Ryman Healthcare Limited (RYM) Earnings Call Transcript & Summary

Good morning, everyone. It's nice to be with you all again, and welcome to Ryman Healthcare's results presentation for the 6 months to September 30, 2021. My name is David Kerr, and I'm the Chair of Ryman Healthcare. And here with me in Christchurch, I have Richard Umbers, our newly appointed Group Chief Executive Officer; and David Bennett, our Group Chief Financial Officer, who many of you will know. On the line from Melbourne is Cameron Holland, the Chief Executive of our Australian business. In a second, I'll hand over to Richard to give an overview of the result, and he will then hand over to David Bennett for further commentary. Dave will pass you over then to Cameron for an update on our progress in Australia. We welcome questions at the end. You can ask questions either online or over the phone. And of course, you can connect with us afterwards. Many of you have appointments made where we can have good one-on-one discussions. For those of you on the phone, our operator will advise when you're free to ask a question. I'd like to start the morning by offering a warm welcome to Richard. We were very pleased to secure his services. His start date was 25th of October, and we've just finished a full week of Board and subcommittee meetings and he's really made a flying start. The Board are delighted with his contribution. He's had the opportunity to visit several of our villages, both in Australia and in New Zealand, meeting residents and both operational and construction team members. He's covered a lot of ground already. Richard will give you more detail in a minute. But from my perspective, it's been a solid first half of the financial year for us despite some major restrictions in our 2 biggest markets, caused by COVID lockdowns. All our teams have continued to work extremely hard to keep everyone safe, and we're well-advanced planning for the months and years ahead in the expectation we will be living with COVID in the broader community. I'd observe that we are now much more knowledgeable about how to manage this virus. And that while the risks of infection continue, we are steadily making the transition from what might be described as a pandemic response to managing this as an endemic threat. There's one particular part of this announcement that I wanted to draw your attention to. The Board has adjusted the dividend policy from a 50% of underlying profit payout to a 30% to 50% range. Clearly, this will enable the retention of capital within the business as we move ahead. And that, in turn, will assist in funding our future growth. We have strong growth plans to deliver the Ryman experience to more communities and remain committed to our investment in critical care infrastructure. As you're aware, we're a company that has and will continue to generate value over the longer term. There's been a major gain in the intrinsic value of our portfolio over the last year, and the company is in a very good position currently in terms of that embedded value that Richard and David will expand on. It's now my pleasure to hand over to and introduce you to Richard.

Thank you, David, and hello, everyone. I look forward to meeting you all in person hopefully sooner rather than later. We've had a solid first half with a lift in underlying profits, driven by continued strong demand for Retirement Living and Aged Care despite the challenges of COVID-19. Our unaudited underlying profit rose 8.5% to $95.9 million. Reported IFRS profit increased 32.5% to $281.5 million. This, of course, includes investment property revaluations. Shareholders will receive an interim dividend of $0.088 per share, unchanged from last year. Total assets rose to $9.85 billion, up 18.1% on September last year. Net assets increased to $3.03 billion, up $579.6 million from a year ago. We had strong cash receipts of $680.5 million, up 40.9% on the corresponding period in the prior year. Total sales transacted rose 48% to $510 million in the first half. Only 1.2% of the group's retirement village portfolio was available for resale as at 30 September. When you consider the extent of the restrictions in our biggest markets, that's Auckland and Melbourne, our team has done an amazing job. Our potential residents are a particularly responsible group of citizens, which makes it challenging for our sales and marketing team to engage effectively and showcase our villages. The gradual easing of COVID-19 restrictions in Victoria changes to migration settings in New Zealand and high vaccination rates in both countries is welcome news. We've started work on 3 new sites during the half at Takapuna in Auckland at Highett and Ringwood East in Melbourne. And this brings the total villages under construction to 15. Another highlight is our recent consent at Park Terrace here in Christchurch. While all construction sites are progressing well, we are experiencing some disruption to supply chain and some upward pressure on construction costs. Fortunately, we have long-standing relationships with many of our contractors and suppliers. We invest for the long term, and these sites will secure a recurring income long into the future. More importantly, they will provide critically needed health infrastructure, beautiful homes and security for thousands of people. A few words about COVID. We're encouraged by the easing of restrictions in Victoria and in New Zealand. The New Zealand government's decision to give many of our workers a pathway to residency was fantastic news. They've worked tirelessly with dedication and loyalty throughout the COVID crisis. We were also delighted with the decision made by the governments on both sides of the Tasman to mandate vaccinations for health care workers. Vaccines are critical to protecting our residents and team. Since April, in fact, we've delivered over 38,000 vaccine doses to the Ryman community, including residents, team members, their families and our contractors. We're delighted to have confirmation that we can now proceed with our Booster program here in New Zealand as well as in Australia. As David mentioned, I've spent my early weeks visiting villages and meeting with residents and team members. The first thing that struck me was the extraordinary commitment to care and the strong bond between our residents and our team members. They're all part of the Ryman community and a strong advocates for what we do. I've been blown away by the professionalism of the teams and the extensive measures in place to keep everyone safe. I feel that we are well prepared for whatever COVID brings next. So in conclusion, we've had a solid half, and we're cautiously optimistic about the months ahead. Before I hand over to our Group CFO, Dave Bennett, I'd like to say a quick thank you for the warm welcome that I have received. I'm delighted to have the chance to lead this very special company and to build on the incredible legacy of the past 37 years. Thank you, and over to you, Dave.

