Ryman Healthcare Limited

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.