Ryman Healthcare Limited

Thank you for standing by and welcome to the Ryman Healthcare half-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.

Good morning, everyone. I'm Naomi James, Chief Executive Officer of Ryman Healthcare. Thank you for joining us for our half-year results for the six months to 30 September 2025. With me today is Matt Pryor, who commenced as Chief Financial Officer on the 31st of July, and Hayden Strickett, our Head of Investor Relations. We're going to be working to get through the presentation in around 30 minutes to allow time for Q&A before we wrap up at midday. Looking at the agenda, I'll provide an overview of sales, stock, operations and development before handing to Matt who will speak to the financials and capital management. And I'll then provide an update on outlook and strategic priorities before opening up for Q&A. Starting on slide four, as you'll see from today's results, we are well on our way to delivering better returns and are doing the things we said we would do when we raised capital at the start of the year. This is the first positive free cash flow result that Ryman has announced in more than a decade. We have made substantial progress towards achieving our cost reduction target in the first half and increased our target for the full year. Our refreshed sales strategy is rebuilding momentum with two quarters of sequential growth at our new 30% deferred management fee. Our balance sheet reset is now complete with the full bank refinancing we announced at the start of the week. And we have today announced that we will hold an investor day in February, which will cover our strategy refresh and new capital management framework. Let me start with the first half highlights on slide five. And starting with our sales performance, we've seen a rebuild in sales volume for the first half with total sales of 704. While down on the second half of last year, which was a record, this was up on the fourth quarter of last year and is at a significantly higher value with the new level of DMF. On the operating side, we've stepped up the level of cost out. To 30 September, this is now at $40 million annualised and we've uplifted the full year target to $50 to $60 million. This is reflected in our financial performance, with a significant improvement in operating EBITDAF and positive free cash flow for the half of $56.2 million, on total revenue up 13% on both pricing and occupancy growth, while total costs fell 2%. We've completed the refinancing of all banking facilities, significantly extending the average facility tenor to five years. As part of this refinancing, we also improved our pricing and have more resilient financial covenants. Through the half, we completed an ASX foreign exempt listing, which we committed to do at the time of the capital raise. This is a pivotal step in broadening Ryman's investor base while reinforcing our commitment to the Australian market. Finally, we've made good progress with the strategy and portfolio review, with additional land investments bringing total contracted sales to $110 million. We will be coming back to the market at an investor day in February with an update on our refresh strategy, and capital management framework going forward, including our dividend policy. Now jumping into the detail, starting with sales on slide eight. We've seen continued improvement in sales effectiveness and contract conversion driven by strong lead generation from village open days and targeted sales and marketing initiatives. Looking at the first quarter, we saw a 12% step up and another 9% step up in the second quarter in our occupied sales. As a reminder, these are RV unit sales only, and we do not include care RADs in our sales numbers. This year we introduced quarterly reporting, so you already have the sales figures you see on this slide. The new news is the update to our full year guidance to 1300 to 1400 units, which I'll speak to at the end in the outlook section. Moving now into pricing and the breakdown in sales mix. On slide nine, you can see the changes we made to the pricing model are now fully in place. As a reminder for those new to the Ryman story, our sales which are recognised at the point of occupancy typically lag contracting by six months on average. We made the shift to a standard 30% DMF on the 1st of October 2024, so contracts signed prior to that date have now been settled and the first half of this year reflects the pricing changes. You can see that three quarters of new residents are moving in on our standard 30% DMF, with the remaining quarter being a mix of DMF options. demonstrating the flexibility in our pricing framework across DMF and unit pricing to meet individual needs. Our contracts are long-dated and the benefit of these changes will build over time, with annual portfolio turnover currently at 12%. As well as the uplift in DMF, we're also seeing a significant step up in weekly fees, with an average 60% uplift in the level of weekly fees on rollover of units. Moving now to sales contracts on slide 10. You can see again the significant improvement half on half coming through in our forward contract book with both increased contracting levels and a reduction in cancellations. Market conditions are still mixed across the regions. We are seeing early signs of recovery in Victoria, while Auckland is yet to show meaningful improvement, which is significant for Ryman with around 30% of the portfolio in Auckland. Our contracted level of stock is lower, reflecting the recent completion and settlement of pre-sold units at Kevin Hackman and Nellie Melba. Stepping now into the breakdown between resales and new sales on slide 11. Our average resales pricing has been broadly stable on first half 2025, while slightly down half on half due to mixed impact. Independent units are down 2% year on year, while service units are up 1%. We've seen our gross resales margin, which reflects the cumulative capital gains on each unit, continue to moderate from historical highs. This reflects the flat housing market we've experienced in recent years. We've seen resales volumes increase across both independent and service departments compared to the prior half. But you will see there is still a gap between sales and turnover, 81 units for the half, which means as we signalled at our full year results, there is a working capital drag through the half with an increase in resale stock and the payout balance. Turnover is an important driver of cash generation in our model through both DMF and capital gains. With improving resales, we have a significant opportunity both to