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LandMark White downgrades FY19 guidance on deteriorating conditions

FY19 EBITDA is expected to be 18.3% lower at $5.8 million.
share price arrow trending downwards
The change in trading conditions was related to the tighter regulation of credit

LandMark White Limited (ASX:LMW) has downgraded its FY19 earnings guidance last provided at its annual general meeting (AGM) in November 2018 by 17-18% citing tough market conditions.

The original FY19 guidance was based on the market outlook at the time and included preliminary assessments of the impact of the Taylor Byrne acquisition.

LandMark noted that changes in trading conditions combined with greater clarity of the impact of its acquisition of Taylor Byrne and review, by the board, of preliminary first-half results require a revision to the FY19 guidance previously provided.

The original FY19 guidance was for revenues of $56.8 million, EBITDA of $7.1 million, NPAT of $4.0 million and EPS of 4.8 cents.

The updated normalised full year FY19 guidance represents a 3.1% decline in revenue, 18.3% decline in EBITDA and 17.5% decline in NPAT.

Taylor Byrne acquisition completed October 1, 2018

On 9 October 2018, LandMark entered an agreement to purchase 100% of Taylor Byrne Holdings Pty Ltd.

Taylor Byrne is a valuation and property consultant firm with 25 offices across Queensland and New South Wales.

At the time the acquisition was set to increase LandMark’s revenues by 50% and further diversify its earnings generated from its Australia-wide branch network providing agricultural product and services.

Fall-out from banking royal commission blamed

LandMark said that during the December quarter it experienced a significant reduction in valuation instructions from the first-tier lenders.

This was a direct result of tighter regulation of credit from APRA as well as the adverse impact of the lenders reaction to the Banking Royal Commission.

The negative sentiment on housing prices across major centres also resulted in weaker loan volumes and hence valuation instructions.

Expecting a bounce back in activity

LandMark noted that in previous property cycles, it has seen similar periods of reduced valuation activity.

These are traditionally followed by a resurgence in sales-driven activity as buyers return to market seeking under-valued opportunities, or borrowers taking advantage of refinancing options.

It also noted that a sharper drop in property prices can lead to banks being more cautious and circumspect with their current lending portfolios, also leading to an increased demand for valuations.

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