Thank you for standing by, welcome to the Ingenia Communities Group 1H23 Results Teleconference and Webcast. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by one on your telephone keypad. I would now like to hand the conference over to Mr. Simon Owen, CEO and Managing Director. Please go ahead. Good morning, everyone, and thank you for joining us today. Apologies for the delays at 11:30 A.M. The presentation was held up with the ASX. I'm pleased to be presenting what I believe is a solid result in an incredibly challenging market. I thought I would make a few opening comments before jumping into the presentation. Let's address the challenges and the bad news up front. This morning, unfortunately, we are about to reduce our settlements target for this current financial year and downgrade our earnings. This is incredibly disappointing and not a reflection of the energy, passion, and commitment of the entire Ingenia team to deliver for our residents, our guests, our colleagues, our investors, and other key stakeholders. We continue to experience chronic labor shortages across many of our 16 development projects. Whilst we will commence construction on over 500 new homes this year, it has become evident that too many of these homes will now not likely complete until late June or early July and August, and therefore will be not available for settlement in this current financial year. Production times have also been impacted by wet weather, particularly with civil works in our three Victorian projects in late 2022. Secondly, in recent times, our sales team has also begun to report incoming residents becoming more hesitant to commit to purchase due to recent rate increases, softening house prices, and fairly rapid and recent increase in time on market. Delays in completion times for our new homes is also causing some purchasers to sit on their hands until they can inspect their completed home. Consequently, with the convergence of these two factors, we have made the difficult decision to adopt both longer construction times across a number of our key projects, as well as longer lead times for settlements across all of our projects. We have dropped our settlements guidance for this financial year from 460-485 settlements down to 370-420 settlements. Reflecting the heightened uncertainty, we've adopted a wider range for settlements at this given point, given the recent and emerging changes in our production and sales cycles. It is worth pointing out that these settlements are not disappearing. They are just drifting into the first half of the next financial year. Nevertheless, it does have a material impact on this year's earnings and cash flows. I'd like to make a few other comments on development and new home settlements. As at 31 December, we only had three completed and unsold new homes. Inventory remains at record lows. We are also holding over 350 deposits and contracts for new homes. Interest remains very high in moving into our communities. The purchase journey has slowed. This year, we have launched more new communities than ever before, including Bob's Farm and Fullerton Cove on the New South Wales Mid-North Coast, our Victoria Point community in Brisbane's eastern suburbs, Millers Glen on the Queensland Scenic Rim, and Bargara on the Queensland Capricorn Coast. This will be followed by further scheduled launches over the coming months, including Australia's largest DA-approved MHC community one hour north of Sydney at Morisset. These projects are forecast to materially drive settlements and earnings growth over the next three years and will underpin our revised three-year settlements target of 1,750-2,000 new homes. There are also many positives to report for the first half. Our rental communities are reporting both record high levels of occupancy and strong rental growth. For many capital cities and regional towns, it is often near on impossible to secure rental accommodation and is quite likely that this will only get worse over the coming year. Our tourism business continues to boom. As many families grapple with rising living costs, affordable domestic travel will likely be a key beneficiary. The key demographic drivers that underpin Ingenia's business model remain firmly in place: an aging population, a housing affordability crisis, especially with rental accommodation, the population drift to the regions, and strong domestic travel. We are enjoying strong pricing power, and we have inbuilt inflation protection. We are enjoying increasing demand from changing work habits, and Ingenia is a sector leader with sustainability and carbon reduction. At its essence, Ingenia's business is underpinned by owning land and collecting cash rent. A significant component of this rent is supported by Commonwealth pension and rental assistance payments. This is supplemented by low risk, high velocity, and profitable development of regional and outer metro lifestyle communities geared towards the rapidly growing number of downsizers and young retirees across the East Coast. Ingenia has been one of the fastest growing REITs in Australia over the past five years, and I firmly believe that we are moving into a prolonged period of demand driven by the aging of population and the desire for high quality community living. Joining me on the call today are a number of Ingenia's executive team, including Karen Landy, our Acting CFO, our General Manager of Investor Relations and Sustainability, Donna Byrne, Natalie Kwok, our Chief Investment Officer, and Von Slater, who heads up our development business. Over the past six months, we've really focused on improving our operational yields and looking at expansion of opportunities within existing communities. I should say I've now moved on to page two. This has seen us add 76 cabins and villas across our holiday parks and our rental communities. We continue to focus on divestment of non-core assets to recycle capital. In addition to previously announced divestments, we have a further four communities under offer and with due diligence well underway with further assets likely to follow. Lifestyle Communities now represent over 57% of our business, our development pipeline comprises some 6,450 future development sites, which will underpin many years of future profitable growth. The domestic holiday thematic will be with Australians far longer than many of us are thinking, Ingenia is strongly leveraged to this story. Revenue in this business is up 65%, sorry, 55%, forward bookings are up 20% on the same period last year. Ingenia is now the largest owner of holiday parks on the East Coast. The two most popular regions in Australia for caravaning and camping are both heading north and heading south out of Sydney. These are two markets where Ingenia is the clear, unassailable market leader. Our group continues to prioritize our ESG program, which remains core to our strategy and lines with our vision, purpose, and values. We remain a leader in diversity and inclusion, we are well advanced with our Green Star strategy for pending new lifestyle community developments. I'll now just touch on slide three, which is our results summary. As previously noted, today, Ingenia announced a solid result, not without its challenges. Our revenue was up 32% to AUD 173.6 million. Our underlying earnings per security were up 57% to AUD 0.085 per security. Our lifestyle rental EBIT was up 65% to AUD 16.7 million. We've commenced four new lifestyle projects, as I previously outlined. I'm now gonna hand over to Karen to discuss in more detail the group's financial performance and capital management. Thank you, Simon. Turning to slide six, the December 2022 half year result represents a positive operational performance across our tourism and lifestyle rental portfolios. This has been tempered by the challenges faced by our development business, which has impacted the first half result and will continue into June. Non-development revenue grew 44% through our rental and tourism portfolios, and this underpinned the EBIT growth and our underlying profit performance. Statutory profit and EPS declined as a relative impact of revaluations in the current period decreased. This was due to stabilizing cap rates and revaluation uplifts and stronger net operating income being offset by the realization of