This article is from the Australian Property Journal archive
HOME builder Simonds Group hit rough seas in FY20, unable to escape the impact of COVID-19.
The result announcement comes after Simonds executive director Mark Simonds made headlines this week, and is currently facing two police investigations in Queensland and New South Wales over the family’s luxury super yacht journey to the Gold Coast.
The company’s full year profit took a battering falling almost 40% to $7.1 million from $11.7 million in the previous corresponding period, due to lower site starts and investment in existing and new sales channels.
Revenue fell to $664.8 million from $687.7 million. EBITDA of $31.5 million (FY19: $23.2 million) was $8.3 million higher due to the new leasing standard wherein FY20 lease expenses totalling $14.1 million is now recorded as depreciation and interest expense.
Joint CEO and managing director Kelvin Ryan said it was a very challenging year for the group.
“The significant downturn in the market, which started in early 2019, was further exacerbated by more restrictive lending conditions and flowed through to impact our FY20 starts.
“The market was showing signs of recovery in early 2020 but the burgeoning COVID-19 pandemic and national lockdown in March impacted our business during April and May. Like many other businesses, we were able quickly adapt and respond to working safely and efficiently within the restrictions currently in place.
“We remained focussed on improving and delivering sustainable operating performance through cost efficiency, increasing sales through displays, and investing in new sales channels to market,” Ryan said.
Despite the challenging conditions, Simonds improved net cash flows to $18.6 million, an increase of $15.9 million on FY19, were due to the positive operating results, supply chain support and efficiencies.
However, to strengthening its balance sheet and shield against the uncertainty created by the COVID-19 pandemic, no dividend will be declared for FY20.
Revenue in the Simonds Homes business were impacted by the flow on effect of subdued market conditions in 2019 associated with a restricted lending environment and the challenges presented by the COVID-19 pandemic, falling 3.6% to $652.6 million from $676.9 million. There were 185 less site starts than last year a 7% decline on FY19, compared to industry forecasts of a decline of 10 to 13% in FY20.
The Builders Academy Australia business revenue jumped 16.7% to $11.9 million from $10.2 million in pcp, with students studying under apprenticeship and traineeships doubling during the period after the group extended state and federal government funding contracts as well as received approval to deliver three courses to international students under CRICOS (Commonwealth Register of Institutions and Courses for Overseas Students).
The group’s net assets rose from $11.4 million at 30 June 2019 to $17.3 million at 30 June 2020 reflecting the positive earnings contribution, the continued strong focus on cash controls and working capital management. Trade receivables and accrued revenue associated with work in progress decreased by $17.4 million whilst trade and other payables increased by $2.5 million, predominantly due to movements in site starts and seasonality.
Inventories, which include display homes under construction and available for sale as well as land holdings, decreased by $1.3 million.
Ryan said the pandemic will continue to impact the business in FY21.
“On 3 August 2020, the Premier of Victoria announced Stage 4 Restrictions for metropolitan Melbourne to apply at least until 13 September 2020. The Stage 4 Restrictions increase the construction time to build homes and reduce visits to display homes. Management have taken a range of mitigating actions to reduce the impact of the restrictions.
“The economic uncertainty in the wake of the COVID-19 pandemic and the inherent difficulty in predicting the speed and timing of any recovery make any forward-looking statement impossible. Notwithstanding our industry and the Simonds brand has shown great resilience through these challenging and unprecedented times. We remain vigilant and are prepared to respond to the recovery when it happens.” Ryan concluded.
