VILLA WORLD JOINS PROPERTY PROFIT RUSH

HOUSING developer Villa World (ASX:VLW) has joined the profit rush across the property sector by posting a record $33.7 million profit for FY16.

The result, up 32 per cent from last year, was underscored by an underlying pre-tax profit of $47.2 million which exceeded the company's forecasts and delivered on a strategy that CEO Craig Treasure says has worked for Villa World for the past 30 years.

"The really pleasing thing for me is that this result comes from our core business of affordable houses and land in growth corridors," he says. "It's sticking to that discipline and doing more of that proven formula."

The bottom-line result would have been better except for higher tax costs after Villa World chewed up its remaining unused tax losses during the year.

The record profit is accompanied by a lift in final dividend to 10c a share, bringing the full-year payout to 18c.

The result has been built through a sustained focus by Villa World on the Queensland market where it has invested heavily through acquisitions.

Queensland represents 67 per cent of the company's development portfolio of 5937 lots, followed by Victoria at 32 per cent.

However, Treasure says there are plans to build Villa World's presence in NSW through joint-venture partnerships with land owners.

"We first flagged this with the market last year because the greatest tool to managing risk is to have geographic diversity across all states," he says.

"But land in NSW is very expensive, so our preference in Sydney is to partner with people who own the land and we are well advanced on starting that plan."

Treasure says the ideal mix for Villa World is to generate 40 per cent of sales each from Queensland and Victoria and 20 per cent from NSW.

Villa World's revenue surged 20 per cent to $387 million in FY16, with Queensland accounting for the lion's share of about 74 per cent. Victoria made up the balance.

"The Queensland market has been a steady performer," says Treasure.

"There have been no big price lifts here. It's been a gradually improving market and that's the market we like. Victoria is stronger because of population growth."

Treasure says until recently he has not credited record low interest rates as a factor driving sales in Queensland.

"I was of the view that it was more about jobs, but the last few cuts are stirring people into doing things. Queensland has also benefitted from the $20,000 grant for first home buyers and affordability compared to NSW and Victoria.

"The Gold Coast is also one of the strongest spots in Queensland at the moment."

Villa World has ramped up its activities on the Gold Coast, with three projects in train, including the 25ha Arundel Springs development at Arundel which will be released to the market later this year.

"We are selling strongly at Parkside Coomera and there is a high level of anticipation for Arundel," says Treasure.

"We are also getting strong interest and inquiries at Jacobs Well (Seabright) and it's coming from a broad range of people, from first homebuyers to people downsizing."

Villa World has started FY17 on the fly, with 464 sale contracts carried forward worth $165.6 million.

It recorded 1185 sales in FY16, almost triple sales of three years ago. The company's development portfolio of 5937 lots represents about five years' supply at current sales rates.

Villa World topped up its south-east Queensland portfolio this past year, acquiring 2139 lots, and the company has forecast after-tax profit growth of at least 5 per cent in FY17 to $35.4 million.

Villa World's rising fortunes are reflected in the company's share price, which has risen about 20 per cent over the past month. They last traded at $2.45.

The property sector has been buoyed by strong results in the current reporting season, with Mirvac (ASX:MGR) this week posting a record $1.03 billion bottom-line profit, up 69 per cent.

Stockland (ASX:SGP) also posted an $889 million profit today, driven by record property settlements.