Retirement village operators

[Snoopy]

I'd argue that having your own builders only delays the inevitable - if it's materials inflation then it doesn't help much, if it's labour inflation they won't hang around for long if Ryman doesn't pay them competitively.

Good points. Perhaps the real savings for the likes of Rymans in employing their own building team is:

1/ Not having members of their building team declaring bankruptcy,
2/ Consequently not losing money on any contractors bankruptcy, AND
3/ Not having to go and scout out replacement builders once the old contractor is 'off the scene'.

Also I have visited different Ryman villages and they have a 'cookie cutter ' look. By that I mean that if you show me a one off photograph of a Ryman village, I could probably identify it as such. But as for where that village is located, I would have no idea. Ryman don't seem to push avant-garde architecture that requires tricky one off building solutions. Consequently the mechanics of the build between villages do not vary that much. And a competent building team at one site will likely do an a similarly excellent job at the next site.

The other side of this coin is CDI have very low overheads. They run without debt, and if the market turns to custard they just retrench and wait for it to pass. From 2007 to 2008, CDI's revenue fell from $39.5 million to $5 million, and they still turned a profit of $1.6 million. Keeping the work outsourced makes the company better able to adapt to external conditions.

CDI had revenue drop by over 75% over 2007 to 2008 yet still kept their profit constant at $1.6m! That is astonishing. Mfd, are you able to provide more insight as to now this was achieved?

SNOOPY

[tobo]

... Ryman villages and they have a 'cookie cutter ' look.
... Ryman don't seem to push avant-garde architecture that requires tricky one off building solutions.

Therein lies one problem with the cost of building.
Why would you want tricky one off building solutions for routine building (unless it was the only way to build on particularly tricky land).
Even Mercedes make hundreds of identical cars, let alone Toyota.

Sorry for the digression.

[mfd]

CDI had revenue drop by over 75% over 2007 to 2008 yet still kept their profit constant at $1.6m! That is astonishing. Mfd, are you able to provide more insight as to now this was achieved?

SNOOPY

To clarify, they did not keep profit constant, it fell from $15 million to $1.6 million. My point is that the company is very resilient to external shocks, partially due to outsourcing a lot of their work. The overheads are very low, and there is no debt. It's quite impressive that their growth has been similar to SUM, despite the lack of leverage, over the last decade. To be fair, CDI was coming off of a low point 8 years ago, so this time frame is extremely flattering, but I did not choose it.

[Beagle]

To clarify, they did not keep profit constant, it fell from $15 million to $1.6 million. My point is that the company is very resilient to external shocks, partially due to outsourcing a lot of their work. The overheads are very low, and there is no debt. It's quite impressive that their growth has been similar to SUM, despite the lack of leverage, over the last decade. To be fair, CDI was coming off of a low point 8 years ago, so this time frame is extremely flattering, but I did not choose it.

Fair enough you didn't choose the 8 year timeframe but well worth noting that I only chose 8 years because that period encapsulates the entire listed history of SUM and as such gives the most accurate picture possible of their long term compound average growth rate. That's the spirit in which I chose that timeframe. 8 years is so flattering to CDI such as to give a grossly disingenuous view of their long term growth rate, in my opinion.

Looking at CDI I think given the nature of the company one should consider as a reference starting point their profit before the GFC hit to give a view across the business cycles and I note their net profit after tax was $9.1m in 2006. $33.6m 12 years later gives an average compound growth rate of just under 12%. (An impressive achievement nonetheless and the PE is cheap so thankyou, I might run the ruler over them in the near term).

Worth highlighting too that their earnings are more variable whereas SUM's underlying profit has increased every single year. Also worth noting as an industry comparison thing (given SUM weren't around during the GFC) that RYM increased underlying profit every year throughout the GFC which underscores the robustness of the retirement sector's business model.

In summary, retirement companies give more consistent earnings growth despite economic conditions as bad as the GFC and are therefore less risky and good ones deliver vastly higher compound earnings growth than CDI has managed to achieve.