development profits. A distribution of AUD 0.052 per security has been declared, which is consistent with the distribution of the prior corresponding period. This is in recognition of our moderate growth in underlying EPS and our guidance update. Moving to slide seven, our lifestyle rental business has achieved its strong performance through growth in sites and CPI-linked rental contracts. Increases of circa 5% have been applied to rent reviews across the period, with higher rates applied to those reviews in more recent months. Headwinds of longer construction times impacted home settlements growth in the period. Increased home sale prices have seen gross development profits rise. Higher portfolio costs associated with future settlements has resulted in lower current period development EBIT. Ingenia Gardens continues to see high occupancy and positive rent increases. It's not immune to inflationary influences, which have impacted wages and utility costs. Combined with the sale of two assets in Horsham and Tamworth during the period, the portfolio's EBIT has remained flat. Tourism has performed well with domestic holiday demand enabling strong rate growth. This delivered a significant increase in the portfolio's EBIT. Capital partnership income for the period reflects the group's ability to derive increasing income from the rollout of the joint venture's existing development with the commencement of construction at Fullerton Cove and Bob's Farm. Bob's Farm will commence delivering home settlements for the joint venture in the second half of FY 2023. As a further two projects commence construction later this calendar year, additional development fees will begin to be generated. With the group's asset base increasing by more than a third in the past 12 months, corporate costs have increased significantly. While there are some one-off costs, this rise also reflects higher insurance, compliance, and governance costs, and increased investment in ESG and technology resources. Turning to slide eight, the group's balance sheet is well positioned with an LVR of 30.9%. We are well within our covenants and have debt headroom with undrawn debt, a capacity of AUD 200 million. Combined with strong cash flows from our lifestyle rental and holidays business and asset recycling, we can actively manage the capital requirements of our development pipeline and the group's three-year growth settlements target of 1,750-2,000 homes. Our cost of debt is being actively managed with approximately 50% hedging in place. Our hedging profile is well matched with a weighted average hedging maturity of 3.2 years against an weighted average debt maturity profile of 3.9 years. Slide nine. Following a prolonged period of cap rate compression in our lifestyle rental portfolio, the cap rates across our portfolios have stabilized between June 2022 to December 2022 to 5.86%. The valuations reflect high occupancy, CPI rental growth, and continued NOI growth. We are cognizant of the anticipated market pressure on cap rates and view the quality of our assets and income, particularly with the inherent long tenure in our lifestyle rental portfolio, will position the assets well in response to the change in market conditions. Further, the price achieved for the small number of assets divested during the period supported our December 2022 values. Thanks, Simon. Thanks, Karen. I'll now move on to page 12 and discuss our lifestyle rental business, where we grew the number of income-producing sites by some 21% compared to the prior comparative period. We're also to hold our operating margin in a high inflation market, which demonstrates the quality and resilience of this business. We have high-quality CPI-linked rents supported by government pensions and transfer payments and Commonwealth Rent Assistance. Same-store rent growth was 3.6%, average rent increases across the portfolio for the first half were 5%. Contractually, we could have pushed some of these increases higher. However, we balanced this against residents' needs, particularly those dependent on government pensions. For the first half, we achieved 128 resales, and we're able to achieve an additional 5%-7% rent increase, representing a market catch-up. On slide 15, we discuss Ingenia Gardens, which is Australia's original build-to-rent business, established over 20 years ago. During the year, we're able to hold record levels of occupancy. Our operating margin fell by approximately 340 basis points, reflecting the sale of two communities, as well as the impact of higher costs, particularly wages, utilities, and food. Our unique Ingenia Connect program delivers care, support, and wellbeing advice to over 1,500 residents and delivers significantly higher occupancy and resident tenure. Let's move to slide 14, which is our lifestyle development. For the first half, we settled 125 homes, including 10 in our joint venture with Sun. Average new home price grew by 18% to AUD 480,000, and I would anticipate further growth in the second half, reflecting portfolio mix. Margins contracted materially to 13.8% due to lower-than-expected settlement volumes, launch costs of new communities yet to contribute settlements, and weather-related claims from several of our builders. I would expect both margin and earnings to recover and improve in the second half, reflecting the higher priced projects we now bring into market, as well as a significant increase in settlement volumes. Above-ground margins remain consistent with prior periods, typically tracking between 40% and 44%. As I noted previously, at 31 December, we only had three built and unsold homes, and inventory levels today remain the same. Everything we can build at the moment is selling. Our development business has absolutely been impacted by chronic, continuing labor shortages over the course of the first half. Our three Victorian communities have also been significantly delayed by wet weather. We are presently sitting on over 350 deposits and contracts. Due to construction delays and softening consumer sentiment, some of these will drift into 1H FY 2024. I'll now touch on slide 18. More specifically, we've experienced some delays at several of our new premium projects, particularly Nature's Edge on the Queensland Sunshine Coast, as well as Victoria Point, which is on the eastern suburbs of Brisbane. Over the last 3 months, the time on market for a person to sell their home has materially started to increase. Typically, three months ago, it was approximately 20-22 days, and now it is between 40-44 days, and that is slowing down settlement times. We do offer homes at a wide range of price points, typically now from AUD 295,000, which is out in Logan or at Beaudesert, through to in excess of AUD 1 million on the Queensland Sunshine Coast and the New South Wales Mid North Coast. The spend ratio of our incoming residents has increased to 73%, which means that they're selling more or investing more of the proceeds from the sale of their family home into our communities, which supports our pricing power. Downsizers are increasingly motivated to free up equity as the cost of living and borrowing capacity tightens. The bank of mum and dad, which is the 5th largest residential lender in Australia, is emerging as a very strong driver of the downsizer decision. Moving on to page 19. We are seeing across a number of our development projects some early signs of easing and greater access to trades. In particular, at our Bob's Farm community on the New South Wales Mid North Coast near Port Stephens, our home build times have normalized to where they were pre-COVID, which is typically in that 16 to 18 weeks. At the moment, we have 500 new homes under construction in this financial year, and we have construction underway at 16 communities, including four new communities being Fullerton Cove, Bob's Farm, Victoria Point, and Bargara. We are well progressed with the introduction of new construction partners to further diversify our supply chain. At several projects, we have also started utilizing offsite or factory-built homes to further develop our building capacity. Today, I noted that our single largest builder, which is the McDonald Jones group, has announced their expansion into Victoria through the acquisition of an existing builder down there, which further