Fleetwood (ASX:FWD) share price soars 10% following half-year results announcement

The Fleetwood Corporation Limited (ASX: FWD) share price is soaring following the release of its preliminary half-year results for FY21. 

Today, the Fleetwood share price reached a 52 week high of $2.48. However, some profit taking has led its shares to slightly retreat to (at the time of writing) to $2.45, up 25%.

So, what did the company announce to cause the Fleetwood share price to push higher?

Performance update

In today’s release, the company highlighted that for the period ending December 31, it has continued its strong cash generation.

Preliminary results for the H1 FY21 term indicated Fleetwood has performed above expectations due to the impact caused by COVID-19.

Unaudited earnings before interest, tax, depreciation and amortisation (EBITDA) is predicted to jump between $15 million and $16 million. Previously, the company issued an EBITDA guidance of $12.8 million at its annual general meeting (AGM) held in November.

Strong cashflow generation is expected to net Fleetwood with a cash positive balance of $64 million. This comes after a first-dividend payment of $11.4 million that will be allocated to shareholders.

The board noted that it will reward investors with a dividend pay out ratio of 100% from its net profit after tax (NPAT) holdings.

The company is scheduled to release its half-year results on 25 February, 2021.

Let’s take a look at Fleetwood’s performance across the 3 business segments it operates in.

Accommodation solutions

In its accommodations solutions business, the Searipple Village in Karratha saw a recovery in occupancy rates early during the half. Major customer Rio Tinto Limited (ASX: RIO) renewed its tenancy contact for its workforce in December for 13 months.

Across to its Osprey Village, rooms remain fully booked, with the company holding a waiting list for potential tenants. Fleetwood said that the demand for its accommodation represents strength in the Port Hedland fly-in fly-out market.

Looking towards the second-half, the company noted that the strong performance will be unable to mimic its accommodation H1 earnings. This is because of rostering stability and additional village capacity at Karratha.

Building solutions

Despite a slow start to the first-half due to COVID-19 restrictions on building activity, the company rebounded later in the term.

Fleetwood secured two important contracts which boosted its order book to $140 million. The first includes a $41.5 million deal to manufacture and supply 460 modular cells for the Prison Infill Expansion Program in Victoria. The second, a $30 million project for Rio Tinto to upgrade its Ti Tree Rail Camp, located 170 kilometres south east of Karratha.

Fleetwood advised that the outlook for its building solutions is strong, and is well placed to benefit from anticipated Government stimulus spending.

RV solutions

Lastly, the RV solutions segment recorded a surge in monthly sales towards the back end of the first-half. The demand in domestic travel using an RV, away from large crowds and hotels, increased because of pandemic fears.

The company believes this market trend will continue to run into the second-half.

Words from the CEO

Fleetwood interim CEO, Andrew Wackett, reaffirmed the company’s continued performance by stating:

The first half result is shaping up as being very pleasing and one that continues our improving operational performance.

All businesses have continued to face significant challenges during the global pandemic, and we are pleased at the way our Company and people have responded. Having three business units and three diverse revenue streams has certainly helped us as a Company to weather the impact.

We continue to generate strong cashflow and our new dividend policy, increasing payouts to 100%, demonstrates to our shareholders we will continue to exercise restraint with our capital management.

Across the business we continue to prioritise sustainably improving margins, increasing utilisation and reducing overheads.

Fleetwood share price summary

The Fleetwood share has gained almost 20% when comparing the last 12 months. The company’s shares dipped to a multi-year low of $1.12 in March, before zooming higher on an upwards trajectory.

Based on the current share price, Fleetwood commands a market capitalisation of roughly $233 million.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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