FULL YEAR RESULTS PRESENTATION YEAR ENDED 31 DECEMBER 2014 SUMMERSET GROUP HOLDINGS LIMITED 29 February 2015 24 2012 0 AGENDA FY14 Result Highlights Business Overview Financial Results Final Dividend Appendix 2 6 20 25 29 1 FY14 RESULT HIGHLIGHTS Operational RECORD NEW SALES AND RETIREMENT UNIT DELIVERY HIGHLIGHTS FOR FY14 FY14 Actual FY13 Actual FY14 Actual vs. FY13 Actual * FY12 Actual New sales of occupation rights 286 228 25.4% 167 Resales of occupation rights 172 174 -1.1% 164 Total sales 458 402 13.9% 331 New retirement units delivered 261 209 24.9% 160 110,433 88,590 24.7% 66,254 1,043,189 844,932 23.5% 702,339 Underlying profit ** 24,420 22,154 10.2% 15,223 Net profit before tax (IFRS) 53,994 31,755 70.0% 14,414 Net profit after tax (IFRS) 54,173 34,223 58.3% 14,821 Financial (NZ$000) Net operating cash flow Total assets * Percentage movements based on unrounded amounts ** Underlying profit differs from net profit after tax (IFRS). Underlying profit is unaudited. Refer to slide 22 for the definition of underlying profit 3 FY14 RESULT HIGHLIGHTS RECORD NEW SALES AND RETIREMENT UNIT DELIVERY HIGHLIGHTS FOR FY14 ■ 261 new retirement units delivered, up 25% on FY13 – on track for delivery of 300 retirement units in FY15 ■ New sales 25% higher than FY13 ■ Higher new sales driven by strong sell down right across the portfolio supplemented by the new villages in Karaka, Hobsonville, New Plymouth and the Trentham extension ■ Total sales up 14% on FY13 ■ FY14 underlying profit of $24.4m up 10% on FY13, despite lower realised resales gains ■ Total assets of $1.0b, up 23% on FY13 ■ Final dividend of 2.1 cents per share declared, amounting to $4.6m ■ FY14 net profit after tax (NZ IFRS) of $54.2m up 58% on FY13 ■ Operating cash flow up 25% on FY13 4 FY14 RESULT HIGHLIGHTS STRONG TRENDS CONTINUE ACROSS THE BUSINESS TOTAL ASSETS $1100m UNDERLYING PROFIT $25m $23m $1000m $21m $19m $900m $17m $800m $1043m $845m $11m $9m $702m $24.4m $22.2m $13m $700m $600m $15m $15.2m $7m $500m FY12 FY13 FY14 $5m FY12 Total assets ($m) FY14 Underlying profit ($m) RETIREMENT UNIT DELIVERY 290 FY13 SALE OF OCCUPATION RIGHTS 490 440 240 390 172 340 190 261 140 90 174 290 209 240 190 160 286 140 90 40 FY12 164 FY13 Unit delivery FY14 228 167 40 FY12 FY13 New Sales FY14 Resales 5 BUSINESS OVERVIEW .1134!?- FY14 REVIEW RECORD UNDERLYING PROFIT IN FY14 ■ Delivered 261 retirement units in FY14, a record for Summerset, and 25% more than FY13 ■ On track for delivery of 300 retirement units in FY15 ■ Karaka, Hobsonville, Trentham extension and New Plymouth villages opened in FY14 ■ Three new village centres opened in Nelson, Dunedin and Katikati ■ Dunedin village completed ■ Resource consent approval for Ellerslie and Wigram received ■ Commenced construction on the Wigram village - this will open in FY15 ■ Announced extension of existing Karaka site ■ 2014 included additional costs associated with an unusually high volume of new villages opening (four new villages) and new care centres opening (three new care centres) ■ Expect 2015 earnings growth to be higher than 2014 7 SUMMERSET SNAPSHOT THIRD LARGEST OPERATOR, SECOND LARGEST DEVELOPER ■ 2,116 retirement units (villas, apartments and care apartments) ■ 485 care beds ■ More than 3,000 residents ■ 261 retirement units delivered in FY14 ■ On track for 300 retirement units in FY15 ■ 20 villages completed or in development ■ Three villages yet to be developed 8 SUMMERSET STRATEGY SUMMERSET BUILDS, OWNS AND OPERATES RETIREMENT VILLAGES IN NZ ■ Focus on continuum of care model ■ High quality care and facilities within every village ■ Continued investment