CALGARY, Nov. 6, 2019 /CNW/ - Genesis Land
Development Corp. (TSX: GDC) (the "Corporation" or "Genesis")
reported its financial and operating results for the three months
("Q3") and nine months ("YTD") ended September 30, 2019. Genesis is a land
developer and residential home builder operating in the
Calgary Metropolitan Area ("CMA"),
holding and developing a significant portfolio of well-located,
entitled and unentitled residential, commercial and mixed-use lands
and serviced lots in the CMA.
2019 Q3 Highlights:
- The CMA housing market remains subdued, with the Calgary Real
Estate Board reporting that the benchmark home price had declined
5% since September 30, 2018.
Nonetheless, Genesis ended Q3 with a backlog of 61 new home orders,
up from a backlog of 37 new home orders a year earlier. New home
orders for the nine months ended September
30, 2019 were 112 units, compared to 95 units for the same
period in 2018.
- This subdued housing market resulted in lower 2019 lot and home
volumes for Genesis, significantly reducing revenues and earnings.
YTD net earnings were also negatively impacted by the decrease in
the Alberta corporate income rate
from 12% to 8%, which resulted in a $1.4
million write down of deferred income tax assets which had
been previously recognized by Genesis.
- This environment has created opportunities for favourable land
acquisitions. In September 2019,
Genesis closed the purchase of 130 acres of future residential
development land in north Calgary
for $23.7 million. Upon completion of
development, the community is expected to include over 800
single-family homes and approximately 7 acres of multi-family and
commercial sites. The purchase was paid for by way of a cash
payment of $5.1 million and an
$18.6 million vendor-take-back
mortgage, bearing interest at the rate of 5% per annum and is
repayable in two installments of $9.3
million, one in each of May
2021 and May 2022. Genesis
continues to actively seek opportunistic acquisition opportunities
while maintaining a strong balance sheet.
- After this land acquisition, Genesis maintained a solid cash
position ($9.0 million in cash and
cash equivalents as at September 30,
2019) and a prudent debt level ($36.8
million in loans and credit facilities as at September 30, 2019) being 13% of total
assets.
Selected financial results and operating data:
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
($000s, except for
per share items or unless otherwise noted)
|
2019
|
2018
|
2019
|
2018
|
Key Financial
Data
|
|
|
|
|
Total
revenues
|
12,786
|
27,178
|
42,016
|
60,502
|
Net earnings
attributable to equity shareholders
|
300
|
539
|
17
|
1,766
|
Net earnings per
share - basic and diluted
|
0.01
|
0.01
|
0.00
|
0.04
|
Cash flows (used in)
from operating activities
|
(10,076)
|
7,694
|
(282)
|
7,555
|
Cash flows (used in)
from operating activities per share - basic and
diluted
|
(0.24)
|
0.18
|
(0.01)
|
0.18
|
Key Operating
Data
|
|
|
|
|
Land
Development
|
|
|
|
|
Total residential
lots sold (units)
|
27
|
42
|
97
|
143
|
Residential lot
revenues
|
4,911
|
7,574
|
16,841
|
25,166
|
|
|
|
|
|
Home
Building
|
|
|
|
|
Homes sold
(units)
|
26
|
32
|
85
|
89
|
Revenues
(1)
|
12,623
|
13,816
|
39,195
|
38,080
|
Outstanding new home
orders at period end (units)
|
|
|
61
|
37
|
(1)
|
Includes revenues
of $4,748,000 for 26 lots in Q3 2019 and $14,020,000 for 85 lots in
YTD 2019 purchased by the Home Building division from the Land
Development division ($4,710,000 and 32 in Q3 2018; $13,242,000 and
89 in YTD 2018) and sold with the home. These amounts are
eliminated on consolidation.
|
($000s, except for
per share items or unless otherwise noted)
|
As at Sept. 30,
2019
|
As at Dec.
31,
2018
|
Key Balance Sheet
Data
|
|
|
Cash and cash
equivalents
|
8,968
|
24,042
|
Total
assets
|
280,914
|
278,156
|
Loans and credit
facilities
|
36,762
|
31,696
|
Shareholders'
equity
|
192,220
|
191,970
|
Loans and credit
facilities (debt) to total assets
|
13%
|
11%
|
Net earnings attributable to equity shareholders in Q3 2019 was
$300,000 ($0.01 earnings per share - basic and diluted)
compared to net earnings attributable to equity shareholders of
$539,000 ($0.01 earnings per share - basic and diluted) in
Q3 2018. Net earnings attributable to equity shareholders in
YTD 2019 was $17,000 ($0.00 earnings per share - basic and diluted)
compared to net earnings attributable to equity shareholders of
$1,766,000 ($0.04 earnings per share - basic and diluted) in
YTD 2018.
No development or non-core land sales occurred in 2019 to
September 30, 2019, while
$10,498,000 was realized from two
land development parcels in the same period in 2018. As well, there
were much lower volumes of lots and homes sold in Q3 2019 and YTD
2019 than the 2018 comparative periods. These two factors explain
the revenue declines for these periods. Due to the lower sales,
direct cost of sales was also lower in Q3 2019 and YTD 2019.