increase cash generation and to release cash from the $330 million of bought back resale stock we have today. Turning to new sales on slide 12. New sales have reduced, reflecting the planned ramp down in development in response to elevated industry stock in some locations. As a result, our level of new sales stock has remained broadly flat over the past six months. We do have elevated levels of service departments following the opening of five main buildings over the last 18 months. This is a key area of focus for us and we are considering a number of options to improve utilisation of this product. Average pricing remains strong, supported by a favourable mix with 45% of new sales coming from Australia. And importantly, our total new sales stock value of around $470 million at the end of the half represents a significant cash release opportunity going forward. As we open the operations section on slide 14, I'm pleased to share that Ryman has once again received significant external recognition. I know these award slides sound a bit repetitive given how many we've won over the years, but this is ongoing recognition across both the aged care and retirement living parts of our business, which truly reinforces the strength of Ryman's reputation. Importantly, our internal customer survey results have also continued to improve year on year across all parts of the village. It's been especially pleasing to see this progress in a year where we've undertaken a significant reset across many parts of the business. And I want to acknowledge the dedication and commitment of our Ryman team members who work every day to deliver great service for our residents and are working to make our business performance even more sustainable. Moving now to aged care performance on slide 15. Starting with pricing, we have seen significant period-on-period improvement in both room premiums in New Zealand, up 10% on PCP, and in average refundable accommodation deposits or RAD balances in Australia, up 5%. These gains are in addition to the base care funding uplifts implemented in both New Zealand and Australia. In New Zealand, a base care funding uplift of 4% took effect from 1 July. We have also successfully trialled a new product for residents transferring to care from within the village, which we're now rolling out across all of our New Zealand villages. This allows us to grow the level of resident capital in care in New Zealand and gives our residents more choice in how they fund the cost of their care. In August, we communicated the closure of our two oldest rest home level care centres in Christchurch. Time to align with the opening of the 80 bed new Kevin Heckman facility, every resident has been supported to find a new home that meets their needs. Moving on to slide 16 and the significant progress with aged care reforms across both Australia and New Zealand. In Australia, reforms have been enacted and are now moving into the implementation phase. Changes to allow a 2% annual retention of new RADs came into effect on 1 November With our average incoming new RAD in Australia currently exceeding $800,000, this is expected to deliver a meaningful increase in revenue from new RADs moving forward. Ryman is already well-progressed in meeting the new clinical care minute requirements which become mandatory with the new funding changes. We've also seen significant progress made in New Zealand with the government announcing the establishment of a ministerial advisory group. While it is lagging Australia in undertaking the necessary reforms, we expect New Zealand will benefit from being able to draw on lessons from the Australian reforms, taking the elements that have worked well and delivered meaningful benefits, while supporting the delivery of high-quality care without creating undue compliance burden. And the New Zealand Government has been specific on the timing it wants to achieve, advised by the middle of next year to enable it to enact changes to the funding model in 2027. This will provide time for all political parties to commit to funding reform ahead of the New Zealand election next year. And there's a big focus on the reforms gaining bipartisan support as occurred in Australia. Moving now on to development. I'm pleased to announce today the appointment of Richard Stevenson as Chief Development and Property Officer. Richard brings deep sector experience with more than 20 years working across the retirement living and aged care sectors in New Zealand and Australia. The addition of Richard to our senior executive team positions Ryman for a return to disciplined growth and supports the continued delivery of high quality communities for residents. Moving now to slide 18, which sets out the status of our program of works across our in-flight projects. We've made good progress in the last half with the completion of the final stage at Nellie Melba completing the village, the completion and opening of the Kevin Heckman main buildings, the commencement of the main building at Patrick Hogan, and progress of Keefe Park Stages 8 and 9, with these independent apartments forming the bulk of our second half build guidance. We expect updated plans for our Hubert Operman Village to be finalised and approved next calendar year, allowing for the commencement of construction, which will be the first project we deliver under the outsourced model. And we continue to have more than 300 RV units sitting in our land bank for future stages on these projects, which have planning approvals and are ready for development as and when market conditions support it. Jumping forward to our land bank on slide 20. In February, we announced that we were undertaking a comprehensive review of our land bank, which was independently valued at 376 million at 30 September. We have been exploring the best opportunities for growth in terms of both our existing villages and our greenfield sites, and are also determining which sites would deliver better value for shareholders through divestment. A number of sites were identified for potential divestment during the early stages of this review, and we're pleased to report the successful sale of Park Terrace in Christchurch for $42 million and Mount Eliza in Victoria for $35 million. This is in addition to the existing contracted sales at Karori and surplus land at Nellie Melba totalling $33 million. We will provide a further update on our land bank review at our investor day in February and expect to have identified sites to be retained for future development as well as additional sites for divestment. Now I'll hand over to Matt to run through the financials.

