Summerset Group's total assets jump 24% to $3b, 1H net profit eases slightly

Tuesday 13th August 2019

Summerset Group reported a slightly lower first half net profit as valuation gains for the retirement village operator and developer continued to ease but its total assets jumped to more than $3 billion.

Underlying earnings, which strip out fair value movements in the value of the portfolio, rose to $47.8 million in the six months ended June 30, up 6 percent from $45.2 million the year before.

Net profit, however, fell 4 percent to $92.6 million. The Wellington-based company registered an $85.7 million unrealised gain on its $3.03 billion property portfolio, compared to a $92.8 million gain a year earlier. The value of the total assets lifted 24 percent on the year. Its total assets have grown almost five times since 2011.

“The fair value movement reflects ongoing strong value growth across the business and is close to the increase seen in the prior comparable period. This is despite the flattening property market in some areas of the country,” said chief executive Julian Cook.

Regarding the slowing property market, “we continue to see increased settlement times for residents selling their home before entering our villages in Auckland and Christchurch. Overall, however, we are still seeing a strong demand.”

Summerset's board declared an interim dividend of 6.4 cents per share, with an Aug. 27 record date, payable on Sept. 9. That compares to 6 cents in the prior year and represents 30 percent of underlying profit.

Total sales of occupation rights eased 7 percent to 278 from 299 in the first half of last year. New occupation rights were down 6 percent at 136 but gross proceeds were up 22 percent at $95.3 million.

Average gross proceeds per new sale settlement were $701,000 up from $540,000 in the first half of the prior year.

The resale of occupation rights fell 8 percent to 142. Its average gross proceeds per resale settlement were $430,000 versus $415,000 in the prior year.

Summerset delivered 139 new homes in the half year. Cook said the company expects to deliver around 350 homes this year.

It has purchased six new sites since the start of the current financial year, located in Blenheim, Rangiora, Cambridge, Milldale, Waikanae and Whangarei.

“These purchases reflect our desire to buy sites in urban fringe locations, retirement destinations, and high growth regional centres. These sites are attractive from a financial return, risk, and demand perspective,” said Cook.

The additional sites have lifted Summerset’s land bank to nearly 5,000 retirement units and it currently has 28 villages completed or under development.

Cook said Summerset continues to explore expansion across the Tasman.

“We are in the process of carrying out due diligence on a number of potential sites in Melbourne, Victoria. We are seeing a good range of opportunities and will continue to be prudent with our approach,” he said.

The shares last traded at $5.84 and are down 8.3 percent so far this year.

(BusinessDesk)

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