Morning, everyone, welcome to Ryman Healthcare's half year results presentation. My name's David Kerr. I'm Chairman of the Board of Ryman Healthcare. To my right, I have well-known Gordon MacLeod, our Chief Executive, and beyond him, of course, is David Bennett, our Chief Financial Officer. Thanks to everyone who's made it along this morning, and welcome to everyone who's watching live. This morning's format includes an overview of our progress from me, followed by presentations firstly by Gordy, and then by David. Gordy will give you an operational review of the first six months, and David will then give you some greater detail on our financial results. At the end of the presentation, we want to open the session up for questions from the floor, and then following that, we'll also take questions of any callers who are on the conference call line.
We'll bring a microphone around to those of you with a question in the room, in order that you're easily heard. It's also important that people on the webcast can hear you clearly. For those of you listening on the phone conference, the operator will advise you when you can ask a question. We anticipate wrapping up around 9:45 A.M., but that obviously depends on the questions that you bring to the table. Our results today reflect a good start to the year. We're pleased to see the amount of momentum building for the second half. The headline numbers were the unaudited underlying profit rose 13.9% to NZD 197.1 million. The reported or IFRS profit, which includes the unrealized fair value gains on investment property, was NZD 169.5 million, which is 16.3% down from last year. David will give you some more detail on that shortly.
Our underlying profit, however, which reflects our trading and is used to determine our dividend, showed a pleasing increase. We're expecting our full-year underlying profit to be in the range of NZD 223 million to NZD 238 million. The half year dividend has been lifted to NZD 0.108 per share, in line with the growth in the underlying profit, with a payment on December 14, and a record date of December 7. The operating cash flows increased 24.4% to NZD 217.8 million. We have 16 new villages in the pipeline, nine in New Zealand, and seven in Victoria. We're in a strong financial position to support our care ambitions. We passed a significant milestone in the first half, with assets reaching NZD 2.1 billion, up 13.7% on September 2017. There are two main themes that you'll see run through our presentations today.
Firstly, the investment in the business we've undertaken over recent times, and secondly, the momentum we've attained that will underpin our growth over future years. In terms of investment, the fundamental passion we have as a company is to care for our residents as well as we possibly can. As I've said on previous occasions, this is at its heart, a care provision company. We are acutely aware that our employee experience is absolutely critical to the delivery of high-quality care. We've invested extensively in our staff over the last couple of years. Most recently, it was the significant investment in our registered nurses' remuneration at a cost of NZD 5 million this year. Across the aged care sector in New Zealand, there are well over 500 vacancies for registered nurses. The Aged Care Association has said publicly that there is a torrent of registered nurses leaving the sector.
This company has a total of five full-time vacancies for registered nurses. I suggest to you that this reflects the investment we've made, not only with respect to remuneration, but in the experience that our staff have in working for us. In addition, despite the steady increase in demand for aged care services, we're seeing many smaller operators being seriously challenged by the inadequate government funding model that exists for aged residential care. The recent introduction of the Pay Equity Settlement has further challenged many. We've seen some well-respected operators closing purely for financial reasons recently. In terms of the actual work experience of our staff, we're aware that the drivers of staff engagement, in addition to being paid fairly, relate to three discrete areas: purpose, mastery, and autonomy. Staff are engaged when they have a purpose.
They understand their role, they like it, they feel a sense of passion for it. They also have to feel that they are acquiring mastery of the skills that they need for that purpose. They want to be the best at what they do. Finally, they want autonomy. They want to be trusted in their role. Trust is essential in care, and we have a huge amount of trust in what they do. We know we have a highly engaged workforce with a passion for care. They love caring for our residents. We see that in every village, every day. Our staff are wonderful, and they honestly make us proud. Our investment in tools such as My Ryman platform, which is now fully operational in New Zealand, is proving to be very successful. This aims to assist with both mastery and autonomy and the residents' experience.
I visit villages on a regular basis, and I'm always keen to talk with the staff and the residents. Without exception, the staff tell me that the recent further increased levels of functionality that the platform is delivering has really changed their work experience. More time is made available to care because assessments and reports are largely done on the My Ryman app with the resident in their room. The resident of the family then have greater awareness and greater engagement with the care that we're providing, and they also can read the tablet in the family member's room. Furthermore, the regular audits that are undertaken both by the Ryman internal audit team and the Ministry of Health external auditors have been further enabled to a quite significant degree by the My Ryman application. The auditors have been delighted at the comprehensiveness of the tool.
I'm sure this is one of the factors in our achieving four-year certification, which is the gold standard in certification for so many of our villages. In July 2017, we had 15 villages with this level of certification and 14 with three-year certification. As of today, we have 23 villages with four-year certification and seven with three-year certification. What a wonderful effort by all our care staff who've worked together so hard to achieve that result. Investment in our leadership program across the whole company has also been an area of significant focus, and this is a program that will clearly continue in perpetuity. That, of course, is focused on the staff acquiring mastery and greater autonomy. We're committed to developing capable, committed staff because we know that that will translate into a better experience for our residents. The physical environment has also been a further area of investment.
Gordy will talk to you about the new villages, one needs to remember, we are also undertaking a major refurbishment on at least two villages each year. This slide shows you the Rowena Jackson and Malvina Major villages, which have both undergone major refurbishments in recent times. This enables us to deliver on our desire to keep all the villages as contemporary as possible and ensure that the care facilities and the common areas such as the kitchens and the recreational areas are kept up to date and deliver on the expectations that our residents have now of the Ryman brand. As a company that provides care, our learning orientation remains high. We're keen to continue to improve the care provision, this is, of course, underpinned by both a combination of research and innovation.
We recently commissioned the University of Stirling from the U.K. to undertake an audit of the physical spaces and environment that we develop for our residents with dementia. They are the international authorities on care facilities for residents with dementia and cognitive impairment. We held a two-day summit with them, getting them together in one room with our builders, our nurses, our clinicians, architects, property team, and as well as key contractors. From that engagement, we've learned ways in which we can improve our design yet further. We've also engaged a medical practitioner who's a well-regarded researcher. Her skills, combined with the investment that we've made in business intelligence and data collection over recent years, enables extensive comparisons between village operations as diverse as the frequency of falls, the frequency of infections, and the value proposition of some prescribing by my medical colleagues.
