Good morning and welcome, everyone, to this year's annual general meeting of Lifestyle Communities. My name is David Blight, the chair of the company. I'd like to introduce my fellow directors here this morning. From my left, Claire Hatton, Mark Blackburn, and Joanne Stevenson. Also joining us is Henry Ruiz, our CEO; Angela Fabridge Curry, Chief Financial Officer Elect; and Anita Addorisio, the Joint Company Secretary; and Claire Lewis on the end as well. Finally, I'd like to welcome Kate Logan of PricewaterhouseCoopers, the company auditor, who's available to answer any questions on the audit for the financial year ended 30 June 2025. Today's meeting is being held as a hybrid meeting. We're delighted to welcome those present here today and also very pleased to have shareholders participate today via the Computershare meeting platform. Shareholders attending online can submit questions at any time.
Both written and verbal questions may be asked. To do so, please follow the instructions set out on the screen. Questions of a similar nature will be consolidated and answered as and when the relevant item of business is addressed. Shareholders attending in person can ask questions by raising their card when the item of business relevant to the question is being addressed. Please state your name and the organization you represent before asking your questions. I intend to address questions from the shareholders in the room in the first instance and then attend to any questions online. Voting today will be conducted by way of a poll on all items of business. To provide plenty of time to vote, I'll shortly open voting for all resolutions.
If you're eligible to vote and are attending this meeting online, please note that once voting opens, you can press the vote icon and all resolutions will be activated with the options to vote. Please follow the instructions on your screen. Voting shareholders at the venue have been given a blue voting card at the registration desk. Please complete that card according to the instructions outlined on the card, marking a box beside each resolution to indicate how you wish to cast your votes. Once completed, please submit your voting card to the Computershare representative. We'll give shareholders additional time after the formal business to complete their votes. I now declare the poll open.
Before moving to the formal business of the meeting, Henry and I would like to provide an overview of the company's performance over the last financial year and provide an update regarding the performance of the company since our last trading update. FY25 was a challenging year. It was marked by leadership change, market headwinds, internal transformation, which we'll hear about more, and a legal challenge regarding the interpretation of one of the three core fee streams that underpin our commercial model. While the operating environment was difficult, we made a lot of progress in resetting the business and laying the foundations for future performance. In March 2025, we welcomed Henry as our new Chief Executive Officer. Henry immediately brought focus and stability to a period of significant change, strengthening the core of the business, deepening our connection with homeowners, and driving more disciplined execution.
As a board, we have full confidence in Henry and the executive team as they guide the business through the next chapter. The year can be described as a tale of two clear halves, with sales impacted in the first half, where we had 41 net sales before recovering in the second half to 98 net sales. The cyclical downturn in the Victorian property market continued in the first half but started to show signs of recovery in Q4. We now have a total of 5,750 homes made up of 4,128 occupied homes, a pipeline of 884 homes remaining in developing communities, and 738 homes to be developed from the land bank. In simple terms, VCAT found that the DMF provisions in the homeowners' site agreements are inconsistent with the Residential Tenancies Act. This had two material impacts on the FY25 results.
First was an AUD 135.5 million write-down in the carrying value of investment properties and an AUD 54.5 million provision for repayment of deferred management fees previously collected. As shareholders are aware, we have appealed the VCAT decision. In the event our appeal is successful, we would expect a material proportion of these adjustments to be reversed. Next slide, please. Moving to our capital management initiatives, our operating cash flow increased by nearly AUD 120 million from AUD -115.2 million in FY2024 to AUD +4.6 million in FY2025. We reduced our total debt facility from AUD 700 million- AUD 571 million, reflecting the overall reset of the business and the reduced development pipeline. The team executed some very targeted pricing strategies on selected homes to address the excess inventory, which resulted in a reduction of 90 unsold homes in the six months to 30 June 2025.
