SHAPE’s $480M Backlog and Strategic Expansion Drive Sustainable Earnings Growth

About Shape Australia Corporation Limited

Shape Australia Corporation Limited (SHAPE, the Group, ASX: SHA) is a national fit-out and construction services business specialising in commercial properties. Its services include design and construction, fit-out and refurbishment, façade restoration and new builds. Sectors serviced range from commercial office, education, health, hospitality, retail, to defence. The Group has delivered 7,250 projects valued at $10 billion, over the past 35 years.

SHAPE is headquartered in Sydney, and listed on the ASX in December 2021, with an IPO price of $1.96. The closing price on the first day of trading was $2.01 a share.

Investment in diversification provides earnings resilience

The key takeaway from SHAPE’S FY25 trading update for the year-to-date is the Group’s investment in diversification is delivering resilient revenue.

Broadening the Group’s capability suite with the addition of Design & Build in February 2024 and Aftercare and Facilities Maintenance in November 2023 is delivering high-value work across multiple segments and ‘sticky’ revenue from repeat clients. The new Design & Build capability has secured a number of design fees with the potential to convert to construction in the second half of FY25. One project has converted to commence construction in the year-to-date, valued at $20 million.

SHAPE’s expanded regional operations in Gold Coast, Newcastle, and Tasmania have delivered project wins of $46 million in the first four months of FY25 compared to total FY24 project wins of $120 million. The Group’s Modular division secured $11 million in project wins in the first four months, compared to $29.7 million for the full FY24 year.

In total, the first four months of FY25 have seen $350 million in project wins, compared to $291 million in the first four months of FY24. These project wins are part of the current $480 million order backlog which is up 5 percent since 30 June 2024, from $457 million. These work orders provide a solid foundation for multi-year revenue growth.

Synergistic service offerings

The other notable feature of SHAPE’s business model is the operational synergies arising from the Group’s inter-related specialist capabilities.

Experience in delivering high-end fit outs provides opportunities to pick up work at all stages of the property lifecycle, including initial fit outs, reconfigurations, and make goods for a broad range of customers such as offices, boutique hotels, as well as projects in the education, health and defence sectors.

Similarly, facilities maintenance contracts for clients with a property portfolio are provided to meet the evolving needs and end-to-end solutions and ongoing support of their business following projects completed by SHAPE. Work can involve preventative maintenance, emergency response, additions or lead into future upgrades. This includes compliance-driven façade remediation requirements and aesthetic upgrades for clients that include Charter Hall.

Value Engineering

Continuing pricing pressures are impacting client budgets, causing delays that have inhibited short-term revenue growth, although the Group’s long-term position has strengthened, represented by increasing backlog orders to $480 million.

In response to industry-wide pricing pressures, SHAPE practices ‘Value Engineering’ which helps clients to identify areas where cost savings can be achieved, without compromising the quality of the overall project.

For example, using SHAPE’s modular methods of construction that includes metal framing instead of custom-fabricated steel, can save on material costs and labour, while maintaining structural integrity. This is why SHAPE has recently expanded its South Australian Modular construction plant by 5000 square metres.

SHAPE also works with its clients earlier to understand their needs which enhances buildability and ensures greater cost certainty and improves working capital management.

Looking ahead

SHAPE’s AGM is scheduled for 26 November and further details of trading activity may be discussed at that time. The Group’s diversification across refurbishments, restorations, maintenance and new builds for sectors such as office, health, education and defence, provides ongoing earnings resilience.

The Group’s robust balance sheet and growing forward-order book should maintain earnings momentum and provide for strong share price performance throughout FY25 and beyond.