Announcement
HALFYR: ARV: Arvida Reports NPAT of $42 million
08:36am
ARV
24/11/2020 08:36
HALFYR
PRICE SENSITIVE
REL: 0836 HRS Arvida Group Limited
HALFYR: ARV: Arvida Reports NPAT of $42 million
NZX listed retirement village and aged care operator Arvida Group Limited
reported unaudited net profit of $41.8 million for the six months ended 30
September 2020.
IFRS profit included a fair value movement on investment property of $37.7
million relative to $35.3 million in the first half of the prior year. The
fair value increase reflected an improvement in unit prices and the partial
reversal of Covid-related assumptions applied at year end by the independent
valuers CBRE Limited and Jones Lang LaSalle Limited.
Arvida CEO Mr Bill McDonald said the residential property market had
rebounded strongly from the uncertain outlook prevailing at year end and led
to a revision of key assumptions applied by the independent valuers in a
desktop review of our retirement villages.
Business Performance
Strong underlying business performance was recorded with an 8% increase in
revenue for the six month period to $86.2 million and a 74% increase in
operating cash flow to $52.9 million.
Underlying Profit of $20.5 million was reported for the period, down $2.9
million on the $23.4 million reported in the same period in the prior
financial year. Mr McDonald said a number of Covid-related factors had
impacted bottom line financial performance in the period.
"As an essential service additional costs were incurred to maintain
Covid-free and safe communities for our residents. We have been successful in
remaining Covid-free having had no positive cases recorded amongst our 4,750
residents or 2,600 staff."
Bill McDonald estimated $5 million of one-off operating costs were incurred
in the April to June period. The additional costs were incurred maintaining
personal protective equipment (PPE) inventory, 24-hour security, increased
cleaning procedures and additional hourly rates for frontline care staff.
Costs substantially normalised in July.
Government subsidies totalling $2.0 million had been accessed, mainly through
rest home relief and essential worker subsidies. A total of $0.4 million was
accessed from the Government's wage subsidy scheme for construction and cafe
workers. During the lockdown periods, all personnel were retained on full
rates or increased rates in care centres.
Sales Activity
Arvida settled $79.2 million sales of occupation right agreements during the
period, comprising $42.5 million of resales and $36.7 million of new sales.
The first six weeks of the period was impacted by the Covid-19 lockdown.
Through levels 4 and 3 normal sales and marketing tasks, such as
co-ordinating open homes and conducting settlements, were not possible. At
level 2 and as restrictions were gradually removed, the sales team was once
again able to operate. The level of sales enquiry and activity steadily
increased as restrictions were removed.
"The average age of people entering a village is in the vicinity of 80 years.
For many, the coronavirus pandemic has brought forward decision making about
their next home and ensuring it meets their needs. We are seeing increased
sales enquiry for our safe communities and from those looking to stay
connected - or becoming more connected - as a key part to healthy living in
their retirement."
Average resale prices were 3% above the pricing independently assessed by our
valuers at 31 March 2020, highlighting sustained momentum in the property
market. This continued to support strong margins across the portfolio.
Financial Position
The total value of Arvida's assets grew to $2.0 billion, up $118 million from
the start of the 2021 financial year. This primarily reflected the fair value
increase of the villages and development capital expenditure invested over
the period.
In April 2020, Arvida increased its bank facility limit to $475 million to
secure additional development funding capacity. Net bank debt at 30 September
2020 was $350 million, maintaining a prudent gearing level of 32% measured on
a net debt to net debt plus equity basis.
Arvida is exploring a potential retail bond issue to replace a portion of its
bank debt and provide diversity of funding and tenor. The timing of a
potential issue is subject to market conditions.
Development Milestones
A total of 48 new units were delivered in the first half across four sites.
Mr McDonald confirmed Arvida was on track to deliver a further 199 new units
in the second half and 247 new units for the year. This target is above the
development guidance provided of constructing over 200 new units annually.
Some construction delays and supply line disruption had resulted from
lockdown measures, but no impact is expected to the development programme at
the current alert level.
The future development pipeline includes 1,574 units and beds with over 200
new units to be delivered annually by Arvida in coming financial years.
