Summerset Group Holdings Limited · NZX:SUM
Summerset — Debt Investor Presentation (September 2018)
38 slides from Summerset's debt investor presentation, Sep 10, 2018
Slide 1: Retail Bond Presentation
Retail Bond Presentation Summerset Group Holdings Limited 10 September 2018 Joint Lead Managers
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) in The information in this document is given in good faith and has been obtained from sources believed to relation to the offer of bonds d
Slide 3: Contents
Contents 1 Business overview 2 Funding and security structure 3 Financial performance 4 Offer terms and timetable 5 Appendices Retail bond presentation 3
Slide 4: Offer highlights
Offer highlights Bond offer further diversifies funding sources and provides tenor Total bank debt facilities of $500m and total retail bonds of $100m before the offer Net debt of $365m as at 30 June 2018 This bond will be used to repay a portion of existing drawn bank debt and for general cor
Slide 5: Business overview
Business overview
Slide 6: Summerset snapshot
Summerset snapshot Third largest retirement village operator * Includes acquisition of new land in New Plymouth post 30 June 2018 half year balance date Information as at 30 June 2018 unless otherwise stated Retail bond presentation 6
Slide 7: Summerset background
Summerset background Second largest retirement village developer in New Zealand Listed on the NZX in 2011, and the ASX in 2013 Summerset Provides a Comprehensive Continuum of Care Nationwide provider Villa 23 operating villages completed or under development Independent Living Units Eight gr
Slide 8: Operational overview
Operational overview Operations Cash flows Provision of care in serviced apartments, ■ Rest home, hospital and memory care fees memory care apartments, rest home, hospital and 1. ■ Stable cash flows memory care facilities Aged care ■ Includes government funding for specified contracted ■ Provide a h
Slide 9: Summerset growth
Summerset growth 21 years of consistent delivery and growth Summerset build rate 4,000 3,443 3,500 3,278 165 450 3,000 2,828 2,419 409 2,500 Retirement units 2,116 303 2,000 1,855 261 1,646 209 1,486 3,278 1,352 160 1,500 1,272 122 2,828 1,109 80 163 2,419 983 921 126 2,116 1,000 795 62 732 1,855 65
Slide 10: Our product
Our product Ellerslie Casebrook Hobsonville Katikati Retail bond presentation 10
Slide 11: Funding and security structure
Funding and security structure
Slide 12: 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 The proposed bond issue will provide further diversification of funding sources and tenor. Summerset
Slide 13: Village development cash flows
Village development cash flows Village developments are cash flow positive Debt is principally used as working capital to build new Summerset cash flow example villages (retirement village and care centre) As debt is repaid for a village build, it is redrawn for new Land acquisition, design, con
Slide 14: Composition of drawn debt
Composition of drawn debt All debt is associated with development activities – development assets exceed the value of net debt Net debt to underlying assets - 1H18 Development projects are debt funded. Development assets Net debt Undeveloped land Development WIP Unsold stock exceeded the value of
Slide 15: The issuer & guaranteeing group
The issuer & guaranteeing group Listed entity Summerset Group Holdings Limited is the issuer Summerset Group Holdings Limited (SGHL) currently owns Summerset Group Syndicated Lending Structure Simplified – as at 10 September 2018 all companies within the Summerset Group Bond Supervisor Summerset G
Slide 16: Security
Security Assets of $1.4b available as security as at 30 June 2018 excluding residents’ loans Total assets as at 30 June 2018 of $2.4b Summerset Group - 1H18 balance sheet $3.0b Assets of $1.4b after payments made to the residents of a Registered Retirement Village supporting net debt of $365m as
Slide 17: 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 18: The ORA and resident protections
The ORA and resident protections Resident rights protected by a statutory supervisor Resident purchases an Occupation Right Agreement (ORA) by providing a non-demand repayable, interest free loan Residents’ loans have no set term, are repayable on resale of an ORA (using proceeds received from t
Slide 19: Loan to value ratio covenant
Loan to value ratio covenant Significant headroom on loan to value ratio (LVR) covenant Key terms of bond LVR covenant: Loan to value ratio LVR must not exceed 50% 50% Covenant level Reported breach of LVR on a Test Date is an Event of Review If the Event of Review occurs, Summerset will hav
Slide 20: Financial performance
Financial performance
Slide 21: Financial performance overview
