You'll need to press the star key followed by the number one on your telephone keypad. I'd now like to hand the conference over to Mr. Bruce Nicholson, CEO. Please go ahead.
Thanks, Darcy. Good morning, everybody, and thank you for joining us. As you heard, my name is Bruce Nicholson. I'm the Managing Director and CEO of Fleetwood. I'm also joined today by Andrew Wackett, our CFO and Company Secretary, and together we'll take you through our results for FY 2023. I'll start by providing some introductory comments. Andrew will go through into some more detail into our financial results, and then I'll talk about our various business units and the outlook. Just flipping over to slide two in our presentation pack, at the moment, at Fleetwood, we continue to focus on our three core businesses. Our Building Solutions business, we're in the midst of a turnaround in the early stages of a transformation as we see the opportunity for long-term growth.
Our Community Solutions business, where we see significant opportunities to optimize Searipple in the near term and extend the business by pursuing the development of new community facilities and key worker accommodation. Our RV Solutions business, which continues to service the ongoing demand in recreational vehicles, caravans, camper trailers, and the motor home sector. If I move over to slide three now, we continue to work to bring to life our refreshed vision and purpose, and to embed our core values. Our vision is to be the leader in reimagining sustainable spaces, which touches all three of our operating businesses, albeit in different ways. Our vision and purpose are underpinned by five core values, which has been a key focus in the last twelve months. Zero harm to both our people and the environment, sorry, collaboration, integrity, accountability, and innovation.
If I move over to slide four, Fleetwood returned to profitability during FY 2023, with improved momentum demonstrated in the H2, delivering a full-year result of AUD 4.2 million EBITDA. Improved operating performance in the H2 saw our cash improved by AUD 6.7 million to AUD 46.6 million at the 30th of June 2023. A major focus on safety as the business stabilized, saw a significant improvement in the lost time, the group's lost time injury frequency rate, which was reduced by 59%. Building Solutions losses were substantially reduced as the FY 2022 major projects were closed out, and the implementation of our build, transform, and growth strategy gained momentum. Work on all FY 2022 major projects was completed early in the H2. I'm pleased to confirm that we've now closed out commercial negotiations on all of these difficult projects.
Close out costs on these projects, and many of the provisions we'd already taken during the year totaled AUD 3.3 million. We split AUD 900,000 in the H1 and AUD 2.3 million in the H2. This meant that the underlying loss for the H2 in Building Solutions was reduced to only AUD 900,000. The Building Solutions business has continued to target projects aligned with its current capability, and this focus saw the order book grow from AUD 87 million in December 2022 to AUD 127 million at June 2023. At the same time, staff numbers are down 7%, as we've centralized key functions and adopted greater standardization.
A highlight of the year was the June 2023 announcement of additional rooms booked by Rio Tinto under its accommodation agreement, which is expected to generate a further AUD 100-120 million in revenue until the end of the contract term in April 2027. I'm also pleased to announce that our improved operational performance and strong cash position has allowed us to reinstate our dividend policy and distribute a dividend of AUD 0.021 per share for Uncertain. At Fleetwood, we continue to embed the build, transform, and growth strategy in the business with the aim to focus on quality of revenue through diversification, generating sustainable margins, increasing utilization, and reducing overheads to improve earnings. This is underpinned by new leadership capability across the business to successfully execute our strategy.
If we now move over to slide five, I'll pass over to Andrew to focus on some more of our financial details.
Thanks, Bruce, and good morning, everyone. Improved results in Building and Community Solutions were partially offset by lower earnings from RV Solutions and higher corporate overheads. Building Solutions revenue declined by 11% due to lower major project revenues. Second half revenue of AUD 128 million was impacted by lower project win rates across the second and third quarters as the business was reset. Win rates and revenue improved markedly towards the end of the year, setting the business up for a stronger start to FY 2024. Still on Building Solutions, major project close out costs, as Bruce said, totaling AUD 3.3 million during the year, weighted AUD 2.3 million in the H2. This compares to FY 2022, where approximately 80% of AUD 19 million of the AUD 24.3 million loss was a result of underperformance on several major projects.
