Ingenia earnings hit by cost pressures across industry

13 April 2022

Ingenia Communities Group have announced a reduction in earnings for FY22 as a results of cost pressures across the industry.

Ingenia are now forecasting FY22 settlements to be in the range of 400 to 425 (down from 475) and have reduced earnings growth to between 5% and 10% on FY21 with underlying EPS anticipated to be 1-2 cents below FY21.

Ingenia confirmed that supply chain challenges and shortages of skilled labour which are causing delays in new home completion have been exacerbated by the flow on impact of recent unprecedented rainfall.

Since announcing the Group’s results in February 2022, the impact of significant rain events in late February and March have led to further delays in key projects across Queensland and NSW, with homes scheduled for completion in Q4 FY22 now expected to settle in early FY23. The Group’s Queensland projects across Hervey Bay, Sunshine Coast, Logan and Gold Coast have experienced significant delays, with rainfall closing sites and limiting access.

While the Group has been working closely with builders to accelerate works to mitigate supply chain and weather delays, the ability to manage project timelines has become limited by the lack of available labour.

An industry wide shortage of key trades has materially impacted the Group’s projects, resulting in additional delays and greater uncertainty. These challenges are not anticipated to abate this financial year as the demand for key trades is further impacted by insurance work following severe storm and flood damage in South East Queensland and Northern New South Wales.

The cost pressures are widespread and all groups involved in the construction of projects will need to respond to the risks of rising costs. Ingenia are likely the first of many to have to announce impacts to their business.

Demand for homes across the Group’s development projects continues to be at record levels. To date the Group has settled 227 new homes with a further 460 homes deposited or contracted. The average new home sales price and margins remain consistent with the first half and the Group continues to increase pricing of new home releases to maintain margins.

Ingenia claim to have a stable team of financially sound core builders and is working with them to respond to current conditions. The Group continues to target settlements to 1,800 – 2,000 over the three years to FY24.

Ingenia Holidays

While cancellations were experienced over recent wet weather events, Ingenia Holidays has continued to perform well, with revenue up 45% on prior year (year to date) and bookings through to June 2022 remaining strong. Barring no further unexpected weather or COVID related disruptions, the Holidays business is anticipated to deliver growth on FY21 for the full financial year, despite the impact of park closures and lockdowns in the first half.

CEO of Ingenia, Simon Owen, said: “Demand for our lifestyle communities under development has never been stronger. With over 460 deposits and contracts on hand, our challenge remains the timing of home completions which are experiencing additional delays as the demands created by recent weather events increase uncertainty in our supply chain and access to key trades continues to be a material constraint on project timelines.

“Our Holidays business is experiencing buoyant conditions with the removal of COVID restrictions and the return of interstate travel driving additional demand.”

“The business remains in a strong position with growth in the asset base and accelerating development supporting returns into FY23. While we are continuing to navigate an unprecedented construction environment, the strong demand we have for homes, the positive outlook for our holidays business and the material growth in our development pipeline, position the business for earnings growth into the future.”

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