Summerset Annual Meeting – Chairman and CEO Addresses

Summerset Group Holdings Limited
Level 27 Majestic Centre, 100 Willis St, Wellington
PO Box 5187, Wellington 6140
Phone: 04 894 7320 | Fax: 04 894 7319
Website: www.summerset.co.nz


NZX & ASX RELEASE

27 APRIL 2018

SUMMERSET ANNUAL MEETING – CHAIRMAN AND CEO ADDRESSES

Chairman’s Address

Welcome and thank you for joining us at Summerset’s 2018 Annual Meeting.
In November last year Summerset celebrated its 20
th
year of operation. With 23 villages and
another seven for development in New Zealand, Summerset has grown quickly since its first
village opened in Wanganui in 1997.
We have more than 4,700 residents, 500 more than a year ago and 1,200 staff, 200 more than a
year ago, and we continue to be New Zealand’s fastest growing retirement village and aged care
provider.
Success to us means delivering results for our shareholders, our residents, our staff and playing
a positive role in the community at large. I will touch on each of these areas in succession.
In 2017 we also celebrated our sixth year since listing on the NZX. Since listing we have more
than doubled our size and are likely to double again in the next five years as we continue to
grow and as the 70 plus population continues to increase.
In 2017 we delivered an underlying profit of $81.7million, up 44% on the same period last year
and a net profit after tax of $223.4 million, a 54% increase on 2016.
We achieved 682 occupation right sales (new sales and resales), met our forecast build rate of
450 new retirement units, 10% more than the previous year and our development margin hit
27.3%, up from 22.2% in 2016.
Our strong profit growth has been driven by strong demand for our homes, the continued benefits
of in-house construction of new villages and the well run operation of our existing villages.
Last year we saw good demand for our homes across the country despite the slowing Auckland
general residential property market. This reflects the demographic we serve.
In 2017 we expanded our offering with land purchases in Kenepuru in Wellington, Avonhead in
Christchurch, additional land alongside our Casebrook village and we opened the main building
at our new Ellerslie village. When completed the Ellerslie village will house 400 residents, freeing
up the equivalent of about 18 hectares of residential land in Auckland.

We also applied to Auckland Council for resource consent to develop 340 homes on 2.5
hectares on St Johns Road in Auckland and to Tasman District Council for resource consent for
our proposed village in Richmond. Plans for our Boulcott, Lower Hutt village continue to
progress with the submission of a resource consent application to Hutt City Council.
Design planning for Summerset’s seventh Auckland village in Cheshire Street, Parnell is also
moving ahead.
Construction of our Casebrook village in Christchurch and Rototuna village in Hamilton is
progressing well. Last month residents moved into the first two and three bedroom villas and
townhouses at Casebrook, while the first homes at Rototuna will be available in June this year.
We recently announced the purchase of a new development site at Te Awa in Napier, which
brings our number of sites to 30 across New Zealand.
We also continue to invest in our older villages, with the recent completion of new recreation
centres at Trentham and Levin.
At the end of 2017, Summerset’s total land bank represented 2,841 retirement units and 396
care beds. This is a total of around six years’ supply based on our intended build programme of
retirement units in 2018 of around 450 units.
Looking at the funding of our operations, last year we issued a $100 million retail bond. This was
a first for the retirement and aged care sector and it has allowed us to diversify our funding
sources and lengthen the tenor of our debt. Subject to favourable pricing and terms we plan to
access this market again in the future.
From a customer perspective we continue to focus on lifting the bar in terms of what we provide
around the country and doing our part to contribute to an industry doing the same. Last year we
were awarded the best built environment award at the New Zealand Aged Care Association
annual conference for our purpose-built memory care centre in Levin.
Our memory care concept sees people with dementia living in their own one bedroom
apartment, within a secure memory care centre. This gives them their own home and a sense of
independence in a safe and caring environment.
Summerset is the first in New Zealand to launch this style of apartment living for people with
dementia and we will be implementing it in future villages, starting with our Casebrook and
Rototuna villages which are under construction now.
Those of you who follow the Australian press will have seen much commentary over the last
year around the retirement and aged care sectors with the Four Corners series on issues within
Aveo being the most notable. The New Zealand market is considerably different with a much
stronger regulatory regime and businesses with a greater customer focus. However, we cannot
be complacent and we must be focussed on providing quality services to our residents and
doing it in the right way. Many of the complaints in Australia are around complex and onerous
contract terms and over businesses simply not “doing the right thing”. I will touch on Australia
later but in many ways this is our opportunity in Australia, to provide a better quality service.