Development Updates
Construction of new care suite facilities at Aria Bay in Auckland and Copper
Crest in Tauranga are progressing to early new year target completion dates.
A pre-launch marketing campaign held at Copper Crest had been very well
received by residents and has led to receipt of transfer applications
already.
"Provision of care is core to our proposition. It provides residents with the
confidence that care services are available at a flexible needs-based level
as they age."
"All our care centres have three or four-year Ministry of Health
certification, with 21 of 25 attaining the gold-standard four-year
certification. Total care occupancy was 95% across all care centres at
September, and in our latest survey of staff 95% confirmed they were
determined to give their best effort at work each day. This is key to the
high quality of care we provide."
Similar care suite developments are planned for Bethlehem Shores, Lauriston
Park, Queenstown Country Club and Waimea Plains.
Development activity at the villages acquired in FY20 continued to expand
with 37 new villas targeted for FY21 delivery across Bethlehem Country Club,
Bethlehem Shores and Queenstown Country Club. Sales enquiry continues to be
very strong for these retirement villages.
Mr McDonald announced construction of the next stage of 20 villas at Waimea
Plains had commenced, adding to the 63 villas already completed. Only 13 of
the 25 villas released late September remain available for sale.
"Waimea Plains is our first greenfield development and is proving to be
incredibly successful with the local Richmond community. We partnered with
local and international architects to design a fresh approach to retirement
living that focuses on an outward-looking, interactive layout to create
vibrancy and connection into the wider community."
"Recently we received resource consents for our second greenfield development
to commence in Kerikeri. We are excited to bring this same innovative design
concept to a new community," said McDonald.
Plans at Arvida's new village in Kerikeri, which has been named Te Puna
Waiora, include building 200 villas, a care centre and multiple community
facilities. Construction of the first stage of 16 villas has commenced.
Index Inclusion
Arvida has expanded rapidly since listing in December 2014 to become one of
New Zealand's larger owner, operator and developers of aged care and
retirement living. Arvida is a member of the NZX 50 Index, the FTSE Small Cap
Index and was recently included in the Refinitiv Top 100 Diversity &
Inclusion Index. This Index ranks over 7,000 companies globally and
identifies the top 100 publicly traded companies with the most diverse and
inclusive workplaces. Arvida was the only New Zealand company to be included
in the Index, joining many well-known global companies and brands such as
Vodafone, Sony, Singapore Airlines, Johnson & Johnson and Coca Cola.
On 1 December 2020 Arvida will also be added to the MSCI New Zealand Index.
Dividend
In August, the Board set the level of the first quarter dividend on the
expected earnings for the first half of the financial year. It was
anticipated the first half would include a period of disruption to business
operations and sales activities.
A dividend of 1.20 cents per share was declared for the September quarter to
be paid on 10 December 2020, bringing the total dividend for the half to 2.40
cents per share. The dividend payout for the first half represented 63% of
Underlying Profit, in line with Arvida's dividend distribution policy.
Dividend guidance for the second half will be provided in February.
Outlook
Covid-19 has presented significant risk for Arvida and the aged care sector
broadly. The commitment and contributions of staff over the last six months
has enabled the safe navigation of the coronavirus pandemic. The Board wishes
to recognise the very important contribution of all staff in achieving this
outcome.
Additional costs have been incurred in continuing to operate as an essential
service. Normal business activities including sales and construction
activities have been disrupted through periods where national containment
restrictions were in place. Outside of these periods, business operations
have substantially normalised.
While the Board continues to see significant economic uncertainty in the
short term, continued buoyancy in the property market, high care occupancy
and an underlying positive organisational culture position Arvida well for
continued financial performance.
- ENDS -
For more information, please contact:
Bill McDonald, Chief Executive Officer, Arvida Group Limited
Tel: +64 21 270 3669 or email: bill.mcdonald@arvida.co.nz
Jeremy Nicoll, Chief Financial Officer, Arvida Group Limited
Tel: +64 21 403 665 or email: jeremy.nicoll@arvida.co.nz
End CA:00363779 For:ARV Type:HALFYR Time:2020-11-24 08:36:01
Click here
to view related attachments.
