Residential property developer and builder AVJennings has announced an interim net profit of $39 million — a continued good sign for the Australian property market.
AVJennings Managing Director, Louis Milkovits, said that for the first half year ending 30 September 2003 the Company had achieved after tax profits of $39.0 million compared with $20.4 million for the previous corresponding period.
This reflects a massive increase of 91.3% on corresponding figures for the same period last year.
Turnover increased by 18.5% to $300.5 million and operating profit before tax increased by 92.1% to $55.8 million.
Milkovits said the proportionately higher growth in profit compared to revenue, arose due to a greater proportion of sales having been development products, including land only sales, rather than home building contracts. This is consistent with the Company’s focus of developing and building on its own housing estates.
AVJ will pay a fully franked interim dividend of 3.5 cents per share, which is an increase of 16.7% compared to the dividend paid for the first half last year.
Mr Milkovits said that both higher levels of retained earnings and debt funding had been used to increase the Company’s development activities which have flowed through to higher profitability.
AVJ intends to target a debt to equity ratio of about 50%, although this may increase or decrease due to the timing of projects.
AVJ’s developable land holdings now stand at some 7,860 lots compared to some 6,650 lots six months ago.
At present sales rates, AVJ’s land holdings are sufficient for over three and a half years and the Company endeavours to ensure that its land inventories are replenished at higher levels than the utilisation rate. It has been successful in doing this over a number of years, Milkovits disclosed.
Urban redevelopment sites continue to comprise about 50% of the Company’s developable land inventory by value, however the Company has made significant investments in broad acre subdivision sites, particularly in Victoria.
While New South Wales continues to be the major profit contributor and all regions have shown strong growth, the growth in Victoria has been particularly strong, consistent with the Company’s high levels of investment activity in that state in recent years.
The Company’s primary market continues to be second and subsequent home buyers. This group continues to remain very active and the Company has been able to sell most of its land, and land with housing, prior to the completion of the development.
Milkovits concluded by saying that the Company holds sufficient project housing sales and presales of its development products for a satisfactory second half.
“The longer term outlook is primarily dependent on the Company being able to maintain and increase its inventory of developable allotments. To date, the Company has been quite successful in this regard,” Milkovits says.
