Genesis Reports 2013 Year End Results and Strategic Plan
CALGARY, March 28, 2014 /CNW/ - Genesis Land Development Corp. (TSX: GDC) (the "Corporation" or "Genesis") is pleased to report its financial and operating results for the three months and year ended December 31, 2013. We report our activities as two business segments: land development and home building. In addition, management and the Board of Directors ("Board") provide a summary of the recently adopted strategic plan, which will drive our future direction.
Our key financial results and operating data were as follows:
Three Months Ended
|($000s, except for per share items)||2013||2012(1)||2013||2012(1)|
|Key Financial Data|
|Gross margin, including impairment||2,353||(19,391)||9,847||9,051|
|Gross margin before impairment(3)||6,508||14,824||26,129||42,197|
|Gross margin percentage before impairment(3)||24.7%||25.8%||27.2%||32.6%|
|Net earnings (loss)(4) attributable to equity shareholders||4,980||(7,126)||5,713||8,861|
|Net earnings (loss) (4) per share - basic and diluted||0.11||(0.16)||0.13||0.20|
|Adjusted earnings per share - diluted(3),(5)||0.12||0.15||0.31||0.50|
|Cash flows from (used in) operating activities||94||(17,245)||53,473||(2,794)|
|Cash flows from (used in) operating activities per share(6)||-||(0.39)||1.19||(0.06)|
|Key Operating Data|
|Residential lots sold to third parties (units)||62||46||150||238|
|Residential lots sold through the home building business segment (units)||36||25||110||56|
|Development land sold (acres)||-||37.59||11.28||49.37|
|Average revenue per lot sold to third parties||154||184||171||184|
|Average revenue per acre||-||929||591||921|
|Homes sold (units)||42||34||164||91|
|Average revenue per home sold||396||409||387||433|
|Net new home orders (units)||54||37||189||152|
|As at December 31|
|Key Balance Sheet Data||2013||2012(1)|
|Cash and cash equivalents||17,678||10,005|
|Loans and credit facilities||50,373||97,224|
|Pre-tax net asset value per share(4)||7.18||7.23|
|Debt to total assets||16.1%||26.0%|
|(1)||The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements|
|(2)||Includes other revenues|
|(3)||Non-GAAP financial measure|
|(4)||Net of income tax expense|
|(5)||Before impairment related to equity shareholders and before proxy contest costs|
|(6)||Basic and diluted amounts per share|
- Improved cash flows from operations:
- Cash flows from (used in) operating activities for year ended December 31, 2013 were $53,473 or $1.19 per share compared to ($2,794) or ($0.06) per share in 2012.
- Accounts receivable decreased to $23,342 at December 31, 2013 from $73,239 at December 31, 2012 primarily due to the Sage Hill Crossing proceeds ($27,713) received in January 2013
- Improved management of balance sheet:
- Significantly reduced loans and credit facilities from $97,224 at December 31, 2012 to $50,373 at December 31, 2013.
- This was largely due to the proceeds from the sale of development land at Sage Hill Crossing and other cash flow from operating activities.
- Debt to total assets dropped by 10% to 16% for 2013 from 26% in 2012.
- Total interest expense was reduced by 34% to $3,771 in 2013 from $5,686 in 2012.
- Achieved turnaround in the home building business segment:
- This business segment achieving essentially a breakeven outcome for 2013.
- Sales volume increased by 80% to 164 units in 2013 from 91 units in 2012.
- Revenues increased to $63,570 from $39,497 for the year ended December 31, 2013 compared to 2012.
- A comprehensive and focused strategic plan is in place and we are executing related business plans focused on cash flow efficiency, effectiveness and a determined effort to close the gap between our net asset value and share value.
- The interests of the CEO and CFO are aligned with those of shareholders through a new compensation structure that includes an equity based incentive plan.
- Established a process to sell all non-core assets:
- Completed the sale of the largest portion for proceeds of $14,000 in February 2014.
- Remaining non-core assets represent only 3.3% of Genesis' land carrying value.
- Made significant progress on design and planning for the development of the Sage Hill Crossing mixed use development.
- Implemented comprehensive planning and controls:
- Established sophisticated planning and control policies, systems and procedures that affect all aspects of the organization from accounting, administration, compensation to governance.
