On 25 January 2019, independent property valuation and property consultancy firm, LandMark White Limited (ASX: LMW) has announced its trading update of FY 2019 and also released the revised outlook of FY 2019. Following the release of FY18 results, at the AGM, the company has provided FY19 guidance indicating revenues of $56.8M, EBITDA of $7.1M, NPAT of $4.0M and EPS of 4.8 cents. This guidance was based on their market outlook at the time and included preliminary assessments of the impact of the Taylor Byrne acquisition.
Due to changes in trading conditions combined with greater clarity on the impact of the company’s acquisition of Taylor Byrne, now the board has reviewed that preliminary first-half results require a revision to the FY19 guidance previously provided.
The company now anticipates their FY19 revenues to be $55.0M, EBITDA to be $5.3M (normalized to remove one-off acquisition costs $5.8M) and NPAT to be $2.8M (normalized $3.3M).
However, with the reduction in the company’s profit guidance, the company expect to deliver EPS of approx. 3.6 cents (normalized circa 4.3 cents). The company anticipates that the second half forecast result, when annualized, provides a reasonable estimate of future performance.
Effective 1 October 2018, the company has completed the acquisition of Taylor Byrne funded via the issue of 8.5 million shares and a bank loan of $5 million. The Taylor Byrne acquisition is expected to deliver an additional profit before tax of approx. $2.3 million on an annualized basis once integration has been completed and synergies realized.
For FY19, the acquisition is anticipated to deliver an increase in profit before tax of approx. $1.3 million with partial delivery of synergies and improved margins arising from the insourcing of valuations previously sub-contracted to licensees and third-party valuation firms.
During the period September through December 2018, LMW has experienced a significant downfall in valuation instructions from the first-tier lenders. This happened due to tighter regulation of credit from APRA as well as the adverse impact of the lender’s reaction to the Banking Royal Commission. The negative sentiment on housing prices across major centers has also driven weaker loan volumes and hence valuation instructions.
In previous property cycles, the company has seen similar periods of reduced valuation activity. A resurgence in sales-driven activity traditionally follows these as buyers return to market due to under-valued opportunities, or borrowers want to take advantage of refinancing options. The banks will become more cautious due to a sharper drop in property prices and circumspect with their current lending portfolios, also leading to an increased demand for valuations.
Current market sentiment towards property will remain cautious due to upcoming State and Federal elections and continuous negative sentiment towards banks. While the company is unable to make predictions about when this resurgence in valuation activity will occur, it is anticipated that volumes will remain subdued.
Within the current financial year, the Company does not expect a return to above trend volumes, but they anticipate that the second half revenues will be substantially stronger than the first half of FY19. Additionally, the company has made changes to their cost structures going forward to partially offset the impact of lower first-half revenues and LMW will continue to monitor costs going forward.
Currently, volumes from government contracts remain below the longer-term averages and expected volumes, but LMW expects an increase in government contract volumes in the coming periods.
In the last six months, the share price of LMW decreased by 17.09 percent as on 25 January 2019. LMW’s shares traded at $0.485 with a market capitalization of circa $40.86 million as on 25 January 2019.
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