Financial performance overview Strong financial performance over last five years Net operating cash flow Underlying profit* New sales of occupation rights 1H 2H 1H 2H 1H 2H $250m $100m 500 $200m $80m 400 $150m $121m $60m $46m 300 231 203 $108m 173 $100m $77m $40m $32m 200 181 $74m $21m $50m $20m $45
Slide 22: Income statement
Income statement Profit growth driven via increasing portfolio IFRS NPAT of $82m in 1H18 IFRS profit (NZ$m) 1H18* FY17* FY16* Total revenue 65.7 110.5 86.1 Underlying profit of $45m in 1H18 Fair value movement of investment property 78.3 218.0 143.5 Underlying profit up 27% and IFRS NPAT down
Slide 23: Cash flows
Cash flows Strong operating cash flows Significant net operating cash flows of $93m for 1H18 and $208m Cash flows (NZ$m) 1H18* FY17* FY16* for FY17 Net operating business cash 17.1 26.1 15.7 flow**** Net operating cash flows are up 23% on a cumulative average Receipts for residents' loans - 75.7
Slide 24: Balance sheet
Balance sheet Total assets of $2.4b with $1.4b assets available as security excluding residents’ loans Total assets of $2.4b, principally from 23 villages Summerset has Balance sheet (NZ$m) 1H18* FY17* FY16* built or is building Investment property 2,241 2,058 1,591 Net assets of $841m and retai
Slide 25: Offer terms and timetable
Offer terms and timetable
Slide 26: Key terms of the offer
Key terms of the offer Summary Detail Issuer Summerset Group Holdings Limited Guaranteed, secured, unsubordinated, fixed rate bonds Bondholders share the benefit of the same security package as bank lenders. The Statutory Supervisor has first rights to the proceeds of security enforcement against al
Slide 27: Key dates of the offer
Key dates of the offer Offer open 10 September to 14 September 2018 Retail bond offer Date Opening Date 10 September 2018 Firm bids due Friday, 14 September 2018, 12pm Closing Date and Rate Set Date 14 September 2018 Issue Date and Allotment Date 24 September 2018 Expected date of initial quotation
Slide 28: Investment highlights
Investment highlights Compelling fundamentals in the retirement village and aged care sector, driven by an ageing population 1. and increasing market penetration Second largest developer of new retirement units, with a successful track record of delivering new 2. retirement units and care beds Stron
Slide 29: Questions?
Questions? Manukau Wigram Nelson Manukau Retail bond presentation 29
Slide 30: Appendices
Appendices
Slide 31: 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’ ■ Chair of the ■ Dually train
Slide 32: Highly experienced management
Highly experienced management JULIAN COOK SCOTT SCOULLAR FAY FRENCH PAUL MORRIS AARON SMAIL DEAN TALLENTIRE ELEANOR YOUNG Chief Executive Deputy Chief Executive General General Manager General General General Manager Officer Officer and Chief Manager Sales Development Manager Manager Operations and
Slide 33: Demographics – market share
Demographics – market share Aged care and retirement village market share Market share - care beds Market share - retirement units Summerset 2% Summerset 9% Bupa 10% Other operators Other operators 48% 66% Ryman 9% Ryman 17% Oceania 7% Arvida 5% Metlifecare 1% Metlifecare 12% Arvida 5% Bupa 4% Ocean
Slide 34: Demographics - population
Demographics - population Population over 75 years forecast to grow 245% from 2018 to 2068 Population growth 75 years and over Per annum population growth 75 years and over 1,200,000 18% 25,000 16% 1,000,000 20,000 14% 800,000 12% 15,000 10% 600,000 8% 10,000 400,000 6% 4% 5,000 200,000 2% 0 0% 0 19
Slide 35: ORA overview
ORA overview How an occupation right agreement (ORA) works Residents moving into a retirement village enter into an ORA How an Occupation Right Agreement works: Example of a single retirement unit over one ownership cycle* An ORA grants the resident the right to occupy a retirement unit in excha
Slide 36: Portfolio as at 30 June 2018
Portfolio as at 30 June 2018 3,443 retirement units and 858 care beds Existing portfolio - as at 30 June 2018 Total Total Village Villas Apartments Serviced apartments Memory care apartments retirement units care beds Ellerslie 34 23 57 - 114 58 Hobsonville 115 37 29 - 181 52 Karaka 143 - 59 - 202 5
Slide 37: Land bank as at 30 June 2018
Land bank as at 30 June 2018* Land bank* of 3,333 retirement units and 368 care beds Land bank - as at 30 June 2018* Serviced & memory care Total Total Village Villas Apartments apartments retirement units care beds Ellerslie 8 196 0 204 0 Hobsonville 10 36 23 69 0 Karaka 39 0 0 39 0 Parnell 0 264 7
Slide 38: 7 year metrics summary
7 year metrics summary Underlying profit 7 year CAGR of 41% Half Year Results 7 Year CAGR* 1H18 2H17 1H17 2H16 1H16 2H15 1H15 FY11 New sales of occupation rights 15% 145 203 179 231 183 173 160 108 Resales of occupation rights 14% 154 156 144 121 123 135 110 123 Operational Total sales 15% 299 359 3
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