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Reliance Worldwide Corporation Ltd – FY19 Profit Results Better Than Expected

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

Reliance Worldwide Corporation Ltd (ASX: RWC) designs, manufactures and supplies water flow and control products for the plumbing industry worldwide. Its market capitalisation is $2.7 billion.


What is the FY19 result?

Today (Tuesday 27 August 2019), Reliance released its FY19 results. The main points are as follows:

  • Net sales of $1.1 billion, up 43 per cent FY18. This is due to the acquisition of John Guest Group. Underlying sales increased by 5.4 per cent.
  • Adjusted NPAT of $154 million, up 80 per cent on FY18.
  • Adjusted earnings per share of 19.4 cent, up 22.7 per cent on FY18.
  • A final dividend of 5 cents per share (fully franked). This takes the total dividend for the year to 9 cents, compared with 6.5 cents in FY18.

The key features of the FY19 result include the following:

  • Reliance acquired the John Guest Group (the largest manufacturer in the world of plastic push-to-connect plumbing products) in June 2018. Reliance says that a key achievement in FY19 has been the successful integration of the John Guest Group with Reliance’s existing operations. Further, realised synergies in FY19 of $14.2 million have been achieved, which is ahead of the $10 million target. Reliance expects synergies to exceed $30 million per annum on a run rate basis by the end of FY20.
  • Reliance noted another year of strong net sales growth in the Americas segment, particularly in the first half, with underlying sales for the whole year up over 8 per cent.
  • Reliance also noted that the record profit result in FY19 was achieved notwithstanding it faced a number of headwinds during the year including a slowdown in new residential construction in Australia, the absence of a freeze in the southern US, higher copper costs in the first half which impacted brass costs, increased tariffs on goods imported from China into the US and Brexit uncertainty in the UK.


What is the outlook?

Reliance expects NPAT for FY20 to be in the range of $150 million to $165 million, around the same level or slightly higher than in FY19. Reliance notes that performance within this range could be impacted by a number of external factors including the extent of Brexit disruption in the UK, economic and construction market conditions in other key markets, raw material costs and foreign currency impacts.

In terms of the regional outlook for FY20, Reliance noted the following:

  • Conditions in the Americas are positive, with modest growth in residential new construction and continued growth in remodel activity.
  • In the Asia Pacific region, Australian new housing construction is expected to continue at lower levels than in recent years with the risk of further decline.
  • In the EMEA region (Europe, the Middle East, and Africa), Brexit uncertainty clouds the short-term outlook for the UK; softer trading conditions at the end of FY19 have continued in the first two months of FY20.


What is the market’s reaction?

Today (Monday 27 August) Reliance is trading at around $3.55, up 7.7 per cent reflecting a better than expected result for FY19. Reliance trades at a P/E ratio in the high teens and an annual dividend yield (based on FY19 dividends) of around 2.5 per cent (fully franked).




This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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