bolsters our development capabilities in that state. Touching now on page 20. In terms of building diversity and scale, in our journey to achieving 1,750 to 2,000 settlements over the next three years, you can see here that we have nine new communities coming to market that will be contributing homes for the first time from FY 2024. That includes Victoria Point, which is presently under construction with first settlements expected in August of this year. Bob's Farm on the New South Wales Mid North Coast, where we expect settlements from May or June this year. Fullerton Cove, which is again on the New South Wales Mid North Coast, just north of Newcastle, where settlements will start to commence from mid-2024. Bargara, which is currently underway, on the coast near Bundaberg. Our Beveridge project in Melbourne's northern growth corridor, which again is presently under construction. Our Beaudesert community, where first settlements will be happening in May of this year. Over the last few months, we approved a final approval for our Sunbury project, in Melbourne's northwestern growth corridor. We will be commencing construction at our Morisset project in April of this year. Finally, on our Nambour project on Queensland's Sunshine Coast, where we have an existing DA, but our amended DA we expect to come out from council very shortly. You can see an incredibly strong and diverse runway of high-quality projects, which will really underpin the growth in group settlements over the medium to longer term. I'm now touching on slide 24. I'll just talk briefly about our holidays business. This business is delivering extremely strongly at the moment. earnings before interest and tax from our holidays business is up 64%. Our margin is up 190 basis points. Across our portfolio of holiday parks from the Great Ocean Road right up to the Great Barrier Reef, we are seeing forward bookings up around 20% on the prior comparative period. We're also seeing a change in Australians' habits, where there's a lot more bookings of shoulder and off-peak, which is really driving performance through that business. Touching briefly on our development partnership with Sun Communities on page 26. In recent weeks, several senior executives from Sun have been in Australia, visiting the five projects and development sites that we have with Sun, of which three are presently under construction, being Freshwater, just north of Brisbane, and Bob's Farm and Fullerton, which I've spoken about previously. They'll be followed up later this year with Morisset, just north of Sydney, and Nambour on the Queensland Sunshine Coast. Our partnership with Sun does expire or comes up for review at the end of this calendar year, and we fully expect that Sun will remain committed to the existing projects that they have in Australia with us at the moment. Under the terms of that agreement, once a development project is sold down to 95%, Ingenia has a 12-month option to acquire Sun's interest, which gives us the great opportunity to continue to feed our origination machine. I'll now close on group outlook, which is on page 32. As noted previously, we are now targeting 370-420 settlements for this financial year. We've had to lower our financial guidance. EBIT now we're looking at 0%-10% growth in EBIT and underlying EPS of between AUD 0.191 and AUD 0.215. The business conditions remain incredibly challenging. Not only are we being buffeted by delays in the time to build a home, but also we're definitely seeing a demonstrable increase in, you know, consumers' wariness to, you know, to commit to a sales journey until their home is completed. We see the opportunity to develop and sell between 1,750 and 2,000 settlements over the FY 2023-FY 2025 year. Over the course of the balance of this financial year, we have a significant number of high margin, high quality projects coming to market which will drive the business forward. With that in mind, I'll now hand over for question time. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Michael Peet with Goldman Sachs. Please go ahead. Hi, Simon and team. Thanks for taking my questions. First one, Simon, just on the build times, can you give us a bit more color into what's happening there? Is it still sort of trades and labor that's the main problem? Maybe if you can quantify. I think you mentioned maybe it was Bob's Farm, 16-18 weeks, but maybe just across the group on average, what the build time is at and where you think you can get it to in the next sort of 6-12 months. Just another part to the question is just with that consumer change possibly where they wanna see a completed home, what's the strategy there? Will you be building more sort of inventory homes to sort of have them ready or just wondering how you're gonna manage that? Cheers. Thanks, Michael. Pre-COVID, you know, back in 2019, it would typically take us approximately 16 weeks to build a home. At the moment across the portfolio, that is typically between 32 and 36 weeks. 12 months ago, we were significantly impacted by delays in being able to access materials such as steel, timber, gyprock tiles. We now have great visibility on the material side, and we are seeing a significant moderation in the inflation that we've otherwise experienced with building materials. Not seeing a lot of retracement, but not seeing the sort of gapping upwards in, particularly in the cost of, or price of steel and timber that we witnessed about a year ago. What we are experiencing at the moment is just a real challenging environment for consistent access to trades. The two worst markets that we're in at the moment is on the Queensland Sunshine Coast, particularly at our Nature's Edge community, where, you know, homes are taking in excess of 32 weeks at the moment. A lot of construction activity on the Sunshine Coast and sometimes trades, if the surf's up, just go missing or don't turn up on site. Secondly, down in Victoria, where we have three projects under construction. We've got the expansion of our Lara community, we've got our Parkside community in Ballarat, and we also have our Beveridge community in the northern growth corridor of Melbourne. Again, the build time across each of those communities would be in excess of 30 weeks. On the flip side, you know, probably our two best performing communities at the moment in terms of build times would be up in Hervey Bay where that's our largest development project at the moment. The build times there would be, you know, sort of in that 16-18 weeks. Our Bob's Farm community, which is on the New South Wales mid-north coast, again, that would be similar 16-18 weeks. It's not a consistent theme across all projects, Michael Peet. Certainly, in Queensland and New South Wales, with the exception of the Sunshine Coast, you know, in the conversations I'm having with the owners and CEOs of our building partners, you know, they're talking about, you know, more trades becoming available, people looking for work. If you look at the number of new home approvals and the number of, you know, from the Housing Institute, the number of new home commencements, there's definitely, you know, a tapering off in new home starts, and we do expect that that's gonna free up trades at some point in time later in this calendar year. That could be potentially offset by, you know, the significant government infrastructure works in place at the moment. We're not seeing a lot of catalyst for change down in Victoria at the moment. Seeing our largest home builder, McDonald Jones Homes, who, you know, are our largest home builder, seeing them move into Victoria, I think is a really positive step. We have started to introduce new builders into the mix, as I mentioned, at our Lara expansion project, out in Geelong and at our Beaudesert community in Queensland Scenic Rim, we have commenced introducing two-bedroom modular homes manufactured offsite to supplement the onsite construction that is presently underway. In terms of, you know, your second question there about consumer confidence, you know, we're remaining committed to continuing to build these homes. We know from experience, you know, over the last eight or nine years that we've been doing this building, that the more homes that we have on site, the more homes we can sell. You know there's a lot of... You