FLEETWOOD LIMITED — Annual Report 2017

Aug 27, 2017

==> picture [113 x 38] intentionally omitted <==

Fleetwood Corporation Limited ABN 69 009 205 261

Preliminary Final Report Year ended 30 June 2017

Results for Announcement to the Market

		Change	Amount
			$’000
Revenue from ordinary activities	Up	16%	to 330,145
Profit from continuing operations after tax	Up	>100%	to 9,432
attributable to members
Net profit attributable to members of Fleetwood	Up	>100%	to 8,995
Corporation Limited

Dividends Interim dividend Total dividend for period Final dividend	Nil ¢ N/A 5 ¢ Amount per security Franked % 5 ¢ 100%

Dividend Reinvestment Plan

The company's dividend reinvestment plan will be available for the final dividend. The plan offers a 2.5% reinvestment discount. The last date for receipt of an election notice for participation in the plan is 6 September 2017.

Record date for determining entitlements to the final dividend Date the final dividend is payable Ex-dividend date	4 September 17
	5 September 17
	29 September 17

For further information contact: Andrew Wackett or Yanya O'Hara Chief Financial Officer Company Secretary 08 9323 3300

==> picture [586 x 103] intentionally omitted <==

Turnaround Progressing

Fleetwood’s turnaround plan, initiated three years ago delivered early results in FY2017 with earnings before interest and tax increasing from a loss of $2.1m to a profit of $14.6m.

There were no impairment charges impacting underlying earnings in FY2017.

Result summary

$ million	2017	2016	**Change **
Revenue	330.1	284.5	16%
Underlying EBITDA	21.9	7.2	204%
Depreciation and Amortisation	7.3	9.3	(22)%
Underlying EBIT	14.6	(2.1)	n/a
Finance costs	0.9	1.0	(5%)
Pre-tax profit	13.7	(3.0)	n/a
Tax expense (benefit)	4.3	(0.4)	n/a
Underlying NPAT	9.4	(2.6)	n/a
Adjusting Items pre-tax	0.0	(10.3)	n/a
Tax on adjusting items	0.0	1.9	n/a
Net adjusting Items	0.0	(8.4)	n/a
Statutory NPAT	9.4	(11.0)	n/a

Notes: 1. Excludes the discontinued resource sector rental business. 2. 2016 revenue, EBITDA, EBIT and finance costs have been adjusted by $2.8m reflecting a change in accounting treatment relating to village operations.

1

==> picture [586 x 103] intentionally omitted <==

The divisional breakdown shown below demonstrates that strong earnings in Modular Accommodation and Village Operations were offset to a degree by continued underperformance in Recreational Vehicle Manufacturing.

All divisions saw an improved EBIT contribution during the year.

$ million	2017	2016	**Change **
Revenue
Recreational Vehicles	47.4	29.8	59%
Parts and Accessories	87.6	86.6	1%
Modular Accommodation	175.8	142.5	23%
Village Operations	26.3	30.2	-13%
Unallocated	0.3	0.1	n/a
Intersegment eliminations	(7.3)	(4.7)	56%
Total revenue	330.1	284.5	16%
Underlying EBIT
Recreational Vehicles	(6.7)	(8.1)	17%
Parts and Accessories	1.3	0.9	46%
Modular Accommodation	15.2	3.6	325%
Village Operations	6.9	5.2	34%
Unallocated	(2.1)	(3.6)	43%
Total underlying EBIT	14.6	(2.1)	n/a

Notes: 1. Excludes the discontinued resource sector rental business. 2. 2016 revenue and EBIT have been adjusted by $2.8m reflecting a change in accounting treatment relating to village operations.

2

==> picture [586 x 103] intentionally omitted <==

Strong operating cash flows during the period were the result of strengthening demand for FIFO accommodation in Karratha, strong volume from affordable housing, continued growth in education markets and sound working capital management.

Despite a large volume of work remaining in progress at 30 June, the company has moved from net debt of $9.6m at 31 December 2016 to a net cash position at 30 June.

While the turnaround remains in progress the directors have resolved to pay a fully franked final dividend of 5 cents per share.

Significant changes have been made to Fleetwood’s board, senior management team and business operations in the last two years. The operational changes have seen the company become net debt free, re-focus on growth markets and significantly reduce operating costs.

Both the board and management team remain focussed on continuing to deliver the turnaround plan in FY2018.

