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Ryman Healthcare’s first-half earnings rose 13 percent as a booming real estate market raised the value of its retirement villas.
New Zealand’s largest retirement village operator posted an after-tax profit of $ 212.4 million in the six months to September 30, up from $ 188.3 million last year. The result includes $ 124.1 million in property appreciation gains, ahead of the $ 92.7 million in gains recorded last year.
Ryman and other retirement village operators have been rapidly erecting new villages and building large land banks for future development to serve an aging population. Ryman continues with its largest expansion program yet with 12 new villages underway, seven in New Zealand and five in the Australian state of Victoria.
Construction in Victoria slowed due to lockdowns as a result of the coronavirus pandemic, but Ryman is sticking with his plan to have five villages open in the state by Dec. 31, although CEO Gordon MacLeod has warned there is a possibility of this is delayed a bit because of Covid-19.
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“While 2020 has been a nightmare, it could have been a lot worse,” MacLeod said.
The company, which received $ 14.2 million in wage subsidies from the government, is paying $ 44 million in dividends to its shareholders from its first-half earnings. It has spent $ 50 million on its response to the pandemic since January, mostly on additional costs for personnel and personal protective equipment. It has had no cases of Covid-19 among its 12,000 residents or 6,100 employees.
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Ryman chairman David Kerr says the board believed it was appropriate to pay a dividend to shareholders when the company had received wage subsidies from the government, given the additional expense the company had incurred as a result of Covid-19.
Chairman David Kerr said the board had “a pretty long discussion” about whether to pay a dividend after receiving the wage subsidy.
The wage subsidy scheme was “a big initiative” by the government, meaning Ryman could continue to employ all of its staff, reassign staff and hire new staff to keep villages safe, he said.
Ryman’s board believed that because the company had spent roughly three times the wage subsidy on the Covid-19 measures, it was “balanced” and “appropriate to pay a dividend,” he said.
“The board decided it was the right decision,” Kerr said.
Ryman does not release a full-year profit forecast due to the uncertainty surrounding Covid-19. In the first half, increased investment raised debt, while cash flow weakened.
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Ryman Healthcare says the coronavirus pandemic reduced sales in the first half of its financial year.
Bank debt increased to $ 2.1 billion as of September 30, up from $ 1.7 billion as of March 31 and $ 1.5 billion in September last year, reflecting its record investment in new villages. Net operating cash flow fell to $ 96.4 million in the first half, down from $ 256.1 million last year.
Ryman received $ 483.1 million in cash from residents in the first half, up from $ 582.8 million last year. Sales of new occupation rights for their towns weakened to $ 71 million from $ 187.6 million last year.
MacLeod said it expects to receive $ 275 million in cash from the sale of new units in the second half, the highest in a six-month period in the company’s history, and ahead of $ 118 million in the same period last year. past.
Ryman posted a total of 577 sales in the first half, up from 683 last year.
The company’s underlying profit, which eliminates the impact of property appreciations and better reflects its business performance, fell 14 percent to $ 88.4 million in the first half as business activity was “severely restricted” in Victoria during six months due to Covid-19. , and for more than two months in New Zealand.
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Ryman Healthcare expects sales to recover in the second half of its financial year.
But with closings closed in Victoria and a booming housing market in New Zealand, Ryman expected conditions to improve in the second half, and the company had a record number of new villages in the pipeline to take advantage of the recovery, MacLeod said.
“It has been a difficult six months due to the continued impact of the pandemic, which increased costs substantially and restricted our ability to sell in key markets during the prolonged lockdowns,” he said.
“While there is likely to be some uncertainty due to the pandemic, clearly there is a lot of pent-up demand in the housing market and we are in a good position to continue to invest heavily.”
Ryman is seeking a CEO to lead its Australian operations as it prepares to expand into Victoria and other Australian states.
The company is paying a first half dividend of 8.8 cents per share, in accordance with its policy of paying approximately half of its underlying earnings. That’s lower than last year’s 11.5-cent payment.
Shares of Ryman fell 2.6 percent to $ 15.11 in mid-morning trading Friday. The shares are down 6.6 percent this year.
