REECE LIMITED — AGM Information 2018

Oct 24, 2018

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ASX Announcement

25 October 2018

2018 AGM

Chairman’s Address and CEO Presentation

Attached is the Chairman’s Address and CEO’s presentation for the 2018 Annual General Meeting.

Gavin Street Company Secretary

About the Reece Group

Reece Group is a leading distributor of plumbing, waterworks and HVAC-R products to commercial and residential customers through 800 branches in Australia, New Zealand and the United States.

Established in 1920 and listed on the Australian Securities Exchange (ASX: REH), Reece Group has approximately 8,000 employees committed to improving the lives of their customers by striving for greatness every day.

For further information on Reece Group and its portfolio of businesses please visit www.reecegroup.com.au.

118 Burwood Highway Private Bag 107 T 61 3 9274 0000 Burwood Victoria 3125 Burwood Victoria 3125 F 61 3 9274 0199

ABN 84 004 097 090 www.reecegroup.com.au

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Chairman’s Address

Financial year 2018 was another record result for Reece, with a sales revenue up 10.7% to $2.7b and net profit after tax up 6.1% to $225m.

We finalised acquisitions in Australia, New Zealand, and the United States and completed a wellsupported debt and equity raising.

We announced the retirement of Bruce Wilson (senior) after almost 50 years with the company and Ron Pitcher after nearly 15 years as a Director. I would like to thank them both for their contributions.

Additionally, the Board added new capability with the appointment of Andrew Wilson as a Non-Executive Director, effective 1 September 2018.

The Board was very pleased to announce an increase in dividend.

Total dividends paid and to be paid for the year ending 30 June 2018 were 20.25 cents per share.

The final fully franked dividend of 14.25 cents per share will be paid today, the 25[th] of October 2018.

I will now pass you over to our CEO & MD, Peter Wilson, who will take you through our financial year 2018 results and give an indication of the company’s performance in the first quarter of financial year 2019.

Mr Alan Wilson Executive Chairman

118 Burwood Highway Private Bag 107 T 61 3 9274 0000 Burwood Victoria 3125 Burwood Victoria 3125 F 61 3 9274 0199

ABN 84 004 097 090 www.reecegroup.com.au

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2018 AGM

25 October 2018

Important Notice and Disclaimer

Disclaimer

The material in this presentation has been prepared by Reece Limited (ABN 49 004 313 133) (“Reece") (ASX:REH) and is general background information about Reece's activities current as at the date of this presentation. The information is given in summary form and does not purport to be complete. In particular you are cautioned not to place undue reliance on any forward looking statements regarding Reece's belief, intent or expectations with respect to Reece’s businesses, market conditions and/or results of operations. Although due care has been used in the preparation of such statements, actual results may vary in a material manner. No representation, warranty or assurance (express or implied) is given or made in relation to any forward looking statement by any person (including Reece).

Subject to any continuing obligations under applicable law or any relevant listing rules of the Australian Securities Exchange, Reece disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements in this presentation to reflect any change in expectations in relation to any forward looking statements or any change in events, conditions or circumstances on which any such statement is based. Nothing in this presentation shall under any circumstances create an implication that there has been no change in the affairs of Reece since the date of these materials.

Information in this presentation, including any forecast financial or other information, should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities. Before acting on any information you should consider the appropriateness of the information having regard to these matters and, in particular, you should seek independent financial advice.

Non-IFRS Financial Information

Reece uses certain measures to manage and report on its business that are not recognised under Australian Accounting Standards. These measures are collectively referred to as non-IFRS financial measures. Although Reece believes that these measures provide useful information about the financial performance of Reece, they should be considered as supplemental to the measures calculated in accordance with Australian Accounting Standards and not as a replacement for them. Because these non-IFRS financial measures are not based on Australian Accounting Standards, they do not have standard definitions, and the way Reece calculates these measures may differ from similarly titled measures used by other companies. Readers should therefore not place undue reliance on these non-IFRS financial measures.

Note: All financial amounts contained in this presentation are expressed in Australian dollars unless otherwise stated. Any discrepancies between totals and the sum of components in tables contained in this presentation are due to rounding.

