Lifestyle Communities (ASX:LIC) used its investor and analyst call to outline its FY26 half-year results, highlighting a focus on balance sheet deleveraging, rebuilding sales momentum, and managing the impact of the Victorian Civil and Administrative Tribunal (VCAT) decision on deferred management fees.
Half-year results: profit, cash flow and deleveraging
Chief Executive Officer Henry Ruiz said the first half reflected “discipline and focus through a challenging market,” with the company executing against its plan to “get strong, to grow stronger when the property cycle turns.” Lifestyle Communities reported statutory profit of AUD 15.8 million and operating profit after tax of AUD 16.1 million.
Management emphasized the balance sheet strengthening achieved through planned land sales and inventory realization. Net debt was reported at AUD 323.6 million at 31 December, down from AUD 460.5 million at June 2025 and from a stated peak of AUD 490 million in May. Farbridge-Currie said borrowings were AUD 353 million at 31 December, with net debt reduced once cash balances were included, and noted debt levels were expected to fall further as inventory continued to reduce.
Sales, settlements and inventory: “meeting the market”
Ruiz said new home sales improved “materially,” with 110 new home sales and 128 new home settlements in the half. Sales were described as up 12% versus the second half of FY25 (110 vs. 98) and up 168% compared with the same period last year (110 vs. 41). Settlements, however, were lower than the first half of FY25 (128 vs. 137), which management attributed to lower sales rates over the last 18 months and the time lag between sales and settlement, noting most customers need to sell their existing homes before moving in.
Farbridge-Currie said development margins were 11% for the half, reflecting targeted price adjustments to clear stock, and she warned lower margins were expected to continue “for a period of time” as the company worked through inventory and awaited recovery in the Victorian property market. In Q&A, management said discounting varied by community but, “on average,” stayed within single-digit percentages.
Inventory reduction was a major operational theme. The company reported a roughly 30% reduction in unsold completed homes since 30 June 2025, with 180 unsold completed homes at 31 December 2025, down from 257 in June. Homes under construction that were unsold fell to 9 from 12, and management said AUD 31.2 million of completed homes were sold and awaiting settlement.
In response to questions on sales trends, Ruiz said inquiry rates were “holding up well” and appointments were being booked, but decision-making had become the “point of inflection,” particularly across the seasonally softer December–January period and amid economic uncertainty. He also noted a “slight skew” toward established homes at lower price points and said consumer confidence was being monitored closely.
Annuity income and homeowner experience
The company’s rental-based annuity stream continued to grow. Management reported 4,256 homes under management and AUD 25.3 million of gross rental income, up 11.9%. Total annuity revenue was reported at AUD 26.7 million, driven by new settlements and inflation-linked rental increases, though Ruiz noted it was “slightly down” on the previous period due to deferred management fee revenue not being collected on contracts affected by the VCAT decision while the appeal remains ongoing.
Ruiz also highlighted improving homeowner sentiment and satisfaction. The company reported its customer satisfaction score improving from 75.7 (March 2024) to 78 (September 2025). When asked to compare performance to peers, management said it was difficult to obtain comparable sector data, but emphasized the importance of referrals in the sales process and referenced a typical referral rate discussed previously of around 40%–50%.
VCAT decision: DMF changes, appeal timing and customer choice
The call repeatedly returned to the VCAT decision and its financial and operational implications. Ruiz said that from July 2025 the company changed its Deferred Management Fee (DMF) approach for new homeowners to be calculated on the homeowner’s purchase price to align with the VCAT ruling. He summarized the ruling as finding that the Residential Tenancies Act does not prohibit a DMF, but that the DMF must be capable of being accurately calculated at the date of entry into the agreement. VCAT considered that the prior DMF clause, calculated as a percentage of the homeowner’s sale price (unknown at entry), was therefore void—an issue the company is appealing.
Management said it will offer all existing homeowners the choice to move to a DMF calculated on purchase price once the appeal is determined, irrespective of the outcome, citing the goal of allowing homeowners to make a fully informed decision and generating goodwill while reducing litigation and regulatory risk.
Ruiz also provided a key timeline update: the Court of Appeal in the Supreme Court of Victoria is scheduled to hear the matter on Tuesday, 23 June 2026, with a decision to be delivered in due course.
As previously disclosed by the company, Ruiz reiterated that if 100% of existing homeowners as at 30 June 2025 were to move to the new model, the estimated potential adjustment to the carrying value of the DMF component of investment properties would be up to AUD 117 million.
Separately, the company introduced an additional option for new customers: paying the management fee either upfront or on exit. Ruiz said buyers can choose to pay 10% upfront or up to 20% when they sell. The initiative was soft-launched in December 2025, with a full rollout now in market, and management reported five upfront management fee contracts signed, with the first settlement completed.
Funding and outlook: no new launches planned, continued focus on cash and debt
Farbridge-Currie outlined a debt facility restructure that reduced total facilities from AUD 571 million to AUD 375 million, effective January 2026, and reduced the lending syndicate from four to two lenders: PGIM Inc. and National Australia Bank. She said the structure provides longer tenor and includes no interest coverage ratio (ICR) covenant until the 30 June 2028 reporting period, though a review event can occur during the relief period if new home settlements fall below thresholds, including 185 for FY26. The company also varied the loan-to-value ratio to be less than 55 during the covenant relief period, stepping up to less than 65% from the June 2028 reporting period. Management expects the weighted average cost of debt to increase due to longer tenor, partially offset by lower unutilized facility fees.
On the operating pipeline, the company said it completed settlement of four land sales as part of right-sizing the land bank to 4–5 years of supply. The portfolio and pipeline was presented as 5,750 homes, with about 4,250 occupied and a further 1,500 in the pipeline.
For the second half, Ruiz said shareholders should expect further deleveraging and full-year positive operating cash flow. He also said no new project launches are planned in FY26, subject to market conditions, because communities in progress contain sufficient supply. He cautioned that due to the lag between sales and settlements, lower prior period sales rates would continue to flow through to future settlement numbers.
Ruiz provided an update on settlements and contracts as at 16 February 2026: 163 new home settlements completed, 202 total contracts on hand, and 98 contracts related to homes expected to be available for settlement in FY26. Of those 98, 28 customers had unconditional contracts on their current homes and were booked to settle before 30 June; 49 were actively marketing their homes without firm booking dates; and 21 had placed deposits but were yet to list their homes for sale.
About Lifestyle Communities (ASX:LIC)
Lifestyle Communities Limited, together with its subsidiaries, provides housing for its homeowners in community in Australia. The company operates communities, including 21 in operation and 9 in planning or development. It serves working, semi-retired, and retired people. The company was formerly known as Namberry Limited and changed its name to Lifestyle Communities Limited in June 2007. The company was incorporated in 1997 and is based in Melbourne, Australia.
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