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Directors’ Report

For the year ended 30 June 2009

Your Directors present their Report on the Company and its controlled entities for the year ended 30 June 2009.

DIRECTORS

The names of the Company’s Directors in office during the year and until the date of this report are as follows. Directors have been in office since the start of the year to the date of this Report, unless otherwise stated.

S Cheong RJ Rowley PK Summe

rs

Chairman (Non-Executive) Deputy Chairman (Non-Executive) Managing Director and Chief Executive

E Sam HR Hochstadt B Chin BG Hayman LF Milkovits

Officer (formerly Chief Financial Officer) Director (Non-Executive) Director (Non-Executive) Director (Non-Executive) Director (Non-Executive)

Managing Director and Chief Executive Officer (Resigned 1 December 2008)

COMPANY SECRETARY

The names of the Company Secretaries in office during the year and until the date of this Report (unless otherwise stated) are as follows:

CD Thompson PK Summers HL Linacre

Appointed 12 January 2009

Resigned 5 September 2008

PRINCIPAL ACTIVITIES

The principal activities of the Consolidated Entity during the year were Residential Land Development, Residential Housing

Development and Contract House Building.

There was no significant change in the nature of these activities during the financial year.

OPERATING RESULTS

The consolidated loss after tax for the financial year was $12.7 million (2008: $11.2 million profit after tax).

DIVIDENDS PAID OR PROPOSED

No dividend has been proposed, paid or is payable in respect of the financial year ended 30 June 2009 (2008: $5,332,489 fully franked).

12 AVJennings Limited ABN 44 004 327 771

REVIEW OF OPERATIONS OVERVIE :

For

the

full

year

ended

30

June

2009,

revenue

was

$504.8 million

compared

corresponding

period.

to $517.6 million The second half

for the previous resulted in an

after tax loss of $3.0 million compared to a first half loss of $9.7 million. The full year result was therefore an after tax loss of $12.7 million compared to an after tax profit of $11.2 million for

the

previous

corresponding

period.

In the current economic climate, focus has been on capital and cashflow management and this has resulted in reduced debt and stronger balance sheet ratios. The Company is in full compliance with its debt covenants.

Whilst market conditions remain challenging, the Company is concentrating on matters within its control. Following the appointment of Peter Summers as Chief Executive Officer in February 2009, a new Executive Team has been created utilising internal resources and further strengthened by additional appointments from outside the Company. In conjunction with the Executive Team, Directors have undertaken a review of strategy and operational aspects of the Company, especially

in relation to Contract Building.

O p e r a t i o n a l l y , t h e s e c o n d h a l f s a w a n u m b e r o f i m p r o v e d

outcomes compared to the first half including:

  • Significant cash generation that resulted in lower debt

levels.

− Net debt decreased 40.4% from $171.1 million at 31 December 2008 to $102.0 million, representing a debt to equity ratio of 35.2% and debt to assets of 21.2%.

− Including the Company’s proportionate share of debt from joint ventures which have been equity accounted, net debt at 30 June 2009 was $125.0 million compared to $200.2 million at 31 December 2008.

  • Contract Signings for the six months were up 60.6% from $183.7 million to $295.0 million with the majority of this increase occurring in the June 2009 quarter. A substantial proportion of these contracts will result in revenue recognition in the 2010 financial year, particularly the second half of the year.

  • Turnover was up 9% from $241.8 million to $263.0 million.

  • Increased momentum in relation to the roll out of new displays and product.

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