Lifestyle Communities Battles $195m Loss but Sees Sales Rebound in H2 FY25

A Challenging Year Marked by Significant Write-Downs

Lifestyle Communities Limited (ASX, LIC) has revealed a tough financial year ending June 2025, posting a statutory loss after tax of $195.3 million. This stark reversal from a $50 million profit in FY24 was largely driven by a $54.5 million provision related to Deferred Management Fee (DMF) repayments to previous homeowners and a substantial $135.5 million write-down in investment property values following an adverse Victorian Civil and Administrative Tribunal (VCAT) ruling.

Despite these setbacks, the company’s operating profit after tax remained positive at $45.2 million, albeit down from $52.9 million the previous year, reflecting resilience in core operations amid external pressures.

Sales and Inventory, Signs of Recovery

The broader softness in the Victorian property market weighed heavily on settlement volumes, which fell to 268 in FY25 from 311 in FY24. However, Lifestyle Communities experienced a notable turnaround in the second half of the year, with new home sales rising from 41 in the first half to 98 in the latter half. This momentum was supported by a strategic push to reduce excess inventory, achieving a 25% reduction over six months, bringing unsold homes down from 359 to 269. This inventory management is critical as the company seeks to align supply with demand more effectively.

Balance Sheet Strengthening and Capital Management

In response to the challenging environment, Lifestyle Communities has embarked on a de-leveraging journey, commencing in the second half of FY25. The company has executed contracts to sell four parcels of land, expected to recoup approximately $114.1 million over the next 6 to 12 months. This capital management initiative aims to right-size the development pipeline and improve financial flexibility.

Operating cash flow also improved markedly, swinging from a negative $115.2 million in FY24 to a positive $4.6 million in FY25, signaling better cash generation from ongoing operations.

A Refreshed Strategy Focused on Homeowners and Downsizers

CEO Henry Ruiz emphasized a sharpened strategic focus on the needs of Australian downsizers, aiming to become the preferred choice for this demographic by delivering high-quality, affordable housing and an exceptional homeowner experience. This strategy is informed by direct homeowner feedback and is being implemented with a clear execution plan, independent of the ongoing VCAT appeal process.

Looking ahead, the company plans to continue de-leveraging, further reduce inventory, and renegotiate contracts with existing customers under revised DMF terms. The refreshed strategy also positions Lifestyle Communities to capitalize on demographic trends, with the over-55 population in Victoria expected to grow by over 60% in the next two decades.

Outlook and Market Positioning

While the VCAT appeal remains a key uncertainty, its successful resolution could reverse a significant portion of the recent financial adjustments. Meanwhile, the company is focused on stabilizing operations and preparing for a new development cycle anticipated in late FY26 or early FY27, contingent on improving property market conditions.

With a maturing operating model and a disciplined approach to capital allocation, Lifestyle Communities aims to strengthen its market position and deliver sustainable returns to shareholders over the long term.