Half-year profit down for retirement village operator Arvida, but unit values rising
Tuesday, 24 November 2020
Large retirement village operator Arvida has posted an almost $42 million half-year profit helped by a booming residential property market.
However, it is 7 per cent down on the previous 2019 half-year profit of $45m with higher operating costs brought by protecting its 4750 residents and 2600 staff from the Covid-19 virus during April to July.
The company said its profit result for the six months to September 30, 2020 was helped by a lift in the value of its retirement units, reversing some of the reductions in value applied earlier this year because of the expected negative impact of Covid-19.
Retirement units rose in value by $37.7m in the six months to September 30, 2020, more than the $35.3m in the same period in 2019.
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“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 chief executive Bill McDonald said.
The residential property market had rebounded strongly from the uncertain outlook prevailing in March and led to a revision of key assumptions applied by the independent valuers in a desktop review of Arvida retirement villages, he said.
Its underlying profit of $20.5m, excluding the rise in property values, was down $2.9m on the $23.4m in the 2019 half-year.
No positive Covid-19 cases were recorded among the residents or staff, he said.
Additional costs were about $5m for personal protective equipment (PPE), 24-hour security, increased cleaning procedures and additional hourly rates for frontline care staff between April and June.
Government subsidies totalling $2m had been accessed, mainly through rest home relief and essential worker subsidies.
The company received $400,000 wage subsidy for construction and café workers. During the lockdown periods all personnel were retained on full rates or increased rates in care centres.
Arvida settled $79.2m sales of occupation right agreements during the period, comprising $42.5m of resales and $36.7m of new sales.
The first six weeks of the half-year were impacted by the lockdown. Through levels 4 and 3 normal sales and marketing tasks, such as co-ordinating open homes and conducting settlements, were not possible.
The pandemic had prompted some elderly people to bring forward decisions about entering a retirement village. Arvida was receiving increased sales enquiries.
Average resale prices were 3 per cent higher than the pricing independently assessed by valuers at March 31, 2020, highlighting sustained momentum in the property market, McDonald said.
The total value of Arvida’s assets grew to $2 billion, up $118m from the start of the 2021 financial year, reflecting the increase in the value of the units and development capital expenditure in the half-year.
Forty-eight new units were delivered in the first half across four villages. The company was on track to deliver 199 in the second half of the 2021 year, above what it said earlier.
There had been some construction delays and supply line disruption from lockdown, but no impact was expected to the development programme at the current alert level.
Arvida was looking at a retail bond issue to replace a portion of its bank debt with investor debt.
While Covid had presented significant risk to Arvida and the aged care sector in general, business conditions were normalising, McDonald said.