Ann: ADDRESS: SUM: Annual Meeting - Chairman's and CEO's Addresses

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					SUM
30/04/2015 13:03
ADDRESS
NOT PRICE SENSITIVE
REL: 1303 HRS Summerset Group Holdings Limited

ADDRESS: SUM: Annual Meeting - Chairman's and CEO's Addresses

NZX AND ASX RELEASE

30 APRIL 2015
SUMMERSET ANNUAL MEETING - CHAIRMAN AND CEO ADDRESSES

Chairman's Address

Thank you for joining us for Summerset's fourth Annual Meeting since listing.

2014 was another positive year for Summerset, with increased growth and
profit achieved. The year was also characterised by two other things:
firstly, strong investment into new villages which will secure Summerset's
ongoing growth and, secondly, ongoing development of the business with the
goal of being a leader in this sector.

I will discuss our growth and financial results firstly. In 2014 we opened
four new villages and three village centres, building 261 retirement units
and delivering 42 care beds. We also welcomed residents to our 2,000th unit
for Summerset, which was in Katikati, and we're very proud of the fact that
more than 3,000 New Zealanders, across 20 villages nationwide, now call
Summerset home.

From a financial perspective in 2014 we delivered a record underlying profit
of $24.4 million, an increase of 10.2% on the 2013 financial year. Our net
profit after tax for the year was $54.2 million, up 58% on 2013. Sales of
occupation rights were 14% higher than in 2013, with a record 458 rights
sold. New sales growth was a key contributor to this, with 286 sales, up 25%
on the previous year. Resales of occupation rights were flat compared to
2013, a result of the natural variation of the availability of retirement
units for resale. Demand for occupation rights is very robust, and indeed at
31 December 2014 there were only 26 unsold resale units across the entire
group.

These results enabled us to declare a total dividend for the year of 3.5
cents per share, up 7.7% on the full-year dividend for 2013. This payout
represents 31% of underlying profit for the year and is in line with the
company's stated dividend policy of paying between 30-50% of underlying
profit. As the board has signalled previously it is our intention to keep the
dividend payout at the bottom end of the stated policy range due the strong
growth which the company is experiencing.

Now I would like to discuss the investment we made into new villages last
year which secure Summerset's ongoing growth. Last year we opened four new
villages and three care centres. This was a record for us both in terms of
the new villages we opened and the new care centres we opened. This is
testament to the demand we see across the country for the village and care
services which we offer. This bodes well for the future of the company.
However, opening villages and care centres does come with a short term cost.
As a result our earnings growth was slower in 2014 than previous years. We
are in this business for the long term and the investments made in 2014 are
all performing well and will deliver returns in 2015 and beyond. As the
company grows in scale we anticipate that there will be less volatility in
our earnings from such investments.

Now I shall turn to the ongoing development of the business and our goal of
being a leader in this sector. I shall talk a little about how we think about
being a leader and then move on to talk about some of the things we are doing
to accomplish this.

The average entry age of people buying independent living occupation rights
in our villages is 78-80. For care apartments and people entering care it is
higher again. Our goal is to create a community which enables people who have
chosen to enter one of our communities to enjoy their time in a meaningful
and fulfilling way, as much as is possible for them. We are very clear that
each person entering one of our communities is an individual and what is
important will differ for each person. Our goal is to facilitate a community
which allows each individual to be able to do what is important for them.
This is the opposite of an institution. We aim to create communities which
reflect the individuals in them, we do not create institutions.

There are very many ways in which we work to create these communities. Choice
is a big part of this. This extends from choices over units, choice of care
options, choice of food and many other things besides. Respect for people,
their homes and their choices is another part of this. We firmly believe that
a unit which a person has purchased under an occupation right agreement, or a
care room which they are occupying is their home and it is important to
extend all the usual courtesies. We knock before entering, we encourage
people to have pets, to have guests and to decorate the unit as their home.
Whilst these might sound like small things they are things which often set us
apart from others.

We are shortly sponsoring Atul Gawande to come to the Auckland Writers'
festival. Atul has recently authoured the book, "Being Mortal". The essence
of this book is that life should be meaningful and fulfilled wherever
possible. This is a philosophy we very much try to emulate in what we do.

We know we are doing a good job in delivering this philosophy. What our
residents and their families think of how we do things is very important to
us. Last year our customer satisfaction results were 97% satisfied or very
satisfied for village residents, and 93% for those in our care facilities.
This is an industry leading result.

But we also know that we must continue to work on our offering and build the
business to both deliver ongoing improvements to how we do business and also
to set a platform for the growth which is ahead of us.

Julian Cook commenced as CEO last year. Alongside this we have placed a
strong focus on building our leadership team for future challenges, welcoming
several new people to our Executive team and ensuring that we have a Board in
place with the right mix of skills and experience. Throughout the business
also we have been focussed on continuing to lift the level of capability of
our people, particularly those in middle management and leadership positions.

