Ladies and gentlemen, thank you for standing by, and welcome to the Ingenia Communities Group Full Year Twenty Twenty Results Briefing. At this time, I must advise this conference is being recorded today Tuesday 18th August 2020. I would now like to hand the conference over to your first speaker today, Mr. Simon Owen, Chief Executive Officer and Managing Director. Thank you sir.
Please go ahead.
Good morning, everyone, and thanks for your attendance today. I'm excited to be presenting another strong recruiting and retaining the best talent, growing our rents, increasing occupancy, building and selling quality homes, integrating acquisitions and being vigilant on our costs. Like most businesses in Australia, Ingenia has been adversely impacted by COVID. Our holidays business was effectively closed for the best part of 3 months, including what was shaping up as a strong before landing at a still compelling 325 new homes. However, we recognized the potential threat of COVID early, and our decisive agile response has reduced the impact.
It is very pleasing in particular to report that across the business to date, we have not recorded a single case of COVID amongst our residents, our guests and our staff. This did not happen by chance, and I would especially like to thank and acknowledge the continuing tireless commitment of our frontline and support teams. I believe that COVID has demonstrated the quality and resilience of our portfolio construct. Ingenia is firmly focused at the affordable end of the seniors housing market, which is the deepest part of the market with few competitors or alternatives. In Junior Gardens, our affordable seniors rental business, is presently trading at an Rent collection within our lifestyle business remains unchanged.
Our business is underpinned by cash rents, which are largely funded by Commonwealth government pension and rent assistance payments. The vast majority of our residents are retired and are not recipients of jobkeeper or job seeker payments. Areas or requests for rental abatements or deferrals are non existent. Our business model is firmly focused at the lower and mid quartile private markets, in outer ring metro and accessible sea and tree change locations, where there is genuine resilience in home prices and underlying demand. Our incoming residents are not requiring a mortgage or refinance.
They're downsizing both in terms of property size and financial commitment. Ingenia's operating and development margins have held firm and the demand outlook remains attractive. Our holidays business is strongly leveraged to a recovery in domestic tourism, and our forward bookings are up some 24.7 percent on the same time last year. Caravan sales are very strong and the 2 most popular regions in Australia for caravanning and camping is the New South Wales North Coast and the New South Wales South Coast, where in Junior has market leading positions. In late April, in June, you made the decision to raise capital.
The purpose of this was not to deleverage the balance sheet, which was already in excellent shape. It was about sector leadership, securing additional growth and creating compelling long term security holder value. COVID is, unfortunately, creating compelling opportunities across the market in which we operate. Many competitors are pausing construction, holding back on marketing spend or withdrawing from M And A. Current market dislocation represents a once in a decade opportunity to build long term sustainable market share and Slingshot passed the competition.
Today, we have announced the pending acquisition of the largest DA approved lifestyle community site in New South Wales. It's located just 1 hour north of Sydney it's around the corner from our long standing Grahams community in Morasset on the New South Wales Central Coast. Demand drivers remain strong across the industry, and if anything, have been magnified by COVID. Ingenia achieved a record 28 settlements in July. In the same month last year, we had just 12 settlements.
An aging population, housing affordability issues and the attractiveness of community living are continuing to drive inquiry and sales across our portfolio. Many of our communities are an attractive coastal markets, such as Port Stevens, Coffs Harbour, and Harvey Bay, which remain accessible and indeed highly desirable to key metro markets. Our business model is uniquely leveraged to the Intersection of 3 key thematics: an aging population a continuing housing affordability crisis and several generations of people retiring with limited savings beyond the family home. We have an incredible growth runway in place and our sector leading development pipeline of over 3000 home sites is significantly larger than any of our competitors. Ingenia has significant capital optionality with our own lower gear balance sheet our development joint venture with Sun Communities and our 8thgate funds management platform.
This all strengthens our capability to deliver, grow and lead. I remain very confident that we are in the initial phases of an extended period of compelling earnings growth for our shareholders. I'm now going to move into the presentation. Joining me on the call today are a number of the Ingenia executive team, including Scott Noble, our Chief Financial Officer Nicky Fisher, our Chief Operating Officer Natalie Kwok, who leads M And A and Donna Byrne, who heads Investor Relations. We're going to start briefly on Page 2, which is our highlights.
Record revenue of $244,200,000 for the year, which was which is up 7% on 12 months ago. To put that in perspective, full year revenue for the 2017 financial year only 3 years ago, was only $149,000,000. My personal favorite operating cash flow is up 13% to $67,200,000. We settled 325 new homes for the year. Just shy of the record achievement of 3 thirty seven homes in 2019.
