The GWA share price is falling lower today following the company’s AGM. GWA reported decreasing sales as a result of the economic downturn.
The post GWA Group (ASX:GWA) share price down after AGM appeared first on Motley Fool Australia. –
The GWA Group Ltd (ASX: GWA) share price is today falling lower following the company’s annual general meeting this morning. At the time of writing, the GWA share price is trading 2.51% lower at $2.72 after the company announced downward results and near-term challenges facing the business.
Highlights from today’s AGM
- The company emphasised its operational discipline throughout the year in what has been a challenging market.
- Revenue for the financial year was $398.7 million, down 12% from FY19.
- Net profit after tax (NPAT) was $44.9 million, down 16.5% from FY19 – which does, however, include interest costs on debt related to the Methven acquisition.
- The earnings before interest and tax (EBIT) margin was maintained at 18% compared with FY19, which supports the company’s claim of operational discipline.
- A solid balance sheet was maintained, with no significant near-term refinancing commitments.
- The company expects FY21 trading to remain challenging due to a weak construction market caused by coronavirus.
- The board has determined a final dividend of 3.5 cents per share fully franked.
Quick peek into GWA’s world
GWA Group operates in a single business division: bathrooms and kitchens. It also recently acquired Methven – a manufacturer of bathroom accessories, taps and valves.
GWA has strong branding in Australia with its Caroma brand in particular. The well-known quality of this brand allows for premium pricing. Caroma also distinguishes itself in the commercial market, and is known as the standard in disabled toilets. The remainder of GWA’s brand portfolio – Dorf, Fowler, Stylus, Radiant and Clark – does not enjoy the same level of brand awareness and hence provides less scope for pricing premiums.
Challenges faced by GWA
As mentioned in today’s AGM, GWA’s business depends considerably on the boom cycle of the real estate market. The coronavirus-stricken Australian economy presented the company with a new challenge to an already depressed property market. Housing constructions across the country pretty much peaked in mid-2018, and have been in decline since.
Management has warned that the whole business sector could feel even more pressure as the bottom in construction activity may not come until late next year.
Competition is also gradually encroaching in the form of global industry leader Roca Sanitorio. The Spanish company has a current market share in Australia of about 2%, still one-tenth that of GWA. But inroads are being made fast by this new giant entrant.
Some good news ahead for GWA
Despite the gloomy market in FY20, the company was able to deliver some respectable results, as announced today.
Looking at the AGM slides, it’s also worth noting that more than half of GWA sales are derived from the repair and remodel market segment. As such, the company is somewhat insulated from the boom and bust cycle of the new constructions market.
Longer term, Australia’s expected population growth should provide continued support for GWA’s products. The impact from the coronavirus, although devastating, is also expected to be relatively short-lived.
How has the GWA share price been perforing?
Including today’s falls, and at the time of writing, the GWA share price price has declined by 19.53% year to date. This compares similarly with the sector’s average of a 20% decline, as indicated by the ASX 200 Industrial Sector Index (ASX: XNJ).
Based on the current GWA share price, the company has a market capitalisation of around $729 million.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.