The Dale Alcock-led group has posted a loss for the first time in its 40-year history, citing unprecedented challenges felt by the industry nationwide.
ABN Group has posted a $42.5 million loss after tax for the year to June 2022, in the first time the Dale Alcock led business has entered the red in its 40-year history.
The Leederville-headquartered company, which has operations in WA and Victoria, cited a “perfect storm” of COVID, global supply chain disruption and labour constraints for the results.
However, the building group is positive about its future and confident it will return to the black next year.
Its result, expected to be lodged with the Australian Securities and Investment Commission today, show revenue of $1.21 billion in FY22, down slightly from $1.22 billion in the prior financial year.
A bigger factor in the group's bottom-line loss was a jump in expenses.
ABN Group’s cost of sales increased from $890.5 million in FY21 to $895.7 million in FY22, its commission paid increased from $6.7 million to $16.6 million and its staffing costs increased from $212.3 million to $226.8 million.
It also posted an impairment expense of $5.29 million, linked to its commercial construction arm PACT.
ABN Group’s balance sheet remains strong, with cash and cash equivalents of $61.2 million and total assets of $415.9 million, including property development opportunities that are yet to be fully monetised.
Managing director Dale Alcock said the results reflected the issues facing the industry in the past two years, which ABN Group was not immune to.
“In our 40 years in this business, this is a confluence of events we’ve never before seen in the building industry,” he said.
“These financial results, while not what we would like, were no surprise given the pressures and challenges faced by our industry across the country.”
ABN Group, which ranks as the state’s second top residential builder on Business News' Data & Insights, notched 4,366 home starts and 3,371 completions in Western Australia and Victoria in FY22.
While the company’s Victorian operations remained profitable in FY22, its Western Australian arm was hampered by a combination of factors.
“The introduction of the building stimulus grants sent our industry into an incredibly steep incline to try to meet surging demand,” Mr Alcock said.
“We’ve also been dealing with the wide-ranging impacts of the global pandemic, and more recently, the effects of the Russian-Ukraine war and significant eastern states flooding, disrupting building inputs and driving inflation.
“As a result, we experienced significant increases in the cost of delivering building works, including building materials, site labour expenses and construction delays.”
He added that he had seen conditions start to normalise in recent months, with materials easier to procure and trade availability easing.
“The positive thing we’re seeing now is full availability of materials and coming through into a Spring pattern now from a WA perspective we are getting our highest productivity rates we’ve seen in 18 months,” Mr Alcock told Business News.
“We see emerging profit within the group and we see a profitable position for the group in FY23.”
In addition, Mr Alcock said the fundamentals of the WA market were strong, with renewed investor interest from the east coast, a tight rental market and a robust economy.
“With cost pressures and labour shortages forecast to ease over the next 12 months and a solid pipeline of work in hand, we are well positioned and have moved into the current financial year with confidence and positive momentum,” he said.
ABN Group chief executive Andrew Roberts said the challenges associated with COVID and escalating cost inflation impacted the group’s commercial construction arm the most.
“Those impacts were felt particularly acutely in the commercial construction sector and this saw the group’s commercial construction entities contribute significantly to the full-year loss,” he said.
Mr Roberts added that the group had moved to an early contractor involvement (ECI model on its commercial projects, meaning the risks would be shared between the company and developers.
This reflects a move away from fixed-price lump sum contracts called for by the Master Builders Association of WA as part of its recent reform package.
“We also elected to take on non-cash impairments and provisions in FY22, which had an impact on the year’s result but have effectively de-risked the business and positioned us for a return to profitability,” Mr Roberts said.
“At the same time we have continued to invest in the future of ABN Group, expanding our teams to focus on delivery to customers and management of our sales pipeline.”
The company’s debt equated to about $26 million at June 30.
Mr Alcock added that the group expanded its apprenticeship program from 55 when the pandemic began to 125 today.
The group also plans to expand its mortgage broking business Resolve into NSW and Queensland this financial year.
In 2020-21, ABN Group inked a $19.03 million profit on the back of high demand, largely dirven by government stimulus.
The group was the second major Western Australian builder this month to post a significant loss, following BGC Australia with its $41.6 million loss.
