Good afternoon, ladies and gentlemen. Welcome to the 2023 Annual General Meeting of Fleetwood. Does that sound echoey, or is it just me? No, just the room. Anyway, I've met most of you, but my name is John Klepec, and I'm the chair of Fleetwood. Once again, we've taken the hybrid approach for this year's AGM, and thank you for your attendance, both here in the room and for those online. I'll start by the acknowledgement of country. I wish to begin by acknowledging the Gadigal people, the traditional custodians of the land on which we meet today, and pay my respects to their elders, past and present. We have a quorum, so I declare the meeting open. With me today is, on my right here, the Managing Director and CEO, Bruce Nicholson.
Next to Bruce is Adrienne Parker, who's Non-Executive Director and Chair of the Nominations and Diversity Committee. Next to Adrienne is Martin Munro, the Non-Executive Director and Chair of the Risk Committee. And over to the left here, we have Mark Southey, also everyone's Non-Executive Director and Chair of the Remuneration Committee. Next to Mark is Jeff Dowling, who's the Chair of the Audit Committee. And then, next to Jeff is Liz Maynard, the General Counsel and Company Secretary, and then Andrew Wackett, the company CFO and Company Secretary, also. The past 12 months have seen a return to profitability and positive momentum in the Building Solutions business towards the end of the financial year, despite a historically difficult construction market in Australia.
As Bruce will touch on in his address and presentation, the Building Solutions business has built even more momentum throughout the Q1 of FY 2024. The board, management, and staff remain absolutely focused on the need to generate an acceptable level of return on our assets for shareholders. So while we're heading in the right direction, there remains work to be done to capture the opportunity that exists, particularly in the market where the Building Solutions business competes and operates. The board and exec team remain focused on the implementation of the strategic plan, which remains appropriate and must continue to be progressed and refined, despite the ongoing attention the Building Solutions' operational issues have demanded of the executive in the last 12 months.
Significant opportunities remain for all Fleetwood businesses, not just the Building Solutions business, in the forthcoming financial year 2024, and we look forward to delivering on these benefits for the benefit of all our shareholders. FY 2023 marks the second anniversary of the appointment of Bruce Nicholson as our CEO. He took the reins of Fleetwood during a time of uncertainty, with the backdrop of the global pandemic. It wasn't that long ago. His leadership has been critical for Fleetwood successfully navigating the pandemic, recruiting key management to a new leadership team, and rebuilding parts of our flagship business for a return to profitability in FY 2024.
I would like to thank everyone here as shareholders for their ongoing support, and those online and those who aren't even here today, and acknowledge my fellow board members and over 600 employees in the business for their commitment, dedication, and efforts over the last 12 months. I remain personally excited about the Fleetwood's future and am committed to the entire group achieving the business transformation and performance we expect and know is possible in FY 2024 and beyond. I'll now hand over to our MD and CEO, Bruce Nicholson, who will present an in-depth operational performance review of Fleetwood and the outlook. More importantly for everyone here is the outlook for the current financial year. Over to you, Bruce.
Thanks, John. It's slide 5. Thank you. Just before I sort of kick off, this is Balwyn High School. It's a modern learning hub down in Victoria, 72 modules on a triple-story building. And I guess that, to me, represents the real opportunity the Building Solutions business does have to build these quality learning hubs and other facilities around Australia. That one was built in 2020. It's been in operation for a number of years, and you'll see these pictures as we go are actually all real buildings that we've done, both here in the East Coast and some in the West Coast. Thanks, John. I'm pleased to provide shareholders with an overview of FY 2023 and an update on our strategy and some insight into our path ahead.
I'd like to take a moment, however, to acknowledge the hard work and commitment of our people at Fleetwood as we work through the turnaround of our Building Solutions business, while at the same time prosecuting our Build, Transform,
and Grow strategy, and it's very pleasing to see the progress we've made in the past 12 months. Moving to slide 6. As we've said, the year-end results presentation, FY 2023 delivered mixed results across our three businesses. Building Solutions significantly reduced its losses while improving its order bank and quality of earnings. Searipple finished strongly and locked in forward bookings through to 2027, and we saw the impact of lower discretionary spending in our RV business as a results reset from COVID-19 driven demand period.
What is clear that our business has built momentum leading into FY 2024, and all three businesses have clear plans to improve our revenue quality, capture our opportunities, increase utilization, and manage costs, and in doing so, improve our earnings. On slide 7, we've continued to bring to life over the last 12 months our refreshed vision and values, which underpin 5 core values: zero harm to our people and the community... and the environment, sorry, collaboration, integrity, accountability, and innovation. The values guide the way we operate day-to-day across our business and have been integral in creating a positive culture within each of the businesses. We're now focused on bringing to life our purpose: to create innovative spaces so that people can thrive. I'm confident this will be a positive impact on our transformation and successful FY 2024 for Fleetwood. Moving to slide 8.
