Ryman Healthcare Ord

Thank you for standing by and welcome to Ryman Healthcare four-year results briefing. All participants are in listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Ms. Naomi James, Chief Executive Officer. Please go ahead.

Welcome, everyone, and thank you for joining us for our FY25 full year results. With me today, I have Rob Woodgate, our CFO, and Hayden Strickett, our Head of Investor Relations. Starting with slide two, we have a lot to get through today, and we'll try and do that in around 30 minutes or so to allow another 30 minutes for Q&A before we wrap up at midday. Looking at the agenda, there is effectively three parts to the presentation. The first part is focused on how our business is performing across sales, operations and developments. The second part is more backward looking, as Rob takes you through the changes we have made in our financial reporting. And we will finish up on our transformation. Updating you on the strategic priorities we communicated at the equity raise and where we are heading from here. Jumping into the highlights section and moving to slide four. The reset of Ryman started well before I started as CEO in November last year. And a lot has already been achieved. We reset our DMF on new contracts in October last year, which delivers a step change in us for long-term business value. We have seen improved sales momentum since the time of the February equity raise. Our operational reset is well underway, with $23 million in cost removed in the second half of FY25, and we are targeting to double this by the end of the financial year. We strengthened our balance sheet by raising capital, which makes us resilient to an extended period of difficult market conditions. And we have completed an extensive review of our financial reporting, and with the capital raise now complete, we can put our full focus on the business transformation we have ahead. FY25 has been a year of significant reset, and while there is still much to be done, we start FY26 with a strong balance sheet, a step change in revenue and cost performance underway, and a portfolio positioned to deliver cash and returns as the housing and economic cycle improves. Moving to slide five. All of the FY25 targets we laid out in the February equity raise relating to outlook, cost savings and capital management were met. The completion of the financial reporting review did mean that additional NTA impacts were identified, which Rob will step you through. And with the completion of the first audit by PwC, we can now draw a line under that. Let me quickly run through some of the highlights from the year on slide six. Firstly, this was the peak build year for Ryman, with the highest ever number of units and beds completed at 950. Our sales volumes and pricing were largely flat year on year, as was our occupancy in mature villages. And we delivered improved free cash flow. stepping through to the operational performance in sales and stock. Turning to slide eight, sales contracts, which we also refer to as sales applications, are a lead indicator in the business, with settlements on average lagging contracts by around six months. Since the equity raise, sales momentum improved through Q4 compared to the prior two corresponding periods. Market conditions are mixed in the regions in which we operate, with varying levels of competition and stock at a village-by-village level. Sales effectiveness continues to be a key focus. We are investing in the capability and performance of our sales team and have targeted strategies for our villagers with the greatest opportunity in stock. As the team builds a stronger pipeline of contracts from the levels seen in the second half, this will provide significant operating leverage as market conditions improve. Slide nine shows the change in contract terms since October last year. The key point to call out is the shift in DMF level, increasing almost 40% from H1 to H2. These are big changes to make in any business, and the new contracts show that we have been able to achieve this change in the market. With the transition made, we are confident in the significant value that will build over time as the contract book turns over. Moving on to sales volumes on slide 10. And just as a reminder, in FY25, Ryman moved the point of sales recognition from contract signing to settlement, so the numbers on this slide now reflect settled sales. Our Q4 sales tracked ahead of the guidance provided at the time of the capital raise, as strategies to improve sales effectiveness after last year's changes took effect. However, as anticipated, new sales in Q4 were lower than previous periods. Year-on-year sales overall were broadly flat with resales stable, demonstrating the continued demand for Ryman's quality mature villages. Notably, we had the highest level of service department resales on record. Moving on to pricing and margins on slide 11. In FY25, we held pricing broadly flat through the year Average pricing improved across both new sales and resales, benefiting from an increasing proportion of sales coming from our higher-priced villages. This was a solid outcome considering the market conditions and competition. It is important to recall that FY25 sales predominantly relate to contracts signed prior to Q3. As we have previously signalled, we are making targeted pricing changes in villages where we have building resale stock and aged new stock. We expect this alongside a higher service department proportion in the sales mix will flow through to average pricing in FY26. While we are seeing growth in gross resales margins moderating with flat HPI in recent years, we are continuing to realise almost $200,000 per unit in average gross resale margin. Finally, touching on our stock levels on slide 12. As our sales effectiveness continues to build and as market conditions improve, We see a significant opportunity with both the level of new stock we have available to sell down following the opening of the four main buildings in FY25 and by reducing the level of resale stock that has been paid out. We expect stock levels to peak in FY26 and then reduce with significant cash release as that occurs. Moving to operations on slide 14. I've now visited more than half of our villages, and I consistently hear two things when I speak with our residents. One is that they wish they had moved in earlier. The other is just how much they value the care and support our team provides. Our offering remains industry leading, And I'm incredibly proud of the business again winning the Readers Digest Most Trusted brand for the 11th time in 2025. Moving on to our retirement living operating performance on slide 15. We've seen continued stable occupancy in our independent units. A drop in occupancy for our service departments reflects added units through FY25. We are seeing year-on-year growth in village and service department fees as price changes in recent years continue to build the revenue base as the contract book turns over. Turning to our aged care operating performance on slide 16. We've seen significant improvement across a number of key indicators as the portfolio continues to grow. You can see both the New Zealand room premiums and in Australia, our RAD balances continuing to build year on year, reflecting the premium value proposition of the Ryman offering. And at the same time, occupancy in mature care centres has continued to sit at high levels. With the significant capacity added in FY25, we have a number of unoccupied beds in our developing care centres, providing the opportunity to build incremental revenue and margin through FY26. Around one third of those unoccupied beds are in Australia. where we are now seeing daily care fees at almost double the rate of New Zealand. This shows the opportunity in the New Zealand care portfolio with funding reforms still to occur. Stepping next into development. On slide 18, you can see the substantial progress we have made this year. We have now got through the peak period of construction and delivered an additional 950 units and beds in line with guidance, with the opening of four main buildings, which was the most in any one year. The pictures on slide 19 give you a sense of the scale of investment. These are the four sites where we opened main buildings. Our Miriam Corbin, James Watty and Burt Newton Villages are now complete. You can see our RV and care occupancy growing across each of these villages since their main buildings opened last year. Our in-flight build program as it currently stands is on slide 20. We now have 597 units and beds under construction or committed, which includes the main building at Patrick Hogan commencing this half. The Kevin Heckman main building is due to open shortly and the Nellie Melba final apartment block will also be completed in the first half of FY26. Following the completion of in-flight stages at Keith Park and Deborah Cheetham later this year, we will be down to three active construction sites at Patrick Hogan, Northwood and Hubert-Opeman. Moving to slide 21. We've already announced we are actively reviewing our land bank, which was independently valued at $369 million at 31st of March. We've got opportunities on both sides of the Tasman. We're looking at what are the best opportunities for growth in terms of both our existing villages as well as in our greenfield sites. We're also actively considering opportunities for divestment of land bank sites where they can deliver better value for shareholders through sale. Now I'll hand over to Rob to run through the financials.