I will turn to our staff now. Last year we were delighted by the previous Government’s decision to
increase caregiver wages and followed this up with our own market leading staff benefits which
Julian will tell you about shortly.
At last year’s Annual Meeting some of you asked what we were doing to increase wages for our
cleaners.
On the first of April this year, we put in place wage increases for our housekeepers, laundry, café,
and kitchen assistants, which has seen their hourly wage increase to $17.25 an hour – 75 cents
more than the Government’s current minimum wage. We are committed to paying all staff above
the minimum wage and are delighted to offer this increase in wages to our hardworking staff. We
plan to keep these wages above the minimum wage over time.
We are also putting increased focus on the social and environmental sustainability of our business
as we are aware that this is an important part of the way that we operate. Summerset already
undertakes a range of activities that contribute to environmental sustainability. But we are in the
early stages of our sustainability journey, and over the coming year will review our approach to
sustainability to improve our contribution in this important area.
Last year I indicated we would commence investigating Australia as a potential market for
expansion. Since that time we have been working through assessing this market and how we
would position ourselves and operate within it. We have now established an office in Melbourne
with a dedicated team headed up by Paul Morris, our former GM Development, who is now GM
Development Australia. We continue to work through the appropriate due diligence required
before entering a new market. We have no further announcements to make at this time, suffice
to say we are taking this very seriously and have dedicated the appropriate resource and focus
to the opportunity.
Summerset will continue to work hard to deliver high quality retirement living for its residents and
subsequent financial results that benefit our investors, residents and staff.
Thank you for your continued support.
CEO’s Address

Thank you Rob. Good afternoon everyone.
2017 was an exciting year for us as we celebrated the 20th anniversary of our first village in
Wanganui.
Summerset’s beginnings go back to the mid-1990s, when Summerset’s founder John O’Sullivan
visited his grandmother in an old fashioned geriatric ward in Waikanae.
She was in a room which housed a number of people who were only separated by plastic
curtains between the beds.
John remembers stretching his arms out and being able to touch the walls and thinking there
had to be an opportunity for proper aged care, where everyone had their own room and facilities.

His philosophy, which continues to this day, is that it has to be good enough for nana.
This was the start of Summerset. We have come a long way since then but we continue to focus
on ensuring that we would be proud to have our own relatives, and indeed one day ourselves, in
our villages.
From a business perspective we are tracking well. Underlying profit in 2017 of $81.7m was up
44% on 2016. Our IFRS profit for 2017 was $223.4m, up 54% on 2016. Since listing our
underlying profit has grown at a compound annual growth rate of 47%. We continue to expect
good growth in earnings as we continue to expand and improve on the business, albeit not quite
at this rate of growth.
As shareholders you know we pay a modest dividend with the bulk of our earnings being
reinvested into the business. In 2017 our dividend, after allowing for the dividend reinvestment
programme was just over $16m compared to IFRS profit of $223.4m. This reinvestment has
allowed us to continue to grow the business, to improve on what we do for residents, what we do
for our staff and how we contribute to the wider community. We see these earnings results as
positive for shareholders, as a fair return on the investments we have made and as essential for
the continued growth in Summerset and improvement in what we do.
At the full year results we signalled that we saw our New Zealand build rate moving to around
600 retirement units over the coming two to three years. At this point we do not expect to
increase our New Zealand build rate beyond this unless we saw particularly strong demand for
our product. We see further growth likely to come from Australia, which market we are currently
investigating.
Over the next period we expect to increase our land bank to support this build rate. We are a
New Zealand wide operator and our land bank acquisitions are likely to reflect this. The diversity
of our operations has been a strength for us in the past as we have seen different dynamics at
play in different parts of the country over time, for example currently the Auckland residential
market is flattening despite a still heated construction market. This is in contrast to much of the
rest of the country.
We continue to build our construction and development teams and have brought in a number of
high quality hires. We expect the pressure in the Auckland construction market to continue
although the exit of Fletcher Building from its Building and Interiors unit has shifted the dynamics
considerably.
You will have seen we undertook a rebrand last year across our business. This has been well
received by residents. In particular the new quarterly magazine which we publish has been very
popular.
Our resident satisfaction scores continue to be high with both village and care resident
satisfaction reaching 97% last year. While these are good, our philosophy is that whilst 97%
might be satisfied, we need to keep working on the remainder and even everyone in the 97% will
have a suggestion or two on how we could do better.
For the third year in a row, we received a Highly Commended award in the Aged Care and
Retirement Villages category of the annual Reader’s Digest Trusted Brand awards. As Rob

