Villa World

About the author:

Author name:

By Scott Murdoch

Job title:

Senior Analyst

Date posted:

18 May 2015, 1:13 PM

Sectors Covered:

Diversified Financials, Professional Services

Villa World (VLW) has released updated FY15 guidance, which now includes a one-off provision of A$6.5m against the legacy Silverstone project. Revised guidance (including the provision) is slightly lower than previous guidance (NPBT A$26-28m vs A$28.5m previously), however on an underlying basis (adding back the provision) guidance assumes a 14-21% upgrade.

In our view, VLW's underlying guidance and result reflects the momentum the business is experiencing heading into the FY16 year and supports our positive view. The FY15 result includes a total of A$8.9m of provision for legacy issues which will not re-occur next year. Simplistically, adding this provision back to VLW's headline FY15 result (without factoring in growth) would result in an upgrade to our FY16 forecasts. We expect to make upgrades to FY16.

Today's announcement provides increased certainty on legacy issues and, more importantly, highlights the momentum being experienced in the business. We believe VLW is well placed to deliver into an improving QLD detached housing market over FY16/17, with positive market conditions and increased scale.

We maintain our Add recommendation.

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Disclaimer(s): Analyst owns shares.

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