Listed homebuilder AVJennings (ASX: AVJ) is raising $30.4 million in a bid to ramp up production of built-form homes across its massive vacant land portfolio using technology that is able to fast-track construction.
With the medium-term outlook for housing remaining positive, AVJennings has revealed a strategic move to leverage its supply of more than 14,000 residential lots in Australia and New Zealand to bring more houses to the market more quickly.
Built-form homes utilise Pro9 Global’s energy efficient walling system for housing, with claims that it can halve heating and cooling costs in a home.
AV Jennings says the pre-fabricated system speeds up the construction process with walls able to be erected on site in three days, while also improving safety on construction sites.
AVJennings CEO Phil Kearns says the company is anticipating the system could see construction times for a new home compressed to within two to three months from about nine months at present.
Through a joint venture agreement, AVJennings has been increasingly using the new walling system to scale up construction of homes across its portfolio. It plans to introduce the new construction method to its product range under the Stellar Collection brand.
The company says despite higher interest rates, enquiry levels for new homes is in line with long-term averages, indicating pent-up demand, particularly for more affordable built-form housing.
“This presents a strategic opportunity for the company to construct built-form homes across a greater proportion of its land lots, where 62 per cent of the work-in-progress portfolio relates to built-form product,” the company says.
While the walling products are currently manufactured in Europe, Pro9 is establishing a factory on the NSW Central Coast to bring production onshore early next year. The Australian facility will have the capacity to produce external walls for 1,000 homes annually on a one-shift basis.
Kearns, a former Wallabies captain, says medium-term market fundamentals for new homes remain positive, prompting AVJennings to scale up its plans for built-form housing production.
“There is a clear, and growing, supply shortage, and we’re seeing an encouraging shift in demand from buyers for more affordable turnkey housing,” Kearns says.
“This trend, along with our recent investment in Pro9’s walling system and today’s equity raising, places the company in a strong position to capitalise on the increasing demand for more built-form housing options and deliver positive returns for investors.”
AVJennings is undertaking a one-for-2.67 renounceable entitlement offer at an issue price of 20c each to raise about $30.4 million to accelerate built-form housing to meet market demand.
The issue price is a 50 per cent discount to the last closing price of 40c on 10 October 2023 ahead of the announcement.
The company says its largest shareholder, SC Global Developments with a 53.95 per cent stake, plans to take up its pro-rata entitlement in the institutional entitlement offer, representing $16.4 million of new shares.
About 152.1 million new shares will be issued under the capital raising, representing 37.5 per cent of AVJennings’ existing shares on issue.
AVJennings delivered a solid FY23 profit with the after-tax result of $21.3 million up 63 per cent on a year earlier.
Revenue grew 23 per cent to $274 million, driven by a 20 per cent increase in settlements, with underlying pre-tax earnings of $30.8 million buoyed by a 36 per cent increase in gross margins.
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