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Ingenia Communities share price dips despite 25% revenue lift

The Ingenia Communities Group (ASX: INA) share price has dropped today, despite the group announcing strong revenue and profit growth in its half year earnings release. At the time of writing, Ingenia shares are down by 1.59% to be trading for $4.96. 

What does Ingenia Communities Group do?

Ingenia owns and manages a portfolio of lifestyle, retirement, rental and holiday communities across Australia. The group’s real estate assets comprise 37 lifestyle and holiday communities, which consists of Ingenia Lifestyle and Holidays, and 26 rental communities. It also manages a further 9 communities through its development joint venture and funds management platform.

What did Ingenia announce?

Ingenia recorded total revenue of $116.9 million for the 6 months to 31 December 2019, which is a 25% rise on the prior corresponding period (pcp).

The group built and sold 140 turnkey homes, compared to 115 homes in 1H19. It also grew its lifestyle and holidays rental income from permanent, annual and tourism clients to $38.5 million, compared to $33.0 million in 1H19.

Ingenia grew its investment in lifestyle communities during the period, and invested part of the funds from an equity raise in November 2019 to acquire Bevington Shores, Taigum (Colonial Village) and land adjacent to Ingenia Holidays Rivershore.

It reported statutory profit of $23.6 million, which was up by a very high 81% on pcp. This impressive growth was driven by improved capitalisation rates, offset by transaction costs on new acquisitions, as well as a reduction of fair value associated with the realisation of development profits on settlement.

Very strong profit growth

Underlying profit from continuing operations increased by $9.0 million to reach $26.5 million, a 52% increase on the prior corresponding period. The lifestyle development segment was up 72% on pcp, thus accounting for a significant proportion of this increase.

In addition, there was higher contribution from the Ingenia lifestyle and holidays segment, up 19% on pcp. The latter was driven by the impact of acquisitions and increased permanent rental contracts for homes that were settled.

Ingenia’s gardens segment saw earnings before interest and tax rise 2% on pcp to reach $5.2 million.

Increased operating cash flow

Operating cash flow was up 60% on pcp to $27.2 million. The group reports that this increase was driven by growth in lifestyle home settlements, as well as growth in recurring rental income and the impact of new acquisitions that were made during the period.

An interim distribution of 5.6 cents per share was declared, up 4% on pcp.

Capital raising

Ingenia successfully raised $131.1 million during the period, the proceeds of which will be invested into identified acquisitions and to provide additional equity for the group’s joint venture with Sun Communities.

The group confirmed it also continued to divest non-core assets to support its capital recycling strategy, with the divestment of Ingenia Lifestyle Mudgee Valley in 1H20.

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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