Ingenia’s expects to Survive with Stable Rent Model24 March 2020
Ingenia strong balance sheet, current liquidity and its base of stable rental revenues is expect to help the Group survive the current crisis.
In making an announcement today, the Group confirmed that new home settlements up to February were strong, but that these will likely slow as prospective residents seek extra time to sell their home. This will likely see some settlements transfer from Q4 FY20 into Q1-2 FY21. In FY19, the Group achieved 336 New Home Settlements are expected to exceed 400 in FY2020. The Group have so far completed, 205 new home settlements (corresponding period FY19: 176 homes) with a further 101 homes under contract and 155 deposited or reserved.
Ingenia Holiday business, which represents 53% of total income, has experienced the most impact due to recent travel restrictions. Easter bookings, which were 15% ahead of prior year at the February result, have reduced as guests reconsider travel plans. The business is focused on domestic rather than overseas travellers, however the ongoing travel restrictions makes the short-term outlook for the Holidays business uncertain.
The group has not provided any guidance as to the expected impact on income at this stage and has withdrawn previous guidance.
The Group’s balance sheet is well positioned with $200m of cash and committed undrawn bank facilities available exceeding $200 million with a current LVR of 27.7%. The Group’s Total and Core Interest Cover Ratios at 31 December were 7.6x and 3.6x respectively (versus a covenant of 2.0x). Based on current forecasts for business operations and home settlements, Ingenia will comfortably meet this covenant at 30 June 2020. The Group’s next debt maturity is not until February 2022. A $100 million, 7-year debt facility which was finalised in February 2020 has enhanced Ingenia’s funding capacity with additional longer dated debt.
CEO of Ingenia, Simon Owen said: “We are in strong financial position to manage our way through this crisis. This includes spending the past eight years building a secure, recurring revenue model that delivers a stable rental base from over 5,800 income producing sites across the portfolio. As the COVID-19 situation continues to evolve, this steady income flow will help underpin the business during this difficult period. Whilst our Holidays business will see a downturn, over time we are also likely to experience a pivot towards domestic tourism, particularly drive holidays, which will be beneficial to our holiday parks, and we have a very low exposure to international tourism.
“The extent of the impact on our development business depends on a number of factors, including the nature of any slow-down in the residential housing market, which we are watching closely. However, our key demand drivers are still firmly in place, which is an ageing population looking for high quality affordable housing.”