Report Card: Ryman spins but leaves out detail

By David McEwen

Friday 26th July 2002

Retirement homes developer and operator Ryman Healthcare has produced its first annual report without founder John Ryder as joint managing director.

This significant event, given Mr Ryder's part in building up the company over the past 18 years, is mentioned only in passing, which is an encouraging sign for those trying to evaluate Ryman's capacity for sustainable growth.

The lack of fuss is partly explained by Mr Ryder moving to the position of non-executive deputy chairman and former joint managing director, with long-time business partner John Hickman staying at the helm.

The report prominently lists five highlights for the year to March, of which the first is "earnings up 47% in the second half."

Such a specific item for what is supposed to be a review of the full year automatically raises the questions "what happened in the first half?" and "what was year-on-year growth?"

Chairman David Kerr clears things up a little in his report by noting that net profit in the first half was $4.5 million and $6.6 million in the second, and this latter figure was 47% higher than the corresponding period last year.

"The net surplus achieved for the year was a good result, after a lower first half, but was down 21% on the previous year."

Those questions answered, it appears as if Ryman was scratching to find a highlight, applying some marketing spin to baffle shareholders, or was signaling that a 47% upturn in the second half was indicative of future growth.

Mr Hickman does state in his report that "the year was one of consolidation" but the report gives little sense that after a reasonably ordinary performance in its three years as a listed company that earnings were about to go ballistic. Ryman is not the sort of company that tries to pull the wool over stakeholders' eyes so the first option, that it was over-eager to find something positive to say, is the most likely explanation.

Hopefully directors will learn that stakeholders prefer their information straight and consistent and will show loyalty to companies that deliver it.

Although the current year's growth rate may not be 47%, their company indicates it will be attractive.

Dr Kerr concludes his review by saying the company has been investing heavily in new retirement villages in Hamilton and Auckland. "The company is now well placed to reap strong earnings growth from these villages in future years."

Mr Hickman notes that the first few months of the current year "have experienced substantial new sales of occupation rights" and that "the net surplus for the current year to date exceeds both the budget and last year's result for the same period".

With the exception of net profit, the rest of the company's numbers are moving in the right direction.

Net operating cashflow more than doubled to $16.7 million and shareholders' funds rose 18% to $112 million, representing a conservative 65% of total assets.

Content-wise, the report focuses too much on profiling its retirement villages, which is nice information to have but not essential, and neglects more important disclosures

Two notable omissions are a corporate governance statement and a multi-year performance history. Ryman may only have been listed for only three years but a three-year history, with ratios, would be better than nothing. Since it has been operating for many years as a private company, some comparisons could be made available from before 1999.

Most reports these days have a corporate governance statement. Often they are a stock standard set of paragraphs that reveal little but at least a statement shows a company is aware of the importance of having a governance regime and adheres to a basic set of checks and balances.

Ryman Healthcare has delivered a spare report that lacks information that many readers have come to expect. It would not require a great deal of effort to disclose more in the next report.

David McEwen is an investment adviser and author of weekly share market newsletter McEwen's Investment Report. Web: www.mcewen.co.nz, Email: davidm@mcewen.co.nz

Comments from our readers

No comments yet