Thank you for standing by, and welcome to the GWA Group Limited FY 2024 results presentation. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. I'd now like to hand the conference over to Mr. Urs Meyerhans, Managing Director and Chief Executive Officer. Please go ahead.
Thank you. Good morning, everyone. Thank you for joining us on the webcast or conference call for GWA's results for the financial year 24. My name is Urs Meyerhans. I'm GWA's Managing Director. Joining me today are Calin Scott, our group's CFO, and Craig Norval, our Group Executive for Sales. We look forward to talking further with many of you over the coming days and weeks. I will start with an overview of our group results and key themes, including an update on our safety performance. Calin will discuss the group financial results for the year, including P&L, cash flow, and balance sheet. Craig will then provide an overview of our business performance, including our key Australian merchants and end markets revenue results.
I will conclude today's presentation with an update on new products and how we continue to evolve and refresh our strategy and provide a summary and outlook for financial year 25. As always, we are happy to answer your questions at the end of the presentation. Moving to Slide 5. Let me first provide you with the highlights of the year. Our discipline and consistent execution approach in a challenging market delivered a solid result. Very pleasingly, we continued to deliver volume growth, with Australian volumes up 3.8% and U.K. up 4.3%. This is a direct reflection of the successful implementation of our Customer First and Profitable Volume Growth strategic priorities. Our ongoing operation and cost discipline resulted in increased normalized group EBIT, with a corresponding lift in our normalized group EBIT margin.
We continue to generate strong cash, with cash conversion up under 10% for the year. Our balance sheet remains strong, with net debt at its lowest level in five years. That enabled continued growth in dividends, with the final dividend up 14% to AUD 0.08 a share, and fully franked, and the full-year dividend up 15% compared to last year. Our mantra on controlling the controllables delivered excellent progress with our strategic initiatives, with solid momentum in key areas of engagement with plumbers, successful launch of new products, and strong improvement in customer service metrics, such as DIFOT and NPS. I'm pleased with the progress of the GWA team in financial year 2024. In addition to delivering a solid financial result, we continued to create a strong strategic platform for sustainable future growth. Moving to Slide 6, a quick update on safety.
We incurred a few minor injuries during the year. Impacted workers returned relatively quickly to full duties. Some of these injuries related to back pain or muscle strains. Unfortunately, that resulted in an increase in the total injury frequency rate. This does not represent an increased safety risk profile, but overall, we noticed an improved safety culture throughout our entire business, which celebrates open and transparent reporting. We continue to target lead indicators, which we believe are more relevant in preventing longer-term, more serious outcomes. This has led to improvement in incident reporting, with the Worker Insight Frequency Rate improving on the prior year. I will now hand over to Calin to go through the group financial results.
Thanks, Urs. Moving on to Slide 8. This slide presents the results first on a normalized basis, which excludes significant items, and then on a reported basis, which includes significant items. Some of you will recall we issued a trading update on the 26th of June, which foreshadowed significant items for the year, primarily related to restructuring of our New Zealand business. FY 2024 significant items are consistent with that update and were AUD 9.7 million pre-tax. These included AUD 6.2 million costs associated with New Zealand restructuring, AUD 1.3 million related to the implementation of the ERP program in the United Kingdom, and AUD 2.2 million related to the enhancement of our digital platforms. Significant items of AUD 1.4 million pre-tax in FY 2023 related to restructuring activities in Australia. Group revenue was up slightly on the prior year.
We had good growth in Australia, with sales up 1.8% on a dollar basis and volume growth 3.8%. We also had an increase in the U.K., with revenue up 8.6% on a dollar basis and volume up 4.3%. New Zealand remained a very challenging market during the year and declined by 16.5% on the prior year. Craig will detail the key components of revenue in his section. On a normalized basis, EBIT was up 5.4%, a strong result in what remains a challenging market. We continue to be disciplined on costs, and that's resulted in a lift in our normalized EBIT margin to 17.9%. Moving to Slide 9. This slide shows the results from the first to second half.
While conditions softened during the second half, revenue was largely flat in Australia, with an increase in the United Kingdom, partially offset by decline in New Zealand. EBIT margin was broadly maintained due to the 4% price increase we implemented in Australia in February. This was primarily to offset EBIT weakness. Now turning to Slide 10. This slide contains the waterfall chart we typically present to set up the key drivers of earnings over the year. As always, this is presented on a normalized basis. With regards to volume, as I had mentioned, we delivered volume growth in Australia and the United Kingdom, and solid traction with our strategic initiatives. This was partially offset by the continued challenging market in New Zealand.
