Ryman Healthcare Ord

Tēnā koutou, tēnā koutou, tēnā koutou katoa. Good morning, everyone. I'm Richard Umbers, Group Chief Executive Officer of Ryman Healthcare, and I'm delighted to be here to present our full year results for the year ended 31st of March. Here with me in Christchurch, I have Dave Bennett, our Group CFO. As previously announced, Dave will be transitioning into the Chief Strategy Officer role and remains the CFO until a new appointment is made. We'll be happy to answer questions at the end of this presentation, and we're hoping to wrap up within 60 minutes. Today, we're announcing a solid result. We delivered this while taking a number of steps to reposition the business for future growth and for improved financial performance. This result was achieved in a challenging economic environment, compounded by significant weather events and the tail-end impacts from COVID. Our result confirms healthy demand for what we offer. Our Australian business continues to go from strength to strength. Following our recent 902.4 million equity raise, we have reset our balance sheet. Importantly, our gearing has reduced to 33.1%, which is within our new medium-term target of 30% to 35%. In line with previous communications, the Board has confirmed that there will be no final dividend for FY23. The board anticipates making an announcement on board renewal, including the appointment of a new chair in the near future. During the presentation, we'll discuss the results in detail, as well as changes we've made to the business. You'll notice some new metrics and improved disclosure in specific areas. So, starting off with the headline numbers. Underlying profit of 301.9 million increased by 18.4% driven by strong resale margins and a growing contribution from the Australian business. Our reported or IFRS profit decreased by 62.8% to 257.8 million due to lower revaluation gains and costs associated with early USPP repayment. To help our decision-making and tracking of progress, this year we've also highlighted two new metrics, free cash flow and operating EBITDA. Free cash flow demonstrates the total cash generated or used by the business, including for development, before any external financing from our debt or equity holders. Ryman invested 1.04 billion in portfolio development in FY23 and finished the year with net operating cash flows of 650.8 million, resulting in a free cash outflow of 389 million. As we've previously indicated to the market, we're targeting positive free cash flow by FY25. We've also introduced operating EBITDA as a key metric to track performance. This metric focuses on the performance of our existing operations, excluding the impacts of development earnings, interest, depreciation, and amortization. Our operating EBITDA is up 29.4% year on year. Neither of the two new metrics are intended to replace underlying profit, but rather to give you a broader perspective on how the business is tracking. Before I talk to strategy, I'd also like to reiterate that our core purpose remains unchanged. We'll continue to operate a vertically integrated business model based around the best continuum of care in each market. We'll continue to offer unparalleled resident experiences and care that is truly good enough for mum and dad, but focused on doing so in a commercially viable way. Our sustainable growth model strikes a balance between development and optimizing the existing operations. To improve cash recovery from development, we are focused on three core things. Firstly, rebalancing our portfolio to lower-density townhouse-style developments. Secondly, right-sizing our care offering. And thirdly, introducing care suites and other design innovations to meet growing market expectations for a premium care offering. Turning now to our existing villages, we're optimizing our pricing strategy, including a trial of alternative DMF structures. Secondly, we're maximizing resales via our refurbishment program. And thirdly, we're placing an increased focus on operational efficiencies. You can expect us to continue bringing new villages to market in carefully selected locations based on local demand and a strong commercial model. We remain very positive about the age and wealth demographic in both New Zealand and in Australia. Our equity raise at the end of the financial year was a very significant event and was strongly supported. Thank you to all our shareholders who participated. The completion of the raise enabled us to strengthen our balance sheet through the repayment of debt, leaving us better able to execute our growth framework. The total cost of repaying our USPP notes and associated swaps was $855.5 million, reducing net debt from $3 billion at September to $2.3 billion at the year end. In conjunction with the raise, we have been able to adjust key covenant ratios, which will give us additional flexibility in the current high interest rate environment. We have provided additional disclosure on these covenant ratios in the appendices. During the year, we continued to invest strongly in portfolio development to meet the growing demand for our product, which is underpinned by positive age and wealth demographics. Within our investment program this year, we have continued to meet our obligation to residents by progressing six high capital intensity main buildings across the portfolio. Overall, we have reprioritized our development program to achieve two key outcomes. Firstly, remixing our land bank with lower density villages that have an improved cash flow profile. And secondly, rightsizing our care offering for future developments. If we looked at these six projects today under our new investment criteria, we would not build care centres with this capital intensity. I'll talk to our development programme just a little later. Our portfolio of RV units and aged care beds increased by 821 in FY23. This movement comprised of 519 units and beds, which were fully complete, and by that I mean you could physically move in. 302 additional units and beds, which have been included on a near-complete basis. And the criteria for near-complete differs across different unit types. Units and beds within main buildings are included on the same proportion of the percentage of cost incurred, but only where we've spent at least 60% of the projected total cost. For units outside of the main buildings, we assess inclusion based on a number of factors, including the stage of the development, the percentage of cost incurred, and the resident move-in date. The net increase of 821 was lower than our prior FY23 guidance of approximately 1,000 units and beds due to weather events and the related impacts that incurred after our guidance was given. A material driver of this was the cyclone in the Hawke's Bay, which has materially delayed construction timeframes at James Watty. This remains a longer-term issue and will directly impact the delivery of future stages. Given that we didn't achieve the 60% threshold at James Watty for its main building, we did not include 109 care beds and service departments in our portfolio movement. In addition, severe weather events impacted all projects in Auckland, where a significant proportion of our development is located. I would also like to highlight that a large proportion of the build rate shortfall in FY23 relates to the main buildings and to care beds. Care is paramount to what we do. It's in our name. We're a market leader in this space, and we have been for some time. In Australia, our continuum of care model is widely talked about as a game changer. At the opening of the new $30 million apartment block at our Nellie Melba retirement village, Victorian Premier Daniel Andrews praised the quality of staff and the vibrant community at our village. Throughout the year, Ryman has maintained the highest standards of care and resident experience remains a key priority. 82% of our New Zealand villages have four-year certification. In Australia, all four of our operational care centres received a four-star rating following the launch of a new rating system for aged care. Aged care occupancy for mature villages has improved steadily throughout the second half to over 96% at March 2023. This again demonstrates the quality of our care operations and the strength of our brand. Sadly, we continue to see a decline in the overall availability of care beds in the broader market because of funding pressures and, of course, skills shortages. There have been some recent welcome developments, including the recent Australian budget and additional funding for nursing pay parity in New Zealand, but the overall situation is far from resolved. I want to assure you that we are actively campaigning both for a rewrite of the aged care residential, or the ARC contract as it's called, in New Zealand, and for a co-contribution model in care in Australia. The launch of the company's sustainability strategy during the year was a major milestone in our journey to a sustainable future. In consultation with stakeholders, the company identified a number of key projects that will be undertaken in coming years. As a step towards addressing our environmental impact, Ryman secured an exclusive agreement with renewable energy developer SolarBay, a first for the retirement sector. the solar farm is expected to generate 30 gigawatt hours of renewable energy and save an estimated 3,294 tonnes of carbon a year. With that, I'd like to pause and perhaps hand over to Dave to run you through the financials in a bit more detail.

