Ingenia Communities Group (INGEF) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to Ingenia Communities Group FY '25 Results Teleconference and Webcast. [Operator Instructions] I would now like to hand the conference over to Mr. John Carfi, CEO and Managing Director. Please go ahead.

Good morning and thank you all for attending. I'm pleased to be presenting my second full year result as CEO of Ingenia Communities, announcing that we have not only exceeded our EPS guidance, but that our year 1 goals have been achieved and we are now well placed to accelerate into delivery of our 3- and 5-year plan. I'd like to start by introducing some of our executive team who are joining me to present and also to answer questions. Justin Mitchell, our CFO; Donna Byrne, General Manager of Investor Relations and Sustainability; Justin Blumfield, EGM, Residential Communities; Matt Young, EGM, Tourism; and Michael Rabey, EGM, Acquisitions and Development. Before I commence, I'd like to address the recent VCAT finding and current litigation relating to deferred management fees in Victoria. Ingenia does not include DMF in its lifestyle development operating model as we believe increased competition in the sector and buyer sentiment has rendered it obsolete. Discerning customers have driven product evolution and pricing closer to surrounding medians, making the value proposition of DMF questionable for new product and resales alike. While our acquired Federation portfolio contained a legacy DMF, it was not material for Ingenia and we have prudently made provision for its impact. I'll start on Slide 4. The implementation and systematic execution of our strategy supported delivery of significant growth as we exceeded our upgraded EPS guidance. EBIT is at the top end of our guidance range after taking a conservative position and adjusting our revenue to exclude DMF received during the year. EBIT prior to this adjustment also exceeded guidance. The announcement of our strategic plan at last year's result saw us enter the year with a clear set of objectives and I'm pleased to say that we have delivered on each and every one. Our ability to build momentum over the year while embedding change is not only reflected in today's outcomes but will see us accelerate towards our 3- and 5-year goals. This result demonstrates the tangible benefits of our focused execution with improvements in our development margins and home settlement volumes, combined with sustained cost savings contributing to meaningful growth and improving development returns. The momentum we have built sees us begin FY '26 with a sustainable flow of new land lease home settlements, continued high occupancy across residential communities and a 14% increase in forward bookings for our holiday parks. Before we talk about the result in more detail, let me quickly recap the areas of focus we identified last year as part of our 1-, 3- and 5-year plan. Turning now to Slide 5. I'm extremely pleased with the delivery of our year 1 goals. Simplifying our business, refining our focus, combined with clear strategic goals has resulted in a range of changes, including winding up the funds business with the sale of assets completed in February, streamlining our structure and driving organizational change to deliver clear accountability and productivity gains, significant Board renewal and changes to our governance structure to support a simplified business and refined strategic direction. We identified development as a key driver of accelerated growth and improved returns and where considerable changes has occurred, including implementation of a new structure and continued refinement. We are already seeing the benefits of some of these changes, which include a vertically integrated delivery model with the core activities, acquisitions, marketing and sales now within the development function. FY '25 settlements were up 13% at the midpoint of our targeted 5-year compound annual growth rate of 10% to 15%. Pleasingly, we've been able to grow our development gross margin as cost-based initiatives begin to impact and we expect to achieve a net cash positive outcome per lot in FY '26. We have already achieved these objectives in our joint venture portfolio where our 4 greenfield projects delivered an average positive cash flow of $70,000 per settlement with a net margin of 18.1%. Following a review of our pipeline and establishment of greater financial discipline, we have chosen to divest or defer some projects and are acquiring in line with clear targets as we reshape the pipeline to meet our targeted returns and growth needs. As we transition out of brownfield and lower-margin projects, we remain disciplined and continue to prioritize performance over volume. We continue to refine our portfolios, divesting lower growth assets and selectively acquiring assets which have opportunity for growth. We are actively engaged in discussions aimed at supporting future land lease growth and continue to acquire land to meet our objectives for growth in an increasingly competitive market. Moving briefly to Slide 6. Our FY '25 achievements position us to deliver our strategic and scale targets in line with our 3- and 5-year goals. As we move to optimize returns, we have a solid foundation underpinning our drive towards our target portfolio structure and returns. Across the business, we have embedded more effective financial discipline and are seeing gains in productivity and accountability. A reduced executive headcount and changes in the development and holidays business are delivering efficiency and productivity along with sustainable reductions in our cost base. Development represents 39% of portfolio EBIT and we are continuing to deploy the majority of our capital in this segment, supporting ongoing EBIT growth, pipeline acceleration and scale in line with a 5-year settlement CAGR of 10% to 15%. We retain a solid balance sheet with funding capacity. We have a fully engaged team committed to execution as demonstrated by recent improvements in our engagement score. We are already well progressed with the actions that will underpin delivery of our year 3 and 5 objectives. As we move into year 3, we expect gains from our initiatives to accelerate, in particular, through the realization of design refinements and procurement in development and a continued focus on productivity and efficiency. We are refining our portfolios and with the clear targets in place, we have further acquisitions under review. Delivery of scale and optimizing returns across the business will continue the pathway to our medium-term targets and strategic goals. Over to Justin to present our financial results.

