Hello everyone, and welcome to the Reece Limited 2021 annual general meeting. I'm Bridget McIntyre, and I'm joining the board at Reece today to ensure we can create the best experience for all Reece's shareholders as you join us virtually. Before we get started, on behalf of Reece, I'd like to begin by acknowledging the traditional owners of the various lands from which you are joining us. I would also like to pay my respects to their elders past, present, and emerging. I extend that respect to Aboriginal and Torres Strait Islander peoples joining us here today. Without further ado, I'll now pass over to our Chair, Alan Wilson, to begin today's proceedings.
Thanks, Bridget, and a warm welcome to all our shareholders who have joined us today online. I advise a quorum of members is present, and I declare the 2021 annual general meeting open. The minutes of the previous AGM of the company held on the 29th of October 2020 were signed on the 17th of December 2020 as a true and correct record of proceedings. The notice of meeting was distributed to all shareholders on the 27th of September 2021, and I will take this as read. I'll now introduce the members of the board. Joining the meeting today, there is Peter Wilson, Group CEO, and our non-executive directors, Tim Poole, Chair of Audit and Risk Committee and Chair of the Remuneration Committee.
Good afternoon.
Bruce Wilson. Megan Quinn. Andrew Wilson. I'd like to welcome Andrew Cowlishaw, our Group CFO, and Chantelle Duffy, our Company Secretary. I'd like to welcome our audit partners from KPMG, Mr. Bernie Szentirmay and Miss Julie Carey from KPMG, who are present and available to answer questions today. Thank you for joining us, Bernie and Julie. I'll now hand back to Bridget, who will run through the proceedings of the meeting, including the voting and asking questions.
Thanks, Alan. Well, we're going to begin the meeting with a short presentation, then go through the formal proceedings, which includes four resolutions. The resolutions will be decided by a poll. Voting on the resolutions is now open. Click the voting icon in the navigation bar of your screen to display the resolutions. The persons entitled to vote are shareholders, representatives, and attorneys of shareholders and proxy holders. You can vote any time during the proceedings until voting is declared closed. You can also change your vote at any time throughout the proceedings until the voting is closed. We will give you a clear prompt later in the meeting to warn of the close in voting. If you have questions you would like to ask, you can start submitting them at any time during the presentation by clicking the question icon.
Once you have finished typing, please hit the arrow symbol to send. An audio questions facility is also available during this meeting. To use this service, please pause the broadcast on the Lumi platform and then click on the link under Asking Audio Questions. A new page will open where you'll be prompted to enter your name and the topic of your question before being connected. You will listen to the meeting on this page while waiting to ask your question. We have also received questions prior to the AGM, and these, together with questions raised during the meeting, will be addressed towards the end prior to the adoption of the resolutions. Due to time constraints, we may not get to answer all questions. If this happens, we will answer them in due course via email, posting responses on our website.
If you have any issues with voting or submitting questions, please consult the Lumi user guide, which can be accessed within the platform, or use the link within our notice of meeting or on the Reece Group investor page. Now I'll hand back to you, Alan.
Thanks, Bridget. The first item of business is the tabling of the financial reports and the directors and audit reports for the year ending 30 June 2021. Reports tabled will not be subject of a resolution, as it is not required by the Corporations Act 2001. I'll give a short address and then hand over to Peter Wilson, the Group CEO, and Andrew Cowlishaw, the Group's CFO, for their presentation. We will then go through the formal business of the AGM as per notice of meeting. Before I present my address, it is appropriate for me to advise that under the Corporations Act 2001, the company is required to present the financial report, directors' report, an independent audit report for the year ending 30 June 2021.
This year, the world has continued to present us with many challenges. From the ongoing uncertainty of the pandemic to the Texas freeze, 2021 has tested us. It has also proved how flexible and resilient our business is. I'm so proud of the way our people have continued to live our purpose and values to deliver on our customers' needs. By keeping our doors open, our customers have been able to continue providing their essential services, ensuring warm homes, access to clean water, providing refrigeration and gas services, and preventing disease. This year has seen major investments in the construction industry, which buoyed the economy and made our tradespeople busier than ever. This led to a record sales revenue for Reece Group of AUD 6.3 billion for FY 2021, up 4% on FY 2020.
Normalized earnings before interest, tax, depreciation, and amortization improved 11% to AUD 720 million. Statutory net profit after tax rose 25% to AUD 286 million. The board has declared a final dividend of AUD 0.12 per share, fully franked, taking the total dividends for the financial year to AUD 0.18, fully franked. This year, we have also listened to the role our customers want us to play in sustainability and developed a customer-led strategy called Reece Cares, which you will hear more about in a moment. We know that the next few years will continue to be challenging and unpredictable, likely to be impacted by inflation, supply chain challenges, and the possibility of ongoing COVID impacts. Our focus will be on servicing our customers who we know are already operating at full capacity.
I'd like to take this opportunity to thank our employees for their resilience, commitment, and contribution in what was, again, another extraordinary year. We will now play a short video about our sustainability program, Reece Cares.
Our simple promise.
