FY19 Results Presentation 20 August 2019
Table of f Contents About AVJennings Financials Looking forward Appendices 2
Housing matters. Community matters. 3
What we do (1) We buy land (2) develop and sub-divide it (3) then sell a mix of land and AVJennings built homes on our land and we don’t do inner city high -rise or contract building. 4
Financials Balance Sheet Profit Cash & Loss Flow Dividends 5
FY19 Results – headline numbers FY19 FY18 % Change TOTAL REVENUE $296.5m $372.2m (20.3%) STATUTORY PROFIT BEFORE TAX $23.8m $45.1m (47.1%) STATUTORY PROFIT AFTER TAX $16.4m $31.3m (47.6%) GROSS MARGINS 24.5% 24.0% 0.5pp NET TANGIBLE ASSETS (NTA) $393.5m $396.2m (0.7%) NTA PER SHARE $0.97 $1.00 (3.4%) EPS (CENTS PER SHARE) 4.1 8.1 (49.7%) DIVIDEND FULLY FRANKED (CPS) 2.5 5.0 (50%) 6
FY19 Profit & Loss summary FIN FINANCIAL RE RESULTS • Revenue $296.5m (down 20.3%); PBT $23.8m (down 47.1%) • Results below FY18 due mainly to the well documented softer market conditions, particularly in Melbourne and Sydney • Settlements of 970 lots down 24.9% • Gross margins better at 24.5% 7
Revenue by land, housing and apartments 250 • Lower revenue across land and housing reflect softer market conditions and product mix 200 available for sale • Settlement of the GEM apartments at Waterline is 150 responsible for the increase in revenue from apartments 100 50 $m - Land Housing Apartments FY18 FY19 8
Increasing average contract value as we sell more built form product Average Contract Value ($k) 450 • This is an intentional re-balancing 400 of our product pipeline towards retail 350 customers and more built form 300 • Built form increases the project value 250 • Built form extends the amount of 200 time between development starting and settlement 150 100 50 - FY16 FY17 FY18 FY19 Total Company Total Company excl. NZ * Average contract value is based on net contract price to AVJennings 9
FY19 Results – Balance Sheet $ MILLIONS June 2019 June 2018 CURRENT ASSETS Cash and cash equivalents 18.2 8.5 Receivables 15.1 95.1 Note: Adoption of the new Inventories 194.7 193.3 revenue accounting standard AASB15 resulted in Total Current Assets 230.4 304.1 reclassifications in current NON-CURRENT ASSETS receivables and current Inventories 430.3 295.0 inventories and the reversal of approximately $12m from Total Non-Current Assets 454.8 336.3 opening retained earnings, TOTAL ASSETS 685.2 640.4 being the revenue and associated cost of sales CURRENT LIABILITIES recognised on contracts with Trade and other payables 41.2 34.5 builders in Australia that were Total Current Liabilities 51.5 68.4 unconditional but where control had not passed at 30 NON-CURRENT LIABILITIES June 2018. Interest bearing loans and borrowings 199.8 125.8 Total Non-Current Liabilities 237.4 173.0 Note: not all line items shown TOTAL LIABILITIES 288.9 241.4 NET ASSETS 396.3 399.0 10 10
FY19 Balance Sheet summary • Net debt of $182 million (26.6% gearing) is well inside our target gearing range • WIP lots at 1,600 were down 17.9% in response to softer market conditions • New project acquisitions including Ara Hills at Orewa near Auckland and the remaining 50% of Riverton at Jimboomba 11 11
Net debt level in target range and flexibility to support future growth NET DEBT AND GEARING RATIO • 26.6% gearing is comfortably inside (net debt / total assets) 15-35% target range • Increase since June 2018 largely $m 30.0% reflects settlement of Ara Hills, NZ 180 and June 2019 acquisition of the remaining 50% of Riverton at Jimboomba 20.0% • Low land creditor balance of $42 90 million 10.0% • Maintain scope for selective acquisitions • Extension of the main $300 million 0 0.0% banking facility to 30 Sept. 2021 Jun '15 Dec '15 Jun '16 Dec '16 Jun '17 Dec '17 Jun '18 Dec '18 Jun '19 Net Debt (LHS) Gearing (RHS) 12 12
FY19 Results – Cash Flow Statement $ MILLIONS FY19 FY18 CASH FLOWS USED IN OPERATING ACTIVITIES Receipts from customers 355.9 450.8 Includes land acquisitions: Payments to suppliers, land vendors and employees (371.3) (378.4) FY19 $81.8 million Net cash (used in) / from operating activities (45.8) 47.6 FY18 $103.1 million CASH FLOWS FROM INVESTING ACTIVITIES Joint venture related activities 3.2 (2.0) Net cash from / (used in) investing activities 3.7 (0.6) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 162.1 154.2 Repayment of borrowings (101.0) (194.6) Net cash from / (used in) financing activities 51.8 (54.1) NET INCREASE / (DECREASE) IN CASH HELD 9.7 (7.1) 13 13
