This article is from the Australian Property Journal archive
DEVELOPER Villa World has not provided a guidance for FY19 due to ongoing uncertainty in the residential property market, weak consumer sentiment, tighter credit conditions and strong prices growth over recent years which is now affecting affordability.
Villa World booked a first half year net profit of $17.6 million, up 2% on the previous corresponding period’s $17.3 million. EPS was 13.9 cps compared to 13.6 cps in the pcp. Revenue increased by 15% to $232.7 million, however revenue from joint ventures fell 75% to $2.2 million. The company announced a dividend of 8 cps, unchanged from the pcp.
During the first half, the company recorded 611 wholly owned settlements, down from 626 in the pcp. The gross margin was $57.2 million or 24.6%, up from $48.0 million or 23.7% in the pcp.
The company recorded 517 sales during 1H19, down 30% on 1H18 (742 lots).
Managing director Craig Treasure said demand for affordable land and housing in the growth corridors – performed as expected in the first quarter. However, residential housing market conditions and customer sentiment have declined.
“Customers are experiencing a reduction in the availability of finance, delayed finance approvals, more stringent assessment criteria and reduced borrowing capacity. This led to lower sales results and enquiries in late 2018.
“Demand in Victoria moderated from the cyclical highs seen in FY18, influenced by tightening credit conditions, waning consumer confidence and strong price growth over recent years which is now affecting affordability,” he added.
The company will carry forward into 2H19 1,126 sales contracts worth $340.4 million5. 30% of contracts (342 lots valued at $116.6 million) are anticipated to settle in 2H19, a further 59% settling in FY20 (666 lots valued at $193.5 million) and the balance of 118 lots valued at $30.3 million settling in FY21. At 31 December 2018, the company had a portfolio of 6,910 lots (FY18: 7,064) representing approximately five to six years of sales.
Looking ahead, the company will not provide a guidance.
“Market conditions and the availability of customer credit are likely to remain challenging for the remainder of FY19. Upcoming federal and NSW elections may also lead to increased customer uncertainty. Several stages in the company’s Victorian projects are scheduled for completion in late FY19, with some likely to extend into 1H20.
“Given those factors, the company considers it prudent not to provide guidance for FY19 at this time,” he said.
However, Treasure is optimistic, adding that, “This phase of the property cycle will bring opportunities.
“The company has a long history of successfully navigating through market cycles, and has a forward strategy focused on its customers and long-term value creation.
“Despite current market conditions, the company remains confident that its medium to long term strategy and affordable price point will provide sustainable success and shareholder value beyond the current sector dynamics.
“Villa World expects current market conditions to present opportunities commencing in FY20, for astute acquisitions and strategic partnering relationships. With a strong balance sheet and disciplined capital management, the company expects to be well placed to capitalise on these as they arise.” Treasure concluded.
Australian Property Journal
