Revenue from continuing operations

Up

2.6%

to

Revenue from discontinued operations1

Down

-100.0%

to

Total revenue from ordinary activities

Down

-19.3%

to

Earnings before interest and tax ('EBIT') ($'000)

EBIT from continuing operations excluding transaction

costs2

Up

3.0%

to

EBIT from continuing operations

Down

-1.0%

to

EBIT from discontinuing operations1

Up

1109.8%

to

Total EBIT from ordinary activities

Up

109.0%

to

Net Profit ($'000)

Net profit from continuing operations excluding

transaction costs2

Up

7.3%

to

Net profit from continuing operations

Up

1.4%

to

Net profit from discontinued operations1

Up

1648.2%

to

Total net profit from ordinary activities

Up

174.0%

to

GWA GROUP LIMITED

ABN: 15 055 964 380

Appendix 4D

Half Year Report - 31 December 2018

Results for announcement to the market

For the half year period ended 31 December

2018

2017

Revenue ($'000)

182,647

178,102

-

48,237

182,647

226,339

38,740

37,627

37,245

37,627

50,060

4,138

87,305

41,765

26,635

24,826

25,185

24,826

50,802

2,906

75,987

27,732

1

Discontinued operations include the Door & Access Systems business (comprising of Gainsborough HardwareLimited and API Services and Solutions Ltd) that was sold with an effective date of 3 July 2018 (date of loss of control).

2

$1.5m transaction costs incurred during the period in relation to the proposed acquisition of Methven Limitedannounced on 14 December 2018.

Dividends (cents per share)

Interim ordinary dividend3 - 100% franked

3

The record date for determining entitlements to the dividend is 22 February 2019 and the dividend is payable on

5 March 2019.

Net tangible asset and net asset backing (cents per share)

Net tangible asset backing

Net asset backing

Brief explanation of the figures reported above

Refer to the Appendix 4D commentary for the review of operations.

9.0

36.4

144.9

The attached Interim Financial Report has been reviewed by GWA's independent statutory auditors.

This Half Year Report should be read in conjunction with the most recent Annual Financial Report.

8.5

- 123.0

18 February 2019

GWA increases net profit by 7%¹ and declares fully-franked interim dividend of 9 cents per share, up 6%

Continuing to drive profitable share growth with EBIT margins maintained creates strong platform to continue to deliver through the cycle

  • Normalised Continuing Operations Net Profit After Tax1 up 7.3% to $26.6 million

  • Reported Net Profit of $76.0m (includes the gain on sale of the Door & Access Systems' business)

  • Fully-franked interim dividend of 9 cents per share, up 5.9% payable on 5 March 2019

  • Group Earnings Before Interest and Tax1 (EBIT) up 3.0% to $38.7 million

    • o Bathrooms & Kitchens EBIT up 2.5% to $45.5 million - continued momentum in driving profitable share growth with EBIT margin maintained at 24.9%

  • Share gains from revenue growth ahead of market

  • Strong turnaround in cashflow generation - operating cashflow up 31.6%

  • Profit on sale of Door & Access Systems - proceeds used to repay debt

  • Proposed acquisition of Methven strengthens water solutions strategy - expect transaction to complete mid-April 2019, subject to regulatory/shareholder approvals

  • FY19 Outlook - expect 2H FY19 Group EBIT (pre-significant items) to be similar to 1H FY19 (excluding any earnings contribution from Methven).

Market conditions

GWA estimates that the increase in market activity weighted across its key end markets was flat for the period. While GWA's largest segment, Renovations and Replacements, remains relatively steady, new residential construction activity has reduced but continues to remain at historically high levels with a significant pipeline of work yet to be completed. The Commercial segment continues to grow strongly.

  • Market activity for home Renovations and Replacements, (approximately 52% of GWA revenue) increased by ~1% per cent.

  • Detached house completions (representing approximately 21 per cent of GWA revenue) decreased by ~4% per cent.

  • Medium and high-density dwelling completions (approximately 12% of GWA revenue) decreased by ~9% per cent.

  • On a value of work done basis, Commercial building activity (approximately 15% of GWA revenue) increased by ~7% per cent.

1 From Continuing Operations and before Significant Items. Continuing Operations exclude the Door & Access Systems' business which was sold on 3 July 2018. Significant Items of $1.5m pre‐tax relate to costs associated with the proposed acquisition of Methven Ltd.

