Fleetwood Limited (FWD) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the 2023 Annual General Meeting of Fleetwood -- does that sound echoey? Is it just me or just the room? Anyway, I've met most of you, but my name is John Klepec; and I am the Chair of Fleetwood. Once again, we have taken the -- a hybrid approach for this year's AGM. And thank you for your attendance, both here in the room and for those online. I'll start by who's on the slides -- I'll start by the acknowledgment of country. I wish to begin by acknowledging the Gadigal people, the traditional custodians of the land on which we meet today; and pay my respects to their elders past and present. We have a quorum, so I declare the meeting open. With me today is, on my right here, the Managing Director and CEO, Bruce Nicholson. Next to Bruce is Adrienne Parker, who's nonexecutive director and chair of the noms and diversity committee. Next to Adrienne is Martin Monro, the nonexecutive Director and Chair of the Risk Committee. And over to the left here, we have Mark Southey, also [ a ] nonexecutive director and chair of the rem committee. Next to Mark is Jeff Dowling, who's the Chair of the Audit Committee. And then next to Jeff is Liz Maynard, the General Counsel and company secretary; and then Andrew Wackett, the company CFO and company secretary also. The past 12 months have seen a return to profitability and positive momentum in the Building Solutions business towards the end of the year, financial year, despite a historically difficult construction market in Australia. As Bruce will touch on in his address and presentation, the Building Solutions business has built even more momentum throughout the first quarter FY '24. The Board, management and staff remain absolutely focused on the need to generate an acceptable level of return on assets for shareholders, so whilst we are heading in the right direction, there remains work to be done to capture the opportunity that exists, particularly in the market where the Building Solutions business competes and operates. The Board and exec team remained focused on the implementation of the strategic plan, which remains appropriate and must continue to be progressed and refined despite the ongoing attention the Building Solutions' operational issues have demanded of the executive in the last 12 months. Significant opportunities remain for all Fleetwood businesses, not just the Building Solutions business, in the forthcoming financial year '24. And we look forward to delivering on these benefits for the benefit of all our shareholders. FY '23 marks the second anniversary of the appointment of Bruce Nicholson as our CEO. He took the reins of Fleetwood during a time of uncertainty with the backdrop of the global pandemic. It wasn't that long ago. His leadership has been critical for Fleetwood successfully navigating the pandemic, recruiting key management to a new leadership team and rebuilding parts of our flagship business for a return to profitability in FY '24. I would like to thank everyone here, our shareholders, for their ongoing support, and those online and those who aren't even here today; and acknowledge my fellow Board members and over 600 employees in the business for their commitment, dedication and efforts over the last 12 months. I remain personally excited about the -- Fleetwood's future. And I'm committed to the entire group achieving the business transformation and performance we expect and now is possible in FY '24 and beyond. I will now hand over for -- to our MD and CEO, Bruce Nicholson, who will present an in-depth operational performance review of Fleetwood and the outlook. More importantly for everyone here is the outlook for the current financial year. Over to you, Bruce.

