AVJennings Boosts Q3 Contract Signings 25% Amid Acquisition Plans

Q3 Performance Highlights

AVJennings Limited (ASX: AVJ) delivered a solid third quarter in FY25, reporting contract signings of 167 lots, a 25% increase over the prior corresponding period (PCP), with a total value of $69.5 million. This growth was primarily driven by strong land sales in Victoria’s Lyndarum North, Aspect, and Somerford projects, alongside Queensland’s Deebing Springs development. However, Integrated Housing (IH) contract signings saw a slight decline compared to the PCP.

Settlements also improved markedly, with 86 lots settled during Q3, up 26% on the PCP, generating $39.2 million in revenue, an 8% increase. Year-to-date (YTD) settlements reached 411 lots, a 22% rise over the previous year, contributing to a 9% increase in settlement revenue to $170.1 million.

Market Dynamics and Sales Conversion

Despite the encouraging quarterly figures, YTD contract signings remain below FY24 levels, largely due to sluggish market conditions in Victoria where a significant portion of completed stock remains available. Queensland’s strong market is tempered by limited stock availability. Enquiry levels held steady compared to Q3 FY24, with notable regional variations: IH enquiries rose in New South Wales and Queensland but declined in Victoria and South Australia. Apartment enquiries in Victoria increased, driven by completed stock availability.

Importantly, sales conversion rates improved by 25%, a boost attributed to the Reserve Bank of Australia’s first cash rate cut in February 2025, which helped restore buyer confidence. This rate cut appears to be a pivotal factor in lifting demand, particularly for land sales.

Portfolio and Operational Updates

The company’s work-in-progress (WIP) inventory remained stable at 958 lots, with 97% of WIP value concentrated in its largest markets: New South Wales, Victoria, Queensland, and New Zealand. AVJennings continues to leverage its Pro9 factory on the NSW Central Coast, which has completed 31 homes to date and has a pipeline of 101 homes either under construction or planned, supporting efficient delivery of built-form housing.

Acquisition Scheme and Dividend Prospects

AVJennings has entered into a Scheme Implementation Deed (SID) with Proprium Capital Partners and AVID to acquire all ordinary shares at $0.655 cash per share. The SID also allows the Board discretion to declare a special dividend of up to $0.167 per share, contingent on factors such as available funds, a favourable ATO ruling, and lender consents. To meet SID obligations, the company has slowed development activities on certain projects.

The scheme is targeted for implementation in August 2025, pending regulatory approvals. This acquisition proposal offers shareholders a premium to historical trading levels and represents a significant milestone for AVJennings.

Outlook and CEO Commentary

Looking ahead, AVJennings anticipates a significant skew of earnings towards Q4 FY25. However, ongoing slow market recovery in Victoria and adverse wet weather in Queensland are expected to pressure FY25 settlements, with revenue forecasted below FY24 levels. Gross margin percentages are expected to remain stable year-on-year. Further interest rate cuts are seen as critical to improving market conditions, especially in Victoria.

CEO Phil Kearns highlighted the positive impact of the RBA’s rate cut and expressed optimism about government support for housing supply. He also emphasized the strategic advantage of the Pro9 system in AVJennings’ built-form housing portfolio and welcomed the certainty provided by the acquisition proposal for shareholders.