Thanks, Richard, and good morning, everyone. Our reported IFRS profit, which includes unrealized fair value movements on investment property was $281.5 million, an increase of 32.5% in the same period last year. This includes unrealized valuation gains of $178.7 million, an increase of 43.9% or $54.5 million on the same period last year. The lift in valuation reflected the inclusion of 187 new units in the valuation and new pricing assumptions, reflecting recent sales and the strength of the wider housing market, particularly in New Zealand. Our underlying profit of $95.9 million was up 8.5% on a year ago. Growth in underlying profit was driven by a 53.5% lift in resale earnings affecting increased pricing and higher volumes. Demand for our villages is strong with only 101 units or 1.2% of our retirement village portfolio available for resale at the end of the half. While our resale margins lifted to 25% in the half, rising construction costs and the fact that we presold units off plan has resulted in a lower development margin of 20.7%. Total book sales for the half of 703 units was up 21.8% on the same period last year. And this was a great achievement given the restrictions in both Auckland and Victoria. COVID remains a challenge, and we've spent an additional $7.6 million on staffing, security and resident welfare in the period. Our cash receipts from residents were $680.5 million for the half, an increase of 40.9%. Operating cash flows were $301.1 million, an increase of 212% on the same period last year, which was impacted by COVID. We have invested $406 million into our portfolio over the half, and this investing cash flow was spent as follows: $315 million was spent building new villages, $35 million was spent on land to replenish our land bank, $26 million was invested in upgrading our existing villages to further enhance the resident experience and the care we provide and $30 million was invested in technology and systems. This investment has seen our interest-bearing debt increased to $2.43 billion, and our gearing ratio is stable at 44.5%. Our debt affects the investment that we've been making over the last few years. We are now building across 15 sites and have a further 11 sites in our land bank. The high-value nature of our sites mean we anticipate generating $6 billion of capital proceeds from these sites on selldown. We are in a healthy financial position with total assets of $9.85 billion, and this is up 18.1% on a year ago. We have seen our net assets more than double over the last 5 years to over $3 billion, and this shows the value we have created from building new villages and also the revaluation of our existing portfolio. Alongside our new assets doubling over the last 5 years, our gross occupancy advances have grown from $2.2 billion to $4.4 billion, a compound average growth rate of 15%. The resale bank on our portfolio is $1.67 billion. And so these pent-up gains mean we can expect our resale earnings to keep on going even if the housing market was flat from here for several years. And this is because resale volumes will increase as our villages mature. The embedded value, which includes the resale bank and accrued DMF is now $2.21 billion. So thank you very much, and over to you, Cam, in Melbourne.