Thanks, John, and good morning, everyone. I want to start my presentation by highlighting the progress made in delivering our key financial objectives. Our settlement volumes increased 13% to 520. Gross margin from development expanded to 47% and there is meaningful progress in improving our net cash contributions from development projects. And the group remains focused on driving enhanced financial returns and a prudent balance sheet position to fund our growth. I'll now start on Slide 9. I'm pleased to present the group's financial results for 30th of June 2025, a year marked by strong performance, disciplined execution and strategic momentum. Our EBIT rose 22% to $164.1 million, supported by margin expansion, a meaningful increase from the development joint venture and a continued focus on cost management. Underlying profit was $126 million and [ EPS was $0.309 ], an increase of 33% and exceeding operating guidance. Revenue increased 8% for the financial year with growth achieved across key segments. We've taken a prudent approach to [Technical Difficulty] following the VCAT decision with no DMF recognized in FY '25. In addition, our provision for $12.5 million has been recognized in our statutory results for potential refunds and we wrote down the fair value of investment properties by $25 million, representing the full value of DMF. The total distribution for FY '25 was $0.096, consistent with our policy to pay out taxable earnings from the trust. The decline relative to last year is due to the inclusion of capital gains associated with the Ingenia Gardens assets that were disposed of in FY '24. Now turning to Slide 10. As I mentioned, our group EBIT was up 22%, inclusive of joint venture operating profit, landing at the top end of our guidance range. Whilst we have seen improvement in overall returns in line with our 5-year targets, there continues to be cost headwinds with growth above CPI and in particular, council rates, utilities and land tax. Lifestyle Rental has delivered growth, driven by CPI-linked rent reviews and new annuity income from settled homes during the period. While maintaining its EBIT growth trajectory, margins have been impacted by lower CPI and legislative changes reducing rental growth relative to prior years. There was no DMF income realized and operating cost growth above CPI, coupled with new communities expanding. Lifestyle Development delivered higher settlements, average home prices and gross margin expansion, contributing to an EBIT uplift of 25% and a pleasing expansion of EBIT margin to 31.8%. Our development joint venture delivered a 124% increase in underlying profit with settlement volumes increasing to 146 for the year, driving growth. Holidays also performed strongly with tourism income rising 6%. Holidays has benefited from both higher occupancy and rate growth, supported by strategic investment in new cabins, enhancing earnings and unlocking portfolio value. While segment EBIT did increase marginally, margins declined slightly due to one-off costs and a targeted investment in marketing spend. Corporate and Support Center costs have declined, reflecting realized savings from restructuring and continued focus on cost management. I'll now turn to Page or Slide 11. We continue to manage capital with discipline and have maintained a prudent balance sheet position. We are actively managing risk as we grow the business with a focus on capital availability and tenure. At 30 June, our gearing was 29.7% and LVR was 35%, comfortably within target range and banking covenants. We have over $185 million in funding headroom supported by stable recurring cash flows from both Lifestyle Rentals and Holidays and can recycle capital with targeted asset disposals as required. The group continues to be well supported by its lenders. In April, we secured $125 million in new facilities and welcomed a new lender. We also refinanced $350 million of existing facilities, extending our weighted average debt maturity to 3.7 years with no expiries before January 2027. Our weighted average cost of debt for the year was 5.24% and we expect this to reduce into FY '26 as our hedging profile positions the group to benefit from further interest rate reductions. Turning to Slide 12. The group recognized a net valuation uplift across the portfolio. Lifestyle Rental total portfolio increased by $160 million, driven by continued CapEx spend on development projects and our 2 acquisitions in Queensland. However, the net valuation decline was realized due to the write-off of the DMF. The Holidays and Mixed Use portfolio grew by $72 million, including $38 million in valuation increases, reflecting strong underlying NOI growth and performance, investment in new cabins and positive rent reviews with a relatively stable cap rate. And finally, Ingenia Gardens portfolio grew to $140 million, maintaining a stable cap rate. In closing, our business remains resilient and well positioned, underwritten by a stable and recurring income coupled with strong momentum. We have made good progress on executing our targets, delivering strong results and maintained a disciplined capital position as we invest for growth aligned with our strategic objectives. And the team remains focused on driving enhanced returns and further embedding financial discipline. I'll now hand over to Michael Rabey to take us through the development results.