Dividends FY FY19 CAPITAL MANAGEMENT • Dividends of 2.5 cents per share fully franked (1 cent + 1.5 cents) • Providing a grossed up yield of 6.2% on a $0.58 share price • Lower than FY18 (5 cents), in line with softer earnings but maintaining a healthy payout ratio Dividend payout ratio to earnings 50% 0% FY14 FY15 FY16 FY17 FY18 FY19 14 14
Looking forward MARKET CAPABILITY INVENTORY SOCIAL LICENCE CONDITIONS 15 15
Current market dynamics – sentiment is improving General market sentiment is beginning to improve driven by: • Continuing supportive market fundamentals • Conclusion of the Federal election • Conclusion of State elections in Victoria and NSW • Changes to lending practices and home loan application processes • Positive media commentary about residential property markets generally • Improving auction clearance rates • Improved affordability in Melbourne and Sydney during FY19 • New tax offsets and future tax cuts announced • Continued support for first home buyers through Government grants and stamp duty relief 16 16
Improving lead indicators Monthly enquiry levels in 2H FY19 Monthly contract signings in 2H FY19 (data baselined to 100% in January 2019) 100 150 140 130 120 50 110 100 90 80 0 Jan Feb March April May June Jan Feb March April May June Enquiries are new enquiries (exclude re-visits) 17 17
Market supply has contracted but underlying demand continues to grow 22 20 18 Dwelling Approvals ('000s per month) 16 Houses (sa) 14 Flats/units/townhouses (sa) 12 Total dwellings (sa) Houses (trend) 10 Flats/units/townhouses (trend) 8 Total dwellings (trend) sa = seasonally adjusted 6 4 2 - 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Source: Australian Bureau of Statistics 18 18
Sector outlook continues to be supported by positive economic fundamentals Population Growth Stable Employment Real GDP Growth Interest Rates Wages Growth > 31m people by 2040 Unemployment rate Around 2.5% to 3% Low by historical Around 2.5% 5.2% standards Source: Australian Bureau of Statistics and RBA 19 19
Work in Progress WIP Progress (lots) WIP by Product (lots) Current WIP by Region (% of $) 2,000 2,241 2,161 1,991 1,949 1,880 1,500 1,623 1,681 VIC 1,600 1,539 1,512 24% NSW 36% 1,264 1,000 974 SA 12% 715 554 500 QLD NZ 25% 3% Note: WA projects are excluded because they are - 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19 carried as investments not inventory Land Housing Apartments 20 20
Strategic allocation of net funds employed Diverse geographic allocation of funds employed helps mitigate market risk NFE By Product ($m) 600 500 400 % NET FUNDS 18% EMPLOYED 300 (PY 18%) 2% 200 (PY 2%) 30% (PY 35%) 100 PY = FY18 16% (PY 5%) 10% 0 (PY 12%) Land Housing Apartments 24% (PY 28%) 21 21
Lots under control stable at around 9.5k Total lots held by AVJennings Caboolture ~3.5k lots • FY19 excludes the Caboolture development near Brisbane which will provide ~3.5k lots (announced in August 2019) • Notable transactions during FY19 included the acquisition of: • Ara Hills (NZ) ~582 lots 11,259 10,876 10,837 10,198 10,048 9,952 9,825 • ~230 lots under contract for land 9,654 9,480 9,530 9,373 9,219 at Mernda near Lyndarum-North • The acquisition of the remaining 50% of Riverton at Jimboomba does not increase lots under control but it does increase value of the land bank FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 22 22
New projects driving cash receipts beyond FY19 PROJECT AREA LOTS FY19 FY20 FY21 FY22 1 Waterline Place, Williamstown VIC 336 2 Lyndarum North, Wollert VIC 1,872 3 Ara Hills, Orewa NZ 582 4 Evergreen Spring Farm East Village NSW 441 5 Evergreen, Spring Farm NSW 91 6 Riverton, Jimboomba QLD 1,196 7 Anise, Bridgeman Downs QLD 63 Physical 8 Arcadian Grove, Cobbitty NSW 57 development start 9 Warnervale NSW 595 First contract signings 10 Kogarah NSW 56 First settlements 11 Arbor, Rochedale 2 QLD 55 Settlements continue 12 Deebing Springs, Deebing Heights QLD 210 13 Huntley NSW 231 • ~65% of the inventory pipeline 14 Cadence, Ripley QLD 292 is in these projects • Activity is based on forecast 15 Arbor, Rochedale 1 QLD 79 project plans 23 23
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