GemLife Communities Group (GLF) Earnings Call Transcript & Summary

Good morning, and thank you for joining GemLife's FY '25 Results Presentation. My name is Adrian Puljich, and I'm the Founder, Managing Director and Group CEO of GemLife. Joining me today is Ashmit Thakral, Chief Financial Officer and Joint Company Secretary. Against the backdrop of a milestone year for GemLife being our first full year results post-IPO, I am pleased to report that the group has delivered a result ahead of prospectus forecast across all key financial metrics. Today, I will speak to the continuing success of GemLife's vertically integrated business model and the key performance drivers for the year. Ashmit will then take you through the financial performance before I return to discuss our portfolio positioning and our FY '26 outlook statement, followed by Q&A. GemLife is a leading pure-play founder-led developer, builder, owner and operator of land lease communities based on a strong track record of operating performance with an established financial history and industry recognition backed by almost 45 years of sector knowledge and experience through its connection with the Puljich family dating back to 1982, GemLife operates a fully vertically integrated business model that delivers superior homes and oversized resort style facilities and amenities, underpinned by material homebuilding profit margins and stabilized self-perpetuating site rental income. At our core, we are placemakers exclusively servicing Australia's over 50s market, providing affordable housing opportunities that deliver strong community connection and well-being, transparency and long-term financial and lifestyle value. We now move on to our FY '25 group overview. Our proven and unrivaled vertically integrated business model has resulted in the group exceeding prospectus forecast across revenue, EBIT and underlying NPAT while preserving strict margin discipline. While sales were modestly below prospectus expectations, margin performance more than offset volume timing differences. The uplift in average sale prices and homebuilding margins is attributable to GemLife's internal building capability that we define as being a reactionary function, responding directly to seasonality and market forces in each specific geographic location. This unique approach ensures that GemLife can preserve consistent homebuilding margins by strategically assigning a range of curated home product types whether they be single, multistory or split level owned on specific home site to maximize homebuild revenue. For FY '25, the average home sale price increased 18% to $833,000, 11.8% ahead of prospectus and the average homebuilding margin increased 24% to $418,000, 12.8% ahead of prospectus. Our reactionary approach has led to 7 years of consistent homebuilding margin preservation amid Australia's worst housing and construction crisis. Importantly, we carried 38 homes that were completed and sold into FY '26, supporting earnings visibility into the new year. To this end, we have provided guidance for FY '26 of underlying EPS between $0.285 to $0.30. I will elaborate on this point further towards the end of this presentation. GemLife generates value through 2 distinct revenue streams. The first is development profit, utilizing our time-proven proprietary building methods to construct and sell homes profitably, allowing us to recycle capital into new greenfield development opportunities to support disciplined organic portfolio growth. The second is recurring and growing rental income, retaining landownership and benefiting from a self-perpetuating rental profile that continues to stabilize as communities mature. These 2 revenue streams are further complemented by our in-house home resale agency function, GemLife Realty. At year-end, GemLife's portfolio grew to more than 10,400 sites across 33 communities in 4 Australian states. More specifically, 2,116 occupied homes, 4,107 sites under development approval and 4,244 sites in the greenfield development pipeline. This 10-plus year fully funded development pipeline gives us clear visibility over our future organic greenfield growth activity. It has firmly entrenched GemLife as a dominant innovator, strategically positioned to expand housing and lifestyle opportunities for the burgeoning Australian downsizing cohort. Importantly, we do not charge deferred management fees. Moving on to Page 6, Slide 6. GemLife's unrivaled vertically -- fully vertically integrated business model remains a key industry differentiator that ensures consistent development margin preservation while also fueling organic portfolio growth. Having control of every aspect of our business enables us to dynamically manage all stages of the development and operations life cycle of GemLife's community. This includes site acquisition, planning and civil work through to residential and commercial construction, sales and marketing, ongoing community operations and resale of established homes. This degree of autonomy means we maintain control over all costs, speed to market, product type, specification and quality, while retaining and internalizing the build margin that would otherwise be paid to a third-party builder. We are holders of an unrestricted building license in each of the operating state, thereby allowing us to contract directly with homeowners to collect progress payments throughout the construction build process. This unique attribute within the listed landscape allows us to reduce peak capital requirements, thereby more efficiently managing our working capital. GemLife's internal building capability also enables us to adjust build pace in response to seasonality and market conditions, helping us avoid excessive inventory while maintaining delivery momentum. GemLife Moreton Bay, shown on Slide 9, is a practical example of this in action with civil, multiple residential and commercial construction teams operating concurrently with an instructive delivery program, enabling multiple uninterrupted revenue streams to progress in parallel. Finally, we will focus on financial performance. Our model is underpinned by long-term community design principles. Our purpose is to create high-quality, thoughtfully designed communities for Australia's downside the cohort. Transparent fee structures, aging in place design, energy efficiency initiatives and strong homeowner engagement all contribute to sustained demand and long-term asset value. Importantly, it is the combination of these unique GemLife community attributes that have made our 3,600 current homeowners our strongest advocates with 47% of new home sales inquiries generated through existing homeowner referrals. I will now hand over to Ashmit to provide a detailed overview of our financial performance.

