Annual Report2020 Artist’s impression of Cranbourne North, Melbourne Summerset is one of New Zealand’s leading and fastest growing retirement village operators. Our business spans development, design and construction, through to running retirement villages and care centres.We aim to develop our villages on both sides of the Tasman responsibly and help create a more sustainable future for all. 02
OUR RESIDENTSBringing the best of life to our residents every day — resulting in high levels of resident satisfactionOUR PEOPLEPeople are the heart of Summerset. Our values are:Strong enough to careOne teamStrive to be the bestOUR ENVIRONMENTEveryday we focus on:Minimising wasteIncreasing energy efficiencyBeing more sustainable Contents
Chair and CEO's Report
Highlights
Who we are and what we deliver
2020 highlights
Portfolio growth
Our people and community
Our villages
Our commitment to sustainability
Our performance
Financial statements
Governance
Board of Directors
Executive leadership team
Remuneration
Disclosures
Directory
Company information
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113
03
OUR RESIDENTSBringing the best of life to our residents every day — resulting in high levels of resident satisfactionOUR PEOPLEPeople are the heart of Summerset. Our values are:Strong enough to careOne teamStrive to be the bestOUR ENVIRONMENTEveryday we focus on:Minimising wasteIncreasing energy efficiencyBeing more sustainable Strategy
04
This Annual Report of Summerset Group Holdings Limited (Summerset) is prepared in accordance with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), the NZX Listing Rules and Corporate Governance Code, the Companies Act 1993 and aligned with the International Integrated Reporting Council’s (IIRC) International Integrated Reporting Framework. This Annual Report covers all business operations for the year ended 31 December 2020. We have started to align our reporting to the International Integrated Reporting Framework to improve the way we communicate and improve transparency, we will continue to build on this approach over the coming years. ‘Bringing the best of life’ to our residents is at the core of what we do. The strategic pillars that underpin this are Growth, Our People and Our Customers. Themes of wellness, innovation, and sustainability run through our work. This includes the wellbeing of our people, being innovative in our approach to ideas and technology, and being more sustainable. ABOUT THIS REPORTSummerset Heritage Park, Ellerslie 05
Our strategyBringing the best of lifeOur strategic goals are underpinned by our desire to bring increased wellbeing to our customers and staff, by harnessing the power of innovation and weaving sustainability into our workGrowthWe look for expansion opportunities and returns for our shareholdersOur peopleWe want to create a great place to work, where our people can thriveOur customersWe continually improve and enhance our offering to residentsInnovationSustainabilityWellbeing Annual Report 2020
Chair and CEO's
report
Rob Campbell
Chair
06
Julian Cook
Chief Executive Officer
Welcome to Summerset’s annual
report for the 12 months ended
31 December 2020. This report
covers an unprecedented year in
which the COVID-19 pandemic had
a major impact on our business,
as it did throughout the world.
Our priority has been keeping our
residents and staff safe, and we
currently maintain our record of no
COVID-19 cases at Summerset.
This year we take our first
step toward integrated reporting.
This provides a fuller picture of
Summerset’s entire business, with
financial and sustainability elements
in one report.
Business performance
Reported underlying profit for the
full year is $98.3 million, a decrease
of 7% on 2019. Our IFRS net profit
after tax is $230.8 million, up 32%
on 2019. Overall, the value of
investment property is $3.6 billion,
up 17% on 2019.
The financial performance of the
business for 2020 has been pleasing.
This is despite the impact of the
COVID-19 lockdown. During this
period prospects were unable to visit
our villages or sell their properties
and we have spent an additional
$9.2 million to date on COVID-19
related costs including preventative
measures to keep residents and
staff safe.
Our COVID-19 response
2020 was dominated by COVID-19
but we are pleased and grateful not
to have had any cases among staff
or residents to date. We activated
our pandemic plan in early March,
and moved quickly to protect our
residents and support them through
the subsequent lockdowns.
A range of protections were put in
place to keep our residents and staff
safe. The measures we took included
mandatory temperature checks and
face masks for staff, security on
village gates to screen visitors, a
negative COVID-19 test prior to
admission for new care residents,
and additional cleaning protocols. At
the outset of the crisis we also took
on extra staff in our care centres and
villages to provide additional care
for residents.
We stepped up physically distanced
activities in the villages to
provide connection and comfort
for residents, operated a grocery
delivery service for residents, and
set up an online wellness centre
to keep residents entertained. We
also provided iPads so residents
could video-call families and
friends during the higher alert
levels. The response from both
residents and their families on our
handling of the pandemic has been
overwhelmingly positive. We would
like to thank our dedicated staff
for their professionalism, resilience
and hard work throughout the
lockdown periods.
CHAIR AND CEO'S REPORT
2020 in review
$98.3m
Underlying profit
In April 2020, we received
$8.6 million from the Government’s
initial wage subsidy scheme. This
was a period of great uncertainty for
the business.
At that time, sales of occupation
rights — a major source of
revenue — had ceased. We also
introduced several cost-saving
measures, including moving more
than 230 corporate staff to a four-
day week. The Executive Team and
Board of Directors also took a 20%
pay cut for the same 10-week period.
We repaid the wage subsidy in full
in December 2020 as trading for the
business has been strong over the
second half of 2020.
August’s lockdown in Auckland
was a reminder that COVID-19 will
continue to impact our residents and
staff for the foreseeable future.
Villages and care
Village life has been affected
by the COVID-19 pandemic and
we look forward to the rollout
of the COVID-19 immunisation
programme, due this year.
We have been pleased to see
heightened enquiries and sales
from the third quarter of 2020
onwards. Performance in our care
business continued to track well,
with occupancy for the year at 96%
in our developed villages, versus
90% for the aged care sector overall.
Protections were put
in place to keep our
residents and staff safe
during lockdowns
07
Adapting to COVID-19
Summerset worked hard to ensure that
its residents and staff were kept safe
throughout 2020. We are pleased that
we have had no cases of COVID-19 in
our villages to date.
Expanding into Australia
Our first village in the Melbourne suburb
of Cranbourne North is expected to
receive development approval shortly.
Summerset also holds eight hectares
in Torquay on the Bellarine Peninsula
in Victoria.
Chair Rob Campbell retires
Rob Campbell announced his
retirement from the Board in December
2020, ending a decade as Chair.
Mr Campbell oversaw Summerset’s
listing on the NZX in 2011, and under
his leadership Summerset has grown
to become one of the NZX’s top
20 companies.
The Board thanks Mr Campbell for
his outstanding leadership which
covered a wide range of initiatives
and achievements, including the
introduction of memory care centres
for people living with dementia, an
improved staff offering, becoming
New Zealand’s first carbonzeroTM
retirement operator, and more
recently, Summerset’s expansion
across the Tasman.
His depth of experience and genuine
passion for the people at Summerset
will be missed.
The Board commenced the search for a
new Board member in December 2020
and once this search is complete, will
appoint a director as the new Chair.
Annual Report 2020
08
Growth and development
Despite the closure of our
construction sites during the first
COVID-19 lockdown, we completed
next-generation main buildings at
our Casebrook and Rototuna villages
in 2020.
These new buildings reflect the
evolution of our village centre
designs. They include our new state-
of-the-art memory care centre for
people living with dementia, as
well as serviced apartments and a
care centre.
Earthworks have progressed well
at our St Johns site in Auckland
and construction work will start
there in 2021. Building also starts in
2021 at our Lower Hutt site, where
final resource consent was granted
in November. We also lodged
resource consent for our villages in
Prebbleton and Rangiora. Our land
bank continues to expand, with the
acquisition of our ninth property in
Auckland in October 2020.
Our latest land acquisition in
Auckland is in Half Moon Bay. It
will be our first retirement village in
East Auckland.
We completed
next-generation
main buildings at
our Casebrook and
Rototuna villages
Our people
We were pleased to see our staff
engagement results increase in
2020, which at the time of survey
completion were at or above the
Australia/New Zealand and global
benchmarks of companies using the
same engagement tool.
We started 2020 with a plan to
prioritise pay and training for our
teams. In January we increased the
pay for care staff to equal the top
pay rates in the sector and increased
weekend allowances for care staff
in April.
We introduced an online
learning system and new training
programmes in 2020, enhancing
our onboarding and professional
development programmes.
We also invested in our
clinical leaders through the
implementation of a leadership
development programme.
Summerset was accredited with
tertiary status in the Accident
Compensation Corporation (ACC)’s
Accredited Employers Programme
for the third year running. During
2020, we launched three-year
strategies for health and safety,
learning and development, and
diversity and inclusion. These
strategies cover all parts of the
business, with tailored plans created
to meet the varying requirements of
individual business groups.
Sustainability
We have continued to make positive
progress on our carbon reduction
targets this year. Notably, we have
set a new science-aligned carbon
reduction target that commits us to
a 62% reduction in carbon emissions
per square metre of building area by
2032 (from 2017 levels).
The Board has oversight of climate-
related risks and opportunities
through our current reporting
framework. The forthcoming Task
Force for Climate-related Financial
Disclosures (TCFD) requirements will
add further disclosure in this area
and Summerset is well placed to
meet these.
Looking ahead
Despite COVID-19, we have gained
good ground since the end of New
Zealand’s nationwide lockdown in
May 2020. Our third and fourth
quarter sales were at record highs
and our business continues to
perform well.
We are optimistic about growth in
2021 and beyond. Our expansion
into Australia will take a major
step forward with the launch
of our first retirement village in
Victoria in late 2021/early 2022,
and we anticipate an increased
build rate across our New Zealand
sites. We will make further
progress toward sustainability
across Summerset, particularly in
design and construction.
We hold the largest land bank of
units in New Zealand’s retirement
village sector, providing a strong
outlook for our construction and
sales teams. This provides us
with a good spread of sites
across the country, allowing us
to change tempo depending on
market conditions.
Thank you to everyone who has
worked so hard throughout 2020. A
special thank you to our Summerset
staff, as well as their families and
support networks, for helping to
keep all our residents safe this year.
Rob Campbell
Chair
Julian Cook
Chief Executive Officer
CHAIR AND CEO'S REPORT
09
Delivering valueBuy land in desirable places where people want to retireBuild high quality,modern villagesHire skilled staffand help them thriveLook after ourresidents and provide excellent careCreate sustainable value for stakeholdersBringingthe bestof life ONE TEAM STRONG ENOUGH TO CARE STRIVE TO BE THE BEST Annual Report 2020
A decade
at the top
Farewell from Julian Cook
It has been a privilege for me to lead
this company and to be part of an
organisation and industry that has
changed so many people’s lives for
the better.
I am retiring as Chief Executive
on 29 March after 10 years at
Summerset, seven of them as Chief
Executive. Summerset has grown
both in terms of size and maturity
over the last decade, and now is the
right time to hand it over for the next
phase of growth in New Zealand
and Australia.
I am enormously proud of what we
deliver to residents, staff and our
communities. Summerset started
out over 23 years ago as a small
family business founded by John
and Rose O’Sullivan. Their goal was
to create a retirement village that
was good enough for their nana.
This philosophy guides us still and
we always ask ourselves, 'Is it good
enough for Mum?'
In 2014, my first year as Chief
Executive, we had 20 villages, 3,000
residents and 700 staff.
We now have 32 retirement villages
and another 10 in the pipeline. We
will open our first retirement village
in Australia in late 2021/early 2022,
and have another piece of land in
Victoria for a second village. We are
now the second largest retirement
village operator in New Zealand, with
over 6,200 residents and more than
1,800 staff.
We have grown sustainably over the
years, and despite 2020’s COVID-19
pandemic and lockdown, we are in
a strong position to continue into
the future.
10
CHAIR AND CEO'S REPORT
I am enormously proud
of what we deliver to
residents, staff and
our communities
Looking back, there are many
highlights, three in particular will stay
with me. The first of these is the 2011
stock exchange listing. This gave us
the capital to accelerate our growth.
The introduction of comprehensive
staff benefits, including health
insurance and the all staff share
scheme, was another step toward
rewarding our staff for their hard
work and loyalty. More recently,
starting up Summerset’s Australian
arm has given us the chance to use
all we have learnt in New Zealand to
build a brand-new offering for
Australian retirees.
In 2011, I knew Summerset had great
potential for growth, but most
importantly, I saw that there was
scope to improve our offering to
residents and staff.
My regular visits to our villages
assure me we are bringing the best
of life to our residents. I see a lot of
joy and companionship in our
villages, with people taking up new
hobbies, sharing old ones with new
friends, and creating a unique and
vibrant community.
Over time, we have gradually refined
and enhanced the homes, facilities
and activities we offer our residents.
New Zealand has a growing
population of older people, and it
makes me proud to see the lifestyle
and comfort we provide those who
choose to live in our villages.
I leave the company knowing we
have fulfilled the potential I saw 10
years ago. I have loved my time at
Summerset, and I will greatly miss all
its people.
Julian
11
Introducing
Scott Scoullar
I have had the pleasure
of being Summerset’s Chief
Financial Officer for almost seven
years now and the Deputy
Chief Executive for three years.
During this time, I have worked
alongside Julian and our Board
developing and implementing
Summerset’s strategy.
It’s a great honour as well as
a great opportunity to lead
one of New Zealand’s largest
retirement providers into its
next phase of development.
At Summerset we are fortunate
to play such an important part in
people’s lives.
Our residents look to us to provide
a home and living environment
that is fulfilling, and they trust us
every day to look after them. The
way I think about it, every resident
living in our villages could be our
mum, dad, nana or poppa – and
therefore we will continue to make
their lives as special as we can.
I’m looking forward to starting
as Chief Executive and meeting
as many residents and staff as
possible. I’d like to thank Julian for
everything he has achieved over
the last 10 years.
The possibilities as we embark on
our growth strategy into Australia
are exciting, and many of our
new sites in New Zealand are
truly ground-breaking.
Thank you to all our residents who
have chosen to live with us, to
our staff and to our shareholders.
I look forward to working with you
all over the coming years.
Scott
Annual Report 2020
Who we are and
what we deliver
Our people
Our care
Our performace
6,200+
Residents
1,800+
Staff
members
12
97%
Care
resident satisfaction
$230.8m
Net profit after tax
FY19 $175.3m
972
57 care units1 and
915 care beds in portfolio
$98.3m
Underlying profit
FY19 $106.2m
95%
Village
resident satisfaction
1,042
863 care units1 and
179 care beds in land bank
$266.8m
Operating cash flow
FY19 $237.9m
1 Care units include care suites and memory care apartments
HIGHLIGHTS
Our portfolio
4,442
Units
in portfolio
$3.9b
Total assets
FY19 $3.3b
5,992
Land bank
of units
32
Villages completed or
under development
↵
↵
↵
↵
↵
↵
↵
↵
↵
785
Sales of
occupation rights
10
Greenfield sites
↵
↵
↵
↵
↵
↵
↵
↵
13
Summerset Rototuna, Hamilton
Annual Report 2020
14
2020 highlightsJanuaryConstruction sites fully back up and running after COVID-19 lockdownMayEarthworks start at St Johns site in Auckland February$20,000 raised by staff and residents for Australian bush fire victimsMarchOur next-generation main building at Casebrook, Christchurch, openedStart of COVID-19 lockdownAprilDementia friendly accreditation awarded New Plymouth’s Bell Block village launched June HIGHLIGHTS
15
SeptemberFirst residents moved into our new Papamoa Beach (Tauranga) and Te Awa (Napier) villages$150 million bond issue offeredOctoberSummerset enters NZ Aged Care Association Awards, winning staff training awardHalf Moon Bay site purchased in AucklandJulyConnect speaker series restarts with our first virtual event hosted by Peta MathiasAugustUniversity of Otago student Riria Mohi-Dewhirst became the first recipient of Summerset’s new Waitaha Te Houhou health scholarshipLower Hutt resource consent received Resource consent notified for proposed retirement village in ParnellNovemberDecemberMelbourne’s Cranbourne North tenders ready to issue to builders Annual Report 2020
Portfolio growth
23 years of consistent growth and delivery1
16
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
o
i
l
o
f
t
r
o
p
n
i
s
t
i
n
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l
a
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T
129129
129129
'98
219219
9090
129129
'99
0
'97
407407
188188
219219
'00
470470
63
407407
'01
528528
58
470470
'02
Existing stock
New units delivered
1 Units include all units to be sold under occupation right agreement
4,442
4,442
4,086
4,086
356356
3,732
3,732
354354
3,278
3,278
454454
2,828
2,828
450450
2,4192,419
409409
2,1162,116
303303
1,855
1,855
261261
1,646
1,646
160160
209209
1,486
1,486
122122
1,352
1,352
8080
1,272
1,272
163163
1,109
1,109
126126
983983
6262
921921
126126
732732
8080
795795
63
652652
124124
528528
'03
652652
'04
732732
'05
795795
'06
921921
'07
983983
'08
1,109
1,109
1,272
1,272
1,364
1,364
1,486
1,486
1,646
1,646
1,855
1,855
2,1162,116
2,419
2,419
2,828
2,828
3,278
3,278
3,732
3,732
4,086
4,086
'09
'10
'11*
'12
'13
'14
'15
'16
'17
'18
'19
'20
HIGHLIGHTS
4,442
4,442
4,086
4,086
356356
3,732
3,732
354354
3,278
3,278
454454
2,828
2,828
450450
2,4192,419
409409
17
2,1162,116
303303
1,855
1,855
261261
1,646
1,646
160160
209209
1,486
1,486
122122
1,352
1,352
8080
1,272
1,272
163163
1,109
1,109
126126
528528
'03
652652
'04
732732
'05
795795
'06
921921
'07
983983
'08
1,109
1,109
1,272
1,272
1,364
1,364
1,486
1,486
1,646
1,646
1,855
1,855
2,1162,116
2,419
2,419
2,828
2,828
3,278
3,278
3,732
3,732
4,086
4,086
'09
'10
'11*
'12
'13
'14
'15
'16
'17
'18
'19
'20
* 2011 existing stock included 12 units acquired as part of the Nelson site purchase
23 years of consistent growth and delivery1
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
o
i
l
o
f
t
r
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p
n
i
s
t
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l
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6262
921921
126126
795795
6363
732732
8080
652652
124124
129129
129129
'98
219219
9090
129129
'99
0
'97
407407
188188
219219
'00
470470
6363
407407
'01
528528
5858
470470
'02
Existing stock
New units delivered
1 Units include all units to be sold under occupation right agreement
Annual Report 2020
18
Our people and community Summerset’s annual satisfaction survey shows continued high satisfaction levels, with independent living residents at 95% and care centre residents at 97%. OUR PEOPLE AND COMMUNITY
Our Summerset community is made
up of more than 6,200 residents in
over 4,400 units and over 900 care
beds. We employ over 1,800 staff
across 32 retirement villages.
COVID-19
Due to the global pandemic,
2020 was difficult and challenging.
However, New Zealand's effective
public health response, and the
plans and procedures we put in
place, resulted in zero COVID-19
cases among our residents and staff
to date.
We engaged our pandemic plan
as soon as news of the virus
emerged and pulled together our
Crisis Response Team.
As events escalated, we worked
quickly to safeguard our residents
and staff through an evolving range
of measures, working with other
members of the aged care sector
at the forefront of the response.
During the nationwide COVID-19
lockdown period we:
•
•
•
•
Procured more than $750,000
of additional personal
protective equipment
Required staff and approved
visitors to undergo temperature
checks and wear face masks
Provided security at all village
gates to screen visitors
Increased our cleaning regimes,
particularly in high-touch areas
•
•
•
Established a safe food delivery
service direct to our residents’
front doors
Provided regular updates via
a new email newsletter
for residents and their families
Provided care packages and
arranged physically distanced
events for residents
• Developed an online wellness
centre promoting physical and
mental wellbeing for residents.
Throughout 2020, our staff have
worked hard to support residents
and their families to stay connected
despite travel restrictions.
19
7,000care calls made to prospective residents 16,600visitors to the Wellness Centre,our online entertainment and education hub 10 daysto implement a new nationwide home grocery delivery service Over2,000 third-party grocery orders processed and delivered 51,000meals delivered to care centre residents in their rooms 41,000mealsdelivered to village residents 131residents tested for COVID-19– all test results negative 76staff on paid leave pending a COVID-19 test– all test results negative 13resident and next of kin newsletters sent in first 12 weeks of lockdown Extra42 nurses employed during lockdown to maintain care levelsExtra80 care staff employed during lockdown to maintain care levelsExtra39 village staff employed during lockdown to maintain care levels
Annual Report 2020
20
Resident wellbeing
During 2020 we continued the
rollout of our signature fitness
programme for residents. Designed
specifically for over-70s by an
experienced personal training
company, the programme has been
accredited as a falls-prevention class
by the Ministry of Health and ACC.
The new programme includes
mental and physical exercises to
improve and maintain coordination,
balance and cognitive health. To
ensure the effective delivery of the
programme, each class is run by a
fitness instructor. The programme is
now available in seven villages and
we will roll it out to a similar number
in 2021.
Although we had to postpone our
popular Connect speaker series
during the COVID-19 lockdowns,
we organised virtual events for our
residents. These included a wine-
tasting experience with Villa Maria
and a food-focused talk by chef and
author Peta Mathias.
We reintroduced face-to-face
events in July 2020, with Connect
talks from Olympic boardsailor
Barbara Kendall and comedians
Ginette McDonald and Pinky Agnew.
We also held a second series of
‘Understanding dementia’ talks in
conjunction with Dementia New
Zealand from September 2020. We
plan to continue hosting virtual
events alongside our village-based
events into the future.
Resident wellbeing is
at the centre of what
we do and Summerset
continues to plan for
a variety of virtual and
village based events
Dementia-friendly accreditation
In April 2020 we achieved
dementia-friendly accreditation
from Alzheimers New Zealand. This
means we are nationally recognised
as a safe, accepting and supportive
place for people with dementia.
Alzheimers New Zealand’s Chief
Executive, Catherine Hall, said, “the
Committee was impressed with the
work Summerset has initiated to
challenge stigma and create kinder,
more accepting communities for
people living with dementia,
Summerset by the Park, Manukau
and the wide range of
creative dementia friendly initiatives
observed during the audit.”
To achieve this, we carried
out intensive work across our
villages, from training each staff
member, to creatively meeting the
individual needs of residents living
with dementia.
More than 195 corporate staff
have also completed an online
training module to increase their
understanding of dementia.
Summerset has a three-year
partnership with Dementia New
Zealand and has been working
alongside the organisation to
provide public talks at our villages to
reduce stigma around the disease.
Summerset has been
recognised as a safe
and accepting place
for people living
with dementia
People are the heart of Summerset
In 2020 we prioritised the training
and development of our staff, and
this will continue into 2021 and
beyond. We introduced a new online
learning system that provides staff
with easy access to user-friendly
training modules.
Online training enables a consistent
learning experience for all our staff,
wherever they work. Our first online
training programme was a six-
module self-paced learning
programme for our sales team.
We also launched our Care Centre
Manager and Clinical Nurse Lead
leadership development
programmes to build capability in
these key frontline roles. They began
with a series of face-to-face
workshops and will continue to roll
out over the next two to three years.
Online learning was invaluable
during the nationwide lockdown,
when we recruited more than 120
nurses and caregivers during the
first six weeks. It allowed us to induct
new staff into our processes,
procedures, and health and safety
protocols before they had even set
foot on Summerset premises.
Our recruitment campaign for extra
staff included contacting over 80
companies that were making
redundancies due to COVID-19.
Online training enables
a consistent learning
experience for staff and
was invaluable during
the lockdown period
OUR PEOPLE AND COMMUNITY
Employee attrition
34%34%
29%29%
27%27%
28%28%
20%20%
40
30
%
20
10
0
2016
2017
2018
2019
2020
Employee retention
%
90
60
30
0
74%74%
79%79%
82%82%
21
2018
2019
2020
Workplace injury rates 1
8.418.41
3.683.68
e
t
a
r
y
c
n
e
u
q
e
r
F
10
7.5
5
2.5
0
5.625.62
4.614.61
5.055.05
6.226.22
4.254.25
2.522.52
2.152.15
2.732.73
2016
2017
2018
2019
2020
Lost time injury frequency rate
Recordable injury frequency rate
1 The prior year (LTIFR) lost time injury frequency rate numbers have been updated due to Summerset changing
to the benchmark methodology used by the Business Leaders' Health and Safety Forum.
Annual Report 2020
22
Attracting and retaining staff
Staff retention and turnover
improved significantly over 2020,
with turnover now below the
industry average. This was partly due
to the border closures and greater
economic uncertainty brought
about by COVID-19. However, it
was also the result of ongoing
improvements in our employee
offering and culture.
During the year we changed our
survey provider for measuring
staff engagement. We now use
the Peakon survey, whose much-
improved technology assisted us in
achieving 86% staff participation.
Our overall staff engagement score
increased from 7.7 to 7.8 out of
10 in 2020, putting us at or above
the top quartile of companies using
Peakon globally.
Diversity and inclusion
During 2020 we also progressed our
diversity and inclusion strategy. The
specialist consultancy, Diversitas,
thoroughly examined our policies
and processes through a diversity
and inclusion lens, and interviewed
staff across the organisation. As
a result of the review, we have
now identified opportunities for
continued improvement and a
three-year plan has been developed
with work starting in early 2021.
Continuing improvement in health
and safety
We were pleased to be reaccredited
with tertiary status in ACC’s
Accredited Employers Programme
in 2020, which we have held since
June 2017. The annual renewal audit
provides an important snapshot of
safety and injury management in
our workplace. We are committed to
the core values of this programme,
creating safe work environments for
our people and ensuring that we
continue to be leaders in health
and safety.
7.8
Staff engagement score
(out of 10)
2020 highlights
•
•
•
•
•
•
•
•
Strategy updated and three-
year plan developed for
implementation in 2021
Increased visibility and training of
senior leaders
Improved risk reporting across
the organisation
Safety in design implemented
and matured
Improved incident reporting,
data and analysis
Improved third-party
contractor management
SiteWise pre-qualification
programme well embedded
Improved onboarding
processes.
