Cavco Industry Overview
Cavco Industry is engaged in designing and building homes such as manufactured, modular, vacation or park model homes, and commercial buildings. The company was found in 2003, succeeding past Cavco entities running since 1965, and became a separate public company. Based in the US, Cavco Industries operates in the US, Canada and Japan though two segments:
Factory-built housing: This segment deals with wholesale and retail systems-built housing operations.
Financial services: This recently established segment of the company deals in manufactured housing consumer finance and insurance.
Financial Overview
During fiscal yer 2015, the company recorded $566,6 million of revenues, recording an increase of 6,2% relative to the preceding year. Its net income increased by 27% in 2015 compared to 2014, reaching $23,8 milion (MarketLine, 2015).
Cavco Industry Competitive Advantage
Cavco industries thrives on the basis of innovation and creating a whole environment of exceptional value for its customers. However, one of the core aspects of the company’s business architecture and the one that provides it with a competitive advantage in the marketplace is by reacting quickly to the changes in the marketplace and the specific needs of the customers through vertical integrations and acquisitions. Post the rebound of the real estate market in the United States and Canada after the market turmoil year of 2007-08, the company has entered into multiple acquisitions. For instance, during 2010, it completed the acquisitions of Fleetwood in fiscal year 2010 and of Palm Harbor in fiscal year 2012. These acquisitions have enhaced the operating capacity of the company, allowed it to increase the home production capability and enter into financial and insurance service business related to real estate industry. In additon to vertical integration of the company, these two acquisitions also expanded geographical reach of the company and allowed it to set up factories in retail locations serving the West, South, Midwest and Mid-Atlantic regions.
One of the most recent acquisition transactions of the company were completed on Mach 30, 2015 as part of which the company purchased the business and operating assets of Chariot Eagle Inc. and then on May 1, 2015, where the company acquired Fairmont Homes. Both of these companies are manufacture of park model RVs and manufactured homes, and are thus expected to add further synergies for the company, and thus enhance its competitive advantage further in the industry.
Cavco Industry Risk Factors
Operating in the manufactured housing industry, the company has long been prone to downturns in the economic and associated pessimistic factors. Even today,this remains the largest and most influential risk factor for the company. Post the debacle of real estate market, the company is facing the ill-effects of tight consumer spending and with Federal Reserve again taking the path of increasing the interest rates, this will yet again affect the availability of consumer finance for the purchase of manufactured homes continues to be constrained. Therefore, if the current lending scenario does not favor the consumer sentiments, this will negatively affect the company’s assets.
Secondly,the company has largely relied on acquisitions to gain competitive advantage. However, in case, the company is unable to lever the resources properly or even if it fails to integrate the acquired companies within the company, this will negatively affect the company and will result in significant losses
REFERENCES
Cavco Industries. (2015). SEC 10K. Cavco Industries.
Cavco Industries, Inc. (2015). Cavco Industries, Inc. MarketLine Company Profile, 1-16.