Growth Markets

As can be seen in the charts below revenue has moved away from resources and has been replaced by affordable housing, an important growth sector.

==> picture [469 x 176] intentionally omitted <==

----- Start of picture text -----

45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Education Recreation Resources Affordable Housing Other
2015 2016 2017
----- End of picture text -----

3

==> picture [586 x 103] intentionally omitted <==

Modular Accommodation

Revenue improved by 23% in the Modular Accommodation segment compared to the previous corresponding period. While education has been a strong contributor to this, supply agreements with key customers have been an important part of the company’s refocus towards affordable housing, which is a market with a solid forward outlook.

The outlook for education spending in core east coast education markets remains strong as evidenced by recent state government budget spending plans.

While education and affordable housing are the backbone of the Modular Accommodation segment, a watching brief is also being kept on other markets.

A major restructure of the Western Australian accommodation business was undertaken in the 2016 financial year. The restructure has substantially reduced overheads in WA which has been a major contributor to the increase in earnings.

Encouragingly, the company experienced an improvement in enquiries from the resource sector towards the end of the financial year.

Recreational Vehicles

The chart below highlights that the Recreational Vehicle business has been able to grow its volume by over 50% into a soft market environment in 2017.

==> picture [469 x 209] intentionally omitted <==

----- Start of picture text -----

30,000 1,200
22,500 900
15,000 600
7,500 300
0 0
2016 2017
Industry volume (LHS) Fleetwood volume (RHS)
----- End of picture text -----

Improvements to the company’s product range and dealer network in the last eighteen months have resulted in a marked increase in order intake and factory output. This is evident in the revenue increase of 59% over the previous corresponding period.

4

==> picture [586 x 103] intentionally omitted <==

However, to facilitate such a rapid increase in output, the number of factory employees has more than doubled in the last two years and time required to train new employees has resulted in lower than ideal labour efficiency.

Despite improvements in the business and strong results at the Perth and Sydney caravan shows, results from other capital city shows have been weaker than previous years. This is in line with a generally weakening trend seen in the Australian caravan manufacturing sector towards the end of the financial year.

Given this and notwithstanding that the company is targeting market share growth in the coming year, it is not expected that the business will return to profitability in FY2018.

The board has confidence in the direction the business is taking given the number of improvement initiatives currently underway, and Recreational Vehicle manufacturing is considered a key component of Fleetwood’s long term future.

Village Operations

The chart below demonstrates the estimated change in supply of accommodation rooms in the Karratha market since 2013.

==> picture [444 x 216] intentionally omitted <==

----- Start of picture text -----

7,500
5,000
2,500
0
2013 2017
Searipple rooms Overall Karratha rooms
----- End of picture text -----

Revenue continued to moderate in the Village Operations segment in 2017 despite some improvement in both occupancy and revenue at the Searipple Village in the second half of the year. This was the result of fluctuating demand from customers.

EBIT improved due to a combination of lower costs negotiated with suppliers and lower depreciation and amortisation charges.

5

==> picture [586 x 103] intentionally omitted <==

While the downturn in the mining sector has generally seen demand for worker accommodation reduce, the income streams from Searipple and Osprey are underpinned by blue chip customers and provide strong cash flows for the company.

Parts and Accessories

Fleetwood’s parts and accessories segment is comprised of Camec which is a major supplier of components to the RV manufacturing industry and Flexiglass which supplies fibreglass canopies and aluminium trays for utility vehicles.

Despite significant pressure from overseas competitors and the caravan market weakness towards year end noted above, a modest revenue improvement of 1% was generated in 2017. Both businesses remain leaders in their respective markets.

While operating costs and capital employed in this segment remain the subject of close management, there is an opportunity to improve market share through the development of innovative products and strong customer relationships. A number of new products are planned for release during the 2018 financial year.

Discontinued Operation

The company’s discontinued mining rental business generated $6.5m in revenue from residual contracts during the period and delivered a result marginally below break-even.

The remaining stock has been reclassified as a current asset held for sale.

Dividends

Given the improved results and outlook, the directors have declared a fully franked 5 cent per share final dividend. This represents 53% of second half 2017 earnings. The dividend reinvestment plan will apply to this dividend. The plan offers a 2.5% reinvestment discount.

