Ryman Healthcare Limited (RYM) Earnings Call Transcript & Summary

[Foreign Language] Good morning, everyone, and welcome to Ryman Healthcare's full year results presentation for the year to March 31, 2021. My name is David Kerr, and I'm the Chairman of Ryman Healthcare. To my right, we have Gordon MacLeod, our Chief Executive; and David Bennett, further down the table, our Chief Financial Officer. So once again, we've opted to make the presentation a virtual event. We find this as best as an approach because it takes the guesswork out of which COVID level we are in. I'm going to give you a brief overview of the year, an update on the COVID situation and impact, Gordy will give you his analysis of the year and growth plans and thoughts on what he sees ahead, and David will then give you some greater financial detail on our financial results. So we welcome questions at the end. You can ask questions either online or over the phone for those of you who've called in, and of course, you can contact us afterwards if there's anything else you'd like to know. You'll see on the right-hand side of your screen, you have the chance to ask a question online. For those of you calling in by phone, our operator will advise you when you're free to ask a question. So after another eventful year for Ryman Healthcare, I'm happy to report, we're still COVID-19 free, and our vaccine rollout program is in full swing. Keeping our villages COVID free, coping with the unexpected lockdowns, adapting to the bubbles, opening and then pausing, keeping the home fires burning as being quite a challenge. It's been a huge team effort, and the Board cannot thank everyone enough for what's been achieved. Our staff have been truly amazing. They have to a person put the welfare of our residents to the fall. Some of them have been a various amounts of PPE for well over a year. And as villages, they've exercised great caution with their own activities and living arrangements and personal health over all of their time. And we're enormously grateful and aware of their extra efforts. It's been one heck of a challenging year. When I first heard of this virus, I feared it was a perfect storm for an operation such as ours. And indeed it was for some operators, which has been very sad to see. But here we are, as I mentioned, COVID free still. Everyone is really attentive to staying that way. So let's look first at the headline numbers. The underlying profit was $224.4 million, which is a decrease of 7.3% compared to the prior year due to the COVID-19 challenges we've experienced. The reported or IFRS profit increased 59.8% to $423.1 million, which is due to property valuation changes and the addition of new units. The property market declined that was widely anticipated this time last year, failed to event rate. We had a much stronger second half. You'll recall we were 15% down at the half year, and full credit to the team for the progress they've achieved over the second half. Shareholders will receive a final dividend of $0.136 per share, taking the total dividend for the year to $0.224 per share. This dividend reflects 50% of our underlying profit. This year's dividend is a milestone. It means we will have paid out more than $1 billion to shareholders since 1999 when we raised $25 million. The record date is June 4, and the dividend will be paid on June 18. Total assets rose 19.5% to $9.17 billion. We're building across 12 sites, up from 4 new sites just 3 years ago, and we'll soon have another 2 underway. Prior to COVID, we were anticipating returning to our 15% medium-term growth target in that prior and current financial years. We are expecting strong growth from Victoria this financial year. The COVID temporarily put [indiscernible]. We couldn't trade for a significant amount of time, but we experienced a significant turnaround in the final quarter of the year in both our markets, and this gives us a lot of cause of optimism about the year ahead, COVID permitting obviously. We've just had the best April sales in our history, so the momentum is continuing. This result also includes our repayment of $14.2 million in wage subsidies, which we clearly qualified for in New Zealand as a result of the COVID lockdown. We repaid it because of the recovery in our key markets and the improved outlook that resulted from the containment of COVID. If we had not paid the subsidy, our underlying profit would have been similar to last year. As a Board, we're constantly aware of our intrinsic purpose as a company and the role that Ryman plays in the communities it operates in as well as the importance of purpose to our staff and many stakeholders. Profit is a critical outcome of identifying our purpose that benefits and is appreciated by society. Our purpose providing beautiful and sustainable homes in the best of care to all the people is greatly valued by the society we operate in. That's why we're call Ryman Healthcare. The name encapsulates our purpose, which means our shareholders trusted us with their investment to get a return on that investment. The competitive returns to shareholders are essential to the company's success, but this is not the purpose. I suggest the purpose continues to the collaboration, the innovation and the commitment and creativity of our teams and all our stakeholders, which is what gives us the momentum for both innovation and growth. I recently read a report relating to what I described is compounding companies. We could describe Ryman as a compounding company on a number of different fronts. Clearly, Ryman has been a compounding investment. We've returned more than $1 billion to shareholders and raised no fresh equity. It's also a company that's demonstrated compounding growth. We've grown by reaching more and more people. We've added 33 villages now since we listed. We have another 16 to build, and we continue to look for more land opportunities. The magnitude of growth is always exciting, but the sustainability of the growth is more important. Sustainability of growth requires retention of our competitive advantage, and this is a constant focus of both the Board and the management of the company. Retaining our competitive advantage means we need to constantly innovate. The first step is always to retain one's current competitive advantage. The next step is for the company to identify the next competitive advantage that will keep us at the front of the sector. And the third step, which is a constant area of focus for this company is to be exploring future competitive advantage. We've been innovating more in the past year than I can remember. COVID meant we were needing to be working in a completely different way and has brought technology to the floor. That pioneering investment we made all those years ago in myRyman, which moved us into the digital space, paid dividends. We're pioneering again with clinical improvements, new resident hosting services and food improvements and in the way we're using new technology to lift the resident experience to a whole new level. Our residents will see this in the next few weeks when we roll out the games at Ryman, coinciding with the 2021 at Tokyo Olympics. Ryman residents across all our villages will use sophisticated technology to participate in the world's first digitally enhanced Olympics for retirees. We're hoping our version of the games will empower our residents to compete, to do things they never thought they could do and demonstrate where technology can take us next. We're not promising gymnastics, but there will be virtual cycling and swimming events, walking relays up mount Fuji, laser powered lawn bowls and a lot more besides. We know our residents are overwhelmingly positive about their lives, and our surveys results during COVID showed how much they appreciate what we do. But we can't rest on our laurels. We will keep going to find the next improvement or innovation that will make their lives yet better. To keep our competitive advantage and continue to innovate, it's important that we are constantly renewing and replacing our team. And we've been through a slow but steady Board renewal process over the past couple of years. In March, we welcomed a new Board member to the table, joining relative newcomers, Paula Jeffs and Anthony Leighs. I was delighted that Greg Campbell could join us recently, and we're lucky to have a skill at the table now. Greg is a well-respected Chief Executive. He's done a job for a number of years leading the team at fertilizer cooperative Ravensdown. Prior to that, he had a number of challenging Chief Executive roles, both here in New Zealand and in Australia, and he's also experienced in governance. He's already having a lot of input at the Board level, and he's got great insights into sustainability issues, which add a valuable new discipline to our governance team. You'll recall from our half year result that we had decided to appoint Chief Executive in Australia for the first time. We were delighted to announce Cameron Holland's appointment. Cameron joined last month, and we're looking forward to his contribution as he develops his understanding of Ryman. Cameron is an experienced business leader. He's worked in the airline and travel industries and also has experience in the aged care sector at a senior level in Australia. As well as running all our Victorian operations, Cameron will be working on our Australian growth strategy, helping our Victorian teams, solidify our activity and enable the continued growth opportunities we see in that state. We also appointed Chris Evans as our Chief Construction Officer. Chris is an engineer who's built a distinguished career in the construction industry in Australia, including 25 years at John Holland. And most recently, he's worked as Chief Assets and Infrastructure Officer at Sydney Airport. So some great appointments there. And so to Gordy. Here's Gordy, and he's man who had Margaret Stoddard in 1994. Gordy's let us know that he's reached a point in his life where he's keen to try something else. He's given 15 years of extraordinary service to Ryman. This is his 29th result. He joined as CFO in January '07 and was promoted to Deputy Chief Executive at the end of 2014 and took over as Chief Executive in June 2017. During his 4 years as Chief Executive, we've opened 10 new villages and increased our market capitalization from $4.2 billion to about $7 billion and returned $450 million in dividends to shareholders, and we achieved our goal of opening 5 new villages in Victoria by 2020. His leadership throughout COVID has been sure-footed and superb. And we've kept more than 12,500 residents and 6,100 staff safe across 2 countries. Gordy has an extraordinary ability to relate very positively to the very many stakeholders in this company. He's shown himself to be an absolutely authentic leader. We are very fortunate that he's committed to stay on until a suitable replacement is found, and he'll be leaving Ryman in a great position. So I'd like to thank him on behalf of the Board and everyone at Ryman. I would add that finding someone to fill his shoes will be challenging. And so there will be many more opportunities to express our gratitude. We respect his decision entirely, of course, and we wish him the best in whatever he does. We'll be conducting an international search. And of course, we'll update shareholders as soon as an appointment is made. A week or so ago, I was lucky enough to receive the Pfizer COVID-19 vaccine. Gordy and I regarded it as our duty to get the vaccine so that we could clearly show our belief in the safety and value of it to the thousands of residents and staff at Ryman. We'd also participated in some evidence-based education sessions over the past few months, encouraging everyone to get the vaccine. We understand it's an important decision, but I didn't have the slightest hesitation about rolling my sleeve up. This mRNA vaccine has a phenomenal track record of efficacy and safety. Like some 200 million other people, I've had no side effects, but I'm reassured that if I come into contact with COVID, my immune system will be ready. We've examined the data every which way, and I think it's one of the greatest advances we've seen in mid of my career. It offers an extraordinary opportunity to safeguard everyone in our communities, and I've been impressed to see how much work the Ryman team has done to educate the residents and staff alike and to answer any queries. The Ryman team actually has trained 50 vaccinators, and they're ready to go. Our aim has been to be able to vaccinate everyone in our community ourselves. And a number of DHBs have taken us up on our offer to protect their resources. Indeed, in a couple of cases, DHBs have asked Ryman to run the vaccination program across all of aged care in their region. That's how valued we are as a local health care partner and indeed how critical our villages have become to the health care infrastructure, talk about purpose. So to summarize the year, we made it. We turned in what I think is a very credible result during the worst pandemic for 100 years. We've kept everyone safe, and we've continued to grow, to innovate and to develop. But most of all, we've proven that our model of care is a critical part of the infrastructure of the communities we serve. The professionalism and clinical excellence of our team during COVID has been extraordinary, means that the safety and security of living in a Ryman Village is more valued by our residents and their families than ever, and we are expecting demand for our services to continue to grow in the years ahead. I'll now hand over to Gordy to talk you through the year. Gordy?

Thank you, David. Well, where to start. In fact, that's an amazing picture of Nellie Melba reception area during the middle of COVID. We had the Australian Defense Force come and visit and look at our infection control procedures. And we've got mark our village manager and staff there, and they just said the team were doing a fantastic job. So it's quite confronting to see that images in that. On my highlight has to be keeping our villages free of COVID. We have more than 18,000 residents and staff across 41 villages and 12 construction sites. So that's a remarkable achievement. This took a huge amount of effort, thought and commitment by the team. We've demonstrated our ability to move nimbly to provide different skills, care and technology in a rapidly changing environment. Leading a team that has been so committed and professional and so consistently has been an absolute privilege. I've said it before, and I'll say it again, I'm absolutely humbled by the dedication and care our team has shown throughout this crisis. I'm delighted that the work is so well recognized by our residents. We've had record survey results throughout. And of course, winning the most trusted brand award 7 times means a word of our success is spread far and wide. And of course, we don't take anything for granted. But as David mentioned, the COVID vaccine program is rolling, and we're encouraging everyone to take part, and the take up is excellent. The other highlight that has been so special for the team is reaching the stretch target of getting those 5 villages open in Victoria by the end of 2020. Our team in Australia is something very special. We have built an extraordinary amount of goodwill over there and word spreads fast. And you can see the residents moving into Nellie Melba, Ocean Grove, John Flynn, Charles Brownlow and Weary Dunlop over the period of the last wee while. In Victoria, there's been half of last year in lock down. They kept everyone safe. The construction team kept on going through multiple COVID-level restrictions, and the sales team came out with a great February and March once the restrictions eased in Victoria. I was delighted to be able to visit for the first time in more than a year a week or so back with David. And it was great to see old friends and colleagues. I also got to visit our new Essendon site, which replaces Coburg as our presence in the north of Melbourne. The Essendon site has medium density and as really a straight swap for the COVID project, which was high-rise and more complex. You can see the [ Mt Eliza ] inside there in the foreground. And you can see the proximity to the Melbourne CBD. It's 1.8-acre site adjacent to Parkland and it's just 10 kilometers from the central district. We've got happy residents and good sales at John Flynn, which is in Burwood East; Charles Brownlow, which is in Geelong; and Ocean Grove and an Aberfeldie village is making great progress. Aberfeldie will be our next village to open stores, our sixth in Victoria. We are hoping to get going at Ringwood East and Highett over the coming months after we have finished the planning endorsement process where both sites have development approval. Businesses bounce back in New Zealand, thanks to a stronger-than-expected housing market, and we are really busy across our 7 sites. We'll be welcoming our first residents at Keith Park and Hobsonville in June, which will be our largest Auckland village to come onstream, our latest Auckland village to come onstream. Our first residents, Miriam Corban in Henderson, and work is well underway on the Village center. James Wattie in Havelock is now very established with townhouse and apartment stage is selling well, and work will start on the care center later in the year. Development of the latest stages continues at William Sanders and Devonport, Murray Halberg in Lynfield and Linda Jones in Hamilton. And gosh, when you look at that slide there, they look fantastic, and they -- it's amazing how much work the team have done. We have received resource consents for new villages in Takapuna and Kohimarama in Auckland and Northwood and Christchurch. In fact, the Karori site was one of the first through the the fast track program with the government, which was a real credit to the team. Takapuna is likely to be the next cab off the rank for construction in New Zealand. We will welcome our first residents at Riccarton Park in Christchurch in a few weeks. It's shaping up to be a beautiful spot on the race course, and interest is galloping away. We've also found a couple of great sites in New Zealand. The Karaka site is a 10-hectare property, just 4 kilometers from the center of Papakura, and we think it has huge potential in a growing part of Auckland. We can build a 10 house style village at the site, which will free up more than 350 homes, easing pressure on the Auckland market. The Cambridge site is 8.56 hectors and are suited to a townhouse-style development. Cambridge is a beautiful Waikato town and has always been popular with retirees from its large catchment, which includes Hamilton. It is a large site, which will provide much-needed care in the area and free up hundreds of homes for families. And if we just look at the couple of photos here, you can see that both regular shape flat sites. So when the construction team saw them, they were pretty happy. So what surprised with everything we have on the go currently. So there's our 12 village in progress there on that picture. They currently will generate $12.8 billion in capital proceeds when they are fully sold down. And after that, recurring income of $222 million -- $220 million. Collectively, those sites will recycle capital, which is always our objective. And if you go back to September 2018, you can see in the column with construction that we only had 4 sites on the go. And the team have put in a massive amount of work to be in the position that we are in to have those 12 sites on the go and also expand the land bank. And if you see how the slide has changed from September '18 to March '21, there you can see 12 sites in construction in a longer land bank. And if we go back one, you can see how the land bank has been increased and the number of sites increased dramatically. And if you take into account our entire land bank, we have 25 villages in the pipeline, which will be worth $5.3 billion and generate recurring income of $420 million after completion. I talked at the half year about getting the flywheel moving again, and it's certainly moving. We finished the final quarter with the highest number of transacted sales we've ever had, and we've been voted most trusted brand for the seventh time. It's also a record IFRS result. The first time we have broken through the $400 million barrier. We had record cash collections in the second half of $693 million and also operating cash flows were another record. So we had a really big second half on the cash collection front. And in the year, when we faced increased operating costs and could not trade or build for a significant amount of time, I'm pleased with where we're at and what the team have achieved. We've reduced our gearing and significantly diversified our debt. We've also increased the tenor of our debt. And importantly, from a trading point of view, we finished the year with resales stock at only 1.4% down on the half year. We showed a significant improvement from where we have been and is a real credit to the sales team. We continue to operate as sustainably as we can, ensuring that we leave the environment and the best shape possible for the generations to come. We were the first retirement operator in New Zealand to join the '22 carbon reduction and measurement program in 2018. And since then, we've been working to reduce our impact through a range of initiatives. We have adopted sustainable design principles and joined the New Zealand Green Building Council, so we can benchmark our work against HomeStart and Green Star schemes. Our construction sites are recycling up to 80% of waste materials, which is a great effort, and we've been working with the Department of Conservation and Predator Free New Zealand to supply hundreds of predator traps manufactured by our residents. Our residents are excited to be part of the effort to make New Zealand predator free by 2050, and there's no shortage of volunteers in our village to help build the traps, and there's a picture of one of them. Fundamentally, our whole model of operating has a sustainable underpinning. Each village we build creates warm, purpose-built homes for older people, where the care they need is on hand. They're energy-efficient and sustainable. Our footprint is much smaller than private homes. Our density is greater. And in most cases, we're also recycling brownfield sites. The traffic each site generates as a fraction of a normal suburb, and our medium density villages prevent urban sprawl. They free up homes and pressured housing markets where demand is outstripping supply. And they fit perfectly with the aim of having people age in place. And of course, our villages are a place where people can age in place with certainty in care. And last but not least, we create thousands of jobs and careers. Technology continues to be a focus. We see huge potential in it to improve the lives of older people. myRyman has been a success in our care centers and came into its own during COVID. We are now looking at ways to roll it out to our independent residents, giving them a digital platform to keep up with Village News and to digitize activities such as health monitoring, medication management, wellness and even everyday activities such as food ordering, outing, bookings and payments. It's early days, but the team is working on a terrific strategy to develop and roll out these innovations and more. And we're also reviewing a nurse practitioner model, which we think will improve access to care and encourage better health outcomes for our independent residents. The model would also recognize the considerable skills of our nurses and provides another career pathway for them as well as easing pressure on our GPs. We're really looking forward to trialing these initiatives and getting feedback from our first residents. On another matter, we've noted the concerns of Dr. John Bonning, President of the Australasian College for Emergency Medicine about the challenges the public health sector faces this winter and has been facing during the summer. Our public hospital system seems to be a breaking point during peak periods, which makes us -- makes what we do even more essential. This, of course, is just the acute care system. When you consider the demand ahead for dementia care alone, which research shows will more than double very soon, you can see where our services are going to be in demand. It's imperative that age care has seen as a critical part of the health care infrastructure in New Zealand and Australia. Now more than ever, it's clear that if we get it wrong, it will create a huge burden on the public system. And we saw the pressures that COVID placed in an already constrained public health system over the last year, and so what we are doing is vital. We've done a lot of work in recent years in developing our leaders, and our Ryman Academy has taken us to a new level. Our aim is to be the employer of choice in the industry, where we are considered to place new staff can come and thrive. Getting everyone home safe remains every day our priority, and we've introduced unsafe, risk management and incident reporting software, which will be rolled out in the coming year. As David mentioned, this is the 29th set of Ryman results either half year or full year that I've been a part of. It's been a real privilege to have my role and my time at Ryman, and I'd like to thank all of our incredible team and residents for all their support over the years and particularly, Simon Challies for choosing me in the first place all those years ago, Kevin Hickman for helping with his selection and David's extreme support as well and that of the Board's. Visiting our villages is always a highlight. It's where you get the nectar and your heart. I always leave each village I visit with an enormous sense of well-being, which comes from seeing the care and attention and sheer hard work that goes on. It just -- well, I just blow you away already. It also comes from the fantastic goodwill of our residents, which forms the basis of our communities. I've had thousands of positive interactions with residents over the years. And as shareholders, you can be assured they love, where they love and what our teams do with them, for them. As David mentioned, I've reached a bit of a crossroads in the last few months. After saying goodbye to 2020, I've found working at this level as all consuming and it means a lot of other things in your life, can or do get neglected. So I've just turned 50, which I know many of you will find hard to believe. That's true. And this milestone made me a fleet. I'll be spending more time with my family and, certainly, my children probably meet the definition of people that might have neglected a bit over the years. And in doing some different things, both at work and also with activities. It will be business as usual though at Ryman until the new person is in the role because I'm committed to being here until the new group Chief Executive starts and is settled. And then it will continue to be business as usual. I know I will leave the company in a great position to grow. It is huge potential and a wonderful purpose to care for older people. And as [ Kevin ] would say, for everything we do to be good enough for mom. Finally, I'd like to thank our shareholders and investors for your support over so many years. Before I hand over, I'd like to make mention of the residents on this slide, it's going to be a transition slide. And we've done -- started something new, which is really exciting over the last few months. The people on those slides are all residents of our villages, and they come in and help us with interviews of village managers. And they just love doing it with us, and they'll sit in with interviews with me and had a huge amount of value and different perspective as an older person and as a resident. And I love the way that our Human Resources team and operations team are always innovating and thinking of a different way to involve residents and do things different. Over to you, Dave.

Thanks, Gordy, and good morning, everyone. I'd just like to start by saying a big thank you to Gordy from both the personal and perspective, but also on behalf of the whole Ryman team. The contribution you've made over the last 15 years, Gordy, has been huge. Your focus on developing the team and finding great Rymanians and maintaining our culture has really set us up amazingly for the future. Your commitment to the company has been on show right throughout, but has been clearly next level throughout COVID. Your drive to protect our staff and our residents was truly amazing. And from a personal perspective, I have learned so much from you over the last 8 years, and I'm grateful for the support and the opportunity you've given me. I know you're not going just yet, but congratulations on what has been a truly amazing contribution to Ryman and the wider sector. All right. So back to some business. So our underlying profit of $224.4 million is a decrease of 7.3% on last year. This was driven by the increased cost of responding to COVID and the impact the lockdowns in New Zealand and Victoria had on our ability to undertake construction and transact units. Having repaid the New Zealand wage subsidy in the second half of the year, the impact of COVID on our underlying profit for the year was a cost of $19.8 million, and this was spent on additional staffing, security and resident welfare. Our reported IFRS profit, which includes the unrealized fair value movements on investment property, was a record $423.1 million, that's an increase of 59.8% on last year. This included unrealized valuation gains of $201.2 million. It compares to an unrealized valuation loss of $70.9 million last year. The lift in the valuation reflected the addition of 503 new units, adjustment made to the valuation in terms of our growth rates and discount rates back to pre-COVID levels and pricing increases to reflect our recent sales. Our total sales for the year of 1,428 units was in line with financial year '20. This was an amazing effort by our sales advisers given the impact of COVID. Going into financial year '21, we were planning and expecting the majority of our growth to come from the Victorian market. It was always impossible to transact with new residents in Melbourne for nearly 6 months. And in Auckland, which is our biggest market in New Zealand, we experienced level 3 lockdowns or above for 20% of the year. And of course, there's always a bit of a lag coming out of the lockdown as well. Seems great for catching out with family and friends, but it's not so good for making life-changing decisions. Our cash receipts from residents was a record $1.18 billion for the year. and that's an increase of 4.1%. And the graph here shows that our second half cash receipts from residents were the strongest we've ever had at $693 million, and up 26.7% in the same period last year. Operating cash flows for the year were $413.1 million, a decrease of 8% on the prior year. And this, again, reflects the impact of COVID on cost and our ability to transact. We finished the year with $397 million of unconditional new sale contracts in place, which will be collected in cash over the next 12 to 18 months. So we have a strong forward order book, which supports cash collections over the year ahead. We have invested a record $844 million into our portfolio over the year. And these investing cash flows were spent as follows: $680 million was spent building new villages, $75 million on land, supporting a land bank of 6,146 units and beds; $42 million was invested in upgrading existing villages to further enhance the resident experience and the care we provide; $2 million on bed licenses in Victoria; and $45 million was invested in a range of projects, including the development of the next stage of system integration and technology to ensure that we continue to enhance the care our clinical staff provide to our residents. This record investment has seen our working capital debt increased to $2.25 billion. We are building across 12 sites and have a further 13 sites in our land bank. The lift in the number of sites we've built across from 4 in 2018 to 12 today requires an upfront capital investment that provides a better diversification from a construction and sales perspective. We expect to recycle capital across the 25 sites in our land bank, and we anticipate generating $5.3 billion of capital proceeds from these sites on sell down. This is why we regard our debt as productive. We invest the bulk of it in new villages, where we recycle capital. And this establishes a growing tail of recurring cash flows. In addition to the $5.3 billion of capital proceeds on initial sell down, if you -- an 8% return from deferred management fees, resale earnings and care, this will generate an additional $420 million of recurring profits each year. Our debt shows the capital efficiency of the business model and debt. Unlike almost all other debt held by other organizations, once we repay it at an individual village, we retain a productive asset, which then generates growing recurring income for decades. Our debt is predominantly a function of the working capital required to create these productive assets or, in other words, new environment communities. They generate growing recurring cash flow for decades. We are in a healthy financial position with total assets of $9.17 billion, up 19.5% on last year. And shareholder equity is lifted from -- by 23% to $2.83 billion. I've already talked about the left -- the valuation of our town and village units gave us. But on top of this, our aged care facility valuations have been completed by CBRE as part of our 2-yearly cycle. The value of these lifted by $195.8 million, and this increase goes directly to our reserves, so it doesn't have a profit impact. The main drivers for this revaluation increase was inclusion of new facilities built over the last 2 years and an increase in CBRE's adopted comparable bid rates, reflecting market forces, but fundamentally, the strong demand for our villages. Occupancy advances have lifted to $4.21 billion, and that shows an increase of nearly $2 billion over the last 4 years. This reflects the development of our new villages, many of which have been built in higher-value areas and generate significant value for the company going forward. Last year, we signaled to the market that we were looking to diversify both the source and tenor of our debt. We have raised NZD 825 million across 3 deep markets with a weighted average debt maturity profile of 9 years. This has included of NZD 150 million retail bond offer, a USD 350 million US private placement and AUD 250 million institutional term loan completed in May this year. All of these issuances were heavily oversubscribed and provide us with a strong platform for future issuances across a number of different markets. This has seen us extend our weighted average debt maturity profile to 5 years, and the source of our debt funding is now 70% bank debt and 30% longer tenor institutional and retail placements. Our total debt facilities are now NZD 2.85 billion. We continue to have very supportive banks and are pleased to welcome our new funding partners. Our syndicate -- funding partners understand our growth plans and strongly support us. The debt to debt plus equity ratio has reduced slightly from September to 44.3%, and the debt to total assets ratio is 24.6%. The positive feedback we received from the soft launch of our RADs, or refundable accumulation deposits, for key beds in Auckland, has seen us roll these RADs ad across all of the villages in New Zealand. RADs give our residents a choice on how to pay the accommodation premium with the full amount of the RAD being returned when the resident vacates the room, and it is consistent with our Victorian model. We're continuing to see the benefit of developments being concentrated in high-value centers. Our development margin for the year is 27%, which is higher than our target range of 20% to 25%. Our occupancy advances from residents accounting $4.21 billion, in the resale bank of gains on this portfolio is $1.15 billion and implies a resale margin of 27%. This reflects the 5% lift in pricing that we introduced in April this year. And if the market continues to hold, there will be further upside. So this resale bank is the amount of resale margin we would crystallize today based on current prices. And these pent-up gains mean we can expect our resale earnings to keep on growing even if the housing market was flat from here for several years because resale volumes increase as villages mature, and we've been conservative on our pricing. Demand remains strong with only 114 units or 1.4% of our portfolio available for resale at the end of the year. This is down from 1.9% at September. So this represents just over 1 month of vacancies. Demand for the care we provide remains very high, and we closed the year with mature occupancy at 97%. The aged care sector, in general, is averaging below 90% in both New Zealand and Australia, so we continue to significantly outperform the market. What triggers our ability to grow is simple. It's our model of recycling capital. Since listing in 1999 and raising $25 million, we have now invested $5.24 billion in our portfolio and paid out a growing dividend stream to shareholders of more than $1.03 billion, but we've never had to raise any new capital. We are in a strong position to continue to grow and bring environment to more and more communities in New Zealand, Victoria and beyond. So thank you very much, and over to you again, David.

