The housing crisis rippling across Australia is news to the ears of residential property developer Tamawood (ASX: TWD) which has reported a substantial profit increase expected, even with political forces and inclement weather adversely impacting the business.
Tamawood specialises in residential construction and property development in Australia, operating under the Dixon Homes brand, offering a range of home designs and construction services. Tamawood generates revenue primarily through the sale of new homes, development projects, and related services.
From unaudited management accounts, the developer anticipates around $8.1 million in net profit after tax for FY24 which would represent a 167% increase on the $3.0 million reporting in FY23.
This profit growth is attributed to several strategic initiatives and operational efficiencies, notably the implementation of Project DeRisk, Tamawood’s integrated enterprise project management software system. This system enabled the Company to adjust prices dynamically, ensuring that profit margins were maintained despite fluctuations in supplier and subcontractor costs.
Additionally, Tamawood’s acquisition of Astivita played a critical role in stabilising supply chains. The acquisition ensured the uninterrupted supply of essential building materials and products, such as tapware, photovoltaic (PV) systems, solar hot water units, sinks, appliances, sanitary ware, baths, basins, door furniture, and air conditioners. By purchasing these goods in local currencies, Tamawood mitigated the risks associated with shipment delays and price volatility.
Tamawood also benefits from a long-standing network of subcontractors and suppliers, many of whom have been partners for decades. This strong base of collaborators, coupled with the diligent efforts of Dixon Homes’ staff, consultants, and subcontractors, has been instrumental in achieving the reported profit growth while the struggles of other builders have been well publicised amid rises in raw material costs.
Tamawood’s cash reserves have also seen an improvement, with cash on hand at the end of FY24 standing at $6.1 million, up from $5.2 million in FY23. Importantly, the Company remains debt-free, further strengthening its financial position.
In light of the improved financial performance, the Board of Tamawood anticipates restoring the final dividend payment in December 2024, bringing the total dividend payments back to two per year. The specifics of the dividend, including whether it will be fully franked, are yet to be determined.
Looking ahead, Tamawood acknowledges several challenges that could impact the Queensland housing market and broader economy in FY25. These include the upcoming state elections in October 2024, economic pressures from inflation and interest rates, a shortage of land in South East Queensland due to complex approval processes and land banking, and unpredictable weather conditions.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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1 Comment
Shraddha13
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