With regard to price mix, as I just mentioned, we implemented a price increase of roughly 4% in Australia in February 2024, primarily related to cost increases. This was offset by some unfavorable product mix, driven by customers looking for more affordable products and solutions. With regard to foreign exchange, the average Australian dollar, U.S. dollar exchange rate for the year was 0.68, which compares to 0.32 in the prior year. The lower Australian dollar impacted stock purchases and balance sheet revaluations. These were partially offset by our hedging activities. In relation to other, this bar relates to our continued cost discipline, controlling the controllables across the business. Primarily, this includes the cost reduction initiatives we implemented in the second half of FY 2023 to adjust our operating rates and models to align to local market conditions, great cost savings, and continued discipline on costs.
Short-term incentives. This refers to accruals of staff incentives for FY 2024, relates to financial performance exceeding targets despite the challenging operating environment. Now turning to Slide 11. GWA continues to generate strong cash, which in turn provides enhanced returns to shareholders. Operating cash flow is up slightly from the prior year, reflecting our continued disciplined approach to working capital management. This assisted in continued strong cash flow generation, together with improved customer service delivery. Cash conversion remains strong, with a cash conversion ratio of 110% for the year. Capital expenditure was AUD 3 million, compared to AUD 2.2 million for the prior year. Our capital expenditure program remains focused on growth initiatives to drive revenue growth opportunities and cost efficiencies. Turning to Slide 12.
We remain focused on providing strong returns to shareholders, while our dividend policy is to pay 65%-85% of net profit after tax dividends. Due to our strong cash flow over FY 2023 and FY 2024 resulting in net debt, the board declared an AUD 0.08 final dividend, fully franked, which is up 14% on the interim dividend. This represents an 87% payout ratio on underlying net profit after tax, bringing the full-year dividend to AUD 0.15 per share, fully franked, up from AUD 0.13 on the prior year, an increase of 15%. Moving to Slide 13. GWA remains in a strong financial position. Net debt as at the thirtieth of June was AUD 97 million, 17% lower than the thirtieth of June 2023, and at its lowest level in five years.
Our credit metrics continue to improve, and they remain at the lower end of our target range. We have total banking facilities of AUD 220 million, a significant headroom of AUD 123 million. I will now hand over to Craig to discuss our performance by markets.
Thanks, Calin, and good morning, everyone. In my section today, I'll provide some further context to our revenue by market and for Australia by state, as well as some commentary on our key segments. Turning to Slide 15. This is the typical Slide we present to show our revenue from our key end markets. I'll start with Australia, our largest market, which represents 83% of group revenue. As Urs and Calin have already mentioned, we generated good volume growth in Australia during the year. We are benefiting from the realignment of our sales team to a state-based structure, as opposed to the previous segment structure. That's enabling us to identify and respond more quickly to local sales opportunities with localized solutions. In New Zealand, the market remains challenging, reflecting the significant decline in local business activity.
We have proactively responded by simplifying our business, streamlining brands and products, and adjusting our organizational model. Despite the challenging conditions in New Zealand, we maintain a solid commercial pipeline and order bank, led by the health and aged care segments. Sales in the U.K. increased by 9%, with overall volume growth, despite the contraction in the market. Our local management team in the U.K. continues to execute well and added three new merchant partners during the second half, which should assist growth into FY 2025. Turning to Slide 16. This slide details Australian states and their sales performance year on year. In New South Wales, despite ongoing softness in renovation and replacement, we had a stronger second half in the builder and project segments. We're also seeing continued traction with our Plumber Bundle offering to targeted maintenance plumbers.
In Victoria, we had good growth in commercial, with several key project wins in the healthcare segment, offset by a decline in the merchant segment. Queensland sales were below the prior year as the market remained soft, but we mitigated this somewhat with some targeted wins, primarily in commercial. Over in the west, we had strong growth from increased completions in the residential builder market and from our strategic investment into entry-level products. In addition, we also had good Plumber Bundle sales, which augments our residential business. South Australia was our highest growth state, with all segments up on the prior year and volume growth across all product categories. Turning to Slide 17. While the last slide demonstrated sales by market, this slide illustrates sales through our main customers in Australia.
