- Retirement village operator, Summerset Group Holdings Limited reported underlying profit of $45.1 million, down by 6% on 1H19 while the reported (IFRS) profit after tax was $1 million in 1H20.
- Summerset closed its five retirement villages on 12 August 2020 in Auckland, with Alert Level 3 put in place.
- Post April-May lockdown, the company witnessed robust rebound in sales as well as settlements.
The resurgence of COVID-19 cases after New Zealand marked its 102 days without any community transmission has sharpened the focus on the aged care centres with older adults highly susceptible to the severity of the infection. The Pacific Island nation was able to dodge the pandemic with its prompt action and relative remoteness from other parts of the world. However, the recent turn of events forced the Government to postpone the elections for four weeks. The election, which was earlier due on 19 September, is now scheduled to be held on 17 October 2020.
Summerset Group Holdings Limited (NZX: SUM) closed its five Auckland-based retirement villages on 12 August 2020, with Alert Level 3 put in place. Notably, the restrictions include no visitors on sites, testing of temperature of staff as well as face masks being worn by the staff in care centres.
As a precautionary measure, the Summerset CEO, Julian Cook, stated that centres across the country had been closed to visitors. At the same time, he indicated that it would be too early to gauge how the recent pandemic developments would impact the business in 2H FY 2020.
The graveness of the situation associated with the aged care facilities is such that even one case can wreak havoc in the entire centre.
In the wake of changing circumstances, when many healthcare players managing the aged care facilities are adopting a concerned stance for evading pandemic, let us explore how shares of Summerset Group Holdings Limited are performing and its business performance in the pandemic-ridden-year 2020.
A Glimpse at the Movement of Summerset Share Price
Impacted by overriding worries associated to the health and well-being of older adults, especially when COVID-19 vaccine or anti-coronavirus drugs remain undiscovered, the shares of Summerset Group Holdings Limited witnessed staggered movement since the pandemic outbreak in March. However, the stock has demonstrated a growth trajectory in the past one month, giving a positive price return of ~12.51 per cent.
A fresh dose of worry has been garnered with the re-emergence in the cases, which could impact investors’ sentiments.
Lens Through the Latest Financial Results
Summerset indicated a rebound in sales and settlements post the April-May Lockdown. While the underlying profit of the Group dropped by 6% on 1H19 to $45.1 million, the reported (IFRS) profit after tax has slumped drastically by 98.9% from $92.6 million in 1H19 to $1 million in 1H20.
The negative fair value movement in investment property has primarily led to the reduction in IFRS profit after tax in comparison to prior periods. The Company indicated that the negative movement was owing to the valuer’s more conservative house price inflation forecasts along with the fewer units delivered in 1H20 with COVID-19 related restrictions on construction.
Snapshot (Source: Company Reports)
As at 30 June 2020, total assets were $3.4 billion, up 13% on 30 June 2019, while net assets stood at NZ$1.1 billion. The Company posted development margin of 22.3%. It is in line with previously signalled expectation of margins in the range of 20-25%.
The company’s Board, after the consideration of recent COVID-19 developments, has declared an unimputed interim dividend of NZ6.0 cents per share. The record date will be 31 August 2020 while the payment date is 11 September 2020.
Touring the Key Operational Highlights of Summerset
Summerset, in the half-year, delivered 139 new homes while anticipating the delivery between 300-350 homes by the end of the year. The delivery would depend on the current and possible future lockdown restrictions in the upcoming months. Notably, the company anticipated the build rate of 400 retirement units for the year 2020 before the pandemic.
Meanwhile, over the six months, the Company launched three new retirement villages along with opening its main building at its Casebrook village stationed in Christchurch. Significantly, the new villages lie in Napier, Tauranga, and New Plymouth.
The company, in early March, opened its three-storey main building having a centre, 56 serviced apartments and 20 memory care apartments which were designed for people with dementia. Summerset indicated that over half of the apartments were sold in three months while the 43-bed care centre was almost full.
Furthermore, Alzheimers New Zealand, in April, accredited Summerset as dementia friendly after 18 months of work towards meeting the award’s standards.
Furthermore, development approval was lodged by Summerset for its first Australian retirement village in Cranbourne North, situated in Melbourne. Mr Cook indicated that the Company hoped the receipt of Cranbourne-related approval and start preliminary earthworks before the end of 2020.
Quickly Exploring Share Price trends of Other Age Care Providers
As on 18th August 2020, Oceania Healthcare Limited (NZX: OCA) closed at NZ$1.000 per share while Arvida Group Limited (NZX: ARV) ended the day’s trade at NZ$1.510 per share. Meanwhile, Ryman Healthcare Limited (NZX: RYM) and Metlifecare Limited (NZX: MET) closed at NZ$13.000 and NZ$5.910, respectively.
On the YTD basis, the stock of SUM has witnessed a fall of ~7.07% while, in the span of past 3 months, the stock rose by ~38.99%.