ARV - Arvida Retirement Villages

**Oliver Mander** · 26-05-2020, 09:20 AM

Originally Posted by bull....

this is the real story going forward not the out dated good results before covid

Financial outcomes of Covid-19 will impact FY2021. The key impacts in FY2020 were in relation to ORA sales where a number of settlements were either deferred or cancelled.

“For Arvida, the effects of the containment measures required and the disruption to sales and construction activities, may have a negative impact on the Group’s FY2021 operational costs, sales volumes, sales margins and earnings,” Mr Wilson said.

“The decline in earnings is also expected to lead to a decrease in free cash flow in FY2021 compared to the previous year. The Group is in a strong financial position and is positioned well for the opportunities and challenges that lie ahead.”

I think that is all 'priced in' bull. No surprise to anyone, and certainly no different to any of the 5 listed operators. Referring back to my own commentaries, its pretty clear that SUM firms more exposed to 'development' activity as a source of their NPAT will take a harder hit. I still believe resales will be impacted also by a drop in value, albeit to a lesser extent. Fortunately for ARV (and RYM, although they are pricier shares), they have a nice 'balance' between development, resales and care.

**bull....** · 26-05-2020, 09:22 AM

Originally Posted by SylvesterCat

I think that is all 'priced in' bull. No surprise to anyone, and certainly no different to any of the 5 listed operators. Referring back to my own commentaries, its pretty clear that SUM firms more exposed to 'development' activity as a source of their NPAT will take a harder hit. I still believe resales will be impacted also by a drop in value, albeit to a lesser extent. Fortunately for ARV (and RYM, although they are pricier shares), they have a nice 'balance' between development, resales and care.

why i agree with alot of what you say i cannot agree on all priced in comment. the uncertainty of covid impacting business is evident in director comments about the future

**Oliver Mander** · 26-05-2020, 09:29 AM

Originally Posted by bull....

why i agree with alot of what you say i cannot agree on all priced in comment. the uncertainty of covid impacting business is evident in director comments about the future

You might be right. Let's see what happens today (I'll be curious as well!). The reason I think it's accounted for is because of the large share price falls across the sector as a whole, which seems to match up with the loss in resales/development income. Pre-trading looks remarkably unspectacular so far.

**Beagle** · 26-05-2020, 09:34 AM

"Financial outcomes of Covid-19 will impact FY2021. The key impacts in FY2020 were in relation to ORA sales where a number of settlements were either deferred or cancelled".

Good result for the year, no question about that. I noted this as an interesting contrast with the presentation last week from Earl Gasparich CEO of OCA wherein he confirmed there had been no cancellations of contracts for OCA.

Nevertheless I think the result announced was a very good one.

**Oliver Mander** · 26-05-2020, 09:44 AM

Originally Posted by Beagle

"Financial outcomes of Covid-19 will impact FY2021. The key impacts in FY2020 were in relation to ORA sales where a number of settlements were either deferred or cancelled".

Good result for the year, no question about that. I noted this as an interesting contrast with the presentation last week from Earl Gasparich CEO of OCA wherein he confirmed there had been no cancellations of contracts for OCA.

Nevertheless I think the result announced was a very good one.

Have just dug into it a bit deeper and run my numbers. Tend to agree Beagle.
The thing that struck me was that even though they have reduced their development expectations for 2021 FY (from 250 to 220 units), they are still projecting AHEAD of what they delivered in 2020FY. That would be a spectacular outcome in context, and one that I (personally) don't necessarily expect this year.

Should say I own this share.

**Beagle** · 26-05-2020, 10:09 AM

I should have dug a bit deeper before putting up an opinion.

Underlying profit on an eps basis was up just 10%. CAGR of underlying eps for the last 5 years was 14%, slower than MET at 15% but in line with RYM at 14%.

Development margin was 18%, not really that good and nothing like what RYM and SUM have historically been achieving.

I think the result is okay, not good or bad. I grade it a C. In terms of relative value to OCA and MET, I see them as considerably more attractive opportunities and I already have enough in this sector so I will continue to leave this one to others.

**Oliver Mander** · 26-05-2020, 10:18 AM

Saw the development margin also...think the saving grace on that is that they have other eggs in their basket; they are not solely reliant on it (like SUM others). It does seem to be increasing however, which is no bad thing.

The other metrics actually seemed ok to me...very happy with 10% eps growth and 14% CAGR!

**Beagle** · 26-05-2020, 11:20 AM

Yeah SUM have about 60% of their underlying profit dependent on development and with development numbers and margins under serious pressure that's going to really hurt regardless of whether they can sell the new units or not, (and we now have a track record of several years where they haven't been able to sell the numbers they've built).

Contrast that with ARV who are doing a good job of selling what they've built and development numbers are staying pretty strong. Was 18% in 2018...so I don't see the growth you refer too in the margin.