AVJennings posts 14.4% drop in first-half earnings for FY2017

AUSTRALIAN residential property developer AVJennings on Monday reported a 14.4 per cent drop in net profit to A$14.1 million (S$15.3 million) for the six months ended Dec 31, 2016, as revenue took a hit.

The net profit also included a net A$3.5 million release of impairment provision predominantly driven by projects in New South Wales and South Australia, which was moderately higher than the impairment released in first half of financial year 2016.

Revenue came in 16.6 per cent lower for the half year FY2017 at A$156 million, due to lower contract signing and settlements.

That said, the company reported gross margins of 2.4 percentage points higher than the previous corresponding half.

Cost of sales improved by 19.3 per cent year on year to A$115.4 million.

Earnings per share came in at 3.69 Australian cents, down from 4.33 in the year-ago period.

Directors have declared a fully franked interim dividend of 1.5 Australian cents per share, similar to previous corresponding period. With this, the directors reaffirm the company's annual dividend target payout range of 40-50 per cent of profit after tax for FY2017.

The company said that AVJennings chairman, Simon Cheong, had said last November that "changes to product mix and timing of revenue recognition may dampen first-half results".

Said Peter Summers, its managing director: "The change in our product mix is aimed at providing more built form choice, that is, completed housing to customers. This change allows the company to continue to strengthen its ability to deliver great communities and good quality, affordable housing options."

The developer said that housing requires longer construction periods than just land only. "As sales are recognised on settlement, this change in mix has impacted the first-half reported results, but will provide the basis for strong results . . . This change in mix also better protects the company from any potential change in market dynamics."