GWA Group (ASX: GWA) Lifts Profit and Fully Franked Dividend

GWA Group Limited, a supplier of bathroom, kitchen and laundry fixtures and intelligent water-management solutions, increased annual profit and its dividend. The result followed volume growth across Australia, New Zealand and the UK.

Reported net profit after tax rose 10.6% to $48 million for the year ended June 30. Revenue increased 0.9% to $422.3 million.

Reported EBIT gained 6.8% to $76.8 million. The stronger reported growth partly reflected lower significant items than a year earlier.

The results show earnings expanding faster than sales despite subdued construction and renovation conditions. GWA serves residential and commercial markets through several distribution and customer channels.

Margins Edge Higher

On a normalised basis, EBIT increased 2.5% to $78.2 million. The corresponding margin improved to 18.5% from 18.2%.

Normalised net profit rose 5.3% to $48.9 million. Basic reported earnings per share increased to 18.4 cents from 16.4 cents.

Group volumes advanced 2.3%, marking a third consecutive year of growth. Management attributed the earnings improvement to operating leverage and continued cost discipline.

Australian revenue rose 0.9% to $353.6 million, supported by 1.8% volume growth. Sales and volumes increased in every state except Victoria.

Meanwhile, New Zealand revenue gained 1.3% to $31.1 million. Growth reached 7.1% in local currency after GWA simplified and resized those operations.

UK revenue increased 0.8% to $37.6 million. National merchant partnerships and social-housing contracts supported sales and volume growth in that market.

Capital Returns Increase

The board declared a fully franked final dividend of 8.5 cents per share. That lifted the annual distribution 6.5% to 16.5 cents.

The full-year dividend represents 88% of normalised profit. The final payment is scheduled for September 4, following an August 21 record date.

GWA also spent about $25 million buying back approximately 10.8 million shares by June 30. The program allows purchases of up to $30 million.

Cash Flow and Debt

Cash flow from operations was $71.7 million, down from $101.8 million. GWA brought forward inventory purchases to defer the impact of product cost increases.

That decision lifted inventories and temporarily reduced cash conversion to 76%. Management expects conversion to exceed its 80% to 85% target range in FY27, depending on global conditions.

Net debt rose to $127.9 million from $85.1 million. The increase reflected working-capital timing and spending under the share buyback.

Leverage increased to 1.6 times EBITDA from 1.1 times. GWA said its credit metrics remained within its target range.

Mixed Conditions Ahead

GWA expects FY27 market conditions to remain mixed and provided no numerical earnings guidance. Its priorities include healthcare, aged care and multi-residential housing.

The company is also targeting social and affordable housing, repairs and maintenance, and deeper plumber engagement. About 60% of Australian revenue comes from renovation and replacement activity.

Separately, the total injury frequency rate rose to 11.3 from 5.5. GWA said targeted actions were underway after the result fell short of its standards.