Ryman Healthcare shareholders question the scale of village development plans

Thursday, 13 August 2020

Ryman Healthcare is proposing a $240m retirement village opposite Hagley Park in central Christchurch. Shareholders questioned the scale of its expansion plans in New Zealand and Australia at its virtual annual meeting.

Ryman Healthcare shareholders have questioned the scale of growth plans of New Zealand’s largest retirement village operator at its first virtual annual meeting.

One told the meeting “biggest is not always best” and another queried the company’s rising debt.

Chief executive Gordon MacLeod said Ryman was well-placed for its biggest ever growth phase. It was building on 12 sites now, and was not planning to build on any more this year even though it had options to do so.

Ryman chief executive Gordon MacLeod says Ryman does not commit to building without knowing there is good demand for village units and beds.

The 12 sites fully developed would be worth $2.6 billion and would provide homes and care for another 4700 Ryman residents.

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“Our drive to get bigger is really to reflect the demand that exists for what we have to offer in a village. So it’s not about more big villages. It’s about providing more care. That’s what I see is the driver,” Ryman chairman Dr David Kerr said.

Asked if the company should slow down expansion and use net cashflow only for that rather than taking on more debt, MacLeod said profits and cashflow had grown in line with expansion.

The Karori teachers' college site has been bought by Ryman for a new retirement village in Wellington.

“The 12 sites we’ve got on the go, we don’t commit to stages unless we can see good demand.” The board kept a very close eye on development to ensure Ryman did not overbuild.

It had on hand $327 million of unconditional new sales contracts that underpinned the development of apartments and units that Ryman had committed to.

The board was asked why it did not take a fees cut given that other companies’ boards, executive teams, government servants and politicians had.

Kerr said no staff had been let go during the Covid crisis and Ryman had increased pay for all staff in care giving and administration.

Ryman chairman Dr David Kerr, at the podium, says Covid-19 has reinforced the attraction of living in Ryman villages.

The executive team had not received an increase in pay, and neither had the directors for more than two years, and that was one of the considerations in Ryman withdrawing the motion to increase the directors’ fees pool. Directors had been exemplary in their preparedness to jump in and help over the last six months.

Ryman had received $14m in wage subsidies and had applied village by village.

“What Covid-19 has done is to reinforce the attraction of living in our villages where residents enjoy security, companionship and a strong sense of community,” Kerr said.

“They regard our villages as safe havens where they find it reassuring to know there’s the best of care on hand if they need it.”

The work and support of its staff through Covid had been outstanding, Kerr said.

Ryman chief executive Gordon MacLeod says staff standing down for illness as a precaution against Covid-19 was difficult to manage. Pictured is Ryman’s Nellie Melba village in Melbourne, now in the last stages of development.

No staff or residents at its 36 villages in New Zealand and Australia, with 11,700 residents, had contracted Covid-19.

“We have had the occasional contractor who has had Covid and they have been isolated very quickly and the relevant testing done to make sure there are no issues there, which there have not been, “MacLeod said.

“We do extremely rigid checks for everyone entering the village gates, ranging from scent checks because people can lose their sense of smell, through to temperature declarations, knowing where people live, who they live with, whether they’ve had exposure to quarantine departures. So we try to develop a very thorough understanding of who’s coming in to our villages.”

Visitors were not allowed in now and there were other layers of protection like PPE (personal protection equipment) which was religiously worn. The health authorities in Melbourne had checked on their procedures a week ago and had thought they were excellent, MacLeod said.

Asked about residents wellbeing when their families could not visit, MacLeod said it was challenging. Zoom was used to connect residents with families. Staff had groups of residents to look after and got to know them well. But the company acknowledged it was still not the same as family visiting and staff wearing PPE and face shields made it difficult.

One of the biggest practical challenges was managing staff standing down for illness. In Australia now 57 staff were off on a precautionary basis because they were not feeling well or had a secondary association with someone who was Covid positive or something similar.

They stood down on pay for 14 days and were tested. It was a lot of people to reorganise in its two operating Melbourne villages. Since February, Ryman had 1000 staff members take precautionary Covid leave.

Kerr said that was a credit to staff’s honesty and why Ryman was “at this moment Covid free”. There was an element of luck in that because something could slip though. “It’s the Swiss cheese scenario,” Kerr said.

Sales had recovered well in New Zealand following the end of the lockdowns in May and demand for aged care remained strong.