Villa World Group 2012 Full Year Results 27 August 2012 - - PowerPoint PPT Presentation

Villa World Group 2012 Full Year Results

27 August 2012

INTRODUCTION

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Carried Forward Sales

• $53.1m6 of Villa World sales contracts (222 lots) 6 carried

forward, and $4.6m6 of sales contracts (29 lots)6 carried forward in joint ventures7

Development Pipeline

• An acquisition strategy and budget is in place to take

advantage of opportunities to extend the development pipeline

Distribution/Dividend

• No interim or final dividend to be paid for FY12

1. Based on weighted average shares on issue of 78,714,262 (FY11: 85,372,526) 2. Underlying operating profit before tax, reflects the statutory profit as adjusted in order to present a figure which reflects the Director’s assessment of the result for the ongoing business activities of the Villa World Consolidated Group. 3. Interest bearing liabilities less cash at bank, excludes bank guarantees 4. (Interest bearing liabilities less cash)/(Total assets less cash) 5. Based on closing shares on issue of 75,223,332. 6. Lots are included on the basis of 100% for Villa World Limited projects and 50% of Joint Venture projects. Represents gross sales price including GST . 7. Based on carried forward sales contracts as at 30 June 2012

2 FY12 Earnings and Cashflows

• Net profit after tax of $8.2 million (FY11: $13.5 million)
• Earnings per share (EPS) of 10.4 cents1 (FY11: 15.8

cents1)

• Operating profit2 of $9.6 million (FY11: $9.1million)
• Net cash outflow from operating activities of $14.6 million
• Revenue – development and construction of $146.5

million (FY11: $110.8 million)

Strong Balance Sheet and Capital Management

• Net debt of $71.3 million3 as at 30 June 2012
• Net gearing of 27.6%4 as at 30 June 2012.
• NTA of $2.015 per share

CORPORATE UPDATE

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3 Dividends

• Due to the current economic climate, and particularly in a

slow housing market, it is likely that dividends will remain suspended in the short to medium term.

• The focus will be on the share buy back program which is

anticipated to be more value accretive to the shareholders.

Share Buy-Back

• The Group commenced an on-market Share Buy-Back on

25 July 2011.

• At 30 June 2012, 10.2 million shares have been

purchased at an average price of 83.9 cents per share including brokerage.

• This represents a 11.9% reduction in issued capital since

the commencement of the buy-back.

Restructure of Trust

• All properties now sold – an asset leased to Caltex in

Goondiwindi, settled in June 2012.

• The final steps of the corporatisation will be completed in

1H13.

• The simplified structure has greater investor appeal, gives

Villa World improved flexibility to implement capital initiatives, simplifies reporting requirements, and reduces administrative complexity and head office costs.

Board and Management

• Craig Treasure was appointed as a non-executive director

in February 2012. Subsequently, Craig was appointed as Executive Chairman of Villa World from 1 August 2012.

RESULTS OVERVIEW

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Revenue

• Development and construction revenue of $146.5

million (2011: $110.8 million).

• 585 Accounting settlements compared to 406 in

2011 (including our share of joint ventures).

• The increase is attributable to the settlement of

sales at Cascades on Clyde (Victoria) carried forward from the previous financial year and a significant revenue contribution from two new projects in Queensland.

• 12 projects contributed to revenue during the year,

steady with the prior year.

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268 138 318 267 50 100 150 200 250 300 350 QLD VIC

Accounting settlements by state

FY11 FY12 19% 93%

RESULTS OVERVIEW

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Earnings

• Statutory net profit after tax of $8.2 million (EPS:

10.4 cents) compared to $13.5 million in 2011 (EPS: 15.8 cents).

• Decrease on prior year due to one off adjustments

included in the prior year.

• Underlying Operating Profit1 increased 5.4% to

$9.6 million (EPS: 12.2 cents) compared to $9.1 million in 2011 (EPS: 10.7 cents)

• The final investment asset was sold in June 2012,

at a discount to book value of $653k. This will now allow the final steps of the corporatisation to be completed in 1H13.

• This is a positive financial result despite the current

strong negative sentiment towards property.

1. Underlying operating profit before tax (unaudited), reflects the statutory profit as adjusted in order to present a figure which reflects the Director’s assessment of the result for the ongoing business activities of the Villa World Consolidated Group.