Its interesting comparing the basic differences between the business models. CDI develop and sell their properties once and pay full tax on their development margin.
Retirement companies develop and get their margin and sell a licence to occupy the same properties over and over and over again and get a fat margin every time they are resold AND get all capital gains over the long run AND are very tax efficient.

There's a heck of a lot to like about the retirement village business model.

[trader_jackson]

https://www.nzherald.co.nz/business/...ectid=12297437

"Ryman Healthcare led the market lower, down 5.1 per cent at $16.33 with 250,000 shares traded, almost half its 513,000 average. The country's biggest listed retirement village operator gained 52.1 per cent this year.

Arvida Group fell 1.5 per cent to $1.92, ending the year up 52.9 per cent, while Oceania Healthcare was down 2.2 per cent at $1.32, for an annual gain of 23.4 per cent. Summerset Group fell 1.7 per cent to $8.90, ending the year up 39.7 per cent."

that dog ARV has taken it out another year... out of the 5 years it been listed, it has been the best performer (in the listed sector) for at least 2 of them... some might be surprised to hear such things given the chat on each of the listed sectors threads.

[justakiwi]

Out of curiosity, have those of you invested in retirement villages, visited a local facility to see first hand what they offer, how they operate, get feedback from staff/residents? If so, was this something villages were happy to let you do as a potential investor, or did you just rock up and give the impression you might be looking for a bed/unit and ask for a tour?

[winner69]

https://www.nzherald.co.nz/business/...ectid=12297437

"Ryman Healthcare led the market lower, down 5.1 per cent at $16.33 with 250,000 shares traded, almost half its 513,000 average. The country's biggest listed retirement village operator gained 52.1 per cent this year.

Arvida Group fell 1.5 per cent to $1.92, ending the year up 52.9 per cent, while Oceania Healthcare was down 2.2 per cent at $1.32, for an annual gain of 23.4 per cent. Summerset Group fell 1.7 per cent to $8.90, ending the year up 39.7 per cent."

that dog ARV has taken it out another year... out of the 5 years it been listed, it has been the best performer (in the listed sector) for at least 2 of them... some might be surprised to hear such things given the chat on each of the listed sectors threads.

The Dogs of the Dow is used by some to base their investments on

So in this sector 2020 will the year for the ‘dogs’ ....go SUM and OCA

[Brain]

This is my concern too. People are living much longer, staying in their own homes longer, and by the time they need to move elsewhere, chances are they are going to need a higher level of care than village units will provide. Down the track the greater need will be more care beds, not more occupy your own villas. How are these companies proposing to provide a higher number and level of care beds/services, when their villa sales drop? I have seen mention of the impact of higher staffing costs - we are not well paid - but you can’t provide quality care without staff. In 10 years (probably less) the rest home I work in, will not be able to manage with our current staffing levels. We already have several residents who should probably be in hospital level care. More and more people require two staff for toileting/mobilising. In other words, the needs of our elderly are increasing rapidly and what was once “low level” care (rest home care) is very quickly becoming something else.

It isn’t even just about the property market slowing down. It is about a potential reduction in the suitability of villa life for our elderly down the track.

Good to get the views from someone at the coal face. Possibly the Oceania model may be better in the long run with their greater emphasis on care as opposed to independent living.

[Bjauck]

Out of curiosity, have those of you invested in retirement villages, visited a local facility to see first hand what they offer, how they operate, get feedback from staff/residents? If so, was this something villages were happy to let you do as a potential investor, or did you just rock up and give the impression you might be looking for a bed/unit and ask for a tour?

A close relative was in Oceania care and I have often visited several family friends in Summerset villages. At Oceania I had a good look around including frequent perusal through the logbooks left for unit licensees' hand written maintenance requests and frank feedback. On the back of witnessing changes over several years at Oceania I decided to buy a shareholding.

[justakiwi]

Good to know Oceania is listening to their licensees and initiating changes as a result of their feedback.

A close relative was in Oceania care and I have often visited several family friends in Summerset villages. At Oceania I had a good look around including frequent perusal through the logbooks left for unit licensees' hand written maintenance requests and frank feedback. On the back of witnessing changes over several years at Oceania I decided to buy a shareholding.