know, the decision to move into a lifestyle community to sell out of your family home where you've raised your kids for 25 years, you know, is a very challenging and stressful decision. Sometimes, you know, prospective residents, you know, are looking for reasons to delay the decision or to slow it down. You know, we do think that having more stock available, enabling our residents to touch and feel the homes, is an absolute, you know, positive development. There are a number of communities where, you know, Bob's Farm, for instance, and also, at Beaudesert, where we don't presently have a display home. We're frantically trying to build that. The same at Victoria Point. You know, there is a little bit of a catch-up to occur, but we are gonna watch our inventory levels, you know, very closely. This financial year, we're building 506 homes, and we're forecasting to settle, you know, between 370 and 420 homes. We'll be watching our inventory levels very closely. You know, at the end of the first half, we had three built but unsold homes, of which two have subsequently settled. At the end of January, the inventory levels were again extremely low. At this present point in time, every home that we've built has sold and settled. In talking to, you know, the 30+ salespeople that we have across the 16 communities we have in market, you know, they're definitely feeding through, you know, stories of, you know, delays in residents making the purchasing decisions, wanting to see their completed home. We're also conscious that, you know, CoreLogic put out some data yesterday which showed that the average time on market across the majority of the regional locations where Ingenia's building, the time on market, so the time from a resident listing their primary place of residence to that home, you know, having a contract on it, has extended from previously it was 20-22 days, out now to somewhere between typically 40 and 44 days. That's just slowing down the, you know, the purchasing decision. Just a couple of follow-ups, if I may. Just on the first sort of six weeks of the half, what are you seeing since January in terms of customer, activity, in terms of inquiry rates? Just how are you managing the 350 sort of deposits? Is there any sort of change in the dropout on deposits, given the delays in building? Good. Look, that's a great question. I'll make a couple of higher level comments and then, joined here by Kate Melrose, who's our General Manager of Sales, and I'll get her to. You know, Kate's in that business a lot more day to day than I am, so I can get her to add some granularity to the question. Yeah, I think, you know, what profoundly changed, Michael, is that with the last rate increase at the beginning of this month, and then, you know, the commentary from the Reserve Bank governor, during those Senate inquiries, I think that, you know, frightened a lot of people who previously had been thinking that we were approaching, you know, the end of the rate increase cycle. Now, you know, you know, people are clearly aware that there's a minimum of two and possibly, you know, another three or four rate increases to come. I think that has, you know, spooked the market. The fact that people are, or some incoming residents are reluctant to put their home on the market until they know definitively when their new home that they're buying from us is gonna be ready because there's no rental accommodation available in, basically, in any capital city or any regional location. That makes people, you know, extra cautious. That's really a couple of, you know, observations from the top. I'll hand over to Kate now. Thanks, Simon. Hi, Michael. How are you? Good, thanks, Kate. I think, to that question, with regard to lead generation, we're seeing leads holding strong. There's certainly no slowing of the overarching demand for this sector. We're coming off the back of a period of pent-up demand from consumers who have stayed in place to ride the property wave and the property price growth. They've then faced three years of COVID. We've got sort of five to eight years of pent-up demand for this sector. Globally and holistically, I don't see a slowing in the, in the appetite for the product. What we are seeing, though, is, to Simon's point, lack of rental, fear of being homeless. If I sell too early, they're quite aware of the very real and broad impact on construction delays. They're hesitant to go to market too early, but then they're also conscious that they need to get to market 'cause days on market's blowing out. That's causing some uncertainty. To the point Simon made earlier, equally, interest rate rises are a two-edged sword for our market and the bank of mum and dad, to both support kids through this period, and also they're seeing a once in a generation opportunity maybe reemerging for their family or children to get onto the property market or trade up. That is in effect driving into our, into our buyers', you know, desire to downsize, and that's a positive impact. The major challenge we've got here is just timing. We all know that people are sitting on the sidelines, and auction clearance rates are bouncing all over the place. They were down last week. They're back up this week. That's our only challenge. It's a timing issue, no lack of demand. Great. Thanks, Kate. Thanks, Simon. Appreciate the color. Thank you. Your next question comes from Solomon Zhang with JPMorgan. Please go ahead Morning, guys. Thanks for your time. Two questions from me. Just firstly, just on your degree of confidence in your revised settlement target for FY 2023, as well as your three-year target. I guess, what are your best case assumptions around the normalization of construction conditions and residential sales velocity? Do you sort of assume current conditions don't improve into the midyear or there's some mild improvement there? Yeah, for sure. I guess in terms of this year's settlement range of 370, you know, to 420 new home settlements, our latest internal forecast is certainly well above the 370. You know that, you know, the market would need to deteriorate further, you know, for that to become a reality. You know, there is significant uncertainty out there, and it really is in the last very short period of time that we've, you know, had to change our guidance. Just, you know, I think with the commentary around the last RBA rate increase, I think has, you know, changed the absolute near term view from prospective residents. You know, we have had a couple of builders, you know, case in point would be, you know, our Victoria Point project, where up until very recently, you know, we were firmly on track for new homes to be available for settlement in late May or early June. Each of those homes will be selling for in excess of AUD 800,000 at a very attractive margin. You know, losing 11 settlements out of that project has a quite a significant impact on group earnings as the margins on those homes alone are typically around double what we have across the weighted average of the portfolio. In terms of the confidence around the 3-year target, look, we absolutely have the pipeline of projects to deliver that volume of that volume of supply. You know, in the presentation there, I stepped through the nine new projects that currently haven't contributed one settlement to the business that are either coming out of the ground right now or are about to commence. You know, we have absolute confidence that we're gonna be able to, you know, to build those homes. We have, you know, the biggest bottleneck in the business, and it's been the same for, you know, at least five years, is finding the land, it's taking it through the approval process. You know, all nine of those projects have DAs in place. Nambour, we're amending the DA, so that takes out a lot of the, you know, the risk there. Look, in terms of, you know, your question around, you know, the builders, we are expanding the panel of builders that we use. Our two main builders who we've been using for in excess of five years, are continuing to work with us, and then we're supplementing them with new builders. We're also introducing prefab homes at two of our communities, being Beaudesert and Lara. I've got Von Slater here, who's our head of development, and I might get her to add a few comments to