Reece prepares for downturn
Sales increase in first quarter
Reece CEO and managing director Peter Wilson said while the company's services continue to be in demand, its outlook is extremely challenging
Thu Nov 05 2020
At its virtual annual general meeting, plumbing and bathroom company Reece announced that group sales revenue rose 4.4% in the first quarter but remains wary of the outlook for the year ahead.
Australia and New Zealand sales revenue was up 6.9%, while sales from its US-based business was up 8.6% on a constant currency basis. According to a report in The Australian, chief executive Peter Wilson said:
We have continued to see growth in both regions which has exceeded our initial expectations.
It's important to note that we do not see the first quarter's performance as illustrative of the remainder of the financial year due to significant uncertainty and negative economic indicators across our regions.
Trading conditions in the US are softening as we speak as the COVID-19 cases escalate and as we are being forced to close more stores.
While the company's business has seen increased demand from people spending more time at home in light of COVID-19 restrictions in some areas, it's faced major challenges by having to close stores in other areas.
As such, despite the record $6 billion in sales revenue over the 2020 financial year, Reece is being cautious in terms of expectations.
The company said "significant uncertainty and negative economic indicators across Australia and New Zealand" meant it couldn't confidently provide any guidance.
Mr Wilson also said activity in Australia was increasing as COVID-19 restrictions eased, largely stimulated by government incentives and low interest rates. He told the AGM:
With borders closed, population growth - a key driver for new housing - has fallen sharply since March. And we don't expect overseas migration to return to pre-COVID-19 levels until 2024. Dwelling approvals are expected to fall by 5% in the 2021 financial year. This represents a 30% decline since 2018.
With more people spending time at home, we will continue to see an increase in demand for alterations and additions, helping to balance the short-term impact of the housing downturn. With less people in the office, coupled with a decline of inner-city investment, non-residential commencements are expected to decline in the 2021 financial year.
Reece, which runs 630 outlets in Australia has navigated two global pandemics. The company launched a major campaign in 1920 in the US after the Spanish flu pandemic highlighting the importance of sanitation and plumbing. Mr Wilson said this idea still underpins the business today.
We often say that doctors and scientists help cure disease, but plumbers prevent it.
With this in mind, the company said it has a clear long-term vision and a resilient business model to withstand the difficulties of 2020.
