Lifestyle Communities shares plunge on profit drop, $275m entitlement offer

The retail component of the offer will open on 29 February and is expected to raise $74 million.

On Thursday, Lifestyle Communities also posted its earnings results for the first half of the financial year. Its NPAT fell 17.4% year on year to $20.8 million. The company said profit was impacted by lower new home settlements and increased pre-sales and marketing costs for new projects which had not yet commenced settlements.

Meanwhile, annuity revenue increased 16%, with higher rental revenue from an increased number of homes under management and the inflation-linked 6.6% rental increase.

Context: The raise aims to support the company's growth into land lease residential estates including acquiring land, developing sites, and recycling capital.

Land lease communities allow people to own a home but lease the land on which the home sits on from the community operator.

What they said: Jarden analysts said Lifestyle Communities earnings result was “weak”.

“Whilst the $275 million entitlement offer is presented as an opportunity to benefit from market conditions, this comes after management stat[ed] repeatedly that LIC would not raise equity to grow the business,” they said.

“Having said that, given the pressure on cash flow and balance sheet, it should help remove a major pushback on the growth story. We are a little surprised that LIC is not providing specific operating profit guidance as part of the raising but if we assume… the group is raising at 23-29x P/E, which includes non-cash items.

“We like the structural story and management has executed well but cost inflation is a concern given the stagnant operating metrics.”