Reece Cares. A better you for a better future is what drives us forward.
It's about our people, our community, and our planet.
We're passionate about building a healthier, happier, and more sustainable future for all of us to enjoy.
It starts with you.
Being your best self is what we care about.
We're committed to the overall health of our people, customers, and families, both mentally and physically.
We're driven to make a difference where it matters.
Where everyone can contribute to a better planet.
We want to change the health of our tradies and empower people to do their best.
Together, we amplify our impact. The commitment to support our community stretches near and far.
Through charities, partnerships, and sustainability initiatives, we want to make a long-term difference.
We're helping to create an inclusive workplace because we believe in a better future for all.
Reece Cares about more opportunities for you to get involved, get support, or give back.
It's not just something we say, it's something we do.
Because you care.
We care. Reece Cares.
Thank you, Mr. Chairman, and a very warm welcome to everybody. Today, Andrew and I will take you through our focus for FY 2021, our financial summary, our business highlights, and then an update on the first quarter of 2022. Please note, for consistency, all figures are in Australian dollars unless otherwise stated. Of course, we have to start our review by acknowledging that it was a very challenging year, from the ongoing impact of the pandemic to the extreme weather events. Our people did everything they could to keep our doors open, support one another, and be there for our customers so they could continue to carry out their essential trade. Our supply chain withstood the test too, and we're proud of how the Reece model continues to support our customers when they need us. Now let's turn to our blueprint.
At Reece, we take a long-term approach that comes to life through our blueprint. From being inspired by our purpose to delivering our unique promise of customized service, we continue to stay one step ahead of our customer needs. We are a purpose and values-led organization, and we call this Living the Reece Way. Our purpose helps our people across the U.S., Australia, and New Zealand maintain a unified focus, stay resilient, and continue to improve in a rapidly changing environment. One of our core values is to do the right thing. This year, we used insight from our customers to define our sustainability approach. We have three areas of focus, and our priority is to build a more sustainable business. Our strategy is brought to life through the Reece Cares program, which you have heard about earlier in the video.
This year, we also created our 2030 vision to be the trade's most valuable partner, helping them succeed in a digital world. This vision was built through insight into how trades will change in the years ahead and how we will respond to it. It means that we'll be both a bricks-and-mortar and a digital business, providing the quality products we are known for and creating services to help tradespeople run their businesses more effectively. Our vision is brought to life by focusing on three strategic priorities. The first is being brilliant at the fundamentals of trade distribution and intentional focus on the foundations of the Reece model to ensure we continue to improve in the areas our customers care most about today. The second is investing for growth, growing our business by expanding in adjacencies and in markets where we can realize growth opportunities.
Finally, we will accelerate our strategy by innovating to stay ahead of our customers' needs. In the U.S., we are focusing on the first two areas. In Australia and New Zealand, we will work on all three, and we will leverage innovation learnings in the U.S. where it makes sense. With the context explained, I'll now hand over to Andrew to share our financial results.
Thank you, Peter. We are pleased to announce that Reece has achieved another record result in FY 2021. Sales revenue for the group was up 4% to AUD 6.3 billion for the period. Normalized EBITDA grew 11% to AUD 720 million, while net profit after tax was up 25% to AUD 286 million. Earnings per share for FY 2021 of AUD 0.44 was up 10% on last year. Due to this strong performance, the final dividend was AUD 0.12 per share, fully franked, meaning the total dividend for the full year is AUD 0.18. In the Australia and New Zealand region, sales revenue increased by 9% to AUD 3.15 billion.
Due to our essential service status, we were able to keep our doors open during the various state and regional lockdowns and did not receive JobKeeper or any other government support packages. In the United States, our revenue grew 11% on a constant currency U.S. dollar basis. This translates to being flat on the prior year, reporting AUD 3.1 billion when converted into AUD. For the period, we experienced an unfavorable foreign exchange impact of AUD 362 million due to the strengthening position of the Australian dollar against the U.S. dollar. We're pleased with the U.S. result, which was achieved through a period of COVID-related challenges and severe weather events. The ANZ region delivered well despite a backdrop of operational COVID-19 restrictions continuing to impact the Australian and New Zealand businesses. Sales revenue in the ANZ operations was up 9% on the prior year.
The ANZ region experienced a notable inflationary dynamic in the second half of FY 2021, and we estimate this to be circa 3% of our growth for the year. Normalized EBITDA was up 17% to AUD 496 million, reflecting the strengthening performance, and EBIT has increased 23% to AUD 382 million. ANZ normalized EBITDA margin has also increased 100 basis points, the outcome of strong operational disciplines and sales growth for the period. The U.S. region performed well operationally in a market that experienced numerous disruptions during the year. Sales revenue was up 11% on a constant currency U.S. dollar basis and flat when converted into Australian dollars. Excluding Todd Pipe & Supply, revenue growth would be 9.5% on a constant currency basis.