Thanks, David, and hello from Melbourne. I'd like to start by saying how much I've enjoyed my first 8 months with Ryman, getting to know the wider team, immersing myself in the culture and continuing our growth story here in Australia. We're enjoying our new freedom. We are about to reach 90% vaccination rate over here, and the last remaining restrictions are about to ease. In fact, we spent over 80 days in lockdown in Metropolitan Melbourne during the half. Fortunately, we were able to broadly maintain our construction program, albeit with restrictions and a 2-week stoppage. Like our operations team in New Zealand, our team here has worked incredibly hard to keep everyone safe. We recently named our Aberfeldie Village in honor of running great Raelene Boyle. The village is a stunner, it will feature solar power generation and special rain gardens, and the team has done a fantastic job. We have made good progress at John Flynn in Burwood East and the village is on track to be complete mid next year. We are also on to building our next stage of independent departments at Nellie Melba. We were delighted to announce recently we've bought additional land at Ocean Grove on the Bellarine Peninsula to cope with extra demand. The village has been named in honor of indigenous Australian leader and Oprah star, Deborah Cheetham. Down the road at Highton, our Charles Brownlow Village has also been progressing well and is nearing completion with our care and village centers now open. We have also completed the purchase of an existing apartment block adjacent to our new Essendon Village, which will become our sixth operational village in Australia. This acquisition will improve the overall development plan for our Essendon Village. Following extensive consultation, we have resubmitted our plans for our Mt. Eliza and Mt. Martha Villages. And construction has started at our Highett and Ringwood villages, and we are working on concept plans for our newly purchased Mulgrave site, which we expect to submit for a planning amendment by the end of the year. We continue to see further opportunities to buy suitable sites of land in Victoria that complement our current geographical spread of villages. Overall, the resilience of the team has been amazing over the rest of months. I am proud of how the team has stood up and kept going. So thank you, and back to you, David.

Thanks, Cameron. As I mentioned, Richard made a flying start. You'll also be aware that I've decided that this is an appropriate time for me to step down as Chair and hand over to my colleague, Greg Campbell. I've worked with Greg for a number of years, and he has had a long association with Ryman Healthcare. I have great respect for his skills and experience. I believe that as Chair, he's very well equipped to assist the Board and the management team, and I believe that Greg and Richard skills will be complementary and the timing of my decision will assist them in developing a strong relationship. I will be continuing as a Director, and I remain committed to serving the company. So I'd also like to thank all of you for supporting Ryman over so many years. I'd now like to open up to any questions. And look, I know you're all busy and that many of you have scheduled one-on-one catch-ups with us. So we're going to restrict this to something around a 20-minute slot. So could we maybe have the first caller?

Your first question comes from Stephen Ridgewell with Craigs Investment Partners.

I just wanted to firstly acknowledge David for your significant contribution as Chair for a prolonged period. [indiscernible] Just to Richard, just like [indiscernible] just this morning, but just wondering if you could give us a sense of [indiscernible] kind of some mix the second half result from last year, particularly in the context of restrictions you seem to be facing in the core New Zealand business in the second half. Any kind of comment you could give us on the run rate of resales and new sales that you've been seeing over the last couple of months, any kind of trends to call out there would be helpful.

Stephen, it's not a very good line, and it's possibly hard. So maybe, Richard, if you repeat the question back, but I think the first part of the question was ability to match the second half.

Yes. What I picked up here is I think your question was, given how we've been tracking, obviously, we haven't given guidance in our announcement today, and you're asking how the second half is in practice going to pan out. The first thing I would say in that before I just invite Dave to give you some further details on that is that these are difficult times, and there is a certain unpredictability to the current COVID situation that we have to be mindful of. Clearly, it's impacting the ability of our sales teams to showcase our villages and the premises that we have for sale. Having said that, the result that we delivered in the first half, I have to say, was quite extraordinary, in my view, given the COVID restrictions. So Dave, have you got anything you'd like to add?

Yes. I think just to add to that, Stephen, is -- we are in, I guess, a slightly changing world, and that's why we haven't done the guidance with the changing in the COVID restrictions. But coming into the previous sort of restrictions in Auckland, things were going very well and we gave that update at the AGM. Obviously, our build program is weighted to the second half, and we would expect that to deliver and fine with what we achieved last year. But we are, I guess, cautiously optimistic just as we get used to these new settings and what they may mean to trading over the -- particularly the next sort of month or 2. But I think longer term, we're very optimistic about where things are tracking.

And I think I'd add to that, that we're quite encouraged by the recent changes to the regulations that allow us to emerge from lockdown in both New Zealand and Australia. I think that's quite an encouraging signal. And our vaccination program and the -- in particular, the booster shots, maybe gives some people more confidence perhaps to come out.

And maybe if I could just make a comment that in discussion with our construction team, it's evident that when you lift the lockdown, everything doesn't return to 100% performance on the construction site. It takes quite a while to get it going again and to build momentum. And so there are some challenges. It's not a sort of a one-off experience for our construction teams. So yes, settings have changed, and we have a bit more of an opportunity to complete our construction aspirations, but it's not immediately occurring.

Sorry. Look, I think my line is not so clear. But just if I can -- sorry, what I was really trying to get to is last year you had a very strong second half results. And obviously, you've had these restrictions in the second half. But are you still feeling it's going to be a second half weighted result for the full year?

Well, obviously, I mean, we're not giving guidance to restate that. But Dave, did you want to add anything to that?

Yes. So we are expecting to be a second half-weighted result, and that's on the back of our development program and the second half weighting of the build program. And you can see the level of presales we have. So assuming no further big delays in our construction program and everything else, then yes, we would expect a weighting towards the second half. But we are just mindful of - we are going through a bit of a change. So we just need to be cautious about that.

And of course, the second half historically has also been -- the weighting has been towards the second half in recent years anyway. Any other questions?

Sure. Understand. And just on the cost pressures in construction. Technically, longer-term development margin guidance sort of 20% to 25%. Should we be thinking the development margins are towards the low end of that range in the near term, just given those cost pressures or are you hopeful that you can offset those cost pressures with perhaps higher prices given the relatively thin pricing environment?

Yes. Perhaps Cam might be the best person to answer that in a second. But what I would say is that there are opportunities certainly to increase prices as indeed, we've done so over the course of the past year. But this cost inflation environment that we're experiencing at the moment is something that is industry-wide. It's affecting the input costs, not just in terms of raw materials but also in terms of labor. And it has an unpredictability to it, but at the moment is causing a problem right across the industry. Cam?

Yes. Look, obviously, cost pressures in construction supplies are evident across the whole industry. We are somewhat insulated through long-term supply contracts and existing relationships. I will say, however, that as you mentioned, there are cost pressures on the input side, but we do have some mitigants around the ability to increase prices on the front end as well. So it's one of those things we'll have to continue to monitor and make sure we adjust our approach as we go.

Your next question comes from Bianca Fledderus with UBS.

So first of all, just basically following up on cost pressures. Are you seeing similar sort of pressure in the Melbourne compared to New Zealand? Or is it sort of more in New Zealand? And then I guess your net funding position in Australia as well post standard development, is that similar as well? Is it slightly better due to RAD?

Yes. So I'll jump in. Bianca, so in terms of cost pressure, I think New Zealand probably has gone through a slightly steeper increase initially, but I think Australia is following. I think it's a -- there's a lot of global pressure on supply chain, which is driving a lot of that cost pressure. So I do think both markets are going through that. But I think it's important to remember, both markets have been through house price inflation as well. Obviously, in New Zealand, I think it's sort of around that 30% mark over the last sort of 12, 18 months. Australia, and particularly Melbourne hasn't been quite the same level yet. But as restrictions ease there, we'll be watching the property market closer. So we are mindful of construction. And one of the challenges is also just maintaining that supply because there are shortages in products occurring. So we are looking out further with our sort of ordering process to make sure that we manage that process. And Cam touched on the long-term relationships we have with suppliers being a huge advantage to us in that space. In terms of the capital recycling model, we are obviously doing RADs in New Zealand as well now. So our -- sort of funding model in both New Zealand and Australia is very consistent.

Further questions?

Okay. So I guess, just on the topic of the RADs. Yes, so could you just please give an update on the number of RADs you have in New Zealand and Australia at the moment is the average price?

Yes. So in New Zealand, we are sort of probably averaging around the $400,000 mark, and I think we're up to about $60 million worth of RADs that we've collected from that. So it's been a good steady start, given that it was something we introduced this time last year. We're really pleased with how that rollout's going and see it as a really exciting product and point of difference for us in the market going forward. In Australia, the RADs, they're pretty averaging around the $500,000 to $550,000 mark, and they will continue to lift because as we sell down our new villages and the price at the sort of higher end of the range. I think our RADs at Nellie Melba are $550,000, $650,000 and $750,000. When we first sold down Weary Dunlop, they were $350,000, $450,000 and $545,000. So as those RADs come up in Australia and repriced and resold, we would expect the leverage to increase there as well.