Thanks Naomi. Starting with slide 23. There is no doubt that these results are complex with the number of restatements, impairments and one-off items. However, under all the changes, there's an improvement in our free cash flow and more importantly, to the core operating performance of our villages. Operating EBITDAF, which reflects our weekly fees, DMF and operating costs excluding one-offs, demonstrates improved operational performance. While we are not yet in a position to report segmentation of RVing care, We remain committed to delivering this, ensuring clear visibility into the returns on capital investment across our business. Moving to slide 24, the review of our financial reporting has taken over 18 months, starting with the external auditor independence policy, alongside an independent external review of Ryman's financial reporting against best practice, and the appointment of a new auditor, all of which would have been important steps in getting to where we are today. And while this process has been a difficult one, and it may take some time to work through the accounts, it's an important reset, improving transparency and comparability of our reporting. On slide 25, you can see the number and the extent of the changes we've made to the financial accounts. Firstly, at the interim results, and then points nine to 15 being the latest ones we're reporting on today. All of these changes have been clearly explained in the financial statements, in particular, Note 1 provides an overview of each of the restatements with further detail on policy changes and judgements shown in the various sections. Moving on to slide 26 and one of the biggest changes to our reporting, the cost capitalisation policy. This change has been complex, has impacted several key areas of our accounts. When we look at our non-village costs in terms of our office-based activities and those that form part of our design, development and construction teams, the capitalised elements are now more closely linked to the physical activities undertaken at site. This provides us with better clarity on development performance, operations and asset returns as we go through the process of reviewing the development portfolio and explore outsourcing models for the next phase of our developments. We recognise that over the last few years there's been an increase in non-village expense costs and these have grown faster than our revenues. we have a program underway that is resetting the cost base going forward. Moving to property, plant and equipment on slide 27. The carrying value of our care centres now reflects the value of land and buildings and are based on fully independent valuations. This has resulted in the removal of the value as apportionment to Goodwill, shown on the chart. We've also taken a revised approach to the RADs, which are no longer included as an add-back within New Zealand care centre carrying values. Whilst these changes are significant, the underlying freehold going concern value has not materially changed year on year. And in the period, we valued six newly opened care centres the first time and recognised an impairment of $148 million. This reflects the cost pressures we've seen in construction since COVID. Moving on to investment property on slide 28. Independent valuations have been performed across all of our sites, including our sites under construction and in our land bank. The value is considered unit and pricing information, capital spend, and site-specific factors such as seismic risks, and these have all been disclosed in the accounts. FY25 saw a positive fair value movement of $195 million, reflecting the pricing model changes we made during the year and the significant level of new units completed. Turning to net tangible assets on side 29, several changes have occurred during the year. These are clearly detailed in the financial statements, and they've been reflected in both current year movements as well as the restatements to prior periods. As a reminder, at the time of the equity raise, we identified five items which had the potential to impact NTA, with our best estimate at the time being an impact of up to $300 million. As I talked to earlier, there's been a significant body of work completed since we've now landed these positions, with the impact of these items totalling $576 million. Key shifts include the impairment of internal goodwill on care centres, which was larger than estimated, and the impact of the cost capitalisation changes on the carrying value of our assets. These changes have been complex to work through and complicated further due to the restatement of prior periods when we reference the interim at the time of the raise. The profit and loss on slide 30 is difficult to review, with a lot of the changes we've talked to coming through here alongside the restated 2024 earnings. We've talked to the revenue changes and impairment losses, and we've detailed these in the accounts. Finance costs were reflecting, or higher, reflecting the cost out of the institutional, sorry, the close out of the institutional term loan and the swaps. combined with the impact of less interest being capitalised. And our deferred tax asset has been written down to the extent that it offsets the existing liability. I mentioned in my introduction that the core operating performance has improved, and this is on slide 31. We measure this internally by looking at the operating EBITDAF, and we've seen an improvement in both village and non-village operating performance. Note 2 in the accounts talks to the segment information in more detail. Village performance improved by $34 million with the growth in the DMF and the pricing changes in the revenue lines and good cost control within the villages. The non-village performance reflects the gains made through restructuring support functions and less the impact of lower capitalisation arising from lower development activity. Both combine to give a year-on-year improvement on operating EBITDAF of $30 million. Taking a closer look at the cash flow from existing operations on slide 32, it was this time last year that we changed our reporting metrics and placed emphasis on the cash flow performance. Cash flow at the village operations level was positive through fee income, reflecting our fee changes, and new villages and care centres lifting occupancy as they were commissioned through the year, improving income and costs. Resales cash flow was impacted by the repayment of occupation rights. We see this reversing as the market improves. And if we adjust for this, the cash from resales improved on FY24. Interest costs were higher as a function of the interest capitalised being booked to active developments, with the balance coming back into existing operations. Slide 33, and cash flow from development activity. New sales volumes in cash terms were marginally softer. Concluding the four main buildings and moderating the build program to take into account stock balances had new development spend reducing on FY24. And capitalised interest decreased as the scope of developments actively being progressed was narrowed with less costs taken to the projects. Moving to free cash flow on slide 34 and bringing both halves of the cash flow together, the cash result of a $94 million cash loss marks an improvement on prior years as we move towards a cash break-even position. We are targeting and making decisive actions to ensure further improvements in FY26. Moving on to capital management on slide 36. We've reset our capital structure with the $1 billion equity raise, which received great support from our shareholders. The combination of the raise and the covenant relief provided by the lending group allows the business time as we see the market recover and to drive the business transformation initiatives that we highlighted at the raise. And Naomi will talk to the progress made on these shortly. Consistent with previous communications, later this year we will provide details on the revised capital management policy, including our approach to divvends going forward. And we are planning for the ASX foreign exempt listing in the first half of FY26. Moving to the debt funding position on slide 37. Our drawn debt is at $1.67 billion. We maintain significant headroom in our facilities of over $500 million and we have no new term facilities renewing. We simplified our debt structure with the repayment of the institutional term loan in March. This leaves us with the syndicated facility and the existing retail bond. The waiver relief afforded to us means that we can work through the impact of the accounting changes on our banking metrics, and re-engage with our lenders with a set of metrics that align closer to the business and how we want to grow in the future. We have a supportive bank group and we're confident that we'll be able to make progress on this and provide an update at the interim results later this year. And finally from me, on treasury management, on slide 38. We've worked through the repayment of our facilities following the capital raise that has reduced our cost of debt. The go-for position will deliver fully interest savings of around $50 million to $55 million. There is a decrease in our effective interest rate at 6.2%, and two-thirds of the debt book is on fixed rates. We've reviewed our hedging position post-raise and closed out around $500 million of swaps to bring our fixed rate profile back in line with our Treasury policy. We'll continue to review these positions as we work through the cash release initiatives and develop our new capital management framework. Now, I'll hand you back to Nomi to talk to the business transformation and outlook.