60%650%4Staff engagement1 201553%20207.8201767%Previous survey providerPeakon20197.7201840%270%8201967%69%%Peakon1. Peakon was provided the 2019 raw data to ensure year on year consistency — noting different scoring scales (67% = 7.7). OUR PEOPLE AND COMMUNITY
Strong wave
of growth
The New Zealand population aged 75 and over is forecast to more than triple in the next 50 years.
NZ population 75+
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
18
15
12
9
6
3
0
%
23
2
0
0
2
7
0
0
2
2
1
0
2
6
1
0
2
0
2
0
2
3
2
0
2
8
2
0
2
3
3
0
2
8
3
0
2
3
4
0
2
8
4
0
2
3
5
0
2
8
5
0
2
3
6
0
2
8
6
0
2
3
7
0
2
NZ population 75+ (left-hand axis)
% population 75+ (right-hand axis)
Per annum New Zealand population growth 75+
30,000
25,000
20,000
15,000
10,000
5,000
0
2
0
0
2
-
7
9
9
1
7
0
0
2
-
2
0
0
2
2
1
0
2
-
7
0
0
2
6
1
0
2
-
2
1
0
2
0
2
0
2
-
6
1
0
2
3
2
0
2
-
0
2
0
2
8
2
0
2
-
3
2
0
2
3
3
0
2
-
8
2
0
2
8
3
0
2
-
3
3
0
2
3
4
0
2
-
8
3
0
2
8
4
0
2
-
3
4
0
2
3
5
0
2
-
8
4
0
2
8
5
0
2
-
3
5
0
2
3
6
0
2
-
8
5
0
2
8
6
0
2
-
3
6
0
2
3
7
0
2
-
8
6
0
2
NZ population 75+ per annum growth
Source: Statistics New Zealand – National Population Projections
Annual Report 2020
24
Our villagesSummerset continues to grow its portfolio of high-quality retirement villages with amenities and facilities designed for Kiwi and Australian retirees.Summerset at Monterey Park, Hobsonville OUR VILLAGES
Village highlights
Summerset has 32 villages in
operation or in development across
New Zealand, and a further eight
sites in New Zealand held for future
development. In 2020 we purchased
2.8 hectares of land in Auckland in
Half Moon Bay.
Our land bank for future
development is the largest in the
New Zealand retirement sector,
allowing us to double our current
resident population. We have
retirement villages in the main
urban centres, including Auckland,
New Zealand’s most populous
city, with five villages and four
more in the pipeline. We also
have villages in major provincial
cities, including Nelson and New
Plymouth, and popular retirement
destinations such as Tauranga and
the Kapiti Coast.
2020 successes
In 2020 we started earthworks at two
sites and our first residents moved
into three newly opened villages.
We also completed construction on
two next-generation main buildings,
at Casebrook in March and Rototuna
in November.
Our main buildings form the heart
of our villages, providing a vibrant
community hub for residents, staff,
families and friends.
At 9,000m2, our new main buildings
are almost double the size of those in
our earlier villages.
New residents
We were pleased to welcome our
first residents to our new villages at
Papamoa Beach (Tauranga),
Te Awa (Napier) and Bell Block
(New Plymouth). We now have two
villages in the Bay of Plenty, four in the
Hawke's Bay and two in Taranaki.
New earthworks
We started earthworks on two sites
in 2020, at St Johns and Whangarei.
Members of Ngāti Hau, a hapū
of Ngāpuhi in the area of the
new Whangarei village site, gathered
for a morning blessing, alongside
contractors, local kaumātua Mike
Kake and Dave Coyne, and Group
Construction Manager Jason Rahui.
25
New technology
We imported New Zealand’s first
Tovertafel — an interactive lightshow
providing stimulation for people
with cognitive impairments. The new
technology is from the Netherlands for
use in our newer memory care centres.
Annual Report 2020
RESOURCE CONSENTS
SITE
DETAILS
PROGRESS
Prebbleton
Resource consent lodged Q3 2020
In progress
Rangiora
Plan change approved.
Resource consent lodged Q4 2020
In progress
Blenheim
Resource consent lodged Q4 2020
In progress
Cambridge
Resource consent lodged Q4 2020
In progress
Waikanae
Resource consent lodged Q4 2020
In progress
Lower Hutt
Environment Court
decision granted
Resource consent received Q4 2020
26
Parnell
Resource consent lodged Q3 2020
Public notification closed
Hearing expected Q2 2021
Memory care centres
Summerset is a New Zealand leader
in next-generation memory care.
Since the 2017 opening of our award-
winning memory care centre in
Levin, we have refined the design
and features for our newest centres
in Casebrook and Rototuna.
Our in-house design and operations
teams have used research from
international dementia design
specialists to create apartment-
style living for residents with
dementia. The modern design
offers clear wayfinding, dementia-
friendly signage, large communal
areas and a secure outdoor
courtyard for freedom of movement
and independence.
Priorities for 2021
In 2021 we will complete our
Ellerslie village by finishing the last
independent apartment building. In
addition, we will deliver our first
units as part of the Hobsonville
village extension.
We expect to see good progress
in 2021 at our St Johns site. Bulk
earthworks will finish in March
2021, and construction will start on
the 8,500m2 basement which will
contain carparking for residents.
We also received final resource
consent from the Environment
Court for our Boulcott site in
Lower Hutt in November 2020.
Construction has started on the
village, which will ultimately be home
to more than 300 residents.
Regional main buildings will be
delivered in both our Richmond and
Avonhead villages in 2021. These
will provide further well-appointed
amenities for our residents.
6
Building
resource consents
lodged
OUR VILLAGES
Half Moon Bay
In October 2020 we announced the purchase of a 2.8-hectare site in
Half Moon Bay.
Once consented, it will be our ninth village in Auckland and our very
first in East Auckland.
It will include independent living and serviced apartments, care suites
and a memory care centre. It is near the Half Moon Bay Marina with ferry
services to the CBD and Waiheke Island.
Upper floors will have west-facing views across Half Moon Bay, towards
the city and out to the Waitakeres.
The number of people in the 75+ age group in East Auckland is forecast
to increase by over 50% in the next eight years.
27
Expanding the model
into Australia
It is important that we have a strong
local base as we expand into
Australia. We are gradually
developing our Australian team and
appointed the heads of the design,
sales and operations teams for
Victoria in 2020.
Two of these roles were filled by
existing Summerset staff, who will
move to Melbourne early in 2021. We
are looking forward to providing the
Australian market with our
continuum of care offering and
the backing of a trusted brand
with 23 years’ experience in
retirement living.
Providing a home for life
in Australia
Summerset will offer a full
continuum of care in Australia.
This sets us apart from many
competitors in Australia, where it is
common for independent living and
care to operate separately and
across different locations.
We will be building Cranbourne
North in carefully planned stages.
We expect to deliver approximately
40 villas in the first stage of the
development, from late 2021/
early 2022.
Planning for our specialist care
centre and care services at
Cranbourne North is already well
under way. The care centre will
offer a unique household model,
with no more than 18 residents
in a household.
Each resident will have a private
room and access to shared lounge
and dining areas. This will provide
them with the comfort, intimacy and
closeness of a family unit, and will
allow our care staff to focus on each
individual resident.
Annual Report 2020
28
Completed villagesIn developmentProposed villagesDunedinCasebrookParaparaumuLevinPalmerston NorthWanganuiNew PlymouthRichmondNelsonLower HuttPapamoa BeachHavelock NorthHastingsTe AwaNapierTaupoKatikatiManukauWarkworthMilldaleHobsonvilleEllerslieKarakaParnellHamiltonRototunaAoteaKenepuruWigramAvonheadBell BlockWaikanaeSt JohnsTrenthamWhangareiCambridgeRangioraPrebbletonBlenheimTorquayCranbourne NorthMELBOURNEHalf Moon BayOur villages OUR VILLAGES
29
* New site purchased Our land bankNew Zealand land bankDesignConsentingConstructionVillage openFinal stagesHobsonville, AucklandEllerslie, AucklandRototuna, HamiltonCasebrook, ChristchurchAvonhead, ChristchurchRichmond, TasmanKenepuru, WellingtonTe Awa, NapierPapamoa Beach, TaurangaBell Block, New PlymouthSt Johns, AucklandWhangarei, NorthlandLower Hutt, WellingtonRangiora, CanterburyParnell, AucklandWaikanae, KapitiCambridge, WaikatoBlenheim, MarlboroughPrebbleton, CanterburyMilldale, AucklandHalf Moon Bay, Auckland*Australian land bankCranbourne North, MelbourneTorquay, Victoria Annual Report 2020
30
Our commitment to sustainabilitySummerset was certified as New Zealand’s first carbonzeroTM retirement village operator in 2018, and we have continued to build on our commitment to sustainability each year. OUR COMMITMENT TO SUSTAINABILITY
Absolute emissions progress
6,671
6,671
6,466
6,466
6,414
6,414
5,939
5,939
e
2
O
C
t
7,200
6,400
5,600
4,800
4,000
3,200
2,400
1,600
800
0
2017
(Base year)
2018
2019
2020
31
Emissions reduction programme
Summerset is Toitū carbonzeroTM
certified. We have been measuring,
managing and reporting on our
carbon footprint since 2017. From
2018, our carbon emissions have
been independently audited by
Toitū Envirocare to the ISO14064-1
standard. We are on track to meet
our target of a 5% reduction in all
operational emissions intensity by
the end of 2022.
Our internal tracking shows we
have reduced our carbon emissions
intensity by 31% since 2017.
Given our significant property
development activities, we calculate
our total gross carbon emissions
per square metre of build. This has
decreased by 22% since 2017.
Decrease in absolute
carbon emissions
Summerset’s total emissions in 2020
were 6,414 tCO2e, which is 1% lower
than the previous year’s total of
6,466 tCO2e and 8% higher than
the base year total of 5,939 tCO2e.
Energy use accounts for 80% of our
carbon emissions.
In 2020, Summerset committed to
a science-aligned carbon reduction
target, that commits us to a 62%
reduction per square metre of
building area by 2032 (from 2017
levels). We are the only New Zealand
retirement village operator to have
done this. Summerset is also working
closely with its supply chains to
reduce carbon emissions. We have
also expanded our emissions
reduction programme into our
villages and started preparing for
innovation in future village builds.
Summerset has a large construction
business, giving us scope to reduce
our carbon emissions and future-
proof our villages against climate-
related risks. We can reduce
emissions by adopting new
technologies in our building designs,
using greener building materials and
creating landscapes that are more
water efficient.
As part of its goal of reaching net
zero carbon emissions by 2050, the
Government is expected to
introduce regulation on the Building
for Climate Change Programme in
2021. Summerset has made a
submission on this as part of the
consultation process.
Summerset has
expanded its emissions
reduction programme
across its villages
Annual Report 2020
Emissions intensity – CO2e tonnes per $ million revenue
5454
4949
4242
3737
60
45
e
2
O
C
t
30
15
0
2017
(Base year)
2018
2019
2020
32
2020 key impact areas by tCO2e
Energy 80%
Travel 9%
Waste 11%
Paper 0.3%
Fertiliser 0.1%
Progress in 2020
In 2020 we monitored
our performance across two
environmental, social and
governance (ESG) indices. We
achieved an AA rating from Morgan
Stanley and submitted a non-scored
survey to the Carbon Disclosure
Project (CDP) for the first time.
In addition, Summerset joined New
Zealand’s main body for sustainable
building knowledge in August.
The New Zealand Green Building
Council membership will provide
our staff with access to technical
knowledge on best environmental
building practices.
Along with over 100 of New
Zealand’s leading companies, we
are a signatory to the Climate
Leaders Coalition and have set a
science-aligned carbon reduction
target for our business in 2021.
This demonstrates our commitment
to the Paris Agreement on global
climate change.
Summerset's five areas of focus as
part of our emissions management
reduction are energy, waste, travel,
paper and fertilisers.
ENERGY
Reducing electricity and
gas usage
We fine-tuned, maintained and
upgraded equipment throughout
2020 to ensure energy efficiency.
This included upgrading the gas
boiler at our Manukau village
and continuing our LED upgrade
programme. In addition, we joined
the New Zealand Green Building
Council to ensure optimal energy
performance for new builds.
OUR COMMITMENT TO SUSTAINABILITY
WASTE
Governance
Minimising our waste to landfill
Reducing the amount of waste
we send to landfill is an ongoing
focus for our offices, operations and
construction activities. In operations
we achieved a 35% diversion
from landfill, and in construction
the figure was 30%.The Ellerslie
construction site achieved a 75%
avoidance. As a result of this focus
on recycling, our facilities now send
25% less waste to landfill per resident
compared to our 2017 base year.
TRAVEL
Being more efficient in the way
we travel
Travel emissions are calculated for
car hire and air travel. Compared to
2019 we achieved a 50% decrease
in emissions from domestic, short-
haul and international flights in 2020.
This was due to COVID-19 travel
restrictions and the increased use of
communications technology.
Roles and responsibilities
Board
CEO
Oversees climate-related issues and responsibility for
sustainability. Reviews and approves direction and
monitors progress against targets
Assesses and manages climate-related risks and
opportunities. Reports programme performance and
progress at Board meetings
Sustainability
Forum
Includes senior managers from across the business.
Shapes and monitors our sustainability strategy
Key functional
workstreams
Covers operational impact areas related to the new
build environment
Green Team
Implements specific actions and initiatives identified in the
emissions reduction plan
33
PAPER
Further details on our climate-related targets,
measurements and results
Reducing our paper consumption
Our paper use went up due to the
increase in printed communications
during the COVID-19 lockdowns.
However, invoices are now sent via
email to 51% of residents, up from
17% at the beginning of 2020.
FERTILISERS
Selecting environmentally
friendly fertilisers
Fertilisers are a small but visible part
of our emissions profile. We continue
to reduce our fertiliser emissions by
working with our landscaping teams,
gardeners and suppliers to ensure
we use products that have a low
carbon footprint.
Summerset is aware of work under way on making climate-related financial
disclosures mandatory for listed companies by 2023. Climate-related risks
are currently managed through our risk management framework and across
our governance and reporting processes.
• Governance – for a statement on the Board’s oversight of climate-related
risks and opportunities see our governance section on page 79
•
•
Strategy – details of our overall business strategy is on page 5 and our plan
is to better understand climate-related material risks and opportunities for
Summerset in the future
Risk management – see our risk management framework presented on
pages 86 to 88
• Metrics and targets – carbon performance metrics can be found
above; operational performance metrics are on pages 18 to 27, financial
performance metrics are on pages 34 to 38
Annual Report 2020
34
Our performanceSummerset has maintained strong profitability and balance sheet resilience throughout 2020 and is well positioned for future sustained growth.Summerset Heritage Park, Ellerslie OUR PERFORMANCE
Financial performance overview
Underlying profit for the year
ended 31 December 2020
decreased by 7% on the prior
year to $98.3 million (2019:
$106.2 million), driven principally
by significant additional operational
costs associated with COVID-19
to ensure our residents remained
safe, increased investment in care,
employee wages and penal rates,
and cost drag from opening new
villages and main buildings.
Our sales of new and existing units
were strong, with increased volumes
for both. We also saw increased
sale prices on our resale units,
reflecting the strong residential
property market. The margin on new
units reduced due to changes in
the mix of units sold, with more
needs-based products and more
regional sales.
Revenue for the year grew 12% to
$172.4 million (2019: $153.9 million),
reflecting the opening of three new
villages and two main buildings,
and strong financial performance
across village operations. Our care
occupancy rates in established
villages remained high despite a
small reduction following the two
COVID-19 lockdowns.
Underlying profit is a non-GAAP
measure. A detailed explanation is
included in Note 2 to the Financial
Statements (see page 49). In
general terms, underlying profit
removes the fair value movement of
investment property and reinstates
the realised gains associated with
our resales and the development
margin associated with our new
sales. Underlying profit is used to
determine the dividend pay-out
to shareholders.
COVID-19 impact
COVID-19 had a significant impact
on 2020 underlying profit. Increased
operational costs of over $9 million
were predominantly from additional
staff resources, pandemic kits and
personal protective equipment.
This included additional care and
housekeeping staff, a $2 per hour
wage increase during level four
lockdown, security at our sites, and
extra sick leave as a precaution for
staff either because of their health or
that of their close contacts.
The costs outlined above are some
of the direct costs related to our
response, but we also incurred a
number of indirect costs. These
include the cost of paying the
construction staff during lockdown
while they were unable to be on
site and significant investment in
marketing and sales post lockdown
to support our sales teams to
ensure our sales were successful.
There were also no sales during the
national lockdown.
In May we received $0.7 million as
part of the Government’s support
to aged care providers for the
additional costs incurred. We note
that this is considerably less than our
actual costs to date. We qualified
for the COVID-19 wage subsidy as
revenue fell by more than 30% in
April, when retirement unit sales fell
to zero, and received $8.6 million.
However, we repaid this in full once
it became clear the business was in
a stable financial position and the
outlook was positive.
Sales were significantly better
than expected once the country
came out of lockdown, with the
third and fourth quarters bringing
record sales and the business
continuing to perform well. While
we have not yet experienced the
economic downturn predicted by
many economists, we are wary
that COVID-19 will be with us for
some time. We will continue to
plan and prepare to ensure we are
well positioned to deal with any
future outbreaks.
Underlying profit has
seen a compound
annual growth rate of
32% since the company
was listed on the NZX
in 2011
Long-term growth
A key component of underlying
profit is the realised development
margin on new sales which was
$48.2 million in 2020 (2019:
$61.0 million). The development
margin was 19.6%, down from
27.9% in the previous year. The
decrease was due to increased
construction costs across our main
centres, an increase in needs-
based products and fewer Auckland
settlements. The long-term returns
remain strong on needs-based
products. Summerset’s medium-
term expectation of development
margins is in the 20–25% range.
This will continue to be an area
of significant focus for the Board
and management.
Good margins reflect the
advantage of having strong
in-house capabilities for each
stage of village development,
including land purchase,
planning, consenting, design and
construction management. We
can achieve cost advantages
through scale and standardisation
of development programmes, while
also being able to adapt each project
to local needs and preferences.
Summerset continues to maintain
the largest land bank for a retirement
village operator in New Zealand, and
acquired a new site at Half Moon Bay
in Auckland during 2020. This brings
our total land bank of units to 5,992.
35
Summary of sales and
developments
New Zealand’s residential property
market is continuing to hold strong
despite early predictions from
market analysts that the global
pandemic could result in significant
decreases in house prices
nationwide. Prices continued to rise
across most regions, partly fuelled
by low interest rates and strong
buyer demand.
Summerset had a record sales year,
with 785 unit sales of occupation
rights (2019: 652), 404 of them new
unit sales and 381 resales. Average
gross proceeds per new sale
settlement of $607,000 were down
from $665,000 in 2019 due to the
change in mix of unit type and region
of sales. Realised resale gain
increased by 25% to $46.1 million in
2020. Average gross proceeds per
resale settlement were $464,000,
up 4% from 2019. This reflects the
growth in the residential property
market in some regions, as well as
the length of time taken between
sale of units.
Key development milestones
included the opening of three new
villages: Papamoa Beach (Tauranga),
Te Awa (Napier) and Bell Block (New
Plymouth). For developing villages
still under construction, new unit
sales were strong at Casebrook
(Christchurch), Rototuna (Hamilton)
and Avonhead (Christchurch).
In addition, our Australian sites
acquired to date illustrate
Summerset's commitment to
diversifying into an attractive
overseas growth market.
36
Annual Report 2020
Underlying profit
m
$
120
80
40
0
37.837.8
56.656.6
81.781.7
98.698.6
106.2
106.2
98.398.3
FY15
FY16
FY17
FY18
FY19
FY20
Land bank over time (units)1
7,000
6,000
5,000
4,000
3,000
5,992
5,992
5,380
5,380
612612
3,9103,910
1,470
1,470
2,4142,414
2,609
2,609
195195
2,841
2,841
232232
1,069
1,069
2,000
533533
1,000
0
1,881
1,881
FY15
2,414
2,414
FY16
2,609
2,609
2,841
2,841
FY17
FY18
3,9103,910
FY19
5,380
5,380
FY20
Existing land bank
Net land bank growth
1 Units include all units to be sold under occupation right agreement
Net profit after tax
Summerset recorded a net profit
after tax of $230.8 million for the year
ended 31 December 2020, up from
$175.3 million in 2019.
This increase is largely due to the
fair value movement on investment
property (2020: $221.1 million; 2019:
$165.3 million).
Fair value movement in 2020 of
$221.1 million reflects the delivery
of 356 units in the financial
year, the completion of two main
buildings, strong sales rates across
our villages reducing our vacant
stock levels and changes to the
key assumptions applied by the
valuer. Assumption changes in the
period were predominately to short
term growth rates and recycle
frequencies, reflecting the tailwinds
seen in the residential property
market across the second half
of 2020.
Business growth and expenses
Summerset derives its revenue from
selling units (deferred management
fees) and providing village and care
services. The company’s revenue
increased as a result of higher
volumes, reflective of the scale and
growth of our operations.
Deferred management fees on
Summerset’s investment property
were $60.8 million in 2020
(2019: $52.5 million). The growth
reflects the increase in the
number, occupancy and value of
Summerset’s portfolio of units.
OUR PERFORMANCE
Expense breakdown
Employee expenses
Revenue breakdown
Revenue breakdown
Dividend cents per share
Employee
expenses 57%
Property-related
expenses 10%
Repairs and
maintenance
expenses 4%
Depreciation,
amortisation
and impairments 7%
Other operating
expenses 22%
37
Deferred
management fees 35%
Care fees and
village services 65%
16
12
8
4
0
7.27.2
7.77.7
7.07.0
7.17.1
5.15.1
2.52.5
3.33.3
2.12.1
1.41.4
3.43.4
1.91.9
2.62.6
3.93.9
6.06.0
6.46.4
6.06.0
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
Interim
Final
Annual Report 2020
Operating activities
Summerset’s net cash from
operating activities was
$266.8 million for the year, up 12%
from 2019 (2019: $237.9 million).
This was principally driven by
gross receipts from new occupation
right agreement sales, amounting
to $237.0 million, up from
$209.4 million in 2019.
Summerset is a growth company
and reinvests operating cash flows
back into the business to finance
future growth. In 2020 Summerset
invested $318.8 million, primarily
in new and existing retirement
villages and care centres (2019:
$327.4 million).
Investment activities are principally
the purchase of land and the
development and refurbishment of
new and existing retirement villages
and care centres.
Assets rose to $3.9 billion
Total assets rose 17% to $3.9 billion
at 31 December 2020 (2019:
$3.3 billion), mainly due to growth
in the size and value of Summerset’s
investment property, which reached
$3.6 billion (2019: $3.1 billion).
At balance date, Summerset also
had other property, plant and
equipment valued at $181.1 million
(2019: $154.0 million), most of
this being care centres (these
are operated to provide services
and are therefore not included as
investment property).
An increased embedded value of
$883.6 million (2019: $752.7 million)
demonstrates future cash that can
be generated when units are resold.
Interest-bearing debt of
$687.1 million was 18% of total assets
at year end (2019: $587.1 million).
Summerset raised $150.0 million
from a new retail bond in September
2020 which brings the year end debt
at face value to $297.6 million of
bank borrowings and $375.0 million
of retail bonds.
Summerset also has residents' loans
of $1.5 billion (2019: $1.3 billion).
This in the form of licences paid
by residents under occupation right
agreements, these are repayable
when residents vacate units and
the associated occupation rights
are resold.
Consistent strong
growth performance
Summerset continued to pay
dividends to shareholders during
COVID-19 despite unprecedented
circumstances. We will pay a final
dividend of 7.0 cents per share (cps)
on 22 March 2021, making a full pay-
out for the 2020 year of 13.0 cps
(2019: 14.1 cps).
Board policy remains for shareholder
distributions in the range of 30–50%
of each year’s underlying profit. The
2020 distribution of $29.7 million
represents 30% of underlying profit
($98.3 million), which is consistent
with the last five years.
Summerset continues to
offer shareholders a dividend
reinvestment option, including a 2%
discount to market share price.
96%
Occupancy in our mature
care centres
At 31 December 2020, Summerset’s
total unit portfolio reached 4,442
(2019: 4,086) and at year end there
were only 179 new sales units and 73
resale units available for sale.
The final apartment building in
Summerset’s Ellerslie village is due
for delivery in early 2021, and
comprises a further 74 apartments.
Strong progress has also been made
on two main buildings in Avonhead
and Richmond, both due to open
in 2021.
Occupancy in our mature care
centres was 96% which is above the
industry average of 90%.
Total expenses increased in 2020
by 22% to $158.3 million (2019:
$130.2 million), largely due to
COVID-19 costs and cost drag
of new care centres and villages
opening in line with Summerset's
ongoing business growth. We also
invested in our employee offering
and culture to ensure we remain
a top employer, we had increased
uncontrollable expenditure items
such as rates and power, and
spent more on additional sales and
marketing expenses.
38
OUR PERFORMANCE
Five year
summary
Key operational and financial statistics for the
five year period up to and including FY20 are
as follows:
Results highlights - operational
Unit
FY20
FY19
FY18
FY17
FY16
New sales of occupation rights
Resales of occupation rights
Total sales of occupation rights
Development margin
New units delivered
Units in portfolio
Care beds in portfolio
Results highlights - financial
No.
No.
No.
%
No.
No.
No.
