I would now like to hand the conference over to Mr. Urs Meyerhans, MD and CEO. Please go ahead.
Thank you, Amy. Good morning, everyone. We appreciate you taking time to join us on today's webcast or conference call as we walk through the GWA's half yearly results to 31st of December, 2025. I am Urs Meyerhans, GWA's Managing Director and CEO. Joining me today are Calin Scott, our Group CFO, and Craig Norwell, our Group Executive Sales. We appreciate your time and interest, and we look forward to continuing the conversation with many of you over the coming days and weeks. I will begin with an overview of our group results and key themes, including progress and updates on our continued commitment to safety. Calin will discuss the group financial results for the half, including P&L, cash flow, and balance sheet. Craig will then provide an overview of our business performance across our end markets, including our major asset and merchant partners.
I'll close with an update on our strategic progress, highlighting advances in our new product development pipeline, and sharing details of an exciting new business pilot that leverages our market-leading expertise in water technology. Before concluding with a summary of our Financial Year 2026 outlook. As always, we're happy to answer your questions at the end of the presentation. On to Slide 5. I will start with a summary of the half, highlighting the key results and developments. GWA delivered a resilient result in what remained a demanding market environment. Despite some continued headwinds across our end markets, we delivered volume, revenue, and earnings growth. That reflects a continued disciplined execution of our Customer First and Profitable Volume Growth strategic priorities. And it also demonstrates our internal commitment to controlling the controllables.
Win the plumber, our number one strategic priority continues to drive results with over 11,000 technical interactions during the half, up from 7,300 for H1 in Financial 2025. That leads to a 6% increase in sales of our Plumber Bundles and Spares. Our customer first priority continues to resonate well in the market. DIFOT performance remains above 90% across all our markets, with a continued improvement in our Net Promoter Score from customers. We continue to generate strong cash with a cash conversion ratio of 92% for the half. And our balance sheet remains strong, with net debt and credit metrics all towards the lower end of our target range. This has supported a 6.7% increase in the interim dividend to AUD 0.08 per share, fully franked.
As previously communicated, we are actively progressing our own market share buyback, which is supporting improved earnings per share. We are strengthening the core of the business while developing new growth opportunities, ensuring GWA is well positioned to benefit as market conditions recover. Moving to Slide 6. As always, I want to reaffirm our ongoing commitment to operating a safe business. Our injury severity rates remain low, and the total injury frequency rate of 6.7% improved from 9.8% in the prior corresponding period. I will now hand over to Calin to go through the group financial results.
Thanks, Urs. Turning 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. After-tax significant items with AUD 300,000 for the half and relates to investment in digital initiatives, which compares to AUD 2.3 million in the prior corresponding half. Group revenue for the half was 2% up, reflecting sales and volume growth across all markets. Volume in Australia was up 4.8%, with sales growth of 2%. We saw a recovery in New Zealand, with an increase in revenue of 1% and 2.4% in local currency and volume 11%. In all sales, were up 7% in the U.K., or 2.2% local currency, with volume increasing by 4.9% on the prior period.
Craig will detail the key components of revenue by market in this section. Normalized EBIT was up 3%, a solid result where we continued to experience some market headwinds. Those earnings have come through at a slightly improved EBIT margin, reflecting operating leverage down the P&L and continued cost discipline. With the reduction in significant items compared to the prior corresponding half, statutory EBIT was up 11%, with statutory net profit after tax up 14.9%. Moving to Slide 9. This Slide includes the waterfall chart we typically present to set out the key driver of earnings over the period. As always, this is presented on a normalized basis. Looking at volume, group volume growth of 4.9% reflects solid growth across all our geographic markets.
Turning to price mix, we experienced some pricing pressure during the half and an anticipated mix shift, driven by increased sales and product ranges targeted at multi-residential and volume home builders. Looking at foreign exchange, the average Australian dollar, U.S. dollar exchange rate for the half was $0.65, which compares to $0.66 for the prior period. This impacts stock purchases and balance sheet revaluations. Looking at other, this bar includes higher cost of goods sold linked to increased revenue and a minor increase in SG&A expenditure, reflecting continued disciplined investment across the business. GWA Group EBIT margin was up by 0.2 percentage points to 18.5%. Turning to Slide 10. We continue to generate good cash with operating cash flow of AUD 43.6 million for the period.
The change in working capital reflects the planned increase in inventory ahead of Chinese New Year in February, March 2026. Cash conversion remains strong, with a cash conversion ratio of 92% for the half. Capital expenditure was AUD 1.7 million and in line with the prior period. Full- year CapEx is expected to be AUD 4 million-AUD 5 million and remains focused on growth initiatives to drive revenue opportunities and cost efficiency. Moving on to Slide 11. Our continued strong balance sheet and cash flow enabled an interim dividend of AUD 0.08 per share, fully franked, up 6.7% on the prior half. The interim dividend is scheduled to be paid on month of March 2026. Moving to Slide 12. GWA's financial position remains strong.