I can see some really exciting opportunities start to unfold with scope for not only improving what's being delivered now but also some proactive observational research on such critical matters as our residents' quality of life while living in the different parts of the villages. The village experience is important in many ways, and we're acutely aware that social isolation and loneliness is a potent cause of poor health in our society. It's even been regarded as being as negative to your health status as an individual smoking 15 cigarettes per day. The final area of investment, which in some ways leads me to comment on the momentum of the company, is in the formation of a specific development and construction subcommittee of the board. This obviously has board members contributing, but also external expert advice is being obtained.
Anthony Leighs, who recently joined the board, is the founder and managing director of the well-respected Christchurch commercial building company, Leighs Construction. He's proven himself to be an excellent appointment. He has extensive experience in this arena, and he's undertaken leadership of this subcommittee. It's been really great to see the executive leaders of our areas in construction, design, and development embrace the value proposition of such a committee as we look to double our build rate over the next few years. If we just reflect for a moment, Ryman, in many ways, is actually four quite significant companies under one umbrella. We are a care provision company. We're a property development and construction company, a property management company, and a real estate sales company.
The direction we're moving to as a board is to ensure that these different areas receive greater focus by subcommittees of the board, who obviously then would report to the board. This hopefully enables the directors of the company to keep their focus on deep dives into specific areas of challenge and to keep themselves focused on the medium and long-term forward planning and value creation. Coming back to the matter of momentum, I think it's probably worth noting that we aren't in pursuit of growth purely for growth's sake. The driver for us with respect to growth is to deliver what we believe is a high-quality experience in residential living and care to as many older citizens as possible. Our purpose is what drives us rather than a pure desire for growth.
As you'll see from our land bank across New Zealand and Australia, and particularly in Victoria, 50% of our planned build will continue to be care related. The momentum the company has built up is very significant. We've talked previously about five villages opening by 2020 in Victoria, and this target continues to be realistic. We've recently acquired a further site in Victoria, taking the total sites we own in that state now to nine. Suffice to say, the demographics, which I'm sure you all understand well, will continue to deliver a strong flow of residents to this sector. The first slide shows you the current demographics, which have driven our growth to date. This next slide shows you the growth opportunity that exists over the next 40 years. These demographics and our unique village offering underpin our medium-term target, which remains to double our underlying profit every five years.
That works out to be on average 15% growth per annum. Naturally, given there's always variability in the short term and given the size of the developments that we undertake, this will vary from year to year. It's now my pleasure to hand over to Gordy, and thank you for listening.
Thanks, David. Good morning, everyone. Thanks for joining us on the call today. As David said, it's been another good six months. The two standouts for me really have been the progress that we've made on care, which David's covered off really well, and also the level of momentum that we're achieving in the business. First, I'd like to start off by talking about the safety of our people. In the month of September, we closed 10 construction sites for the day and had representatives from all our offices, villages, for Safer Together, which was a one-day Ryman safety summit. It was the first time we've ever done something like this.
We got 350 people together in one room to talk about safety. This included leaders from our villages and construction sites in New Zealand and Australia, as well as subcontractors and people in roles such as gardening and maintenance. I sort of think of it like you can send out all the safety memos that you like. People need to hear safety messages, I think, from the horse's mouth, the people who lead the business. I made it really clear that our staff have my express permission to stop what they are doing if they don't feel safe doing it, to stop others doing unsafe things, and to speak up if they weren't being supported to work safely. Everyone at Ryman should feel confident to do what they need to do to keep themselves and their people safe.
We don't want anyone working for Ryman or with Ryman who doesn't take safety seriously. You may think that some of this should always be a given, but when you're dealing with the complexity of the human condition, I can tell you that it requires a lot of hard work actually. We've had great feedback from the team, as you can see from the slide, we set the day up so that it was interactive, not just a series of lectures. In fact, just a couple of images there, the top left-hand side, we set up some driving modules so that people could see what it's like to experience driving when they're tired and how much that impairs your performance. On the bottom left-hand side there in the hoist, that's Tom Brownrigg, he's our Chief Construction Officer.
It's a real enlightening for him to be in a resident hoist. He said to us afterwards he was amazed how vulnerable he felt in that position. It all helps to understand the sort of point of view and empathy for the resident as well. We've also achieved a lot of momentum in our leadership development program. More than 280 leaders have completed development sessions by the end of this year, and our senior leaders have been actively participating in leadership coaching sessions. I've been getting great feedback on the investment that we're making in our leaders right across the business. We've also stepped up our apprenticeship scheme, which we are running in partnership with the Building and Construction ITO. It's no secret that New Zealand has not trained enough skilled builders for a long time.
We now have 12 construction apprentices in training, and we're constantly on the lookout for talented tradespeople to foster and develop into the Rymanians of tomorrow. There's a pic of Jamie and Rory, who I met a few weeks ago. They're loving their job. We opened a new office in Central Melbourne, actually on St. Kilda Road, and we've gone from three staff in Melbourne two years ago to 16 staff today. We have recruited right across the board from community relations, development, construction, marketing, through to operations and sales management. Our design and development teams have also grown in the first half, and the construction design team in our Auckland office is now well established. I saw them yesterday, and they had a ton of work up on their whiteboard, so that's good.
Four years ago, Ryman had a total of 16 staff dedicated to development and design. Today, we have a team of 60, including specialist teams concentrating on design concepts, construction design, visual design, and a new team dedicated to interiors. Developing villages is a long-term game. It takes time to find the right site, complete concept design work, get consent, and then complete all the detail building design consent work and agree all the pre-start conditions with local councils, and that's just before construction even gets underway. We've needed to make this upfront investment over the last couple of years because we're going to be doubling our build rate as we ramp up in Victoria. We need to build the teams now to be able to do that, and it takes time to get the output from more resource in this area.
I tell you, we will reap the benefit over the next three to four years. Momentum is really building out in Victoria. We've just bought our ninth site at Ocean Grove, which is a lovely seaside town about a 90-minute drive from Melbourne CBD and 30 minutes from Geelong. The site already has development approval for a retirement village and aged care, and it's in a great location. Ocean Grove is an established and thriving community with strong demand for retirement living options. There's a really nice resale precinct just down the road. Town center's very nice actually. The 3.7 hectare site will allow us to build a traditional townhouse style village in the area. I was doing some highly technical market research last week by having a couple of flat whites in the center of Ocean Grove, including at the Driftwood Cafe, which was very nice.