Community Solutions had a solid year, with EBITDA up 23% on FY 2022. The timing of major client shutdowns at Searipple Village saw an excellent performance in the Q4, with the highest occupancy and average room rates so far this cycle. This business is well-placed with long-term demand now contracted. RV Solutions saw reduced consumer discretionary demand emerge in the Q4. This changed the trend of the past two years and we also saw several aftermarket clients reduce their stock holdings leading into the end of the FY. Turning to slide six, the company maintained a stable net cash position after allowing for the payment of the AUD 14.1 million miners' contract provision made in FY 2022.
While net cash fell from AUD 55 million in June 2022 to AUD 46 million in June 2023, net cash actually increased from the December position of AUD 40 million, reflecting commercial settlement for several major projects and improved operational performance. CapEx remains broadly in line with our non-IFRS AASB 16 depreciation of our fixed assets, which is about AUD 9 million. We expect CapEx to increase a little bit in FY 2024 as we prepare suitable village for the upcoming increase in demand. On slide seven, on the balance sheet. Our balance sheet remains strong, with net cash of AUD 46.6 million. As I said before, working capital returned to more typical levels as the FY 2022 IRS contract provision was paid out during the year. The company continues to carry no balance sheet debt and retains AUD 62 million in undrawn credit facilities.
At the end of the period, AUD 19 million of the facilities were drawn for performance bonds and guarantees. Overall, bonding outstanding fell from AUD 27 million in June 2022 to AUD 19 million in June 2023, reflecting reduced exposure to major projects. Also, during the year, the company's banking facility was extended for a further two years. As Bruce said, the balance sheet position and improved earnings momentum means the company has resumed dividend payments with a fully franked final dividend of AUD 0.021 per share. The company's dividend policy remains to pay out 100% of net profit after tax, and we currently have AUD 0.20 per share in franking credits available to support up to AUD 0.46 per share in fully franked dividends.
In summary, we continue to manage our finances prudently, and we are maintaining the strength and flexibility to invest in the development of the business. Back to you, Bruce.
Thanks, thanks, Andrew. I'll move over to slide eight now, if I can, and I'll now walk through the different business units and the outlooks for each of them. As you've said, Building Solutions losses were substantially reduced as FY 2022 major projects were closed out and the implementation of our build transform and growth strategy gained momentum. As previously highlighted, major project close out costs, and all of our provisions during the year totaled AUD 13.3 million. Revenue for the year declined by 11% as expected, due to the lower major project revenues, and H2 revenue of AUD 127.7 million was impacted by low project win rates across the second and third quarters as we reset the business, as Andrew mentioned.
Win rates and revenue improved markedly towards the end of the year, setting the business up for a very strong start to the FY, 2024. Our Queensland business continued its excellent performance, where population growth is creating education and key worker accommodation demand, and pleasingly, Fleetwood was added to the QBuild social housing panel during the H2 of the year. Activity levels in Victoria and New South Wales also improved in the Q4 as renewed management turned growth performance. Western Australia made significant gains over the H2, and it's seeing the early signs of a strengthening market. Gross margins improved throughout the year as the benefit of our focus on repeatable modular works took effect, and we gained traction with our procurement savings. Pleasingly, Building Solutions achieved target margins in the Q4.
Overheads increased 3% for the year, with labor shortages continuing and competition for key staff in the broader construction industry remaining intense. This is reflected in market pressure, which saw costs rise despite lower staff numbers. We did, however, see material shortages ease further in the Q4. Overall, the business achieved its goal of an underlying profitability on a run, monthly run rate by year-end. If I move across to slide nine, the reset of the Building Solutions business commenced in December 2021. As I've previously spoken about, this involved qualifying work coming into our pipeline against key measures, including buildability for modular and our capability, the right margin, a deeper understanding of the risks and opportunities and how to manage them, and the right customers to partner with.
