Summerset Group Holdings Limited · NZX:SUM
Summerset — Debt Investor Presentation (May 2017)
45 slides from Summerset's debt investor presentation, May 2017
Slide 1: Joint Lead Managers
a JOINT LEAD MANAGERS DeutscheCRAIGS FNZC &@ FORSYTH BARR
Slide 2: Disclaimer
DISCLAIMER PLEASE READ CAREFULLY BEFORE THE REST OF THE PRESENTATION This presentation has been prepared by Summerset Group Holdings Limited (SGHL or the Issuer) The information in this document is given in good faith and has been obtained from sources in relation to the offer of bonds described in
Slide 3: Contents
CONTENTS 4 BUSINESS OVERVIEW 17 FINANCIAL PERFORMANCE 24 SECURITY STRUCTURE 32 OFFER TERMS AND TIMETABLE 37 APPENDICES 2
Slide 4: Offer Highlights
OFFER HIGHLIGHTS BOND OFFER FURTHER DIVERSIFIES FUNDING SOURCES AND TENOR ■ Total bank debt facilities of $600m ■ Net debt of $265m as at 31 December 2016 ■ This bond will be used to partially repay bank debt facilities and provide diversification of funding sources and tenor RETAIL BOND OFFER DETAI
Slide 5: Business Overview
BUSINESS OVERVIEW 4
Slide 6: Summerset 2016 Snapshot
SUMMERSET 2016 SNAPSHOT THIRD LARGEST RETIREMENT VILLAGE OPERATOR MORE THAN 4,200 748 CARE BEDS RESIDENTS IN PORTFOLIO MORE THAN 1,000 2,828 RETIREMENT UNITS STAFF MEMBERS IN PORTFOLIO 409 6 RETIREMENT UNITS GREENFIELD BUILT IN 2016 SITES LAND BANK OF LAND BANK OF 366 2,609 CARE BEDS RETIREMENT UNIT
Slide 7: Summerset Background
SUMMERSET BACKGROUND SECOND LARGEST RETIREMENT VILLAGE DEVELOPER IN NEW ZEALAND ■ Summerset will turn 20 years old this year ■ Listed on the NZX in 2011, and the ASX in 2013 ■ Nationwide provider ■ 21 operating villages completed or under development ■ 99% occupancy rate within established care cent
Slide 8: Summerset Awards
SUMMERSET AWARDS FOUR-TIME WINNER OF RETIREMENT VILLAGE OF THE YEAR ■ Four-time winner of Best Retirement Village Operator at the Australasian Over 50s Housing Awards ■ Received a Highly Commended in the Reader’s Digest Trusted Brands Survey three years running, from 2015 - 2017 ■ 94% care customer
Slide 9: Demographics
DEMOGRAPHICS UNPRECEDENTED GROWTH FORECAST IN POPULATION 75 YEARS AND OLDER ■ The New Zealand population 75 years of age or older is forecast to increase from around 300,000 currently to around 1,000,000 by 2068 ■ The current penetration rate across New Zealand for people 75 years or older living in
Slide 10: Summerset Track Record
SUMMERSET TRACK RECORD 19 YEAR TRACK RECORD OF DEVELOPING AND OPERATING VILLAGES ■ Consistent year-on-year growth in our portfolio over the last 19 years ■ Delivered 409 retirement units in 2016 and targeting a delivery of 450 retirement units in 2017 to meet strong demand *Build rate and portfolio
Slide 11: Summerset Strategy
SUMMERSET STRATEGY SUMMERSET BUILDS, OWNS AND OPERATES RETIREMENT VILLAGES IN NZ ■ Focus on continuum of care model ■ High quality care available across all villages ■ Village designed to integrate into local communities ■ Internal development and construction model ■ Nationwide brand offering ■ Cus
Slide 12: Integrated Business Model
INTEGRATED BUSINESS MODEL FULL CONTINUUM OF CARE OFFERING IS KEY TO VILLAGE SUCCESS ■ Integration of independent and assisted living with the provision of aged care is a key reason why residents choose a village ■ Aged care available at all villages to ensure residents receive full support (can move
Slide 13: Operational Overview
OPERATIONAL OVERVIEW OPERATIONS CASH FLOWS Provision of care in serviced apartments, ■ Rest home, hospital and dementia care fees care suites, rest home, hospital and 1. dementia care facilities ■ Stable cash flows Aged care ■ Includes Government funding for specified services ■ Provide a high stand
Slide 14: ORA Overview
ORA OVERVIEW HOW AN OCCUPATION RIGHT AGREEMENT (ORA) WORKS ■ Residents moving into a retirement village enter into an ORA ■ An ORA grants the resident the right to occupy a retirement unit in exchange for a lump sum payment to the operator (residents’ loans on the balance sheet) ■ Legal ownership of
