Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Achieved 375 new home sales, the fourth highest in the company's history, despite challenging market conditions.
- Successfully completed a $275 million fully underwritten rights issue to pay down debt and strengthen the balance sheet.
- Continued strong demand for assets, contributing to a steady asset base despite macroeconomic challenges.
- Positive feedback from homeowners on new recreational facilities, enhancing customer satisfaction and driving sales.
- Finished the year with 3,867 homes under management across 24 operating communities, with a total portfolio of 6,563 homes including those under development.
Negative Points
- Market conditions in Victoria have been challenging, with high inflation impacting consumer confidence and house prices.
- New home settlements decreased from 356 last year to 311 this year, contributing to a drop in profit from $71 million to $53 million.
- Increased marketing costs for new projects impacted profitability, with a lag effect between incurring costs and realizing settlement revenue.
- Renegotiation of the debt facility increased facility size and associated fees, adding to financial burdens.
- Negative media coverage and a VCAT case have affected customer confidence, leading to a higher-than-normal cancellation rate of deposits.
Q & A Highlights
Q: Can you remind us what the settlements were at this time last year? Also, what are customers saying since the media reports?
A: Settlements in July this year are slightly higher than last year, around $20 million. Customers generally did not believe the negative media reports, and some even think it will help with referrals as homeowners justify their decisions more strongly.
Q: What is the timing of completions for the 228 homes sold and available for settlement in FY25?
A: Homes are built progressively throughout the year, but settlements are typically second-half weighted due to new projects launching and seasonal factors in Melbourne.
Q: When do you expect the review of the business model to be completed, and will it consider whether you should still charge a DMF on future projects?
A: The review is not focused on whether to charge a DMF but may consider offering customers the option to pay it upfront or upon exit. The DMF model remains preferred as it lowers the upfront entry cost.
Q: Can you talk about the sales rate, confirmed sales, and cancellations versus prior periods?
A: The deposit holders have largely stuck with us, with only about 5% cancellations post-media story. However, there has been a drop-off in face-to-face appointments, indicating potential volatility in sales cadence.
Q: What does "rightsizing the team for the current sales environment" mean, and can you provide some quantum around expectations for overheads or sales and marketing into FY25?
A: We are trimming corporate overheads and key team members to reflect current demand. This process is ongoing and will be quick and meaningful.
Q: Are there any particular covenant issues you have or any changes to the timing of project releases?
A: Merrifield has been paused, and Yarrawonga and Ocean Grove are on watch. We will assess market conditions and sales performance before proceeding with further development spend.
Q: What obligations do you have to purchase future land payments, and is there scope to push them out if market conditions don't improve?
A: Land payments will proceed as planned, with obligations more on the vendor to deliver services. These sites are strategic for future growth.
Q: How are you handling interest capitalization for paused projects like Merrifield?
A: We do not capitalize interest into paused projects to avoid making them unviable long-term. Interest is capitalized across other active projects.
Q: What are your assumptions for sales rates going forward, given the current challenging market?
A: It's too early to predict accurately. We are monitoring the situation closely and will adjust our strategies as needed.
Q: How are you addressing customer concerns and rebuilding trust post-media coverage?
A: We are enhancing transparency in our declarations and marketing information. We are also leveraging homeowner testimonials and adjusting our marketing strategies to rebuild brand trust.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
