- Net Profit After Tax: $139 million, up 69% from the prior period.
- Increase in Fair Value of Investment Properties: $165 million.
- Underlying Profit: Down from $88 million to $85 million.
- Operating EBITDA: Up from $84 million to $95 million.
- Total Assets: Increased by 12% to $4.2 billion.
- Embedded Value: Increased by 11% to $1.3 billion.
- Operating Cash Flow: $144 million, compared to $148 million last year.
- Gearing: Ended the year at 33.9%.
- Net Tangible Assets Per Share: Increased from $1.90 to $2.5.
- Earnings Per Share: $11.7 per share.
- Resales Revenue: $74 million.
- New Sales Revenue: $28 million.
- Service Packages Revenue: Increased by 25%.
- Weekly Fees for New Residents: Up 12% on average across the group.
- Development CapEx: Reduced to $90 million from $127 million in the first half.
- Sale of Strathallan Village: $30 million.
- Revenue Growth: 11% for the year.
- Operating Costs: Increased to $241 million.
- Employee Costs: Up due to increased care suite operations and support office investment.
- Interest Expense: Increased to $28 million.
- Resale Units: 414 units with total income of $249 million.
- New Sale Units: 218 units with total value of $178 million.
- Average Price Per Unit: $816,000.
- Embedded Value Per Share: $1.72 per share.
- Units Delivered in FY24: 201 units.
- Total Debt: $780 million with gearing at 33.9%.
Release Date: May 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Arvida Group Ltd (NS) (NZSE:ARV, Financial) recorded a $139 million net profit after tax, up 69% from the prior period.
- Total assets increased by 12% to $4.2 billion, and embedded value rose by 11% to $1.3 billion.
- Operating EBITDA increased from $84 million to $95 million, indicating improved operational performance.
- Record sales performance with $74 million from resales and $28 million from new sales despite a challenging property market.
- Successful repositioning of debt facilities to align with future business operations, providing financial flexibility.
Negative Points
- Underlying profit decreased slightly from $88 million to $85 million.
- Gearing ended the year at 33.9%, approaching the upper end of the company's target range of 35% to 25%.
- Operating costs increased to $241 million, driven by higher employee costs, insurance, and food expenses.
- Interest expense rose to $28 million, impacting underlying profit.
- The dividend has been suspended while the company undergoes a value recognition program, which may concern some investors.
Q & A Highlights
Q: Can you describe the engagement on various capital partnerships and restructuring options?
A: The Board has appointed advisers to assess external options, including capital partnerships where Arvida might sell a majority position but retain management rights. Other options include restructuring the business, potentially through mergers or splitting into separate entities, or even a full sale of the company. All options are on the table to recognize value.
Q: What is the timeframe for the $200 million core debt reduction initiatives?
A: The majority of these initiatives are expected to be completed within 12 months, though some may take longer. The plan includes proceeds from the sale of Strathallan, suspending the dividend, capturing deferred resale settlements, resolving a business interruption claim, reducing resale stock levels, and recycling surplus land.
Q: Are the $10 million OpEx savings dominated by village-level savings or head office, and are they expensed or capitalized?
A: Most savings are within the workforce, with about 5% related to capitalizable costs. The indexing of weekly fees for new residents is expected to be in place by the end of September.
Q: How will care suite conversions be treated from a margin perspective?
A: The price at which care suites are sold will be deducted by the amount spent on upgrading the unit. There is no incoming value or holding value of the units reflected in the care weekly fee amount.
Q: Can you provide more details on the investment property under construction and development land?
A: The largest projects include the Queenstown Karen apartments and Bethlehem Shores. Costs are capitalized for direct employment related to development, but not for travel or ancillary expenses. The feasibility of projects like Lincoln shows positive total project cash returns.
Q: What is the expected trend for net debt over the next 12 months?
A: The goal is to reduce net debt, with new sales cash flow expected to exceed development CapEx. The company aims to be cash flow positive across entire projects.
Q: What are the expected operational cost growth and savings for FY25?
A: Operational cost growth will be mixed due to factors like the sale of Strathallan and the opening of Queenstown. There will be ongoing cost pressures from council rates, insurance, and wage rates, but efforts are being made to pull back on operational costs where possible.
Q: How do current new sales and pricing trends compare to last year?
A: New sales are ahead of last year's slow start. The company aims for a 3% to 4% increase in unit pricing on the existing book, compared to a 4.7% increase last year. The 3% to 4% increase is like-for-like based on end-of-year valuations.
Q: What is the timing for the value recognition program?
A: The timing is uncertain, but it will be a topic of discussion at the annual meeting in August. The timeframe will depend on the progress and direction of the initiatives.
Q: What are the expected savings from new rostering in the second half?
A: The company aims to capture $3 million to $4 million of the $10 million total savings in the second half of the year, with the full savings expected by the end of September.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