More than three years on from listing on the NZX, we continue to build the
business as planned and set strong foundations for the future. By
strengthening our systems and processes we will ensure we continue to lead in
the sector, offer the very best experience and levels of care to our
residents and prepare the business for continued growth.

We are on track to meet our targets and are in a strong position to continue
to develop more villages around the country, bringing our offering to new
markets.

An example of the work we are doing is in the care side of our business. Care
is a very important part of village life, and we are committed to excellence
in care and making a real difference in the lives of those we care for. To
this end, in 2014 we established a Clinical Governance Committee at Board
level. We also continued to strengthen our quality control and internal audit
systems, increased our investment in clinical oversight and education, and
increased the wages of the caregivers who are the heart of the care we
provide.

I will touch now on the land we have purchased in Lower Hutt and the
shareholder sponsored resolutions which we will deal with in the meeting. In
2013 we purchased land in Lower Hutt, bordering Boulcott's Farm Heritage Golf
Club. We have had strong support shown from prospective residents in the
area, with nearly 300 people registering interest.

We are currently in the process of working towards gaining consent to develop
the village. As is the case with many community developments, there has been
some local opposition to the development, including a resolution today that a
shareholder has requested we include, as is their right. This will be
discussed at the appropriate time in today's proceedings, when the resolution
is heard. The Summerset Board is unanimously in support of the Boulcott
development and the professional manner in which management has acted
throughout the process. We believe this will be one of the premier villages
in Wellington, serving a community in need of retirement communities so that
people do not need to move out of region. Over the coming months, we look
forward to continuing to work with the Council and community to make the
village a reality.

Looking to the year ahead, we are very well placed to deliver more than 300
retirement units and a development margin of 17% or greater. Our current
landbank now stands at 1,881 retirement units and 556 care beds: enough to
provide more than six years of growth at our targeted build rate of 300
retirement units per annum.

We continue to trade well, as you will no doubt know from our quarterly sales
results. In all other areas of business we are also performing well, and are
very pleased with the progress we have seen so far in 2015. At the release of
our full year earnings for 2014 we stated that we expected earnings growth in
2015 to be higher than that achieved in 2014. We continue to reiterate this.

I would like to thank you all for your ongoing support of Summerset. In order
to be the first choice provider of retirement home living and aged care
services in New Zealand, we need to be leaders in everything we do, paying
close and constant attention to every aspect of our business, making
improvements in our efficiency and in the quality of care we offer. To
deliver this level of experience and to achieve these goals we depend on the
willingness of investors to continue to support us as we grow; and for this
we thank you.

CEO's Address

Good afternoon and welcome. It's now more than a year since I began as Chief
Executive Officer, and we're at a very exciting point in Summerset's history.
While we're much younger than many others in the sector - only 18 years old -
we've achieved a significant amount in that time, and are poised for strong
growth well into the future. In the space of less than two decades we've
become one of the largest operators and developers in the retirement the
sector, and on many measures we're the fastest growing.

As of today, we have 20 villages and four land sites in various stages of
development across the country. We have more than 3,000 residents and have
built more than 2,000 retirement units. We have industry-leading customer
satisfaction ratings and are well positioned to make a real and positive
difference to people's lives, and to grow as a business at the same time.

As a business providing services to older New Zealanders, predominantly over
the age of 75, 'growth' is a word increasingly associated with this
demographic. Statistics New Zealand population forecasts show that the number
of New Zealanders aged over 75 will increase from 260,000 in 2011, to 540,000
in 2031 and then 820,000 in 2051. We are well placed to play a strong and
active role in this growth, focusing strongly on delivering an excellent
experience and quality of care for our residents.

It is this customer-centric view that, I believe, sets us apart. For us to
continue to grow and develop as leaders, it is essential that our customer
needs are foremost in our mind in everything we do. Our goal is to be the
first choice operator of retirement village and aged care services in New
Zealand. As Rob mentioned, one of the things we're proudest of, is the 97%
and 93% satisfaction rates from our residents and our care centre residents
and their families respectively. In essence, we are a business whose primary
goal is to create villages that enhance the lives of our residents and help
to provide enriching communities for older New Zealanders.

Our staff are critical to us making this vision a reality: they are the ones
who work with residents and their families on a day-to-day and week-to-week
basis to make a positive difference in their lives wherever they can. I would
like to take this opportunity to acknowledge the commitment and passion they
show and the invaluable role they play in making us who we are.

2014 was a year of strong investment in the business, strengthening our
people, systems and processes to support sustainable growth and long-term
value creation, and to ensure we're providing the best-quality experience for
our residents.

