Lifestyle Communities Limited

Good morning and welcome to Lifestyle Community's Investor Analyst Conference Call. My name is Anita Adirisio, Company Secretary of Lifestyle and moderator for this call. This webinar will be recorded for the benefit of those who are unable to attend today and the webcast will be available upon request. Please be advised our conference call will strictly be limited to one hour. Due to the number of attendees, we will endeavour to address as many questions as possible during this time. We encourage you to contact the company via the Investor Centre available on the company's website should you have any queries following today's update. Our presenters today are our Chief Executive Officer, Henry Lewis, and Chief Financial Officer, Angela Farbridge-Curry, who will provide an update on the FY26 half-year results as released to the market this morning. Also joining us today is Claire Lewis, Investor Relations. This will be followed by a Q&A session for which I now outline the procedure as presented on your screen. Prior to asking your questions, we invite you to introduce yourself and advise the organisation that you are representing. If you wish to ask any written questions, please do so via the Q&A function. To ask a verbal question, please select the raise hand icon to be placed on cue. You will be invited to speak at the appropriate time. Please note that questions received by the Q&A function, which are of a similar nature, will be grouped and answered at the appropriate time. I now invite our CEO, Henry, for his presentation. Over to you, Henry.

Thanks very much, Anita, and good morning, everyone. Thank you for joining us for our FY26 half-year results. I'm joined today by Angela Farbridge-Curry, our CFO, and Claire Lewis from Investor Relations. Moving to our purpose. Our company purpose is to reimagine a way to live for independent downsizers. We develop and manage architecturally designed low-maintenance homes together with resort-style communities that allow downsizers to free up equity from their previous home and live the life they want. Moving to a business snapshot of our results. Our first half results are summarized at a high level on this slide. and show we are strongly executing against our plan to get strong to grow stronger when the property cycle turns. The first half reflects the business that is operating with discipline and focus through a challenging market. We delivered statutory profit of $15.8 million, generated positive operating cash flow of $41.2 million, and continued to materially strengthen the balance sheet, reducing net debt to $323.6 million, down from a peak of $490 million in May. Importantly, we're seeing early momentum as our refreshed way-to-live strategy embeds. New home sales improved materially, recording double-digit growth in sales with 110 new home sales and 128 new home settlements. Our annuity income stream continues to grow with 4,256 homes under management, recording $25.3 million of gross rental income, up 11.9%, and customer satisfaction is trending positively. We have also enhanced our attractiveness to new prospects by introducing choice on when to pay the management fee. upfront or when they sell, and we have a healthy portfolio and pipeline of over 5,700 homes. At the same time, we have remained deliberately cautious, selling through built inventory, right-sizing the land bank, and restructuring our debt facilities to provide longer tenor and flexibility. At the 31st of December, the fair value of our investment properties was $898.1 million. While the Victorian property market remains challenged and the timing of the VCAT appeal decision is uncertain, our focus is clear. Supporting our homeowners, protecting cash flow and positioning the business to emerge stronger as conditions normalise. With that context, I will walk you through our results before handing to Angela for the financial detail. Moving to our results snapshot. So going a little deeper on our results, you can see we have had a pleasing market response to the launch of our Way to Live brand campaign, which has landed well with new prospects and our existing homeowners. Net sales from new homes improved materially from the prior period, up 12% from the second half of FY25, 110 versus 98, and a market improvement from this period last year, up 168%, 110 versus 41. New home settlements were lower than the first half of FY25, 128 versus 137, driven by lower sales rates over the last 18 months and the elapsed period between sales and settlement timing, as almost all of our customers need to sell their pre-existing homes before moving in. Annuity revenue from rental income continued to grow to $26.7 million, driven by new home settlements and inflation-linked rental increases. That said, the total annuity revenue was slightly down on the previous period due to the deferred management fee not being collected on contracts impacted by the VCAT decision, which remains under appeal. Following the settlement of planned land sales and ongoing inventory realisation, we are pleased to report a further reduction in our net debt balance, down from $460.5 million at June 2025 to $323.6 million at December, as I just highlighted. Our operating profit after tax was $16.1 million, reflecting a period of transition as lower new home settlements from earlier sales cycles flow through. Margins were compressed as we intentionally sold through built inventory, and deferred management fee