404
381
785
329
323
652
339
301
640
382
300
682
414
244
658
19.6%
27.9%
33.2%
27.3%
22.2%
-30%
356
354
454
450
409
4,442
4,086
3,732
3,278
2,828
915
858
858
806
748
1%
9%
7%
Net operating cash flow
Total assets
Net assets
Underlying profit
Profit before income tax (IFRS)
Profit for the period (IFRS)
Dividend per share
Basic earnings per share
Unit
FY20
FY19
FY18
FY17
FY16
$m
$m
$m
$m
$m
$m
cents
cents
266.8
237.9
217.8
207.7
192.6
3,893.2
3,337.9
2,766.4
2,232.8
1,706.8
1,354.8
1,131.9
978.8
785.8
545.6
98.3
221.7
230.8
13.0
102.3
106.2
173.6
175.3
14.1
78.6
98.6
216.2
214.5
13.2
97.1
81.7
240.2
239.9
11.0
109.8
56.6
145.6
145.5
7.7
66.9
FY19 to
FY20 %
Change
12%
17%
20%
-7%
28%
32%
-8%
30%
FY19 to
FY20 %
Change
23%
18%
20%
39
Annual Report 2020
40
Financial statements Income Statement
For the year ended 31 December 2020
Care fees and village services
Deferred management fees
Interest received
Total revenue
NOTE
4
4
4
2020
$000
2019
$000
111,619
101,259
60,752
52,470
51
217
172,422
153,946
Fair value movement of investment property
11
221,142
165,252
Total income
Operating expenses
Depreciation and amortisation expense
Impairment of property, plant and equipment
Total expenses
393,564
319,198
5
(146,805)
(122,399)
9, 10
9
(8,097)
(3,431)
(7,833)
-
(158,333)
(130,232)
Operating profit before financing costs
235,231
188,966
41
Net finance costs
Profit before income tax
Income tax credit
Profit for the period
Basic earnings per share (cents)
Diluted earnings per share (cents)
The accompanying notes form part of these financial statements.
6
7
20
20
(13,496)
(15,405)
221,735
173,561
9,041
1,701
230,776
175,262
102.30
101.23
78.59
77.52
Annual Report 2020
Statement of Comprehensive Income
For the year ended 31 December 2020
Profit for the period
Fair value loss on interest rate swaps
Tax on items of other comprehensive income
(Loss)/gain on translation of foreign currency operations
Other comprehensive income that will be reclassified subsequently to
profit or loss for the period net of tax
Net revaluation of property, plant and equipment
Tax on items of other comprehensive income
Other comprehensive income which will not be reclassified
subsequently to profit or loss for the period net of tax
NOTE
2020
$000
2019
$000
230,776
175,262
14
7
9
7
(7,075)
1,981
(491)
(7,015)
1,964
266
(5,585)
(4,785)
12,712
(3,145)
9,567
-
-
-
Total comprehensive income for the period
234,758
170,477
The accompanying notes form part of these financial statements.
42
Statement of Changes in Equity
For the year ended 31 December 2020
SHARE
CAPITAL
$000
HEDGING
RESERVE
$000
REVALUATION
RESERVE
$000
RETAINED
EARNINGS
$000
As at 1 January 2019
269,467
(10,122)
24,941
694,508
-
-
-
(1,413)
269,467
(10,122)
24,941
693,095
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$000
5
-
5
-
TOTAL
EQUITY
$000
978,799
(1,413)
977,386
175,262
-
-
-
-
13,351
1,256
-
(5,051)
(5,051)
-
-
-
-
-
-
-
-
-
175,262
-
266
(4,785)
175,262
266
170,477
(30,586)
-
-
-
-
-
(30,586)
13,351
1,256
Adjustment on adoption
of IFRS 16
Adjusted balance at
1 January 2019
Profit for the period
Other comprehensive
income for the period
Total comprehensive
income for the period
Dividends paid
Shares issued
Employee share plan
option cost
As at 31 December 2019
284,074
(15,173)
24,941
837,771
271
1,131,884
43
As at 1 January 2020
284,074
(15,173)
24,941
837,771
271
1,131,884
Profit for the period
Other comprehensive
income for the period
Total comprehensive
income for the period
Dividends paid
Shares issued
Employee share plan
option cost
-
-
-
-
16,395
3,030
-
-
230,776
-
230,776
(5,094)
9,567
-
(491)
3,982
(5,094)
9,567
230,776
(491)
234,758
-
-
-
-
-
-
(31,222)
-
-
-
-
-
(31,222)
16,395
3,030
As at 31 December 2020
303,499
(20,267)
34,508
1,037,325
(220)
1,354,845
The accompanying notes form part of these financial statements.
Annual Report 2020
Statement of Financial Position
As at 31 December 2020
Assets
Cash and cash equivalents
Trade and other receivables
Interest rate swaps
Property, plant and equipment
Intangible assets
Investment property
Total assets
Liabilities
Trade and other payables
Employee benefits
Revenue received in advance
44
Interest rate swaps
Residents’ loans
Interest-bearing loans and borrowings
Lease liability
Deferred tax liability
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity attributable to shareholders
The accompanying notes form part of these financial statements.
On behalf of the Board
Rob Campbell
Director and Chair of
the Board
James Ogden
Director and Chair of the
Audit Committee
Authorised for issue on 22 February 2021
NOTE
2020
$000
2019
$000
8
14
9
10
11
12
13
4
14
15
17
16
7
19
19
15,817
33,395
18,412
21,462
36,662
12,617
181,098
154,004
5,709
6,123
3,638,760
3,107,014
3,893,191
3,337,882
158,610
134,680
15,438
114,737
28,150
11,434
91,142
21,075
1,520,298
1,327,607
687,099
597,081
11,184
2,830
10,460
12,519
2,538,346
2,205,998
1,354,845
1,131,884
303,499
284,074
14,021
10,039
1,037,325
837,771
1,354,845
1,131,884
Statement of Cash Flows
For the year ended 31 December 2020
Cash flows from operating activities
Receipts from residents for care fees and village services
Interest received
Payments to suppliers and employees
Receipts for residents’ loans - new occupation right agreements
2020
$000
2019
$000
110,719
101,116
51
217
(142,205)
(116,811)
237,000
209,364
Net receipts for residents' loans - resales of occupation right agreements
61,282
44,010
Net cash flow from operating activities
266,847
237,896
Cash flows to investing activities
Sale of investment property
Payments for investment property:
- land
- construction of villages
- refurbishment of villages
Payments for property, plant and equipment:
- construction of care centres
- refurbishment of care centres
- other
Payments for intangible assets
Capitalised interest paid
Net cash flow to investing activities
Cash flows from financing activities
Net (repayments of)/proceeds from bank borrowings
Proceeds from issue of retail bonds
Proceeds from issue of shares
Interest paid on borrowings
Payments in relation to lease liabilities
Dividends paid
Net cash flow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
The accompanying notes form part of these financial statements.
45
1,154
-
(44,386)
(57,344)
(229,205)
(232,768)
(8,244)
(7,201)
(16,651)
(15,413)
(1,107)
(7,760)
(668)
(146)
(3,172)
(567)
(11,910)
(10,800)
(318,777)
(327,410)
(71,542)
135,636
150,000
-
4,201
2,215
(15,436)
(13,549)
(1,549)
(1,264)
(19,389)
(19,544)
46,285
103,494
(5,645)
13,980
21,462
15,817
7,482
21,462
Annual Report 2020
Reconciliation of Operating Results and Operating Cash Flows
For the year ended 31 December 2020
Profit for the period
Adjustments for:
Depreciation and amortisation expense
Impairment on property, plant and equipment
Fair value movement of investment property
Net finance costs paid
Income tax credit
Deferred management fee amortisation
Employee share plan option cost
Other non-cash items
46
Movements in working capital
Decrease/(increase) in trade and other receivables
Increase in employee benefits
Increase in trade and other payables
Increase in residents’ loans net of non-cash amortisation
2020
$000
2019
$000
230,776
175,262
8,097
3,431
7,833
-
(221,142)
(165,252)
13,496
15,405
(9,041)
(1,701)
(60,752)
(52,470)
1,576
90
1,256
271
(264,245)
(194,658)
1,632
4,004
903
(10,724)
1,980
624
293,777
265,412
300,316
257,292
Net cash flow from operating activities
266,847
237,896
The accompanying notes form part of these financial statements.
Notes to the
financial
statements
For the year ended 31 December 2020
1. Summary of accounting policies
Reporting entity
The consolidated financial statements presented for the year ended 31 December 2020 are for Summerset Group Holdings Limited
(the "Company") and its subsidiaries (collectively referred to as the "Group"). The Group develops, owns and operates integrated
retirement villages in New Zealand, including independent living, care centres with rest home and hospital-level care and memory
care centres. The Group also owns land for development of retirement villages in Australia.
Summerset Group Holdings Limited is registered in New Zealand under the Companies Act 1993 and is a FMC Reporting Entity for
the purposes of the Financial Markets Conduct Act 2013. The reporting entity is listed on the New Zealand Stock Exchange (NZX),
being the Company’s primary exchange, and is listed on the Australian Securities Exchange (ASX) as a foreign exempt listing.
47
Basis of preparation
These consolidated financial statements have been prepared in accordance with generally accepted accounting practice in New
Zealand (NZ GAAP), except for Note 2: Non-GAAP underlying profit, which is presented in addition to NZ GAAP compliant information.
NZ GAAP in this instance refers to New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) as appropriate
for profit-oriented entities. These financial statements also comply with International Financial Reporting Standards.
These financial statements are expressed in New Zealand dollars, which is the Company’s and New Zealand subsidiaries' functional
currency. The functional currency of the Company's Australian subsidiaries is Australian dollars. All financial information has been
rounded to the nearest thousand, unless otherwise stated.
All amounts are shown exclusive of goods and services tax (GST), except for trade receivables and trade payables, and except where
the amount of GST incurred is not recoverable. When this occurs, GST is recognised as part of the cost of the asset or as an expense
as applicable.
The measurement basis adopted in the preparation of these financial statements is historical cost, with the exception of the items
noted below.
•
•
•
•
Interest rate swaps – Note 14
Investment property – Note 11
Land and buildings – Note 9
Retail bonds – Note 17
Basis of consolidation
Subsidiaries are fully consolidated at the date on which the Group obtains control, and continue to be consolidated until the date
when such control ceases. The financial statements are prepared for the same reporting period as the Company, using consistent
accounting policies. All intra-group transactions and balances arising within the Group are eliminated in full.
All subsidiary companies are 100% owned and incorporated in New Zealand or Australia with a balance date of 31 December.
Annual Report 2020
Notes to the financial statements (continued)
The New Zealand subsidiaries are:
Summer Land Developments Limited
Summerset Care Limited
Summerset Holdings Limited
Summerset LTI Trustee Limited
Summerset Management Group Limited
Summerset Properties Limited
Summerset Retention Trustee Limited
Summerset Villages (Aotea) Limited
Summerset Villages (Avonhead) Limited
Summerset Villages (Bell Block) Limited
Summerset Villages (Blenheim) Limited
Summerset Villages (Cambridge) Limited
Summerset Villages (Casebrook) Limited
Summerset Villages (Dunedin) Limited
Summerset Villages (Ellerslie) Limited
Summerset Villages (Half Moon Bay) Limited
Summerset Villages (Hamilton) Limited
Summerset Villages (Hastings) Limited
Summerset Villages (Havelock North) Limited
Summerset Villages (Hobsonville) Limited
Summerset Villages (Karaka) Limited
Summerset Villages (Katikati) Limited
Summerset Villages (Kenepuru) Limited
Summerset Villages (Levin) Limited
Summerset Villages (Lower Hutt) Limited
Summerset Villages (Manukau) Limited
Summerset Villages (Milldale) Limited
Summerset Villages (Napier) Limited
Summerset Villages (Nelson) Limited
Summerset Villages (New Plymouth) Limited
Summerset Villages (Number 42) Limited
Summerset Villages (Number 43) Limited
Summerset Villages (Number 44) Limited
Summerset Villages (Number 45) Limited
Summerset Villages (Palmerston North) Limited
Summerset Villages (Papamoa) Limited
Summerset Villages (Paraparaumu) Limited
Summerset Villages (Parnell) Limited
Summerset Villages (Prebbleton) Limited
Summerset Villages (Rangiora) Limited
Summerset Villages (Richmond) Limited
Summerset Villages (Rototuna) Limited
Summerset Villages (St Johns) Limited
Summerset Villages (Taupo) Limited
Summerset Villages (Te Awa) Limited
Summerset Villages (Trentham) Limited
Summerset Villages (Waikanae) Limited
Summerset Villages (Wanganui) Limited
Summerset Villages (Warkworth) Limited
Summerset Villages (Whangarei) Limited
Summerset Villages (Wigram) Limited
Welhom Developments Limited
48
The Australian subsidiaries are:
Summerset Care (Australia) Pty Limited
Summerset Holdings (Australia) Pty Limited
Summerset Management Group (Australia) Pty Limited
Summerset Villages (Cranbourne North) Pty Limited
Summerset Villages (Number 2) Pty Limited
Summerset Villages (Number 3) Pty Limited
Summerset Villages (Number 4) Pty Limited
Summerset Villages (Number 5) Pty Limited
Summerset Villages (Number 6) Pty Limited
Welhom Developments (Australia) Pty Limited
Accounting policies
Accounting policies that summarise the measurement basis used and that are relevant to the understanding of the financial
statements are provided throughout the accompanying notes.
The accounting policies adopted have been applied consistently throughout the periods presented in these financial statements.
The Group adopted all mandatory new and amended NZ IFRS Standards and Interpretations. and there has been no material impact
on the Group's financial statements.
There are no new standards, amendments or interpretations that have been issued and are not yet effective, that are expected to
have a significant impact on the Group.
Critical accounting estimates and judgements
In preparing the financial statements, management has made estimates and assumptions about the future that affect the reported
amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during
the period. Actual results may differ from those estimates.
Estimates and assumptions are regularly evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances. The principal areas of judgement in preparing these
financial statements are described in the following notes:
•
•
•
Deferred management fees – Note 4
Deferred taxation – Note 7
Interest rate swaps – Note 14
•
•
•
•
•
Leases – Note 16
Revenue in advance – Note 4
Valuation of investment property – Note 11
Valuation of land and buildings – Note 9
Valuation of retail bonds – Note 17
Comparative information
No comparatives have been restated in the current year.
2. Non-GAAP underlying profit
Profit for the period
Less fair value movement of investment property
Add impairment of assets
Add realised gain on resales
Add realised development margin
Less deferred tax credit
Underlying profit
Ref
a)
b)
c)
d)
e)
2020
$000
2019
$000
230,776
175,262
(221,142)
(165,252)
3,431
46,072
48,208
-
36,901
60,973
(9,041)
(1,701)
98,304
106,182
Underlying profit is a non-GAAP measure and differs from NZ IFRS profit for the period. Underlying profit does not have a standardised
meaning prescribed by GAAP and therefore may not be comparable to similar financial information presented by other entities.
The Directors have provided an underlying profit measure in addition to IFRS profit to assist readers in determining the realised
and unrealised components of fair value movement of investment property, impairment 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 a measure that the Group uses consistently across reporting periods. Underlying profit is used to
determine the dividend pay-out to shareholders.
This statement presented is for the Group, prepared in accordance with the Basis of preparation: underlying profit described below.
49
Basis of preparation: underlying profit
Underlying profit is determined by taking profit for the period determined under NZ IFRS, adjusted for the impact of the following:
a)
b)
c)
d)
Less fair value movement of investment property: reversal of investment property valuation changes recorded in NZ IFRS
profit for the period, which comprise both realised and non-realised valuation movements. This is reversed and replaced with
realised development margin and realised resale gains during the period, effectively removing the unrealised component of
the fair value movement of investment property.
Add impairment of assets: remove the impact of non-cash care centre valuation changes recorded in NZ IFRS profit for the
period. Care centres are valued at least every three years (last valued as at 31 December 2020), with fair value gains flowing
through to the revaluation reserve unless the gain offsets a previous impairment to fair value that was recorded in NZ IFRS profit
for the period. Where there is any impairment of a care centre, or reversal of a previous impairment that impacts NZ IFRS profit
for the period, this is eliminated for the purposes of determining underlying profit.
Add realised gain on resales: add the realised gains across all resales of occupation rights during the period. The realised
gain for each resale is determined to be the difference between the licence price for the previous occupation right for a
retirement unit and the occupation right resold for that same retirement unit during the period. Realised resale gains are a
measure of the cash generated from increases in selling prices of occupation rights to incoming residents, less cash amounts
repaid to vacated residents for the repayment of the price of their refundable occupation right purchased in an earlier
period, with the recognition point being the cash settlement. Realised resale gains exclude deferred management fees and
refurbishment costs.
Add realised development margin: add realised development margin across all new sales of occupation rights during the
period, with the recognition point being the cash settlement. Realised development margin is the margin earned on the first
time sale of an occupation right following the development of a retirement unit. The margin for each new sale is determined
to be the licence price for the occupation right, less the cost of developing that retirement unit.
Annual Report 2020
Notes to the financial statements (continued)
Components of the cost of developing units include directly attributable construction costs and a proportionate share of the
following costs:
•
•
•
•
Infrastructure costs
Land cost on the basis of the purchase price of the land
Interest during the build period
Head office costs directly related to the construction of units
All costs above include non-recoverable GST.
Development margin excludes the costs of developing common areas within the retirement village (including a share of the
proportionate costs listed above). This is because these areas are assets that support the sale of occupation rights for not just
the new sale but for all subsequent resales. It also excludes the costs of developing care centres, which are treated as property,
plant and equipment for accounting purposes.
Where costs are apportioned across more than one asset, the apportionment methodology is determined by considering the
nature of the cost.
e)
Add/(less) deferred tax expense/(credit): reversal of the impact of deferred taxation.
Underlying profit does not include any adjustments for abnormal items or fair value movements on financial instruments that
are included in NZ IFRS profit for the period.
3. Segment reporting
The Group operates in one industry, being the provision of integrated retirement villages. The services provided across all of the
Group’s villages are similar, as are the type of customer and the regulatory environment. The chief operating decision makers, the
Chief Executive Officer and the Board of Directors, review the operating results of the Group as a whole on a regular basis. On
this basis, the Group has one reportable segment, and the Group results are the same as the results of the reportable segment. All
resource allocation decisions across the Group are made to optimise the consolidated Group’s result.
50
The Group continues to proceed with its expansion into Australia. Two Australian sites were purchased in 2019. It is intended that
these sites will be developed into retirement villages. To date the expenditure incurred and assets acquired in Australia have been
immaterial to the Group and so are not reported as a separate operating segment as at 31 December 2020.
The Ministry of Health is a significant customer of the Group, as the Group derives care fee revenue in respect of eligible government
subsidised aged care residents. Fees earned from the Ministry of Health for the year ended 31 December 2020 amounted to
$36.2 million (2019: $32.2 million). No other customers individually contribute a significant proportion of the Group revenue. All
revenue is earned in New Zealand.
4. Revenue
Care fees and village services income are recognised over the period in which the service is rendered.
Deferred management fees, which entitle residents to accommodation and the use of the community facilities within the village,
are recognised over the period of service, being the greater of the expected period of tenure or the contractual right to revenue.
The expected periods of tenure, being based on historical Group averages, are estimated to be seven to eight years for villas,
five years for apartments, three years for serviced apartments and memory care apartments and two years for care suites. Where
the deferred management fees over the contractual period exceed the amortisation of the deferred management fee based on
estimated tenure, the amount is recorded as a liability (revenue in advance). At balance date, the majority of the revenue in advance
balance is non-current. Deferred management fees are recognised on a gross basis in the receipts for residents’ loans section of the
statement of cash flows.
Interest income is recognised in the income statement as it accrues, using the effective interest method.
5. Operating expenses
Employee expenses
Property-related expenses
Repairs and maintenance expenses
Other operating expenses
Total operating expenses
Other operating expenses include:
Remuneration paid to auditors:
- Audit and other assurance related services review of
financial statements
Donations
Rent1
1 Outgoings and short term and low value amounts exempt under NZ IFRS 16 - Leases.
2020
$000
90,691
16,187
5,824
2019
$000
72,921
13,589
5,185
34,103
30,703
146,805
122,399
2020
$000
2019
$000
205
34
158
194
58
217
Employee expenses include post-employment benefits (KiwiSaver/Superannuation) of $2.3 million (2019: $2.0 million).
51
During the year the Group received a $8.6 million one-off Government wage subsidy in relation to COVID-19. The subsidy related
to a 12-week period between March and June 2020. Although the Group was entitled to receive the wage subsidy, the Directors
subsequently determined that it was appropriate to return the subsidy back to the Government and the full $8.6 million was repaid
on 23 December 2020. This resulted in a net nil impact to other operating expenses for the year ended 31 December 2020.
The Group also received an additional $0.7 million of funding as part of the Government's package to support residential aged care
providers to keep COVID-19 at bay. This funding has been recorded as a deduction to other operating expenses.
Included in the above operating expenses is $9.2 million of additional costs incurred as a result of COVID-19.
6. Net finance costs
Interest on bank loans, retail bonds and related fees
Interest on interest rate swaps
Interest on lease liability
Capitalised finance costs
Fair value movement of interest rate swaps through profit or loss
Fair value movement of retail bonds designated as fair value through profit
or loss
Other
Net finance costs
2020
$000
2019
$000
22,156
22,664
3,193
466
2,623
442
(12,323)
(10,481)
(5,795)
(7,991)
5,782
8,082
17
66
13,496
15,405
Interest expense comprises interest payable on borrowings and is calculated using the effective interest rate method.
Annual Report 2020
Notes to the financial statements (continued)
Borrowing costs are capitalised for property, plant and equipment (Note 9), and investment property (Note 11), if they are directly
attributable to the construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the activities
to prepare the asset commence and expenditure and borrowing costs are incurred. Capitalisation of borrowing costs continues until
the assets are substantially ready for their intended use.
Borrowing costs of $12.3 million (2019: $10.5 million) have been capitalised during the period of construction in the current year. The
weighted average capitalisation rate on funds borrowed representing the borrowing costs of the loans used to finance projects is
3.15% per annum (2019: 3.87% per annum).
Two of the Group's retail bonds are designated in a fair value hedging relationship. Details of fair value hedging are included in Note 14.
7. Income tax
Tax expense comprises current and deferred tax, calculated using the tax rate enacted or substantively enacted at balance date and
any adjustment to tax payable in respect of prior years. Tax expense is recognised in the income statement, except when it relates to
items recognised directly in the statement of comprehensive income, in which case the tax expense is recognised in the statement
of comprehensive income.
Deferred tax expense is recognised in respect of temporary differences between the carrying amounts of assets and liabilities in
the financial statements and the amounts used for taxation purposes. A deferred tax asset is recognised only to the extent that it is
probable it will be utilised. Temporary differences for the initial recognition of assets or liabilities that affect neither accounting nor
taxable profit, unless they arise from business combination, are not provided for.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net basis.
(a) Income tax recognised in the income statement
52
Tax expense comprises:
Deferred tax relating to the origination and reversal of temporary differences
Total tax credit reported in income statement
2020
$000
(9,041)
(9,041)
2019
$000
(1,701)
(1,701)
The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the
financial statements as follows:
Profit before income tax
Income tax using the corporate tax rate
Capitalised interest
Other non-deductible expenses
2020
2019
$000
221,735
62,086
(3,450)
208
%
$000
%
173,561
28.0%
48,597
28.0%
(1.6%)
0.1%
(2,935)
399
(1.7%)
0.2%
Non-assessable investment property revaluations
(62,501)
(28.2%)
(46,271)
(26.7%)
Reinstatement of tax depreciation on non-
residential buildings
Other
Prior period adjustments
Total income tax credit
(6,008)
(2.7%)
-
0.0%
180
444
0.1%
0.2%
(1,681)
190
(9,041)
(4.1%)
(1,701)
(1.0%)
0.1%
(1.0%)
Total Group tax losses available amounted to $250.5 million (2019: $184.0 million). There are no unrecognised tax losses for the Group
at 31 December 2020 (2019: nil).
(b) Amounts charged or credited to other comprehensive income
Tax expense comprises:
Net gain on revaluation of land and buildings
Fair value movement of interest rate swaps
Total tax expense/(credit) reported in statement of comprehensive income
(c) Amounts charged or credited directly to equity
Tax expense comprises:
Deferred tax relating to employee share option plans
Total tax credit reported directly in equity
2020
$000
3,145
(1,981)
1,164
2020
$000
(1,812)
(1,812)
2019
$000
-
(1,964)
(1,964)
2019
$000
-
-
(d) Imputation credit account
There were no imputation credits received or paid during the year and the balance at 31 December 2020 is nil (2019: nil).
(e) Deferred tax
Movement in the deferred tax balance comprises:
BALANCE
1 JAN 2020
$000
RECOGNISED
IN INCOME
$000
RECOGNISED
DIRECTLY IN
EQUITY
$000
RECOGNISED
IN OCI*
$000
BALANCE
31 DEC 2020
$000
53
Property, plant and equipment
Investment property
Revenue in advance
Interest rate swaps
17,607
29,188
23,479
(5,901)
(6,581)
6,043
11,680
-
Income tax losses not yet utilised
(51,631)
(18,678)
-
-
-
-
-
Other items
Net deferred tax liability
(223)
12,519
(1,505)
(9,041)
(1,812)
(1,812)
3,145
-
-
14,171
35,231
35,159
(1,981)
(7,882)
-
-
1,164
(70,309)
(3,540)
2,830
Property, plant and equipment
Investment property
Revenue in advance
Interest rate swaps
Income tax losses not yet utilised
Other items
BALANCE
1 JAN 2019
$000
RECOGNISED
IN INCOME
$000
RECOGNISED
IN OCI*
$000
BALANCE
31 DEC 2019
$000
17,062
24,111
11,650
(3,937)
545
5,077
11,829
-
-
-
17,607
29,188
23,479
-
(1,964)
(5,901)
(31,802)
(19,829)
(900)
677
-
-
(51,631)
(223)
Net deferred tax liability
16,184
(1,701)
(1,964)
12,519
* Other comprehensive income
Annual Report 2020
Notes to the financial statements (continued)
(f) Income tax legislation amendments during the period
During the period, the Income Tax Act 2007 in New Zealand was amended to restore tax depreciation deductions for non-residential
buildings. This amendment resulted in a $6.0 million credit to tax expense during the period and a corresponding reduction in the
deferred tax liability related to property, plant and equipment.
