- Reece Group (REH) slumped this afternoon after revealing to shareholders it would not provide any earnings or profit guidance for the 2021 financial year
- The 100-year-old plumbing and bathroom supplies specialist is in the midst of navigating its second global pandemic after facing the Spanish flu in the 1900s
- While sales grew by 4.4 per cent in the first quarter of the 2021 financial year, the company says this is likely not illustrative of the rest of the year
- While some regions are seeing increased demand from people staying home, other regions are facing tough challenges as Reece has to close stores down
- As such, the company says it can’t confidently provide any guidance for how the rest of the year will track along
- Shares in Reece retreated after the company’s announcement, closing almost 2 per cent lower and worth $14 each
Reece Group (REH) slumped this afternoon after revealing to shareholders it would not provide any earnings or profit guidance for the 2021 financial year.
The 100-year-old plumbing and bathroom supplies specialist did not mention COVID-19 specifically but said “significant uncertainty and negative economic indicators across Australia and New Zealand” meant it couldn’t confidently provide any guidance.
This is despite Reece increasing sales for the first quarter of the 2021 financial year by 4.4 per cent compared to last year, tabling just under $1.6 billion in sales revenue between July and September.
Sales were up 6.9 per cent in Australia and New Zealand and 8.6 per cent in the United States.
Nevertheless, Reece CEO and Managing Director Peter Wilson said while the company’s services continue to be in demand, its outlook is extremely challenging.
“It’s important to note that we do not see the first quarter’s performance as illustrative of the remainder of our financial year due to significant uncertainty and negative economic indicators across our regions,” Peter said in an address to shareholders today.
“Trading conditions in the U.S. are softening as we speak as the COVID-19 cases escalate and as we are being forced to close more stores,” he said.
Planning for the pandemic
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 completely in other areas.
As such, despite the record $6 billion in sales revenue over the 2020 financial year, it seems Reece is deciding on a more conservative approach to business expectations will be best for the company.
Of course, not many companies can say they’ve navigated two global pandemics, but Reece has. The company launched a major campaign in 1920 in the U.S. after the Spanish flu pandemic highlighting the importance of sanitation and plumbing.
Peter said this idea still underpins the business today.
“We often say that doctors and scientists help cure disease, but plumbers prevent it,” he said.
With this in mind, the company said it has a clear long-term vision and resilient business model to withstand the woes of 2020.
In a tough day on the market, however, it seems shareholders were ready to sell at the first sign of bad news.
As such, REH shares — which were fighting off the losses and green in early afternoon trade — tumbled after the company’s announcement and closed 1.89 per cent lower at $14 each. Reece has a $9.04 billion market cap.