Summerset, the country's second-largest retirement village developer and operator, is on track to deliver a record full year underlying profit in a range of $72million to $75million; up more than $7million on last year.
Summerset chief executive Julian Cook said the strong six month period was driven by its in-house construction model and strong demand for homes, with good sales levels and record development margin of 28%.
''We have previously signalled we're seeing cost pressure in the Auckland construction market and despite this we have delivered our strongest development margin for any six month period ever,'' Mr Cook said.
As with some other competing retirement operators, Summerset oversees its own construction division, as opposed to contracting out.
An interim dividend of 3.9c was declared. Summerset shares rose more than 3% to $5.06 following the announcement.
Craigs Investment Partners broker Peter McIntyre said Summerset had delivered ''another strong result'' with clear evidence of maturity across the business, especially its further growth in resales volume and increasing diversification of earnings streams.
''Summerset is poised to deliver more new units in the second half, which should support further earnings and asset growth, notwithstanding headwinds from a softening housing market,'' Mr McIntyre said.
Summerset is targeting the delivery of 450 retirement units in 2017, while its land bank equates to about six years supply, based on this year's build rate.
Mr Cook said the development pipeline was weighted towards the second half of the year.
''We're 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,'' he said.
Forsyth Barr broker Lyn Howe said the $37.5million profit was ahead of her $30million forecast, driven by strong pricing and margins and confirmed the robustness of the retirement sector.
Summerset's development and sales track record was strengthening.
''There remains significant long-term growth potential from demographic trends. Summerset has the development expertise to capitalise on these themes, although execution risk is increasing as it tackles large and intensive Auckland developments late stage in the housing cycle.''
The level of 144 resales was up from 123 last year and was the highest level of resales in a six month period, with gross proceeds of $53.4million, up 28% on a year ago.
He said Summerset's resale margins at about 20% were below MetlifeCare, Ryman Healthcare and Oceania Healthcare's, suggesting there was less risk of margin compression for Summerset.
''Summerset remains a favoured pick in the sector on a risk-rewards basis,'' Mr McIntyre said.
The 28% development margin was up from 20.3%, and the realised development margin of $21.3million up 37% from $15.6million last year.
Mr Cook said Summerset's total current land bank represented about 2670 retirement homes and 412 care beds, inclusive of recently purchased land in Avonhead, Christchurch.
Summerset booked a record low level of new sales stock, with 128 retirement units in stock, 14% lower than a year ago
The 179 new sales, delivering 171 new retirement units, had net receipts from sale of occupation rights of $89.2million, which was flat compared with last year, driven by a lower volume of new sales within the period.
Mr McIntyre said while Summerset had more debt than some other competitors, a lot was financed by its strong cash flow position.