Thank you, Adrian, and good morning, everyone. Turning to Slide 9. Overall, we're very pleased with our 2025 performance, delivering pro forma underlying NPAT of $90 million. Despite fewer settlements than last year, revenue increased and both EBITDA and underlying NPAT grew by approximately 9% to 10% on FY '24. This outcome was driven by the strong sales prices and margins achieved, which I'll expand on shortly. Statutory NPAT includes approximately $49 million of one-off costs relating to the IPO, stamp duty on the Aliria portfolio acquisition and higher pre-IPO interest costs. As Adrian said earlier, our business model is straightforward. We build and sell homes for a profit through the development segment, and we retain land ownership to generate recurring rental income through community operations. And on Slide 10, we break down the performance across these 2 segments. Both development and community operations outperformed FY '24 and exceeded prospectus forecast as shown in the table. Within the Development segment, the key drivers are sales prices, margins and settlement volume. Together, these drivers delivered development EBITDA 6.6% above prospectus and 7.4% higher than the prior year. In community operations, all key drivers improved year-on-year, compounding to produce a 30% increase in operating profit on FY '24. Performance was consistent with prospectus expectations, reflecting the stable and predictable nature of this rental income. Looking more closely at development on Slide 11. Average sales prices and build margins were up 18% and 24%, respectively, on FY '24 and were more than 11% to 12% ahead of prospectus. This reflects both the quality of our locations and our disciplined approach to optimizing the right home on each lot. We are measured in the timing of new stage releases to the market. This is done to ensure we can price our homes confidently once we know how much that home will cost to build. By applying this method, we have consistently maintained our home build margins between 47% to 52% that same discipline meant we entered FY '26 with 246 homes under contract or with EOI. Stages that we have released after year-end have continued to sell very strongly as well. And as at earlier this week, we have 301 sales in hand, which we believe is an optimal level aligned with the current build activity. Moving to Slide 14. To further elaborate on our capital management, we refinanced our debt facility earlier this month, splitting the facility into 3 tranches with the longest tranche maturing in 2031. This was achieved at the same time as reducing the overall cost of debt by 25 basis points. Our debt is 78% hedged, and we believe we are well cushioned in that current -- in the current interest rate environment. With over $250 million available to be drawn under our facility, we're also well positioned to fund future growth while maintaining strong covenant headroom. Apologies. If I head back to Page 12. Moving to Slide 12. The growth in occupied homes continues to strengthen community operations. While new agreements have contracted increases to site fees by the greater of 3.5% or CPI. Our average weekly site fee rose by 7.3% over last year. This is driven by 2 factors: one, new residents paying current market pricing; and two, the removal of temporary discounts at communities where clubhouse reached completion. Resale commissions were well ahead of last year and prospectus as a result of strong resale prices on established homes. This demonstrates that sector supply is still falling short of demand, leading buyers to purchase completed resale dwellings. Operating margins are usually lower in this early-stage communities and improve as they mature. And so we're pleased that we still maintained a 64.6% operating margin across the group, even with the addition of new communities in our portfolio. When considering the drivers of this segment, more occupied homes, higher site fees, strong retail performance and margin expansion, all of these factors compound to create earnings growth. Over the past 3 years, occupied homes grew at 25% per annum, while community operating profit grew at 39% per annum. On the balance sheet on Slide 13, gearing was 29.5% at year-end, comfortably within our target range of 25% to 35%. The modest increase in gearing was expected and reflects planned investment into early civil, and infrastructure works at new communities. We expect gearing to increase slightly within our stated band as we acquire additional land through 2026 and 2027 before trending lower as those projects begin selling homes and generating cash. The ability to acquire new sites on balance sheet while remaining within our target gearing range is a key feature of our model, demonstrated by the recent addition of the Townsville site. Turning to Page 15. Inventory management is another important element of our capital management strategy. As Adrian mentioned earlier, our ability to collect progress payments and control build volumes at each site allows us to respond efficiently to demand while managing capital carefully. We also utilize our working capital to build a measured level of stock. This is to ensure sufficient product for buyers seeking immediate occupancy and is reflected in our inventory on hand. At year-end, there were 59 completed homes with a further 241 under construction, a big step-up from June, demonstrating our ability to scale build activity when required. Importantly, of the 59 completed homes, 38 were already sold and could have settled in FY '25. This leaves 21 unsold homes across 10 communities. And if we exclude the display homes, the number of genuinely available completed homes was under 10, highlighting how effectively the platform manages inventory and working capital. I'll now hand over back to Adrian to cover the portfolio and provide key updates.

