Reliance Worldwide Corp. Ltd. · ASX:RWC
Reliance Worldwide — Jefferies Asia Forum 2020
39 slides from Reliance Worldwide's conference presentation, Sep 16, 2020
Slide 1: Jefferies Asia Forum
Jefferies Asia Forum 16 September 2020 Heath Sharp Group CEO RELIANCE WORLDWIDE CORPORATION LIMITED ABN 46 610 855 877
Slide 2: Important Notice
Important Notice This presentation contains general information about Reliance Worldwide Corporation Limited’s activities at the date of presentation (16 September 2020). It is information given in summary form and does not purport to be complete. The presentation is not an offer or invitation for s
Slide 3: Agenda
Agenda 1. RWC Overview 04 2. FY20 Financial Performance 11 3. Covid-19 Response 19 4. Strategy and Outlook 22 3
Slide 4: RWC Overview
RWC Overview 4
Slide 5: RWC at a glance
RWC at a glance RWC is a leader in the design, manufacture and supply of water flow and control products and solutions for use in the “behind the wall” plumbing sector ▪ The leader in brass and plastic push to connect (“PTC”) fittings in key geographies ▪ Majority of sales are to the repair and reno
Slide 6: RWC financial snapshot for year ended June 2020
RWC financial snapshot for year ended 30 June 2020 Net sales Adjusted EBITDA 2 Adjusted NPAT 2 $1,162 million $251.3 million $130.3 million +5% growth overall1 -9% on prior year -18% on prior year Operating cash flow Net debt reduction Total dividend $278.3 million $124.4 million 7.0 cps +56% Net de
Slide 7: RWC product portfolio
RWC product portfolio RWC and its family of brands transform performance and efficiency for plumbing and heating and specialist industries around the world. Fittings Pipe Valves Integrated FluidTech Installation Solutions
Slide 8: Fittings provide a strong foundation
Fittings provide a strong foundation A variety of fittings solutions that deliver efficiency and reliability available through a vast network of outlets across markets and channels Available across Americas, UK, and Australia ▪ #1 position in Americas Brass PTC ▪ #1 position in Australia ▪ Growing i
Slide 9: Growing category diversification
Growing category diversification RWC has built a complete portfolio of solutions with top market positions - all aligned with the SharkBite value proposition – ease of use, efficiency, labor savings, and availability PEX pipe available across global regions ▪ Top 3 producer in US 9% Pipe ▪ Top 2 in
Slide 10: RWC operates in 3 regions: Americas, Asia Pacific, EMEA
RWC operates in 3 regions: Americas, Asia Pacific, EMEA 10
Slide 11: FY20 Financial Performance
FY20 Financial Performance 11
Slide 12: Summary of FY20 Performance
Summary of FY20 Performance A$m FY19 FY20 % ▪ Net sales up 5% driven by strong 2nd half Americas Change sales growth partly offset by lower sales in EMEA due to Covid-19 Net Sales 1,104.0 1,162.4 5% ▪ A$/US$ weakness during the 2nd half positively Reported EBITDA 242.5 217.9 -10% impacted reported A
Slide 13: Strong operating cash flow performance
Strong operating cash flow performance Cash generated has enabled reduction in net debt and payment of final dividend Cash Flow from $m Operations Net Debt/EBITDA Total Dividends Declared ($m) 278.3 2.0 80 71.1 1.9 70 250 1.8 60 55.3 200 1.7 1.67 178.9 1.57 50 1.6 42.1 150 1.5 40 124.8 1.39 1.4 30 1
Slide 14: Segment results: Americas
Segment results: Americas Resilience of the US market and repair and remodel sector demonstrated US$m FY19 FY20 % US$m 1H20 % over pcp 2H20 % over pcp Net Sales 467.8 495.8 6% Net Sales 237.4 1% 258.4 11% EBITDA 79.1 64.9 -18% EBITDA 36.7 -8% 28.2 -16% Adjustments 2.0 14.4 n/m Adjustments - n/m 14.4
Slide 15: Americas: 11% second half revenue growth