I can tell you there were lots of very friendly locals and a lot of older people and just had a great feel. I think that's going to go really well. Look, it's a beautiful four-hour drive from Ocean Grove, taking in our sites in Melbourne and across to our new sites in Mount Eliza and down to Mount Martha. Now, it might not look it, but in that distance is a population roughly the size of New Zealand. When I did it the other day, it made me realize why Melbourne is noted as being one of the fastest growing cities in the developed world. It's also regarded as one of the world's most livable cities. If you have a look at the map, you can see what a great spread of sites we have now.
From Ocean Grove in Geelong, back through the center of Melbourne, across through the southeastern suburbs, and also down to the Mornington Peninsula. For sort of true Ryman fans, can be the new Melbourne drive perhaps. The development team has done a really great job of strategically building clusters of sites. You can see the clusters of two or three in different areas. We can develop our brand in distinct markets and with different styles of villages. You can tell from the map that our construction team will be able to get a roll on with new sites in a much smaller geographic setting in a way that is quite different to how we've had to work in New Zealand over the last 34 years, where we've had to go from Invercargill to Whangarei, Gisborne, Waitangi, you name it.
Just a quick reminder, we bought a site at Aberfeldie in July, and you can see its proximity to central Melbourne. Development applications are due to be lodged in the next few months for this site and for Mount Martha and Mount Eliza. We have received development approvals from Burwood East and also the Coburg sites in Melbourne, and we're poised to start work as soon as we can once final pre-start conditions are confirmed by the councils. There's actually quite a lot to do to get underway on sites in Melbourne. We're also in advanced discussions with the city council about our new village at Geelong. You can see an artist's impression there. I was in Geelong as well a couple of weeks ago, and it's actually really beautiful for those of you who haven't been.
Sort of lovely seaside sort of frontage, a lovely old fashioned pier, nice sort of central shopping, and, yeah, it looks really nice there. Our site is a great location as well. There's also a significant milestone in the first half to welcome our first residents at Nellie Melba, which is our second village in Melbourne. As you can see from the picture, the village looks amazing. I appreciate there's been a significant gap between finishing our first village in Melbourne and opening our second village. We have learned a lot, and we're still learning a lot. We're learning new stuff every month, actually, it's really good. We're really building momentum in Victoria. To sum up, we've got two villages open, two with work about to start, and we're about to submit another three development applications in the next two to three months.
We're also hoping for a positive outcome with Geelong, maybe December, January. The feedback we get on the ground from residents and potential residents is that they love the Ryman difference, and it's becoming better known. They like our fair terms, they like our lower DMF, they like our continuum of care, they like our fixed weekly fees, they like the way we do activities, and they like the feel of the village. We're starting to really develop that. The fact that we can look after people for the rest of their days as their health needs change, I think is becoming increasingly important for the older cohort of people. We're building the same sort of trust in our brand in Victoria that we've worked hard to develop in New Zealand over the last 34 years. It's quite interesting.
A lot of people in Melbourne, a lot of prospects, they do their due diligence, and they do actually know people in New Zealand, and they ask, and they get good feedback from people who have been at or live at villages or work at villages. That aspect is actually working quite well for us. The 80+ population of people in Victoria is going to grow to more than one million over the next 35 years or so. You can see why Victoria is an exciting opportunity where we can bring Ryman to more and more communities. We're just as busy in New Zealand. We've just received in the last, when was it? Two days ago. We've just received consent for our new Lincoln Road village in West Auckland. There she goes there. We haven't built it yet though.
That's just a really good picture. I thought we had built it actually. The first phase of the village will have 200 care beds and assisted living apartments and 130 independent living units. We're also pleased to be back underway at River Road in Hamilton. We attracted excellent interest at our public meetings in September. You can just see sort of in the foreground there, in about the middle of that photo, the Waikato River, and it runs back along sort of diagonally to the right there. It's a really beautiful site. We had a four-month delay, though, unfortunately, which we advised shareholders of at our AGM because we had found pre-European bone artifacts. We've had to work with local iwi and Heritage New Zealand, and in the last four months, we've now to recommence work. That's good.
Next week, we're going to welcome our first residents at, we still call it Tropicana, but the official marketing name is Lynfield. Tropicana being Tropicana Drive on the way to the Bill Subritzky estate. We've had great interest from locals actually. There was a really nice subdivision built there about 40, 50 years ago. A lot of those residents are going to be moving into the village. We've heard a lot of good stories about them. We're looking forward to that happening. You can see the sort of views actually that in the setting of that village, it's beautiful. Our Devonport site is not far behind, and there is Hansel and Gretel, which is the name of the two cranes. Matt Hutchinson, our project manager, couldn't resist naming them. They can lift six tons, I'm told, at a diameter radius of 60 meters.
Yeah, the construction team get pretty excited about those sort of stats. You can see the views are going to look over to Central Auckland. Consents are also due to be lodged in the next few months for Karori, Havelock North and Hobsonville. We have a pipeline of nine \ villages in New Zealand with work underway at three. Overall, across Victoria and New Zealand, we have 16 new villages in the pipeline, six of which are either underway or just about to get underway. The development team, I can assure you, is always looking for new opportunities, and we have a number of sites under due diligence as well, which we haven't talked about today. It's also important that we give back in ways that are meaningful. Our charity partner this year is the Stroke Foundation of New Zealand.
The Foundation wanted to put a special stroke van on the road so that it could extend its blood pressure check program. We bought a van for them so they could get going, and the Foundation is well on its way to completing an additional 50,000 blood pressure checks in its first year. Elevated blood pressure can have significant consequences, and having it identified and treated early on can help prevent strokes. The van is going to shopping malls, A&P Shows, building sites, and is calling on all of our villages. In fact, my brother sent me a text photo of it from the A&P Show in Christchurch last week when he was getting his done. We're delighted to be able to help improve the health of thousands of New Zealanders in this way.
In October, Prime Minister Jacinda Ardern presented Japanese inventor Takanori Shibata with the 2018 Ryman Prize. The prize is our annual award for the best work anywhere in the world to enhance the life of older people. We're also really excited about partnering with the Antarctic Heritage Trust, and we're going to be taking people on a virtual reality tour of Sir Edmund Hillary's Scott Base Hut in the ice around our villages and also around airports and major features of New Zealand. We're going to bring the ice to a whole bunch of people, including me, who probably would never otherwise get there in their life. In Melbourne, we've sponsored exhibitions of the art of Jack Chalker at the Caulfield RSL and the Heidelberg Rehabilitation Hospital. His artwork is on the top right-hand side.