6

Fleetwood Corporation Limited Consolidated Statement of Profit or Loss and Other Comprehensive Income Year ended 30 June 2017

==> picture [98 x 34] intentionally omitted <==

Profit (loss) before interest and tax(EBIT) Items that may subsequently be reclassified to profit or loss From continuing and discontinued operations Basic (cents per share) Diluted (cents per share) From continuing operations Basic (cents per share) Diluted (cents per share) From continuing operations before impairment Basic (cents per share) Diluted (cents per share) Note Other expenses Employee benefits expense Sub-contract costs Operating leases Revenue 2 Materials used Profit (Loss) before income tax expense Impairment of non-current assets 13 Finance costs 3 Profit (loss) before interest, tax and Impairment(EBIT before impairment) Depreciation and amortisation expense 3 Other comprehensive income Net exchange difference relating to foreign controlled entities Total comprehensive income (loss) attributable to members of the parent entity (net of tax) (Loss) from discontinued operation 16 Profit (Loss) attributable to members of the parent entity Income tax (expense) benefit Profit (Loss) from continuing operations Profit before interest, tax, depreciation, amortisation and impairment(EBITDA before impairment) Earnings (loss) per share 11	2016 $ '000 $ '000 (24,856) (25,444 (8,709) (58,067) (56,092 (10,059 (138,384) (110,382 (78,262) (75,311 2017 330,145 284,492
	(7,256) (9,305 21,867 7,204
	- (10,312 14,611 (2,101
	14,611 (12,413 (921) (968
	13,690 (13,381 (4,258) 2,362
	(437) (16,985 9,432 (11,019
	8,995 (28,004
	301 13
	9,296 (27,991
	15.5 (3.0 15.4 (3.0 15.5 14.7 (45.9 14.7 (45.8 (18.1 15.4 (18.0

Fleetwood Corporation Limited Consolidated Statement of Financial Position Year ended 30 June 2017

==> picture [98 x 34] intentionally omitted <==

Current assets Cash and cash equivalents Trade and other receivables Inventories Assets held for sale Total current assets Non-current assets Trade and other receivables Property, plant and equipment Intangible assets Goodwill Deferred tax assets Total non-current assets Total assets Current liabilities Trade and other payables Interest bearing liabilities Provisions Other financial liabilities Total current liabilities Non-current liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings (losses) Total equity 7 Note 8 7 9 5	$ '000 $ '000 5,383 6,116 2017 2016 64,953 40,628 63,211 49,291 20,220 25,839
	153,767 121,874
	91 1,120 55,230 55,230 1,369 427 46,848 45,836 10,167 14,121
	113,705 116,734
	267,472 238,608
	5,812 5,556 58,831 42,247 363 301 5,000 3,000
	70,006 51,104
	1,551 1,177
	1,177 1,551
	71,557 52,281
	195,915 186,327
	195,371 195,079 57 (244 487 (8,508
	195,915 186,327

Fleetwood Corporation Limited Consolidated Statement of Changes in Equity Year ended 30 June 2017

==> picture [103 x 22] intentionally omitted <==

2016 Financial Year 2017 Financial Year Balance at 1 July 2015 Total comprehensive income (loss) for the year Loss for the year Exchange differences arising on translation of foreign operations Balance at 30 June 2016 Share-based payments Total comprehensive income for the year Profit for the year Exchange differences arising on translation of foreign operations Share-based payments Balance at 30 June 2017	$ '000 $ '000 $ '000 $ '000 194,762 (257) 19,496 214,001 Issued capital Foreign currency translation reserve Retained earnings Total - - (28,004) (28,004) - 13 - 13
	- 13 (28,004) (27,991) 317 - - 317
	195,079 (244) (8,508) 186,327 - - 8,995 8,995 - 301 - 301
	- 301 8,995 9,296 292 - - 292
	195,371 57 487 195,915

Fleetwood Corporation Limited Consolidated Statement of Cash Flows Year ended 30 June 2017

==> picture [98 x 34] intentionally omitted <==

Cash flows from operating activities Receipts in the course of operations Note Payments in the course of operations Payment for acquisition of business Cash flows from investing activities Acquisition of property, plant and equipment Proceeds from sale of non-current assets Finance costs paid Interest received Income taxes paid Net cash used in financing activities Net (decrease) increase in cash and cash equivalents held Net cash provided by operating activities 6 Repayment of borrowings Payment for intangible assets Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Cash and cash equivalents at the end of the financial year Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on the balance of cash held in foreign currencies	345,102 381,985 2017 2016 $ '000 $ '000 (338,240) (313,528 (921) 54 290 (116) (617 (1,153
	5,879 66,977
	- - (8,719) (7,972 117 436 (10) (484
	(8,612) (8,020
	(68,300) (144,500 70,300 85,000
	2,000 (59,500
	(733) (543 6,116 6,634 - 25
	5,383 6,116

Fleetwood Corporation Limited Notes to the Financial Statements Year ended 30 June 2017

==> picture [98 x 34] intentionally omitted <==

1. Significant accounting policies

Basis of preparation

This preliminary final report has been prepared in accordance with ASX Listing Rule 4.3A and the disclosure requirements of ASX Appendix 4E.