Thank you, Ashmit. Turning to Slide Page 17. We now review the portfolio. We now have 33 communities and over 10,400 sites across Queensland, New South Wales, Victoria and South Australia. Geographically, our portfolio remains weighted towards high-demand coastal and regional lifestyle locations where there is a pronounced undersupply of downsizing opportunities for our target customers. Queensland remains our largest market with 22 communities, followed by New South Wales with 7, Victoria with 3 and South Australia with 1. Importantly, the portfolio spans active underdevelopment, DA approved and greenfield pipeline sites, providing responsible, fully funded growth for at least the next 10-plus years. When considering land opportunities, GemLife focuses on sites that provide natural undulation, view corridors, aspect and breezes. These key factors complement our internal building capability, enabling us to deploy a range of curated home product types across specific home sites to maximize homebuilding profit margins. Australia's land lease legislative and regulatory framework remains deeply fragmented across operational jurisdictions. To hedge different legislative requirements and regulatory risk, GemLife deployed a universal proprietary chassis system that ensures compliance with movability requirements in each of the operating states. Over the last 6 months, we secured development approvals for 604 additional homes across 5 communities. Earthworks and civil construction are underway at 7 communities and active home construction is occurring across 10 communities. We also commenced settlements at new developments, including GemLife On Dean and Highfields Heights, further broadening earnings contribution. Our oversized resort-style facilities have also commenced in earnest, including Country Clubs, Summer House's and other sporting facilities and community amenities, which underpin pricing strength and homeowner satisfaction. Gemlife's vertically integrated business model allows for steady and disciplined construction progression across multiple sites, manages concentration risk and ensures consistent delivery of product to the high standard. Now moving on to outlook and guidance on Page 21. Looking forward, our development pipeline comprises of over 4,000 homesites under development and development approval and a further 4,200 homesites in the greenfield pipeline. Capital recycling from near-complete communities into new greenfield development opportunities is one way we intend to achieve our aspirational growth objectives. Recycled capital has most recently been deployed to organically fund the acquisition of our latest greenfield development site in Townsville, which upon development approval will boast 550 homesites. We continue to innovate in both format and delivery. GemLife is continuing to pioneer innovation within the land lease sector through the upcoming development of Australia's first vertical land lease community on the Gold Coast and the successful rollout of our first pocket park community at GemLife On Dean in Rockhampton. Our vertical multistory land lease community will redefine the senior living landscape and provide operators the opportunity to target middle and inner-ring metropolitan locations, further broadening the appeal and access to the land lease model. Pocket Park development comprising of 50 to 100 homes per community will deliver housing choice located within established urban or regional locations, providing a practical downsizing option for older Australians and seniors seeking lifestyle-orientated living without the need to relocate. GemLife is also in the early stages of pioneering a new factory-built home construction and building method that will enhance build margins across the group, further improve build time frames from our industry-leading 16-week build program, reduce waste and enhance our ESG credentials. I am pleased to report that we delivered a pilot home at our GemLife Rainbow Beach community on the eve of Christmas 2025. We are confident in the product and its application, and we'll continue to develop the business case over the coming 12 months. So far, so good. In FY '26, our focus remains on disciplined execution and home construction profit margin preservation. While we expect to settle over 420 homes, earnings remain our priority. Accordingly, we have provided FY '26 underlying EPS guidance of $0.285 to $0.30, representing growth of 20% to 27% on FY '25. This is well supported by both construction and sales. As at year-end, 300 homes were either completed or under construction, and we also had 246 homes under contract or with expressions of interest. While early-stage communities may see a higher mix of standard homes, the average sales price of the 246 homes we have sold is greater than the average sale price achieved in 2025, providing strong visibility into 2026 earnings. GemLife remains bullish on the sector thematic, supported by favorable long-term trends and demographic tailwinds expected to persist over the next 20 to 30 years. Overall, FY '25 demonstrates the scalability of our model, the resilience of our margins and the visibility embedded in our pipeline. And with that, we're happy to take your questions.