Jack was a prisoner on the Death Railway with Sir Weary Dunlop during World War II. He risked his life to record as a prisoner of war, the work and the work of Weary that he did to keep men alive. His art, amazingly, was also used as evidence at the Tokyo War Crimes Tribunal. In that painting, you can see Weary Dunlop on the far right doing surgical work. It's wonderful to be able to support things like that pay tribute to people that we are privileged to use names of for our villages, including Sir Edmund Hillary as well. We're also delighted to be the principal sponsor of the Royal New Zealand Ballet season of "The Nutcracker," which is on now. That is a stunning photo, isn't it?
You might think it's unusual, I guess, for me to be talking about this sort of stuff at an interim results presentation, but we see it as a very important part of what we do. We actually put a lot of effort into these sort of activities. We like to contribute and give back to society, and it's a very important part of the company's DNA going right back to the founders. What's this all about really? Why do our staff go to such amazing lengths? Well, a great example from my recent travels is a lady called Margaret Dorner, whose husband was in our dementia or special care unit at Essie Summers in Christchurch. Margaret is an artist, and she decided to help her husband and the other residents suffering from dementia by running art classes as a form of therapy.
You can see Margaret in the picture with Rosemary Deane, who is the village manager, and me. She's teamed up with Lavinia, the activities coordinator in the special care unit, who's top left-hand side there. This year was their third year of running an exhibition of the residents' art within the dementia care unit. They run a special exhibition at nighttime on a Friday night, residents and families and friends, they all come along nicely dressed up like a proper art exhibition, which it is, residents just love the classes. Their families can't believe what they've achieved. It takes a huge amount of patience, we've made their art into a calendar to raise money for the Stroke Foundation.
When you look at some of the artwork, most of that artwork is done within about one hour because people struggle to recall painting techniques for the next class, and you sort of have to start again. When I think about what we do every day, and I think about the 24/7 nature of what we do in visiting villages and that sort of thing, it makes me very proud to work for Ryman. It's the sort of thing that also makes me very determined to bring what we do to as many communities as we can in New Zealand and Victoria. That's like what David said. It's not about growth for growth's sake. It's because we want people to have the same sort of opportunities as they enjoy right now at our villages and many other communities.
That's why I think you, as shareholders, can feel proud of your investment in Ryman. We're successful because we do good things for people. That's all from me at the moment. We've had a good first half with a lot going on. We're seeing good momentum that will continue to grow in the second half as we gear up for the years ahead. I'm about to hand over to David Bennett, our CFO. Just have a look at that picture there, Bert Sutcliffe at night. When I was there for the opening of our Crowe block, probably about two weeks ago, I spoke with Graham, and he had supplied an amazing picture from his apartment of Bert Sutcliffe at night. I just think it's one of those photos that's really cool. I thought I'd leave that up there while Dave comes up. Thank you.
Thank you, Gordy, and good morning, everyone. It's time for a few numbers. Our underlying profit of NZD 97.1 million is an increase of 13.9% on last year, with the big driver being new sale gains, which were up 110%. Reported or IFRS profit, which includes unrealized fair value gains on investment property, was NZD 169.5 million, NZD 33.1 million less than last year. The reason for this drop was that last year's first half result was boosted by changes to the independent valuation assumptions. As I explained this time last year, CBRE, who are our independent valuers, lifted our five-year-plus long-term growth rates from 2.8% to 3.4%, which is an increase of 0.6%.
When you think about it, with occupancy advances of close to NZD 3 billion and the compound impact of this change, this contributed approximately NZD 70 million to the unrealized valuation uplift in the first half last year. It's important everyone realizes that this was a one-off, and if you exclude this one-off change, our unrealized valuation gain has actually increased from NZD 48 million last year to NZD 73 million this year. The valuation gain of NZD 73 million this half is due to 168 new units and also a 4% uplift in pricing, reflecting strong demand for our village offering. Our operating cash flows were NZD 218 million in the half, and that's up 24.4% as we benefited from cash collections at some very high-value sites over the half. In fact, strong cash flows have continued into the second half.
We're actually expecting approximately NZD 50 million of settlements over the next two weeks. This shows the value of those sites completing, particularly Lynfield and Nellie Melba stages. These strong operating cash flows have allowed us to invest a record NZD 304 million in the half in new villages and in our care offering. Investment cash flows were spent as follows: NZD 208 million building new villages, NZD 48 million on land with a land bank of beds and units lifting 8%, NZD 28 million was invested in upgrading existing villages, and NZD 20 million on a range of projects, which include continued investment in our IT infrastructure, new care hubs, and further development of My Ryman. With such major investment during the half, our working capital debt has increased to NZD 1.2 billion.
We regard this as productive debt as we invest the bulk of it in new villages where we recycle capital and which establishes a growing tail of recurring cash flows. We have a very strong financial position with total assets of NZD 6.2 billion, and shareholder equity has lifted by 13.7% to NZD 2.1 billion compared to this time last year. We continue to have very supportive banking partners. They understand our growth plans and strongly support us. Our debt-to-debt-plus-equity ratio is 37%, up by 2% from March this year. We've also increased our bank facility to NZD 1.5 billion, and over 80% of this has tenure of over three or more years. In the half, our gross development margin was 27%, which is higher than our target range of 20%-25%.
This is a direct result of the new Melbourne village in Victoria, which is a very high margin site for us. We expect our full-year margin to be back within our normal range of 20%-25%. The resale bank of gains still to come currently stands at NZD 855 million. These pent-up gains mean we can expect our resale earnings to keep growing even if the housing market was flat for several years because volumes increase as villages mature. The deferred management fees also reset to new price levels with each resale, creating a compound effect. In fact, when our current portfolio matures, we would expect annualized resale volumes of approximately 1,300 units and margin of approximately NZD 150 million, and the deferred management fees would lift to about NZD 135 million per year.
What this means is that we can expect our profits to lift by approximately NZD 100 million based on what we have already built. Demand remains strong for our offering as well, with only 78 units or 1.2% of our portfolio available for resale at the end of September. This represents basically one month's vacancies. We also have our highest ever value of pre-sales of NZD 214 million at our new villages. Our care demand was also strong because we averaged 97% for the half at our established villages, which is a great result. If you put that in perspective, the aged care sector in general is averaging around 88%. The team are doing a great job, and the demand is very strong. Affordability of our units is also something we monitor very closely.