Americas: 11% second half revenue growth Covid-19 impact estimated to be 3.4% of Americas second half sales growth Figures are in US$ Market growth – source: LIRA 15
Slide 16: Segment results: Asia Pacific
Segment results: Asia Pacific Sales performance reflects success of new products introduced in Australian market A$m FY19 FY20 % Change A$m 1H20 % over pcp 2H20 % over pcp Net Sales 249.1 244.8 -2% Net Sales 125.4 -3% 119.4 0.1% EBITDA 48.1 44.3 -8% EBITDA 22.8 -7% 21.4 -9% Adjustments 5.5 - n/m Adj
Slide 17: Segment results: EMEA
Segment results: EMEA Significant impact from Covid-19 restrictions and curtailed distribution GBPm FY19 FY20 % GBPm 1H20 % over pcp 2H20 % over pcp Net Sales 199.5 172.7 -13% Net Sales 94.4 -2% 78.3 -24% EBITDA 54.0 43.2 -20% EBITDA 28.4 17% 14.8 -48% Adjustments 7.5 6.3 n/m Adjustments - n/m 6.3 n
Slide 18: John Guest Look-back
John Guest Look-back Business quality and successful integration with RWC demonstrated despite Covid-19 ▪ Integration successfully completed with improved operational performance ▪ John Guest and RWC cultures successfully meshed together John Guest Synergy Realisation (A$m) ▪ Synergies: delivered $3
Slide 19: Covid-19 Response
Covid-19 Response 19
Slide 20: Responding to the Covid-19 Pandemic
Responding to the Covid-19 Pandemic Employee health and safety ▪ Health and safety of RWC employees has been our number one priority ▪ On-site social distancing, daily temperature checks, provision of additional PPE ▪ Cleaning protocols initiated to deal with any outbreak at all manufacturing/distri
Slide 21: Responding to the Covid-19 Pandemic (cont'd)
Responding to the Covid-19 Pandemic (cont’d) Preserving cash ▪ Review of SG&A: limited discretionary expenditure ▪ Capex: all non-essential capex halted, capex reduced by approx. $17m for FY20 ▪ Working capital management: a key area of focus, particularly inventory levels and receivables collection
Slide 22: Strategy and Outlook
Strategy and Outlook 22
Slide 23: Strategy Overview
Strategy Overview Our Growth Plan Our Priorities Se @ Making our customer: Growth Drivers. 1 lives easier Contractors End users ‘Achieve profitable growth in core Specifier OEMs ‘Taking greater ownership of driving end repair and maintenance markets in Distributor partners user demand and owning the
Slide 24: Strategy overview
Strategy overview Our strategy is unchanged but we have sharpened our new product development approach with increased focus on core products ▪ Guiding strategy is unchanged, after extensive review in light of Covid-19 ▪ The greater focus on core products we announced at the half year are even more r
Slide 25: Outlook for FY 2021
Outlook for FY 2021 RWC is not providing earnings guidance at this time ▪ Due to the uncertain market outlook and potential impacts of further Covid-19 outbreaks, RWC will not provide earnings guidance for FY20211 ▪ We will ensure the market has appropriate visibility on trading conditions as FY2021
Slide 26: Segment performance drivers: Americas
Segment performance drivers: Americas US home improvement has seen strong growth during Covid-19 Market backdrop: ▪ Low-interest rate environment remains supportive ▪ US demographics support a strong rate of household formation ▪ Unemployment rate and a broader recession will be risks in FY21 What w
Slide 27: Segment performance drivers: Asia Pacific
Segment performance drivers: Asia Pacific Declining Australian new residential construction likely to negatively impact volumes Australian Residential Approvals1 Market backdrop: 250,000 -26% ▪ We expect to be adversely impacted by a reduction in 200,000 Australian new residential house and apartmen
Slide 28: Segment performance drivers: EMEA