Thanks, Richard. Good morning, everyone. I hope you're keeping well. It's fair to say it's been another unique and challenging year for the business. Before we dive into the financials, I want to take a moment to look at some of the key performance indicators for the business over the last 12 months. Booked sales of occupation rights have been stable year on year, despite softer housing market conditions. Pleasingly, our margins for both new sales and resales have been strong, and we finished the year with just 2.1% of resale stock available. This is up slightly on the prior year, but is still at very manageable levels. Our average occupancy in mature aged care centres was robust at 95% throughout the year, notwithstanding COVID challenges through the winter months of 2022, and it has actually rebounded to over 96% at year end. Now moving into a deeper dive of the numbers. Our IFRS profit decreased 62.8% to $257.8 million. The fall was driven by two main factors. First, a smaller unrealised revaluation uplift on investment property due to softer valuation assumptions and also costs relating to the repayment of our USPP and associated swaps. I would also like to note that our aged care centres received a valuation uplift in FY23 in line with our two yearly valuation cycle. This uplift is taken through reserves and is therefore only visible on the balance sheet and isn't reflected in the profit. Underlying profit of $301.9 million is up 18.4% year on year and ahead of guidance we provided in February of $280 to $290 million. This difference was largely due to resale volumes through February and March. Our Australian business has had a strong year with underlying profit lifting 36.1% to $69.7 million and has now grown to nearly a quarter of our group underlying profit. As mentioned earlier, we have introduced some new disclosures. This breakdown of our profit and loss movement starts with a non-gap presentation of underlying profit, and then bridges this back to our reported profit. I would like to draw your attention to our operating EBITDA. This metric focuses on performance of our existing operations, excluding the impacts of development earnings, interest, depreciation, and amortization. Up until FY22, operating EBITDA has been relatively flat, as you can see on this chart. This reflects cost pressures that have been matched by additional funding specifically in our care centres during those years. While these funding challenges remain, these pressures have historically been offset by a growing contribution from resale margins and management fees. In FY23, operating EBITDA has lifted 29.4% to $272.6 million. This growth has primarily been driven by resale margins as a result of villages that were built in higher value locations in recent years having now started to mature. This has resulted in higher resale margins on increasing volumes and therefore increasing our management fees as well. As you can see on this chart here, our resale pricing, which is shown by the orange line, has lifted materially in FY22 and FY23 and now sits at $714,000. That's 42% higher than it was just five years ago. Our average new sale pricing has also lifted. It now sits at $905,000, up 35% on five years ago. This slide here provides a snapshot of the key sales metrics for our retirement village units. As mentioned earlier, our book sales of RV units has been stable with 1,519 sales in FY23, broadly flat on FY22. Booked resales lifted 7.5% to 1,057 units. Booked new sales fell 17.5% to 462 units. And this predominantly reflects the challenging market conditions in the second half in New Zealand. Resale margins during the year lifted to 31.1% in FY23. Our implied resale margin for our resale bank sits at 24.9%. However, this will be on higher value units and volumes are expected to continue to grow in the future years. New sale margins on developments also remain strong at 29.4%. underpinned by strong performance in Australia, which delivered margins of 32.7%. Our resale bank reflects the gross resale uplift, which would be realised if all of our retirement village units were resold today. This currently sits at $1.78 billion. While this is down on March 2022, this is due to the realisation of resale margin through FY23. Accrued management fees and resident loans reflect the timing difference between when contracted management fees are accrued and when they are realised. This is a key component of our embedded value. FY23 cash outflow of $389 million was driven by $650.8 million of net operating cash flows and $1.04 billion of net investing cash flows. As Richard mentioned earlier, we have reprioritised our development programme to achieve positive free cash flow by FY25. This includes remixing our land bank with lower density villages that have an improved cash profile and right-sizing our care offering for future developments. Total RADs increased to $300 million, resulting in a net cash inflow of $100 million during the year. While New Zealand contributed half of this increase, the opportunity for RADs remains substantial, with only 9% of our occupied beds in New Zealand having a RAD at year end. Following the completion of our capital raise and repayment of USPP notes, our balance sheet has been reset. Alongside our shareholders, our banking syndicate, institutional term loan holders, and retail bond holders have been incredibly supportive of the business. In conjunction with the equity raise, our interest coverage covenant has been amended from 2.25 times to 1.75 times through to March 2025. In line with our focus on improved disclosure, we have set out our covenant calculations in the appendices. We are compliant with all covenants at 31 March 2023. We had $577 million of funding headroom across our undrawn bank facilities and cash on hand at year end. As Richard mentioned at the start of the presentation, I will be transitioning into the Chief Strategy Officer role when a new CFO is appointed. I would like to assure you that I remain committed to playing my part in delivering on our plans. And at this point, I'd like to hand back to Richard.

