Ingenia sees Land lease Demand & Consolidation Increasing18 August 2021
Ingenia Communities delivered it FY21 results announcing a profit growth of 31% as demand for affordable land lease housing continue to build.
lngenia’s CEO Simon Owen said, “Demand drivers remain strong across the industry, and if anything, have improved. An ageing population, housing affordability issues and the appeal of community living post COVID-19 isolation will continue to make lngenia’s communities an attractive proposition. More than ever residents’ capacity to fund a comfortable lifestyle is challenging and downsizing to one of our communities is an effective way to make a significant difference to the quality of lifestyle for our residents.
lngenia Communities Group today announced Underlying Profit of $77.2 million for the year ending 30 June 2021, an increase of 31% on the previous financial year. Statutory Profit of $72.8 million was up 131% on the prior year.
Simon Owen described the Group’s performance as strong despite the challenging environment, demonstrating the overall resilience of the business. “The health and safety of our residents, guests and staff has remained our first priority in these highly challenging conditions and we are really pleased with the outcomes achieved. The momentum we have maintained despite continuing headwinds is a testament to all of our employees. While we remain responsive to changes in trading conditions and are cautious about the impact of Government restrictions, we are benefitting from the diversity of our community locations and revenue streams as we have continued to trade and grow.
Group revenue was up 21%, to $295.6 million, and EBIT was up 31% to $94.4 million. Operating cash flow of $137.6 million was up 105% on FY20. These results were driven by an increase in rental sites , higher new home settlements and strong performance from the Group’s holiday communities.
lngenia achieved a record 380 new home settlements across the Group’s development projects, up 17% on FY20, despite conditions being disrupted due to lockdown restrictions. A further ten new homes were settled in the Group’s funds operations.
Underlying EPS of 23.6 cents represents a 7% increase on FY20, driven by strong performance across the business and impacted by an increase in weighted average securities on issue as a result of the June 2020 equity raising which was deployed progressively over FY21 as the Group completed acquisitions totalling $215 million.
The full year distribution is 10.5 cents per stapled security, representing a rise of 5% on a cents per security basis. The 2H21 distribution of 5.5 cents per security will be paid on 23 September 2021.
Mr Owen said, “Our holiday parks have experienced strong demand as international borders remain closed and, as a result, intrastate and interstate travel is buoyant. There are now over 741,000 caravans and campervans registered in Australia – the highest ever on record – reflecting the increasing demand for domestic travel. With an unrivalled network of 29 coastal parks spanning from Torquay on the Victorian Surf Coast through to Cairns in Tropical North Queensland Ingenia is uniquely poised to benefit from many Australians newfound fondness to holiday at home. We believe the five-year outlook for our holiday parks is incredibly positive with considerable tailwinds in place.
“Ingenia’s dedicated focus on acquisitions has driven growth in our portfolio scale, aligned with our strategy to grow rent based, annuity style revenue. The addition of thirteen established communities, land acquisitions and over $200 million in assets now under review, reflects our demonstrated ability to establish ourselves as a sizeable sector leader across our industry.
“Ingenia’s communities are located in attractive regional locations which are benefitting from strong real estate markets. Net internal migration to Queensland and regional areas has increased since COVID-19. These regional markets have also seen a significant increase in dwelling values over the last 12 months, supporting local sales for new and existing communities.
“Ingenia delivered record home settlements in the second half as sales rebounded, supported by a resilient residential market post COVID-19 lockdowns. The business settled 380 new homes, and our development pipeline continues to grow, with 4,220 potential home sites owned or secured.
“There continues to be solid ongoing demand for our communities and our uninterrupted resident rental streams provide a strong defensive element to our business model. Throughout COVID -19 the strength of our rental business has been demonstrated, with our Lifestyle residential rental income up 38% and Ingenia Gardens at a record 96% occupancy.
“Funds Management remains a key growth platform for the Group as we move forward with plans for a new $100 million Fund.
“The current pipeline is significant, and we are well positioned to identify and progress opportunities, with a dedicated team focussed on delivering growth in our asset base. Even in these uncertain times, we are well placed to build sector leadership,” Mr Owen said.
Ingenia are not on our Top Picks List.
The REIT commenced the year with a security price of $4.50 against a NAV of $2.90 (55% premium to NAV) and closed the year at $6.12 against a NAV of $3.03 (102% premium to NTA). The REIT provided a 10.5c distribution for FY21, equating to a 2.3% yield, which together with a 36% lift in unit price would provide investors with a total return of 38%.
Key financial and operational highlights for the period are:
• Record EBIT of $94.4 million, up 31%
• Revenue of $295.6 million, up 21%
• Underlying EPS of 23.6 cents, up 7%
• Operating cash flow of $137.6 million, up 105%
- -Growing sales pipeline – record 317 deposits and contracts in place
- Significant pipeline of acquisitions secured and under assessment
Ingenia generate revenues from 6 operating models;
- Lifestyle Development – EBIT up 16% on FY20 to $46.1m – strong settlements in second half, with increased home sale prices
- Lifestyle Rental – EBIT up 43% on FY20 to $16.5m – expanding rental base – driven by recent acquisitions, new home settlements and new rental cabins
- Ingenia Gardens – EBIT up 7% on FY20 to $10.9m – at record 96% occupancy with lower moveouts
- Holidays & Mixed Use – EBIT up 57% on FY20 to $28.7m – saw increased demand as COVID-19 restrictions eased
- Food & Beverage Services – EBIT $1.3m
- Capital partnerships / Funds Management – EBIT $4.1m
Ingenia invested $215m in acquisition in FY21 with the addition of thirteen established communities with income producing sites delivering immediate yield ranging from 5% to >12%. The Group have also contracted to acquire 7 additional assets in FY22.
- Sunnylake Shores, NSW – Lifestyle community with expansion
- Lake Sherrin (Redlands), QLD – Rental community with expansion
- Middle Rock, NSW – Mixed use community
- BIG4 Inverloch, VIC – Holiday park
- Nature’s Edge, QLD – Lifestyle community with expansion
- Woodlands, QLD – Mixed use community
- Merry Beach, NSW – Holiday park (>400 annuals)
- Freshwater, QLD (JV) – Expansion of current lifestyle development
- Ballarat, VIC – Lifestyle development site – now underway
- Morisset, NSW (JV) – Large Lifestyle development site (DA approved)
- Beveridge, VIC – Lifestyle development site (DA approved)
- Bargara, QLD – Lifestyle development site (DA approved)
Ingenia completed independent valuations for 28 villages in the 2H21 and 20 in the 1H21. The continued compression in capitalisation rates has increased the book values as follows;
- Lifestyle Rental +$163m in uplift, with avg cap rate no 5.91%
- Holidays & Mixed Use +$113.3m, uplift with avg cap rate now 7.78%
- Ingenia Gardens +$10m uplift, with average cap rate now 9.25%
The Group closed FY21 with a strong balance sheet with long term funding in place. Following establishment of a 7-year facility with the Clean Energy Finance Corporation and extended tenor for existing facilities, the Group has no debt expiry until December 2025. Over $270 million in cash and available undrawn debt is available, supporting additional investment in growth. Ingenia closed the year with an LVR of 22.2% and 17.5% gearing.
The stability of rent from the Group’s residential communities has continued uninterrupted, holiday parks remain responsive to changing conditions and are benefiting from the unique opportunity for domestic travel, and demand for new homes is strong. However, in light of current uncertainty, FY22 guidance cannot be provided at this time.
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