AVJennings awaits the return of confidence to house and land buyers
By Jonathan Chancellor Thursday, 28 February 2013
The home builder AVJennings has posted a $19.1 million loss for the first half of the 2013 financial year compared to a $3.3 million profit a year ago. But it has advised that consumer confidence remains the key issue and until there was a positive change, market conditions will continue to remain challenging.
The value of its residential projects has had a 5.3% cut, slashing $16 million from its result.
Total lots under control sits at 10,581 for the group whose history stems back to 1932 when "proud old builder" Albert Jennings founded Australia's most famous house building company which is now publicly listed.
Almost 80% of the impairments related to its troubled Queensland projects.
"The Queensland market has still not recovered to the extent previously expected by either the company, its competitors or most industry forecasters," the chief executive Peter Summers said.
"Until relatively recently Queensland prices, particularly in the lower and middle segments, were high by historical levels compared to Sydney and Melbourne.
"This is no longer the case and the Queensland markets in which the company operates are now priced at, or even below, historical levels and overall fundamentals are quite strong.
"Unfortunately, Queensland has suffered in recent times from many issues such as the effects of floods, lower population growth, the impact on tourism from the high Australian dollar and recent softening in the
mining sector. This has impacted on consumer confidence, probably to an even greater extent than many other areas in Australia," he said.
But the main reduction in revenue occurred in Victoria.
"The Victorian market was overheated during 2010/11 and conditions have since softened considerably.
"Revenues declined by $31.8 million for the reporting period from December 2011 figures, however, margins on Victorian projects remain acceptable and sales performance over the December 2012 and January 2013 period improved and indicate that market conditions in Victoria appear to have stabilised."
The company cut the value of a Victorian project, noting that the downturn in that state had "required a more aggressive pricing structure" on the project.
It also cut the value of its Cobbitty, NSW project where bureaucratic red tape had been costly, according to the market update. AVJennings owns 43 hectares of residential-zoned land at Cobbity, in Sydney's south-west, where it hoped 470 lots could be developed.
Mr Summers said the development status of AVJennings’ two main projects in South Australia should see improved performance in the short term. The St Clair project is now entering a significant stage of maturity and sales activity is increasing accordingly. The Eyre (Penfield) project is just underway with the first stage including a substantial display village comprising 8 contract builders and 20 display homes.
Revenue fell from $92.2 million in the prior corresponding period to $52.9 million, which the company attributed to "reduced completed inventory and softer Victorian market conditions".
"Residential property market conditions during the reporting period were adversely affected by weak consumer confidence which has subsisted for some time now," Peter Summers said.
"There are signs that some markets are starting to improve although this is taking time to translate into transactions."
"Consumer confidence remains the key issue and until there is a positive change, market conditions will continue to remain challenging."