Having challenges of the major projects in our rearview mirror has allowed us to refocus, and this has seen the order book grow from AUD 87 million in December 2022 to AUD 127 million in June 2023, with small to medium projects that meet this criteria. Our business is continuing to consolidate its national functional leadership model to improve coordination and effectiveness of important functions such as sales, estimating and design, procurement, and manufacturing. During the year, the centralization of our design, estimating, and procurement functions was completed. Manufacturing KPIs are now in place across our eight factories and manufacturing hubs, and we're starting to see improved utilization and productivity across our business as we use these to drive our business decisions.
If I move to slide 10, our build transform and growth strategy provides the roadmap for medium- to long-term improvement in the quality and consistency of our earnings. The build phase involves improving capability, systems and processes, and brand awareness to underpin long-term sustainable growth. This includes aligning our national workflows and developing common processes and procedures across our business to deliver consistency, introducing sales and operational planning to improve the capability to push and to pull orders to optimize our factories, and as I've said, we're now measuring factory capacity and utilization, and this is driving our sales decisions and our operational planning decisions. Balancing build complexity with standardization of modular components will open up pathways to greater standardization for the Building Solutions business. Opportunities with government, including housing, education, defense, are expected to increase as the adoption of modular building gathers momentum.
The Western Australian Department of Housing and Queensland QBuild are now using modular solutions after engaging with Fleetwood, and our own proprietary housing designs will launch to the broader market in the H2 of the year in Queensland and New South Wales. We're receiving significant interest from government, community, and key worker housing accommodation providers on. During the year, a number of states announced a move to make kindergartens compulsory, which extends our offering in the education sector, and the business has already seen an uptick in demand for this. Fleetwood's strategy in the defense sector has been well-defined and is now underway. As we've said, this refocused focus has seen our order bank grow by almost 60% from AUD 87 million in December 2022 to AUD 127 million at the end of the FY.
It's also important to note that in addition to our order bank, Building Solutions generates approximately 50% of its annual revenue from long-term contracts or panel agreements in the education and housing sectors. This gives Fleetwood the ability to plan and manage utilization in many of its states and provides a solid foundation for the business. Our customers include state education departments, building and lifestyle developers, and state housing authorities. Building Solutions anticipates a continued improvement in earnings in FY 2024, which is expected to come from a combination of a solid order book, better quality margins, procurement savings, no impact from the major project cost overruns we've experienced, and careful overhead management. If I now move to slide 11. Our overhead staff numbers are down by 7% since June 2022, as activity on major projects reduces, and we consolidate these key functions.
A refocus on safety led to a 63% in Building Solutions' lost time injury frequency rate in the last FY. An example of aligning our national workforce and development of common processes and procedures to build a consistency is the centralization of our design, estimating, and procurement functions, which will generate benefits for the business over time. As I've said, factory capacity and utilization is now being modeled and driving sales and operational planning decisions. A focus on national procurement to reduce our costs by consolidating and 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, we've seen material savings in the FY ahead.
Over the medium term, we expect to see a stable and growing business able to effectively leverage the advantages of modular building, which include: reduced building time or speed, lower costs, especially when various design variations are considered, improved quality when compared to in situ buildings, and better environmental, social, and governance credentials, especially around waste reduction, sustainability, and the ability for us to recycle, repurpose, and reuse the buildings we create. I'll move across to slide 12 now. As Andrew mentioned, Community Solutions had a solid year, with EBITDA up 23% on FY 2022. The timing of major project shutdowns in Circle saw an excellent performance in the Q4, with the highest occupancy and average room rate so far this cycle. The five-year agreement with Rio Tinto, executed in July 2022, underpinned base utilization and profitability during the year.
