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.
Expansion in target growth areas
Shape is maintaining market share in the office and interiors market, while achieving substantial growth in hotels, education, health, and retail sectors. The Group is also boosting revenue sourced from Government Defence contractors. Defence work is complex and involves strict and unique requirements that come with confidential aspects of these secure projects. This sector delivered revenue of $66 million in FY24, up 31 percent on the previous year’s result. Shape has hired a highly capable Defence team and is continuing to win work in this specialised sector in FY25.
Shape’s service offering is expanding to include replacement of combustible cladding facades on commercial buildings, while its geographic expansion includes a focus on Newcastle, the Gold Coast and Tasmania, with project wins from these centres in FY24 totalling $120 million.
Other recently introduced service offerings are in Aftercare and Facilities Maintenance, which commenced in November 2023, with a focus on commercial office clients in Sydney and Melbourne. Shape will, in time, look to expand this service offering across multiple market segments and geographies.
Although non-office markets now account for half of the order book compared to 25 to 30 percent a few years ago, the Group maintains a dominant market share in the commercial office sector.
Smart risk management
Shape is particularly adept at managing complex projects requiring well-planned high-risk works, permit requirements, and strict regulatory compliance. These jobs require smart risk management, but also provide higher margins that compensate for the higher risk.
A key risk mitigant adopted by Shape is to maintain the workbook at 40 percent weighted to shorter duration projects (less than 4 months), to limit cost escalation risks. Twenty-three percent of projects have a duration of 4 to 6 months and 25 percent have a 6 to 12 months duration. Long duration projects are avoided.
Eighty-eight percent of projects are internal and not affected by weather events, and internal projects are lower risk from an industrial relations perspective.
Eighty-four percent of work is sourced from repeat clients. This is a key risk mitigant because of the higher risk associated with dealing with new clients for the first time in a market with a rising incidence of insolvencies.
Shape’s 50 percent weighting to the commercial office sector provides earnings resilience because of the variety and ongoing nature of work across all aspects of the property cycle. Commercial office activity encompasses construction, fit-out for long-term occupancy, ongoing maintenance, and periodic refresh or reposition of the aged asset.
Cash of $70 million and $28.7 million in investment grade corporate bonds for a total of $98.7 million in liquid assets at 30 June 2024 serves to further mitigate business risk for the Group.
Highest backlog order
Shape entered FY25 with the Group’s highest backlog order book, providing optimism about the Group’s ability to deliver sustainable, medium-term earnings growth. Backlog orders at 30 June 2025 were $457 million, augmented by the identified work pipeline of $3.2 billion and stable 49 percent conversion rates.
The domestic economic growth outlook is expected to be subdued in the short term with recovery taking longer to materialise. However, diversified across refurbishments, restorations, and new builds, and drawing from different sectors, Shape is well positioned to maintain its recent strong performance history into FY25 and beyond.
