Profit more than doubles for Summerset

See also: Analysis: Summerset's profits taking off

Summerset Group [NZX: SUM] more than doubled first-half profit as it boosted sales after opening four new villages in the second half of 2014.

Profit at New Zealand's third-largest listed retirement village rose to $35.7 million, or 16.33c per share, in the six months ended June 30, from $15.3 million, or 7.04c, a year earlier. Revenue rose 29% to $32.6 million as sales of occupation rights jumped 38% to a record 270 for the Wellington-based company. 

Underlying profit, which excludes the impact of unrealised property valuation gains, increased 81% to $17.1 million in the first half, and the company reiterated it's on track to post full-year profit on that basis of between $32 million to $34 million, up from $24.4 million last year.

Summerset's earnings growth is accelerating as it benefits from opening new villages in Karaka, Hobsonville and New Plymouth, and almost doubling the size of its Trentham village.

The company says it's on track to deliver 300 retirement units for 2015, and raised its target for 2016 and beyond to 400 units a year.

"A large contributor to the growth seen in this period relates to the four new villages opened in the second half of 2014," chief executive Julian Cook says. "The company is well funded (and) has a good land bank in place for future growth."

Summerset improved its development margin to 18.4% from 15.7% in 2014 as it takes management of construction sites in-house. It says there is potential for the development margin to further increase to around 20% over time.

To help fund its future growth, Summerset increased its bank funding lines to $450 million from $255 million. It had $161 million of debt at June 30, up from $132 million a year earlier. Mr Cook says he  is confident the business will remain prudently geared given its strong earnings growth.

Summerset says the opening of its Wigram village in Christchurch and three new care centres will likely see some additional costs in the second half of this year. Expenses rose by a third to $27.2 million in the first half.

The company will pay a dividend of 1.85c per share on September  7, up from 1.4c in the year earlier period. Its policy is to pay 30-50% of annual underlying profit in dividends and payments will likely continue to be at the bottom of the range given the growth opportunities for the business, it says.

Shares in Summerset last traded at $4.13 and have surged 49% so far this year. The stock is rated an average 'hold' according to analyst recommendations compiled by Reuters.

(BusinessDesk)