Build rates at development sites have also been adjusted to match the sales rates. We divested four parcels of land to right-size our development pipeline, which released circa AUD 110 million in capital that has been recovered. Finally, as shareholders are aware, we made the decision to pause the dividend to preserve capital within the business until the sales environment improves, and that decision still holds today. Next slide, please. The macro themes that have underpinned Lifestyle's business growth not only remain but continue to intensify. We have an aging population in need of downsizing solutions against a backdrop of a general housing undersupply, with additional pressure being felt due to a lack of affordability. Lifestyle Communities plays an important part in addressing each of these issues through the communities we build and manage. I'll now pass to Henry for his comments.
Thank you, David. Good morning, everyone. My name is Henry Ruiz, and I'm delighted to join you at my first AGM with Lifestyle Communities. Since joining the company some eight months ago, I've spent considerable time immersing myself inside the business together with our teams and with our homeowners across all 25 of our communities. A key initiative was leading a strategic review along with the senior leaders across the business. Moving to the next slide. Our refreshed strategy can be described in three core strategic pillars: becoming the go-to choice for downsizers, renowned for our homeowner experience, and powering our growth engine. The last point highlights our work to embed capital discipline, market-led product and pricing strategies, refinement of our home designs, and a more efficient sales and marketing approach, with the aim of building agility across property cycles and sustainable financial returns.
With strong foundations and a sharpened strategic focus, together with a maturing operating model, Lifestyle Communities will be well positioned to realize its long-term potential. Moving to the next slide. To better understand what drives growth in our business, we describe it as four operating pillars to value that work in a virtuous cycle to strengthen our value proposition for homeowners. We call these way to live, way to grow, way to build, and way to operate. I will take them one by one. Way to live centers on us delivering a truly outstanding homeowner experience while doing it more efficiently with the goal of improving our operating margins, which maximize the value of the Lifestyle Communities annuity book. Way to grow centers on the sales and marketing engine that ultimately drives the company's settlement rate.
We are aiming to grow our net sales and settlement rate back to our pre-COVID levels over the coming years. Way to build refers to our development engine, delivering homes and amenities that enable efficient capital recycling at a sale price of 80-90% of the catchment median, enabling the company to sustainably grow. All of this is underpinned by our way to operate, which talks to our focus on a market and homeowner-centered strategy, where we manage our corporate overheads commensurate with our long-term growth ambitions for the business. Moving to the next slide. Our five-year strategy has two phases. We describe these as get strong to grow stronger. The get strong phase includes a number of facets, including a brand refresh, market-led pricing, strengthening our balance sheet, and an evolution to our business model, to name a few.
The goal of all of this is setting the business up to capitalize on when the property cycle returns. The grow stronger phase will be predicated by market strength and sales momentum and include a build-out of our developing sites and an unlocking of our land bank. As one of Victoria's most established operators in the land lease sector, we benefit from a recognized brand, passionate homeowners who are proud to be part of our communities, and a robust housing pipeline that supports our longer-term growth ambitions. Moving to the next slide. As we turn our mind to the FY2026 strategic priorities, we have continued our disciplined and targeted selling in the first half of the financial year, which has resulted in a continued reduction in inventory balances and further deleveraging of the balance sheet.
As of 31st of October 2025, we are carrying 202 unsold properties or unsold completed homes. This is down from 257 reported at the 30th of June, which represents a 21% reduction in the number of inventory homes completed and not sold. There are 10 unsold homes currently under construction compared to the 12 that were under construction as at 30th of June 2025. Our net debt balance continues to reset downward to AUD 338.3 million, down from AUD 460.5 million at the 30th of June, which is driven by the receipt of AUD 100 million of land sale proceeds and our sales and settlement activities. Our sales and settlement pipeline, as at 19th of November, can be described as follows.
Pleasingly, we have made 93 new sales so far this half, with an uplift in sales rate off the back of our marketing campaign and improving consumer sentiment leading into spring before the expected quieter holiday period at the end of the year. We have also completed 93 new home settlements, and we have 240 contracts on hand, and 150 of these relate to homes that are expected to be available to settle in FY2026. We have also been evolving our business model to increase our attractiveness to a broader market. We have conviction around the deferred management fee, which contributes to, amongst other things, our ability to sustainably create and maintain great experiences across our communities and assisting our homeowners to unlock more equity.
