Summerset Group Holdings Limited (SUM) Earnings Call Transcript & Summary

Ladies and gentlemen, my name is Mark Verbiest, and I'm the Chair of Summerset Group Holdings. Today, we're very pleased to welcome you both in person and as online participants through our virtual meeting platform provided by our share registrar MUFG corporate markets. Welcome to Summerset's 2025 General Meeting. To maximize attendance, we are again providing the opportunity to attend online. Online participants can vote and ask questions online. [Operator Instructions] Also in attendance my fellow directors, Fiona Oliver, Dr. Marie Bismark, Venasio Lorenzo Crawley, Grainne Troute, Dr. Andrew Wong, and Stephen Bull. We also have with us our future Director, Andrea Scown; and our CEO, Scott Scoullar. For those here in person, bathrooms are clearly marked and can be found across the lobby, head down the corridors to the corridor under the escalators and then turn right through the glass doors. In case of emergency, note this is a designated -- this has been designated as an earthquake safe building. Remaining in the building during a shake and adopting the drop, cover and hold protocol is actually the recommendation. In the event of a fire, an alarm will sound, that's reassuring. The nearest fire evacuation route is through -- through to the -- next to the toilets. Follow the instructions of the generator staff and fire wardens in the event of an evacuation. The meeting point is outside the downtown carpark, you turn right once you exit the PwC tower. Now for the formalities of the meeting. The Company Secretary has confirmed to me that the Notice of Meeting has been duly given to shareholders and all other persons entitled to receive it and that the meeting has been properly convened. We will turn to the resolutions later in the meeting. I confirm that the requirement for a quorum for the meeting has been met, and therefore, declare the meeting open. The agenda for today will be, I will give a brief address. You will then hear from Scott, we will receive an update from our Board committee chairs. There will be general business and shareholder discussion. And then we'll have the formal business of the meeting, which includes the formal resolutions being put to the meeting. Voting on all resolutions will be conducted by way of poll. Shareholders in attendance online will be able to cast their vote using the electronic voting card received when online registration is validated. Please refer to the virtual meeting guide, or if you need to, phone the help line on 0800 200 220 from New Zealand or 1-800-990-363 if calling from Australia. Questions from shareholders online will be taken through the virtual meeting website. To ask a question, please tick Ask a Question. It's a box either at the top or bottom of the web page at any time during the meeting. Type your question into the form and click submit. Your question will be immediately submitted. I encourage shareholders attending online who have questions to send their questions through as soon as you feel able. Proxies have been appointed for the purposes of this meeting in respect of roughly 137 million shares, representing 57% of the issued capital. As indicated on the proxy form, I intend to vote all undirected proxies I have received as Chair in favor of the resolutions before the meeting. I'm holding up to 94,376 undirected proxies for each resolution. The results of the proxies will be displayed following the voting. The financial statements for the 12-month period to 31 December 2024, along with the auditor's report are set out in our annual report, which has been previously distributed to shareholders. Sam Nicolle from EY, who were the company's external auditor for the 2024 financial year is present at the meeting. Richard Day from PwC, who has been appointed as the company's external auditor for the 2025 financial year beginning on 1 January this year, is also present. We will address any questions on the financial statements in the general business section of the meeting. It is my pleasure to address you today at my fourth Annual General Meeting as Summerset's Board Chair. Over the past year, we faced a very challenging macroeconomic environment and uncertainty continues to be the theme, unfortunately. Despite these conditions, Summerset has delivered value for residents and for investors. We grew our portfolio and therefore our net tangible assets by 13% represented roughly at $12.53 per share, and we provided a modest dividend return of $0.245 a share to shareholders for the 2024 financial year, which was in line with the previous financial year. I'd like to share with you some of the highlights of our financial performance and initiatives, which are, of course, are fully detailed in our annual report. We saw our highest year of occupancy -- occupation rights sales, delivered our forecast new homes and continue to strengthen our development pipeline. We also continued to experience high demand and inquiry for our offering. This has been assisted by a growing population aged over 75 with the desire for improved health, lifestyle and a general sense of community. Despite the economic conditions, our addressable customer market continues to grow and will do so for some decades. Summerset is now home to some 8,700 residents, and we employ over 3,000 people across New Zealand and Australia in our villages, construction sites and offices. In New Zealand, our construction teams worked across 18 sites, delivered 676 new homes, which was at the lower end of earlier guidance we had provided, along with 21 aged care beds. It's roughly a 2% growth in construction numbers year-on-year. Our total unit portfolio reached 7,970 units. During 2024, we were very deliberate in how we managed our portfolio, demonstrating the flexibility we can bring to our build program, being able to slow work down where demand is lighter and concentrate efforts elsewhere given the vast bulk of our development sites deemed to be broad acre. We're committed to expanding our footprint and enhancing our offerings to meet the growing demand for our services. We have a well-diversified land bank with proposed village sites from Auckland to Dunedin in New Zealand, and 4 sites in Victoria, Australia, giving us flexibility in the rate and location of development. Across both New Zealand and Australia, we have the potential to build a further 7,543 units in care beds, which is roughly double our current size. In 2024, our build rate meant that we're also 1 of the top residential builders in the country, I think, in fact, second, as I understand it. We continue to progress in Australia and are carefully building momentum with our portfolio there. Our development and expansion is continuing as we look to prudently expand our footprint and consent our land bank to meet the forecast demand in the market. We welcomed our first Australian residents in March 2024 at Cranbourne North. We expect to finish our main building there late this year and welcome our first care residents in 2026. Once completed, we expect sales in this village to accelerate. We've also begun construction on 2 other villages at Chirnside Park and Torquay in Victoria. We're proud of our industry-leading approach to sustainability and have made significant improvements in how we measure, reduce and report on our impacts. This year, we released our second sustainability review and our climate-related disclosure document alongside our annual report. This document outlines our successes over 2024 as well as the risks and opportunities that climate change bring for us as a business. In 2024, our main major sustainability achievements and milestones include installing more than 1,000 solar panels in our village main buildings, reducing the upfront embodied carbon in our townhouse homes by 24%. Moving to a reduced embodied carbon contract product, planting 80,000 native plants and meeting all 3 of our sustainability-linked lending performance targets as well as diverting more than 4,400 tonnes of construction waste. Our sustainability award -- sorry, work has been recognized with several awards including being named a sustainability leader in the property and construction category by the Australian Financial Review, and receiving an Ethical and Sustainable Business Award from Money Matters and Catalyst Leadership. And indeed, in the last week, the [ Infants ] Organization nominated us for their sustainability award. Both the New Zealand and Australian governments have been considering changes to legislation relevant to our operations. From what we understand of the proposed legislative changes, our practices already largely aligned with the proposed changes, and we don't anticipate material changes to impact our operations in either country. In New Zealand, the government has indicated they would like to consider greater transparency for a retirement villages code of practice. Increased protection for residents, such as restrictions on passing on insurance excess and that they will take advice on 3 key areas, passing on the cost of maintaining operator-owned chattels, the management of complaints and disputes, and incentivizing earlier capital repayments when a resident leaves a village. Summerset supports practical measures that require operators to lift their standards. We've worked hard on plain English documentation. We don't charge for maintenance or repairs on chattels in our villages, and we will pay interest to a resident or there a state if their home hasn't sold within 6 months from leaving a village. We also support a fair and transparent disputes resolution option if we can't agree with a resident or their family on a particular issue. In Australia, a new Aged Care Act has been passed by the Australian Parliament and will commence in July of this year. The reforms in Australia will increase accountability for operators through strengthened standards and include the introduction of user pays provisions for funding models. It is our view that we will be well placed to benefit from these reforms when our care operations commence in Victoria in 2026. In conclusion, I'd like to thank my fellow directors for their work and support over the last year and to thank the Summerset management team for all they do in supporting our purpose and our vision. Thanks also to you, our shareholders, for your support and trust in us as we work to continue to grow and build excellent retirement villages. I'll now ask Scott to briefly address you.