Thanks, John. It's Slide 5. Thank you. Just before I sort of kick off: This is Balwyn High School. It's a modern learning hub down in Victoria, 72 modules on a triple-story building. And I guess that to me represents a real opportunity the Building Solutions business does have to build these quality learning hubs and other facilities around Australia. That one was built in 2020. It's been in operation for a number of years. And you'll see these pictures, as we go, are actually all real buildings that we've done both here in the east coast and some in the west coast. Thanks, John. I'm pleased to provide shareholders with an overview of FY '23 and an update on our strategy and some insights into our path ahead. I'd like to take a moment, however, to acknowledge the hard work and commitment of our people at Fleetwood as we work through the turnaround of our Building Solutions business while at the same time prosecuting our Build, Transform and Grow strategy. And it's very pleasing to see the progress we've made in the past 12 months. Moving to Slide 6. As we've said at the year-end results presentation, the FY '23 delivered mixed results across our 3 businesses. Building Solutions significantly reduced its losses while improving its order bank and quality of earnings. Searipple finished strongly and locked in forward bookings through to 2027. And we saw the impact of lower discretionary spending in our RV business as the results reset from COVID-19-driven demand period. What is clear is that our business has built momentum leading into FY '24. And all 3 businesses have clear plans to improve our revenue quality; capture our opportunities; increase utilization; and manage costs; and in doing so, improve our earnings. On Slide 7. We've continued to bring to life our -- over the last 12 months our refreshed vision and values, which underpin 5 core values: zero harm to our people and the community -- and the environment, sorry; collaboration; integrity; accountability; and innovation. The values guide the way we operate day to day across our business and have been integral in creating a positive culture within each of the businesses. We're now focused on bringing to life our purpose: to create innovative spaces so that people can thrive. And I'm confident this will be a positive impact on our transformation and successful FY '24 for Fleetwood. Moving to Slide 8. In FY '23, Fleetwood returned to profitability, with improved momentum demonstrated in the second half delivering a full year result of $4.2 million EBITA compared to a loss of $12.3 million in FY '22. The balance sheet remained strong with a net cash of $46.6 million as at the 30th of June 2023 due to improved operating performance in the second half. I'm also pleased that our improved operating performance and strong cash position allowed us to reinstate our dividend policy and distribute a dividend of $0.021 per share fully franked. A major focus on safety in the business as the business stabilized saw a significant improvement in the company's lost time injury frequency, which reduced by 59% last financial year. A highlight of the year was that, in June 2023, we announced the additional rooms booked by Rio Tinto under the Searipple Village agreement, which is expected to generate a further $100 million to $120 million in revenue until the end of the contract term in April 2027. The Building Solutions business has continued to target projects aligned with our current capability. And this focus has seen the order bank grow from $87 million in December 2022 to $127 million in June 2023. And at the same time, our staff numbers are down 7% since [ June 2023 ] as we centralize key functions and adopt greater standardization across the business. Moving to Slide 9. Building Solutions revenue declined by 11%, as expected, due to lower major project runoff. Second half revenue of $127.7 million was impacted by low-volume project wins across the second and third quarters as the business started to reset. Win rates and revenue improved markedly towards the end of the year, setting the business up for a very strong start to FY '24. Building Solutions losses were substantially reduced in FY '22 (sic) [ FY '23 ] as major projects were closed out and the implementation of our Build, Transform and Grow strategy gained momentum. Work on all major projects was completed in the -- early in the second half, and I'm pleased to confirm that we closed out all commercial negotiations on all of these projects. Close-out costs on these projects, net of our provisions, during the year totaled $3.3 million. This meant that the underlying loss for the second half in Building Solutions was reduced to $900,000. This compared to our FY '22, where approximately 80% of our $24.3 million losses were as a result of the underperformance of several major projects. Overheads increased 3% for the year, with labor shortages continuing the -- and competition for key staff in the broader construction industry remaining intense. This was particularly apparent in the white collar space. This was reflected in wage pressure that saw our costs despite -- rise despite lower staff numbers. We did, however, see material shortages ease in the fourth quarter. Overall, the business achieved its goal of underlying profit on a monthly run rate by year-end in the Building Solutions business. The Building Solutions reset. Now as I've previously spoken about, the reset commenced in December 2021. This involves qualifying work that comes into our pipeline against 4 key measures, including buildability for modular and our capability, having the right margin, having a deeper understanding of how we play out the risks and opportunities on the project and having the right customer to partner with. Having the challenging major projects well and truly in our rear-vision mirror has allowed us to refocus. The business has consolidated its national functional leadership model to improve coordination and effectiveness of important functions. And manufacturing KPIs are now in place across our 8 factories and manufacturing hubs. We're starting to see improved utilization and productivity across our business as we use these to drive our business decisions. Shifting to our strategy and our outlook. Our Build, Transform and Grow strategy provides the road map to -- for medium- to long-term improvement in the quality and consistency of our earnings. The build phase involves improving capability, systems and processes; building brand awareness to underpin our long-term sustainable growth. This including -- includes aligning national workflows and developing common processes and procedures to deliver consistently. Balancing build complexity with standardization of modular components will open pathways to greater efficiency. Opportunities within the government, including housing, education and defense, are increasing as the adoption of modular building, particularly in regional areas, gathers momentum. The WA department of housing and Queensland's QBuild are now using modular solutions after engagement with Fleetwood. And our proprietary housing designs were launched to the broader market in the second half of the year in Queensland and New South Wales, where we're seeing significant interest from government, community and key worker housing providers. During the year, a number of states across Australia on the east coast announced the move to make kindergarten as compulsory for age 3 and above, which extends our offering in the education sector. And the business -- already seen a significant uptick in demand. Fleetwood's strategy in defense sector has been defined and is well underway. As we've said, our refocus on -- this order book grew from -- grew by 50% from $87 million in December to $127 million in June. And I'm pleased to confirm that this continued to grow to $142 million at the end of September 2023. It's important to note that, in addition to this order book, Building Solutions generates about 50% of its annual revenue from long-term contracts and panel agreements in the