Australian market collapse drags down GWA Group results

Bathrooms and kitchens supplier GWA Group’s profit has taken a hit but investors will still get a dividend.

Despite the resilience of the home improvement and renovations retail sector the decline in multi-residential and commercial projects for GWA took the guts out of COVID recovery.

Profits at bathrooms and kitchens supplier GWA Group have been hit far harder than revenues as costs continued apace in the face of lower business.

Half-year net profit slipped 17 per cent from its pre-pandemic heights to only $20m.

This was a far harder fall than overall revenue at the group which only declined four per cent to $197.2m.

Revenue growth continued in the United Kingdom and New Zealand, but was offset by a weaker Australian market.

The Australian market declined 6.2 per cent through the first half of the financial year and weighs in at a lofty 77 per cent of overall business for GWA further amplifying the downturn.

That’s compared to New Zealand which takes in 14 per cent of group business and which grew 3.1 per cent for the first half of the financial year.

Despite the resilience of the home improvement and renovations retail sector the decline in multi-residential and commercial projects took the guts out of a COVID recovery.

Multi-residential business declined by 20 per cent across the group, while commercial new build was also slammed, falling 17 per cent.

However, managing director Tim Salt said Australian government HomeBuilder and housing incentives projects would buoy GWA’s business in the market throughout the remainder of the calendar year.

GWA manging director Tim Salt.

A fully franked interim dividend of six cents per share will be paid, down on the eight cents paid last year.

But it was not all bad at GWA Group, with the business slashing debt from the $144.8m it stood at June 2020 to $125m as of December.

Mr Salt said margins were impacted by shipping delays.

“While our commercial order bank is up on the prior-year, we experienced timing delays in projects being drawn down which impacted margins and earnings for the first half,“ he said.

“We have continued to respond to the short-term challenging market conditions by remaining disciplined on operational costs, ensuring the ongoing stability and efficiency of our supply chain and managing our working capital and cash flow accordingly.“

Despite the recent trade tensions between Australia and China, GWA recently launched new Methven showerware ranges in the country as part of its growth strategy.

GWA acquired Methven in April 2019, with Mr Salt reporting it was “performing to expectations”.

GWA is also pushing cost synergies from the acquisition with the aim to save $6m in the financial year.

The business recently commenced the consolidation of existing networks and deliveries in New Zealand with the view to save an additional $3m by the 2022 financial year.