It also created a strong negotiating position for ongoing discussions with additional clients to support planned shutdowns and major projects over the coming periods. A highlight of the year was the June 2023 announcement of additional rooms booked by Rio Tinto under its accommodation contract, which is expected to generate a further AUD 100 million-AUD 120 million in revenue until the end of the contract term in April 2027. During the year, we also secured contracts with Woodside and Yara Pilbara, further underpinning future demand. Opportunities remain for securing long-term demand in Searipple to support future earnings, which was a major focus of the business in FY 2023, along with planning for the village upgrades to support future occupancy. Our Searipple Village remains fully occupied. I'll move across to slide 13.
The outlook for Community Solutions is bright, with a strong prospect that Western Australia's northwestern will see significant future development of new projects in the oil and gas, fertilizer, and green energy sectors. Securing an existing demand from current customers places Fleetwood in a strong position for our medium term. The most significant new project during the year was the $6 billion Perdaman Urea project, which achieved financial close in April 2023, and will see the creation of approximately 2,000 construction and 200 permanent roles up in the Karratha region. There's a growing number of low-carbon projects that are currently under consideration in the northwest of WA. The requirements for housing to populate these projects with significant medium-term opportunities for Community Solutions. Commercialization of our uncertain energy management system, using the Fleetwood-developed drive technology, is underway.
Fleetwood, Fleetwood's development of the technology and availability to deliver, deliver through our Building Solutions business, positions the company as a digital market leader. 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, supported by our Building Solutions business and Fleetwood's balance sheet. If I move across to slide 14... RV Solutions saw reduced customer discretionary spending in the Q4 on rising interest rates. This resulted in lower revenue EBITDA in the H2 of the year. In the H1 of the year, the business continued its positive revenue performance, driven by ongoing strength in domestic tourism, albeit with ongoing global supply chain challenges.
The original equipment manufacturers in that segment experienced solid trading conditions throughout the year, as many manufacturers worked through the historic customer orders. The aftermarket segment noticeably softened in the Q4 of the year, and while underlying customer demand did fall, the business also saw, as Andrew mentioned, aftermarket market customers reducing their stock holdings as they head into the end of the FY. The business adopted a pass-through pricing practice strategy to key customers during the period, which largely maintained their product margins, but weren't enough to offset wage inflation and significant increases in property costs, which saw operating costs increase by 14% compared to FY 2022 and translated to lower EBITDA margins. Moving to slide 15. The medium-term outlook for RV Solutions remains solid. While international travel has resumed, the order book for manufacturers has resettled at historic levels.
The early part of FY 2024 has also seen some signs of restocking by our aftermarket customers. The business will remain in a strong position through our exposure to locally built RV market by our parts and accessories business, Camec, and to overflow in support through the services business, Northern RV. The booming caravan sales during the past two years will continue to deliver demand in our aftermarket service and renovation offering. Further price increases and work to right-size the business is underway, given we anticipate the business will normalize over the Q1 of this year. New product development is a major focus of the business. The new Invictus premium door has been launched to the market, while aluminum wall frames and the new sandwich panel, wall, roof, and door products are currently under trial with keen interest from multiple customers.
Several exciting new imported products and a range of upgrades are also coming to the market this year. The increase in secondhand van sales provides an opportunity for combining our products and the promotion of renovations for our NRV service offering. Challenges remain primarily around raw material supply and foreign exchange, as well as access and the cost of skilled labor. We are, however, seeing freight costs lowering. The potential impact of interest rates and interest rate rises, fuel increases and the impact on discretionary spending continues to be closely monitored. If I move across to slide 16 now. Based on the improved Building Solutions order backlog and bookings, we would anticipate a continued improvement in earnings momentum in FY 2024. Building and Community Solutions are gaining momentum.
All three businesses have clear plans to improve revenue quality, capture future opportunities, increase utilization, manage costs, and in doing so, improve our margins. The company has come off a particularly challenging two years, and in doing so, has become adept at identifying emerging challenges. I'm confident that our new refreshed and experienced leadership teams will continue to find ways to identify and successfully navigate these challenges as they occur. As we've said, our balance sheet remains solid, and we've been prudent in the way we've leveraged this strength to support growth. I'd like to thank all of our shareholders for your understanding as we work through the turnaround in Building Solutions business and implement our build, transform, and grow plans. With that, we'd now be happy to take any questions.
