Cedar Woods Properties Limited (CWP) Earnings Call Transcript & Summary

Good morning. I thank you all for joining us at Cedar Woods 2025 Annual General Meeting. My name is William Hames, and I am Chairman of Cedar Woods. As it is now after 10:00 a.m., a quorum is present, I formally declare this meeting open. I welcome all of our shareholders who are joining us today in person or they're joining on the web platform. Welcome to you all. Turning to our agenda. I will provide a recap of our strategy, discuss our financial performance for '25 and comment on the share price, which I noted first thing this morning, $8.78. We will then hear from our Managing Director, Nathan Blackburne, who will provide a business update, showcase some of our projects, comment on the market conditions. And then finally, comment on our future outlook. Then I will return to the formal proceedings as set out in the notice of the meeting. voting on all resolutions will be conducted by way of a poll. Shareholders will be able to submit their questions in writing, on the Open Briefing platform at any time until the end of the meeting. If you have any questions, I encourage you to submit them as early as possible because we have a moderator in place who will place -- who will receive the questions, and they will provide them to me. Given the agenda and the limited time, we may not be able to answer all of your questions today, but we will endeavor to get back to you if we don't answer them today. If you have a question, it will help us if you can note the resolution to which it relates, unless it is a general question. This session is being recorded, and a webcast of today's presentation will be available via the ASX and also our website after this meeting. The notice confirming the meeting and related documents have been made available to shareholders on our website. I propose that this notice be taken as read. The minutes of the previous meet general meeting of members have been signed by the Chair and has been placed on the shareholders' minute book. I would like to welcome also my fellow directors and members of our executive team who are here today. Nathan Blackburne, our Managing Director, right. Robert Brown, our Deputy Chairman; Valerie Davies, our Independent Nonexecutive Director; Jane Muirsmith, Independent Non-Executive Director; Sarah Reilly, Company Secretary and General Counsel. Also joining the meeting by telephone is Paul Say, who is an independent nonexecutive director, and he is based in Sydney. Also in attendance is Pierre [indiscernible] , lead audit partner of the company's auditor, Ernst & Young to answer any questions on the conduct of the audit and also the auditor's report. Now to our strategy. Our strategy is to grow and develop our national project portfolio diversified by geography, product type and price point. so that it continues to hold broad customer appeal and performs well over a range of market conditions. The strategy is a key differentiator of our business. and has been for a long time. The strategy is proving successful with strong relative financial returns that we've been able to deliver over the long term. Cedar Woods has multiple product types in 4 states and different price points, which we appeal to a varying buyer profiles. This is important as ever so that we can have a product that attracts different product buyers -- buyer profiles and ultimately delivers better earnings outcomes. We have been executing this strategy and now have a very diversified, high-performing projects. We constantly refine our site acquisitions brief to target areas and products that we project will meet future demand sweet spots. The projects we have acquired in recent years and in line with this strategy are already delivering good earnings results, and we will continue to deliver earnings for the business over many years. And in part, this has been done through also our partnering strategy which our Managing Director will expand on shortly. Now for a summary of our financial results. We are pleased with the outcome for '25. We delivered a net profit after tax of $48.1 million. This was ahead of the guidance we -- and it also represented 19% growth in earnings. That profit was generated from a revenue of $466 million, which was up 21% on last year, and it came from selling 1,125 properties. This resulted in a return on equity of 10% and an earnings per share of $0.584, which is up 19% on '24 figures. The board delivered a final dividend of $0.19 fully franked, taking the full year dividend to $0.29, this reflects a payout ratio of 50% of NPAT and a favorable fully franked yield of near 4%. Over the year, strong sales were achieved, our Managing Director, will talk about the latest outcomes reported recently in our first quarter update. Share price, our share price. Let's look at our performance over the last 2 financial years, and so far, in the current market, I think the market is just waking up to see what is -- the chart shows our performance against the small industrials index. We have worked diligently to grow the portfolio and get projects designed and approved in readiness for the conditions that we are now experiencing. We have good momentum, supported by healthy economic conditions and we have a very strong balance sheet. The earnings look -- or the earnings outlook is the best it has ever been. Now that's a big statement. We have guided for even further earnings growth in '26. Trading conditions were good in '25, but conditions have even further strengthened in the first quarter of '26. We hope for a continued outperformance against the benchmark indices. I'll now ask Nathan to address this.

