Summerset on target for full-year forecast

The Summerset at Bishopscourt village, under construction in Dunedin last week. Photo by Stephen...
The Summerset at Bishopscourt village, under construction in Dunedin last week. Photo by Stephen Jaquiery.
Retirement village developer and operator Summerset Group Holdings has delivered increased revenue and remains on target to complete construction of 155 units this year, the latter underpinned by a $40 million Dunedin development.

For its six months' trading to June, Summerset increased revenue from $16.1 million to $18.2 million and turned a $1.1 million loss a year ago to a $3.93 million profit.

While maintaining its forecast when listing for a full year after tax result of $9.7 million, chief executive Norah Barlow said yesterday that if trading momentum continued, Summerset expected to exceed that forecast.

The half-year result was due to unit sales, a strengthening of the company's in-house development and design capabilities and higher development margins, she said.

Operating cashflows rose more than 100%, from $14 million last year to $28.8 million.

"Sales are strong. Last year, sales were the highest in the company's history. We are on track to exceeding that record," Mrs Barlow said.

During the half year, Summerset completed 68 new units, across four developing sites, and is confident of meeting its full-year target of 155 units.

"We have started building at our newest village in Dunedin and are in a good position to reach our full-year target," Mrs Barlow said.

This is Summerset's second financial result since listing on the NZX last November. Its 56% majority shareholder is Australian company Quadrant Private Equity.

From a low of $1.31 in mid-December, Summerset shares have since risen to a high of $1.95 earlier this week.

After yesterday's announcement, its shares were down 3.6% at $1.88, possibly with some investors taking a profit from gains in recent months.

Craigs Investment Partners broker Peter McIntyre said the result was "a solid performance" and should keep investors happy.

While Summerset was on track to deliver a maiden dividend, and had expectations of beating its profit forecast for the year, Mr McIntyre noted there had been no "substantive financial guidance" offered, including expectations in 2012.

"They have performed better than expected, especially in sales, resales and with a strong lift in development," he said.

Forsyth Barr broker Peter Young said the result was close to expectations, in terms of care revenues, deferred management fees and operating costs.

"Summerset's target remains its prospectus forecast of $9.7 million [profit] and it is well on track to achieve this with $6.9 million [booked already] in the first six months," he said.

Highlights of the result were the improvement in operating margins and the operating cash flow gains along with the sharply increased volumes of new and resold units, Mr Young said.

In Dunedin, Summerset is building a $40 million, 200-person village on a 1.9ha Wakari site, called Summerset at Bishopscourt.

The first of more than 30 homes are "spoken for" and expected to be completed by the end of the year. Stage two pre-sales are also strong.

Summerset surprised the market in March with an underlying profit 35% ahead of its prospectus forecast, at $8.1 million for the year to December. Profit before tax was up 2.3% on the prospectus forecast and sales of occupation rights were up 25% on 2010.


Summerset: six months to June

• Country's third-largest retirement village operator.

• Dunedin construction is 15th village.

• 1 Three more land-banked sites.

• New units 68; target 155 Total almost 2000 residents.

• 18 villages equals 1234 retirement units and more than 280 care beds.

• Room sales of 83 (52% increase*).

• Gross proceeds $28.8 millionRoom resales of 88 (102% increase*) Gains realised of $4.2 million.

*Compared with same period last year

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