RYM-Ryman

[Basil]

More cockroaches coming out of the woodwork.  Hopefully that's the last of them.

I doubt it.  Just like FBU the cockroaches just keep on coming and coming and coming...  No worries though Ferg, another billion dollar capital raise in due course should sort this one one out and the next few problems as well     All the obvious problems should all be sorted out in a few years time and then all that's left to contend with is just the "minor" issues such as a lack of new stock to sell due to the radical wind-back of new builds, a lack of competitiveness with the cost of new builds after their internal development team has been disestablished, huge village operational cash burn due to legacy issues of residents on super low fixed weekly fees for life and for good measure RYM now have a much more expensive DMF structure that their main competitor SUM who are still on 25%.  Hmmm...so really, there's lots of ongoing headwinds and systemic problems to deal with for the foreseeable future, certainly well into the next decade.

Optimists will say that the tremendous destruction of capital that's transpired in recent years is now all reflected in the current discounted price and the way underlying earnings per share have been completely crushed to almost nothing in recent years is irrelevant as underlying earnings per share is no longer a relevant measurement basis.  I'm definitely not in that camp.

Curious Ferg,  you're an accountant too, what do you think of them no longer using underlying earnings as a measurement yardstick and what do you think Simon Challis would think about that ?

[Cod]

Good report gains 0.80c -- Bad report lose a buck.
You cannot view this attachment.

[Ferg]

Curious Ferg,  you're an accountant too, what do you think of them no longer using underlying earnings as a measurement yardstick and what do you think Simon Challis would think about that?

I'm a chameleon and jack of all trades.....accountant is one of many!  I can't speak for Simon Challis, but I have been giving some thought to the concept of underlying earnings for RV's.  I think it is still relevant, so I am surprised RYM have dispensed with that.  Given the increase in ORA on resale is not in the P&L, we can't get away from using underlying.  The increase in ORA on re-sale is a genuine cash gain to the RV, but I'm struggling to come up with a sensible alternative to underlying profit.

But something no-one has ever touched on AFAIK is the double counting of the DMF portion of the resale gain, or some might say the resale gain portion of the DMF.  There is a sneaky little double count in there but the effect is quite minor (say 30% of 25% of the ORA assuming full occupation term) and the effect is spread over up to 8 years depending on what was sold.  You read it here first. 

[Basil]

I'm a chameleon and jack of all trades.....accountant is one of many!  I can't speak for Simon Challis, but I have been giving some thought to the concept of underlying earnings for RV's.  I think it is still relevant, so I am surprised RYM have dispensed with that.  Given the increase in ORA on resale is not in the P&L, we can't get away from using underlying.  The increase in ORA on re-sale is a genuine cash gain to the RV, but I'm struggling to come up with a sensible alternative to underlying profit.

To move away from this well established reporting methodology is to lose the plot completely in my opinion.  No doubt the current board and CEO with their very limited experience think they know how to reinvent the wheel

[KW]

Another disingenuous example, they are in fact very nice comfortable apartments. I get it that it might not appeal to a current owner of a leafy estate large private and relatively secluded property, especially those who stand to have millions to spend on their retirement accomodation. But not everyone has that perspective, in fact it is probably in the small minority of prospective RYM residents.

This form of RYM bashing is misguided imo, from an investor perspective. There are far more pressing considerations for investors to consider regarding RYM than their apartment builds. All of the listed RV's offer a similar range of living styles, just in varying proportions, so focusing on one aspect of it which adequately suits a certain demographic and price point, and trying to diminish RYM because of it, adds nothing of value to an investor discussion. 

In Christchurch at least, those with money wouldn't be considering either RYM or SUM.  They'd be parked up at the Russley (Antony Gough) or Merivale (Metlifecare) villages.  

The most pressing concern for investors is "why arent people buying RYM units"?  The change in the product mix of units at villages is 100% of utmost importance in answering that question.  To ignore it is folly.  Just like every other consumer company, if you dont have a product that consumers want to buy, you'll soon go out of business.  If your product only appeals to a small number of consumers, then you'll slowly (then suddenly) go broke.  

Everyone I know who is looking at moving into a RV want one that is in an area that is familiar to them.  They dont consider villages on the opposite side of the city, away from everyone and everything that they are used to accessing.  So the quality of the village in the area under consideration is important - because its not like an person who is living on the North Shore is going to move to Papakura because the village is "nicer".  They'll pick whichever one is the nicest in their local area, close to friends and family.  

