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Retirement village company’s earnings up by 44 per cent

BusinessDesk report by Tina Morrison
The Wellington-based retirement village developer and operator Summerset Group lifted annual earnings 44 per cent, ahead of its forecast, after it built more units and improved its margins.

Underlying earnings, which excludes property revaluations, increased to $81.7 million in calendar 2017, from $56.6 million in 2016, the company said in a statement. That’s ahead of its forecast for earnings of between $77 million and $79 million.

Net profit jumped 54 percent to $223.4 million, as the value of the company’s investment properties increased by $218 million, compared with a $143.5 million gain a year earlier. It improved its development margin to 27.3 percent from 22.2 percent.

Summerset built a record 450 retirement units during the year, up from 409 units the previous year, and plans to match that level again this year. It bought new development sites in Avonhead in Christchurch and Kenepuru in Wellington and additional land alongside its Casebrook village in Christchurch, taking its total number of sites to 29. The company is the youngest of New Zealand’s big retirement village operators, following in the footsteps of Ryman Healthcare and Metlifecare to acquire land and build units in anticipation of increased demand as people born in the country’s post-war era reach the target age for operators, with the number of people aged over 75 set to more than triple in the next 50 years. At year’s end, Summerset’s land bank represented about 2,841 retirement units and 396 care beds, or about six years’ supply.

“With 23 villages and another six for development in New Zealand, Summerset has grown quickly since its first village opened in Wanganui on 21 November 1997,” said chair Rob Campbell. Since listing on the NZX six years ago “we have more than doubled our size and we are likely to double again in the next five years as we continue to grow our footprint and as the ageing population continues to increase.

“We continue to assess potential entry into the Australian market.”

The company will pay a final dividend of 7.1 cents per share on March 22, taking the annual dividend to 11 cents, ahead of the 7.7 cent annual payment the previous year.

Summerset shares last traded at $5.81 and have gained 15 percent the past 12 months.