Summerset prof it doubles on boom

‘We are very much focused on continuing to expand our offering.’

STRONG demand for retirement villages across the country has almost doubled Wellington-based operator Summerset’s underlying profit for the first half of the year.

Summerset Group Holdings announced an underlying profit of $17.1 million for the half year to June 30, up 81 per cent on the same period last year, excluding one-off property valuation gains.

Net profit after tax for the first half of 2015 was $35.7m, an increase of 134 per cent on the same period last year.

That included unrealised valuation gains of $17.6 million in the fair value of investment properties, land and buildings.

The total value of assets grew to $1.2 billion. The share price has increased by 40 per cent in the past year. Shares were trading at $4.13 after the announcement yesterday.

An interim dividend of 1.85 cents per share would be paid on September 7, which was up from 1.4c from the last half.

Summerset chief executive Julian Cook said dividend payments were likely to continue to be at the bottom end of its 30 per cent to 50 per cent of underlying profit range, because of growth opportunities.

There were record sales of occupation rights and profit in the trading period for the first six months of 2015, as well as an increased number of retirement units delivered. The underlying profit for the year was forecast to be about $32m.

Summerset updated its target build rate for 2016 and beyond to 400 retirement units a year, up from 300. New sales of occupation rights had increased 52 per cent on the first half of 2014.

Resales of occupation rights increased 22 per cent on the same period last year.

Summerset was experiencing demand across the country for its

Summerset chief executive Julian Cook living and care options.

‘‘A large contributor to the growth seen in this period relates to the four new villages opened in the second half of 2014,’’ Cook said.

‘‘We are very much focused on continuing to expand our offering around the country and to continue to find ways to improve in service delivery for residents.’’

The company was well-funded, had a good land bank for growth and was well-placed to meet the needs of the growing number of older New Zealanders, he said.

To fund that increased growth rate, Summerset had secured additional bank funding lines, increasing it from $255m to $450m.

‘‘Our debt at June 30 was $160 million. We do not expect to draw the full amount, but believe it is prudent for the business to have additional funding lines over and above what we expect to utilise.’’

The company built 141 retirement units across six sites in the first six months of 2015.

It recently strengthened its position to meet increasing demand across the Auckland region. It acquired land in St Johns, Parnell and Warkworth, and has started building a village in Ellerslie.

Summerset plans to open its first Christchurch village in Wigram this year, a village centre and a care centre in its Karaka and New Plymouth villages, and a care centre in its Katikati village.

The strong sales of occupation rights, the range of new sites and increased efficiency through inhouse management of development and construction had increased the rate at which the company could expand, Cook said.