Good day, everyone. First of all, thanks, Mark, for handover and good afternoon, everyone. Tena koutou katoa. Look, I just started -- I thought I'd start with just a little bit of a synopsis around trading conditions for the last 12 months. So yes, look, I'd probably categorically going on. Record is saying it was probably the most challenging conditions I've seen as [ Mike work ] in Korea. For us as a company ourselves, it was particularly challenging just to get people to commit to taking a sales contract to come into a new home. And why was that the case? It was pretty much because there was sort of a few objections sitting there. The first one was people didn't necessarily believe that they could sell their house at all in the market last year. Secondly, people believe that if they didn't manage to sell their house, that it probably wouldn't be for a price that would enable them to come into a village or leave them enough money for retirement. And thirdly, they -- with those sort of 2 factors at play had a concern around spending their own money personally about marketing their properties. So we sort of got to the end of the year -- last year and delivered a sales result where the sales were up 12%. So that's combined with underlying profit being up 8%. Sales was really the driver upon loan profit performance for the business, but being up 8% and delivering a $6 million result. I think as a leadership team, we felt that was a pretty credible result in the conditions. But at the same time, the balance sheet side of the company and the financial strength of the company, we've got like $780 million worth of unutilized funding capacity at the end of last year. So that placed us pretty well from a balance sheet perspective and operating well within our covenants as well. So -- at the same time, for us, as a business, we were still whilst managing costs really tightly through that period, able to invest in some of the key things that are really important to us. So the likes of care facilities, looking at transforming some of our older care facilities. We're currently sort of rebuilding 3 of those at the same time, rolling out [ hosts ] and all of our key facilities, to all our key drastically sort of improves the resident experience and also protective of our staff. And at the same time, on the independent living side of things, we invested quite heavily into Lumen, which is technology platform that enables us to sort of communicate with our residents living independently. So we sort of got through that year and felt like the financial results were saccretable, but at the same time, I think sitting back and sort of looking at the customer satisfaction ratings of 97% for independent living and for care and at the same time, for engagement. Staff engagement maintained status quo 8.1 out of 10 and as context, that is top quartile for health care providers around the world. So I think there was making sure we deliver a credible funds performance for investors, but at the same time, making sure that we're investing appropriately to keep our residents and join their lives and our staff happy at work as well. So there was a bit of 2025 and then sort of 2024, I should say, and then looking sort of forward a bit of 2025, in terms of what are we sort of seeing right here at the moment. As Mark said, we're still pretty cautious around there's a challenging environment. There's still a lot of things changing. A lot of stuff going on, but you would have probably recognized in the first quarter. We just announced a couple of weeks ago, our Q1 sales results. And so that essentially showed that the settlements for the company are up 14% on this time 12 months ago, and likewise, like sales contracts. So those are when people have come in and gone and taken a contract with us, but haven't necessarily sold the half yet. That's up 32%. Both of those are pleasing for us and a good start to the year. At the same time, things like cancellation rates have actually improved a little bit so far. So they're probably down about 4%, 5% at the moment. Average days to sell is pretty stable now. So you sort of combine that together and it does feel like there's an improving sort of set of trading conditions at the moment, but early in the year. So still watching that very, very closely. At the same time, just a couple of comments around sort of other things that are going on in the business. So St Johns and Boulcott are 2 villages, which are big metro villages for us, that St Johns' village is selling at a really consistent rate at the moment of about 2 a week and the same thing for our Boulcott village. So that's really pleasing for us. It's probably a little bit better than what our expectations are. But also, we just opened our Rangiora village for sales about 3 or 4 weeks ago, and that has -- we're selling 21 homes this year, that's really presold half of those homes within the first few weeks. So I'm sort of pretty encouraging aspects to that. And we announced sort of the full year results that we were targeting $650 to $730 build rates. So that's still something that we're focused on and on track for. I'll just talk a little bit about growth now. So Australia, how we're sort of going. So as Mark mentioned, we opened the Craigieburn village at the start of last year. We're going to open our care facilities at the end of this year in our big [ opportunity ]. That will be the first time when we get to the end of the year when we open those that people can actually see this is what the Summerset's experience is actually like living in Australia. So at the moment people don't really know Summerset as a brand. They don't really know sort of how integrated aged care and retirement living works. So we're still looking forward to that happen, and that's on track at the moment. In terms of sort of how we're going selling down there, if you sort of looked at how much -- how many homes were sort of built and delivered, we've essentially either sold or sit what on people have moved into about half of those homes. So we're comfortable with that, but there's sort of opportunities to go faster and I think inquiry on that site is very, very strong, like it's actually a bit better than what we see in our New Zealand villages. Melbourne generally, at the moment, the trading conditions in Melbourne are a bit like New Zealand probably 6, 12 months ago, they're quite tough. And Cranbourne has challenged a little bit socioeconomic for the Cranbourne, and people sort of often come in and struggle to be able afford to come in at the moment with the property market over there at the moment. So there's a few challenges over there, but inquiries strong that we think at the time we get to the end of the year, and we open those care facilities in that village amenity. We think that will continue to improve and people sort of understand a bit better about the Summerset brand. In terms of other things going on in Australia. So we've done earthworks for the vast majority of our churn side site, and we're just about to start platforms up for our first pillars and Chirnside. And then for Torquay, we're just doing some enabling works on Torquay and our Oakleigh South site is also consented as well. So if you can see a trajectory there where we've sort of started our second site, we will advance now to second site for delivering those homes at Chirnside at the end of the year. And we're just sort of thinking about next sort of steps for Torquay. So that's Australia. In terms of New Zealand, just touched on the land purchase we made. So we made sort of 5 purchases of land in New Zealand first 1 in Kapiti Coast and Paraparaumu, that should be a pretty good village. We're pretty excited about the village down the road at Waikanae that we're selling. That is pretty much sold out, even though it's only halfway through being developed and, I mean, some amount of demand in that Kapiti Coast region. So I think that's sort to go very, very well. In terms of Belmont, you were fortunate enough to buy a site in Auckland last year, but it's not very often you get to buy a site that's actually a broad acre site. So really, really -- especially encouraged that, that will be the only site of its sort of nature in that region. So again, pretty excited about that. And then the third site we bought, which was in Hawke's Bay, traditionally, we've seen sites and villages go through all there. And when you look at the penetration rates and the demographics in Hawke's Bay, that should perform pretty well as a village. And then we've also second -- separate to that, we've bought 2 extensions sites which has some additional land in our Boulcott's village in Wellington and some additional land in our Blenheim village as well. So those will be highly accretive from a financial perspective, mainly because we're building the village already, we're building the village immunity. And so you're just building some extra homes for people to live in. So it's quite financially beneficial for us. And then just consenting -- a couple of sort of good outcomes last year, the first 1 being our retro site, which has been a bit painful to get considered, finally got consented. Our Masterton sites consented as well, and we're pretty well progressed on our Mosgiel site, which is just going through a fast track process at the moment. So consenting wise, making good progress. In terms of other sort of business updates, I've sort of touched on St John's a little bit, but opened in October last year. Got about now 70 people living in St John's for us. As I said, we're filling at about a rate of 2 a week. Our exterior amenity, that's about to be delivered in the next 4 weeks, so that will give people a lot of sort of enjoyment outdoors. But the 1 great thing about the village when we delivered on day 1 was essentially it comes fully built with key facility available with all the village immunity available from day 1. So that's a great part of that village. So -- and that village is going as well as we can expect at the moment. In terms of care center refurbs, we have been going through, and we've done 3 that we've sort of got underway, 1 in Levin, which is being completely the old care facility completely knocked down and demolished and then we just brought in new ones. That was due to open at the end of this year. We've got 1 in strength in which we reopened about 3 weeks ago, and that is going very well. So that's about 70% full already, which is way above our expectations. And then I'm just due to open Havelock North one next week as well. So with those will be quite a comprehensive change for our residents experience living in those first generations of villages for [ Trentham ]. Previously, there was no on-suites for people living in there. So all the rooms going forward will be fully on-suited and quite nice here. In terms of exec team members, so just to see 2 changes in exec team. The first 1 being the CFO. So Margaret is sitting just off the front row here. She was at Summerset went away. She did some time with [indiscernible] realized how much she missed us. So she's come back to join us. But she brings like a worth of knowledge around capital management, balance sheet management. So that's really us full scale to have for us. And in terms of -- we also recruited a new role for, which really sort of brings technology onto the exec team. And so we hired a CDO, Rob Gillespie, who -- she's got 30-year sector experience, and she will be just great for us in 2 particular ways, I think. One is how we get operational efficiency using technology in our organization, how we continue to sort of improve the resident experience via the use of technology as well. So those are 2 changes to the exec team. And then just -- I was just going to quickly touch on design. So a couple of things we're doing in the design space. We're doing a whole lot of work around really next generations of villages, whether it be, and you can see that bottom right photo there. That's the next of our prudential main building. So that's a new design really and it's designed to sort of give a bit more of a community feel rather than being 3 storeys high, it sort of sets amongst those people's homes they're living and it feels a bit more sort of homely. We're doing a bit of work on the next generation of sort of bit true main buildings. We're doing quite a lot of work on interiors of villas and just refreshing them, looking how they function a bit better and the same thing of changing the feel on the exteriors of our villas to make them look a little bit more contemporary. So quite a lot sort of innovation going on product design on our sites. And then my last slide I'll talk about was just as aged care. So what I'd say sort of with aged care is and it is pretty challenging, I think, as a kiwi -- I think if you sort of roll forward to 2030, where you've got about another 130,000 people in New Zealand who above 85 years old. And essentially, what that means for us is a country is we need about another 13,000 beds in New Zealand to cope with that demand. And if you sort of step back, the retirement village operators as a community, all of us together, we're going to build about half of those at best. So there's quite a gap there. And probably 6,000, 7,000 bed gap at the very minimal. So it's going to be pretty more and more challenging going forward to get an aged care bed at a time of need in New Zealand. And if you sort of correlate being 5,000, 6,000, 7,000 beds short, there's only 5,000 beds, I think, in the public hospital system in its entirety. So that's a bit of a challenge. And then you sort of start looking at sort of the challenge we face as an operator, and it's quite transparent in the accounts we made just less than $3 billion in total out of care on $450 million worth of assets. So the return on aged care at the moment is sort of less than 1%. And if you sort of go back and assess even in the last 2 years alone, the New Zealand Aged Care Association, who are an independent body, assessed that it's probably been underfunded by somewhere around about 20% alone in the last 2 years from Health in New Zealand. So look, there's a lot of factors sort of play there. Like it's -- there's increasing demand. There's an underfunding. And so at the moment, what that really means for us is a couple of things we're sort of looking at. The first 1 is the size of our care facilities, reducing them in size from sort of essentially 50 beds over new facility we build to around 30 beds and essentially just catering for those people who are living and enjoying life in a village. So rather than people coming in from the public system directly. And then the second thing that we're looking at doing is just whether we stop public emissions and just focus our care on to the residents who live in their life in our villages. So that's something that we just haven't ever think about at the moment, but aged care funding, as I said, both the funding aspects and capacity aspects in New Zealand are pretty challenged at the moment. So yes, look, that's my few slides, and thank you for that.

