Reece Ltd (ASX: REH) released its 2018 financial results to the market today revealing a 10.7% rise in revenue.
Reece is the largest bathroom and plumbing supply business in Australia.
Here are some of the highlights from the report:
- Net sales revenue increased by 10.7% to $2.69 billion
- EBITDA grew by 5.4% to $378 million
- Net profit grew by 6.1% to $225 million
- Dividends per share went up by 1.3% to 20.25 cents
According to Bloomberg, analysts were expecting Reece to report a profit of $230.6 million. A dividend of 21 cents was also expected. The result and the dividend appears to have been below expectations.
A large piece of news during Reece’s 2018 financial year was the US$1.44 billion acquisition of MORSCO Inc, which settled in July 2018. This provided Reece an entry into the US$80 billion plumbing, waterworks and HVAC markets. It has 171 branches and 2,500 employees across 16 states.
To fund the deal Reece raised $600 million of capital from shareholders and also raised US$1.1 billion from an institutional term loan, called a Term Loan B.
Reece CEO and Managing Director Peter Wilson said: “We’ve achieved a record financial performance this year and realised a transformational opportunity”.
During FY18 Reece added another 28 outlets to its Australia & New Zealnd network. It now has 615 outlets. This included 16 stores from the acquisition of Viadux and Heatcraft New Zealand. Viadux is an Australian distributor of water pipeline systems to the civil and industrial markets. Heatcraft is a HVAC-R distributor.
Mr Wilson continued: “We enter the 2019 financial year with the building market robust, activity levels are above long-term averages for both dwelling approvals and non-residential commencements, which underpins our business. We also continue to see growth in the alterations and additions market”.
In a separate announcement, Reece announced the resignation of directors Bruce W.C. Wilson and Ronald Pitcher, who served for a combined 63 years. Andrew Wilson, son of Bruce Wilson, will take up a non-executive directorship.
The Reece share price has risen by 44% over the past year, with investors seemingly excited by the US deal. The company has grown a lot in its century-long history.
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