AVJennings FY24 Financial Results Show Major Decline
AVJENNINGS LIMITED (AVJ) Share Update August 2024 Tuesday 27th
AVJennings Reports Significant Drop in FY24 Financial Results
AVJennings Limited (ASX: AVJ), a leading residential property developer, has reported a substantial decline in its financial results for the fiscal year 2024, reflecting challenging market conditions and strategic adjustments.
Instant Summary:
- Profit before tax fell by 95% to $1.6 million.
- Revenue increased by 12% to $320 million.
- Gross margin dropped by 8.5 percentage points to 23.2%.
- Retail settlement volumes decreased by 23%.
- Sales conversions increased by 44% compared to the prior corresponding period (PCP).
- No dividend declared for FY24.
Financial Performance
AVJennings reported a dramatic 95% decline in profit before tax (PBT), falling to $1.6 million from $34.7 million in the prior corresponding period (PCP). This significant drop is attributed to various market challenges and strategic capital management initiatives.
Revenue for FY24 saw a 12% increase, reaching $320 million. However, the gross margin decreased by 8.5 percentage points to 23.2%, impacted by ongoing cost pressures in most markets and a slowdown in New Zealand.
Operational Highlights
The company experienced a 23% decline in retail settlement volumes, with more value contributed from built-form products, which accounted for 63% of revenue compared to 44% in the PCP. Despite the lower settlement volumes, sales conversions showed a promising increase of 44%.
AVJennings also reported a 70% increase in retail contract signings, totaling 590, and a 12% rise in enquiries. The company secured $90 million in presales, although this was a 25% decrease from the PCP.
Strategic Initiatives
Throughout FY24, AVJennings undertook several strategic initiatives to improve its capital structure and operational efficiency. The company raised $30 million in equity and secured a $30 million increase to its Club facility, bringing the new limit to $330 million. Additionally, AVJennings divested non-core assets, including the Glenrowan project in Queensland, and terminated the Rocksberg option to redeploy funds into existing pipeline opportunities.
Pro9 Achievements
AVJennings made significant progress with its Pro9 joint venture, which focuses on prefabricated wall systems. The first domestically produced walls were manufactured in August 2024, and six two-storey terrace homes utilizing Pro9 walls are under construction at Elderslie, NSW. The company has over 80 homes in the pipeline that will benefit from this innovative construction method.
The substantial decline in profit before tax is likely to negatively impact AVJennings' stock price as investors react to the disappointing financial results. The company's strategic initiatives, including the Pro9 joint venture and capital restructuring, may offer long-term benefits, but the immediate market reaction is expected to be cautious.
Investor Reaction:
Analysts are likely to express concern over the significant drop in profit and the absence of a dividend for FY24. However, the increase in revenue and sales conversions, along with strategic investments in Pro9, may provide some optimism for long-term growth.
Conclusion:
Investors should closely monitor AVJennings' strategic initiatives and their potential to drive future growth. The company's ability to navigate current market challenges and capitalize on its investments will be crucial in maintaining investor confidence.