File pic Photo: 123RF
Retirement village operator Summerset's bottom line profit has fallen 23 percent as it faced higher tax costs and due to a smaller increase in property values, but leaving aside one-offs, its underlying profit was steady.
Key numbers for the six months ended June compared with a year ago:
- Net profit $102.2m vs $133.1m
- Revenue $151.6m vs $128.2m
- Underlying profit $89.9m vs $87.2m
- Income tax (expense)/credit ($18.6m) vs $5m
- Interim/final dividend 11.3 cents per share vs 11.3 cps
The NZX-listed company's underlying profit was at the upper end of the $87 million to $90m guidance it provided in July.
"We feel, in the current market, we've shown the continued strength of our sales pipeline, our disciplined approach to costs and the demand for our retirement living option despite the weak macroeconomic conditions we find ourselves in," chief executive Scott Scoullar said.
He described the result as "subdued" but "credible" given challenging property market conditions, which Scoullar said were "the worst that I've seen" in his 11 years at the company.
The one-off tax cost related to a change in government policy on depreciation of building structures.
Six-month sales rose 22 percent to 588 - the highest first half the company has recorded, with strong resales.
Scoullar said the property market saw a soft start to the year, meaning prospective residents took longer to sell their homes before they moved into a retirement village.
Summerset also announced the purchase of a new site in Napier, which would have 300 units.
The company said its development margin was lower at 28.3 percent, due to competition pressure as a number of the new facilities it had built had care-based products, which carried a smaller margin.
'Concern' at aged care funding 'failures'
Scoullar said Summerset and other aged care sector operators were "concerned" about "government underfunding" in the sector.
"Despite the industry's continued raising of this issue, successive governments have failed to take the risks to aged New Zealanders and the wider health system seriously," he said.
Scoullar warned it would mean more elderly people requiring the public healthcare system.
"Health New Zealand's most recent offer of a 3.2 percent increase in aged care funding is well below the 11 percent required to simply cover aged care providers' rising costs over the last 12 months," he said.
Scoullar said 60 percent of aged care was provided by non-profit or charity services, and many were closing or reducing aged care beds.
"We'll continue to provide care, as it's highly valued by our residents, but with the funding model the way it is we are focusing our care offering on smaller care facilities that are targeted at our village residents only."