Newly listed retirement village developer and operator Summerset Group Holdings has reported a net profit after tax of $4.3m for 2011, down from its prospectus forecast of $5m, which the company said was due to non-cash accounting adjustments.
Summerset's "underlying'' net profit - the number preferred by market analysts - came in at $8.1m, compared with its initial public offering (IPO) forecast of $6.0m.
Australia's Quadrant Private Equity offloaded 30 per cent of its Summerset holding through last year's IPO, but would have sold down more of its 97 per cent stake if market conditions had been more favourable at the time.
Summerset managing director and chief executive Norah Barlow said the Summerset's net profit forecasts were put together on the assumption that Quadrant would sell down a greater proportion of stock, which would have meant that continuity, for tax purposes, would have been broken.
As it turned out, Quadrant sold a smaller-than-expected stake, which meant continuity remained intact, so Summerset was not able to book those tax adjustments.
However, she told APNZ that all the company's "operating metrics'' were running ahead of the prospectus forecasts.
Sales of occupation rights in the 2011 year were the highest for Summerset since it was established in 1997, she said, and were up on its IPO forecast by 6.0 per cent.
Barlow said company had a stronger-than-expected fourth quarter, which had flowed through into the first quarter of the current year, but said it was too early to upgrade its forecast for 2012, which was for an underlying net profit of $9.75m.
Summerset's net operating cash flow was also up on IPO forecast by 14 per cent at $44m -- driven by higher occupation rights sales and a better than expected operational performance.
The company, New Zealand's third biggest retirement village operator, runs along similar lines to its far larger rival, Ryman Healthcare.
James Schofield, research analyst at Craigs Investment Partners, said Summerset's share price, on a net tangible asset backing basis, was at a 45 per cent discount to Ryman's.
"After its recent IPO, Summerset is unproven, the key question is execution of growth over the next 12 months and beyond,'' Schofield said in a research note. Schofield said the result should give the market confidence that Summerset can start to close the valuation gap with Ryman over the long term.
Summerset shares last traded at $1.44, up 2c from Tuesday's close. The shares were issued at $1.40 at last year's IPO.
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