and upgrade of existing facilities ■ Internal development model embedded ■ Nationwide brand offering ■ Customer centric philosophy – “we love the life you bring to us” ■ Respect for everyday New Zealanders ■ New Zealand focus 9 OPERATIONS AND STAFF FOCUS ON CLINICAL QUALITY AND STAFF TRAINING ■ In 2014 a new Clinical Governance Committee of the Board has been established to further support Summerset’s commitment to deliver care of the highest standard, at all times ■ Review of our quality programme, to promote consistent quality care across all villages ■ Continued Careerforce training programme participation, and qualification attainment ■ New role for Head of Clinical Services to continue evolving the Summerset clinical care strategy ■ 93% care customer satisfaction – industry leading result ■ Summerset increased caregiver wages by between 2.4% and 7.5%, with the higher increases rewarding staff for training and qualifications gained throughout the year 10 DEMOGRAPHICS POPULATION OVER 75 YEARS FORECAST TO TRIPLE FROM 2014 TO 2068 POPULATION GROWTH 75 YEARS AND OVER 1,200,000 18% 16% 1,000,000 14% 800,000 12% 10% 600,000 8% 400,000 6% 4% 200,000 2% - 0% 2014 2018 2023 2028 NZ population 75+ (left hand axis) 2033 2038 2043 2048 2053 2068 % of population 75+ (right hand axis) Source: Statistics New Zealand 50th percentile (median) 11 SUMMERSET GROWTH 17 YEARS OF CONSISTENT DELIVERY AND GROWTH SUMMERSET BUILD RATE 2,500 2,116 2,000 1,855 1,486 1,500 1,352 1,272 1,109 921 1,000 732 652 500 407 219 129 - 90 - 129 - 129 1997 1998 1999 470 63 528 80 795 407 470 2001 2002 2003 652 163 126 62 63 1,272 124 528 122 80 126 58 188 983 732 795 2005 2006 921 983 2007 2008 209 160 1,364* 1,109 *2011 existing stock includes 12 units acquired as part of the Nelson site acquisition Retirement Units 1,646 261 1,855 1,646 1,486 219 2000 2004 Existing stock New Retirement Units delivered 2009 2010 2011 2012 2013 2014 12 FY14 DEVELOPMENT ACTIVITY DELIVERY OF 261 RETIREMENT UNITS IN FY14 ACROSS NINE SITES ■ 261 retirement units delivered across nine villages ■ Three new villages opened and one existing village extension underway Unit Delivery FY14 Villas Apartments Care Apartments Total Care Beds Dunedin - 20 20 40 42 Hamilton 24 - - 24 - ■ First retirement units in Hobsonville, Karaka and New Plymouth delivered Hobsonville 36 - - 36 - Karaka 27 - - 27 - ■ First retirement units in Trentham extension delivered Katikati 24 - - 24 - Nelson - - 15 57 - ■ Care apartment delivery gaining momentum with units delivered in Dunedin and Nelson New Plymouth 14 - - 14 - Trentham 24 - - 24 - ■ Large main building programme underway: Warkworth 15 - - 15 - Total 206 20 35 261 42 ■ Recently delivered main buildings in Nelson, Katikati and Dunedin ■ Extensions to the Nelson and Hamilton main buildings under way ■ Build of Hobsonville, Karaka and New Plymouth main buildings commenced ■ Warkworth care apartment extension commenced 13 FY14 DEVELOPMENT ACTIVITY DELIVERY OF 261 RETIREMENT UNITS IN FY14 ACROSS NINE SITES Hamilton Karaka Trentham Warkworth Nelson Katikati 14 FY14 DEVELOPMENT ACTIVITY DELIVERY OF 261 RETIREMENT UNITS IN FY14 ACROSS 9 SITES Trentham New Plymouth Warkworth Hobsonville New Plymouth Dunedin 15 FUTURE DEVELOPMENT LAND BANK OF 1,881 RETIREMENT UNITS AND 556 CARE BEDS ■ Land bank of 1,881 retirement units spread across brownfield and greenfield sites ■ Additional pipeline of 556 care beds across existing sites. Delivery of these future care beds will more than double the current level of Summerset care beds available ■ Build target remains 300 retirement units by 2015 ■ Land bank