In FY 2023, Fleetwood returned to profitability, with improved momentum demonstrated in the second half... delivering a full-year result of AUD 4.2 million EBITDA, compared to a loss of AUD 12.3 million in FY 2022. The balance sheet remains strong, with a net cash of AUD 46.6 million as at the 30th of June 2023, due to improved operating performance in the second half. I'm also pleased that our improved operating performance and strong cash position allowed us to reinstate a dividend policy and distribute a dividend of AUD 0.021 per share, fully franked. A major focus on safety in the business, as the business stabilized, saw a significant improvement in the company's lost time injury frequency, which reduced by 59% last financial year.
A highlight of the year was that in June 2023, we announced the additional rooms booked by Rio Tinto under the Searipple Village agreement, which is expected to generate a further AUD 100 million to AUD 120 million in revenue until the end of the contract term in April 2027. The Building Solutions business has continued to target projects aligned with our current capability, and this focus has seen the order bank grow from AUD 87 million in December 2022 to AUD 127 million in June 2023. At the same time, our staff numbers are down 7% since June 2023, as we centralize key functions and adopt greater standardization across the business. Moving to slide 9. Building Solutions' revenue declined by 11%, as expected, due to the lower major project runoff.
Second half revenue of AUD 127.7 million was impacted by low-volume project wins across the Q2 and Q3 as the business started to reset. Win rates and revenue improved markedly towards the end of the year, setting the business up for a very strong start to FY 2024. Building Solutions' losses were substantially reduced in FY 2022, as major projects were closed out and the implementation of our Build, Transform, and Grow strategy gained momentum. Work on all major projects was completed early in the second half, and I'm pleased to confirm that we closed out all commercial negotiations on all of these projects. Close-out costs on these projects, net of our provisions during the year, totaled AUD 3.3 million. This meant that the underlying loss for the second half in Building Solutions was reduced to AUD 900,000.
This compared to our FY 2022, where approximately 80% of our AUD 24.3 million losses were as a result of the underperformance of several major projects. Overheads increased 3% for the year, with labor shortages continuing to come and competition for key staff in the broader construction industry remaining intense. This was particularly apparent in the white-collar space. This was reflected in wage pressure that saw our costs rise despite lower staff numbers. We did, however, see material shortages ease in the Q4. Overall, the business achieved its goal of underlying profit on a monthly run rate by year-end in the Building Solutions business. The Building Solutions reset, as I've previously spoken about, the reset commenced in December 2021.
This involves qualifying work that comes into our pipeline against four key measures, including buildability for modular and our capability; having the right margin; having a deeper understanding of how we play out the risks and opportunities on the project; and having the right customer to partner with. Having the challenging major projects well and truly in our rear vision mirror has allowed us to refocus. The business has consolidated its national functional leadership model to improve coordination and effectiveness of important functions, and manufacturing KPIs are now in place across our eight factories and manufacturing hubs. We're starting to see improved utilization and productivity across our business as we use these to drive our business decisions.
Shifting to our strategy and our outlook, our Build, Transform, and Grow strategy provides a roadmap to for medium- to long-term improvement in the quality and consistency of our earnings. The build phase involves improving capability, systems and processes, building brand awareness to underpin our long-term sustainable growth. This includes aligning national workflows and developing common processes and procedures to deliver consistently. Balancing build complexity with standardization of modular components will open pathways to greater efficiency. Opportunities within the government, including housing, education, and defense, are increasing as the adoption of modular building, particularly in regional areas, gathers momentum.
The WA Department of Housing and Queensland's QBuild are now using modular solutions after engagement with Fleetwood, and our proprietary housing designs were launched to the broader market in the second half of the year in Queensland and New South Wales, where we're seeing significant interest from government, community, and key worker housing providers. During the year, a number of states across Australia on the East Coast announced the move to make kindergartens compulsory for age three and above, which extends our offering in the education sector and the business that are already seen a significant uptick in demand. Fleetwood's strategy in defense sector has been defined and is well underway. As we've said, our refocus on this order bank book grew by 50% from AUD 87 million in December to AUD 127 million in June.
I'm pleased to confirm that it's continued to grow to AUD 142 million at the end of September 2023. It's important to note that in addition to this order book, Building Solutions generates about 50% of its annual revenue from long-term contracts and panel agreements in the education and housing sectors. This gives Fleetwood greater ability to plan and manage utilization in many of its states and provide a solid foundation for the business. Panel customers include state education departments, lifestyle village developers, and now state housing authorities. As I've previously said, factory capacity and utilization is now being monitored and is driving our sales and operational planning across Building Solutions. A focus on national procurement to reduce costs by consolidating our buying and leveraging the purchasing power of our national business is well underway.
Procurement savings have been identified and captured in major spend categories, and while the benefits were relatively minor in FY 2023, material savings are forecast in FY 2024, and we've seen these delivered to plan in our Q1. I'm pleased to also announce that combination of a solid order book, better quality margins, the procurement savings I've just mentioned, no impact of these major project cost overruns, and careful overhead management, has meant that Building Solutions has been profitable in the Q1.
Over the medium term, we see a stable and growing business able to effectively leverage the advantages of modular building, including: reduced build time, lower cost, especially when compared to design variations, improved quality with comparative to in situ builds, and better environmental, social, and governance credentials, especially around waste sustainability, and the ability for us to recycle, repurpose, and reuse the buildings we create. Moving to Community Solutions. We had a solid year, with EBITDA up 23% on FY 2022. The timing of major client shutdowns at Searipple saw an excellent performance in the Q4, with the highest occupancy and average room rate so far in this cycle, and we saw some of this flow over into the Q1 of FY 2024.
