118 Burwood Highway Burwood Victoria 3125 Private Bag 109 Burwood Victoria 3125 T 61 3 9274 0000 F 61 3 9274 0199 ABN 84 004 097 090 www.reecegroup.com.au 1 ASX Announcement 26 August 2020 FY20 Results Presentation Proudly essential for 100 years Reece Limited (“Reece Group”; ASX:REH) announces record financial results for the year ending 30 June 2020. Please find attached the FY20 Results presentation. For further information contact: Andrew Hewett Media Relations Reece Group E: [email protected]T: 0419 559 517 Scott Newstead Investor Relations Reece Group E: [email protected]T: 0437 066 512 This announcement has been authorised by Chantelle Duffy, Company Secretary at the direction of the Board of Directors. About the Reece Group Reece Group is a leading distributor of plumbing, waterworks and HVAC-R products to commercial and residential customers through over 800 branches in Australia, New Zealand and the United States. Established in 1920 and listed on the Australian Securities Exchange (ASX: REH), Reece Group has approximately 8,000 employees committed to improving the lives of its customers by striving for greatness every day. For further information on Reece Group and its portfolio of businesses please visit www.reecegroup.com.au.
Transcript
118 Burwood Highway Burwood Victoria 3125
Private Bag 109 Burwood Victoria 3125
T 61 3 9274 0000 F 61 3 9274 0199
ABN 84 004 097 090 www.reecegroup.com.au 1
ASX Announcement 26 August 2020
FY20 Results Presentation Proudly essential for 100 years
Reece Limited (“Reece Group”; ASX:REH) announces record financial results for the year ending 30 June 2020.
Please find attached the FY20 Results presentation. For further information contact: Andrew Hewett Media Relations Reece Group E: [email protected] T: 0419 559 517
Scott Newstead Investor Relations Reece Group E: [email protected] T: 0437 066 512
This announcement has been authorised by Chantelle Duffy, Company Secretary at the direction of the Board of Directors. About the Reece Group
Reece Group is a leading distributor of plumbing, waterworks and HVAC-R products to commercial and residential
customers through over 800 branches in Australia, New Zealand and the United States.
Established in 1920 and listed on the Australian Securities Exchange (ASX: REH), Reece Group has approximately
8,000 employees committed to improving the lives of its customers by striving for greatness every day.
For further information on Reece Group and its portfolio of businesses please visit www.reecegroup.com.au.
Group Chief Executive Officer & Managing Director since 2008
25+ years' experience at Reece, including roles as General Manager of Operations and Chief Operating Officer
Board member since 1997
Presenters
Andrew Cowlishaw
Group Chief Financial Officer
20+ years' experience in finance roles. Former Partner at EY
Long-term advisor to Reece working on key acquisitions
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Reece Group - Full Year Results 2020
Disclaimer
The material in this presentation has been prepared by Reece Limited (ABN 49 004 313 133) (“Reece") (ASX:REH) and is general background information about Reece's activities current as at the date of this presentation. The information is given in summary form and does not purport to be complete. In particular you are cautioned not to place undue reliance on any forward-looking statements regarding Reece's belief, intent or expectations with respect to Reece’s businesses, market conditions and/or results of operations. Although due care has been used in the preparation of such statements, actual results may vary in a material manner. No representation, warranty or assurance (express or implied) is given or made in relation to any forward-looking statement by any person (including Reece).
Subject to any continuing obligations under applicable law or any relevant listing rules of the Australian Securities Exchange, Reece disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements in this presentation to reflect any change in expectations in relation to any forward looking statements or any change in events, conditions or circumstances on which any such statement is based. Nothing in this presentation shall under any circumstances create an implication that there has been no change in the affairs of Reece since the date of these materials.
Information in this presentation, including any forecast financial or other information, should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities. Before acting on any information you should consider the appropriateness of the information having regard to these matters and, in particular, you should seek independent financial advice.
Non-IFRS Financial Information
Reece uses certain measures to manage and report on its business that are not recognised under Australian Accounting Standards. These measures are collectively referred to as non-IFRS financial measures. Although Reece believes that these measures provide useful information about the financial performance of Reece, they should be considered as supplemental to the measures calculated in accordance with Australian Accounting Standards and not as a replacement for them. Because these non-IFRS financial measures are not based on Australian Accounting Standards, they do not have standard definitions, and the way Reece calculates these measures may differ from similarly titled measures used by other companies. Readers should therefore not place undue reliance on these non-IFRS financial measures.
Reece use non-IFRS financial measures, Normalised EBITDA and Normalised NPAT to reflect the underlying performance. These measures allow the comparability of the underlying financial performance by excluding the impact of business acquisition costs and finance income.
Non-IFRS performance measures have not been subject to audit or review.
Note: All financial amounts contained in this presentation are expressed in Australian dollars unless otherwise stated. Any discrepancies between totals and the sum of components in tables contained in this presentation are due to rounding.
