Here’s Monday’s key June 2022 half-year results, featuring the latest from developer Lendlease, retail chain Nick Scali and plumbing supplies group Reliance Worldwide.
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Lendlease Group (ASX: LLC) says it is now a leaner company, but investors will have to wait longer for the new diet to produce rewards promised by the new managers.
The building developer and investor said on Monday in its 2022 final result that it will take a year for it to hit the return targets it has set for itself.
Lendlease investors, though, will also feel a lot of ‘lean pain’ from the company’s new diet.
The company cut its final payout to security holders to 11 cents from 12 cents in turn slashing the full year payout to 16 cents from 27 cents.
Investors left the shares up less than one per cent at Monday’s close at $10.41 which was a better result than the near 1% drop in the wider market.
Lendlease Group reported an after-tax loss attributable to security holders of $A99 million for 2021-22, from a profit of $A222 million a year earlier.
The construction and infrastructure company said revenue fell year on year to $A8.82 billion from $A$9.02 billion.
The company said that “simplifying the Group’s operating model and addressing legacy issues while managing the ongoing impacts of COVID, affected our financial performance. This was reflected in a Statutory loss and a modest Core profit.”
“The Group’s financial performance improved in the second half and there is solid momentum going into FY23. Core profit rose from $28m in H1 to $248m in H2 and development commencements accelerated from $1.5b in H1 to $4.4b in H2.”
Global CEO Tony Lombardo said in Monday’s statement, “We made significant progress in resetting our company for future growth. We are now a leaner organisation and more agile in responding to our customers.”
“This year, we formed approximately $11b of investment partnerships that will underpin strong growth in funds under management while work in progress is at a record $18.4b”.
Group Chief Financial Officer Simon Dixon said in the statement “Maintaining financial strength, reflected in gearing of less than 10 per cent, was a priority for the Group as we transitioned through a reset year. This was achieved while deploying an additional $1b of development capital during the year.”
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Sydney-based furniture chain Nick Scali (ASX: NCK) has lifted dividend even though profit fell as the company was bitten hard by the impact of the pandemic and lockdowns for a second financial year in a row.
The $102 million acquisition if the Plush chain of outlets helped offset the negative impact of the store lockdowns in Australia and NZ, higher freight costs and China’s two months of lockdowns in the June half year.
The Plush offset was enough to boost sales while leave earnings down around 5% on an underlying basis and just over double that on a top line basis.
Despite the weakness Nick Scali lifted final dividend to 35 cents a share from 25 cents a year ago, making a total for the year of 75 cents a share, up from 65 cents in 2020-21.
Investors liked that news and sent the shares up 5% to $10.51 at the close on Monday.
On a topline basis net profit after tax fell 11.1% to $74.9 million for the year ended June 30.
Revenue rose 18.2% to $440.957 million for the year to June.
During the 2022 year, the retailer said it faced a number of significant challenges, with more than 55% of its stores closed for three months in the first half of the year and widespread disruption to its supply chain in the second half of the year.
CEO Anthony Scali said in the statement “FY22 was a particularly challenging period, with store network closures and lockdowns in sourcing countries impacting the business at various stages throughout the year.”
“Despite these challenges, the Group was still able to deliver a strong result and end the year with a significant order bank which will translate to revenue in FY23.
“We continue to be pleased with the Plush acquisition and have seen increased scope for synergies as the integration of the business has progressed.”
“On 1 November 2021, the Group acquired Plush for $102.5m from Greenlit Brands Household Goods. The acquisition was funded through a combination of debt and existing cash reserves.
“The Plush business has been successfully integrated in to the Group, is expected to support profit growth over the coming years through store network expansion and operational synergies.”
The company said Plus, which added 46 showrooms to the network of stores contributed revenue of $88.8 million to Group revenue in the period post-acquisition.
Overall, total written sales orders for the Group for the year were $473.8 million, “representing growth of 18.0% on the prior year, with Plush stores contributing $98.7 million to the Group total for the period post- acquisition” and offsetting a fall in orders at Nick Scali stores in Australia and NZ..
Total revenue for the Group grew by over 18% during FY22, due to the Plush acquisition. However, revenue for Nick Scali was down due to the store network closures and the China lockdowns which restricted delivery volumes in the fourth quarter.