Further question?

Yes. Just last question from me, could you just talk about the dividend payout cuts? And what's sort of the main reason is behind this? Is it for growth? And how much more growth should we expect?

Okay. Well, Bianca, we've given over a number of years, an aspiration to grow the underlying profit at 15% per annum. And so there is still a desire to achieve that on a continuing basis. But the Board are very mindful of our gearing and noting that we are well within our bank covenants, we see our present capital management as being something that we review regularly. And in addition to that, we're quite aware of the disparate views of some of our shareholders when we have one-on-one discussions with them. So we believe that this change in the dividend policy will really support our growth plans, and we'll reinforce to many of our shareholders that, in fact, we are a growth company, and their -- the view of many shareholders is that we are better able to manage that money than they are and that reinvesting it with us is a positive thing. So it is a change in policy. And -- but you'll note that we continue with our dividend today to be $0.088. So that is a fairly small reduction than the actual dividend payout.

Your next question comes from Andrew Steele with Jarden.

The first one is just on the expectations for development deliveries. Clearly, this is a COVID impacted year. So what's your expectation of where the build rate is up for the full year? And how does that impact the, I guess, potential step change in build rate into FY '23, what sort of step change might be reasonable considering the time it takes to get projects up to speed again?

Well, the good news is that we are managing to maintain construction. As you know, in Victoria, although there was a shutdown, the actual closing of the industry actually is not something that took place particularly. So although we had significant delays in the build program, we were able to continue building. And indeed, that's also been true in New Zealand, albeit with some delays. In terms of the actual build rate, we believe that we can, therefore, maintain the rate that we've been tracking to in the past 12 months or so into the future. But obviously, there are certain uncertainties at the moment in the market. David, would you like to add something to that?

Yes. So I think, Andrew, in terms of the build for this year, I think we've previously given the guidance to sort of 900 that you were probably alluding to. That is going to be a stretch. I think it's -- we're going to be in and around similar to last years, which has sort of touched on. But we are -- and that's just some of the projects that get underway quite as quickly as we would have liked due to the restrictions in place with COVID. So that'll slid into next year. It does mean we'll need to reevaluate next year's build, but I think that slippage will just sort of replace other things that may slide out of the year, but we'll give that sort of view maybe at the full year results when we have a bit more certainty around what these new COVID sort of environment looks like. But yes, we are still focused on delivering the beds and units. But I do think it's also worth reminding that beds and units is just one metric. It's actually around the value creation is really important. So what we've seen over the last few years is a shift to building in higher-value locations. And so they are generating higher value returns for us in terms of the sale proceeds that we get from those units. So as much as we've always sort of talked to been units, I do think it would be good to start thinking more around that value creation is a long-term play for us as it represents what we're actually doing as a company.

And I think we should add as well just the impressive performance in terms of the resales in the first half as well, in that it is just interesting that I think there's a shift going on in the market between perhaps the units being sold off plan versus the resales that we're getting through the business at the moment and how that is adding to value and building intrinsic value in the overall balance sheet, so. Further question?

Yes. Just a follow-up on the -- your comment on more from the value of what we're building. Does this mean that you are deemphasizing or pushing back the 1,600 medium-term build rate target?

No, we're not looking to sort of push that back. I just think what we're saying is that 1,600 units can look very different depending on where they're built. So the long-term view on us will be to start to move towards the value creation of that because building villages in Auckland, you don't need to build as many as you do in some other parts of the country to deliver the same value creation for the company longer term. So that's where, I guess, we're trying to signal the move towards.

And in terms of the impact of the difficult operating environment on your operating costs. Is there anything in the OpEx for this period that you would highlight as being unusual? And how do you think about OpEx seasonality in terms of between 1H and 2H this year?

I'm not sure I heard all of that question.

Balance between 1H and 2H was part of the question.

Yes.