Thank you, Justin, and good morning. We'll start on Slide 17. As mentioned, we are pleased with our development results, which reflect our ongoing focus on execution and the emerging impact of enhancements to our delivery model. Our EBIT grew materially, contributing 39% of portfolio EBIT and we have also recently seen an increase in gross margins. Home settlements were up 13%, consistent with our 5-year total growth. FY '26 sees us move into positive cash creation as our project mix evolves and benefits of the design, cost, construction and procurement initiatives progressively improve returns. We traded out of 3 of our brownfield projects in FY '25 and are already seeing the benefits from our refined structure and greater financial discipline as future projects commence and we drive towards greater scale and efficiency. We are investing heavily in our pipeline with further investment this year as we commence another 5 communities and launch a total of 7 projects to market. We're now on Slide 18. Reflecting first settlements in Q2 for Archer's Run, the joint venture increased its contribution, settling 146 new homes for the financial year at an average price of $829,000. This is above the Ingenia portfolio average due to the majority of these projects being in New South Wales. This year, Archer's Run will contribute a full year of settlements, further increasing the joint venture's contribution to fees and returns for FY '26. Moving to Slide 19. We have stable build times with 16 projects currently underway, and we are continuing to align our delivery with demand. We completed 511 homes over FY '25 and closed the year with limited inventory. Across the Ingenia-owned projects, there were only 30 completed homes unsold at financial year-end with 17 in the joint venture. As at 21 August, we have settled 63 homes and have a further 398 contracts on hand. [Technical Difficulty] anticipated rates of allocation to buyers providing a relatively smooth settlement profile supported by delivery of project amenity, release of new products and communities completing first homes. We're now on Slide 20. Settlements continue across a diverse range of locations, protypes and price points with home selling across 13 projects this financial year. While we operate in a number of submarkets, a large portion of our pipeline is in Queensland, a market which continues to deliver strong sales, stable rates and price growth. New South Wales continues to deliver higher than average pricing relative to the markets with a slight decrease in days on market in the areas we operate. We have limited exposure to the slower market, which is tracking in our forecast with inquiry remaining favorable and sales volume increasing in the areas we operate. We're now on Slide 21. We settled our last homes at 3 brownfield projects, now delivering stable rental returns. Facilities delivery continues across new and existing projects with 11 communities opening display homes and amenity over the year. We are commencing 5 greenfield projects this year, building our pipeline of settlements across Queensland, New South Wales and Victoria. We will see an uptick in marketing expense over the year as we launched 7 new projects, impacting short-term EBIT margins before delivering first settlements from the end of FY '26 and more significantly into subsequent years. These new projects will provide opportunity to implement many of the improvements we've been working on over the past 12 months aimed at productivity, quality and efficiency gains. We acquired 2 projects in Queensland over the financial year, extending our pipeline of development sites, along with approval for 1,055 homes and we are actively reviewing a range of further opportunities to extend this growth. We will continue to work on initiatives to improve returns and our customer experience over FY '26 as we move from a focus on our team and structure to delivering further enhancements through technology, systems and standards. I'll now hand over to Justin Blumfield to take us through residential communities.