Net debt as at 31st December 2025 was AUD 96.4 million, which compares to AUD 85.1 million as at 30th June, and continues to be at the lower end of our target range. The increase in net debt relates to the share buyback during the period. Our credit metrics remain strong and towards the lower end of our target ranges, with a leverage ratio of 1.2x and gearing ratio of 20.1% as at 31st December 2025. We maintain total bank facilities of AUD 205 million, with significant headroom of AUD 109 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 and key segments. Turning to Slide 14. This is a consistent Slide we present to represent our revenue from our key end markets. I'll start with Australia, our largest market, representing 83% of group revenue. As Urs and Calin have already mentioned, we continue to deliver sales and volume growth in Australia. Our localized sales force is focused on their state markets, working closely with local customers to identify mutual opportunities and execute solutions in partnership. During the half, our focus on Win the Plumber and renovation and replacement drove solid sales and volume growth in the majority of states, with New South Wales returning to growth. I'll talk about our states shortly.
Revenue in New Zealand was slightly ahead, however, in local currency terms was 2.4% ahead of last year, stemming the recent decline in sales. We simplified and right-sized our New Zealand operations to better align with the local market conditions and refreshed our Methven product range. Sales in the U.K. were up 7.3% or 2.2% in local currency, reflecting sustained growth with new customers. Turning to Slide 15. This Slide details our Australian sales by state. We delivered strong performance across three states, with growth across segments led by Win the Plumber and renovation and replacement. New South Wales returned to growth following a reset of our go-to-market plan, with positive momentum across most segments. Performance was led by merchants, renovations and replacement, and Win the Plumber.
In Victoria, we lapped a very strong prior corresponding half last year, which included two major hospital contracts. Notwithstanding the broader economic climate in the state, we are seeing some early signs of improvement across renovation replacement, plumbers, and residential. Queensland also lapped a strong prior corresponding half. Like other states, we had growth in merchant, renovation and replacement, and plumbers, but these were offset by weakness in the commercial and residential sectors. Over in the West, we continued to achieve solid sales growth, with sales up 9%, driven by residential, plumbers, and renovation and replacement. And in South Australia, we also continue to grow, with sales up 6% from solid growth in merchant, R&R, and plumbers. Turning to Slide 16. This Slide details sales performance through our key merchant customers in Australia.
This is a pleasing result, with continued momentum across merchant and plumber channels, delivering 8.2% growth in sales across the overall merchant segment. We achieved growth with two of our top four merchant partners, supported by our customer-first approach and a strong focus on identifying and executing local sales opportunities with key customers. We have a solid pipeline of opportunities within the merchant segment, particularly in Multi-residential. I will now hand you back to Urs.
Thanks, Craig. Over the next Slides, I will discuss our NPD and innovation pipeline. Moving to Slide 18. We continue to launch new products with a number of key introductions targeting the residential and care markets. In summary, our NPD activities during the half supported portfolio renewals and customer engagement, including launch of Methven Maku II range of tapware and showers, enhancing our premium tapware and shower offering in New Zealand.
Expansion of Liano II range into showers and accessories, enhancing our mix to premium bathroom portfolio. Extension of entry-level ranges into new product types, increasing competitiveness in value segments. Expansion of our heated towel rail product, driving higher margin access, accessories growth, and customer collaboration on exclusive ranges, deepening key account partnership and securing differentiated shelf space. NPD remains a core focus for the group, and we have a strong pipeline of product launches planned for the next, near future. Moving to Slide 19. I am pleased to provide an update on an exciting new offering, which leverages our technical expertise in water solutions. We are piloting a new business opportunity, which builds on our proven level of Smart Command capability. An AI-enabled leak detection and protection solution for the residential sector. Water leaks remain a significant issue.
Every year, around in every 100 Australian homes will experience a significant water leak, with an average insurance claim of AUD 15,000. That does not include the disruption and inconvenience to the residents. In fact, approximately 20% of all household insurance claims relate to water leaks. To support this, we have partnered with Phyn, a global category leader in AI-enabled leak protection, to pilot a smart system that monitors residents for leaks, alerts the homeowners in real time, and can automatically shut off the water supply to prevent costly water damage and disruptions. The system also takes water usage down to fixture level and provides detailed insights through the app, helping consumers conserve water, identify unusual usage, and potentially lower water bills. GWA has an exclusive partnership with Phyn for the ASX market for this product, and the pilot is now underway.