Thanks, William, and welcome, everyone. We appreciate you all joining us here today and online. I'm going to provide an overview of the year's activity and achievements, review some of our projects. I'll touch on market conditions, and then I'll talk finally about the outlook. So I'm very pleased with the performance of our business, and I reiterate what our Chairman has just said that the outlook has never been stronger. Our vision is to be the best Australian property company renowned for performance and quality. And as Managing Director, I regularly talk to our team in Cedar Woods about our reasons for being which are captured in our purpose, vision and values. Our commitment to quality, sustainability and community are evident in everything that we deliver. We strive to create communities from the ground up, where people can live and thrive, and we understand that there are many elements to building a community. Owning a home remains 1 of the most common aspirations in Australia. And we respect how big that decisions -- how big that decision is for each individual and our customers. We also, of course, understand the importance of what we do to our investors, and we respect that many of our investors rely upon our dividends. To these ends, we have a diversified product suite that helps us both have a wide product offering for our customers, and at the same time, generate reliable and growing earnings for our shareholders. In an industry where it's easy to follow the trends, we're always working hard to be ahead of the curve. And it's this focus that sets us apart from our peers. With the proven strategy, projects across 4 states and a very favorable trading environment, it's an exciting time to be part of Cedar Woods and part of this journey that we're on, and I'm privileged to lead the business. We have worked hard to create the best working environment that we can for our staff, and I'm pleased with the strong staff satisfaction results that we've been consistently getting. Our value proposition for staff is compelling, especially in the opportunity to work on many different types of projects coupled with our strong financial position and growth aspirations. We continue to make our investment in systems and tech, particularly cyber security but also the further integration of our financial systems. Meaningful efficiency gains are expected to be made this year, particularly in the area of integration of those financial systems. There is a very supportive policy environment at the moment with all levels of government working hard to unlock meaningful levels of supply around the country. There are significant tailwinds for the new housing sector with all the fundamentals that we look -- that we look to serving our business well and creating favorable trading conditions that we think will persist for some time yet. Last week, we released our first quarter update, which contained a lot of positive news for shareholders. There is good momentum with high sales volumes and continued price growth as the company releases new stages and new projects into a significantly undersupplied housing market. Price growth in the first quarter alone has been strong, and this has continued into October. And accordingly, group margins are very strong and growing across the business. Presales have now accumulated to a record $763 million at the end of Q1 which is up 36% on the solid presales result of $560 million that we had at the same time last year. This chart up on the screen shows the quarterly sales going back to FY '23. And as you can see, our sales volumes are elevated and have been progressively growing over the last 3 quarters. There are variations with state performance with WA now the strongest, followed by Queensland, then South Australia and finally, Victoria. But we are starting to see some early signs of growing sales volumes and even prices in our Victorian projects in the last month. Our balance sheet is strong. We have maintained low gearing and have significant undrawn finance facilities that are available to us in delivering our portfolio and acquiring projects. All of this has led to a material upgrade in earnings that we have recently provided. We now expect net profit after tax growth of 15% which is up from the 10% number previously targeted. Importantly, the expected NPAT growth is on top of the 19% growth that we delivered last year. We have made good progress with our partnering strategy. The objective of this is to scale up the business and the earnings in a capital-efficient manner. But these partnerships also serve to improve our return metrics for shareholders, leverage the existing skills base of the company, to generate recurring fee income for us, and to diversify our funding sources. The 2 partnering arrangements that we have in place are with QIC and Tokyo Gas real estate. Two projects have been completed under these partnering arrangements, and we have 3 underway at present. The Robina project in Queensland has secured planning approvals, and we are trying to secure a builder at present, though it is a very tight and tough construction market at the moment there. Both partnerships have the intention of expanding beyond the current few projects, and we expect that some future acquisitions will be made under these partnering arrangements. So we continue to deliver on our ESG strategy with significant investment in climate responsive developments both in design and the material selection, we are ensuring the sustainability of our core projects. There are many great examples across our portfolio where we are leading the way sustainable development, including the award-winning energy-efficient apartments that we're delivering at Glenside, and the electricity micro grid that we have in place and that was commissioned during the year at Eglinton Village. Over the last 3 years, we've mapped our corporate carbon footprint, and we are well on the way in our preparations for mandatory climate reporting, which we expect from