Group chief executive’s report

Ryman residents Pat Mansell, Bruce Mansell and Kay Johnston with group chief executive Gordon MacLeod.

We faced a number of unprecedented challenges during the year. We’ve kept innovating and improving, and as a result we are in a strong position to grow in the years ahead.

GORDON MACLEOD GROUP CHIEF EXECUTIVE, RYMAN HEALTHCARE

My highlight of the year is the way we kept our villages free of COVID-19.

Keeping more than 18,600 residents and staff across 41 villages and 12 construction sites safe was a remarkable achievement.

Leading a team that has been so committed and professional – and consistently so – is an absolute privilege.

I am delighted that their work is so well recognised by our residents. We won the Most Trusted Brand award for our industry for the seventh time.

We do not take anything for granted. COVID-19 is a tricky virus and things can change very quickly. We are always on alert.

The COVID-19 vaccine programme is under way and we’re encouraging everyone to take part. Take-up by our residents and staff has been excellent.

2021

Aged Care & Retirement VillagesAged Care & Retirement Villages

Five villages in Victoria

Another highlight was reaching our long-held stretch target of getting five villages open in Victoria by the end of 2020.

Our team in Australia has done a wonderful job.

They spent half of last year under lockdown, they kept everyone safe, the construction team had to adapt to multiple COVID-19 level restrictions, and the sales team came out with great February and March sales numbers once the restrictions eased in Victoria.

We have built an extraordinary amount of goodwill and almost 1,000 residents in Australia now call our villages home.

A strong finish to the year

We ended the year with a flourish, recording the highest number of transacted sales ever in the final quarter of a financial year.

Our reported IFRS profit was higher than $400 million for the first time and we had record cash collections in the second half of $693 million, up 26.7 percent on last year.

Total cash receipts from residents were a record $1.18 billion, an increase of 4.1 percent and we finished the year with $397 million of committed new sale contracts in place. This is a record year-end amount and this cash will be collected over the next 12 to 18 months.

“Leading a team that has been so committed and professional is an absolute privilege.”

This was a solid achievement given the significant shutdowns experienced in our two key markets. Heading into FY21, we were expecting half of our growth to come from Victoria, where it was almost impossible to transact with new residents for nearly 6 months. And in Auckland, which is our biggest market in New Zealand, we experienced level 3 lockdowns or above for 20 percent of the year.

We are in a healthy financial position with total assets of $9.17 billion, up 19.5 percent on last year. Shareholders’ equity has lifted by 23.0 percent to $2.83 billion.

Available resales stock at 31 March was only 1.4 percent of the portfolio, down from 1.9 percent at 30 September.

Our low resale stock, combined with mature care occupancy of 97 percent, demonstrates that our villages continue to be in strong demand.

In a year when we faced increased operating costs and could not trade or build for a significant amount of time, I am pleased with what the team has achieved.

CASH RECEIPTS FROM RESIDENTS

$1,200m

$1,000m

$800m

$600m

$400m

$200m

2010 2011 2012 2013 2014 2015 2016 2017 2018

First half Second half

2019 2020 2021

TOTAL ASSETS

$10bn

$8bn

$6bn

$4bn

$2bn

Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18 Sep 18 Mar 19 Sep 19 Mar 20 Sep 20 Mar 21

Interest-bearing debt Total assets

Interest-bearing debt represents ‘interest-bearing loans and borrowings’ in the balance sheet.

“We are in a healthy financial position with total assets of $9.17 billion, up 19.5 percent on last year.”

Victorian land bank

We have recently added a new site in Essendon, which replaces our nearby Coburg site in the north of Melbourne.

The Essendon site is medium density and is a more attractive prospect than the high-rise Coburg site, which we have sold.

We’ve got happy residents and strong sales at Ocean Grove, John Flynn in Burwood East and Charles Brownlow in Highton, and our Aberfeldie village is making great progress.

Aberfeldie will be our next village to open its doors, our sixth in Victoria.

We are hoping to get going at Ringwood East and Highett over the coming months after we have finished the planning endorsement process – both sites have development approval.

This means we will have seven sites on the go in Victoria, matching the seven sites we are building at in New Zealand.

We continue to be busy in New Zealand

Our construction teams are busy building across seven sites in New Zealand.

We are about to welcome our first residents at Keith Park in Hobsonville and Riccarton Park in Christchurch.

Our first residents are settled at Miriam Corban in Henderson and work is under way on the village centre.

James Wattie in Havelock North is now very established with townhouse and apartment stages selling well, and work will start on the care centre later in the coming year.

