Ryman dip just blip says Hickman

By Chris Hutching

Friday 21st June 2002

KEVIN HICKMAN: Disappointing first six months

Ryman Healthcare's dip in earnings is caused by holdups in marketing the company's new retirement village in Auckland but performance is now back on track, according to joint managing director Kevin Hickman.

The slip in performance means the company has pulled back from expansionist talk about tackling the Australian market and is now keeping a watching brief on the aged healthcare sector across the Tasman, which Mr Hickman said was highly regulated and complex.

The annual result for the March 2002 year revealed a surplus after tax of $11 million compared with $14.1 million the previous year when the company made bullish forecasts about its ability to compete in the sector while analysts questioned the ultimate depth of the market.

But although sales of occupation rights may have slowed, earnings from ongoing operations - such as care fees, deferred management fees and re-sales of occupation rights - provided more income than new sales of occupation rights, a trend the company expects to continue.

Profit was lower but revenue in the latest year rose to $61.9 million from $59.7 million the previous year, with 211 sales of occupation rights compared with 225 last year and 184 the previous year.

Mr Hickman said the first six months of the period under review were a little disappointing because it took longer to get make inroads into the Auckland market and it took a few months before things got back on track. The company began selling occupation rights at the Grace Joel Retirement Village in St Heliers with the completion of the first 10 units and it opened the Hilda Ross Retirement Village in Hamilton.

"The bigger villages take some time to bed down but the bigger we grow the less effect each new one will have. As a result earnings are a bit lumpy but we've effectively doubled the size of the company over the past couple of years."

Mr Hickman said the Auckland market was crucial for Ryman because there were more senior citizens considering retirement homes and the value of their existing home was generally much higher than in other parts of the country.

At balance date the company owned and operated 832 retirement village units and 823 resthome, hospital and special-care beds. Net assets increased $16.6 million to $112.3 million.

The company's higher gearing ratio, associated with holding a substantial landbank, also affected performance but the ratio is expected to improve as the landbank is converted into operating cashflow.

Since balance date the company says sales of occupation rights have grown, particularly in the Hamilton and Auckland markets. Recent increases in the fee rates for resthome residents will also provide some upside in earnings in the 2003 financial year.

The net surplus for the current year to date is ahead of both the budget and last year's result.

Ryman holds land for future development at six of its villages between Invercargill and Auckland, plus a further site yet to be developed in Auckland. This landbank would potentially provide a further 1084 retirement village units or resthome/hospital beds for future development.

A final dividend of 3.6c a share has been declared, with no imputation credits attached, and will be paid on July 5, 2002. The total dividend for the year was 5.6c a share.

The share price is steady at around $1.70 after rising late last year as high as $2.15. Mr Hickman and fellow managing director John Ryder both hold 20% as does Ngai Tahu and a Canadian institution.

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