Thank you for standing by, and welcome to the Summerset Group Holdings Limited Half Year 2022 Results Investor Briefing. 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 the number one on your telephone keypad. I would now like to hand the conference over to Mr. Scott Scoullar, Chief Executive Officer. Please go ahead. All right. Welcome, everyone, to our 2022 half year results call. If you hear any cheering in the background, it isn't fake cheering we've put on. There's a protest going on outside, which isn't a protest. It's obviously a protest by the way as well. It's something else. Yeah, just a quick caveat there. You guys obviously know me. My name is Scott Scoullar. I'm CEO, and today, you'll be hearing from me and Will, our CFO. Look, with that, I'm gonna jump straight into the slides. I will go to sort of, and deal with slides four, five, and six sort of collectively together. The first point I'll just touch on is the last six months has been a pretty trying period for our staff out there, particularly on those guys on the front line who have been dealing with Omicron. It's been a real sort of show of dedication and focus to bring the best of life to our residents. I'd just like to take this personal opportunity to thank everyone on that front line for their dedication. In terms of results, there's a number of highlights really to mention. Underlying profit is obviously a record for us in the first half at NZD 82.5 million, up 9% on last year and up 26% on the second half of last year. Up 9% on the first half, up 26% on the second half. Look, just context that relative to the environment we were in. You know, if you think about last year and that first half of the year, we didn't really have any sort of COVID community transmission going on around the community, so the business wasn't really being impacted by that. Relative to, you know, what we've seen this half of this year, quite different dynamics. If you look at new sales settlements of 289 sales relative to the 223 units that we delivered in the first half, and we've made super great progress on that reduction in new sales stock of 66. You know, it's lower. I think from me, from my perspective, you know, we're only really 13 sales, new sales less than what we actually did in the first half of 2021. The first half of 2021 didn't have any sort of, as I said, material level of COVID transmission going on in the community relative to the first half of this year, where, you know, we had, you know, quite a lot of impacts with prospects, you know, are unwell at home or hunkering down for periods of time. So, you know, I think the second point I'd just raise really is, if you look at the number of deliveries, you know, this half in order to sort of achieve those sales rates, we've, you know, dipped into and reduced stock levels, whereas, you know, for the first half of 2021, you had somewhere just over 320 units that we delivered, so significantly more units delivered to be able to sort of sell to. Look, putting sort of context around first half of this year versus, sort of, the first half of last year, I think we've done a pretty strong job. If you come through and look at realized development margin, the NZD 52.3 million, that's up 29% on the first half of last year. Much the same realized resale gains were up 8% on the same time last year. Pretty strong efforts, particularly in that realized development margin space, where the impact of the strength of our supplier relationships and the maturity of our procurement processes has really sort of shone through in that to be able to, you know, get the margin that we got in the first half. You know, we're really proud of that. You will expect to see that come back somewhat, not in the second half of this year, but, you know, looking forward to next year, that will come back within that range of that 20%-25%. The key driver there for that will be the delivery of four main buildings, three next year, but Kenepuru at the tail end of this year. If you think about Kenepuru, once we deliver it in November this year, the bulk of the selling will actually be next year as well. You know, you're gonna see a lot higher weighting than we'd typically normally ever sort of see, the four main buildings all just sort of, you know, essentially selling down in a year with assisted apartments and retirement apartments and care suites. and then the only other thing, look, I'd touch on just at a macro level is sales prices. You know, outside of Auckland, median house prices have obviously contracted around 6%. We've increased prices by around 3%. Even after all these adjustments, we were very comfortable with where pricing sits across New Zealand. Remembering a lot of our prospects are selling homes well above the median house price, and they're often selling, you know, homes that are a lot bigger square meter footage as well than coming into one of our homes. You know, and obviously in Auckland, you know, we're still seeing relative to median house price, where homes are still below the 90% of the median house price. Still feeling a bit comfortable around that. As I said, I think that's sort of borne out in pre-sales, which we obviously see, you know, even in the last four weeks. The last four weeks for us as a business would have been a record four weeks for us in terms of sales. You know, even live as we are sitting right now, really, really strong strength in sales pipeline. Slide seven, acquisitions. Look, three properties there. All properties, we're really proud to have. The Masterton one that's sitting in a brand new subdivision. It's a bit of a lifestyle-y sort of type subdivision, about 400 square meter sections, really nice homes. Look in a different residential property market. In fact, some of those homes are in Lincoln, they're probably NZD 3 million homes. Lovely sort of grand boulevard entrance into there with trees. We have the most on-site, yeah, I think it would be the nicest little suburb within there. The Rotorua site, obviously straight across at the Gondola, and I think that represents itself as a really cool dynamic with, you know, people in our village being able to obviously wander along to the Gondola, pop up and, you know, have a coffee. The site in Mernda in Victoria, that's 30 kilometers northeast of Melbourne CBD. That's in a real significant growth corridor for Melbourne, defined by government, by state government. They announced, if I remember about six to nine months ago, AUD half a billion dollar investment in the town center, the hospitals, like a new hospital there, and a new train station there. Separate to that, if you look at sort of what's parked right next door to us, really, really high quality housing and a median house price in that area, just under NZD 800,000. You know, great broad acre site with a good median house price. The only other thing I'd touch on is just... You know, obviously, we're still largest land bank in New Zealand, but if you think about Australia and you think about Mernda, we're up to almost 1,700 units in Australia now. If you context that back to when I sort of started in Summerset or just before I started in Summerset, that's more in Australia than what we had when we