Against that background GWA recorded revenue growth of 2.6 per cent in the period.

Commentary on Result

Managing Director, Tim Salt, said GWA had delivered another solid result, continuing the strong momentum in building a more competitive and sustainable platform through the cycle.

"We are continuing to grow the top line ahead of the market through profitable share gains in our core segments of Renovations and Replacements, Commercial and Detached housing.

"Importantly, we are also maintaining EBIT margins, through a consistent focus on sales in higher value categories and cost management.

"We continue to improve our customer engagement resulting in enhanced ranging of existing products and listing of new products in showrooms and trade counters.

"We are working more collaboratively with customers on programs to target specific growth segments such as Aged Care and Commercial Renovation and Replacement opportunities.

"At the same time, we are investing for future growth.

"We have re-aligned our brand portfolio to target distinct consumer groups with brand relaunches of Caroma and Clark, supported by increased investment in marketing and media to improve consumer engagement.

"Our two flagship stores in Adelaide and Sydney provide a strong physical brand and product experience for our customers and consumers alike.

"Meanwhile, GWA has now successfully launched Caroma Smart Command® to the market. This is an intelligent bathroom system which includes a set of Bluetooth-enabled, touchless bathroom products that integrate into commercial building management systems to enable monitoring use and management of water.

"The system is now installed in thirteen commercial R&R locations and test sites with further installations planned for Q3 FY19.

"I am pleased with the continuing progress we're making in our strategy to deliver superior water solutions.

"That progress will be accelerated through the proposed acquisition of Methven, which we expect to complete in mid-April, subject to all conditions being satisfied.

"The acquisition of Methven strengthens GWA's core Australasian business and enhances the regional diversity of our revenue and earnings through leveraging Methven's presence in international markets to accelerate growth opportunities aligned to our core focus on water solutions.

"The acquisition will also increase our exposure to the more resilient Renovations and Replacements segment. Post transaction, GWA's exposure to the Renovations and Replacements segment in Australia will increase from 52 per cent currently to 57 per cent, while globally our exposure to this segment will be around 60 per cent," he said.

Group Results - Continuing Operations Before Significant Items1

A$ million (unless specified)

1HFY18

1HFY19

% change

Sales Revenue

178.1

182.6

+2.6%

EBITDA

39.3

41.0

+4.2%

EBIT

37.6

38.7

+3.0%

EBIT Margin

21.1%

21.2%

+0.1ppts

NPAT

24.8

26.6

+7.3%

Return on Funds Employed

21.7%

20.6%

(1.1)ppts

GWA Group Limited, a leading supplier of water solutions in residential and commercial premises across Australia / New Zealand, today announced a 7.3 per cent increase in net profit after tax1 to $26.6 million for the half-year ended 31 December 2018.

The strong increase in net profit after tax, reflects the increase in Group EBIT, together with lower net interest expense compared to the prior corresponding period.

Group EBITDA1 increased by 4.2 per cent to $41.0 million while Group EBIT1 increased by 3.0 per cent to $38.7 million.

GWA's earnings per share1 of 10.1 cents improved by 7.3 per cent on the prior year.

GWA continues to focus on higher value product categories and cost management, resulting in Group EBIT margin1 increasing by 0.1 percentage points to 21.2 per cent.

Group Return on Funds Employed1 (ROFE) was 1.1 percentage points lower on the prior corresponding period at 20.6 per cent. This reflects an increase in funds employed from higher capital expenditure focused on growth initiatives over the past 12 months and an increase in inventory to support the transition to the new Innovation and Distribution Centre in 2H FY18.

Reported Results - Continuing and Discontinued2 Operations

A$ million (unless specified)

1HFY18

1HFY19

% change

Sales Revenue

226.3

182.6

(19.3)%

EBITDA

44.2

89.5

+102.5%

EBIT

41.8

87.3

+108.9%

NPAT

27.7

76.0

+174.4%

Earnings Per Share (cents)

10.5

28.8

+174.4%

GWA's reported net profit after tax for the period was $76.0 million. Reported net profit includes the $50.8 million3 after tax profit for the period on sale of the Door & Access Systems' business which was sold on 3 July 2018, and $(1.5) million in

  • 2 Discontinued Operations include the Door & Access Systems' business which was sold on 3 July 2018.

  • 3 Divestment of Door & Access Systems' had a total gain on sale of $49.1m.

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GWA Group Limited published this content on 18 February 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 17 February 2019 21:46:06 UTC