Property revaluation helps Summerset boost profit more than 200%

Retirement village and aged care operator Summerset Group significantly increased its profit in the year ended December, but with much of the improvement coming from a higher revaluation of its property.

It also announced its first dividend for shareholders of 2.5c per share, representing a total dividend of $5.4 million.

The group, which operates a village in Dunedin, was also ahead on all but one of its IPO forecasts. The only one which was down was financing costs, a plus for the balance sheet.

Summerset's profit before tax of $14.4 million was up 230% on the $4.4 million reported in the previous corresponding period (pcp) and up 18% on its IPO forecast.

Its reported profit was $14.8 million, up 243% on the $4.3 million in the pcp and 11.8% on the IPO forecast.

Summerset had total revenue in the period of $38.1 million, up 13.1% on the $33.7 million reported in the pcp. Revenue was 7.7% ahead of the IPO forecast.

The big increase came in the ''fair value movement of investment property'', which in 2012 was $15.13 million compared with $5.8 million in 2011. The fair value movement was 7% ahead of the $14.14 million in the IPO forecasts.

That gave Summerset total income of $53.25 million in the reported period, up 33.7% on the $39.8 million in the pcp.

Net finance costs fell 4.7% on the IPO forecast to $4.89 million and were 13.3% lower than the $5.6 million in the pcp.

Operating cash flow in the period was $66.25 million, up 27.4% on the IPO forecast and 51.7% on the pcp.

Craigs Investment Partners broker Chris Timms said the key driver of the year-on-year growth was the tripling in gross development profits from $2.3 million to $6.9 million, which in turn was driven by settlement volumes which were up 55% and 25% ahead of the prospectus.

Summerset managing director Norah Barlow said the year had been one of significant growth for Summerset.

''Our financial results reflect another year of hard work and commitment to driving this company forward.''

The company was working through the planning process for its Karaka and Hobsonville villages and was continuing to examine new sites across the country.

The new Auckland sites lifted Summerset's land bank to 1400 retirement units.

''There is demand for care in retirement villages, especially care provision into care apartments. We are working to meet that demand. This is not only through focusing on building care beds but also looking at innovative ways to meet our residents' care needs. Care apartments are one way to do this.''

Mrs Barlow said the company had last year upgraded its longer term build rate to 300 retirement units a year by the end of the financial year. The group had banking facilities to enable that and was not seeking additional funds from shareholders.

 

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At a glance

Total revenue: $38.12 million

Total income: $53.23 million

Profit before tax: $14.41 million

Reported profit: $14.82 million

Operating cash flow: $66.25 million

Dividend: 2.5c per share

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