Thanks, Dave. Turning to development activity, as you will see on the next two slides, there has been significant progress made over the past year. We've recently completed our Linda Jones village and have commenced construction at Cambridge in New Zealand. This means we now have nine sites under construction in New Zealand. Our land bank is in good shape, and two sites, that's Karori and Rolleston, achieved resource consent. During the year, we added Topo to the land bank, and Newtown is currently being held for sale. While in some ways it's disappointing to be selling sites, this also demonstrates our focus on capital discipline. If we don't think a site will achieve a viable return, then we won't build it. Looking to Victoria, we are now building across five sites, a reduction of two sites compared to FY22, having completed Charles Brownlow and Raylene Boyle during the year. Consenting activity has also been a highlight in Australia, with both our Mulgrave and Mount Eliza sites receiving planning approval. As announced at the half-year, we have divested our Mount Martha site. Guidance for the year. remains in line with that given in our equity raise outlook statement. FY24 underlying profit is expected to be in the range 310 to 330 million. Our portfolio is expected to grow by 750 to 800 aged care beds and units. And as I said earlier, we expect to invest between 800 million and a billion through FY24. The Board will consider the resumption of paying dividends in FY24, taking into account trading performance, cash flow and market conditions. Our medium-term outlook remains unchanged. During this year, we have not only delivered a solid result, but have also taken important steps to reposition the business to capitalise on the significant growth opportunities which lie ahead in both New Zealand and Australia. The strength of the Ryman team gives me every confidence that we will deliver on our care promise, reposition the business to capitalise on future opportunities and improve financial performance. The team continues to impress with their dedication and commitment and I wish to thank everyone for their efforts. I would also like to thank all of our shareholders for your continued support through this journey. And with that, I'll now open up to questions. And please note that we plan to wrap up at 11.30. Operator.

Thank you. If you'd like to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you'd like to cancel your request, please press star 2. If you are on speakerphone, please pick up the headset and ask your question. Your first question comes from Nick Marr from Aquarium. Please go ahead.

Good morning. Just on the bill going to FY24, could you just talk through sort of what's caused, I guess, the mutants to slip out the back end of FY24, meaning that those that were disrupted by the litter events weren't sort of additive to the 24 delivery targets?

Yeah, obviously when we gave that guidance, that was pre the storms that took place. And obviously we had the cyclone in the Hawke's Bay, but actually severe weather throughout the North Island. And that significantly slowed down the developments. Importantly, though, those were the village centres and heavily made up of care beds, which, of course, are part of our PPE and therefore don't go into the profit result. So although the build number was down by the traditional way it's looked at, of course, that didn't affect the profit. And indeed, it was because of the storms. There is a flow on impact from that, however. If you take a location like James Waddy, for example, the issue now post-storm is that it's very difficult to get the raw materials and the labor because it's largely involved with the cleanup of the broader area. And it is cost prohibitive for us to accelerate that in order to bring it on stream more quickly. So I believe we've got the optimal result, even if there has been some step back in the delivery of units.

Great. And then just on the resale stock, can you just look through what you're seeing out there in the sort of markets and, you know, the drivers of that? but it needs to be appreciated.