Todd Pipe & Supply was acquired on the first of October 2019, and as such, contributed nine months' revenue to FY 2020. Inflation in the second half, post the Texas freeze, impacted the business and we estimate this to be circa 2% of the U.S. growth for FY 2021. COVID-19 has continued to impact our U.S. operations through short-term branch closures and increased cost of doing business. Normalized EBITDA was flat on prior year with margin constant at 7.2%. I'll now hand you back to Peter who will take us through the business highlights.
Thanks, Andrew. Now let's look at how we've progressed with our first priority of being brilliant at the fundamentals of trade distribution. Our branch network in ANZ continues to be the core of our business, ensuring we are where our customers need us and being positioned for growth. This year, we opened three new stores in New Zealand and a specialized fire branch in Victoria. We closed three stores, bringing the total network to 642. Another fundamental of our business in ANZ is to provide our customers with quality, innovative products. In the last six months, this has included the EnviroPod, a stormwater gully pit designed to prevent litter entering the stormwater system and our oceans. We've also added to our market-leading hot water product range with the launch of the Theralux, helping the end customer to reduce their carbon footprint.
In our HVAC business, we've made progress in bringing more efficient products to the refrigeration market. During the voting section, you will see a video which will demonstrate the impact this has for a small business and the tradespeople who supported them. This year, we have seen a continued uplift in our customers ordering and interacting with us online. We've enhanced the integration of maX into accounting applications, seeing a 25% increase in invoices being processed automatically. We have more than doubled the number of customers we connect with online sales increasing 57% on last year. Turning to the fundamentals in the U.S. business, this year, we continued to focus on delivering great customer experiences across the Sunbelt region. In the second half, we closed one Waterworks branch and opened a plumbing branch, both in Texas.
We have focused on embedding our continuous improvement mindset into the U.S. In FY 2021, we've standardized policies and procedures across MORSCO. We've developed behaviors to drive adherence to our standards, which have made our approach more efficient. We've used automation to eliminate manual processes and saved over 7,000 hours of our people's time. Now let's look at the second priority, investing for growth. 2021 is a good example of how we invest for growth despite the challenge of COVID. The pandemic unexpectedly increased demand for housing and home improvement as lockdowns saw people prioritize and invest in their living space. This created challenges, but also an opportunity for growth for Reece, requiring us to execute well, invest in stock, and support our people to succeed.
Our safety-first approach helped us keep our doors open and serve our customers while they navigated lockdowns and capacity and resource issues. We worked together and stayed focused, which enabled us to deliver growth and realize opportunity. We know that our people are our real driver of our success, so investing in their development is a key long-term focus. In the U.S. this year, we defined our people promise, helping to foster a culture where everyone can achieve their best. We enhanced our benefits offering from wellness programs to flu shots and vaccine support. We've also invested in our people by accelerating our training approach with over 1,000 team members enhancing their coaching, selling, or pricing skills. Staying in the U.S., this year we have focused on improving and growing our presence in the Sun Belt region.
In our new stores, we have trialed different ways of working to understand the best model for our different customer segments. From Waterworks to HVAC and plumbing, we are testing and learning before we roll out an approach for all future stores and refurbishments. We've gained deep customer insight over the last three years in the U.S., and we're using this to accelerate our transformation program. It has given us confidence to commit to a symbolic step forward, bringing the Reece brand to the U.S. network, starting with our Californian branches in early 2022. This is something the U.S. team has been waiting for and are really excited about. We have taken our time to ensure we had the right capability, processes, and support in place to deliver the Reece customer experience.
It will be a significant investment to enable our business and reputation, helping us realize great opportunity across the U.S. Sunbelt. Our third strategic priority is delivering innovation. At Reece, we believe innovation is about increasing our capability, our creativity, and our commerciality. To enable this, in FY 2021, we established the Breakthrough Innovation Group, or BIG. BIG has a global mandate and enables the acceleration of our 2030 vision. We believe BIG will help us at least stay one step ahead of our customers and potentially disruptive trends in the trade industry. The following video explains BIG in more detail.
To achieve our 2030 strategy, we've got to think big, and that's what we're doing. Introducing the Breakthrough Innovation Group. BIG will help us achieve our 2030 vision to be the trade's most valuable partner, helping them succeed in a digital world. What is BIG? BIG is our group of businesses that bring the outside in, making sure Reece can stay on top of what's happening, what's coming in the future, and how we can stay one step ahead. You might already know Trout, Next, and SuperSeed. Each brings their own skills to form BIG. Trout has been Reece's creative agency for more than 25 years, creating marketing campaigns and brand experiences to connect with customers and differentiate Reece. Over this time, Trout has become the go-to agency for companies who create, build, and maintain living spaces.
Next is our innovation and insights arm, helping us solve problems and develop new ideas using design thinking. Next also helps embed innovation capability within the Reece Group, making us better insight gatherers and innovators. SuperSeed is our ventures business, investing in start-ups and creating new businesses that will help our customers and all trades run better businesses in a rapidly changing environment while helping Reece mitigate disruption. These businesses work separately and together, combining diverse capability and experience to bring to life our unique innovation model of creativity, capability, and commerciality. To achieve big things, you've gotta have room to grow. BIG will operate globally, working across Australia, New Zealand, and the U.S. This gives them the space to create, innovate, disrupt, and stay one step ahead. They'll identify industry trends, capture insights, and explore new businesses to bring the outside in.
