Summerset profit up 78pc after strong sales growth

New Zealand's second-largest listed retirement business, Summerset Group, pushed up net after-tax profit 78 per cent to make $90.3 million in the latest half-year compared to $50.6m in the previous period.

The business, second only to Ryman Healthcare, owns 2999 retirement village units and accommodates more than 4400 residents in its 22 villages but it is expanding fast with a land bank capable to taking a further 2670 units.

Chief executive Julian Cook said Summerset's underlying profit, which excludes unrealised valuation gains in the fair value of investment property, was $35.7m for the half year to June 30, up 45 per cent on the same period last year.

The company had a strong half-year, with good sales levels and a record development margin of 28 per cent. It sold licenses to occupy 178 properties in the half-year and made resales of existing properties of 144 places, up from 123 in the previous period.

Retirement village residents usually sell their licenses to occupy back to Summerset when they become ill and move to higher-care places in the same villages, or die.

Cook expressed delight with the financial result.

"This is particularly pleasing. We have previously signalled we are seeing cost pressure in the Auckland construction market and despite this we have delivered our strongest development margin for any six-month period. This has been driven by our in-house construction model and strong demand for our homes," Cook told the NZX.

The total value of assets for the group grew from $1.5b last year to $1.9b this year.

New sales and resales of occupation rights were 6 per cent higher than the first half of 2016, with 171 dwellings delivered.

Cook said the company's development pipeline was weighted towards the second half of the year.

"We are on track to build approximately 450 retirement units across our villages in 2017 and expect new sales levels over each half of the year to reflect this," Cook said.

Summerset's total current land bank represents approximately 2670 retirement homes and 412 care beds, including land in Christchurch's Avonhead, the business said.

Summerset paid shareholders an interim dividend of 3.9c.