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Reece Group - Full Year Results 2020
Agenda4
Our focus
01
Financial summary
02
Business highlights
03
FY20 financial performance
04
Reece Group - Full Year Results 2020
Agenda5
Our focus
01
Financial summary
02
Business highlights
03
FY20 financial performance
04
Reece Group - Full Year Results 2020
Experienced all phases of the cycle – focus on what we can control
Supporting our customers to carry out an essential service - home comfort and sanitation has never been more important
Strong balance sheet, clear plan and strategy
Proudly essential for 100 years
Reece Group - Full Year Results 2020
Our purpose and values have guided us now more than everImproving the lives of our customers and people by striving for greatness every day.
Customers for life.
Discover your best.
Grow as a team.
Try. Try. Try.Innovatebig and small.
Own it. Keep it simple.
Do theright thing.
Write thenext chapter.
Be humble.
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Reece Group - Full Year Results 2020
Australia &New Zealand
Customised service in a digital landscape
Our long-term regional approach
United States
Growth platform
8Reece Group - Full Year Results 2020
Reece Group - Full Year Results 2020
Strengthen our balance sheet
Look after our people and customers
Protect and preserve Accelerate for the long-term
Protect and accelerate through COVID-19
9
Accelerate investment
Renewed senior leadership
Reece Group - Full Year Results 2020
Protecting our business through COVID-19
10
Kept our doors open to support the essential work of our customers
Taking action early to protect our people, our customers and the community
Equity raise managed risk and fortified the balance sheet
Protect and preserve
Reece Group - Full Year Results 2020
Reece Group - Full Year Results 2020
Accelerating our strategy11
Digitising the customer experience
Renewed talent in leadership teams
Accelerate for the long-term
Continuing to build the foundations for growth in the US
Reece Group - Full Year Results 2020
Reece Group - Full Year Results 2020
Agenda12
Financial summary
02
Business highlights
03
FY20 financial performance
04
Our focus
01
Reece Group - Full Year Results 2020
Financial highlights13
Including impact of AASB 16 Leases
up 10%to $6,010m
Sales Revenue
up 25%to $650m
Normalised EBITDA*
up 13%to $229m
NPAT
up 10%to $6,010m
Sales Revenue
up 3%to $537m
Normalised EBITDA*
up 19%to $240m
NPATExcluding impact of AASB 16 Leases
Full year dividends 12 cents per share
*Normalised EBITDA excludes business acquisition costs, finance income, fair value inventory unwind and impairment expense
Reece Group - Full Year Results 2020
Segment performance14
2,8662,598
5,464
2,8883,122
6,010
ANZ US Total
FY19 FY20
Sales Revenue
ANZ• Sales increased by 1%
in a challenging year
US• Sales revenue grew 20%• Up 13% on a constant
currency basis
Group / COVID-19 information• FY20 Q4 sales above last year• No Government subsidies
received in the US or Australia• New Zealand wage
subsidy $1.5m
Reece Group - Full Year Results 2020
Reece Group - Full Year Results 2020
Business highlights
03
Agenda15
Our focus
01
Financial summary
02
FY20 financial performance
04
Continuing to build the foundations for growth in the US
Digitisingthe customer experience
Business highlights
Business highlights
Digitisingthe customer experience
Reece Group - Full Year Results 2020 18Reece Group - Full Year Results 2020
Digitising the customer experience
Accelerated customer interaction with maX
Integration with key job management platforms
Creating seamless interactions for small to big customers
Introduction of virtual bathroom consultations
Reece Group - Full Year Results 2020 19Reece Group - Full Year Results 2020
Innovationbringing digital platforms to life
Strategic partnership with job management platform, FieldPulse
Empowering future leaders through a blended learning approach
Reece Group - Full Year Results 2020
Offering market-leading products
Dimax Geberit Sovent Prefab Hideaway+ Cool-Fit
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Reece Group - Full Year Results 2020
53
44
11
122
178
182
15
34
ANZ branches21
6395
Reece Group - Full Year Results 2020
Supporting those who need it most –from bushfires to mental wellbeing
Reece Cares
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Business highlights
Digitisingthe customer experience
Continuing to build the foundations for growth in the US
Business highlights
Continuing to build the foundations for growth in the US
Reece Group - Full Year Results 2020 25Reece Group - Full Year Results 2020
We’ve listened and we’re starting to invest
Continuing to embed right values & culture - The Reece Way
Leading indicator of remodeling activity (US$bn / ROC%)
Non-residential building construction expenditure(US$bn)
Water supply construction expenditure(US$bn)
US economic commentary29
Source: FMI as of Q1 2020Source: FMI as of Q1 2020 (Includes both private and public expenditures)