Thank you, Scott. I'll ask each of our committees chairs to briefly talk about the work that they commit board committees have undertaken during the year, and I'll start with Fiona Oliver, who chairs our Audit and Risk Committee.

Tena koutou katoa. Good afternoon, everyone. My name is Fiona Oliver, and I have been Chair of Summerset's Audit and Risk Committee since I joined the Board in March 2023. And my fellow Board members who are on that committee. Our Chair, Mark Verbiest, Grainne Troute, Venasio-Lorenzo Crawley and Stephen Bull. A reminder of our purpose at this committee is that we are there to provide additional scrutiny of Summerset's compliance obligations in relation external financial reporting and climate-related disclosure. We're also there to oversee the integrity of the systems and processes that underlie this reporting, i.e., make sure it's accurate and the effectiveness of Summerset's risk management framework, including identifying and managing our strategic risks and overseeing the program of internal audit that goes alongside managing those risks. We believe that it's really important to the committee that we have the right people there. And so we had quite a bit growth, and I'd like to remind my fellow directors that we are the most popular committee amongst the 4 of us. And notwithstanding our title role, standing invitations given to Scott, our Chief Executive Officer; Margaret, our new Chief Financial Officer; Sarah, our Deputy Chief Financial Officer; Derek, our GM for Finance; as well as to Summerset's internal auditor and external auditor. Often, we also have an attendance Jack and Debbie, who are our Heads of Risk and Sustainability. We also, from time to time, hear from other members of the Summerset team who have other specialist operational skills and to make sure that we hear directly from these people who are responsible for those areas of the business. And the committee, just the Board itself, plus myself often meet alone without the management team with the external auditor. So we can discuss both the performance of the management team as well as the external auditors performance. In FY '24, so our financial year ended in December, we had another busy one again, complying with climate-related disclosures with a significant job. But notwithstanding the long-term objectives of the regime as topical as it is, we believe, good ones. And so we approach that reporting with the level of commitment and enthusiasm. We think it deserves. I've already mentioned we've got senior capability in the series to help us manage the work and reporting requirements for climate-related disclosures. So -- and as Mark has said, actually, you've seen product of that work, which is excellent, and we have been given feedback. It's market-leading in terms of peers and the broader NZX listed companies. I think it's important also to comment here, though, that our sustainability strategies are really well embedded in our business. We continue to improve on this. There's always work we can do. So we're constantly finding more innovative ways to manage what we call ESG risk. And we like to hear about those things, both at the Board level and audit committee level. With respect to risk management, more generally, we are overseeing that and started a significant refresh of the strategic risks this year. And we're also busy with internal audit reviews. And this year, in terms of the internal audit reviews, we've looked at legislative compliance and Victoria and Australia more generally, financial systems management and automation, employee roster systems management, privacy and cybersecurity. We're looking forward in 2025, hopefully, to cover our Australian care center operations, health and safety, artificial intelligence and IT governance and procurement. So looking forward to another busy year. Thanks, team. And I'll take this opportunity to thank KPMG, who are our internal auditor with the work they've done for us during the financial year 2024. The other work that we've done is included overseeing the financial systems and processes and compliance with half year and full year financial reporting requirements and our sustainability lending loans and the sign-offs we need from the statutory trustee and supervisor. We continue to believe in full transparency for the market. So we spend a lot of time in our committee meetings and board meetings on disclosure and how much if we can improve that disclosure. Again, we've been given feedback. We are excellent in terms of our disclosure. As I say, we'll keep working on that to make sure everybody can understand enough about the business to be able to measure our performance. We like to regularly and openly engage with the market to provide that clarification. To this end, I'd like to thank EY, Sam Nicolle and his team should be, but others included for their invaluable support. They've retired, as Mark has mentioned, from their role as auditor. They were auditor for a very long time of Summerset prior, in fact, to Summerset listing on the NZX. They, therefore, have a very defunstanding of the business and have always done a big job at understanding our competitors. And in fact, the sector and how they report and disclose and we have benefited from that. Thank you very much, Sam, for your commitment to our need to be really transparent and to have excellent disclosures. And welcome to PwC, our new auditor with Rich Day heading up that team. To the Summerset team, thank you for your hard work and particularly your commitment to placing investors interests at the forefront of what they do. Thank you to my committee colleagues for their valuable contributions. And I'm very much looking forward to the year we're in already, of course, and working with the Summerset team and being part of what Summerset can achieve. Thank you.

Thank you, Fiona. We'll now move to Stephen Bull, who Chairs the Construction and Development Committee.

Good afternoon, everyone. My name is Stephen Bull, as you just heard. I'm the Australian Director on the Board based in Sydney. So it's a pleasure to be here. I Chair the desired Development and Construction Committee of the Board, and I'm joined by Mark, Fiona, Vena, and Andrew on the Development and Construction Committee. Our role is to provide oversight of the extensive activity in this space that Summerset engages in. As you know, some asset has a long history of successfully delivering new villages across New Zealand and now obviously forging into Australia. And as you also know, as Scott and Mark alluded to, we have a large pipeline of projects to develop into the future. I think it's important to remind ourselves that there's no question that development and construction as a sector and as an industry has faced enormous headwinds over the last couple of years. And the committee has been really focused on working with the management team to ensure we manage those challenges successfully. The 5 key areas I wanted to touch on today in relation to what the committee has been focused on for the last 12 months in particular. The first of those is prudential capital management and project performance. So really being conscious and focused on how we spend our shareholders' money. The cost of capital has increased significantly over recent years as has the cost of construction, and that makes the economics of any development activity, not just for Summerset but for any developer more challenging. Accordingly, we've increased the granularity of our reporting. We've added multiple scenario testing to all the decisions we make. And we've put these processes in place a number of years ago. And I think it's been a reflection of the organization as to how they've done that and how they think about the decisions they make in terms of allocating capital to those projects. That's something we'll continue to do because it's a very important part of the work we do. The second area is governance oversight of our safety systems and our resourcing as they pertain to Construction and Development. The first thing I'd like to say is that safety is not just about process and policies. It's very much about culture. It's about how the team engages on safety issues, when and how they think about them. And the first comment I would make from my involvement with a range of businesses is that how comfortably -- management team engages with the Board on safety issues, be they challenges, albeit their positive outcomes. There is no attempt to discord around the issue, it is first on the mine. I know when we visit sites, the first thing we talk about is safety on site. So that's a testament. Last year was the second year of our current safety strategy and saw the implementation of our new reporting and assurance system, which is a critical part of how we get information and how we help the team manage safety across the portfolio. The third point, and Scott touched on this a bit, is innovation in design. There's no question our customers preferences are changing and whether that be about the homes they live in, about the care centers that they live in, whether that be about the community facilities and the main buildings we provide, it's changing, and that's just about customer preference. There are also changes in construction techniques, the types of products we use to build with and the team do an excellent job in researching those changes and staying on top of what needs to happen. This is a never-ending task for the Group. Those things will continue to change and evolve over time. I think what's really been exciting to see is the thinking the team puts into not just the design, but then how we translate that into a dual form. The techniques that are used to build it, the types of products we use to build our homes. So we've been working heavily with the management team on that. Scott and Mark have outlined our many achievements in ESG and that's the fourth focus area for the D&C Committee this year. Construction activity is a massive part of our impact, especially environmentally. The impact we have is only going to grow because we're doing more and more construction and delivering more and more homes for people. So it's important that while we continue to grow that we look at ways to manage that. And the committee has overseen the thinking of the team on how best we can reduce things like waste from construction like embedded carbon, how we can improve energy efficiency, and then Scott and Mark have already talked to that. Again, this is an area that will continue and change and evolve. The last area I want to touch on was our land acquisition program. Clearly, for a business that's growing and has targets like Summerset, we need to keep buying land to fulfill the bucket as we keep developing more and more villages. This is a balancing act, right, because we love to have lots of land, but that's also a very expensive. So balancing between securing our long-term growth plans and managing our capital prudently is a big part of what we focus on. I think the team have done an excellent job this year thinking about how we acquire land. I've said no to many more sites than they said yes to. So they're very conscious of the challenges we all face. But they're also looking at different ways to secure land, whether that be on deferred payment terms, looking at different structures that make more sense for us. So I think it's a hats off to the team for doing that. I think the last thing I would like to add is just that I work with a lot of businesses and the transparency and the openness between the management team and the Board at Summerset is as good as I've seen. And I think that's played out in the way the whole organization operates. So from my point of view and the committee's point of view, a massive thank you to the management team and also a personal thank you from me to my Board colleagues. Thank you.

Thank you, Stephen. We'll now move to a report on the Clinical Governance Committee, Dr. Marie Bismark.

