Fleetwood in for long haul

Investors looking for Fleetwood Corporation to make a quick return to its halcyon days as a booming stock should not hold their breath, though people looking for dividend income and a solid growth outlook should be happier.

Fleetwood was one of Western Australia’s top stocks over the five years to late 2004, with consistent growth in profits and dividends and a share price peaking at just north of $9.

The stock price plunged in the first half of last year to nearly $6 per share, as the company entered a period of rationalisation to provide what it called “an efficient framework to capitalise on the anticipated growth opportunities ahead”.

Its latest results, for the half-year to December 2005, depicted a company still affected by its rationalisation program.

It said labour shortages had delayed the construction of new premises and constrained the production of caravans and park homes from its existing operations.

Fleetwood said a number of other caravan manufacturers had experienced production difficulties during the period, and this flowed through to its Camec unit, which suffered a 10 per cent fall in demand for its caravan components and accessories.

For the group as a whole, revenue fell 10 per cent to $123.9 million (partly as a result of one large contract in the previous period) and net profit fell 8 per cent to $10.2 million.

Looking ahead, the company said labour shortages still offered challenges but the impact was expected to lessen.

It added that orders for caravans were higher than one year ago while forward orders for manufactured accommodation were at an all time high.

Broking firms surveyed by WA Business News agree that the outlook is positive, helped by long-term demographic trends, which are sustaining growing demand for caravans, and the resources boom.

However, they believe it will take time for the benefits to flow through.

The brokers responded to the half-year profit announcement by cutting their profit forecasts by five to 8 per cent per annum.

They expect a slight improvement in the second-half, resulting in an average full-year profit forecast of just over $21 million.

In future years, they expect net profit will rise to about $24 million in 2007 and $26 million in 2008.

One of the positives for investors is Fleetwood’s plan to pay special fully franked dividends totaling 40 cents per share for each of the next three years.