Thank you. If you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. The first question today comes from Matthew Chen from Wells Australia. Please go ahead.
Morning, Bruce and Andrew. Thanks for the opportunity. Just wanted to get an update on the progress of the building strategy, and how you're seeing that timeline on a return to break even in that segment. Thanks.
Thanks, Matthew, for the question. Look, the trajectory is positive. As I just said, we returned to a small profit in Building Solutions on an upfront rate by year-end. That was our aim. We've done that. We don't expect it to accelerate quickly, so we're not expecting it to turn around in a fast way. We're taking a prudent approach to that. We think it will. So certainly, we believe it'll be profitable in FY 2024. As I said, it's currently tracking sort of a little bit better than break even or near break even. We are optimistic that that will gain traction in the H1 and then continue to gain traction H2. As I said, we've got a strong order book with good quality margins in it.
We've also got procurement savings coming through, Matthew, so I hope that answers the question for you. I'm not sure I'm going to give you much more detail than that around our detailed forecasting model.
No, that's, that's very helpful. And just, following up on that order book, so that delta in the order book, can you talk to, the, the sources of that increase and, and I guess the quality of that order book? And I guess if that gives, you confidence in that, run rate, profitability run rate. Thanks.
Yeah. Yeah. So, there's been a combination of us expanding our education sector offering, Matthew. So we've had the kindergartens, it's been certainly an uptick in both Queensland and Victoria. We've picked up significant work in the private education sector in New South Wales. We've also picked up work in housing in WA, in housing in Queensland, and housing in Victoria. So it's not one, it is actually, we are prosecuting our diversification of revenues strategy, so that we're not entirely dependent on the education sector. And so I would argue three of those sectors are where we've seen growth. Queensland, we've done a bit of work in health, for example, in terms of key worker accommodation. There's work coming through the pipeline in the hire business.
We're manufacturing for a number of hire companies at the moment, particularly in South Australia and in New South Wales. There's been quite a bit of good quality work done to deliver on a diversification of revenue and reduce our reliance on the education sector. Does that answer your question for you, Matthew?
That's very helpful. Thanks. I'll pass it on, and I'll come back into the queue. Thank you.
Thank you. Once again, if you would like to ask a question, please press star one on your telephone and wait for your name to be announced. The next question comes from Tony Mitchell from Shoreham Partners. Please go ahead.
Thank you, Bruce and Andrew. A fantastic turnaround. What I'd like to ask you, Bruce, is: given the huge amount of interest in developing projects in the Karratha area, can you give us some idea of the total spend that all these different companies are looking to do within the next two years? I haven't got the data.
Thanks for the question, Tony. Actually, at the edge, I haven't got the data in front of me, and I would be wrong to try and guess because it is a moving feast, Tony. So I apologize if that sounds like I'm obfuscating the answer. But I'll take it. I will take it. There is upwards of 20 projects in the region being discussed. We are having open discussions with a number of interested parties around our Searipple operation.
I don't want to sort of... The answer is, the projects are all taking longer to come to market, and there's very speculative projects, and there's very real ones, such as, you know, the Clough Perdaman project that we talked about previously, Tony. Yeah. Okay. In terms of, I mean, it's hard for you to know, but how many of these real projects do you think will get off the ground in the next one, two years? I'm not sure I want to answer that, Tony. I think that, that's, that's a question for others. We're very focused on the stuff that's right in front of us right now.
As I've said, we have been very focused on layering Searipple, and clearly, the first and second tranche of offers and acceptance with Rio Tinto take Fleetwood well above half its capacity when their demand peaks. We're focused on the stuff that's near term right now, Tony, and as other opportunities come to fruition, we will sort of prosecute them. As I said, a lot of people are talking to us about speculative projects for a year, two years out, whether it's a solar project, a hydrogen project. There's a hydrogen pilot project being built for Yara up there at the moment. We're aware of all that. We're watching that closely. You know, obviously, that's subject to how that pilot project goes, Tony. So I might sort of pause here.
