Dean Hamilton (pictured), said a grow-at-all-costs mentality and a Head Office Christchurch-centric operations were the core of Ryman’s problems, he told the New Zealand Herald.
A year ago the share price was $6.99 and today it is $3.74, a drop of 46%.
Dean Hamilton joined the board of the New Zealand-based continuum of care company in June 2023 and took over as Board Chair on 31 July 2023. He accepted the CEO role last month.
“The DNA of the place was all about 15% growth. It was a kind of a mantra when you walk in. Ultimately, to keep up that level of growth, you take on more risk,” he said.
At its peak, Ryman had 14 villages under construction at once.
By the end of 2022, it had $3 billion in debt on its balance sheet - a mix of bank debt, retail bonds and United States private placement debt.
“It was enormous. And that just ultimately got beyond the capability of the organisation,” Dean said.
Ryman raised $902 million from shareholders last year specifically to advance the pay down and deletion of the US debt portion, with added costs of $152 million including interest. It still had $2.5 billion of bank debt on its books, putting its gearing ratio at 36.2%, above its medium-term target of 30 to 35 per cent.
The company was previously using debt borrowings to pay dividends to shareholders, as it did not have positive operating cash flow to use.
“So, a simple person like myself doing that maths, that doesn’t feel right,” Dean said.
Its operational overhead costs had risen faster than its resident count across its 48 villages in New Zealand and Australia.
Total expenses rose 20% to more than $1 billion in the financial year to the end of March, with costs unrelated to retirement villages (meaning head office) alone up 19%.
“That’s a work in progress; we need to stare at that,” Dean said.
The other glaring issue was former directors deciding on the value of its $12 billion property portfolio internally, using market values as a guide, effectively inflating the value of its assets on paper.
“Directors got comfortable, the auditor got comfortable,” Dean said.
Hamilton and his board had reversed or were still working to reverse, almost all of the glaring issues.
Former CEO Richard Umbers left abruptly along with the former Chief Financial Officer who led the near $1 billion capital raise in 2023.
“That’s half the leadership team,” Hamilton said blankly.
Ryman has suspended dividend payments to investors until at least the 2026 financial year.
“You’ve got to earn it, to pay it, very simply,” he said.
Development has been stopped on a handful of villages, including Ringwood East in Melbourne, with three land sites in New Zealand for sale.
The business is moving out of Christchurch, with all new directors not residing in the South Island city. Hamilton himself was based in Queenstown.
“It had become quite a Christchurch-centric business - directors, management, lawyers, accountants, auditors - and there was a sense that they had become quite insular, and [we questioned] whether that was being as objective as it could be.
“So, we’ve purposely changed it quite significantly.”
The auditor, Deloitte, may be removed, with a tender out for their replacement (or at the very least Deloitte would be forced to audit the business outside of Christchurch, as Hamilton had told it directly).
“I’m not sitting here throwing everybody before me under the bus. There was a lot of good things happening,” Dean said.
“But there’s a point in time ... where it’s time for change, and it was definitely a time for change.”