Our residents in Auckland and Melbourne free up significant amounts of capital when they move into a Ryman village. In fact, property prices in Auckland would have to drop 20% before the residents stop freeing up capital, and 34% in Melbourne. We also have the largest serviced apartment portfolio in the sector, with approximately 30% of our retirement village unit portfolio being serviced apartment, which are priced even lower and are purely needs-based decisions. What triggers our ability to grow is simple, a model of recycling capital for each village. Since listing in 1999 and raising NZD 25 million, we have now invested NZD 3.4 billion in our portfolio and paid out a growing dividend stream to shareholders of more than NZD 740 million, we've never had to raise any new capital.
Finally, as David said, the outlook for the full year is an underlying profit range of NZD 223 million to NZD 238 million. This would be growth of between 10% and 17%. Our expectation for the full year has been impacted by the two things we told you about at our annual meeting in July. Firstly, we had the unexpected four-month delay at Hamilton and of course, our pay increase for nurses, which will cost us NZD 5 million this year. We're expecting our build rate to be 800 beds and units for the year, which is about 50% up on last year. This 800 includes 300 aged care beds and 50 apartments at Nellie Melba, where we are rebuilding our figure apartment block. In terms of the full year 2020, we expect the build rate to lift to over 900 subject to villages receiving the necessary consents.
Thank you very much, and I'll now hand back over to David. Thank you.
Look, thank you, Gordon MacLeod and David Bennett. Those are great presentations. The observant amongst you will have noticed that the slide showing the operating cash flow, those lovely meaty operating cash flows out to the side was some steak. You'll also notice that the underlying profit growth slide up the side was some desserts, some sweet foods. Those are examples of the sorts of meals that our residents are now having. Look, I'd like to open the session up for questions from the floor, and then following that, we'll take questions from any callers who are on the conference line. We'll bring a microphone round to you with those with a question in the room so that you're heard, as I said at the beginning, and so that people on the webcast can hear you clearly.
For those of you listening on the phone conference, the operator will advise you when you can ask a question. Let's have some questions, please.
Thanks. The first one on the aged care business for May. At the AGM, you flagged an increase in nurse wages and no doubt well deserved. Interested in your thoughts, though, on or if you can provide some comments on the profitability of the aged care business and whether these large-scale facilities that Ryman's been building, 100, 120 unit facilities, are still warranted given the funding environment in New Zealand, particularly compared to what you can return in Australia.
We're very committed to them, Stephen, because in our opinion, 120 care bed facility is very appropriate for a village where there might be, say, 200 or more independent living residents. In addition to that, we're also committed to our serviced apartment and assisted living offering as well.
Where we'd typically be looking to build anywhere from 60 to 80 of those per village in a typical sort of configuration. We still very much absolutely focus on doing approximately about 50% of our build as care related and 50% as independent related. The reason for that is that, although people are living longer, they are also living frailer, and we're seeing medically more, it's called sort of a greater compression of some of the comorbidities towards the end of people's lives. It's absolutely vital at that time when people really do need quite intensive assistance with their life and medications and everything, that villages are able to cater for that and deliver on the promise of a continuum of care.
When we look at the profitability of the care business, it's obviously enhanced for us because we do run a 97% occupancy, and it's also enhanced by the fact that we receive room premiums for the majority of our rooms. We do have people come in and don't pay a room premium. That's okay. We tend to target getting a room premium for all the rooms that we build. That actually means that our care business is profitable. If it's purely stood on its own, you'd maybe look at it and wonder about the return on equity. I and the board actually don't do that for a really simple reason that if you think about the villages you have visited, Stephen Ridgewell, there's no sort of segregation.
There's no Berlin Wall between one part and another. The villages truly are a seamless, integrated being and community. I see that the care business drives as much the retirement village earnings as vice versa. I cannot, in my mind, separate them. That is why we don't do segment reporting under international standards, because we genuinely don't look at the business that way. That's why we focus on an overall underlying profit, because all parts contribute.
Okay, thanks. Just maybe one on the guidance range, the 23-38. Maybe give us a bit of a flavor as to what would need to happen to get to the top end of the range and perhaps also at the bottom. Any comments you can make on allowance within that range for performance in Melbourne, which has been quite topical?
Yeah
as margins been a little bit under pressure.
Yeah
during the last quarter. any comments on-
Yep
on that would be helpful, thanks.
Yeah. It's more around the new sales and resales of retirement village units. It's not really around any care sensitivity, if you like, nor DMF. When we look at it, we take a view that we get about 80 units come up for resale a month. If you had two or three months where it was a lot less than that or a lot more than that actually could, you could have NZD millions one way or the other, given the margin associated with each unit now. That adds a degree of variability, Stephen. The other thing is that we could sell more actually at some of our villages between now and the end of March than what we're planning is possible, and is what sales is targeting. That reflects the higher end of the range.
The lower end of the range probably just reflects probably more of a disappointment of how many vacancies we get on resales, which we don't know about yet, and perhaps any sort of softer sales at any of our villages we were able to book.
Great. Thanks for that, Gordon. Just one last one from me. Are you able to provide any approximate indications of where net debt might end up at the end of the year, given your visibility on the investment plans and expected cash flow recycle? Thank you.
I would just intend to forecast debt, but I guess the helpful comment from David Bennett earlier on was that we've got NZD 50 million coming in the next two weeks. We will continue to be cashing up sites quite well, I think, over the next few months. Yeah. Stephen Ridgewell, one of the things about the first half result, which I thought was really good when we went through it with the team one afternoon a couple of weeks ago was the operating cash flow increase, actually. Seeing that come in at over 24% on the back of a really strong last month, last couple of months sales-wise. They're obviously always going to be debtors. It was great to see that strong operating cash flow performance.
If you couple that with the record amount of pre-sales at NZD 214 million, we're now sort of looking at our historical statistics yesterday, actually. In the 2016 financial year, in the whole of 2016, our new sale value was NZD 222 million. It's amazing how time moves on that we're sitting here with pre-sales that would have represented an entire year's activities only two years ago. I think it's worth repeating also that our bank debt, 80% of that is purely designated for the development that we're undertaking at the moment. What happens to the bank debt will be determined by what development we're undertaking. The actual core debt is relatively small for a company of this size with a balance sheet such as we have.
Which doesn't give me an opportunity to give another statistic, which I was hoping to get out. Which is, we hit over 10,000 beds and units in our portfolio.