FY '27. Cedar Woods continues its national partnership with The Smith Family, which is Australia's leading children's education charity. Our flagship community grants program is another initiative that we are very proud of that sees monies or a portion of profits from each of our projects allocated to grassroots communities organizations. And over FY '25 alone, we supported 35 clubs and organizations with small donations. Our latest staff survey recorded strong staff satisfaction scores, 82%, in fact, for that year, indicating that our staff value the rewarding workplace that we've worked hard to create. Our FY '25 ESG and climate reports are available on the Sustainability page of our website, if anyone wants further information. So now on to market conditions. There are considerable tailwinds for our business and which we expect to persist for some time. The chronic shortfall in housing remains a pressing issue with the supply of new housing being close to the lowest levels they've been in a decade. Housing completions are expected to fall short of the government's target by over 390,000 for the combined capitals by 2029. Our view is that it will take several years for meaningful levels of supply to be bought to market to address this shortfall and that is across product types and across the locations that we operate in. This fact will support sales volumes and our pricing going forward, and Cedar Woods has 35 projects and over 9,400 odd lots, dwellings and units to deploy into this undersupplied market. There is unprecedented policy support for the new housing sector at present. Approvals are faster and some state governments are providing infrastructure contributions to help with the viability cap -- gap of some built-form projects within the industry. So there's a national effort to help make a difference on the supply side of things. But there is also support on the demand side of things with various grants in place and the first homeowner deposit guarantee scheme. On house prices, the outlook is for further growth driven by this undersupply and the strong demand fundamentals. Oxford Economics expects the combined Capital City house price is expected to grow 9% over FY '26 and with further growth into FY '27 and FY '28. And we're certainly seeing evidence of this in the first quarter outcomes across our own projects. Melbourne is expected to lead the market in terms of this price growth coming off a low base and not having seen the growth that the other capitals have over the last couple of years. So the interest rate reductions this cycle have served to further strengthen property markets around the country. First-home buyers in particular, benefit from rate cuts, and this is a dominant buyer cohort for our business around the country. Unemployment, job security is a key factor determining sales volumes as it is very closely tied to buyer confidence. The tight skills market across the states for skilled workers means that buyers are feeling secure in their employment. On population growth, this too is supporting our sector. The growth rate is sitting at around the 10-year average of 1.7% and the outlook is that -- is that it continues at these levels supporting the need for skilled migration around the country. So with all of these factors, we have a favorable set of conditions that bode well for our business and our sector for the medium term. Now to look at a couple of our projects. well-designed and sustainable projects are key to our approach. And to give you some insight into this, I wanted to show you 2 projects that we're currently working on. The Millers Landing project is a major master plan community with over 1,500 lots, of which we've completed 300 and therefore, have 1,200 left to go. It's located 30 kilometers south of Perth in the suburb of Baldivis, there has been high demand for this estate and good sales have been achieved over the past 12 months in particular. And solid price growth has been achieved over FY '25, in fact, 10% price growth was achieved over that period and more since then. This project is, in fact, the highest performing project out of all 35 in our national portfolio. And the project appeals primarily to first home buyers. Flourish is another project that is located in the suburb of South Maclean which is 46 kilometers south of Brisbane. It consists of 577 residential lots, of which 250 have been completed to date. The estate has also been 1 of our best performing over the last 12 months and very good margins are coming from this project. It achieved 35% price growth over FY '25 and very strong price growth in the first quarter of FY '26 on top of that. Southeast Queensland has experienced very strong demand for residential lot product like we're delivering at this estate. Our buyers are predominantly first home buyers and the products that we've settled to date, we have very happy customers with what we've delivered for them. So looking ahead, Cedar Woods is well placed for further growth in earnings. Conditions for the housing sector are favorable in 3 of our 4 states but we expect Victoria to make a recovery and see some evidence of this occurring at the moment. Low supply levels, easing interest rates, population growth, low unemployment and a supportive policy environment all bode well for our business for the medium term. We have very strong presales with that record of $763 million secured as at 30th of September. We have a strong balance sheet with low gearing, significant undrawn facilities and the capacity to fund our existing portfolio and future acquisitions. Our partnerships with QIC and Tokyo Gas are progressing well and with further acquisitions planned under that strategy. We are now guiding, as I said, for full year NPAT growth of approximately 15%, which is up from the 10% previously expected. And finally, Cedar Woods is well placed with its pipeline of 35 projects and over 9,400 lots. So thank you very much for listening to me, and I'll now hand back to our Chairman.

