STRONG SIGNS FOR RESIDENTIAL DEVELOPERS: TREASURE

STRONG SIGNS FOR RESIDENTIAL DEVELOPERS: TREASURE

VILLA World Group (ASX:VLW) has almost doubled its first half pre-tax profit expectations in the space of a month.

Managing director Craig Treasure says the upgrade, from $5 million to $9.4 million is primarily driven by the timing of sales into unconditional status, but there is no doubt the company is benefiting from a boom in the sector.

Last month the company reported predicted Net Profit before Tax of between $17.5 and $19.5 million for FY14, compared to a Statutory Net Loss after Tax of $13.5 million for the previous financial year - an increase of up to 74 per cent against Underlying Operating Profit Before Tax of $11.2 million in FY13.

“You will see we have made a series of announcements and we had very strong sales for the past six months, and it was gradually building in the six months prior to that,” says Treasure.

“Things are very strong in our sector. We have done 50 sales in December, and 474 in the first half, which is just under 80 sales per month.

“In the previous year we were doing about 42 a month, so we have almost doubled what our previous sales rate had been.”

The company also notes completions are running ahead of schedule and improved net realisation values, particularly at the Eynesbury project.

The movement of sales into the first half gives the company an even distribution of profits between the first and second half of this year, where it still holds a full year FY14 guidance of Net Profit before Tax of between $17.5 million - $19.5 million.

A combination of low interest rates, first home buyers grants and increased consumer confidence is driving the market revival.

“It is very strong and I can’t see any reason for that to change as the fundamentals driving our sector ... aren’t likely to change; the first home buyers grant will stay, interest rates are likely to remain unchanged and the biggest one of all of them, consumer confidence, has been increasing very consistently in our sector since the election,” says Treasure.

“Last year in our sales offices people would come in, and six or eight weeks later some would buy and some would decide not to buy, whereas now they are coming in and buying within two to three weeks, there is a whole different sense of interest out there.
“Our sales are coming across the board, 14 projects in three states and nowhere in those three states is the market quiet.”

Despite the good results, Treasure is remaining cautious, noting the volatility of the industry and the deep hole from which residential building is emerging.

The company intends to recommence payment of dividends with an interim dividend expected to be declared for 1H14 and paid in April 2014.

The Company recorded 50 sales worth $20 million in December, bringing the total sales for 1H14 to 474 worth $177.6million.

Restocking remains a priority for the Company. In December 2013, the company acquired three sites in Melbourne, adding 348 residential lots.

Since July 2012 five site acquisitions have been made and settled adding 579 lots to the development pipeline.

VLW is trading up 2.17 per cent at $1.88 per unit this morning.

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