Andrew, I'm not sure whether you have anything you could add to it, because you're a bit closer over there in WA.
Yeah. Thanks, Bruce. I think, Tony, the way we look at it internally here is we look at the existing customer base in Karratha, which is, you know, we'd say Rio, Yara, and now Perdaman, as Bruce said, and we're very excited about all of their CapEx plans, and there are others than our fellow companies. But behind that, there is a wave of more speculative projects, as Bruce said, a lot of these new energy projects and the like. So we're monitoring all of those closely, and like Bruce said, we're trying to layer up the demand for Searipple and get the, you know, the highest return through the cycle that we can.
Okay, just as a follow-up then, where's the-- what's the state of the Perdaman negotiations at the moment? They are ongoing. Tony, I think it's fair to say that there's some rumors that they have secured their first tranche of accommodation, a smaller village, for their startup works. As I said, we are in continuing to have open negotiations with Saipem Clough joint venture. We're looking at their histograms. They're looking to talk to us about that. So it's an ongoing process, but we're also talking to multiple other parties in the region about other opportunities with Searipple as well. So they are just one of the people that we're talking about there, Tony.
Thank you. Once again, if you would like to ask a question, please press star one on your telephones and wait for your name to be announced. The next question comes from Caleb Wang from Pac Partners. Please go ahead.
Hey, Bruce and Andrew. Congrats on the turnaround. Just on the color on the WA, the increase in, well, what's getting you guys excited there? Is that the social and key worker housing, or is there a bit of mining going on as well?
Caleb, it's a combination of both. We've got a very strong position in social housing. Sorry, sorry, lifestyle housing over in WA and social housing now. We're seeing significant uplift in demand in the mining sector, and it's really about mining companies, particularly FIFO mining companies, having to refresh and upgrade the quality of their facilities on the ground up there. Some of the expectations are probably a bit much for us, but certainly we are, we're building mining SPQs again now. They're going out as fast as we're building them. We've got Frank Calip, so, we're seeing the mining sector start to ramp up, but that's probably driving the demand the most at the moment.
We've got a very secure base in terms of the housing sector, the lifestyle and social housing sector, and we see this as the strong upside. In fact, we've just turned on our production line over in WA, so we've actually moved back onto our production line in the factory, which hasn't been operating for several years, so.
Yep. All right, thank you. Just on Searipple. So the CapEx, do you see that disrupting occupancy levels at all, or?
Oh, look, of course, spending CapEx on anything will have some drawdown on our cash position cover, but we're in a good strong cash position to meet the commitment. It's not many-
Sorry, there's disrupting your occupancy, so you have to, like, close room down.
Oh, sorry. No, no.
Yeah.
No.
Mm-hmm.
Sorry.
Okay.
It's okay. No, no. Look, at the end of the day, we still have a reasonable amount of the village is unoccupied, so we can move people around in the village. It is about upgrading the older rooms that haven't been used for several years. It is around upgrading some of the facilities, and Searipple has multiple gyms, multiple swimming pools, and multiple rooms. We can actually move people around within the facility. It's a large facility, as you would know, and therefore, we don't see any real disruption to our current occupancy out there with that. In fact, we're doing it ahead of demand to make sure that the people actually get what they expect when they come to a high quality village like Searipple.
All right. Thank you, Bruce.
Thank you. As there are no further questions at this time, I'll now hand back to Mr. Nicholson for any closing remarks.
Thank you, Darcy. Look, on that sweet note, I'd like to thank you all for joining us this morning. I'd like to thank our investors for their patience as we've worked through the last two years of quite challenging circumstances. I'm quite positive with Andrew about the outlook for the business, and certainly look forward to seeing some of you on our roadshow in the next few days. With that, I'll close. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.