And we commenced the current financial year with 187 Homes deposited or under contract. Over the course of the year, we're able to lift average home prices by 12% to $430,000, And of course, this flows through to dollar margins. On Page 4, we've collected some data from CBRE, and our own rent roll, which shows the resilience of our rent collections when compared to the traditional classes of office, industrial, and retail. Across more than 5100 residents, In our lifestyle and gardens communities, we have a total of 5 residents who are on structured payment terms as a result of COVID. I'm now going to move on to page 8 of the presentation.
And as I noted previously, Today, we're delighted to announce the pending acquisition of a 4 27 Home DA approved development site at Mora Set, on the New South Wales Central Coast, about 1 hour north of Sydney. The median house price in this catchment exceeds $500,000. This is the largest DA approved lifestyle village site in New South Wales. With construction likely to commence in early 2021. The purchase price is a little over $30,000,000 and is staged over several years.
The development will be carried out within the joint venture with Sun Communities and Ingenia retains the right to acquire the community once it is stabilized. This is a truly amazing development site and is in very close proximity to our highly successful Grange community. I'm now going to hand over to Scott to step through the group's key financials and capital management.
Thank you, Simon. Good morning, everyone. While 2020 was an extremely challenging year, the group delivered solid results and is well placed as we moved into 2021. Running through our key financials. Revenue increased 7 percent to $244,200,000, driven by growth in our lifestyle rental income and development revenue.
Development revenue grew 7% with 325 turnkey settlements across Ingenia and our development joint venture. Delivering a 12% increase in average sales price on the prior year. EBIT increased 17% to 71,900,000 This result, while pleasing, was adversely impacted by COVID-nineteen, which materially impacted our tourism and development result. With the mandate of closure of our holiday parks and delayed house settlements. This adverse impact of COVID was partly offset by a 4,400,000 jobkeeper subsidy, which enabled us to reengage casual staff that was stood down at the beginning of COVID-nineteen.
EBIT was also adversely impacted from provisioning for additional casual leave entitlements associated with the recent Workpack federal court case. Underlying profit increased 25% to $59,100,000, and underlying EPS increased 5 percent to $0.221 per security. Statutory profit increased 7 percent to $31,500,000. The statutory result was adversely impacted by fair value losses on investment property, relating to transaction costs and stamp duty on new acquisitions, a COVID earnings adjustment on a number of our tourism assets, a write down in noncore assets, the realization of development profits on high margin projects, and maintenance capital on properties, which as yet has not yet translated to fair value growth. The group's underlying and statutory EPS numbers were impacted by the group's recent equity raise.
Which increased securities on issue. The group's operating cash flow was up 13% to CHF 67,200,000, with collections through COVID from our Ingenia Gardens and lifestyles business being unaffected. Through COVID, we had less than $5000 of uncollected rent related to COVID hardship, reflecting the quality of the cash flows from these businesses. Net asset value for security increased 9% $2.90 per security. And a final distribution of $0.044 per security has been declared.
Taking the full year distribution to $0.10 per security. This is lower than last year on a sense per security basis due to a combination of increased number of shares on issue from the capital raising that was completed in May and the current uncertainty in the market. Turning to Slide 11. While the result was adversely impacted by COVID, Ingenya still delivered a 17% growth in EBIT from prior year and continued to grow margins across all business segments, delivering continued scale improvement. Lifestyle and holidays EBIT increased 9 percent to $29,800,000 with lifestyle and holidays stabilized margin improving to 39.7%.
Lifestyle Development EBIT grew 19 percent to $39,900,000, with development EBIT margin growing 3.40 basis points to 31.5%. This improved result was driven by a higher average sales price and an improved margin. With our greenfield projects at Latitude One And Plantations, delivering high aboveground development profit. In Junior Gardens, continue to deliver strong cash flow for the group, ending the year with a record high occupancy of 94.4%. Turning to Slide 12, our capital management position has strengthened with continued support from our investors and lenders.
During the year, we entered a new 7 year $100,000,000 debt facility, taking our total available facilities to $450,000,000. We improved the group's borrowing terms and covenants. Over the year, we successfully raised $328,000,000 in new equity, positioning us well to grow the business by investing in new assets and our development pipeline. We completed the acquisition of the 8th Gate Capital Funds Management platform, which expanded the group's assets under management by $140,000,000, providing Ingenia with new revenue streams and access to a strong investor base. And we made really good progress on our development joint venture with Sun Communities, which delivered its first settlements at its freshwater project.
At 30 June, hearing was 5.7% and LBR was 8.4% compared to our covenant of 55%. Weighted average debt maturity was 3.3 years, with our next maturity in February 2022. The cost of drawn debt was 2.5 percent at 30 June. This has reduced to 1.92% in August as our longer term debt roles have matured. Turning to Slide 13.
30 June, we we had 15 assets independently valued. The average capitalization rates of our portfolio have remained unchanged from 31 December. With the lifestyle and holidays portfolio at an average of 7.44 percent. While our Ingenia Gardens average capitalization rates occurred at 9.72 percent. A number of our tourism asset valuations were impacted by a COVID earnings adjustment, which will unwind in the future as restrictions ease.
