Earnings call transcript: GWA lifts profit in H2 2026 as stock rises

GWA Group reported a resilient full-year result for FY 2026, with revenue increasing by 1%, normalized EBIT rising by 2.5%, and statutory net profit rising by 30% after tax, mainly due to fewer significant items. The company also raised its full-year dividend by 6.5% to 16.5 Australian cents per share, increasing its dividend yield to approximately 7%. GWA's stock rose by 2.75% to $2.42, close to the top of its 52-week range of $1.97 to $2.79, indicating positive investor sentiment.

Australia, accounting for 84% of group revenue, showed a 1% increase in revenue for the year. New Zealand revenue fell by 9% in Australian dollar terms due to currency moves, despite local-currency sales increasing by 9%. The UK experienced a 0.8% decline in local-currency revenue. Despite these challenges, GWA maintained its normalized EBIT margin at 18.5%, a 0.3 percentage point improvement from the previous year, demonstrating strong profitability protection.

The company's dividend payments have been maintained for 34 consecutive years, showcasing its commitment to shareholder returns. GWA's financial health score of "Good" reflects balanced fundamentals across profitability, cash flow, and leverage metrics. The company's revenue grew by 1%, normalized EBIT increased by 2.5%, and the EBIT margin improved. Statutory profit rose more rapidly due to the exclusion of fewer significant items compared to the previous year.

Analysts believe GWA is currently undervalued based on its Fair Value assessment, placing it among companies on the platform's Most Undervalued list. The company's financial health score further supports its resilience. GWA shares experienced a 2.75% increase to $2.42, adding 6 Australian cents per share and moving the stock close to the upper end of its 52-week trading band.

This reaction suggests investors welcomed the margin improvement, dividend increase, and operating discipline, although the rise was not dramatic, possibly reflecting caution about weaker end markets, cash conversion, and higher net debt.

Management outlined expectations for FY 2027, including improved cash conversion above its 80% to 85% target range as the working-capital impact from stock pull-forward unwinds. They are 55% hedged for FY 2027 at an exchange rate of AUD 0.69. Management highlighted several strategic initiatives, including the plumber-focused strategy, which generated over 30,000 tech interactions in FY 2026, up from 26,000 in FY 2025.

The introduction of a new leak-protection product is expected to open a larger market opportunity in Australia, with approximately 5 million serviceable residences representing the primary target market.