Thank you, Dave. Thank you, Gordy. Look, we're now happy to open up for questions. And have we got any callers on the phone in the first instance.

Can you here me?

Yes. Could you just introduce yourself, please?

It's Andrew Steel from Jarden.

Thank you, Andrew. Far away.

And the first one for me is just on your thinking behind the disposal of Coburg? And what do you think for the right-sized land bankers your growth targets?

Yes. So with Coburg and Essendon, which we looked at together, we really felt that the Essendon site was superior. And therefore, we decided that the Coburg site wouldn't be something that we would proceed with anytime soon, and it was too much capital to have tied up here. It also would have required an 11-story retirement village to be built at Coburg. And at this point in time, over the last couple of years, that just wouldn't have been appropriate. So the Essendon site is lower density than that. It's in a, we believe, better location, and that's why we made the decision to essentially swap the sites. In terms of land bank, our aim is to match the build rate -- first of all, our aim is to match the build rate in Victoria as it is in New Zealand, and we will continue to want to increase our build rate in the Australian market by probably around sort of 10% compound growth per annum after that, once we've got to that sort of level. And then the land bank would be growing commensurate with that as our build rate escalates. Normally, we would want probably 4 years headroom of whatever our build target aspirations are.

Andrew, I'd just add about with respect Coburg. It was quite a challenging decision, but I think all credit to the team for actually taking the decision that it wasn't the right piece of land for us at this time, and Essendant is a much better opportunity for us. And so I think sometimes changing your mind is a good sign and actually actioning at is a good thing to do. So all credit to them.

Great. That's very clear. Just the next one for me is on operating cash flow. If I look at that, excluding the impact of cash inflow from development and RAD, this decreased pretty materially year-on-year. And even if I look at just the second half, it's a pretty significant decline. What were the drivers of, I guess, this underlying cash flow deterioration? And were any of the transitory that you would like to call out of other than the obvious COVID sales impact?

I guess, first of all, I'd say we don't -- we never exclude development cash flows from our operating cash flows because they are operating cash flows. We have a significant construction design development team that's very much part of business as usual. And so it would be a bit like excluding the manufacturing arm of Apple from therefore result. It just -- it makes no sense to do that, in my opinion. The operating cash flows, including development cash flows in the second half of $316 million, and they're the highest we've ever had in a half. And the cash receipts from residents in the second half were $693 million, the highest we've ever had in the half. So on the back of the very significant shutdowns that we had, we are -- most of our growth for FY '21 was scheduled to come from Victoria, and it was shut for 6 months, and our second biggest market, which is Auckland, by far, where Auckland was shut for 20% of the period. I would say having the strongest operating cash flows and resident receipts from our ongoing activities, which includes development is an outcome that we are satisfied with.

Okay. Just on the shift in composition of your debt. You've obviously introduced USPP and the ITL and also the retail bond. You've always previously highlighted the great support from your debt syndicate. Reading to the line, should we assume that you've effectively reached the limit of what the syndicate is prepared to lend you in both Australia and New Zealand? Or is one market in particular tapped out?

No. In fact, the opposite. What we've done is we have created further headroom with our banking partners. It just made sense to us that with our growth plans long term and just with good practice, it just made sense for us to diversify our data in a number of ways and particularly because the sources of financing in those 3 areas were able to offer considerably longer tenor, so 9, 10 years plus. And that sort of tenor really isn't available from the banking world. However, what it has done is for very supportive bankers who easily could have been at that level collectively as they know that they have -- we know they have very supportive additional headroom for us in the event that we need it.

Okay. Great. And just a final one on the New Zealand accommodation deposits. How do you expect that these will be treated from a valuation perspective from your -- from a -- I guess an accounting valuation perspective, given that you are in a fit sacrificing care earnings stream for a -- taking on a liability, albeit you do get the time value of money benefit on it.

Yes. You've got with that last, but Andrew, it's a time in over of money that you're receiving that cash to generate the future earnings. And obviously, there's is an interest value I think as well.

Yes, from valuing the assets though, as -- when the valuer looks for that, you have less earnings and they take a capitalization of earnings approach. Does this mean that you effectively take a write-down when people convert to accommodation bonds?

No, you don't because you also get the benefit of grossing that up for the cash you receive much like you do for the retirement village model.

And it's the same approach in Australia, of course because the same model is used there where strong valuations are raised in aged care because of the interest-free cash capital sum and the optionality people have for a rental amount. This is the case here.

Your next question comes from Jeremy Kincaid with UBS. .

I'll start with construction costs fixed price. Obviously, there's anecdotes of supply chain constraints and rising import costs. I was just wondering if you're seeing a similar thing. And if you have hedged your exposure there to some degree and also the difference between the Australia and the New Zealand markets?

