The shift in the timing of AN-ACC price increases from 1 July to 1 October in 2024 cut into residential aged care operator's profits in the first quarter of 2024-25, according to the Q1 2024-25 Quarterly Financial Snapshot (QFS).
Earnings before interest, tax, depreciation and amortisation (EBITDA) declined 21% or $9.14 from $43.54 per resident per day (prpd) in Q1 2023-24 to $34.40 prpd in 1Q 2024-25.
Operating expenses grew 10.3% in the quarter, while revenue grew only 7.1%.
The growth in operating expenses were driven by higher labour costs, reflecting both the Fair Work Commission's increase in the national minimum wage and increased compliance with care minutes and 24/7 Registered Nurses (RN), the Q1 2024-25 Quarterly Financial Snapsot stated.
With the Aged Care Quality and Safety Commission cracking down on providers not complying with care minute targets, it's expected labour costs will continue to rise as operators continue to move towards compliance. As of December 2024, less than half (45%) of aged care homes were compliant with both the total care minute and RN care minute targets.
Bed amortisation
Net profit before tax also decreased over the quarter, falling $0.41 prpd from Q1 2023-24 to $9.95 prpd.
The decline was in part due to a sharp 24.5% decrease in non-operating expenses due to an 83.3% decline in the value of bed license amortisation.
For Profit providers still have approximately $238.1 million left in bed licenses to amortise by 30 June 2025, and Not For Profits have approximately $58.9 million left to amortise, which means these expenses are expected to continue impacting financial results for the remainder of 2024-25.
Margin Squeeze
As was the case for home care, margins were squeezed in Q1 2024-25, from a median of 9.7% in Q1 2023-24 to a median of 6.8% in Q1 2024-25. This means residential aged care operators earned EBITDA of $6.80 for every $100 or revenue earned.
Other notable features of the results:
- Average occupancy in Q1 2024-25 increased to 89% (87.4% in Q1 2023-24);
- The median of wages to revenue increased to 72.3%, (70.2% in the previous corresponding period);
- In Q1 2024-25 only 26.2% of For Profit providers met both their care minutes targets, compared to 50.9% of Not For Profit providers, and
- Agency staff represented 8.3% of total direct care labour costs, down from 10.3% in Q1 2023-24. RNs had the highest percentage of agency staff, at 11.4%.
You can read the Q1 2024-25 QFS here.