Genesis is seeing the demand for presale homes increasing. The
Corporation ended the third quarter of 2019 with a backlog of 61
new home orders, up from a backlog of 37 new home orders a year
earlier. New home orders for the nine months ended September 30, 2019 were 112 units compared to 95
units for the same period in 2018.
On June 28, 2019, legislation was
enacted to decrease the Alberta
corporate income tax rate from 12% to 8% with a 1% reduction
effective July 1, 2019 and further 1%
reductions on each of January 1,
2020, 2021 and 2022. As a result, during the three months
ended June 30, 2019, deferred income
tax assets were reduced by $1,371,000, which was recognized as an increase
in deferred income tax expense. Increased income tax expense
resulted in Genesis' net income attributable to equity shareholders
in YTD 2019 declining.
Genesis' cash flows used in operating activities were
($10,076,000) or (($0.24) per share - basic and diluted) in Q3
2019, compared to cash flows from operating activities of
$7,694,000 ($0.18 per share - basic and diluted) in Q3 2018.
Cash flows from operating activities can vary considerably between
periods. The total change of $17,770,000 is a result of numerous factors
including (1) lower lot and home volumes; and (2) significant
one-time transactions including $5,101,000 of cash used in the Q3 2019 land
acquisition and the Q3 2018 cash proceeds of $10,249,000 from the sale of development land.
Genesis' cash flows used in operating activities were ($282,000) or (($0.01) per share - basic and diluted) in YTD
2019, compared to cash flows from operating activities of
$7,555,000 ($0.18 per share - basic and diluted) in YTD
2018.
Genesis had $8,968,000 in cash and
cash equivalents at September 30,
2019, compared to $24,042,000
as at December 31, 2018, with the
reduction primarily due to Genesis making an $8,000,000 payment on a vendor-take-back mortgage
payable in the first quarter of 2019, $6,951,000 in cash investments in land
development projects and the partial repayment of land project
servicing loans and housing project construction loans. Total loans
and credit facilities outstanding at September 30, 2019 were $36,762,000, (13% of the total book value of
assets) compared to $31,696,000 (11%
of the total book value of assets) at December 31, 2018.
Outlook
Genesis continues to implement its strategy focused on
developing its existing assets in a prudent manner, while taking
advantage of opportunities in the market to acquire additional land
positions. Genesis continues to actively market lots, parcels and
homes while controlling costs with the goal of maximizing cash flow
and maintaining its solid financial position, and actively pursues
servicing and zoning approvals to maximize the value of its land
holdings. Its strong land base, integrated approach, solid
financial position and experienced team positions Genesis to take
advantage of opportunities to acquire additional lands for future
residential development.
Additional Information
The information contained in this press release should be read
in conjunction with the unaudited condensed consolidated interim
financial statements for the three months and nine months ended
September 30, 2019 and 2018 and the
related Management's Discussion and Analysis ("MD&A") dated
November 6, 2019 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.
ADVISORIES
Cautionary Note Regarding Forward-Looking
Statements
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. 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", "seeks", "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
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.
Forward-looking statements are based on material factors or
assumptions made by us with respect to, among other things,
opportunities that may or may not be pursued by us; changes in the
real estate industry; fluctuations in the Canadian and Alberta economy; changes in the number of lots
sold and homes delivered per year; and changes in laws or
regulations or the interpretation or application of those laws and
regulations. Because forward-looking statements relate to
the future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of our control. The following table outlines
certain significant forward-looking statements contained in this
press release and factors that could cause actual results to differ
from such statements.
Forward-looking
statements in this news release include, but are not limited
to:
|
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 expected
completion dates of various projects that the Corporation is
currently engaged in;
|
•
|
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;
|
•
|
plans and
strategies surrounding the acquisition of additional
land;
|
•
|
the uncertainties
of real estate development and acquisition activity;
|
•
|
the future
residential development of land;
|
•
|
fluctuations in
interest rates;
|
•
|
anticipated
general economic and business conditions;
|
•
|
ability to access
and raise capital on favourable terms;
|
•
|
expectations for
lot and home prices;
|
•
|
not realizing on
the anticipated benefits from transactions or not
realizing
on such
anticipated benefits within the expected time frame;
|
•
|
construction
starts and completions;
|
•
|
the cyclicality of
the oil and gas industry;
|
•
|
the future impact
of marketing efforts;
|
•
|
changes in the
Canadian US dollar exchange rate;
|
•
|
future servicing
and zoning approvals;
|
•
|
labour
matters;
|
•
|
anticipated
expenditures on land development activities;
|
•
|
governmental
regulations;
|
•
|
the sales process
and construction margins;
|
•
|
general economic
and financial conditions;
|
•
|
the ability to
continue to renew or repay
financial
obligations; and
|
•
|
stock market
volatility; and
|
•
|
the availability
of excess cash on hand and its proposed use.
|
•
|
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 in the Corporation's MD&A under the
heading "Risks and Uncertainties" and the AIF under the heading
"Risk Factors".
|
Furthermore, the forward-looking statements contained in this
news release are made as of the date of this 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.
SOURCE Genesis Land Development Corp.