I think there's quite a broad range of factors in that dynamic. I mean, the encouraging thing from our point of view is that we still continue to enjoy strong demand, and we've got strong databases of people looking to move in, which supports demand and it supports pricing. On the other hand, people who are very committed to us and looking to move in, certainly the broader economic conditions make it difficult in some circumstances, for example, to sell their own property. And that delays them being able to move in and come to us. And with that, we see some of the cash that we would get in normally from settlements being pushed out. But, you know, I think it's more that the demand is still there. It's a matter of timing when we get that money in. But certainly we're like any other developer at the moment, we're, I guess, subject to the poor housing market in New Zealand. I would contrast that, however, with what's going on in Australia, where actually the results have been very encouraging. The sale of service departments has been particularly strong, and there's an appendix that breaks all of that down. And equally, the new sales have been much stronger over there. So we do see a different market dynamic operating in the two markets. And to some extent, the Australian business, for us, has been a hedge against the deteriorating conditions in New Zealand. Dave, do you want to add anything to that?

No, I think that's largely covered it. Your points, Nick, are valid. It's a bit of an all of the above just with the days to settle. But there's also been, I guess, a slight increase in the number of people transitioning through or vacating units as well, sort of closer to year end. When it's taking a little bit longer to sell, that's more noticeable in a short period. But the underlying demand is still very strong.

Yeah, that's great. And just one more for me before I jump off. The contract's not booked number. Is there any sort of change in the way that you're selling or accounting for stuff, given how much that's sort of come off versus historic?

No, the biggest change is probably just how early we're releasing things for sale ahead of construction. Just with where the construction market is and costs associated with that, we are just making sure that we are sort of keeping those a little bit closer aligned than what we probably have historically. So that's been one of the key drivers for that. Okay, great, thanks.

Thank you. Your next question comes from Stephen Ridgewell from Craig Investment Partners. Please go ahead.

Yeah, good morning. And look, first of all, guys, thanks for the additional disclosure provided in the appendix, as it is appreciated and noted. I just wanted to follow up on Nick's question, sorry, on the, I think it was the new, the lowest new sales volumes in the second half, and you have kind of called out the poor weather, you know, delaying some construction. But also, in Appendix 23, it looks like you've kind of had an increase, potentially, in unsolved new stock of about 130 units, if you had the completed and near-completed units together, and presumably they are available for sale to residents. Can you just perhaps comment a little bit more about whether you're seeing, you know, resident demand for new units holding up, and perhaps is there a difference between New Zealand and Australia?

Yeah, there's... A couple of parts to that, probably, Steve, that we will cover off. But New Zealand is more challenging than Australia at the moment. And it's probably where having the two markets that we're currently participating in is very beneficial and that we're seeing very, very strong demand for what we do in New Zealand. But the new sale market in New Zealand is probably more challenging. A lot of that unsold new sale stock, too, relates to service departments as well, as the main buildings are coming online. So what typically happens with your service departments is you might sell 10% to 15% of those when the unit's complete and built, and the remaining service departments will sell down over the next 12 to 24 months because they are a needs-based portfolio. So that's another contributing factor, but we are, probably Auckland in particular as well, some of the apartments up there are taking slightly longer to sell, which is why you are seeing us be a bit more cautious with the build programme going into next year and in the following year as well, just as we wait for that market to pick back up. Long-term demand, still very confident about all of that, but there's just a little bit of short-term noise, as we're seeing with a lot of things in the property market at the moment.

Perhaps I could just add to that by saying that perhaps what skews this slightly is that the large proportion of main centres that are currently in construction, we have a strong obligation to our residents to complete those, and so we do continue to spend money on completing them. I think we wouldn't be doing that again in the same way, to have this number coming on stream, and indeed the capital recycling of those centres. main centers is not as strong as we would ordinarily want it to be and what it means is that as those main blocks come to fruition large amounts of stock are released at one particular time onto the market specifically and it's much harder to sell large volumes of stock but hit the market all at one time Selling the more traditional mix of care beds or main centre orientated property to independent living, the independent living is normally a more efficient vehicle for recycling capital than the main centres and that's just a legacy issue that we're dealing with. We're working through it, coming out the other side and the mix shift that you're seeing will become stronger as time progresses and we get out of those more capital intensive sites.

That's helpful. Thanks, guys. And then just, Richard, on your comments and the prepared remarks about trialling new DMF structures, could you elaborate a little bit on what you mean by that? Because I think you mentioned at the end of yesterday... The team had done some work on that and didn't think there was a free lunch there. So just can you give us a little bit more information about what you're trolling?

Probably. The way I would sort of talk about this in a broader context is towards the end of last year, as the interest rates went up and the property market stagnated, we knew we had to face into that challenge. and address go-to-market proposition with a different mix of tools. And we started experimenting, I guess, with other team structures, rolling out, for example, Salesforce infrastructure to get much better handle on our databases, then new systems for triaging who was out there and who would be good prospects for us and who were the right kind of people to move in. And I think we sort of invented a new model through that that has been highly effective, and we saw some of the gains from that in the last couple of months of the year. One of those components was experimenting with DMF structures, because quite clearly there's a toggle between the ticket price on a village and also the proportion of DMF people play. And there is a cohort out there that, particularly in a declining property market, the money that people are getting from the home they're selling isn't perhaps where they wanted it to be. And would they be interested in a higher DMF structure and a lower ticket price requiring less capital outlay? What it turned out is that there was an appetite for that in some sectors of the market. So we've started trialling different structures in order to accommodate different cohorts of population out there, with some success, I might add, and I see that expanding over a period of time as we get to see and analyse the results of that trial.