2. Revenue Sales revenue Goods Construction Rental Other income Interest Loss on sale of non-current assets	138,073 109,300 2017 2016 32,643 33,504 $ '000 $ '000 159,428 141,493
	330,144 284,297 53 290 (52) (95)
	1 195
	330,145 284,492

3. Profit from ordinary activities before income tax expense

Profit from ordinary activities before income tax expense has been arrived at after charging the following items:

Cost of sales Depreciation and amortisation of: buildings leasehold improvements plant and equipment product development Finance costs: Bank loans and overdraft Research and development costs Equity settled share-based payments Net bad and doubtful debts	748 1,921 5,761 6,602 713 748 260,666 226,240 34 34
	7,256 9,305
	921 968 292 317 869 1,192 255 310

Fleetwood Corporation Limited Notes to the Financial Statements Year ended 30 June 2017

==> picture [98 x 34] intentionally omitted <==

4. Commentary on the results 5. Retained earnings Retained (losses) earnings at the beginning of the year Profit (Loss) attributable to members of the parent entity Retained earnings (losses) at the end of the year 6. Notes to the cash flow statement Operating profit (loss) after income tax Less items classified as investing activities: Loss on sale of non-current assets Add non-cash items: Equity settled share-based payments Depreciation and amortisation - continuing operations Depreciation and amortisation - discontinued operations Written down value of rental fleet sold Impairment of non-current assets (Increase) in inventories (Increase) Decrease in trade and other receivables (Increase) in other financial assets Increase (Decrease) in trade and other payables Increase in provisions Decrease (increase) in deferred taxes receivable Increase in other financial liabilities Non-cash financing and investing activities 7. Trade and other receivables Current Trade receivables Other Non-current Other The commentary on the results for the year is contained in the review accompanying this statement. Reconciliation of profit (loss) from ordinary activities after income tax to net cash provided by operating activities Changes in assets and liabilities during the year: Net cash provided by operating activities There were no dividends paid during the year.	2017 2016 $ '000 $ '000 8,995 (28,004 (8,508) 19,496
	487 (8,508
	8,995 (28,004 52 95 292 317 (13,920) (4,046 (25,267) 55,142 - 29,991 7,256 9,305 442 9,795 6,799 5,813 3,954 (10,258 62 301 - (206 16,584 (1,425 630 157
	5,879 66,977
	11,417 11,423 53,536 29,205
	64,953 40,628
	1,369 427
	1,369 427

Fleetwood Corporation Limited Notes to the Financial Statements Year ended 30 June 2017

==> picture [98 x 34] intentionally omitted <==

8. Goodwill Goodwill Carrying amount at beginning of year Effect of foreign exchange differences 9. Financing arrangements Total facilities available: Multi Option Facility Facilities utilised: Bank loans Bank guarantees Facilities not utilised Bank loans Bank overdraft Bank guarantees Facilities not utilised 10. Dividends Unrecognised Final 2017 - 5 cents per share fully franked Reconciliation of the carrying amount of Goodwill: Impairment loss on goodwill The economic entity has access to the following lines of credit: Under the terms of Multi Option Facility, the economic entity is entitled to draw on any mix of commercial bill, bank guarantee, standby letter of credit or overdraft facilities. A fully franked dividend of 5c per share has been declared, the ex-dividend date for the final dividend is 4 September 2017, the record date for determining entitlements to the final dividend is 5 September 2017 and payment for the final dividend is 29 September 2017. The company's dividend reinvestment plan will be available for the final dividend. The plan offers a 2.5% reinvestment discount. The last date for receipt of an election notice for participation in the plan is 6 September 2017.	2017 2016 $ '000 $ '000 55,230 55,230
	55,230 61,761 - (6,529) - (2)
	55,230 55,230
	20,000 25,000
	3,000 1,842 1,438 5,000
	6,842 4,438
	13,000 17,000 158 2,062 - 1,500
	13,158 20,562
	- 3,052
	3,052 -