[Buzz]

I'm a chameleon and jack of all trades.....accountant is one of many!  I can't speak for Simon Challis, but I have been giving some thought to the concept of underlying earnings for RV's.  I think it is still relevant, so I am surprised RYM have dispensed with that.  Given the increase in ORA on resale is not in the P&L, we can't get away from using underlying.  The increase in ORA on re-sale is a genuine cash gain to the RV, but I'm struggling to come up with a sensible alternative to underlying profit.

But something no-one has ever touched on AFAIK is the double counting of the DMF portion of the resale gain, or some might say the resale gain portion of the DMF.  There is a sneaky little double count in there but the effect is quite minor (say 30% of 25% of the ORA assuming full occupation term) and the effect is spread over up to 8 years depending on what was sold.  You read it here first. 

In Businessdesk today (paywalled) Ryman tries to explain why they moved away from underlying profit, to cash flow as the measure of financial performance.

https://businessdesk.co.nz/article/property/retirement-sector-faces-reckoning-over-performance-metrics?utm_source=nzh&utm_medium=referral&utm_campaign=nzh-home

[Basil]

Cash flow is very important, its the lifeblood of business, (which is why I foresee RYM unlikely to be able to pay a dividend anytime soon), but it is not, never has been and never will be the correct way to measure profitability.  I have no confidence at all in RYM's board or management.    Neither does Matt Peek at Kingfish.

[Shareguy]

Some good insider buying.

https://api.nzx.com/public/announcement/455337/attachment/447829/455337-447829.pdf

[Dolcile]

Yeah don't they have to? I think I read something about mandatory ownership in the Governance presentation.

[Basil]

In Businessdesk today (paywalled) Ryman tries to explain why they moved away from underlying profit, to cash flow as the measure of financial performance.

https://businessdesk.co.nz/article/property/retirement-sector-faces-reckoning-over-performance-metrics?utm_source=nzh&utm_medium=referral&utm_campaign=nzh-home

Extract

Margaret Warrington, defended underlying profit, saying it "has been, and remains, a strong indicator of the performance of our business".  "This is a view shared by the majority of the investment community whom we regularly engage. Underlying profit allows for benchmarking performance, understanding how the business grows over time, both through development and from a maturing asset base, and is widely understood."  Warrington said Summerset updated its financial disclosures in 2024 and sought widespread feedback afterwards from analysts and investors.   "The feedback we received was that underlying profit is still a focus, with almost all analysts agreeing it remains a good measure that forms part of a set of financial statements that also include the balance sheet and cash flow statement."

I'm in SUM's camp.  Who are you going to trust here ?  RYM's inexperienced board with their multiplicity of egregious errors, accounting changes and mismanagement over recent years or SUM's highly experienced management and board with their impeccable track record ?  While I have the upmost respect for Arie Dekker's lead approach with this sector, investment professional's in particular are well placed to understand underlying profit as a measurement base in tandem with the cash flow statement and balance sheet.

[Shareguy]

Very interesting agm. Some good questions asked.

Snippet as follows

Question from Jeffrey Hogan and Kathleen Hogan. When is the total Board going to resign. Thank you, Jeffrey, and Kathleen. The share market price is poor. You haven't paid out a dividend. It is time for a completely clean out is for poor performance. You can remuneration regardless. Look, that for your questions. The share price performance has been unacceptable, and I totally acknowledge that. And I do expect shareholders to be frustrated by the loss of value in their shareholdings. There has been substantial change. I joined the Board 2 years ago. with a clear mandate from shareholders to create change and to create improvement. There's been significant change in the Board since then, and you have 5 new directors on the board now, and we'll be replacing a new director in the following 12 months. The majority of that Board has been here for less than 2 years. So I think I would ask for support for this Board to demonstrate that we can rebuild value in the organization

[Basil]

At least shareholders had the courage to speak up and vent their spleen, good on them I reckon.  OCA annual meeting was a very tame affair by comparison.  Might not be next year if the share price is still sixty something cents.

[Shareguy]

Yes good to see some hard questions. Those still left on the board that were involved in the massive value destruction need to do the decent thing and resign.

Hopefully this becomes a good turn around storey. Don't see any insiders buying OCA recently unlike RYM. Good to hear that the market is showing signs of improvement.

[anotherday]

https://businessdesk.co.nz/article/property/ex-rothschild-banker-david-kingston-sees-upside-in-ryman-healthcare

[Shareguy]

https://businessdesk.co.nz/article/property/ex-rothschild-banker-david-kingston-sees-upside-in-ryman-healthcare

Thanks for posting. I agree with David Kingston, will be very surprised if the share price is still languishing around $2.50 this time next year.