Slide 15: Understanding the ORA
UNDERSTANDING THE ORA ORA’S ARE PURCHASED WITH A NON-DEMAND REPAYABLE “RESIDENT LOAN” ■ Resident purchases an Occupation Right Agreement (ORA) by providing a non-demand repayable, interest free loan ■ Key features of residents’ loans are: ■ They have no set term ■ Repayable on the resale of an ORA,
Slide 16: Resident Protections
RESIDENT PROTECTIONS RESIDENT RIGHTS PROTECTED BY A STATUTORY SUPERVISOR ■ The right of the retirement village resident under an ORA is protected by the Statutory Supervisor who has a first ranking mortgage over the land and permanent buildings owned by the Summerset company that operates the Regist
Slide 17: Our Product
OUR PRODUCT 16
Slide 18: Financial Performance
FINANCIAL PERFORMANCE 17
Slide 19: Financial Performance Overview
FINANCIAL PERFORMANCE OVERVIEW STRONG FINANCIAL PERFORMANCE OVER LAST FIVE YEARS 18 *Underlying profit differs from IFRS net profit after tax. Refer to disclaimer on slide 1
Slide 20: Income Statement
INCOME STATEMENT PROFIT GROWTH DRIVEN VIA INCREASING PORTFOLIO ■ IFRS profit of $145m and underlying profit of $57m UNDERLYING PROFIT NZ$M FY16 ACTUAL* FY15 ACTUAL* CHANGE %* continues to grow rapidly since listing on the NZX in 2011 Total revenue 86.1 68.8 25% ■ IFRS profit is up 102% and underlyin
Slide 21: Cash Flows
CASH FLOWS STRONG OPERATING CASH FLOWS ■ Significant annual net operating cash flows of CASH FLOWS NZ$M FY16 ACTUAL* FY15 ACTUAL* CHANGE %* $193m to 31 December 2016 Care fees and village services 57.2 46.4 23% ■ Investing cashflows of $200m are high relative to net debt of $265m. If investment was
Slide 22: Balance Sheet
BALANCE SHEET TOTAL ASSETS OF $1.7B WITH $0.9B ASSETS AVAILABLE AS SECURITY EXCLUDING RESIDENTS’ LOANS ■ Total assets of $1.7b, are principally made up from BALANCE SHEET NZ$M FY16 ACTUAL* FY15 ACTUAL* CHANGE %* investment property spread across the 21 villages Investment property 1,591.4 1,261.2 26
Slide 23: Development Track Record
DEVELOPMENT TRACK RECORD LAND BANK OF 2,609 RETIREMENT UNITS AS AT 31 DECEMBER 2016 ■ Experienced internal property development team allows Summerset to exercise a greater degree of control over the development and construction process ■ Significant amount of due diligence is undertaken before purch
Slide 24: Village Development Cashflow
VILLAGE DEVELOPMENT CASHFLOW VILLAGE DEVELOPMENTS ARE CASHFLOW POSITIVE ■ As debt is repaid for a village build (retirement village and care centre), it is redrawn for new retirement village builds ■ Each village project is expected to be cash flow positive ■ From the time construction of a village
Slide 25: Security Structure
SECURITY STRUCTURE 24
Slide 26: Purpose of Debt
PURPOSE OF DEBT DEBT IS USED TO DEVELOP SUMMERSET VILLAGES ACROSS NEW ZEALAND ■ Summerset uses debt to fund the acquisition of land for future development, and the development of land into villages ■ Debt will fluctuate depending upon the level of acquisition and development activities ■ Debt is typ
Slide 27: Composition of Drawn Debt
COMPOSITION OF DRAWN DEBT $307M DEVELOPMENT ASSETS INCLUDED WITHIN $0.9B ASSETS AVAILABLE AS SECURITY EXCLUDING RESIDENTS’ LOANS ■ Development projects are debt funded. Development assets exceed the value of net debt by $42m ■ All debt is associated with development activities ■ Debt holders have be
Slide 28: The Issuer & Guaranteeing Group
THE ISSUER & GUARANTEEING GROUP LISTED ENTITY SUMMERSET GROUP HOLDINGS LIMITED WILL BE THE ISSUER ■ Summerset Group Holdings Limited (SGHL) currently owns all companies within the Summerset Group ■ Summerset Holdings Limited (SHL), which is a 100% owned subsidiary of SGHL, is the bank debt borrower
Slide 29: Security
SECURITY TOTAL ASSETS OF $1.7B WITH $0.9B ASSETS AVAILABLE AS SECURITY EXCLUDING RESIDENTS’ LOANS ■ All of the debt of Summerset Group relates to VALUE OF INVESTMENT PROPERTY AS AT 31 DECEMBER 2016 development projects, with net debt of $265m at 31 December 2016 primarily funding undeveloped land, v
Slide 30: Security
