Retirement village operator Summerset delivered a strong but well-flagged result for the six months ended June, helped in no small part by an upwards fair value movement in its investment property.
In the period under review, Summerset's total revenue increased 29% to $32.6 million from $25.2 million in the previous corresponding period (pcp).
The fair value movement this year was an increase of $34.5 million, up from $14.2 million in the pcp, taking total income to $67.1 million from $39.5 million.
Although total expenses rose in the period, the operating profit rose more than 112% to $38.4 million, up from $18 million in the pcp.
The reported profit, which included a tax credit of $1.1 million, rose 133.7% to $35.7 million from $15.3 million.
An interim dividend of 1.85 cents per share would be paid on September 7. The dividend policy remained 30% to 50% of underlying profit for the full year.
The underlying profit, which excluded the unrealised property gains and deferred tax, increased 83% to $15.1 million.
Craigs Investment Partners broker Chris Timms said the key drivers of growth were the development profits which were up 131% on the previous period, on the back of an improvement in margin, a 52% increase in volume and an 11% increase in average value of new units sold, as development began tilting towards Auckland.
''Encouragingly, resale profits also improved, mainly on the back of a recovery in resale margin to 16.7% from an abnormally low 12.5%."
Summerset chief executive Julian Cook said the trading period for the six months to June had been positive.
There had been record sales of occupation rights and profit, as well as an increased number of retirement units built.
''Summerset is experiencing good demand across the country for our living and care options. We are delighted to see more people are choosing us and that what we provide is highly regarded by our residents.''
A large contributor to the growth seen in the period related to the four new villages opened in the second half of 2014, he said.
Summerset was focused on continuing to expand its offering around the country and to continue to find ways to improve service delivery for residents.
The company was well funded, had a good land bank in place for future growth and was well positioned to continue to meet the living, community and care needs of the growing number of older New Zealanders, Mr Cook said.
Mr Timms said Summerset also posted a much improved cash flow result.
Operating cash flow was up 82% on the pcp to $66.5 million, mainly reflecting an increase in new unit sales receipts.
Investing cash outflows increased a more modest 22% to $66.5 million.
As a result, the growth in net debt slowed. Net debt was up $11 millon to $154.4 million, despite a $25 million increase in work in progress.
''Summerset's earnings growth has been less than smooth since the initial public offering, reflecting the small size of the portfolio and that relatively small cost or revenue increments can have a relatively significant percentage impact on earnings.''
Summerset flagged costs were likely to increase in the second half, as new villages and care centres opened.
Craigs remained comfortable with its 2015 full-year forecast for a $35 million underlying profit, Mr Timms said.
