Villa World (ASX:VLW) 1H18 results & outlook


by Jessica Amir

Villa World Limited (ASX:VLW) Managing Director & CEO Craig Treasure talks 1H18 results, eastern seaboard strength in housing and flagship projects.

Jessica Amir: Hi I’m Jessica Amir with the Finance News Network here with Villa World (ASX:VLW) CEO and Managing Director, Craig Treasure. Hi Craig, welcome back.

Craig Treasure: Thank you, it’s great to be back to update on our results.

Jessica Amir: And Craig, maybe you can tell investors new to the company about your value proposition?

Craig Treasure: Yes, Villa World is unique in that we deliver the fully completed house and land product to the customer. So what’s different about our business is our core turnkey housing product, where we deliver to the buyer the completed house in the completed street. They know what they’re going to get and we make it easier for them with a single deposit and a single contract, which makes it easy for their financing. So that’s the real essence of the Villa World business and its success in the markets.

Jessica Amir: So, just on those results, tell us how did your first half 2018 wrap up?

Craig Treasure: Really good profit result for the first half, so 17.3 NPAT and we’re tracking really nicely on our full year guidance of 41.6. So for the half it was 13.6 cents per share, which again is tracking nicely to where we want to be for the full year of 32.8 cents per share. And our NTA at the end of that period was $2.31.

Jessica Amir: And Craig, what was the dividend?

Craig Treasure: Dividend declared for the half year was 8 cents per share. And again, we’re forecasting to deliver at least 18.5 cents per share for the full year.

Jessica Amir: Can you give us an update on first half 2018 sales and margins?

Craig Treasure: Sales have been very strong for the business again. So we recorded 715 sales for the period, which is nicely on target for our forecast 1400 sales for the full year. We’ve been fortunate to have a lot of significant flagship projects start to contributing during that period, and we’re envisaging a stronger second half in the marketplace. Our margin across those sales tracked for the first half year at 24.5 per cent, which is nicely within the guided range of 24 to 26 per cent.

Jessica Amir: So what drove those stellar results?

Craig Treasure: Sales for us are different in different states. So, in the Sydney market here where we are today, it’s a steady market. We bring product to the market and it’s selling well. Melbourne is an extremely strong property market in the Greenfield house and land area that we operate in. And Brisbane is a market that’s undervalued and steadily improving for us.

Jessica Amir: Craig, now to your portfolio, just tell us about your key projects?

Craig Treasure: Certainly, during this period, we’ve commenced selling at a number of flagship projects. Some of those, for example in Queensland, are The Meadows at Strathpine, an ongoing house and land project, Covella, our joint venture in Greenbank in Brisbane, and Lilium, a large land estate in the south-eastern suburbs of Melbourne. So it’s good for Villa World to be back in those flagship projects that will run for some time, rather than smaller projects that we’ve had a lot of in recent years.

Jessica Amir: Can you give us an update on acquisitions and disposals?

Craig Treasure: As always, the business has been busy in acquisitions during the year. In development, you’ve got to continue to bolster the portfolio as we sell throughout each period that we report on. So this year we’ve been focusing on our joint ventures and partnering arrangements in Sydney, continuing to grow in Melbourne through joint ventures and structured acquisitions and redeployment of some capital into the Queensland market which we view as undervalued, and that program has been quite robust throughout the year.

Jessica Amir: Now to your acquisitions and disposals. Can you update us on that?

Craig Treasure: Certainly. Acquisitions are an ongoing part of the business and as we’ve said to the market, we’re continuing to grow our partnering in joint ventures here in Sydney. We’ve been able to be a little more selective in acquisitions through this year, because of the restocking we’ve done previously. And you’ve seen a number of those settlements come through in the half year that we’re just reporting on. Our view is to continue to grow in Melbourne with structured transactions and reinvest capital going forward, predominantly into the Queensland market.

Also of note, a major disposal that we announced in December with our Donnybrook property, which is an opportunistic sale of the property subject to the planning outcomes. And the revenue and profits from that transaction will be booked from financial year ‘20 onwards over a period of time and maybe as soon as FY19 in the last period of that year.

Jessica Amir: A more general question now. With people living longer, how does that really change what type of properties people are looking for?

Craig Treasure: We’re continually seeing the markets change. The big change that we’ve seen in our space is the size of blocks of land and the size of homes getting smaller. And that’s predominantly around affordability. But to your point about the aging demographic, we are seeing more and more customers come to our houses, where people are downsizing their traditional home. It lets them pay some money off their mortgage or payout their mortgage, do some travelling and have a smaller home that’s lower maintenance. And for a lot of those people it’s quite exciting, because often it’s the first new home that they’ve ever owned. So they’re a growing customer that we’re seeing in our product range.

Jessica Amir: And Craig, just remind us, what’s your guidance for the full financial year?

Craig Treasure: Sure, guidance for the full year is $41.6 million NPAT, that equates to 32.8 cents per share in earnings. And we’re guiding for a full year dividend of at least 18.5 cents per share, which represents around a 7 per cent fully franked yield for our investors.

Jessica Amir: Craig Treasure, thank you so much for the update.

Craig Treasure: Thank you, we look forward to being back to update at full year results.


Jessica Amir

Finance News Network
Jessica joined FNN in January 2017 after having worked in financial advising for seven years and in TV journalism for seven years, specialising in finance, equities and analysis. She has interviewed former Prime Ministers of Australia, Tony Abbott, Julia Gillard and Kevin Rudd and ex Treasurer Jo Hockey. Jessica has worked as a journalist with Sky News Business, ABC 1, ABC's The Business, ABC24 and has also been a regional Channel 7 and 9 TV reporter with Prime7 and Win News.