8. Trade and other receivables
Trade and other receivables are stated at amortised cost less impairment losses. Trade receivables are not significant on an individual
basis and are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate, less
an allowance for impairment. The allowance for doubtful debts is made up of expected credit losses based on assessment of trade
receivables debt at the individual level for impairment, plus an additional allowance on the remaining balance for potential credit
losses not yet identified. The expected credit losses allowance requirement on the remaining balance has been set at 2%.
Trade receivables
Allowance for doubtful debts
Net trade receivables
Prepayments
Accrued income
Sundry debtors
Total trade and other receivables
54
9. Property, plant and equipment
2020
$000
3,357
(237)
3,120
12,215
1,092
16,968
33,395
2019
$000
2,912
(169)
2,743
8,331
923
24,665
36,662
Property, plant and equipment includes care centres, both complete and under development, and corporate assets held.
All property, plant and equipment is initially recorded at cost. Cost includes expenditure that is directly attributable to the acquisition
of the asset. The cost of self-constructed care centres includes directly attributable construction costs and other costs necessary to
bring the care centres to working condition for their intended use. These other costs include professional fees and consents, interest
during the build period and head office costs directly related to the construction of the care centres. Where costs are apportioned
across more than one asset, the apportionment methodology is determined by considering the nature of the cost.
Subsequent to initial recognition, completed care centres are carried at a revalued amount, which is the fair value at the date of the
revaluation less any subsequent accumulated depreciation on care centres and accumulated impairment losses, if any, since the
assets were last revalued. Other corporate assets are subsequently measured at cost less accumulated depreciation and impairment
losses, if any. Where an item of plant and equipment is disposed of, the gain or loss recognised in the income statement is calculated
as the difference between the net sales price and the carrying amount of the asset.
Fair value is determined by reference to market-based evidence, which is the amount for which the assets could be exchanged
between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction as at the valuation date.
Any revaluation surplus is recognised in other comprehensive income unless it reverses a revaluation decrease of the same asset
previously recognised in the income statement. Any revaluation deficit is recognised in the income statement unless it directly offsets
a previous surplus in the same asset in other comprehensive income. Any accumulated depreciation at revaluation date is eliminated
against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal,
any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. Independent valuations are
performed with sufficient regularity to ensure that the carrying amount does not differ materially from the asset’s fair value at the
balance sheet date.
Note 6 provides details on capitalised borrowing costs.
Depreciation is charged to the income statement on a straight-line (SL) basis over the estimated useful life of each item of property,
plant and equipment, with the exception of land, which is not depreciated. Depreciation methods, useful lives and residual values
are reassessed at each reporting date.
Major depreciation rates are as follows:
•
Buildings (2% to 13% SL)
• Motor vehicles (10% SL)
•
•
Furniture and fittings (7% to 20% SL)
Plant and equipment (2% to 50% SL)
Additions
Disposals
Balance at
31 December 2019
Additions
Transfer
Impairment through profit
or loss
Net revaluations through
other comprehensive income
Balance at
31 December 2020
Accumulated depreciation
Balance at 1 January 2019
Depreciation charge for
the year
Disposals
Balance at
31 December 2019
Depreciation charge for
the year
Transfer
Impairment through profit
or loss
Also included in the buildings category is building fit-out.
Right of use assets are depreciated on a SL basis over the term of their lease. Refer to Note 16.
LAND AND
BUILDINGS
$000
MOTOR
VEHICLES
$000
PLANT AND
EQUIPMENT
$000
FURNITURE
AND
FITTINGS
$000
RIGHT OF USE
ASSETS
$000
TOTAL
$000
Cost
Balance at 1 January 2019
123,104
1,545
12,603
7,303
-
144,555
15,394
-
354
(66)
2,866
-
138,498
1,833
15,469
17,511
(2,885)
(3,634)
5,882
617
6,326
-
-
-
-
-
-
202
-
7,505
1,285
-
-
-
9,203
28,019
-
(66)
9,203
172,508
1,806
27,545
-
-
-
(2,885)
(3,634)
5,882
155,372
2,450
21,795
8,790
11,009
199,416
2,307
2,357
-
4,664
2,537
(168)
(203)
55
857
161
(66)
952
186
-
-
-
5,661
2,189
-
2,984
1,144
-
-
11,809
910
6,761
-
(66)
7,850
4,128
910
18,504
2,078
1,070
1,144
7,015
-
-
-
-
-
-
-
-
-
(168)
(203)
(6,830)
Net revaluations through
other comprehensive income
(6,830)
Balance at
31 December 2020
Carrying amounts
-
1,138
9,928
5,198
2,054
18,318
As at 31 December 2019
As at 31 December 2020
133,834
155,372
881
7,619
1,312
11,867
3,377
3,592
8,293
154,004
8,955
181,098
Buildings include $16.9 million of care centres under development carried at cost at 31 December 2020 (2019: $20.4 million). Right
of use assets relate to the Group's leased office premises and car park spaces; refer to Note 16 for further information.
Annual Report 2020
Notes to the financial statements (continued)
Transfer
As at 31 December 2020, a number of care rooms have been decommissioned as they are to be converted to serviced apartments
and accordingly have been transferred from property, plant and equipment to investment property. The care rooms were transferred
to investment property at their fair value which totalled $2.5 million. An impairment loss of $0.2 million was recognised on transfer
via the revaluation reserve.
Revaluations
An independent valuation to determine the fair value of all completed care centres that are classified as land and buildings was
carried out as at 31 December 2020 by CBRE Limited ("CBRE NZ"), an independent registered valuer. Valuations are carried out every
three years unless there are indicators of a significant change in fair value. CBRE NZ determines the fair value of all care centre
assets using an earnings-based multiple approach and the amount apportioned to goodwill of $18.9 million is not recognised (2017:
$16.8 million). Significant assumptions used in the most recent valuation include market value per care bed of between $71,300 and
$231,600, and individual unit earning capitalisation rate of between 11.0% and 13.5%.
As the fair value of land and buildings is determined using inputs that are unobservable, the Group has categorised property, plant
and equipment as Level 3 under the fair value hierarchy in accordance with NZ IFRS 13 – Fair Value Measurement.
Sensitivity analysis to significant changes in unobservable inputs within Level 3 of the hierarchy
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of
the entity’s portfolios of land and buildings are the capitalisation rates applied to individual unit earnings and the market value
per care bed. A significant decrease (increase) in the capitalisation rate would result in a significantly higher (lower) fair value
measurement, and a significant increase (decrease) in the market value per care bed would result in a significantly higher (lower) fair
value measurement.
Cost model
If land and buildings were measured using the cost model, the carrying amounts would be as follows:
56
Cost
Accumulated depreciation and impairment losses
Net carrying amount
2020
2019
LAND AND
BUILDINGS
$000
LAND AND
BUILDINGS
$000
126,225
111,599
(18,971)
(16,602)
107,254
94,997
Security
At 31 December 2020, all care centres held by retirement villages registered under the Retirement Villages Act 2003 are subject to
a registered first mortgage in favour of the Statutory Supervisor.
10. Intangible assets
Intangible assets acquired by the Group are measured at cost less accumulated amortisation and accumulated impairment losses.
Amortisation is recognised in the income statement on a SL basis over the estimated useful lives of intangible assets from the date
that they are available for use. The intangible assets are software and the amortisation rates at 31 December 2020 are between 10-20%
SL basis.
Cost
Balance at 1 January 2019
Additions
As at 31 December 2019
Additions
As at 31 December 2020
Accumulated amortisation
Balance at 1 January 2019
Amortisation charge for the year
As at 31 December 2019
Amortisation charge for the year
As at 31 December 2020
Carrying amounts
As at 31 December 2019
As at 31 December 2020
TOTAL
$000
9,804
567
10,371
668
11,039
3,176
1,072
4,248
1,082
5,330
6,123
5,709
57
Annual Report 2020
Notes to the financial statements (continued)
11. Investment property
Investment property is held to earn current and future rental income (deferred management fees). It comprises land and buildings,
and associated equipment and furnishings, relating to retirement villages and common facilities in the retirement village. Investment
property includes buildings under development, excluding care centres under development, which are included in property, plant
and equipment. Initial recognition of investment property is at cost and it is subsequently measured at fair value, with any change
in fair value recognised in the income statement.
The cost of retirement villages includes directly attributable construction costs and other costs necessary to bring the retirement
villages to working condition for their intended use. These other costs include professional fees and consents, interest during the
build period and head office costs directly related to the construction of the retirement villages. Where costs are apportioned across
more than one asset, the apportionment methodology is determined by considering the nature of the cost.
Land acquired with the intention of constructing investment property on it is classified as investment property from the date
of acquisition.
Rental income from investment property, being deferred management fees, is accounted for as described in Note 4.
Depreciation is not charged on investment property.
Note 6 provides details on capitalised borrowing costs.
Balance at beginning of period
Additions
Disposals
Transfer from property, plant and equipment
58
Fair value movement
Total investment property
Development land measured at fair value1
Retirement villages measured at fair value
Retirement villages under development measured at cost
Total investment property
2020
$000
2019
$000
3,107,014
2,585,049
309,024
356,713
(920)
2,500
-
-
221,142
165,252
3,638,760
3,107,014
2020
$000
2019
$000
335,694
305,148
2,973,040
2,580,855
330,026
221,011
3,638,760
3,107,014
1 Included in development land are pieces of land that were acquired close to balance date and as such were excluded from the valuation of investment property. These pieces
of land have been accounted for at cost, which has been determined to be fair value due to the proximity of the transaction to balance date. At 31 December 2020 the land
at cost was $9.9 million (2019: $74.9 million).
Manager's net interest
Plus: revenue received in advance
Plus: liability for residents' loans
Total investment property
2020
$000
2019
$000
2,003,725
1,688,265
114,737
91,142
1,520,298
1,327,607
3,638,760
3,107,014
The Group is unable to reliably determine the fair value of non-land retirement villages under development at 31 December 2020 and
therefore these are carried at cost. This equates to $330.0 million of investment property (2019: $221.0 million).
The fair value of investment property as at 31 December 2020 was determined by independent registered valuers CBRE Limited
("CBRE NZ") and Jones Lang LaSalle Limited ("JLL") for villages including land in New Zealand and CBRE Valuations Pty Limited
("CBRE AU") for land in Australia. The fair value of the Group’s investment property is determined on a semi-annual basis, based on
market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing
buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably,
prudently and without compulsion.
As required by NZ IAS 40 - Investment Property, the fair value as determined by the independent registered valuer is adjusted for
assets and liabilities already recognised on the balance sheet which are also reflected in the cash flow analysis.
To assess the fair value of the Group's interest in each New Zealand village, CBRE NZ and JLL have undertaken a cash flow analysis
to derive a net present value. The Group's development land has been valued by CBRE NZ using the direct comparison approach.
Each valuer continues to review market conditions in relation to the COVID-19 global pandemic. Since 30 June 2020 the level
of uncertainty and unknown impact has decreased with markets becoming more used to operating under COVID-19 conditions.
Because of this, the valuers have reversed their COVID-19 specific adjustments relating to near term growth rates and recycle
frequencies when determining value at 31 December 2020.
The valuers' view is that the longer-term economic impact as a result of COVID-19 on the New Zealand aged care sector still remains
largely unknown with comparable transactions and market evidence since the outbreak limited. Therefore they advise that a higher
degree of caution should be exercised when relying upon the valuation.
Significant assumptions used by CBRE NZ and JLL in relation to the New Zealand investment property include a discount rate of
between 13.5% and 16.5% (2019: 13.5% to 16.5%), and a long-term nominal house price inflation rate (growth rate) of between 0% and
3.5% (2019: 0% to 3.5%). Other assumptions used include the average entry age of residents of between 72 years and 90 years (2019:
72 years and 91 years), and the stabilised departing occupancy periods of units of between 3.7 years and 9.0 years (2019: 3.6 years
and 8.8 years).
Two sites under development in Australia have been valued separately by CBRE AU. The Cranbourne North land was valued under
the same methodology as development land in New Zealand. The Torquay land was valued under a modified direct comparison
approach which takes into account the gross realisation of the proposed units 'as if complete'.
As the fair value of investment property is determined using inputs that are unobservable, the Group has categorised investment
property as Level 3 under the fair value hierarchy in accordance with NZ IFRS 13 – Fair Value Measurement.
59
Sensitivity analysis to significant changes in unobservable inputs within Level 3 of the hierarchy
To assess the market value of the Group's interest in a retirement village, CBRE and JLL have undertaken a cash flow analysis to
derive a net present value. As the fair value of investment property is determined using inputs that are significant and unobservable,
the Group has categorised investment property as Level 3 under the fair value hierarchy in accordance with NZ IFRS 13 - Fair
Value Measurement.
The sensitivities of the significant assumptions are shown in the table below:
31 December 2020
Valuation ($000)
Difference ($000)
Difference (%)
31 December 2019
Valuation ($000)
Difference ($000)
Difference (%)
1 Completed units excluding unsold stock.
Adopted
value1
Discount rate
+50 bp
Discount rate
-50 bp
Growth rates
+50bp
Growth rates
-50bp
1,142,825
963,530
(40,635)
43,395
53,550
(70,865)
(3.6%)
3.8%
4.7%
(6.2%)
(34,320)
36,610
57,812
(52,994)
(3.6%)
3.8%
6.0%
(5.5%)
Annual Report 2020
Notes to the financial statements (continued)
Other key components in determining the fair value of investment property are the average entry age of residents and the average
occupancy of units. A significant decrease (increase) in the occupancy period of units would result in a significantly higher (lower) fair
value measurement, and a significant increase (decrease) in the average entry age of residents would result in a significantly higher
(lower) fair value measurement.
Operating expenses
Direct operating expenses arising from investment property during the period amounted to $41.1 million (2019: $34.3 million).
Security
At 31 December 2020, all investment property relating to registered retirement villages under the Retirement Villages Act 2003 are
subject to a registered first mortgage in favour of the Statutory Supervisor to secure the Group’s obligations to the occupation right
agreement holders.
12. Trade and other payables
Trade and other payables are carried at amortised cost. Due to their short-term nature they are not discounted.
Trade payables
2020
$000
3,687
2019
$000
2,071
Accruals - development of retirement units and care centres
118,185
114,735
Accruals - other
Short-term advance
Sundry payables
60
Total trade and other payables
13. Employee benefits
14,275
15,750
6,713
13,480
-
4,394
158,610
134,680
A provision is made for benefits accruing to employees in respect of wages, salaries, annual leave and short-term incentives when
it is probable that settlement will be required and the amount can be estimated reliably.
Leave liabilities
Other employee benefits
Total employee benefits
14. Interest rate swaps
2020
$000
8,284
7,154
2019
$000
5,755
5,679
15,438
11,434
The Group uses interest rate swaps to manage its risk associated with interest rate fluctuations. Interest rate swaps are initially
recognised at fair value on the date a contract is entered into and are subsequently measured at fair value on each reporting date.
The fair values of the interest rate swaps are determined based on cash flows discounted to present value using current market
interest rates.
Cash flow hedges
The Group has entered into interest rate swaps to manage its interest rate risk in relation to its floating rate debt. These interest
rate swaps qualify for cash flow hedge accounting. When interest rate swaps meet the criteria for cash flow hedge accounting, the
effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income, while the ineffective
portion is recognised in the income statement. Amounts taken to reserves are transferred out of reserves and included in the
measurement of the hedged transaction when the forecast transaction occurs. When interest rate swaps do not meet the criteria
for cash flow hedge accounting, all movements in fair value of the hedging instrument are recognised in the income statement.
Under the interest rate swap agreements that qualify for cash flow hedge accounting, the Group has a right to receive interest at
variable rates and to pay interest at fixed rates. At 31 December 2020, the Group had interest rate swap agreements in place with a
total notional principal amount of $337.0 million (2019: $377.0 million). Of the swaps in place, at 31 December 2020 $312.0 million
(2019: $292.0 million) are being used to cover approximately 45% (2019: 49%) of the floating rate debt principal outstanding. These
agreements effectively change the Group’s interest exposure on the principal covered by the interest rate swaps from a floating rate
to fixed rates, which range between 1.22% and 3.87% (2019: 1.22% and 4.43%).
The fair value of these agreements at 31 December 2020 is a $28.2 million liability, comprised of $29.2 million of swap liabilities and
$1.0 million of swap assets (2019: liability of $21.1 million, comprised of $22.6 million of swap liabilities and $1.5 million of swap assets).
Of this, a liability of $274,000 is estimated to be current (2019: $515,000). The agreements cover notional amounts for terms of up
to eight years.
The notional principal amounts and the period of expiry of the cash flow hedge interest rate swap contracts are as follows:
Less than 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
Between 5 and 6 years
Between 6 and 7 years
Between 7 and 8 years
Between 8 and 9 years
Total
Current
Forward starting
Total
2020
$000
25,000
70,000
-
105,000
-
77,000
50,000
10,000
-
2019
$000
40,000
25,000
70,000
45,000
60,000
25,000
52,000
50,000
10,000
337,000
377,000
312,000
292,000
25,000
85,000
337,000
377,000
61
Fair value hedges
The Group has entered into interest rate swaps to manage its interest rate risk in relation to its fixed rate debt arising from the retail
bonds. The hedge is for the future fair value movements in the retail bonds as a result of market interest rate movements. The Group
has designated $225.0 million of its retail bonds in fair value hedge relationships.
Both the hedging instrument (interest rate swap) and the hedged risk are recognised at fair value. The change in the fair value of both
items offset in the statement of comprehensive income to the extent the hedging relationship is effective. The increase in fair value
of the interest rate swaps of $5.8 million (2019: $8.0 million) has been recognised in finance costs and has been offset with a similar
fair value loss on the retail bonds to leave an ineffective amount in finance costs of $13,000 (2019: $92,000).
Under the interest rate swap agreements that qualify for fair value hedge accounting, the Group has a right to receive interest at
fixed rates and to pay interest at floating rates. At 31 December 2020, the Group had interest rate swap agreements in place with
a total notional principal amount of $225.0 million (2019: $225.0 million). Of the interest rate swaps in place, at 31 December 2020
$225.0 million (2019: $225.0 million) are being used to cover 60% (2019: 100%) of the fixed interest rate retail bonds outstanding.
Annual Report 2020
Notes to the financial statements (continued)
The notional principal amounts and the period of expiry of the fair value hedge interest rate swap contracts are as follows:
Between 3 and 4 years
Between 4 and 5 years
Between 5 and 6 years
Total
Current
Total
15. Residents' loans
2020
$000
2019
$000
100,000
100,000
-
-
125,000
125,000
225,000
225,000
225,000
225,000
225,000
225,000
Residents’ loans are amounts payable under occupation right agreements. An occupation right agreement confers a right of
occupancy to a villa, apartment, serviced apartment, care suite or memory care apartment. The consideration received on the grant
of an occupation right agreement is allocated to the resident’s loan in full. These loans are non-interest-bearing and are payable when
both an occupation right agreement is terminated and there has been settlement of a new occupation right agreement for the same
retirement unit and the proceeds from the new settlement have been received by the Group. Residents’ loans are initially recognised
at fair value and subsequently measured at amortised cost.
The Group holds a contractual right to set-off the deferred management fee receivable on termination of an agreement against the
resident’s loan to be repaid. Residents’ loans are therefore recognised net of the deferred management fee receivable on the balance
sheet. Deferred management fees are payable by residents in consideration for the supply of accommodation and the right to share
in the use of community facilities. Deferred management fees are paid in arrears, with the amount payable calculated as a percentage
of the resident’s loan amount as per the resident’s occupation right agreement. Deferred management fee receivable is calculated
and recorded based on the current tenure of the resident and the contractual right to deferred management fee earned at balance
date. Refer to Note 4 for further detail on recognition of deferred management fee revenue.
62
Balance at beginning of period
2020
$000
2019
$000
1,599,854
1,355,535
Net receipts for residents' loans - resales of occupation right agreements
27,830
26,294
Receipts for residents' loans - new occupation right agreements
Total gross residents’ loans
Deferred management fees and other receivables
Total residents’ loans
Note 18 provides a split between current and non-current residents’ loans.
16. Leases
245,052
218,025
1,872,736
1,599,854
(352,438)
(272,247)
1,520,298
1,327,607
The leases to which NZ IFRS 16 applies are the leases of office premises and car parks occupied by the Group in New Zealand and
Australia. In respect of these leases, a right of use asset is disclosed along with a corresponding lease liability. The right of use assets
are depreciated on a SL basis, while the lease liability is measured at the present value of the lease payments that are not yet paid,
discounted using the Group's incremental borrowing rate.
The Group has elected not to recognise right of use assets and lease liabilities for short-term leases of office spaces, car parks and
information technology equipment that have a lease term of 12 months or less, or as a transitional expedient, have less than 12 months
left on the lease term as at the date of application of NZ IFRS 16. The Group recognises the lease payments associated with these
leases as incurred as a rental expense over the lease term.
Right of use assets are classified as property, plant and equipment and lease liabilities are disclosed as such in the Group's statement
of financial position.
The following practical expedients have been utilised in relation to the Group's operating leases as lessee:
•
•
•
•
A single discount rate has been applied to a portfolio of leases with reasonably similar characteristics
Leases with a term ending within 12 months of the date of application have been treated as short term leases
Initial direct costs have been excluded from the measurement of the right of use asset at the date of initial application
Exclusion of leases for which the underlying asset is of low value
The weighted average incremental borrowing rates used to measure lease liabilities at the date of application are between 3.80%
and 4.67% (2019: 4.17% and 4.67%).
When the Group has the option to extend a lease, management uses its judgement to determine whether or not an option would be
reasonably certain to be exercised. Management considers all facts and circumstances, including their past practice and any cost
that will be incurred to change the asset if an option to extend is not taken, to help determine the lease term. Other assumptions and
judgements used by management include calculating the appropriate discount rate.
As a direct result of the COVID-19 pandemic the Group, as a lessee, received $60,000 in rent concessions over a three-month
period from April to June 2020. Management has applied the COVID-19 practical expedient, issued by the IASB in May 2020, and has
accounted for the rent concessions as if they were not lease modifications. The rent concessions have instead been accounted for
as a reduction to operating expenses.
As a lessee
Right of use assets disclosed:
Balance at beginning of period
Additions
Depreciation charge for the year
Balance at end of period
Lease liabilities disclosed:
Less than 1 year
Between 1 and 5 years
More than 5 years
63
2020
2019
Buildings
$000
Buildings
$000
8,293
1,806
(1,144)
8,955
2020
$000
1,123
4,994
5,067
8,557
646
(910)
8,293
2019
$000
919
4,106
5,435
Total lease liabilities at end of period
11,184
10,460
Amounts recognised in the profit and loss:
Interest on lease liabilities
Expenses relating to short-term and low-value asset leases
Depreciation on right of use assets
Total amounts recognised in profit or loss
2020
$000
466
4
1,144
1,614
2019
$000
442
125
910
1,477
Annual Report 2020
Notes to the financial statements (continued)
As a lessor
The Group acts as a lessor under occupation right agreements with village residents, along with a small amount of residential
rental properties. The assets leased by the group as a lessor are disclosed as investment property and lease income on occupation
right agreements is generated in the form of deferred management fees. The lease term is determined to be the greater of the
expected period of tenure or the contractual right to revenue. The Group uses the portfolio approach to account for leases of units
to village residents and allocates individual leases to different portfolios depending on the type of unit. The Group does not have
any sub-leases.
17. Interest-bearing loans and borrowings
Interest-bearing loans and borrowings include secured bank loans and unsubordinated fixed-rate retail bonds.
Interest-bearing loans and borrowings are recognised initially at fair value net of directly attributable transaction costs. Subsequent
to initial recognition, the borrowings are measured at amortised cost, with any difference between the initial recognised amount and
the redemption value being recognised in profit or loss over the period of the borrowing using the effective interest rate. The retail
bonds SUM010 and SUM020 are designated in fair value hedge relationships, which means that any change in market interest rates
result in a change in the fair value adjustment on that debt. Retail bond issue expenses, fees and other costs incurred in arranging
retail bond finance are capitalised and amortised over the term of the relevant debt instrument.
Repayable after 12 months
Secured bank loans
Retail bond - SUM010
Retail bond - SUM020
64
Retail bond - SUM030
Total loans and borrowings at face value
Issue costs for retail bonds capitalised:
Opening balance
Capitalised during the period
Amortised during the period
Closing balance
Total loans and borrowings at amortised cost
Fair value adjustment on hedged borrowings
Carrying value of interest-bearing loans and borrowings
Coupon
2020
$000
2019
$000
Floating
297,576
362,139
4.78%
4.20%
2.30%
100,000
100,000
125,000
125,000
150,000
-
672,576
587,139
(2,688)
(1,876)
676
(3,290)
-
602
(3,888)
(2,688)
668,688
584,452
18,411
12,629
687,099
597,081
The non-cash movements included in the table above are the issue costs for retail bonds amortised during the period and the fair
value adjustment on hedged borrowings.
A summary of the changes in the Group's borrowings is provided below:
Borrowings at the start of the year
Net cash borrowed
Cash change in deferred financing costs
Non-cash change in deferred financing costs
Non-cash change in fair value adjustment
Borrowings at the end of the year
2020
$000
2019
$000
597,081
452,760
85,436
135,637
(1,876)
676
5,782
-
602
8,082
687,099
597,081
The weighted average interest rate for the year to 31 December 2020 was 3.15% (2019: 3.87%). This includes the impact of interest
rate swaps (see Note 14).
The secured bank loan facility at 31 December 2020 has a limit of approximately NZD$750.0 million (2019: $500.0 million). Lending of
NZ$315.0 million expires in March 2022, AU$120.0 million expires in November 2023 and NZ$310.0 million expires in November 2024.
The Group has issued three retail bonds. The first retail bond was issued for $100.0 million in July 2017 and has a maturity date of
11 July 2023. This retail bond is listed on the NZX Debt Market (NZDX) with the ID SUM010. The second retail bond was issued for
$125.0 million in September 2018 and has a maturity date of 24 September 2025. This retail bond is listed on the NZDX with the ID
SUM020. The third retail bond was issued for $150.0 million in September 2020 and has a maturity date of 21 September 2027. This
retail bond is listed on the NZDX with the ID SUM030.