listed in New Zealand. You know, pretty sizable, meaningful land bank starting to develop in Australia now. Slide 19, COVID update. Look, you can see 3, just over NZD 3 million worth of COVID response expenditure. Again, just to reiterate that, you know, relative to 12 months ago in that first half of 2021, and we'll touch on costs conversations in a bit. We obviously had no COVID costs in that first half of 2021. You know, Omicron has come with a cost. We've spent about NZD 18 million now since the start of the pandemic. In terms of like other two things really touch on in COVID would be, the first one is it's been pretty hard on staff while going through that period of Omicron. You know, New Zealand's been opening up and we're all going off to cafes and having a bit more entertainment, a bit more enjoyment. Through our care facilities and a lot of those times, we're taking a choice to actually increase the level of protection mechanisms there. You know, we'd sort of at times gone down to surgical masks, but then going back in to N95 masks because we're cognizant of community transmission, not wanting to avalanche staff with transmission or transmission into the care centers. You know, being prudent around that, and we're still requiring negative RAT tests for people to go into our care facilities. Again, that's been a meaningful assistance for us in terms of managing, protecting those care environments, but has been tough on staff. You know, as a result of that, we set up at Summerset sort of village reliever program where we're trained to essentially step in and help and support where we had any staffing shortages driven by, you know, sickness within our own staff, which has worked really well for us. Slide 10, our residents. Look, really pleased with our continued focus on improving our resident experience. Over the six months, we've done a bunch of sort of new stuff between just sort of evolving our Summerset Sessions entertainment program, whereby we've had concerts by Will Martin. We've had cooking lessons and recipes with New Zealand's original MasterChef, Brett McGregor, if you know him. Interviews with well-known Kiwis hosted by Andrew Dickens. And we've also had a variety show created by a New Zealand actor, William Kitcher. It's been good to sort of be able to get some of that stuff underway while still in, you know, some pretty challenging times with Omicron. We've also continued to roll out our Summerset signature exercise classes, and even done a bunch of those online throughout the last six months. Outside of that is about NZD four and a half million dollars we've invested in both sort of frontline staff and new digital innovation this year. Which is a combination of the Kaitiaki roles which we announced that we were doing at the end of last year. We've now got about 60 people in those roles across all of our care facilities, helping with high quality social and wellbeing sort of support. Improving independence with things like mobile therapy, supporting access and participation in recreational and diversional sort of therapy. Just a bunch of things that enrich the lives of those guys who are living in our care facilities. You'll also see we rolled out and in the process of rolling out PainChek, which is a pretty cool app that's got really essentially runs on a smartphone, uses AI and facial recognition tech to basically identify presence of pain. We've done a couple of trials on that now. It's been super helpful. It's used by over 1,500 aged care facilities across the world. From what we understand from PainChek crew, we're the first aged care provider in New Zealand to use this tech in our care facilities. Then you'll see just rolling into slide 11, the Lumen portal. Really excited to be able to announce the next steps for us on that journey and partnership with Lumen. You know, that's a purpose-built platform designed to complement residents' lives living in our villages on the independent living side. We completed a pilot on that over the last six, 12 months, and we've just been working with Lumen around sort of functionality we can access there. You know, a super broad range of stuff that gives us. It gives residents ability to sort of access village communication across other residents living in the village, communication with our key staff or our village staff provides, you know, both a combination of video calling and messaging options there. It allows them to book activities, meals, services such as haircuts, integrates with doorbells, lights, intercoms, it can even do medication reminders and emergency call functions. You know, that really is a massive step in terms of platform for introducing technology to enriching the lives of our people living independently. Slide 12 on staff. Look, I'm not gonna talk about because I think it's pretty self-explanatory. Slide 13, our environment. Look, target for us back in 2017 now, when we kicked this off, was we had an initial target for the first five years from 2018 onwards to reduce our emissions intensity by 5%. It's shaping up by the time we get to the end of the year that it looks like we'll achieve somewhere around about 17% emissions intensity reduction. That's a massive effort and, you know, big congrats to the people and our sustainability manager who's driven a lot of that stuff and the people who committed to that within our business. 17% emissions intensity reduction in the first five years is, you know, we're really, really happy with that and places us well towards our medium and long-term targets of that 60% we've committed to by 2032. Well on target for that. You know, obviously, we still remain, to my knowledge anyway, the only retirement village operator in New Zealand to be carbon zero certified and a member of the Climate Leaders Coalition. On top of that, really proud that we took the first step of integrating solar panels into our existing and developing villages, where we started with our Nelson village, which is an existing village, where we've basically put in solar panels on the clubhouse there, and that sort of essentially runs all power for running the clubhouse and for running the heated swimming pool as well. That's our first step in that journey, and you'll see more of that to come over the next couple of years. On the EV side of things, we've continued to make that switch to electric vehicles and continue to introduce EV charging stations across our villages. Making good progress on that as well. Slide 15, the New Zealand development slide. Began construction out at Blenheim Village, which is cool. Now we're up to 16 villages under construction. We're making really good progress on the villages we recently started construction on. Lower Hutt, we've got the first 2 apartment blocks being developed, and we've got a bunch of residential homes being developed on that site at the moment. Cambridge, we're running ahead of schedule there. We possibly even may deliver a couple of units before the end of this year. Prebbleton's on track to open later this year. Waikanae's finished all our earthworks on Waikanae, and we're just starting our civil works on Waikanae at the moment. For our larger sort of commercial stuff, Kenepuru main