NZ’s second-largest village operator Summerset sees profits plunge 99% to $1M on back of pandemic and lower valuations – earthworks on first Victorian village to start by end of 2021

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Summerset has been left with a net profit after tax of just $1 million – down from $92.6 million in 1H19 – after delivering fewer units due to COVID-19 restrictions and “more conservative house price inflation forecasts by the valuer”.

In HY19, the operator’s properties had been revalued with an $87.5 million gain, but this year were devalued to $14.7 million by its valuers CBRE.

“The reduction in IFRS profit after tax compared to prior periods was primarily caused by a negative fair value movement in investment property,” the operator said.

“Adjustments related to COVID-19 uncertainty and are in line with those applied to other retirement village operators.”

CEO Julian Cook added that the reduction in investment property value represents less than 1% overall.

It was not all bad news however.

The operator still delivered 139 units for the first half of the year – even with the six-week shutdown in New Zealand – and says it expects to deliver between 300 and 350 by the end of 2020, lower than its previously forecast of 400 units.

As we reported here in early April, the operator had already cut its building forecast by 25% due to the country’s strict Stage 4 lockdown restrictions.

Underlying profit was NZ$45.1 million for FY20 – down 6% on 1H19 and just above its previous forecast of NZ$40 to $45 million.

Revenue was also up from $74 million last year to $82 million while shareholders will receive an unimputed interim dividend of NZ6 cents per share.

“Despite the impacts of COVID-19 on trading conditions in the first half of 2020 the result is pleasing and demonstrates the underlying strength of Summerset’s business,” CEO Julian Cook said. “Following the April-May lockdown we saw sales and settlements rebound strongly.”

Summerset now has 31 villages completed or under construction in New Zealand with 5,700 residents plus two sites progressing in Victoria.

Development approval has been lodged for its first village at Cranbourne North in Melbourne with plans for preliminary earthworks to be done before the end of the year, while a second village in Torquay is currently subject to master planning and engagement with Council.