education and housing sectors. This gives Fleetwood greater ability to plan and manage utilization in many of its states and provide a solid foundation for the business. Panel customers include state education departments, lifestyle village developers and now state housing authorities. As I've previously said, factory capacity and utilization is now being monitored and is driving our sales and operational planning across Building Solutions. A focus on national procurement to reduce costs by consolidating our buying and leveraging the purchasing power of our national business is well underway. Procurement savings have been identified and captured in major spend categories. And whilst the benefits were relatively minor in FY '23, material savings are forecast in FY '24. And we've seen these deliver to plan in our first quarter. I'm pleased to also announce that a combination of a solid order book, better-quality margins, the procurement savings I've just mentioned, no impact of these major project cost overruns and careful overhead management has meant that Building Solutions has been profitable in the first quarter. Over the medium term, we see a stable and growing business able to effectively leverage the advantages of modular building, including reduced build time; lower cost, especially when compared to design variations; improved quality [ whilst ] comparative to in situ builds; and better environmental, social and governance credentials, especially around waste, sustainability and the ability for us to recycle, repurpose and reuse the buildings we create. Moving to Community Solutions. We had a solid year, with EBITA up 23% on FY '22. The timing of major client shutdowns at Searipple saw an excellent performance in the fourth quarter with the highest occupancy and average room rates, so far, in this cycle. And we saw some of this flow over into the first quarter of FY '24. A highlight of the year was the June 2023 announcement of additional rooms booked by Rio Tinto under its accommodation contract, which is expected, as I've said, to generate a further $100 million to $120 million of revenue until the end of the contract term in April 2027. During the year, contracts were secured with Woodside and Yara fertilizers, further underpinning future demand. The business is well placed with long-term demand now contracted. Osprey Village remains fully occupied, with a significant wait lift (sic) [ waitlist ]. And we are planning to resubmit a proposal for additional accommodation to the Western Australian government this year. Our strategy and outlook for Community Solutions is buoyant, with strong prospect that the Western Australian North West will see significant future development of new projects in the oil and gas, fertilizer and green energy sectors. Securing existing demand from current customers places Fleetwood in a strong position for the medium term. A growing number of low-carbon projects are currently under consideration in the North West. In the near term, we're also seeing the need for investment in major repairs and maintenance and upgrades in the region as the existing aging infrastructure declines. The requirement to house and facilitate staff for these projects is a significant medium-term opportunity for our communities business. Commercialization of our keyless lock and energy management system using the Fleetwood-developed Glyde technology is underway. Fleetwood's development of the technology is available to deliver through our Building Solutions business and positions the company as a potential digital market leader in modular. In addition, Community Solutions is well placed to pursue "build, own, operate and transfer" or build-to-rent opportunities in several sectors, leveraging the ability to source new villages at a competitive cost through the Building Solutions business and Fleetwood's strong balance sheet. Moving over to RV Solutions. We saw reduced consumer discretionary demand emerge in the fourth quarter, changing the trend over the past 2 years; as well as several aftermarket clients reducing their stock holdings leading into the end of financial year. In the first half of the year, we saw continued positive revenue performance driven by ongoing strength in the domestic tourism, albeit with ongoing global supply challenges. The original equipment manufacturers or OEMs segment experienced solid trading conditions through the year as many manufacturers worked through historic customer orders. The aftermarket segment softened noticeably in the fourth quarter of the year. Whilst underlying consumer demand fell, the business also saw aftermarket customers destocking, as I just said. The business was able to pass-through price increases to key customers during the period, which largely maintained our product margins but were not enough to offset the wage inflation and significant increases we experienced in our property costs which saw our operating costs increase by 14% compared to FY '22 and translated to lower EBITA margins. Looking at the outlook for RV Solutions. The medium-term outlook remains solid. Whilst international travel has resumed, the forward order book for manufacturers resettled at historical levels. The early part of FY '24 also saw some signs of restocking by the aftermarket customers. We expect demand to settle at lower levels, and we've reset the overhead already to actually accommodate this. The business will remain in a strong position through the exposure to locally built RV market via the parts and accessories business Camec and to overseas imports through the services business in northern -- NRV. The boom in caravan sales during the past 2 years will continue to deliver demand for our aftermarket services and the renovation offering we now have in the NRV business as well. Further price increases and work to rightsize the business have been implemented over the first quarter of this year. And we're monitoring the demand closely. New product development is a major focus of the business. And the new Invictus premium door has been launched to the market, while aluminum wall frames; and new sandwich panel walls, roofs and floor products are currently under trial with a number of customers and very keen interest. Several exciting new imported products and a range of upgrades are also coming to the market this year in RV. The increase in secondhand van sales provides us opportunity for combining our products and promotions, and this is why we've launched this service offering in our NRV business in Melbourne. Challenges remain primarily around raw material supply, foreign exchange as well as access to the cost and -- (sic) [ access to and cost ] of skilled labor. Freight costs, however, are easing. The potential impact of recent interest rate rises on fuel increases and the impact [ toward discretionary spending ] continues to be monitored very closely. The cost and margin pressure experienced in the second half of FY '23 has continued into the first quarter of FY '24. And whilst we've reset our overhead in the business, plans are in place to recoup these impacts through further price adjustments and accelerating our new product development for the balance of FY '24. In summary. Overall, the business is positioned to generate an improved set of results for FY '24. We've continued to embed the Build, Transform and Grow strategy in the business, with the aim on focusing on the quality of revenue through diversification, through generating sustainable margins, through increasing utilization and reducing overheads to improve earnings. This is underpinned by new leadership capability across the business to successfully execute this strategy. The company's dividend policy remains to pay out 100% of our net profit after tax. Our balance sheet remains solid, and we'll be prudent in the way we leverage this to strengthen or support growth. I'd like to thank all of our shareholders for their support. And I look forward to keeping our shareholders up-to-date on our progress throughout the year. I'll now hand back to John.

