Melcor Developments Ltd. (TSX:MRD), an Alberta-based real estate
development company, today reported strong results for the quarter
ended June 30, 2013. Revenue increased by 45% to $50.74 million in
the second quarter compared to Q2-12 and by 35% to $92.35 million
year-to-date. Melcor earned net income of $10.21 million or $0.34
per share (basic) in Q2-13, a decrease of 46% over Q2-12.
Year-to-date net income was $22.83 million, a decrease of 8% over
the first six months of 2012. The decline in net income is the
result of one-time costs relating to the formation of Melcor
REIT.
Adjusted earnings, which excludes REIT transaction costs and
unitholders' portion of earnings of the REIT, was $20.57 million in
the second quarter, an increase of 9% over Q2-12, and $33.19
million year-to-date, an increase of 34%. Management believes that
adjusted earnings provides a clearer measure of operational and
relative performance.
Funds from operations (FFO) was $0.21 per share in Q2-13
compared to $0.24 per share in Q2-12. Year- to-date FFO was $0.51
per share compared to $0.44 per share in the first six months of
2012. FFO per share adjusts for certain non-cash earnings items
included in income such as fair value adjustments on investment
properties, fair value adjustments on REIT units and stock based
compensation expense.
Brian Baker, Melcor's President and Chief Executive Officer
commented on the quarter: "We are pleased to report strong growth
in revenue, adjusted earnings and gross margin stability. All
operating divisions are performing well and we've had a productive
construction season to date. With strong leadership in all
divisions and a strategic supply of short- and long-term
development assets, we remain well positioned for continued growth
and success."
Second Quarter Highlights
-- Melcor achieved solid results in the first half of 2013:
-- Consolidated revenues of $50.74 million, up 45%; year-to-date
revenues of $92.35 million, up 35%
-- Adjusted basic earnings per share of $0.68 in the quarter and $1.10
year-to-date compared to $0.63 and $0.82 respectively in 2012. Basic
earnings per share were $0.34 in the quarter and $0.75 year to date.
Net income and earning per share were impacted by the formation of
Melcor REIT. Adjusted earnings per share provide a clearer measure
of operational and relative performance than basic earnings per
share as a result.
-- FFO of $0.21 per share in the quarter, down 13%; year-to-date FFO of
$0.51, up 16%
-- On May 1stwe formed Melcor REIT through an initial public offering which
raised gross proceeds of $83.00 million and on May 10th, 2013 the
underwriters exercised, in full, their over-allotment option for gross
proceeds of $8.30 million.
-- We declared and paid $7.66 million in semi-annual dividends and $15.33
million in special dividends.
-- Revenues were higher across all divisions in Q2-13 as a result of
increased activity and continued execution of Melcor's growth strategy.
-- The Community Development division sold 197 single-family lots (Q2-
12: 149), sold 7.37 acres for multi-family projects (Q2-12: 2.47)
and 5.11 acres for commercial and industrial use (Q2-12: 5.96). This
resulted in revenue growth of 49% to $32.19 million.
-- The Property Development division completed construction on 4
buildings in Q2-13 and recognized $1.43 million in fair value gains.
This compares to fair value gains of $1.06 million in Q2-12.
-- Leasing activity in the Investment Properties division was strong
with portfolio-wide occupancy rates rising to 96% compared to 86% in
Q2-12. This increase is a result of new leasing activity on two
commercial properties as well as the assets transferred from our
Property Development division in the last fiscal year at 100%
occupancy. Funds from operations grew 53% to $2.77 million in Q2-13.
-- Leasing activity in the properties owned by Melcor REIT was also
strong, with rental revenue increasing 9% over Q2-12 as a result of
increases in base rents and higher average occupancy in the quarter.
-- Subsequent to the quarter, Brian Baker assumed the role of Chief
Executive Officer of Melcor Developments Ltd.
Outlook
The majority of Melcor's business operations and assets remain
focused on Alberta. Alberta economic fundamentals remain strong,
with low unemployment rates, net in-migration, higher than the
national average weekly earnings, strong capital investment,
stabilizing inflation and relative stability in the price of oil.
These fundamentals create a favorable environment for both
residential and commercial property development.
The company continues its selective US expansion by increasing
its stable of residential rental properties, serviced lot inventory
and raw development land. These assets now comprise approximately
10% of the company's total assets in a strengthening real estate
market. With Melcor's inventory of raw and developed land,
financial resources and strong management group, the company is
well positioned to take advantage of market opportunities.
MD&A and Financial Statements
Melcor's consolidated financial statements and management's
discussion and analysis for the three- and six-months ended June
30, 2013 can be found on the company's website at www.Melcor.ca or
on SEDAR (www.sedar.com).
About Melcor Developments Ltd.
Melcor is a diversified real estate development and management
company with a rich heritage of integrity and innovation in real
estate since 1923.
Through four integrated operating divisions, Melcor manages the
full life cycle of real estate development: from acquiring raw
land, to community planning, to construction and development, to
managing leasable office, retail and residential sites. The company
develops and manages mixed-use residential communities, business
and industrial parks, office buildings, retail commercial centres
and golf courses.
Melcor's headquarters are located in Edmonton, Alberta, with
regional offices throughout Alberta and British Columbia. Company
developments span western Canada and the US. Melcor has been a
public company since 1968 and trades on the Toronto Stock Exchange
(TSX:MRD).
Forward Looking Statements
In order to provide our investors with an understanding of our
current results and future prospects, our public communications
often include written or verbal forward-looking statements.
Forward-looking statements are disclosures regarding possible
events, conditions, or results of operations that are based on
assumptions about future economic conditions, courses of action and
include future-oriented financial information.
This news release and other materials filed with the Canadian
securities regulators contain statements that are forward-looking.
These statements represent Melcor's intentions, plans,
expectations, and beliefs and are based on our experience and our
assessment of historical and future trends, and the application of
key assumptions relating to future events and circumstances.
Future-looking statements may involve, but are not limited to,
comments with respect to our strategic initiatives for 2013 and
beyond, future development plans and objectives, targets,
expectations of the real estate, financing and economic
environments, our financial condition or the results of or outlook
of our operations.
By their nature, forward-looking statements require assumptions
and involve risks and uncertainties related to the business and
general economic environment, many beyond our control. There is
significant risk that the predictions, forecasts, valuations,
conclusions or projections we make will not prove to be accurate
and that our actual results will be materially different from
targets, expectations, estimates or intentions expressed in
forward-looking statements. We caution readers of this document not
to place undue reliance on forward-looking statements. Assumptions
about the performance of the Canadian and US economies and how this
performance will affect Melcor's business are material factors we
consider in determining our forward-looking statements. For
additional information regarding material risks and assumptions,
please see the discussion under Business Environment and Risk in
our annual MD&A.
Readers should carefully consider these factors, as well as
other uncertainties and potential events, and the inherent
uncertainty of forward-looking statements. Except as may be
required by law, we do not undertake to update any forward-looking
statement, whether written or oral, made by the company or on its
behalf.
Contacts: Melcor Developments Ltd. Brian Baker Chief Executive
Officer 780.423.6931info@melcor.ca Melcor Developments Ltd.
Jonathan Chia, CA Chief Financial Officer
780.423.6931ir@melcor.ca
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