AVJennings shares slides 6pc after first-half profit crashes to earth

AVJennings shares have crumbled more than 6pc after the home builder booked a sharp fall in first-half profit.

AVJennings has introduced a new home design in its Enclave community at Bridgeman Downs, just north of Brisbane, which has been created for downsizers who plan to remain in their new home long term.

Weak consumer confidence on the back of political uncertainty and a lending clampdown has sent house and land builder AVJennings’ half year profit crashing with the iconic Australian business foreshadowing a bounce back in the second half, but warning of a still softer full year result.

On a brighter note, chief executive Peter Summers said the group believed the souring housing market was temporary, and was not “the new normal”.

AVJenninngs (AVJ), which flagged the earning downgrade late last year, reported profit after tax of $1.4 million, down from $15.5m in the previous December half.

Shares fell 6 per cent in morning trade to 53 cents.

The company said revenue expected in the six months to December 30 had been pushed into the second half of the financial year.

Settlement delays in four projects meant about $11m in profit was dragged into the second half with around $8.7m to be earned by the end of the month (February), the company said.

“Major lenders are digesting the recommendations of the banking royal commission and tighter credit conditions have bitten particularly hard over the past six months,” Mr Summers said.

“We are seeing first homebuyers re-enter the market, which is pleasing, but second and subsequent buyers are not currently confident to contract prior to selling their existing home, so the transaction chain is slower across the board.”

The outlook for the Australian economy remained positive, with interest rates likely to remain low, inflation and wages were starting to improve and affordibily looking better which would support demand for affordable homes, AV Jennings said.

“The banking regulator APRA has acknowledged that some of the curbs imposed upon bank lending over the past few years have done their job and must be reconsidered to avoid unintended consequences, particularly as new construction activity diminishes and developers pare back supply,” the company said.

The company suspended its dividend reinvestment program with directors saying it was not currently in the best interests of shareholders.

A 1c dividend for the half will be paid.