buildings on track to be delivered later this year and all the other three main buildings that I talked about right at the start of this conversation, we have four main buildings sort of centrally running probably next year. All the other three that are delivered on next year are all on track as well. Construction's going well. The development pipeline on slide 21. Look, I'll just reinforce 88% of our New Zealand land bank is fully consented now, so, you know, pretty strong position. Slide 23, we just get to that. Look, six Australian sites now in terms of the first village, Cranbourne, obviously fully consented. We've completed all the earthworks. We're underway on civils now. We had some hold-ups with roading infrastructure that was provided to the village that impacted us for a period of time there, but that's all been resolved. Melbourne Roads, VicRoads, all those guys are doing that infrastructure now. That pathway's cleared, civil work's underway, and expect first deliveries of villages in 2023. Consenting's progressing really well on our Truganina site, and we've lodged now the planning application for Torquay. As I mentioned before, you know, that pipeline's becoming pretty meaningful, and we're starting to really get into the stages now where we're advancing sort of planning progress, consenting progress on some of those sites. Look, with that being said, I will hand over to Will to cover off the accounting stuff. Thanks, Scott, and good morning, everyone. Moving to slide 27. We've reported net profit after tax of NZD 135 million for the half, down from the 264 in the first half 2021, primarily driven by fair value movements in our investment properties. Our total revenue of NZD 114 million was up 20% on first half 2021, with increased revenue seen in care fees, village services, and deferred management fees. Total expenses increased to NZD 108.6 million, with almost half of this, or about NZD 10 million, relating to growth in our developing villages. Of the balance, about a third relates to investment in care and improvements in food quality. About a third relates to those COVID costs that Scott spoke about, and about a third relates to general cost inflation, and investments in sales and marketing, for new developments, delivering in future periods. Turning to slide 28, fair value movement. Our fair value moved 137 for the half. There were four main drivers of this. Firstly, the value of retirement units built of NZD 95 million. This is the value of our 223 new units delivered in the period, all of which were villages. Secondly, the increase in retirement unit pricing of NZD 55 million, reflective of continued, albeit modest, price increases through the period. Thirdly, the reversal of unsold stock discounts of NZD 13 million. Finally, uplift in the value of the land bank, which relates to increases in valuation for our Australian sites. These were partially offset by the change in growth rate assumptions applied by our valuers. Turning to slide 29, underlying profit. Pleased to announce a record half-year underlying profit of NZD 82.5 million, up 9% on first half 2021. Our recurring earnings from our core business functions continued to perform well. We've seen double-digit growth in care fees and village services, as well as deferred management fees. Average realized gain per unit is up 17% on first half 2021 to NZD 144,000. Overall, when normalized for resale volumes and COVID costs, we see recurring earnings of NZD 36.6 million, up 5% on first half 2021. If we please turn to slide 30. Our net operating cash flows of NZD 190.4 million are down 14% on first half 2021, but up 19% on the second half of 2022. Now, three main factors. Firstly, lower volumes of new sales settlements relative to first half 2021. Noting that receipts from resident loans relating to new sales were around NZD 23,000 per unit above the prior period. Secondly, timing variance in resale cash flows of about NZD 17.5 million. Thirdly, increased expenditure relating to investment in food and care, COVID-19 and the general inflation outlined on previous slides. Overall, when adjusting for the timing of resident receipts for resales, our investment in the quality of care and food and COVID costs, the net operating business cash flow position for the first half 2022 is largely consistent with the first half 2021. Investing cash outflow of NZD 267 million, increase in line with growth in development, including earthworks and civil expenditure on our new sites of Blenheim, Cambridge, Lower Hutt, Prebbleton and Waikanae. Our main building spend in Bell Block, Kenepuru, Papanui and Te Awamutu. Kenepuru delivering later this year, with the others expected to deliver in 2023. Further construction on basement and apartment blocks at our St. John's site. Turning to the balance sheet. Our balance sheet continues to grow, with total assets now NZD 5.4 billion as at 30 June. Retained earnings are now NZD 1.7 billion, up 29% from NZD 1.3 billion at first half 2021, which continues to help strengthen our balance sheet. Net tangible assets. The net tangible assets slide just demonstrates the growth in NTA per share. Our NTA per share of 891 is the highest of all listed operators in the sector, and NTA has grown from NZD 1.09 when we listed in 2011. Now moving to slide 33. Our net debt has increased from NZD 742 million at December to NZD 860 million at June, with the primary driver for this being increased development at our new sites, particularly the main buildings and land purchases. We remain pleased with where our capital management is at the moment. Gearing is now 29.4%, up slightly from the 27.8% at December. Our core gearing ratio with Australian debt excluded is now approximately 24%. Our bank facility is approximately NZD 1.2 billion with existing NZD 375 million of retail bonds. Our total facilities have an average tenure of 3.2 years. The bank facility has undrawn capacity of NZD 640 million at June, which provides us with sufficient headroom to fund ongoing growth in New Zealand and Australia. Moving to slide 35. The interim dividend of NZD 0.107 per share unimputed. This compares to an interim 2021 dividend of NZD 0.099 per share. The dividend policy remains 30%-50% of underlying profit for the full-year period. As previously indicated, given the growth opportunities in front of the business, at this time, dividend payments are likely to remain at the bottom end of this range. The DRP scheme will be available for shareholders with a 2% discount to be applied. Moving on to the business performance section. Retirement unit delivery. 