A highlight of the year was the June 2023 announcement of additional rooms booked by Rio Tinto under its accommodation contract, which is expected, as I've said, to generate a further AUD 100 million to AUD 120 million of revenue until the end of the contract term in April 2027. During the year, contracts were secured with Woodside and Yara Fertilizers, further underpinning future demand. The build business is well-placed, with long-term demand now contracted. Osprey Village remains fully occupied with a significant weight lift, and we are planning to resubmit a proposal for additional accommodation to the Western Australian Government this year. Our strategy and outlook for Community Solutions is buoyant, with strong prospect that the Western Australian Northwest will see significant future development of new projects in the oil and gas, fertilizer, and green energy sectors.
Securing existing demand from current customers places Fleetwood in a strong position for the medium term. A growing number of low-carbon projects are currently under consideration in the Northwest. In the near term, we're also seeing the need for investment in major repairs and maintenance and upgrades in the region as the existing aging infrastructure declines. The requirement to house and facilitate start for these projects is a significant medium-term opportunity for our Community Solutions business. Commercialization of our keyless lock and energy management system using the Fleetwood-developed Glyde technology is underway. Fleetwood's development of the technology is available to deliver through our Building Solutions business and positions the company as a potential digital market leader in modular.
In addition, Community Solutions is well-placed to pursue build, own, operate, and transfer or build-to-rent opportunities in several sectors, leveraging the ability to source new villages at a competitive cost through the Building Solutions business and Fleetwood's strong balance sheet. Moving over to RV Solutions, we saw reduced consumer discretionary demand emerge in the Q4, changing the trend over the past two years, as well as several aftermarket clients reducing their stock holdings, leading into the end of financial year. In the first half of the year, we saw continued positive revenue performance, driven by ongoing strength in the domestic tourism, albeit with ongoing global supply chain challenges. The original equipment manufacturers, or OEMs, segment experienced solid trading conditions during the year as many manufacturers worked through historic customer orders. The aftermarket segment softened noticeably in the Q4 of the year.
While underlying consumer demand fell, the business also saw the aftermarket customers destocking, as I just said. The business was able to pass through price increases to key customers during the period, which largely maintained our product margins, but were not enough to offset the wage inflation and significant increases we experienced in our property costs, which saw our operating costs increase by 14% compared to FY 2022 and translated to lower EBITDA margins. Looking at the outlook for RV Solutions, the medium-term outlook remains solid. While international travel has resumed, the forward order book for manufacturers resettled at historical levels. The early part of FY 2024 also saw some signs of restocking by the aftermarket customers. We expect demand to settle at lower levels, and we've reset the overhead already to actually accommodate this.
The business will remain in a strong position through its exposure to locally built RV market via the parts and accessories business, Camec, and to overseas imports through the services business in Northern RV. The booming caravan sales during the past two years will continue to deliver demand for our aftermarket services and the renovation offering we now have in the NRV business as well. Further price increases and work to right-size the business have been implemented over the Q1 of this year, and we're monitoring the demand closely. New product development is a major focus of the business, and the new Invictus premium door has been launched to the market, while aluminum wall frames and new sandwich panel walls, roofs, and floor products are currently under trial with a number of customers and very keen interest.
Several exciting new imported products and a range of upgrades are also coming to the market this year in RV. The increase in secondhand van sales provides this opportunity for combining our products and promotions, and this is why we've launched a service offering in our NRV business in Melbourne. Challenges remain primarily around raw material supply, foreign exchange, as well as access to the cost of skilled labor. Freight costs, however, are easing. The potential impact of recent interest rate rises on fuel increases and the impact of discretionary spending continues to be monitored very closely. The cost and margin pressure experienced in the second half of FY 2023 has continued into the Q1 of FY 2024.
While we've reset our overhead in the business, plans are in place to recoup these impacts through further price adjustments and accelerating our new product development for the balance of FY 2024. In summary, overall, the business is positioned to generate improved set of results for FY 2024. We've continued to embed the Build, Transform, and Grow strategy in the business, with the aim on focusing on the quality of revenue through, through diversification, through generating sustainable margins, through increasing utilization, and reducing overheads to improve earnings. This is underpinned by a new leadership capability across the business to successfully execute this strategy. The company's dividend policy remains to pay out 100% of our net profit after tax. Our balance sheet remains solid, and we'll be prudent in the way we leverage this to strength, to, to strengthen or support growth.
I'd like to thank all of our shareholders, holders for their support, and I look forward to keeping our shareholders up to date on our progress throughout the year. I'll now hand back to John.
Thank you, Bruce, for that, comprehensive overview of all of the three business units. Today's AGM is an opportunity for shareholders to hear from and put questions to myself, the board, the MD and CEO, Bruce, and our external auditors, Ernst & Young. Given the crossover between here, the room, and online people, I will outline some of the procedural matters associated with this meeting. We welcome shareholders and proxy holders attending in person or online to ask questions. As in past years, only shareholders, proxy holders, attorneys, and corporate representatives are permitted to vote and ask questions. There are two ways to ask a question: if here, by raising your hand, and we'll hand over a microphone for you to ask the question. If attending online, by typing and submitting a question on the online platform.
To ask a question, select the Q&A icon, type your question in the text box. Once you've finished typing, make sure to hit the Send button so we receive it. So for those shareholders or proxy holders attending online who wish to ask a question verbally, please follow the instructions written below the broadcast that you are viewing. Information about the submission of questions via the online platform is set out in our online meeting guide, available on our website. If your question relates to a specific item of business, please refer to that item of business when you submit your question. Please also ensure your questions are relevant to shareholders as a whole. So are there any questions from any shareholders, either here in the room or online, of my address or the MD and CEO's presentation, or anything else concerning Fleetwood Limited?
Hello, everyone, Jordan from Phoenix Portfolios. Just wondered if I could ask on Abernethy Road at Perth Airport, that we hold on our balance sheet. Given many investors probably don't even know it's there, or potential investors don't know that it's there and don't value it in the stock, would we consider a sale and leaseback and perhaps using that capital to buy back shares, given where they're trading?
Look, a potential sale and leaseback of that property could be done. But when we've looked at it, if we were to move to, you know, the logistics of moving to another property, because there are inherent things with the Abernethy Road property. If we were to make a move or do something with that, you'd want to go to a better facility. Finding that facility is not easy, and the cost, the return of a lease commitment versus the release of capital that you could get from selling it, the equation there is not overwhelmingly in favor of selling the property. So commercially, it suits to retain the property.
Not to say we wouldn't look at it, but it's not something that is pressing the agenda at the moment, and you need an alternative site, if we were to go somewhere else. So the preference would be to go to find a new site rather than leaseback just for a financial transaction. So if a site was to present itself that was better for what we would use it for, we would look at it. Otherwise, we're happy with the arrangements that we currently have. Tony, you want to have a microphone? We can all hear you. Probably, you're pretty close.
Well done. Can you... You, you mentioned that there are going to be-- you've had 7% staff cuts, which is around 42 people. Are there going to be any further staff cuts in this financial year?
Bruce?
Actually, no, Tony. In fact, probably quite the contrary. The staff cuts are coming from a number of things. As the major projects were able to actually pull people out, so we pulled a lot of project teams out and a lot of admin people out. We also centralized design and estimating. What we're finding now is, as the order bank is growing, we're having to put more design and estimating resources back in because the technology is not there to do anything automated at this stage. So, it's actually stabilized, and actually, we're also now starting to see the factory numbers go up, so our blue-collar employees. We're certainly not seeing much of a lift in our white collar.
Certainly, we're seeing blue-collar employees go up, certainly in our Victorian business and our New South Wales business, which have had the largest uptick in the order bank. It's just going to be natural, as I said. We are still seeing a fair bit of wage pressure, though, inflation. It is that white-collar space, so project managers, design estimating staff are very highly sought after, and good ones are expensive.
Definitely. Now, again, follow-up. We're on a roll.
We're on a roll. I've got a few, actually.
Um-
You've mentioned the bookings at Searipple out to 2027. Could you give us an idea of what the utilization rate would be with the existing bookings out to 2027?
No, Tony. Sorry, we have histograms.
Yeah.
As I've said, right now, we've got a very low ebb there, so it would probably be in the 20% to 25% range today-
Yep
... after the shutdowns.
Yep.
We've seen the Perdaman project pushed back, so while we didn't get the first tranche of that, we've seen that pushed back around three months. The numbers could be north of 50% by this time next year. Hit me under the table, Linda, if I get this wrong. But, but it's on a histogram, Tony.
Yeah.
So there is some fluidity with that, was what I'm saying. Okay?
Right. Right.
Certainly, we're seeing demand come up, and there are other smaller projects that have come in recently that could fill some gaps with us.
Mm.
We're not a shoo-in for those. We've got to compete for them.
Mm.
Certainly, we'd expect utilization to be north of 50% over the cycle.
... without any major announcements. Right, okay.
I would add to that, Perdaman is not the only game in town.
No, no. Exactly. How many more rooms can you add to Osprey?
We've actually done the work on this, Tony, and we could, we could actually put another 200 rooms in if the planners approve it. So we do have to go back through a planning process for that, and if we can justify the fact that there is a need, we have the potential. I've got to make the decision on whether I manage capacity in the market or whether, whether I chase the extra rooms. And given the cyclical nature of that business, our choice today is to manage room capacity, not put additional rooms into a market that could turn off in 3 years or 4 years' time.
Right. Right, right.
Yeah, the trick with that market is the cyclical nature of it. You know, you get caught the wrong side of that, you have a lot of rooms empty. But there is land adjoining the site that can be developed, so you need a developer's mentality to come in there and we can provide the units. Someone else and we can operate the site, but that the developer's risk, whether the return on that risk is worth it in that market, is where it comes unstuck.
We have a... Sorry, John. We have a bit of an interesting cycle up there because the camp is reaching sort of the end of its life. So this is probably the last cycle before it's going to need a major overhaul. And so part of our thinking was, if we were to put more rooms up, they would ultimately end up as a replacement for the next downturn cycle. But as I said, we're balancing at the moment capacity. At the moment, there's excess capacity in the market right now, even with the Perdaman project kicking off.
