Reece share price jumps 13% on stronger than expected half-year profits

Investors have been impressed with this half-year result.

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The Reece Ltd (ASX: REH) share price is catching the eye on Tuesday.

In morning trade, the plumbing parts company's shares are up 13% to a 52-week high of $27.22.

This follows the release of the company's half-year results this morning.

Reece share price jumps on results

  • Sales revenue up 2.5% to $4,537 million
  • Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) up 8% to $526 million
  • Adjusted net profit after tax up 6% to $224 million
  • Earnings per share up 6% to 34.6 cents
  • Fully franked interim dividend flat at 8 cents per share

What happened during the first half?

For the six months ended 31 December, Reece reported a 2.5% lift in sales to $4,537 million. This was driven by a 2% increase in ANZ sales to $1,972 million and sales of US$1,683 million in the United States. While the latter was flat in constant currency, it was up 3% in Australian dollars thanks to favourable currency movements.

Reece's adjusted EBITDA was up 8% to $526 million for the half. This was driven by disciplined operational cost management and continued focus on executing the fundamentals of the Reece model.

Statutory net profit after tax was up 20% to $224 million, while adjusted net profit after increased 6%.

Given that the market is forecasting a sizeable decline in earnings per share in FY 2024, this result appears to have been far stronger than the market was expecting.

Management commentary

Reece's CEO, Peter Wilson, was happy with the result. He said:

We delivered a very solid HY24 result, underpinned by our resilient business model and strong ongoing execution by our team. The team has focused on strong execution of the fundamentals to continue delivering our customer promise, which is the driver of our success as a business.

As we look ahead to the second half, we expect subdued demand across our business with a softening in the environment in ANZ. We take a long-term view and will continue to invest to build a stronger business and deliver on our 2030 vision of being our trade's most valuable partner.

Outlook

Management advised that it is anticipating the subdued demand environment to continue during the second half, with some softening in the ANZ region.

However, medium to long term industry fundamentals remain supportive.

The company's approach remains unchanged. It plans to focus on its customer proposition and being "brilliant" at the fundamentals.

The Reece share price is now up almost 70% over the last 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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