GWA : Annual Report 2020

2020

Annual Report

In this report

Five Year Financial Summary	1	Board of Directors	12
Company Profile	2	Directors' Report	14
Strategic Summary	3	Financial Report	32
Chairman's Report	4	Other Statutory Information	79
Managing Director's Review of Operations	7	Shareholder Information	80

FY20 Performance Highlights

GWA delivers disciplined financial result

Continued cost discipline helps mitigate challenging market conditions

NORMALISED1 FROM CONTINUING OPERATIONS2

A$ million excludes significant items, includes Methven for full year

	REVENUE	EBIT	OPERATING CASH FLOW
	$398.7 million	$71.8 million	$61.0 million
	 4.4%	 8.0%	 9.9%
	EBITDA	NPAT	EPS
	$92.2 million	$44.9 million	$17.0c per share
	 0.8%	 11.6%	 2.3c per share
	Reported3 Net Profit After Tax	Solid balance sheet maintained	Successful integration of the
	for the period was $43.9 million	with strong cashflow conversion	Methven acquisition into the
	$43.9 million	and cost discipline, enabling	Group which remains on track
	the Company to manage	with synergies achieved ahead
	through the current challenging	of schedule.
	Final dividend 3.5 cents	conditions.	Caroma Smart Command®
	per share, full-year dividend	Continued execution of superior	gaining market traction with
	11.5 cents, fully franked	water solutions growth strategy	focus on sustainability benefits
	11.5 cents	which has strengthened	and enhanced hygiene.
	position for when market
		the Company's competitive
		conditions improve.

1. Normalised is before $(1.0)m in significant items (after tax) relating to integration costs associated with the acquisition of Methven (FY19: $(7.6)m).
2. Continuing Operations include the revenue and earnings contribution from Methven from the effective date of acquisition, 10 April 2019, but exclude the Door & Access Systems' business which was sold on 3 July 2018.
3. Reported result includes $(1.0)m significant items (after tax) relating to integration costs associated with the acquisition of Methven. FY19 Reported result includes $50.8 million after tax profit from the sale of the Door & Access Systems business and $(7.6)m in significant items (after tax) relating to transaction and integration costs associated with the acquisition of Methven.

Five Year Financial Summary

CONTINUING OPERATIONS(1)	2015/16	2016/17	2017/18	2018/19(7)	2019/20(7)
$'000	$'000	$'000	$'000	$'000
Revenue from continuing operations	439,666	350,437	358,622	381,730	398,704
Earnings before interest, tax, depreciation,
amortisation (EBITDA) and significant items(2)	84,250	78,423	80,171	92,986	92,206
EBITDA margin (%)	19.2	22.4	22.4	24.4	23.1
Depreciation and amortisation	(5,985)	(4,122)	(3,929)	(14,869)	(20,366)
Earnings before interest, tax and significant items (EBIT)(2)	78,265	74,301	76,242	78,117	71,840
EBIT margin (%)	17.8	21.2	21.3	20.5	18.0
Interest (net)	(6,508)	(5,338)	(4,813)	(5,811)	(8,644)
Normalised profit before tax(2)	71,757	68,963	71,429	72,306	63,196
(%)	16.3	19.7	19.9	18.9	15.9
Tax expense on normalised profit	(19,837)	(19,712)	(21,290)	(21,467)	(18,273)
Normalised effective tax rate (%)	27.6	28.6	29.8	29.7	28.9
Normalised profit after tax(2)	51,920	49,251	50,139	50,839	44,923
Significant items after tax	-	-	-	(7,597)	(1,037)
Net profit after tax from continuing operations	51,920	49,251	50,139	43,242	43,886
Profit from discontinued operations (net of income tax)	1,761	4,420	4,113	50,802	-
Net profit after tax for the period	53,681	53,671	54,252	94,044	43,886
Net cash from operating activities	54,924	57,171	39,158	67,630	60,952
Capital expenditure	3,628	5,281	12,475	4,326	12,317
Net debt(3)	88,420	79,756	97,729	141,930	144,841
Shareholders' equity	307,698	320,603	333,401	286,756	279,731
OTHER RATIOS AND STATISTICS
Interest cover (times)(4)	14.3	17.1	19.6	23.5	13.6
Gearing: net debt/(net debt + equity) (%)(8)	22.3	19.9	22.7	27.5	28.4
Return on shareholders' equity (%)	17.4	16.7	16.3	32.8	15.7
Dividend payout ratio - Group (%)(5)	81.4	81.1	87.4	51.9	69.2
Dividend payout ratio - Normalised Continuing (%)(5)	84.1	88.4	94.7	96.0	67.6
Dividend per share (cents)(6)	16.0	16.5	18.0	18.5	11.5
Franking (%)	100	100	100	100	100
Share price (30 June) ($)	2.09	3.15	3.40	3.42	2.77
Dividend yield at 30 June share price (%)	7.7	5.2	5.3	5.4	4.2
Number of employees	876	760	757	665	629
Basic earnings per share (cents) - Group	19.7	20.3	20.6	35.6	16.6
Basic earnings per share (cents) - Continuing	19.0	18.7	19.0	16.4	16.6
Normalised basic earnings per share (cents) - Continuing	19.0	18.7	19.0	19.3	17.0

