Arvida's first-half net profit dips on lower portfolio valuation

Arvida Group, the retirement village company that listed in 2014, reported a decline in first-half profit on lower valuation gains and higher employee costs after a pay equity deal.

Net profit fell to $14.5 million in the six months ended Sept. 30 from $19.4 million a year earlier. The result included an $8.9 million valuation gain on its investment properties from a $14.3 million gain a year earlier as the property market shows signs of slowing after several years of solid growth.

"Whilst we have seen a period of substantial and sustained house price appreciation across New Zealand, there are now signs of some slowing in house price growth, particularly in Auckland," the company said. Still, "it is our view the drivers of demand and the supply constraints on housing will remain and will not materially change in the near term." To date, it hadn't experienced any material lengthening in settlement time or unit pricing weakness.

Expenses were higher at $51.7 million versus $39.4 million a year earlier, largely due to 32 percent jump in employee costs. Arvida noted that increased employee costs from the introduction of pay equity rates were largely offset by increased funding from government and private sources. "However, we expect higher-than-anticipated employee costs will continue," it said.

Total revenue was $60 million, a $13.1 million increase on the prior corresponding period, and continued to be underpinned by growth in care fees, which represent more than 70 percent of total revenue. Underlying profit, an earnings measure that excludes changes in property values, increased 29 percent to $12.4 million and included $5.7 million of gains, $5.2 million from resales of 98 existing units and $500,000 from the sale of three new units.

The company declared a dividend of 1.15 cents per share for the September quarter, with a Dec. 7 record date, payable on Dec. 15.

It offered no specific guidance but said momentum in earnings is on track to deliver a strong full-year result.

Arvida's 29 villages comprise 1,752 retirement units and 1,748 care beds.

The stock last traded at $1.17 and has gained 2.8 percent over the past 12 months.

(BusinessDesk)