That said, we have also learned that having an exit fee is not desirable for all of our prospects, and we are soft launching the ability to pay this management fee upfront. For new customers from December, we expect to introduce a no-exit fee option. Buyers will now be able to choose when to pay their management fee, either 10% upfront or up to 20% when they sell. Lifestyle Communities is flexible as to which option the customer chooses, with each payment pathway being modeled to deliver an equivalent net present value. We believe this will enhance our appeal as the next destination for prospects looking to downsize. Moving to the next slide. As I touched on earlier, another key initiative was the launch of our new brand positioning and marketing campaign. We call it Way to Live, which heroes our homeowners.
We launched this in mid-September, and this positioning is reflected through our entire strategy. Our advertising campaign is seen across traditional media such as TV, now streaming services, radio, billboards, and print, as well as digital formats including social channels like Facebook, Instagram, and our own channels, including our own website and email. We are pleased with the market response to the campaign so far. Separate to the advertising, we have also created short films with some of our existing homeowners where we get to hear about their own Way to Live experience. I would like to share one of those with you now.
When we're around Anita or in the group, all we do is laugh. It's just the most wonderful thing. Keeps us young and happy.
Lifestyle Interview Mark.
We've been friends for about 30.
Yeah, coming up 30.
We saw the four that first pan was a little bit, yeah, no, not what.
Oh, I don't know if we're going to like her, but we did.
We always think, why don't we just buy some land and each build our own place? Now we've done that here, and we are living the dream because there is no way what we had in our mind back then.
We couldn't have done this.
No, A, we couldn't afford it.
Stop. And then this.
Gym, pool, sauna, spa, the pool billiard room.
The theatre room.
The theatre.
Watch Max.
Watching Max.
Every Sunday.
Wednesdays and Sundays. As you age, there's so much that can get you down to know that you've got friends there that you can just call on at any time and grab a coffee or have a glass of wine, whatever it is. It's a sense of reassurance. It's a sense of, I'm okay. I'm going to be fine. I'm going to be looked after here. I just feel secure. It counts for so much. Have a look at what we've got here and the feel of the community. You never look back. The three of us, as I've said before, will always be advocates for Lifestyle because it's just fabulous. Cheers to friendship and our Lifestyle journey. Many more years to come.
Absolutely. Yeah.
Thank you. Just moving to the next slide. As you can feel from that short film, our homeowners are very passionate about their experience with Lifestyle Communities and great ambassadors for the business and new prospects. Further to our marketing approach, the company has trialed a number of different ways of engaging with our homeowners this half. For the first time ever, we ran an all Lifestyle open day on Saturday, 18th of October, simultaneously across all 25 communities. We had 80% of the entire Lifestyle Communities team opting to work on the weekend and stand alongside our homeowners and our Lifestyle Managers and sales teams, resulting in 174 prospect groups coming through our doors and, equally importantly, creating an invaluable cultural moment and a true sense of community for everyone involved. Moving to the next slide.
In closing, the company is taking proactive steps in FY26 with a clear plan and the right team in place. We are focused on execution and positioning the business for the next development cycle, which we expect to emerge late in FY26 as the property market conditions improve. Shareholders can expect to see continued deleveraging of the balance sheet and positive operating cash flows due to further targeted inventory reductions, communities in progress having passed their peak development phase, and no new project launches planned this financial year as existing communities contain sufficient supply. We have set our team market-oriented financial targets, ensuring alignment on both strategy and execution. Our long-term strategy remains anchored by a growing annuity base with a differentiated customer offering and a disciplined approach to capital allocation.
Before I close, I want to take a moment to sincerely thank Darren Rowland, our long-serving Chief Financial Officer, for his impactful contribution to the business, and we wish him well for his next career step. I'm also delighted to warmly welcome Angela Fabridge Curry as our incoming Chief Financial Officer, and I'm confident her contribution will further drive the continued growth and resilience of the business. Thank you to our homeowners, partners, and shareholders for your ongoing support, and a heartfelt thank you to the entire Lifestyle Communities team and our board members for their passion and commitment during a critical time of transition where we are getting strong to grow stronger. Thank you, everyone. I will now hand back to David.