Yes. So in terms of the OpEx, Andrew there, we talked about the additional sort of $7.6 million of COVID costs. Obviously, at some point, we would like to think we won't be incurring those, but I think it's pretty optimistic to assume that we won't have additional costs in the second half. But longer term, I would expect some of those to come out of the business. But we are incurring additional OpEx as a result of our response to COVID.

And just on the 1H, 2H seasonality, OpEx. Anything you'd like to say on that?

Seasonality?

Between 1H and 2H.

Yes. No, there's not a huge amount of seasonality in our OpEx between years. Our staffing levels remain the same throughout. So COVID is the biggest impact on that, so.

But it's difficult to imagine that the COVID OpEx will increase in the next -- in H2. It's more likely to decrease than increase.

Okay. That's very clear. And just a last one for me. In terms of the reduction of the dividend payout, you noted David that the Board is mindful of where gearing is and the Board is correctly trying to figure principal movement for dividend payout. But I mean when you think about the future growth run rate ahead of the business and the actions you've announced today, where do you see a comfortable level of gearing or target gearing that allows you to sort of execute on that medium term growth trajectory?

Right. Well, I believe that the change in dividend policy that we've announced today actually will enable us to continue our current planned growth with -- let's suggest something 9% or 10% increased build rate each year and a 15% underlying profit increase. So the adjustment we have made at the present looks to be sufficient. Does that answer your question, Andrew?

Yes. It does, largely. Just to be clear, though, you don't operate to a target gearing spend? They've always done kind of like increasing around that.

Yes, we do. We do have a target. And we have a capital management plan that it's not appropriate for me to share with you. But it's -- we are conscious that our gearing is higher than other parties in the sector. And we're also conscious that we see a very large growth opportunity ahead of us. And so that's really driven us to make this change in the dividend policy.

Yes. I think, Andrew, just with that too that, it's really important to remember, our debt is a function of our growth plans. It is productive working capital debt. And -- So when you're doing a straight gearing, like our landbank example is obviously debt, but there's no representation of that in our NTA, and it is there for future growth. So we do sort of monitor our gearing ratio, we do. But more particularly, we look at the composition of our debt. And I think when you look at the debts and the land bank we have, the sites currently under construction, the proceeds that we expect them to generate, and then you put that on top of our current resale bank and embedded value with the DMF of $2.2 billion, we're in a very strong position from a cash generation perspective right now. So that's how we also look at our debt as forward-looking, how we're going -- what cash are we going to generate as a business.

Your next question comes from Jason Familton with ACC.

Just for David. Lots of things you did. Congratulations on the team here. I'm just a little bit surprised of the timing of the announcement. Can you -- obviously, you had guided folks of leaving last month. Can you talk to the timing of why now those thoughts on to step down as Chief? It's a little bit unusual for a CEO and Chief to go within a month with each other.

Yes. No, I appreciate that, Jason. So I guess that succession planning is a constant debate at the Board table for the Directors. And with the appointment of Greg and his preexisting knowledge of the company and relationship with the company and his very quickly coming up to speed, that was sort of a factor. We then -- obviously, we've welcomed Richard on Board. And there's no doubt that the relationship between the Group Chief Executive and the Chair of the Board is very important. And it just didn't seem particularly useful for me to develop a strong ongoing relationship with Richard when I had already advised the Board that I felt that I had nearly done my dash and I think that no one would dispute I have done my dash. So it's sort of the combination of a desire to assist a good relationship developing between Richard and Greg as our new Chair. And there is nothing lost in that I will continue in the role as a Director. So I acknowledge it's a little unusual to have so much transition in such a short time. But the transition is not as great as it might seem, and that I am continuing to fulfill my role as a Director. And I have a deep emotional relationship with this company. So you can be confident that I'll be displaying my interest on a continuing basis as a Director. Does that answer your question, Jason?

Yes, it does. But can I ask -- also a lot of focus on where you're being invested rather than the number of units, pretty crucial for this business perhaps versus others in the sector. Can you just sort of sentiment, can you talk about what CapEx is going to be in the second half? Is it going to be pretty similar to what you've invested in the first half is $400 million or so, obviously, perhaps plus the COVID? What's the range for CapEx in the second half?

Is your question about capital investments or -- and build program?

