Ryman has 30 villages now in New Zealand and Australia, having recently opened or has under construction five more, plus four in the consenting phase and a further six in the planning and design phase.
Ryman's bank debt facility has for the first time reached $1billion, with broker expectations that could rise to as much as $1.3billion in coming years.
Last week for its half year Ryman posted operating cash flow gains, up from $157.4million a year ago to $161.2million and underlying profit rose 9% to $76.5million.
Valuation gains lifted reported profit after tax by 41% to $187million, while for the six months Ryman invested a record $272million into new retirement villages.
Craigs Investment Partners broker Peter McIntyre said the half-year result was in line with expectations, but net debt rose against expectations.
''Net debt stepped up more rapidly than our forecast as Ryman's build rate transitions to more working capital-intensive sites in Melbourne and Auckland, which is likely to continue for the next two to three years at least,'' Mr McIntyre said.
While changes in the debt mix were likely, on balance Craigs remained comfortable with its underlying net profit after-tax estimate of $180million for the full year ''which sits bang in the middle'' of Ryman's $175million to $185million guidance range, he said.
Last week Ryman announced it had increased its bank facility limit to $1billion.
''Net debt ended for the first half 2017 higher than our year-end estimate,'' Mr McIntyre said.
Forsyth Barr broker Lyn Howe said Ryman had a stronger first half than Forsyth Barr was expecting, driven by stronger new sales pricing, volumes and margins than the brokerage was forecasting, with its underlying profit of $76.5million, stripping out unrealised development gains of $118.2million, up on Forsyth Barr's $74.7million estimate.
''Operating cash flow was steady at $161.2million, up 2.4% and tracking just under 40% of our full year 2017 forecast,'' Mrs Howe said.
Net debt had increased to $704million, up 43% against a year ago and up 9% since March.
''[However] gearing ratios have only slightly increased given the growth in the business and remain comfortable given the nature of the business,'' Mrs Howe said.
She said the net debt to net debt plus equity ratio was now 32.5%, up from 29.3% a year ago and debt remained all project debt, and funding of land purchases.
Mr McIntyre said while predicting the timing of development, working capital and land settlements was difficult on a period-by-period basis, Craigs would need to further review its estimates, reflecting both the observed increase in debt and Ryman's greater disclosure on its Melbourne build plans.
Mr McIntyre said in response to Craigs' questions on the call, Ryman management had indicated that facility would ''get us most of the way there'' to funding the necessary increase in working capital over the next two to three years.
Ryman management noted the facility has been increased on a regular basis from $120million in 2007.
''It remains unclear what facilities the company believes will be necessary before the build rate in Melbourne becomes self-sustaining, however we estimate debt will exceed $1.1billion at peak debt, which implied a facility of around $1.3billion was available,'' Mr McIntyre said.
Ryman's debt gearing now stood at 32.5%, up from 29.1% in March, he said.
''While towards the top end of the [debt] range we're comfortable with, Ryman would still appear to have sufficient buffer in the event of a market downturn at this point,'' Mr McIntyre said.
Net debt had stepped up $159million during the half, including $40million of land settlements with the remainder reflecting a significant step up in working capital to fund village construction, and also a significant cash outflow to fund the dividend, Mr McIntyre said.
Ryman had further signalled a step up in debt to about $800million by year end, or up another about $100million over the next six months, including $70million for settlement of recent land acquisitions, Mr McIntyre said.
''Ryman's clearly in the midst of a major [capital expenditure] cycle as it ramps up its build rate across both Auckland and Melbourne and at higher value, more capex-intensive, apartment-style sites in those cities,'' Mr McIntyre said.