Thanks, Rob. We talked extensively about our business transformation through the equity raise, and I just want to again reiterate the intentional focus at this point in time on optimising performance in the current portfolio. This is not because we have abandoned growth, but because we see significant opportunity to realise more value from the investments we've already made, and because we are recognising the need to change how we grow and allocate capital in the future. Moving to slide 40. Before I step through the update on our strategic priorities, let me remind you of the trends that we're seeing in the sector and how Ryman is uniquely positioned to benefit from these. Three trends really matter. We all know about the ageing demographic. The change now underway is a step up in the rate of growth in aged healthcare demand. That growth is not being matched by supply. And this means we will see a scarcity in residential aged care, which is already starting to emerge in some regions. As more care is provided in the home, the acuity in residential aged care is increasing. That means more demand for higher value hospital level care. The Ryman portfolio is uniquely placed as these changes occur. A premium care offering which will attract increasing value and a portfolio of assets and a workforce able to provide more care across the full continuum from independent living to hospital to end of life care. And the security that a move into a Ryman village provides that you will be able to access all the levels of care that you might need. I shared three strategic priorities at the time of the equity raise that will drive operating leverage and growth for Ryman over the next three to five years, starting with the target to release over $500 million on slide 42. With over $700 million in new and paid-out stock, Over $300 million in our land bank and a very low level of resident capital in care in New Zealand, there is significant opportunity to release cash and reduce both the level of debt and capital intensity of our business. Priority two on slide 42 is to make a sustainable improvement in the performance of our existing portfolio. As we moderate growth and steer more clearly into the permanent cost base of the business without historic levels of capitalisation, we know this needs to be a significant shift. We have already made good progress on this priority, as we talked about today, with the pricing model changes increasing the value of the future contract book, $23 million in annualised costs taken out of the cost base and a target to double that in FY26. The build rate has been all-consuming for the company at times. It's meant we haven't had the focus that's needed on ensuring the assets we build are delivering a cash yield which reflects the investment we've made. And this is the shift occurring in the company right now. as we build a strong performance cadence across all levels of the organisation, while maintaining our resident-centred culture and industry-leading care. The third priority on slide 43 is taking a disciplined approach to growth. Having got off the development treadwork mill, we now have the flexibility to do this. One of the important things to remember is that the development returns of the last 10 years have reflected the housing market appreciation. We have a lower growth outlook ahead, much higher development costs and increasing competition in the RV market, particularly in New Zealand, which will make historic development margins much more difficult to achieve moving forward. This means we really want to test the best options for growth to be highly confident that the capital we deploy from here will generate a return, not on paper, but in cash flow. We are intending to undertake a review across the existing portfolio, our 49 villages and our 10 land bank sites in New Zealand and Australia, and to review the business strategy, recognising those industry trends I talked to, to give us a full potential picture of the business and identify the very best opportunities to optimise and grow the existing portfolio. And I look forward to sharing the outcomes of that review with you later in FY26. Let me finish with our outlook on slide 46 before I open up for Q&A. We provided FY26 and FY27 combined guidance at the time of the raise. We have now refined that and provided build rate, CapEx, and have also added sales guidance for FY26. As we indicated at the time of the equity raise, H1 sales will be impacted by the lower sales contracting levels we saw through H2 FY25. Market conditions do remain challenging and we are focused on improving sales contracting through the year to deliver a higher level of settled sales in H2. Stock levels will increase with the Kevin Heckman building opening shortly before stabilising as new sales stock is sold and resales volumes lift as market conditions improve. Our cash performance will benefit as we continue to lower our cost base in support services and construction and lower capital spend as in-flight stages complete. Before opening up for Q&A, I again want to reiterate the substantial opportunity within Ryman's portfolio to improve cash performance from selling down unsold stock at a higher DMF with an increased weekly fee and filling our new care capacity, leading to increased occupancy. At the same time as resetting our cost base and taking a more disciplined view of development and capital management moving forward. Now I'll open up the Q&A.

