Another strong result from Ryman Healthcare came in ahead of market expectations yesterday.  The Company posted an underlying profit for the year ended 31 March 2012 of $84m which is a 17% increase on last years $72m and ahead of consensus of $83m.  Ryman has continued to impress the market by its ability to sustain high earnings growth after increasing underlying profit from around $10m in 2002 to the $84m for the latest year.  This strong growth has led Ryman to be the top performing stock on the NZX over the past decade.

So how has Ryman managed to grow from a small collection of Christchurch retirement villages to a national network of 24 villages while most competitors have struggled? 

The major driver of its success comes from the culture and model implemented by founding shareholders and management John Ryder and Kevin Hickman.  This has carried and improved on by the current management.  Integral to the model are Ryman’s superb design, construction and sales teams.  With these teams working efficiently together Ryman can build and sell village units at a rapid pace and reinvest capital into the next village.  Rymans ability to quickly recycle cash from one village to the next has allowed it to sustain the high earnings growth and return on capital it has achieved over the last decade.

One of the key outcomes of this year’s result was management increasing the target build rate in New Zealand from 550 units to 700 units per year.  The build rate was upgraded to 550 units last year after sitting at 400 units for the previous few years.  Increasing the build rate underpins Rymans ability to continue strong growth in the medium term.  The strong demand for retirement living in New Zealand has allowed Ryman to continue increasing the build rate.

With another good year in the bag the focus has turned to the coming year which presents new challenges and opportunities for Ryman including construction of its first Australian village and achieving the more aggressive build rate.

William Curtayne

Disclosure:  Milford Funds own shares in Ryman Healthcare.