And would the expectation at this point be, Richard, that that's going to be neutral to the business overall, but perhaps improve appetite from residents as opposed to... Can it change the cash flow profile of the business?

If you analyzed it on a unique sale basis, I think that would be right, that we see it as neutral. However, of course, the go-to-market proposition, if that strengthens because we have a broader range of tools to appeal to residents in different cohorts, then you'd expect the demand to respond positively, and therefore we do get a benefit, but it's, I guess, spread over the portfolio effect of having a broader customer base or higher demand, which then plays through into the overall result. but on a unit basis, that would be correct, yes.

Got it. Okay, great, thanks. And then just on the comments on RADS, you've called out New Zealand at 9% and it has been a project, if you like, underway for a couple of years now to increase the number of New Zealand care beds with bonds attached. Can you give us an idea, based on what, you know, you're fairly advanced in it now, but what proportion of beds... could have RADs attached in the New Zealand business and how much cash that might release?

Perhaps the starting point is to say that it isn't a commonly understood or known model in New Zealand, so some of this is about communicating what it's all about in order to get traction on it. I think what's very encouraging, though, is just the sheer lift that we've had in RADs showing that there is a market for it, and obviously it's something that we're seeking to encourage.

Yeah, and I think it's something that... is going to play out in the next couple of years with how the funding piece works Stephen because obviously at the moment we have our traditional care rooms which we are offering a pay for your room premium either through a weekly room premium charge or through a RAD but as we've touched on we're also looking to do care suites in the future so it's going to be part of the wider value proposition for us and how that works The best indicator in Australia, you often hear operators talking 50% to 70%. I think it's quite some time before we get to that level in New Zealand because at the moment we are the only operator doing that. But as the sector works through the funding challenges that are facing us at the moment, one of the key aspects of that is not just the operating costs or the funding lift, but also how do we start to make a better return on capital And do we follow the Australian model where we split out the care fee from the accommodation component? And that would then likely drive to the RAD model and the care suite model or care apartment model with AUS and DMF on that becoming a lot more prevalent as well. So I think there's plenty of upside, but I probably wouldn't want to put a number on it right now. But plenty of upside.

OK, that's useful. And just one more from me. So just in terms of the guidance for 310 to 330, which, you know, is reiterated from what you said in February, but is kind of still well ahead of consensus as of yesterday. Can you just give us a bit of an indication around some of the key assumptions, you know, for new sales, volumes and margins and resales, volume and margins, that book in the top and the bottom end. And then I'm particularly interested as to whether that range assumed for unit prices? Are you sort of assuming flat unit prices, or have you allowed for some decline? Can you just give us some sense of the assumptions there, please?

Yeah. The assumptions aren't drastically different to this year in terms of pricing. I think we're assuming stable pricing as part of that. One of the key drivers, though, of that, obviously, is we would expect increased resale volumes in particular as our villages continue to mature and as our resale earnings obviously lift with that. So more volumes at, I'd still think, similar higher margins in terms of resale margins as what we've experienced this year because even though our implied resale margin in the resale bank is at 25%, So majority of the units that we would be expecting to come up are units that transacted last three, four, seven, even 10 years ago. So there's significant sort of pent-up gains in that pricing. So still expecting really strong unit pricing gains or margin gains in the resale part of the business in particular. So I think you'll see... a lot of that growth coming through from that part of the business still.

And those are the internal factors, of course. I think we're also watching the OCR quite carefully because I think the link between the housing market and the OCR is proven now. And I think things like settlement times and so on are things that... will improve as the market improves. And, you know, people are starting to talk about, you know, a slowing down of the rate of increase of the OCR. You know, we would be obviously pleased with that. And seeing a bit more liquidity in the property market is something that we would want to see. And I would view those with some optimism if those things were to come to pass.

Can I just... Last one, follow-up. You didn't allude to kind of assumptions on the new sales...

you know that you'll book you've talked about kind of build rates but and then also margin are you allowing for a decline in new sale margin in that guidance range yes so the margin that we're expecting on the new sales would be tracking back more or closer to our normal 20 to 25 in terms of what we've assumed for that but um uh always hopeful on that front particularly with the strength of how things are going in australia at the moment um in terms of volumes we'd expect a bit of a lift on this year um So around that $500,000, $600,000 mark, I think, would be where our new sales, we would be looking for that to be. Obviously, mix on that will be important, too, with the independent dollar margin being higher than the service department margin. So I guess the focus for the team, though, is selling that built new sales stock that also has been called out earlier on the call. That's a big opportunity for us to sell that down in the next 12 months. Mm-hmm.

That's really helpful. Thanks, guys.

Thanks, RG.

Thank you. Your next question comes from Ari Decker from Jarden. Please go away.

Good morning, Ari. Oh, good morning. Morning. Yeah, just first one, just on your investing cash flow guidance for FY24, which is really helpful. Thank you. Just want to understand, at the bottom end of that range, $800 million, does that assume any... settlement on land over and above what you have in payables, which I think sits at just $75 million at the moment. So, Lola?

Yes. We can only model what we know about, so certainly we've built in the plans that we already have slated, but we're not oblivious to new opportunities coming along, certainly.