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Ari Decker with Jarden.

Oh, good morning. Yeah, just starting on the gross sales contracts, just a couple of questions there. In April, I realize it's probably bumpy month to month, but has it moved into the 80% yet on the two-year PCP and how's May looking?

Morning, Ari. So just to talk to what we've shown you in the pack on the last quarter of FY25, that is the monthly trend on contracts and we're comparing it against the two prior corresponding periods. Contracting is lumpy and it can be impacted by seasonality and by the sales activities we have underway. And so that's why we're giving you the trend to try to give you a normalised view of it and a sense of the volume and the direction of travel. So looking at Q1, to the extent we're into that now, we have seen ongoing improvement in the contracting trend against that Q4 metric of 75% that we've shown in the presentation, although it's still well below the two-year average. so far through this quarter. We are expecting to continue to see that recovery progress through the year as we see the benefits of the ongoing work around sales effectiveness. But to reach full run rate is also in part dependent on the market conditions that we see through the coming year. And so, as we've said in our guidance, with that contracting trend we saw in H225, we are expecting that to impact sales through H126 and are guiding to FY26 sales being weighted to the second half. Importantly, with all of that, all of those sales are at an almost 40% higher DMF than what we've had in the past, and so at a significantly higher future value for Ryman.

Thank you. And then there is obviously, you've highlighted it's a gross figure. Can you confirm that cancellations are reasonably steady?

Yes, we're not seeing any significant change around that.

Great. And then just on pricing, just finishing this thread, Just on mature villages, you've given some guidance to making targeted pricing changes and inventory obviously being a key guide to that. But just on the mature villages, can you confirm your expectation would be that on balance you would see year-on-year upwards pricing in mature villages, assuming that the housing market remains you know, broadly flat, i.e. the weight of pricing changes in mature villages will be to increasing price.

So what we're seeing, and this is reflected in our 25 results as well, is that resale pricing is generally steady with limited HBI growth. But this is mixed across the portfolio. So for villagers with more resale stock, we are making sure our pricing is in line with the market and in certain villages. we are adjusting it. And in other villages where we have very high levels of occupancy and wait lists, we are increasing pricing based around the market conditions specific to those villages. So it's a very village by village question, but really what our focus is on is making sure we've got the pricing right to the market conditions in each village, particularly at those villages where we do have a higher level of aged stock, which is a relatively small proportion of the overall portfolio.