On the people side of this, Summerset's staff numbers grew by nearly 100
during 2014, reflecting the strong growth of the business. Alongside this we
have also been focussed on lifting the capability and leadership across the
wider business. At Executive Team level we welcomed three new people to the
team. Scott Scoullar joined us as Chief Financial Officer; Carol McNaught as
General Manager Human Resources; and Sadhana Raman as General Manager
Marketing. We are already seeing positive impact across the business as the
result of their leadership.

Well-trained and motivated staff are critical to our success. Over the last
few years we have invested heavily in the training of our caregivers and an
NZQA certified qualification is now provided to all caregivers. We have
recently also extended this programme and now provide qualifications up to
NZQA level four.

The topic of caregiver wages was also top of mind in 2014. In 2014 we
increased caregiver wages between 2.4% and 7.5%. Caregivers who have higher
than the entry level qualification received pay increases of around 7%. These
increases are considerably greater than the government funding increase to
the sector and we strongly believe that in the longer term the government
needs to fund caregiver wages commensurate with the value of the services
they provide. In the meantime, however, our aim here is to take a leading
position and to commit to a being part of a journey towards caregivers being
fairly remunerated for the invaluable work they perform. We welcome members
of the Service and Food Workers Union in the audience here today and look
forward to being part of continued dialogue on the subject within the sector.

Celebration of the achievements of our staff is important and we hold our
annual Applause Awards to do this, recognising staff across all areas of the
business. The stories we hear about the dedication and passion of our staff
are truly heart-warming. The overall Supreme Applause Award winner for 2014
was Matt Wallace, Napier Head Gardener, for his dedication to creating an
extraordinary environment for residents and helping other villages to do the
same.

Another key area of focus for us in 2014, and for the year ahead, has been on
the importance of care. We understand that our residents have varying
requirements when it comes to care and support, and that a one-size-fits-all
approach does not work. As the population ages, care will be an increasingly
important factor for those choosing a retirement village, and we are working
hard to ensure we offer the very best levels of care, tailored to the
individual stages and needs of our residents. As Rob mentioned, the Board has
introduced a Clinical Governance Committee to provide guidance and oversight
of our clinical operations and to make sure we continually lift the bar in
the quality of care we provide and the quality of life our customers can
expect. We are also focusing on improvement to our quality systems, improving
our internal audit capability and investing further in clinical support,
education and monitoring across the group.

In December of 2013 we announced the purchase of two sites in Christchurch,
in Casebrook and Wigram. This is a new market for us, and was an obvious gap
in our portfolio. We are already building on our village in Wigram, with very
strong levels of local interest shown in the development and the largest
database of interested prospects in the country. Two weeks ago we held the
Friends of Summerset launch for Wigram, where those who have indicated they
are interested in living in the village can find out more and move towards
securing their home. All three sessions attracted full houses and the demand
for Summerset's villas is significant. The only challenge we face here is
being able to build at a rate that will satisfy this demand. Through the
development of these two villages we will invest more than $200 million in
the rebuild of Christchurch.

Earlier this year we also commenced works in Ellerslie and this site is
starting to rapidly transform. There is a large amount of activity on the
development side of the business with retirement units and village centres
being delivered across 9 sites this year. We have extensions to existing main
buildings in Katikati and Hamilton being built, and new main buildings being
delivered in Karaka and New Plymouth. Through this year we will also be
working on main buildings in Wigram, Hobsonville and Ellerslie. You can see
there is clearly a lot of growth for us going on.

I do get asked from time to time how much of this is down to the property
market and whether we are a property business. My answer is this, whilst an
element of our returns are derived from property, we are a people business
tasked with delivering communities and care for older people. This is an
important distinction. Ultimately we are answerable to shareholders to
generate a return, but we are clear that to do this we must focus on our
customers and our staff.

In terms of the property market, clearly it is moving upwards generally
across the country and particularly so in Auckland. However, we are conscious
that there is a cycle in the housing market. Our business is based on meeting
the needs of community and care for older New Zealanders. This needs exists
regardless of the property cycle. Our focus is to continue to improve on how
we deliver this and to ensure that the business has sufficient capital base
to weather any property downturn.

One of the greatest highlights of my role as CEO is travelling around our
villages and getting the chance to meet and talk with our residents in
person. You may have heard us say on a number of occasions that we love the
life our residents bring to Summerset's villages. It only takes one village
visit to see just how vibrant the life and energy is amongst Summerset's
resident communities. Seeing this, and knowing we play a part in making it
possible, is hugely rewarding and is ultimately the reason we do what we do.
And of course, everyone in this room plays a very big part in making
Summerset's growth possible, and I thank you all very much for being part of
the journey with us.

ENDS

For investor relations enquiries:
Scott Scoullar
Chief Financial Officer
[email protected]
04 894 7320 or 029 894 7317

For media enquiries:
Katy Sweetman
Senior Communications and Marketing Advisor
[email protected]
04 894 6993 or 027 601 2001
End CA:00263726 For:SUM    Type:ADDRESS    Time:2015-04-30 13:03:40