Curated, designed just for the Reece Group. That's it. Trout, Next, and SuperSeed, a global business group that will help us achieve big things.
Now for a look at how we are creating innovation in our workplace today. Our focus on innovation was acknowledged externally earlier this month with the AFR naming Reece the most innovative company in the property, construction, and transport sector for 2021. This award was in recognition of the great innovation culture we have at Reece, where everyone is a part of innovating big and small. This was great validation for us that our focus on innovation over the last 4 years is starting to be realized. We'll be supercharging our innovation strategy in 2022 when we move to our new custom-built headquarters called The Works. The move is all about enabling our 2030 strategy, and it's been in the pipeline since 2016, and it comes at a perfect time.
We've incorporated all our learnings around flexible working through COVID and are creating the right environment to help our people perform at their best. The Works will help us attract and retain talent, enabling a culture of collaboration and innovation and ensure we continue to deliver on our customer promise for the years to come. Now let's look at a short video which will show you why we are so excited about the move and how it will accelerate our innovation approach. We have got this big vision for the future, and it all centers around innovation and investing for the future. We want to innovate so that we can continue to improve the competitive advantage of Reece and also to create new sort of business opportunities, new revenue streams. The Works is going to be the workplace of the future. Our promise is Works For You.
That's what Reece is all about. That customized service promise, which we call Works for You. You couldn't come up with a better name because that's what it's all about. We're wanting to do great work, and we wanna work with each other. We wanna work in partnership with our branches to do great things for our customers and for our people. Cremorne is this historic location. It was like a blue-collar, suburb that's turned into this tech innovation hub, and it's a seriously cool place. We started blue collar, and we still are blue collar. We're this great, mysterious brand, very humble trade origins, but we've become an iconic brand in Australia. I think the works fits beautifully with our promise. It sits very well with the location. It's an amazing space, and it's been designed in a way to facilitate the new ways of working.
In that building, we get to bring together everyone that we haven't seen for the last kind of 18 months to work collaboratively together to really accelerate where Reece is going in the future.
I'm really excited about creating a great environment where people can come together to collaborate. People have natural light. They have the opportunity to work in different ways. They have a great environment to kind of have fun and socialize with. Culturally, I'm excited about how it's been, the physical environment is gonna help us keep the best of what's made Reece great, but will enable us to kinda move forward.
Communication is always gonna be really important, and it's really backed up by a lot of digital support from a communication perspective. Reece is a relationship business, so the whole building is, has been created so people can have those little corridor conversations that actually can end up leading to real progress.
I can't wait to actually get there to experience what I think is gonna be a world-class workplace. I do think we're gonna set the standard for what a workplace will be going into the future. Okay. Now let's look at the economic environment in our key markets. First, Australia and New Zealand. As we know, COVID has had an ongoing impact, increasing demand for housing and home improvement, but leading to uncertain trading conditions as changing lockdown rules are navigated. Residential approvals were estimated to be up 27% in FY 2021, driven by HomeBuilder program and very low interest rates. Significant capacity constraints are being experienced, which is expected to smooth the delivery of the HomeBuilder projects. Our customers have never been busier, and with a lack of immigration, labor is in short supply.
Combined with the complexity of the changing COVID environment and supply chain issues, there are likely to be sustained challenges to meet demand. Non-residential construction is estimated to have decreased 10% in FY 2021, with a moderate growth of 4% projected for FY 2022, driven by a significant pipeline of public works and commercial projects. In New Zealand, we continue to see a strong housing market, falling unemployment rates, and increased renovation activity. This has been tempered by strict recent lockdowns, but we anticipate the overarching trends to remain resilient into the medium term. Now, moving to the U.S. Residential housing continues to be resilient with starts expected to grow over the next 18 months. As interest rates remain at historically low levels, demand remains strong. Non-residential construction declined in 2020 and is expected to fall again in 2021.
Remodeling activity is expected to remain strong, supported by home sales and house price growth. Like in Australia and New Zealand, we are seeing inflation across most commodities. Supply chain constraints and stock shortages are expected to persist in the short term. These factors, coupled with trade labor shortages, are expected to lead to affordability issues which could also be further impacted if interest rates are increased. In summary, there are positive short-term indicators in both regions, but the medium term remains more uncertain. We will need to navigate the impact of the pandemic, labor shortages, rising inflation, supply challenges, and a lack of availability in skilled labor. With strong execution, we believe our model is both flexible and resilient in the face of a continuing changing environment. Moving now to the Q1 update. Sales for the first quarter have been strong, reflecting momentum from FY 2021.