Thanks, Naomi. As my first half at Ryman, it has been fantastic getting to see the opportunity to unlock value in the business on a number of fronts, which I will touch on today. For the result, I'll talk to the financial highlights in our P&L, cash flow and valuations, as well as speak to the refinancing update, which we announced earlier in the week. Starting with slide 22. As Naomi has spoken to, we have made meaningful progress in the first half, which is reflected in these financial results. I'll call out four highlights on this slide. Firstly, we've seen a significant improvement in financial performance with losses before tax and fair value movements reducing 57.6 million year on year, underpinned by revenue growth of 13% and disciplined cost control. Next, free cash flow of $56.2 million was positive, underpinned by strong net development cash flows and lower finance costs. And thirdly, acknowledging the quality of our $1 billion of unrealised development assets, which represents a material cash opportunity. Lastly, the full refinancing of our bank debt, which has extended average tenner to five years, improved pricing and introduced a fit-for-purpose covenant structure. The refinancing completes our balance sheet reset and provides a robust foundation to grow earnings. Moving to slide 24. Strong revenue growth is a notable highlight for the half, driven by the benefit of both our growing resident base, up 4% year on year in volume terms, and stronger pricing in both aged care fees and retirement village fees. Year-on-year growth in DMF revenue includes a one-off adjustment for the prior year period relating to a historical GST issue which was disclosed at the full year result. Removing this impact, DMF was broadly flat year-on-year. There are a number of factors at play here including the changes to our pricing model as well as the accounting changes made in the prior year. If we look at independent units, we have moved from a 20% to a 30% DMF. but with revenue recognition period changing from seven years to nine years. Similarly, service departments have moved from the 20% to 30% DMF, with recognition changing from three years to four and a half years. This means that whilst the change in DMF contract terms is building a higher value contract book, it will take time to flow through to the P&L, and this is shown in revenue in advance. In simple terms, revenue in advance represents DMF, which has been contractually accrued but not yet recognised in the P&L. The balance will underpin future DMF revenue. I would stress that our front book revenue profile across both DMF and weekly fees is significantly greater than the revenue in place from our back book, which supports our growth in years to come. Slide 25 shows the significant progress we have made in our cost out programs over the past year. Non-village expenses reduced half on half by 27% to $54 million, with the majority of this improvement coming from last year's restructure to support services. Adding to this is also some reallocation of costs to villages following these operational changes. Village expenses increased 7%, reflecting additional capacity which has come online, noting that we have opened five main buildings in the past 18 months. While cost savings remains a key focus for the business, this is being approached in a considered way, given the importance of the Ryman brand and our strong resident proposition. Moving to slide 26. Combining the revenue and cost improvements I've talked to, we have seen a $26.4 million year-on-year lift in operating EBITDAF to $40.1 million, a key measure we focus on internally to track the core operating performance of our business. I would note that this does not include any realised capital gains on retirement village AURAs, which are reflected in other metrics such as cash flow from existing operations. The chart shown on this slide shows the improvement with non-village cost reduction and positive leverage in developing village growth providing the most benefit. Moving to slide 27. A key strategic priority for F26 has been segmenting our financials between aged care and the retirement village parts of the business, which we will report on going forward. I'd like to highlight that this is a non-GAAP disclosure which currently sits outside of our financial statements. Segmentation is based on property type with the aged care segment comprising our care centres and the retirement village segment comprising our independent living units, service departments as well as common areas and amenities. I should also make clear that home care services provided to a resident in RV are included in the retirement villages segment. Central to this analysis is the allocation of support services to each of the segments. A substantial amount of the support is provided through our office functions, such as operations, clinical, procurement and contracting. Allocating these costs to the segments provides a complete picture of our cost structure and business performance. The output of this work provides metrics such as EBITDAF per aged care bed of approximately $15,000 on an annualised basis. For a scale operator such as Ryman, this is significantly below the full potential of our portfolio and there are transformation projects underway to improve performance. It is also important to note that the figures shown on a per bed or unit metric are averages with variations seen throughout