223 villas delivered across 10 sites, which is a record number of villas for a six-month period, but also the second highest number of first half deliveries for the company. Build rate guidance for 2022 is approximately 600 total units. Kenepuru's main building is nearing completion and expected to be delivered in Q4. This includes rec and admin areas, 86 serviced apartments, 20 memory care apartments, and a care center. A development margin for first half 2022 was 28%, up from the 22% achieved in first half 2021, and above the target range of approximately 20%-25%. If you can hear the cheering in the background, that's not for our development margin, that's the protests kicking off. The realized development margin for the half was NZD 52.3 million, which is up from NZD 40.7 million in the first half 2021. A great result that we achieved on a total of 289 new sales. Margins were influenced by two main factors. Firstly, strong villa margins. Further strengthening of margins on villa sales with an average margin of around 35% up from 28% in the first half of last year and 31% in the second half of last year. All regions achieved margins in line or above our target range. Secondly, mix and location of settlements. There was a higher weighting for apartment settlements outside of Auckland in FY in the first half 2021 less than 25% of apartments settled were outside Auckland compared to almost 50% in the first half of 2022. Pleasingly, construction costs have been tightly managed across the country through our strong procurement and supply agreements, and this is also reflected in our overall margin returns. We do expect this to moderate back towards our target range over the short to medium term as our mix shifts back towards our assisted living and care-oriented units and construction cost increases flow through. New sales of occupation rights on slide 39. We settled 289 units in the first half of 2022, which is the second highest number for a six-month period. For first half 2022, our top-selling new sale villages were Avonhead with 65, Richmond with 42, followed by Rotorua and Kenepuru. Overall, seven regions secured more than 20 settlements each. We also saw a 41% increase in the number of serviced apartments, memory care apartments, and care suites settled in the period relative to the first half of 2021. A large portion of units to be delivered in the second half of this year have been pre-sold already, and we're seeing good geographical spread across the country. Turning to slide 40. Our new sales stock totaled 314 units out of 201 units uncontracted. This is down from the total stock of 377 in December. What's been really pleasing to see is the reduction in overall uncontracted stock in the period. The 201 uncontracted stock represents a 23% reduction from FY 2021. The uptick in villa stock was representative of timing only, but with high deliveries in the last two months of the period. Turning to slide 41. New sales performance. We've talked to most of this already, so I really just wanna highlight a couple of the charts here. Bottom left, this chart highlights my comments on closing uncontracted stock. As you can see, uncontracted stock as a percentage of the portfolio is now at 3.8%, which is the lowest in five years. Chart on the bottom right, committed new sales pipeline was at 272 contracts for 30 June, maintaining historically high levels seen six months ago. Since June, this has increased further to around 332 contracts to date. Moving to slide 42. Resale volumes were 222, down from 243 in the first half of 2021, but up from the 195 in second half of 2021. Nothing really fundamentally different between periods except the timing of units vacating, leaving less time to refurb and for new residents to move in. In first half 2022, almost 40% of the units vacated in the period did so in the last two months. Our realized resale gain of 26% is up from 23% in first half 2021, but does reflect a higher proportion of resales in developing villages and a higher weighting to serviced and memory care apartments in the period, with only 42% of resales coming from villas compared to 51% in first half 2021. The embedded value within the portfolio is now NZD 1.5 billion, having increased from NZD 1.1 billion over the last twelve months. Embedded value per unit is now NZD 278 thousand. This includes NZD 197 thousand of unrealized resale gain. Moving to slide 44, resale stock. A resale closing stock of 233 units compares to 198 at December. The increase in overall stock, driven by a record number of vacated units in the period, up 24% on the first half of 2021. As mentioned earlier, our closing stock is a function really of the timing of residents vacating the units, more than anything else. Our contracted resale stock of 137 units is the highest number of contracted resale units in Summerset's history. This is up 16% on 2021 and almost 60% on the same time last year and puts us in a strong position heading into the second half of this year. As a proportion of our total portfolio, available resale stock is 1.8%, which is in line with what it's consistently been over the last five years. I won't talk too much about slide 45 because I think we've covered most of it. I might pause there and see if we have any questions. Thank you, Mr. Wright. 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 are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Andrew Steele from Jarden. Please go ahead. Good morning, guys. The first one for me is just on market conditions. Your commentary has been, I guess, recently upbeat in terms of inquiry levels, wait lists, and your confidence in pricing. I just wanted to know, are you seeing any pockets of weakness, whether that is sort of slow momentum or any sort of areas of concern starting to emerge in any particular locations? Or is it pretty strong across all areas? Yeah. Andrew, Scott Scoullar here. No, the market position's pretty good. Like, pre-sales rates really strong. Inquiry levels, they're showing the same thing. As I said, like, sales in the last four weeks even still on a record for the company. If I was to sort of say anything, it'd probably be that I think the regional locations and outside of Auckland are probably still slightly stronger than Auckland and Auckland being a little bit less, you know, positive. Like, not sort of struggling to sell houses either, you know. It's not an extreme where Auckland's terrible. I would just say the rest of the country is sort of, like, slightly stronger. You know, we continue to benefit from just that large number of villages, you know. We're not trying to, you know, as you guys know, we're not trying to push large volumes of stock through a single site. Yeah, like, we're not seeing any untoward factors. Not seeing any push outs in settlement timeframes. No. If anything, possibly, even a little bit of a bounce, possibly, Andrew, attached to Omicron. You know, being past Omicron, but it's sort of hard to know whether that's the case or not. Yeah, demand drivers seem very, very good. Great. Thanks, Scott. I guess in terms of, you know, what you've seen, for movement in share value gains and change in the value of assumptions, yeah, as we look forward, there's, I guess, a potential for a further slowdown, in share value gains, I guess, relative to the ramp up in debt. We still, I guess, despite what we've seen in terms of your own market, observations, you know, I guess the broader backdrop is, potentially still weak. You know, how are you thinking about, you know, what's a sort of upper comfortable limit for gearing metrics? You're clearly at a conservative level now. Would you be happy for it to go up to 35%, 40%? What is the sort of the top end of the range for you? Yeah. Look, Andrew, I think we said previously that, you know, we remain pretty comfortable in