We continue to gain traction with our Win the Plumber strategy, including Plumber Bundle sales, and that's reflected in two merchants growing by just under 5% for the full year. We remain absolutely committed to our customer first and Profitable Volume Growth strategies, and the transition to a state-based organization is assisting in improved customer relationships and customer metrics. I'll now hand back to Urs, who will discuss this further.
Thanks, Craig. Moving to Slide 19 . We continue to launch new products during the year to build our presence in core segments. We launched Contour II Hero collection during the year, which has resonated strongly in the market and is the best performing new product launch in GWA's recent history, or in terms of initial sales. All products we launched during the year included Modular prefabricated frame collection as part of our scalable bathroom offer. This is an increasing trend we're experiencing to streamline installation at building sites. We introduced stylish entry-level sanitary ware and baths, and affordable commercial tapware to grow the share in builders and affordable housing segments. In the current market environment, customers are looking for lower-priced products. We continued with the introduction of lead-free tap ranges ahead of the new mandatory code, which will come into effect from May '26 .
Looking forward, we are planning to launch our new Cleanflush urinal technology and smart connected tapware in the beginning of this financial year to future-proof our commercial product offerings. I will make a few comments about our strategic progress and how we continue to evolve our strategy, targeting key growth segments. Moving to Slide 21. During the year, we made further excellent progress in core areas of strategy, which I will summarize on this Slide. Firstly, Win the Plumber. As we've said consistently, plumbers represent the single biggest opportunity for GWA to grow volume and share in Australia and New Zealand. Extending our reach and engagement with plumbers continues to underpin our strategy. We achieved substantial progress here across both commercial new builds and maintenance plumbers. As Craig mentioned earlier, our specialized Plumber Bundle, also targeting maintenance plumbers, continue to gain traction.
We say it's up 8% on the prior year. During the year, we extended our reach with Australian and New Zealand plumbers, with 25,000 plumbers now signed up and categorized between new build and maintenance. We are now also engaged with 18,000 plumbers in providing technical services. We are assisting plumbers with technical training and to help them meet the CPD hours. During the year, we conducted training for over 2,500 plumbers. This includes the inaugural GWA Plumber Roadshow across all six capital cities in Australia and New Zealand, with over 800 attendees learning about the latest trends and our innovative plumbing solutions. For innovation through design and partnership, a key priority for our growth strategy remains on product innovation. As I mentioned earlier, we continue to launch of new products through the year.
That has resulted in our vitality index being new product development sales as a percentage of total sales, continues to track ahead of our 10% target. We are also ramping up our speed to market with these launches. For customer service, our service level continued to improve, with delivery in Australia and New Zealand consistently delivering over 90%, from 78% last year. Meanwhile, we continue to experience a steady improvement in our net promoter score, and continue to improve and strengthen our relationship with our key trading partners. Moving to Slide 22. Some of you will have attended our strategy update at our Innovation and Design Center in Preston in March this year, where we provided an update on our strategic priorities.
While our strategy remains clear and consistent, we continue to evolve our priorities, and this slide represents a refreshed strategy on a page to 2027 . The fundamentals have not changed. We continue to maintain an absolute focus and commitment to Win the Plumber and customer first and Profitable Volume Growth . Our goal is clear: We are determined towards the position of trusted technical partner. Our strategic plan summarizes the key growth pillars per segment, and on the next slide, I will summarize our key initiatives to support this. Moving to Slide 23. This slide drills down into more detail of the key initiatives by each growth pillar. Our growth pillars target areas where we see the biggest opportunities over the next few years for GWA's. Firstly, Win the Plumber. As we mentioned earlier, our priority remains on being the trusted technical partner for plumbers.
We will achieve this by continuing to provide leading technical services and solutions to plumbers, leveraging our unrivaled expertise in this market. We will build on the initial success we have had with Plumber Bundle sales and build a comprehensive aftermarket capability to grow spare parts sales. This will provide a growing presence in the more stable maintenance and repair segment of the Aussie market. For Caroma, we have prioritized health and aged care within our commercial new build and renovation offering as key growth segments. This will continue. We are developing unique solution in this segment, such as hospital smart ecosystem, which is currently in trial. Residential, with the ongoing shortage in housing, we continue to monitor market trends and lifestyle changes in residential building, and we are enhancing our product offering accordingly.