- All aspects of the administrative infrastructure and systems have been reviewed and necessary changes made or pending.
- Home building sales and administrative infrastructure and systems are substantially in place to support our continued growth.
"We're extremely pleased with the achievements we made in 2013 and to date," said Bruce Rudichuk, President and Chief Executive Officer. "Many of these results show the substantial progress we made in 2013 and relate to the main areas of emphasis in our new strategic plan. While 2013 was transformative in that we focused on reviewing and reengineering the Corporation, we simultaneously delivered on a number of key initiatives to improve our business."
Alberta's general economic conditions continue to be strong, supporting expectations of a robust pace of activity in Calgary's home building industry throughout the balance of 2014. Solid economic fundamentals include low unemployment and interest rates, low and stable inflation rates, positive net migration to Alberta and above average earnings by Albertans. These market dynamics provide a continued healthy environment for development and growth of our core land positions, sale of lots and expansion of our home building activities.
We own a large portfolio of residential and mixed-use land, which is well positioned to benefit from the continued robust activity in the Alberta economy. Land values in Calgary are rising for both entitled land and home building lots, reflecting the tightening of entitled land supply and the continuing strong demand for homes in the Calgary Metropolitan Area.
We believe that 2014 is going to be a year of growth and profitability. We will continue to focus on our two core businesses of land development and home building in the Calgary Metropolitan Area, where our three primary residential communities continue to generate attractive earnings and cash flows. In addition to our residential strength, we own several major mixed-use land holdings in the greater Calgary area, which are expected to contribute future earnings and cash flows as the projects mature and sites are sold or developed.
In 2014, we anticipate additional profitability from the home building business segment as sales volume of home closings is expected to reach 230 units. Current and future developed lots will be primarily reserved for the home building business segment, thus capturing the construction as well as the lot margins. In addition, higher volumes, higher margins, established infrastructure and assured lot supply are predicted to assist us in achieving significant and recurring profits from this business in 2014 and beyond.
Due to the strong balance sheet at this time, Genesis has significant borrowing capacity to finance future land development and house construction. Further improvements will be undertaken to the balance sheet in 2014. Credit facilities are being renewed or arranged with leading lenders at substantially lower rates, resulting in a decrease from an average of 6.25% for 2012 to 5.83% for 2013. We believe we are underleveraged, and are evaluating how to increase leverage on a cost effective basis and use those funds while balancing growth with distributions to shareholders.
One of our major opportunities is to close the gap between our net asset value and share price. We are committed to improving shareholder communication, better explaining our assets, business and potential to the market to gain their understanding, trust and, eventually, the appropriate valuation.
Over the course of 2013, management and the Board developed a comprehensive strategic plan focused on building our existing land development and home building businesses to maximize shareholder value and position the platform for future growth. This plan will drive our focus and activities in 2014 and beyond. The plan's strategies are outlined as follows:
Build a Sustainable and Highly Profitable Home Building Business. Home building unit volume grew 80% from 91 homes sold in 2012 to 164 in 2013, and we are well-advanced in meeting our objective of growing this by a further 40% to 230 home closings in 2014. We have a strong production team and sufficient infrastructure to assist us in increasing home sales to 300 homes per year, improving net margin and profitability of the home building business segment as volume rises.
As volume in the home building business segment rises, we expect improvements in both gross and net margins as a result of more efficient use of our home building platform. The land business generates regular revenue from the sale of home building lots, which is a relatively predictable business in normal market conditions. As mixed-use sites mature and are sold, Genesis will generate large, but irregular, increases in earnings and cash flow. The timing of these sales depends on the progress of development for these large, mixed-use land positions.
Part of our strategy to increase growth and profitability is to use our developed lot supply primarily in our own home building business segment. This provides a reliable long-term supply of land to grow the home building business and enables us to capture additional margin from the sale of homes.
Grow Land Development Operations. We hold a valuable bank of residential land in our three primary communities in Airdrie, Calgary NE and Calgary NW, Alberta, which continues to fuel growth in our lot sales and home building business. Total residential lot sales are expected to grow by 7% from 260 lots (sold to third parties and used in our home building business segment) in 2013 to 277 lots in 2014. In addition, we are actively securing approvals and advancing development for our prime mixed-use land holdings at Sage Hill Crossing and North Conrich. These development lands represent some of the best located and developable mixed-use land in the Calgary Metropolitan Area.
