This article is from the Australian Property Journal archive
Takeover target AVJennings reported a lower profit in the first half but is expecting significant revenue and earnings skew to the second half.
AVJ reported a net profit after tax of $2.4 million, down 13.2% from $2.8 million in the previous corresponding period.
During the period the company settled 325 lots, representing a 20% increase on the 270 lots in the pcp. Revenue grew by 9% to $131.4 million, driven by a significant increase in apartment settlements.
Gross margin was 22%, a decline compared 26% due to a greater number of apartment settlements, overall cost escalation. Contract signings decreased 22% to 228 lots, impacted by both macroeconomic factors.
CEO Philip Kearns said variable conditions across the market are likely to remain until the impact of the interest rate cutting cycle in Australia takes hold.
As at 31 December 2024, the company had 164 unconditional contracts on hand, valued at $62 million, nearly all of which are expected to settle within FY25.
“Land and built-form enquiry levels were slightly lower than in 2H24, influenced by limited completed stock availability. However, enquiry levels remain a key indicator of market confidence and have the potential to strengthen in coming months with the commencement of the Australian rate-cutting cycle and more built form being brought to market. Interest in built-form housing continues to grow, reflecting strong demand for AVJennings’ turnkey housing solutions.
“Given the ongoing due diligence process underway with Proprium Capital Partners and AVID Property Group jointly (AVID), and Ho Bee Land Limited (HBL) both having made Non-Binding Indicative Offers (NBIO) for AVJennings shares, the Board felt it prudent to await the outcome of the due diligence process and the finalisation of the proposed offer terms, structure and documentation prior to considering any 1H25 dividend. While the exclusivity period for both parties expired on 21 February 2025, AVJennings remains in active discussions with both parties as they continue to conduct due diligence to pursue a binding proposal,” he added.
The company has 951 lots currently under development. Over 60% are current and future built-form housing. As at 31 December 2024, 174 completed lots were available for sale, with over 80% located in Victoria due to ongoing market challenges. 12% of the pipeline is activated, up from 11% a year ago.
Kearns said macroeconomic indicators for the residential property market are becoming increasingly positive, with factors such as the commencement of the interest rate cutting cycle in Australia and New Zealand, low unemployment, government-led planning reforms, and a growing supply shortfall supporting future market conditions.
“Despite this, segmentation across regional markets is expected to persist throughout FY25. Queensland and South Australia are expected to continue to outperform, while recovery in New South Wales, Victoria, and New Zealand may be impacted by affordability and investment constraints. The recent commencement of interest rate cuts in New Zealand has already led to improved buyer sentiment, with similar trends anticipated in Australia following the recently announced interest rate cuts.
“Our expectations for a significant revenue and earnings skew to the second half of FY25 remain with ongoing risks related to recovery in the Victorian and New Zealand markets and achieving timely full production within the Pro9 factory.
“The second-half skew is a result of an increased proportion of built-form housing settlements compared to the prior year and the ramp up in built-form construction commencements as markets improved, as well as the delayed commissioning of the Australian Pro9 factory. FY25 gross margin (%) is expected to be down on FY24 due to the greater settlement skew towards apartments and built-form housing.” Kearns concluded.