Thanks, Nathan. Now on to the formal business of the meeting. Ordinary business consideration of reports. The first item of business is to receive and to consider the financial report for the year ended 30th of June 2025, and the accompanying directors' report, directors' declaration and also the auditors report. I now table these documents and invite any questions from shareholders that relate to the financial report. Questions on the conduct of the auditor's report and the audit, I may also be directed to Pierre, right, if I can't answer -- thank you, Pierre. Any questions in regard to the financial report? Anything [ from Lee. ]

Yes. So we have a question from Stephen Mayne. Mr. Mayne asks, when was the last -- sorry, when with the external audit last competitively tendered and where will next be competitively tendered? How long have Ernst & Young had the external audit work and how many tenders have they won during their tenure besides this first one.

So I'm happy to answer that question. So it was just over a year ago that we tendered the audit work for Cedar Woods and EY have just completed their first audit with Cedar Woods.

Any other questions? Okay. Okay. Well, now no more questions? Thank you.

No more online.

We'll now turn to the resolutions to be put to the meeting. We'll move directly to the poll for all remaining items of business, right? If there is anyone here in person who believes they are entitled to vote but have not registered to vote, please raise your hand for assistance. Okay. Persons entitled to vote are all shareholders, representatives, attorneys of shareholders and proxyholders who hold the green admission cards like the one on the screen, right? On the back of your admission card is your voting card and instructions. Proxy holders have a summary of proxy votes attached to their admission cards, which details the voting instructions for the items of business. In respect to any open votes, you may mark the box beside each motion to indicate how you wish to cast your open votes. Shareholders also need to mark the box beside each motion to indicate how you wish to cast your votes. Please ensure you print your name where indicated. At the end of the formal business, please lodge your completed voting cards in the ballot box to ensure that your votes are counted. Thank you. Ordinary resolutions 1, relates to the reelection of retiring Director, Mr. Robert S Brown, having retired in accordance with the company's constitution and being eligible, offers himself for reelection to be reelected as a Director of the company. The explanatory memorandum sets out Rob's credentials. The notice of meeting states that the other directors unanimously support the resolution. The proxy votes for this resolution are shown on the slide. Are there any questions from shareholders on this resolution?

We do have 1 online question Chair. We have another question from Stephen Mayne. He said thank you for disclosing the proxy votes early with the formal addresses, there was a 16.86% protest vote against the reelection of Robert Brown. Stephen Mayne asks did one of the proxy advisers recommend against and did our largest shareholder AustralianSuper with 11.4% vote against his reelection. Was it an independence or tenure question. From Mr. Mayne's point of view, Cedar Woods is performing well, so Robert should stay on the board, but perhaps add 1 independent director or more to an independent Chair model.

So I'm happy to answer this question. So we have 2 proxy adviser firms that cover Cedar Woods, all recommendations, resolutions were voted in favor of except for 1 proxy adviser, 1 of those proxy advisers voted against the reelection of Robert Brown on the basis of a perceived lack of independence. And then the matter relating to AustralianSuper, they are no longer a shareholder in the company.

Any other questions in regard to ordinary resolution 1?

No further online question.

Thank you. Ordinary Resolution 2 relates to the company's remuneration report. The report is set out in the directors' report on Pages 33 to 51 of the 2025 annual report, right? Further information on the remuneration report is contained in the explanatory memorandum attached to the notice of meeting. We have good support for our remuneration report in recent years. At last year's AGM, less than 1% of the shareholders voted against the remuneration report. A summary of the significant matters dealt with during the year are set out on Page 33 of our Proxy votes received for this resolution are shown on the slide. Please note that directors, key management personnel and persons associated with them are not eligible to vote in favor of this resolution, and this is reflected in the proxy votes shown. I'll now table the remuneration report and invite any questions from shareholders that relate to it. If asking a question, please state your name, who you represent and ask your question it. Anything from...

Nothing online.

Nothing online?

No.

Right. I now put the following resolutions to the meeting. that the remuneration report that forms part of the Directors' report for the financial year 30th of June 2025 be adopted. Shareholders are advised that the vote on this resolution is advisory only and does not bind the directors of the company. Please enter your vote on the voting paper for resolution 2. [Voting]

We will now move to the next item of business. Resolution 3 request shareholder approval for the issue of 35,863, 0 priced options to the Managing Director or his nominee under the deferred STI plan for the 2025 financial year. Full details of the deferred STI plan is set out in the explanatory memorandum. The directors, other than Mr. Blackburne, recommend that shareholders vote in favor of resolution 3. Mr. Blackburne makes no recommendation in respect to resolution 3 due to his personal interest and outcome. Proxy votes received for this resolution are shown on the slide. Are there any questions from shareholders on this item?

No online questions for this one.