Yes. So the New Zealand construction market is obviously under some resource constraint right now. There's been tax incentivization to build new residential homes. And there's been significant announcements around infrastructure build. At a time, where there has been a pullback on immigration settings. So -- and we run a reasonably tight supply market in New Zealand, which I understand that the government might look at some point. So we are expecting some construction inflation in New Zealand over the next sort of 12 to 18 months, Jeremy. Steel, for example, out of China. I understand they've changed some of the tariff arrangements, where it might be up 13%. So construction inflation could be in the region of sort of 5% or something like that or higher. We don't know yet, but we're preparing for it. We are very careful around the supply chain issues. You're seeing on television and hearing about, that's where it's good to have long-standing supplier relationships with nationwide suppliers so that we can be looked after, which is occurring. And then in relation to Melbourne and Victoria, what we're seeing is what we've always seen for a while is that where there is volume and competition in the market, the prices are lower. And I guess it's one of the things that will be looked at in New Zealand.

And then moving to your new debt exposure. So these new providers of debt have differing sort of interest rate and covenant terms. And are you able to provide a bit of color around what those are?

Yes. We don't give a color about the banks -- there's been no additional covenants put in place on us from a lending perspective. That will be -- they've got some of the covenants that the banks have got, not necessarily all of them, but there's no additional covenants in place for us.

Jeremy, one of the interesting things is that with the USPP, it was really well received. These are sophisticated long-term investors and they were particularly positive about our model, and it was oversubscribed. So I think that it's really very comforting to have that experience. It gives us a sense of confidence, yet greater confidence that how we operate is really well regarded.

Yes, I actually notice that Dave with your team that both -- all 3 markets required significant amount of information, provision, questions, good engagement, understanding of the business, support for what we do. And so therefore, what it does, it's another layer of strength around the team's knowledge and experience dealing with different types of funding providers, which is great and really well done to you guys.

At and just one final one on Coburg. Is that a cash loss of $15 million? Or is there a revaluation in there as well?

It's a little bit of noncash, I think, and some of it's cash.

Are you able to break down how much is...

No, the majority of it will be cash. So we haven't taken a valuation uplift on the assets. When we valued it up, we hold our -- we typically hold all of our work in progress and stuff at cost.

So you have to remember, we went through a development of [indiscernible].

Your next question comes from Stephen Ridgewell with Craigs investment partners. .

Just, first of all, I want to congratulate the company on a strong second half and also on behalf of Craigs and hopefully, other investors, too. I wanted to thank Gordon for your huge contribution to Ryman success. I mean I think the market kept when I first met you as CFO about 11 years ago, it was around about $1 billion, and the company is up around $7 billion today. And it's not the only way to measure success, it's certainly have been a remarkable story. So a very successful tenure. And I wish you all the best for the next phase of your journey.

Thanks.

Thanks, Steve. I appreciate that.

Now I should ask a few questions. First of all, on the care business. The sale of orders on care beds in New Zealand, David, you alluded to a good start so far. Are you able to give us a bit of an idea about how much cash you would hope to generate from sale of orders in the New Zealand business and the roughly what time frame that would might come in based on the deal experience?

Yes. Yes. Thanks, Ridge. In terms of, I guess, back on as to where we are at today, we received about $10 million worth of cash into the year ended March 31. And as of today, we're pretty sitting about $22 million. And the average, we're collecting is about $400,000 a bed. So depending on where that goes from a percentage point of view is probably the driver for how much we will get. In Australia, we've historically seen about 50%, 60% uptake on our RADs. So yes, there's plenty of opportunity, but it will just be sort of waiting for that, I guess, to be down. But from the -- if you sort of apply some of those assumptions and then work on maybe 40% of our beds, it could be still $400 million, $500 million worth of cash over time over the next 3 or 4 years?

Just based on the early experience, it sounds like you're still confident basically, assessment tool.

Yes. It's a great product and that it gives our residents choice on how they fund the premium on the room.

And particularly in a low interest rate environment, Stephen, it's a great alternative for people.

And then maybe just on the aged care business. The change in the bed license regime, that's announced in the Australian federal budget a few weeks ago. Can you just talk to any impact you see from Ryman from the package of aged care changes announced? And should we expect any kind of write-offs for money already spent? I mean just on the [indiscernible] $30 million spend in FY '20. So just any impact from those changes that you want to call out?

Yes. Look, it's going to take -- I think it's going to take a few years for them to do that sort of phase out. And at the moment, if we're operating a facility and we've used the -- the license is really like a cost of construction ready. And over the next 2 or 3 years, the licenses, the few extra licenses that we have got, we'll also be using as we open up care facilities in places like Ocean Grove, Geelong, that sort of thing. So -- and also Burwood, of course. And then in time, hopefully, we won't need to buy any more licenses. So it's a real positive. And between then and now, this has really been a cost of the -- essentially a cost of building a care facility that could operate. And the ultimate check, of course, is that all of the aged care assets are carried at valuation. So some of the asset revaluations may decrease potentially if there's been a cost associated with it, but we wouldn't expect an earnings ahead.

We're not carrying another asset just linked to those licenses is just part of our aged care asset.

I think the other thing -- is in terms of the expectations that the Royal Commission have and the Australian federal government have in terms of care minutes that we currently already meet those care minute expectations, which I think is really important to be clear about. And there's quite an emphasis in the budget over there around home care and provision of more home care, which, of course, we have residents in their homes and our villages. And so I think it's net positive all around for us.

And it should make it easier for us to take Ryman to more communities without going to way about getting bed licenses.

Correct. Yes.

That's great. And then just maybe on the land bank. Sorry I don't hear the first question that Andrew was asking, so I apologies if is repeating anything. But I guess, in the last 12 months, we've seen the land bank kind of reduce in terms of undeveloped units. Are we going to go back to land bank growth this year? And if we do, is it going to be a bit of a tilt to perhaps more broad acre sites like the only just out in Cambridge. Are there any other sites that you might perhaps see the listed in debt capital recycle into sort of more broad acer sites?

Yes. Well, what I guess a interesting lead into it, if you look at the 3 sites we have announced today, Essendon, Karaka and Cambridge. Certainly, Karaka and Cambridge are more broad acre site, Stephen. And they'll recycle capital really well. And so they are great acquisitions from the NZ team. In Australia, the Essendon site, one of the appeals, like I said earlier, versus Coburg because Coburg basically had to be built all at once, 11 stories. And we'll be able to do some phasing at Essendon, which is good. The team also, in Victoria, need to search for more land over the course of the next 12 to 18 months. And certainly, within that, we're interested in a range of sites from medium density to also broad acre, so that we have a mix, just like we have here.