1. The Door and Access Systems' business has been sold with an effective date of 3 July 2018. During the year ended 30 June 2016, the Gliderol business was sold with an effective date of 31 July 2015. Accordingly, the operating activities of Door and Access Systems were classified as discontinued in FY18 and FY17, and Gliderol classified as discontinued operations in FY16, and presented separately from the results of continuing operations. FY16 includes the operating activities of Door and Access Systems as part of continuing operations. Continuing operations includes the contribution from Methven from the effective date of acquisition, 10 April 2019.
2. Normalised profit before significant items is a non-IFRS financial measure reported to provide a greater understanding of the

underlying business performance of the Group. The disclosures are extracted or derived from the financial reports and have not been subject to review or audit. The non-IFRS financial measures included in this table exclude significant items that are detailed in the relevant years' financial reports.

(3) Net debt reflects the Group's borrowings and bank guarantees less cash (including cash classified within assets held for sale).

(4) Interest cover (times) is calculated using EBITDA excluding non-recurring other significant items divided by net interest expense.

1. Dividend payout ratio is calculated as the Dividend per share (cents) divided by the relevant Basic EPS. Basic EPS is calculated using the weighted average number of ordinary shares at 30 June.
2. Dividend per share includes ordinary and special dividends.
3. AASB16 Leases and the May 2020 IFRS Intepretation Committee decision on 'Multiple Tax Consequences of Recovering an Asset' have been adopted from 1 July 2019 (FY20), with retrospective restatement of FY19 made. FY16-FY18 has not been restated.
4. Equity for the purposes of gearing excludes the retained earnings impact from the adoption of the May 2020 IFRS Intepretation Committee decision on 'Multiple Tax Consequences of Recovering an Asset'.

GWA GROUP LIMITED | 2020 ANNUAL REPORT | 1

Company Profile

We make life better for all our stakeholders

GWA Group Limited (GWA) listed on the Australian Securities Exchange in May 1993 and is a leading innovator, designer and supplier of product solutions, services and intelligent technology focused on the water solutions segment.

We own and distribute market-leading brands and state of the art product solutions across our ranges of sanitaryware, tapware, showers, basins, baths, kitchen sinks, laundry tubs, bathroom/kitchen accessories and valves. We have an intelligent bathroom system incorporating IoT smart water management solutions.

GWA operates a central-led business with corporate functions supporting our water solutions business. We have sale and distribution facilities across our primary end markets of Australia, New Zealand, United Kingdom and China.

We are highly respected within the building industry for innovation, water efficiency, product reliability and quality, technical expertise and superior service.

We maintain cost efficient long term supply agreements with selected, exclusive manufacturing partners across Asia and Europe, and with light manufacturing operations in New Zealand and China. GWA has an experienced senior management team in R&D, design, brand building, customer engagement, supply and distribution.

GWA remains committed to growing shareholder value through our focus on superior solutions for water and has strong market positions, market-leading brands and significant growth opportunities.

GWA is a member of the ASX 200 index of listed Australian companies.

OUR BRANDS

2 | GWA GROUP LIMITED | 2020 ANNUAL REPORT