Thanks, Henry. We now come to the Q&A part of our meeting today. We'll save questions relating to the financial statements, the REM report, and the election of directors to those formal items of business. Anita, did we receive any general questions prior to the meeting?
Thank you, David. Yes, we did from two shareholders. We had a question from Reuben Kong. Given the current pressures on the over-50s land lease model and the affordability crisis affecting younger Australians, has the board considered expanding Lifestyle Communities' offering to include a product tailored for first home buyers or younger downsizers?
Thank you. Henry, I might pass that one to you, mate.
Sure. Look, we have a strategy always on approach, and we're regularly testing the markets that we serve. We think, as you heard in the presentation, there's still a very big opportunity in the segments that we serve, and we are laser-focused on maturing the business platform and making sure that we see that through with our five-year plan, but we will continue to scan the market for new opportunities as they arise.
Thank you, Henry. We have another question from Reuben. How does the board view the long-term balance between maintaining the Lifestyle brand's focus on the over-50s segment and potentially diversifying into adjacent markets like affordable living communities for younger buyers?
Yep. Same to you, Henry.
Yeah. Look, I think similar thematic in the answer. We just think the whole category has a long way to run. Certainly in Victoria, where we have a footprint now, we are always having a look at different categories, whether they be different demographics or interstate. We get those questions often, but we think there is a long road ahead for Victoria where we currently play.
Thank you. Another question from Reuben Kong. How will you measure success in the next 12 to 24 months beyond just financials? For example, brand strength, community satisfaction, resident referrals, contract renewal rates, pipeline conversion rates?
Henry?
I think, Reuben, you have answered the question well. We use a balanced scorecard approach that takes a lot of those factors into account. There are financial metrics, but we do balance them with brand metrics, customer satisfaction, likelihood that they're going to refer, and equally importantly, metrics inside the company. Team engagement, clarity on strategy, clarity on role, all of those things contribute to the likelihood that the company is going to perform. We would agree with your question.
Thank you. A further question from Reuben. Given the legal contractual issues, how will the company ensure that new buyers and their financial advisors have clarity on all fees, exit options, market resale risk, and community service charges? Will you consider standardised plain language disclosures or third-party certification of resident contracts?
Henry?
Yep. Look, I think we will continue to review all of our contracts and collateral, especially as we begin to adjust our business model as well. We have a lot of external advisors that look over our contracts to ensure that, one, they comply with the legal requirements and are easy to understand.
Thank you. One last question from Mr. Kong. Many of the negative stories relate to perceived unfairness of fees and exit arrangements for residents in Lifestyle Villages, for example, the allegation of rent charge under demise in a community. How is the company proactively engaging with residents to rebuild trust, and what disclosures will be enhanced? Example, full life cycle costs, exit scenarios, refurbished obligations.
I've actually—apologies. Could you just repeat the question?
Yes, of course. Many of the negative stories relate to perceived unfairness of fees and exit arrangements for residents in Lifestyle Villages, for example, the allegation of rent charge after demise in a community. How is the company proactively engaging with residents to rebuild trust, and what disclosures will be enhanced? Example, full life cycle costs, exit scenarios, and refurbishment obligations.
Thank you. Look, we've engaged in a different way. We've enhanced how the company has traditionally engaged by using the power of digital. We've been in constant contact with our homeowners, particularly as it relates to the VCAT case and any other brand impacts that we've had. That's part one. The second part, the executive team and management teams have been actively engaging in each one of our communities. Since I've been here, we've engaged in a listening tour across all 25 communities, meeting face-to-face with our homeowners. A big part of that is us expressing where we think the company should go. An equally important part is listening to our homeowners on what are the things that we can do better. We've gained a lot from that, and that will be a go-forward approach.
Thank you. Lastly, we have a question from Kenneth Moore. Will the board order an independent review of the skills and ability required of each board position and of each senior manager position in the company to meet and achieve the challenges of the past 12 to 24 months, also to ensure that share prices return to an acceptable level and that shareholders are satisfied by the returns on their investment?