Sell Non-core Assets. We have identified seven non-core properties that are either outside the Calgary Metropolitan Area or do not have development characteristics that fit within our core business. In order to more efficiently deploy our capital, we have decided to pursue the sale of these properties. We have largely met our short-term sale objectives with the sale of the first and largest of these properties in February 2014, and now have 98% of our real estate assets within the Calgary Metropolitan Area. The balance of the non-core properties is expected to be sold over the next 12 to 24 months. We continue to evaluate several other ancillary parcels to determine whether they fit into our long-term development and building program.
Simplify and Streamline the Organization. To provide cost savings and operating efficiencies, we are in the process of eliminating redundant and inefficient software systems. The implementation of a new accounting and operations software system is underway and planned to be fully operational in the third quarter of 2014. We will continue to examine our operations to identify future opportunities to improve efficiencies.
We are committed to improving communication with our shareholders and the market. Over the past year, we have substantially improved the quantity and quality of our public disclosure documents. In 2014, our shareholders can expect management to further increase its focus on investor communication through a variety of investor relations activities. We believe that better explaining our assets, business and potential to the market will help gain understanding, trust and, eventually, improved market valuation.
Focus on Financing Strategies. Genesis strengthened its balance sheet by reducing debt by $46,851 in 2013 (2012 - $8,993). Subsequent to the year end, Genesis' highest interest loan (excluding limited partnerships) was prime +2.5%. A comprehensive financing approach is intended to ensure the optimal allocation and use of our capital resources, and achieve a prudent capital structure and long-term returns. Our objective is to better match the term of financing with the underlying land asset as follows:
- Obtain the maximum amount of financing available for land servicing and home building, which is generally at a lower rate due to the nature of the assets' short-term earnings potential and lower risk; and
- Finance long term land with equity, except in certain cases when acquisition financing is obtained from a vendor or other advantageous sources.
Create Liquidity for Shareholders. In management's opinion, Genesis' share price does not currently reflect the underlying net asset value of the Corporation. In order to help reduce this significant gap and improve trading liquidity of our common shares, we will be considering various alternatives for the return of capital to shareholders. Any strategy would be implemented if, and when, appropriate with sufficient cash flow being retained to sustain and grow earnings over the long-term.
Capitalize on New Opportunities. We actively identify and evaluate potential land acquisitions to sustain and grow the land development and home building businesses in the Calgary Metropolitan Area. We plan to create a strategy to enter the multi-family home building business in order to benefit from our large land base and a multi-year supply. In addition, our multi-use development projects present significant opportunities to extend our development capabilities and enter into joint venture arrangements to capitalize on potential profitable commercial opportunities.
"We're excited about moving forward with execution of our strategic plan," said Bruce Rudichuk, President and Chief Executive Officer. "We have the strategic direction approved by the Board, assets, team and ability to translate our actions into improved results and growth. I believe the combination of all of these factors will result in a good year for Genesis and its stakeholders."
The information contained in this release should be read in conjunction with the consolidated financial statements for the year ended December 31, 2013 and 2012, the related Management's Discussion and Analysis dated March 28, 2014 ("MD&A"), and the Annual Information Form dated March 28, 2014, which have been filed with Canadian securities regulatory authorities. Copies of these documents may be obtained via www.sedar.com or our website at www.genesisland.com.
2013 Year End Conference Call
Genesis will host a conference call and web cast on Monday, March 31, 2014 at 7:00 a.m. MDT (9:00 a.m. EDT) to discuss the Corporation's 2013 financial and operating results. The format of the call will be as a question and answer session for analysts and investors after a brief summary of results and strategy. To participate in the conference call, please contact the conference operator ten minutes prior to the call at 1-888-390-0546 or 1-416-764-8688. To participate in the web cast, please visit: www.genesisland.com. The web cast will be archived two hours after the presentation at the websites listed above for 90 days. For a replay of this call, please dial: 1-888-390-0541 or 1-416-764-8677 and enter access code 873233# until April 18, 2014.
