Research Team, 22 December 2020

In this video, we take 5 minutes with Gordon MacLeod, CEO, Ryman Healthcare. We discuss resident safety during COVID, demand drivers for Ryman and the sector, their move into Australia, and the best investment advice he has ever been given.

Questions covered include:

  1. Tell us about the Ryman business?
  2. How did Ryman keep residents safe during COVID?
  3. What were some other operational challenges during this time?
  4. What are the key demand drivers creating an increased demand?
  5. What's Ryman offering in Australia that others are not?
  6. Where will your focus be in the future, when acquiring new sites?
  7. What are some key focuses for 2021 and beyond?
  8. What's the best investment advice you've been given?

MS: Gordon, thanks for joining us today. Can you start by telling us a little bit about the Ryman business?

GM: That’s a pleasure, Mo. We look after older people in New Zealand. And we do that through a continuum of care village where people can start with independent living, and then go all the way up to rest home, hospital and dementia level care.

MS: COVID-19’s obviously been a big part of 2020. Can you tell us a little bit about the steps Ryman took to maintain resident safety?

GM: They were huge, and it started right back in January when we started monitoring what was happening in China. And ended up with us actually having to lock down all of our villages in New Zealand and also Victoria, which was an unprecedented step for us. Our staff were wearing masks all the time in villages, in Victoria they even had to wear face shields. It was just a huge infection control effort to try and keep COVID out. And we’ve been really successful, 18,000 people across both countries and 39 sites, and not a case of COVID to this point in time which is a real tribute to the team.

MS: Outside of resident safety, what were some of the operational challenges that you faced through that period?

GM: Just really keeping things going, because everything was different. Interactions with people for sales contracts. Construction sites had to shut down in both countries, or operated very different levels. Pretty much everything changed, our offices weren’t functioning, you name it. So we had to learn how to work remotely, very quickly and work together well as teams. At villages, residents had to get used to a different way of life in the village that we hadn’t had before, and our activities staff in particular became great entertainers on site.

MS: And thinking about the sector more broadly, what are some of the key demand drivers that are seeing increased demand for Ryman?

GM: Well the single biggest thing is the demographic tide. If you think about it in a global sense, it’s taken 200,000 years for there to be 125 million people aged over 80 in the world. And in just 30 years’ time, which is kind of like the last sentence of that book, it’s going to increase to 425 million people. So the aging of the world’s population is profound. It’s very similar type rates of increase in New Zealand and also Victoria. And on top of that of course we build really unique Ryman communities which are in strong demand as well. So it’s both of those things.

MS: And you’ve made the brave move across the ditch in recent years. What is it that the Ryman offering has that maybe some of the incumbents in the Australian market aren’t providing at the moment?

GM: The biggest difference is that we provide a continuum of care village with independent living, assisted living, rest home. Or it’s called high care and low care in Australia, and secure dementia care. And that’s very rare in the Australian market and Victoria where we are. Most people either do nursing homes or retirement villages as a generalisation. The other big difference is our Ryman ‘piece of mind’ differences where we charge a deferred management fee capped at 20 percent for life and quite often it’s much higher in the sector. And things like our weekly fees are fixed for life as well. So there’s a number of key differences both in our terms, and also in what people can expect in terms of village life which make us really quite different in the market.

MS: And obviously thinking about growth and into the future, your land bank is really important for that. So, can you tell us where you’re at in terms of the size of that land bank and maybe, where the focus is going to be in the future when you’re acquiring new sites?

GM: Well there’s 6200 units and beds in our land bank right now. Which equates to 23 sites. About nearly half of those now are in Victoria, which is about right because we want to have a similar build rate in both countries for now. And if we think about Victoria, a big focus is on just expanding the regions we can be in. Because we could probably have as many villages as we have in New Zealand in Victoria right now. So we have to try and find the best sort of sites. And in New Zealand we still continue to see great opportunities as well, and we can obviously be more selective.

MS: And assuming we don’t have any more lockdowns, assuming business as usual, what are some of the key focuses for your business over the next 12 to 24 months?

GM: Well one of the biggest challenges always, is in building enough capability within the management and leadership team, and capacity as well. We’re getting a much bigger more complex business, so we’re investing heavily in leadership training, management training, that sort of thing, to grow the people of the future for Ryman. We want more ‘Rymanians’. And that’s probably the single biggest risk we face is having the right people to execute what we need. The next biggest thing is probably around digital and technology transformation within our villages. We already have a fully digitised inhouse built care system in our care facilities. And the question that we’re thinking about is what other technology can we roll out across our independent living residents? Which is about half of our installed base.

MS: And finally, just thinking about your own investing experience, what’s the best piece of investing advice you’ve been given?

GM: Well my father said to me when I came back from the UK in 2002, “Keep a close eye on that company Ryman Healthcare, you should buy some shares really.” And I listened to Dad very carefully because my Nana had been in a Ryman village and we loved it as a family. But I didn’t buy my first shares till 2007 and I sort of regretted that. But what I’ve learnt on that journey as a personal investor is that often people will say in the very short term, something’s overvalued. So Ryman’s been overvalued at one dollar, two dollars, three dollars, four dollars, five dollars at points in time. But I think the best advice then is just to play the long-term game and try and understand what businesses you like and don’t like, and ones that you particularly have a real affinity for. And that makes investing more fun too, because you follow it more closely.

MS: I think you won’t be alone in wishing you’d bought Ryman shares earlier. I’m sure there’s plenty of people out there thinking the same thing. Gordon, thanks for your time today, very good to catch up.

GM: Thank you very much.