Thank you, Michael, and good morning, everyone. Today, I'm pleased to be presenting the results for our established residential communities. These outcomes demonstrate the security of our rental annuities and our team's focus on delivering high levels of customer satisfaction as we continue to grow the number of sites in our Lifestyle and Rental portfolios. I'll start on Slide 22 with a summary of the Ingenia Lifestyle Rental segment, which achieved 2% EBIT growth for the year. This growth was driven by an uplift in revenue arising from rental increases from existing sites and the addition of 369 new rent-producing sites. The removal of DMF income in FY '25 impacted overall EBIT growth, whilst our stabilized EBIT margin was impacted by lower comparative rental from declining CPI and the commencement of the Queensland government's rental cap. Operational costs, higher CPI were also experienced throughout the year. Turning now to our land lease communities on Slide 23. Our landing rental annuity income continued its growth with new homes added by development. This included final settlement at our [ Yeppoon and Taroomball ] communities. Average weekly rental growth of 5.2% achieved, we supported this rental growth by completing 233 [ resales across established ] communities, generating $3.5 million in sales commissions. Future rent growth will be impacted by the legislation changes, including in Queensland, where rents are currently capped at the higher of CPI or 3.5%. In New South Wales, which resulted in our adoption of 4% annual increases and lastly, the changes as a result of the Victorian government's current review. Our new Ingenia Lifestyle app has been extended to all Ingenia Lifestyle communities with over 5,000 residents now connected to this platform. Our focus on customer retention has been further entrenched by the rollout of our new HOME customer framework. We refer to these as our HOME principles, and they reflect our team's commitment to delivering health well-being, opportunities for discovery, meaningful connections and easy living outcomes for our residents. These principles will guide ongoing execution of resident community experience. Moving now to our All Age Rental portfolio on Slide 24. We achieved strong rental growth across this portfolio and we'll continue to maximize revenue by upgrading and the addition of new homes where available. Occupancy remains strong at 98% with continued demand rental accommodation in our key markets in Brisbane and Melbourne. Consistent with our strategy, we are targeting over 14% yield on future investment in new homes across these communities. Lastly, I'll turn to our Ingenia Gardens communities on Slide 25. Divestment of 6 Australian communities in December '23 impacted revenue and EBIT for this portfolio. However, on a like-for-like basis, the existing 19 communities continue to perform with an increase in average weekly, high occupancy and careful control of costs, resulting in a stable operating margin. Our commitment to delivering exceptional support and service to our residents is demonstrated by an average 85% satisfaction rate across our Gardens communities. In closing, we are very pleased to have demonstrated discipline in our operational execution and have advanced our customer focus of building belonging at all our residential communities. Thank you. And I'll now pass to Matt Young, our Executive General Manager of Tourism.

Thanks, Justin. Good morning, everyone. I'm pleased to share with you an update on our full year results. I'll start on Slide 28. As Justin mentioned, the portfolio continued its track record of growth in tourism revenue and EBIT. While EBIT increased, EBIT margin declined largely as a result of one-off costs and increased marketing expenditure, which included the development of a new website. We continue to deliver modest growth in occupancy and rate, demonstrating the resilience of this portfolio and a great result in light of disruptions due to extreme weather earlier this year. We expect margins to improve in FY '26, driven by a reduction in one-off costs experienced in FY '25. Ongoing focus on enhancing performance through the new website is expected to reduce travel agent commissions, while responsive use of forecasting and [Technical Difficulty] tools will further support operational efficiency. We've refined the portfolio and simplified the business, completing the sale of the subscale fund assets and we've been selective in investing for growth by the addition of new accommodation and strategic acquisitions. I'll now move to Slide 29. Over FY '25, in addition to investing in densification opportunities, we've identified and acquired 2 established parks, which fill a strategic gap in our network and provide significant growth opportunities. We have additional accommodation plan for both sites with both already benefiting from integration into our marketing and revenue management system. Both sites will deliver attractive returns on investment in line with our targets and leverage our existing platform and distribution capability. We continue to target densification opportunities where market intelligence indicates capacity constraints and drive long-term value creation. I'll now close on Slide 30. We added additional 50 cabins across the portfolio in FY '25, investing $5 million and are forecasting to exceed a yield of over 25%. Over the year, revenue generated by these new cabins, including booked and future revenue has exceeded $2 million with a forecast operating margin of 60%. The launch of the new website is exceeding expectations over the first 3 months of operation with an increase in booking desktop conversions up 26% and an impressive 36% increase in mobile conversions. In addition to reducing demand on our team for phone bookings, this has improved the overall customer experience. The rollout of the AI pricing tool continues, supported by proactive marketing campaigns to boost bookings in shoulder periods. In closing, I'm excited about the opportunities ahead, particularly with bookings up 14% and I look forward to sharing further progress at our half yearly results. Thank you. I'll now hand back to John.