To answer your question, to be at the bottom end of the range, we wouldn't be spending it a significant amount on additional land. There would still be some anticipated land sales on that number. But there's a lot of moving parts that will drive through that capex spending and why we've given ourselves a bit of a range because the wider property market and when we commit to new stages and new villages will have a big determination on that as well.

And for each new stage that we embark on, we're looking at the external factors of demand in that local area. I guess common sense is telling us not to build more units in a place where we've still got stock hung over from previously, in which case we divert that capital to elsewhere. So there needs to be some flexibility in that. What we're trying to share with you is enough for you to get a feel of how we're thinking about the business, recognizing that market conditions, sales rates, how the market is unfolding will determine ultimately where we put the dollar in that location or in another location. But in ballpark, I think that guidance is about right.

Yeah, sure. And then, I mean, I guess what you've sort of indicated is that you're, I guess, pushing out the phasing with the 150 under this year and no change to the 24 guidance for delivery. But can you just sort of confirm FY25 delivery is sort of in line with what you indicated at the capital raise and from there your intention is still to build up to 1300?

Yeah, we haven't changed anything in the medium term to what we published at the time of the raise, correct? Sure.

Okay, just the EBITDA disclosure, and, you know, I think it's useful. I mean, I guess just one point, perhaps, you know, it would be potentially worth sort of disclosing that on a settled resales basis as well, because, you know, clearly what we're seeing, particularly in this market, but I think we've sort of seen it over time as you know, the resales level of unsettled resales receivable has been sort of growing. But my question on this one, I guess, is more in terms of, you know, that breakdown sort of highlights the earnings, you know, on the rest of the business. And when you take into account DMF, you know, clearly care and overhead sort of, you know, you know, quite a drag. Is there some visibility you can give on just where care earnings sort of sit at the moment in FY22 over FY23, you know, in terms of is it getting a bit better now that you're getting out of the worst of COVID? But, yeah, I'm specifically sort of asking, you know, are we at break-even on care or is care losing money on an EBITDA basis?

Yeah, on an EBITDA basis, our care is really break-even. There's been a little bit of COVID costs come out, but there's continued sort of CPI challenges that the whole sector is facing on that front. So, look, that is a key focus of ours around looking at levers to pull within the care business. It's part of the care suite offering that we are looking to develop. that's sort of become more widely accepted in the market to try and improve that care earnings piece. But there's also a significant amount of work going on at the sector level around addressing that funding. So there's been, as Richard touched on in the presentation, a few sort of good announcements around pay parity, but there's also pay equity sort of discussions happening at the moment, but also the wider funding and how we also get a return on capital that's being put into that sector as well. So there's a journey to go on care that's still very close to break even.

Yeah, sure. And just on the care suites, you know, and you've been sort of, you know, clear on your forward intentions, has there been any sort of further work done on the opportunity to convert to care suites, you know, in what is, you know, I guess a 3,500-odd bed space? you know, embedded care beds in the existing portfolio? Yeah, it's a piece of... In New Zealand?

Yeah, it's something we are exploring. One of the, I guess, key things within our existing portfolio too is the service department offering that we have. So we can already provide rest home level care into our service departments. So what we want to make sure is that we're not going in and... creating even more competition for yourself within those existing villages, particularly when there is a large service department offering. One of the key things that we have seen in Australia, though, with that service department offering is the ability to get home care funding into that product as well. So our residents can get some of the weekly fee funded, which means that they can add additional services into their service department. So I'd like to think that may come through in New Zealand as well in the future years, but converting existing care is something we will consider, but it's still very early stages.

I mean, realistically, just adding to that, it is a significant but slower-burn strategy that plays out through the execution of new villages. There is some opportunity in existing villages, and we have, in fact, during the course of this year, actually knocked some units together to create larger, more compelling accommodation for people. But realistically, to do it on any meaningful scale with the existing portfolio is difficult due to the configurations of existing buildings. So that does play out over a period of time. I'm going exactly where Dave is going to say one of the interesting aspects to this result, and if you look at, again, the appendices, you can see the shift of service departments that have been selling in Australia. The trick to that has actually been that growth is not just a service apartment. It's a service apartment quite often with a care package bolted into it, which of course creates, in practice, it's like a new product that we're able to bring to market. And to some extent, the implementation of that is a quicker realization of benefit than a longer-term project to redesign our villages for a care suites operation. So they're both relevant. One has short-term impacts. One has longer impacts. But they're both playing to this point about an enhanced package for people in higher levels of acuity.

Yeah, and then just sort of I guess it's related to the care and the value of the care on the balance sheet. I think there's some useful additional color on the revaluation. there of the care assets, which, you know, again, sort of EBITDA break even, obviously has a very substantial value in your books. Can you just comment a little bit on, there's reference here, I think, for the first time to the value of taking into account a portion of the DMF and coming up with, you know, so the Retirement Village DMF and coming up with the valuation supporting the care assets. How material is that apportionment of your DMF through to the care asset valuation.