Segment performance drivers : EMEA Covid-19 led to a severe economic contraction in EMEA; outlook remains uncertain Market backdrop: UK new work, repair and maintenance1 120 ▪ The European economy is experiencing a severe contraction resulting in CY20 annual GDP declines of 8- 110 11% in RWC markets
Slide 29: Priorities for FY21
Priorities for FY21 We will continue investing in the future growth of the business while meeting the operational challenges and market uncertainties of the current environment ▪ Health & safety and wellbeing of our people, especially in the context of ongoing COVID, including enhanced communication
Slide 30: Summary
Summary We remain well positioned for future growth and the resilience of the business has been demonstrated through the Covid-19 pandemic ▪ The RWC business is robust, successfully weathering recent extreme challenges ▪ The plumbing & heating market, and especially our primary repair and maintenanc
Slide 31: Supplementary Information
Supplementary Information
Slide 32: FY20 Group EBITDA margin drivers
FY20 Group EBITDA margin drivers Results significantly impacted by Covid-19 ▪ Volume / Mix: sales performance varies by region reflecting the differing market responses to the pandemic • EMEA: Sales in our highest margin business impacted by Covid-19 in the second half • Americas: Surge in US Retail
Slide 33: Restructuring and non-cash impairment charges
Restructuring and non-cash impairment charges Continuous improvement and cost out initiatives expected to yield A$25m benefit on an annualised basis by end of FY21 Summary of restructuring and impairment EBITDA charges (A$m) Impact ▪ Restructuring costs of $10.7m incurred in FY20 to Impairment of US
Slide 34: Cash flow performance
Cash flow performance Strong cash flows in the second half and for the year ended 30 June 2020 A$m FY19 FY20 % 2HY19 2HY20 % Reported EBITDA $242.5 $217.9 -11% $121.8 $92.0 -25% Changes in working capital -$63.6 $60.4 n/m -$12.4 $51.1 n/m Cash flow from operations $178.9 $278.3 56% $109.4 $143.1 31%
Slide 35: Cash flow generation from operations
Cash flow generation from operations A$m FY19 FY20 Variance Reported EBITDA 242.5 217.9 -10.0% Changes in Working Capital (63.6) 60.4 Cash flow from operations1 178.9 278.3 53.9% Operating cash flow conversion2 73.8% 127.7% Growth capital expenditure (45.2) (21.5) -52.4% Maintenance capital expendit
Slide 36: Capital expenditure
Capital expenditure FY2021 forecast capital expenditure (A$m) 90 6.3% 5.6% 6.0% 80 5.0% $70m 70 5.0% 4.2% 3.7% 60 4.0% 50 $35m-$55m Maintenance $38m $43m 40 $30m 3.0% 30 $26m Growth 2.0% 20 1.0% % of Sales 10 0 0.0% FY16 FY17 FY18 FY19 FY20 FY21 Cullman Phase 1 Property acquisition Capacity expansio
Slide 37: Balance Sheet further strengthened
Balance Sheet further strengthened Debt metrics Commentary (A$m) 30 June 2019 30 June 2020 ▪ Strong balance sheet with net leverage of 1.39x at 30 June ▪ Net debt reduced by $124.4m since 30 June 2019 Cash and cash equivalents 69.3 82.2 ▪ Syndicated bank debt facility of $750m with undrawn Gross deb
Slide 38: Reported segment results (A$)
Reported segment results (A$) AMERICAS (A$m) FY19 FY20 % Net Sales 653.9 739.1 13% EBITDA 102.5 96.8 -6% EBITDA margin 15.7% 13.1% (260) bps Adjustments 10.1 21.4 Adjusted EBITDA 112.6 118.2 5% Adjusted EBITDA margin 17.2% 16.0% (120) bps EMEA (A$m) FY19 FY20 % Net Sales 360.9 324.3 -10% EBITDA 95.8
Slide 39: Summary of restructuring and impairment charges
Summary of restructuring and impairment charges A$m FY19 FY20 John Guest Costs to Achieve Synergies $19.7 - Implementation of AASB 16 (Lease Accounting) $16.3 - Impairment of US non-core products - $16.8 EMEA Restructuring - $6.0 Impairment of Spain operations - $5.9 US Restructuring - $4.7 Total $3