• Revenue Increase: 21% increase in revenue, driven by diverse revenue streams.
• Lifestyle Rental Revenue: Increased by almost 10% due to CPI-linked rent increases and new annuity income.
• Lifestyle Development Revenue: Up over 50% with 199 homes settled, a 39% increase.
• Holidays Revenue: Achieved a 4% uplift, with tourism income increasing 7% on a like-for-like basis.
• EBIT Growth: 48% increase in EBIT, supported by revenue growth and cost management.
• Underlying Profit: $68.8 million, an uplift of 58%, resulting in an underlying EPS of $0.169 per security.
• NTA: Increased to $3.85 per security.
• Interim Distribution: $0.052 per security declared.
• Gearing and LVR: Headline gearing at 29% and LVR at 34%, within target range.
• Funding Headroom: $107 million available for further investment.
• Development EBIT Contribution: Increased with an EBIT margin up more than 8% to 33.8%.
• Joint Venture Settlements: 59 homes settled with an average sales price of $825,000.
• Residential Communities EBIT Growth: 14% growth in the lifestyle rental segment.
• Land Lease Communities: 194 new homes added, with average weekly rent increases of 4.2%.
• All-Age Rental Portfolio: Occupancy at 99% with average annual rent increases of 8.5%.
• Tourism Revenue Growth: Continued growth in tourism revenue and EBIT, despite a slight decline in EBIT margin.
• Forward Bookings: Up 14% compared to the prior corresponding period.

• Warning! GuruFocus has detected 9 Warning Signs with INGEF.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ingenia Communities Group (INGEF) reported a 21% increase in revenue, driven by diverse revenue streams.
• The company achieved a 48% increase in EBIT, supported by stable development margins and cost management.
• Lifestyle rental revenue increased by almost 10%, benefiting from CPI-linked rent increases and new annuity income.
• The development segment saw a significant EBIT uplift of 103%, with a 47% increase in overall settlements.
• The company maintained a prudent balance sheet with a headline gearing of 29% and $107 million of funding headroom.

Negative Points

• The EBIT margin for the holidays segment declined slightly due to one-off costs and increased marketing expenditure.
• There is a noted buyer hesitancy and extended sales journey in the short term, affecting sales momentum.
• The Victorian market is experiencing a slowdown, impacting sales and settlements in that region.
• The effective tax rate is expected to increase in the second half, affecting overall profitability.
• There is a slight skew in settlements towards the second half, with a higher contribution from joint ventures, which may lower overall margins.

Q & A Highlights

Q: Can you elaborate on the improvement in margins for the development segment and whether these margins are sustainable? A: John Carfi, CEO, explained that the improvement is due to a more disciplined approach to design and cost savings in clubhouses. Justin Mitchell, CFO, added that the scale of operations has allowed for stable costs despite increased volume, suggesting that while there might be slight reductions, the overall trend is towards improved EBIT margins.

Q: Is there any truth to the market speculation about a potential merger with another land lease company? A: John Carfi, CEO, did not comment on specific speculation but emphasized Ingenia's strong five-year growth plan and balance sheet, indicating confidence in their current strategy without distractions from such speculations.

Q: How are sales rates progressing, and what is the outlook for FY26? A: John Carfi, CEO, stated that sales are progressing well, particularly in new communities like Morisset. While the broader market has slowed, especially in Victoria, Ingenia remains confident with good product offerings and no production concerns, supporting a positive outlook for FY26.

Q: What are the expected drivers for the second half EPS, given the first half results? A: Justin Mitchell, CFO, highlighted several factors, including a skew towards joint venture settlements, increased corporate costs, higher interest costs, and a normalized tax rate, which will impact the second half EPS.

Q: Can you provide more details on the effective tax rate and its future outlook? A: Justin Mitchell, CFO, explained that due to higher infrastructure costs, the effective tax rate is expected to be at the lower end of the 10% to 15% range in the future. For the full year, the effective rate is anticipated to be around 8% to 9%.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.