AVJenning shares slide after it warns full-year profit could halve

AVJennings has warned its full-year profit could nearly halve in the wake of the property downturn.

An AVJennings designed home design on the outskirts of Brisbane.

House and land builder AVJennings shares slid more than 5 per cent in early trade after it warned full-year profit could almost halve following a deterioration in Sydney and Melbourne market conditions.

The company (AVJ) told the market today that based on unaudited financial results, it’s before tax profit for the year through June 2019 was likely to be around $23 million, compared to $45.1m the prior year.

Still, AVJennings said that market fundamentals remained supportive and that it expected a stronger result in fiscal year 2020, on improved market sentiment.

“With the federal election, and state elections in Victoria and New South Wales now behind us, this is reflected in rising confidence indicators,” the company said in a statement to the ASX.

Economic and population growth, low interest rates and a stable employment environment would help support the company’s profits in the new financial year, the company said.

“Importantly, the lending environment is also improving with the reduction in the cash rate by the RBA in June and the announcement in early July by APRA that it has removed the minimum 7 per cent debt servicing threshold formerly required to be applied by retail banks when assessing loan applications,” AVJennings said.

The company said it was in the process of implementing initiatives that were expected to positively impact its fiscal year 2020 result, including additional active projects and increased revenue recognition from New Zealand on pre-sales.

In February, the company foreshadowed a bounce in the second-half compared to the first-half, but still warned of a softer full-year result partly due to weak consumer confidence.

AVJennings said it would release its preliminary financial report later this month, at which point it would provide further commentary on operating trends, market conditions and updates on significant projects.

At 10.45am (AEST) shares in AVJ were down 4 cents, or 6.67 per cent, at 56c.