that 30%-35% range. You know, we run a number of scenarios and we see it staying comfortably within that range. We'll obviously move up within that range, as we continue to develop in Australia, and as we have some of these metro sites being completed in St. John's and in Lower Hutt. Great. Thanks, Will. In terms of OpEx growth, it was up 29% year-on-year, and you've provided a helpful breakdown of the component parts of that. How should we think about OpEx growth in 2H? Should it be similar to the year-on-year growth in 1H? Or is there a degree of, I guess, cost in or cost build in 1H we should be benefiting from in 2H, and therefore slower pace of growth? Look, I think the total cost year-on-year tended to grow at about 20% per annum. I think we'll be slightly less than that this year. You know, you can see from the things I've spoken about, some of those you can annualize, such as, you know, obviously, investment in sales and marketing for future years, you know, investment in key staff, and sourcing of food to increase the quality. Whereas some of the costs are clearly one-off, such as COVID. Great. Thanks, Will. I guess then reflecting this, is there any particular reason why 2H underlying earnings seasonality would vary materially from history? Look, I think we've always said that the you know, deliveries have a weighting towards the second half. I think you would see that sort of flow through in second half earnings. I mean, it's pretty strong for us, the fact that we've got, you know, close to 400 units that we're likely to deliver on the second half of the year, combined with, you know, really good contracted stock levels as well. You know, so we've got, like, a bit of a double whammy of positiveness there. You know, which, as Will said previously, good pre-sale rates, you know. I think, you know, pretty well placed at this point for the second half of the year. You know, we'll obviously watch those, you know, settlement conditions and whether those times between contracting and settlement sort of shift out further, but we're not seeing evidence of that right now. even, you know, going back to your original question around fair value movement, you know, like in gearing, I think we're pretty well placed from my perspective on that. I mean, if you know, if you decompose the position, where we get value from on those fair values, you know, like two-thirds of it's coming from the retirement units built, which is, you know, places us pretty well if you think about the number of retirement units we've built in that second half of the year and the value we'll extract from that. Two-thirds comes from that as opposed to pricing. You know, both on the sort of the balance sheet side and on the sales side, I think pretty well placed for the second half. Excellent. Thanks, guys. That's all from me. Thank you. Your next question comes from Stephen Ridgewell from Craigs Investment Partners. Please go ahead. Good morning. I just wanted to follow up on those comments just on potential settlement activity in the second half. Just of the circa 370 homes that you're delivering in the second half, can you give us a sense of what proportion would kind of be townhouse units and what proportion could be more apartments or SAs or other kind of units it might take a little bit longer to sell down? I think from memory, Richie, it's only Kenepuru that's sort of delivering. If you just lop off the 80-odd, I think it is from memory. Yeah, 86. Yeah. From Kenepuru, you know, the rest of it is just the local villa deliveries. Right. Okay. You got people to an opening as well, you know, which is often, you know, good having a new village open as well. You know, you obviously have some pre-sales sitting there for that as well. Got it. Okay. On that basis, yeah, the big reason would expect your settlements might pick up from the 39 the second half. Yeah. Yeah, I think so. Look, Stephen, it's early days in Kenepuru pre-sale, but the initial Kenepuru pre-sale is in the last few weeks, and we've just those serviced apartments actually been better than what we would normally see. You know, obviously that continuum of care is very low penetration in Wellington region. I don't know whether that stands us in good stead for Kenepuru as well. Like, you know, even if you take out Kenepuru, you know, I think we've got a good volume of stock across a good number of sites with one new site being there. Actually, as I said, pre-sales look encouraging for serviced apartments. Now, there is always a higher pre-sale rate for villas and serviced apartments, typically because people are waiting with, you know, health conditions and often can't wait. You know, as I said, there's not an abundance of serviced apartments available in that Wellington market either. Yeah. No, thanks. That's pretty clear. Just on the resale margin, it was probably one area that was a little bit softer than I was expecting in the first half. I think you called out some of the unfavorable mix in terms of units pretty clearly in the comments. Just interested in, you know, whether you can talk a little bit to what you're seeing in the second half. Are you seeing perhaps a more normal mix of resale units? I guess you'd be starting to see the ones that are becoming available, you know, the last few months is what you're actually gonna sell in the second half. Just any comments you could provide on the kind of mix you're starting to see as we go to the second half on the resale side. Yeah. Look, it's interesting, Stephen Ridgewell. I think, you know, the villa margins will continue to track, you know, above that sort of 33% in FY 2020. You know, 25% of our resales came from developing villages. In the first half of this year, that was 45% from developing villages. What you're seeing there is kind of the impact of having more turnover in those developing villages and their shorter stays in the village. You know, that will be a trend, you know, that continues, I think. You know, the exact quantum of it may vary sort of depending on half and where we get those exact terminations. In all honesty. No, I under- It's still pretty early days to figure out what stocks come in and when it's gonna settle and timing of when it's, you know, sale process and all that sort of stuff. You'd probably get a better feel for that in 1.5, two months' time. Okay. I just wanted to follow up as well on Andrew's kind of question on the OpEx. I mean, 29% is a big number. We have seen a lot of pressure on operating margins in the sector in the last few years. I understand Summerset is a growth business, so we are seeing growth regardless, but it does seem high. You know, when are we gonna start to see operating margins stabilize and perhaps even start to cap at some point? Yeah. Look, I think, you know, those three buckets, we've spoken about previously that we've taken a deliberate decision to invest in the quality of our care and our customer experience. We've spoken previously about the Kaitiaki role, about the increased number of cleans, in our care facilities, and about in-housing our food, to deliver a higher quality of food, across our care centers. None of those costs should have really been a surprise. You know, we've