Ingenia Communities Group · ASX:INA
Ingenia Communities — H1 2019 Earnings Presentation
42 slides from Ingenia Communities's earnings presentation, Feb 19, 2019
Slide 1: Underlying profit up 20% as Ingenia continues to grow rental base and new home settlements
ASX / Media Release 19 February 2019 Underlying profit up 20% as Ingenia continues to grow rental base and new home settlements Highlights • Revenue up 21% on 1H18, to $93.4 million • EBIT of $22.9 million, up 19% on 1H18 • Underlying profit of $17.5 million, up 20% on 1H18 • Underlying earnings per
Slide 2: Group focus and strategy commentary
“The Group is focused on further growing our rental annuity base, divesting non-core assets, maximising the opportunity with Sun Communities and improving efficiencies across the business.” “We are working against the backdrop of a slowing residential market yet the underlying fundamentals that make
Slide 3: Capital Management and Guidance
Capital Management As of 31 December 2018, Ingenia’s loan to value ratio (LVR) was 27.8%, below the Group’s target of 30-40% and well below the banking covenant of 50%. Debt facilities remain at $350 million with weighted average term to maturity of 3.8 years. Ingenia currently has a contract in pla
Slide 4: New Home Precinct
> Ye “NEW HOME PRECINCT ANB HOLIDAYS LAKE’CONJOLA; NSW SEPTEMBER 2018
Slide 5: Highlights
Highlights FINANCIAL STRATEGY OPERATIONS DEVELOPMENT • EBIT $22.9 million – • Non-core asset sales • Lifestyle and • Sector leading up 19% on 1H18 continuing - $23 million Holidays rental development pipeline under contract revenue continuing – 3,984 home sites • Underlying EPS to grow – up 8% on se
Slide 6: Building rental base through acquisition and expansion
Building rental base through acquisition and expansion Continued focus on expanding rental base • Adjacent land (181 potential homes) now under contract at successful Lara lifestyle community • Contract exchanged for established mixed use park in Byron Bay region, NSW • Acquisition of Rivershore Res
Slide 7: Joint Venture to accelerate development
Joint Venture to accelerate development first projects identified 50:50 Joint Venture with Sun Communities established November 2018 • Joint Venture has the first right to acquire all greenfield opportunities identified by Ingenia › Ingenia has the right to acquire each completed community at market
Slide 8: Business Overview
Business Overview rental portfolio growing as development accelerates Ingenia owns 60 Australian communities Portfolio value now Over 7,700 Income producing sites $797 million Stable rent base >$2 million/pw Creating Australia’s Best Lifestyle and Holiday Communities Over 4,700 rental and lifestyle
Slide 9: Market landscape
Market landscape some challenges but generally supportive Consumer / demand • Demand for quality affordable seniors housing continues to grow • Federal and NSW elections will impact consumer sentiment Competition • Minimal competition pressure in affordable downsizers/retirees market • Some discount
Slide 10: Performance and capital management
Performance and capital management Original precinct 7
Slide 11: Key financials
Key financials successful integration of new assets delivering increased earnings Key Financial Metrics 1H19 1H18 Revenue and EBIT growth driven by increasing rents and accelerating Revenue $93.4m $76.9m 21% development EBIT1 $22.9m $19.3m 19% Statutory profit impacted by write down on non-core asse
Slide 12: Earnings growing as development accelerates and rent roll grows
Earnings growing as development accelerates and rent roll grows EBIT 1H19 1H18 Expanding rental base – driven by acquisitions, additional rental cabins and new home settlements, offset by recent divestments Lifestyle and Holidays $13.5m $13.0m 4% operations Development earnings up substantially as n
Slide 13: Capital management
Capital management well positioned to fund development pipeline Debt Metrics 31 Dec 18 30 Jun 18 Capital position enhanced via joint venture and placement Loan to value ratio (covenant <50%) 27.8% 32.6% • Joint Venture with Sun Communities to fund future Gearing ratio1 22.3% 26.6% greenfield develop
Slide 14: Growth in value across core portfolios
Growth in value across core portfolios lifestyle capitalisation rates continue to compress Av. Cap Av. Cap Dec 18 • Independently valued 27 assets in 1H19 Portfolio Book Value Rate Dec 181 Rate Dec 171 ($m) • Ingenia Gardens and Lifestyle and Holidays portfolios’ value Lifestyle and Holidays 7.68% 8
