Summerset annual profit more than doubles to record

Summerset Group [NZX: SUM], whose shares have made almost three times the gains of the NZX 50 Index since listing in 2011, said annual profit more than doubled to a record as sales of occupation rights in its retirement villages reached an all-time high.

Net profit rose to $34 million, or 15.87 cents a share, in calendar 2013, from $14.8 million, or 6.9 cents, a year earlier, the Wellington-based company said in a statement. Revenue gained to $45.2 million from $38 million.

The company has 18 villages and a land bank equivalent to 2,100 retirement units after buying five sites in 2013. It opened the doors to facilities in Dunedin and Katikati last year and began construction at its Karaka and Hobsonville sites. Planning approvals are underway for villages in Lower Hutt, Ellerslie and New Plymouth. Total assets rose 20 percent to $845 million last year.

The rapid pace of growth in 2013 means growth rates may not be as sturdy in the current year as the company spends money to acquire sites and build villages ahead of making sales. Summerset has set a target of reaching a build rate of 300 units a year by the end of 2015 and chief executive-designate Julian Cook said the company is "well placed to reach our targets going into 2015."

"We don't expect earnings growth to be as fast as last year," Cook told BusinessDesk. "It will be a temporary effect because we're growing so fast." He declined to give specific guidance.

The company lifted its full-year dividend 3.25 cents a share, up 31 percent from a year earlier, though below the 3.5 cent payment forecast by analysts at First NZ Capital. Summerset has a dividend reinvestment plan in place.

"The business is in a very strong growth phase and shareholders would like us to use the money to fund that growth," Cook said.

Summerset shares last traded at $3.33. They are rated 'hold' based on the consensus of five analysts polled by Reuters, with a median price target of $3.55.

The company has sufficient funding to meet its growth needs and doesn't plan to return to the market any time soon for more, Cook said. It had about $3 million of cash at Dec. 31 and a secured bank loan facility of up to $180 million, of which $105.2 million has been drawn, its accounts show.

Last month the facility was extended to June 2018 from January 2016. The company's weighted average interest rate last year was 3.82 percent, down from 4.28 percent in 2012.

(BusinessDesk)