Villa World’s Reported Subdued Housing Market In 3Q FY19, Sales Settlement Delayed

Aussie Housing Slump has carved out a major portion of potential revenue from many real estate companies. Villa World Limited (ASX: VLW) has been one of them!

Villa World today released an operational update for the 3Q FY19. The company reported a continued downtrend in Australia’s residential housing market in CY2019, leading to subdued sales figure. Sales for the financial year to the end of April 2019 stood at 783 that includes 266 sales during the first four months of CY19.

Customers continue to struggle from a lack of availability of finance and tightening of credit standards resulting in a delayed finance approvals. As a result, both carried forward sales and new sales are taking longer than anticipated to settle.

Given this scenario, the company expects ~80 to 115 settlements previously expected in 2H19 to now settle in FY20.

Image: Financial Performance of the company (Source: Company’s Presentation)

Due to the uncertainties hovering around the sector’s future and growth, the company decided not to provide any guidance for Fiscal 2019. However, the company currently expects that the FY19 gross margin will be within the target range of 23% to 25%. It anticipates that customer sentiment is likely to improve following the Federal election, and that finance conditions may free up during the second half of CY19, as lenders work through the repercussions of the Banking Royal Commission.

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The report read that the company has continued to work on invigorating its sales strategy to highlight its value across the affordable housing sector. The business cost structure continues to be managed in light of current trading conditions, with the results likely to mostly impact FY20.

VLW  further informed that AVID has been granted due diligence access, exclusively on customary terms, to facilitate a binding proposal for 100% of the shares in the company at $2.3451 per share. The company is reportedly working closely with AVID to facilitate its due diligence investigations. There is, however, no guarantee that a transaction will result.

The Board recognises the importance of returns to shareholder through fully franked dividends, as reflected in its stated dividend policy of a payout ratio of 50% to 75% of annual NPAT, paid semi-annually. The Board will give further consideration to the 2H19 dividend once there is further clarity regarding the company’s FY19 results.

The company stated that any 2H19 dividend will also need to be considered in light of the AVID acquisition proposal, given that the offer price of $2.345 per share will be reduced by any dividends that shareholders become entitled to receive on or after 1 May 2019 (being the date of AVID’s revised proposal).

In today’s trading session, VLW stock price declined by 2.212% to last trade at $2.210 on 15 May 2019. The stock closed at 6.510x with a market capitalisation of $282.86 million, today.

Over the past 12 months, the stock has declined by 9.60% including a positive price change of 17.71% recorded in the past three months.

Also Read: How Did VLW Perform In The First Half Of FY2019?


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