Mm.
My view is our right choice at the moment is to manage utilization and price.
Would you ever consider setting up a similar mining accommodation village in a place like Port Hedland, which is booming as well?
As I said, we're actually actively pursuing build-own-operate and build-own-to-rent, but opportunities now like Searipple.
Right.
So we've promoted Giles to WA MGM to run our communities business and get out of the day-to-day of Building Solutions.
Mm.
And he's, he's actively now putting his mind to what the next one of those looks like. And there's more than just WA. This is not-
Yes, yes.
There's stuff in the energy cycle over here. There's stuff we've been talking to in the Orange area. Because there's a combination of people, and WA's got the same experience: they need mining accommodation in the short term, but they need social and affordable housing in the longer term. So there's a different type of product, and the product that we're creating now in terms of our housing-
Mm
... the IP we have in that, is very well suited to that.
How would you finance like something like that if it was, you know, reasonable?
Off-balance sheet. So we'd be looking for partners. So we don't want to take the risk on the civils and-
No
... We know what happens with a project when we do that.
Yeah, yeah.
So we'd look for a partner to take the risk in that space.
Mm.
We could build and operate the facility well, and we'd also look for a funder to do debt and equity for us.
If we're sitting here in 12 months' time, what, what degree of probability would you give that you'd be doing a new project like that?
Less than 50%.
Less than 50?
Because we've got to find the right counterparty, Tony.
Right.
Yeah, so I, I'd say even less.
Yeah.
Yeah, you need a big change in mindset up there as well. The incumbents, the two main mining companies that have their camps there, want to own the camp, BHP and FMG.
Mm.
If there's a change in that, that they don't want to own their camp and control their own destiny,
Mm
... there's a whole different game. But you need the core people that use that for shutdowns, et cetera, they need to say, "Okay, I'm happy to be at the whim of the market.
Right.
That to date, that hasn't occurred. So two biggest players in town have to have a change in thinking.
But-
Because the other side of it is all the other ancillaries, it just becomes a higher risk that you have a camp that's sometimes empty.
Mm.
Well, we would know. I mean, there was an opportunity, I think I've mentioned it, a year ago, which we looked at, which was a 1,500-person camp in Port Hedland for BHP, that went to market. That's public news. We initially put an expression of interest in on that. Because of everything else that was going on, we thought we didn't have the bandwidth, so we pulled away from it. That actually ultimately fell over.
Right.
So what I'm saying is, you know, those things... Now, there is potential for a 500-person camp. But again, the layers of management in BHP, it could be gone in a heartbeat.
Can I ask this, Why hasn't the company made a profit forecast for 2024? Is it because you've got too many variables and it's too difficult to do, or could you give a, like a EBITDA range, for example?
No, not this year, but we will. When there's a greater track record and there's less volatility, which is what we've had, we will, you know, we can make range forecasts. However, you have a large driver Community Solutions, which timing-wise, are quarter out, quarter in, you know, which are part of the financial year that the rooms come in, et cetera, it has a massive impact.
Mm.
So it's the volatility. The volatility of one of the core pieces of the business doesn't lend itself to putting numbers out there, 'cause then you're coming out giving revisions, et cetera, so it doesn't serve-
Mm
... you know, so-
That said, John, there's already three analyst reports out. Very public.
Yes.
We agree with the numbers that look in there.
Right, okay.
We're comfortable with those numbers.
Okay, just one-
Last question.
Okay.
Make it your best one.
Um, okay.
We have to give everyone else a chance.
Other directors.
Okay, okay. The gentleman before mentioned the possibility of a buyback. Would the company look at doing a buyback, an on-market buyback, given where the share price is?
Oh, we've looked at... And it's always open to buy back shares. It's every company, listed company can do it when they like, and we're no different to others. We would look at it if the circumstances were right. When we've looked at it in the past, they haven't been right. You know, when you look at the cash that's on the balance sheet, it does have variability over the course of the year and over the course of a month. So don't look at that we're sitting on this massive, big cash pile and not doing anything with it. And, you know, we're not silly. If, you know, if the share price was...
I don't, I wouldn't quote a number, but if it was, you know, beneficial, we would look at it for the, you know, optimum capital management. But there are restraints on that as well, so it's not, you know, you know. There's a lot of things that go into that, into that pot. But, it's always there. We have, we've looked at it, said no, and we'll look at it again in the future. So I'm not going to say we would or we wouldn't, it depends on the circumstances.
If I can give some flavor around that, John. We've actually just run a recent assessment again. We've had another look at it again, and I guess there's a couple of things here. One is, as you would note in our balance sheet, there was a big chunk of the cash we had was prepayments. We are currently drawing those prepayments down. And because there is a large contract involved in that, we don't expect prepayments to come. The other thing is we have this big cycle in the business, particularly in the education sector with-
Mm
... space with relocatable schools, where we actually do an enormous amount of work and don't get paid for three months. So we have a very big swing around the Christmas period and into January, February, March, and even April, with our working capital. And it can be many, many—tens of millions of AUD. So we've done a forecast. Right now, that forecast suggests it would not be prudent for us to do a share buyback. And that's why, that's why I guess we're sort of saying not, that's not on the agenda right now, Tony.