spoken previously about the increase in sales and marketing, not for developments that are delivering this year or necessarily next year. But those sort of 2024 deliveries, you know, where we've got some large sites coming online. Again, net sales and marketing has been well flagged. You know, the COVID spend was probably more than we would have liked, but the Omicron wave you know really hit us, and probably more so than previous COVID waves. Really the existing cost base you know the CPI on that was only a very small part of the overall cost increase. You know, we're talking kind of NZD 3 million. I think we're reasonably well controlled in our operating costs. What you're seeing there is selective investments that you know Scott Scoullar's spoken at length about the previous leads in the market. I guess so. Just on that though, I mean, so you are increasing OpEx for various things that you've identified, but are you gonna start getting that back from residents, or the investors are gonna have to suck that up, the additional cost? Largely, Stephen Ridgewell, the stuff that you're talking about, customer experience, which is, you know, a component of that cost that I was talking about before. I think, you know, technically, you probably do end up sucking a lot of that stuff up, but it's for differentiation ultimately. Yeah. I think our really high-quality care, Stephen, enables us to sell those independent living units for a premium. You know, I think it's really important, and it's the right thing to do to continue on to invest in care to deliver the sort of best-in-market care. We will continue to assess the volume of care that we're delivering on sites going forward, though, because, you know, to set this out at the moment, even for us, and I've probably mentioned this before to you both individually, that 60%-70% of those care beds are filled with people who don't actually come from the village. You know, you want to, I think, always maintain a very premium experience in care, but you might limit the volume of care that you do a little bit more. Obviously with those sites like Havelock North and Inglewood where we're looking to refurbish the care facilities, you know, we are looking at putting less care rooms in there. Higher spec with the ability obviously to charge more and stuff. You know, I think there's a bit which is a question mark as to whether you'll always ever recover the dollar you put back in. If you limit the volume, you probably limit the cost damage. Does that make sense? Yeah. Okay. No, that's fine. Appreciate that. Just one last one from me. Just on Victoria, I guess I've spotted the guidance in the deck. You know, the first village in Cranbourne North now scheduled for 4Q 2023. I guess a couple of years ago, that guidance might have been 4Q 2022. You touched on some of the reasons earlier, but can you just give us a little bit more of a sense of the reasons for the delay there? More importantly, I guess at a high level, you know, can you give us some comfort that, you know, how you're navigating dealing with council or the build process? Is that maybe a little bit more complex than was first appreciated across the board, or is this an isolated kind of delay that we shouldn't read too much into? You know, obviously the context there is, you know, investors will be mindful of these sorts of delays given what we've seen, development programs in Melbourne from some of your competitors. Just interested in any insight you can give us there. Thank you. Sure, Stephen Ridgewell. I'd be happy to cover that off. Look, I wouldn't say the delay that we had in Cranbourne was untypical of what we can experience in New Zealand. I can think of our Papamoa site had a similar degree of challenge with council. Like what you probably see in the New Zealand portfolio is, you know, a really big, strong land bank, where even if you do get one or two problematic sites for whatever reason, you know, you've got flex in that land bank. That's what we're trying to do ultimately, is build flex and strength for land bank in Australia. That's when I talk about that six sites and 1,700 being more than on the exit X. [more than omni-today] You know, we will keep pursuing down that path of strengthening that land bank to the point that it doesn't stop build rate. But obviously, you know, being first village at Cranbourne, you know, it's problematic and painful that that one's the one that we have that is challenging. There's nothing for us at this point in time that says that's gonna be the same sort of experience in the other locations, but I'm sure we will get the odd site over there, which is painful. Like the Christchurch site, as I mentioned, it has actually gone pretty well. Like that's been open for public engagement. There wasn't that much feedback on that site. And we think that's tracking pretty well, but it could be famous last words. You trip at the last minute on that. We actually think, you know, if anything, Christchurch is actually tracking ahead of the game faster than what we thought. That may change, as I said, so don't lock that in as gold. Torquay has been going very, very smoothly for us at the moment. Our experiences are very, very mixed. You know, with two almost better than expected and one, you know, considerably worse than expected. Chchide was considerably worse than was expected. You know, in reality, we had an unusual situation there. It was never about the size of the village, what we're building on the village, the composition of the village, any of that stuff. The issue on that was they were building a bigger arterial route down one side of the village. We're taking a two-lane road and putting it into a four-lane road. There were some challenges attached to infrastructure, us connecting to that as they were actually building that road and the stormwater systems. When they were building that road, they had some challenges associated with some neighbors and runoff to that, so they couldn't actually do what they needed to do to build the road until they actually sorted out some issues with some other neighbors. We got caught in the midst of connecting up all our sewer systems and stormwater systems to the infrastructure. You know, we were a peripheral liability on the sort of side of like, what was going on there, which is nothing to do with us that held us up. I hope that sort of gives everyone a bit of color and flesh around the challenges with that site were nothing to do with Summerset and the way that we consented that site and what our expectations were for the yield on that site. It was purely to do with, you know, a very unusual situation. You don't typically have every day at the time of building your village to have a big four-lane sort of, you know, highway sort of, infrastructure being developed, you know, on the side of you, which interferes with you. You know, I do think that was a particular set of circumstances. They were very, very frustrating for us. It is clear that you've got like Melbourne Water, VicRoads and council over there all dancing together on that particular issue 'cause VicRoads or Melbourne Water were building the roads, but trying to sort of get all those three to dance