New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

Summerset Group Holdings / Equity Bottom-Up

<h2>Summerset Group (SUM) FY20 Result – Initial Impressions</h2>
Summerset Group (SUM) have reported an FY20 result in-line with guidance (NZ$96m – NZ$98m) with underlying profit of NZ$98.3m versus our forecast of NZ$97.1m. Annuity EBITDA came in at NZ$71.7m +5% vs FY19 and in line with our expectations of NZ$71.9m. The key positive for us is SUM’s build rate commentary, with the largest land bank in the sector and relatively high cash conversion of development capex SUM have provided FY21 build rate guidance of 500 to 550 units (versus our current forecast of 425 units). SUM declared a full year dividend NZ 13 cps, below our (admittedly bullish) expectations of 14.2 cps.
Key details
<ul>
<li>The dividend; a small disappointment: SUM have declared a full year dividend of NZ 13 cps (Forsyth Barr; 14.2cps) a decline of 1.1 cps, a decision that has disrupted its uninterrupted dividend growth pathway. SUM have stated they will stick to the dividend pay-out policy of 30% to 50% but will be at the lower end of pay out reflecting further business growth opportunities</li>
<li>Net debt stable: SUM reported net debt of NZ$657m, a small increase from the NZ$622m reported at 1H20. SUM’s gearing ratio (net debt/ net debt plus book equity) decreased to 32.6% from 35.8% in 1H20.</li>
<li>Build rate strong: With the largest land bank in the sector at its disposal, SUM have plenty of firepower to steadily increase its build rate over the coming years. SUM completed 356 retirement village units in FY20, slightly ahead of the 300 to 350 units guidance and have provided very strong guidance of 500 to 550 units (Forsyth Barr; 425 units)</li>
<li>Development margins guidance for FY21 at lower end of 20-25% (Forbar at 22%)</li>
</ul>
Investor briefing – 11am NZT
Details:&nbsp;NZ; 09 280 5290 or 0800 444 845, Australia; 1 800 175 864. Passcode: 2776878
FY20 Result Summary
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.1&amp;permmsgid=msg-f:1692427919455043527&amp;th=177cb639d3123fc7&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ9A8u5_e7LvLwl43VMKzlSHPPFjdPpwx6c5YhKK5R-nblr4aPp6T6KqiH9nroXuMNmn_UEJNCLYdcJOGNBoXcMNZNuLXD_JG-VVUj8ibOtM_v34en4IQvIG9mI&amp;disp=emb" width="618" height="342" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Forsyth Barr analysis, Company Reports
Aaron Ibbotson &nbsp;CFA Director / Senior Analyst, Equities
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.3&amp;permmsgid=msg-f:1692427919455043527&amp;th=177cb639d3123fc7&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ94Q7yJa9pXcA3cbQXXSil5Sg_KYNJLb59S1khacYy_NE4sulYja0ezMxMRGmB4skJyeqCYZ3zTh0x_UgB2AebKgt5OMjiTg6ct8bLYtbvRnjk9IVlAOgcr-nQ&amp;disp=emb" class="editor-image img-responsive"></figure>
 M: +64 21 470 377 |P: +64 9 368 0024 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Summerset Group (SUM) FY20 Result – Initial Impressions
Summerset Group (SUM) have reported an FY20 result in-line with guidance (NZ$96m – NZ$98m) with underlying profit of NZ$98.3m versus our forecast of NZ$97.1m. Annuity EBITDA came in at NZ$71.7m +5% vs FY19 and in line with our expectations of NZ$71.9m. The key positive for us is SUM’s build rate commentary, with the largest land bank in the sector and relatively high cash conversion of development capex SUM have provided FY21 build rate guidance of 500 to 550 units (versus our current forecast of 425 units). SUM declared a full year dividend NZ 13 cps, below our (admittedly bullish) expectations of 14.2 cps.
Key details

The dividend; a small disappointment: SUM have declared a full year dividend of NZ 13 cps (Forsyth Barr; 14.2cps) a decline of 1.1 cps, a decision that has disrupted its uninterrupted dividend growth pathway. SUM have stated they will stick to the dividend pay-out policy of 30% to 50% but will be at the lower end of pay out reflecting further business growth opportunities
Net debt stable: SUM reported net debt of NZ$657m, a small increase from the NZ$622m reported at 1H20. SUM’s gearing ratio (net debt/ net debt plus book equity) decreased to 32.6% from 35.8% in 1H20.
Build rate strong: With the largest land bank in the sector at its disposal, SUM have plenty of firepower to steadily increase its build rate over the coming years. SUM completed 356 retirement village units in FY20, slightly ahead of the 300 to 350 units guidance and have provided very strong guidance of 500 to 550 units (Forsyth Barr; 425 units)
Development margins guidance for FY21 at lower end of 20-25% (Forbar at 22%)

Investor briefing – 11am NZT
Details:&nbsp;NZ; 09 280 5290 or 0800 444 845, Australia; 1 800 175 864. Passcode: 2776878
FY20 Result Summary

Source: Forsyth Barr analysis, Company Reports
Aaron Ibbotson &nbsp;CFA Director / Senior Analyst, Equities

 M: +64 21 470 377 |P: +64 9 368 0024 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Summerset Group (SUM): FY20 Result – Initial Impressions