Okay, no one else? Oh, here we go. Yeah.
Thank you. Thanks. So, just on Searipple, what's the gross profit there?
We don't... Well, you, the results that have been presented is the level of results that we, we give in the segmental analysis in the annual report, so we have nothing to add than what's in there already.
Okay. Can I just ask, in terms of the manufacturing programs that are being run, what are the key issues which you're finding are holding back efficient production, effective manufacturing?
Look, I can give you a bit of experience. I went overseas and checked out the UK to look at this. It is industry-wide, so it is that feast or famine in factories. So it's the ability to get quality work in the factory and get it through in a timely fashion, then replace it with something. So to give you an example, the big projects we had got into our factory choked the factory with supply chain constraints as a result of COVID and other things. We couldn't get them out, so factories were sitting there ostensibly idle, with a very fixed overhead. Where we have a significant advantage in Australia versus, I'll call them the enemy, our competitors, is that we have, as I said, seven factories and manufacturing hubs around Australia.
So our ability to leverage. We actually took the board through it today. We went into our Sydney factory here. So the Sydney factory is ostensibly at about 70% utilized at the moment. So it's the highest it's been, certainly since I've been here. A number of buildings in that were for Victoria. There's buildings in there about to go in that'll be for Queensland, so we're actually leveraging that. So the biggest constraint tends to be bringing the work in in a timely fashion and getting it through the factory in a timely fashion and, probably more importantly, getting it out.
One of the things I looked at in the UK was the factories that have gone into full automation, and they've moved away from what I'd call the builder or construction, which is in many ways what modular currently is in Australia, to full automation. While I was in the UK, two went broke. Their problem is they can't get it out of the factory, so their production lines get completely blocked up. So they can control all of the supply chain in a fully automated sense until they get to the site works, and then there's somebody in the town planning department or a civil contractor or the weather can affect that and stop everything, and that just blocks all the way back up through the supply chain. So they're the biggest things.
So we're looking at how we utilize this floor space, which ultimately defrays fixed costs for the business, and then we work on how fast we can get it through the factory. And I've got to say, it's a work in progress 'cause we've only started to get real traction as that order bank has built. Okay? And so, you know, right now, you know, I speak to the guys in the factory, and they'll say to me, "The factory's full." You know, I look and I say: "Well, there's actually space here, here, and here, and here." But in their minds, it's full because they're thinking from a different sense. As I said, I don't think about one factory at a time. I think about the entire East Coast footprint and our ability to leverage-
Mm
...that, which is what our competitors don't have here.
Bruce, what is it that's holding up getting the gear out the door?
Tends to be the client. The client's not ready for it, doesn't want it. The weather affects them. They... I mean, we've had school classrooms in a lot of circumstances, and we're certainly insisting on now we get paid rental if they can't get it out the door, 'cause we have to do something with it. We didn't on the quarantine facilities and a number of other major projects, but we do now. It tends to be the client gets delayed. So we had a school that sat in our storage yard for 18 months in Queensland because they couldn't get town planning approval on MacGregor High School. Just sat there.
Now, we—they paid us rent for that, and, you know, we—as a taxpayer, you think: "God Almighty!" But that, that tends to be the challenge, getting it out the, out the gate, is the client. There is some still, still some supply constraints. I mean, our procurement has done a couple of things. One is it's reduced our costs. The other thing, it's freed up supply to us, so we've become, you know, a tier one customer now because we're buying nationally. But certainly windows are a long lead item. It's hard to get windows in Australia at the moment because all the componentry is manufactured overseas, and it's only put together in Australia. So that, that's a unique one.
So we will. We've got orders now, we've been paid to order windows for jobs we haven't won yet, for certain clients.
Okay, is there any questions online? All right... But is there any questions online?
Yes, there is.
Oh, there is?
Yes.
Well, let's take this one first, and then we'll go to the online ones.
How important is social housing in the mix? Do you think that's a big future?
We actually think it's a huge... Sorry, John.
Mm-hmm.
We think it's actually a huge future for us. We've actually put a special segment manager on who's chasing that space for us. The challenge, it's an interesting one. We had some investors come out. We've actually built three homes here in Sydney as display homes. We've built three in Queensland as well, and, you know, once you've been in them and seen them and felt them, you think: "Wow, this is fantastic!" And they are very much in that social and affordable housing space, and key worker or essential worker accommodation. In fact, we've just sold 10 of the one-bedder houses to the Queensland Health Department for nurses and doctors accommodation in remote Queensland. And so we see it as a massive opportunity for us, and we're actually right in the sweet spot in terms of our capacity to do it.
The challenge is government sort themselves out, to be quite blunt. You know, we're on the QBuild panel now. We're on the WADOC panel. But you know, government just needs to get its stuff sorted, and then we'll have a half a chance of getting stuff in there. We could, we could produce a lot of housing through our factories. But as I said, sometimes they spend three months on community consultation. Some poor family's living in a castle.