that, Solomon. Thanks, Solomon. Obviously, it's been a really tough market for our building partners, but, you know, we're, I guess, somewhat buoyed by the feedback that we're getting out there, and even on our most difficult projects that Simon outlined earlier, there are early signs that there are more trades available at the front end of the development as the pipeline of build over the last few years, I guess, starts to flush through and minimizes with the lower approval rates. We're certainly watching that, watching that closely, but we're not necessarily assuming in our numbers that that's just gonna happen immediately. We're taking a cautious approach there. I think as well, obviously you'll see with our growing portfolio, and Simon touched on it briefly, that, our building partners are fundamental to that. That's both the quality of the builder and I guess, the diversity we have amongst our building partners, and that's been a real focus of ours to really, I guess, not just deliver on this year, but really focus on that pipeline we have ahead of us. Great. Thanks for that. Second question was just on, I guess, the balance sheet and the funding position gearing did tick up a bit, but obviously impacted by the low operating cash flow. Could you just perhaps talk through when you expect the business to be sort of self-funding, given, you know, you've got a bit of CapEx commitment in the short term, but you've got the ramp up of development earnings and the annuity stream coming through. I'd be interested in your latest thoughts given the current conditions. Look, I'll make some comments I might ask Karen, our CFO, to add some color there. You know, firstly, you know, we're categorically not looking to raise any equity in the headstock. Can't be clearer on that. We've already divested three communities. We have an additional four communities where we've, you know, we've got offers, where the purchasing entity is undertaking due diligence at the moment. You know, whilst all four of those may not proceed, you know, we would expect that quite a number of those would. Beyond that, we have outlined another four or five communities that we're potentially looking, you know, to divest. That is really about, you know, maximizing the portfolio quality. There's a few geographic markets that we feel that we don't, you know, necessarily need to be in, and trying to prioritize capital to be available for both development but also reinvestment in our existing, you know, holiday communities and rental communities where we can typically get a return on invested capital of in excess of 15%. Now we remain in discussions with Sun Communities about extending our development partnership, which has now been running for over four years. I'll be catching up with, you know, Gary Shiffman, who's the CEO and Managing Director of Sun Communities next month. We're also in discussions with a number of other capital partners. At this point in time, the cash flow, as you pointed out for the first half, was impacted. You know, we have 506 homes under construction for this financial year, of which we've settled 125 as at the first half, including 10 in the partnership. We have a significant number of homes presently under construction and the level of working capital we have tied up in inventory is, you know, is higher than what we've had previously. You know, that's really important to make sure that, you know, as we complete those homes, residents we expect will have confidence then to proceed, and we'll be able to, you know, monetize that inventory and convert it into cash flow to enable us to, you know, reinvest into other projects. With that, I might just hand over to Karen. Hi, Solomon. Yeah, there's no doubt, like Simon said, there's a number of projects that are coming out off the ground for the first time, which will require some EMW works and costs over the next six months. I'll highlight that some of those projects are in the joint venture, so we will have the support of Sun Communities from a capital perspective. Also the joint venture has non-recourse debt facilities in its own right as well. I guess that's the first point to call out. I think the other thing that I highlighted in the notes that I was making in relation to the capital management, we will actively manage the phasing as best we can the projects. We have that capacity to work with the development team, as well as both the portfolio managers as to when some of this EMW work occurs across the projects. You know, we have good relationships with each of our developments, and even on the rollout of the, of the construction of the homes, they will be phased as well. That's great. Maybe just to follow up, I think you guided to about AUD 100 million or AUD 220 million of CapEx across sort of Estate Master Works maintenance and expansion CapEx. Is that broadly the run rate we should expect over the next, you know, 12 months or so? Are you sort of paring that back a little bit given the hold-ups and perhaps just on the landbank restocking as well, the run rate there? I think, I think on the CapEx on the EMW works, we had, I'm just looking at it. In the first half, we incurred about AUD 40 million on EMW, there's probably around AUD 50 million-AUD 60 million in the second half. I think we do have enormous capacity to phase that, and we'll be working with Von and her team to look at which of those projects, given where we're looking at settlements, as to how that can be phased. That's not just in terms of the staging of some of the civils on where the homes are being built in the stages, but also things like where the community facilities are. Lastly, in terms of your last question there about land banking, whilst we're not seeing any distress, in terms of buying land, what we are seeing is that vendors are, you know, more willing to enter into longer dated transactions. That is, you know, where we don't have to sign a contract until we get a DA or where we get a, you know, a two or three-year period of time to get a DA before the, you know, before the contract becomes unconditional. You know, we're certainly not looking to, you know, acquire land outright without approvals and with no time to procure a DA. You know, the environment for, I guess, continuing to invest in our landbank, you know, it's that continues to be, you know, quite favorable at the moment. 12 months ago it was absolutely a seller's market, but, you know, what we're seeing at the moment is, you know, our ability to negotiate much better terms than we have for the last four or five years, you know, is absolutely the case. We have absolutely moderated. We stepped back our M&A program. We don't presently have any mature communities that we're planning to acquire in the near term. You know, we would have maybe 15 or 20 development sites that we're looking at, but, you know, most of those I doubt we would proceed with or we'd only proceed if we can get a, you know, acceptable terms on that. You know, we're watching our gearing, our LVR very closely. You know, our covenants with the banks are well above 50%, but, you know, our current, I guess, target range is in that sort of, you know, around that 35% LVR, which, you know, we've still got quite a significant amount of, you know, headroom to go. You know, the weighted average tenor of our debt is quite long, and we do have in place around 50% hedging, I'm pretty comfortable with the balance sheet settings at the moment. Would you look to pare back some of that holiday park and lifestyle rental expansion CapEx given the EMW priority or? Yes. Okay. Thank you. Thank you. Your next question comes from James Druce with CLSA. Please go ahead. Good morning, Simon and team, thank you for your time. Just sort of the third downgrade now since July. I think it's fair to say that peers haven't had quite the same experience. I'm just trying to figure out what exactly keeps tricking the business when you're trying to forecast things out. Yeah. Thanks, James. Look, I'm not sure I would say it's three downgrades. Certainly, last year, we left our existing guidance in place, said that we wouldn't be at the top end of that range anymore. We were, you know, traveling towards the bottom end. Yeah, I think you do make a very valid point and, you know, some of our assumptions