Security
The banks loans and retail bonds rank equally with the Group’s other unsubordinated obligations and are secured by the following
securities held by a security trustee:
•
•
•
•
•
•
a first-ranking registered mortgage over all land and permanent buildings owned (or leased under a registered lease) by each
New Zealand-incorporated guaranteeing Group member that is not a registered retirement village under the Retirement Villages
Act 2003;
a second-ranking registered mortgage over the land and permanent buildings owned (or leased under a registered lease) by each
New Zealand-incorporated guaranteeing Group member that is a registered retirement village under the Retirement Villages Act
2003 (behind a first-ranking registered mortgage in favour of the Statutory Supervisor);
a first-ranking registered mortgage over all land and permanent buildings owned (or leased under a registered lease) by each
Australian-incorporated guaranteeing Group member;
a General Security Deed, which secures all assets of the New Zealand- incorporated guaranteeing Group members, but in respect
of which the Statutory Supervisor has first rights to the proceeds of security enforcement against all assets of the registered
retirement villages to which the security trustee is entitled;
a General Security Deed, which secures all assets of the Australian-incorporated guaranteeing Group members; and
a Specific Security Deed in respect of each marketable security of Summerset Holdings (Australia) Pty Limited, held by
Summerset Holdings Limited.
65
18. Financial instruments
Exposure to credit, market and liquidity risk arises in the normal course of the Group’s business. The Board reviews and agrees on
policies for managing each of these risks as summarised below.
The Group has seen no material change in its exposure to credit, market and liquidity risk as a result of the COVID-19 pandemic, but it
will continue to monitor the situation. Further to this, given the Group's status as an 'essential service' during the COVID-19 pandemic,
operations have been allowed to continue largely uninterrupted.
Categories of financial instruments
Financial assets
All financial assets of the Group are classified at amortised cost except for interest rate swaps, which are classified as fair value
through profit and loss, and those assets that are designated in a hedge relationship.
Financial liabilities
All financial liabilities except interest rate swaps and retail bonds are classified as liabilities at amortised cost. Refer to Note 17 for detail
on the retail bonds.
Credit risk
Credit risk is the risk of financial loss to the Group if a resident or counterparty to a financial instrument fails to meet their contractual
obligations. The Group’s exposure to credit risk relates to receivables from residents and bank balances. The Group manages
its exposure to credit risk. The Group’s cash is held with its principal banker; with the level of exposure to credit risk considered
minimal, with low levels of cash generally held. Receivables balances are monitored on an ongoing basis and funds are placed
with high-credit-quality financial institutions. The level of risk associated with sundry debtors is considered minimal due to the
recoverability of this balance being assessed as high. The Group does not require collateral from its debtors and the Directors
consider the Group’s exposure to any concentration of credit risk to be minimal.
There has been no instances of residents or counterparties failing to meet their contractual obligations as a direct result of COVID-19.
There has been no change to credit terms and aging of receivables remains consistent with the prior years.
Annual Report 2020
Notes to the financial statements (continued)
The carrying amount of financial assets represents the Group’s maximum credit exposure. The status of trade receivables is
as follows:
Not past due
Past due 31 to 60 days
Past due 61 to 90 days
Past due more than 90 days
Total
2020
2019
GROSS
RECEIVABLE
$000
IMPAIRMENT
$000
GROSS
RECEIVABLE
$000
IMPAIRMENT
$000
2,894
236
118
109
(44)
(55)
(54)
(84)
2,624
90
31
167
(31)
(33)
(26)
(79)
3,357
(237)
2,912
(169)
In summary, trade receivables are determined to be impaired as follows:
Gross trade receivables
Impairment
Net trade receivables
2020
$000
3,357
(237)
3,120
2019
$000
2,912
(169)
2,743
66
Market risk
Market risk is the risk that changes in market prices such as interest rates will affect the Group’s income. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
Interest rate risk
The Group’s exposure to interest rate risk is managed by seeking to obtain the most competitive rate of interest at all times. The Group
has entered into interest rate swap agreements in order to provide an effective cash flow hedge against the variability in floating
interest rates. The Group has also entered into other interest swap agreements to reduce interest rate repricing risk in relation to retail
bonds. See Note 14 for details of interest rate swap agreements.
To comply with the Group’s risk management policy, the hedge ratio is based on the interest rate swap notional amount to hedge
the same notional amount of bank loans or retail bonds. This results in a hedge ratio of 1:1. This is the same as used for actual risk
management purposes, and such a ratio is appropriate for the purposes of hedge accounting as it does not result in an imbalance
that would create hedge ineffectiveness.
In these hedge relationships the main sources of ineffectiveness are:
•
a significant change in the credit risk of either party to the hedging relationship;
• where the hedge instrument has been transacted on a date different to the rate set date of the bank loan or retail bonds, interest
rates could differ; and
•
differences in repricing dates between the swaps and the borrowings.
Other than these sources, due to the alignment of the hedged risk in the hedged item and hedged instrument, hedge ineffectiveness
is not expected to arise.
At 31 December 2020 it is estimated that a general increase of one percentage point in interest rates would decrease the Group’s
profit by approximately $2.8 million (2019: decrease by $3.5 million) and increase total comprehensive income by approximately
$8.7 million (2019: increase by $8.0 million).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity
by maintaining adequate reserves and undrawn banking facilities, by continuously monitoring forecast and actual cash flows, and
matching the maturity profiles of financial assets and liabilities. The Group manages liquidity risk on residents’ loans and related
sundry debtors through the contractual requirements of occupation rights agreements, whereby a resident’s loan is repaid only on
receipt of the loan monies from the incoming resident.
The following table sets out the contractual cash flows for all financial liabilities for the Group (including contractual interest
obligations on bank loans):
Financial liabilities
Trade and other payables
Residents’ loans
2020
2019
LESS THAN
1 YEAR
$000
GREATER
THAN
1 YEAR
$000
LESS THAN
1 YEAR
$000
GREATER
THAN
1 YEAR
$000
158,610
-
134,680
-
118,724
1,401,574
113,278
1,214,329
Interest-bearing loans and borrowings
20,562
706,908
22,524
491,228
Interest rate swaps
Lease liability
Total
8,315
1,123
32,882
10,061
6,774
919
30,292
9,541
307,334
2,151,425
278,175
1,745,390
Residents’ loans are non-interest bearing and are not required to be repaid following termination of an occupation right agreement
until receipt of cash for the new resident loan from the incoming resident. The figures above have been calculated using best
estimates of resident loan repayments based on historical information. To date, cash for new residents’ loans received has always
exceeded cash to repay residents’ loans, net of deferred management fees.
Foreign currency risk
Foreign currency risk is the risk that the value of the Group's assets, liabilities and financial performance will fluctuate due to changes
in foreign currency rates.
The Group is primarily exposed to currency risk through its subsidiaries in Australia.
67
The risk to the Group is that the value of the overseas subsidiaries' financial position and financial performance will fluctuate in
economic terms and as recorded in the Group financial statements due to changes in foreign exchange rates. Due to limited activity
in the Australian subsidiaries in 2020, the Group did not have a material exposure to foreign exchange risk.
Fair values
The carrying amounts shown in the balance sheet approximate the fair value of the financial instruments, with the exception of
residents’ loans and retail bonds, shown below:
Residents’ loans
Retail bonds
Total
2020
2019
CARRYING
AMOUNT
$000
FAIR VALUE
$000
CARRYING
AMOUNT
$000
FAIR VALUE
$000
(1,520,298)
(1,082,943)
(1,327,607)
(932,932)
(389,523)
(394,303)
(234,942)
(239,817)
(1,909,821)
(1,477,246)
(1,562,548)
(1,172,749)
The fair value of residents’ loans is based on the present value of projected cash flows. Future cash flows are based on the assumption
that the average tenure periods are those disclosed above and have been discounted at 14% (2019: 14%). The fair value of residents’
loans is categorised as Level 3 under the fair value hierarchy in accordance with NZ IFRS 13 – Fair Value Measurement.
The fair value of retail bonds is based on the price traded at on the NZX market as at 31 December 2020. The fair value of the retail
bonds is categorised as Level 1 under the fair value hierarchy in accordance with NZ IFRS 13 – Fair Value Measurement.
The fair value of interest rate swaps is determined using inputs from third parties that are observable, either directly (i.e. as prices) or
indirectly (i.e. derived from prices). Based on this, the Company and Group have categorised these financial instruments as Level 2
under the fair value hierarchy in accordance with NZ IFRS 13 – Fair Value Measurement.
Annual Report 2020
Notes to the financial statements (continued)
Capital management
The Group’s capital includes share capital, reserves and retained earnings. The objective of the Group’s capital management is
to ensure a strong credit position to support business growth and maximise shareholder value. The Group is subject to capital
requirements imposed by the bank lenders (through covenants in the Syndicated Facility Agreement) and bond holders (through
covenants in the Master Trust Deed). The Group has met all of these externally imposed capital requirements for the year ended
31 December 2020 (2019: all requirements met). The Group capital structure is managed, and adjustments are made, with Board
approval. There were no changes to objectives, policies or processes during the year ended 31 December 2020 (2019: none).
19. Share capital and reserves
At 31 December 2020, there were 228,785,314 ordinary shares on issue (2019: 226,827,675). All ordinary shares are fully paid and have
no par value. All shares carry one vote per share and carry the right to dividends.
Share capital
On issue at beginning of year
Shares issued under the dividend reinvestment plan
Shares paid under employee share plans
Other
Employee share plan option cost
On issue at end of year
Share capital (in thousands of shares)
On issue at beginning of year
Shares issued under the dividend reinvestment plan
Shares issued under employee share plans
On issue at end of year
68
2020
$000
2019
$000
284,074
269,467
11,833
11,100
4,562
-
3,030
2,214
37
1,256
303,499
284,074
2020
2019
224,250
221,734
1,820
1,003
1,795
721
227,073
224,250
The total shares on issue at 31 December 2020 of 228,785,314 for the Company differs from the share capital for the Group due
to shares held in 100% owned subsidiary, Summerset LTI Trustee Limited. As at 31 December 2020, 1,712,181 shares are held by
Summerset LTI Trustee Limited for employee share plans, which are eliminated on consolidation. Refer to Note 21 for further details
on employee share plans.
Revaluation reserve
The revaluation reserve is used to record the revaluation of care centre land and buildings.
Hedging reserve
The hedging reserve is used to record gains or losses on instruments used as cash flow hedges. The amounts are recognised in profit
and loss when the hedged transaction affects profit and loss.
Foreign currency translation reserve
The foreign currency translation reserve is used to record the gain on translation of foreign currency subsidiaries to the Group's
reporting currency.
Dividends
On 23 March 2020 a dividend of 7.7 cents per ordinary share was paid to shareholders and on 11 September 2020 a dividend of 6.0
cents per ordinary share was paid to shareholders (2019: on 21 March 2019 a dividend of 7.2 cents per ordinary share was paid to
shareholders and on 9 September 2019 a dividend of 6.4 cents per ordinary share was paid to shareholders).
A dividend reinvestment plan applied to the dividends paid. 1,155,370 ordinary shares were issued in relation to the plan for the March
2020 dividend and 665,095 ordinary shares were issued in relation to the plan for the September 2020 dividend. (2019: 866,704
ordinary shares were issued in March 2019 and 928,017 ordinary shares were issued in September 2019).
20. Earnings per share and net tangible assets
Basic earnings per share
Earnings ($000)
Weighted average number of ordinary shares for the
purpose of earnings per share (in thousands)
Basic earnings per share (cents per share)
Diluted earnings per share
Earnings ($000)
Weighted average number of ordinary shares for the
purpose of earnings per share (diluted) (in thousands)
Diluted earnings per share (cents per share)
Number of shares (in thousands)
Weighted average number of ordinary shares for the
purpose of earnings per share (basic)
Weighted average number of ordinary shares issued under
employee share plans
Weighted average number of ordinary shares for the
purpose of earnings per share (diluted)
2020
2019
230,776
175,262
225,591
223,006
102.30
78.59
2020
2019
230,776
175,262
227,979
226,087
101.23
77.52
2020
2019
225,591
223,006
2,388
3,081
227,979
226,087
69
At 31 December 2020, there were a total of 1,712,181 shares issued under employee share plans held by Summerset LTI Trustee Limited
(2019: 2,577,328 shares).
Net tangible assets per share
Net tangible assets ($000)
Shares on issue at end of period (basic and in thousands)
Net tangible assets per share (cents per share)
2020
2019
1,349,136
1,125,761
227,073
224,250
594.14
502.01
Net tangible assets are calculated as the total assets of the Group less intangible assets and less total liabilities. This measure is
provided as it is commonly used for comparison between entities.
Annual Report 2020
Notes to the financial statements (continued)
21. Employee share plans
Senior employee share plan - share option scheme
Effective from 2018, the Group operates an employee share plan granting share options to selected senior employees ("Participants").
The exercise price of the granted share options is determined from the volume weighted average price on the NZX during the 10
trading day period determined by the Board prior to the grant.
Commencement date
Exercise price at grant
SHARE
OPTION
PLAN
(2018
grant)
SHARE
OPTION
PLAN
(2019
grant)
SHARE
OPTION
PLAN
(2020
grant)
10 Dec 2018
9 Dec 2019
18 Dec 2020
$6.34
$7.62
$10.85
Years the performance goals relate to
2019 to 2021
2020 to 2022
2021 to 2023
% of options vested
Vesting date of final tranche
50%1
0%
0%
31 Dec 2021
31 Dec 2022
31 Dec 2023
Final exercise date of final tranche
30 Jun 2023
30 Jun 2024
30 Jun 2025
1 The first tranche of the December 2018 grant had a vesting date of 31 December 2020.
The performance hurdles for the option grant made in 2020 are based on:
70
•
•
•
•
•
50% absolute earnings (cumulative actual underlying net profit after tax for the Group against budget)
20% relative earnings (earnings per share growth of the Group compared to a defined peer group)
10% clinical delivery
10% employee initiatives
10% customer initiatives
While there is a requirement to remain employed by Summerset up to vesting date, there are no performance hurdles for vesting
of share options to senior management team members, other than the members of the Executive Leadership Team, whose
performance hurdles are described above.
A total of 576,852 options vested at 31 December 2020 (2019: nil) and subsequently became exercisable.
The share option scheme is an equity-settled scheme and measured at fair value at the date of the grant. The fair value determined
at the grant date of the equity-settled share-based payments is expensed over the vesting period, based on the Group’s estimate
that the share options will vest. These options were valued using the Black-Scholes valuation model, and the option cost for the year
ending 31 December 2020 of $980,000 has been recognised in the income statement of the Company and the Group for that period
(2019: $422,000). The Group has no legal or constructive obligation to repurchase or settle the share options in cash.
2020
SHARE
OPTION
PLAN
(2018 grant)
SHARE
OPTION
PLAN
(2019 grant)
SHARE
OPTION
PLAN
(2020 grant)
Options held at year end (in thousands)
1,058
1,004
549
Valuation assumptions
Discount to reflect options may not meet vesting criteria
Risk free rate of return
Volatility
15%
2%
23%
15%
1%
24%
15%
0.5%
26%
Options held at year end (in thousands)
Valuation assumptions
Discount to reflect options may not meet vesting criteria
Risk free rate of return
Volatility
Balance at beginning of period
Granted during the year
Forfeited during the year
Balance at end of period
2019
SHARE
OPTION
PLAN
(2018 grant)
SHARE
OPTION
PLAN
(2019 grant)
1,084
1,064
15%
2%
23%
15%
1%
24%
2020
2019
WEIGHTED
AVERAGE
EXERCISE
PRICE
NUMBER OF
OPTIONS
000's
WEIGHTED
AVERAGE
EXERCISE
PRICE
NUMBER OF
OPTIONS
000's
$6.97
$10.85
$7.23
$7.78
2,148
549
(85)
2,612
$6.34
$7.62
$6.34
$6.97
1,154
1,064
(70)
2,148
Senior employee share plan - share and loan scheme
Up to and including 2017, the Group operated employee share plans for selected senior employees (“Participants”) to purchase
shares in the Company (the "2013 share plan"). The shares for the plans are held by a nominee as share options on behalf of
Participants, until such time after the vesting of shares that the nominee is directed by the Participant that they wish to exercise the
share option, or the shares are sold or cancelled by the nominee if vesting criteria are not met. The shares carry the same rights as
all other ordinary shares.
The Group provided Participants with interest-free limited recourse loans to fund the acquisition of the shares for these plans. These
loans are held by Summerset LTI Trustee Limited and eliminate on consolidation.
The issue price of shares under the 2013 share plan was determined from the volume weighted average price on the NZX during the
ten trading days prior to issue.
71
Commencement date
Issue price
Expiry date of interest-free limited recourse loans
Years the performance goals relate to
% of shares vested
Vesting date of final tranche
2013
SHARE PLAN
(2016
issue)
2013
SHARE PLAN
(2017
issues)
16 Dec 2013
16 Dec 2013
$4.76 $5.19 & $5.24
30 Jun 2021
30 Jun 2022
2017 to 2019
2018 to 2020
83%
94%1
31 Dec 2019
31 Dec 2020
1 The final tranche of the December 2017 issue had a vesting date of 31 December 2020 and a first release date of 25 February 2021.
The performance hurdles for the grant of shares under the 2013 share plan between 2016 and 2017 to Executive Leadership Team
members are based on:
•
•
•
•
50% absolute earnings (cumulative actual underlying net profit after tax for the Group against budget)
25% relative earnings (earnings per share growth of the Group compared to a defined peer group)
10% employee initiatives
10% customer initiatives
Annual Report 2020
Notes to the financial statements (continued)
•
5% clinical strategy initiatives
While there is a requirement to remain employed by Summerset up to vesting date, there are no performance hurdles for grants
of shares to senior management team members, other than the members of the Executive Leadership Team, whose performance
hurdles are described above.
A total of 888,346 shares were vested and eligible for exercise at 31 December 2020 (2019: 866,717). The exercise prices range from
$4.76 to $5.24 (2019: $3.91 to $5.19). An additional 392,473 shares were vested on 31 December 2020 but are not eligible for exercise
until 25 February 2021.
The share and loan scheme is an equity-settled scheme and is measured at fair value at the date of the grant. The fair value
determined at the grant date of the equity-settled share-based payments is expensed over the vesting period, based on the Group’s
estimate that the shares will vest. These options were valued using the Black-Scholes valuation model, and the option cost for the
year ending 31 December 2020 of $128,000 has been recognised in the income statement of the Company and the Group for that
period (2019: $471,000).
Shares held at year end on behalf of participants (in thousands)
Shares held at year end as a percentage of shares on issue
Valuation assumptions
Discount to reflect that shares may not meet vesting criteria
Risk-free rate of return
Volatility
72
2020
2013
SHARE PLAN
(2016
issue)
2013
SHARE PLAN
(2017
issues)
245
0.1%
0-15%
2.5%
23%
1,036
0.5%
0-15%
2-2.5%
23%
Shares held at year end on behalf of
participants (in thousands)
Shares held at year end as a percentage of
shares on issue
Valuation assumptions
Discount to reflect that shares may not
meet vesting criteria
Risk-free rate of return
Volatility
2013
SHARE PLAN
(2015
issue)
2019
2013
SHARE PLAN
(2016
issue)
2013
SHARE PLAN
(2017
issues)
341
0.2%
0-30%
2.8%
22%
706
0.3%
0-15%
2.5%
23%
1,170
0.5%
0-15%
2-2.5%
23%
The range of exercise prices at 31 December 2020 is $4.76 to $5.24 (2019: $3.91 to $5.24).
Balance at beginning of period
Exercised during the year
Forfeited during the year
Balance at end of period
2020
2019
WEIGHTED
AVERAGE
EXERCISE
PRICE
NUMBER OF
SHARES
000's
WEIGHTED
AVERAGE
EXERCISE
PRICE
NUMBER OF
SHARES
000's
$4.89
$4.51
$5.24
$5.16
2,218
(931)
(6)
1,281
$4.54
$3.34
$4.84
$4.89
2,936
(663)
(55)
2,218
All-staff employee share plan
The Group operates an all-staff employee share plan. A total of 1,282 employees participated in the share issue under the plan for
the year ended 31 December 2020 (2019: 1,060 employees). In 2020 the Group contributed $800 per participating employee (being
the total value of the shares issued). A total of 137,174 Company shares were issued under the scheme at $7.4712 per share (2019:
148,400 shares at $5.6938 per share). The shares are held by Summerset LTI Trustee Limited and vest to participating employees
after a three-year period.
The cost for the year ending 31 December 2020 of $370,000 has been recognised in the income statement of the Company and the
Group for that period (2019: $366,000).
22. Related party transactions
Refer to Note 21 for employee share plan details.
Transactions with companies associated with Directors
During the year ended 31 December 2020, Summerset Villages (Half Moon Bay) Limited purchased land at Half Moon Bay in Auckland
from BeGroup New Zealand Limited ("the vendor"). James Ogden is the Chair of the Investment Committee for Pencarrow IV
Investment Fund, which owns 48% of the vendor. Due to this conflict, James Ogden abstained from all aspects of the transaction in
both entities. As at 31 December 2020, there is an amount of $15.8 million outstanding in relation to this purchase, which is expected
to be paid to the vendor by 26 February 2021 in line with the agreement to purchase.
During the year ended 31 December 2020, Summerset Management Group Limited entered into a three year contract for the supply
of natural gas with Contact Energy. Venasio-Lorenzo Crawley is the Chief Customer Officer at Contact Energy. The procurement
process in relation to this contract was conducted on an arms-length basis with no involvement from Venasio-Lorenzo Crawley. The
agreement is in effect from 1 January 2021.
On 1 October 2020, Rob Campbell became a director of UFF Holdings Limited which provides services to Summerset villages. During
the period from 1 October to 31 December 2020, the Group paid $60,000 to Ultrafast Fibre Limited, a subsidiary of UFF Holdings
Limited, for fibre reticulation at villages.
There were no other related party transactions for the year ended 31 December 2020 (2019: nil).
73
23. Key management personnel compensation
The compensation of the key management personnel of the Group is set out below:
Directors’ fees
Short-term employee benefits
Share-based payments
Total
2020
$000
786
3,861
729
5,376
2019
$000
684
3,799
686
5,169
There were seven Directors from 1 February 2020 (2019: six Directors).
Refer to Note 21 for employee share plan details for key management personnel and for loans advanced to key management
personnel under the terms of employee share plans.
Annual Report 2020
Notes to the financial statements (continued)
24. Commitments and contingencies
Guarantees
As at 31 December 2020, NZX Limited held a guarantee in respect of the Group, as required by the NZX Listing Rules, for $75,000
(2019: $75,000).
Summerset Retention Trustee Limited holds guarantees in relation to retentions on construction contracts on behalf of the Group.
As at 31 December 2020, $10.0 million was held for the benefit of the retentions beneficiaries (2019: $8.0 million).
Capital commitments
At 31 December 2020, the Group had $139.7 million of capital commitments in relation to construction contracts (2019: $133.1 million).
Contingent liabilities
There were no known material contingent liabilities at 31 December 2020 (2019: nil).
25. Subsequent events
On 22 February 2021, the Directors approved a final dividend of $16.0 million, being 7.0 cents per share. The dividend record date is
9 March 2021 with a payment date of 22 March 2021.
There have been no other events subsequent to 31 December 2020 that materially impact on the results reported.
74
Independent Auditor’s Report to the Shareholders of Summerset Group
Holdings Limited
Report on the audit of the financial statements
Opinion
We have audited the financial statements of Summerset Group Holdings Limited (“the company”) and its subsidiaries (together “the
Group”) on pages 41 to 74, which comprise the consolidated statement of financial position of the Group as at 31 December 2020,
and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in
equity and consolidated statement of cash flows for the year then ended of the Group, and the notes to the consolidated financial
statements including a summary of significant accounting policies.
In our opinion, the consolidated financial statements on pages 41 to 74 present fairly, in all material respects, the consolidated
financial position of the Group as at 31 December 2020 and its consolidated financial performance and cash flows for the year
then ended in accordance with New Zealand equivalents to International Financial Reporting Standards and International Financial
Reporting Standards.
This report is made solely to the company's shareholders, as a body. Our audit has been undertaken so that we might state to the
company's shareholders those matters we are required to state to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's
shareholders, as a body, for our audit work, for this report, or for the opinions we have formed.
75
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance
Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance
Standards Board, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Ernst & Young provides other assurance related services to the Group. Partners and employees of our firm may deal with the Group
on normal terms within the ordinary course of trading activities of the business of the Group. We have no other relationship with, or
interest in, the Group.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated
financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each
matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of
the audit report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to
respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying
consolidated financial statements.
Annual Report 2020
Valuation of investment property and freehold land and buildings
Why significant
How our audit addressed the key audit matter
As disclosed in notes 9 and 11 to the consolidated
financial statements:
•
•
the Group’s investment property portfolio was valued
at $3,639 million at 31 December 2020 and included
completed investment property and investment
property under development
the Group’s freehold land and buildings were valued
at $155 million at 31 December 2020. This included
freehold land and buildings operated by the Group for
the provision of care services, and land and buildings
to be developed into care facilities in the future.
The Group’s accounting policy is to measure these assets
at fair value.
Independent valuations of all investment property and
freehold land and buildings were carried out by third
party valuers, CBRE Limited and Jones Lang LaSalle
Limited (the Valuers). The valuation of investment
property and freehold land and buildings is inherently
subjective given that there are alternative assumptions
and valuation methods that may result in a range of
values. As discussed in note 11 to the consolidated
financial statements, the Valuers have advised that a
degree of caution should be exercised when relying
on the valuations. This caution reflects the ongoing
uncertainty compared to prior years as a result of the
COVID-19 pandemic.
Completed investment property and care suites are
recorded in the consolidated financial statements based
on the value determined by the Valuers.
