Property developer group Villa World Limited (ASX: VLW) today released its Investor Insight along with explaining the changes made to accounting classifications. Some of the key highlights of the report includes:
Changes to accounting classification: The company explained that in line with industry peers, it has made two major accounting changes, first in the presentation of borrowing costs previously capitalized into the cost of inventory sold and impairments, and second in sales, production and settlement statistics. The impact of reclassification will have no changes in the net profit after tax of the company however, gross margin, EBITDA, and finance costs will vary, as told by the company. Following the changes in accounting, the company expects lower gross margin range of 23% to 25%, reduced from 24% to 26%.
Sales Contract: In the Investors Insight, the company reported that ahead of strong carried forward sales worth around $278 million, it anticipates that around one third of those 845 sales contracts will settle during the first half of Fiscal 2019. It is reported to include an elevated 87-lot land development at Bella Vista Estate, south of the Wollongong CBD. Further, about 21% of more contracts, valued at over $61 million, are due to be settled by the end of the financial year, with the balance of contracts worth in excess of $108 million settling in FY20.
Investment strategy: Villa World is committed to build well-located, affordable to mid-priced house-and-land packages under its no-variations, all-inclusive turnkey model. Currently, the company focuses to make strong investment in operational delivery and cash settlements pursuant to which limited new acquisitions are anticipated to be undertaken in Financial Year 2019.
Segment performance: Ahead of strong product positioning within the affordable owner occupier market in Queensland, Villa World has attracted a steady sale. Whereas, in Victoria market the company expects to eye a further upswing in construction activity underpinned by the delivery of carried forward sales. The New South Wales segment of the company has experienced substantial slow down across the Sydney housing market. Commenting on which, the company said that it will continue to address the affordability challenge, with the release of medium density product in Sydney’s south-west.
Buy Back: The Villa World Board approved an on-market buy-back for up to 5% of issued ordinary shares. Having activated the buy back, Villa World to date has acquired 321,699 shares worth $0.6 million, moreover buyback will be effective until October 2019. The management advised that buy-back represents a strategic and prudent deployment of capital, being NTA and earnings per share accretive.
FY19 Guidance: The company continues to target a statutory profit after tax of approximately $40 million in FY19, with the Board guiding to an FY19 full-year dividend of 18.5 cents per share fully franked.
The Annual General Meeting of the company is scheduled to be held on 16 November 2018.
The stock of Villa World Limited traded flat today. The stock price last traded at $2.010 with PE of 5.840x and market capitalization of $255.12 million as on 13 November 2018.
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