around our ability to bring the product to market have probably been a little bit ambitious. You know, I've been building these communities, both retirement and MHE for over 20 years now, this is without exception, the most challenging period. You know, having to work through, you know, a significant shortage of qualified trades. Before that, it was a, you know, significant tightness in procuring the materials. We've had to deal with significant adverse weather events. You know, it's been really a, you know, a perfect storm. You know, I think your criticism is fair and, you know, we have really had a look at this forecast and I think, you know, that's why the range that we've put out to the market today, and it is very disappointing to be in a position where we have to do that. You know, we've put in place a broad target to really try and, I guess, put a bottom end to the range that, you know, we have very good confidence that we'll be able to achieve. Also the top end of the range where, you know, I think there's an absolute pathway to achieve that. You know, we have moderated our three-year target from what was previously 2,000-2,200 down to 1,750-2,000. I think for the first time, we've given you a bit more granularity of the key 9 projects which are not contributing any settlements at the moment. Those 9 projects that we'll be bringing to market over the next 12-18 months, which will, you know, underpin that 1,750-2,000 new home settlements. You know, there absolutely remain risks. You know, I guess there's a lot of buyers out there who are waiting to see, you know, when the market bottoms. You know, if you look at the Financial Review and the broadsheets today, you've got one investment bank calling a further 15% decline in the housing market, and then John McGrath calling the bottom of the market. There's a lot of conflicting news out there and, you know, that's why we've taken a very prudent, you know, cautious approach in setting this guidance. You know, the unassailable fact is that there's over 600 people turning 65 every day of the week. Manufactured housing communities are proving to be very popular with downsizers and retirees. You know, to Kate's point, these settlements will drift into the next financial year, but they're not disappearing. The number of people we've got on a purchase journey, you know, remains incredibly strong. If you add up all of the people in Australia that are doing land lease communities, whether it's Stockland, Lifestyle Communities, GIC, and others, you know, we're barely as an industry, delivering 3,000 new homes a year against 600 people turning 65 every day of the week. The demand is absolutely going to be there. We've got six months of turbulence and, you know, I think we'll be very cautious when we put out our guidance for next financial year. You know, I take on board your feedback. Just talking about the sort of revised medium-term settlements. You sort of touched on this a little bit before, but can you just describe broadly what normalization of build times you're assuming for that medium-term forecast, and whether demand is average or below average in terms of buyer appetite to those assumptions? Yeah, that's a great question. Look, extending out the build time from, you know, 16 weeks out to 32 weeks, combined with, you know, wet weather delays, particularly in Victoria, which, you know, has significantly slowed down our civils construction. At one of those projects, Beveridge, we actually had to demobilize the civil contractor because the site was too wet for three months. You know, that has a massive impact, and that of itself, those delays probably impairs our ability to build, you know, 300 homes. The biggest bottleneck that we faced over the last five years and where we've put incredible focus into is making sure we have a great runway of DA-approved projects ready to launch. A lot of those projects we're bringing to market are in markets where we will be the sole participant, where we'll be a price maker. I think the absorption rate and the ability for us to, you know, to attract very high and profitable development margins is, you know, very strong. You know, in the Mid North Coast where we've got two projects, there's no competition in that Port Stephens, Newcastle area. At Morisset, which is, you know, on the New South Wales Central Coast on the western side of Lake Macquarie, you know, median house price there is around AUD 700,000. There's not one MHE in planning between south of that project down to Wollongong. We have got effectively the 5 million people in the Sydney catchment plus the Central Coast, and we've got the only product in town. Our pricing power on projects like that is absolutely immense. You know, we've not only got the projects to bring to market to support that 1,750-2,000 settlements, but in a lot of those markets, you know, we've got the only show in town, and I think, you know, that really underpins the value that we've been able to create and capture over the last, you know, four or five years when we've really had a focus on putting, you know, that pipeline in. I think, you know, even at an absorption rate of, you know, four or five settlements a month across nine new projects, if you add that onto what we're building this year, that gets you up to a number approaching 1,000 homes a year. We've got these great pipeline of projects. Most of the new communities we're developing, there are a couple of exceptions, are typically in that, you know, 3, 4, 500 homes. That means you can be in market for four or five years, you know, consistently selling down 60 or 80 homes a year. You know, when you multiply that across 15 or 20 communities, you know, the output of that becomes quite high. You know, clearly we're in a period of volatility. You know, a lot of residents are waiting for the market to bottom. They're waiting for certainty around when interest rate increases are going to pause. You know, balanced against that is that there's a lot of families having discussions that, "This is the best time to get my kids into the housing market." You know, they're prepared to transact and, you know, the bank of mum and dad is the fifth largest residential home lender in Australia, and that's driving a lot of people. It's also that 90% of our development pipeline is in Queensland and coastal markets, and that's increasingly where retirees wanna live. Case in point around Queensland, that's where a lot of first home buyers are moving based on relative affordability, and their grandparents and parents are following them. You know, I think we've got a great pipeline. You know, we have to satisfy the market that we can manage the execution risk and, you know, we do expect that over the next six months, that selling conditions will start to improve. It's just the next, you know, short period of time is gonna be a bit volatile. All right. I get that you've got a number of projects coming through. The message there, it sounds like you are assuming a bit of a normalization for build times over the next two years and demand remains reasonably healthy on a sort of like-for-like basis. That's right. you know, if you look at the number of new home approvals, so the number of people who are lodging a DA for a house, that is dropping off. If you look at the HIA statistics, the number of new home builds that are commencing, again, is dropping off. you know, what we've really been working through and caught up in the washing machine over the last few years is that when COVID started to impact the Australian economy, the government or, you know, state and feds pump primed the economy through stimulating the residential housing market, through making available stimuluses. That therefore was a sugar hit to the construction industry. We're only now completing the build through of that work, but there's not a huge volume of new home commencements, you know, about to roll through, particularly freestanding residential homes. You know, we do fully expect that, you know, more building capacity will become available and, you know, that's certainly not, just wishing and praying for that to be the case. That's sitting down with the CEOs, the owners of the major building partners and, you know, talking to them about their forward order book, sharing with them