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Directors’ Report

For the year ended 30 June 2009

REVIEW OF OPERATIONS (continued) SEGMENT RESULTS: (continued) Contract Building: (continued)

Even though this second half outcome has been significantly aided by the Federal Government’s First Home Owners Boost, the Company’s traditional market segment is second and subsequent home buyers and recovery in this segment, and

the internal improvements referred to above, will be the main drivers for better outcomes from this division.

BALANCE SHEET: Review of Carrying Values Whilst Directors and management



inventory carrying values, the current market environment has seen extra focus placed on this at 30 June 2009. The review process has not identified any development projects requiring a write down based on the realisable values that are estimated to be derived from the development intentions for each project.

Directors and management have also examined the carrying value of other assets. The outcome of this review has been a provision of approximately $1 million (pre-tax) against the

carrying values of provision relates to

Contract Building display homes. This over capitalisation on some displays, as

well as price reductions to ensure sales are achieved on a timely basis, thereby reducing funds employed.

Number of Lots & NTA

As at 30 June 2009, net tangible assets per share was $1.04 (net assets was $1.06 per share). Total lots owned or under management or control were 9,825. Based on FY09’s utilisation rate of 1,840 lots, this would equate to approximately 5 years

supply which is consistent with historical levels.


The Company’s main banking facilities were due to mature on 30 September 2009. The Company has received approval from its bankers renewing the facilities for a further 12 months to 30 September 2010. Documentation is in the process of being completed and is expected to be signed within the next 2 weeks. The renewed facilities are, in the opinion of the Directors, sufficient for ongoing business operations in the foreseeable future. Details are set out in note 24 to the Financial Statements.

14 AVJennings Limited ABN 44 004 327 771

Lower reliance on the main banking facilities has been achieved through a number of joint venture arrangements and development agreements which have reduced cash requirements under the facilities and preserved capital. As previously reported, the Company continues to explore new

funding structures and arrangements.

As at 30 June 2009, the net debt level as reported in the Balance Sheet was $102.0 million. This represented 35.2% of equity and 21.2% of total assets. Taking into account the Company’s proportionate share of debt within equity accounted joint ventures, net debt was $125.0 million with debt to equity of 43.1% and debt to assets of 23.9%.


In February 2009, the Company announced its intention to launch the AVJennings Residential Property Fund.

To date, feedback on the structure of the fund has been positive and has confirmed the Company’s belief that there is a market requirement for this type of product. However, the capacity of many potential investors continues to be constrained due to them being over-weight to property at this time.

The Company remains committed to the fund and its long term strategic benefits. Accordingly, Directors have decided that it is important to take a long term view and that additional time be allowed to let potential investors participate, rather

than react to short term market issues.


Decreased interest rates and the introduction of the First Home Owners Boost have, to a degree, had a positive impact as evidenced by the increase in contract signings for the second half. However, the Company continues to be faced with market pressures and challenges such as holding c o s t s , c a u s e d b y p l a n n i n g a n d b u i l d i n g a p p r o v a l d e l a y s a n d

substantial government charges and levies, and consumer confidence, which continues to be impacted by factors such as rising unemployment and difficulties customers face sourcing finance. Consequently, it is anticipated that the remainder of 2009 will continue to be challenging.

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