Thank you, Mark, and thank you for everyone who's taken your time to come along today. It's really wonderful to have you all here and to see some familiar faces in the audience. So we've had a really good year in the Clinical Quality Committee. I'd like to say thank you to my committee members, Vena, Andrew, and Grainne and to the other Board members who often come along and attend our committee meetings as well. We met 3 times this year and also went out and did village visits where we had a chance to speak with some of our residents and staff members face to face. I want to give you a sense of the difference that our committee makes in residents lives. I just speak to you about 2 prospective couples. So hypothetical couples who might be interested in moving into our village. So 1 couple, they are called Margaret and Lowe, they're in their '80s and 1 couple are called Hank and Naine, in their '90s. So for me, clinical quality is really about removing barriers and enabling joy. If I think about the 2 things that our committee is really focused on, it's removing barriers and enabling joy. So if we think about Margaret, she's still very fit and active, but she wants to know that she is safe that if anything ever goes wrong, that she'll be looked after. So we've been investing a lot in technology. We have a screen with an app called Lumen. That's really easy for our residents to use. They can book activities, they can book appointments. And if they need help, they can activate an emergency call through the Lumen app. So for Margaret, that helps to keep her active and also helps to keep her safe. Naine, in her '90s, she more frail and she's planning some really major surgery that's going to have a significant rehabilitation afterwards. Naine is really worried that she may not be able to mobilize from her cheer to who bid by herself after the surgery. And it's a lot of work for our nursing staff to lift and move people. So we've been investing in sealing hoists, which are a great way for our residents to be moved safely from a chair to their bed, and it also makes the job of our nurses and carers easier that they can use these ceiling hoists to transport people and saving their backs and allowing them to put their energy into the heart and soul of care. Lowe is doing really well, but he really doesn't like having to take a handful of paws, morning, lunchtime and night. So we've invested in a medicines optimization program where we have a pharmacist who can take a look at all of the medicines that our residents are taking and figure out which ones are actually helping them and which ones they don't really need anymore. So for example, if Lowe is still on a blood pression medicine, it's making them feel dizzy every time he stands up, may not really be adding to his quality of life and so we could potentially reduce that. That program has been really successful at reducing the number of our aged care residents who are on more than 5 medications and also improving the quality of life. Hank has had a couple of stumbles and falls, and he wants to know what would happen if he fell in the middle of the night because he knows sometimes they might just be one relatively an experienced news available overnight. So we've invested in a national nursing clinical support program, which means that if Hank did fall overnight at any stage, the news in that village 24 hours a day has access to one of our most senior and 1 of our most experienced nurses who's going to be right at the end of the phone, be really responsive within our clinical quality committee to complaints and concerns that have been raised by previous residents and those issues of pain, not being properly assist overnight is a concern that come up. So we now have this national clinical support system where nurses can get support from a senior colleague day or night and know that they're going to get the best advice. So all of those measures helped to remove barriers. And then in terms of enabling joy, it's so important for our residents, health and well-being to stay active. Hank is in his 90s, and he's got a lovely little Jack Russell dog, called Bobby. Residents are very welcome to bring their pets into the village. Many of our villages have swimming pools or beautiful walking tracks and exercise classes we people can stay active. . Lowe doesn't talk very much, but what he sees is often really important. So for example, 1 day Lowe mentioned that headlight raise and host for breakfast, which on the face of it, we see like a pretty simple request. We're trying really hard to increase the choice that we have available to residents around meals. But we have a fabulous diversion of therapists called Acadia, who wondered of maybe this request for a raise and toast has something more sitting behind it. So she asked Lowe, what raise and toast means to him. And it turns out that when Lowe was an officer in the Navy, they used to have raisin and toast for breakfast when they got to poked. And it was a really wonderful time of his life. And so raisin and toast, lot of meaning. So our diversional therapy has really worked with people to understand their life stories, who they are, where they've come from and what really matters to them. Naine, who is we who. It is getting frail. It's really important for who to have relationships with people she can trust. She has a deep Catholic faith and 1 of her caregivers from means is also Catholic and then has formed a really close attachment to her. In Summerset, with those relationships between residents and staff really, really better. So we've invested a lot in making it a great place to work. We care for our caregivers that the caregivers can care for our residents. And we're so pleased that we've managed to increase retention and staff engagement and have surprise and delight programs to really encourage our caregivers to stay with us so that residents can have those long-term relationships with people who they know and really trust. And then finally, for my great part of our enabling joy is, we offer a prem of holiday homes. So Margaret has grand children in Wellington and Kapiti, and residents are able to travel to another village and stay in a holiday home where they have the familiarity and comfort of the Summerset environment that they can still go and visit family or family can come and stay in a holiday home in their own village. So I hope that just gives you a little bit of a flavor of the kind of things we care about on our clinical quality committee about removing barriers and enabling joy so that people can live their best lives. . I want to say thank you to my fellow committee members and Board members to Linda, Eleanor, and the rest of the clinical quality team, all the other Summerset staff, and also to all of our residents who bring so much to the joy and vibrancy and sense of care and community within our villages. Thank you.

Thank you, Marie. Last but not least, Grainne Troute.

Thank you, Mark. Tena koutou katoa. Good afternoon. It's my honor as Chair of the People and Culture Committee to provide you with a report of the committee's work in the last year. I'm joined on the committee by fellow Board members, Mark, Marie and Vena. The People and Culture Committee formally met 5 times during 2024, along with a couple of additional short meetings to consider specific matters that we had on the table. The committee adopts a systematic approach to establishing and reviewing remuneration policies and practices, culture, leadership and capability, succession, employee development, inclusion, diversity and engagement for the company and in reviewing Board composition. As is always the case, it was a busy year in 2024, and some of the committee's particular focus points, we're in the area of remuneration design and practices. We made progressive changes to long-term and short-term incentive schemes to support shareholder value creation and to achieve closer alignment to market practice. We placed a greater weighting on shared key performance objectives for the executive team. We improved linkages of schemes -- the remuneration schemes that we have to business strategy, and we introduced a minimum shareholding requirement for executives. So that's a minimum shareholding that they would be required to build up to over time. With respect to executive remuneration reviews, we benchmarked the remuneration of the CEO and executive team to ensure appropriateness to market. We want to keep our best people. We input to and improved the performance review outcomes of the executive team. We assessed performance against the STI shared performance metrics, and we made adjustments to Scott's pay to reflect his continued high performance and the Board's confidence in his ability to lead Summerset into the future. Relating to workforce strategic planning and implementation, we gave focus to the people and culture strategy and objectives and priorities. Oversight of the recruitment process for the CFO and CIO roles, the pilot of a new care delivery model known internally as workplace of tomorrow, reviewing workforce requirements to ensure we are a more efficient and effective business and talent retention and succession planning. From the standpoint of culture and capability, we oversaw initiatives to understand employee engagement and related actions, monitor employee turnover and retention, support diversity and inclusion -- including understanding pay gaps, increasing diversity in hiring pipelines and reducing the potential for bias and remuneration practices and work environments. And we supported the development of Summerset's employee value proposition. And we also input to and monitor the new learning and development strategy and implementation of the workers associated with that strategy. And finally, we strove for continued improvement in external reporting, including better explaining the rationale for remuneration practices and links to strategy, increased disclosure of short-term and long-term incentive KPIs and outcomes, and increased disclosure of pay gaps. This is an area where every year we try to build on the effectiveness of our remuneration disclosures. We've already had feedback on areas where we can make enhancements for the 2025 reporting. As I said, we've had lots on. The People and Culture Committee was very pleased. The teams were able to continue to invest in our people on these work streams during 2024. I'd like to thank the committee members and the executive team, particularly Scott and Summerset's Chief People Officer, Chris Lokum, for their contributions to the work of the committee over the course of the year. Thank you. Thanks, Mark.

Thank you, Grainne. All right. We'll now move to part of the meeting, where you, our shareholders, both present and online, can ask questions, whether related to the presentations, the financial statements or the management of the company. Questions related to the formal resolutions will be discussed when we come to that formal business later in the meeting. Can shareholders present in the room please wait until a microphone is provided to you and clearly state your name before asking the question. That's for the taking of the minutes of the meeting. I will take questions from those present in person at the meeting first before moving to questions from shareholders online. If you are online, please start submitting your questions now as there may be a small delay in us receiving them. If your question is received late, we will respond to you separately after the meeting. You can certainly ask follow-up questions by submitting further questions online. I'm going to allow roughly 40 minutes for questions. If we do run short and are unable to answer your question today, rest assured we will endeavor to respond to you after the meeting. If we receive a number of questions on the same or similar point or topic, we may group those together rather and provide a single response. If we receive questions related to village operational matters, we'll forward those to the relevant village for discussion at the Village AGM rather than at the general meeting. So the floor is open. Who would like to ask the first question. Lady on my left.

My name is Margaret Theron, [indiscernible]. So my main interest is in the development of the new Summerset village in Rototuna. I have been hugely impressed by the openness of the environmental protection agencies process. I was checking 2, 3 times a week. And every time there were new bits of information about what was happening, and it was challenging. We've heard that the development getting the resource consent, which was obtained about a month ago was a challenging process because it was everything from serious plant management, that is right through to plans or how to manage native visits and how to manage native bets. Now no visits where found. The bet management plan is being developed. So congratulations. My question is that there is a growing number of people in Rototuna telling me that they would be interested in moving into this village. My question is, what can we do to support this? Will a larger number of people buying into the village sooner than your plans have indicated mean that we will have a community center sooner simply because the whole process is going faster. And what can we do to help because I would love to have those people together and say, we are here. We know how to negotiate with [ notifica ]. That's one of the things you've got to do. You've got to keep notifica involved right through the process. And if you have a local group of prospective residents, I think we can provide some support.

Well, thank you for your question and your comments, Margaret. Scott, I might pass this to you to answer.