the details of our upcoming build. That's really how we're trying to mitigate that. We're also, you know, sprinkling prefab homes into a number of our communities, and if that ultimately proves to be successful, then I would imagine, you know, that that will be, you know, rolled out across a lot more projects. Those prefab homes, they can typically be fabricated in eight to 10 weeks. you know, I think that's a great solution that Yvonne and her team have, you know, really, thinking outside the square have brought to market. All right. Thank you. Do you have any insight as to the lag between immigrations obviously picking up and the time it actually filters down to the trades that you need? Look, not, you know, hard data. I mean, certainly anecdotally, we have worked with a number of our building partners to help them sponsor qualified trades out of Asia with 457 visas. You know, that maybe half a dozen trades we've helped a couple of our Queensland builders, you know, to procure. Certainly, you know, if you look at CoreLogic's put out a recent report on the state of the rental market in Australia and across most capital cities there's, you know, no vacancy signs up everywhere. You know, as to your point, as you have overseas migration tick up, you know, everyone moving into Australia needs a home to live and invariably they rent first before making the decision to purchase. You've got that coupled with the Chinese government's, you know, recent decision that you can't study online anymore. There's, you know, a significant influx of Chinese students moving into Australia with their families and they're looking to typically acquire homes or apartments. You know, I think the underlying demand of that resi housing market is extremely strong. It's just, you know, it's been a really challenging time with build times and whilst we see some green shoots, some, you know, emerging encouraging signs across our portfolio of 16 projects in market, there's probably, you know, Yvonne, 3 or 4 that were at 16 weeks or under, and the balance are slowly starting to come in. Unfortunately, you know, the build times for this financial year are gonna preclude us hitting our previous settlement guidance. Okay. One more question, if I may. You might have sort of covered this a little bit with Solomon's question. You're talking about recycling capital and some asset sales coming through. Did I get the message right that that was more the gardens business that you're gonna look to recycle more of? Is that just other projects that you have in the lifestyle business or otherwise, which just aren't in your geographical sort of sweet spot? No, I didn't say that. You know, we've divested three assets to date, which is two Ingenia Gardens villages and 1 holiday park. We have a further four communities that, you know, are under offer, where the purchaser is currently doing, you know, hard cost due diligence. On top of that, you know, there's another four or five communities that, you know, we're in the early stages of bringing to market. You know, the capital is gonna be released from that divestment program. We'll support the significant investment in EMW that we anticipate making over the next, you know, couple of years. You know, we're not, you know, we're a motivated vendor, but we're being very sensible with pricing. The settlements we've achieved to date have been at a premium or at book value, and that's where we anticipate these settlements occurring, and we've significantly stepped back our acquisitions program and any land that we're looking at would typically be secured under a two or three-year option or a contract subject to getting an acceptable DA. Those divestments, you know, would be across a mix of all the property types that we currently own. All right. That's clear. Thank you. Thank you. Your next question comes from Andrew MacFarlane with Jarden. Please go ahead. Hi, guys. Thanks for your time. Just two for me. I know we're conscious talking about guidance a little bit. I'm just trying to get an understanding of why we've got a reasonably wide guidance range even from here, given the time of the year. Just keen to explore. You talked us through a little bit in terms of development. I'm just keen to unpack what's sitting in the thinking for the bottom end of the range and what's sitting in the thinking for the top end of the range. Yeah, look, that's a great question. you know, the thinking around the bottom end of the range is really more about near-term consumer sentiment. you know, in terms of the homes that we are gonna be able to bring to market, you know, we have 506 homes under construction this financial year. you know, we'll certainly be able to build and have ready for settlement well in advance of thirty June in excess of 430 new homes. You know, we are conscious that, as I mentioned, our very high margin, you know, Victoria Point project, where we have over 60 qualified, interested buyers chasing 11 initial release homes, unfortunately those homes aren't gonna be ready until July or August, but they would've, you know, comfortably sold themselves out on a, you know, a number of times if that product was available. The nervousness and I guess the, you know, reason why there's a quite a wide range is really, you know, just based on the conversations that we're having with our sales team on the ground, looking at the time on market data, which, you know, CoreLogic released yesterday, which has shown that across most regional markets where a lot of our communities are, that the time on market has increased from, you know, 20-22 days out to 40-44 days. You know, that's made us extremely cautious and, you know, we really wanted to put out a range there that we felt, you know, there was, you know, absolute certainty we could achieve on the downside, but, you know, still left, you know, there's an absolute clear pathway to hitting that 430 settlements. It's just, you know, it's really hard to determine where consumer sentiment's gonna go over the next couple of months. I think, you know, waiting to March and seeing what the RBA does with rates and seeing the commentary that the governor accompanies with that, you know, I think that's gonna be really important. As I noted today, you know, one of the Australian investment banks called out, you know, a further significant decline in residential house prices. John McGrath, I think, called out that we're at the bottom. You know, there's a lot of conflicting views there and we just wanted to, I guess, take a conservative perspective, and that's why we've got quite a wide range of, you know, guidance. It was... You know, I think yesterday there would've been, you know, three or four conversations with the board thinking about, you know, how wide we should set that range and, you know, ultimately we landed at that 50 homes. You know, our current forecast, where we think the most likely is certainly not at the bottom end or near the bottom end of that. We do think that, you know, we've made an allowance for a further softening in the market, should that be the case. Got it. Just one final one from me. Of the three-year revised target, how much of that do you expect to contribute from the JV versus your balance sheet? Look, that's a really good question. I think, of the existing 16 projects in market, there's, three that are in the JV. The vast majority of the contribution from those 16 projects is in the headstock. Of the new projects we're bringing to market, approximately half of that would be, in the JV and half would be in the headstock. Yeah. That's helpful. Thank you. Thank you. Your next question comes from Rushil Paiva with Ord Minnett. Please go ahead. Hi, Simon and team. Thanks for taking my questions. sorry to dwell on guidance, just following on from a question before regarding the normalization of construction conditions or the construction supply chain. obviously, you know, what you've alluded to in terms of lead indicators starting to decrease and potentially freeing up supply, I completely acknowledge that. There also obviously is a backlog to work through. I'm just wondering from FY 2024 or, and/or 2025, when have you. I guess, what are your assumptions for the normalization of construction conditions? Do you expect that to occur from the start of