Summerset chief executive Scott Scoullar. Photo / Supplied
Summerset chief executive Scott Scoullar. Photo / Supplied
Retirement village operator Summerset Group is in an expansion mood, buying two new sites in the South Island and investing more than $400 million in building 600 more units.
Summerset will be developing new villages at Mosgiel, and Rolleston near Christchurch, which is predicted by Stats NZ to have thehighest population growth in the country over the next 30 years. The first units will be delivered in the 2026 financial year.
Scott Scoullar, Summerset chief executive, said the company has the largest landbank of units in the retirement village sector and provides enough secured land to more than double the size of its current New Zealand business.
Presently, Summerset operates 18 villages in the country with 5670 units and 1161 care beds, and another 6060 units and 1435 care beds landbanked. It has $6.3 billion worth of assets, representing net tangible assets of $9.88 a share.
Summerset reported record underlying profit of $87.15 million, up 5.7 per cent, for the six months ending June compared with the previous corresponding period.
Its revenue increased 12.4 per cent to $128.24m and net profit was $133.06m boosted by property revaluation of $131.5m. It is paying an interim dividend of 11.3c a share on September 19.
Rolleston near Christchurch is predicted to have the highest population growth in the country over the next 30 years. Photo / Supplied
Summerset recorded 483 sales comprising 241 new and 242 resales in the first half, and uncontracted new sale stock was down 17 per cent from last year.
Scoullar said the first quarter of 210 total sales reflected lower turnover in the housing market and in the second quarter a record 147 resales were settled.
“The result is pleasing, as the business performed solidly through a challenging economic environment over the first six months and continues to lay the platform for ongoing growth.
“Our strong financial discipline has put us in a good position, our gearing ratio is 35.5 per cent (28.9 per cent with Australia growth related debt excluded), and we expect this to remain well within our target range of 30-40 per cent,” said Scoullar.
Arie Dekker, head of research with Jarden, said given the conditions in the housing market the sales, both new and resale, were pretty good. The reduction in the new sales inventory was pleasing.
“Summerset continues its development at a lot of sites and it’s part of their strategy to add flexibility to their portfolio,” Dekker said.
Aaron Ibbotson, senior analyst equities with Forsyth Barr, said Summerset had strong development margins, deferred management fees were a little weaker and debt went up $200m - but there was nothing dramatic with the numbers.
During the first half, Summerset delivered 152 units over nine sites and construction is taking place in 16 villages, providing $250m in positive cash flow.
Scoullar said deliveries were weighted towards the second half and the company expected to deliver 625-675 units this year.
The company has become the second-largest home builder in New Zealand, and its development margin has increased from 28.1 per cent (in the first half of 2022) to 33.5 per cent.
Three new villages, Milldale in Auckland, Lower Hutt and Waikanae, are opening in the second half of this financial year, and Summerset is moving in Victoria with the first village, Cranbourne North in Melbourne, under way. Seven villages totalling 2100 units are planned in Australia.
Scoullar said Summerset and all New Zealand operators continue to be concerned about under-funding in the wider aged care sector. The under-funding contributed to more than 1000 beds closing last year.
The government’s collective 10 per cent increase to funding was a positive step covering recent inflationary cost pressures but didn’t address the pay relativity between staff in aged care and in public hospitals.
“This situation is not sustainable, nor fair to New Zealanders, and we will continue to champion for better outcomes for all,” Scoullar said.
Summerset supported the recent draft findings of the review of the Retirement Villages Act 2003.
Scoullar said Summerset’s business practices aligned with the vast majority of the recommendations within the report.
“We don’t charge weekly fees after residents vacate their unit, we don’t charge additional fees for maintenance or repairs, and our advertising does not guarantee services which are subject to availability.
“We also have plain English contracts that are easy to understand. We are very comfortable with the services we offer and that we are not engaging in practices that disadvantage our residents,” Scoullar said.