the portfolio. Our transformation progress will be reflected in these segment measures going forward. Slide 28 details our cash flow from existing operations, or CFEO for short, which is down year on year when excluding interest. Robust cash flow from village operations aligned with the improvement in operating EBITDAF has been offset by lower net cash flow from resales. Resales cash flow continued to be impacted by growth in our bought back stock, which grew 53 million and a half. Excluding this, our cash performance would have been meaningfully higher. I'd also highlight that we have made some refinements to our cash flow methodology. The most significant change is the allocation of interest on unsold new stock and land bank to development activities. Whilst much of this interest does not meet the criteria for capitalisation, functionally it still relates to our development business. Other changes include the allocation of sales and marketing costs between CFEO and CFDA, and similarly reallocating costs on land bank sites, such as rates or site security, to CFDA. The composition of CFEO shows the improvement in village operations, but this is held back by gross receipts from resales, compared with the previous half, which had the benefit of stronger sales. Totalled against lower non-village expenses and attributed interest costs, there was a slight improvement in overall CFEO. Turning to slide 29, We have seen strong net cash release from the development side of the business, with our project spend reducing significantly as we sell down existing stock. The opportunity to release cash from inventory is substantial, with approximately $470 million of new sales stock at 30 September. Consistent with my previous comments, the figures on this slide reflect our updated methodology with cost allocation to CFDA, including marketing and selling costs, as well as allocating notional interest on unsold new stock and our land bank. Slide 30 shows the positive free cash flow for the half, which was the first time in many years for Ryman. Free cash flow of $56 million was partly offset by a headwind of $42 million in other movements, primarily FX, with the 3% decline in the New Zealand dollar for the period. While this has had a negative impact on the Australian dollar debt, I'd note that our Australian dollar assets have also seen an FX uplift, which is an offsetting benefit to our balance sheet and our NTA. And as Naomi has already highlighted, there have been subsequent land bank sales that will benefit our second half cash position. Turning to asset valuations on slide 31. Independent valuations across our sites consider unit and pricing information, capital spend and site specific factors with further details in our presentation appendices. The half saw a positive fair value movement of $3.2 million, reflecting a number of changes, including price. But the outcome was broadly flat, taking into account FX and the previous result adjustment. There has also been a small impairment for three care centres as detailed in the financial statements, noting that the broader care portfolio is valued annually. The overall investment property carrying value and net tangible asset value remained broadly flat against the previous result. My final slide on financial performance provides a summary of our profit and loss with per share measures which I won't speak to in detail given most line items have already been covered. Earnings per share of negative 4.4 cents was down for the half with the improvement in operating earnings offset by lower fair value movements as well as the higher number of shares on issue following the February equity raise. Now on slide 34. As announced Earlier in the week, we have successfully completed a full refinancing of our syndicated loan facilities. This extends our weighted average maturity to nearly five years, with no maturities until FY31. To achieve this, we have received strong support from our lending group, who has recognised the turnaround that is underway at Ryman by providing funding out to seven years. Our new ICR covenant is 1.5 times adjusted EBITDA to interests, excluding interest on development debt. This designated development debt includes our committed developments that are in flight, as well as recently completed care centres in New Zealand. Importantly, our existing covenant waiver remains in place with first testing of the new covenant to apply from September 2026. Overall, this refinancing retains significant funding headroom of over $500 million and provides a strong foundation to support our strategy and long-term value creation. Finishing my sections, I'll talk to Treasury Management on slide 35. Since the equity raise earlier this year, we have delivered annualised interest savings of around $67 million, driven by lower debt following the February equity raise, positive free cash flow and a reduced cost of funds. With nearly 70% of drawn debt now on fixed rates and an average hedge tenner of three years, we have strong interest cost certainty. Combined with a lower debt profile post-equity raise, this positions us for substantially reduced interests going forward. Before I hand back to Naomi, I'd like to thank all the operational teams across Ryman's Villages, as well as the development and support teams in Christchurch, Auckland and Melbourne that helped deliver these results. I'll now hand back to Naomi to talk to her outlook.