revenue was impacted by the VCAT decision, alongside interest costs associated with the land bank. Closing out this half, we open two new impressive clubhouses at our Ridgely and St Leonard's The Shores communities. Moving to the property market. The Victorian property market has shown signs of improvement this half, however, still lags national trends and continues to face into some headwinds into the second half. As you can see from the figures on the right, sourced from Totality, The value of dwellings in Melbourne increased 0.8% over the quarter and 4.8% over the December 12-month period, placing it at the lower end of capital city growth. The pace of growth in home values lost some steam through the end of 2025 and into the early months of 2026. The slowdown aligns with a dent in consumer confidence in December as inflation tracked higher and given the RBA's posture towards monetary policy. Total listing volumes in Melbourne were down 12.6% from December 2024. And as recently as the past few weekends, option clearance rates are still in the low 60s. Moving to a business update and strategy recap. So with that property market context, as I mentioned at the opening, our company purpose is to reimagine a way to live for independent downsizers. It's brought to life through three strategic pillars. The first is to be the go-to choice for downsizers, committed to mastering both sides of the sales process, the inquiry to appointment journey and supporting homeowners through the process of selling their existing properties. The second pillar is to be renowned for the homeowner experience in our communities by investing prudently in high-quality amenities, digitally enhancing our communication methods, and a consistent experience that empowers homeowners and strengthens referral advocacy across our communities. We refer to our third pillar as powering our growth engine. by embedding capital discipline market-led product and pricing strategies refinement of our home designs to ensure product market fit with the aim of agility across cycles and sustainable financial returns now translating our operating pillars to value refers to how we create value for shareholders and our homeowners through four key operating pillars that work in tandem in a virtuous cycle. We refer to these pillars as way to live, way to grow, way to build, and way to operate. And I'll take them one by one. Way to live refers to our focus on delivering a truly outstanding homeowner experience while doing it more efficiently. with the goal of improving our operating margins to drive value to our annuity book. Way to grow refers to the sales and marketing engine that ultimately drives the company's settlement rate. We are aiming to grow our net sales levels over the coming years as the property market strengthens. way to build refers to us re-engineering the development process to deliver quality homes and community amenities that help enable efficient capital recycling at a sale price of 80 to 90 of the median of the catchment area with the aim of enabling the company to sustainably grow and way to operate refers to our focus being market and homeowner centred and managing our corporate overheads commensurate with the longer-term growth ambitions of the business. The subsequent updates from this presentation are organised into these operating pillars. Moving to way to live, the homeowner experience. As part of our homeowner-centred operating philosophy, we continue to work in closer partnership with our homeowners. We use data-driven insights to inform prioritisation, community action plans and decision-making. We've introduced consistent communication frameworks and elevated our transparency. Key trends, as you can see on the right, indicate we are on the right path, with strengthened trust indicators and a shift to more scalable and positive engagement from homeowners. Overall, customer satisfaction continues to improve from each six-month survey period, improving from 75.7 as at March 2024 to 78 at September 2025. Moving to Way2Grow, the deferred management fee model for existing homeowners. In July 2025, we changed our deferred management fee to be consistent with the findings of the VCAT ruling handed down on the 7th of July 2025. For new homeowners entering into a residential site agreement with lifestyle communities, The deferred management fee is now calculated on the homeowner's purchase price. As previously announced, we will offer all existing homeowners the choice to move to a deferred management fee calculated on purchase price once the appeal of the VCAT decision has been determined, irrespective of the outcome. The key advantages of offering the new deferred management fee model to all existing homeowners after the VCAT appeal enables homeowners to be in a position to make a fully informed decision. We anticipate this offer will generate substantial goodwill and sentiment amongst the homeowner community. Any good will generated is anticipated to contribute to homeowner satisfaction and harmony and protect and strengthen a strong sales referral rate. This approach assists with our continued strengthening of the lifestyle community's brand and reputation, whilst reducing potential litigation and regulatory risk that may be associated with offering the new deferred management fee model prior to the outcome of the appeal. As a reminder on the VCAT case, Justice Woodward decided on two key elements as follows. One, the Residential Tenancies