End of year results: Profit plunges by half for Gold Coast-based developer Villa World
A leading Gold Coast developer has reported net profit half of last year. It could be the last time it reports as shareholders mull a takeover offer valuing the company at $293.5 million.
Business
Don't miss out on the headlines from Business. Followed categories will be added to My News.
VILLA World has reported net profit of almost half of last year as weak consumer sentiment and tightening credit conditions impacted the bottom line for the Gold Coast developer.
This morning the company reported net profit of $22.9 million, 47 per cent down from last year’s record full-year profit of $43.6 million.
Villa World called it a “solid result” given the challenging housing market.
Revenue fell 11.3 per cent to $391.6 million, including 1049 settlements compared to 1303 in the previous period. Sales dropped from record highs to 870 lots.
SUBSCRIBE TO THE BULLETIN: $5 A MONTH FOR THE FIRST THREE MONTHS
Queensland, where its projects include Arundel Springs on the Gold Coast, and NSW made up 89 per cent of revenue compared to 84 per cent in the prior period.
“After years of double-digit growth, this was a pleasing result given the challenges faced during FY19,” the company said.
“The result is consistent with the decline in the Australian residential housing market throughout FY19.
“Lower sales results and inquiries were observed in late 2018 and continued into the second half. In the lead up to the Federal election home buyers experienced increased market uncertainty as lending conditions remaining tight and consumer sentiment continued to soften.”
In contrast to last year, Queensland projects contributed to just 55 per cent of sales, down from 66 per cent in FY18.
Villa World said the anticipated improvement in the Queensland market did not occur.
It previously reported a $17.6 after tax profit for the first half, hit by cooling demand for its projects in Victoria.
The company said demand had come down from record highs in that market with sales this financial year making up 39 per cent of the total.
The Broadbeach-based company did not provide full-year guidance citing the challenging market conditions.
The poor full-year results come as shareholders mull a bid from private-equity-backed Avid Property Group to acquire all shares in the company for $2.345 per security ($2.035 cash and special dividend of 31¢).
Villa World said it expects to mail the scheme booklet, outlining the offer and with a report by independent expert Grant Thornton Corporate Finance, to shareholders next month.
The company first revealed the bid in March.
The proposal received the board’s blessing when the offer was increased to $2.345 per share and last month the company announced it had enter into a binding agreement for Avid to acquire all the shares in the developer. The company said the bid offered “certainty of value” to shareholders”.
The recommended offer represents a 17.8 per cent premium to the Villa World closing share price of $1.99 on March 14, before the offer was announced.
Implementation of the scheme is slated for October or early November subject to shareholder approval.
Avid, which says it has a pipeline of $3 billion worth of broad acre and medium-density residential and industrial projects, is eager to move into markets where Villa World has made large inroads.
Villa World’s underperformance in the wake of a weakened housing market has made it an attractive target for takeover, especially given prior to the offer it was trading at a steep discount to net tangible assets per share.
Olivia Wirth’s big plans for Myer take shape
Former Qantas executive Olivia Wirth has moved at lightning speed in her first 100 days in charge of the retailer. This is where she wants to take it.
‘Follow the rules’: Developer warning as tower begins to rise
The first sod has been turned on a ultra luxury beachfront Broadbeach tower despite warnings from the Gold Coast City Council its building permit is yet to be approved.