The Reece Ltd (ASX: REH) share price is on watch today after the bathroom and plumbing products supplier released its half-year results after market close yesterday. Reece reported record sales revenue driven by growth in its US operations.
Reece's 1H20 results
Reece delivered record sales revenue of $2,962 million for the half-year, a 9% increase on 1H19. Despite a moderating market, Australia and New Zealand recorded sales revenue of $1,466 million.
MORSCO, Reece's strategic US growth platform, increased revenue by 19% to $1,496 million. On a like-for-like and constant currency basis, sales revenue for MORSCO was up 9%.
In Australia and New Zealand, Reece added five new stores during the half, bringing the total to 639. Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) was $179 million in Australia and New Zealand (pre AASB 16), down 4% from $186 million in 1H19. Australia and New Zealand recorded an increase in depreciation expense due to the impact of AASB 16, as well as MORSCO acquisition costs.
During the period, MORSCO added eleven stores to its network bringing the total to 186. This includes six stores from the acquisition of Todd Pipe in October 2019. Normalised EBITDA was $84 million for MORSCO (pre AASB 16), a 13% increase from $74 million in the prior corresponding period.
At a group level, normalised EBITDA increased 1% to $263 million, up from $260 million in 1H19. Earnings before interest and tax (EBIT) increased 18% to $202 million.
Statutory net profit after tax (NPAT) increased 46% to $112 million, up from $77 million in 1H19. Meanwhile, normalised NPAT came in 7% higher at $106 million. The interim dividend was maintained at 6 cents per share, fully franked.
Management commentary
Commenting on Reece's 1H20 results, CEO and Managing Director Peter Wilson said, "we're proud to share another record result as we write our next chapter as a global business. We're laying the foundations for the next century through our US expansion."
"We're also maintaining our competitive advantage in Australia and New Zealand through investment in technology and innovation," he added.
Balance sheet
Reece reported cash and cash equivalents of $103 million at 31 December 2019, down from $128 million at 30 June 2019. Total debt was $1,738 million at the end of the year, an increase on the $1,609 million at 30 June 2019. Reece's leverage ratio (net debt/EBITDA) was 3.0x at 31 December 2019.
Reece's focus
The United States is seen as the growth platform while in Australia and New Zealand, Reece aims to provide customised service in a digital landscape.
Innovation continues to be a core focus, with Reece investing in back end systems to drive efficiency and productivity. In FY20, Reece is focused on reducing complexity and digitising the customer experience.
