Ingenia Communities Group (ASX:INA) talks 1H17 results and outlook


by Carolyn Herbert

Transcription of Finance News Network Interview with Ingenia Communities Group (ASX:INA) CEO and Managing Director, Simon Owen.

Carolyn Herbert: Hello I’m Carolyn Herbert from the Finance News Network and joining me from Ingenia Communities Group (ASX:INA), to discuss its half-year results is Managing Director and CEO, Simon Owen. Simon, welcome back.

Simon Owen: It’s great to be here Carolyn.

Carolyn Herbert: You’ve just released your first-half results for 2017. What were the highlights?

Simon Owen: I think the highlights was very strong growth in revenue and underlying earnings. So they’re both up around 26 per cent. Our statutory profit was down slightly, reflecting the loss on sale when we exited our deferred management fee business. In terms of home sales, we recorded record settlements for the half. And also we’ve got our margins have continued to expand, which is very positive.

Our garden villages business, which is probably a bit of an unsung hero, has closed out the year at record occupancy of 90.4 per cent. And within our relatively new tourism business, we were able to grow likeforlike site rents by around six per cent. So overall, I think it was a very good result.

Carolyn Herbert: What was the distribution for the half and how does it compare to the same time last year?

Simon Owen: Distribution for the half is 5.1 cents per security, which is up a bit over 15 per cent on the prior comparative period.

Carolyn Herbert: Now to your portfolio, how did each segment perform starting with lifestyle parks?

Simon Owen: In our lifestyle parks, there’s really two elements to that. One is the collection of rental income. We were able to grow that income very strongly over the half, up around $15. I think that’s a very strong result. And then in terms of the development, we had record settlements for the half of over 80 settlements, which is up over 60 per cent on the prior period. And we’ve also been able to expand the margins to around $105,000 per new home sale. So I think overall, a very good result from that segment.

Carolyn Herbert: What about Ingenia holidays?

Simon Owen: Ingenia holidays, so we’re now in a position following the acquisition of the Cairns Coconut Holiday Resort, we now have over 750,000 room nights per annum. What we’ve seen in that business is like for like rent growth of around four per cent. I think it’s a strong position and we’re also seeing some very strong tailwinds in that business, underpinned by a lower currency. So that business is performing very well Carolyn.

Carolyn Herbert: And how are your garden villages going?

Simon Owen: Garden villages are a bit of an unsung hero, but closed out the year at a record occupancy of 90.4 per cent. During the half we actually launched a new care initiative, called Ingenia Care PLUS. We’re trialling that in two of our carecommunities at the moment. And we see that that’s a longer-term way to extend the tenure of our residents, and provide a higher level of care. So we’re very excited with garden villages, it’s a great business.

Carolyn Herbert: Can you tell us about your acquisitions and disposals for the half?

Simon Owen: Over the half in terms of disposals, we sold a 90 per cent interest in five of our deferred management fee villages. That released a bit over $40 million. And following the announcement of the acquisition of Cairns Coconut Holiday Resort last week, that capital is going to be deployed into that acquisition. For the half, we actually either acquired or announced the acquisition of well over $100 million, in new communities.

The two largest there was we bought the largest caravan park in western Sydney, called the Avina Van Resort and we have a DA in for that project now, to bring in around 246 new homes.And the other major acquisition we actually announced last week. That’s the acquisition of the single largest caravan park deal ever done in Australia, which is up in Cairns. And we take ownership of that park next month, but we’ve got a team up there at the moment preparing for the integration.

Carolyn Herbert: Now to a more general question about interest rates, yields have moved sharply higher since the election of Donald Trump as President. So what impact will this have on Ingenia?

Simon Owen: I think like a lot of executives, we’re very closely watching what’s happening in the US and the impact on the global economy. I think in the US, they’re definitely on a tightening bias. I’d be surprised if we start to see interest rates in Australia go up in the short term, but things can change very quickly. I actually think the election of President Trump is probably very positive for our business in the short term, in that it’s going to put pressure on the Australian dollar currency. Which means that people are more likely to holiday at home, rather than go overseas, which is positive for our holiday business.

But underlying the development side, we’re seeing a very strong and continuing growth in a number of our communities, including our South West Rocks community on the New South Wales mid north coast. We can’t actually get the homes in quick enough to meet the demand. So I guess its watch and see with Trump, but overall I think it’s very positive for our business.

Carolyn Herbert: Finally Simon. What’s your focus for the next six months and your guidance for the remainder of FY17?

Simon Owen: I guess in terms of guidance, for the first time ever we’ve given EBIT guidance, earnings before interest and tax guidance of $30 million for the full year. That represents a growth on last year’s profit of over 20 per cent. So I think that’s a strong result. In terms of the key focus, there’s probably three things. One is sweating our existing assets harder, so trying to maximise the returns from those assets.

Secondly, it’s divesting some remaining non-core assets to recycle that capital into further acquisitions and development. And then in terms of development, this year we’ve given guidance of 190 settlements for the year, which is strongly up on last year. And also targeting 260 settlements for next year, so there’s lots to keep us busy.

Carolyn Herbert: Simon Owen, thanks for the update.

Simon Owen: Thank you very much.