Amid Australia’s housing crisis, people’s ambitious plans to set up and expand their businesses have anything but halted. Thanks to the anticipated demand from the post-pandemic population growth, construction and building companies like Fleetwood (ASX: FWD) are winning big.
In H1 FY24, Fleetwood recorded a net profit after tax (NPAT) of $3.9 million following an $800k loss in H1 FY23. Comparatively, its earnings before interest and tax (EBIT) stood at $6.3 million, a notable improvement from the breakeven result reported in PCP.
The Building Solutions segment (designing and selling accommodations) of the Company returned to profitability during H1 FY24, reflecting progress made with the Build, Transform & Grow strategy. By focusing on projects aligned with its current capabilities, Fleetwood saw margins improve to target levels. The order book for Building Solutions increased from $87 million in December 2022 to $100 million by December 2023.
Managing Director, Bruce Nicholson, said, “The return to profit in Building Solutions was pleasing and a direct result of the implementation of our strategy. The business has continued to target projects aligned with its current capability and this has seen our order book stabilise.
“Our opportunity pipeline is at the highest level for many years, particularly in the kindergarten programs as well as social and key worker housing sectors. Despite strong interest, we are seeing decision making from State Governments slowing as they work through their internal processes in these key areas.”
Fleetwood operates across three key segments: RV Solutions, Building Solutions, and Community Solutions. It services a range of industries—from education to mining, tourism, housing developments and more.
During the period, Community Solutions witnessed an improvement in results, attributed to planned shutdowns and heightened activity in the Karratha market in Western Australia.
Community Solutions had a solid half with EBIT up 83% on H1 FY23. Efforts during the half focussed on preparing Searipple Village for increased levels of demand expected over the medium term.
Conversely, RV Solutions experienced reduced consumer demand, leading to significant margin pressure and fluctuating demand levels throughout the half.
The near-term outlook for RV Solutions has stabilised with its new products and services gaining acceptance in the market and orders continuing to increase. Building Solutions’ gross margins are nearing target levels due to the focus on qualified works within capability and procurement savings. Wage pressure saw labour costs rise faster than staff numbers, particularly for white-collar labour.
Looking ahead, Fleetwood remains cautiously optimistic about its prospects, especially considering RVs. Meanwhile, Community Solutions secured a significant agreement with Rio Tinto, which is expected to bolster future utilisation levels. Building Solutions maintains a solid order book at $100 million, albeit with a note of caution regarding decision-making delays from state governments.
Fleetwood concluded the first half with net cash of $34.1 million, down from $39.9 million in December 2022.
In light of its financial position and positive earnings trajectory, Fleetwood has declared a fully franked interim dividend of 2.5 cents per share, signalling confidence in its continued growth and value creation for shareholders.
Alinda is a Business Reporter for The Sentiment
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