Thank you, Matt. I'm on Slide 32. As you can see, our 3 areas of priority from a strategy perspective are guiding our actions throughout the business as we focus on optimizing financial returns and accelerating growth. I've spoken before to our strategic focus areas and they have not changed. We have simplified the business with a structure and embedded focus that is fit for purpose. Over the next year, we will continue to refine our structure, seek further efficiency and build our focus on customer. Secondly, we are beginning to see improved development returns in line with targets. However, there are further gains to be realized. Our development team structure supports delivery at scale as we extend our pipeline and productivity goals. Finally, aligned to these objectives is maintaining our focus on operational efficiency and productivity and ongoing focus on the returns we need from our portfolios, continued cost management and continual improvement in how we do what we do are key to value creation and improved returns from the business. These priorities have placed us in a strong position to deliver our financial and strategic goals and will continue to guide our actions into FY '26. I'll close on Slide 33. Our focus on execution is yielding results. We upgraded our guidance in FY '25 and have met those targets with the delivery of EPS growth of 33% and EBIT growth of 22%. Importantly, we have made solid progress on our strategic goals and have embedded changes that will provide longer-term benefits, moving the business from aggregator to creator and operator with a clear pathway towards enhanced returns. A refined structure, stable corporate cost base and entrenched financial discipline support our FY '26 guidance as we target growth in underlying EPS and EBIT. We continue to grow our annuity and recurring revenue base via our established residential communities and holiday parks. Recent acquisitions, investment in densification and development activity will deliver growth in this diverse income stream over FY '26. For development, FY '26 is a key year as many of the design and procurement initiatives move into production. With 5 projects commencing over the next 12 months and additional land under review, we are building momentum towards our year 3 goals. We are fortunate to have strong demographic drivers support growing aging population, underlying housing demand and the appeal of domestic travel, all support demand. We are acquiring with discipline, mindful of longer-term financial impacts and shareholder value. However, we are operating in an emerging sector and remain cognizant of the impact of the broader housing market on our customers' ability to sell. The land lease industry is continuing to grow. It is institutionalizing as an asset class and being viewed as a viable alternative or preference to traditional retirement villages for a growing number of retirees. Aligned with this, we are seeing increasing competition and greater regulatory focus, which will continue to shape the future of this industry. For Ingenia, continuing to support positive industry change and managing the impacts on our residents and returns is a priority. It has been a busy 12 months and I'm immensely proud of the outcomes we're sharing today. With our year 1 strategic goals achieved and strong financial returns delivered, we retain conviction in our strategy and our ability to deliver improved returns. FY '25 has been a year of transition and significant internal change for Ingenia. Despite increasing competition, external headwinds in some markets and growing regulatory oversight, we have embedded an aggressive change program while delivering solid growth and improved margins. We move into FY '26 with a more efficient and sustainable operating model, a stable cost base, greater development focus and diversity of cash flows to support improved returns. We have a clear pathway, committed team, sufficient capital to fund growth and a simplified business that will continue to drive efficiency and productivity. Over FY '26, you will see us build on the momentum established in FY '25, increasing development activity and improving returns, continued portfolio refinement and selective investment, disciplined acquisition activity and a solid capital base to fund growth. That concludes the formal presentation today. But before I go to questions, I'd like to thank the Ingenia team for their support and commitment to this year and their openness to change. I'm pleased with the position the business is in and look forward to updating you on further progress. I'll now open the call to questions.

[Operator Instructions] First question comes from the line of Lou Pirenc with Jarden.

Two questions from me. Can I start with the one the gating factor in '25 well flagged. Your guidance for '26, what does that assume? Or what should we bear in mind there from a tax point of view?

Lou, Justin here. Look, yes, you're right, and I agree it was flagged. I think for guidance purposes of FY '26, I'd be somewhere in the range of 5% to 8% is where we're thinking and probably towards the top end of that.

Great. And then on tourism, you kind of mentioned some one-offs in '25. Should we expect margins to get back to the '24 levels or even higher in '26? Or will some of these one-off items [Technical Difficulty]?

No, I was just going to say one-off items relate to some sewer issues on a couple of projects and obviously, significantly investment in the new site. We don't expect those to continue. So we expect margins to improve. The only things we're toying around with a minimal impact is where we might do short-term stays [Technical Difficulty] will bring overall margins down at the park level, but it will increase EBIT margin if we get extra bookings. We're really toying around with minor bits.