“As a result of the China lockdowns in April and May, the outstanding order bank remains elevated and totalled $185.3m at 30 June 2022 – 67% higher than at the same time in the previous year.”
Nick Scali said its gross margin fell by 100 basis points to 62.5% due to increased freight costs, “whilst the overall gross margin for the Group was down a further 150 basis points to 61.0% due to the dilutive impact of the lower margin Plush business.”
“Similarly, Plush had an adverse impact on the cost of doing business, which increased from 31.3% to 35.2% of revenue.
“The Group expects the overall gross margin and cost of doing business to improve as the synergies of Plush acquisition are realised.
As a result of reduced margin, incremental cost of doing business and the reduction in Nick Scali revenue due to the China lockdowns, underlying net profit after tax fell by 5% to $80.2 million.
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Shares in plumbing supplies group Reliance Worldwide Corporation (ASX: RWC) fell more than 6% yesterday as investors showed a dislike for what was a modest improvement in the company’s 2021-22 results.
Even though the results were a ‘record’ for RWC, investors though they were a bit light on and the small rise in dividend was hardly convincing as well.
The shares ended down 6.2% at $6.23 as there were clear sign profit margins had taken a hit and the company warning that it could see problems out in 2023 with the medium-term outlook described as “less certain”.
Net profit after tax was down 3% to $US137.4 million, despite a 17% jump in revenue for the year to $US1.172 billion.
Adjusted net profit after tax rose 2% to $US161.4 million (we shouldn’t be surprised of that measure showing a rise).
RWC will pay a final dividend of 5 US cents a share making total dividends for the year of 9.5 US cents a share, compared with 9.3 US cents in 2020-21 – hardly a robust show of confidence in the outlook.
Sales in the Americas jumped 26% year on year, reflecting the inclusion of sales from EZ-FLO from November 2021 onwards and also the impact of price increases during the year.
Asia Pacific sales were 6% higher on a constant currency basis, with external sales up 12% reflecting stronger Australian new housing construction and remodel markets. Intercompany sales were down 5%, with the prior year having been boosted by demand in the Americas as a result of the winter freeze in the US.
Emerging markets and European sales were up 1% on a constant currency basis, with lower volumes in the UK following strong sales in the previous year after COVID lockdowns in the UK, offset by increased sales in Continental Europe.
RWC said the it battled higher commodity costs for key materials including copper, zinc, resins, and steel, were experienced during the year together with higher costs for freight, packaging, energy and other cost inflation.
“Average price increases across the group of approximately 9.5% were achieved during the period, with price rises implemented in all key markets helping to offset cost increases.”
RWC CEO Heath Sharp said the 2022 financial year had been another record for the Company:
“This was a year of significant operational challenges. Supply chain disruption, ongoing COVID outbreaks, and cost inflation were all prominent. Despite this, our team has guided the company effectively through these disruptions and delivered record underlying net earnings.
“The integration of two acquisitions, LCL in Australia and EZ-FLO in the US, has been a significant highlight of the year. LCL has enabled us to take full control of the supply of our brass requirements in Australia. With EZ-FLO, we now have the capability to serve the large appliance connector market. This is a significant market that is immediately adjacent to our core plumbing end-markets in North America.
“For a second consecutive year we have set new all-time volume records across many of our markets. At the same time, we have been able to implement price increases in all our markets to offset the significant cost inflation we encountered throughout the year”, Mr Sharp said.
Looking to the new financial year, RWC said the short-term demand outlook for RWC’s key markets remains satisfactory.
“A backlog of work in core repair and maintenance markets, along with committed new home construction activity in Australia, is expected to support volumes in the short term.
“RWC’s end market exposure, which is predominantly repair and maintenance activity, should provide greater resilience to economic shocks compared with the more cyclical new residential construction market.”
“Given weaker global economic conditions and the risk of recessions in RWC’s key markets, however, the medium-term outlook is less certain.
“The company remains vigilant and is working to mitigate risks of rising interest rates, weaker consumer confidence, inflation and supply chain disruption in FY23.”
With the 6% plus drop in the share price, investors clearly didn’t like that warning right at the end of the commentary accompanying the results.