FY 2024? How have you phased your expectations within guidance for that normalization? Yes, great question. I think across New South Wales and Queensland, where, you know, a significant amount of those new communities are, you know, we would absolutely expect a normalization in construction time, so, you know, 16-18 weeks. Now Victoria, we're probably taking a bit more of a cautious approach. You know, we're looking to introduce at least one more new building partner into that market. You know, so we've got nine new projects that we're bringing to market, of which, you know, two of those are in Victoria, and the other seven are in New South Wales and Queensland. Yeah, we do expect construction times to normalize, and that's based on, you know, the data around new home approvals, the HIA data around new home commencements, and also the conversations that, you know, Vaughn and I are having every week, every month, you know, with key executives from our builders and also the new building partners that we're looking to introduce, into the mix. Sure. Thank you for that. Just sticking on guidance, but looking across the rest of the business, obviously the change in settlements will be the key driving factor there. Just wanted to know if there are any changes to your expectations across the board of business. It looks like operating costs potentially were a little bit higher across the board in terms of the EBIT and EBIT margins for some of the operating segments. Just wanted to get your thoughts on that. If there's any change to either the top line or the costs within each respective operating segment. I don't think we've had any questions on the operational segments of the business. I guess, you know, within holidays, you know, we do think that we're probably approaching a point where, you know, rate growth is largely being captured, and now it's gonna be, you know, holding on to the rates that we've got, which are, you know, 30% or 40% above pre-COVID levels, and really, you know, focusing on building out the shoulder and off-peak times. I do think, you know, to my commentary, that it's gonna be quite a while until Australians en masse travel overseas. Flights are expensive, it's very inconvenient. As households tighten, you know, their budgets, you know, a significant number of people are coming off fixed rate mortgages in the next quarter that, you know, holidaying domestically, because people will still holiday, will become and remain, you know, increasingly attractive. I would see there's, you know, further margin expansion or certainly consolidation opportunity there. In terms of Ingenia Gardens, where, you know, the margin did track backwards, that was, you know, as a result of some significant increases in labor and utilities and food costs, and we expect some of that level of increase to normalize. It was also impacted by volume because we divested two rental villages in the first half of the year. Across our rental communities, you know, where occupancy is around 99%, I do think that, you know, there's gonna be significant continuing opportunity to, you know, to deliver, to capture, high single-digit rent growth, just given that there's such a chronic shortage of affordable rental accommodation in. You know, we have six communities in Brisbane, which has probably got the tightest capital city residential rental market in Australia. We have three communities, you know, in the southeast growth corridor of Melbourne, you know, Frankston, Carrum Downs, and Chelsea. And one on the New South Wales mid-north coast at Port Stephens. You know, there I would think there's gonna be continuing top line growth and margin expansion opportunities. Again, in our lifestyle business, as we start bringing through some of these, you know, significant step up in the volume of new homes, you know, we have a number of communities that, you know, haven't yet stabilized, so I do think there's opportunities there. You know, to Karen's point around discussing, you know, corporate costs, you know, we have seen a significant step up in areas like insurance, in audit fees. There were some one-off costs associated with some executive changes. There's gonna be an element of, you know, one-off costs there, but also, you know, reflecting that since the commencement of COVID, the business has nearly doubled in size. It is a much larger business today than what it was, entering into the COVID time being. You know, we're very vigilant on our cost base, but we are also making sure that we can, you know, if we can deliver that 1,750 to 2,000 new home settlements over the three years, I really don't feel that's factored into the current share price. Great. Thank you. Sorry, I might just get in another two questions if I can. Just quickly on the lifestyle development and the profitability margins. I think prior to this you've spoken to 300-400 basis points of margin expansion there. Now, with the revised guidance, what are your expectations for margin growth in that perspective? Obviously, just acknowledging that some of the higher priced homes that you would be selling might be pushed into FY 2024. Just keen to get your thoughts on that. Yeah. Typically the above ground margin, so, you know, the margin on comparing the revenue that we receive from the incoming resi-resident and the cost of goods sold, you know, that's typically tracking at, you know, between 40% and 44%. Some of our higher margin or higher priced projects, the margin's in excess of 50%. The overall development margin, you know, net of all of the other costs of development and sales did contract this first half, that is substantially just because of, you know, volume. You know, we're clearly expecting a significantly stronger second half in terms of new home settlements. You know, that has a significant, you know, margin impact, just the higher volume of homes being settled and, you know, on a relatively fixed cost of doing business in development. Great. Thank you. Just one last one. You have talked about the Sun JV and negotiations ongoing there. In the past, you've also talked about potentially seeking further strategic relationships. Is that still something that's being considered? Yes, is that something that's still being considered? Sorry, I just missed that question. Could you just repeat it? Oh, no, that's right. Sorry. In terms of you mentioned that the discussions with Sun Communities in terms of the JV continuing is still ongoing. In the past, you've also mentioned that Ingenia is considering other strategic partnerships. Is that still being considered or has anything changed on that front? No, look, we're absolutely in discussions with other capital partners. you know, we've had a fantastic relationship with Sun. you know, they've been a very supportive capital partner right through COVID. you know, we've learned some incredible IP off them during that period of time. you know, we absolutely, you know, look forward to that development partnership continuing. As I mentioned 2 weeks ago, several members of the Sun executive team are in Australia looking at the projects we're developing together, and they were very pleased. Next month, you know, I'm planning to catch up with Gary and some of the other Sun executives over in the U.S. I've, you know, confidence based on everything I'm hearing that that partnership will continue. We remain in discussions with a range of other capital partners about, you know, other opportunities across the business, whether that's, you know, in holidays, whether it's in Gardens, whether it's in other parts of our lifestyle business. Categorically, we are not looking to raise equity in the headstock. That's great. Thanks a lot for taking my questions. Great. Look, we'll have to wrap it up there. Appreciate there's a lot of questions, and thank you for your time today. Donna, Karen, and myself look forward to catching up to everyone, you know, one-on-one over the next couple of weeks. Also, if you have any urgent questions or comments, please feel free to reach out to Donna or drop us an email. Thank you for your time. Once again, apologies for the delay at the beginning. That was outside of our control. Thank you for your time today. That does conclude our conference for today. Thank you for participating. You may now disconnect.