Ryman Healthcare profit plummets, but revenue up 18 per cent

The Miriam Corban Retirement Village in Henderson. This is owned and operated by Ryman Healthcare.

New Zealand’s largest listed retirement owner-operator increased total revenue 18 per cent to make $689.9 million but reported net profit after tax plummeted from $257.8m to just $4.8m.

Ryman Healthcare said its full-year result to March 31, 2024 showed a turnaround was under way.

Higher revenue came from the company providing more hospital-level care and reaping more money from deferred management fees, set at 20 per cent of purchase prices - the money it retains when people leave their places due to illness or death.

But the impacts of impairments and other one-off costs ($283.9m, FY23: $175.4m) and a lower fair value gain on investment properties led to a plunge in net profit after tax, the company said.

Last month, chief executive Richard Umbers unexpectedly resigned and left on the same day.

Umbers had only joined Ryman in October 2021 from a mainly retail background and the announcement did not say why he went so quickly.

Chairman Dean Hamilton is acting as executive chair while a search starts for a new group chief executive.

Ryman had already flagged that instead of making $300m to $330m, it would only make an underlying profit of $265m to $285m.

Today, it reported underlying profit of $270m, down 11 per cent on the $301.9m previously.

“The reduction in underlying profit on FY23 was primarily a result of lower margins on new developments which have suffered from higher costs to complete through construction inflation, the impact of delays and higher interest costs.

“Ryman has traditionally used underlying profit as a key measure of its financial performance. It now believes that there are better indicators of performance,” it said.

While he was still in the job, Umbers had cited lower new sales volumes and lower margins on resales which he called “disappointing”.

The company said late last year it would be selling two sites and deferring work on another three:

• Selling land at Kohimarama after abandoning a controversial $150m plan neighbours opposed;
• Selling land in Newtown, Wellington, described as an extremely capital-intensive site;
• Pausing work at the ex-fire station site at Takapuna;
• Development of Melbourne’s new Ringwood East village has been paused, although basement work has also begun;
• Expansion of Murray Halberg Village in Lynfield in Auckland has been paused.

Today, Ryman said its land bank could take 5371 units and beds, including 2627 at sites now under active development, and 2744 at the rest of the sites.

Last year, shareholders got 8.8cps dividend but no dividend will be paid for the 2024 year.

Craigs’ analysts Stephen Ridgewell and Rob Morrison said Ryman had “taken a bath” via asset writedowns and more disclosure which put pressure on their peers to follow.

“It’s not pretty reading, with higher than previously understood capitalisation of cash costs and incorrect allocation of costs to developments that will no doubt see consensus downgrades to analyst valuations overnight,” their analysis said.

Overall, the approximately $800m of projected capital recycling on current projects would help reduce net debt from $2.5b to around $1.7b, they said.

Shares have been trading around $3.79, giving a market cap of $2.6b.

Anne Gibson has been the Herald’s property editor for 24 years, has won many awards, written books and covered property extensively here and overseas.