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Ryman first-half profit climbs 8.4% as unit resales outstrip slowing property market

Thursday 23rd November 2017

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Ryman Healthcare, the country's biggest retirement village operator and developer, boosted first-half profit 8.4 percent and lifted its interim dividend on rising resales of existing units at a fatter margin, even as the broader property market slowed. 

Net profit rose to $202.6 million, or 40.5 cents per share, in the six months ended Sept. 30, from $187 million, or 37.4 cents, a year earlier, the Christchurch-based company said in a statement. Underlying earnings, the company's preferred measure which strips out unrealised movements in the value of its property portfolio, gained 11 percent to $85.2 million. It expects annual underlying profit between $195 million and $210 million, compared to $178.3 million a year earlier. 

The result was underpinned by a 12 percent increase in the sale of existing occupation rights to 394 with a 37 percent gain in the value of those sales to $201.8 million. Of that, Ryman's realised fair value gain was $52.8 million, a gross margin of 26 percent compared to 24 percent a year earlier. Sales of occupation rights for new units fell 35 percent to 157 while the value shrank 18 percent to $90.5 million, of which Ryman's realised gain was $15.16 million at a gross margin of 17 percent compared to $23 million at a 21 percent margin a year earlier. 

"We are keeping an eye on the property market like everyone else," chair David Kerr said. "It is also important to remember that moving into a Ryman village is usually a decision based on health needs rather than a purely market-driven decision." 

New Zealand's listed retirement village operators are typically linked to the broader housing market, which influences the prices paid by residents, and the new government's heightened rhetoric over the property market prompted investors to scale back their expectations for the sector. That's coincided with Reserve Bank-imposed lending restrictions and tighter lending criteria which has already seen a cooling in the market, with recent results from listed commercial property investors showing property values plateauing. 

Ryman bucked the trend, recognising a $186.8 million gain in the value of its property portfolio, of which $118.3 million was unrealised. That's up from a $175.8 million gain a year earlier, of which $118.2 million was unrealised.

The retirement village operator's portfolio of 31 villages houses more than 10,500 people, and was valued at $4 billion as at Sept. 30, up from $3.34 billion a year earlier. It has four more villages under construction and another 10 in the planning and design phase, including a $95 million village in Mount Martha, Victoria, announced today. 

Ryman had 6,060 units and 3,281 care beds in its portfolio at the balance date, with another 4,036 units and 1,604 care beds to be developed. 

While the company didn't comment on the government's housing policies, chief executive Gordon MacLeod said Ryman was lobbying policymakers over immigration settings to ensure they have enough staff. 

"We are about to experience huge growth in demand and the reality is there is likely to be a shortfall locally," MacLeod said.

Kerry said the company expects a busier second half with construction activity weighted towards the end of the year, and is still targetting a doubling of underlying profits every five years. 

"Our long-term goal remains to grow to meet the massive amount of demand we see ahead as the population ages," he said. "Each new village we build represents a long-term investment in care for the communities we operate in, and the villages create a new economic engine to support our future growth as a company." 

The board declared an interim dividend of 9.5 cents per share, payable on Dec. 8 with a Dec. 1 record date. That's up from 8.5 cents a year earlier.

The shares last traded at $9.21 and have gained 14 percent so far this year, making it the best performing retirement village stock on the benchmark S&P/NZX 50 index so far this year. 


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