Simonds Reports 5.6% Revenue Drop but EBITDA Climbs 12% in H1 FY25
Simonds Group reported a 5.6% revenue decline for the half year ended December 2024 but achieved a 12% rise in EBITDA, driven by higher margin projects and cost control. The company also announced a strategic acquisition to expand its footprint.
- Revenue down 5.6% to $318.1 million due to fewer site starts
- EBITDA up 12% to $13.6 million on improved margins and cost management
- Profit after tax from continuing operations increased 18% to $2.0 million
- Net assets rose to $20.4 million, supported by strong liquidity
- Binding agreement to acquire Dennis Family Homes, expanding market reach
Revenue Decline Reflects Softer Residential Demand
Simonds Group Limited (ASX: SIO), a major player in Australia's residential construction sector, reported a 5.6% decrease in revenue to $318.1 million for the half year ended 31 December 2024. This decline was primarily driven by a 23.8% drop in site starts, reflecting subdued demand amid ongoing macroeconomic pressures, particularly the impact of higher interest rates on homebuyer borrowing capacity.
Profitability Gains Through Margin Improvement and Cost Control
Despite the revenue setback, Simonds delivered a 12% increase in EBITDA to $13.6 million. The company attributed this improvement to a higher proportion of margin-accretive jobs commencing construction and disciplined expense management. Profit after tax from continuing operations rose 18% to $2.0 million, underscoring operational resilience in a challenging environment.
Balance Sheet Strength and Liquidity Position
Simonds maintained a healthy liquidity position with $32.4 million available, including $7.8 million in cash and $24.6 million in undrawn banking facilities. Net assets increased to $20.4 million as at 31 December 2024, up from $18.5 million six months earlier, reflecting sustained profitability and prudent balance sheet management.
Strategic Acquisition to Enhance Growth Prospects
In a significant strategic move, Simonds announced a binding agreement to acquire Dennis Family Homes Pty Ltd, a respected residential builder operating in Victoria and New South Wales. The $10 million transaction, expected to complete by early March 2025, will broaden Simonds’ product range and geographic footprint, potentially boosting volumes and pipeline jobs over the coming year.
Navigating Risks Amid Market Uncertainty
The company acknowledged ongoing risks from the macroeconomic environment, including continued pressure on retail customer borrowing capacity and housing affordability. Simonds is actively diversifying sales channels and investing in alternative markets to mitigate these headwinds. Additionally, the integration of Dennis Family Homes will require careful management to realise anticipated synergies without disrupting working capital or liquidity.
Bottom Line?
Simonds’ ability to grow EBITDA despite revenue pressures and its strategic acquisition signal cautious optimism for navigating a challenging housing market.
Questions in the middle?
- How will the integration of Dennis Family Homes impact Simonds’ operational efficiency and margins?
- What is the outlook for residential demand given ongoing interest rate pressures?
- Will Simonds resume dividend payments as profitability stabilises?