We've continued to see growth in both regions, which has exceeded expectations. ANZ sales revenue was up 9%. MORSCO sales revenue was up 18.6% on a constant currency basis, and group sales revenue was up 13.2% for the first quarter. Inflation remains persistent across a wide range of building inputs, including a number of Reece's core inventory lines. Tight labor markets and wage inflation have also become factors across both our regions, which is putting pressure on our operating expenses. We believe that the EBITDA margins in both ANZ and the U.S. regions will be under pressure for the remainder of the financial year. EBITDA for the first half of FY 2022 is expected to be up between 8% and 11% on the first half of FY 2021. In the near term, the environment remains unpredictable.
As we look ahead, we will continue to invest in the business, including additional expenditure in both OpEx and CapEx. The elevated CapEx profile is a result of three factors. The first is a catch-up dynamic after the COVID-related disruptions and caution of the past two years. We are planning a significant step up in branch refurbishments. The second is an accelerated investment in our technology capabilities, both internal and market-facing digital tools. The third is what we're calling Project Warp Speed, an accelerated investment into the U.S. business to consolidate the operating platform and begin the Reece USA rebrand. Market dynamics will require careful management. Inflation is expected to persist, and supply chain challenges will continue for the remainder of FY 2022. A deliberate approach to investing in a strong stock position has helped us consistently supply our customers.
Being in stock on critical items is likely to be an ongoing issue, which we will continue to navigate by leveraging our long-standing supplier relationships. Labor shortages and elevated demand for the services of tradespeople is driving capacity constraints. We believe these shortages may be an additional cap on the growth in the second half. Like we've always done, we will focus on what we can control and invest in the long-term success of the business. In summary, we achieved another record result in FY 2021. We have a resilient business model, and guided by our blueprint, we continue to focus on our customers and our strategic priorities for the future. Thank you for your time today, and I'll now hand you back to Bridget.
Thank you to Peter and Andrew. Well, as I mentioned at the start of the meeting, voting on the resolutions is currently open, and you can vote at any time until voting is declared closed. Results will be released to the ASX after the conclusion of the meeting and will be available on the Reece Group website. A reminder that only shareholders, proxy holders or authorized shareholder representatives may vote. Any directed proxies given to you by the shareholder will automatically be cast as directed when the poll is closed. The voting icon is available within the navigation bar. Once you click on this, the resolutions will appear on your screen, along with the for, against, and abstain voting options. Simply select one of these options to cast your vote. When voting is closed, your final voting selection will be recorded.
If you have any issues, please refer to the user guide, which can be accessed through the platform. Any undirected proxy votes given to the chair will be voted in favor of the relevant resolutions. I'll now hand over to Alan for consideration of the resolutions.
Resolution 1: Adopt the remuneration report. Under the Corporations Act 2001, ASX-listed companies are required to include, as part of their directors' report, a remuneration report. The directors have prepared a remuneration report in respect of the year ending 30 June 2021, and it is included in the annual report on pages 49- 61. The Act also requires the company to put to shareholders a non-binding vote to enable shareholders to voice their opinions on matters included in the report. Displayed on the screen are the details of the proxies received in relation to the adoption of the remuneration report. I have directed all open usable votes to be in favor of this resolution. As this item will be determined by poll, you can now vote online in relation to item 2. Resolution 2: The re-election of Andrew Wilson.
The third item of ordinary business is the re-election of Andrew Wilson. Andrew retires in rotation in accordance with the company's constitution and being eligible, offers himself for election. Andrew joined the board in 2018. Details of Andrew's background, qualification and experience are set out in the notice of meeting. I will now hand over to Andrew.
Thank you, Alan. Good afternoon to the shareholders of the Reece Group, and thank you for giving me the opportunity to address the meeting today. I have enjoyed the past three years being a constructive member of the board within a company that has been associated with my family for over half a century. Over these past years, and indeed for many prior to that, I have seen the business continue to grow and expand, providing fantastic services to its customers and wonderful opportunities for its employees, even during the challenges of COVID. It is an exciting time for the business as it looks to execute its 2030 vision, and I would feel privileged to play a role in helping to realize that ambition.
My previous corporate experience across multiple industries and countries, combined with my current role managing a portfolio of diversified global assets and involvement on various private and no-for-profit boards, ensures that I make a valuable contribution to the Reece Group. I believe that solid, constructive debate, diversity of thought, coupled with a range of skills and experience, results in good governance and leadership. This exists on the Reece board, and I'm proud to be a member. I confirm that I have the time and capacity to fulfill my role on the board. With your approval.
21 Long-Term Incentive Plan. I'll hand over to our Chair of the Remuneration Committee, Mr. Tim Poole.
Thank you, Alan. During the 2021 financial year, the Remuneration Committee reviewed the incumbent Reece Long Term Incentive Plan to ensure it is aligned with our focus on achieving our long-term goals, while also enabling us to attract and retain key executives. The committee engaged Godfrey Remuneration Group to assist with this assessment, which led to some changes and improvements to our Long Term Incentive Plan. The 2021 Long Term Incentive Plan represents a modernization of the available equity instruments and terms aligned with current market regulations and practices. The details of the 2021 Long Term Incentive Plan are included in the Notice of Meeting. Some areas of relevance include the following. The LTI plan will be based on a four-year performance period.
