Reliance Worldwide Corporation Ltd

RWC Details

Revenue growth led by SharkBite PTC segment: Shares of Reliance Worldwide Corporation Ltd (ASX: RWC) zoomed up 8.9% on August 28, 2017, after the company reported 25.9% surge in net profit after tax at $65.6 million for FY17 over pro forma FY16 Results. RWC has posted 12.6% yoy (year on year) growth in net sales at $601.7 million, while posting 17.2% growth on a constant currency basis. The increase in sales was driven by continued expansion of SharkBite PTC business in the Americas operating segment, including a sales benefit in the second half from the initial rollout of product to approximately half of Lowe’s 1,700+ stores in the USA. This was partially offset by a decline in the AUD translated value of sales in the EMEA segment that was primarily due to a materially stronger AUD/GBP exchange rate post Brexit. Accordingly, EBITDA grew 21.8% to $120.7 million. Robust results reflect growth in net sales combined with benefits of procurement initiatives and improved manufacturing efficiencies achieved during the year.


Results for the financial year; (Source: Company reports)

The SharkBite PTC business in North America is at the core of the RWC growth story and it has continued to deliver strong double-digit sales growth in FY2017. Moreover, it has continued strategic focus on building awareness of SharkBite PTC fittings and associated accessories to drive sales growth and market penetration. The majority of SharkBite PTC sales are in the defensive repair and maintenance and renovation end markets. The company expects FY2018 EBITDA to be in the range of $145 million to $150 million, driven by continued strong top line growth expected from ongoing expansion of the PTC business, inclusion of a full year of Holdrite results and ongoing growth and targeted opportunities to gain market share in Asia Pacific and EMEA.

The stock has moved up 20.0% in the past six months, while it is up 5.0% in the past one year (as at August 25, 2017). Given the strong movement in the last six months and current trading levels, we maintain an “Expensive” recommendation on the stock at the current price of $ 3.66

RCG Corporation Ltd

RCG Details

Record result: For FY17, RCG Corporation Ltd (ASX: RCG) reported a record annual profit with underlying EBITDA rising 30% to $78.3 million. Underlying Net Profit After Tax rose 21% to $39.9 million, with underlying diluted Earnings Per Share increasing 7% to 7.48 cents. The company has completed the acquisition of Hype DC and fully integrated it into operating structure. In addition, RCG has opened more than 50 new stores, commenced the rollout of the TAF performance store format, and delivered three new, best-of-breed eCommerce sites.Accent delivered $67.1 million of underlying EBITDA, an increase of 57% on the prior year, while retail sales for the year rose 59% to $512.5 million and wholesale were down 4% at $77.4 million. RCG stock price surged over 6% at the back of the result announced on August 28, 2017.

 
FY17 Financial Highlights; (Source: Company reports)

The stock has declined 31% and 49.5% over the past six months and one year (as at August 25, 2017), respectively. With the recent improved result in light of earlier stock falls, we believe that it will be prudent to watch out for the performance recovery. We give a “Hold” recommendation at the current price of $ 0.84

Adairs Ltd

ADH Details

Improving business performance: For FY17, Adairs Ltd has posted 7.1% yoy growth in sales at $265.0 million, while posting 1.4% decline on Like for like basis. Gross profit was up 3.8% to $156.8 million, while EBIT down 21.5% to $30.8 million and NPAT was down 19.6% to $21.0 million. During the year, it has opened 13 new stores including 9 in Australia and 4 in New Zealand. The first half of FY17 was a challenging period, as range issues in some product categories together with a softer than expected Christmas trading period impacted the performance of the business. Over the course of the second half of FY17, the company successfully re-balanced its range, largely correcting the issues within some of key product categories, and stabilised the underlying profitability of the business.

Over FY17, Adairs’ Gross Margin decreased to 59.2% (FY16: 61.0%) due to a declining Australian dollar in the first half together with additional promotional and clearance activity to drive sales and clear underperforming inventory. However, the business will continue to work with its suppliers to manage gross margin. Further, the new product that has arrived over the last few months is showing positive signs to achieve a more stable gross margin in FY18.

The stock has moved up 5.2% on August 28, 2017, led by improving sales and operating performance in H2FY17. Given the improving business scenario and launch of new product,we maintain a “Hold” recommendation on the stock at the current market price of $ 1.42

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