Thank you, Kenneth, for that question. We review the skill sets of the board members every year relative to the challenges that we face as a company. Similarly, for executives, there is a very rigorous performance management program called Roadmap, which everyone is subject to within the firm, which is very granular and very focused on getting the best from the executive team. I think we recognize the last one to two years have been very challenging for all concerned. I am more confident now than ever that we have the right team in place to get this company back on track. Secondly, we have the right board members around the table to provide the guidance and mentoring required to help management get there. Having said that, we are seeking an additional non-executive director, and we have a defined set of skills that we are looking for in that instance.
If I may, just preempt a question we get every year, which is about how we go about searching for non-executive directors. For those of you who were here last year, you recall we got asked that question about jobs for mates, which was implied in the question. For clarity, the way we search for non-executive directors to join our board is firstly exhausting our networks. One of the most valuable things that board members bring to a business is the network that they have developed over many years in business. Secondly, if that does not bring the right person to the table, then we will use a search firm in order to identify the right person with the right skill set to optimize our collective skill set around the board table. Hopefully, Kenneth, that answers your question.
Yes, thank you.
That's it?
Yes. Back to you, Chair.
Right. Thank you. All right. I now invite questions from the floor. Please raise your hand and state your name and the organization you represent before asking your question. Do we have any questions anyone would like to ask?
Yes. My name's Greg Head. I'm a private investor. Don't represent a company. I'd like to know what progress has been made with DMF contracts for existing—sorry, replacement contracts for existing homeowners and what that potentially is going to achieve in terms of restoring the asset value that was formerly, I guess, decimated by that legal challenge. Thank you.
Henry?
Thanks for the question, Greg. We are going through a process, like I said, in engaging with each of our communities to get feedback from our existing homeowners to make sure that they, one, understand where we are as it stands today with the VCAT case, and also to listen to their feedback around our go-forward plan. As you know, the VCAT case is still underway. Without having that clarity, we are getting some external advice on some of our homeowners expressing interest about moving to a contract like what we have with existing new homeowners. We are still very early in getting some of that feedback. It is actually quite complex. Once we have got something to announce around that, we will be talking to both the market and our homeowners.
Okay. So no update?
No, I've—no material update. Yeah. Yeah. Thank you.
Thank you. Any further questions from the floor? All right. Thank you. Anita, do we have any questions online?
Confirmed no questions, Chair.
All right. As we have no further questions, I will now move to the formal business of the meeting. The notice of meeting has been made available to all shareholders and is also available on our website. The first item of business is to receive and consider the financial statements of the company for the financial year ended 30 June 2025, excuse me, together with the director's report and auditor's report as set out in our published annual report, a copy of which has been made available to shareholders online. There is no requirement for shareholders to vote on these reports. Anita, have we received any questions in relation to the reports or further questions on the management of the company? As I mentioned, we'll save questions relating to the REM report and the re-election of directors to those items of business when we get to it.
None have been received online.
Okay. Thank you. There being no further questions, we come to the items of business for which a vote is required. The next two items of business require a shareholder vote and must be passed by ordinary resolution. Proxy voting received prior to the meeting will be shown on the screen at each resolution dealt with today. I propose to vote those proxies left to my discretion as Chair of the meeting in favor of all resolutions. Moving to item two is to consider and if thought fit to pass the following resolution as a non-binding ordinary resolution: that the remuneration report forming part of the director's report for the financial year ended 30 June 2025 be adopted in accordance with Section 250R, Subsection 2 of the Corporations Act 2001. Item two is subject to voting exclusions as outlined in the notice of meeting.
Please note that a vote on this resolution is advisory only and does not bind the directors or the company. Instructions in respect of the proxies received prior to the meeting are now displayed on the screen. Anita, have we received any questions in relation to this item?
No questions online, David, but happy to invite questions from the floor if anyone wants to raise their hand.
No. If there are no questions, I ask that you place your vote in relation to item two concerning the approval of the company's remuneration report. Moving to item three, which is to consider and, if thought fit, pass the following resolution as an ordinary resolution: that Claire Elizabeth Hatton, having retired by rotation in accordance with clause 8.1(e)(2) of the company's constitution and being eligible and offering herself for re-election, be re-elected as a director of the company. Claire's profile has been included on page seven of the notice of meeting, and I'll now invite Claire to speak to her re-election. Claire.
