Ryman Healthcare’s profits take a nosedive

Monday, 27 May 2024

Ryman Healthcare's profit after tax plunged significantly for the year March 31, despite an increase in revenue.

The retirement village operator reported a profit of $4.8 million, but that was down from $257.8m last year.

The company said the reduction was due to the combined impact of impairments and other one-off costs, and a lower fair value gain on investment properties.

Ryman also reported an 18% increase in revenue to $689.9m for the year, driven by growth in care, village and deferred management fees.

Underlying profit was $270m, down 11% on last year’s $301.9m, but within the range of $265 to $285m that it flagged earlier this year.

The result came in a particularly challenging operating environment with residential property markets subdued and cost inflation impacting all areas of the business, the company said.

Ryman Healthcare acting executive chairperson Dean Hamilton said the result was “clearly disappointing”.

The company had made the hard decision to reassess the carrying value of a number of its assets in light of the economic environment and to place higher hurdles on new developments, he said.

“Despite these non-cash write-downs, it is pleasing that the company achieved an improvement in cash flow from existing operations to $43.3m, up from negative $8.5 million in the 2023 year.”

No dividend was announced as the board had earlier decided to suspend dividends due to the need to continue to spend capital to complete committed village buildings and limit increased borrowings.

The company would review its dividend policy at a later date, but any future policy would be based on cash flow.

Hamilton said the board’s financial focus was to strengthen cash flow outcomes from existing operations and to recycle capital on new developments.

“Over time, we aim to grow the value of Ryman while gradually reducing our net debt position.”

The 2024 year had been one of significant change for the company, with governance and leadership changes, he said.

In April, Ryman announced its group chief executive officer Richard Umbers had resigned, and the search for a new group chief executive is still underway.

Hamilton said the company was refining its strategy and driving a transformation program that would place stronger emphasis on its financial performance to get fit for the future.

But it would maintain its commitment to purpose-driven care and exceptional resident experience, he said.

“We are clear on two things - our residents remain at the heart of what we do, and our villages are the place where we create value. Everything else we do is in support of these two principles.”

The company would focus on improving the financial performance of existing villages, improving the efficiency of new developments and creating a sustainable structure to support village and new development activities.

Hamilton said economic conditions remained challenging in New Zealand and Victoria, Australia, and it was unclear when interest rates would begin to decline and support improved housing market conditions and liquidity.

“Key to our performance in 2025 will be our ability to maintain high occupancy in our existing facilities and settle new units and beds as they come onstream throughout the year.”

But the company would continue to target positive free cash flow, from the combination of existing operations and development activity, he said.

It expected to complete 850 to 950 retirement village units and aged care beds, and 200 to 300 independent retirement village units, and expected to spend $700m to $820m on development activity and existing operations.