sort of together is quite hard. Look, as I said, that's behind us. It did delay it a year. You know, we expect at this point to be underway with homes construction at the end of this year. We'll see where it gets to for next year. You never know. It might even be a little bit earlier in Q4, but Q4 at this point in time is what we'll commit to. Yeah, hopefully that gives you a sense, Stephen, around the particular challenges on that Truganina site. Look, you know, that's. That's really helpful. Thanks, Scott. That's all from me. Thank you. Thank you. Your next question comes from Bianca Fledderus from UBS. Please go ahead. Yeah. Good morning, guys. Just one question for me really around the residential property market and the discount between local median house prices and your unit prices. I guess obviously that buffer is now narrowing quite quickly as residential prices fall and the unit prices continue to be slightly up. I guess the first question, are you concerned about this and do you have confidence you can continue to slowly lift unit prices or at least keep them flat? Secondly, as you mentioned as well, your average resident probably sells a residential house above the median local house price. I'm just wondering if you have a view on what a more realistic discount or buffer would be based on probably higher residential values for your residents. Yeah, sure. Look, you know, we've continued to see some pretty modest price growth over the last six months. You know, sort of, 3 to 3.5%, on average across the board. But that's varied quite a lot across the regions. I think, you know, there's some regions that are definitely a bit more buoyant, and you're able to take more price growth, than potentially others as well. I think, you know, that, demand dynamic in our, resale villages remains really strong, where there's really strong demand, strong wait lists. And you know, you're typically only turning over sort of 10 to 15 units per annum. You know, that's kind of one per month. You've got a strong wait list of people trying to get in. You've got very strong pricing tension in those resale villages. In the developing villages, you know, I think, we've seen good wait lists and continued strong demand for stages as we release them. That's both, you know, in the villa stages that we've released this year, but also now that we've released pricing for Kenepuru main building, as Scott said, you know, really strong demand there for serviced apartments. I think last week, Scott, was a record week for new sales for us. You know, relatively pleased with the ongoing demand. Just in terms of buffer and how you might like to think about it, you know, a typical one of our residents isn't selling a small house. You know, those are typically first time buyers, and that's all included in the median price. You know, when you're selling a four-bedroom home in an area, you're kind of more at that sort of upper quartile kind of level. You know, we're continuing to see people come into our villages, you know, with a cash surplus after selling their houses. Traditionally, our resale villages have been up at sort of 110, 115% of median. There's still some room to just get back to sort of normal levels of pricing. Bianca, Scott here. From my perspective, you sort of hit the nail on the head a little bit like we sort of always take a conservative stance of including the median house price. But I think, you know, if you did throw an upper quartile, you know, you would see a very different picture. I think, you know, just to supplement that again, still, you know, if you take the average of that two-bedroom apartment that we're talking about and the numbers that we stats we provide, you've got to remember we also have a lot of cottage and townhouse product that's smaller, more affordable, again, for the people who are on the median house price who may struggle, which is still very, very nice product. You know, and then you get down to serviced apartments where you're going, you know, NZD 400,000 or NZD 500,000 often for each serviced apartment. There's some real affordability options across the portfolio as well for those people who are closer to the median house price. Yeah. Okay. If demand were to slow at some point in the future, are there any sort of other levers you would pull first to attract new residents before lowering your sale prices? Look, I think our geographic diversification is a real plus for us. You know, we have the ability to flex where we're delivering new units in response to demand. We also have a range of incentives available to us that, you know, all the operators have kind of used through the cycle that you can use to sort of generate interest and demand in your villages. Look, from my end, we only really turned on open days from the start of August. If you think about the tools and levers we have available from a marketing platform, we haven't been using a couple of those major levers for, like, probably the biggest part of, I don't know, a year and a half. In terms of incentives and levels of incentive use that we're using at the moment, I think from a perspective around incentive use, it's probably at the lowest level I've seen for years upon years upon years. Like, you know, we're in this market and, you know, we're pretty well positioned. We're not actively using any incentive tools at the moment to a material degree is the outcome. It's at a very low level from my perspective, relative to what we've done previously. As I said, then we've got marketing channels that we're in the process of switching back on. As I said, the sales rates, as Will said, for the last week and the last month have been records for the company. I think, you know, we're well positioned sort of going into that with a lot of levers that are available to us still. It's not like you've tapped out and you've used all your levers and you're going, you know, the market might be a little bit tighter. We're not in that position at all. I think you've got to remember that people tend to move into our village because of life events, and those life events continue to happen regardless of the property cycle. Our residents don't really have time to sit around and wait for the market to turn. That provides some sort of ongoing backdrop to our demand. Yeah. Okay. Great. That's all for me. Thank you. Thank you. Your next question comes from Shane Solly from Harbour Asset Management. Please go ahead. Good morning, guys, and well done on a great result in a very, very tough time. Your team's done a great job. Can I just go back to caregiver availability? What are you seeing in terms of some of the changes that we've observed lately? Yeah. Specifically caregivers or are you talking about our wholesale care workforce Shane? The whole care workforce, I should say, yeah, rather than specifying, yeah. Yeah, sure. Look, I think it's been tough and challenging, right? Like, from my perspective, you know, I think there's probably more risk for the sector as a sector. With the borders opening, there is sort of benefits attached to that. You know what I mean by that in a sense is I think the net migration inflow of nurses is possibly gonna be morphed by the net outflow of