76
To address the key audit matter, we:
External valuations
•
•
read the valuation reports and discussed them directly
with the Valuers. We assessed the valuation approach and
confirmed that this was in accordance with the relevant
accounting standards; and
tested on a sample basis, whether property specific
information supplied to the Valuers by the Group
reflected the underlying property records held by
the Group.
Assumptions and estimates
•
•
•
held discussions with the Valuers to gain an
understanding of the assumptions and estimates
used and the valuation methodology applied. This
included understanding the impact that ongoing market
uncertainty had on their assessment of significant inputs
and assumptions. We also sought to understand and
consider whether any restrictions had been imposed on
the valuation process;
considered whether the valuation sought to make
appropriate assumptions for a sample of individual
properties to reflect their characteristics, overall quality,
geographic location and desirability as a whole; and
engaged our in-house Real estate valuation experts to
challenge the work performed by the Valuers and assess
the reasonableness of the assumptions used based
on their knowledge gained from reviewing valuations
of similar properties, known transactions and available
market data.
Our work over the assumptions focused on the largest
properties within the portfolio and those properties where the
assumptions used and/or year-on-year fair value movement
suggested a possible outlier compared to the rest of the
portfolio and the market data for the sector.
Valuation estimates
As a result of the judgement involved in determining
valuations for individual properties and the existence of
alternative assumptions and valuation methods, there is a
range of values which can be considered reasonable when
evaluating the independent property valuations used by the
Group. If we identified an error in a property valuation or
determined that the valuation was outside of a reasonable
range, we evaluated the error or difference to determine
if there was a material misstatement in the consolidated
financial statements.
Disclosures
We considered the adequacy of the disclosures made in
notes 9 and 11 to the consolidated financial statements.
These notes explain the key judgements made in relation
to the valuation of investment property and freehold land
and buildings and the estimation uncertainty involved in the
valuation process.
Deferred Management Fee Revenue Recognition
Why significant
How our audit addressed the key audit matter
Deferred management fee (“DMF”) revenue is 35% of the
Group's total revenue. The Group recognises deferred
management fee revenue from residents over the longer
of the expected period of tenure or the contractual right
to revenue in accordance with the terms of the resident’s
occupational right agreement.
The amount of revenue recognised in each year is
subject to the Group’s judgement of each resident’s
expected tenure in the village as well as the terms of
the occupational right agreement and the type of unit
occupied. A change in the assumed tenure may have a
material impact on revenue recognised in the year.
Disclosures in relation to DMF revenue and the
associated DMF receivable and revenue in advance
balances are included in note 4 to the consolidated
financial statements.
To address the key audit matter, we:
•
•
•
•
•
for a sample of residents, assessed the accuracy of a
sample of the inputs to, and calculation of, the DMF
revenue recognised during 2020;
agreed the contractual terms used in the revenue
recognition calculation for a sample of residents to the
occupational right agreement;
assessed the movements year on year in revenue
recognised by each village based on an expectation
derived from underlying village data;
compared the Group’s assessment of assumed tenure
against actual observed tenure; and
assessed the adequacy of the related financial
statement disclosures.
Information other than the financial statements and auditor’s report
The directors of the company are responsible for the Annual Report, which includes information other than the consolidated financial
statements and auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge
obtained during the audit, or otherwise appears to be materially misstated.
77
If, based upon the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Directors’ responsibilities for the financial statements
The directors are responsible, on behalf of the entity, for the preparation and fair presentation of the consolidated financial
statements in accordance with New Zealand equivalents to International Financial Reporting Standards and International Financial
Reporting Standards, and for such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing on behalf of the entity the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so.
Annual Report 2020
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing
(New Zealand) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated financial statements.
A further description of the auditor’s responsibilities for the audit of the financial statements is located at the External Reporting
Board’s website: https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/. This
description forms part of our auditor’s report.
The engagement partner on the audit resulting in this independent auditor’s report is Grant Taylor.
Ernst & Young
Chartered Accountants
Wellington
22 February 2021
78
Governance
Summerset is committed to following best-practice governance structures and principles and to having good
governance of the way in which the Company operates. It also takes account of the Company’s listings on both the
NZX and ASX.
Summerset has adopted the principles below as an appropriate way to demonstrate its commitment to these
fundamental principles and to illustrate the transparency of the Company’s approach to corporate governance for the
benefit of its Shareholders and other stakeholders. These principles are from the NZX Corporate Governance Code
issued in January 2019 ("NZX Code"). Each principle of the NZX Code is set out below with an explanation on how
Summerset meets each principle.
As at 31 December 2020, Summerset considers that it was in full compliance with NZX Listing Rules and the NZX Code.
Summerset’s Board and Committee Charters, and a number of the policies and guidelines referred to in this section,
are available to view at https://www.summerset.co.nz/investor-centre/governance-documents/.
79
• Whistle blowing – This policy encourages employees
to come forward if they have concerns regarding
serious wrongdoing, and ensures that employees
have access to a confidential process in which
they can report any issues in relation to serious
wrongdoing without fear of reprisal or victimisation.
• Conflicts of interest – Summerset's Code of Ethics
outlines the standards of integrity, professionalism
and confidentiality to which all employees and
Directors of the Company must adhere with respect
to their work and behaviour. To maintain integrity
in decision-making, each Director must advise the
Board of any potential conflict of interest if such
arises. If a conflict of interest exists, the Director
concerned will have no involvement in the decision-
making process relating to the matter.
• Gifts, entertainment and inducements – This policy
governs the acceptance and reporting of benefits
given to staff by third parties.
•
Interests Register – In accordance with the
Companies Act 1993 and the Financial Markets
Conduct Act 2013, the Company maintains an
Interests Register in which all relevant transactions
and matters involving the Directors are recorded.
The Code of Ethics Policy, Securities Trading Policy and
Guidlines and Whistle Blowing Policy can be found on the
Company’s website and internal intranet.
Principle 1: Code of ethical behaviour
“Directors should set high standards of ethical
behaviour, model this behaviour and hold
management accountable for these standards being
followed throughout the organisation.”
Ethical standards
The Board maintains high standards of ethical conduct
and expects the Company’s employees to act legally and
with integrity in a manner consistent with the policies,
guiding principles and values that are in place. These
include the following:
• Code of Ethics – This guide sets out the basic
principles of legal and ethical conduct expected of all
employees and Directors. The Company encourages
open and honest communication by staff about any
current or potential problem, complaint, suggestion,
concern or question.
• Securities trading – In accordance with the
Company’s Securities Trading Policy, the NZX Listing
Rules, and the Financial Markets Conduct Act 2013,
Directors and employees of the Company are
subject to limitations on their ability to buy or sell
Company shares.
• Diversity and inclusion – This policy outlines
the Company’s guiding principles for diversity and
inclusion. Refer to Principle 2 for further details.
• Code of Conduct – This policy sets out the expected
behaviours while in employment with the Company.
Company employees are expected to act honestly,
conscientiously, reasonably and in good faith while
at all times having regard to their responsibilities,
the interests of Summerset, and the welfare of our
residents and staff.
Annual Report 2020
Principle 2: Board composition
and performance
“To ensure an effective board, there should be
a balance of independence, skills, knowledge,
experience and perspectives.”
Role of the Board of Directors
The Board of Directors is elected by Shareholders, and
has responsibility for taking appropriate steps to protect
and enhance the value of the assets of the Company
in the best interests of its Shareholders. The Board has
adopted a formal Board Charter detailing its authority,
responsibilities, membership and operation.
The key responsibilities of the Board include setting
the overall direction and strategy of the Company,
establishing appropriate policies and monitoring
performance of management. The Board appoints the
Chief Executive Officer and delegates the day-to-day
operating of the business to the Chief Executive Officer.
The Chief Executive Officer implements policies and
strategies set by the Board and is accountable to it. The
Board also has responsibility for ensuring the Company’s
financial position is sound, financial statements comply
with generally accepted accounting practice, and that
the Company adheres to high standards of ethical and
corporate behaviour.
A summary of the Board mandate is as follows:
• A majority of the Board should be Independent
Directors as defined in the NZX Listing Rules;
•
•
The Chair of the Board should be independent;
The Chair and the Chief Executive Officer should be
different people;
• Directors should possess a broad range of skills,
qualifications and experience, and remain current on
how best to perform their duties as Directors;
•
•
Information of sufficient content, quality and
timeliness as the Board considers necessary shall
be provided by management to allow the Board to
discharge its duties effectively;
The effectiveness and performance of the Board and
its individual members should be re-evaluated on an
annual basis.
Directors receive an induction upon appointment to the
Board to ensure their full knowledge of the Company
and the industry in which it operates. The Directors are
expected to keep themselves abreast of changes and
trends in the business and to keep themselves up to date
to ensure they best perform their duties as Directors of
the Company.
All Directors have been issued letters setting out the
terms and conditions of their appointment.
Delegation of authority
The Board delegates to the Chief Executive Officer
responsibility for implementing the Board’s strategy
and for managing the Company’s operations. The
Chief Executive Officer and management have Board-
approved levels of authority and, in turn, sub-delegate
authority in some cases to direct reports. This is
documented in the Delegated Authority Policy.
Before approving the Company and Group's financial
statements, a management representation letter is
obtained from the Chief Executive Officer and the Deputy
Chief Executive Officer and Chief Financial Officer
declaring that, in their opinion, the financial records of
the Company and Group have been properly maintained
and the financial statements comply with the appropriate
accounting standards and give a true and fair view of
the financial position and performance of the Company
and Group.
Retirement and re-election
In accordance with the Company’s Constitution and
the NZX Listing Rules, Directors are required to
retire three years after their appointment or at the third
Annual Shareholder Meeting following their appointment
(whichever is later). Directors who have been appointed
by the Board must also retire at the next Annual
Shareholder Meeting following their appointment.
Directors may offer themselves for re-election by
Shareholders each year at the Annual Shareholder
Meeting. Procedures for the appointment and removal
of Directors are also governed by the Constitution.
The People and Culture Committee identifies and
nominates candidates to fill Director vacancies for Board
approval. Information about candidates for election or
re-election is included in the Notice of Meeting to assist
Shareholders in deciding whether or not to elect or re-
elect the candidate.
80
Board composition
The Company’s Constitution prescribes that the Board
shall be comprised of a minimum of three Directors, with
at least two Directors ordinarily resident in New Zealand.
As at 31 December 2020, the Board was comprised
of seven non-executive Independent Directors. In
determining whether a Director is Independent, the
Board has regard to the NZX Listing Rules.
The Board considers all current Directors to be
Independent in that they are not executives of the
Company and do not have a direct or indirect interest or
relationship that could reasonably influence, in a material
way, their decisions in relation to the Company.
As at 31 December 2020, the non-executive Independent
Directors were Rob Campbell (Chair), Dr Andrew Wong,
Anne Urlwin, Gráinne Troute, James Ogden, Dr Marie
Bismark and Venasio-Lorenzo Crawley.
The Board is comprised of Directors who have a mix of
skills, knowledge, experience and diversity to adequately
meet and discharge its responsibilities and to add value to
the Company through efficient and effective governance
leadership. The current Directors have a varied and
balanced mix of skills relevant to the Group’s operations.
A summary of the key skills and experience held across
the Board as at 31 December 2020, is set out in the
table below.
Rob
Campbell
Dr
Andrew
Wong
Anne
Urlwin
Gráinne
Troute
James
Ogden
Dr Marie
Bismark
Venasio-
Lorenzo
Crawley
Governance
Listed company governance experience
Executive Leadership
NZ and international business leadership
and CEO experience
Finance & Accounting
Senior executive or board experience
in financial accounting and reporting,
corporate finance and internal controls
Customer & Operations
Deep understanding of business operations
and sales, marketing and brand strategies
Health & Clinical
Health and clinical industry
experience (in New Zealand and/or
Australian environments)
Property & Construction
Property, construction and development
management experience
Health & Safety
Experience and understanding of health
and safety and wellbeing requirements
Human Resources
People and performance strategy and
management experience
Digital & Technology
Experience overseeing IT and digital
innovation and an understanding of the
opportunity and risks associated with
technological development
Strategy
Experience in the development and
execution of growth strategies and the
ability to assess strategic options and
business plans
Australian Experience
Australian property and
business experience
81
Annual Report 2020
Inclusion is defined as a sense of belonging, respecting
and valuing all individuals, providing fair access to
opportunity, and removing discrimination and other
barriers to involvement. The Board recognises that
inclusion leads to a better experience of work for
Summerset’s employees, makes teams stronger, leads
to greater creativity and performance, contributes to
a more meaningful relationship with residents, their
families and stakeholders, and ultimately increases value
to Shareholders.
The Board believes that diversity across the workforce
makes Summerset stronger and better able to connect
with, and bring the best of life to, residents on a day-to-
day basis. When there is a variety of thinking styles,
backgrounds, experiences, perspectives and abilities,
employees are more able to understand residents’ needs
and to respond effectively to them.
The Diversity and Inclusion Policy establishes the
following objectives for achieving diversity:
•
•
•
Facilitate and promote equal employment
opportunities at all levels, and identify and remove
any barriers to equal opportunity;
Facilitate and promote a merit-based environment in
which all employees have the opportunity to develop
and perform to their full potential; and
Reward excellence and ensure all employees are
treated fairly, evaluated objectively, and have
equitable access to opportunities for progression and
promotion on the basis of performance.
More information on the Directors, including their
interests, qualifications and security holdings, is provided
in the Board of Directors and Disclosures sections of
this report.
The Board holds regular scheduled meetings. The
Directors generally receive material for Board meetings
five working days in advance, except in the case of special
meetings, for which the time period may be shorter owing
to the urgency of the matter to be considered.
The Company Secretary attends all Board meetings, and
in this capacity is accountable directly to the Board,
through the Chair, on all matters to do with the proper
functioning of the Board.
All Directors have access to the Executive Leadership
Team to discuss issues or obtain information on specific
areas in relation to items to be considered at Board
meetings or other areas as considered appropriate. Key
Executives and managers are invited to attend and
participate in appropriate sessions at Board meetings.
Directors have unrestricted access to Company records
and information.
Directors are entitled to obtain independent professional
advice relating to the affairs of the Company or other
responsibilities. Prior approval of the Chair is required
before seeking such advice and Directors are expected to
ensure that the cost of such advice is reasonable.
Diversity and inclusion
The Company and its Board are committed to a
workplace culture that promotes and values diversity
and inclusiveness. This is outlined in the Company’s
Diversity and Inclusion Policy, which is available on the
Company’s website.
Diversity is defined as the characteristics that make one
individual different from another. Diversity encompasses
gender, race, ethnicity, disability, age, sexual orientation,
physical capability, family responsibilities, education,
cultural background and more.
82
Directors
Total
Senior Managers
Total
Executive Leadership Team
Total
All staff
Total staff
Each year the Board reviews and assesses performance
against these objectives. The Board considers that for
the year ended 31 December 2020, the objectives for
achieving diversity have been met.
As at 31 December 2020 (and 31 December 2019 for the
prior comparative period), the mix of gender of those
employed by the Company is set out in the table above.
Senior Managers of the Company are the Chief Executive
Officer and the Deputy Chief Executive Officer and
Chief Financial Officer. The Executive Leadership Team
comprises the Chief Executive Officer, the Deputy
Chief Executive Officer and Chief Financial Officer,
and all General Managers who report to the Chief
Executive Officer.
These figures include permanent full-time, permanent
part-time, fixed-term and casual employees, but not
independent contractors.
GENDER
Male
Female
Male
Female
Male
Female
Male
Female
Gender diverse
2020
2019
4
3
7
2
-
2
6
2
8
438
1,382
3
1,823
3
3
6
2
-
2
6
2
8
349
1,199
-
1,548
Board performance
The Board is committed to evaluating its performance on
a regular basis, generally with a formal, external review
bi-annually with an internal self-review each intervening
year. In 2020 the Board completed an externally-
facilitated review which provided the opportunity
for directors to independently evaluate board and
committee performance and processes as well as to give
individual feedback on and to each director. The process,
including evaluation criteria, is considered by the People
and Culture Committee and approved by the Board.
Executive Leadership Team performance
The Board evaluates annually the performance of the
Chief Executive Officer. The Chief Executive Officer
reviews the performance of direct reports and reports
to the Board on those reviews. The evaluation is
based on criteria that include the performance of
the business and the accomplishment of longer-term
strategic objectives. It may include quantitative and
qualitative measures. During the most recent financial
year, performance evaluations were conducted in
accordance with this process.
83
Annual Report 2020
Principle 3: Board committees
“The board should use committees where this will
enhance its effectiveness in key areas, while still
retaining board responsibility.”
Board committees
The Board has four standing committees: the Audit
Committee, the People and Culture Committee, the
Clinical Governance Committee, and the Development
and Construction Committee. Each committee operates
under a charter approved by the Board, and any
recommendations they make are recommendations
to the Board. The charter for each committee is
reviewed annually. All Directors are entitled to attend
committee meetings.
Audit Committee
While the ultimate responsibility to ensure the integrity
of the Company’s financial reporting rests with the
Board, the Company has in place processes to ensure
the accurate presentation of its financial position.
These include:
• An appropriately resourced Audit Committee
operating under a written charter with specific
responsibilities for financial reporting and
risk management;
•
Review and consideration by the Audit Committee
of the financial information and preliminary releases
of results to the market, which then makes
recommendations to the Board;
• A process to ensure the independence and
competence of the Company’s external auditors
and a process to ensure their compliance with the
Company’s External Audit Independence Policy;
•
•
Responsibility for appointment of the external
auditors residing with the Audit Committee;
The Audit Committee monitors the strength of the
internal control environment by considering the
effectiveness and adequacy of Summerset’s internal
controls, reviewing the findings of the external
auditors’ review of internal control over financial
reporting, and being involved in setting the scope
for the internal audit programme.
One of the main purposes of the Audit Committee is
to ensure the quality and independence of the external
audit process. The Audit Committee make enquiries
of management and the external auditors so that it is
satisfied as to the validity and accuracy of all aspects
of the Company’s financial reporting. All aspects of the
external audit are reported back to the Audit Committee
and the external auditors are given the opportunity at
Audit Committee meetings to meet with Directors.
The Audit Committee must comprise a minimum of three
Directors, the majority of whom must be Independent.
The committee is chaired by an Independent Director
who is not the Chair of the Board. The Committee
currently comprises of James Ogden (Chair), Anne
Urlwin, Rob Campbell and Gráinne Troute.
The Audit Committee generally invites the Chief
Executive Officer, Deputy Chief Executive Officer and
Chief Financial Officer, Head of Finance, internal auditors
and external auditors to attend meetings. The Committee
also meets and receives regular reports from the external
auditors without management present, concerning any
matters that arise in connection with the performance of
their role.
People and Culture Committee
The role of the People and Culture Committee is to assist
the Board in establishing and reviewing remuneration
policies and practices for the Company and in reviewing
Board composition. Specific objectives include:
•
Supporting the Board in ensuring the Company's
vision and commitment to its people strategy is
aligned with and is an enabler of the Company's
business strategy;
• Assisting the Board in planning the
Board’s composition;
•
•
Evaluating the competencies required of prospective
Directors (both non-executive and executive);
Identifying those prospective Directors and
establishing their degree of independence;
• Developing the succession plans for the Board, and
making recommendations to the Board accordingly;
• Overseeing the process of the Board’s annual
performance self-assessment and the performance
of the Directors;
•
Establishing remuneration policies and practices,
and setting and reviewing the remuneration of
the Company’s Chief Executive Officer, Executive
Leadership Team and Directors.
The People and Culture Committee must comprise a
minimum of three Directors, the majority of whom must
be Independent. The Committee currently comprises
Gráinne Troute (Chair), Dr Marie Bismark, James Ogden,
Anne Urlwin and Venasio-Lorenzo Crawley.
The Board’s policy is that the Board needs to have an
appropriate mix of skills, experience and diversity to
ensure that it is well equipped. The Board reviews and
evaluates on a regular basis the skill mix required, and
identifies any existing gaps.
84
Clinical Governance Committee
The role of the Clinical Governance Committee is to
assist the Board in ensuring a systematic approach to
maintaining and improving the quality of care provided
by the Company. Specific objectives include:
•
•
Providing oversight that appropriate clinical
governance mechanisms are in place and are
effective throughout the organisation;
Supporting the leadership role of the Chief Executive
Officer in relation to issues of quality, safety and
clinical risk;
• Working with management to identify priorities
for improvement;
•
•
Ensuring that the principles and standards of clinical
governance are applied to the health improvement
and health protection activities of the Board;
Ensuring that appropriate mechanisms are in place
for the effective engagement of representatives of
residents and clinical staff.
The Clinical Governance Committee must comprise a
minimum of three Directors. The Committee currently
comprises Dr Marie Bismark (Chair), Anne Urlwin, Gráinne
Troute and Dr Andrew Wong.
Development and Construction Committee
The role of the Development and Construction
Committee is to assist the Board in:
•
Supporting management to establish and achieve
development and construction objectives within the
Company’s long-term plan;
•
Supporting management to develop and implement
strategies to achieve the Company’s development
and construction objectives in line with best practice;
• Helping the Company maintain appropriate risk
management strategies to identify, mitigate and
manage development and construction risks;
• Maintaining a good understanding of, and confidence
in, the Company’s frameworks, systems, processes
and personnel required to manage the Company’s
development and construction activities effectively,
including the assessment and realisation of
opportunities and the application of appropriate
risk management;
• Working with management to identify areas for
improvement and innovation in construction and
development practices.
The Development and Construction Committee must
comprise a minimum of three Directors. The Committee
currently comprises Anne Urlwin (Chair), James Ogden
and Rob Campbell.
Attendance at Board and committee meetings
A total of six Board meetings, seven Audit Committee
meetings, five People and Culture Committee meetings,
three Clinical Governance Committee meetings and
three Development and Construction Committee
meetings were held in 2020. Director attendance at
Board meetings and committee member attendance at
committee meetings is shown below.
Total number of meetings held
Rob Campbell
Anne Urlwin
Dr Andrew Wong
Gráinne Troute
James Ogden
Dr Marie Bismark
Venasio-Lorenzo Crawley
Audit
Committee
People and
Culture
Committee
Clinical
Governance
Committee
Development
and Construction
Committee
7
7
7
7*
7
7
(Chair)
7*
5*
5
5*
5
5*
5
(Chair)
5
5
2**
3
3*
3
3
3
3*
3
(Chair)
2*
3
3
3
(Chair)
3*
3*
3
2*
2*
Board
6
6
(Chair)
6
6
6
6
6
6
* attended the meeting as a non-committee member
** appointed to the People and Culture Committee on
24 February 2020 (after the first two meetings had
been held)
85
Annual Report 2020
Principle 4: Reporting and disclosure
Principle 6: Risk management
“The board should demand integrity in financial and
non-financial reporting, and in the timeliness and
balance of corporate disclosures.”
Making timely and balanced disclosures
The Company is committed to promoting Shareholder
confidence through open, timely and accurate market
communication. The Company has in place procedures
designed to ensure compliance with its disclosure
obligations under the NZX and ASX Listing Rules. The
Company’s Market Disclosure and Communications
Policy sets out the responsibilities of the Board and
management in disclosure and communication, and
procedures for managing this obligation.
Copies of key governance documents, including
the Code of Ethics, Securities Trading Policy
and Guidelines, Board and Committee Charters,
Diversity and Inclusion Policy, Board and Executive
Remuneration Policy, and Market Disclosure and
Communications Policy are all available on the
Company’s website at https://www.summerset.co.nz/
investor-centre/governance-documents/.
Non-financial disclosures, such as the Company’s
approach to health and safety, our people, the
community and the environment are included within
this Annual Report. The Company recognises it is in the
early stages of reporting on non-financial information,
and intends to continue to enhance future disclosure in
this area.
Principle 5: Remuneration
“The remuneration of directors and executives should
be transparent, fair and reasonable.”
Remuneration of Directors and the Executive Leadership
Team is reviewed by the Board’s People and Culture
Committee. Its membership and role are set out under
Principle 3. The Committee makes recommendations
to the Board on remuneration packages, keeping in
mind the requirements of the Board and Executive
Remuneration Policy. The level of remuneration paid to
the Directors and the Executive Leadership Team will
be determined by the Board. However, Directors’ fees
must be within the limits approved by the Shareholders of
the Company.
Further details on remuneration are provided in the
Remuneration section of this Annual Report.
“Directors should have a sound understanding of the
material risks faced by the issuer and how to manage
them. The Board should regularly verify that the issuer
has appropriate processes that identify and manage
potential and material risks.”
Summerset has robust risk management and reporting
frameworks in place whereby material business risks are
regularly identified, monitored and managed. The Board
reviews this risk management framework on an annual
basis to ensure it remains fit for purpose. A review was
undertaken by the Board during the 2020 financial year.
The members of Summerset’s Executive Leadership
Team are required to regularly identify the major
risks affecting the business, record them in the risk
register (which identifies the likelihood and consequence
of each risk to Summerset’s business), and develop
structures, practices and processes to manage and
monitor these risks.
Summerset has introduced a co-sourced model for
internal audit with an in-house Internal Audit Manager
appointed. As part of the co-sourced model, Summerset
has engaged KPMG as its partner to assist with carrying
out internal audit work on various parts of the Group’s
operations and all major risk and internal control issues
are reported on at each Board meeting.
Health and safety (including in relation to risks,
performance and management) is discussed regularly
at Board meetings and specific reviews are sought as
required. Monthly reporting is prepared and used to assist
in risk management, covering areas such as health and
safety incidents, injury and near miss frequency rates, and
actions undertaken. Further information is covered in the
health and safety section of this Annual Report.
Summerset has a Tax Governance Policy in place which
sets out its tax risk management objectives, tax reporting
requirements to the Audit Committee and policies and
processes to manage tax risk. This Tax Governance
Policy is reviewed by the Board every two years. It
is next due for review in December 2022. The Board
is satisfied that Summerset has effective policies and
processes in place to ensure the Company is meeting
its obligations. Summerset adopts a risk averse stance in
relation to tax issues and, where possible, seeks certainty
on tax positions through proactive engagement with
tax authorities.