Easy. Look, thank you for that. Really appreciate the sentiment. And I think, look, the challenge we've only just recently obviously got that concern. The challenge for us at the moment is the economics. Look not probably quite as favorable as what we'd like them to be, and that's probably -- some to what we've all seen around median house prices in New Zealand to take a bit of a hit in the last 12, 24 months. So ordinarily, it would be really, really helpful. Obviously, the more demand, the faster it gives us confidence to build, that's probably not quite a challenge in the constraint that we have at the moment. It's just purely waiting for the housing market to recover a little bit to make it a bit more viable for us to build in Rototuna.

Okay. So gentleman at the back, and then I'll come to you.

My name is Roland Robertson, and my question is to Scott. In regard to the care aspect of the business, you mentioned how challenging it was and mentioned what you call it a funding gap between the need and the available bids for people that need care. And you mentioned a figure as much as 20% government underfunding. So my question to you is how is the company addressing this. I couldn't help with notice that one of the slide you showed had the Prime Minister in it, opening a village. So what does he say? Is the money going to be forthcoming to make up for this funding gap?

Yes, really a great question. I, for the first time, the last 12 months have become a Board Member of New Zealand Aged Care Association who sort of look at the collective interest of aged care in New Zealand. And so in that sort of capacity and also my capacity as CEO, there is quite a lot of work going on at the moment. I mean, I think sort of longer term government understands, and I think accepts the need to kind of fund to increase the funding levels. That's quite complicated in itself in the way that we assess like aged care need and a key home in New Zealand is sort of it's quite a blunt instrument. It's like you've got rest-home-level care and essentially hospital level care is sort of the basic genesis behind the sort of the 2 charges in New Zealand and Australia. They have quite a lot more sophisticated system to sort of assist need and then fund appropriately for that. And so I think government acknowledges that, that's probably a path that we need to sort of assess and sort of think about New Zealand. So that is quite a big longer-term piece of work though. So that's probably -- I think it will take 2 to 3 years to work with government and the Aged Care Association to figure out how we sort of give an outcome and whether we can get an outcome there. I think the second sort of challenge that probably exists is one of a public challenge in the sense that governments are challenged, I guess, was there part of that health system increases costs and whether that means that the society has been participating in society, whether we all have to contribute more individually. And so I think for us, as a care provider, we know that the money is not enough to really manage and contain our costs. When I was talking before about that $2.8 million we make, that doesn't include any allowance for head office costs. So we truthfully probably actually lose a little bit of money running care. Are there -- either we've got to have government sort of fund that more directly themselves or people in the New Zealand have to be prepared to pay more. And that's quite a big social kind of question and social discussion that makes you sort of put out the right guess. But in the shorter term you can see Summerset like what we're essentially forced to do in some sense is essentially charged more by putting an occupation right agreement want to be it. So that's sort of the way that we hit that as a business is to make it more sustainable for us to continue to provide care, but at the same time, allow people to store access care and still sort of justify us building care on every single site and the volume we do. Yes, we are going to ask people to essentially pay a license price for a bid. And then you will particularly take a deferred management fee from that. And so that's a way where you can ultimately sort of see us as a business charging privately, but more for that, but at the same time, working alongside government acknowledging in the short term, I think there's a real financial challenge for government with the health system in general. But longer term, thinking through that funding model and how we change that funding model so that funding is more appropriate for the sector.

One more from me to Stephen Bull. You are based in Sydney and have overall responsibility for the construction of the new villages. So a series of questions for you. Are your construction teams hired in-house by Summerset? Or are you dealing with unionized workforces?

So I'm happy to talk to that unless you want to, Scott. So in New Zealand, we are a principal contractor. So we insource the construction team. We obviously sub out particular trades within that. So it's a combination of the 2. In Australia, we have a construction team, but we aren't a builder or a principal contractors and Australia at the moment. We partner with third-party builders to the construction for us as the developer. So answer to your question, it's a combination of both.

Okay. But in regard to Australia, is the unionization of the workforce over there causing cost issues for Summerset in its construction of the villages.

It's not particularly at the moment, given the nature of the kind of product we build. So we're building individual homes, fillers lot of -- which is using homebuilders. So a lot of the noise around unionized labor in Australia has been much more of the commercial end rather than at the localized housing in, so it's not causing us any issues at the moment.

Kim Seten. I've got 3 questions. The first 1 is, can you give us an update on the status of Parnell?

Yes, look, we -- can I say it, Parnell. Well, we do have a contract on Parnell at the moment and so that's to sell to sell it. And that's just been worked through, if that isn't successful, we'll probably look at some point to go to terms of a market RFP process on that. But at the moment, just brilliantly ceasing there to the state of the property market and recovery of that and whether that's the optimal time and sort of relative holding costs versus delaying it a little bit longer. So yes, that's a bit of a live situation at the moment, which you're just sort of monitoring.

Is that still included in the lean bank, the $545 million, or is that...

I certainly think we've removed it from memory.

Yes. Second question is for you, Fiona. You mentioned disclosure before. Certainly, from my point of view, I'd be very interested in seeing the results presentations, the discussion that goes to the analysts put up either live or subsequently online. There's often deep dive questions asked at those presentations that certainly retail shareholders would benefit from having a greater understanding of those particular presentations.

Certainly, I can confirm the presentations go up as soon as we have those sessions with analysts and media. They go up straight away.

I'm talking about the actual questions and things...

We don't record that forum.

Could I ask that you give consideration to the other companies do. And I found it very beneficial to understand those particular presentations because it's softer than the deep dive questions that might give us a lot of...

I understand, yes. Of course.

Yes. Okay. And thirdly, there was mentioned in 1 of those presentations, the annual presentation about -- there's about -- an excess of about $200 million worth of new stock. And I think you were looking to reduce that. With the current build rate that you've connected for this year, is that still -- that's going to be difficult to let you really accelerate the sales, we'll cut back on that particular build rate surely.

I'll hand this to Scott. Can I just ask have you seen the recent sales results, yes?

Look, I think the intention is like trading conditions have improved and continue to improve. We'd like to see or like to believe that ultimately rather than lift the build rate, we're utilizing that additional capacity that you see from our contracted stock. And I'd sort of characterize that it's not been bad over the last 12 months, like if you look at the percentage of unsold or uncontracted stock is us now relative to 12 months ago. It's about for new sales to talk about 6% of the portfolio, and it didn't actually lift through the last year, but the -- so as a percentage of the portfolio, just is obviously getting bigger and bigger all the time. But like, yes, our major focus in the next 6 months is to actually just try and chip away the contrary to stock, acknowledging though that we are focused on like aged stock. So we look within that and say, new stocks has been delivered through 3 months ago, there's a good problem to have, like, but this is the old stuff that we're sort of looking at making sure that we're actually not having big chunks of stock that are sitting down around for long periods of time. And so we're constantly every 6 weeks looking at reschedule and fixing that build rate as well and make a decision around fixed and build rate, other buy side or particularly with an aggregate within that range that we gave the market would build this year. But yes, that's not sort of easy. I think that's your original question about, you do have to obviously clear enough stock and sell enough stock to manage the build rate, but also, yes, we're hoping that uplift in the economy at 50%, I spoke to increasing contracts. Rates continues on and that does help hit their stock level. Acknowledging, as I said, I don't think it's still being pretty good 100% through out the portfolio over the last 12 months, though we've had a pretty poor performing property market.

I [indiscernible] I am a shareholder and also Shareholders' Association representative. So the just you touched on both of these, but I couldn't find in the report the percentage of empty properties or unsold properties. I'm not sure if it might be buried somewhere. Can you give us as a percentage of that?

That's what we refer to as uncontracted stock.

So is in the report?

It's not in the report, but essentially if you could find, it's at a 6% for new sales stock and 2% for resale stock. And 2%, again, that hasn't really changed over the last 12 months, even though the product market has been more challenged. And so I think, look, resi stocks at a pretty good level, we've got a little bit of elevation in terms of new sales stock, which you get through those sort of -- those poor property market periods, which is [ generated ] before an analogy around how do we sort of clear that now.

And so with the challenging conditions, following on from there, how much are you having to discount or provide inducements? Like I know some villages do fees free and all this sort of it. So how much are you having to do some sort of discounted reducement to keep sales going?

Yes. Look, you always do a little bit and again, like we're trying to rather than do blanket wide across the portfolio. You're sort of looking at the age profile of the stock and which locations have that and what the challenges are. But typically, you intending to try and understand what are the objections recently have of coming in because -- and you sort of trying to work with that principally. So like if it's -- that's not confidence that they can sell their own home, you might not necessarily giving a discount in that regard, it might be actually giving people an ability to move in early for 6 months and enjoy life in a village, but at the same time, have enough time to sell their house in a different situation. You could find there's quite a few sort of different situations where it's not really so much incentives that will drive a difference. It's actually sort of more things, other sort of core drivers like confidence in sort of different people. And so I would say like we're doing less incentives now than we were through the COVID sort of 2020 to 2022 period, it's not high, but it's quite targeted. And so there's quite a bit of activity, but it's quite targeted to those areas of stock in those villages, which are struggling a little bit more. But at an aggregate level, it's probably marginally more than what we would do during good times. And so we haven't used that very heavily. To give you sort of an analogy, if it's -- people are struggling to afford to come and to live into us some village, and can't -- don't think they can get enough money from their existing house price. Again, rather than give an incentive of what you might do is you might discount the value of the home to allow them to afford to come in, but also think perhaps charge a little more different management fee. So overall, the impact sort of the same for us long term from a financial profitability perspective, but it enables the customer to come in. So we haven't sort of given away any value, but we've sort of changed our pricing mechanism to allow people to be able for to come enjoy life in a village.

