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Shares in Lifestyle Communities (ASX: LIC) have fallen again today after the land-lease community developer revealed consumer sentiment had been damaged by critical media coverage, with the proportion of cancellations to new home sales reaching almost three-quarters in the financial year to date.
In its annual general meeting (AGM) presentation, LIC reported 89 new home sales between 1 July and 31 October, but this figure was dampened by 64 cancellations.
This 71 per cent proportion of cancellations to sales compares to a 40 per cent level in the first six months of 2024.
"It is clear the adverse media coverage has impacted our lead indicators, sales rates, and deposit cancellations," the company stated, claiming the "vast majority" of its 5,500-plus homeowners were disappointed at how the business had been portrayed.
But the fallout on activity is impossible to ignore and management is taking "proactive steps" to adjust the cost base and reduce development spend to match reduced activity levels. In mid-October it was revealed that co-founder and managing director James Kelly would retire at the end of this year.
LIC received 525 new leads in October compared to 1,031 in June, which was the month prior to the ABC's coverage that focused on the company's deferred management fees, or exit fees, that rise in increments to a cap of 20 per cent of the sale price for the owner's fifth year.
The report also included allegations from residents of rent being charged to dead people and misleading marketing, while it was also revealed that at an investor conference the company described a key cohort of its buyer market as "Miss Lonely, Miss Homely and Miss Active" - a description the company said it regretted in a statement given to the broadcaster.
LIC has repeatedly defended its deferred management fees model, and in today's presentation it reiterated that the media coverage "largely focused on exit fees without considering the lower entry price that our homeowners typically pay, nor the other benefits we offer".
"We have always preferred the DMF model because it lowers the upfront entry cost for people buying into one of our communities," the company stated.
"This enables customers to release more equity to supplement their lifestyle. Capital gains made over time typically assist with paying the DMF."
An independent public relations firm has been appointed in a bid to restore LIC's reputation, while an independent expert was also commissioned to review the fairness of its sales processes and customer disclosures.
The review was received earlier this month and found that policies and marketing collateral were in line with or ahead of competitors for transparency and comprehensiveness, while its fee structure, policies and agreements were in line with regulation.
The review also found that LIC’s compassionate policy was in line with industry competitors, but did find some inconsistencies in marketing collateral with suggestions made to ensure it remains industry leading.
"Further considerations include the potential to introduce choice within the fee structure, along with ongoing updates to policies and marketing collateral," the company stated.
"LIC board and management team are considering the report. Any definitive changes will be implemented following finalisation and testing."
The group expects December-half settlements to be between 120 and 130, versus 124 in the December half last year, while the earnings guidance is also comparable to the previous year at $19.5-22 million versus $20.8 million.
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