RYM - Ryman Healthcare

[winner69]

I see Umbers got $1,525,000 for leaving.

6 months notice and severance and a bit of a bonus

[Newman]

NZ Herald: Ryman Healthcare selling former Victoria University Karori campus after company profit plummets. "There was an impairment loss of $37.6m for the Karori site and a sale was expected within 12 months, it said"
https://www.nzherald.co.nz/nz/ryman-...AO5BK5NE2UEFE/

[troyvdh]

Just curious ..did anyone on this thread actually meet and talk to this umbers bloke.
How did he come across as.
In the past ive always had a great deal of respect for J Ryder and for the late K Hickman.

[Balance]

NZ Herald: Ryman Healthcare selling former Victoria University Karori campus after company profit plummets. "There was an impairment loss of $37.6m for the Karori site and a sale was expected within 12 months, it said"
https://www.nzherald.co.nz/nz/ryman-...AO5BK5NE2UEFE/

So Ryman bought it for $28m (yes, $28m) in 2016 and now, they are writing the value of the land down by $37.6m!?

Begs the question of how much revaluation ‘gains’ the site has yielded Ryman in the last 7 years before reality bit this year!!!!

No wonder the market has rightly not taken any heed of Ryman’s NTA backing. All smoke and mirrors.

[Toddy]

Good decision. Who would want to retire in Karori anyway.

The new CEO is clearly onto it.

[Balance]

Good decision. Who would want to retire in Karori anyway.

The new CEO is clearly onto it.

New CEO would be a goose if he doesn't take every opportunity to write down everything he possibly could get the Board to agree to!

Why would he want to carry the burden of unrealistic valuations and expectations?

[Toranaman]

New CEO would be a goose if he doesn't take every opportunity to write down everything he possibly could get the Board to agree to!

Why would he want to carry the burden of unrealistic valuations and expectations?

Nimby neighbours and Heritage NZ delayed village for five years, so Karori misses out.

[Greekwatchdog]

For Bars Review
At its FY24 result Ryman Healthcare's (RYM) new management and board lifted the veil on a decade plus of opaque accounting practices and half truths. What was behind the veil was worse than we had anticipated. The aggressive revenue recognition and poor cash recovery of capex was largely expected. Capitalising village start up costs (now abandoned), a meaningful valuation uplift (~+NZ$400m, now written down) at directors' discretion, as well as overstating expected cash recycling from villages under construction to the tune of ~NZ$250m was not. RYM needs a clear break with the past, and that, we believe, it has got. An entirely new management team and largely a new board, unencumbered by the past, has set out a credible path forward, focusing on all the right things. Namely, cash recovery of new developments and increasing cash generation of existing villages. The transition will be more painful than was expected, but the end result has the potential to be better. RYM is currently under earning meaningfully on its ~NZ$13bn of assets, with the sector's lowest (by far) deferred management fees and ‘fixed fees for life’. The new management made it clear that everything is on the table and current levels of profitability is unacceptable. We reiterate OUTPERFORM, with a reduced target price of NZ$7.25.

What's changed?
Earnings: Annuity EBITDA reduced -13%/-6% over FY25/FY26, +2% in FY27 with less capitalised costs the key driver.
Target price: Reduced to NZ$7.25 (from NZ$8.25), driven by reduced annuity estimates, lower dividends and higher core debt.
Finding firmer ground
The aged care sector operates with largely non-GAAP measures as a marker of performance. RYM is making a clean break from the past. Going forward, cash generation and audited earning will be the focus. We expect the rest of the sector to eventually follow suit. With RYM's change of focus comes numerous minor and major changes in how it reports. The most relevant relates to lower capitalising of costs, abandoning new sale gains, and now only reporting units and beds that have been delivered. RYM also provided numerous new disclosures, in particular, in relation to cash generation for care, villages and head office. Over time this should provide firmer ground to stand on.


Fundamentals slightly ahead of expectations with strong DMF and resales gains more than offsetting higher costs
Fundamentals played second fiddle on the day, but RYM delivered a decent underlying result, with cash generation and annuity EBITDA slightly ahead of our estimates. Net debt remained broadly stable in 2H24 as guided. DMF and resales gains were strong, partly offset by higher costs. Guided deliveries for FY25 were ahead of expectations, but the change in approach makes it hard to compare. Build rate guidance for FY26/FY27 was substantially below our estimates and even further below previous ambitions. This make sense. RYM reiterated that it does not need capital, but our estimate of core debt has increased to well over NZ$1bn.

FY24 result; the good, the bad & the ugly
The good


DMF grew +15% year-over-year in 2H24, +5% ahead of our forecast. DMF is now up +50% over the last three years. Likely partly due to shortening the contractual terms over which the DMF is recognised. DMF is included in audited earnings.
Resale gains and resales cash flow. Resales gains increased +11% year-over-year and against our expectations of broadly flat. Resales cash flow was up +75% year-over-year to a record high of ~NZ$144m in 2H24, ~+NZ$30m ahead of our estimates. Since FY23, resales cash flow is up >+NZ$100m, almost +60%, and has more than doubled over the last three years. RYM’s future treatment of the non-GAAP resales gain is ‘up for review’ but we expect at least the cash component (after ~NZ$20m of refurbishment costs) to feature going forward.
The bad


Impairment loss of NZ$244m. This primarily relates to the parts of the land bank with uncertain development plans.
~800 units and beds previously counted as delivered on a part complete basis taken out of its assets. Early recognition of deliveries has been known, and to some degree a communicated feature of RYM’s for a long time. The magnitude was larger than we had anticipated.
Operating expenses, even allowing for a change in capitalisation policy and deducting some one-off costs, was ~+NZ$10m–$15m (~+3% to 5%) ahead of our 2H24 estimates.
The ugly


RYM took a ~NZ$400m write down on the fair value of its assets. We understand previous management had used a ‘directors' range assumption’ adjustment to the independent valuation of its properties. This involved assuming that new residents would pay a 30% DMF with no price adjustment. This compares to the valuers' assumptions of 20%, what RYM currently charges.
Capitalisation of village start-up costs. It was revealed that RYM has historically capitalised start-up costs for new villages. This will not happen on a go forward basis.
RYM restated its expectations of capital recycling from 10 villages under construction down by -NZ$256m. NZ$160m of this related to ‘correction of cost allocation … relating to head office and interest’.

