Reece Ltd (ASX: REH) has revealed its half year result to 31 December 2018.
Reece is the largest bathroom and plumbing supply business in Australia, there are over 450 stores across Australia with over 4,000 staff. The Reece business began in 1919 when Harold Joseph Reece commenced selling hardware products from the back of his truck. Reece is also a major player in irrigation, pools, civil works and HVAC-R (heating, ventilation, air conditioning and refrigeration).
Here’s What Reece Reported
Reece reported that its sales revenue went up by 104% to $2.72 billion. ‘Normalised’ EBITDA, which excludes acquisition costs, grew by 45% to $260.1 million (click here to learn what EBITDA means) and EBIT increased by 25% to $192.1 million.
Normalised net profit after tax (NPAT) went up by 20% to $127 million, but actual net profit for the period declined by 7.6% to $97.7 million.
In the first half Reece opened 20 new branches in the Australia and New Zealand network through both organic growth and acquisitions. This included establishing a HVAC presence in New Zealand and expanding the network in the South Island. In the US, MORSCO opened two new outlets in the sun-belt region.
The Reece Board has declared a fully franked interim dividend of 6 cents per share, which is consistent with the same interim dividend that was paid last year.
Reece Management Comments
Reece Group CEO and Managing Director Peter Wilson said: “Reece has had another strong result, including, for the first time, the performance of our newly acquired US business, MORSCO, which is performing in line with expectations.”
“We are seeing more moderate growth in the residential building market in Australia, while non-residential commencements remain strong. Business momentum in the US continues, with construction and investment in infrastructure returning to long-term averages.”
Is Reece a buy?
Reece has a lot of potential with its MORSCO integration and the growth opportunity. However, with a recession in Australia and the US looking more likely in the next couple of years it might be better to wait to see what happens.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).