RWC Boosts Profits 32% on Holman Acquisition and Operational Gains
Reliance Worldwide Corporation posts a robust 14.8% sales increase and a 31.8% jump in net profit for H1 FY25, driven by the Holman acquisition and solid cost efficiencies.
- Net sales rise 14.8% to US$676.5 million
- Net profit after tax surges 31.8% to US$67.2 million
- Holman acquisition contributes fully for six months
- Adjusted EBITDA up 15.2% with margin improvement
- Leverage reduced to 1.41 times amid strong cash flow
Strong Half-Year Growth Fueled by Strategic Acquisition
Reliance Worldwide Corporation Limited (ASX: RWC) has delivered a compelling set of results for the six months ended 31 December 2024, with net sales climbing 14.8% to US$676.5 million and net profit after tax soaring 31.8% to US$67.2 million. The standout driver behind this performance was the full six-month contribution from Holman Industries, acquired in March 2024, which has been seamlessly integrated into RWC's Australian operations.
Excluding Holman and the discontinued Supply Smart sales model, underlying sales growth was a more modest 3.8%, reflecting a mixed regional performance. The Americas region showed resilience with a 3.3% sales increase (5.4% excluding Supply Smart), while Asia Pacific external sales were flat, and EMEA sales declined 4.6%, highlighting ongoing challenges in the UK market.
Operational Efficiency and Margin Expansion
RWC’s operating earnings (EBITDA) rose 26.8% to US$142.8 million, boosted by Holman’s earnings and disciplined cost management. Adjusted EBITDA, which excludes one-off integration and synergy costs, increased 15.2% to US$143.8 million. The company achieved a slight improvement in operating margin to 21.3%, and when excluding Holman, adjusted EBITDA margin expanded to 22.2% from 21.2% in the prior corresponding period.
Cost savings of US$10.8 million were realized through continuous improvement initiatives, restructuring in EMEA, and synergy capture from Holman. Despite a 16.2% decline in cash generated from operations to US$127 million, largely due to increased inventory levels, RWC maintained a strong operating cash flow conversion rate of 88.3% of adjusted EBITDA.
Dividend and Balance Sheet Strength
Reflecting confidence in its financial position, RWC declared a total distribution of 5.0 US cents per share, split evenly between an unfranked interim dividend and an on-market share buyback valued at US$19.5 million. The company also reduced its leverage ratio to 1.41 times net debt to adjusted EBITDA, down from 1.56 times a year earlier, underscoring robust cash flow generation and prudent balance sheet management.
Outlook and Market Challenges
CEO Heath Sharp acknowledged the subdued market conditions, particularly in the UK plumbing and heating sector, but highlighted the positive momentum in Continental Europe and the Americas. Looking ahead, RWC expects full-year group external sales growth of mid-single digits, with underlying sales (excluding Holman and Supply Smart) anticipated to be broadly flat within a low single-digit range. The company aims to improve consolidated EBITDA margins through ongoing cost reductions and efficiency gains, targeting operating cash flow conversion above 90% for FY25.
While the integration of Holman has been a clear catalyst for growth, the mixed regional sales performance and inventory build-up warrant close monitoring. RWC’s ability to navigate these headwinds while maintaining margin discipline will be critical to sustaining its upward trajectory.
Bottom Line?
RWC’s Holman acquisition and operational discipline have propelled strong growth, but regional market softness and inventory trends pose watchpoints.
Questions in the middle?
- How will RWC manage ongoing challenges in the UK and EMEA markets?
- What impact will inventory increases have on future cash flow and margins?
- Can RWC sustain margin improvements without further acquisitions?