In September, we got to just over 10,000. That's quite a milestone for the company, actually. Our land bank hit 6,000 too. When you think about the fact the land bank has to be funded, and a lot of it is also in progress, and it's taken us 34 years to get the land bank to 6,000, you can see why there's some debt to fund that. We didn't script that answer, Stephen. I've just been dying to. As soon as I saw it hit 10,000, I just missed it.
I'll pick up on debt too. Good morning. I think, David, you mentioned the facility's been increased to NZD 1.5 billion, which I guess gives you almost NZD 300 million headroom again. I guess just in terms of the syndicate's five, as the debt keeps getting bigger, given your growth ambitions, what's your approach going to be to diversity of funding, and I guess potentially duration as well? Just one other thing on debt. I think at the full year, you were at around 11% or 12% interest rate hedging, which has obviously been very beneficial for you over the last few years, that low hedging position. Can you just sort of comment on where you are at the half year and what the outlook is for interest rate cover for the business if you are increasing it?
Yeah. I guess in terms of the five banks, but as we mentioned, we've got five very supportive banks that were all willing to participate in the increase.
In fact, oversubscribed.
Yeah, oversubscribed on that. There are other parties we could talk to, and we do talk to, but there's also the option of a retail bond that we will consider potentially in due course. At the moment, we're very happy with the banking partners we have and the relationship we have with them and the support they've given us.
What was the total oversubscription?
There's been about NZD 125 million, I think it was.
Plus the other bank.
The other bank that was ready to come in, about NZD 250 million we could above. Yeah. The reason for that is that when banks look at us from a funding point of view, they can see that we've got an enormous healthcare business supporting a highly specialized asset class that is driven by need and which has sort of got the fundamentals of residential housing behind it, but with basically like a 50% deposit underpinning it too. If they think about repayment, the majority of the debt is working capital debt. It's the land bank, and it's the work in progress, the places like the slides you saw at Narre Warren and Tropicana, and when people move in, that will be paid for.
They can see that if that's total debt, that part of the debt will just go like that if we were to stop development. That's repayment ticked for banks, which they like. Then there might be, say, NZD 100 million or NZD 150 million of sort of core debt we've done, Suffolk Villages to keep them refurbished and what have you, projects. Given our significant earnings, the ability to service any level of debt, even the full debt, is very straightforward, even just with our recurring income. Even if we made no development earnings at all, our covenants would still cover us on just purely on a recurring income basis. Serviceability is comfortably covered and so is repayment.
We've got the resale bank of NZD 855 million and a crude DMF of about NZD 350 million. There's another NZD 1.2 billion of in-type sort of cash in the established part of the business as well.
Yeah. Look, we're obsessed about recycling capital. Don't get me wrong.
That is the business model of Ryman, and we just have to have times where if we're building up the land bank, say, in Melbourne, we've had to sort of accept the fact, I guess, that we'll just have slightly higher debt while we're doing that. On the hedging, we're at similar levels to what we were at year-end. We haven't changed our approach to that in the half. Look, we'll continue to monitor that, but as you say, we've benefited from that, and it still annoys me that they'll always owe us money. There's still a fair value loss on the face of that balance sheet for about the last five years because of swaps.
Well, they can change quickly when they do.
Well, I know.
I guess moving to the other bit that sort of interested me and was sort of the theme of a couple of questions I had. David, I guess like you in the business, I'm sort of trying to look at it from the four segments, I guess you mentioned care provision, property development, property maintenance, and a real estate business. It's not always easy to sort of, from a forecasting perspective, put all that together. I won't go over care again because Richie's already had a go at that. Just in terms of, I guess, the real estate sales business. You guys touched on it a lot through the presentation, and it's a huge part of what you guys are.
Sales and marketing expenses, in terms of both over the resales engine and then what you do on the development side and all the work you do on the brand and that sort of stuff, what sort of orders of magnitude are you investing in the sales engine and the brand in this business, and how much of it's capitalized and how much of it's expensed?
None of it's capitalized. We don't really run around disclosing it, to be honest, because I wouldn't want to provide a benchmark for competitors. It's NZD millions.
Yeah, well, I'm sure it is.
Yeah, it's millions.
Tens, probably.
No, it's not NZD tens of millions.
Okay. Just in terms of the resale margin, which you disclose as gross, obviously, I think your portfolio has significant differences to some of the other operators in composition, including Metlifecare. In terms of the amount you spend on refurbishment, some of the investment you do around the villages, which you do on a rolling basis, as I think you referred to there, what sort of percentage of resales turnover revenue is that each year off the gross margin?
I don't know that we calculate it in that way. In fact, on the back of your information pack, it identifies line by line the refurb costs and what we invest in refurbs. We don't really see it in that line. As I said in the presentation, it's much more about meeting the expectation of the resident and the promise that Ryman has. We'll do whatever is required. In fact, at Malvina Major, it was quite a major refurbishment, partly because of the earthquakes, but partly also that it just really didn't match the promise that we make to people.
Yeah. I understand that's important.
You're probably looking at about, for an individual village, it could be in the region of NZD 4 million to NZD 5 million to do a 15-year refurb of the common facilities and the community center, the kitchen, that sort of thing.
Yeah.
For a service department, each time there's a resident move between each time, it really depends on the tenure, but on a typical basis, first time around, there might be things like new drapes. It might be some time actually before things like kitchens need to be replaced, and that might not be for 10, 15 years. Same for independent living units. Because we do all of our construction in-house, all of our buying in-house, I think when I looked at it last a while ago, for an independent unit, you might be looking at sort of NZD 5,000-NZD 10,000 the first time around, and maybe second time around, anywhere from NZD 15,000-NZD 25,000, depending on what work needs to be done for the kitchen and the bathrooms. New drapes and carpet, 15 as well, 15 years.
Sure. Then just closing out on this. The village CapEx that you disclose separate to the project or the care systems, that would comprise maybe NZD 10 million a year on upgrade if you're doing a couple of villages a year, and then there'd be the refurbishment in there as well.
Yes.
What would be the sort of split between investing back into care, which is PP&E investment, I guess, and the IP investment, the refurbs?
Yeah, probably. I think Dave will probably come back to you.
Yeah.
We'll work that out.
Okay, cool. Thanks. That's all from me.
Good.
