Ingenia Communities Group (ASX:INA) 1H20 results & outlook

Interviews

by Anna Napoli

Ingenia Communities Group Limited (ASX:INA) CFO, Scott Noble, discusses 1H20 results, the company's portfolio and the demand for seniors accommodation.

Anna Napoli:
Hello. Anna Napoli for the Finance News Network and joining me now from Ingenia Communities Group is CFO, Scott Noble. Scott, welcome back.

Scott Noble: Thank you very much, Anna.

Anna Napoli: Ingenia Communities owns, operates and develops seniors accommodation. How big is the sector and how many people do you look after?

Scott Noble: Our business really focuses on affordable seniors accommodation. We have two business streams. The first is Senior Lifestyle where we develop and operate lifestyle communities and our second is a seniors rental business called Ingenia Gardens where we have over 1,400 units that is a build to rent structure that we collect rent from every day. In terms of the size of the industry, there are 27% of the Australian population is over 65. It is a big market and we're expecting it to grow to over 32% by 2050 so it's going to continue to grow and is a sizeable market now.

Anna Napoli: Thanks Scott. And to your first half 20 results, what were some of the highlights?

Scott Noble: Thanks Anna. We're really pleased with our first half result. Revenue increased 25% to $116.9 million. EBIT increased 40% to 32.2 million. Our underlying earnings per share increased 32% to 10.7 cents per security. What had a first half distribution of 5.6 cents which is up 4% on the same period last year. Our net asset value grew 7% from 30 June. Operating cashflow increased 60% on the same period last year.

Anna Napoli: And the bushfires this summer were unlike anything we've seen before. How did the communities cope and what impact was there on the business?

Scott Noble: Devastating time for the people of South coast. Yeah. We had a number of parks that were impacted. Really want to do a big call out to the rural fire service, our residents, our guests and our staff who worked tirelessly to ensure no one was injured. We had minimal sort of property loss. We will have some losses associated with some cancellations of holiday revenue. But yeah, that should mostly be covered by insurance. So we came out relatively unscathed compared to a lot of other people who did lose a lot. The nice thing we're seeing now is that we're starting to see the recovery. Bookings for our holiday parks in the South coast are now up 15% on what they were same time last year for April. So that's pleasing. People are coming out to support the area.

Anna Napoli: Turning to your portfolio, how are the categories performing starting with the Ingenia Lifestyle?

Scott Noble: Yeah, our Ingenia Lifestyle business is going great. On the same period last year, our rent increased 17%. That's a combination of some new acquisitions we've made, but also our development pipeline has contributed some additional 140 sites for us to collect rent from. We also had rental increases for our existing sites and our occupancy in our holiday business is up. So all those factors has really led to a positive result for our Lifestyle business.

Anna Napoli: And how about in terms of development?

Scott Noble: Yeah, development's been going great. We had a 22% increase in number of turnkey sites we developed during the year and settled. The average sales price is up 16% on last year to $420,000 a site. Yeah, so great margin. We're seeing margin improvement and just a really good demand for our offering.

Anna Napoli: And Ingenia Gardens?

Scott Noble: Ingenia Gardens is a great part of our business. It delivered really good cashflow and occupancy growth over the year.

Anna Napoli: Now to the share price, Ingenia was the best performing ASX 300 rate in 2019. Can you provide a comment on this, Scott?

Scott Noble: Really pleased with the performance of our share price in 2019. Look, I think it just goes to the increase in investor interest in the sector. It's a sector that provides really good cash flows, is trading on relatively high cap rates compared to other asset classes. We also were introduced to the ASX 200 in December, which has also peaked investor interest in the stock.

Anna Napoli: Last question, Scott. What's the outlook for the second half of 2020?

Scott Noble: Anna, we gave [guide early 00:04:03] on in the year that we would have EBIT growth of to 20% and underlying EPS growth of five to 10%. In January as a result of the fires, we guided to the lower end of that range. Yeah, we've reconfirmed that guidance. Look, we think Ingenia is really well positioned for the remainder of the year and going into 2021. We have the largest development pipeline in the sector, which will continue to grow rental streams for us and increase our market share. We have a great joint venture with sun communities who's one of the largest manufactured park owners in the world. We've got new funds management businesses which is going to increase our revenue streams and is creative to the business. We've got good vision of margin expansion and where our growth is coming from. So we're really looking forward to the remainder of the year and then moving into 2021.

Anna Napoli: Lots of exciting things in the pipeline there. Scott Noble, thank you for the update.

Scott Noble: Thanks very much, Anna.


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