Why is the CVC Limited (ASX:CVC) share price sinking today?

The investment company is under pressure after issuing a profit guidance and several business updates.

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The CVC Limited (ASX: CVC) share price is down today. At the time of writing, shares in the investment company are trading for $1.95 – down 2.01%. By comparison, the S&P/ASX All Ordinaries Index (ASX: XAO) is 0.19% higher.

The company comes into focus after issuing a profit guidance and several business updates.

Let's take a closer look at today's announcement.

CVC share price edges lower

In a statement to the ASX, CVC Limited gave the following updates.

Profit guidance

CVC is forecasting a net profit after tax of $21–$23 million for the year ended 30 June 2021. In the prior corresponding period, the company made a $2.1 million loss. CVC stated that the forecasted profit includes a "significant proportion of unrealised gains, approximately 50%, arising from the revaluation of long-term investments held by CVC."

In its half-year report, the company posted a net profit after tax of $15.7 million. Today's announcement would mean profits for the second half of the financial year are down by approximately 50%.

Business updates

In today's statement, CVC also highlighted its portfolio investment "is now significantly more weighted to property focused investments."

It provided a number of property-related updates, including:

  • A property in East Bentleigh, Victoria, which CVC has a 50% stake in, has been rezoned from industrial use to mixed residential, retail, and commercial use. The property has now been revalued upwards to $67.3 million – adding $13 million in pre-tax profit for FY21.
  • A property in Donnybrook, Victoria, which CVC has a 49% interest in, is on the brink of being approved. Formal approval is now with the state minister for planning, and the area is expected to be rezoned.
  • A property in Liverpool, NSW, which CVC owns a 66% stake in, has had planning approval from Liverpool City Council and is now in the hands of the NSW Department of Planning.
  • A Bunnings Warehouse has been approved for development at a 60% owned property of CVCs in Caboolture, Queensland. Construction of shopping centre at the site should commence within FY22.

CVC share price snapshot

Over the past 12 months, the CVC share price has increased 39.3%. The company was hit hard by the COVID market sell-off of March 2020, losing 53.9% of its value in the space of two and a half months.

Its recovery since then has been steady but it has still not reached its pre-pandemic levels.

CVC has a market capitalisation of $228 million.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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