Okay, this next question, please forgive me, there's a little bit of a lead into it. But a year ago, you talked about $800 million of recycling to go on 16 projects, six of which had recently completed. Now, since then, there's been cost moved from capitalisation to the P&L, so that would be supportive of that figure going up. But then also, equally, you're pausing a number of developments We've talked about price changes being required to move stock where it's more concentrated. I guess the question I've got is there's a large gap between that $800 million recycling to go and the targeted cash release of over $500 million from initiatives that actually extend beyond the recycling of cash from developments. And so my question is, have things got meaningfully worse on the 800 reference point since a year ago, or are you being very conservative on the at least $500 million cash release?

There's a few parts to that, Ari, so I'll try and make sure we respond to the different parts of it. Firstly, just your overall point, which is that you were hoping to see the cash recycling in these results, and we haven't been able to do that at this point in time, not because we're not wanting to, simply because of the volume of work that has gone into... finalising the results and the financial statements and those changes to cost capitalisation, which then need to feed through to those capital recycling calculations as well, as well as things like development margins. So the only reason you're not seeing those in the presentation today is purely time and further work needed to get that done. In terms of things that are impacting that, there's obviously changes on both sides as you've talked to Our approach with in-flight projects has been to pause future stages where we've got stock on hand and are looking to sell that down first. So it's not that we're not intending to proceed with those future stages, it's a pause and our intention is to come back to them when there is market demand for them and obviously the cost of developing those future stages is going to be dependent in part on the timing of when we do that. In terms of our construction... are projects that are in flight and underway. We haven't seen significant variation in terms of cost expectations for those projects, but the accounting for them is obviously changing with the changes to the cost capitalisation policy. So that's the bit we need to work through and pick up when we update those numbers. And then the final part would be the pricing. We are seeing changes in the pricing. We are focused on making sure that where we have aged new stock, it's rightly priced. and when we update capital recycling in the future, we'll make sure we pick that up as well. So that's just the directional response to, I think, all the questions you raised in that. Tell me if I missed something. There is some movement, but it's certainly not any concern in terms of the cost side of the equation and purely a question of timing for us to be able to update that information.

No, thank you. I'll let somebody else ask the question. Thank you.

Our next question comes from Bianca Murphy with UBS.

Morning. Firstly, just following up on the question around pricing, but could you comment on what you're seeing in terms of acceptance from new potential residents of the new pricing structure with the higher DMS and weekly fees?

Morning, Bianca. Yeah, look, we've obviously got the data in the pack in terms of the mix of DMF levels that we've seen through the second half of last year with our new contracts that have been signed. And I think there's two parts to that. We are seeing acceptance of that level in the market at 30%. We think that aligns with what others are doing in industry. And we are seeing the take-up of that very much more. weighted to the 30% level rather than the flexible 25% option, and that's reflected in an overall average, I think it's 28.1%. in total across the contracts in the half. We are continuing to look at how we communicate that as effectively as we can and are evolving that in terms of how both our sales advisors engage with customers around it and make it as straightforward to communicate explain as they can. But I think the overall message is we've been able to make that transition now. That is not limiting sales, we don't think. And it's really about making our sales team as effective as we can. They have been selling under the old terms for a very long time. They're very used to that. And so one of our areas of focus has been in really investing in our training and the tools we give them to be really effective in how they present that to prospective residents.

Okay, thanks. And in terms of incentives, what are you doing there at the moment and how does that compare to sort of a year ago?

In terms of incentives, I think we continue to make that targeted and really based on competition. And more and more, we're looking at it in a much more regional way. I think the big change versus a year ago, I would say, and obviously qualifying this for not being there at the time, but that we probably had more of a single approach of, across the whole of the country. And now we really have a clear view about performance at a village by village level, including the competition that each of our villages is facing into and are making sure that any incentives we're offering are targeted to where they need to be to secure a sale. and equally that we're not giving away value at other villages where that is not required to achieve our sales. So that's, I think, the difference year on year. We have, through the second half, as we talked about in February, made sure and spent time really making sure our sales incentives are targeted and are effective in... in making the Ryman offering attractive to customers who want to come into a Ryman village.

Okay, but would you say that most of the sales do still have some sort of incentive?

No, I wouldn't say that. As I said, I'd say it's targeted and really specific to the village and also to the customer because different customers are sensitive to different things. More and more what we see is most customers have gone to other villages around their area, particularly where there's multiple options, and then they'll normally be focused on a particular aspect Sometimes it's the headline unit price based on their own housing that they are looking to sell. Sometimes it's the weekly fees. It just varies by customer. And so part of that refinement that I'm talking about in the pricing model and in the incentive tools is just making sure our sales advisors are equipped as well as they can be to really conclude a sale with every resident who wants to come into a Ryman Village and has the means to do that.

Yeah, okay, thanks. And then last question for me just on free cash flow. So, yeah, pleasing to see that that was slightly ahead of your expectation. You are saying that you are targeting a further free cash flow improvement. but could you provide any sort of further colour around what you're expecting and, in particular, when you expect to be free cash flow positive?

