GWA share price on watch following earnings release

The GWA Group Ltd (ASX: GWA) share price will be on watch this morning following the release of the company's half-year earnings result.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The GWA Group Ltd (ASX: GWA) share price will be on watch this morning following the release of the company's half-year earnings result.

What does GWA do?

GWA is involved in the research, design, manufacture, import and marketing of building fixtures and fittings to residential and commercial premises in Australia, New Zealand and selected international markets.

The group is the owner and distributor of an extensive range of market-leading bathroom and kitchen brands including Caroma, Methven, Dorf and Clark.

What did GWA announce?

For the six months to December 2019, GWA's normalised earnings before interest and tax (EBIT) came in at $38.1 million, within its $37-41 million guidance range.

However, EBIT was down 2.6% on the prior corresponding period (pcp) due to lower revenue in the weaker Australian residential segment, partially offset by accelerated cost savings and higher Methven synergies.

GWA estimated that the market declined approximately 6% on the pcp. In addition, the significant trade de-stocking experienced in Q1 FY20 was not reversed in Q2 FY20, reflecting tougher market conditions.

GWA continues to invest in growth initiatives in anticipation of near-term market improvement.

Market share was maintained in Australia (excluding Methven) with EBIT margin held broadly within the target range. Including Methven, market share actually increased.

Meanwhile, normalised net profit after tax came in at $24 million. The company noted that its ongoing robust financial position enabled it to declare a fully franked interim dividend of 8 cents per share, payable on 4 March 2020. This compares to the 9 cents that was declared in 1H FY19.

Ongoing operating cashflow was reported to be strong at $42.2 million.

Operational update

The Methven integration was reported to be progressing well, with New Zealand performance improving.

GWA's commercial forward order book continues to be strong and is said to be growing. The company's commercial order bank has accelerated its cost-out and efficiency improvements as part of the $9-12 million cost out program by FY21. $3 million savings were delivered in 1H FY20; ahead of the $2 million target.

Relationships with trade partners continued to improve through joint business planning and core range extensions. GWA continues to drive growth in commercial segments through increased collaboration with secondary customers to capture segment opportunities including Aged Care and Commercial Renovation and Replacement.

Key replacement achievements during the quarter included the roll-out and extension of Caroma Smart Command which is now installed in 36 sites with a significant bank of additional projects in the pipeline. The company is now developing further international expansion options for Caroma Smart Command through GWA-generated leads and leveraging Methven's footprint across South East Asia and China.

New distribution centres in Victoria, Queensland and Western Australia complement the investment previously made in New South Wales and enable integration of the Methven portfolio. The centres provide a base for the improvement in operating efficiencies in FY21 and beyond

Outlook

According to the company, trading conditions are expected to remain challenging in the short term. However, forward indicators including population growth, low interest rates, easier access to credit, and housing supply and demand moving back into balance are expected to provide a solid platform for growth.

With this, GWA is continuing to invest in key initiatives to capitalise on the upturn that it anticipates in Australian market conditions in early FY21.

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Ten smiling business people wave to the camera after receiving some winning company news.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX was back in the black this Tuesday.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Cromwell Property, Metcash, Pilbara Minerals, and Tyro shares are falling today

Let's see why these shares are under pressure on Tuesday.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why DroneShield, Hansen, Hub24, and Paladin Energy shares are racing higher today

These shares are having a strong session. Let's find out why.

Read more »

A man in a dark blue suit walks through an airport past floor-to-ceiling windows with a Qantas plane flying in the distance
Travel Shares

Up 16% this year, does Macquarie rate Corporate Travel Management shares a buy, hold or sell?

Does the travel stock have further to fly?

Read more »

Business women working from home with stock market chart showing per cent change on her laptop screen.
Opinions

1 month until ASX earnings season begins: how I'm preparing

It’s almost reporting time. Here’s what I’m looking at.

Read more »

Smiling man with phone in wheelchair watching stocks and trends on computer
Share Market News

5 things to watch on the ASX 200 on Tuesday

A good session is expected for Aussie investors today.

Read more »

a man sits at his desk wearing a business shirt and tie and has a hearty laugh at something on his mobile phone.
Opinions

Potential buys: 2 compelling ASX shares I like

These ASX shares have an exciting future.

Read more »

Man on a laptop thinking.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors weren't in a good mood this Monday.

Read more »