Summerset earnings rocket 55% in 2015; plans to double size in six years

Wednesday 24th February 2016

Summerset Group lifted annual underlying earnings 55 percent in 2015 as the country's third-biggest retirement village operator by market value generated more sales after opening new sites and said it wants to double its national footprint over the next six years.

Underlying profit, which strips out unrealised movements in the value of its property portfolio, rose to $37.8 million in calendar 2015 from $24.4 million a year earlier, the Wellington-based company said in a statement. The result was within Summerset's guidance for earnings to be between $36 million and $39 million, though came up short on Forsyth Barr's estimate for $38.4 million.

Net profit climbed 56 percent to $84.2 million, or 38.46 cents per share, including an $83.5 million uplift in the value of its property portfolio but excluding some factors included in the company's underlying profit calculation, while revenue rose 27 percent to $68.8 million.

"With a significant lift in investment in 2014 we anticipated a higher level of earnings growth," chief executive Julian Cook said. "We continue to realise the benefits of our internalised development model and strong demand across our villages is demonstrating that we continue to deliver high quality retirement living and care to our residents."

Summerset will open its Ellerslie village in Auckland this year adding another 250 units and an 80-bed care centre to the company's books as it continues to expand its network, which was sitting at 2,419 units and 616 care beds at Dec. 31, across 20 sites.

The company wants to accelerate its building programme to 400 units in 2016 from 300 last year and says its existing land bank can add 2,414 units and 406 care beds over the next six years of development.

"While we are always looking for opportunities across New Zealand, Auckland is clearly constrained for living and care services for older people," Cook said.

Summerset beefed up its banking facilities to $450 million to support the increased build rate and had bank debt of $248.2 million at Dec. 31. Its ratio of debt to equity increased to 37.1 percent at the end of 2015 from 30.5 percent a year earlier, which it said was prudent and within expectations.

The board declared a final dividend of 3.4 cents per share, payable on March 24 with a March 9 record date. That takes the dividend for the year to 5.25 cents, up from 3.5 cents a year earlier. The company's dividend reinvestment plan will apply to the payment at a 2 percent discount.

Separately, the company said former chief executive Norah Barlow will retire from the board at its annual meeting in April and a search for her replacement has been started.

The company's shares remained quoted this morning at $3.95, unchanged from yesterday's closing price on the NZX, and have declined 3.7 percent this year. The stock is rated an average 'hold' based on five analyst recommendations compiled by Reuters, with a median price target of $4.48.

BusinessDesk.co.nz

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