Great. And finally, John, you mentioned in your remarks in your strategically buying or assessing a number of acquisitions. Are you talking about land acquisitions? Or are you looking at broader bigger platform acquisitions as well?

Very much so land acquisitions. Obviously, we want to continue to build our development pipeline as our path to growth. Most of those are greenfield opportunities, but there's the occasional brownfield, although from our experience, significantly developed brownfield tend to come at lower margins. whilst we'll still keep an eye out for those, predominantly, we're looking for rural development land.

Next question comes from the line of Ben Brayshaw with Barrenjoey.

John, you mentioned that the DMF is in effect obsolete, if I heard your comments correctly on the call, but you're also flagging a revised DMF may be included in the future Federation resales. Could you just explain what you have in mind for that, please?

Yes. Thanks for the question, Ben. Look, we've been saying for some time, we think the market has rendered the DMF obsolete. Most of the product in the markets we're operating are getting closer to medium price points for those areas, somewhere around the 80% to medium price and makes it difficult for customers to justify DMF, especially when there's good quality competitive product without it. In our DMF -- sorry, the DMF and our Federation portfolio, when you look at those, it tends to trade at a significant discount to the surrounding markets, whether that's Glenroy, Sunshine or Werribee. The discounts associated with that make that product available to, I suppose, low-income households from the surrounding area. And as an example, in Glenroy, the medium price point is about $1 million and we sell our product in the 300. So there, we think it's justifiable to retain a DMF to retain access for future residents into that product. But obviously, we've transitioned to a compliant DMF. We'll continue to monitor. But at this stage, we think it makes sense really about making the product available to low-income households.

And John, in the presentation, I think it was Michael that mentioned that marketing expenses will be up for development in FY '26. Should we be expecting to get some downward pressure on the development?

Maybe, Ben if I take that, Justin here. Yes, you can expect that there will be some downward pressure, as Michael indicated, launching 7 projects in FY '26 and some probably somewhere between $3 million to $4 million in incremental marketing costs.

Next question comes from the line of Tom Bodor with UBS.

Just on the DMF point, does that mean in practice you will not be collecting the DMFs until the various VCAT challenges are resolved? Or are you still open to collecting the existing DMFs?

Yes. So the way we understand the ruling of VCAT, that particular clause in the contract is now void and can't be enforced, but the contracts remain on foot. We're not collecting DMF. We don't like the idea of collecting it and putting it in a trust fund. We retain the right to collect it, although that's probably more of a technical right, but we're not collecting it. Now we expect that appeal based on advice to run for 8 or 9 months. If you take the last 12 months into account, we would have collected about $2.7 million to $3 million worth of DMF over that period. So think of us potentially forfeiting that or not collecting that over the next period while the appeal runs.

Okay. Great. That's clear. And look, if you think about the DMF, that was one of the impacting factors on the Lifestyle Rental margin. But even adjusting for that, the margin is in the low 50% range. Where do you see that margin trending over time in Lifestyle Rental on a normalized basis? And how do you sort of see the cost headwinds you've talked about today evolving over the next year?

We're still sort of targeting NOI margins in the mid-60s. And obviously, as we accelerate development, while we have projects under development, that NOI margin is always under pressure because we haven't hit maximum efficiency. From a headwinds point of view, we obviously have a regulatory environment that's changed in Queensland and New South Wales that limits growth opportunities in rent, although it's still growth. And we have potential legislation coming in Victoria regulation that might also limit mechanisms for growth there. And we've had some cost pressure mainly to do with utilities and council rates and taxes and what have you. But certainly, we'll be taking opportunities to make sure we run as efficiently and maintain that preferred NOI margin range.

Okay. Yes, no, that's clear. And just a very much a final one for me. On Slide 40, you very helpfully lay out the revaluation for developments. And in the period, I see it was almost $100 million negative. Do you expect as your development margin improves over time, that figure to go to 0? Or will it sort of remain negative for the foreseeable future?

Yes, Tom, and I'm happy to take it off the line in more detail when we catch up. But no, that number will always be negative because as you -- the biggest driver of that negative number is the actual realization of development profit. So I think the number for FY '25 was something in the vicinity of $60 million being released, but we actually booked over $100 million in gross margin. So really, it's just moving from fair value to being realized through the P&L.

Next question comes from the line of Solomon Zhang with JPMorgan.