Thanks for the question. Look, the outlook for our cash flow is going to be dependent on mix. As Nomi's pointed to, we have seen a slowdown in the negative cash drag towards the second half of the year we've just reported on. It's going to come down to a number of factors. It's going to come down to the sales cadence that Nomi's alluded to, we also need to look at the speed of the cost-out program and how that will be a driver to the improvement in the year we're in now. What we will say, though, at the moment is that the direction of travel is positive, albeit early, in FY26. So we feel we're sort of going in the right direction when it looks to cash flow.

Thanks, Rob. And just to add, just that reminder that in FY26... 25, sorry, Bianca, We had a lot of one-off costs. We had four main new buildings opening and that scale of developing villages is impacting short-term earnings. So you've got the drag of that and you're yet to see, as Rob mentioned, the benefit of a full year of cost savings and the benefit of the lower interest costs we will have post-equity raising. So we certainly see a lot of benefits from those factors coming through into our FY26 cash flow, as well as the lower capital spend overall.

Yep. Okay, that's helpful. Thank you.

Your next question comes from Erin Ibertson with Forsyth Bar.

Hi there. Good morning, Naomi. Good morning, Rob and Hayden. A couple of questions from me. I guess my first one is sort of a form question. So the P&L item you have sort of guided us to or at least 12 and six months ago, the target was this IFRS profits before tax and fair value. But your core operating performance that you're referring to on slide 31 and the one number you highlighted from the P&L, Rob, was this non-gap EBITDA. So I'm just curious what we should read into this, why you've chosen to focus on this non-gap metric, which, if I understood it correctly, includes imputed interest from RADs, which I appreciate is an IFRS metric, so I can sort of see why you've included it. obviously doesn't include any sort of allowance for the free funding for the independent living units. So given that it's a non-GAAP metric and that it's your choice to highlight it, I'm just trying to understand why you've chosen that metric. Thank you.

Yeah, thanks, Aaron, for the question. I think really the emphasis on the initial dashboards was to show where we came against the guidance metrics we put out at the time of the equity raise. That's been our primary focus. What we wanted to do here is share the operating EBITDAF number that you've highlighted. It does give us a chance to look through some of the accounting changes that we've pushed through, such as take some of the noise away from the operating performance and allow some comparability internally on how we are performing. So we wanted to raise that factor. I think what you can do, though, is if you – a lot of the underlying information that pins the EBITDAF comes from Note 2, which is the second report. It's been quite a shift for us. I think as we made a point earlier, we haven't had a chance to get through to look at the split between RV and care. That is something we will do as we work through the cost capitalisation exercise Naomi talked to and then come back at the interim with that RV split. But yeah, it's not a deliberate move to put a new metric in there for you. It's just really highlighting how we look at the business internally and what we think the relative performance is with the accounting noise put to one side.

Yeah, I guess that's what all underlying earnings metrics aim to do now, putting accounting noise to one side and trying to understand... the operating performance of the business you know you guys have done a lot of work in this area so what I'm trying to understand is is this you think this is most representative we've obviously had lots of other non-GAAP metrics from Ryman and others and my impression from you specifically was that you wanted to break from that but is this now what you consider a good representation of the Underlying earnings power, which includes RAD imputation, but not any consideration on the independent living unit side?

Look, it's a fair challenge. I think what we're trying to do is there's many metrics which we can consider as being relevant. We think this is relevant to articulating what we think core operating performance is. It doesn't include the fair value gains. Look, what we report going forward, we'll come back to it, but we do want to come back to the metrics we showed before, but we just tried to provide a relevant metric today to really underline the operating performance that we've seen.

Aaron, just to add to what Rob said as well and to connect back with why Ryman made that shift a year ago in terms of cash flow from existing ops, cash flow from development and net profit before tax and fair value. it was because the cash performance of the business had disconnected from the P&L. And so those metrics I see as part of the reset that we've been doing. To your point, you're looking for the long-term performance and value creation metrics, and I accept we've got some more work to do to give them to you. But we are trying to make sure we continue to report to those ones that we've talked about, so we haven't changed that, to give you the visibility of the improvement in the underlying operational performance, which that EBITDAF measure is. And I think where we're going to come back to you and get to is that actually you need to look at the retirement living returns a little bit differently from the aged care side of the business. So we've got the segmentation work ahead. We've got the portfolio and the strategy review. I want to come out of that with some really clear metrics on how we're going to talk to those separate parts of performance because I think the cash yield you get out of retirement living, out of the more property-focused part of the business, is a really important thing to have line of sight to, as is the annuity earnings... that you have in care, which is probably the basis for the aged care business performance and valuation. So that one, work in progress. We understand the feedback and we'll make sure we come back on that.

Yeah, well, it's not so much feedback. I'm trying to understand how you look at your business now. So us analysts have made it very clear how we look at the business. You're a new management with new metrics, so we're trying to understand what you prioritize. So I just got quite surprised when you introduced this metric, which I've never come across before from Ryman or anyone else before. So that's all. But it seems like you just put it in there to clean out some noise rather than having put too much thought into why this metric rather than some other non-gap underlying message or metric. But I'll leave it there.

