Summerset more than triples FY profit, beats expectations with dividend

Monday 25th February 2013

Summerset Group, the retirement village operator and developer, more than tripled its net profit, beating the forecast from its 2011 prospectus, and will pay a bigger dividend than what analysts were picking.

Net profit climbed to $14.8 million, or 6.96 cents per share, in the 12 months ended Dec. 31, from $4.3 million, or 2.39 cents, a year earlier, the Wellington-based company said in a statement. That was ahead of the company's initial public offering forecast of $14.3 million.

Underlying profit, the company's preferred measure which removes unrealised movements in the value of its property, jumped 88 percent to $15.2 million, ahead of the IPO forecast of $9.7 million.

Last month, Summerset said it beat its annual sales targets with 331 occupation rights changing hands, and last year raised its forecast build target to 300 units a year by 2015.

Total revenue climbed by a third to $53.2 million in the year, including a $15.1 million gain in the fair value of investment property, while operating revenue gained 13 percent to $38.1 million.

The board declared a dividend of 2.5 cents per share, and has set up a dividend reinvestment plan with the support of cornerstone shareholder Quadrant Private Equity. Forsyth Barr analyst Jeremy Simpson was expecting a dividend of 2.1 cents per share.

"Our results were driven by very good sales and a continued strengthening of the company's internal development capabilities," chief executive Norah Barlow said in a statement. "Our strong sales of occupation rights, range of quality new sites, and increased efficiency through the inhouse management of the development and construction process has increased the rate at which we can expand."

This week, Summerset's plans had a spanner thrown in the works by the Auckland Council turning down consent for a planned village on a 7.6 hectare site in Hobsonville, a decision that's been appealed.

Barlow told BusinessDesk the decision won't impact on Summerset's build plan, with a handful of other new villages in the pipelines and cheaper development coming from internalising that management.

She said she's optimistic about the company's future, with demographics for over-75s and over-80s set to double between 2011 and 2031, and Summerset likely to reap the benefit from that population shift.

The shares gained 2.8 percent to $2.55, and have advanced 11 percent this year. The stock is rated an average 'outperform' based on four analyst recommendations compiled by Reuters, with a median target price of $2.64.

Today marks the end of the escrow period for Quadrant Private to keep its majority stake in the company. Barlow said she hadn't heard whether the firm had decided to sell down.

BusinessDesk.co.nz

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