86
87
on future proofing our designs, understanding
emerging risks and improving our resilience, with
the other responsible for implementing specific
actions and initiatives identified in our emissions
reduction plan. Both of these working groups
report into the Sustainability Forum who report
through to the Board on sustainability strategy and
targets, including our key climate-related targets
and risks.
• Climate change considerations are integrated
into the due diligence process for potential
acquisitions to assess the climate change risks
inherent at each site.
• Climate related risks are included within our
corporate risk matrix.
•
The Board has oversight of climate-related issues
and responsibility for sustainability.
These measures and our approach to sustainability
are discussed in more detail on page 31 of this report.
Summerset has considered whether it has any
material exposure to economic, environmental and
social sustainability risks (as defined in the ASX
Corporate Governance Principles) and has determined
the following:
• Climate change risk: Over the longer term,
Summerset expects to operate in a climate that will
progressively depart from the weather conditions
and events currently experienced, to more acute
challenges and risks arising from increasing climate
variability. This is likely to have various impacts on
the longer-term plans and operation of the Group
– specifically in relation to the design, build and
construction of villages, as well as in the provision of
care services to frail residents and the overall lifestyle
satisfaction enjoyed in Summerset’s villages.
Summerset responds to these risks in the
following way:
•
•
Summerset is a certified carbonzero organisation.
This requires us to measure our greenhouse
gas emissions, understand our carbon liabilities,
and put in place management plans to reduce
emissions within the organisation and more widely
through our supply chain.
The Company is structured internally with two
key working groups in place. One which focuses
HIGHLY LIKELY Climate ChangeProperty MarketStaff Retention & CapabilityCorporate Governance & ComplianceStrategy & InnovationDiversity &InclusionConstruction & DevelopmentCare Occupational H&SResident / Customer ExperienceAustralia Market EntryData Privacy & Asset Maintenance & UpgradesSector Penetration RatesEXTREMELY UNLIKELYLOWCRITICALSummerset’s Current Key Strategic Residual Risks LIKELIHOODCONSEQUENCESReputational Annual Report 2020
•
Property market risk: Property market factors could
adversely affect sales, occupancy levels or revenue
streams. This may have a flow on impact to the value
of Summerset’s property assets and the associated
investment property valuation, which would in turn
impact Summerset’s financial performance.
is a challenge due to the nature of the organisation.
Summerset has various methods in which it manages
and monitors these issues closely, including move-in
surveys, on-going resident feedback surveys, close
one-on-one feedback sessions and close contact with
residents, families, next of kin and prospects.
• Occupational health and safety risk: This remains a
material risk. Its importance has increased further this
year for staff given the mental health risks associated
with the uncertainty of COVID-19. The physical and
mental wellbeing of all Summerset staff is one of our
top priorities.
• Australia market entry: Entering a new market
requires a measured and well researched approach.
Summerset is mitigating many new market entry
risks by setting up a new local team, entering a
well-researched market and developing product and
service offerings, procedures and processes tailored
for the new market. Progress in Australia will be
closely managed.
• Data privacy and confidentiality: Summerset
actively monitors and manages these risks through
the risk management and reporting frameworks.
• Asset maintenance and upgrades: Summerset has
a co-ordinated approach to asset management and
upgrades in all areas of the business. This is constantly
up for review and progress is managed accordingly.
• Sector penetration rates: Summerset is fortunate to
operate in the high growth New Zealand retirement
sector. The risk is a declining penetration (or
participation) in the market. Current forecasts show
this is unlikely to be the case in New Zealand but is a
risk to be monitored. Competitors making significant
changes to their revenue models or pricing strategy
could impact on the revenue earned by Summerset.
• Reputational risk: Summerset operates in a sensitive
market involving care of vulnerable members of
society. Summerset’s performance and reputation
could be adversely impacted should it suffer adverse
publicity, particularly in respect of care or health and
safety issues.
88
• Staff retention and capability risk: In a tight
and highly competitive labour market, Summerset
is at risk of staff shortages. Key areas within
our construction and nursing teams will continue
to be monitored closely. Given COVID-19, this is
currently not considered an extreme risk, but one
for consideration in the medium to long term.
• Corporate governance and compliance: Changes
in regulation could have a material impact on
Summerset’s business operations. Summerset's
governance procedures are continually monitored.
Failure to comply with regulatory, societal and
investor expectations in relation to corporate
and environmental sustainability could impact
Summerset’s reputation and financial performance
over the longer term.
• Strategy and innovation: There is a moderate risk
with regard to Summerset’s strategic direction and
ability to continue to innovate. Summerset’s intention
is to stay at the forefront in all areas of its business
including technology, design, development and care.
However, there is a risk that a competitor may bring
something new to market.
• Diversity and inclusion: Developments in our
diversity and inclusion strategy mean there is some
level of risk in terms of fulfilling all our obligations
in this area, especially in a tight labour market. This
needs to be monitored closely and the staff survey will
bring out useful research and information in this area.
• COVID-19: The unknown factors surrounding the
COVID-19 pandemic mean this remains a high-risk
area at the time of writing this report. However,
global research and work on various vaccines, better
management of care overall and New Zealand’s
positive response to date all mean we are in a good
position. The risk of community transmission and
moving alert levels remains.
• Construction and development risk: Summerset
faces construction and property development risks
when developing new villages. These risks include
project delays, default risk, governance and design
risk and potential labour and materials shortages.
• Care: This is a high-risk area for Summerset,
which requires constant monitoring, management
and policy review. Good training and professional
development, retention of staff and investment into
health and safety all help mitigate risk in this area.
• Resident and customer experience: Providing top
level resident and customer experience at all times
Principle 7: Auditors
“The board should ensure the quality and
independence of the external audit process.”
The Board’s relationship with its auditors, both external
and internal, is governed by the Audit Committee Charter,
External Audit Independence Policy and the Internal
Audit Charter. These charters and policies set out the
types of engagements that can be performed by the
external and internal auditors.
The external auditor (Ernst & Young) attends the
Company’s Annual Shareholder Meeting, and is available
to answer questions from Shareholders in relation to the
external audit.
External audit work for the Group was tendered during
2017, with Ernst & Young remaining in this role.
KPMG was appointed in the role of internal auditor of the
Company in December 2016 and with the establishment
of a co-source model approach to internal audit in 2020,
they currently remain the Company's co-source partner.
Their internal audit role is governed by the Internal
Audit Charter.
Principle 8: Shareholder rights
and relations
“The board should respect the rights of
shareholders and foster constructive relationships
with shareholders that encourage them to engage
with the issuer.”
Respecting the rights of Shareholders
The Company seeks to ensure that its Shareholders
understand its activities by communicating effectively
with them and giving them ready access to clear and
balanced information about the Company.
To assist with this, the Company’s website is
maintained with relevant information, including copies of
presentations and reports. The Company’s key corporate
governance policies are also included on the website.
The Company’s major communications with
Shareholders during the financial year include its annual
and half-year reports and the Annual Shareholder
Meeting. The annual and half-year reports are available in
electronic and hard-copy format.
The primary objective of internal audit is to increase the
strength of the Company’s control environment. This is
guided by a philosophy of adding value to improve the
operations of the Company. It assists the Company in
accomplishing its objectives by bringing a systematic
and disciplined approach to evaluating and improving
the effectiveness of its governance, risk management
and internal controls.
Communicating with Shareholders
The Company welcomes communication and feedback
from Shareholders. The Company’s investor centre (on
its website) provides a Company phone number and
email address for communications from Shareholders
and investor relations enquiries. All Shareholder
communications are responded to within a reasonable
time frame.
89
The scope of the internal audit programme is set by the
Audit Committee.
The Company provides options for Shareholders to
receive and send communications electronically, to and
from both the Company and its share and bond registrar.
The Company’s investor centre includes contact details
for Link Market Services, through which all Company
shares and bonds are managed.
Shareholder voting rights
Shareholders have the right to vote on major decisions as
required by the NZX Listing Rules. Further information
on Shareholder voting rights is set out in the
Company’s Constitution.
Notice of Annual and Special Shareholder Meetings
Notice of Annual and Special Shareholder Meetings
are sent to Shareholders and published on the
Company’s website at least 20 working days prior to
the relevant meeting.
Annual Report 2020
90
Dr Marie Bismark (MBChB, LLB, MBHL, MPH, MD, MPsych, FAICD, FAFPHM)IndependentMarie is the Chair of Summerset’s Clinical Governance Committee. She holds degrees in law, medicine, bioethics and public health, and has completed a Harkness Fellowship in Healthcare Policy at Harvard University. Marie works as a psychiatry registrar with Melbourne Health, and as an Associate Professor at Melbourne University. Her research focuses on patients’ rights, quality of care, and medical regulation. Marie is an experienced company director, serving on the board of GMHBA Health Insurance, Royal Womens Hospital in Melbourne and on the Veterans’ Health Advisory Panel. Marie has been a director of Summerset since 2013.Board of DirectorsRob Campbell (BA (Hons 1st), MPhil (Econ))Chair, Independent Rob is the Chair of the Board. He has over 40 years’ experience as a director and an investor. He is currently the Chair of SKYCITY Entertainment Group, WEL Group, Tourism Holdings and a director of Precinct Properties NZ. Rob is also an investor and director of a number of substantial private companies and is a director of, or an advisor to, a number of private investment funds. Rob has been Chair of Summerset since 2011, when he was appointed to Summerset to lead its listing on the NZX.Venasio-Lorenzo Crawley (MBA, BA) IndependentVenasio-Lorenzo is the Chief Customer Officer at Contact Energy and an Advisory Board Member at the Auckland University of Technology. He has also recently completed a term as a Future Board Director for The Warehouse Group.Venasio-Lorenzo’s previous directorships and trustee positions include the Electricity Retailers Association of NZ Electricity, Gas Complaints Commission (now Utilities Disputes), Loyalty New Zealand and Workbase.He has held senior executive positions at ASB Group and at IAG in both New Zealand and the United Kingdom and has worked across a wide variety of areas including strategy, finance, IT, pricing, data analytics, digital technology, culture and brand.Venasio-Lorenzo has been a director of Summerset since 2020. 91
James Ogden (BCA (Hons 1st), FCA, CFinstD, INFINZ (Cert)IndependentJames is the Chair of Summerset’s Audit Committee. He is a director of Vista Group International and Foundation Life (NZ). James is the Chair of the Investment Committee of Pencarrow Private Equity.James has had a career as an investment banker, including six years as Country Manager for Macquarie Bank and five years as a director of Credit Suisse First Boston. He also worked in the New Zealand dairy industry for eight years in chief executive and finance roles. He holds a Bachelor of Commerce and Administration with First Class Honours, and is a Chartered Fellow of the Institute of Directors and a Fellow of Chartered Accountants Australia and New Zealand (CAANZ). James has been a director of Summerset since 2011 when he was appointed to Summerset prior to its listing on the NZX. Gráinne Troute (GradDipBusStuds, CMInstD) IndependentGráinne is Chair of Summerset’s People and Culture Committee. She is a Chartered Member of the Institute of Directors and is also Chair of Tourism Industry Aotearoa and a director of Tourism Holdings and Investore Property. Gráinne is a professional director with many years’ experience in senior executive roles. She was General Manager, Corporate Services at SKYCITY Entertainment Group and Managing Director of McDonald’s Restaurants (NZ). She also held senior management roles with Coopers and Lybrand (now PwC) and HR Consultancy Right Management.Gráinne has vast expertise in operating customer-focused businesses in highly competitive sectors. She has also spent many years as a trustee and Chair in the not-for-profit sector, including having been the Chair of Ronald McDonald House Charities New Zealand for five years. Gráinne has been a director of Summerset since 2016.Anne Urlwin (BCom, FCA, CFInstD, MAICD, ACIS, FNZIM)IndependentAnne is the Chair of Summerset’s Development and Construction Committee. She is a professional director with experience in a diverse range of sectors including construction, health, infrastructure, telecommunications, regulation and financial services. She is the Deputy Chair of Southern Response Earthquake Services, and a director of Precinct Properties New Zealand, Tilt Renewables and Queenstown Airport Corporation. Her other directorships include City Rail Link and Cigna Life New Zealand. Anne is a former director of Chorus and a former Chair of national commercial construction group Naylor Love Enterprises and of the New Zealand Blood Service.Anne is a Chartered Accountant with experience in senior finance management roles in addition to her governance roles. Anne has been a director of Summerset since 2014. Dr Andrew Wong (BHB, MbChB, MPH) IndependentAndrew is the Managing Director of Mercy Ascot Hospitals and HealthCare Holdings, having held these positions since 2009. He holds a medical degree and has previously practised as a Public Health Medicine specialist.Andrew is also a director of a number of medical organisations. These cover a diverse range of areas such as surgical hospitals, day surgeries, diagnostic radiology and cancer care. Andrew has been a director of Summerset since 2017. Annual Report 2020
92
Executive Leadership TeamJulian Cook (MAF, MSc, BSc, BA)Chief Executive Officer Julian has overall responsibility for Summerset and is focused on developing and operating vibrant villages, and ensuring that respect for our customers is always at the core of everything we do.Prior to becoming Chief Executive Officer in 2014, Julian was Summerset’s Chief Financial Officer after joining Summerset in 2010. He oversaw Summerset’s transition to become a publicly listed company on the New Zealand Stock Exchange and the Australian Securities Exchange.Julian is a member of the Executive Committee for the New Zealand Retirement Villages Association.Scott Scoullar( CA, FCPA, BCA)Deputy Chief Executive Officer and Chief Financial OfficerScott has overall responsibility for the financial management of the company and corporate services functions.Before joining Summerset in 2014, Scott held CFO roles at Housing New Zealand and Inland Revenue.Scott was named CFO of the Year at the New Zealand CFO Summit Awards in 2019 and was NZICA’s Public Sector CFO of the Year in 2011. Scott is also a Fellow of CPA Australia, and a CPA New Zealand Council Board Member. Dave Clegg(MBA)General Manager Human ResourcesDave is responsible for leading Summerset’s Human Resources and Health and Safety teams to build and grow Summerset’s people capability and engagement.Before joining Summerset in 2018, Dave was the General Manager of People and Culture at Steel & Tube. Dave has over 25 years’ experience in human resources leadership roles in New Zealand and overseas. Dave holds an MBA from Southern Cross University in Australia. Fay French(RNZcmpN)General Manager Sales Fay leads our national sales team and can be found at Summerset’s Wellington office or at one of our many New Zealand villages.Fay has a breadth of experience across sales, hospitality and the health sector. Prior to joining Summerset in 2015, she held a sales leadership role at a leading New Zealand e-commerce platform, where she was responsible for leading a team of business development managers.Trained as a registered nurse, Fay has worked in various nursing roles and medical sales for Roche Pharmaceuticals. 93
Paul Morris(Dip. BS)General Manager Development AustraliaPaul leads Summerset’s investigation of development opportunities in the Australian market.Paul has been with Summerset since early 2000. He commenced in the GM Development Australia role in 2018, having previously been GM Development New Zealand since 2003. Aaron Smail(BE (Civil), BBS)General Manager DevelopmentAaron leads Summerset’s development team in New Zealand, which covers identifying and purchasing new sites, project feasibilities, consents, design concepts, master planning and design standards for villages. Previous roles in his 25 plus years of property and development experience include senior positions at Todd Property Group and Kiwi Property.Aaron has been with Summerset since 2015. Dean Tallentire (BSc (Hons), HND, RICS)General Manager ConstructionDean leads our design management, building consents, procurement, cost management, construction management and administration support teams in the construction team. Dean has extensive construction and development experience and has led teams in the public and private sectors within developer and main contractor environments.Dean has been with Summerset since 2015. Eleanor Young(BSc (Hons))General Manager Operations and Customer ExperienceEleanor oversees the operational performance across all Summerset villages. Her focus on service experience and delivery ensures Summerset’s residents receive the highest quality facilities and care. Before joining Summerset in 2016, Eleanor held senior roles at Inland Revenue. This included four years as the Group Manager of Customer Services, managing over 2,000 staff across New Zealand to deliver services to customers. Eleanor has a background in human resources within both the public and private sectors, having worked in managerial roles for the Ministry of Social Development, Mighty River Power and Air New Zealand. Annual Report 2020
Remuneration
Director remuneration
The Company distinguishes the structure of non-executive Directors’ remuneration from that of executive Directors.
The total amount of remuneration and other benefits received by each Director during the year ended 31 December
2020 is provided below.
Board
Fees
Audit
Committee
Clinical
Governance
Committee
People and
Culture
Committee
Development
and
Construction
Committee
$173,077
(Chair)
$86,538
Other
committees1
Total
remuneration
$9,372
$182,449
$4,500
$91,038
Director
Rob Campbell
Dr Andrew
Wong
Anne Urlwin
$86,538
Gráinne Troute
$86,538
94
James Ogden
$86,538
$17,308
(Chair)
$7,212
(Chair)
$7,212
(Chair)
$9,372
$103,122
$93,750
$9,372
$113,218
Dr Marie
Bismark
Venasio-
Lorenzo
Crawley2
Total
$86,538
$76,154
$14,423
(Chair)
$100,961
$76,154
$681,921
$17,308
$14,423
$7,212
$7,212
$32,616
$760,692
1 Fees for being on additional sub-committees of the Board throughout the period, including a Due Diligence Committee in relation to the issue of retail bonds in September
2020 and a sub-committee formed in relation to group strategy.
2 Venasio-Lorenzo Crawley was appointed as a Director on 1 February 2020.
The above amounts reflect the 20% pay reduction that Directors took for a period of 10 weeks in response to the
COVID-19 pandemic.
Directors’ fees were reviewed during 2020 and an increase to the Directors' fees pool was approved by Shareholders,
in order to provide a surplus for payment of non-standard fees to Directors for assuming additional responsibilties
above and beyond the normal duties of the Board or any standard committee. Standard Directors' fees remained
unchanged. However, the appointment of a seventh Director in February 2020 increased the total amount of Directors'
fees payable.
As at 31 December 2020, the maximum aggregate amount of remuneration payable by Summerset to Directors (in
their capacity as Directors) was $840,000 per annum (2019: $750,000) and annualised standard Directors’ fees were
$768,000, inclusive of additional remuneration for committee Chairs (2019: $678,000).
As at 31 December 2020, the standard Director fees per annum are as follows:
Board of Directors
Audit Committee
Clinical Governance Committee
People and Culture Committee
Development and Construction Committee
Position
Fees
(per annum)
Chair
$180,000
Member
$90,000
Chair
Chair
Chair
Chair
$18,000
$15,000
$7,500
$7,500
No additional fees are paid to committee members.
Directors’ fees exclude GST, where appropriate. Directors are entitled to be reimbursed for costs directly associated
with carrying out their duties, including travel costs.
Directors and Officers also have the benefit of Directors’ and Officers’ liability insurance. Cover is for damages,
judgements, fines, penalties, legal costs awarded and defence costs arising from wrongful acts committed while
acting for Summerset. There are some exclusions within the policy. The insurance cover is supplemented by the
provision of Director and Officer indemnities from the Company, but this does not extend to criminal acts.
Executive remuneration
The remuneration of members of the Executive Leadership Team (Chief Executive Officer and direct reports) is
designed to promote a high-performance culture and to align Executive reward to the development and achievement
of strategies and business objectives to create sustainable value for Shareholders.
95
The Board is assisted in delivering its responsibilities and objectives for Executive remuneration by the People and
Culture Committee. The role and membership of this Committee is set out in the Statement of Corporate Governance.
Summerset’s remuneration policy for members of the Executive Leadership Team provides the opportunity for
them to receive, where performance merits, a total remuneration package in the upper quartile for equivalent
market-matched roles. The People and Culture Committee reviews the annual performance appraisal outcomes for
all Executive Leadership Team members, including the Chief Executive Officer. The review takes into account external
benchmarking to ensure competitiveness with comparable market peers, along with consideration of an individual’s
performance, skills, expertise and experience.
Total remuneration is made up of three components: fixed remuneration, short-term performance-based cash
remuneration and long-term performance-based equity remuneration.
Fixed remuneration
Fixed remuneration consists of base salary and benefits. Summerset’s policy is to pay fixed remuneration with
reference to the fixed pay market median.
Short-term incentives
Short-term incentives (STIs) are at-risk payments designed to motivate and reward for performance, typically in that
financial year. The target value of an STI payment is set annually, as a percentage of the Executive Leadership Team
member’s fixed remuneration. For 2020, the relevant percentages were 25% to 50%.
Annual Report 2020
A proportion (80% for the Chief Executive Officer, 30% to 40% for other Executive Leadership Team members) of
the STI is related to achievement of annual performance metrics which aim to align executives to a shared set of key
performance indicators (KPIs) based on business priorities for the next 12 months. Target areas for the shared KPIs for
2020 are outlined below:
Target
Underlying EBITDA
Retirement unit delivery
New sales development margin
Resales net cash
Customer satisfaction
Customer clinical quality of care
Health and safety
Staff - HR
Weighting
40%
20%
10%
10%
5%
5%
5%
5%
There are three performance levels within each target area - gate-opener, on-target and maximum performance - with
100% of the amount allocated to that target area being payable when the on-target level is achieved. The maximum
performance levels allow employees to be rewarded for performance above target levels. The maximum amount of
an STI payment for an Executive Leadership Team member is 112% of the STI on-target amount for that Executive
Leadership Team member.
The balance of the STI is related to individual performance measures.
96
In the event that gate-opener underlying EBITDA performance against budget is not achieved, no STI payment will
be made.
Long-term incentives
Long-term incentives (LTIs) are at-risk payments through a share option plan, designed to align the reward of Executive
Leadership Team members with the enhancement of shareholder value over a multi-year period.
LTI Plan
The Executive Leadership Team members are participants of an LTI option plan. Under this plan, Executive Leadership
Team members are granted share options. These share options are exercisable in relation to shares in Summerset
Group Holdings Limited.
Option grants are made annually, with the value of each grant being set at the date of each grant and determined
as a percentage of the Executive Leadership Team member’s fixed remuneration. There have now been three option
grants under this plan. For 2020, the relevant percentages were 20% to 40% (2019: 20% to 40%). Vesting of the share
options is subject to achievement of performance hurdles, which are assessed over two and three-year periods.
The performance hurdles for the option grant made in 2020 are based on:
•
•
•
•
•
•
•
50% absolute earnings (cumulative actual underlying net profit after tax for the Group against budget);
20% relative earnings (earnings per share growth of the Group compared to a defined peer group);
10% clinical delivery;
5% staff engagement;
5% staff turnover;
5% customer satisfaction - village residents;
5% customer satisfaction - care centre residents
The performance hurdles above were consistent with those for 2019.
Performance hurdles are set by the Board with the objective of aligning Executive reward to the development and
achievement of strategies and business objectives to create sustainable value for Shareholders. The Board considers
that the performance hurdles reflect the drivers of sustainable value for Shareholders.
In addition to the LTI share option plan in place for Executive Leadership Team members, Summerset also operates
an unhurdled LTI share option plan for other senior managers.
A total of 262,324 share options were granted to Executive Leadership Team members in December 2020. A total
of 1,618,274 share options have been granted to Executive Leadership Team members in the 2018, 2019 and 2020
grants. 386,528 of these share options vested as at 31 December 2020, (out of a total of 386,528 eligible to vest),
and subsequently became exercisable. The Executive Leadership Team includes the Chief Executive Officer. The
Chief Executive Officer section provides further details of share option movements under the LTI Plan for the Chief
Executive Officer.
LTI Plan prior to 2018
Prior to 2018, Executive Leadership Team members were able to purchase shares in Summerset Group Holdings
Limited under an LTI share purchase plan. The shares under this plan are held by a nominee on behalf of the Executive
Leadership Team members until such time after the vesting of shares that the nominee is directed by the Executive
Leadership Team member to transfer or sell the shares, or the shares are sold or cancelled by the nominee if vesting
criteria are not met. The shares carry the same rights as all other ordinary shares.
The Group has provided Executive Leadership Team members participating in the LTI share purchase plans with
interest-free limited recourse loans to fund the acquisition of the shares for these plans. These loans must be repaid
in full before shares are transferred to Executives from the nominee.
Grants under this plan were made annually, with performance measured over two and three-year periods. The value
of each grant was set at the date of the grant and determined as a percentage of the Executive Leadership Team
member’s fixed remuneration, ranging from 15% to 40%. Vesting of shares is subject to achievement of performance
hurdles, which were assessed over two and three-year periods.
The performance hurdles for each grant under the LTI plan made between 2013 and 2015 are based on Summerset’s
total shareholder return (TSR) relative to the performance of relevant peers and the NZX 50.
The performance hurdles for the grants made in 2016 and 2017 were based on:
97
•
•
•
•
•
50% absolute earnings (cumulative actual underlying net profit after tax for the Group against budget);
25% relative earnings (earnings per share growth of the Group compared to a defined peer group);
10% employee initiatives;
10% customer initiatives;
5% clinical strategy initiatives.
Performance hurdles were set by the Board with the objective of aligning Executive reward to the development and
achievement of strategies and business objectives to create sustainable value for Shareholders. The Board considers
that the performance hurdles reflect the drivers of sustainable value for Shareholders.
In addition to the LTI share purchase plan in place for Executive Leadership Team members, Summerset also operated
an unhurdled LTI share purchase plan for other senior managers.
A total of 1,169,450 shares are held by Summerset LTI Trustee Limited under the LTI share purchase plan on behalf
of the Executive Leadership Team as at 31 December 2020. As at 31 December 2020, 335,170 shares vested to
the Executive Leadership Team (out of a total 335,170 available to vest at this date). These shares have a first
exercise date of 25 February 2021. This is the final tranche of shares to vest under the LTI share purchase plan. The
Executive Leadership Team includes the Chief Executive Officer. The following section provides further details of
share movements under the LTI Plan for the Chief Executive Officer.