provides in excess of six years of supply at build rate target Land Bank - as at 31 December 2014 * Villas Apartments Care Apartments Total Retirement Units Care Beds Casebrook 179 - 53 232 49 Ellerslie 62 147 43 252 80 Hamilton 85 - 25 110 46 Hobsonville 89 70 30 189 90 Karaka 167 24 20 211 49 Katikati 109 - 20 129 49 Lower Hutt 42 96 43 181 49 Nelson 38 - 25 63 46 New Plymouth 94 - 40 134 49 Trentham 115 - 20 135 - Warkworth - - 36 36 - 156 - 53 209 49 1,136 337 408 1,881 556 Wigram Total * Land bank reflects current intentions as at 31 December 2014 16 DEVELOPMENT MARGIN STRONG PERFORMANCE IN REALISED DEVELOPMENT MARGIN ■ Development margin of $16.7m, and 15.7%, in FY14, up 60% on FY13 ■ Strong 2H14 development margin of 16.6% ■ We expect to achieve a FY15 development margin of 17% DEVELOPMENT MARGIN – HALF ON HALF MARGINS 16.6% $14m 13.9% $12m $10m 11.9% 12.1% 12.4% 13.6% $8m $6m $11.7m $4m $2m $3.4m $3.5m 1H12 Actual 2H12 Actual $4.9m $5.5m $4.9m $m 1H13 Actual 2H13 Actual Realised development margin ($m) 1H14 Actual Margin (%) 2H14 Actual DEVELOPMENT MARGIN – FULL YEAR MARGINS 18% $18m 16% $16m 14% $14m 12% $12m 10% $10m 8% $8m 6% $6m 4% $4m 2% $2m 0% $m 15.7% 13.2% 16% 14% 12.0% 12% 10% 6.2% $16.7m 8% 6% $10.5m 4% $6.9m 2% $2.3m FY11 Actual 0% FY12 Actual FY13 Actual Realised development margin ($m) FY14 Actual Margin (%) 17 NEW SALES OF OCCUPATION RIGHTS NEW SALES GROSS PROCEEDS UP 34% ON FY13 TO $106M ■ FY14 lift in sales associated with continued build programme and new villages opening FY14 Actual FY13 Actual FY14 Actual vs. FY13 Actual * FY12 Actual 106,252 79,274 34.0% 57,739 237 204 16.2% 117 Apartments 20 18 11.1% 36 ■ Villas: 237, up 16% on FY13 Care apartments 29 6 383.3% 14 ■ Apartments: 20, up 11% on FY13 Total occupation rights 286 228 25.4% 167 ■ Over the last two years, annual sale rates have lifted 71% Gross proceeds ($000) ■ New sale gross proceeds surpass $100m in FY14, a $27m increase in proceeds relative to 2013 Villas ■ New sales of occupation rights up versus FY13: ■ Care apartments: 29, up 383% on FY13 * Percentage movements based on unrounded amounts 18 RESALES OF OCCUPATION RIGHTS RESALES OF 172 OCCUPATION RIGHTS IN FY14 ■ Gross proceeds of $54.9m, up 6% on FY13 FY14 Actual FY13 Actual FY14 Actual vs. FY13 Actual * FY12 Actual 54,854 51,602 6.3% 44,514 Realised resale gains ($000) 8,090 9,671 -16.3% 9,073 Realised resale gains (%) 14.7% 18.7% - 20.4% 6,165 6,199 -0.5% 5,215 Villas 99 105 -5.7% 93 Apartments 51 34 50.0% 38 Care apartments 22 35 -37.1% 33 Total occupation rights 172 174 -1.1% 164 ■ Occupation rights resold: 172, down 1% on FY13 Gross proceeds ($000) ■ Higher proportion of apartments sold FY14 relative to FY13 – up 50% ■ Lower average resale gains per unit associated with higher mix of both newer villages and shorter tenure DMF realisation ($000) ■ 26 resale occupation rights available for sale at 31 December 2014 REALISED RESALE GAINS AND VOLUME – HALF ON HALF 90 90 85 82 17.3% 80 75 30% 12.5% 25% 20% 15% 70 10% 65 5% 60 0% 1H14 Actual Resales * Percentage movements based on unrounded amounts 2H14 Actual Realised resale gains (%) 19 FY14 REPORTED PROFIT (IFRS) NET PROFIT AFTER TAX UP 58% VERSUS FY13 ■ NPAT up $20m relative to FY13 NZ ($000) FY14 Actual FY13 Actual FY14 Actual vs. FY12 Actual FY13 Actual * ■ FY14 total revenue up 20% versus FY13 ■ FY14 total expenses up 24% versus FY13 ■ 2014 expenses include higher operating costs associated with both new villages and opening of care facilities ■ Fair value movement of investment property up 77% versus FY13 reflecting: ■ Increases in Summerset occupation right agreement