Developer and home builder AV Jennings has returned to profitability and its chief executive has forecast better times ahead for the residential construction sector.

Chief executive Peter Summers unveiled a net profit yesterday of $3.2 million for the first half of 2009-10, turning around a $9.7m net loss for the first half of the previous year. He credited a restructure of the company, which gave its individual units greater autonomy and accountability, for helping reverse the loss.

Although he predicted better times as the industry emerged from the global slowdown amid an undersupply of housing, he said problems with land supply and government property charges would weigh on home builders.

"Consumer confidence remains volatile, likely rate rises will further add to affordability concerns and the end of the first home owners boost has seen a significant decline in first home owner activity," he said. "However, the Australian residential property market has proven resilient.

"The dramatic under supply of new residential property compared to underlying demand is continuing to be reflected in selling prices, albeit tempered by affordability constraints."

AV Jennings' first-half revenue fell slightly from $241.6m in the previous corresponding period to $239.8m, but the company credited improved margins and lower costs with driving its return to profitability.

Debt at the end of December was reduced to $71.3m from just over $200m the previous year. Earnings before interest, tax, depreciation and amortisation were $5.16m, well up on a $12.1m loss in the first half of the 2008-9 financial year. There was no dividend declared for the first half of this year, the same as for the first-half of the previous year.

The company's contract building division posted a strong revenue result of $106m compared with $87m for the same period last year, while the developments division brought in $131m compared with $153m in the first half of last financial year.

Despite the fall of revenue in the developments division, its profit was up from $7.5m to $12.2m for the December half because of interests in joint ventures and recurring income from project management fees.

Source: The Australian