Reliance Worldwide Corporation Ltd (ASX: RWC), a leading provider of water flow and control products used in plumbing fittings, has seen its share price rise by over 9% after the company released its financial results for the year ending 30 June 2024.
FY24 Financial Highlights
The company reported modest growth and a mix of positive and negative outcomes for FY24:
- Net Sales: Increased slightly by 0.2% to US$1.24 billion.
- Adjusted EBITDA: Remained steady at US$274.6 million.
- Adjusted Net Profit After Tax (NPAT): Decreased by 6% to US$146.9 million.
- Cash Flow from Operations: Rose by 7% to US$314.2 million.
- Dividends: A final dividend of US$0.025 per share was declared.
- Share Buyback: An on-market buyback of US$19.6 million, or US$0.025 per share, was executed.
Cost-saving measures contributed significantly to the company’s performance, including $23 million in savings from various initiatives such as restructuring in the Americas and EMEA regions, procurement savings, and other continuous improvement efforts.
Net sales were positively impacted by the acquisition of Holman Industries, which was finalized on 1 March 2024. Despite this, external sales in different regions showed declines: the Americas experienced a 1% decrease, Asia Pacific sales excluding Holman fell by 3%, and EMEA external sales decreased by 10%. Overall, the company faced softer volumes due to weaker remodel and residential new construction markets. However, new product revenues and the Holman acquisition helped offset these challenges.
The company also incurred $27.1 million in one-off costs related to various activities, including the closure of the Supply Smart business, restructuring in EMEA, the impairment of manufacturing assets in Spain, and expenses associated with the Holman acquisition.
Management's Commentary
Heath Sharp, CEO of Reliance Worldwide Corporation Ltd, shared insights into the company's performance:
“We introduced a range of new products in the Americas, which drove above-market sales performance. Cost reduction programs across all regions helped mitigate the impact of lower volumes and offset cost inflation, allowing us to maintain stable operating margins.”
Sharp highlighted that strong working capital management enabled the company to generate robust operating cash flows. This financial strength facilitated the acquisition of Holman and allowed for a reduction in borrowings. The company concluded the fiscal year in a solid financial position, with leverage now at the lower end of its target range.
The integration of Holman has been well-received, and Sharp expressed enthusiasm about the growth potential resulting from this acquisition.
Outlook for FY25
Looking ahead, Reliance Worldwide Corporation Ltd expects external sales for the first half of FY25 to be "broadly flat" when excluding the impacts of Holman and the closed Supply Smart business. The company anticipates similar performance trends across regions, with new product initiatives and revenue strategies expected to help mitigate the effects of weaker market conditions.
Cost reduction and efficiency measures will continue to be a focus, with the company aiming for an improvement in consolidated EBITDA margins (excluding Holman) compared to the previous period. Holman is on track to meet the expectations set at the time of its acquisition.
The recent financial results and positive outlook have contributed to a notable increase in RWC's share price, reflecting investor confidence in the company's strategic direction and financial health.