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REVIEW OF OPERATIONS (continued) As at 30 June 2009, the Company’s net assets per share

was $1.06 and net tangible assets per share was $1.04. This follows a full review of asset carrying values, which did not result in any write downs of the Company’s projects, reflecting

the conservative approach to acquisitions adopted








in recent down in

relation to the carrying value of display homes.

The result for the year includes an unrealised loss of $3.1 million (after tax) on interest rate hedging contracts. The Company regularly has in place such contracts to prudently limit its interest rate exposure. Due to interest rate reductions, mainly

in the first half, the current market value of these contracts has decreased resulting in the unrealised loss.

The result reflects the challenging external environment that has existed in recent years for the Company and the industry in general. Many of the challenges have resulted from the Global Financial Crisis. However, they also reflect the impact of substantial government charges and delays and costs resulting from the poor planning approval process as discussed under Integrated Housing Developments.


Integrated Housing Developments:

Integrated Housing turnover for the year increased by 34.8% to $145.6 million. The improved performance emerged as a result of this type of product offering affordable housing options accommodating current economic conditions and being suited to the Federal Government’s First Home Owners Boost.

This increase enabled the Company to generate significant cashflows resulting in reduced debt levels. However, margins remained low as the new housing market has continued to carry significant costs, particularly in New South Wales, due to:

  • Additional holding costs caused by planning and building

approval delays.

  • Substantial government charges and levies.

These costs continue to accumulate and impact on the industry’s ability to deliver sufficient supply of affordable housing stock to meet Australian housing needs.

Directors’ Report

For the year ended 30 June 2009

Land Developments:

Land turnover for the year decreased by 23.4% to $166.4 million. The Company’s major land customer base is other builders who tend to take a more prudent approach to purchasing in challenging market conditions. Additionally,

many of these builders have faced difficulties sourcing bank financing, thereby further limiting sales to this customer


Margins on land sales decreased during the year due to the impact of amortising holding costs incurred in previous years and the full year impact of price decreases, reflecting an industry wide trend, initiated in the second half of the previous financial year. Land was also impacted by the issue of carrying costs referred to in Integrated Housing.

Apartments Developments:

The Company currently has 2 apartment projects in New South Wales, both within 15 kilometres of the Sydney CBD. Only one of these, Kirra on Powell at Killara is at revenue recognition stage. Kirra is a prestige development which,

whilst representing excellent value for a quality product, is in

the high end market segment which has been slow in Sydney. The remaining apartment project, Verve at Erskineville, is recording strong pre-sales as it offers affordable housing options within a prime location. Revenue recognition for Verve is forecast to commence in December 2009.

Contract Building:








$158.9 million as a result of poor contract signing levels in the prior year and the first half to 31 December 2008. The business








expects that the strengthening of management together with the introduction of new product, opening of new displays, new workflow systems which will greatly improve efficiency and a reinforced focus on customer service, will result in significant improvement in 2010 and beyond. Improvements have already emerged as evidenced by the second half which has seen a 79.7% increase in contract signings from $67.7 million to $121.6 million and improved margins on new contracts. This increased contract signings level will translate into increased revenue in the financial year just commenced.

AVJennings Limited ABN 44 004 327 771 13

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