SECURITY ASSETS OF $0.9B AVAILABLE AS SECURITY AS AT 31 DECEMBER 2016 EXCLUDING RESIDENTS’ LOANS ■ Total assets as at 31 December 2016 of $1.7b ■ Assets of $900m after payments made to the residents of a Registered Retirement Village supporting net debt of $265m as at 31 December 2016 * Liabilities
Slide 31: Security
SECURITY BONDHOLDERS ON AN EQUAL RANKING SECURITY BASIS WITH BANK LENDERS ■ The bonds share the security provided by the guaranteeing group on an equal ranking basis with Summerset’s bank lenders as per the Security Trust Deed ■ The bonds and bank lenders have a first ranking mortgage over undevelop
Slide 32: Loan to Value Ratio Covenant
LOAN TO VALUE RATIO COVENANT SIGNIFICANT HEADROOM ON LOAN TO VALUE RATIO (LVR) COVENANT ■ All covenants are well within bank requirements ■ Key terms of bond LVR covenant: ■ LVR must not exceed 50% ■ Reported breach of LVR on a Test Date is an Event of Review ■ If the Event of Review occurs, Summers
Slide 33: Offer Terms and Timetable
OFFER TERMS AND TIMETABLE 32
Slide 34: Key Terms of the Offer
KEY TERMS OF THE OFFER SUMMARY DETAIL Issuer Summerset Group Holdings Limited Guaranteed, secured, unsubordinated, fixed rate bonds Bondholders will share the benefit of the same security package as bank lenders. The Statutory Supervisor has first rights to the proceeds of security enforcement again
Slide 35: Key Dates of the Offer
KEY DATES OF THE OFFER OFFER OPEN 15 JUNE TO 6 JULY 2017 RETAIL BOND OFFER DATE PDS lodgement 30 May 2017 Firm bids due 14 June 2017, 12pm Rate Set Date 14 June 2017 Opening Date 15 June 2017 Closing Date 6 July 2017 Issue Date 11 July 2017 Expected date of initial quotation on the NZX Debt Market 1
Slide 36: Investment Highlights
INVESTMENT HIGHLIGHTS Compelling fundamentals in the retirement village and aged care sector, driven by an ageing population and 1. increasing market penetration 2. Significant projected demand for retirement units and aged care beds Strong cash flow and earnings growth potential from a maturing vil
Slide 37: Questions?
QUESTIONS? Ellerslie Hobsonville Karaka Manukau Wigram Katikati 36
Slide 38: Appendices
APPENDICES 37
Slide 39: Board of Directors
BOARD OF DIRECTORS ROB CAMPBELL JAMES OGDEN DR MARIE BISMARK ANNE URLWIN GRÁINNE TROUTE DR ANDREW WONG Independent Non-executive Non-executive Non-executive Non-executive Non-executive Chairman Independent Independent Independent Independent Independent ■ Over 30 years’ experience ■ Director, The Wa
Slide 40: Highly Experienced Management
HIGHLY EXPERIENCED MANAGEMENT JULIAN COOK SCOTT SCOULLAR PAUL MORRIS ELEANOR YOUNG JARROD SMITH DEAN TALLENTIRE Chief Executive Chief Financial General Manager, General Manager, General Manager, General Manager, Officer Officer Development Operations and Customer Sales Construction Experience ■ Over
Slide 41: Demographics – Market Share
DEMOGRAPHICS – MARKET SHARE AGED CARE AND RETIREMENT VILLAGE MARKET SHARE Source: CBRE as at April 2017 40
Slide 42: Portfolio as at 31 December 2016
PORTFOLIO AS AT 31 DECEMBER 2016 2,828 RETIREMENT UNITS AND 748 CARE BEDS EXISTING PORTFOLIO – AS AT 31 DECEMBER 2016 SERVICED TOTAL RETIREMENT VILLAGE VILLAS APARTMENTS CARE SUITES CARE BEDS APARTMENTS UNITS Aotea 96 33 38 0 167 0 Dunedin 61 20 20 0 101 42 Ellerslie 12 0 0 0 12 0 Hamilton 169 0 20
Slide 43: Land Bank as at 31 December 2016
LAND BANK AS AT 31 DECEMBER 2016 LAND BANK OF 2,609 RETIREMENT UNITS AND 366 CARE BEDS EXISTING PORTFOLIO – AS AT 31 DECEMBER 2016 SERVICED AND TOTAL RETIREMENT VILLAGE VILLAS APARTMENTS CARE BEDS DEMENTIA APARTMENTS UNITS Casebrook 197 0 76 273 43 Ellerslie 30 221 57 308 58 Hamilton 14 0 30 44 0 Ho
Slide 44: Five Year Metrics Summary
FIVE YEAR METRICS SUMMARY 5 YEAR CAGR* FY16 FY15 FY14 FY13 FY12 New sales of occupation rights 31% 414 333 286 228 167 Resales of occupation rights 15% 244 245 172 174 164 OPERATIONAL Total sales of occupation rights 23% 658 578 458 402 331 New retirement units delivered 27% 409 303 261 209 160 Reti
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