VILLA WORLD SEES DANGER IN TARGETED TAX REFORM
Written on the 17 February 2016 by Nick Nichols
PROPOSED changes to negative gearing could be a positive for Gold Coast housing developer Villa World, but CEO Craig Treasure has warned against taking a narrow focus when it comes to tax reform.
The company, which this year celebrates 30 years as a listed company, has delivered a bumper net profit of $20.4 million for the December half, up 47 per cent on a year earlier.
The result has been built on a strategic move by company three years ago to its home market of Queensland after a heavy concentration on Victoria in previous years.
According to Treasure, the current talk surrounding negative gearing will have minimal effect on the company's business with only about 20 per cent of sales going to investors.
However, he the property veteran voiced general concern that tinkering with the tax regime could be counter-productive in the long term.
"Since its introduction, negative gearing has been responsible for the creation of a lot of housing stock in this country, including affordable housing," Treasure says.
While Labor's proposal to restrict negative gearing to new properties would benefit Villa World, he says past experience shows that targeted measures such as these could have broader, unintended ramifications.
"We would not support a narrow focus on tax reform in the property sector; reform should be more broadly based than that," he says.
Treasure's comments followed the release of the company's interim results today which showed strong momentum in the company's housing development business across Victoria and Queensland.
More specifically, it revealed the underlying strength of the Queensland market, particularly Brisbane's northside and bayside, where the company achieved 80 per cent of its sales during the period. Treasure expects this to dip to 70 per cent in the current half-year.
Villa World's core housing development business secured 550 settlements in the December half, up from 329 a year earlier.
This led to a 49 per cent increase in revenue for the half year to $200.2 million, with higher gross margins boosting the company's operating result.
Sales also tracked higher in the half-year, with 497 recorded over 19 projects in Queensland and Victoria.
The pace of sales has risen to 83 per month from 59 per month in the previous corresponding period. This is expected to rise further as the company delivers another seven projects to the market this financial year.
Villa World has reaffirmed its target of achieving between 1000 and 1200 sales in FY16.
"The latest result sets our framework for strong growth in2017 where we are continuing to deliver strong shareholder value," says Treasure.
"With this result we're celebrating 30 years as a listed company, but the real important thing is the lessons we have learnt in that time and how we are applying it to our business."
Treasure says while Villa World is happy to be heavily invested in Queensland at the moment, the company has not lost sight of the need to diversify.
"We need to be more diversified across the east coast and we are gradually moving to that position. We will be replenishing in Queensland, growing in Victoria and re-establishing in Sydney."
Treasure says Villa World plans to push into the Sydney market through partnerships and joint-venture agreements.
The latest half-year result was boosted by the prolonged settlement of the Eynesbury project in Victoria to the Hyde Group. This landed Villa World a share of a $3.6 million windfall from the deal.
Author: Nick Nichols