Thank you, Bruce, for that comprehensive overview of all of the 3 business units. Today's AGM is an opportunity for shareholders to hear from and put questions to myself; the Board; MD and CEO Bruce; and our external auditors, Ernst & Young. Given the crossover between here, the room and online people, I will outline some of the procedural matters associated with this meeting. We welcome shareholders and proxy holders attending in person or online to ask questions. As in past years, only shareholders, proxy holders, attorneys and corporate representatives are permitted to vote and ask questions. There are 2 ways to ask a question: if here, by raising your hand, and we'll hand over a microphone for you to ask the question; if attending online, by typing and submitting a question on the online platform. [Operator Instructions] Information about the submission of questions via the online platform is set out in our online meeting guide available on our website. If your question relates to a specific item of business, please refer to that item of business when you submit your question. Please also ensure your questions are relevant to shareholders as a whole. So are there any questions from any shareholders, either here in the room or online, of my address or the MD and CEO's presentation or anything else concerning Fleetwood Limited?

[ Jordan ] from Phoenix Portfolios. I just wondered if I could ask on Abernethy Road [ at ] Perth Airport that we hold on our balance sheet given many investors probably don't even know it's there. Or potential investors don't know that it's there and don't value it in the stock. Would we consider a sale and leaseback and perhaps using that capital to buy back shares given where they're trading?