[Daytr]

For Bars Review
At its FY24 result Ryman Healthcare's (RYM) new management and board lifted the veil on a decade plus of opaque accounting practices and half truths. What was behind the veil was worse than we had anticipated. The aggressive revenue recognition and poor cash recovery of capex was largely expected. Capitalising village start up costs (now abandoned), a meaningful valuation uplift (~+NZ$400m, now written down) at directors' discretion, as well as overstating expected cash recycling from villages under construction to the tune of ~NZ$250m was not. RYM needs a clear break with the past, and that, we believe, it has got. An entirely new management team and largely a new board, unencumbered by the past, has set out a credible path forward, focusing on all the right things. Namely, cash recovery of new developments and increasing cash generation of existing villages. The transition will be more painful than was expected, but the end result has the potential to be better. RYM is currently under earning meaningfully on its ~NZ$13bn of assets, with the sector's lowest (by far) deferred management fees and ‘fixed fees for life’. The new management made it clear that everything is on the table and current levels of profitability is unacceptable. We reiterate OUTPERFORM, with a reduced target price of NZ$7.25.

What's changed?
Earnings: Annuity EBITDA reduced -13%/-6% over FY25/FY26, +2% in FY27 with less capitalised costs the key driver.
Target price: Reduced to NZ$7.25 (from NZ$8.25), driven by reduced annuity estimates, lower dividends and higher core debt.
Finding firmer ground
The aged care sector operates with largely non-GAAP measures as a marker of performance. RYM is making a clean break from the past. Going forward, cash generation and audited earning will be the focus. We expect the rest of the sector to eventually follow suit. With RYM's change of focus comes numerous minor and major changes in how it reports. The most relevant relates to lower capitalising of costs, abandoning new sale gains, and now only reporting units and beds that have been delivered. RYM also provided numerous new disclosures, in particular, in relation to cash generation for care, villages and head office. Over time this should provide firmer ground to stand on.


Fundamentals slightly ahead of expectations with strong DMF and resales gains more than offsetting higher costs
Fundamentals played second fiddle on the day, but RYM delivered a decent underlying result, with cash generation and annuity EBITDA slightly ahead of our estimates. Net debt remained broadly stable in 2H24 as guided. DMF and resales gains were strong, partly offset by higher costs. Guided deliveries for FY25 were ahead of expectations, but the change in approach makes it hard to compare. Build rate guidance for FY26/FY27 was substantially below our estimates and even further below previous ambitions. This make sense. RYM reiterated that it does not need capital, but our estimate of core debt has increased to well over NZ$1bn.

FY24 result; the good, the bad & the ugly
The good


DMF grew +15% year-over-year in 2H24, +5% ahead of our forecast. DMF is now up +50% over the last three years. Likely partly due to shortening the contractual terms over which the DMF is recognised. DMF is included in audited earnings.
Resale gains and resales cash flow. Resales gains increased +11% year-over-year and against our expectations of broadly flat. Resales cash flow was up +75% year-over-year to a record high of ~NZ$144m in 2H24, ~+NZ$30m ahead of our estimates. Since FY23, resales cash flow is up >+NZ$100m, almost +60%, and has more than doubled over the last three years. RYM’s future treatment of the non-GAAP resales gain is ‘up for review’ but we expect at least the cash component (after ~NZ$20m of refurbishment costs) to feature going forward.
The bad


Impairment loss of NZ$244m. This primarily relates to the parts of the land bank with uncertain development plans.
~800 units and beds previously counted as delivered on a part complete basis taken out of its assets. Early recognition of deliveries has been known, and to some degree a communicated feature of RYM’s for a long time. The magnitude was larger than we had anticipated.
Operating expenses, even allowing for a change in capitalisation policy and deducting some one-off costs, was ~+NZ$10m–$15m (~+3% to 5%) ahead of our 2H24 estimates.
The ugly


RYM took a ~NZ$400m write down on the fair value of its assets. We understand previous management had used a ‘directors' range assumption’ adjustment to the independent valuation of its properties. This involved assuming that new residents would pay a 30% DMF with no price adjustment. This compares to the valuers' assumptions of 20%, what RYM currently charges.
Capitalisation of village start-up costs. It was revealed that RYM has historically capitalised start-up costs for new villages. This will not happen on a go forward basis.
RYM restated its expectations of capital recycling from 10 villages under construction down by -NZ$256m. NZ$160m of this related to ‘correction of cost allocation … relating to head office and interest’.

Thanks for sharing.
I agree with the previous poster, new management taking the hit before their term of responsibility starts.

I don't see an increase in DMF impacting sales particularly, especially if it only moves to 25% rather than 30%. It appears though that DMF isn't a huge consideration for buyers as it's expected.

Fee generation will improve, although that will take some time to feed through the life cycle of the current residents.

[Jenny Ruth]

Hi all. My latest column published on my Substack, Just the Business, looks at Ryman's annual results. The headline is: Ryman clears some murk but the emerging picture is ugly
And you can find it here:
https://justthebusinessjennyruth.substack.com/