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Ryman hikes dividend as annual earnings grow on wider development margin

Friday 24th May 2019

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Ryman Healthcare will pay a bigger return to shareholders after chalking up another record earnings result on wider development margins, despite slowing sales. 

The country's biggest listed retirement village operator will pay annual dividends of 22.7 cents per share, up from 20.4 cents a year earlier, matching a 12 percent increase in underlying earnings to $227 million from $203.5 million. The result was in line with its November guidance for earnings to be $223-238 million. 

The growth was due to a widening of its gross development margin on new sales to 30 percent, especially at the company's second village in Melbourne. That was up from 19 percent a year earlier, and above Ryman's target margin of 20-25 percent. 

The improved performance was in spite of a decline in sales of occupation rights to 1,238 from 1,283 a year earlier. Of that, new sales fell to 414 from 458 and there were 824 resales compared to 825. 

Net profit dropped to $326 million in the 12 months ended March 31 from $388.2 million a year earlier. The decline was largely due to a smaller increase in the value of its property portfolio of $292.9 million, compared to a $351.5 million uplift in the March 2018 year. 

Retirement village stocks have fallen out of favour among many investors, who often link them to the residential property market, and house price deflation in Auckland is seen as removing a tailwind for the sector. The shares last traded at $11.87 yesterday and have increased 11 percent so far this year.

The latest Real Estate Institute figures showed Auckland house prices fell 4.4 percent in the year ended April, although prices in the rest of New Zealand were up 6.7 percent in that year. 

"We are pleased to report it has been a solid year given the current trading environment which has included challenging market conditions," chair David Kerr said in a statement. 

"These have not put a dent in our plans to invest for the long term in our villages and in improving life for residents and staff."

Ryman invested $552 million on new and existing villages during the year, up from $478 million a year earlier. It owns and operates 36 villages in New Zealand and Australia, with 3,660 aged-care beds and 6,878 units. 

The portfolio was valued at $5.08 billion as at March 31, up from $4.4 billion a year earlier. That uplift included $395.9 million of new building, $190.5 million of realised fair value gains, and $102.4 million of unrealised fair value gains. 

The company announced plans for four new villages today - two in Christchurch, one in Auckland and one in Melbourne - which it expects will cost about $570 million to develop. 

It has 20 new villages under development or in the planning stages, with a record land bank of 7,012 beds and units, up from 5,952 a year earlier. 

Ryman reaffirmed its medium-term target of doubling underlying profit every five years, implying it wants to crack $500 million in the year ending March 2024. 

The final dividend of 11.9 cents will be paid on June 21 with a June 7 record date. 


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