Average cap rate continue to remain high when compared to other real estate classes. And post closing our result, we've seen some recent lifestyle acquisitions at new record cap rate levels. As investors seek the high quality cash flows of the assets delivered.
Thanks, Scott. We might now move into operations. So moving forward to page number 15, which focuses on our lifestyle and holidays business. Over the course of the year, we're able to grow our lifestyle business by 24% to 4034 permanent sites. And in July, post results, we acquired and settled the Sunny Lake Shore's community on the New South Wales Central Coast, which has grown this number even further.
Through COVID, we have made a decision to either sell or let Options lapse on a few development sites. Or regional communities with expansion land, which is why the number of development sites have decreased over the past 12 months. However, this pipeline still represents by a considerable margin, the largest development pipeline in the sector. Moving on to Page 16. Total rental income from our lifestyle and holidays business was $72,200,000 for the year.
Up 6% on the prior year, pleasingly, permanent rental income was up 27% to $31,800,000 and average weekly rents grew by 3.6% to $183 per week. EBIT for the year grew by 9% to $27,400,000, and we've been able to further improve our operating margins by another 40 basis points up to 39.7%. As noted previously, these results were impacted by the mandatory closure of our holiday parks from late March through to early June. Moving on to Page 18, which is in January Gardens, And again, as I noted previously, it is now trading at an all time high occupancy of 94.4%. Through COVID, we have experienced significantly fewer move outs whilst new move ins have remained broadly have broadly remained the same.
Rent has tracked flat over the past 12 months as rent incentives to build occupancy in Western Australia offset standard rent increases achieved across the Eastern States. On page 19, we discussed our funds management strategy. Our plan was to launch a new $100,000,000 mixed use community fund in the second half of twenty twenty. However, this has been deferred into 2021 primarily due to the inability to meet with new investor groups. Significant progress has been made across the existing funds, over the past 12 months, including preparing and executing specific asset management plans.
In July, in January acquired a DA approved development site in Ballarat, Victoria, out of the platform. To improve distributions for underlying investors. Funds Management provides in January with additional capital flexibility in terms of within each of the funds should the funds ever be wound up. Moving through to development on Page 21, New home settlements finished marginally lower for the full year at 325 settlements. In February, pre COVID, we were firmly on track for a record 400 settlements.
Development margin was up 19%, to $39,900,000 and the EBIT margin expanded by 3.40 basis points to 31.5 percent. This margin expansion is being driven principally by sales volume, higher home sales prices, and margins and scale leverage. Product segmentation has been a key focus over the past 12 months, and we have recently launched a new sub-two $100,000 prototype home at Chambers Pines in Brisbane, to significant purchaser interest. At the other end of the spectrum, we have now sold a few bespoke waterfront homes at Latitude 1, for in excess of $900,000. New or expansion projects at Sunny Lake Shores in New South Wales and Ballarat and Lara in Victoria are all expected to contribute first time settlements in the current financial year.
The chart at the bottom of the page demonstrates the strong Year on year sales volume growth we have been able to achieve since we entered the development business back in 2014. Ingenia is now clearly the largest developer of new manufactured homes in Australia. Our development joint venture with SUN is outlined on Page 22 and is progressing well. Construction of the clubhouse for our 1st community, freshwater, just north of Brisbane, is running ahead of schedule is expected to be open for residents and their families ahead of Christmas. As announced Earlier today, we are now finalizing the acquisition of the 4 27 home development site at morrisette on the New South Wales Central Coast, and we had exchanged a conditional contract to acquire a 220 home community in the Northwest Growth Corridor of Melbourne.
Settlement of this site is subject to receipt of an acceptable is anticipated in the coming months. On Page 26 is an update on market outlook. At this stage, Ingenia is unable to provide guidance due to the considerable uncertainty in our current operating environment. There is a high level of certainty in the rental inflows we receive across our lifestyle and gardens businesses. However, the near term outlook for new home settlements and demand across our holidays business is far less certain.
Our balance sheet is in an incredibly strong exceeding $370,000,000. Our focus over the next 12 months will remain on operational excellence and building upon the great momentum we have reestablished as we move through the current year. However, we also intend to use to establish clear sector leadership, securing additional growth opportunities and creating compelling long term security holder value. That's all Scott and I were going to present today. So I'm now delighted to hand over to Q And A.
And if you have any especially hard questions, please direct them to Nat or Nicky
Ladies and gentlemen, we will now begin the question and answer session. For those of you participants names are Our first question comes from Michael Pete from Goldman Sachs. Michael your line is open.