Okay. And then going back to the age care cost of funding, so that's obviously a problem for the hot country. But what -- so you have 2 types of people in your age care, I think. You had people who are self-funding and people live on government funding from the demo, right?

Yes, that is right. Ever, yes, that's right.

So if a self-funded person, and I guess this is fair, how much are they paying on a, I don't know, a weekly basis has appeared to what you're getting for government-funded bed?

So yes, like what you'd typically charge. So even with government funding, we would typically charge additional premium charges on top of that. And so those premium charges might be like -- so government funding would be like for restorable care of $180 a day, ranging up to sort of $300 a day versus hospital level care. And just to give you a sense of what we would charge on top of that for someone who's partially paying or fully paying -- fully paying, they're obviously paying those values. But on top of that, they might be paying another sort of $50 with a premium charging a day. And that can range around a bit, to be fair. It could be anywhere between $50 and $75 a day, depending on what location it is. There is quite a lot of constraints in the contract in the way that works. It will be funded from Health New Zealand that actually allows us to privately charge. And so 1 of the problems the sector actually faces at the moment is we can't actually just go out there and implement a private paying sort of model. The way that contract works is if we sign up to provide services on behalf of Health New Zealand, essentially we kind of charge for certain extra things, and those extra things the challenges they don't actually cover the cost, an aggregate of actually providing that service. So you're thinking in a sort of a free market, you would actually be able to just put your prices up and charge appropriately and hope that people could have still sort of come on, and there's quite a lot of constraints in the way that they contract with the worlds works at the moment. They don't allow us to do that.

So what that means is we are disincented to take people that receive public funding and is why we are concentrating more on making sure our own residents catered for that.

So if you think of it in an aggregate level, where you can only charge a certain amount, and that still doesn't really cover the costs of doing aged care. And so we're trying to do 1 of the things that we're actually trying to do when he was asking before is 1 of the long-term funding model. The other 1 is in the short term, trying to free up the contract structure to allow us to charge to private charge. That sort of sounds easier than it actually is, and there's a bit of a debate going on between the sector and Health New Zealand at the moment about whether we have to get a legislative change to actually allow that to occur.

So I'm still not quite sure I understand. So if I'm in a privately funded bed and I am paying 100% of the cost.

Yes. We can only still charge...

Still only charge...

A certain amount...

Say, $300 a day. So that amount you can charge is still legislatively constrained. .

Yes.

Is that only...

Try to make constrained.

That's contractually constrained. The dollar value isn't set, but what we can charge for is contractually constrained.

Is that contract with the whole of Summerset or with each individual site?

Technically it's each individual site, but it's the same contract across all operators across New Zealand. So in legal former goes to each key facility we have, but it's the same contract in genesis. There's a slight difference in amounts that we can charge across the regions calculated by...

And with all operators in the sector.

And it say $300 a night, I think that was figure...

Yes. That's across all operators.

Yes. That doesn't cover the cost effectively.

Well, you compare it to a hotel room and you think about the added care and every services set on...

To Mark's point, like $180 doesn't go far likely to get a hotel room, that's probably there, and then you've got to pay $25 for using medical costs, full food costs, GP visits, all of the taxi rides to place, there's all sorts of stuff that sort of go sits in there...

Issued for the country.

Bruce Parker, shareholder. Welcome back to Auckland where we missed you. Please come again sooner. Given legislation on your annual report, it's a good ask me to read. I think some thing is missing there. There's a sharp rise in the audit fees last year. Can you explain more?

Sure. Thanks for your question. The listing rules require that we rotate the partner of the audit firm who are providing services every 5 years. So when Sam took over from Grant is appropriate for him to review the fees of Ernst & Young. And so that's obviously a calculation of time and cost of labor, which they did. And they also undertook a benchmarking exercise so that they could determine whether or not the new number they come up was appropriate, and it ended up that the new number was fair and reasonable.

Second question, it's hard to find the corporate fees in the end report. Our CFO, pointing me to an investment presentation there. Has that led to your size of the company? Or will that reduce overtime corporate fees?

And when you say corporate fees, do you mean sort of overheads -- all overheads? Yes. Like -- I mean, so there is a bit of disclosure in there. We break down about 7 or 8 different sort of cost lines. But look, the genesis of your question is yes. I mean over time, if the company could grow faster at scale or there is ever opportunity in there, but that's sort of a most like a forward sort of track question for the company.

The challenge, which we continue to put to management is that we want to increase the operating leverage over time. So as a percentage of overall cost, we want to see that number reduce.

And we did a bit of a review that last year as well, like just talking with the economy and seeing if we could do sort of cost out, what opportunities are we around that. So we did take a reasonable quantum of money out last year, which is something we're sort of watching some of it over time will sort of come back in a sort of growth plan sort of increasing stuff, but some -- it's a pair of review that's good to do from a business discipline perspective as well.

One third question. Queensland, when will we move towards Queensland [indiscernible] now.

All dependent on finding the right site and the economics of that site working. It's as simple as that.

So it could be next year...

Yes. And it's a great example. I think even the Board went to visit 3 sites late last year. They look like great sites, but we can't get the numbers to work. And we're very disciplined. So we won't do anything that doesn't make economic sense.

And look, we did actually have a contract on site last year, but with the economy being poor in New Zealand and I suppose, adopting a particular balance sheet approach to that and not knowing how bad it was going to be in New Zealand, we decided it's prudent to walk away from that site at the time as well. And so I think, again, to Mark's point, that's just good balance sheet management discipline within the company to say, actually, we don't know what's going to happen in New Zealand, that's actually that site go. And then there's been other sites, as Mark said, that we've looked at where it just economics wise hasn't stacked up. So we won't do anything that doesn't make a -- and look, we did actually have a contract on site last year, but with the economy being poor in New Zealand and, I suppose, adopting a particular balance sheet approach to that and not knowing how bad it was going to be in New Zealand we decided to sprint to walk away from that site at the time as well. And so I think on to Mark's point, that's just good balance sheet management discipline within the company to say, actually, we don't know what's going to happen in New Zealand that side go. And then there's been other sites. As Mark said that we've looked at, we're just economic wise hasn't stacked up.

There are no more questions from the floor. I'll go to online. Then I'll go to online questions after this one if that's all right.

I have a couple of questions. First is about remuneration, as I think Fiona was discussing. So I saw that the rem package increase for our CEO was circa $400,000. I wanted to ask is what increases to frontline staff or support staff were implemented over the last financial year and whether we have anybody working at Summerset who are on the minimum wage versus the living wage. I have another question after that.

We don't have anybody on the minimum wage. We pay above minimum wage. We don't have people on the living wage either. We know where we sit vis-a-vis others in the sector and we pay well and we offer good benefits and overall good package. We can see through our retention rates, our employee satisfaction rates that, in fact, our employees value where they work and they feel valued by us and are very happy. And...

So did they get a pay raise last year?

Yes.

And my other question was related to diversity. I see in the annual report, you report on gender specifically for your Board and your executive leaders. But I wanted to understand what other diversity initiatives or measures you consider or that you have within the organization.

Sure.

Yes, I'll just make a comment. And I'm just wondering whether your question relates to do we look beyond purely gender and do we look at other metrics. We do, and we have some reporting that we have fairly regularly coming through to the Board on that. But we haven't yet set any targets in that space. It's a bit complex. But we -- I guess, as we're looking towards our schedule of work for this year, looking at diversity targets for a couple of our groups beyond purely gender is definitely on the table. Right now, we only focus on gender, though, in terms of our reporting numbers.

What would those initiatives or metrics been?

Well, so with gender, we do look at things like when we're recruiting for roles, making sure that we have at least one representative from the underrepresented gender. So if you're talking about the building the construction team, we would be looking for at least one female person on the short list. We would be looking at what similar initiatives we could do to encourage representation in underrepresented groups in other parts of the business. So it would come down to how many people do we have of different ethnicities, for example, in different workforces. Are there any groups that are under-representatives? Under-representatives, first of all, finding out or trying to understand why that might be. And then secondly, working on what initiatives we need to put in place to make sure that any disincentives for those groups being more represented were removed. Yes, it's a good question, and it's an important area, and it's a trickier one than gender.

It's a great, can I state something.

Sure.

I think it's a fantastic question. And when we think about diversity of age as well, we know that there's so much skill and experience among some of our older nurses and caregivers. But at a point in their career, lifting and turning people can become tricky. And so we're really trying to value those skills. So for example, with our national clinical support program, we can begin to move some of our really experienced clinical staff into mentorship and leadership and advisory roles and perhaps a little bit less of the bedside care and then really thinking about how we can use technology to support them to do their job safely as well. Great question though, and we're continuing to work on it.

Right. We'll move to the online questions. The first, I think, has largely been answered, this is a pre-submitted question from Deborah Williams. First, what is the role of the People and Culture Committee. I think Grainne did a pretty good job of answering that in her introduction about the work of the committee in the last year. Her question was specifically related to what do we do in relation to culture. As I mentioned briefly, we do measure employee engagement. We're very big on understanding what is required to ensure that we have an inclusive workforce so that everybody feels a part of the business. We do measure that quantitatively and qualitatively. So that's what we do on that front. And she asked the same question about the living wage. The one thing that I didn't mention is we do provide, for example, health insurance up to $1,650 per employee for all of our permanent employees to provide for GP visits, physiotherapy, dentist bills, et cetera, et cetera. So we've just gone through a pay round collective agreement, and we know where we sit relative to the sector is, again, pretty much at the top, Chris, right? And those negotiations have concluded, and we're pretty happy with the outcome. We want to make sure our people are properly paid and therefore, motivated to do the best they can for our residents. So we move on to the next question. That's an interesting one.

