Release Date: February 28, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fleetwood Ltd (ASX:FWD, Financial) reported a significant increase in Earnings Before Interest & Taxes (EBIT) to $10.4 million, up 65% from the previous half.
- The company's Net Profit After Tax increased by 18% to $4.7 million compared to the first half of FY '24.
- A fully franked dividend of $11.5 per share was declared, nearly five times the dividend paid in the first half of the previous year.
- The Community Solutions segment showed strong performance with EBIT of $16.8 million on $33.5 million of revenue, driven by high occupancy rates.
- Fleetwood Ltd's Building Solutions segment saw EBIT more than double to $7.1 million, supported by a strong order book and improved project execution.
Negative Points
- The RV Solutions segment faced challenges due to cost-of-living pressures, resulting in a $6 million impairment and a $1.9 million restructuring cost.
- The RV Solutions business reported operating losses due to softer demand and an inability to pass on price increases to OEMs.
- Fleetwood Ltd's strategic review of the RV Solutions segment highlighted ongoing challenges in consumer discretionary spending.
- The New South Wales government's modular taskforce has not shown significant progress, limiting opportunities in that region.
- Victoria's market was noted as softer, although underpinned by strong government work in the education sector.
Q & A Highlights
Q: How should we think about the Searipple margin in the second half given the expected high occupancy?
A: Bruce Nicholson, CEO: With occupancy expected to reach about 90% in the second half due to new contracted rooms, we anticipate an expansion in our EBIT margin compared to the first half.
Q: Can you clarify the 15% return on capital target for Building Solutions and the capital base for that?
A: Cate Chandler, CFO: The target is expected to be achieved through FY '25. The capital base can vary, but it is generally around $70 million, with working capital shifts affecting it month to month.
Q: How much of the market expansion in Building Solutions was due to increased factory utilization versus efficiency gains?
A: Bruce Nicholson, CEO: We do expect a slight softening in revenue due to seasonal factors, but our gross profits are holding strong. The mix of work, including more installation work in education, affects revenue but remains positive overall.
Q: What is the progress on the New South Wales government's modular taskforce, and how does it compare to Queensland's QBuild program?
A: Bruce Nicholson, CEO: The New South Wales modular taskforce has not shown significant progress or traction. We are focusing on opportunities in school infrastructure, but we do not expect a large volume of work similar to Queensland's QBuild in the near term.
Q: Can you explain the cash flow outlook, considering the tax inflow and working capital benefits?
A: Cate Chandler, CFO: We target a cash conversion of 90% to 100%. The recent tax refund from the ATO was a one-off benefit, and we expect similar CapEx numbers next half. Lease repayments will remain consistent, and future cash flow will depend on EBITDA performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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