Or weeks and months on where the cabinet goes, instead of, "Well, I need 200 houses here by this date." So they're focusing on some insignificant issues that everyone gets involved.
We see it as a very big segment for us in the future, and certainly our revenue diversification under the Build, Transform, and Grow-
Mm
... is social. We haven't talked about affordable, 'cause it's very hard to define what affordable housing is. You know, Harry Triguboff builds million-dollar apartments and calls them affordable, so I'm not sure what that is. But social housing and key worker accommodation, two very strong segments that we think are our growth future.
Yeah, and building those, I'll add to it, having been through the three units today, having seen them, touched and feel them, the perception issue of modular housing is still an issue that we encounter, i.e., you know, perception of the basic mining camp, or Coates Hire units that we produce. That's a product, but it's not where people want to live. Whereas when they see, "Oh, this is a modular house," you cannot tell the difference between a modular house and a in situ build.
So we've had probably 24 government and community housing providers through those houses in the last couple of months, and they're amazed at what they are. They're the... And to be fair, we're finding a bit of a push. There's this perception issue, like, HIA in Queensland came out and said, "You can't have people living in wobbly, wobbly tin boxes. That's not fair." So shots fired, okay?
Yeah.
We're a disrupter to their segment. We don't actually want to be competing against HIA, but go and do your in situ, but that's fine. We see a particular segment in affordable social housing and key worker accommodation, particularly in remote locations where you can't get services, you can't get trades, you can't get materials.
Oh, regionally, it's a no-brainer, you know, to take a modular house. Okay, is that all? Yep. Over to the online questions. Liz?
Chairman, Chairman, so we've received the following question from Mr. Richard Thackray and Ms. Angela Clancy: "You have announced revenue of the Rio Tinto contract but have not announced the number of rooms associated with the contract or profitability. What are shareholders to make of the announcement?
What are shareholders to make of the announcement is, it's very good. It provides an underlying... Look, you don't have to be a rocket scientist to do the mathematics backwards. If you work out the revenue over the period of time, you can, if you want to call up a village in Karratha, you can get a room rate, market room rate, so you can work it backwards. You know, there is competitive information there that we do not release to the market for obvious reasons, and also confidentiality with the customer concerned. So, I would encourage the shareholder to, if they're interested in the minute detail, room rates, whatever, you can find them if you want them. But, it's not something we release and look at.
But, it's an underlying base for that, for that village that is good for the company. As I said before, here, Perdaman is not the only game in town. Is that the only one?
There are no other questions.
Good. That's the most questions I've ever had in any forum for quite a period of time, so I appreciate everyone's interest. So now we'll move to the more formal part of the meeting and deal with the resolutions that we have. So I declare, formally declare the voting open on all items. Just for a bit of housekeeping, how to vote, for those who haven't already voted. Voting today will be conducted by way of a poll on all items of business in order to provide you with enough time to vote. And in case you're not able to stay for the full meeting, we've already opened the voting for every resolution. So if you want to vote for all of them and leave, so be it.
If you're eligible to vote at this meeting, there are two ways to vote, cast your vote: in person or online via the, the platform that you are viewing at the moment online. If you're present in person, you may vote using the green voting card, which there's one there. Bruce, if you want to hold that one up, which you're handed when you entered the room. The voting card is for all resolutions. When called upon to vote, please do so by marking your voting card either for, for the resolution, against the resolution, or abstaining. Your voting cards will be collected prior to the end of the meeting. If you do not have a pen, we can provide one.
And if you don't have a voting card and would need one, raise your hand, and we will have someone deal with it. So we're all good to go? For those casting their vote using the online platform, press the Vote icon, and all resolutions will be activated with the voting options in front of you. To cast your vote, simply select the option you wish to make. A tick will appear to confirm the receipt of your vote. There is no need to hit a Submit or Enter button, as the vote is automatically recorded. If you decide to change your vote, select Click here to change your vote and select a different option to override your initial voting.
You can change your vote up until the end of the meeting, which will be five or 10 minutes' time. If you require any technical assistance during the meeting, please refer to our online meeting guide available on our website or contact Computershare. So over to the resolutions. We have worked hard to ensure this webcast runs smoothly for those online. However, should you experience any technical difficulties, a recording of the meeting will be made available on our website after we conclude. The first item of business is to receive and consider the financial statements of the company and reports of the directors and auditor for the year ended 30 June 2023. This item of business does not require a vote.
However, the reports are open for questions, and we've arranged for the company's auditors from EY to be available today to answer any questions about the conduct of the audit, the prep of the audit, and content of the auditor's report. If you like, the accounting policies adopted in preparing the financial statements and auditors' independence. Is there any questions relating to this item of business from anyone here in the room or online? No one here in the room. Nothing online. We'll move to the next item of business. The remaining items are resolutions for your consideration. I intend to vote all open proxies held in favor, in favor of all the three resolutions that are coming. First of all, resolution one.
The resolution one is to adopt the remuneration report that forms part of the directors' report in the company's annual report for the financial year ended thirtieth of June, 2023. The remuneration report details the principles used to determine the nature and amount of remuneration, sets out the remuneration details of each director and other senior executives of Fleetwood, and provides a detailed summary of the short- and long-term incentives and how performance is measured against them. Voting on the resolution is not binding on the company or directors and is advisory only. The proxy votes in relation to resolution one are on the screen. Are there any questions in relation to the resolution of the remuneration report? Nothing online, Liz?
