Summerset posts record profit
Summerset Group has defied a “challenging” environment to deliver a 62% increase in net profit over the year to December 31.
The retirement village operator announced it made $436.3 million after tax in the 2023 financial year, and that was its second highest profit ever.
Underlying profit was a record $190.3m, up 11% on the last financial year, and it had net operating cash flows of $398.2m, up 8% from $369.2m.
But the company’s expenses increased to $263.8m from $225.4m, while its finance costs, which include interest expense, also rose.
Shareholders will get a final dividend of NZ13.2 cents per share, up 9.9% on the 2022 year.
Summerset chief executive Scott Scoullar said 2023 had been a good year, despite a very challenging macroeconomic environment.
“Increasing inflation, recruitment shortages and a falling residential property market made business difficult throughout the year, and yet we withstood those challenges and continued to grow.”
Summerset sold a record 1103 occupancy rights agreements (ORA) for units in its villages in the 2023 year, an increase of 10% on the last financial year.
ORAs give residents the right to live in a village unit, and most people buy them using a portion of the sale proceeds from their homes.
It also turned in a strong year of construction to deliver 643 new ORA homes, which met its build target.
These included serviced apartments, care suites and memory care suites, and came through the opening of three main buildings at its Kenepuru, Bell Block, and Te Awa villages in Wellington, New Plymouth and Napier.
Summerset reported a development margin of 31.6% up from 29.7% the previous year, driven by improved margins across all unit types.
It had 6087 retirement village units, a land bank total that would allow a further 5571 units to be built, and total assets of $6.9b, up 18.9%.
Scollar said the result showed that while the residential property market had an influence on the company’s business, its strong sales and demand pipeline demonstrated it was not solely dependent upon it to grow.
“Our residents are often motivated by life events such as community, security and health when coming to Summerset. We continued to see these motivating factors prompting moves into our villages.”
More than 8000 people live in Summerset’s villages, and they are staffed by more than 2800 employees.
Scoullar said that having navigated through a challenging year last year, Summerset was optimistic about the year ahead.
It remained focused on growth while providing an excellent retirement experience for residents, he said.
“We expect to deliver 675-725 homes in 2024, including stage 1 of our St Johns village in Auckland, our first multi-level village, delivering four of the seven buildings comprising the main building, care centre and sixty percent of the village’s homes.”
The company’s development was healthy, with the obtaining of resource consent for its Half Moon Bay (Auckland) and Kelvin Grove (Palmerston North) sites, and the purchase of two new sites in Rolleston (Christchurch) and Mosgiel (Dunedin).
Summerset has also moved into Australia, and its first Australian residents would be moving into its recently completed Cranbourne North village in Victoria in March.
It was set to begin construction on its second Australian village, Chirnside Park near Melbourne, and the company’s Oakleigh South and Craigieburn sites in Melbourne had also received consent.
Summerset’s results contrasted with its fellow retirement village operator, Ryman Healthcare, which last week reported that it was going to cut $35m to $45m off its expected underlying profit for its current financial year to March 31.
Ryman and Summerset are the two biggest retirement village operators in New Zealand, but Ryman has the biggest share of the market.