Sales up, but profit down for Summerset

Friday, 28 February 2025

Retirement village giant Summerset Group had a record year of sales over the year to December 31, but it was not enough to prevent a steep fall in its after-tax profit.

The NZX-listed company announced it made $339.8 million after tax in the 2024 financial year, and that was a 20.1% decline on the $436.3m profit it made the previous year.

The decline was largely due to the fair value movement of its investment properties in 2024, compared with 2023, the company said.

It delivered $111.8m new retirement units over the year, down from $159.1m the year before, and the decrease included fewer new units.

But underlying profit was a record $206.4m, up 8% on the last financial year, while its total revenue was up 18% to $319.9m, and it had net operating cash flow of $443.2m.

The company sold 1238 occupancy rights agreements (ORA) for units in its villages, its highest number ever and an increase of 12% on the previous year which was itself a record sales year.

Shareholders will get a final dividend of NZ13.2 cents per share.

Summerset chief executive Scott Scoullar said the results showed the strength of the company’s balance sheet despite trading in conditions some commentators said were worse than the Global Financial Crisis.

“We have worked hard to control our costs, our cash flow is improving, our asset base is strong and our balance sheet is well positioned.”

But the company’s broadacre build strategy was a continued strength, he said.

“We continue to see the benefits of our regionally diverse portfolio with eight regions seeing over 30 sales settlements across 2024, highlighting the broad appeal and strength of our villages nationwide.

“When we exclude the three new village centre buildings we opened this year our uncontracted stock is down between 20-50% year-on-year across our home types, a very pleasing result in a tough market.”

The company continued to develop new retirement homes, and was building on 20 sites across New Zealand and Australia in 2024.

It met its forecast build target for 2024, delivering 676 ORA homes in New Zealand and 32 in Australia, a 10% increase on 2023, and completed some significant projects including the main buildings of its flagship St Johns village in Auckland.

New sites - in Napier, the Kāpiti Coast, and Auckland’s North Shore - and land extensions at its Boulcott (Lower Hutt) and Blenheim sites had been purchased for future development.

Summerset now had 6671 retirement village units and 1299 aged care units, a land bank total that would allow a further 7543 units to be built, and total assets of $8.1b, up 16% on 2023.

While ORA sales across the portfolio of villages were strong, only 30% of the completed units in its new, high profile, $350 million St Johns village have sold to date.

Scoullar said St Johns, which opened in October, was a unique opening for Summerset as it delivered a large percentage of the village’s apartment homes in the first stage.

“We typically develop broadacre villages where we deliver homes in a staggered process across multiple years, but the nature of St Johns meant we delivered 60% of its homes on day one.

“Having care available immediately, along with its facilities increases the appeal to our prospective residents, but it does mean we have higher levels of uncontracted stock than normal.”

He was pleased with the amount of homes under contract, and said the 30% figure compared favourably with similar retirement villages in the area which had been open longer.

More than 8700 people now live in Summerset’s 54 villages,and they are staffed by more than 3000 employees.

Scoullar said Summerset would continue to grow and would bring more New Zealanders and Australians into its retirement villages.

But the company was considering changes to its care model due to aged care underfunding in New Zealand, and the major gap between its funding and the costs of running its care centres, he said.

Summerset’s fortunes contrasted with its fellow retirement village operator, Ryman Healthcare, which announced on Monday that it was seeking to raise $1 billion of new capital to reduce its $2.6b debt to a more “prudent” level.

Ryman and Summerset are the two biggest retirement village operators in New Zealand, but Ryman has the biggest share of the market.