This article is from the Australian Property Journal archive
AGAINST a strained construction landscape, Australian homebuilders Simonds Group Limited (ASX:SIO) are restructuring and strengthening core operations.
With rising construction costs and labour shortages, Simonds Group Limited has, since August, focused on placing considered limited on the volume of contracts it commits to and re-aligning its cost base to match market conditions.
Simonds has also noted ongoing adverse impacts to the residential building sector and its own business operations.
This includes ongoing wet weather and flooding conditions, supply chain shortages, delivery delays for materials, interest rate rises, reduced customer borrowing capacity, inflation and delays to land registrations.
“In addition, there has been further adverse impacts from the recent floods in Victoria and what is predicted to be a reduction in demand for new homes over the next 6 to 12 months due to interest rate rises, inflation and as a result of the demand generated by the HomeBuilder Scheme coming to an end,” read a statement from the board.
As a result, the Simonds board is exploring options to strengthen its balance sheet for the expected prolonged adverse trading period.
Options being considered include a yet to be determined capital solution, with the major shareholder giving its in-principle support.
The board has also set up an independent board committee to investigate the various options.
“The board is confident that additional funding will allow Simonds to continue to operate strategically during this adverse period, including positioning the Company to respond to the opportunities presented in the recent Federal Government Budget announcements concerning the new Housing Accord and a new national housing supply target,” concluded the statement.
The building and construction industry continues to face headwinds.
This comes as major builders such as construction giant Probuild, multibillion-dollar developer Caydon Property Group and Queensland building company Condev, buckled under the pressure of the current challenging environment.
Meanwhile its competitor Metricon received a $30 million cash injection from its owners earlier this year.