That includes providing a complete bathroom offering, not just sanitary ware or taps, but a more complete sales solution for builders. It also includes building capability in multi-residential solutions. And lastly, commercial. We will leverage our already strong presence in the commercial segment by ensuring we are well positioned across all categories. While new build in the office space is slow in the short term, commercial renovation remains a core target area, and we remain well placed to grow in this category as commercial premises are refurbished, particularly in relation to water-saving technology and being more competitive in the market. Of course, underpinning these initiatives is our attention on our merchant partners, and ensuring that we continue our service offering in key areas such as delivery, product availability, and service. Let me move to Slide 25.
Let me summarize the key points from today's presentation before concluding with the outlook for financial year 2025. In a challenging market, an aligned GWA team delivered a solid result. We continue to deliver volume growth with increased normalized scope, EBIT, and margin. While the New Zealand market remains challenged, we have responded proactively and directly with a reset and simplification of our operations. Our balance sheet remains solid, and our prioritization on customer first and Profitable Volume Growth initiatives have resulted in excellent progress on our strategy. Meanwhile, our continued attention on Win the Plumber underpins our refreshed and evolving strategy. Moving to Slide 26. I will conclude with an outlook for financial year 2025. First, a roundup of our key geographic markets. In Australia, the outlook for most segments is mixed.
However, we expect solid demand in health and aged care projects, and strong demand in the residential sector in the medium term. We expect the New Zealand economy to remain challenging, and we have realigned our business in response. In the U.K., we expect a modest recovery in financial 2025 across both new build and repair renovation, and we also expect to benefit from new customer wins late in financial year 2024. Moving to Slide 27. Moving more specifically to Australia, our largest market, accounting for 83% of group revenue. In commercial, new office builds are expected to decline, offset by office refurbishment and a positive outlook in healthcare. In response, we continue to prioritize healthcare and aged care projects, and increase product specification with existing builders, property owners, and developers. In residential detached, we expect a contraction following a decline in approvals to a ten-year low.
In that context, we are targeting an increased market penetration and product specification with volume home builders across our markets. Activity in multi-residential is expected to increase, driven by an acute housing shortage, although the timing of this recovery remains uncertain, and finally, in residential repair and renovation, we expect residential activity to remain subdued. We will continue to court the dormant plumbers and increase our share of wallet in this more stable market segment. Regardless of the economic conditions across our markets, our strategy centers on controlling the controllables and building on our technical strengths. Ladies and gentlemen, that concludes the presentation. Calin, Craig, and I are happy to take your questions.
Thank you. If you wish to ask a question, please press the star key followed by the number one on your telephone keypad. Wait for your name to be announced. If you wish to cancel your request, please press star two, and if you are on a speakerphone, please pick up your handset before asking your question. Your first question comes from Ben Kairaitis from MST Marquee . Please go ahead.
Morning, all. Morning, all, and Calin. So my first question was just on Australia volumes. So clearly great result for the year with volumes up 4%. I just wanted to see how this compares to where you see market volumes in the period, and how much you believe that was a function of share gains. So I know back in February, you indicated the BIS forecast for the year was for markets to be down 11%. So clearly a significant delta to where volumes ended up. So just hoping you could square that up for me, please.
Yeah, look, we clearly are seeing in the second half the market slowing a bit, so with us continuing to achieve volume growth, we relate that to market share gains across our key categories.
Okay, great. Thank you. So when you look at the BIS Oxford forecast, so down 11% last year, is that your internal views of where the market declined? And then just wanted to square that up for FY 2025, of that market being down 2% or the external forecast being down 2%. So how does that compare to your internal expectations for next year?
Thanks, Ben. So I think we did mention at the half year when we published the BIS numbers that we always publish them unadjusted. We thought 11% was probably a bit aggressive in terms of the decline. We don't necessarily think we've seen such a strong decline. If I think about 2025 and look at their projection of about 2%, that to me feels a bit more realistic and a bit more on the money. But so that 11%, we mentioned at the half year that we thought it was a bit aggressive.
... Okay, great. Thank you, and then just on cash conversion, so another really strong result, again, above 100%, so if I look at the components of working capital, you've got receivables down and payables up. Just wondering if this is sustainable going forward, or should we expect some reversion there?