mentioned, in September we also received the New Zealand Aged Care Association best built
environment award for our first memory care centre at our Levin village.
This is the first apartment style living offer for people living with dementia in New Zealand. The
genesis of this was simple: there must be a better way to care for people with dementia. We are
building these facilities into our new villages and we aim to be a leader in the dementia space.
Last year we worked on the food offering in our villages and last month introduced three new
regionally based caterers - White Tie Health Services, Kerr & Ladbrook and Cater Plus - to
provide the food at our villages. We have also employed an in-house team to cater for the
residents at our Levin and Paraparaumu villages who are working with Kapiti-based chef Ruth
Pretty on recipes.
Food is a hugely important part of our care offering, and also for our cafes. Our focus was
finding local, food providers who really care about what they do, where the owners are
personally connected, and open to resident feedback.
In the clinical space we have a number of ongoing initiatives designed to continue to lift our
standards. The roll-out of the V-Care system throughout our villages is largely complete and we
are currently testing the clinical modules on one of our sites. Increased internal audit work as
well as continued focus by the Clinical Governance Committee are seeing ongoing
improvements in this area. 43% of our care centres which have been open for longer than three
years have certification lengths of the maximum four years, with 50% having three year
certification lengths.
In the design space we have a new range of village designs being built in Casebrook and
Rototuna now. These are the culmination of a dedicated three years of work commencing with
customer focus groups and research, revision of our designs to improve what is provided for
residents, and then consenting and construction of these designs. There are a number of
improvements which feature in these designs and we have had very good customer feedback
from them.
One of the most exciting initiatives we introduced last year was a raft of benefits to reward our
staff, enhance our employee brand and improve staff retention. We now believe we have the
most compelling staff offering in the market.
These benefits include:
 Health insurance covering everyday health care costs such as GPs, dentist, physio and
optometrists
 Funeral cover - $10,000 for every permanent employee or their spouse should they need
it
 A week of long service leave – after five years’ service with Summerset
 Buyers group trade discounts and Summerset supplier discounts from a range of
companies
These benefits apply to all Summerset permanent full or part time staff, at all levels, from the
immediate commencement of their employment with us. This is on top of the government funded
pay increase for caregivers, diversional and occupational therapists.

We have also increased wages for our housekeepers, kitchen café and laundry assistants to
ensure they are higher than the new minimum wage.
In 2017, we once again offered staff the opportunity to participate in our all-staff share scheme,
with 83% of employees signing up.
In consultation with our frontline staff, we’ve also been developing a new uniform range, which
will be rolled out across all villages later this year.
Staff engagement is an important measure within any business and we were delighted to receive
an overall company engagement score of 67% last year. This is 9% above the average
engagement score of 58% for New Zealand companies and places Summerset in the highest
quartile for staff engagement among New Zealand companies. Whilst this is pleasing and
demonstrates that the work we have undertaken in this area over the last few years is delivering
results, we plan to continue to progress this area over time given its importance.
Health and Safety continues to be a huge area of focus for us. We have moved further towards
improving our systems, including the implementation of a risk management framework across
the company, taking part in two external Health and Safety audits, which identified where we are
making good progress and how we can further enhance our practices.
We have also achieved ACC accredited employer status, employed a Health and Safety
consultant dedicated to construction, employed dedicated on-site health and safety personnel for
our vertical construction sites, and have achieved positive results with our Site Safe New
Zealand audits across our construction sites.
This year we have signed a partnership agreement with New Zealand Bowls. We also provide
support to Alzheimers New Zealand, Age Concern and the Dementia Cooperative. We are
looking to grow this portfolio over time to support and encourage those who seek to raise the
quality of older people’s lives. Rob has touched on sustainability and whilst we are not an
extractive or resource hungry industry we have a part to play in this and will be working on our
approach through this year.
Finally I will touch briefly on Australia. Rob has given an outline of what we are doing in this
space. I will simply add that whilst the opportunity is exciting it is important that we plan carefully
to ensure we succeed and we are committed to doing just this.
I’d like to thank our investors who continue to support Summerset, our residents who have
chosen a Summerset village as their home, and our staff, who are bringing the best of life to our
residents every day.

ENDS

For investor relations enquiries: For media enquiries:
Scott Scoullar Michelle Brooker
Chief Financial Officer Senior Communications Advisor
scott.scoullar@summerset.co.nz michelle.brooker@summerset.co.nz
04 894 7320 or 029 894 7317 04 830 1106 or 021 225 9624

ABOUT SUMMERSET

 Summerset is one of the leading operators and developers of retirement villages in New
Zealand, with 23 villages completed or in development across the country. In addition,
Summerset has seven sites for development in Avonhead (Christchurch), Richmond
(Nelson), Kenepuru (Wellington), Lower Hutt (Wellington), Te Awa (Napier), St Johns
(Auckland) and Parnell (Auckland), bringing the total number of sites to 30.
 It provides a range of living options and care services to more than 4,700 residents.
 Four-time winner of Retirement Village of the Year and Silver Award winner in the Reader’s
Digest Quality Service Awards 2017.
 The Summerset Group has villages in Aotea, Casebrook, Dunedin, Ellerslie, Hamilton,
Hastings, Havelock North, Hobsonville, Karaka, Katikati, Levin, Manukau, Napier, Nelson,
New Plymouth, Palmerston North, Paraparaumu, Rototuna, Taupo, Trentham, Wanganui,
Warkworth and Wigram.