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Underlying Operating Profit1 (unaudited) FY12 ($'000) FY11 ($'000) Revenue - development and construction 146,500 110,835  32.2% Profit from continuing operations 7,920 9,716  (18.5%) Profit from discontinued operations 288 3,769  (92.4%) Total net proft after tax from continuing and discontinued operations 8,208 13,485  (39.1%) Weighted Average Shares on Issue 78,714 85,374 EPS 10.4 15.8  (34.0%) Net (gain)/loss on sale of investment property / fair value adjustment for investment properties 653 (1,376) Impairment of development land 700

• Hedge ineffectiveness on interest rate swaps

157 105 Reversal of impairment of receivables

• (5,654)

Subtotal 1,510 (6,925) Income tax benefit / (expense) 106 (2,557) Subtotal 1,404 (4,368) Net operating profit before tax, fair value write- downs and impairments and non recurring one off discontinued

• peration expenses

9,612 9,117  5.4% Weighted Average Shares on Issue 78,714 85,374 EPS 12.2 10.7  14.3% Change

OPERATIONAL REVIEW

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• 1. Villa World’s joint ventures include Eynesbury, Cornell’s Hill and Cotton Ventures.

FY12 FY11 Group Group Sales (lots) 496 497 Year on year sales were stable, however, the sales skew shifted towards Queensland, with 387 sales (FY11 244), versus 109 sales in Victoria (FY11 253). This was as a result of challenging market conditions in Victoria, a project in the resource strong Gladstone market, and two new Queensland projects coming online in Brisbane.  0% Settlements (lots) 585 406 Stage 5 in Cascades Victoria registered in FY12 (sales in prior period), contributing to the 267 settlements in Victoria. Improved sales activity in Queensland saw 318 settlements in the year.  44% Revenue - property sales ($m) 146.5 110.8



32% Revenue - other ($m) 5.0 7.0 The material revenue items are the share of joint venture income1 and project management fees. Cornells Hill JV project had sold out in FY11 and Cotton Ventures has now sold out in FY12 with only Eynesbury JV forecast to be the major contributor of other income in FY13.  29% Gross margin ($m) 37.0 31.8



27% Margin (%) 25.2% 28.7%  4% Mean rate of sale pcm 41.3 41.4 Improved market conditions in the second half of 2012 saw the mean rate

• f sales rise from 34.4 per month in the 1H12 to 48.3 in 2H12. Strength of

a diversified portfolio.  0% Number of projects contributing to profit 12 12 12 projects contributing to profit, including new projects Park Vista and Circa II. Two new projects at Brookside and Burpengary to contribute to revenue in FY13.  0% Performance Change Key Drivers We have experienced a margin decrease in our regional projects compared to prior year, however the larger, well established projects in Gladstone and North Brisbane have maintained their margins year on year.

OPERATIONAL REVIEW

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Industry

• Strong negative sentiment towards property as a result of

broad economic conditions in both Australia and

• verseas impacting on consumer sentiment.
• The domestic economy appears relatively sound with

strong banking and financial systems, low unemployment and real GDP growth.

• However, Europe’s sovereign debt issues continue to

influence sentiment, and both private and public sectors are deleveraging.

• Consumer and business confidence continues to

weaken, with flow on effects on residential property.

Villa World

• The group continues to focus on its core business of

land, and house and land products in Melbourne and south-east Queensland.

• Villa World’s geographic diversity remains a core

strength of the business providing the flexibility to respond to varying market conditions.

• 496 sales were recorded in FY12 compared to 497 in the

prior year, with the sales skew shifting to the Queensland market.

• The ability to maintain sales despite large variations in

performance between regions and projects, is evidence

• f the value of our diversification strategy.

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MARKET REVIEW

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• Strategies for addressing market conditions and a new project at

Park Vista saw sales in the 2H12 rise 38% over 1H12, reversing two halves of lackluster sales. Queensland

• Sales in the Queensland developments grew by 58%.
• Exposure to the energy sector via the Little Creek project in

Gladstone and two new projects in Brisbane underpinned the performance.

• The remaining Queensland operations were consistent with the prior

year.

• Growth is expected out of the Gladstone and Brisbane markets in

FY13.

• For FY13, Villa World’s Queensland operations will carry forward

1081 lots sold worth $29.2 million1 Victoria

• Sales in Victoria declined as a result of tougher market conditions.
• Pockets of the Victorian market are expected to recover in the

coming year, however the Western region of Melbourne will likely provide Villa World with challenges into FY13.

• For FY13, Villa World’s Victorian operations will carry forward 1431

lots sold worth $28.5 million1

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244 253 387 109 100 200 300 400 QLD VIC

Sales by state

FY11 FY12

288 209 207 289 ‐ 50 100 150 200 250 300 350 1H11 2H11 1H12 2H12 1. Lots are included on the basis of 100% for Villa World Limited projects and 50% of Joint Venture projects. Represents gross sales price including GST .

Sales by Half Year

MARKET REVIEW

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• Villa World continues its strategy of providing new

stock at or below the competing existing established properties to maintain market share.