A number of questions online seen. This question is from [indiscernible] number of questions. And this relates to an anecdote from former [indiscernible], his contention being that the best-performing teams have been together for a long period and have great cohesion and continuity. With reference to Summerset's great success, do you agree that stable and long-serving leadership such as the 10-year run from Rob Campbell, Julian Cook's 7-year stretch and Scott Scoullar's long apprenticeship to Julian and 5-year run as CEO partly explains Summerset's success. What else can you put that down to?

That has something to do with it provided things are going well, right? Just stating the obvious. I think the key reason is that we're very disciplined. We stick to our metrics. We don't move away from those. And rugby teams, given his use and analogy, can often fail if someone stays too long as well. So I would put it down to a number of factors as well as [indiscernible] the team of people I think I have around the Board, and I'm sure Scott would reiterate this in terms of his management team, we're very comfortable at the depth and experience in that team, and that serves us incredibly well.

Another question from [ Stephen Mayne ] for Grainne Troute. As Chair of the People and Culture Committee, could Ms. Troute please expand on her comment in the annual report. Although not evident in this FY' 2024 report, the Board has made another adjustment to Scott Scoullar's remuneration to take effect from January 1, 2025. Mr. Scoullar's total remuneration jumped by $413,000 or 37% to $1.525 million last year. What further increase has been approved? Was this a formal change to the CEO's contract or a matter of Board discretion? And has the power to do this been delegated to the People and Culture Committee?

I'll take the last one first. Probably the People and Culture Committee is only empowered to make recommendations to the Board. What we did in this case with Scott, as we do with the executive team on a regular basis, really on an annual basis, is we commission external reporting on the pay of each of the roles relative to similar roles, both in our sector, but also in large listed companies in New Zealand. We also do take a look across the Tasman, but primarily, we focus on New Zealand. We found that Scott's remuneration relative to the comparable organizations had fallen relatively significantly as a comparator. It's really important to us that we pay appropriate to the market so that we retain the talent that we have around the table. And that was the rationale and the basis on which we made the adjustments to Scott's remuneration rather than any other factor. So we increased his base to $1.1 million. We also changed the ratios of his LTI. So his long-term incentive program is now 60% and his -- that's of that -- those base earnings and his short-term incentive is 50%.

If I could just add to that a few points. First, that increase took effect from the beginning of this year. And so we're quite happy to report on it going forward. The second thing is Scott's remuneration is just like Scott has been on a bit of a journey. When he started off as a CEO, we arguably, I wouldn't say underpaid. But we're sort of reflecting his experience in coming into the role, and he's built on that. And consistently amongst all particularly our big investors, our large investors, we got a consistent message that Scott is performing very well and make sure you are retaining him and not losing him. We were conscious that others among his competitors are still actually paid more. So we were -- we do believe that the increases that we agreed to are appropriate. And as I say, it's really important to retain top quality staff. So Okay. Next question, Steve.

Another question from [ Stephen Mayne ]. As Chair of Meridian, Mr. Verbiest disclosed the proxy position to the ASX and NZX before last year's AGM commenced, which is best practice to allow for a better informed debate. Why has this not been done today? Which proxy advisers issued reports for this meeting? And were there any material protest votes against the directors up for election today? How many shareholders voted by proxy? And do we run any sort of proxy campaign to improve the turnout?

Another multifaceted question. Firstly, I'd be surprised if I did disclose the proxy outcome at Meridian's AGM because the fundamental point is that listed companies have [indiscernible] sort of understanding or agreement with the New Zealand Shareholders' Association that we do not disclose the outcome of the proxy voting until after the meeting. So that is why we haven't done it. We've had 2 proxy advisers that issued reports in relation to the meeting, CGI Glass Lewis and ISS, who are the most well-known in the market. They advise institutional shareholders how they should vote. Both of them recorded or recommended that shareholders vote for all resolutions. So I think that pretty much answers this question.

We have a question from [indiscernible]. Debt-to-equity levels look higher than previous years. Will there be an effort to lower debt equity levels going forward?

Well, we maintain a very tight set of metrics that management work to. The gearing ratio has not moved up materially. It's moved up very slightly that reflects more than anything, the nature of the portfolio, but we wouldn't call it significant. And indeed, as I say, we -- everything that we do, including the pace of development, the pace of our growth is very much geared towards metrics around both our cash flow and our debt-to-equity gearing.

Second question from the same shareholder. Since there are no imputation credits on dividends, have there been any consideration to holding this capital for future developments instead of continuing to pay dividends?

We have a policy in place that we pay 20% to 50% of underlying profit at the moment. We always consider issues like that, that the shareholder has just raised. We haven't changed our policy as yet, but we always think or look at these things on a dynamic basis, so it could change.

The question from [ Barry Stanway ]. How many units are vacant at present?

Do you want to answer that Scott?

That's probably like [indiscernible] like market sensitive. So I think, look, I probably prefer not to answer that, I think, other than to say, just given market sensitivities attached to that, but no material shift in even resales or new sales stock. So when we talked before about those percentages relative to portfolio sizes of 6% for new and 2% for resale, they haven't moved in a material way. The only thing you really saw happen late last year was -- and you probably need sort of just out of the numbers is the delivery of St. John's was a massive kind of handover of homes that's quite unusual to our business. And so artificially, that sort of makes it look like our stock levels have grown. They have grown and it is in particular to that village. But if you normalize for that, actually the stock position relative to previous year is actually pretty favorable, I think from me. It's actually lower by about 40 or 50 units on the new sales side of things.

We have a further question from [ Stephen Mayne ] relating to mandated annual voting on remuneration reports which is standard in many countries, will Mark Verbiest undertake to consult with major shareholders and lead a Board discussion on the issue of whether Summerset will voluntarily put up a remuneration report resolution for an advisory vote at next year's AGM.

Well, we certainly take it into consideration. But my own personal view is that these sorts of mandatory resolutions have often been used in Australia, and it's well recognized for reasons unrelated to executive remuneration have been used for tactical reasons. That's actually well understood, including by not only institutional shareholders, but also the proxy advisers who advise them. So there is -- and indeed, the way that, that system works in Australia has been a source of constant comment and potential review. So we'll look at it. But frankly, there's certainly not a strong desire on this side of the Tasman to introduce that. All the information is there. It's transparent. So when Director elections come up, it's entirely open to shareholders to vote in favor or not of a particular director based on what we're doing vis-a-vis executive remuneration.

And we have another question from [ Stephen Mayne ]. Stephen Bull's last year as an executive at ASX-listed Stockland was in 2018, where the Stockland remuneration report detailed the pay of the 11 most senior executives. Mr. Bull was paid $1.67 million and was the sixth highest paid. This was excellent transparency and Stockland shareholders voted 98% in favor of the remuneration report. As one of the 2 Australians on our Board, does Mr. Bull agree that Summerset's remuneration disclosure, which is limited to just the CEO amongst the executive team is worse than Stocklands and does he support Australian style nonbinding remuneration vote?

That's an excellent question. Do I think Summerset's disclosure is worse than Stockland? No, I don't. I think your disclosure meets the market in which you operate in. I think there are benefits and negatives to that kind of disclosure in Australia. I think, yes, it's increased transparency, but that creates other challenges for organizations as well. So I don't think it's as simple as saying should we disclose more or not. I think disclosing the CEO's pay is appropriate, but it can be problematic for organizations if they have to disclose a number of executives, both internally and externally, can create challenges.

There are no questions online.

Okay. I should ask just are there any more questions from the floor, just to make sure there's -- nobody has anything lingering. [indiscernible].

Obviously, very brief. You've introduced the Chief Financial Officer, the new Chief Financial Officer, Margaret Warrington earlier, if you haven't introduced the other members of the senior management team. And I thought it would be interesting, certainly from my point of view because I haven't been to an AGM for a number of years to know and about to recognize the other members of the senior management team.

Sure, absolutely. And look, I'll be first to say they're not all here today. A couple are on annual leave. But Dean Tallentire, is our Head of Construction. Chris Lokum, is our Head of Human Resources. That's it so far that are here. More than happy to in the future, introduce others, but feel free to talk to them afterwards. Okay. Ladies and gentlemen, we now come to the matters requiring resolution, which are outlined in the Notice of Meeting. There will be an opportunity for shareholders to ask questions on each of them, and I ask that the questions raised relate to the specific matters. So you -- those of you who are joining us today in the room, you will have been given or you should have been given a shareholder voting card if you haven't, please sing out. If you are a shareholder and did not -- and do wish to vote by all means, make yourself known to the registration desk and the staff will help you. Please mark your voting intentions for each resolution, and the voting cards will be collected at the appropriate time. As I mentioned earlier, shareholders in attendance online will be able to cast their vote using the electronic voting card received when online registration was opened. To vote online, you need to click, get a voting card within the online meeting platform. Then you'll be asked to verify your shareholder proxy or your proxy number to validate. Please then mark your voting card how you want to vote for, against or abstain. Once you've made your selection, please click submit your vote on the bottom of the card to lodge your vote. Voting will remain open until 5 minutes after the conclusion of the meeting, and the results of the vote will be announced through the NZX and ASX. If you're participating online and require any assistance, please refer to the virtual meeting guide or use the help line previously indicated. Each of the resolutions set out in the Notice of Meeting are to be considered as an ordinary resolution and as such, must be approved by a simple majority of votes cast by shareholders entitled to vote and voting on each resolution. The outcome of the proxy votes will be displayed for your information after voting of the resolutions. Now in relation to the first resolution, given it relates to me, I'm going to ask Fiona Oliver, if she would share the discussion on this resolution.