The plan has an earnings per share performance measure based on a compound annual growth rate over the four-year period. The plan structure will be performance rights. Importantly, the company intends to purchase shares on market to avoid any shareholder dilution.
Thank you, Tim. I move that the approval be given to the establishment and operation of the company's 2021 LTI plan. Displayed on the screen behind me are the details of the proxies received in relation to the approval of the company's 2021 LTI plan. I have directed all open, usable votes to be in favor of this resolution. As this item will be determined by poll, please vote online now in relation to item 4. Resolution 4, Grant of Equity to the Managing Director and Group CEO. For the fifth item of ordinary business, I will again hand over to Tim.
Thank you, Alan. The board is absolutely committed to rewarding and retaining Peter Wilson as our CEO and Managing Director as he continues to deliver outstanding company results. The board believes that part of the reward for Peter's services to the company should be performance-based, at risk, and involve equity interest in the company. Peter has served as the Group Chief Executive Officer since January 1st, 2009, and during this time has continued to transform and grow Reece, both organically and via acquisition. The Remuneration Committee has undertaken a review of Peter's remuneration package to ensure it remains fit for purpose, aligned to Australian market practice, and reflects the desire to incentivize Peter to deliver long-term sustainable growth for the company.
As explained in our notice of meeting on pages 9- 11, these performance rights will be granted in accordance with the terms and conditions of the company's 2021 Long Term Incentive Plan. Peter will be granted 129,838 performance rights. This is calculated by dividing AUD 2,662,500, which is 125% of Peter's fixed remuneration by a fraction over AUD 20.50, which is the 20-day volume-weighted average price of the shares from August 24th, 2021 until September 20th, 2021. These performance rights will be issued to Peter at no cost. Back to you, Alan.
Thank you, Tim. The board, with Mr. Peter Wilson abstaining, considers the grant of performance rights to the Managing Director and Group CEO appropriate in all circumstances and recommends that shareholders vote in favor of the grant. Displayed on the screen are the details of the proxies received in relation to the approval of the financial year 2022 award under the 2021 company LTI plan. I have directed all open, usable votes to be in favor of this resolution. As this item will be determined by poll, please vote online now in relation to item 5. We'll now open the meeting to all members to ask questions of the directors and make comments of the management of the company. I will ask Bridget to read out the questions received from shareholders. As a reminder, questions can be asked during the question icon. Over to you, Bridget.
Thank you, Alan. A quick reminder to anyone wanting to ask an audio question, you will need to pause your AGM broadcast until you've asked your question, please. I'll now read our first question, which comes in from Mr. Edmund Campion Carew. "Mr. Wilson, thank you and the board for the usual good work in trying circumstances. Are there a couple of USA states or particular Reece USA businesses with whose performance you are especially pleased?
Thank you again for the question. COVID has
COVID in the U.S. and Australia has seen a step change in the housing renovation market, as we've talked about. In terms of the U.S., across the Sun Belt where we're based, it's been consistent across all the states. I'm particularly pleased with how every state's going, and it's sort of above the expectations that we had, when we started, the journey back three years ago. There's not one standout state. It's pretty consistent.
All right. We now have an audio question, which has come in from Mr. John Whittington. John, would you please go ahead with your question?
Good afternoon. My name is John Whittington, and I'm a volunteer for the Australian Shareholders' Association. Today, I hold proxies from 36 ASA members and non-members for over 400,000 Reece shares. Mr. Chairman, we'd like to thank you and the whole Reece team on producing a solid performance in another very challenging year. I believe that I should also be wishing you a very happy birthday.
Thank you.
Now to my comments. Mr. Chairman, I'd like to commend Mr. Poole on the clarity and the understandability of the remuneration report. You may remember I've had issues or the ASA's had issues with that in the past. Now it's just taken over as my best practice example. It's also good to see that LTI vesting targets are back up from last year's lower figures and that you've adjusted the timing of the LTI grant. At this meeting, we'll know exactly how many rights will be issued. Many thanks for all of that. It's really appreciated.
Is there a question?
John, is there a question on board? Thank you for those comments. That's, it's nice to receive.
John, do you have a question that you would like to ask?
It's a comment at this stage. I've got two questions later, but I'll go back to the queue.
Okay. Great comment. All right. Let's move along to a question from Mr. Brian Garfield Benger. The acquisition of MORSCO doubled revenue, but has so far made little impact on profit. Will this potentially be what Homebase was to Bunnings for Reece? And that's to you, Peter.
Well, thanks, Brian, again for the question. Certainly when we announced the acquisition over three years ago, there was a really strong rationale for going to the U.S., and it was MORSCO represented a strategic platform across the Sun Belt, gave us access into the biggest plumbing market, biggest waterworks market, biggest HVAC market in the world. We've been researching the U.S. for well over 15 years. We did a stack of DD, and what we said at the time is this is a really long-term play. It's a multi-decade story, and it was an opportunity for us to really participate in the big league. We're 3 years in. The business is holding up really well, probably ahead of where we expected.
In terms of any comparison, I think that's for others to judge. We're really clear on our plan and our rationale, and I think the U.S. represents the growth for the Reece Group into the decades ahead.