Source: John Burns Consulting, J.P. Morgan forecasts as of July 2020 Source: Joint Center for Housing Studies of Harvard University, LIRA and US Census Bureau as of June 2020
Reece Group - Full Year Results 2020
Agenda30
Our focus
01
Financial summary
02
Business highlights
03
FY20 financial performance
04
Reece Group - Full Year Results 2020
Results summary31
(A$m) FY20 FY19 Var. (%)
Sales revenue 6,010 5,464 10%
Normalised EBITDA* 650 522 25%
NPAT 229 202 13%
Final DPS (cents) 6 14.25
Key metrics Var. (bps)
Normalised EBITDA margin 10.8% 9.6% 120 bps
Including impact from AASB 16 LeasesYear ended 30 June 2020
(A$m) FY20 FY19 Var. (%)
Sales revenue 6,010 5,464 10%
Normalised EBITDA* 537 522 3%
NPAT 240 202 19%
Final DPS (cents) 6 14.25
Key metrics Var. (bps)
Normalised EBITDA margin 8.9% 9.6% 70 bps
Excluding impact from AASB 16 LeasesYear ended 30 June 2020
*Normalised EBITDA excludes business acquisition costs, finance income, fair value inventory unwind and impairment expense
Reece Group - Full Year Results 2020
Reece Group - Full Year Results 2020
Group performance 32
Excluding AASB 16 Leases (A$m)
1H20 2H20 FY20
Sales revenue 2,962 3,048 6,010
Normalised EBITDA* 263 274 537
Normalised EBITDA margin 8.9% 8.9% 8.9%
• Sales remained strong in second half of FY20
• Maintained margins
• COVID-19 affected our markets from March including a four week lock down in New Zealand
• Focused on areas of cost inefficiency whilst maintaining investment in capabilities
*Normalised EBITDA excludes business acquisition costs, finance income, fair value inventory unwind and impairment expense
Reece Group - Full Year Results 2020
ANZ segment performance33
Year ending 30 June 2020 (A$m)
FY20(post AASB 16)
FY20(pre AASB 16)
FY19 Var. (%) (pre-AASB 16)
Sales revenue 2,888 2,888 2,866 1%
Normalised EBITDA* 424 363 373 3%
Normalised EBITDA margin 14.7% 12.6% 13.0% 40 bps
• Revenue solid in COVID-19 impacted markets
• Australian operations remained open throughout
• New Zealand stage 4 lockdown in March
• Repair and maintenance remains resilient
*Normalised EBITDA excludes business acquisition costs, finance income, fair value inventory unwind and impairment expense
Reece Group - Full Year Results 2020
US segment performance34
Year ending 30 June 2020 (A$m)
FY20(post AASB 16)
FY20(pre AASB 16)
FY19 Var. (%) (pre-AASB 16)
Sales revenue 3,122 3,122 2,598 20%
Normalised EBITDA* 226 174 149 16%
Normalised EBITDA margin 7.2% 5.6% 5.8% 20 bps
• Sales increased 20%
• Todd Pipe contribution for 9 months
• On a like-for-like constant currency basis increase in sales 7%
• Margin compression driven by investment in people
*Normalised EBITDA excludes business acquisition costs, finance income and fair value inventory unwind
Reece Group - Full Year Results 2020
Cashflow35
Year ending 30 June 2020 (A$m) FY20 FY19
Normalised EBITDA* 650 522
Net movements in working capital 134 (88)
Non-cash items in EBITDA (8) (4)
Income Tax Paid (90) (92)
Finance Costs (85) (83)
Cash flow from operations 601 255
Capital expenditure (83) (99)
Proceeds from sale of assets 8 10
Lease payments (95) -
Dividends paid (114) (114)
Cash flow before acquisitions and repayment of borrowings 317 53
Capital raise 642 -
Business Acquisitions (205) (2,007)
Net proceeds from borrowings 124 1,540
Net increase / (decrease) in cash 878 (414)
Net Working Capital (FY16A–FY20A)
0%
5%
10%
15%
20%
25%
-1000
-800
-600
-400
-200
0
200
400
600
800
1000
1200
FY 16 FY 17 FY 18 FY 19 FY20
Receivables Inventory Payables NWC % (RHS)
*Normalised EBITDA excludes business acquisition costs, finance income, fair value inventory unwind and impairment expense
Reece Group - Full Year Results 2020Full Year Results 2020
Balance sheet36
Year ending 30 June 2020 (A$m)
As at 30 Jun 2020
As at 30 Jun 2019
Cash and cash equivalents 1,005 128
Senior debt 1,765 1,609
Net debt* 761 1,482
Net Financial asset (FX derivative) 14 13
Net debt including FX derivative impact 746 1,469
Leverage Ratio**(Net Debt / EBITDA**) 1.4 x 2.8 x
40
(2)
(540)
1,482
761
FY16 FY17 FY18 FY19 FY20
* Net debt is Senior debt less cash and cash equivalents** Normalised EBITDA excludes business acquisition costs, finance income, fair value inventory unwind and impairment expense
Net Debt*(excluding lease liabilities)
Summary
Reece Group - Full Year Results 2020
Record result in our 100th year
Focus on what we can control
Protect and preserve
Paying final dividend
Accelerate for the long-term
Quick to learn and adapt
Summary38
Reece Group - Full Year Results 2020 39
In
Record result in our 100th year
Protect and preserve
Accelerate for the long-term
A final word
Reece Group - Full Year Results 2020
Q&A
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Reece Group - Full Year Results 2020
Appendix - Leasing impact41
• Adopted 1 July 2019, with no change to comparative numbers as permitted by AASB 16
• Recognition of right-of-use assets and lease liabilities