Genesis is an integrated, award-winning land developer and residential homebuilder, creating innovative and successful communities in the Calgary Metropolitan Area. Genesis is committed to supporting its communities through partnerships like the Genesis Centre of Community Wellness and Genesis Place Recreational Centre. Genesis owns a large portfolio of entitled residential and mixed-use land, which is exceptionally well positioned to benefit from the continued robust activity in the Alberta economy. The Corporation's common shares are listed on the Toronto Stock Exchange (TSX: GDC).
Non-GAAP Financial Measures
Net asset value, gross margin before impairment, adjusted earnings per share, and net earnings attributable to equity shareholders are non-GAAP measures that do not have any standardized meaning as prescribed by IFRS and therefore they may not be comparable to similarly titled measures reported by other companies. These non-GAAP measures have been described and presented in this news release in order to provide shareholders and potential investors with additional information regarding the Corporation's performance, liquidity and value. Additional information on these measures and reconciliations can be found in the MD&A.
Cautionary Statement Regarding Forward-Looking Information
This news release contains certain statements which constitute forward-looking statements or information ("forward-looking statements") within the meaning of applicable securities legislation, including Canadian Securities Administrators' National Instrument 51-102 'Continuous Disclosure Obligations', concerning the business, operations and financial performance and condition of Genesis.
Forward-looking statements include, but are not limited to, statements with respect to the nature of development lands held and the anticipated inventory and development potential of such lands, ability to bring new developments to market, anticipated general economic and industry conditions in 2014 including low unemployment and interest rates, low stable inflation rates, positive net migration, petroleum commodity prices and above average earnings in Alberta and the anticipated impact on Genesis' development and home building activities, the positive trend in the general economic conditions and the industry through 2014; the future development of raw lands held by LPLP 2007 which were annexed by the City of Airdrie in 2012; Genesis' business strategy, including the geographic focus of its activities in 2014, the expected capital contribution of future earnings and cash flow from land holdings in the Greater Calgary area, the ability to meet the objective to increase the closing of home builds in 2014 as compared to 2013, including the ability to significantly increase home builds per year without substantial addition to costs to our production team or infrastructure so as to increase the effect on net margin and profitability, the timing and operation of new accounting and operating software, anticipated areas of focus for Genesis in 2014; and the ability of Genesis to develop projects (and the nature of such projects). Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Although Genesis believes that the anticipated future results, performance or achievements expressed or implied by the forward-looking statements are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements because they involve assumptions, known and unknown risks, uncertainties and other factors many of which are beyond the Corporation's control, which may cause the actual results, performance or achievements of Genesis to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements. Accordingly, Genesis cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements.
Factors that could cause actual results to differ materially from those set forth in the forward-looking statements include, but are not limited to: the impact or unanticipated impact of general economic conditions in Canada, the United States and globally; the impact of contractual arrangements and incurred obligations on future operations and liquidity; local real estate conditions, including the development of properties in close proximity to Genesis' properties; timely leasing of newly-developed properties and re-leasing of occupied square footage upon expiration; dependence on tenants' financial condition; the uncertainties of real estate development and acquisition activity; the ability to effectively integrate acquisitions; fluctuations in interest rates; ability to raise capital on favourable terms; the impact of newly-adopted accounting principles on Genesis' accounting policies and on period-to-period comparisons of financial results; not realizing on the anticipated benefits from transactions or not realizing on such anticipated benefits within the expected time frame; and other risks and factors described from time to time in the documents filed by Genesis with the securities regulators in Canada available at www.sedar.com, including the MD&A under the heading "Risks and Uncertainties" and the Annual Information Form under the heading "Risk Factors". Furthermore, the forward-looking statements contained in this news release are made as of the date of the news release and, except as required by applicable law, Genesis does not undertake any obligation to publicly update or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise.
Caution should be exercised in the evaluation and use of the appraisal results. The appraisal is an estimate of market value at specific dates and not a precise measure of value, being based on subjective comparison of related activity taking place in the real estate market. The appraisal is based on various assumptions of future expectations and while the appraiser's assumptions are considered to be reasonable at the current time, some of the assumptions may not materialize or may differ materially from actual experience in the future.
SOURCE Genesis Land Development Corp.For further information:
Bruce Rudichuk, President & Chief Executive Officer
Mark Scott, Executive Vice-President & Chief Financial Officer
7315 - 8 Street NE Calgary AB T2E 8A2
P: 403-265-8079 TF: 800-341-7211 F: 403-266-0746