Act does not prohibit a deferred management fee. Two, the deferred management fee must be an amount capable of being accurately calculated as at the date of entry into the residential site agreement. Justice Woodward considered that because the original deferred management fee clause was calculated as a percentage of the homeowner's sale price, which is unknown at the time of entry into the agreement, it is therefore unable to be calculated as an exact amount and therefore void. This is the key point that is under appeal. That said, to reiterate, we will offer all existing homeowners the choice to move to a deferred management fee calculated on purchase price once the appeal of the VCAT decision has been determined, irrespective of the outcome. As set out in our FY25 results presentation, if 100% of existing homeowners, as at 30 June 2025, were to move to this new model, The estimated potential adjustment to the carrying value of the deferred management fee component of investment properties would be up to $117 million. Lifestyle Communities also advises it has received a notice of listing from the Court of Appeal, the Supreme Court of Victoria. The applications for appeal include The applications for leave to appeal and the appeals, if leave is granted, relating to the orders made by President Woodward in VCAT, will be heard by the Court of Appeal on Tuesday 23rd of June 2026. The Court will then deliver its decision in due course. So just to repeat... The date for the case to be heard will be on Tuesday 23 June 2026. The court will then deliver its decision in due course. Moving to Way to Grow, the introduction of choice and expanding our market opportunity. To recap, for new homeowners entering into a residential site agreement with lifestyle communities, The management fee is now calculated on the homeowner's purchase price. Further to that, new homeowners can now choose when to pay the management fee, upfront or when they sell. Lifestyle Communities aims to have a best-in-market model, providing choice to customers to either free up cash now and pay later, or buy with no exit fee. Buyers can choose when to pay their management fee, either 10% upfront or up to 20% when they sell. Soft launch took place in December 2025, with full rollout now in market. And to date, we have had five upfront management fee contracts signed, with the first settlement having already taken place. I will hand over to Angela to talk to our way to build and development pipeline. Thanks, Angela.

Thank you, Henry, and good morning, everyone. In relation to our development pipeline, during the period we completed the settlement of the four land sales previously announced as part of our strategy to right-size the land bank and carry four to five years of supply. Following the divestments, we retain a well-balanced portfolio that supports the next phase of the development pipeline as existing projects complete. Our portfolio and pipeline now sits at 5,750 homes with around 4,250 currently occupied and a further 1,500 homes remaining in the pipeline. In the graph to the top right-hand side of this page, you can see that 756 of these homes remain in developing communities, and a further 738 homes remain to be developed from the retained land bank. As we deliver the pipeline, we'll continue to be market-led in our pricing strategy, which will impact development margins in future periods as we follow the cycle and work through the existing projects. However, as we've previously noted, the ongoing drivers of demand for the sector remain and continue to intensify. We have an ageing population in need of downsizing solutions against a backdrop of housing undersupply, with additional pressure being felt due to lack of affordability. The delivery of our pipeline and future projects plays an important part in addressing each of these issues. Moving to an update on our debt facility restructure. As we previously announced, we've taken proactive steps to restructure our debt facilities, right-sizing down from $571 million to $375 million. The new facilities became effective in January 2026 and simplified the financing structure, following a reduction in the lending syndicate from four to two lenders, while providing longer tenor with no ICR covenant until the 30 June 2028 reporting period. The new facilities are provided by PGM Inc, one of the world's largest pension funds and a provider of long-term debt, and one of our existing lenders, National Australia Bank. While the balance sheet has delevered since the May 2025 peak, the transaction provides ongoing funding flexibility as the business navigates the recovery in the Victorian property market. Under the revised facilities, during the ICR relief period, a review event will occur if the number of new home settlements at each reporting period fall below certain thresholds, which for FY26 is 185. The loan to value ratio was also varied down to be less than 55 during the covenant relief period and steps back up to less than 65% from the June 2028 reporting period. Due to the longer tenor of the PGM facility, the weighted average cost of debt is expected to increase. However, this is expected in part to be offset by a reduction in unutilised facility fees due to the lower facility limits. Our new facilities have been supported by two high-quality lenders in NAB and PGM. We value their support and their commitment and thank the exiting financiers for their support in the lifestyle community's journey.