Retirement village operator Summerset posts $260m-plus half year profit and confident it can get through a long lockdown

Tuesday, 24 August 2021

Retirement village operator Summerset has posted a leap in half year profit to $263.8 million, and says it can get through a long lockdown if necessary.

Chief executive Scott Scoullar said it had the capacity to get through an extended lockdown, with the ability to borrow another $850m from banks.

About 30 per cent of its business was in Auckland, less than some of its competitors, Scoullar said.

Its $263.8m after-tax profit for the six months to June 30, 2021 has been boosted by a jump in property values and booming sales.

**READ MORE:

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* Summerset opens new chapter starting soon to build its first Australian retirement village

* Record sales for Summerset in first quarter 2021 continues post-lockdown robust sales trend

* Covid-19 cuts the value of Summerset's retirement village units sending profit plummeting to $1m.

**

The first lockdown brought home to many people the advantages of retirement village living and that showed in the half year result. It was the highest half year of trading ever for the company, Scoullar said.

“We are continuing to see strong demand for our brand of retirement living.”

Nearly 60 per cent of villas in its developing villages nationwide were pre-sold.

One of the country’s six big village operators, Summerset sold 545 units in the six months to the end of June 30, 2021, a record for a half year.

Scoullar said prices for occupation rights of units rose about 8 per cent in a year, substantially behind the 28 per cent rise in residential property prices nationally.

Summerset had been careful with pricing and had raised prices enough to cover the increased costs of building.

The $263.8m profit was driven by a $260m lift in the value of its investment properties (units and apartments).

The $260m gain was made up of an 8 per cent increase in its existing assets and new properties built.

It compares with just $1m profit in the previous 2020 half year, dragged down by a $14.7m cut to property values, because of the uncertainty surrounding the impact of Covid-19 last year.

Its underlying profit, excluding property revaluations, came in at $75.5m, up 68 per cent on the first half in 2020. Also, a record for a half year was its building and delivery of 347 new units.

Summerset has 6,600 residents, 1900 staff and 4669 units in 33 villages.

Summerset has a smaller proportion of care beds in its villages than Ryman Healthcare and less staff because of that. It has approximately one staff member for about every 3.5 residents as opposed to Ryman’s one staff to every two residents.

Scoullar said the current lockdown was a reminder that New Zealand was still operating in an environment dominated by Covid-19.

“We have moved quickly to keep our residents and staff safe by restricting entry to our villages, and protective measures such as having care staff in masks and working in cohorts were already in place when the new community case was announced.

“We have been here before, and are well-placed to look after our residents’ health and wellbeing once again.”

The record sales were buoyed by new villages in Te Awa, Napier, Bell Block, New Plymouth, and Richmond, near Nelson.

Its development margin fell slightly to 21.6 per cent, from 22.3 per cent for the same period last year.

Total assets grew to $4.4 billion, up 27 percent on the previous half year.

To meet growing demand, it would lift its build rate for this year from between 500 and 550 units to 550 to 600, plus 52 care beds, Scoullar said.

The company has just confirmed the purchase of another New Zealand site, at Kelvin Grove in Palmerston North for a village offering more than 300 retirement units.

That boosted its land bank and gave Summerset enough secured land to more than double the size of its current New Zealand business, Scoullar said.

It also announced the purchase of its fourth site in Australia, at Craigieburn, in north Melbourne.