Probably the other thing just to make -- to point out, Stephen, is the amount of our sites that have got resource or development approval on them as well. But the sites in our land bank now that we have those approval and we haven't necessarily started. So we've sort of caught up a lot over the last sort of 3 or 4 years in terms of getting sites through that process earlier, and it gives us more chance. So you don't -- it doesn't mean you can be, I guess, slightly more cautious on your land purchases because you've got plenty of opportunities there to tune on other sites.

Yes. The caution is not due to the financial restriction. It's really just getting the right mix of sites in terms of complexity and geography and demographics in the area. So it's the right mix that we aim at.

You'd want to see the Australian as such Victoria land bank increase over time, more relatively than New Zealand perhaps.

Makes sense. And I think Coburg was the right move. Just in terms of the outlook into FY '22, I know there's a lot of potential way markets. But can you give any broad quantification of where you'd be hoping to land for build rate this year across the group?

Yes. For FY '22, I think the build rate will be somewhere between 900,000 beds in units. It's pretty slightly down on what we sort of previously thought, but that's mainly to do with some of our care build, just with the impact of COVID is now going to fall into FY '23. So there'll be a high proportion of our build being retirement village units. And you'll see quite a significant step-up in FY '23, I think, as those casing test come online. We just can't physically get them built time for FY '22?

Your next question comes from Aaron Ibbotson with Forsyth Barr.

Good luck to you, Gordon, with your new ventures. Brave call, hopefully a wise one. I got a few questions. And the first one to you, David. I just wanted to sort of pass out exactly what you were saying here. I think you said you had a $2.8 billion total debt facility, which, if I'm right, compared to $2.4 billion, which was your banking syndicate only. So I just wanted to understand what's included in that $2.8 billion. Is that the $300 million USPP and the retail bonds, you still around $2.4 billion? Or is that institutional term loan. If I deduct it all, I get to $2.1 billion. So basically, I was just trying to understand what is your actual banking syndicate facility now versus the 6 months?

Yes. So the banking facility is around about $2.1 billion. So we have canceled some of that bank facility as part of the diversification. And that's why Gordy touched on earlier. We have additional capacity with our banks going forward if needed.

So basically, we have canceled some bank facility in New Zealand.

Okay. Perfect. And secondly, I just wanted to sort of circle back. I think you mentioned the $275 million of cash collection from new sales at the half year expected. I got it to $260 million, which is not too far off. But I would just wanted to ask for the year ahead. If you look at the value of contracts not settled, it's around the $400 million mark. Is that a reasonable expectation for your cash collection for the next 12 months? It was pretty close last couple of times. Or should we expect it to a bit more or a bit less? I believe you mentioned 12 to 18 months in the presentation.

Yes. I think with that, a couple of things. The Slide 15 mass was just one stage messed by a couple of weeks moving in at William Sanders. Is the difference between those? In terms of the year ahead, not quite all of that sort of $400 million will come through this year. There are some sales that are pushing out into next year, but we'd also expect to sign up new contracts during the next 12 months, so we'd expect to easily achieve that number would be my...

Should be more than that.

Should be way more than that.

Yes. Yes. Over new sales, you saw of occupation rights were $500 million to FY '21 a year. So $400 million position at the end of March 31, '21 of contracts we've got unconditional but not settled. Some will go into the following year. Some will occur during the year and be settled in the year. So yes, $400 million plus, I guess.

And finally, I believe you mentioned just short of $20 million of COVID-related costs in FY '21. How much of that should we think about -- when we think about sort of additional costs in FY '22? Do you expect most of that to reverse or some to reoccur or...

We don't know? We're hoping that -- what I said to David last night was, I really hope that the -- all the PPE we bought just turns out to be unnecessary. And we've got a lot of PPE suppliers in New Zealand, all throughout New Zealand and Australia. We've got really amazing stuff ready to go, and I really hope that it's not needed.

As far as they're not done yet with us, I'm sure.

So we just say, we don't know what the hit to the P&L might be because those items are legitimate -- a lot of those PPE items are legitimately stock until used for a period of time.

And villages and our aged care facilities in Australia are still in PPE.

So even David and I were there 1.5 weeks ago, the Department of Health and aging, they haven't stopped -- they have not allowed people to stop very mask kit in care facilities, even though there was no community transmission at that time. So I think because they lost 655 older people during that July to October period last year with 134 aged care facilities being infected with COVID significantly and very significantly in some cases. The department has taken a very, very approach, understandably. So yes, we've got a lot of stock, which is good.

Your next question comes from Jason Familton with ACC.

First of all, Gordy, thank you very much for your tenure. That's great many years of success, including now as an investor for last 8 years or so. So thank you, and I wish you all the best for the future.

Thank you, Jason.

Secondly, just looking at -- I mean, some great purchase of the new villages at Keith Park and James Wattie and Miriam Corban. Clearly, you've changed the design, which I think looks pretty good. Can you just talk about what impact do you see on some of the older villages in the portfolio? And I'm sort of thinking about as that new stock comes to market, it looks quite different. How do you think about demand for those older villages, price appreciation and potentially the maintenance CapEx you need to spend?

Yes. Look, it's a great question, Jason, and we were just talking about it with the Board a couple of days ago because it's an area that we look at regularly. We've got a very sophisticated and talented group property management team and who led reliably by Julie-Ann Beattie, and they've reported through the operations team. And we've got -- so we've got regional property people throughout the country and in Australia. And the objective we have is we want to have all of our villages to look good all the time. And different villages need different work at different times. We're really conscious of when we do that and what's best for residents. And it's sort of a process of regular evolution, I suppose. Interestingly, the villages that are often incredibly full and so popular. If you, say, take Wellington, we've got a number of well-established villages. We had no resale stock available there at all and the aged care centers were fall at the end of March. If I think about that [indiscernible] when I was 24, Margaret Stoddard still in great demand as it would go the other day, still in great demand. So it's really interesting because whilst some of the older villages aren't the latest, what they do have is they have decades sometimes of loyalty in the community and reputation. So that's equally important. But that doesn't mean that we don't go back and extend community centers, make sure things look beautiful, make sure the gardens look great. And over time, we'll just do what's necessary to refurbish units as they come up to the latest standards. And that's how we approach it.

Yes. Look, we've built up an impressive asset with all those properties, Jason, and there's a constant program of improvement. And we really have to meet the promise that the name Ryman applies to our residents. So there is constant attention to the quality of that asset. And it's visiting older villages, they don't feel older. They have a great sense of vibrancy, and we were -- I just forget where it was recently, but putting in a new cafe because the village nearby had a cafe, and so this village wants a cafe. Fair enough. Cafe has to go in. So maintaining the promise is important.