Nothing.
So I now put formally to the meeting that the remuneration report for the year ended 30th of June, 2023, and as set out in the 2023 annual report, be adopted. Please select your vote by marking or casting one of the options available if you've not already done so. Okay, we'll move over to resolution 2A. There's 2, the resolution 2 is the 2 directors. We now, the first one being the re-election of Adrienne Parker. I'm very pleased to propose the re-election of Adrienne as a director of Fleetwood. Adrienne was appointed as a non-executive director in August 2017, and thereafter, Chair of the Nominations and Diversity Committee. A copy of Adrienne's bio is set out in the notice of annual general meeting and is on our website.
The board, in the absence of Adrienne, unanimously recommends that shareholders vote in favor of the resolution. The proxy results for this resolution are on the screen. Are there any questions from the floor or online in relation to Adrienne's re-election as a director?
Chairman.
No question. So I now formally put to the meeting that Adrienne Parker, being a director of the company, he retires in accordance with the Rule 15.6 of Fleetwood's Constitution, and being eligible, is re-elected as a director of Fleetwood. Please select your vote by marking or casting one of the options available if you've not already done so. We now move to resolution 2B, the re-election of Martin Munro. I'm very pleased to propose the re-election of Martin as a director of Fleetwood. Martin was appointed as a non-executive director in June 2020, and thereafter, as Chairman of the Risk Committee. A copy of Martin's bio is set out in the notice of AGM and is on our website. The board, in the absence of Martin, unanimously recommends that shareholders vote in favor of the resolution.
The results are on the screen, the proxy results in relation to resolution 2B. Are there any questions from the floor or online? No.
Chairman.
So I now put to the meeting formally, that Martin Munro, being a director of the company, he retires in accordance with Rule 15.6 of Fleetwood's Constitution, and being eligible, is re-elected as a director of Fleetwood. Please select your vote, marking or casting one of the options available if you've not already done so. All done. Now over to the last resolution. Resolution three is to seek approval of the issue of 161,692 performance rights to the MD and CEO of the company, Bruce Nicholson, and the issue of shares following any vesting of the performance rights. This is in accordance with Fleetwood's long-term incentive plan for the FY 2024 year.
The information that must be provided to shareholders in order to obtain shareholder approval under Listing Rule 10.4, and the terms of the long-term incentive plan are set out in the notice of annual general meeting. The proxy results in relation to this resolution 3 are on the screen in front of me/us. Are there any questions from the floor or online in relation to this resolution? No questions on the floor. We're all exhausted.
I put it to the meeting that for the purpose of ASX Listing Rule 10.14, and for all other purposes, shareholders approve, as further described in the explanatory notes, the issue of 161,692 performance rights, and the issue of shares following any vesting of the performance rights in accordance with the long-term incentive plan to the Managing Director and Chief Executive Officer of the company, Bruce Nicholson, in relation to the FY 2024 financial year. Once again, please select your vote by marking or casting one of the options available if you've not already done so. Okay, ladies and gentlemen, that concludes our discussion on the items of business. I thank you for your attendance here today, and I'll now... and for those joined, who joined us online, I now close the voting system.
The final votes will be tallied, and results will be released to the ASX either later today or overnight, I'd say, maybe, or if the time is sufficient, but before trading tomorrow. That concludes the meeting for this year. Thank you for your attendance today and look forward to seeing you all again. Yes?
Uh, John?
Yes.
Sorry to ask a question.
That's all right.
Uh-
Off the record one.
You can put this on the record if you like.
There's no record. There's no reporters here, so there's no record.
Well, whatever the song and dance is. But, I'm just interested if you have any insight as to why, in regard to the re-election of the two directors, 13% of the votes were against that?
Oof! I know who voted against those, but the short answer to your question is no, I don't know. I don't know why. It's not, it's just a no vote.
Do you think they ticked the wrong box?
No, I don't think they ticked the wrong box. I don't think they ticked the wrong box. Everyone's entitled to vote as they would like. You have to ask the shareholder concerned.
Was there a proxy advisor report which?
No-
But-
... it's not my understanding is it's not nothing to do with the proxy advisor report. Pretty sure it's not. It's just a matter for the shareholder was against those resolutions. Like I said, you need to seek out that shareholder and ask him, but the reasons why, I don't know.
So that's one particular shareholder?
Yes, predominantly. Correct me if I'm wrong, but yeah, the majority of it, yes.
Okay, thank you.
It's not like there's 20 of them, all saying no, and it's not... Anyway. We're just taking more questions. You throw us, threw us there outside of the agenda, outside the format. Good tactic. But anyway, thanks for everyone. We're open, anyone who wants to seek any questions from us, approach anyone on the board directly. Happy to talk to anyone here today, and in the future. Tony, you can keep trying, getting more than what we disclose on market, but we'll keep on pushing back. And anyway, thanks, everyone. We'll close the meeting, and like I said, anyone who wants to discuss anything, happy to talk.