Look. A potential sale and leaseback of that property could be done, but we -- when we've looked at it, yes, if we were to move to -- the logistics of moving to another property. Because there are inherent things with the Abernethy Road property, if we were to make a move or do something with that, you'd want to go to a better facility. Finding that facility is not easy. And the cost, the return of a lease commitment versus the release of capital that you can get from selling it, the equation there is not overwhelmingly in favor of selling the property, so commercially it suits to retain the property. Not to say we wouldn't look at it, but it's not something that is pressing the agenda at the moment. And you need an alternative site if we were to go somewhere else, so the preference would be to go to find a new site rather than lease back just for financial transaction. So if a site was to present itself that was better for what we would use it for, we would look at it. Otherwise, we're happy with the arrangements that we currently have. [ Tony ], you want a microphone? We cannot hear you. Probably you're pretty close.

Well done. Can you -- you mentioned that there are going to be -- you've had 7% staff cuts, which is around 42 people. Are there going to be any further staff cuts in this financial year?

Bruce?

[indiscernible].

[ Yes ]...

Actually no, [ Tony ]; in fact, probably quite the contrary. The staff cuts are a number of things. There's the major projects [ where we'd ] actually pulled people out. So we pulled a lot of project teams out and a lot of admin people out. We also centralized design and estimating. What we're finding now is, as the order bank is growing, we're having to put more design and estimating resources back in because the technology is not there to do anything automated at this stage. So it's actually stabilized. And actually we're also now starting to see the factory numbers go up, so our blue collar employees -- we're certainly not seeing much of a lift in our white collar. Certainly we're seeing blue collar employees go up, certainly in our Victorian business and our New South Wales business which have had the largest uptick in order bank. It's just going to be natural, as I said. We are seeing, still seeing a fair bit of wage pressure, though, inflation. And it is that white collar space. So project managers, design and estimating staff are very highly sought after; and good ones are expensive.

[indiscernible] again, a follow-up. We're on a roll.

[ Right ]. I've got a few actually. The -- you'd mentioned the bookings at Searipple out to 2027. Could you give us an idea of what the utilization rate would be with the existing bookings out to 2027?

No, [ Tony ]. Sorry. We have histograms. And as I've said, right now we've got a very low ebb there, so it would probably be in the 20% to 25% range today after the shutdowns. We've seen the Perdaman project push back, so whilst we didn't get the first tranche of that, we've seen that push back around 3 months. The numbers could be north of 50% by this time next year. Kick me under the table, Andrew, if it is wrong, but it's on a histogram, [ Tony ]. So there is some fluidity with that was what I'm saying, okay? Certainly we're seeing demand come up. And there are other smaller projects that have come in recently that could fill some gaps with us. We're not a shoo-in for those. We've got to compete for them, but certainly we'd expect utilization to be north of 50% over the cycle, without any major announcements.

I would add to that. Perdaman is not the only game in town.

No, no, exactly. How many more rooms can you add to Osprey?

I can -- we've actually done the work on this, [ Tony ]. And we could actually put another 200 rooms in if the planners approve it, so we do have to go back through a planning process for that. And if we can justify the fact that there is a need, we have the potential, I've got to make the decision on whether I manage capacity in the market or whether I chase extra rooms. And given the cyclical nature of that business, our choice today is to manage room capacity, not put additional rooms into a market that could turn off in 3 years or 4 years time.

