Reliance Worldwide Corp. Ltd. · ASX:RWC
Reliance Worldwide — FY2020 Earnings Presentation
36 slides from Reliance Worldwide's earnings presentation, Aug 24, 2020
Slide 1: FY20 Results Presentation
FY20 Results Presentation 24 August 2020 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 (24 August 2020). It is information given in summary form and does not purport to be complete. The presentation is not an offer or invitation for subs
Slide 3: Agenda
Agenda 1. FY20 Results Overview 04 2. Covid-19 Response 08 3. Group Financial Performance 12 4. Strategy and Outlook 24 3
Slide 4: FY20 Results Overview
FY20 Results Overview 4
Slide 5: Key business highlights
Key business highlights Results reflect resilience of US and Australian markets and strong operational performance Strong performance by the Americas segment: outstanding operational execution enabled us to meet surge in demand in US retail and hardware channels Australian market generally perfo
Slide 6: FY20 Financial Highlights
FY20 Financial Highlights 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 Final dividend $278.3 million $124.4 million 2.5 cps +56% Net debt $302.2 million Total F
Slide 7: 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 8: Covid-19 Response
Covid-19 Response 8
Slide 9: The story of the second half
The story of the second half While Covid-19 presented significant operational challenges we continued to make progress on key initiatives North America: Surge in US Retail and Hardware channel sales added pressure on supply chain but high service levels maintained New bay rollout in Retail chann
Slide 10: 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 11: 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. $17m for FY20 Working capital management: a key area of focus, particularly inventory levels and receivables collection
Slide 12: Group Financial Performance
Group Financial Performance 12
Slide 13: Summary of FY20 Performance
Summary of FY20 Performance A$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 14: 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 15: 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 16: 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 16
Slide 17: 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 18: 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 19: 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 20: 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 $10.7m incurred in FY20 to Impairment of US
Slide 21: Cash flow performance
Cash flow performance Strong cash flows in the second half and for the year ended 30 June 2020 A$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 $143.1 31%
Slide 22: Capital expenditure
Capital expenditure FY2021 forecast capital expenditure (A$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 $26m Growth 2.0% 20 1.0% % of Sales 10 0 0.0% FY16 FY17 FY18 FY19 FY20 FY21 Cullman Phase 1 Property acquisition Capacity expansio
Slide 23: Balance Sheet further strengthened
Balance Sheet further strengthened Debt metrics Commentary (A$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 24: Strategy and Outlook
Strategy and Outlook 24
Slide 25: 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 - refer Appendix The greater focus on core products we announced at the half yea
Slide 26: 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 27: 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 28: 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 29: 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 30: 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 31: 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 32: Q&A
Q&A
Slide 33: Appendix: Strategy Overview
Appendix: Strategy Overview 33
Slide 34: Appendix: reported segment results (A$)
Appendix: 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$m) FY19 FY20 % Net Sales 360.9 324.3 -10% E
Slide 35: Appendix: summary of restructuring and impairment charges
Appendix: summary of restructuring and impairment charges A$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 - $4.
Slide 36: Appendix: cash flow generation from operations
Appendix: cash flow generation from operations A$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 capita