Yeah, you're right. So it is, in terms of the uplift in this year, it's probably about half the uplift related to that apportionment, which we capture every two years. So what we're doing is taking some of the deferred management fee sort of forward cash flow valuation from the investment property valuation and apportioning that over. So it is reducing the investment property valuation but obviously underpinning the valuation for the care. It's something we have been doing for a long, long time but have added that additional disclosure to make that clear in the financial statements. The rationale for that obviously is people coming in to... Villages are coming in knowing that they're coming into a village that offers residential aged care in the future as well. So that offering of the aged care is a big driver for people coming to our villages.

I would add that the economics... Sorry?

Go on. Just on the materiality of it. So if you're realising, say, on average, 15%, 16% BMS... In total, how much of that 15%, 16% is being apportioned to the care asset valuation?

Probably about a quarter of that.

Okay. Thank you.

I'd also just add the care business is, I guess I'd use the phrase quasi-regulated in the sense that in New Zealand we have the ARC agreement, In Australia, obviously, there's the ANAC funding settings, but essentially the amount of money that comes in is fixed, and to some extent the level of service provided is regulated. In Australia, for example, there's a number of minutes per day. What I think is encouraging in the Australian market, and I do think we should see them as different markets here in this question, is the recent budget and other funding announcements over in Australia have had some encouraging signs built into them that there is funding here available. If you see our proposition as part of the ecosystem of healthcare, I believe that we offer actually a very cost-effective option for governments to be able to look after people in old age, particularly compared with the alternative of the hospital And with that, therefore, there is a way forward, I guess, that is starting to be mapped out in Australia. To some extent, those same influences are also playing out through the New Zealand market, and I think there is a logical journey that will also play out in Australia, in New Zealand, as demand builds and as the economics, I guess, are evaluated by government about how cost effective what we provide versus the, you know, the DHB or former DHB type alternatives. So in the medium to longer term, we're encouraged that there is a way through this, but in the short term, certainly we're saying that we've got to break even business when it comes to care.

Thank you. And then final question, just in relation to dividend resumption in FY24, and I can appreciate, you know, with board renewal sort of occurring that you're going to wait for that, but could you just sort of give an indication, has there been a lot of work done on it and you'll be able to come out with something recently, shortly after the board refresh is done, or is this something that we're going to be waiting until first half of 24 on in terms of dividend.

Yeah, I'm not really in a position to comment on behalf of the board, unfortunately, but certainly what we've put in this statement, I think, is an accurate reflection that there's certainly work going on.

Yeah. Yeah, so you can't comment on when guidance for approach on dividend will be given at this stage.

No.

Okay, thank you. That's all. Thanks, guys.

Thanks, Harry.

Thank you. Your next question comes from Aaron Iverson from Forces Bar.

Please go ahead. Hi, Aaron. Hi there. Good morning, everyone. And also appreciate the new metrics and the increased transparency around unit delivery. I think that's encouraging. I got three hopefully slightly quicker questions. So first one, just on cost, you called out that cost growth would have been 12 and change versus 14.4 if it hadn't been for a few one-offs. So I was just curious if you could let us know if that's related to sort of first half or second half. I can't recall anything from the first half being called out. So 10 million or so, I guess.

Yeah, they were second half adjustments. So, yeah, it occurred in the second half. Fantastic.

Fantastic. Second question, Richard or anyone else, but you mentioned main buildings. I think you said six in 2024 and that contributed to capital intensity. I appreciate early days, but is there any chance you can give us some sort of rough idea where you think that number is going to land, 25? How many main buildings are you already aware of that's going to come up in 25?

Certainly the number will come down as these ones deliver and the context would be that the future villages we do of course have smaller proportional care centres anyway and therefore what is currently perhaps two to two and a half year build time frame for a main building of quite significant complexity, the burden that that places on us is reduced significantly in future builds. The other factor is that care or village centers do affect demand. And what we find is if we haven't built the care center, it makes it much more difficult to sell apartments and individual units, independent living units. So there is not only an obligation for us to finish those, there's a commercial logic to us doing so. But at the moment, as a result of several years of COVID delay stoppages and so on on those main buildings, we happen to have a disproportionately large amount happening at the moment. So during the course of the year, we'll complete some of those. In fact, Deborah Cheetham is actually about to complete very soon. And we'll bring that down and the proportions will shift over time. I think what we've suggested in our guidance this time around in the outlook statement is the proportion of care beds to independent living will be broadly similar to this current year in the year ahead. But after that, we see that reducing.

Fantastic. Thank you. Third little tiny one. I think you called out that Mount Martha had been sold or agreed sale. So I just wanted to know, you know, is this significant amount of dollar value and has it been included in your investing cash flow 800 to 1 billion guidance? Has the positive from Martha been included in that guidance?

Yes, so that is a net number, but it's not hugely significant. You can There's a couple of assets that we've got for sale that are held on the balance sheet. Is assets available for sale? That gives you a rough idea for the scale of the numbers combined.

Yeah, okay, but it's been included in the 800 to 1 billion guidance. Yes. Okay, fantastic. Final question, just... Any chance I can invite you to comment on the very recent trends? Have you anything to say about sort of May? Does it look similar to what it has done? Do you see any further deterioration or a small pickup or steady as she goes? Anything you want to say about May?

I mean, certainly no large-scale shocks in the market, I would probably say, but I wouldn't want to comment more than that. No.