Jeremy Simpson, Forsyth Barr. Well done on the good result, guys, and great to see the momentum continuing across all parts of the business. I'm interested in the high-level feedback you got from Stirling and just what they think of what we're doing with regard to the concerns around looking after people with dementia in New Zealand. Then also just a bit on in terms of the pipeline and some thoughts on what your thoughts are around Karori, given the size of the opportunity there, and you had a bit of an unfun fight at Port for a while, and there's learnings from that, and what you can say around that.
Perhaps David, as someone who's actually got medical knowledge.
Yeah. The Stirling question. Stirling obviously had not met with us before, and they were not familiar with the fully integrated village that we run. Their experience was much more with special care units or dementia care facilities. They were fascinated at how we managed to provide the full continuum of care. I think it's fair to say that they were impressed at what we offer, but they had lots of really great little ideas about how to improve, I would say, the small detail, that to us is small detail, but to a person with dementia or cognitive impairment is important.
At the safety day, one of the things we did was we had a virtual reality headset that you put on, which gave you the impression of being cognitively impaired, and such simple things as the clear definition of color between the carpet and the wall, so that the person could sense when they were near the edge of a room and stuff like that. All of that was really brought to life to me, some of those critical sort of things. It's at that level that they were able to make really constructive comments.
Karori. Look, I've known the Karori suburb for probably, I mean, I'm based in Christchurch, but my dad grew up in Wellington, and my dad's brother, Ken, and his wife, Judy, they lived in Karori for about 45 years. I've been to Karori a lot, so I know it's a very special place. The difficulty has been that a lot of locals weren't happy about the fact that the university sold that site to us. Obviously, that's got nothing to do with us. That's just a sort of, I guess that's more of a political thing. Anyway, that's happened now and we move on. What we've done is we've had lots of drop-in days with the community.
There's a number of interest groups there, Jeremy, who have given us their full and frank views on a whole bunch of stuff around how they'd like to see it developed, things that they are concerned about. What we do is we just take all of those into account, and we have to sit down and think about how can we make it work. One thing that we are doing is we're working with a heritage architect because there is potential with that site to retain some of the older buildings where there's real historic and cultural significance to events that happened there and with some of the brutalist architecture, where some of the site maybe will be integrated in with the village.
What we need to do is we will be talking through more detailed plans with people like the Historic Places Trust and the community over the next couple of months as well. They're never easy when you've got to work with the community hard. We want to build a village that just looks great. There's real interesting architectural opportunities here, and I know from my family connections that it's an excellent site for the village, and it will be in very, very strong demand there because there is very limited offering, and that is a very large suburb. We will end up with a very successful village in Karori.
There's a definite shortage of retirement village units and care beds in that area.
Yeah.
I think one of the challenges has been that the community has used the facility itself, and so we are keen to try and continue that opportunity for the community. That's where we're sort of listening acutely to see how we can help make that happen.
Is that in regards to the sports amenities as well?
Yeah, things like dance halls and performance halls, netball courts. It's a whole ton of stuff.
Market days, yeah.
You have to stand back and look at what you can work on-site, maybe what you can do off-site. We're really committed to try and make it work because we want it to be something that people feel good about.
Yeah. Just lastly from me, resale pricing is something I was expecting. Can you give some feedback on what's happening on pricing generally for like-for-like, if you like, on a village-by-village basis?
Like-for-like, the pricing hasn't changed. It's actually gone up since the end of the year. What you're seeing, though, is just a bit of a mix of what has actually come up. The units coming up have been, like you said, our more regional sites and villages. That's pulled the pricing back. That's why it's hard to look at it at that granular level.
Yeah, pricing is up.
Yeah.
Yeah. The mix can be quite significant because you get a few at some of our very, well, some of the higher-end villages, and can affect the weighted average price quite a lot. Yeah.
That's all from me. Thanks.
Yeah. Thanks, Jeremy. Marcus.
Three questions from me. I just wonder if you could talk a little bit about the competitor dynamic in New Zealand at the moment. I suppose some of your peers talking about higher inventory levels, some of their villages are hard to sell. I suppose the other thing I note is your comments around care profitability, smaller players going out of the markets, obviously different messages from different people. I just wondered if you could give some views on how you see the market at the moment in New Zealand.
Yeah. Okay. From a peer point of view, we just absolutely don't comment on competitors. We're very respectful of what people do. From our perspective, what are we seeing? I guess the best summary of it is in the actual results really, which is we have got incredibly high pre-sales. We've got resale stock at the same level we've had for the last five years at what, 1.2% which has been our average for the last five years of the portfolio. Care occupancy is 97%. We've had strong operating cash flows. The basic metrics that we look at to see whether we're performing in the market are healthy and good. Look, I don't actually follow too much what competitors view on those sort of things is.
I did read one in Australia last week which talked about sales being off, sounded pretty significant, actually, like 38% or something. That may be a legacy issue they have with some of the media commentary they had a year before that.
I'd just add, Marcus, that in terms of the care, one has to remember that we've been in this business for 30 years and invested very heavily in acquiring the IP. You can see from the presentations that we continue to invest in both skill and quality of care provision, and that's not easy to duplicate.
It's challenging for other operators. I probably would go to a village every week, and one of the things I do is always have lunch with our serviced department residents or afternoon tea with independent residents and stuff like that. Obviously a bit of social chitchat, but I really like to find out why they bought, particularly people that have bought in the last sort of 12 months. The things that are really important for people are the full continuity of care.
Yeah.
I have met a number of people, every single village where either the husband or someone's wife, unfortunately, is in the dementia unit. Okay? Our average age of entry for independent is 78.5 years old. I just find people are more, I guess some people, you can be quite pragmatic at that stage of your life that there may be health changes ahead for you. That full continuum of care is hugely important for people. You know that our villages are 50% care related, and that's a big deal. The other thing that people, I think are, and society is becoming more conscious of fairness.
That the Ryman difference, which is the lowest DMF in the sector of 20%, fixed weekly fee for life, don't charge any fees when you vacate the unit, all that sort of stuff, is more widely known than maybe even we think when we speak to people. It's a very important part of the bargain of trust that we form. Perhaps that's the context for the fact that the overall metrics we've talked about today are in reasonable shape.
Secondly, can you talk a little bit about why you're so confident in five villages in Australia? Clearly the progress has been slower than you would've thought.
Yeah.
What gives you the confidence? Five by 2020 just seems a long way away from just opening the second in end of 2018.