I don't think that's the case, Aaron, but happy to talk with you offline on it. And as we've said, we've got more work to do to break down the different parts of what performance looks like within the village. So that's the work in progress there.

Okay. Just coming back to Ari's question on, you know, your run rates of, you know, gross sales contracts or what, you know, old sales are now called. So if you look at your guidance, 1,200 midpoints on Auras, what have you assumed? You're saying that you have six months lead time, so I guess the next six months is sort of quite crucial when it comes to gross sales contracts. It sounded like things have improved a little bit in this quarter, the start of this financial year. Are you assuming that we flatline around 75%, 80%, which it sounds like, or are you assuming some sort of modest improvements?

I think what we've indicated to you, Aaron, in the guidance and in saying that we see sales with a weighting to the second half is a progressive improvement through the year. We'll be able to give you an update on how we're progressing in July and continue to tell you how that is trending through the year. But we're definitely seeing it as a progressive improvement improvement through the year with a weighting to the second half in terms of sales settlements.

Thank you. And final question. Again, I'll follow up on your answer to Bianca's question on free cash flow. I'm not 100% clear on where the uncertainty lies, certainly within the next six months. You should have a very clear idea of sales, given your six-month lead times that you pointed to. Your CapEx and OpEx is presumably relatively fixed, so assuming... no dramatic change elsewhere, which would be unusual. So do you expect to be free cash flow positive in the next six months or not? Or I appreciate you don't necessarily want a guide to it, but painting with a broad picture, it seems that it should be relatively easy to have a clear idea of what that is.

Yeah, we're certainly not going to get into giving six-monthly guidance, Aaron, as you've anticipated. Payouts is an area of uncertainty that's very connected with how quickly residents settle. So we might have a contract, but the timing of settlement is often determining whether we have that... increasing working capital requirements with payouts of units. But it's also an opportunity as well, and that's that cash leverage that I've talked to, that as the momentum comes back through, we've got that value sitting there and able to be released from that working capital. I'm just conscious, Aaron, we haven't heard from Stephen. I just wanted to give him an opportunity to ask questions in our last couple of minutes.

Okay. Thank you very much. That was it.

Thanks, Aaron. Your next question comes from Stephen Ridgewell with Craig's IP. Stephen Ridgewell, your line is open. Hi, Mr. Ridgewell, your line is open to ask a question.

Sounds like we may have lost Stephen. We might just quickly check if there's any online or other questions.

I will just hand back to Hayden for any online questions. Pardon me, we do have a question from Nick Marr with Macquarie. Please go ahead.

Hey, good morning. Just following on from that last comment. Have you got any intention on changing your process or your preferred terms around how you do buybacks and when you do buybacks to sort of reduce some of that potential cash impost and sort of prevent this happening again in terms of the build-up?

Hi, Nick. Look, we made a change in that last year, which was to give us an ability to pay interest if we are not buying back or paying out the contract within the six months. Obviously, that's the term of new contracts, and so what we're continuing to do at this point is obviously making sure... we are buying back on the terms of contracts as they roll over. So that's where that stands. Not anticipating a change there, but making sure we are complying with the terms of contracts we have in place. It's also an area where there is regulatory review underway. The six-month payout is set in Victoria by law. And New Zealand is looking at whether it introduces a mandatory standard there, which I think we'd already be pretty well placed to meet with our current practice.

That's good. And just one last one. Just within the guidance for sales, would you expect a net increase in resales or unsolved resale stock sales? whether that cadence is starting to catch up and the rest of the market has seen some pretty good resales numbers coming through recently. So just trying to gauge where you're at and sort of the main differentials of that sort of tracking you guys down more.

Yes, I think if you look at our guidance for FY26, if you look at our turnover rates and levels, you'll see that effectively there is a build of resale stock as we recover the sales performance. And then as that occurs and we can effectively sell above our turnover level, there's a pretty significant cash release coming from that. So, yes, you get the build-up short-term effectively off the back of H2 FY25 contracting levels. We need to get the resales performance back fully at the rate of turnover and then actually exceeding it for a period to run down that stock position, and that's what we're looking to do. But that will go... take us into FY27 with just that lag from contracting to settlements. I think we've got Stephen back on the line, potentially. So, Nick, is it okay with you if we give Stephen one before we wrap up the call?

Yeah, absolutely. All done. Thank you.

All right. Thank you.

Your next question comes from Stephen Ridgewell with Craig's IP.

Yeah, apologies for the technical difficulties, Julia. Hopefully you can hear me now.

Yes, we can.

Hi, Stephen. Hi. But just on the weekly fees and the change there, just interested in your view, Naomi, of the market acceptance of that change, you know, which... And what a pretty decent step up in some cases might have seen Ryman be above market, whereas the change in the DMF, you know, was kind of bringing Ryman into line with market. Just interested, are there any plans to kind of tweak the weekly fee approach or strategy, you know, the year ahead? And, you know, it does appear to have cost some sales, so I'm just interested in, you know, how much pain the company's prepared to tolerate on the weekly fee front, just on lost sales in return for, you know, a higher weekly fee. Thank you.