Yeah. That would indeed be good. Thank you very much. That's all from me.

Thanks, Aaron.

Thank you. Your next question comes from Jason Thamilton from ACC. Please go ahead.

Morning, Jason. Morning, guys. Good result. Well done. Just back to the first question Nick asked, just to understand the guidance for build rate and the impact from James Waddy. So is James Waddy going to deliver any units in FY24, or is it more cautious around the build rate? Just trying to understand a little bit more in detail around what's happening between, I guess, the under-deliveries in 23, which you would have thought would turn up in 24.

Yeah, I think the key with that, Jason, is James Waddy will start to deliver through 24, assuming supply chain challenges and everything ease there. But what it means is we're just a little bit more cautious about the next pieces that you start so that you're not stacking everything on top of each other. So the disruption just means we're not sort of doubling down and trying to do too much, just taking a bit of a measured approach to it all.

And don't underestimate that while obviously in the Hawke's Bay, the storm has been obviously the key input factor, but supply chain issues, which is what I loosely talk about, the sort of tail end COVID effects, supply chain is still an issue and supply of certain building materials goes in and out. labor is complex and, you know, we're going through a shortage at the moment of bricks, for example, and it just holds up the process and we don't get the normal sort of build sequencing that we would expect. So things have slowed down, particularly across the upper half of the North Island.

Okay. So can you just sort of follow up a little bit on Ari's question, but Well, I'm a little bit surprised of continued revaluations of aged care given trends around profitability. How important is the profitability that beats themselves in the valuation assumptions by the valuer?

So they do look at sort of earnings as part of that, but they are also looking at transaction prices and market evidence informing that view. So It is one of the drivers, but it's not the sole driver's part of doing that.

And they're formally valued every two years, of course, aren't they? Yep.

Okay. And then instead of the other one, just Newtown, good to see that come out finally. I'm guessing that's in the net numbers as well, but it wouldn't be material anyway.

Yeah, that's correct.

Okay, cool. That's all I had. Thank you.

Thank you. Thanks, Jason.

Thank you. Your next question comes from Bianca Flutteris from UBS. Please go ahead.

Hi, Bianca.

Hi, good morning. Sorry, I submitted some questions online as well because I thought my style one wasn't working. But first of all, just on your Australian development margins at 32%, so that's obviously quite high. And I'm just wondering if that was what you were expecting for Australia because it's I don't think many analysts were expecting that. So just wondering what drove that? Was it mainly price driven? And also what can we expect there going forward, please?

Yeah, price has been a factor. The team on the ground over there has done a great job in terms of managing the build program, obviously supported by the wider group design and construction teams to look at those opportunities. So But as we're getting some scale over there too, we are starting to see some pricing opportunities. But the team's also looking at, as we've built a name, starting to lift our prices that we're achieving relative to the wider property market as well.

I'd say also there's a mix effect going on there as well, because the more recent units that have been coming on board are of a type that has enhanced that margin number. And so you're seeing an average, obviously, but within that there are mix movements as well.

I do think over time it will naturally track down a little bit, but yeah, there's some good wins over there at the moment for us.

Okay, thank you. And then just on the Newtown site, being for sale, I believe that's a low-density site, so... Just wondering how that fits in with your move back to Broadacre, any sort of other sites that you'd like to sell in your current land bank, assuming high density sites. And ideally, how many more Broadacre sites would you aim to buy in FY24 for this move back to Broadacre strategy?

Yeah, so the Newtown site's quite a sort of boutique-tight site. So it would have been not a large-scale development for us, but the cash flow sort of profile on that would have been quite intense because you would have to build most of the site before you could move anyone in. That was sort of one of the drivers for that change. And then in terms of the sites we're looking to acquire... In a typical year we might be looking at two, three, four, five sites, but we'll do that on merits of the sites as they come up. But we are always looking to replenish our land bank, but your question is right in that we are focusing that on lower density sites. It's not to say we won't do the high density sites, but our focus is on adding those to rebalance the land bank further.

Okay, thanks. And so are there any high-density sites in your current land bank that you would consider selling or would like to sell?

We haven't announced any of that. What we're really doing is evaluating every site now before we commence any future stages and rerunning the financials on it and making sure that we prioritize according to what the results are going to be. but certainly the remaining sites in our portfolio or in our portfolio until at some subsequent point we decide they're not in which case we'll announce that in due course but at the moment the disposal of Mount Martha in Newtown was a very logical step for us given the way the numbers were looking We have developed some very good stage getting processes over the last few years as well to just go through those sites at different points of the journey to challenge is this where we want to be putting our money

Okay, thank you. And then just lastly, you mentioned the chairman to the appointment in the near term. Any sort of progress on the CFO appointment or is that too early still?

Nothing to announce, of course, but certainly it's a process that's underway, yes.

Stay with me for a bit longer.

Okay, thank you very much. Thank you, Bianca. Is that your final question? Okay, thank you very much for your time and attention today. I'm afraid that's all we've got time for, but we look forward to staying in touch and, of course, keeping you up to date with our progress. And many of you, of course, will see as we come around and meet with you as part of our roadshow. So thank you again.