Reliance Taps into COVID Boom

Global plumbing and heating firm Reliance Worldwide is another stock to ‘enjoy’ the benefits of the Covid driven pandemic and shutdowns with an 82% surge in after tax profit and a higher dividend.

The company lifted its payout to shareholders after meeting the new higher guidance issued at the end of January for the six months to December.

The company told the ASX on Monday that first half profit jumped 82% on a COVID boom in home repair, renovations, and building activity.

But the uncertainty caused by the pandemic means the company cannot provide an outlook for the full year.

The plumbing equipment and fixtures manufacturer reported a net profit of $91.4 million for the six months to December 31 – up from $50.1 million a year ago.

Profit margins rose strongly as the surge in earnings was built on only a 13% rise in revenue for the half to $642.4 million.

Operations in the USA recorded particularly strong sales growth through retail and hardware channels, and from original equipment manufacturing customers.

Sales in the Americas rose 22% in constant currency, Asia Pacific sales were up 10% “with a recovery in Australian new residential construction” and UK and Europe recovered strongly following COVID lockdowns, with sales up 10% for the half in constant currency

Directors lifted interim dividend 33% to 6 cents a share, which as good a guide to the confidence in the remainder of the year than any guidance.

RWC CEO Heath Sharp said the first half of the year had been exceptionally strong for the Company.

“All regions recorded strong sales and operating earnings growth, driven by resilient repair and maintenance activity and the strength of home improvement markets,” he said in the statement.

“Operating earnings, measured by earnings before interest, tax, depreciation and amortisation (“EBITDA”), were up 32% to $166.3 million.

“The increase was driven by the strong growth in sales together with the successful implementation of various cost reduction initiatives.

“RWC is on track to deliver annualised cost savings of $25 million on a run rate basis by the end of the 2021 financial year.

“At the same time this was an extremely demanding period from an operational point of view and our manufacturing operations in the US and UK had to contend with a number of interruptions due to COVID.

“Despite this, we have been able to keep all of our facilities operating and meet the challenge of supporting increased demand for our products in all key markets,” Mr Sharp said.

The shares fell 2.5% to $4.60.

Glenn Dyer

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.

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