Thank you, David. Firstly, thank you for your continued support. I joined the board in 2022 with a background in technology, digital transformation, and customer experience from organizations like Google, Qantas, and British Airways, among others. For the last 11 years, I've had a portfolio career serving on a number of ASX-listed boards as well as co-founding Full Potential Labs, where I help organizations navigate the opportunities in AI. It's been a challenging three years as the business has evolved and matured. When David Blight became Chair in 2024, I took on the role as Chair of People and Culture and focused on ensuring that we attract and retain the talent needed to deliver extraordinary homeowner experiences as well as sustainably scale the business.
A key achievement was leading the CEO Search Committee that brought Henry to Lifestyle Communities, and I think we can all agree that was an excellent outcome. My technology background has been particularly relevant as we've invested in digital marketing and customer experience, areas that directly support the sales momentum and the brand campaign results that we're now starting to see. I've also been working with the team on AI strategy and cybersecurity preparedness, ensuring we're building capability in areas that increasingly matter for our business. My customer understanding from the travel industry, particularly my recent experience as a non-executive director on the APT Travel Group, an over-60s provider in the travel sector, also resonates strongly with our homeowner demographic and the lifestyle aspirations they're pursuing. I resonate deeply with the Lifestyle Communities' purpose, and I'm really proud to work with this talented team.
I'm encouraged by the sales improvement and positive response to our new brand campaign alongside the balance sheet work, which has strengthened our financial position. With your support, I look forward to continuing to contribute as we capitalise on these foundations and deliver value for our homeowners and our shareholders.
Thank you, Claire. If I can just add unscripted that Claire is a wonderful board member, a very hardworking board member, and brings a perspective, a different perspective to our group, which she has described, and I would be delighted for her to continue. The board, with Claire abstaining in her capacity as a director, recommends that shareholders vote in favor of this resolution. Instructions in respect of the proxies received prior to the meeting are displayed on the screen. Anita, do we have any questions?
No questions online, but again, welcome any questions from the floor if you'd like to raise your hand.
Any questions to Claire? Thank you. If there's no further questions, I ask that you place your vote in relation to item three concerning the re-election of Claire Elizabeth Hatton as a director of the company. That brings us to the end of our formal business. We'll now provide shareholders with an additional minute or so for poll voting to be completed. Please ensure that you have cast your vote on all resolutions. Finally, if there are any final questions, I invite you to ask them now while we wait for the voting to close. Yes, Claire, we have a question at the back. Oh, sorry, just give me a sec. Sorry, I had this is working here.
Sorry, I had another commitment, so I'm a little bit late, and this may have been covered, but clearly the big issue is the likelihood of when the legal issue is resolved and how it's going to be resolved. Apologies if it's already been covered, but clearly it's got a big impact on the shareholder value. Yeah, so Stephen, is it? David Kingston, Kelly. Oh, sorry, David. Sorry. David, the VCAT, we're waiting for the appeal of the VCAT case, of course. We have no control or indication of when that timing, when that appeal will be heard. We're anticipating 6-12 months from when we lodged our appeal. Again, we've been given no guidance at all. We have set the company up into a position where there's no further downside in the event we lose the appeal.
There is upside in the event that we win the appeal in terms of the financials. I appreciate litigation is chronically uncertain, but have your barristers given you any view on prospects?
No, we haven't. I mean, obviously, we're appealing because we think there are merits to the case, but haven't been given a % likelihood outcome.
Certainly, at the pub test level, I think it was a pretty silly decision. The law is the law, and it's difficult. Litigation is a lottery, so good luck.
Thank you.
Thank you.
I might add, it really comes down to a matter of interpretation of some wording, and that's what we're arguing about, which is crazy, but so be it. Yeah. Thanks, David.
Oh, a bit of vote. Okay. Thank you. I confirm that voting is now closed, and the results of the poll will be notified to the ASX and put on our website later today. On behalf of the board, I'd like to thank Henry and the Lifestyle team who show such incredible dedication and commitment to the company. Finally, thank you to you, our shareholders who are here today and online, for your ongoing support and investment in Lifestyle Communities. I now declare the meeting closed. Thank you.