Simonds Group finds momentum as profit rebounds and WA venture takes shape

Profit recovery reaches $10.5 million

Simonds Group Limited (ASX:SIO) has turned a modest FY25 profit into its strongest annual result since listing, reporting statutory net profit after tax of $10.5 million for FY26, up from $1.0 million. Revenue from continuing operations rose 9.5% to $729.1 million, while EBITDA climbed 76.8% to $42.5 million.

The improvement was not simply a volume story. Site starts increased 16.1% to 1,772, but gross margin also expanded to 24.0% from 22.3%. Simonds attributed the improvement to pricing and procurement discipline, construction productivity, sales mix and benefits from integrating Dennis Family Homes, acquired in the prior financial year. The absence of $6.2 million in FY25 transaction and integration costs also lifted the year-on-year comparison.

The result extends the trajectory described in the FY26 profit surge, which reported the same headline earnings rebound and Western Australian expansion. Operating expenses rose 6.8% to $132.6 million, slower than revenue growth, helping EBITDA margin widen to 5.8% from 3.6%.

Cash remains the constraint on expansion

Simonds generated $25.3 million in operating cash flow, down from $39.4 million despite the stronger earnings result. Cash at year-end fell to $16.5 million from $23.3 million, while available liquidity declined to $39.1 million from $47.7 million. The movement reflected the $7.1 million settlement of deferred Dennis Family Homes consideration and heavier investment in display homes, inventory and customer-facing infrastructure.

Inventories and display homes rose to $31.9 million from $21.2 million, while accrued revenue increased to $50.7 million. Those balances are ordinary features of a builder’s expansion, but they also make cash conversion important: the auditor identified revenue recognition and work in progress as a key audit matter because revenue is recognised according to construction progress and estimated total costs.

Western Australia venture moves into investment phase

The company’s 50/50 joint venture with Perth-based Atlas Building gives Simonds a platform in Western Australia, following the entry outlined in the Western Australia joint venture. Simonds Homes WA recorded a $642,000 loss for FY26, leaving Simonds with a $321,000 share of the loss. The Group invested $1.336 million and carried the joint venture at $1.015 million at year-end.

There were no reported WA site starts by 30 June, so the venture remains an establishment-stage proposition rather than a material earnings contributor. Management said FY27 priorities include progressing the WA opportunity, expanding medium-density and investor channels, improving procurement and construction productivity, and using data, automation and artificial intelligence to strengthen execution.

Dividend returns as board faces governance scrutiny

The board declared a final dividend of 0.5 cents per share, fully franked, payable in November. It is a small distribution relative to the earnings rebound, but marks a return to dividends after none were declared for FY25.

The report also records a difficult governance backdrop. Shareholders delivered a second strike on the 2025 remuneration report, triggering a spill meeting in January 2026 at which four directors stood for re-election and were returned. PKF’s audit identified related-party relationships and transactions as a key audit matter, including construction contracts, property leases, advisory services and employee-related charges involving the Simonds family and associated entities. The Group said the arrangements were at arm’s length where applicable and that relevant balances had been settled after year-end.

Climate assurance outcome adds a disclosure risk

The most pointed qualification in the report concerns sustainability reporting. PKF’s limited-assurance review of specified climate disclosures under AASB S2 states that the review found those disclosures did not comply with the relevant requirements. The report also notes that the first-year disclosures omit formal interim emissions milestones, separately quantified climate-related capital expenditure and Scope 3 emissions, with Scope 3 reporting due to begin from FY27.

Simonds reported 2,900 tonnes of combined Scope 1 and Scope 2 emissions and set a gross target to reduce those emissions by 20% from the FY26 baseline by 2035. However, the company has not yet established interim milestones, a net-zero target or a dedicated sustainability function. That leaves FY27 as a year in which the quality, completeness and assurance status of its climate reporting will matter alongside the financial numbers.