Reliance Worldwide (ASX:RWC) FY24 Interim Results
24th Feb 2024
RWC reported flat revenue of $589.5m, down 2% for the half. Reported EBITDA was down 19% to $112.6m, with reported net profit down 23% to $51m. All RWC’s business segments reported flat or lower revenue. On face value this doesn’t look like a good result. But we are about to see why cash flow is king.
RWC increased cash flow from operating activities by 61% to $151.6m for the half. This is why when you strip out one of costs for the half RWC’s underlying net profit was $67.7m which is inline with reported net profit for the FY23 half. This large increase in cash flow from operations allowed RWC to reduce net-debt by $138.8m to $394.7m. RWC has a total committed debt facility of $1.0bn with $628m available. This debt facility will also be used to fund the $160m Holman acquisition which is expect to double APAC business segment revenue. When completed, this will be a timely acquisition for RWC as their APAC business segment was the worst performing with net sales down 21% and adjusted EBITDA down 55% for the half. This was due to restructuring part of their manufacturing facilities to the US reducing internal sales, and declining new housing starts in Australia, reducing demand for their products.
RWC maintained their divided policy of distributing between 40-60% of annual net profits and declared a 4.5c dividend for the half, total of $35.6m. The dividend will be broken up into two components. A cash divined of 2.25c and an on-market share buy-back of 2.25c.
A further good sign is RWC reduced net-working capital by $77.2m for the half, more than double the amount they will payout as dividends for the half.
RWC is expecting sales, margins and profits to be down by low signal digits cross the whole business in FY24.
This report sums up why I like RWC, they are doing all the right things for shareholders. Paying down debt, buying back shares, maintain a prudent dividend policy, and continue to make strategic acquisitions that deliver vale for shareholders. And is why despite the flat forecast for FY24 their share price is AU$5.27 at the time of writing, up 70% on my original investment. RWC are a cyclical business due to their exposure to construction and housing and I’m expecting some…