11. Earnings per share Profit (loss) from continuing and discontinued operations Adjustment to exclude loss from discontinued operations Profit (loss) from continuing operations Basic Diluted The final dividend in respect of ordinary shares for the year ended 30 June 2017 has not been recognised in the financial statements because the dividend was not declared, determined or publicly recommended at 30 June 2017. Number of shares deemed to be issued for no consideration in respect of employee options and rights	8,995 (28,004) 437 16,985
	9,432 (11,019)
	61,039,412 61,039,412 104,810 131,220 Weighted average number of shares used
	61,144,222 61,170,632

Fleetwood Corporation Limited Notes to the Financial Statements Year ended 30 June 2017

==> picture [98 x 34] intentionally omitted <==

12. Net tangible assets per security

Net tangible assets per security

2017	2016
$2.30	$2.13

13. Segment information

Group operating segments are based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources.

Business segments

RV Manufacture of caravans Parts and Accessories Manufacture and distribution of RV and commercial vehicle parts and accessories Modular Accommodation Design, manufacture and sale of accommodation Village Operations Operation of accommodation villages Unallocated Group corporate function

Group revenue and results by reportable operating segment:

RV Parts and Accessories Modular Accommodation Village Operations Unallocated Intersegment eliminations Finance costs Asset Impairment Profit (loss) before income tax expense Income tax (expense) benefit Profit (loss) from continuing operations Loss from discontinued operations Profit (loss) attributable to members of the parent entity	627 2,298 Depreciation and Amortisation 1,876 2,232 2,323 Revenue $ '000 2016 30,246 (7,303) (4,689) - - 86,570 87,616 142,533 175,827 26,303 80 349 4,282 222 2016 2017 $ '000 $ '000 29,752 47,353 212 1,857 632 $ '000 2017	6,944 5,183 858 15,211 3,583 $ '000 (6,721) (8,096) $ '000 2017 2016 Result (EBIT) 1,255 (2,078) - - (3,629)
	9,305 7,256 284,492 330,145	14,611 (2,101) (921) (968) 13,690 (13,381) (4,258) 2,362 - (10,312) 9,432 (11,019) (437) (16,985) 8,995 (28,004)

Segment result represents the earnings before interest and tax of each segment without the allocation of corporate and other overheads. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.

2016 included asset impairment for the Parts and Accessories operating segment of $6.5m of goodwill as disclosed at note 8, and $3.8m of other intangible assets. There were no asset impairments recorded in 2017.

Group assets and liabilities by reportable operating segment:

RV Parts and Accessories Modular Accommodation Village Operations Unallocated	Acquisitions of Non- Current Assets Assets $ '000 1,155 $ '000 $ '000 $ '000 2016 Liabilities 847 1,510 27,786 97,148 54,838 15,959 $ '000 $ '000 2017 2017 2016 56,367 6,840 6,280 23,603 24,474 126,930 6,601 4,788 191 42,877 172 2,782 2,442 3,789 41,921 25,428 1,114 13,413 13,343 326 5,537 2016 2017 36,098 2,659
	8,719 238,608 267,472 52,281 8,581 71,557

14. Information on audit

This preliminary final report is based on accounts that are in the process of being audited.

Fleetwood Corporation Limited Notes to the Financial Statements Year ended 30 June 2017

==> picture [97 x 33] intentionally omitted <==

15. Comparatives

Comparative information shown is for the year ended 30 June 2016. Comparative figures, where required, have been adjusted to conform to changes in presentation for the current year.

16. Discontinued Operation

On 1 March 2016 the company ceased resource sector rental operations due to the downturn in the mining industry and the resulting reduction in demand for construction workforce accommodation.

Revenue Impairment Expenses Loss from discontinued operation before tax Loss from discontinued operation after tax Loss attributable to members of the consolidated entity Profit (loss) from continuing operations Loss from discontinued operations Cash flows from discontinued operation Net cash inflows from operating activities Net cash outflows from investing activities Net cash provided by discontinued operation Attributable income tax benefit	6,479 12,524 (7,103) (17,108) 2016 $ '000 $ '000 - (19,680) 2017
	(24,264) 187 7,279 (624)
	(437) (16,985)
	9,432 (11,019) (437) (16,985)
	8,995 (28,004)
	5,384 9,729 - (2,596)
	5,384 7,133

17. Events after the reporting date

There were no material events subsequent to the reporting period.