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Arvida lifts annual profit 7%, shares rise to 10-month high

Tuesday 29th May 2018

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Arvida Group, the retirement village company that listed in 2014, increased annual profit 7 percent after expanding its business and lifting margins. Its shares hit a 10-month high.

Net profit rose to $57.6 million in the 12 months ended March 31, from $53.7 million a year earlier, the Auckland-based company said in a statement. The latest earnings included a $41.2 million unrealised lift in the value of its investment properties, ahead of the $39.3 million gain booked the previous year. Revenue rose 30 percent to $132.3 million.

Underlying profit, which excludes changes in property values and other one-time items, increased 43 percent to $33 million.

Arvida is expanding its aged care portfolio, which extends from independent living to full rest home, hospital and dementia-level care, as it seeks to benefit from increased demand from an ageing population. It notes that by the middle of the century, one in four New Zealanders is expected to be aged 65 or over and the number of people aged over 85 years will triple. 

In the latest year, Arvida raised $77 million to buy three villages, which it says have been successfully integrated and performed above budget, taking its total villages to 29 and broadening its reach across the country. It delivered 97 new units across six villages during the year, and expects to deliver 111 new units this financial year. The company says it has further developments in train, and is currently progressing eight brownfield sites and one greenfield site.

"We have a sizeable development pipeline that includes the addition of nearly 1,100 units/beds to be completed over the next six years," said chief executive Bill McDonald. "This represents a 30 percent increase in our current portfolio. Most of this activity is to occur within existing villages where we have the opportunity to enhance our offering and better utilise capacity."

Its shares rose 2.3 percent to $1.32 in early trading, the highest level since July 2017. 

Arvida said it benefited from $41.7 million in gross proceeds from the settlement of 79 new unit sales over the past year, with the average value per new sale up 20 percent to $528,000. Its development margin lifted to 19 percent, from 17 percent a year earlier, and it said it expects to capture additional construction margin and increase its project oversight by bringing contractor functions in-house.

The company sold 295 occupation rights over the past year, 49 percent ahead of the year earlier. It processed 216 resales during the year, up 30 percent on the year earlier, with the average value per resale up 13 percent to $310,000. Its resale margin lifted to 20 percent from 19 percent.

Arvida will pay a fourth quarter dividend of 1.56 cents per share on June 21, comprising an ordinary dividend of 1.3 cents and a special dividend of 0.26 cents. That brings the total annual dividend to 5.01 cents per share, up from 4.45 cents the previous year. The company said the lift in the regular dividend paid for the fourth quarter is sustainable for FY19 with momentum in revenue and earnings continuing whilst retaining balance sheet capacity to fund its current development pipeline.

The company said it is monitoring the property sector outlook with house price growth slowing and construction market remaining tight, and will retain timing flexibility on its development pipeline.

It said its $150 million debt facility is split evenly between two tranches with expiry dates of June 2020 and June 2022 and it is negotiating an extension to the bank debt facility limit and tenure.


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