Villa World Limited (ASX:VLW) talks 1H17 results and outlook


by Clive Tompkins

Transcription of Finance News Network Interview with Villa World Limited (ASX:VLW) Managing Director & CEO, Craig Treasure

Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from Villa World Limited (ASX:VLW) is Managing Director and CEO, Craig Treasure. Craig, welcome to FNN.

Craig Treasure: Thanks Clive, it’s great to be here.

Clive Tompkins: First up Craig, can you start with a quick introduction to Villa World?

Craig Treasure: Villa World’s a residential property developer, operating in the growth corridors of our east coast capital cities. We operate in the affordable to mid price point of the Australian property market and sell both, house and land packages and vacant land. Our customers are quite diverse and include first home buyers, people upgrading through the housing cycle, downsizers, other builders and of course, investors. Last year we were proud to have been listed on the ASX for 30 years, and we are included in the ASX 300 Index.

Clive Tompkins: Now to your first half results Craig. What were the highlights?

Craig Treasure: We recorded a terrific result Clive of $19.6 million net profit, after tax and there were a couple of key things to highlight from that result. The first was a record 673 sales for the half year. And the second thing to note is the $192 million of carry-forward contracts, which will set us up really nicely for the full year. The Board also declared an eight cents per share fully franked dividend, for the half year.

Clive Tompkins: What drove the results?

Craig Treasure: It’s interesting in our sector the things that are driving our sales are low interest rates, consumer confidence, first homebuyer grants have a big impact on our business. But the most important one is probably job confidence. If people feel confident about their job, they’re much more likely to buy a home or an investment property. So it’s fair to say that Villa World has very much become a customer focused, sales driven organisation. And they’re the things that are driving our sales.

Clive Tompkins: Can you give us an update on your portfolio?

Craig Treasure: Geographic diversity is probably one of the main ways we manage risk, within the Villa World business. So the best way that I can describe our portfolio is to go through the three States. We have in the coming year up to 25 projects contributing to profits, across those three States and in Queensland we’re replenishing our portfolio. It represents 65 to 70 per cent of our book at this point in time. In Victoria, we’re actively growing the business and it accounts for 25 to 30 per cent of the portfolio. And here in New South Wales we’ve re-established the business, but it only represents five per cent of the portfolio at present.

We maintain a five to six year supply within our portfolio, which currently is 5,500 to 6,000 lots. And we intend to maintain it at that kind of level as we go forward. We have spoken at length before about gradually shifting our portfolio focus, to be 40 per cent Queensland, 40 per cent Victoria and 20 per cent New South Wales, as opportunities and markets allow us to.

Clive Tompkins: A more general question. What kind of properties are people buying and what are they looking for from a developer?

Craig Treasure: We offer a unique product to our customers, so we sell the completed house in the completed street. We make it very easy for our customers when they’re buying the home. So they pay a single deposit, it’s one contract and they settle the purchase when it’s ready for them to move into. So we offer that point of difference.

But what the customer is seeking from people like us, is amenity, they like the location of where they want to live. They want to see those things like parks and other attributes of a community. They want a sense of belonging to where they’re going to live. They demand great value in their purchases and they also demand great design. So you’ve got to cater for all of those things within your communities.

Clive Tompkins: Can you give us some examples Craig?

Craig Treasure: We’ve got some really great projects that we’re in the process of launching currently. That is a project at Arundel, called Arundel Springs on the Gold Coast in Queensland, which has all of those essential community elements that people are looking for. Specifically large areas of open space and an enhanced environment, for people to live in.

We also have a large project at Logan, called Killara; it’s on the southern suburbs of Brisbane, which we’re marketing as an active lifestyle community, all around your lifestyle for your family and your children. And the buyers are really responding well to that message that we’re giving. And elsewhere in the country, in Victoria we’ve also got a release coming up of Sienna Rise our new land community there, which we’re looking forward to as well.

Clive Tompkins: Craig, last question. What’s the focus for the next six months and full year guidance?

Craig Treasure: Our focus Clive as always is what we call the four pillars of our business. And that’s about acquisitions, delivery, sales and capital management. Specifically the strong sales that we spoke about earlier, have allowed our Board to upgrade the guidance to $37.5 million for the full year period, which is an 11 per cent increase on the prior year. That will have us achieving 33.1 cents earnings per share. And it will mean that we will have delivered nearly 15 per cent compound EPS growth since 2014, which is quite a strong achievement.

The Board’s also indicated a 10.5-cent dividend for the second period of the year, which will bring it to a total dividend of 18.5 cents. And that represents approximately a 7.5 per cent fully franked yield, which is great value for our investors.

Clive Tompkins: Craig Treasure, thanks for the update.

Craig Treasure: Thank you.