AVJ toughens up & bounces back

AVJENNINGS has bounced back from the red to record a pre-tax profit of $8.8 million for the six month period ended December 2007.

This compared to the company’s six month period ended September 2006 of a pre-tax loss of $3.3 million.

During the period, AVJ booked a net profit after tax of $6.1 million for the year compared to net loss of $2.4 million a year ago.

The profit result was underpinned by revenue rising 25% to $265.4 million compared to $212.4 million.

AVJ’s managing director Louis Milkovits said the growth in the company’s performance is largely attributable to the strengthening of the market in Queensland and Victoria.

He said the results were achieved, despite the continuation of the downturn in New South Wales, particularly on the Sydney urban fringe where market activity has been at an all time low.

“The result was also influenced by the company’s two apartment projects under construction in the inner Sydney suburbs of Cammeray and Killara not yet reaching revenue recognition stage, despite pre-sales being achieved and construction being well advanced,” he added.

Meanwhile, Milkovits said contract building contributed negatively to the result due to inadequate performance of the Victorian operations over the period and low volumes of contract building sales in NSW.

But Milkovits said contract building operations have been restructured and this division is expected to improve performance.

During the period, contract signings were $313.8 million, up 24.4% from $252.3 million. However, revenue recognised in the accounts for that period was $265.4 million. The balance will be recognised in subsequent reporting periods.

Milkovits said current financial half-year margins have remained in line as margins continue to be a major issue due to state and local government charges on greenfield residential developments, particularly in NSW.

But he added, recent price growth in QLD and Victoria is likely to result in improved margins in future periods.

“There is an expectation that the NSW market will improve significantly due to the major imbalance between available housing and underlying demand.

“The company is well positioned to benefit from such an improvement,” he added.

During the period, the company grew its land bank by 40% to some 10,500 developable lots compared to some 7,500 a year ago.

And in light of the company’s strategy to increase its developable land inventory and the current investment opportunities available, the directors have decided not to declare an interim dividend.

AVJ shares closed 3 cents lower at 85 cents.

Australian Property Journal