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Summary
- Share price of Reliance Worldwide has gone up from March lows of $1.72 to $3.795 on 27 August. Post the FY20 results’ update, the stock price has been on a growth trajectory.
- RWC reported a 5% growth in net sales, strong cash generation and robust balance sheet for FY20. It announced a final dividend of 2.5 cents per share, bringing full-year dividend to 7.0 cents per share.
- FY20 results reflect resilient core markets in the US and Australia coupled with strong operating performance.
Stock of ASX200 company, Reliance Worldwide Corporation Limited (ASX:RWC) has been on a growth trajectory, post the release of FY20 results on 24 August 2020. On the day of results announcement, RWC settled at $3.38 and on 27 August 2020, it closed the session at $3.795. The last five-day return of the stock was noted at more than 26%, as of 26 August.
Before the pandemic impacted the markets, RWC was sitting at a share price of $3.48 on 25 February 2020. However, the announcement of a country wide lockdown saw the share price drop to $1.72 on 23 March. Since then, its share price has experienced several ups and downs, with the share price reaching $3.795 on 27 August.
In its FY20 results update, Reliance Worldwide stated that the ongoing pandemic has left considerable uncertainty surrounding market demand and potential impacts of further outbreaks. Consequently, the company decided not to provide earnings guidance for the financial year 2021. However, RWC plans to make periodic updates to investors throughout the year, in order to keep them updated regarding trading conditions within its three regions.
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Director’s Interest Change
On 25 August, the company released a change of director’s interest notice, unveiling that the rights held by Director Heath Sharp under the Equity Incentive Plan declined from 987,800 to 611,201. This amounts to 376, 599 rights disposed of in the change.
As stated by the company, these rights lapsed following assessment of Performance Conditions agreeable to the terms of the grant approved by shareholders at the Annual General Meeting held on 30 October 2018.
Shares and options remained the same.
FY20 Reflecting Strong Operational Performance
For the 12-month period ended 30 June 2020, RWC reported a 5% growth in net sales over the prior year to $1,162 million. Other highlights reported by RWC included an 11% sales growth in the second half of the year in the Americas, on a constant currency basis, reaching a 6% rate overall for the year.
In the Asia-Pacific region, the company registered a 2% increase in external sales even in the face of a construction decline, specifically in the residential market space, in Australia. Alongside this, RWC reported that COVID-19 negatively impacted the UK and European sales, yet recovery was indicated towards the end of the financial year.
RWC registered a reported net profit after tax (NPAT) of $89.4 million, while adjusted NPAT stood at $130.3 million. The company stated the figures reflect charges incurred during restructuring and adjustments. Adjusted NPAT for the prior comparable period was $158.3 million.
A strong cash flow performance was highlighted with cash from operating activities up 56% to $278.3 million, driven by focus on working capital management, and operating cash flow conversion of 128% of RWC’s earnings, before interest, taxes, depreciation, and amortisation (EBITDA). RWC also noted a decline of $124 million in net debt with leverage down to 1.39 times net debt to EBITDA (from 1.67 times).
The company reported a strong operational performance plus resilient core markets in the US and Australia. In its reporting as stated on ASX, RWC also recorded a strong balance sheet with $511 million of available funding liquidity.
Closing the year, RWC announced a final dividend of 2.5 cents per share, scheduled to be paid in October concurrent with payment of the interim dividend, which was deferred due to COVID?19. Total dividends declared for the 2020 financial year stood at 7 cents per share.
During the period, the company recognised restructuring costs totalling $10.7 million over the financial year 2020. This covered various revamps including a consolidation of HoldRite production into Alabama plant in August, a reduction of 21 roles within North America and restructure of UK operations to be completed in September quarter.
Positive Momentum in Post FY20 Sales Performance
Reliance Worldwide registered sales growth of 22% in Americas, while APAC sales were up slightly and EMEA sales recovered to 96% of pcp in July 2020.
For the first three-week period of August 2020, Americas sales growth continued, though at a slower rate than for the last month. APAC sales were flat to slightly ahead of the same period a year ago and EMEA regional sales continued to witness a recovery in sales and are ahead on a year-on-year basis in the first three-week period of August 2020.
Amid COVID-19, RWC’s guiding strategy remains unchanged; however, it plans to have a greater focus on core products plus product extensions and leveraging their brand strength. The next financial year (FY21) near-term emphasis of the company would be on moving forward with planned business goals.
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Author’s Bio:
Kate is an experienced Journalist with a demonstrated history of working in the financial services industry. She also has a strong media and communication skills with a bachelor's degree in Journalism from The University of Queensland.