Slide 15: Strategy
Strategy ce Hi >< Ingenia 12
Slide 16: Australia's best lifestyle communities
Australia’s best lifestyle communities strategy focussed on growing stable rental returns Stable, recurring and growing rental cashflows • Strong demand for affordable accommodation for an ageing population • Government supported cashflows with CPI+ growth (lifestyle and rental communities) • Favour
Slide 17: Underlying demand drivers remain strong
Underlying demand drivers remain strong many seniors will struggle to fund a comfortable retirement Median House Price ($) Home Ownership (Age) Limited Savings or Superannuation Pension Source: 6416.0 Residential Property Price Indexes: Eight Capital Cities $1.2m 90% Superannuation account balances
Slide 18: Operations review
Operations review portfolio dominated by rental assets - development supporting growth in rent base Core Portfolio by Book Value 18% Under Development 66% Ingenia Gardens 16% Lifetyle and Holidays Core Portfolio by EBIT 32% Lifestyle Development Ingenia Gardens 49% Lifestyle and Holidays 19% Beach a
Slide 19: Ingenia Lifestyle and Holidays
Ingenia Lifestyle and Holidays over 95% weighting to capital city and coastal markets Key Data 31 Dec 18 31 Dec 17 • Portfolio enhanced as new communities acquired and development continues to accelerate Total properties 36 35 • Strong growth in rental base in 1H19 Permanent sites 2,828 2,604 › Acqu
Slide 20: Ingenia Lifestyle and Holidays
Ingenia Lifestyle and Holidays rental income growing Key Data 1H19 1H18 Continued growth in cash flows – rental revenue up Permanent rental income $11.9m $10.6m over 7% Annuals rental income $2.5m $2.4m • Average weekly rent $167 per week Tourism rental income $18.6m $17.7m • ‘Same store’ average we
Slide 21: Ingenia Holidays
Ingenia Holidays stable returns with ongoing growth Footprint expanded with addition of Rivershore Resort Ingeniaholidays.com.au OTA revenue revenue generation generation • Extends presence in attractive east coast tourist market Digital platform delivering returns $2.2m $3.7m (15.7% Growth) (19.6%
Slide 22: Ingenia Gardens (seniors rental)
Ingenia Gardens (seniors rental) strong, stable, government supported earnings Key Data 1H19 1H18 Continuing to deliver stable returns Total revenue $12.5m $14.5m • Sale of five non-core Tasmanian assets complete in April 2018 EBIT $5.1m $6.1m • Average rent now $343 per week EBIT margin 41.0% 41.8%
Slide 23: Continuing to expand rental base
Continuing to expand rental base • Accelerated rollout of new cabins providing immediate yield on investment • Eighteen new 1 and 2 bedroom rental cabins installed 1H19 › New cabins replacing older stock and vacant sites across Durack and Eight Mile Plains rental communities • Additional fifteen tou
Slide 24: Development
Development Ingenia Lifestyle Plantations, NSW February 2019 21
Slide 25: Development
Development accelerated growth supported by new joint venture Key Data 1H19 1H18 New home settlements up 28% on prior year New home settlements 115 90 22% • Average above ground margin per home over 40% Av. new home sales price1 • Settlements target of 350+ supported by 272 deposits and 363 298 22%
Slide 26: New, larger scale projects underpin sales growth
New, larger scale projects underpin sales growth Vacant sites remaining Development commencement to completion Hunter Valley (NSW) 4 Addition of 61 new homes, almost complete South West Rocks 4 Addition of 57 new homes, almost complete (NSW) Lake Conjola (NSW) 80 Stable demand Latitude One (NSW) 377
Slide 27: Second greenfield project on track for 1H19 settlements
Second greenfield project on track for 1H19 settlements Ingenia Lifestyle Plantations, Coffs Harbour, NSW Construction well advanced on 197 home community • Stage 1 and 2 civil works and infrastructure in place; later stages to commence 2H19 • Presently 45 homes under construction (plus six displays
Slide 28: Sector leading pipeline in place
Sector leading pipeline in place supporting sustainable future growth • First Joint Venture projects identified – due diligence underway 750 Approved Not Approved Development Size Far North Coast NSW (JV) >200 sites (new, optioned) <200 sites 650 Newcastle NSW (JV) (new, secured) Greenfield/JV > $55
Slide 29: On track to meet sales target for FY19
