Write-off dents profit for home builder AVJennings
Buffeted by challenging market conditions, home builder AVJennings paid the price for the termination of an option on a mega subdivision north of Brisbane with profit before tax plunging 95 per cent in the 2024 financial year.
The 92-year-old company declared a profit after tax of $1.02m, down 96 per cent, with the termination of its option in relation to the Rocksberg project in Caboolture, Queensland, costing AVJennings $17.8m in capitalised development expenses and payments to reimburse the landowners’ transaction costs.
The termination of the option associated with the Rocksberg project also reduced lots under its control by 3500. This, in conjunction with no new acquisitions during the year, has resulted in the pipeline of lots under control reducing to 9871. AVJennings has 1062 lots under development; more than 50 per cent of those relate to current and intended future built-form homes.
AVJennings chief executive Phil Kearns said the company’s strategic decisions in FY24 focused on improving the quality and future profitability of its portfolio. “Our decision to terminate the Rocksberg option, sell the Glenrowan (Queensland) project and other (undeveloped) sites across the portfolio, highlights our commitment to prudent capital management and recycling of capital,” he said. “Decisions and progress made in FY24 demonstrate our commitment to achieving long-term growth and operational excellence while mitigating the effects of operating in challenging market conditions.”
Revenue grew 12 per cent to $319.7m in FY24 while gross margin decreased 18 per cent to $74.3m compared with $90.8m in FY23. Normalised profit before tax fell by 44 per cent to $19.4m.
Inquiries rose by 12 per cent over FY24. A total of 874 lots was settled in FY24 and 584 of these settlements related to retail lots. Key retail contributors to FY24 settlements were Waterline, Lyndarum North and Aspect in Victoria; Eyre in South Australia; and Riverton and Cadence in Queensland, with an overall skew towards land settlements.
Contract signings increased by 139 per cent to 830 lots, valued at $269m. AVJennings declared no final dividend and no new acquisitions in FY24. The company said it expected FY25 revenue to be “roughly in line” with the previous year.
“AVJennings notes the market’s supply and demand imbalance, and lead indicators which are slowly improving,” it said. “Southeast Queensland is expected to continue to be the company’s strongest market in the near term. Other regions, especially Victoria and New Zealand, remain challenging.” Its shares closed 1c lower at 28c.