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CEO & MD’s Address

Mr Peter Wilson

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2018 year in review

Financial Performance

Operational Highlights

MORSCO

Preview to FY19

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2018 year in review

Financial Performance

Operational Highlights

MORSCO

Preview to FY19

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Financial Performance

Sales Revenue FY17 - $2,429m % FY18 - $2,689m

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Financial Performance

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Sales Revenue
CAGR
(A$m)
10.9%
Column1
$2,689
$2,429
$2,276
$2,085
$1,776
FY14 FY15 FY16 FY17 FY18
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Financial Performance

EBITDA

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FY17 - $357m % FY18 - $378m

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Financial Performance

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EBITDA (A$m)
CAGR
13.7%
$378
$357
$331
$280
$227
FY14 FY15 FY16 FY17 FY18
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Financial Performance

NPAT

FY17 - $212m FY18 - $225m

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%

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Financial Performance

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CAGR
NPAT (A$m)
16.2%
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2018 year in review

Financial Performance

Operational Highlights

MORSCO

Preview to FY19

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1 / Customers
2 / People
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3 / Innovation 4 / Community

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Customers

Customer Hi hli hts g g

Highlights Continued Strong uptake New innovative network growth of maX products World-class net Strengthening customer promoter score relationships

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People

Workplace of Strengthening the Future our graduate and trainee programs Enabling Employee Leadership NPS Programs

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Innovation

Opened our Superseed and design and goodwork innovation centre, NEXT

Innovation toolkit

Digitising the customer’s experience

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Community

Solar Installation Program

The Reece Grant

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2018 year in review

Financial Performance

Operational Highlights

Preview to MORSCO FY19

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MORSCO
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Strategic platform in Sun Belt region Opportunity for future organic and Unique acquisition-led growth opportunity for long term growth Leverage expertise and relationships

Access to biggest plumbing, HVAC, waterworks markets

Experienced management team

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MORSCO

A$5.0bn sales distribution business

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FY18 Summary

FY18 Summary

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World-class
Strong financial Investing in Innovation and Acquisition of
customer
position the future digitisation focus MORSCO
experience
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2018 year in review

Financial Performance

Operational Highlights

MORSCO

Preview to FY19

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Australia
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$219

$216

Underlying Australian economic indicators remain supportive

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$211
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$202
$230 $238 $231
$192
$222
Dwelling approvals (000’s) Dwelling completions (000’s)
$199 $198
$161 $162
$176 150 $151
$148
$146
$168
$165
$149
$135
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19E
Non-residential commencements ($m) Alterations and additions ($m)
$47,051
$44,951
$42,885
$39,291
$7,907
$37,224 $36,962
$35,361
$34,466 $7,756
$7,708
$32,897
$31,131
$30,618 $7,601
$7,339
$7,312
$7,309
$7,269
$7,130
$7,015 $7,019
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 EFY19FY19E FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19E
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Source: BIS Oxford Economics

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United States
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$400

Positive momentum sustained in the US market

Single and multi-family housing starts (000’s)

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Single Family Multi-Family
336
40 year average
309
344
346
384
354
392
395
355
283 307.5
1,465
246
1,046 112 114 178 965 1,003
915
849
782
715
622 619 648
536
442 471 434
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E
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Source: National Association of Realtors Mortgage Bankers Association, Fannie Mae, National Association of Home Builders as of May 2018, John Burns Consulting as of April 2018

Non-residential building construction expenditure (US$bn)

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$547
$515
$489
$480
$446
$434
$392
$355 $360
$348
$337
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E
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Source: FMI as of Q2 2017

Repair and remodelling spending (US$bn)

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$387
$367
$347
$327
$311
$293
$277
$266
$253 $254
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E
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Source: L.E.K., U.S. Census, and NAHB

Infrastructure construction spending (US$bn)

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$262
$250
$239 $237
$228 $228
$220
$217 $217
$209
$199
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E
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Source: FMI as of Q2 2017

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Q1FY19

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Q1FY19 (AUD$m)

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$647 $1,379
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1st Quarter Sales Revenue

$40 $732

$40

$652 Q1 FY 2018 Reece Organic Reece Growth Acqusition Growth

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Total Reece

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Morsco Q1 FY 2019

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Thank You

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2018 AGM

25 October 2018