We expect an initial investment of AUD 1.5 million-AUD 2 million in the second half of financial 2026 to support the pilot and associated market entry activities. While early in the process, we are excited about this new opportunity and look forward to sharing further details in due course. I will now provide a few comments about our continued strategic progress. Our strategy continues to evolve, guided by customer needs, market dynamics, and our commitment to long-term value creation. Moving to Slide 21. Our overall market involves multiple decision makers and influencers across the value chain. Over the past two years, we have deliberately evolved our strategy to increase customer pool by engaging directly with plumbers as well as commercial and volume home builders.
Our objective is to influence pool specification and product selection early in the value chain, while recognizing the critical role of our merchant partners who provide reach, fulfillment, and execution. Merchant relationships remain central to our strategy. As part of this shift, we have significantly increased our engagement with end users, particularly plumbers and volume home builders. At the same time, we have strengthened our partnership through our push strategy with merchants, valuing our strong partnership by enhancing customer service levels and introducing new digital tools that make day-to-day interaction easier, faster, and more reliable. This balanced approach, deep engagement with end users, supported by strong merchant partnerships, has enabled GWA to drive increased pull through the channels. Despite challenging markets, our pull strategy has enabled GWA to deliver volume growth for three consecutive years.
We made good progress across the core area of our strategy in the first half. In the Plumbers, Plumbers remain central to our strategy, and we continue to extend our reach and engagement throughout the period. That's reflected in a 6% increase in Plumber Bundles and Spares, which primarily target the maintenance plumbers. For care, as Craig mentioned, we had a very strong prior period that included two hospital contracts in Victoria. Health and aged care continue to be the priority segments for our sales efforts. Residential. While we deliver strong growth in multi-residential, this was offset by the decline in completions in the detached segment during the period. Commercial. Commercial new build remains subdued, and that continues to impact our performance in this segment. Finally, merchants.
As Craig outlined, our customer-first strategy with individual plans for key merchant partners and strong focus on in-store execution delivered a solid growth for the half. Moving to Slide 24. Let me summarize the key points from today's presentation before turning to the outlook for the full year. Despite some headwinds, we delivered a solid first half result, volume, revenue, and earnings growth, and improved margin. Our financial position remains strong, supporting a 6% uplift in the interim dividend, alongside AUD 10 million of the AUD 13 million share buyback. Our focus on customer-first and profitable volume growth initiatives are delivering good strategic progress, and we continue to develop new products and solutions, including launching our exclusive partnership with Phyn to bring in an AI-enabled leak detection and protection solution to the market.
Overall, we continue to build a stronger, more resilient business, well-positioned to capture opportunity as and when markets improve. Moving to Slide 25. Let me conclude with an outlook for Financial 26, beginning with a summary of our key geographic markets. In Australia, we anticipate a mixed demand environment in the second half. Our ongoing emphasis remains on our key strategic priorities to drive revenues and strengthen our competitive position. In New Zealand, the outlook is also mixed. While residential approvals are increasing, they remain below long-term averages and are somewhat offset by the continued declining commercial approvals. We have a targeted launch of new products and plumber routes to support growth in the second half. And in the U.K., conditions are challenging, with key lead indicators in building construction declining. In response, we continue to deepen strategic partnership with our key customers, targeting affordable and social housing.
Moving to Slide 26. Moving specifically to Australia, our largest market, accounting for 83% of group revenue. In commercial, we expect the markets to remain broadly stable. Growth in education and aged care is likely to be offset by continued softness in office new build. We will continue to prioritize healthcare and aged care projects and increase product specification with existing builders and developers. In residential detached, we anticipate an improvement from late Financial 26, supported by the recent uplift in approvals. We continue to target greater market share and tailor products for volume home builders, with sales and promotions focused on those regions with strongest approval momentum. Activity in multi-residential is also forecast to increase from late Financial 26, driven by build-to-rent sectors and social and affordable housing developments. We continue to collaborate with property developers with relevant product and solution offerings.
Finally, in repair and renovation, demand continues to be tempered by cost of living pressures, with consumer confidence likely to be impacted by the interest rate increase earlier this month and the uncertain economic outlook. We will continue to implement our win the plumber strategy with a clear focus on maintenance partners and strengthen our relationship with merchants who value trusted long-term partnerships. That concludes the formal part of the presentation. Calin, I'm looking forward to your questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name. If you wish to cancel your request, two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Keith Chau at MST. Please go ahead.
