questions regarding this resolution, we will proceed to the vote. The proxy position for this resolution will now be shown. If you have not yet voted, please now select either for, against or abstain for resolution 2.2. [Voting]

Thank you. Ladies and gentlemen, the next item of business on the agenda is the adoption of the remuneration report for the financial year ending 30 June 2021. This report was included in the directors' report on Pages 68 to 78 of the company's annual report. This report sets out the company's remuneration arrangements for the executive and nonexecutive 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 consideration by the Board. Are there any telephone questions regarding this item?

Chairman, there are no telephone questions regarding this item.

Rebecca, are there any questions online regarding this item?

Chairman, there are no online questions regarding this item.

Given that there are no questions, I will now move to vote on this resolution, reminding that -- shareholders that this is nonbinding. But should the final vote against this resolution be greater than 25%, the Board will review issues raised by shareholders or proxy advisers in relation to the remuneration. If you have not yet voted, please now select either vote for, against or abstain for resolution 3. [Voting]

I will now move on to the final item on the agenda. The final item of business on the agenda is the approval for the grant of share rights to Dr. Linda Mellors as an annual equity incentive grant for the year ended 30 June 2021 under the company's Variable Reward and Retention Plan on the terms described in the explanatory memorandum accompanying the notice of meeting. The ASX listing rules require that a majority eligible shareholders approval be obtained for the acquisition of securities by a director under an employee incentive scheme. Financial year 2021 VRRP was subject to the performance measures determined by the Board at the start of the financial year 2021 as set out in the notice of meeting. The Board determined that the care and compliance gateway was not met, and therefore, the entire cash component comprising 40% of the VRRP was forfeited. The total achievement percentage was, therefore, applied to the share rights component, which is 60% of the VRRP. Based on performance, the MD/CEO is eligible to receive a total VRRP award of $158,400 for FY 2021. Subject to majority shareholder approval, Dr. Mellors will be granted VRRP share rights, which represent 33% of the VRRP award. If shareholder approval is not obtained, the Board would consider alternative arrangements to appropriately remunerate the MD/CEO. The nonexecutive directors unanimously support the grant of the share rights to Dr. Mellors. I will now take any questions you may have in relation to the grant of share rights to Dr. Mellors as Managing Director and CEO. Are there any telephone questions?

Chairman, there are no telephone questions on this item.

Rebecca, are there any online questions?

Chairman, there are no online questions for this item.

Thank you. We have now finalized discussion on this item, and the proxy position for the resolution will now be shown. If you have not yet voted, please now select either for, against or abstain for resolution #4. [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. Are there any remaining telephone questions?

Chairman, there are no final telephone questions.

Rebecca, are there any other general questions?

Chairman, there are no other general questions.

Ladies and gentlemen, that concludes the formal business of the meeting. The detailed results of the final polls will be announced on the company's website and ASX announcement platform later today. On behalf of the Board, I would like to thank you for your support and participation today, and I now declare the meeting closed. Thank you.