That's fair enough, Marcus. We probably should clarify, 2020, I would regard that as New Year's Eve on 2019. Not New Year's Day. No. Maybe one resident sleeping in a.
Not Gordy.
place. I'll be the village manager. Look, it's a big time between the first and second village, Marcus. That was frustrating for us. I know that was frustrating for shareholders. I think that what we do is we learn a lot during that. They are the sort of times that you learn the most, probably when you get frustrated and you think, we should have resourced up a bit more, or maybe we should have tackled that issue in a different way. The Brandon Park is a very large-scale village, and it was a tremendous achievement to get that approved and now to get that open. I think that if we've got two villages, so if you think about, well, how do you get five sites open? First of all, you've got to buy them. Now we've got nine, and they're great.
You can see from the map of Melbourne, they're quite cleverly all around the border of Melbourne in different clusters. They're not all big metro, big intensive apartment style villages. There's a mix. You've got to buy the land, then you've got to get them consented. We've had two consented now, and three, four consented now, Burwood, Coburg, Weary Dunlop, and Brandon Park. We need one more to get our fifth. We were hoping that we would have heard from Geelong this month, actually, but the meeting with council's been deferred to December 18th. Ocean Grove, though, already has a development approval for a retirement village and aged care facility, so we'll hopefully move quickly on that. Aberfeldie's preliminary discussions with local council and so on has been really positive.
Just to give you a bit of a flavor, we've got some good development approval progress happening with three being submitted. You've got to start building them. One built, one open, Coburg and Burwood East, I hope that we're building there in the next sort of two or three months. There are various pre-start conditions at councils that just take time. We've been doing things at Burwood, for example, where we've been discussing some refinements to the urban design look and feel of the village. That's good because it will actually give it a better long-term outcome. By the end of March, hopefully, we'll be building at three sites. Ideally by, say, this time next year, we might be building at Geelong as well. We might be building at Ocean Grove. We might be starting to look at Aberfeldie.
There's just a number of points of momentum where if I would go back and I remember sitting in these meetings sort of two or three years ago, it was all just a question about where's Brandon Park at? What you're hearing is we've got a lot more irons in the fire now, and that's what gives us confidence about that. For me, at a certain point of time, we'll be looking well beyond 2020. We're committed to the Victorian market. We want to get a roll on there. We want to match the New Zealand build right there. I think, to think to it about a really wonderful portfolio of sites there, we're on the way.
I think, Marcus, the impatience was shared at the board level as well. One has to remember that the Brandon Park on Dame Nellie Melba Village is actually the size of Edmund Hillary. It is a really big village. I think that we learned a lot from the first village, and we then have had to spend some time building some strength. You heard Gordy talk about the increase in the number of people in design, and that takes time to get the right people. We've been building in New Zealand. We built Weary Dunlop largely out of New Zealand. Now we're actually building our team in Australia, which will enable us to go with much greater speed. I feel confident. They keep telling us we're going to have five by 2020.
We promised five by 2020, we will do it. I think Gordon MacLeod's point that we do actually have a much longer-term horizon that we're aiming at for that particular number.
Just finally, with the residential house turning down in Australia.
Yeah
could you talk a little bit about, and I know you're obviously just selling one village at the moment, so experience around selling that relative to a housing downturn may be pretty limited. On the flip side, are there opening opportunities to be more aggressive on land purchases at fair prices?
Yes to the second question.
Yeah
We'll be our usual fussy selves, though. They have to be great locations. If you want to bring up the slide, people, on the median house price one. It's got the two nice ladies with the golf clubs looking at it. Anyway, while they bring that up, the most important thing I think, Mark, is in a market where there is price risk is that there's great affordability for people, and that the shape of the village that you're building is driven strongly off needs. If we were building a lifestyle village, I believe that they may struggle because you may decide if you're sitting in the paper, reading the paper every day, incredibly, another story, basically a photocopy of the last story of the previous day, which is the housing market's got a problem, and that can put people off.
If they fit in well and they don't need to move, what happens is they don't move. What we found during the GFC, which was where housing transactions in New Zealand dropped by two-thirds, prices dropped by 10%, days to sale doubled from 30-60, and that all happened in six months, was that the stuff of life continued. People who are needing to come into care, people who are needing to come into service departments, who are typically about 86 or 87, and you can see from that graph, incredibly affordable in any sort of market, that sort of stuff happens. You're left just really talking about what's the risk with independent. Independent are about 50% of our portfolio, and the average age of entry is 78 and a half, so it's the older elderly.
When you speak to people about their story of why they came to the village one-on-one, it's usually some sort of life event or health-related story, to be honest. Even in a market like Melbourne, David Bennett mentioned that the house prices would have to drop 34% before someone wasn't freeing up additional capital. It would still be affordable, ironically, in Auckland, 20%. We like the fact there's good headroom, there's plenty of affordability, and there's a compelling offering for people with really fair terms and good service. As you said earlier, it's a needs-based decision. It's not a lifestyle decision. The last few dollars in the house price are not what's critical to the person selling their home.
On that slide, the lower price point or cost for you in Melbourne versus Auckland, does that continue as the villages roll out?
It may not. No, it may not. Auckland's got a number of key villages in there, which some of them are a bit high priced. Yeah, as the village matures, we get close to the local sort of median house price. On the first sale round, we are typically a bit more of a discount, that chart reflects that in Auckland there's a lot more mature villages than there are in Melbourne. It's a great time to buy in Melbourne if you're a resident. If you thought the prices were coming down, now is good.
Yeah, thanks for your view. Any other questions in the room? Are there any questions from people calling in?
Your first question comes from Jason Hamilton from Aspire Consultation Corporation. Please go ahead.
Morning, guys.
Hi, Jason. That's nice and clear.
Hello.
I've got three. I guess this one's a comment.
With that need in the community at any one time.
Okay. Can I ask a question a slightly different way? You talked to the receivable balance, can I guess how many units are related to as at 31 March and how many units are related to as at 30 September?
No. Honestly, Jason, we just don't track it like that. We've obviously got detailed cash flow stuff that we manage the business on, but I don't look at the number of units in our debtors at March and September.
Okay. All right, Mike. That's me.
Thank you.
Thank you. Again, to ask a question, please press star one on your telephone and wait for your name to be announced.
Take that as a no. Great. Thank you everyone for coming and joining us. As you've identified, we've had a very good first half, great momentum, and great progress in the way we deliver care. Now we can just have some informal discussions. Thank you very much