On track to meet sales target for FY19 continuing to monitor market conditions Slowdown in residential housing expected to continue Annual change in dwelling values by decile – but long term fundamentals remain strong (12 months to Jan’ 19) Highest value • Prices continuing to fall in 2019 10th › Pr
Slide 30: On track to meet settlement guidance
On track to meet settlement guidance good momentum into final run home • Strong pipeline of contracts and deposits supports achievement of FY19 guidance and growth into FY20 • Plantations (new greenfields project) on track for settlements from May 2019 350 FY19 Guidance 350+ Turnkey Settlements 144
Slide 31: FY19 guidance
FY19 guidance guidance reaffirmed – on track for continued growth FY19 builds on the strong growth delivered in FY18 Guidance Comment New home 350+ settlements Guidance maintained EBIT1 15-20% Strong deposits and contracts in place but growth project timing, including Plantations, and further deteri
Slide 32: FY19 focus
FY19 focus • Continue focus on sales and marketing to deliver FY19 settlements • Integrate recent acquisitions and accelerate rollout of new rental and tourism cabins • Execute Joint Venture business plan, securing opportunities for capital light growth and additional revenue streams • Capitalise on
Slide 33: Appendices
Appendices Ingenia 30
Slide 34: Underlying profit
Appendix 1 underlying profit 1H19 1H18 ($m) ($m) Lifestyle and Holidays – Operations 13.5 13.0 Lifestyle Development 8.8 4.1 Ingenia Gardens 5.1 6.1 Other 0.1 0.5 Portfolio EBIT 27.5 23.7 Corporate costs (4.6) (4.4) EBIT 22.9 19.3 Net finance costs (3.5) (3.3) Income tax (expense)/benefit (1.9) (1.3
Slide 35: EBIT and underlying profit by segment
Appendix 2 EBIT and underlying profit by segment Lifestyle Lifestyle Ingenia Fuel, Food and Corporate and ($m) TOTAL Operations Development Gardens Beverage Other Rental income 33.0 - 11.0 - - 44.1 Manufactured home sales - 39.4 - - - 39.4 Catering income - - 1.3 - - 1.3 Fuel, food and beverage inco
Slide 36: Cash flow
Appendix 3 cash flow 1H19 1H18 ($m) ($m) Opening cash at 1 July 14.5 9.6 Rental and other property income 54.1 52.8 Property and other expenses (45.3) (43.9) Net cash flow associated with manufactured home development 12.9 6.1 Net borrowing costs paid (4.7) (3.9) All other operating cash flows (0.0)
Slide 37: Consolidated balance sheet
Appendix 4 consolidated balance sheet 31 Dec 2018 30 Jun 2018 ($m) ($m) Cash 8.4 14.5 Inventories 35.1 30.2 Investment properties 767.2 730.4 Assets held for sale 41.1 28.7 Other assets 26.8 22.0 Total assets 878.6 825.8 Borrowings (excluding finance leases) 201.7 229.0 Derivatives 0.3 0.1 Retiremen
Slide 38: Drivers of change in EBIT
Appendix 5 drivers of change in EBIT Drivers of change in EBIT H1 FY18 to FY19 30.0 1.3 2.0 25.0 1.8 0.2 0.5 22.9 2.8 20.0 19.3 $m 15.0 10.0 5.0 0.0 EBIT Dec 17 Development sales Development margin Acquisitions Same store NOI Divestments Other EBIT Dec 18 volume growth 35
Slide 39: Capitalisation rates have progressively tightened
Appendix 6 capitalisation rates have progressively tightened Lifestyle and Mixed-use Communities 11.50% 10.50% Armidale,NSW Surfrider,NSW Crystal Cascades,QLD Darwin FreeSpirit,NT Implied cap rate % 9.50% Highway 1,SA Ballina,NSW Rainbow Waters,QLD 8.50% Dunbogan,NSW Aspley,QLD Rockhampton,QLD Frase
Slide 40: Competitor landscape
Appendix 7 competitor landscape • Ingenia is the largest ASX listed lifestyle and holidays Group • Further consolidation expected as global landlords seek entry/scale 80 Proposal to manage Aspen assets 70 Acquired 60 Gateway Lifestyle Nov 18 50 No. of assets 40 30 20 10 0 Discovery Hometown Ingenia
Slide 41: Contact information
Contact information Scott Noble Donna Byrne Chief Financial Officer Group Investor Relations Manager Tel: +61 2 8263 0538 Tel: +61 2 8263 0507 snoble@ingeniacommunities.com.au dbyrne@ingeniacommunities.com.au Ingenia Communities Group Level 9, 115 Pitt Street Sydney NSW 2000 www.ingeniacommunities.c
Slide 42: Disclaimer
Disclaimer This presentation was prepared by Ingenia Communities Holdings Limited (ACN 154 444 925) The forward looking statements included in this presentation involve subjective judgment and and Ingenia Communities RE Limited (ACN 154 464 990) as responsible entity for Ingenia analysis and are sub
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