people going, "Yee-ha, we can go work overseas again in a safe environment." I think there's probably more risk with the borders opening, for us around workforce on the care side of things. Obviously experienced a heck of a lot of sickness, throughout that workforce and through the tiredness aspect of that workforce. I still think, you know, we're obviously better placed than, you know, corporates are better placed than the nonprofits in the sector who can't obviously subsidize that salary gap between what, you know, exists for what we're funded from the public health system versus what they pay their own hospital nurses. Look, I would say out of the challenge of the two, between nurses and caregivers, it's the nurses challenge is definitely, you know, a stronger challenge typically for us than caregivers. Caregivers, you know, you've just got sheer weight of numbers in terms of caregivers, but it consumes time and energy and cost and training and, you know, customer experience. The nurses are just hard to get hands on, you know, attracting the nurses into the business and then retaining them. There's no silver bullet, Shane, on this. Care funding, there's nothing going on there that we should be thinking about from the government notification, sir? Look, I think there's probably a better appreciation, would be my sense, from the government around the systemic issues in the sector. You know, that those systemic issues in the sector are gonna be the 25,000 beds in the sector that are actually non-for-profits first, and therefore in the way at, you know, a material rate at the moment. You know, the irony is that sort of strengthens in some senses, you know, the supply-demand curve more towards, you know, the corporate operators. At the moment, that doesn't do us that much good if you're struggling to kind of keep staffing, you know, your existing facilities because there's a lack of nurses. It's a bit, you know, 50/50. I think there's, you know, better appreciation, definitely with ministers. You know, having been around and talked to quite a few ministers in recent weeks. It's just the need for more intense action more quickly. I think, you know, there's some general sort of commitment and promise around there that they're gonna fix some of the stuff. You know, at the moment, I can't really see it happening, look, in the next 12 months, Shane, I'll be honest with you at this point in time, which I think. Great. Thanks, Scott. Sorry, Tim, go on. Just, it's another question if I may then. Cash flow conversion, Will, could you just talk a little about that? Yeah, sure, Shane. I think, you know, the key thing there is just timing of the resale cash. There's about a NZD 17.5 million swing that really just relates to timing guarantees around the repurchase of resale units. Once you normalize for that and the cost increases, you get pretty similar, you know, net operating business cash flows with the first half of last year. Okay. Thank you. Thank you. Your next question comes from Aaron Ibbotson from Forsyth Barr. Please go ahead. Hi there. Good afternoon now, I guess. Thank you. I got a couple of quick questions. First of all, just on Australia and how much you've invested. Thank you for adding the little comment on New Zealand gearing excluding Australian growth-related debt. I was just trying to, on the back of the envelope, get out how much that debt then was. Is it right that it's roughly AUD 250 million, and got to AUD 230 million? Just how much, you know, Australian growth-related debt you actually have. Yeah. Aaron, you're probably directionally moving in the right direction. I don't wanna really get into specifics of segment reporting. I was just referring to you've re-given the 23.8% versus the 29.4%. I assume we can calculate it, but I'll just calculate it then. Secondly, just on resale margins. I'm just curious, you know, if you compare to the second half, what is your sort of best estimate if you say like for like, so ignoring the mix effect, would it have been that the resale margins were roughly flat or anything else in particular up or down? Yeah. Look, I think, you know, that's our, you know, obviously, I'll put a caveat around this of, you know, you never quite know what the product mix is gonna be or the mix across villages in the second half. I think on a removing that, I think we're kind of expecting them to be broadly flat, half one. No, sorry, I was just referring to the half just reported relative to the second half last year. On a sort of like-for-likes, ignoring mix effects that you talked about lower villa share, et cetera. Is it fair to assume that they were roughly flat? Would you say that they went up or down excluding mix effects? I know that there was an increase excluding mix effect. I think we highlighted that in my notes. I spoke about a 33% resale margin for villas. Okay. Finally, I guess you answered that to Shane, the NZD 17.5 million swing related to repurchase of unit. Was that any change of policy at all, or was it just sort of random timing with a lot of vacancies just towards the period end? No change in policy, Aaron, just sort of random timing, the way these things work out. Okay. That was all I had. Thank you very much. Thanks, Aaron. Thank you. Your last question comes from Nick Marran from Macquarie. Please go ahead. Hey, guys. Just a really quick one, on care occupancy that sort of dipped down a little bit. Is there anything behind that you guys taking a view on, you know, how many people you can actually take into care and are there any other changes you're making to admissions, at the moment? Yeah. No, Nick, you've got it instantly. Like, that was sort of a constructive choice for us across key facilities when Omicron was going on with staff sickness to basically protect our staff and make sure the customer experience remained strong as well. We've been at times choosing not to take people into the key facilities due to that sickness and illness and stuff. You know, I think you'll sort of see that stabilize and start to lift again. You know, I was down at Inglewood the other day, and that's one of the examples, right? It's a village that's been hit pretty hard, so we've restricted occupancy. Got about five beds there. I said to the Care Centre Manager, "How long would it take to fill them if, you know, much less sickness sort of clears up a little bit?" She was like, "Oh, two weeks." There is definitely that, you know, self-imposed protection in the interest of staff and our residents' experience that's coming through there. You know, in looking at brutal reality probably doesn't really impact bottom line a whole heck of a lot because, you know, you kinda got this cost at times, but you got, you know, this revenue coming through. Not so much the case if it's, you know, staff sick leave when it's, but if it's staff, or it's time in lieu that's not paid, it, you know, depends on the circumstance. Given the margins on care at the moment, you know, occupancy is probably a little bit less relevant. Cool. That's all. Thanks a lot. There are no further questions at this point. That does conclude our conference for today. Thank you for participating. You may now disconnect. Thanks, everyone.