Okay. Well, I believe we've got Mr. John Whittington back live on the line for another audio question. John, go ahead with your question.
Thank you very much. Mr. Chairman, John Whittington from the ASA. It seems that the trading volume in Reece shares went up considerably during this year with some huge trading days. Are you aware of the reason for this, and if so, can you share it with shareholders?
John, maybe I'll jump in there and take that one. Thank you also for your comments before about the remuneration report. As you know, we have been on a journey with our remuneration report. As we said in the letter, the cover letter for our remuneration report, we did consult with a number of shareholders and other stakeholders, and I know your feedback has been important in that regard. We appreciate the feedback, and we appreciate the Australian Shareholders' Association support. In relation to your particular question about trading volumes, as you well know, we've done two capital raisings since the MORSCO acquisition. That coupled with the increase in profitability of the company, our market cap has expanded quite significantly over the last two years or so.
About 12 months or so ago, we got included in the ASX 100 index. We're now covered by a greater range of analysts, so a lot more coverage from the analyst community. Therefore, being included in the ASX 100, we're also covered by a much greater range of institutional investors. All of that coupled together means you have seen quite a significant increase in trading volumes in the last 12 months. Back to you, Bridget.
Okay, well, let's go back to another question from Mr. Edmund Campion Carew. You've previously said lockdowns in Greater Sydney and Melbourne meant a sales cut as much as 80% in at least one of those cities. Based on the Sydney experience, when cities reopen, do you see a sudden upsurge in sales? Excuse me. And if so, what percentage of the lost sales do you believe Reece recovers in the few weeks post-lockdown? And I think that's for you, Peter.
Yeah. Thanks, Edmund. I think I was misquoted in terms of that 80% stat. In terms of when we went into the really strict lockdowns, that did vary by state. New South Wales and the strict lockdown, for the period of strict lockdown, we dropped by 50%. As lockdowns, we exited out of the lockdowns, volumes went back to fairly we're trading to where they were before the lockdown. That was New South Wales. Victoria traded down for a, for that few week period too, into a significant level, but then went back to more normal volumes. The strictest lockdown was in New Zealand, so that had the biggest fall. As we've exited out of the lockdowns, trading has gone back to where it was prior.
What we can say is that there's definitely a pent-up demand, so there is. There's never been more houses under construction. I think I mentioned before that there's a step change in renovation market. I'd say the industry is at capacity. I think really looking forward, we're seeing conditions remain like this for the next 6-9 months. Thanks, Bridget.
All right. Well, we've got another question from Mr. Edmund Campion Carew, you're popular today, Peter. The U.S. has had a greater CPI rise than Australia. Can you share insights about the effects in the U.S.? If higher inflation or stagflation became an Australian problem, can Reece typically pass on cost rises, or would you be likely to absorb some or many price pressures?
Thanks again for the question. In terms of our model, our model's basically all about being competitive, so we need to be competitive. The two regions do differ in terms of their ability to pass through cost rises or price increases. We do have that ability, but we've got the lens that we need to be competitive. Where we see ourselves from a margin perspective is that the model is all designed to maximize margin, but really is an outcome of our performance, and we're balancing between our customers' needs and shareholder needs. That sort of sets the scene about the model. In terms of inflation, we are seeing inflation in both markets, and really at the same sorts of levels.
The first quarter of 2022, there's significant inflation coming through on all of our commodities and that's being passed through in a lot of our key categories. That's the really big question I think everyone's gonna be working through over the next period to see just whether it's temporary or whether it's more permanent, and I think there's a lot at play and there's a lot of moving parts in that.
Okay, let's go to another question from Mr. Brian Garfield Benger. Are all Reece staff now vaccinated? Peter.
We're following, obviously, public health orders, so we're an essential service. To work at Reece in store or coming into the office, you have to be fully vaccinated. We've had an enormous uptake. Obviously, there's some exceptions to that, like everybody, but to come into a Reece store, you've got to be fully vaccinated, and we're following the public health orders.
All right. We have another audio question from John Whittington. John, please go ahead with your question.
Mr. Chairman, a final question from me and the ASA. I first should say that I'm very impressed by the production quality of your AGM. It's probably the most professionally produced I've come across. If things are back to normal next year, what type of AGM do you envisage holding? A normal face-to-face one, a hybrid one, or a virtual one?
Who's answering that?
I think we're gonna throw to Chantelle to answer this one.
Thank you, Bridget. Thank you, John, for your question, and it's a really good question. It's something that we've talked about internally. For now, we're gonna keep future AGMs under review, and we will look to best practice, we'll look at regulatory guidelines, and we'll also take feedback from shareholders and any concerns raised for future AGMs. Back to you, Bridget.
Thanks, Chantelle. Okay, let's go to a question from Marsden Holdings. There is a gap of Reece coverage in the displayed U.S. Sunbelt map. Does Reece have plans to expand into this area? Peter.
