Simonds Group Profits Defy Slowdown

Melbourne-based builder Simonds Group has defied soft market conditions to post a rise in revenues last financial year.

Simonds Group has built a rise in first-half earnings, with site starts lifting by 80 to 2,580 in the year ended June.

The ASX-listed homebuilder more than doubled revenue to $687.7 million and net profit to $10.1 million from $4 million and net cash flows up 184.4 per cent of the year prior to $5.9 million.

The group also increased its proportion of two-storey dwellings to 26 per cent from 18 per cent a year earlier.

Revenue of the company's training arm, Builders Academy Australia, fell 8.9 per cent to $10.2 million even as EBITDA earnings rose 50 per cent to $1.2 million.

While the figures suggest the turnaround, the troubled builder, which has lost 84 per cent of its share value since listing in late 2014, still faces challenges.

Once Victoria's largest detached home builder, Simonds has slipped down the rankings, placing third in the state, after Multiplex and Metricon, and fifth nationally.

In February of last year, the company appointed its third head in less than three years

Now headed up by former chief executive of Perth-based home builder BGC Residential, the group is now eyeing alternative housing markets, including specialist disability accommodation, to further pad out its pipeline and rebuild its market share.

“The Group continued to lift its performance and strengthen its financial position,” Simonds Group managing director Kelvin Ryan said.

“We are well positioned to maximise uplift in our traditional markets and further benefit from the expansion into new sales channels.

Ryan, who also previously worked at Downer EDI and Boral, pointed to a shift in product mix combined with a move away from highly customised, low-margin product, for the company's boost in revenue.

“Like others in the residential housing sector, we expect to see a decline in our housing starts — notwithstanding this — some positive macro factors, including relief in financing and lending criteria, suggest market confidence has improved post the Federal Election,” Ryan said.

The amount of new homes built across Australia is tipped to keep falling until next financial year, with a pick-up in housing sentiment taking some time to translate into more activity, new research suggests.

HIA expects detached house commencements to contract by 7.6 per cent in the 2020 financial year, particularly in the first six months, and remain stable for the following two years.