Just capital investment [indiscernible]

We have 15 projects in flight at the moment. And we started on site on a further 3 during the half just gone. So there's a very strong emphasis on building for the long-term future of the business and building the instruments, if you like, that will allow us to generate the embedded value in the business in the years to come. And we are absolutely focused on maintaining a build program to deliver on that for the long term. The challenge that we've got is the short-term one of managing through the COVID crisis and the very real impact that has both on our ability to sell, but also the construction program as well. So we're not flagging that we are in any way not committed to what we're delivering. We're just simply flagging that there's some uncertainty over the course of the coming 6 months or in the coming year.

In terms of the capital expenditure, with the number of sites we're working on, Jason, I think it's a safe assumption to say that our investments will be at some of the levels as to what they have been over the last few halves, obviously assuming we can keep building.

Resale was up pretty strong. Can you just talk to what price increases you bring through in units at sort of individual village level? Because clearly, the broader housing markets has been incredibly strong, and I'm pretty sure you won't be in need. Do you?

And I think that's probably one of the most encouraging things that through COVID and through the first half, we were very encouraged by the level of resales that we were able to achieve for the business. And while our building program was impacted, it was a real strength in the business that we were able to generate a return out of the resales. And maybe there is some shift in the balance emerging in the way that we're creating value for the long term. But I just seek to emphasize that ultimately, we want to build the embedded value in the business, and therefore, it's a combination of our ability to deliver not just the individual units, but the right kind of buildings in the right place and also to keep the flywheel turning, if you like, as we also are then able to on-sell and resell those units many times over their full life span. Dave, do you want to add anything?

Yes. So I think in terms of pricing increases, Jason, we have -- we sort of signaled at the AGM, we did one in April, we did another one in June. We have just recently completed another review in October. Overall, they're probably sort of the 15% to 17% range in New Zealand. We've been more cautious, I guess, in Melbourne, just with the additional restrictions they've had there and just waiting to see that the property market holds. But if you look at Slide -- the appendix 13 in our results pack, it still shows that we're very affordable in all markets that we are selling in. So we have followed the market, albeit slowly and/or a bit of a lag, but we still see there's a buffer there. And for me, I guess one of the really key indicators for us is that we're still selling incredibly strongly when it's shown through the level of resale stock we have available at 30 September.

Your next question comes from Aaron Ibbotson with Forsyth Barr.

So I just would like one clarification, if I may, and then 2 questions. So firstly, just on the build rate guidance that I think you mentioned, David, on sort of 9% to 10% build rate growth. Is that sort of from a reset base that you're guiding or indicating towards sort of flat year-on-year? Or is it from the previous sort of [ 91,000 ] ratability guided for the full year. Just sort of a clarification on how we should broadly think about sort of from FY '22, '24 or how you're thinking about it?

I think the question is really off what base -- is that what?

Yes.

So, I think the key to that is the 9% to 10% is our sort of medium- to long-term view. Obviously, we are mindful of lifting our build rates over the last -- in particular, the next sort of couple of years, but we will just do that on a, I guess, we're constantly reviewing that in light of the restrictions and how sales are going, but we are still committed to lifting that. But the 9% to 10% is a more medium to long-term view. That's what we think we need to continue to do long term to continue to deliver a 15% growth in underlying profit. The -- so short term, we'll just assist the market. I guess the benefit we have at the moment is the particularly strong resales bank we have and the expected lift in resale volumes will -- we anticipate getting as well as our villages mature. Over half of our units are less than 7 years old. So they haven't even had maturity yet. So that will underpin a lot of our growth as well in the next few years.

Okay. And then is there any chance you can give some sort of indication, in particular, I guess, in light of what I assume has been slightly higher construction costs driven by COVID as you built out in Australia. Where you're seeing new sales margins coming in, in Australia, or expectations around that relative to your experience in New Zealand? Any chance you can give some early indications and expectations around that?

Yes. I'll perhaps hand that to Cam to comment on the expansion in Australia. Cam?