[Operator Instructions] First question comes from the line of Connor Eldridge with Bell Potter Securities.

First question from me, just around maybe give us some color on the key projects contributing to that 420 settlement number in FY '26. Just looking like Gold Coast and Moreton Bay are obviously key contributors in the last half. But yes, maybe just the number of actively selling communities for FY '26. So I guess we can start thinking about sales rates.

Well, at the moment, we have active house construction across 10 communities, which we've outlined on Page 18. So that's at Elimbah, GemLife On Dean, Gold Coast, Highfields, Highfields Heights, Maroochy Quays, Moreton Bay Palmwoods, Rainbow Beach and Tweed Waters. But importantly, we have another 7 communities where earthworks are underway. So those are the ones that we bought in the Aliria portfolio as well as our site at Beachmere and New Gisborne. Those will all start contributing towards the end of the year. So we expect a good second half of the year, picking up what projects are finishing in the first half of the year.

Great. That's clear. And maybe just around the average sales price, premium homes coming through, obviously pushed that number up a little bit versus original expectation for the full year. But just wondering how we should think about the mix of homes going into FY '26 and where we expect that average sales price number to land?

Yes. So the mix of the current sales prices at FY '25, we've actually given a breakdown on Page 30 in the appendix. So that's the graph on the right. As you can see, there's a lot of homes in that sort of standard range, but then we had 64 homes that were over $1 million ex GST. Having said that, the average sales price of the 246 contracts and EOIs that we have as of the end of the year was actually higher than the FY '25 average. So even though we expect new sales and new communities to start at more standard homes, we still believe the average will be in line with FY '25.

Yes. Great. That's very clear. And just a final question from me. Just around cost pressures and what you guys are seeing on the ground, particularly up in Queensland just with materials, civils, labor and I guess, how confident you are in being able to sustain these strong development margins moving forward?

Yes. Thanks, Connor. Adrian here. Look, we continue to manage that responsibly with our suppliers and [indiscernible] networks. These are relationships that we have had for quite a number of years where we actively manage inventory and balance sheet of our subs and suppliers to ensure that they are able to assist GemLife's growth. So at the moment, as far as GemLife is concerned, we are managing those risks extremely well. No doubt, there are price point pressures and cost escalations starting to creep in. However, as a business, because of our vertical integration and our building capability, there are many levers that we can pull before there is any building margin erosion. So for us, it's something that we monitor weekly, but at this stage, managing quite successfully.

Next question comes from the line of Adam Calvetti with Bank of America.

Congrats on the results. Look, you got 246 contracts on hand at 31 December. How has that tracked year-to-date in terms of new contracts on hand?

Thanks, Adam. That's a great question. So actually, as of Monday this week, we have 301 sales on hand, including 69 EOIs. So as we sort of talked about earlier, we're measured with how we release stages. It was the right time to release those stages in the first half of the year, we've seen a really good uptick. So to put the 301 in context, whatever we've settled year-to-date, we've replaced with a new sale, and we've added an additional 55 homes on top of that to refill that bucket.

Okay. That's pretty clear. And then so I'm just trying to reconcile. I mean you've quoted 420 or above that number for settlements. But I mean, at that sales rate with those current contracts on hand, it seems like you don't have to do a lot to get well above 420. I mean what am I missing? What's going to be -- I guess, what's hindering that number?

Yes. So it's a combination of a couple of things. So I think there's a few communities that are completing this year and a few communities that are starting towards the end of the year. So yes, I guess the current sales in hand are pretty strong, but there's not many homes we can still sell at some of these completing communities like Rainbow Beach and Tweed Waters all spoken for, but really, it's the new sales in the second half of the year, which will contribute. So it's more of a timing thing, but really with the number of active projects we have in the second half of the year 2027 should be a lot stronger, but 2026 guidance is in line with just with what's active at the time.

