Bathroom and kitchen fixtures supplier GWA Group Ltd (ASX: GWA) has seen its share price plunge more than 10% in early morning trade, after reporting a $12.8 million loss for the December 2014 half year.
Despite revenues growing by 6.5% to $307 million, $37 million in restructuring expenses and significant items saw net profit fall from $1.7 million last year to a $12.8 million loss this year. Underlying net profit actually rose 9.3% to $19.2 million, but the company has again declined to pay an interim dividend, thanks to insufficient retained earnings.
Late last year, GWA announced the sale of both its Dux Hot Water division as well as Brivis Climate Systems for $46 million and $49 million respectively, following a strategic review, which identified both businesses as non-core assets.
The proceeds are expected to be returned to shareholders in the form of a capital return in the near future.
GWA, with several leading brands of bathroom and kitchen fixtures including Caroma, Dorf, Fowler, Clark, Austral Lock, Gainsborough and Gliderol, has been struggling in recent years with revenues and net profit falling.
Source: Company reports
It's hard to identify the one issue that's caused the problem – perhaps a profusion of too many brands, competition against cheaper, imported products or just consumers unwilling to buy GWA's branded products. Certainly other suppliers of similar products such as Reece Australia Limited (ASX: REH) haven't had the same issue – although Reece even sells some of GWA's brands such as Caroma. Reece has grown sales by 6.5% annually over the past decade, while GWA has gone backwards at the rate of 2% each year.
But with property prices soaring and new dwelling approvals rising, GWA could be a turnaround opportunity. Having said that though, remember Warren Buffett's words, "turnarounds seldom turn".
With no dividend, Foolish investors have no real reason to be invested in GWA Group at this stage.