Development of the latter stages continues at William Sanders in Devonport, Murray Halberg in Lynfield and Linda Jones in Hamilton.

Our pipeline of New Zealand projects is growing.

Our development team has secured resource consents for new villages in Takapuna and Kohimarama in Auckland and Northwood in Christchurch.

We’ve also added a couple of great new sites in New Zealand.

The Karaka site is a broad-acre property a short drive from Papakura, and we think it has huge potential in a growing part of Auckland.

The Cambridge site is suited to a townhouse-style development. It’s a popular place for retirees and has a large catchment in a fast-growing region.

Our debt is productive debt

We are building across 12 sites in two countries and we will soon be under way on another two. This compares with development across just four sites 3 years ago.

We anticipate the 12 villages we have under way will generate $2.8 billion in capital proceeds and recurring income of $220 million on completion.

This level of development requires a large upfront capital investment and we invested a record $844 million into our portfolio over the year. This has seen our working capital debt lift to $2.25 billion.

Our development pipeline of 25 new villages would provide homes for more than 6,800 residents and would generate anticipated capital proceeds of $5.3 billion with recurring income of $420 million, subject to market conditions and consenting outcomes.

This is why we regard debt as productive. It is predominantly a function of the working capital required to create new Ryman communities and these communities generate growing recurring cash flows for decades. On top of the $420 million of recurring profits that will be generated each year from developing and selling down our land bank, our current earnings will also lift as our existing portfolio matures.

We significantly diversified our debt funding

Last year we signalled to the market that we were looking to diversify both the source and tenor of our debt and we achieved this during the year. We have raised NZ$825 million across three new debt markets. In the year to March 2021 we raised NZ$150 million through a retail bond offer and US$350 million via a US Private Placement. In May 2021 we raised a further AUD$250 million via an institutional term loan.

The weighted average debt maturity profile of these three debt raisings is 9 years. This has seen us extend our weighted average debt maturity profile of all our interest-bearing loans and borrowings to 5 years.

Through the debt issuances it was great to be able to explain our model to new markets. The response we received was very positive, with all three debt raisings heavily oversubscribed, a further endorsement of our business model and strength.

“Each village we build creates warm, purpose-built homes for older people with the care they need on hand.”

Sustainable Ryman

We continue to operate as sustainably as we can, ensuring that we leave the environment in the best shape possible for the generations to come.

Fundamentally, our whole model of operating has a sustainable underpinning.

Each village we build creates warm, purpose-built homes for older people with the care they need on hand.

They’re energy efficient and sustainable.

Our carbon footprint is much smaller than private homes, our density is greater, and, in most cases, we are also recycling brownfield sites. The traffic each site generates is a fraction of a normal suburb.

Our medium-density villages prevent urban sprawl. They free up homes in pressured housing markets where demand is outstripping supply. They fit perfectly with the aim of having people age in place.

By developing and operating our villages we create thousands of jobs and careers.

myRyman continues to develop

Technology continues to be a focus; we see huge potential in it to improve the lives of older people.

Our myRyman Care app is continuously being developed and it came into its own during the pandemic.

We are now looking at ways to roll out new myRyman applications to our independent residents, giving them a digital platform to keep up with village news and to digitise activities such as health monitoring, medication management, wellness, and even everyday activities such as food ordering, outing bookings and payments.

We are also reviewing a nurse practitioner model, which we think will improve access to care and encourage better health outcomes.

The model would also recognise the considerable skills of our nurses and provide another career pathway for them, as well as easing the pressure on our GPs.

We are really looking forward to trialling these initiatives and getting feedback from residents.

We are a critical part of the healthcare infrastructure

The public health systems in New Zealand and Australia continue to be under pressure.

When you consider the demand ahead for dementia care alone – which research shows will more than double over the next 30 years – you can see why our services are going to be in demand.

It’s imperative that aged care is seen as a critical part of the healthcare infrastructure in New Zealand and Australia.

Now, more than ever, it’s clear that if the aged-care sector fails to meet this need it will create a huge burden on the public system.

Thank you

I’d like to take this opportunity to thank all our shareholders and stakeholders for your support over my 15 years at Ryman.

It’s been a privilege to have this role, and I’d like to thank all our incredible team members and residents for their support.

I will be standing down once my replacement is in place, but you can rest assured it will be business as usual for me until then.

I know I will leave with the company in a great position to grow – it has huge potential and a wonderful purpose – to provide retirement homes and care that are “good enough for Mum or Dad”.

Gordon MacLeod

GROUP CHIEF EXECUTIVE, RYMAN HEALTHCARE