This article is from the Australian Property Journal archive
THE national undersupply of housing and continued strong demand has propelled developer Cedar Woods Properties (ASX: CWP) to deliver a full year net profit of $40.5 million, smashing its own guidance.
The result is a 28% increase on the previous corresponding year’s $31.6 million and was above the top end of the guidance of $36-39 million. Earnings were 49.2 cents per share up from 38.5 cents pcp and the group declared a fully franked dividend of 17 cps, well above 7 cps in the pcp.
Managing director Nathan Blackburne said the strong sales momentum experienced in previous quarters continued into the fourth quarter and higher than expected settlements in June boosted the final result.
“Demand for housing continues to be supported by population growth, strong economic conditions in most states, low vacancies in rental markets and significant nationwide housing supply shortages.
“The national undersupply of dwellings, low vacancies in rental markets, high employment and government incentives for homebuyers are expected to underpin housing demand in the medium term, maintaining a positive outlook for our business,” he added.
Bank debt was paid down significantly during the financial year, with net bank debt reduced to $120.1 million at 30 June 2024. As a result, gearing (net bank debt-to-total tangible assets (less cash)) at 16.7% and net bank debt-to-equity at 26.1%, fell to the lower end of their respective target ranges. At 30 June, liquidity of $156.8m was available from $134.8 million of undrawn headroom under bank facilities and $21.9m in cash on hand.
Blackburne said Western Australia and Queensland were the best performers and strong price growth was achieved during FY24 in all states except Victoria. Construction costs too have continued to grow but more in line with long-term averages and at a markedly lower rate than revenue growth.
“The company is experiencing favourable market conditions in three out of four states in which it operates with Victoria the exception, as it is comparably less affordable with higher median price points and more supply available. Despite cost-of-living pressures weighing on discretionary spending, demand for new housing across all product types is strong, resulting in significant price growth and margin improvement at the company’s projects.
“Based on the low level of approvals coming through the system, home completion volumes are set to continue for the medium term. Australia’s dwelling stock deficiency is currently around 146,000 dwellings and this is forecast to increase to 164,000 dwellings in 2027 (Oxford Economics).
“As a consequence of the supply demand imbalance, economists are forecasting further significant growth in median dwelling prices across all major capital cities over the next three years, particularly Perth. Whilst median dwelling prices are not directly related to new residential prices, the company expects the market fundamentals to result in favourable conditions for its products over the medium term,” Blackburne continued.
Meanwhile the company is also off to a good start for FY25, with presales contracts of $559 million, up 25% on the same time in the prior year, with approximately 70% expected to settle in FY25 and the balance in FY26.
As a result, Cedar Woods is targeting 10% growth in NPAT for FY25. Half to half earnings in FY25 will be more balanced than in FY24, whilst still weighted to the second half due to the expected timing of settlements.
Several new projects are expected to contribute to earnings from FY25, including Clara Place and 88 Leveson townhouses (VIC), Banksia, and Bloom apartments (SA), Henley Brook (WA), and Greville and Flourish (QLD).
“We start the new financial year in an excellent position with $559 million in presale contracts. With a national pipeline of more than 10,000 dwellings, lots and offices, and our initiative to further boost earnings through strategic partnerships, the business is well-placed to grow earnings,” he concluded.