Thanks, Stephen. So you will see from the pack, I guess, the choices customers are making in terms of the fixed versus flexible fee levels, and clearly residents are valuing the fixed offering with about 50-50 take-up there. I think one of the things that we're seeing in the market is a bit of change as certain costs within those fixed fees, things like council rates and insurance and things like that, which are pretty outside of your control. Some operators are removing them from what... what the fixed rate or the index rate covers. And we're also seeing quite a bit of variation by region as well, just reflecting different cost levels in different regions. So that's one we continue to watch. At the moment, we have relatively fixed levels across the portfolio outside of Auckland and a different level again in Victoria. But like with pricing, we want to make sure the offering is hitting the mark in the region as and at the village level. So that's one we continue to watch as sort of industry practice evolves and changes a bit there.

Okay. And then just if I can squeeze in one more, just the CapEx guide for 26 of 260, 320 is a little bit lower than the market was thinking. The last guide we had from Ryman was over FY26 and 27 for 550, 650. And the expectation was you'd kind of phase down the CapEx over those two years of being a little bit higher this year and a bit lower next year. So just given today's CapEx guide being a little bit lighter, should we also read that the total CapEx guide for 26-27 is also likely to be perhaps a little bit lower than indicated at the time of the capital rates?

I think the thing you need to factor in there, Stephen, is just that the cost capitalisation policy changes have brought that down as well. And so we've obviously given you an FY26 position post those changes with a much more specific view on that year based on also a confirmed sort of build rate for that year as well. So it's fair to say FY27 is going to be coming down from that, but we haven't got to a point of giving guidance on that that would be down the track.

Okay, but on a like-for-like basis, the previous guide range on the same capitalisation policies would be approximately what it was before. Is that the way to read it?

It may be down a bit. It's not a change in build rate relative to what we've shown before. It's probably more in the nature of refinement and as we sort of go through year-end budgeting and other processes, as well as, as I've said, cost capitalisation.

OK, sorry, just one quick one for Rob maybe. Just the write-downs, you know, of Care Goodwill, I guess that was one of the surprises today was that, you know, obviously it's been about double the previous kind of upper end guide. Can you just give us a little bit more colour as to, you know, where the surprise was coming from, you know, in terms of the exposure there and what led to that write-down, you know, being so much larger? And then In terms of the carrying value of the key assets now, can you give us a little comfort that there's no significant risk of further write-downs in terms of perhaps an EBITDA per bed or the EBITDA multiples? Those beds are now held out on the books, I think.

Yeah, thanks, Stephen. I think at the time of the capital raise, we said that there was a lot of work ahead of us in terms of completing the accounting adjustments, and so we've concluded all that work now. With regards to the care valuation, the critical point is that we start off with the valuers looking at the freehold going concern, and what it was was we needed to land an estimate on what the difference between that and then the land and buildings and chattels piece, which ends up in our property plant and equipment. And that delta, when we went through it with not just our auditors, but got an expert review of that undertaken, was just bigger than we expected, or bigger than we foresaw back at the time of the capital raise. So we're happy with the position we've got now as being thoroughly tested and reviewed, and that'll be our go-forward position. In terms of the other question you made around other changes, We've gone through a pretty extensive review. The initial review was sort of plus 50 items. We've shown you today the 15 that go to the face of the accounts. There are a number of disclosure improvements and internal changes we've made as well, but we can definitely say we've drawn a line under the review and don't expect to see any future changes. We've tried to, as we can in the accounts, to be through the notes, be as transparent as we can on those treatments.

Okay, thanks. That's all from me.

There are no further phone questions. I'll hand back to Hayden for online questions.

Thank you. So we have two questions online. The first is, are you forecasting a higher tax burden with a reduction in new development and associated cost deductibility forecast in the next few years?

I'll take that one, Hayden. Thanks. Look, the simple answer is no right now. We're not in a taxpaying position. Yeah.

The second online question is, on slide 21, Kohi Marama has been reclassified to investment property. Why is that and what are the plans for the site?

Yep. In terms of Kohi Marama, the assets held for sale note, which is note 10 in the accounts, outlines the land that we do hold for sale. This site doesn't qualify from an accounting standards point of view. It's being actively marketed any longer. The default there is you need to bring it back into the greenfield valuation. Therefore, it moves back under investment property. It hasn't changed what we're doing on site. We're still committed to trying to sell the site.

There are no further questions online. I'll pass back to Naomi for closing comments.

Thanks, everyone, and apologies for running a few minutes over. Important that we just get through the questions that we had. I know there is a lot to process in what we've released today, and I encourage you to take the time to read through it in detail. I do want to finish by emphasising the number of value levers that we can pull in this business to drive change. shareholder returns which are already in very clear focus a very significant release of cash by selling down over 700 million of vacant stock that we have today moderating our investment in new stock while we do this releasing cash from our land bank and the scale of operating leverage that we have in this business as well resetting the level of our dmf and weekly fees and our cost base as well as optimising how we utilise the very significant premium care capacity that we have. We've made a lot of progress in the last year to make our business more resilient and there is now substantial opportunity ahead, which as a management team, we are really looking forward to getting after. Thank you for joining us today. That does conclude our conference for today.

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