So not necessarily any reversion, Ben. I think your observation is valid about payables being up, but you'll also notice that stock was up. So there's a correlation there in terms of what we bought, and we just haven't paid for the stock coming through. I would expect our cash conversion moving forward to probably be more in line with our target of 90%-100%.
Okay, perfect. That was all for me. Thank you.
Thank you. Once again, if you do wish to ask a question, please register by pressing star then one on your phone. The next question comes from Gus Greenberg from Macquarie. Please go ahead.
Hi, gents. Thanks for taking my question. Just touching on Australia, you noted some mixed headwinds there. Could we delve a little bit deeper into that? Maybe touch on what end markets you see the most trading down, and those end markets, you know, whether you're seeing volume growth in those that the trading down's happening? Thanks.
Yeah, so look, if I go through our four sort of segments, we usually talk about, first of all, commercial, particularly commercial office buildings. We would expect a decline into 2025, because there's not a lot of new offices being built. Offsetting that, we see good pickup in regard to office renovations and a strong demand in the health and aged care sector. If you look at residential, clearly, as I mentioned in the presentation, we are at the ten-year low in regard to approval, so that will have obviously an impact on sales for new buildings. If I look at repair and renovations, we continue to believe that will be subdued, but again, our strategy is clearly focusing on the maintenance plumbers and getting a bigger share of the more stable market environment.
Thanks for that, Urs, and maybe just touching on your strategy, so you've hit your 25,000 target for plumber sign-on signups. Yeah, could you maybe step on or step through what you're doing to drive engagement? You know, what are the next steps here, and what do you, you know, expect that plumber bundle sales performance to continue outperforming your number for Australia?
Yeah, look, first of all, we're not giving a forecast in regard to expected outlook for specific product segments, but if I look at the plumber engagement, there's probably a few things we continue to do. Clearly, we are very much focused on providing training opportunities across all the plumbers, across all our states and our markets. We continue to provide technical interactions with plumbers, and we are also continuing to work with the plumbing industry to develop new solutions. Because as we often said, when you look at a plumber, the most valuable asset is time. So if we can provide them with products and solutions where they will save time on the job, it becomes more valuable to them.
Perfect. Just a last quick question on freight. You know, we've seen spot rates increase, had a bit of tailwinds in the current year, in the order of AUD 2-4 million headwind to next year. What's your level of freight, ocean freight contract coverage? Just a very rough estimate there in terms of your requirements.
Yeah, thanks, Gus. So we typically enter into contracts 12 months in advance, and we usually cover around 50% of our forward expectations. This year, we noticed an increase in volatility in the ocean freight rate, so we actually increased that coverage to around 70%-80%. So we're sort of well covered into FY 2025.
Perfect. Thanks a lot. That's it for me.
Thank you. Your next question comes from Shayura Bizan at Bank of America. Please go ahead.
Hey, morning, Urs. Morning, Calin. Thanks for taking my question. Just some quick one on Australia. Just following on some of the comments you made. Look, Australia demand has been quite soft, right? And you sort of flagged it that for, you know, last couple of halves. I'm just trying to think, you know, as you see and as you speak to your customers, do you think that demand has sort of bottomed out, or, you know, you think it will sort of worsen before it gets better? I know it's not an easy question to answer. Thank you.
Well, look, you know, it depends what time of the day or week you pick up the newspaper. Sometimes it's suggested that we hit the bottom, sometimes it's suggested it could get a bit softer. What we're really focusing on is to come back to our strategy. We're very clear where we're focusing on. We identify growth opportunities in regard to the market. We will absolutely focus on those areas going forward.
Thanks, Urs. And just in looking at, you know, your, your slide, you know, where you've sort of got your targets and how you're tracking versus them, I just noticed on, you've got an orange dot on the, the EPS CAGR. Just wondering what does it mean? Is like tracking in line or, or lower, or what, what does it mean? Sorry.
Thanks, Shayura. So if you look at our FY 2024 results, normalized net profit after tax was 3.4%. Our target for the LTI for executives is 5%-10%. So that orange is just we're tracking probably just a bit below the 5%-10% target.
Okay, great. Thank you.
Thank you. Just a reminder, if you do wish to ask a question, star then one on your phone to register. We are showing no further questions at this time, so that concludes the conference for today. Thank you all for participating.