Builder Simonds says new housing starts fell even as profit increased
“Our earnings growth of $17.6 million against the comparative period last year reflects the dual impact of lower operating costs and expanding margins on jobs going to site,” chief executive officer David McKeown, who took over the role from Mr Simonds in November.
The shares were trading up 2.5¢, nearly 13 per cent, after the announcement, at 22¢. Over the past 12 months, the company’s shares have jumped 91 per cent, outstripping the 2.7 per cent gain of the broader S&P/ASX200 index.
Simonds cut expenses over the six-month period almost 19 per cent to $55.8 million – it has cut staff from 750 before the pandemic to 600 – a faster decline than the reduction in revenue to $337 million.
Pre-tax earnings swung from a $17.3 million loss to a $2.5 million profit and the company made a net profit after tax of $2.5 million, up from a net loss of $12.7 million.
Simonds cut no staff during the period, Mr Simonds said.
But like other builders, the company is competing for the smaller pool of new work available. The Housing Industry Association trade body is predicting the lowest level of housing starts this financial year since 2013.
Mr Simonds said the company was competing by offering a wider range of products.
“It is around having some diversity in product mix,” he said.
“We have traditional retail mum-and-dad customers through display homes, we have insurance work we assist the [state government agency] VMIA with, we have a medium-density arm doing townhouse-style product.”
Simonds on Monday said the likely stabilisation of interest rates at the current level would boost the confidence of buyers and investors and that longer-term demand for housing remained strong.
“Simonds observed an increase in customer deposit taking in [the six months to December] compared with [the previous six months],” the company said.
“Management expect the longer-term volume outlook to be supported by strong future demand for residential housing.”
The controlled company foreshadowed the results with an announcement in October that it eked out a first-quarterly profit $100,000, its first profitable trading period in two years.