Okay. And maybe just one more just on the actual guidance number. I mean if you take the average sale price, you put a margin on it and assume the rest of the business is tracking well, it's not hard to get to the top end, if not above that. Is there anything that's going to be dragging down? Or what's the flex that's going to be in that 28.5% to 30%?

Yes. So one thing that may sort of drag it down, I guess, I suppose, is that we're marketing a lot of new sites that will come on in 2027, second half of '26. So there's a lot of setup and, I guess, scalability costs that we're putting into the business now to set up for that future growth. But otherwise, yes, look, things are looking positive at the moment, but we just want to make sure, obviously, we hit our numbers appropriately.

Adam, Adrian here, just to add to Ashmit's comments, look, where we need to revise guidance this year, we will do so. What we wanted to ensure was that security holders had confidence in GemLife's ability not to blame weather and other reasons for not [indiscernible]. We've taken a very consistent approach as an operator, developer and builder to ensure that the homes that we are releasing we can price correctly and ensure a margin. So whilst we look at those numbers and the guidance we've given you, whilst it may look easy to hit on paper, there are many factors across multiple locations that could potentially drag us down, but we feel confident that with the numbers that we've provided today, we should very much be in control of our destiny in FY '26.

Next question comes from the line of Lauren Berry with Morgan Stanley.

Just on the FY '25 result, you delivered 312 settlements. Originally, you've been saying 333. Can you just talk to us the reason why those have slipped into FY '26, please?

Yes. So look, I think it's important to know, Lauren, it's a very good question. So we had 38 homes completed and sold at year-end that could have settled in F '25. So really for us, there are just timing differences. So more importantly, for GemLife, noting that we are not a widget business for us, we are a margin-driven business because we use those margins to grow our portfolio organically. But what I can say, a lot of those homes are now starting to settle in the early part of this year. So when we look at the settlements year-to-date and reflect on January and February and now obviously into March, the guidance that we've given for the year ahead, we feel very confident and strong on delivering.

So was this more like a purchaser-led delay? Or were you managing the process?

Yes. So just timing differences, obviously, with so much activity over the Christmas period, some people push their settlements into January, just to enable a smooth transition from their homes into ours. And we're very relaxed with that approach. At the end of the day, we're confident in the margins that we will receive for those homes. So whether they push out by a month or 2, as far as we are concerned, it's not so relevant because they are still profitable sales and they complement the FY '26 numbers.

And just to add to what Adrian is saying, Ashmit here, obviously, the 21 homes that didn't settle now fall into FY '26, which can boost our FY '26 earnings. So the fact that we still surpassed our forecast by 4% to 5% and giving clear visibility of additional earnings that was coming into FY '26 that theoretically didn't exist before, is we view as an overall positive.

Yes. And just on that, Lauren, 38 of those homes were sold. So we only had 10 homes when you strip it all back, there are only 10 homes across 10 communities that remained unsold in the group. So we were very inventory light whilst also recognizing the fact that no homeowner missed out nor did we miss out on the sale.

Yes. Great. Just on production, you've called out you've got 300 lots under production at the moment. You've got 7 sites also doing earthworks. Can you give us a bit of a feel how you expect the production rate to trend over the course of the year and particularly as you hit the end of FY '26, please?

Yes, very good question, Lauren. So look, you're right. We've started a number of sites where civil construction is now in full swing. I can say that we have now filled all of the positions required to now execute home delivery and community facilities and amenity delivery. So we certainly anticipate a very strong second half, and we are primarily positioned to capitalize on margin preservation and growth across those communities based on what we are seeing from a house cost perspective. So whilst we have a number of communities in this first half coming to its conclusion being GemLife Tweed Waters, Palmwoods, as Ashmit raised earlier, for us, it's very much those Aliria communities that we acquired through the IPO process that will now come into their own. And that's why in the past, when we've spoken to that uninhibited runway of delivery, we are about to embark on that runway kicking off in the second half of this year.

Okay. Great. And then just final one from me. Can you make any comment on any first half, second half skew that you expect on the settlement numbers, please?

Yes. Look, typically, there is always a bit of a skew. November, December tends to be a bit stronger, but not materially so this year simply just because, I guess, as Adrian said, there's completing communities that are finishing in the first half of the year, and that's replaced by new communities in the second half of the year.

Next question comes from the line of Suraj Nebhani with Citi.