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Retirement home operator Arvida reports strong FY19 earnings lift

Tuesday 28th May 2019

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Arvida Group is reporting a 17 percent increase in underlying profit after tax of $38.6 million for the year to March 31, citing new retirement villages acquired in previous years and higher resales of vacated units at higher margins as the main contributors to the result.

The underlying profit measure gives a truer picture of operating performance than the statutory net profit after tax measure, which includes property portfolio revaluations and showed a 3 percent increase on the previous financial year to record net profit of $59.1 million.

Total revenue from care and village service fees, deferred managed fees and other revenue rose 15 percent to $152.4 million, while portfolio valuation rose by $46.4 million, compared with $42 million the year before, taking the total asset value to $1.3 billion, an increase of 15 percent on the previous year, giving an implied net asset value per share of $1.38.

Arvida shares rose 0.8 percent to $1.31 after the earnings announcement to the NZX this morning as the company announced an increased final ordinary dividend for the final quarter of 1.45 cents per share, taking full-year dividends to 5.35 cents to reflect what chairman Peter Wilson described as "the strong momentum evident in the business". The dividend is due in shareholders' hands on June 20, with a record date of June 12.

Total income on an NPAT reporting basis of $202.2 million was up 13 percent on the previous year, and operating cashflows also rose strongly, up 28 percent to $69.1 million.

Wilson said he expected "further earnings growth in the coming year" but noted several headwinds.

These were principally the additional cost of higher wages for retirement sector staff, who are predominantly women and are receiving a boost through a recent, historic pay equity settlement and the impact of a softer residential property market in Auckland and Christchurch, which he said was "extending settlement timeframes".

The company had assessed "a number of acquisition opportunities" in the last financial year but had not moved on any of them as Arvida seeks a combination of criteria including location, quality, current management, potential for development, and earnings accretion.

"Our ability to acquire and integrate well provide access to immediate cashflows and new brownfield development opportunities," said chief executive Bill McDonald.


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