Ingenia Communities Group (ASX:INA) Chief Executive Officer and Managing Director Simon Owen discusses the company’s FY2015 results and growth strategy.
Transcription of Finance News Network interview with Ingenia Communities Group (ASX:INA) CEO and Managing Director, Simon Owen.
Carolyn Herbert: Ingenia Communities is a leading Australian property group that owns, operates and develops a growing portfolio of affordable seniors communities, across key urban and coastal markets. I’m Carolyn Herbert and joining me at the CEO sessions in Sydney is the company’s Chief Executive Officer and and Managing Director, Simon Owen. Simon welcome back
Simon Owen: Thanks for having me
Carolyn Herbert: Can you start by introducing the company?
Simon Owen: Ingenia is one of the largest owners and operators of affordable seniors accommodation across Australia. We own 61 communities, we provide accommodation and care to over 4,000 Australian seniors and we have a property portfolio worth over $420 million.
Carolyn Herbert: And what different types of accommodation do you have on offer?
Simon Owen: We have three different types of accommodation. Ingenia is the largest owner and operator of seniors rental villages. We have 31 rental villages providing accommodation to over 1500 Australian seniors. The second part of our business is we own and operate eight traditional deferred management fee villages. Lastly, the third part of our business, which is the fastest growing part of our company, we own 22 manufactured home communities. That’s the area of our business where we’re putting all of our growth capital and we see that’s a great model because it provides affordable seniors housing to a large aging population.
Carolyn Herbert: And now to the financials – The company has released its full-year results for FY2015. What were the highlights?
Simon Owen: I think there was probably three highlights. One is that the operating profit was up over 51 percent to around $17.5 million. Our statutory profit was up over 100 percent, driven principally by some strong growth in underlying asset valuations. We were also able to grow our distribution for the second year in a row by over 15% year-on-year. Overall we would characterise it as a very strong financial result.
Carolyn Herbert: Simon, Ingenia recently raised $6.2 million. Where are the funds going?
Simon Owen: The funds from our underwritten drp are going into acquiring some land adjacent to an existing community in Brisbane that we bought recently. Ingenia currently has an acquisition deal flow of around 20 properties that we’re working on, either under contract or in advanced due diligence, so we’ve got a very strong growth pipeline in front of us.
Carolyn Herbert: And now to the portfolio. It comprises active lifestyle estates, garden villages and deferred management fee villages. What’s the plan for the portfolio?
Simon Owen: The plan over the next six months is to exit the deferred management fee space. We own eight traditional retirement villages with a book value of around $65 million. Our plan is to divest those and transition that $65 million into acquiring additional active lifestyle estates that we currently have under due diligence, as well as fund our development pipeline. Ingenia has a land bank of over 1500 sites, with an end sales value of over $350 million. So it’s really about freeing up that capital to invest into our growth business.
Carolyn Herbert: The aged care space has grown significantly. What market drivers are you observing and how’s the company poised to take advantage of this?
Simon Owen: I think in the seniors living market Ingenia is quite unique in that we’re aiming at the affordable segment. So that’s people who either haven’t had the opportunity to buy their own home during their working years, or basically their entire wealth is tied up in the family home and they haven’t accumulated a lot of superannuation. So Ingenia’s really targeting that more affordable end of the market, so at a price point typically well below what the traditional retirement living model offers.
Carolyn Herbert: With the lifestyle parks market growing institutional support, what are your expectations for the sector?
Simon Owen: I think over the last two or three years we’ve seen a lot more institutions invest in the sector. We’ve seen new companies recently list on the market. Ingenia has a very strong pipeline of acquisition opportunities, but I think with groups like Blackstone recently entering the space and investing $150 million, I think over the next six to twelve months you may start to see some corporate consolidation. But Ingenia’s focus is very much on continuing with our strategy of making individual off-market acquisitions.
Carolyn Herbert: And finally Simon, what’s your outlook for the next twelve months?
Simon Owen: We expect to continue to pay an increasing distribution to our security holders. We’re continuing to ramp up our development opportunities. We’ve given guidance to the market this year of 120 sales, which is quite a significant increase on last year. We expect to make continuing acquisitions to grow the business and we anticipate over the next six months divesting our non-core traditional retirement village business.
Carolyn Herbert: Simon, thanks for the update on Ingenia Communities