Hi, Simon and team. Congratulations on a strong result given the situation. Just first question, just on next year for 'twenty one current year, looks like there's probably not going to be too much on the side of settlements on the joint ventures. Just sort of trying to get a feel for of wholly owned versus joint venture. It's only freshwater.
Is that correct?
That is correct. Michael, it'll only be freshwater, which is up in Burp and Gary north of Brisbane, and I'd be anticipating settlements there somewhere in the region of between 2540 Homes, depending on market conditions, We'll be breaking ground at morassette in early 2021 calendar year, but I wouldn't anticipate any settlements until the following financial year.
Yes, that's what I was thinking about 'twenty two as well. Just Morris said any others? Obviously, there were a couple of other sites you'd acquired into the JV, but just Wanted to get a sense of maybe over the medium term, how that transition is going to go from wholly owned to joint venture?
Moving into FY 'twenty two, I would anticipate settlements at SUNBuy from probably at least 4 projects. So you would have at Freshwater. You would have Fulton Cove, which is on the northern side of the Hunter River adjacent to Newcastle. You would have up at Mariset, And the projects, that I mentioned today, just north of Melbourne in the northwest growth corridor is adjacent to a very large residential development and, all the services are at the door. So in not in the current financial year 'twenty one, but in 'twenty two, I would expect that we would ideally have at least 4 projects contributing settlements.
Okay. And, just noting the job keeper payment, would we expect any in 2021? I guess your holidays is open again, but still disrupted to some degree, but it's got to be down by that 30%, I guess. Should we from what you know at the moment, would you expect any job keeper in 'twenty one?
Yes, you're Michael Scott here. Yes, we will. The current program for eligibility runs through to the end of September. So we'll have another 3 months We had 3 months in FY 'twenty, and there'll be another 3 months in FY 'twenty one.
But after that, we would not anticipate being eligible.
Understood. So you mentioned some development sites that you've either pulled on the side. Could you just remind us, I know there have been a number that you've been looking to divest. Just wondering if you could just list the ones that you've sold or foregone?
Yes. So, so Albury and some country in Malawi. They're both we haven't contractually, we haven't settled those yet, but they are under contract. So we've also, divesting upper Kumar, taking too long to work with the Gold Coast City Councilaire to get an approval. So that's in the process of being sold to a residential developer.
And then there's a couple of, projects in Victoria, which we haven't previously named where we've taken a, an option over. And I think there was also one project, sort of, in central Queensland on the coast that we've passed on as well.
Okay. And Arena, where does that sit at the moment?
So we continue to own the existing holiday and residential community at Avina. And during the course of the FY 2021 year, we exercised an option to acquire the surrounding land adjoining that community, which gives us about 15 hectares of land. We took an impairment on that land through the last 6 months. So that land is currently reflected in our accounts as I guess, semi rural land as opposed to being, residential land, but we do believe, in that part of Sydney that, Avena will at a point in time be a highly successful project. There's not one new or proposed manufactured housing community under development or implanting in the entire New South Wales Basin.
So over the medium to longer term, we do believe that Avina has significant strategic value to the business.
And just finally, I'm at 37 settlements is a very strong start to the year, given COVID. I mean, What sort of disruptions are you finding out of the sales, construction or settlement as a result of COVID? I guess outside of Victoria?
So we have 2 developments under construction even in Victoria. So we're not expect or not experiencing any disruption at the moment in any developments across the country, whether they're in Victoria or elsewhere, We're not experiencing any disruptions with supply chain. So we've got great visibility on building materials. Probably the greatest bottleneck at the moment is just across the broader residential market. There's not huge volumes of homes for sale.
So for residents to, I guess, have a liquid market to be able to sell their home and then move into our community, that's probably the greatest challenge for us at the moment, but what we're seeing at the moment is the time on market is starting to come in. And I do think we are going to, experience, say, pretty strong spring and summer selling period. So yes, we've started the year very strongly. I think it's very fair to say that through sort of late March into probably late May, there wasn't a lot of activity at our communities from prospective residents. So that's really why we started a new financial year with a lesser number of deposits on hand or contracts, then we, commenced the FY 2020 year 12 months ago.
But, the market's certainly improving. And, we do think that the year ahead is looking, positive. I guess the greater known is what happens, when the job, keep her allowing eventually finishes often. And there's a lot of Australians at the moment on subsidized or not paying any interest or principal on their home loan. So how does that play out?
But broadly, the underlying fundamentals are attractive. And as I noted through my speech, what we're witnessing is a lot of other lifestyle developers, certainly the smaller groups have suspended development activity. So There's not a huge amount of stock out there on the ground in our space.
We have no further
Well, thank you very much for your participation today. Scott and myself and Donna will be available over the next few days. And if you do have any additional questions, please feel free feel free to find them through or email them. So thank you very much.
Thank you, ladies and gentlemen. That does conclude today's conference. Thank you all for attending, and you may disconnect your lines.