Ingenia cuts dividend, promises stronger second half
Ingenia Communities, a developer of affordably priced housing for downsizing Baby Boomers, said it was on track to deliver full-year earnings at the top of its guidance range even as new home settlements fell 4 per cent from a year earlier to 248 in the six months to December.
The ASX-listed company attributed the decline from 258 settlements as one of many reasons, including higher interest costs, for first-half earnings before interest and tax slipping to $85 million from $86.2 million.
The company cut its interim dividend by about 8 per cent to 4.8¢ per share from 5.2¢.
Chief executive John Carfi said, however, that settlements would pick up in the second half and Ingenia would meet its stated EBIT guidance of between $180.5 million and $188.7 million, and underlying earnings per share between 32.5¢ and 34¢.
“Our first half demonstrates targeted execution, which puts us on track to deliver the full-year result at the top of our guidance range.”
Net profit rose 11 per cent to $97.4 million from $86.6 million, driven by upward revaluations of investment properties.
Analysts welcomed the strength in sales but said the company’s weaker profit margins across its range of businesses were a concern.
“Lifestyle development sales appear strong,” Jarden analyst Tom Bodor said. “Margins appear slightly soft across lifestyle, development, rental and holidays, which is somewhat underwhelming, and this will be a focus.”
In the current trading period, home sales deposited or contracted have risen from 395 since the start of January to 440, and the average pricing of these dwellings was higher than settlements in the first half, when the average sale price across Ingenia’s projects slipped from $647,000 to $646,000.
“We have 13 active projects in market and eight new projects commencing this financial year,” Carfi said. “Our focus remains on delivering targeted development returns and growing settlements as new projects progress.”
The company said sales conditions were improving in its key markets. Days on market were falling in NSW and Victoria. Queensland, which represents 51 per cent of the company’s pipeline, remained a buoyant market, according to Ingenia.
This follows the Reserve Bank of Australia’s decision to hike its cash rate for the first time in more than two years in February. Carfi said, however, the rise in borrowing costs did not impact Ingenia’s sales, which were at 440 as of February 20.
“We’ve seen an increase in inquiry, an increase in conversion rate, right through December, January, February,” he told The Australian Financial Review. “Our customers generally aren’t directly impacted by upward rate increases.”
“The sentiment driven out of any interest rate increase is probably going to have a greater impact than the actual two or three increases themselves.”
Ingenia shares were trading at $4.35 – down about 3.6 per cent – at market close, making them the worst performer on the 20-member S&P/ASX 200 A-REIT Index.
