GWA Group [ASX:GWA] is a household and commercial supplier of building fixtures and fittings.
The company has a market capital of around $770 million, and is the owner of a large range of brands and products in the marketplace.
The company’s stock price rocketed up to hit $3.08 earlier today, settling down to $2.94 at time of writing.
What happened to GWA share price?
Today the company posted its earnings report for the half year ending in 2017, highlighting an increase in net profit by 7% and dividend payments of 13%.
On all fronts GWA has seen growth, with sales revenue up 2% and EBITDA (earnings before interest, taxes, depreciation, and amortisation) up 5%, which shows costs are being better managed, as backed by an increase in gross profit margin from 39.8% to 41.1%.
Investors have reacted positively to a reiteration of the group’s strategy. GWA intends to divest its Door & Access Systems business and move focus towards Bathrooms & Kitchens where it claims it has significant growth opportunities.
This, in combination with the upcoming strategy briefing in April gives the impression that the company is focussed on sustainable growth while cutting its lagging operations.
GWA highlighted a reduced, yet still high level of activity in residential construction. With steady conditions across its largest segment of renovations and replacements, and a general 0.7% increase in activity across its key markets.
Ahead in 2018 for GWA
Managing Director Tim Salt justified GWA’s strategic shift stating:
‘That focus has resulted in the increase in net sales ahead of the market and also in an expansion of margin and returns on funds employed within the business.’
Salt claimed the new stratergy is getting ‘back to basics’ to simplify business, improve the supply chain, and address the cost base which increase in gross profit margin gives evidence to.
The company aims to achieve a $13–15 million cost savings by FY19, with the savings to be reinvested in growth initiatives and margin resilience to offset the market cycle.
The company forecasts earnings, before interest and tax, in the second half of FY18 to be similar to the $4.1 million generated in the first half.
Editor, Money Morning
Junior Analyst, Money Morning
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