Good morning, gents. Thank you for taking the time this morning. Firstly, just a question on the competitive dynamics and the pricing backdrop. So no price increase announced this year, and I think there was an explicit mention of some pricing pressures. So it'd be great to get a bit more color on this. I'm not sure if you've spoken about it earlier on the call. Apologies, I was a bit late, but it'd be good to just understand the dynamics around this, please, in a bit more detail. Thank you.
So, Keith, thanks. So look, on, on the competitive pricing pressures, look, it's, it's not necessarily broad-based. We've seen it in, in some categories, and it's starting to sort of materialize slowly. But what we've been able to do is simply look at our cost profiles, and look at offset that through cost management. Because if you look at our GP margins, it's actually held very consistent with the prior period. So whilst we are seeing a little bit of pricing pressure, it's not, it's not significant, and it hasn't impacted margins.
Okay, thank you. And the decision not to take a price increase this year, what was the key driver of that? Is that a currency-related, strategic, decision or something else?
Look, so there's probably a couple of inputs there. We did actually announce price increases in both the U.K. and New Zealand markets. Those are coming up in March and April. In Australia, to your point, we are having a look at our cost profiles, and we've always said previously that we would typically put price up to match any sort of cost imposed on the business. At the moment, with the exchange rate where it is, we certainly are looking at that very closely.
Okay, thank you. Maybe it's an opportunity going forward, but probably a good segue into your FX hedging profile. Given where the FX has actually tracked, which is obviously favorable, has there been a decision made to hedge more aggressively on the outlook, or are you just sticking to the same program that GWA's implemented previously?
Look, Keith, we're probably sticking to a tried-and-tested program that's held the business in good stead for a couple of years. We've had, you know, some impacts from FX come through, but through our hedging, have always managed to still maintain margins. So look, we don't see any need to make any fundamental changes to our current policy and program.
Okay, thank you. And maybe if I can, just one last one on the customer backdrop. You know, we've talked forever and a day about, you know, Tradelink having new owners, and then there's always been the old adage of some of these buying groups or co-ops trying to do private labels. So I know it's a very broad question and probably requires more than, you know, 30 seconds of Q&A time, but can you give us a high-level view of whether you've seen any material changes in the space, particularly around the customer level?
Keith, good question. So I mean, the short answer is no. I think as all three of us have talked to, the strategy is built around pool. So hence our focus for sort of short term, I suppose we're seeing results come through both the win plumber focus and renovation replacement. That continues to still be a major opportunity for us to go after incremental share in that R&R and maintenance plumber sort of segment, which we know is significant, but takes time to unlock. Outside that, we've still got the same focus on the longer lead times across commercial, care, and residential, be it sort of a lumpy, I suppose at the moment, and not expected to change any time soon.
The one that we, I suppose weren't more customer specific, wise is, is always talked about the ability to differentiate. And I think or to Calin’s point on as the, as, I suppose, economic conditions become more challenging, the need to differentiate across our customer base to drive profitable volume growth certainly continues to increase, and we remain open-minded. So then, if we can find opportunities that work for us in our key accounts, we continue to have examples where we sort of follow through on those.
That's great. Thanks very much. I'll hand it over.
The next question comes from Dylan Adrian at JP Morgan. Please go ahead.
Morning, Urs, Calin, and Craig. Thanks for taking my question. Just very quickly, just on the working capital piece, can you quantify how much of that, working cap outflow was due to the inventory build ahead of Chinese New Year? And should we expect that to unwind in the second half?
Yes. So like I said, was in the order of AUD 5 million-AUD 6 million. And yes, it is something that we would expect to see unwind in the second half.
Thank you.
The next question comes from Ollie Burson at CLSA. Please go ahead.
Good morning, guys. Just regarding your volumes, just looking at the quarter-on-quarter, it looks like volume growth has actually accelerated in Q2 from Q1. I guess, can we expect Q2 volumes to growth to flow into the second half? You know, just noting your planned price increases, in New Zealand and, and the U.K. in March. Cheers.
Well, thanks for the question. As you know, we don't give forecast in regard to future performance. Sort of if we are back to our strategic priority, customer first and profitable volume goals, clearly profitable volume growth for us is important. If you look at some of the movements, you would have seen that volume has grown faster than our revenue. To some of that issue coming through, that with the depressed market condition or the answer than out, some customers probably focus more on the lower to entry-level products. As I think we discussed about two years ago, where we sort of started pushing quite actively to offer a product range from entry, good, better, best, and that has worked well for us.
Great, thanks for that. I'll pass it over.
There are no further questions at this time. I'll now hand back to Mr. Meyerhans for closing remarks.
Thanks, Amy. Well, again, thank you very much for your time and interest, and we are looking forward to catching up with many of you over the next few days and weeks. So thank you and have a productive week.
That does conclude our conference for today. Thank you for participating. You may now disconnect.