This article is from the Australian Property Journal archive
RESIDENTIAL developer AVJennings reported a weaker full year profit due largely to the combination of drought, bushfires and coronavirus pandemic.
Profit after tax fell to $9.0 million in FY20 from $16.4 million in FY19 and revenue declined 11.5% to $262.4 million following lower settlement volumes (down 14.7% to 827 lots). Land and housing revenue increased to 4.9% to $246.4 million but apartment revenue decreased by 76.8% to $13.2 million. Given the FY20 earnings results the company did not declare a final dividend for FY20.
CEO Peter Summers said FY20 presented unforeseen challenges including drought, bushfires and a global pandemic.
“As we entered FY20, we were confident of a recovery in the Australian market, particularly in Victoria and New South Wales. This was slower to materialise than hoped, with early signs of recovery in late calendar year 2019 subdued by the bushfires which impacted consumer confidence and attendances at sales offices as people stayed indoors due to poor air quality.
“The early months of 2020 did see growing momentum and results started to strengthen just as the first stage of the pandemic hit, draining the last three and a half months of FY20 of their anticipated strong finish,”
The FY20 result also includes an increase in inventory loss provisions of $1.6 million relating to regional projects in Queensland and South Australia.
Summers said as a response to pandemic-induced uncertainty, the company sharply wound back physical production in early March to conserve cash, although production continued for those projects necessary to facilitate settlements of existing presales.
Work in progress was down year-on-year to 1,117 lots (30 June 2019: 1,600 lots), however, planning and design work continued largely unabated, leaving the company well placed to resume physical works in key locations as government stimulus measures were introduced and buyer confidence began to return.
“Enquiry levels and contract signings strengthened in the period leading up to 30 June, as government support and stimulus measures, such as HomeBuilder and state government stamp duty and other measures were announced, with net contract signings in March, April, May and June of 57, 51, 86 and 97 respectively.
“There is short term uncertainty and volatility, but we are encouraged by recent contract signings and schemes such as HomeBuilder. A total of 385 contracts were carried over at 30 June 2020, with a further 76 contracts signed in July 2020,” he added.
Summers said net migration is a key driver of underlying housing demand and whilst this will be a challenge in the short term, the company anticipates it is likely to recover strongly when international borders reopen.
