Summerset’s earnings rise 50%
Elder-care firm adds 409 units
Summerset Group boosted annual earnings 50 per cent after opening more retirement villages and improving its margins. Underlying earnings, which exclude property revaluations, increased to $56.6 million in calendar 2016, from $37.8m a year earlier, the Wellington company said, ahead of its forecast for earnings of $53m to $55m.
Net profit jumped 73 per cent to $145.5m, as the value of investment properties grew by $143.5m to $1.59 billion, compared with an $83.5m gain a year earlier. The company attributed the valuation gain to additional units and strong price inflation.
Summerset invested $200m in new and existing villages in 2016. The company delivered a record 409 retirement units during the year, 35 per cent more than in 2015, and it raised its target for 2017 to around 450 units. Chief executive Julian Cook said the company expected a long-term annual building rate of at least 450 units.
“If we see market opportunities and we see continued demand, then it may increase beyond that and certainly we have positioned our land bank so that we are able to do that if we want to,” Cook said.
New Zealand retirement village operators are acquiring land and preparing for a record building spree in anticipation of increased demand as people born in the postwar era reach the target age for operators, including Summerset and its larger rivals Ryman Healthcare and Metlifecare.
Summerset has a land bank of about 2609 retirement units and 366 care beds, and it expects the population aged over 75 to grow 239 per cent from 2016 to 2068.
“We are certainly seeing good demand across the country,” Cook said. “We are busy working through the villages that we have running now but also working on the next wave of villages which will come. We continue to see good earnings growth forecast for the business.”
He declined to provide specific earnings forecasts.
The company’s shares closed up 15c at $5.06 yesterday.
Summerset improved its development margin to 22.2 per cent from 20 as it benefits from taking management and design of its construction sites in house, and its larger scale.
Cook said the company was “broadly comfortable” with the margin in the low 20s, although the rate was likely to improve further over the medium term as it eked out further gains from the construction and procurement parts of the business.
Summerset’s revenue rose 25 per cent to $ 86.1m while expenses increased 23 per cent to $74.8m.
Sales of new occupation rights increased 24 per cent to 414, while resales fell 0.4 per cent to 244.
The company will pay a final dividend of 5.1c a share on March 22, taking the annual dividend to 7.7c.
—
We are busy working through the villages that we have running now but also working on the next wave of villages which will come. Julian Cook (above) CEO Summerset Group