AVJennings has triumphed over Australia's tough residential property market booking a solid net profit of result of $11.2 million for the 12 months to June 30 up from an annualised result of $9.7 million in FY07.
Last year the company adopted the Australian financial year reporting system and had booked a net profit of $12.2 million for the 15 months to June 30 2007.
In the 12 months to June 30 2008, AVJennings increased its revenue from $505.8 million a year ago to $517.8 million.
A reserved chief executive Louis Milkovits told Australian Property Journal he had anticipated stronger profit results but acknowledged the combination of levies, taxes, stamp duty and successive interest rate rises has kept a lid on residential property market.
“Never less in the second half of year the business performance was inline with the first half,” he added.
Milkovits said
“The NSW housing environment has been at particularly low levels for a prolonged period due to the compound effects of taxes, protracted approval processes and interest rate rises. These factors are structural in character and, other than possibly interest rates, unlikely to change in the short term,” he continued. “Imbedded levies, taxes and charges in NSW now account for $200,000 in a $550,000 house and land package. The state has the lowest level of activity in 70 years,”
On the other hand,
And in
During the 12 month period, contracts signed totalled $570.0 million compared to $559.0 million, also up is the number to 3,022 from 2,877. And the company’s margins increased to 19.4% from 19.0% in 2007.
AVJennings increased its total assets during the year, from $528.7 million to $581.6 million and increased developable lots from some 7,600 to 10,800. as a result, debt to total assets ratio increased from 22.6% to 28.9% and the company’s net interest bearing debt at June 30 2008 was $168.0 million up from the $119.2 million in 2007.
Milkovits said NSW continues to be plagued by planning red tape. For example, it can take up to a year for the Council to approve the design of a house which AVJennings has built over a hundred times in the same area.
He welcomed the NSW Treasurer Michael Costa’s recent comments about abolishing stamp duty as part of the Federal ‘root and branch’ reform review.
“If stamp duty is abolished it will be an immense step forward and will provide the state with much needed boost and it will not only benefit AVJennings but other residential property developers too,”
On commercial front, AVJennings has one project in a joint venture with Ashe Morgan Winthrop for an office and retail development at Sydney Olympic Park. Milkovits said there is no doubt of the sell ability or lease ability of the project as it is located in a highly sought after area.
Looking ahead, he said the company is well positioned for growth.
“AVJennings’ business model has cyclical earnings prospects… The current environment has been particularly difficult for the sector, however a cyclical turnaround is inevitable, as has always been the case.
“Whilst short term issues such as affordability, purchaser confidence and investor activity can cause more volatile short term cycles, long term prospects for residential property development are strongly linked to underlying supply and demand.
“The company has continued to pursue a growth strategy which has seen its development pipeline increase to some 10,800 lots (or equivalents) from some 7,600 a year ago. A significant proportion of this increase has been by way of development agreements with minimal upfront investment. The increase in its developments pipeline positions the company well for the next growth cycle in the housing sector,” he continued.
Milkovits said the key to stronger result in the year ahead would be the easing of interest rates.
“Interest rates in
“Interest rate rises are a crude and rough tool to slow down the economy.
“Let’s face it, what has been driving economic growth in country is the resource boom state of
“Yet the Reserve Bank keeps raising interest rates which go about punishing the eastern seaboard of
The company has declared a fully franked final dividend of 2.0 cents per share taking the final dividend to 3 cents for the year.
AVJennings shares closed unchanged at 72.5 cents.
Australian Property Journal