Annual Report 2020
Chief Executive Officer remuneration
Remuneration for years ended 31 December 2018 to 2020
Fixed remuneration
Pay for performance
Salary
Other
benefits1
Subtotal2
STI
FY2020
$623,242
$1,758
$625,000
$261,6253
LTI
$04
Subtotal
Total
remuneration
$261,625
$886,625
FY2019
$623,405
$1,595
$625,000
$282,7345
$250,0006
$532,734
$1,157,734
FY2018
$547,720
$2,280
$550,000
$271,4007
$220,0008
$491,400
$1,041,400
1 Other benefits include medical insurance. The Chief Executive Officer chooses not to participate in KiwiSaver
2 Fixed remuneration reflects entitlement for the year, and therefore excludes the 20% pay reduction the Chief Executive Officer took for a period of 10 weeks in response to
the COVID-19 pandemic during FY2020
3 STI for FY2019 performance period (paid FY2020)
4 No LTI value granted in FY2020
5 STI for FY2018 performance period (paid FY2019)
6 LTI value granted in FY2019 period (which was to vest based on performance in FY2020 to FY2022)
7 STI for FY2017 performance period (paid FY2018)
8 LTI value granted in FY2018 period (which was to vest based on performance in FY2019 to FY2021)
Three-year summary
98
Total
remuneration
% STI awarded
against on-
plan performance
STI
performance
period
% LTI vested
against on-
plan performance
Span of LTI
performance
periods
FY2020
$886,625
FY2019
$1,157,734
83.7%
102.8%
FY2018
$1,041,400
98.7%
1 Vesting date 31 December 2019, release date 27 February 2020
2 Vesting date 31 December 2018, release date 27 February 2019
3 Vesting date 31 December 2017, release date 26 February 2018
FY2019
FY2018
FY2017
100%1
97.9%2
83.7%3
FY2017 - FY2019
FY2016 - FY2018
FY2015 – FY2017
The STI in the table above is based on amounts paid in the financial period. The LTI vested in the table above refers to
shares eligible for vesting during the financial period.
Components of CEO remuneration
1,250,000
1,000,000
750,000
500,000
250,000
0
Fixed
On-plan
Maximum
Fixed
Annual variable
As at 31 December 2020, the Chief Executive Officer’s fixed remuneration comprised salary and taxable benefits set
at $625,000 per annum. The annual variable element pays out at 50% of fixed remuneration for on-plan performance
or 56% for maximum performance.
Description of Chief Executive Officer remuneration for performance for the year ended 31 December 2020
99
Plan
Description
Performance measures
Percentage awarded against
on-plan performance
STI
LTI
Set at 50% of fixed remuneration
for FY2020 on-plan performance,
up to a maximum of 1.12
times (equal to 56% of fixed
remuneration), where the highest
levels of both company and
individual performance measures
are achieved.
In February 2020, vesting for
108,434 shares issued under the LTI
Scheme at $4.76 on 14 December
2016 was assessed per the Plan
Rules. The assessment period was
1 January 2017 to 31 December 2019.
The vesting criteria were met and all
shares vested.
In February 2020, vesting for
142,857 shares issued under the LTI
Scheme at $5.24 on 12 December
2017 was assessed per the Plan
Rules. The assessment period was
1 January 2018 to 31 December
2019. The vesting criteria were met
and all shares vested.
80% based on the company target
areas (see table on page 123
for weightings)
20% based on individual measures
100.0%
100.0%
100.0%
50% based on absolute earnings
25% based on relative earnings
10% based on employee initiatives
10% based on customer initiatives
5% based on clinical
strategy initiatives
100.0%
50% based on absolute earnings
25% based on relative earnings
10% based on employee initiatives
10% based on customer initiatives
5% based on clinical
strategy initiatives
The above STI payment will be paid in FY2021.
Annual Report 2020
Chief Executive Officer LTI share movements for the year ended 31 December 2020
Balance at 1 January 2020
Forfeited
Dec 2015
issue
139,355
-
Dec 2016
issue
237,005
-
Loan repaid and shares transferred
to CEO
(139,355)
(128,571)
Balance at 31 December 2020
-
Vesting status
Issue price
Vested
$3.91
108,434
Vested
$4.76
Dec 2017
issue
263,736
-
-
263,736
Vested
$5.24
Total
640,096
-
(267,926)
372,170
120,879 shares were vested on 31 December 2020 (out of a potential 120,879 shares eligible to vest on that date). These
vested shares are not eligible for exercise until 25 February 2021.
Chief Executive Officer LTI share option movements for the year ended 31 December 2020
Balance at 1 January 2020
Forfeited
Granted
Exercised
100
Balance at 31 December 2020
Vesting status
Exercise price at grant
Dec 2018 grant
Dec 2019 grant
224,074
200,352
-
-
-
224,074
Partially vested
$6.34
-
-
-
200,352
Unvested
$7.62
122,222 share options were vested on 31 December 2020 (out of a potential 122,222 share options eligible to vest on
that date).
Employee remuneration
The number of employees or former employees (including employees holding office as Directors of subsidiaries),
who received remuneration and other benefits valued at or exceeding $100,000 during the financial year ended
31 December 2020 is specified in the table below.
The remuneration figures shown in the “Remuneration” column include all monetary payments actually paid during
the course of the year ended 31 December 2020. The table also includes the grant value of shares issued to individual
employees under Summerset’s LTI Plan during the same period. The table does not include amounts paid after
31 December 2020 that relate to the year ended 31 December 2020.
The method of calculating remuneration is consistent with the method applied for the previous year.
Remuneration
No. of employees
Remuneration
No. of employees
$100,000 to $109,999
$110,000 to $119,999
$120,000 to $129,999
$130,000 to $139,999
$140,000 to $149,999
$150,000 to $159,999
$160,000 to $169,999
$170,000 to $179,999
$180,000 to $189,999
$190,000 to $199,999
$200,000 to $209,999
$210,000 to $219,999
$220,000 to $229,999
$230,000 to $239,999
$240,000 to $249,999
42
35
42
33
22
15
4
8
5
10
6
2
2
1
4
$250,000 to $259,999
$260,000 to $269,999
$270,000 to $279,999
$310,000 to $319,999
$340,000 to $349,999
$350,000 to $359,999
$370,000 to $379,999
$390,000 to $399,999
$480,000 to $489,999
$500,000 to $509,999
$510,000 to $519,999
$540,000 to $549,999
$810,000 to $819,999
$910,000 to $919,999
1
2
3
2
1
1
1
1
1
1
1
1
1
1
Pay gap
The pay gap represents the number of times greater the Chief Executive Officer remuneration is to the remuneration
of an employee paid at the median of all Summerset employees. For the purposes of determining the median paid to
all Summerset employees, all permanent full-time, permanent part-time and fixed-term employees are included, with
part-time employee remuneration adjusted to a full-time equivalent amount.
At 31 December 2020, the Chief Executive Officer’s base salary of $625,000 was 11.6 times (2019: 11.8 times) that of
the median employee at $53,830 per annum. The Chief Executive Officer’s total remuneration, including STI and LTI,
of $886,625, was 16.0 times (2019: 21.5 times) the total remuneration of the median employee at $55,445.
101
Annual Report 2020
102
Disclosures
Director changes during the year ended 31 December 2020
Venasio-Lorenzo Crawley was appointed to the Board on 1 February 2020.
Directors’ interests
Directors made the following entries in the Interests Register pursuant to Section 140 of the Companies Act 1993
during the year ended 31 December 2020:
Rob Campbell: Disclosed the following positions in respect of the following entities: New Zealand Rural Land
Company Limited (Chair), Paua Wealth Management Limited (Advisory Board Member), Ara Ake Limited (Chair), UFF
Holdings Limited (Director), He Toutou Mo Te Ahika Trust (Trustee). Disclosed he ceased to hold the following position
in respect of the following entity: King Tide Asset Management Limited (Chair).
Anne Urlwin: Disclosed the following positions in respect of the following entities: Cigna Life New Zealand Limited
(Director), Tilt Renewables Insurance Limited (Director), Queenstown Airport Corporation Limited (Director). Disclosed
she ceased to hold the following positions in respect of the following entities: Onepath Life (NZ) Limited (Director),
Steel and Tube Holdings Limited (Director).
James Ogden: No new disclosures were made.
Dr Marie Bismark: Disclosed the following positions in respect of the following entities: Royal Women’s Hospital,
Melbourne (Director), North Western Mental Health (Psychiatry Registrar). Disclosed she ceased to hold the following
positions in respect of the following entities: Royal Children’s Hospital Melbourne (Psychiatry Registrar).
103
Gráinne Troute: Disclosed the following position in respect of the following entity: Tourism Industry Aotearoa (Chair).
Dr Andrew Wong: Disclosed the following positions in respect of the following entities: Auckland University of
Technology (Adjunct Professor), MyACC (Director). Disclosed he ceased to hold the following positions in respect of
the following entities: Ninety Nine Investments Limited (Director), Mercy Angiography Limited (Director).
Venasio-Lorenzo Crawley: Disclosed the following positions in respect of the following entities: Contact Energy
Limited (Chief Customer Officer and Shareholder), Crawley Rowlands Family Trust (Trustee).
Information used by Directors
There were no notices from Directors of the Company requesting to disclose or use Company information received
in their capacity as Directors that would not otherwise have been available to them.
Annual Report 2020
Directors’ security holdings
Securities in the Company in which each Director has a relevant interest as at 31 December 2020 are specified in
the table below:
Director
Rob Campbell
Anne Urlwin
James Ogden
Dr Marie Bismark
Gráinne Troute
Dr Andrew Wong
Venasio-Lorenzo Crawley
Total
Ordinary shares
SUM010
retail bonds
SUM020
retail bonds
SUM030
retail bonds
60,274
31,413
-
30,000
-
-
-
30,000
239,504
15,000*
100,000*
150,000*
23,828
25,000
10,500
-
-
-
-
-
-
-
-
-
-
-
-
-
390,519
45,000
100,000
180,000
*James Ogden has a non-beneficial interest in 15,000 SUM010 retail bonds of which he is the registered holder in his capacity as
trustee of the Wakapua Trust. Clara Ogden has a legal and beneficial interest in 100,000 SUM020 retail bonds and 150,000 SUM030
retail bonds, of which James Ogden has the power to acquire or dispose.
Securities dealings of Directors
During the year, Directors disclosed the following transactions in respect of Section 148(2) of the Companies Act 1993.
These transactions took place in accordance with the Company’s Securities Trading Policy.
104
Director
Date of transaction
Number of securities
acquired/(disposed)
Rob Campbell
23 March 2020
11 September 2020
Anne Urlwin
23 March 2020
28 May 2020
11 September 2020
570
424
250
5,000
148
21 September 2020
30,000
James Ogden
21 September 2020
150,000
10 November 2020
(150,000)
Consideration
Issue of shares under dividend reinvestment
plan at $5.36 per share
Issue of shares under dividend reinvestment
plan at $8.47 per share
Issue of shares under dividend reinvestment
plan at $5.36 per share
On-market acquisition of ordinary shares
at an average price of $6.01 per share
Issue of shares under dividend reinvestment
plan at $8.47 per share
Issue of SUM030 retail bonds during
initial offer period at $1.00 per bond
Issue of SUM030 retail bonds during
initial offer period at $1.00 per bond
On-market disposal of ordinary shares
at average price of $10.85 per share
Dr Marie Bismark
23 March 2020
11 September 2020
285
142
Issue of shares under dividend reinvestment
plan at $5.36 per share
Issue of shares under dividend reinvestment
plan at $8.47 per share
Director appointment dates
The date of each Director’s first appointment to the position of Director is provided below. Since the date of
appointment, Directors have been re-appointed at Annual Meetings when retiring by rotation as required.
Director
Rob Campbell
Anne Urlwin
James Ogden*
Dr Marie Bismark
Gráinne Troute
Dr Andrew Wong
Venasio-Lorenzo Crawley
*James Ogden was also a Director from 1 October 2007 to 26 March 2009.
Indemnity and insurance
Appointment date
2 September 2011
1 March 2014
2 September 2011
1 September 2013
1 September 2016
1 March 2017
1 February 2020
In accordance with Section 162 of the Companies Act 1993 and the constitution of the Company, the Company
has arranged insurance for, and indemnities to, Directors and Officers of the Company, including Directors of
subsidiary companies, for losses from actions undertaken in the course of their legitimate duties or costs incurred in
any proceeding.
Directors of subsidiary companies
105
The remuneration of employees acting as Directors of subsidiaries is disclosed in the relevant banding of remuneration
set out under the heading ‘Employee remuneration’ in the Remuneration section of the Report. Employees did not
receive additional remuneration or benefits for acting as Directors during the year.
Julian Cook, Scott Scoullar, Aaron Smail and Robyn Heyman were Directors of all the Company’s New Zealand
incorporated subsidiaries as at 31 December 2020, with the exception of Summerset LTI Trustee Limited (the Directors
of which are Rob Campbell and Dr Marie Bismark). Julian Cook, Scott Scoullar, Paul Morris and Robyn Heyman were
Directors of all the Company’s Australian incorporated subsidiaries as at 31 December 2020. No extra remuneration
is payable to any Director of the Company for any Directorship of a subsidiary.
Annual Report 2020
Top 20 Shareholders as at 31 December 2020
Rank
Registered Shareholder
Number of shares
% of shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
106
New Zealand Central Securities Depository Limited
131,739,136
57.58%
FNZ Custodians Limited
Forsyth Barr Custodians Limited
Custodial Services Limited
Hobson Wealth Custodian Limited
Custodial Services Limited
New Zealand Depository Nominee Limited
Custodial Services Limited
Custodial Services Limited
Motutapu Investments Limited
Summerset LTI Trustee Limited
Paul Stanley Morris & Clive Stephen Morris
Custodial Services Limited
ASB Nominees Limited
JBWere (NZ) Nominees Limited
FNZ Custodians Limited
PT Booster Investments Nominees Limited
Custodial Services Limited
Investment Custodial Services Limited
Loto Jade Pty Limited
Total
6,270,443
6,014,003
6,004,756
5,041,801
4,884,744
3,684,294
2,676,051
2,010,100
1,894,283
1,678,240
1,623,487
1,191,680
1,049,913
980,793
927,434
925,139
897,014
738,130
678,977
2.74%
2.63%
2.62%
2.20%
2.14%
1.61%
1.17%
0.88%
0.83%
0.73%
0.71%
0.52%
0.46%
0.43%
0.41%
0.40%
0.39%
0.32%
0.30%
180,910,418
79.07%
Shareholders held through the NZCSD as at 31 December 2020
New Zealand Central Securities Depository Limited (NZCSD) provides a custodian depository service that allows
electronic trading of securities to its members and does not have a beneficial interest in these shares. As at
31 December 2020, the ten largest shareholdings in the Company held through NZCSD were:
Rank
Registered Shareholder
Number of shares
% of shares
1
2
3
4
5
6
7
8
9
Citibank Nominees (NZ) Limited
Tea Custodians Limited
HSBC Nominees (New Zealand) Limited
National Nominees New Zealand Limited
Accident Compensation Corporation
JPMorgan Chase Bank
HSBC Nominees (New Zealand) Limited
New Zealand Superannuation Fund Nominees Limited
Cogent Nominees Limited
10
BNP Paribas Nominees NZ Limited (BPSS40)
20,230,475
17,914,549
16,986,945
13,219,709
10,754,926
10,385,719
9,127,270
6,630,837
6,248,634
5,418,993
8.84%
7.83%
7.42%
5.78%
4.70%
4.54%
3.99%
2.90%
2.73%
2.37%
Spread of Shareholders as at 31 December 2020
Size of shareholding
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 50,000
50,001 to 100,000
100,001 and over
Total
Shareholders
Number
Shareholders
%
3,152
4,029
1,214
829
58
60
33.74%
43.13%
13.00%
8.87%
0.62%
0.64%
Shares
Number
1,412,576
10,213,552
8,774,188
15,507,653
4,006,761
188,870,584
9,342
100.00%
228,785,314
Shares
%
0.62%
4.46%
3.84%
6.78%
1.75%
82.55%
100.00%
Substantial product holder notices received as at 31 December 2020
According to the records kept by the Company and notices given under the Financial Market Conducts Act 2013 the
following were substantial holders in the Company as at 31 December 2020. The total number of voting products on
issue at 31 December 2020 was 228,785,314 ordinary shares.
Shareholder
Jarden Securities Limited*
Harbour Asset Management Limited**
Milford Funds Limited
Fisher Funds Management Limited
Relevant interest
% held at date
of notice
18,981,594
18,981,594
12,006,954
14,184,637
8.296%
8.296%
5.267%
6.222%
Date of notice
2 October 2020
2 October 2020
6 May 2020
28 April 2020
107
* As at the date of the notice, Jarden Securities Limited held 2,691,168 shares (1.176% of issued capital). The relevant
interest disclosed includes the interest of Harbour Asset Management Limited as related body corporate.
** As at the date of the notice, Harbour Asset Management Limited held 16,290,426 shares (7.120% of issued capital).
The relevant interest disclosed includes the interest of Jarden Securities Limited as related body corporate.
Spread of bondholders as at 31 December 2020
SUM010
Size of bondholding
1 to 5,000
5,001 to 10,000
10,001 to 50,000
50,001 to 100,000
100,001 and over
Total
Bondholders
Number
Bondholders
%
9.26%
25.44%
54.63%
6.33%
4.34%
Bonds
Number
395,000
2,109,000
12,775,000
4,561,000
80,160,000
Bonds
%
0.40%
2.11%
12.77%
4.56%
80.16%
100.00%
100,000,000
100.00%
79
217
466
54
37
853
Annual Report 2020
Bondholders
Number
Bondholders
%
100.00%
125,000,000
Bonds
Number
225,000
1,220,000
11,234,000
3,937,000
108,384,000
Bonds
Number
240,000
1,680,000
11,571,000
4,452,000
132,057,000
6.68%
19.02%
60.77%
6.69%
6.84%
6.40%
23.06%
57.07%
7.07%
6.40%
Bonds
%
0.18%
0.97%
8.99%
3.15%
86.71%
100.00%
Bonds
%
0.16%
1.12%
7.71%
2.97%
88.04%
100.00%
45
128
409
45
46
673
48
173
428
53
48
750
Bondholders
Number
Bondholders
%
SUM020
Size of bondholding
1 to 5,000
5,001 to 10,000
10,001 to 50,000
50,001 to 100,000
100,001 and over
Total
SUM030
Size of bondholding
1 to 5,000
5,001 to 10,000
10,001 to 50,000
50,001 to 100,000
100,001 and over
Total
100.00%
150,000,000
108
Waivers from the NZX Listing Rules
No waivers from the application of NZX Listing Rules have been utilised by the Company during the year ended
31 December 2020.
Credit rating
The Company has no credit rating.
Auditor fees
Ernst & Young Wellington has continued to act as auditors of the company. The amount payable by Summerset and
its subsidiaries to Ernst & Young Wellington in respect of FY20 audit fees was $205,000. In addition, Ernst & Young
Wellington undertook assurance services in relation to Summerset's long term incentive plan during the year, the fees
for this engagement were $4,000. No other non-audit work was undertaken by Ernst & Young during the year.
Donations
In accordance with section 211(1)(h) of the Companies Act 1993, Summerset records that it donated $34,000 during
the year ended 31 December 2020.
Dividend reinvestment plan
The last date of receipt for a participation election from a shareholder who wishes to participate in the dividend
reinvestment plan is 10 March 2021.
This Annual Report is authorised for and on behalf of the Board by:
Rob Campbell
Director and Chair of
the Board
James Ogden
Director and Chair of the
Audit Committee
Authorised for issue on 22 February 2021
109
Annual Report 2020
Directory
110
New Zealand
Northland
Summerset Mount Denby
7 Par Lane, Tikipunga,
Whangarei 0112
Phone (09) 470 0282
Auckland
Summerset Falls
31 Mansel Drive,
Warkworth 0910
Phone (09) 425 1200
Summerset Milldale1
Argent Lane, Milldale,
Wainui 0992
Phone (0800) 786 637
Summerset at Monterey Park
1 Squadron Drive, Hobsonville,
Auckland 0618
Phone (09) 951 8920
Summerset at Heritage Park
8 Harrison Road, Ellerslie,
Auckland 1060
Phone (09) 950 7960
Summerset by the Park
7 Flat Bush School Road,
Flat Bush 2019
Phone (09) 272 3950
Summerset at Karaka
49 Pararekau Road,
Karaka 2580
Phone (09) 951 8900
Summerset Parnell1
23 Cheshire Street, Parnell,
Auckland 1052
Phone (09) 950 8212
1 Proposed villages
Summerset Half Moon Bay1
25 Thurston Place
Half Moon Bay,
Auckland 2012
Phone (09) 306 1422
Summerset St Johns
188 St Johns Road, St Johns,
Auckland 1072
Phone (09) 950 7982
Waikato – Taupo
Summerset down the Lane
206 Dixon Road,
Hamilton 3206
Phone (07) 843 0157
Summerset Rototuna
39 Kimbrae Drive,
Rototuna North 3281
Phone (07) 981 7822
Summerset by the Lake
2 Wharewaka Road, Wharewaka,
Taupo 3330
Phone (07) 376 9470
Summerset Cambridge1
80 Laurent Road,
Cambridge 3493
Phone (07) 839 9482
Bay of Plenty
Summerset by the Sea
181 Park Road,
Katikati 3129
Phone (07) 985 6890
Summerset by the Dunes
35 Manawa Road,
Papamoa Beach, Tauranga 3118
Phone (07) 542 9082
Hawke’s Bay
Summerset in the Bay
79 Merlot Drive, Greenmeadows,
Napier 4112
Phone (06) 845 2840
Summerset in the Orchard
1228 Ada Street, Parkvale,
Hastings 4122
Phone (06) 974 1310
Summerset Palms
136 Eriksen Road,
Te Awa, Napier 4110
Phone: (06) 833 5852
Summerset in the Vines
249 Te Mata Road,
Havelock North 4130
Phone (06) 877 1185
Taranaki
Summerset Mountain View
35 Fernbrook Drive, Vogeltown,
New Plymouth 4310
Phone (06) 824 8900
Summerset at Pohutukawa Place
Pohutukawa Place, Bell Block,
New Plymouth 4312
Phone (06) 824 8532
Manawatu – Wanganui
Summerset in the River City
40 Burton Avenue, Wanganui East,
Wanganui 4500
Phone (06) 343 3133
Summerset on Summerhill
180 Ruapehu Drive, Fitzherbert,
Palmerston North 4410
Phone (06) 354 4964
Summerset by the Ranges
104 Liverpool Street,
Levin 5510
Phone (06) 367 0337
1 Proposed villages
Wellington
Summerset Waikanae1
Park Avenue,
Waikanae 5036
Phone (04) 293 0002
Summerset on the Coast
104 Realm Drive,
Paraparaumu 5032
Phone (04) 298 3540
Summerset on the Landing
1-3 Bluff Road, Kenepuru,
Porirua 5022
Phone (04) 230 6722
Summerset at Aotea
15 Aotea Drive, Aotea,
Porirua 5024
Phone (04) 235 0011
Summerset at the Course
20 Racecourse Road, Trentham,
Upper Hutt 5018
Phone (04) 527 2980
Summerset Lower Hutt
Boulcott’s Farm, Military Road,
Lower Hutt 5010
Phone (04) 568 1442
Nelson – Tasman
Summerset in the Sun
16 Sargeson Street, Stoke,
Nelson 7011
Phone (03) 538 0000
Summerset Richmond Ranges
1 Hill Street North, Richmond,
Tasman 7020
Phone (03) 744 3432
Marlborough
Summerset Blenheim1
183 Old Renwick Road, Springlands,
Blenheim 7272
Phone (03) 520 6042
111
Annual Report 2020
Australia
Victoria
Summerset Cranbourne North1
1435 Thompsons Road,
Cranbourne North,
Melbourne, Australia
Phone (1800) 321 700
Summerset Torquay1
Grossmans Road and Briody Drive,
Torquay,
Victoria, Australia
Phone (1800) 321 700
Canterbury
Summerset Rangiora1
141 South Belt, Waimakariri,
Rangiora 7400
Phone (03) 364 1312
Summerset at Wigram
135 Awatea Road, Wigram,
Christchurch 8025
Phone (03) 741 0870
Summerset at Avonhead
120 Hawthornden Road, Avonhead,
Christchurch 8042
Phone (03) 357 3202
Summerset on Cavendish
147 Cavendish Road, Casebrook,
Christchurch 8051
Phone (03) 741 3340
Summerset Prebbleton1
578 Springs Road,
Prebbleton 7604
Phone (03) 353 6312
112
Otago
Summerset at Bishopscourt
36 Shetland Street, Wakari,
Dunedin 9010
Phone (03) 950 3102
1 Proposed villages
Company
information
Statutory Supervisor
Public Trust
Bond Supervisor
The New Zealand Guardian Trust
Company Limited
Share Registrar
Link Market Services,
PO Box 91976, Auckland 1142,
New Zealand
Phone: +64 9 375 5998
Email: enquiries@linkmarketservices.co.nz
Directors
Rob Campbell
Dr Marie Bismark
Venasio-Lorenzo Crawley
James Ogden
Gráinne Troute
Anne Urlwin
Dr Andrew Wong
Company Secretary
Robyn Heyman
Registered offices
New Zealand
Level 27, Majestic Centre,
100 Willis Street, Wellington 6011,
New Zealand
PO Box 5187,
Wellington 6140
Phone: +64 4 894 7320
Email: reception@summerset.co.nz
www.summerset.co.nz
Australia
Deutsche Bank Place,
Level 4, 126 Phillip Street,
Sydney, NSW, 2000
Australia
Auditor
Ernst & Young
Solicitor
Russell McVeagh
Bankers
ANZ Bank New Zealand Limited
Australia and New Zealand Banking Group Limited
Bank of New Zealand
National Australia Bank
Commonwealth Bank of Australia
Westpac New Zealand Limited
Westpac Banking Corporation
Industrial and Commercial Bank of China (New
Zealand) Limited
113
summerset.co.nzsummerset.com.au