Yes. The trick with that market is the cyclical nature of it. You get caught the wrong side of that, you have a lot of rooms empty, but there is land adjoining the site that can be developed, so you need a developer's mentality to come in there. And we can provide the units to someone else and we can operate the site, but the developer's risk, whether the return on that risk is worth it in that market, is where it [ comes and start ].

We have a -- sorry, John. We have a bit of an interesting cycle up there because the camp is reaching sort of the end of its life. So this is probably the last cycle before it's going to need a major overhaul. And so part of our thinking was, if we were to put more rooms up, they would ultimately end up as a replacement for the next [ downturn ] cycle, but as I said, we're balancing at the moment -- capacity at the moment. There's excess capacity in the market right now, even with the Perdaman project kicking off. My view is our right choice at the moment is to manage utilization and pricing.

Would you ever consider setting up a similar mining accommodation village in a place like Port Hedland which is booming as well?

So as I said, we're [ actually ] actively pursuing build-own-operate and "build, own to-rent" opportunities now like Searipple, so we've promoted Giles, the WA EGM, to run our communities business and get it out of the day-to-day of Building Solutions. And he's actively putting his mind to what the next one of those looks like. And there's more than just WA. This is not [indiscernible]. There's stuff in the energy cycle over here. There's stuff we've been talking to in the Orange area because there's a combination of people. And WA has got the same experience. They need mining accommodation in the short term, but they need social and affordable housing in the longer term, so there's a different type of product. And the product that we're creating now in terms of our housing, the IP we have in that, is very well suited to that.

How would you finance like -- something like that if it was...

Off balance sheet, so we'd be looking for partners. So we don't want to take the risk [ on the civils ] [indiscernible]. We know what happens with a project when we do that, so we'd look for a partner to take the risk in that space. We could build and operate the facility well, and we'll also look for [ a funder ] to do debt and equity for us.

If we're sitting here in 12 months time, what degree of probability would you give that you'd be doing a new project like that?

Less than 50%.

Less than 50%.

Because we've got to find the right counterparty...

I'd say even less.

Yes.

And yes, there's a -- you need a big change in mindset up there as well. The incumbents, the 2 main mining companies that have their camps there want to own the camp, BHP and FMG. If there's a change in that, that they don't want to own their camp and control their own destiny, there's a whole different game, but you need the core people that use that for shutdowns, et cetera. And they need to say, "Okay, I'm happy to be at the whim of the market." And that -- to date, that hasn't occurred. So 2 biggest players in town have to have a change in thinking because the other side of it is all the other ancillaries. It just becomes a higher risk that you have a camp that's sometimes empty.

Well, we would know. I mean there was an opportunity I think I was -- mentioned a year ago which we looked at, which was a 1,500-person camp in Port Hedland for BHP. That went to market. That's public news. We initially put an expression of interest in -- on that. We -- because of everything else that was going on, we thought we didn't have the bandwidth, so we pulled away from it. That actually ultimately fell over, so what I'm saying is, those things [ now ], there is potential for a 500-person camp, but again, the layers of management in BHP, that could be gone in a heartbeat.

Can I ask: Is -- and why hasn't the company made a profit forecast for 2024? Is it because you've got too many variables and it's too difficult to do? Or could you give a -- like a EBITDA range, for example?

No, not this year, but we will when stability -- when there's a greater track record and there's less volatility, which is what we've had, we will -- we can make range forecasts. However, you have a large driver, Community Solutions, which timing-wise a quarter out, quarter in, which part of the financial year that the rooms come in, et cetera has a massive impact. So it's the volatility of, one, the core pieces of the business doesn't lend itself to putting numbers out there because then you're coming out and giving revisions, et cetera. So it doesn't serve, so...

That said, John, there's already 3 analyst reports out, very public. And we agree with the numbers [ that look in there ]. We're comfortable with those numbers.

Okay. Just [ one ]...

Last question, [ Tony ]. Make it your best one. We have to give everyone else a chance.

[indiscernible].

Okay, okay. The gentleman before mentioned the possibility of a buyback. Would the company look at doing a buyback, an on-market buyback, given where the share price is?