The first resolution concerns the reelection of Mark as the Director of the company having retired by rotation. The Board recommends Mark to you as a Summerset Director and unanimously supports his reelection. Mark will now say a few words about his background.

In terms of my background, way back in history in the long distant past, I was a lawyer. I then went into the corporate scene and was a senior executive for a number of years. And subsequent to that, I've held a number of governance roles. I love Summerset. I love what it stands for. I love its values. I love our purpose. My own parents went through full continuum of care and both passed away during COVID, but having the reassurance, them having the reassurance and community as well as us as children having assurance that they were being well cared for was fantastic. I'm a great believer in the model. And I like the fact that Summerset is continuing to grow. I love growth businesses. I want to be a part of it as long as we do it in a careful, considered manner. So I hope that you'll support my reelection. Steve has a question. Mr. Mayne.

We have one question online regarding this resolution. Why does Mr. Verbiest hold his relatively small 11,500 Summerset shares through his wife rather than in his own name. Also, does he agree that a Chair of 4 years should own shares worth a year of Board fees, which, in this case, was 266,667 last year. Will Mr. Verbiest or his wife buy more shares before next year's AGM to increase alignment and does he agree that this is the sort of issue that would be more fully discussed with shareholders and proxy advisers if the company put its remuneration policies up for shareholder endorsement each year.

Well, firstly, yes, my wife does own 11,500 Summerset shares. Might I say she bought them at the absolute top of the market. And so in fact, the value today does not reflect the purchase price that was paid, and I'm waiting with bated breath and pushing Scott, continue to push Scott to make sure that they increase in value. I'm not going to advise when or we might buy further shares. I don't want that to be taken as a signal. The one thing I do need to clarify as it says in the annual report, I was paid $266,000-odd for my Board fees last year. In fact, I was paid $220,000. The [ $266, 000 ] my last fee invoice happened over the holiday break and less the payroll staff at Summerset paid it in December. So it went into last year. So 40-something thousand-odd that's included in that figure is actually for the current year. So it's not a correct figure. And as to -- we're quite transparent around our Director Shareholding policy, and it's generally for a Director to hold a minimum of 1 year's base Directors' fees, not Chair fees. That's the way we do it. We're over and above that amount, but that certainly doesn't reflect what we may or may not do in the future.

There are no further questions online but Fiona, I'm not sure if there are noted in the room.

Can I ask are there any questions from shareholders in the room? No. Thank you. I now propose that Mark is reelected as a Director of the company. Please now select either for, against or abstain for Resolution 1 on the voting card. I will now hand back to Mark.

Thank you, Fiona. The next resolution concerns the reelection of Stephen Bull as a Director of the company having retired by rotation. The Board recommends Stephen to you as the Summerset Director and unanimously supports his reelection. Steve, would you now like to say something brief.

Sure. Good afternoon, everyone, again. As you do know now, I'm an Australian-based Director. And thanks to our shareholder online, you have some insight into my executive history. I joined the Summerset Board about 3 years ago. And since that time, I've chaired the Development and Construction Committee. I'm a member of the Audit and Risk Committee, and I have been a member of the Board Due Diligence Committee for our last 2 successful retail bond issuances. I finished my executive career in 2018. The last of my roles was as the CEO of Stockland's retirement Community business. So we were a business that had over 10,000 residents. We developed, managed, ran retirement villages across Australia. Prior to that, I ran Stockland's commercial development business, so retail, office, industrial property development. Going back prior to my Stockland days, I've had a range of roles, both in management and development, but also in sort of corporate finance and Investor Relations. I currently sit on a range of Boards, including Summerset that covers the listed government, private and for-purpose space. I'm particularly interested in roles that require you to balance strong commercial outcomes with the delivery of human services, and Summerset fits very much into that category. I think that the financial performance of Summerset, combined with the offer and support it provides to its residents is not easy to achieve. So I really enjoy contributing to that discussion and that debate. To this end, I hold degrees in both finance accounting and also in psychology. So it's a bit of a mix of that commercial and human element. I'm a member of the Institute of Chartered Accountants, the Australian Institute of Company Directors and the Institute of Directors in New Zealand. And finally, on a personal note, I feel quite connected to the work that Summerset does having spent the last 15 years with my mother who has been suffering from dementia for that period, most of which has been living in a care community in Australia. I would love Summerset to have had communities in Australia over that period. But I see every day the care she has received from the people that support her, and I'm proud to be able to contribute to the work that Summerset does so that we can continue that kind of work. So I present myself to you for reelection and I would appreciate your support, obviously.

Thank you. Are there any questions on the resolution? There is one.

So we have a question online from [ Stephen Mayne ]. Given Mr. Bull is not a member of the People and Culture Committee, which determines remuneration arrangements, why did he attend 4 of the 5 People and Culture Committee meetings last year when he next attends this committee, will he advocate for a policy change to embrace Australian-style remuneration report voting? And also, could you please explain the extra $5,000 payment for doing due diligence on Summerset's retail bond issue?

Yes, I can respond to that. So the first thing I would say that even though we have Board subcommittees, the decisions are made at the full Board level. So the committees make recommendations to the Board. Why did I attend those committee meetings? All of our committee meetings are open to all of our Board members to attend. We often have them together. So we have them one after the other. So if I'm here from Australia and the committee meeting is on and it's useful for me to attend, I'm happy to do so. So there are other parts of -- will I recommend an Australian-style reporting? I think I answered that in the last question. I think the reporting you do has to be relevant to the market in which you're in and the competitive environment in which you're in. And I think Summerset reports as it should in the New Zealand context. $5000 payment. When we do the retail bond issuances, we set up a separate subcommittee of the Board to do due diligence to make sure that the issuance of that bond into the marketplace follows all the requires and regulations. Those Board members that sit on that committee receive an extra payment for the additional work involved in being part of that committee, which usually runs for 2 months or so. We go through a series of meetings to make sure that the [indiscernible]. There's a lot of extra work.

A lot of extra work way beyond the norm. Okay. Thanks, Stephen. There are no further questions. If we can move to the resolution, and I'll now ask you to select either for, against or abstain in relation to resolution 2 on the voting card. The next and I think the final resolution concerns the reelection of Grainne Troute as a Director of the company, having retired by rotation, noting that it is intended that she will retire at some point during the next 3 years. The Board recommends Grainne Troute as a Summerset Director and unanimously supports her reelection. Grainne, if reelected, will have served on the Board of Summerset for 10 years by next September. Although Summerset's charter provides that Directors will generally not hold office for more than 10 years, we've asked Grainne to stand this year anyway due to the valuable work that she performs as Chair of the People and Culture Committee. And as I said, she certainly intends that she will retire at an appropriate time during her term, so she won't stay for 3 years. Grainne, would you like to say anything briefly?

Yes. Thank you, Mark, and good afternoon again, everyone. I, as Mark has said, have been privileged to serve Summerset shareholders as a Director of the company for the last 8.5 years as well as Chairing the People and Culture Committee throughout my tenure. I'm also a member of the Audit and Risk and Clinical Care Committees. The other listed Boards of which I'm a member are Tourism Holdings and Investor Property. And I also serve as an Independent Director on the Board of the legal firm, Duncan Cotterill. I'm a member of the NZX's Corporate Governance Institute and have recently been appointed to the Auckland Branch Committee of the New Zealand Institute of Directors. From the standpoint of my own background and skill set, I bring long experience in the governance and leadership of large businesses that operate in competitive and customer-focused sectors. These experiences have developed my capability in the leadership of large and diverse workforces, change management and its relationship with people, operations and systems, human resources management and executive remuneration, the governance and management of risk, strategy and as important as strategy, the operational delivery of that strategy and corporate social responsibility and reputation management. Also, as Mark mentioned and Stephen touched on as well, I really strongly buy into Summerset's culture and purpose. And I've had personal experience with my mother also with dementia, like Stephen's mother, who spent her final months in the Summerset care home and it was a wonderful experience as far as these things go. As shared today by Mark, Scott and others, your Summerset Board and management teams continue to have bold ambitions for the future, the delivery of which requires, amongst other things, a strong Board of Directors with diverse and complementary capabilities. While given my long and proud tenure, this will be the last time I stand for the Summerset Board. And indeed, should I be elected, as Mark said, I plan to step down before the completion of the term. I'm excited about the future of Summerset, and I'm committed to striving alongside my colleagues towards these ambitions. Accordingly, I'm pleased to seek reelection today. Thank you.

Thank you, Grainne. Any questions?

Don't have any questions from shareholders joining online.

Any questions from the floor. No, if there are no further questions, can you please now select for, against or abstain for Resolution 3, from the resolutions? Given that's all the formal business, I'd now like to advise the outcome of the proxy votes that were lodged in respect of each of the resolutions. I will not read the results out for each resolution, but they're up on the screen now. MUFG corporate markets will now move through the room to collect your voting cards. For shareholders online, you can now submit your vote. Voting will be open until 5 minutes after the conclusion of the meeting. Results of the poll will be announced to the NZX and ASX after the conclusion of the meeting. Ladies and gentlemen, thanks for your patience attendance at our annual meeting. I now declare the meeting close. Thank you very much.