Yes. So I think, look, overall, I've been really pleased with the progress over the last 6 months. The lockdowns have been quite severe in Australia, obviously, and that's definitely impacted ability to sell, particularly with the high emotional purchase of real estate, getting people in to see the product to actually affect the sale. It can be challenged when they can't get out of their homes. So the fact that we've had sales in the last 6 months has been remarkable, frankly. I think looking forward, I'm cautiously optimistic that once the restrictions are starting to ease this week, that sales process will be somewhat improved, and that we'll see some interest regained in that area. And that overall, those margins will continue to reflect both the increasing property market overall and our ability to actually transact. So look, I'm cautiously optimistic of the next few months will definitely put us in a better position than we've been in the last 6 for sure.

I think we have to see this in the context of a lockdown, which has been in place in Victoria for an awfully long time, and in fact, is a large proportion of the last half as well. And so some of this is all about the unpredictable human reaction to those restrictions being eased. Are people going to reengage with normal life? Are they still going to be cautious? What is their spending going to be like? Is this a time when they're going to make life-changing decisions in terms of where they're going to live in the lifestyle that they're going to take on? We're optimistic based on the pattern that we're seeing, cautiously. But I have to say it's an uncertain time and we haven't seen a situation like this before, of course.

And just for you to touch on that -- around the new sale pricing, there has been a bit of a depth in the pricing we've achieved at a group level. And -- but that's more of a representation of the mix of -- or geographical mix of our units. So obviously, with the restrictions that have been in place in Auckland and Melbourne, we are seeing a large proportion of our sales in the wider New Zealand market. So that represents that dip in pricing as opposed to anything else that we've been able to achieve.

Aaron?

Okay. And final question to, I believe, you David Bennett is just on the sort of $350 million of CapEx that's been sort of allocated to new village CapEx, excluding land. I was just wondering, if I look at your work in progress investment properties at $45 million or so and your new sales cash flow, which I believe was $213 million with 20% of the margins. So I wanted to know if there's any chance you can -- you have a number around how much of that has been allocated to or will they to be independent living units with orders I guess around [ 5% to 6% ] or so. Is that about right?

I think that'd be about right, but it would be useful just a little bit if I can just say you'll just quickly check your calc, Aaron, because it's just a little bit hard to follow that on the phone.

It's not proving particularly good the audio. So you'll forgive us if we are looking at each other, trying to get to the number of the questions that are being asked. But look, maybe if we take one more question and then we wrap up. And I do that acknowledging that we will be over the next 5 or 7 days having lots of one-on-one discussions with you individually. So maybe one more question.

Your next question comes from Alex Prineas with Morningstar.

Most of my questions have been answered. Just one question on the dividend. You stated a new range around the dividend. Should we be assuming for second half dividend would be the same in terms of the percentage of underlying profit that it was in the first half or more along the line with the same in terms of absolute amount. Can you give us some indication?

Not really. Yes, I understand the question. But no, I -- we can't really give you an indication, that we don't give a forecast on dividend. But I think that the dividend will be determined by what the Board feels the company's shape is and how our debt and gearing is at 31 March. So no, I think what we're just signaling today is that the Board seek flexibility, and that's what we're keen to have the change interpreted as.

Yes. I guess maybe if I could just rephrase it in terms of how you came to the percentage proportion that you decided on for the first half? What was the sort of key drivers in that?

Yes. I do understand the question, but no, I'm not in a position to determine what the payout ratio will be in the second half. I don't think that would be helpful. No trouble. No trouble. Look, there are a number of questions online, but we'd happily take those subsequent to this meeting. So look, it's -- I'd like to thank you for your attention. When I look back on the 6 months, it's been another tough 6 months, isn't it? We've got continued demand for what we do, right? That's quite evident. We've seen continued growth, although it's been stymy to some extent by the lockdowns. We've got residents for whom we've been able to absolutely demonstrate that being in a Ryman community is actually a safe haven and that they will be well supported and the quality of life will be attended to. And sort of during that time period of such turbulence, we've continued to see an increase in the intrinsic value of the portfolio and a continued strong culture that Richard is evidenced by coming in with fresh eyes and going to villages. So I feel very positive about the 6 months. And it's just that we do have a level of caution. We, a couple of years ago, would never have imagined this particular pandemic would have come upon us. So I feel very positive about how the company has done in this challenging 6 months, and I am optimistic about the next. So with those sort of closing comments, I'd like to thank you very much for joining us, and we look forward to catching up with you one-on-one over the next week. Thank you very much.