The GWA Group Ltd (ASX: GWA) share price will be on watch as it delivered a profit result that showed it's yet to capitalise on the building boom.
The water products and systems supplier posted a 4.7% drop in adjusted group earnings before interest and tax (EBIT) to $68.5 million for FY21.
This is despite a 1.8% increase in group revenue to $405.7 million thanks to the strong residential construction market.
Management also said that strong growth in its New Zealand and UK businesses helped support the top line. The ongoing decline in its Australian commercial operations detracted from the results.
The adjusted EBIT does not include costs associated with the consolidation of New Zealand warehouses. It also doesn't count the sale of its China plant, Methven integration costs, and Enterprise Resource Planning (ERP)/Customer Relationship Management (CRM) systems' project costs.
GWA profit results lagging peers
GWA's latest profit results confirmed what many investors have suspected. The group isn't making as much hay as its peers on a sunny day.
Its subdued outlook could prove to be another drag. Management is anticipating a flat to slightly positive year for renovation and replacement activity in the residential and commercial segments.
Multi-dwelling construction is also tipped to be soft due to lack of migrants and border closures. On top of this, lockdowns in Sydney and Melbourne could impact on its business.
GWA share price underperforming its peers
"While GWA's Commercial order bank remains strong and 14 per cent above the prior year, completions are expected to remain subdued in FY22," said GWA.
"Growth in education and health is expected to be offset by declines in offices and retail. As confidence and activity increases in the Commercial segment, GWA remains well placed to capitalise on this improvement."
Fellow building products suppliers like James Hardie Industries plc (ASX: JHX), BlueScope Steel Limited (ASX: BSL) and CSR Limited (ASX: CSR) have all posted strong growth or positive updates.
Bad news already priced into the GWA's share price?
But GWA is trying to put a positive spin on its latest results. Management pointed out that its performance in the second half exceeded that of the first. It's confident that this provides positive momentum into the current financial year.
Group EBIT in 2HFY21 gained 13.4% and EBIT margin improved 120 basis points to 17.5% over the first half.
Foolish takeaway
GWA also declared a final dividend of 6.5 cents a share to take its full year payment to 12.5 cents. This is a 9% increase over the previous year and puts the GWA share price on a yield of 6.8% (including franking).
Shareholders can also get some comfort from the fact that the GWA share price has been underperforming. Some if not all of the bad news in the GWA profit results is probably reflected in the share price already.