Okay. Second question, Aaron asked this one for a little while. But Newtown, the more steel factory there, which looks good. Obviously, it's gone from nothing design in your plans, like what other thoughts around that site at the moment?

Sort of interested, my son lives in Newtown. He's a 22-year-old musician. So I go there quite a bit. And I go to cafés and walk around, have a good look. Look, I still believe it's a great location for a retirement village. The prices in Newtown have changed materially since we bought it in a way that is good from a feasibility point of view. And I think that some of the structural engineering innovation has improved a bit as well. So I wouldn't be surprised if we start having a way look at the drawings for that site over the next 12 months.

And then just a fully question with David, and I'm sure it was a good ask. But if I look at Slide 48, which is the composition of debt. You've got $251 million of the company's debt in relation to systems and other assets. But when I look at the balance sheet, I only find $42 million of intangibles and $27 million of inventory assuming that some of the other assets. So I'm just wondering where the other assets are that, that has been so posted against?

That are we sitting as part of our money we've spent on existing villages. So it will be part of your PPE, and then be some -- primarily your PPE...

Additions...

Additions and other [indiscernible] work in those. So are your existing villages.

Okay. Is it a possible [indiscernible] at some stage?

Yes, why wouldn't you check, Jason, the picture on the same page.

Your next question comes from Shane Solly with Harbour Asset.

I just want to start by recognizing the amazing stewardship you provided Gordy. I think you've kept the momentum going in this business through some pretty tough times. So -- and secondly, just to recognize the amazing job the team has done through COVID. Just in terms of understanding the build rate in WIP, can you just talk about -- David, you talked about $900 million for the coming period, but what does it look like in a year or 2's time? And where does that means for the work in progress number?

Yes. So as we've sort of touched on, Shane, there's been a big investment, I guess, over the last couple of years of getting the number of sites we're building across up from 4 to 12 sites that will increase by a couple of the next couple of years, but those sites that we've been working on are also going to start to really generate some strong cash flows as we sell them down and finish some quite high-value villages. So I think it's likely that our build program in FY '23 had quite a sizable lift up to towards that 1,300, 1,400 beds in units. But we'd be looking to fund a lot of that with the sell-down of the villages we've been working across now and also the RADs and other pieces across the group. So yes, I see a lot of that being self-funded.

But I guess the profile of what you're wondering is what is a growth in the build rate look like over, say, the next 3 or 4 years is that we are conscious. We want to get to 1,400, 1,500, 1,600 beds in units per annum to have a balancing between Victoria and New Zealand. The good news is that with Highett and with Ringwood East starting during this calendar year, we will have 7 sites on the go in Victoria and 7 sites on the go in New Zealand. So in terms of sort of actual number of sites on the go, the outputs from those sites will sort of vary a bit. But we want to get to the point where there's a similar sort of output that takes us towards that sort of 1,600 mark. But we don't stop here. The goal is to continue to grow the overall group build rate at about 10% compound annual growth rate per annum. And I suspect there will be more weighted towards the Australian market than the New Zealand market, if that helps.

Yes, that's great. Just a broader point, there's obviously been -- you talked about the regulatory change in Australia. Can you talk about the white paper that's been produced here in New Zealand and what that may or may not mean for Ryman?

Yes. Look, I often think about when Kevin and John founded Ryman. It's fascinating to me that the terms and conditions, which were put in place at that time, which was a 20% deferred management fee spread over a reasonable period of time for independent and serviced and fixed weekly fees for life. People getting paid out after 6 months as a practice. And I got in stopping weekly fees on vacant position, all that sort of stuff. We've been very fortunate that our founders created terms and conditions, which older people look at and talk with us about, and they feel fear on both sides. Whether it be the quantum of the DME for how we charge and that sort of thing. The commissioner for financial capability looked at the whole sector and maybe she wondered about whether some of the other practices that she sees, like charging weekly fees after vacant position, like charging a much higher DMF and that sort of thing and what else that led to raise some questions. But look, when we look at it, we go, okay, is our value proposition strong, as demand for what we do strong, our residents happy and the answer to all those questions is yes. We're constantly looking to improve and innovate. And we have the best terms and conditions that we are aware of in the sector. I'm not sure what things might happen elsewhere in the sector. We can only speak for ourselves, but it's always good for the sector to be challenged. I think the government or any government probably realized what a massive benefit, retirement villages and aged care have been to older people in the last 12 months in New Zealand. It's -- I think it's been quite profound and that's taken a huge burden off the state. And older people have been really happy, and I suspect what's really happened is that we've had extremely volatile positive house price inflation and a small group of people have that's irritated them. But that's going to go away very soon now because treasury is saying it's going to be pretty much 0 growth. And that changes the headlines.

Shane, you could almost describe what happens in aged care as being a bit like a motor around the public hospital system. Without aged care, the public hospital system would drown. And so whilst we have residents telling us how much they are enjoying being residents and whilst we have good demand and we think the best terms and conditions of anyone in the sector, we just press on with keeping our residents happy. That's our goal very much.

That really reinforces the great purpose your business has. And thanks, once again, Gordy. Really appreciate it.

Thank you.

Thanks, Shane.

I'll now hand back to the Ryman Healthcare team.

Okay. So I'm just going to see is there -- right, so we have a question from Raveen Kuhadas saying, has the regulatory environment improved, given our performance during COVID?

The answer to that question is no. That's because the only really fair way to answer it. I think the regulatory environment in Australia and New Zealand understandably from both governments and state governments is that they have to provide a framework for older people where when they're held accountable as politicians that provides all the quality of care and high standards that a consumer would expect. And look, that's where in our clinical governance work we do, David, that's where we just -- that's what we just go to anyway. So we see that regulatory changes that support auto people's health, usually just another way of just verifying for families and so on, good things are being done. And we're not expecting any regulatory change from the white paper of any impact on us in terms of what we do. And aged care in Australia through the Royal Commission, what's really apparent is the very big budget last year. I think everyone agreed was pretty much positive for aged care because there was a very significant budgetary allowance towards. And then New Zealand is today and the budget, there wasn't really much for aged care. And I guess it's something that the sector will need to talk with the government about in due course.

I don't want to sound like a stuck record, but I think that aged care is such a critical part of the total health care activity in a country, given the demographics that exist. That we wait with bated breath what the impact of the health reforms is going to have on aged care because I think it's really critical that aged care receives appropriate support and recognition in this country. Right. Look, I think that might be the last of the questions. So look, thank you very much for joining us. As always, it's good to hear your questions and engage with you, and we look forward to catching up again in some months' time. Thank you very much.

Thanks very much.

Bye-bye.

Thank you.