GWA To Again Restructure

While the broader market is up this year (just by only a few per cent), building products group GWA has seen its shares go nowhere, despite the biggest building boom for four years.

GWA shares ended 2013 just over $3 a share and haven’t regained that level in 2014 .

The shares closed at $2.77 yesterday, up 1.8%, after the company issued a trading update (in fact announcing the annual result, without much detail) and announced a new round of restructuring.

Perhaps that lack of growth in the share price was behind the latest revamp, the second in a year.

The weak share market performance seems to have led Australian Foundation Investment Co (AFIC), the country’s biggest listed investment company and one of the most conservative investors there is, to give up on GWA in the year to June.

AFIC revealed in its final result last week that it had sold all its holding of GWA shares in the year to June 30 – that was the only company of around 78 investments that AFIC had sold out of completely.

AFIC had 5.22 million shares (or 1.7%) of GWA’s issued capital at June 2013, so the departure of the group from the share register is a vote of no confidence of some magnitude.

Explaining the sale, an AFIC spokesman said the company thought GWA would face more and more pressure from imports and competitors such as Bunnings (part of Wesfarmers) and the privately-owned Reece group of Melbourne which has a large chain of building supply outlets, including plumbing and other products.

GWA vs XJO YTD – GWA to again restructure and sell unwanted assets

It’s not that the building boom isn’t helping GWA – the trading update shows definite signs of that happening with an 8% rise in earnings before interest and tax to $72.3 million, more than reversing the 1% decline reported in the interim figure in February to $34.14 million.

Sales for the year rose 2% to $576 million and the company says it cut net debt by $17 million to $145 million (which is still a lot of money).

Net profit after tax for the year was $18.6 million, a big improvement on the $1.7 million interim figure (which was reduced by restructuring charges in the first half).

Over the full year those restructuring charges of $17 million mean the net figure was down sharply on the $32.4 million net profit in the 2012-13 year.

And, after passing on an interim dividend, GWA will pay a 5c a share final.

A return to dividends was forecast in the interim statement when the board said it didn’t have enough retained earnings from which to make an interim payment to shareholders.

The restructuring move will see GWA quitting its Dux Hot Water heater and Brivis Heating and Cooling businesses.

GWA said in yesterday’s statement it now considers the Dux and Brivis businesses non-core and will consider returning “a portion” of the capital released by the sale to shareholders after the sale.

The company said it will now look for stronger growth in kitchen, bathroom and doorway products.

“Revenue growth in the traditional bathrooms and kitchens business, Gainsborough and Brivis, was offset by declines in the Dux Hot Water and the Gliderol Garage Door business,” the company said in a statement to the ASX.

Gliderol is where the $17 million in restructuring costs were announced last December in the previous revamp.

The company will produce its full annual result and accounts on August 19.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →