GWA : FY21 Half Yearly Report and Accounts

16 February 2021

ASX On-Line

Manager Company Announcements

Australian Securities Exchange

Dear Sir

Financial Results for the Half Year Ended 31 December 2020

We enclose the following documents for immediate release to the market:

• • Appendix 4D Half Year Report

• • Appendix 4D Commentary

• • Interim Financial Report

On 16 February 2021 at 10:00am (AEDT), GWA will be hosting a webcast of its FY21 half year results briefing. The webcast is accessible via the GWA website at

www.gwagroup.com.au.

This document was authorised for release by the GWA Board.

Yours faithfully

R J Thornton Executive Director

GWA GROUP LIMITED

ABN: 15 055 964 380

Appendix 4D

Preliminary final report - 31 December 2020

Results for announcement to the market

For the half year ended 31 December	2020	2019
Reported Results ($'000)
Total Revenue from ordinary activities	Down	-4%	to	197,235	206,272
Total EBIT from ordinary activities	Down	-20%	to	29,915	37,477
Total NPAT from ordinary activities	Down	-22%	to	18,501	23,591
Continuing Operations (Normalised1) ($'000)
Revenue from continuing operations	Down	-4%	to	197,235	206,272
EBIT from continuing operations excluding integration costs	Down	-16%	to	32,078	38,099
NPAT from continuing operations excluding integration costs	Down	-17%	to	20,014	24,038

1 Normalised results excludes integration costs incurred during the period in relation to the acquisition of Methven Limited - 2020: $2.2m ($1.5m post tax) and 2019: $0.6m ($0.4m post tax).

Dividends (cents per share)

Interim ordinary dividend - 100% franked

6.0

8.0

The record date for determining entitlements to the interim ordinary 2021 dividend is 16 March 2021 and the dividend is payable on 20 April 2021.

Net tangible asset and net asset backing (cents per share)	As at	31 Dec 20 30 Jun 20
Net tangible asset backing	(50.8) (53.6)
Net asset backing	108.3 106.0
Brief explanation of the figures reported above
Refer to the attached Appendix 4D commentary for the review of operations.

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

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

Appendix 4D Commentary

16 February 2021

GWA reports normalised1 net profit of $20 million in challenging market - well positioned for expected market improvement

Continued strong financial position enables payment of fully-franked interim dividend of 6 cents per share

• • Group Revenue down 4.4% to $197.2m - revenue improved 1.6% in Q2 vs Q1 FY21

• • Normalised Group Earnings Before Interest and Tax (EBIT) of $32.1m, down 16%

• • Normalised Net Profit After Tax of $20.0m, down 17% from prior period

• • Reported Net Profit After Tax of $18.5m, down 22% from prior period

• • Continued solid cashflow generation - operating cashflow of $49.7m, up 18% with cash conversion ratio of 118%

• • Net debt further reduced to $125m - leverage ratio down to 1.7 times

• • Strong cash generation and ongoing strong financial position enables fully-franked interim dividend of 6 cents per share, payable on 20 April 2021

• • Leading market share position maintained in Australia. Grew share in New Zealand and the United Kingdom

• • Commercial forward order book strong and growing - up ~16% since 31 December 2019, although commercial completions expected to remain subdued in 2H FY21

• • Methven continuing to perform to expectations - in growth in NZ and the UK, partially offset by weaker Australian market

• • Methven synergies in line with FY21 guidance of over A$6m total - consolidation in NZ to deliver additional $3m annualised cost savings from FY22

First half result

Overall conditions in the first half continued to be impacted by the ongoing construction market downturn and further COVID-19 related slow down.

Managing Director, Tim Salt, said: "In Australia the retail-focused merchant channel and residential detached activity have shown signs of improvement, particularly in the second quarter. However, these have been more than offset by declines in the commercial and multi residential segments.

"While our commercial order bank is up on the prior-year, we experienced timing delays in projects being drawn down which impacted margins and earnings for the first half."

GWA estimates that total market activity in Australia declined approximately 6 per cent for 1H FY21 vs the prior corresponding half2.

The New Zealand and United Kingdom markets have performed well despite the significant market disruption in the United Kingdom due to COVID-19.

• 1 Normalised is before Significant Items

• 2 Source: BIS Oxford Economics and GWA estimates Australia market (value). 12 months MAT

"We have continued to respond to the short-term challenging market conditions by remaining disciplined on operational costs, ensuring the ongoing stability and efficiency of our supply chain and managing our working capital and cash flow accordingly," Mr Salt said.

"Notwithstanding the 4 per cent decline in Group revenue, these initiatives have assisted our Australian / New Zealand EBIT margin to remain consistent with the prior corresponding period."

Group 1H FY21 performance was impacted by challenging market conditions but was in line with expectations and includes staff incentives accrued in FY21 but not in the prior corresponding period. This resulted in an overall Group EBIT margin of 16.3 per cent compared to 18.5 per cent for the prior period.

GWA well positioned for expected market improvement

Mr Salt said GWA demonstrated continued discipline in responding to the challenging market conditions in the first half while executing its growth strategy.

As a result GWA remained well capitalised to manage through the current environment with a stronger platform for growth.

"We saw signs of market improvement in Q2 FY21 with more recent lead indicators pointing to an increase in detached residential completions and renovation and replacement activity in Q4 FY21 / FY22.

"GWA maintains significant operational leverage to an improvement in the residential building cycle, while our commercial forward order bank is 16 per cent ahead of 31 December 2019. The implementation of our superior water solutions strategy and ongoing investment in revenue enhancing initiatives means GWA has a very solid foundation to improve revenue and earnings momentum as market conditions improve," Mr Salt said.

Water solutions growth strategy on track

GWA continued to successfully execute its strategy for growth as market conditions improve.

"We have established centres of excellence in Auckland and Sydney to harness our quality, technical, design and sourcing capability in taps, showers and sanitaryware. In Q2 we launched new ranges of taps, showers, accessories and sanitaryware under the Caroma brand in Australia and New Zealand through key merchant partners. As part of this launch we introduced Germgard® antibacterial glazing to our sanitaryware to capitalise on consumers' heightened concerns over safety and hygiene following the COVID-19 outbreak. In addition, we launched new Methven showerware ranges in Australia, New Zealand and China.

"The current temporary slow-down in commercial activity has required us to pivot our focus to commercial segments which offer greater short term growth opportunities including aged care, education and commercial renovation and replacement.

"We have progressed our consumer engagement with a focus on our digital communications strategy leveraging our key brands' social media and websites to interact more directly with consumers in the renovation decision process. We also used