prices throughout the year, driven by both general property market conditions and Summerset specific pricing reviews ■ Strong sell down rates and low vacant stock levels across the portfolio Total revenue Reversal of impairment on land and buildings Fair value movement of investment property Total income Total expenses Net finance costs Net profit before tax Tax credit . Net profit after tax 54,285 45,208 20.1% 38,120 1,882 - - - 52,481 29,722 76.6% 15,128 108,648 74,930 45.0% 53,248 47,819 38,566 24.0% 33,938 6,835 4,609 48.3% 4,896 53,994 31,755 70.0% 14,414 (179) (2,468) -92.7% (407) 54,173 34,223 58.3% 14,821 * Percentage movements based on unrounded amounts 21 FY14 UNDERLYING PROFIT REALISED DEVELOPMENT MARGIN UP 60% ON FY13 ■ Record underlying profit of $24.4m, up 10% on FY13 NZ ($000) ■ Record development margin achieved in FY14, with an additional $6.2m of revenue generated Reported profit after tax $18m $16m 12.0% $14m 13.2% $8m 54,173 34,223 58.3% 14,821 (52,481) (29,722) 76.6% (15,128) (1,882) - - - 8,090 9,671 -16.3% 9,073 16,699 10,450 59.8% 6,864 (179) (2,468) -92.7% (407) 24,420 22,154 10.2% 15,223 Add realised gain on resales 16% Add realised development margin Less deferred tax credit 10% 6.2% $16.7m 8% Underlying profit 6% $10.5m $4m $m FY12 Actual Reversal of impairment on land and buildings 12% $6m $2m FY14 Actual vs. FY13 Actual * 14% $12m $10m FY13 Actual Less fair value movement of investment property ■ All new sites across the group contributing to strong development margin DEVELOPMENT MARGIN – FULL YEAR MARGINS 15.7% FY14 Actual 4% $6.9m 2% $2.3m FY11 Actual * Percentage movements based on unrounded amounts 0% FY12 Actual FY13 Actual Realised development margin ($m) FY14 Actual Margin (%) Underlying profit differs from IFRS net profit after tax. The directors have provided an unaudited underlying profit measure to assist readers in determining the realised and non-realised components of fair value movement of investment property and tax expense in the group’s income statement. The measure is used internally in conjunction with other measures to monitor performance and make investment decisions. Underlying profit is an industry wide measure which the group uses consistently across reporting periods. 22 FY14 CASH FLOWS SUBSTANTIAL INVESTMENT IN NEW VILLAGE BUILDS ■ Net operating cash flow of $110.4m for FY14, up 25% on FY13 ■ Strong investment in new villages continued in FY14 FY14 Actual FY13 Actual FY14 Actual vs. FY13 Actual * FY12 Actual 36,211 31,797 13.9% 27,391 307 209 46.9% 159 Payments to suppliers and employees (42,023) (36,910) 13.9% (32,541) Net receipts for resident loans 115,938 93,494 24.0% 71,245 Net operating cash flow 110,433 88,590 24.7% 66,254 (139,830) (108,070) 29.4% (75,017) (2,240) (1,463) 53.1% (1,903) (142,070) (109,533) 29.7% (76,920) 45,551 27,109 68.0% 9,041 (10,035) (5,342) 87.9% - 4,431 3,705 19.6% - Other financing cash flows (6,464) (4,270) 51.4% (4,577) Net financing cash flows 33,483 21,202 57.9% 4,464 1,846 259 612.7% (6,202) NZ ($000) Care fees and village services Interest received Acquisition of PPE & IP Other investing cash flows Net investing cash flow Proceeds from bank loans Dividends paid Proceeds from issue of shares . Net increase in cash * Percentage movements based on unrounded amounts 23 FY14 BALANCE SHEET TOTAL ASSETS OF $1.0B, UP 23% FROM $845M IN FY13 ■ Total assets have reached a milestone of $1.0b, up 23% on FY13 NZ ($000) ■ Investment property valuation of $958m, up 23% on FY13 Investment property ■ Other assets include land and buildings (primarily care facilities) ■ Embedded value of $172m, $81k per retirement unit, as at 31 December 2014: FY12 Actual 776,637 23.4% 644,506 Other assets 85,018 68,295 24.5% 57,833 Total assets 1,043,189 844,932 23.5% 702,339 Residents' loans 513,683 414,226 24.0% 336,133 ■ $94m resales gain Bank loans 150,819 105,268 43.3% 78,162 ■ $79m deferred management fee Other liabilities 46,417 43,526 6.6% 39,250 Total liabilities 710,919 563,020 26.3% 453,545 Net assets 332,270 281,912 17.9% 248,794 Embedded value 172,131 147,326 16.8% 124,123 153 131 16.8% 116 EMBEDDED VALUE $160m $140m $79m $120m $62m NTA (cents per share) $53m . $80m $60m FY14 Actual vs. FY13 Actual * 958,171 $180m $100m FY14 Actual FY13 Actual * Percentage movements based on unrounded amounts $71m $86m $94m FY13 FY14 $40m FY12 Resales gain ($m) DMF($m) 24 I 1 FY14 FINAL DIVIDEND SUMMERSET BOARD DECLARES FY14 FINAL DIVIDEND ■ The Summerset Board have declared a final dividend of 2.1 cents per share, unimputed ■ This represents a total pay-out for the second half of 2014 of approximately $4.6m ■ Total dividends paid for the 2014 year (interim and final) are 3.5 cents per share, being approximately $7.6m ■ The dividend reinvestment plan (DRP) will apply to this dividend enabling shareholders to take shares in lieu of the cash dividend ■ A discount of 2% will be applied when determining the price per share of shares issued under the DRP ■ Eligible investors wishing to take up the DRP must register by 5pm NZT on Wednesday the 11th of March 2015. Any applications received on or after this time will be applied to subsequent dividends ■ The final dividend will be paid on Wednesday the 25th of March 2015. The record date for final determination of entitlements to the interim dividend is Tuesday the 10th of March 2015 . 26 BE SUMMERSET SURE DISCLAIMER This presentation may contain projections or forward looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in any forward looking statement based on a number of important factors and risks. Although management may indicate and believe the assumptions underlying the forward looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward looking statements will be realised. Furthermore, while all reasonable care has been taken in compiling this presentation, Summerset accepts no responsibility for any errors or omissions. This presentation does not constitute investment advice. 28 PORTFOLIO AS AT 31 DECEMBER 2014 2,116 RETIREMENT UNITS AND 485 CARE BEDS Existing Portfolio – as at 31 December 2014 Villas Apartments Care Apartments Total Retirement Units Care Beds Aotea 96 33 38 167 - Dunedin 61 20 20 101 41 Hamilton 98 - 10 108 30 Hastings 146 5 - 151 - Havelock North 94 28 - 122 41 Hobsonville 36 - - 36 - Karaka 27 - - 27 - Katikati 47 - - 47 - Levin 64 22 - 86 28 Manukau 89 67 27 183 52 Napier 94 26 20 140 48 Nelson 176 - 15 191 42 New Plymouth 14 - - 14 - Palmerston North 90 12 - 102 43 Paraparaumu 92 22 - 114 41 Taupo 94 34 18 146 - Trentham 116 12 20 148 41 Wanganui 70 18 12 100 37 Warkworth 123 2 8 133 41 1,627 301 188 2,116 485 Total 30 LAND BANK AS AT 31 DECEMBER 2014 LAND BANK OF 1,881 RETIREMENT UNITS AND 556 CARE BEDS Land Bank - as at 31 December 2014 * Villas Apartments Care Apartments Total Retirement Units Care Beds Casebrook 179 - 53 232 49 Ellerslie 62 147 43 252 80 Hamilton 85 - 25 110 46 Hobsonville 89 70 30 189 90 Karaka 167 24 20 211 49 Katikati 109 - 20 129 49 Lower Hutt 42 96 43 181 49 Nelson 38 - 25 63 46 New Plymouth 94 - 40 134 49 Trentham 115 - 20 135 - Warkworth - - 36 36 - 156 - 53 209 49 1,136 337 408 1,881 556 Wigram Total * Land bank reflects current intentions as at 31 December 2014 31