Really good question in terms of if you look at the markets, some of the primary markets are in the Sunbelt, like California and Texas. Like Texas has a population bigger than Australia, and we've only got 75 stores in Texas versus, that's 75 plumbing stores, versus like 375 here in Australia. So there's a lot of space to grow organically into the existing states. So there's I'd say that's the priority for the next number of years. But clearly the end state is to be moving into as many of the states and markets that we think are viable. So there's That's why we went to America, for the growth opportunity, and we're three years in.
Okay, moving right along into another question from Marsden Holdings. Is Reece likely to increase the ratio of dividend to net profit in future years? I might get Andrew to answer this one.
Yes. Thanks, Bridget. The Reece board doesn't have a stated dividend policy. The dividend is assessed each half year based off the cash requirements of the business, and the outlook for the business. Can't really comment on which way the dividend payout ratio is going at this point. Thanks, Bridget.
Okay. All right. We have another question from Tyalla Capital. Congratulations on your great work. You have indicated reduced margins. What factors are preventing price increases to maintain margins? Not sure who wants to take that. Peter?
No, no, I'll take it. In terms of a big part of our story in the U.S. in particular is about investing in our capabilities. There's a step change in our OpEx. Andrew mentioned also in the CapEx. The U.S. story was always a growth opportunity for us. Long term, we want to improve the quality of the business. It's not a margin story, it's a growth story. Over time, as we improve the business, we are hoping we can improve the margin. At this point, it's all about growing our capabilities and going from there. Thanks, Bridget.
Okay. Our next question is from Mr. Miles Edwin Cody. The Cremorne office looks very impressive. What sort of payback period do you expect on this investment, and how will you quantify the success of the venture?
Very good question, Miles. In terms of the whole idea of going to Cremorne, which has been many years in the making, it really is all about our innovation agenda and creating a really an innovation culture. In terms of how we look at it at Reece, everything we do is for the long term. Everything is about reinvesting back in the business to improve the customer experience. You're investing to try to improve your competitive position and then also find new revenue streams. That's the primary reason we're going to Cremorne. Then also to be able to attract the talent that we're gonna need to achieve our vision. With the way the world's going, there's no doubt there's gonna be labor shortages.
There's so many openings and vacancies right now. In terms of being able to attract the talent, you're gonna need to create the best environment, the best brand. That's the reason. The other part is to be able to give our people an environment where they can genuinely work together, connect, and do really great work.
All right. Well, Miles has another question. There are large infrastructure packages expected in both Australia and the U.S. How would you anticipate this would benefit the Reece Group? Peter.
Yes. Well, any of the stimulus and any package on infrastructure is definitely going to benefit Reece 'cause we've obviously got the play in the U.S. in waterworks, and we obviously have that play here too in the ANZ region. So a direct benefit and then clearly indirect, creating jobs. Infrastructure creates productivity, so it's good for the country and allows Australia to actually grow. That's a really great thing for the country.
All right. Well, thank you for all of your questions today. It looks like there are no further questions. Alan, I'll now hand back to you to move all resolutions.
Thank you, Bridget. I now move the resolutions be moved by the meeting. We will take a few moments now to allow you to finish voting. While you're completing voting, we will play another short video. Voting will close automatically after this.
G'day. My name's Justin Joiner, and I'm one of the founders of Stomping Ground Brewing Co. I look after the hospitality part of our business. We've got 3 venues, one in Collingwood, one at the airport, and then one here in Moorabbin. We've got anywhere between sort of 15 and 20 beers on at any one time. All are our beers that we've brewed. Well, the whole process is pretty important, from the choice of ingredients in the beginning, to how it's looked after through the production process and how it's packaged. The beer system itself is pretty integral to executing a great beer as well. If the refrigeration fails, we have to stop trading effectively, so we need them to be able to respond really quickly and be able to repair things pretty quickly.
We pretty much put the trust in the fridges to know what they're doing.
It's what's in the glass at the end of the day that sort of has the impact on what the customer experiences. It's no fault on the brewery should the customer end up drinking out of a bad system or a tainted system or something that's not doing the beer any justice. I think it's really important. Well, when we started, it was to form relationships some sort of brewers could have faith in their product being represented out there on the road and really sort of, you know, getting to the customer or the consumer the way that it was designed to.
It's getting the right beer and getting it installed correctly to begin with, and then it's preventive maintenance throughout its lifespan, and then it's being able to react really quickly if something does go wrong. We can't serve beer without refrigeration at all. It just simply won't pour. We have had situations in the past with massive heat waves and that sort of thing where we've lost a compressor or something of that nature and as a result, lost a whole kitchen full of food. That's how much we sort of rely on refrigeration, I guess.
You just need something that's gonna be reliable and it's gonna work when you need it. Yeah, especially in a venue like this, if the equipment went down at the busiest time, you know, you're standing to lose a lot of revenue and, you know, it's not good for anyone involved.
We just need that peace of mind to know that if, well, A, that something's gonna work properly to begin with, and B, if something goes wrong, we can get it fixed, you know, really rapidly.
Voting is now closed. We will notify the ASX later today the results of the voting on each of the items of business. I thank you all for your attendance, and we'll now close the meeting.