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59 70 247 191 191 235 100 200 300 400 500 600 FY11 FY12

Buyer composition (sales)

Investors and other Upgraders First Home Buyer

1. Source: McMahon Property Group/RP Data – January to May 2012 – product and lot sizes comparable to applicable estate. 2. Villa World product at Circa II is the only new product on the market. 3. Mt Cotton and Park Vista average sales price is based on house and land product (excludes land only) for comparative purposes. 257,958 454,203 325,533 283,525 229,867 408,125 533,346 285,000 452,000 320,000 296,250 227,500 450,000 444,025 ‐ 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 550,000 Little Creek Mt Cotton Augustus Domain Longhill Rise Park Vista Circa II

Average Villa World sales price v local median price (2HY12)1,2,3

Average Villa World Sales Price Local Median

BALANCE SHEET

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• 1. (Interest bearing liabilities – Cash) / (Total assets – Cash)

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As at 30 June 2012 ($m) Assets Cash 2.8 Receivables 43.6 Inventories 190.9 Investment properties

• Investments accounted for using the equity method

9.7 Other 13.9 Total Assets 260.9 Liabilities Trade and other payables 35.3 Interest bearing liabilities 74.2 Related party loans

• Other

0.2 Total Liabilities 109.6 Net assets 151.2 Net tangible assets 151.2 Gearing (%)1 27.6% NTA per security 2.01

DEVELOPMENT PORTFOLIO

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Project Type % Total Pipeline Land Only 24% 1,100 House & Land 36% 1,672 Integrated Housing 1% 50 Joint Ventures1 40% 1,852 Total 100% 4,674 52% 48%

Number Of Lots (as at 30 June 2012)

QLD VIC

• As at 30 June 2012, the group had 4,674 lots under

control, representing approximately 9.4 years of supply at the 2012 sales rates.

• Our portfolio is diversified across:
• state (QLD and VIC)
• product (land only, house and land, integrated

housing)

• Ownership - wholly owned and joint ventures
• Project - 13 projects, 12 of which will contribute to

profit in FY13.

• Minimal project-based risk - all developments with

development approval – no foreseeable issues around our ability to put product on the ground.

DEVELOPMENT PORTFOLIO (continued)

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Project Name Location Total Lots Lots Remaining as at 30 Jun 12 Contribute to FY13 Profit 2013 2014 2015 2016+ Land Cascades on Clyde VIC 1,142 376



Little Creek1 QLD 665 560

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Longhill Rise QLD 157 28

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Burpengary QLD 136 136

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Subtotal 2,100 1,100 House and Land Augustus QLD 730 631

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Mt Cotton2 QLD 535 283

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Circa II QLD 146 102

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Circa III QLD 88 88

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Brookside QLD 107 107

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Park Vista2 QLD 482 461

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Subtotal 2,088 1,672 Integrated Housing The Domain QLD 80 47

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Caprice QLD 89 3 Subtotal 169 50 Total (wholly owned projects) 4,357 2,822 Joint Ventures (50% share) Eynesbury3 VIC 2,253 1,851

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Eynesbury Commercial4 VIC 1 1

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Subtotal 2,254 1,852 Total (all categories)5 6,611 4,674

1 Predominantly Land Only 2 Predominantly House & Land Only 3 Based on current planning approval of 4,500 lots 4 50% of Eynesbury Homestead, surrounding commercial land, golf course and shopping precinct

OUTLOOK

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13 Acquisitions/Restocking

• The group maintained a disciplined and conservative

approach to balance sheet management through out 2012.

• An acquisition strategy and budget is in place to take

advantage of opportunities to extend the development pipeline.

Outlook

• Well balanced and mature portfolio of projects in regions

where sales activity will be either maintained or improved. We have strategies in place to address conditions in markets which we believe may continue to struggle.

• Projects in Gladstone and Brisbane provide us with the

most confidence of achieving growth in FY13.

• We believe some pockets in Victoria will recover, however

the western region of Melbourne will provide us the greatest challenge.

DISCLAIMER

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14 Villa World Group

Villa World Limited (ABN 38 117 546 326) and its subsidiaries (‘Villa World’) has made every effort to ensure the accuracy of information contained in this presentation. The presentation has been prepared based on information available to Villa World at the date of this

• presentation. No responsibility or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the

information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of Villa World, its related bodies corporate or any of its directors, employees, agents or advisers accept any liability for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it, including, without limitation, any liability arising from fault or negligence on the part of Villa World, its related bodies corporate or any of its directors, employees, agents or advisers. The material contained in this presentation is for information purposes only and does not constitute financial product advice. The information contained in this presentation has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. Before making any investment decision, you should consider, with or without the assistance of a financial adviser, whether an investment is appropriate in light of your particular investment needs, objectives and financial circumstances. Nothing in this presentation is a promise or representation as to the future. Statements or assumptions in this presentation as to future matters may prove to be incorrect and the differences may be material.