New Zealand’s largest listed retirement company cited the “challenging” housing market in declaring net profit down 4 per cent and downgrading its profit outlook but its boss provided more details of the five sites up for sale or where it is “pausing” work.
Ryman Healthcare’s reported net profit after tax fell 4 per cent from $193 million a year ago to $186.7m for the six months to September 30.
The company reported a $139m underlying profit, up slightly on the $138m it made at this time a year ago.
Total revenue rose from $274m to $322m.
Ryman has five sites where it has stopped work after it already began, or it is quitting the land.
Chief executive Richard Umbers said Ryman was “pausing” development at Takapuna.
“At the moment, we’ve done ground works at the site. It’s ready to build when we’re ready,” he said of the ex-fire station site at Lake Pupuke.
In Melbourne, the development of a new village at Ringwood East has also been paused: “It’s a reasonably dense development and we have other opportunities. We’ve only basement work there which is below-ground construction. We haven’t commenced construction.”
Expansion of the existing Murray Halberg village in Auckland’s Lynfield had also been paused: “It’s a very successful village. We build in a series of stages. We’re pausing stages five, six and seven which were to be mainly apartments.
“It’s a very large, complete village but we have available land to carry on building and that’s still available but stages are being paused because we have better use for our capital elsewhere. That money is now being used for some of the other 14 developments.”
Land was being sold in Kohimarama after the company abandoned controversial $150m plans opposed by people in the area.
“That was quite an expensive site for us to develop because it’s in a gully. It’s also quite a tight site so in terms of the return, it makes no sense for us to progress that site. It doesn’t meet our hurdles any more”.
Land at Newtown in Wellington was also for sale: “It’s a very capital-intensive site,” Umbers said.
The Auckland and Wellington land incurred high holding costs.
“We’ve held both these pieces of land for a considerable period of time. It was a land bank when money was quite cheap. As interest rates rose, the holding costs for us became significantly greater. We’re holding less land and not holding sites that we could use money from to do developments.”
The Newtown land was not ideal from a Ryman point of view which sought more open-plan developments, away from intensive developments.
“We’re not drastically slashing our build programme. The build rate has come down but we’re reallocating capital towards locations where we get a better return,” he said citing sites in Christchurch, Cambridge and Melbourne.
These projects were more heavily skewed towards townhouse developments rather than higher rise, he said.
But when house prices drop, people are more reluctant to sell and buy into a retirement village, so Ryman felt the pinch during the last half-year.
It sold fewer places.
“The real estate market has been through a challenging period and the retirement sector has not been immune from this. This was relative to a buoyant first half last year and has resulted in booked sales of occupational rights agreements of 699, down 9.5 per cent on the prior corresponding period,” the company said.
Umbers said the result was delivered during tough market conditions, including a subdued housing market for the majority of the period.
“While our financial results are steady on the prior year, we continue to make progress on resetting the business and executing the strategy which was communicated at the time of the equity raise,” he said, referring to the $902m capital raise.
Village occupancy is up 2 per cent to 96 per cent and is back to pre-Covid levels.
Net interest-bearing debt stands at $2.47b, up from $2.3b in March. Gearing of 33.6 per cent sits within the company’s medium-term target of 30-35 per cent.
On the outlook, the company said underlying profit for the full year was now expected to be in the range of $300m-$330m, when it was previously forecast to be $310m-$330m.
“This wider range reflects the ongoing levels of market uncertainty and dependency on sales in the new year,” the company said.
Shareholders will get no interim dividend for the first half of the 2024 financial year.
Shares are trading down 16 per cent annually near $5.30, giving a market capitalisation of $3.6b.
Anne Gibson has been the Herald’s property editor for 23 years, has won many awards, written books and covered property extensively here and overseas.