Fleetwood posts a $10.2m profit, down 8% on previous period

Shares in East Perth-based portable accommodation builder Fleetwood Corporation Ltd dropped almost 1 per cent after the company recorded an 8 per cent fall in half year operating profit after tax.

At market close, the share price for Fleetwood had fallen 6 cents to $6.88.

The company's operating profit after tax was $10.2 million, down from $11.1 million in the previous corresponding period.

Revenue for the period was down 10 per cent to $123.9 million, while EBITDA for the period marginally increased to $19.1 million.

The company said a fully franked interim dividend of eight cents per share will be paid on 28 April 2006.

The company said availability of labour still offers challenges in the future. Demand for caravans has strengthened since December with order banks being at levels higher than the same time last year.

Below is the edited Directors' Report:

Directors' Report

The directors present their report together with the consolidated financial statements for the half-year ended 31 December 2005.

Directors

The directors of the company during or since the end of the half-year are:

Peter Gunzburg - Chairman, Non-executive Director since 2002
Greg Tate - Managing Director Director since 1987
Stephen Gill - Executive Director since 1990
Robert McKinnon - Executive Director since 2005
Michael Hardy - Non-executive Director since 2005

Review of Trading Results

Overview

Adjusting for the after tax profit of $7.5 million relating to the sale of the Parks division in 2004, operating profit after tax for the period was down 8% to $10.2 million.

Revenue down 10% to $123.9 million

EBITDA unchanged at $19.1 million

EBIT down 6% to $15.4 million

Operating profit after tax down 8% to $10.2 million

Trading results for the period were impacted by the strategic rationalisation of the group's operations undertaken during the period which included:

Completing the expansion of the caravan manufacturing facilities at Coromal and Windsor.
Combining the manufactured accommodation operations in Western Australia to new purpose built premises and moving the Victorian operations to larger premises.
Relocating Camec in New South Wales to warehouse style premises.

Completion of the rationalisation was delayed as contractors experienced significant difficulties sourcing labour to complete the premises expansions. The major part of the rationalisation was completed in December.

Review of Operations

Recreational Vehicles

Coromal and Windsor both experienced difficulties obtaining and retaining skilled and unskilled labour during the period

Productivity was negatively impacted while new employees were recruited and trained and as a result production volumes for the period were lower than forecast.

Production difficulties experienced by a number of caravan manufacturers during the period resulted in a 10% lower demand for Camec products compared to the same period last year.

Manufactured Accommodation

Labour availability had a significant
impact on production output during the period and is expected to continue to constrain production in the second half, although to a lesser extent

Consolidation of the Western Australian manufacturing operations to a single location will be completed by the 30 April
2006 with minimal impact on second half earnings.

Revenue for the previous period included revenue for the Ravensthorpe project of approximately $14 million with no comparable revenue in the current period.

Occupancy rates at Searipple Village in Karratha are currently higher than forecast. With the commencement of the Woodside LNG 5 project occupancy is expected to be strong for at least the next 2 years.

Dividends

Interim Dividend
A fully franked interim dividend of 8 cents per share will be paid on 28 April 2006.

Special Dividend
In conjunction with the interim dividend a fully franked special dividend of 20 cents per share will be paid on the 28 April 2006.

Subject to ongoing profitability, acquisition opportunities and market conditions, it is the directors' intention to pay a special dividend of 20 cents per share with each interim and final dividend payment made during the next 2= years; i.e. further special dividends totaling $1.00 per share. The aim of this capital management initiative being to distribute excess franking credits to shareholders.

Dividend Reinvestment Plan
The Company's dividend reinvestment plan will be available for the purpose of this dividend. Shares will be issued at a 2.5% discount to the weighted average market price at the record date. The last date for receipt of an election notice for participation in the plan is 24 March 2006.

Shares issued under the Plan will be entitled to any future special dividend payments.

Outlook

The group's strategic rationalisation was substantially completed by the 31 December 2005 with any impact on the second half earnings to complete the rationalisation being minimal.

Availability of labour still offers challenges to the group however the impact of this is expected to be less in the second half.

Demand for caravans has strengthened since December with order banks being at levels higher than the same time last year.

A very active resource sector in Western Australia and strong demand for park homes for retirement housing has forward orders for manufactured accommodation at an all time high.

Auditor's Independence Declaration

Section 307C of the Corporation Act 2001 requires our auditor, Deloitte Touche Tohmatsu to provide the directors of Fleetwood Corporation Limited with an Independence Declaration in relation to the review of the half-year financial report. This Independence Declaration forms part of this Directors' Report, and is included on page 5.

Rounding

The company is of a kind referred to in ASIC Class Order 98/100, dated 10 July 1998, and in accordance with that Class Order amounts in the financial report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Signed in accordance with a resolution of the directors made pursuant to s. 306(3) of the
Corporation Act 2001.

On behalf of the Directors

Greg Tate
Director
Perth, 13 March 2006