Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cedar Woods Properties Ltd (ASX:CWP, Financial) delivered a net profit after tax of $40.5 million, up 28% from the previous year.
- The company achieved revenue of $386 million from 1,140 settlements, reflecting strong operational performance.
- Cedar Woods Properties Ltd (ASX:CWP) declared a final dividend of $0.17 per share, bringing the full-year dividend to $0.25 per share, fully franked.
- The company has a robust pipeline with over 10,000 lots or dwellings across 40 projects in four states, ensuring future growth.
- Cedar Woods Properties Ltd (ASX:CWP) has established strategic partnerships with QIC and Tokyo Gas Real Estate, enhancing its project portfolio and reducing capital requirements.
Negative Points
- Higher finance costs were noted due to increased average debt balance and higher base interest rates.
- Revenue remained broadly flat despite an increase in settlement volume, indicating potential challenges in pricing or product mix.
- The Victorian market experienced softer conditions due to higher interest rates, impacting sales performance in that region.
- Construction costs have continued to grow, which could impact future project margins and timelines.
- The company's guidance for 10% NPAT growth in FY25 was seen as conservative, indicating potential uncertainties or constraints in achieving higher growth.
Q & A Highlights
Q: Nathan, can you help me understand how you've built the inventory back to over 10,000 lots after strong sales in FY24?
A: (Nathan Blackburne, Managing Director) We have several key components contributing to this. Firstly, the Noble Park project in Melbourne, which involves around 100 apartments. Then there's Corayo near Geelong, with about 400 lots. Additionally, our partnership with QIC for the Robina Town Center project, which includes 414 townhouses and apartments. Lastly, we recently acquired the Subiaco Depot site for over 200 apartments in JV with Tokyo Gas Real Estate.
Q: The impact growth for FY25 seems conservative. What are some of the constraints or uncertainties leading to that conservatism?
A: (Leon Hanrahan, CFO) We believe a 10% growth target is appropriate. We have $559 million in pre-sales, with around $400 million expected to settle in FY25. Constraints include the pace of construction and potential market fluctuations. We will update the market as we progress.
Q: Should we expect a lift in cash tax paid next year due to capital gains on the shopping center site?
A: (Leon Hanrahan, CFO) Yes, there is a one-month lag with income tax payments. We had a significant revenue month in June, resulting in a large tax payment in July. Our effective tax rate is close to 30%, which is a fair proxy for cash tax in a typical year.
Q: Can you give us a feel for the product mix and assumptions for FY25 compared to FY24?
A: (Leon Hanrahan, CFO) In FY23, around 45% of our settlement volume came from built form projects. For FY24 and FY25, we expect about 20% of our settlement volume to come from built form, reflecting a shift towards house and land packages.
Q: What is your appetite for continuing to restock inventory given the current balance sheet and market opportunities?
A: (Nathan Blackburne, Managing Director) We have significant balance sheet capacity and support from capital partners. We are open to acquisitions in all four of our markets, focusing on projects that can contribute to FY27 and FY28. We are interested in both land and built form outcomes, being selective with built form acquisitions to ensure reasonable construction costs.
Q: How do you plan to achieve the 10% growth target for FY25 given the absence of the Williams Landing Shopping Center sale?
A: (Nathan Blackburne, Managing Director) We expect extra volume and better margins from settlements, particularly from recent strong price growth in Queensland and Western Australia. We anticipate a step-up in revenue growth, potentially reaching around $500 million, supported by ongoing sales and settlements.
Q: How have construction constraints affected your performance, particularly with respect to built form projects?
A: (Leon Hanrahan, CFO) Construction constraints mainly impacted apartment projects, leading to some being put on hold. However, builder availability and pricing have improved, allowing us to prepare for launches in FY25. We expect these projects to contribute more significantly in FY26 and beyond.
Q: Can you elaborate on the expected gross margin for FY25 and how it compares to previous years?
A: (Leon Hanrahan, CFO) For FY25, we expect overall group gross margins in the mid-20s, with potential growth. WA portfolio margins have expanded, but some projects, like the Melbourne project, may drag on margins. Year-to-year product mix can impact overall group margin.
Q: What are the key factors driving your confidence in achieving the 10% profit growth target for FY25?
A: (Nathan Blackburne, Managing Director) Key factors include strong price growth in WA and Queensland, a significant land portfolio selling well, and the anticipated return to viability of apartment projects. We have a robust pipeline and are confident in our ability to deliver growth.
Q: How do you plan to manage the supply constraints and ensure timely project delivery?
A: (Leon Hanrahan, CFO) We are focusing on house and land packages, which are performing well. We are also preparing apartment projects for launch as builder availability improves. Our diversified portfolio and strategic partnerships help us manage supply constraints effectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
