Investors sold off the shares in Fleetwood Corp yesterday (which makes caravans, recreational vehicles (RVs) as well as affordable housing) after it slashed its 2017-18 profit guidance by more than 50%.
The shares tumbled more than 20% to a low of $1.72 before struggling back to end at $1.90 – down 16%.
Seeing the company paid a one cent interim earlier in the year (after a single 5 cents a share payment in 2016-17), the chances of a final dividend later this year look poor given the plunge in second half earnings.
The future of the dividend wa not mentioned by directors in yesterday’s downgrade and update.
Such a violent reaction was to be expected given the enormity of the downgrade – just $1.5 million for the current half and a total of $5.5 million for the June 30 financial year.
That’s down from an earlier outlook of more than $14.7 million for the 122 months to June ($14.6 million for 2016-17).
“The expected result is driven primarily by ongoing losses in Caravan Manufacturing (RV) and smaller secondary effect in Modular Accommodation related to timing of capital spend in the education sector and lower volume from the affordable retirement sector,” directors said yesterday.
The downgrade was largely due to ongoing losses in caravan manufacturing and modular accommodation.
Yesterday’s downgrade was foreshadowed earlier this year, when Fleetwood said that consumer demand had fallen and caravans were being heavily discounted.
“The Board acknowledges that a resolution of shareholder dissatisfaction with the performance of the RV business is required,” it told the market yesterday in something of an understatement.
The company though seems to be having problems elsewhere as well, directors saying in the update: "Excluding an expected loss in the RV division detailed below, results from the other divisions for the full year are expected to show an underlying EBIT of $18.5 million (compared to $21.3 million for FY17).
”The Board acknowledges that a resolution of shareholder dissatisfaction with the performance of the RV business is required, and achieving this has been a strong focus of Board and Management. To this end a full review of the RV business was undertaken in late calendar 2017 with clear goals set. The outcomes of this review remain a work in progress, with the update to expected trading conditions underlining this. The Board considers the expected losses of the RV business for the second half to be unacceptable and is dissatisfied with the expected performance.
"The Company has previously announced it was considering all structural and corporate alternatives for the RV business. This process is the Board’s top priority and will be resolved in the coming months."