We've looked at, and it's always open and -- to buy back shares. It's every company, listed company, can do it when they like; and we're no different to others. We would look at it if the circumstances were right. When we've looked at it in the past, they haven't been right. When you look at the cash that's on the balance sheet, it does have variability over the course of the year and over the course of a month, so don't look at that, that we're sitting on this massive, big cash pile and not doing anything with it. And we're not silly. If the share price was at a -- and I wouldn't quote a number, but if it was beneficial, we would look at it for an optimum capital management. But there are restraints on that as well, so it's not -- there's a lot of things that go into that pot, but it's always there. And we've looked at it, said no. And we'll look at it again in the future, so I'm not going to say we would or we wouldn't. It's -- depends on the circumstances.

If I can give some flavor around that, John. We've actually just run a recent assessment again. We've had another look at it again, and I guess there's a couple of things here. One is, as you would note, in our balance sheet there was -- a big chunk of the cash we had was prepayments. We are currently drawing those prepayments down, and because there is a large contract involved in that, we don't expect prepayments to come. The other thing is we have this big cycle in the business, particularly in the education space with relocatable schools, where we actually do an enormous amount of work and don't get paid for 3 months. So we have a very big swing around the Christmas period; and into January, February, March and even April with our working capital. And it can be many, many -- tens of millions of dollars. So we've done a forecast. Right now that forecast suggests it would not be prudent for us to do a share buyback. And that's why, I guess, we're sort of saying not -- that's not on the agenda right now, [ Tony ].

Okay, no one else -- here we go, yes.

So just on the -- on Searipple, what's the gross profit there?

We don't -- well, the results that have been presented is the level of results that we give in the segmental analysis in the annual report, so we have nothing to add than what's in there already.

Okay. Can I just ask: In terms of the manufacturing programs that are being run, what are the key issues which you're finding holding back efficient production, effective manufacturing?

[ And if ] I can give you a bit of experience. I went overseas and checked out the U.K. to look at this. It's industry-wide, so it is that [indiscernible] factories. And so it's the ability to get quality work in the factory and get it through in a timely fashion then replace it with something. So to give you an example: The big projects we had got into our factory, choked the factory. With supply chain constraints as a result of COVID and other things, we couldn't get them out, so factories we're sitting there ostensibly idle with a very fixed overhead. Where we have a significant advantage in Australia versus, I'll call them, the enemy, our competitors, is that we have, as I said, 7 factories and manufacturing hubs around Australia. So our ability to leverage -- we actually took the Board through it today. We went into our Sydney factory here. So the Sydney factory is ostensibly at about 70% utilized at the moment, so it's the highest it's been certainly since I've been here. A number of buildings in that were for Victoria. There's buildings in there about to go [ and they will be ] for Queensland, so we're actually leveraging that. So the biggest constraint tends to be bringing the work in a timely fashion and getting it through the factory in a timely fashion and, probably more importantly, getting it out. One of the things I looked at in the U.K. was the factories that have gone to full automation. And they've moved away from what I'd call the [ builder or construction ], which is in many ways what modular currently is in Australia, to full automation. And [ whilst I was in the U.K. too, I went ] broke. And their problem is they can't get it out of the factory, so their production lines get completely blocked up. So they can control all of the supply chain in a fully automated sense until they get to the site works. And then somebody in the town planning department or a civil contractor or the weather can affect that and stop everything, and that just blocks all the way back up through the supply chain. And so they're the biggest thing, so we're looking at how we utilize the floor space, which ultimately defrays fixed costs for the business. And then we work out how fast that we can get it through the factory. And I've got to say it's a work in progress because we've only started to get real traction as that order bank has built, okay? And so right now I speak to the guys in the factory and they'll say to me the factory is full. I'll look and I'll say, well, there's actually space here, here and here, so -- but in their minds, it's full because they're thinking from a difference sense. As I said, I don't think about one factory at a time. I think about the entire east coast footprint and our ability to leverage that, which is what our competitors don't have here.