REECE LIMITED — Interim / Quarterly Report 2015

Feb 25, 2015

Reece Australia Limited (ABN 49 004 313 133) and controlled entities

Half-year information for the six months ended 31 December 2014 provided to the ASX under listing rule 4.2A.3

This half-year financial report is to be read in conjunction with the financial report for the year ended 30 June 2014

Appendix 4D

Half-year report for the six months to 31 December 2014

Reece Australia Limited (ABN 49 004 313 133)

1. Reporting period

Report for the half-year ended 31 December 2014.

Previous corresponding period is the financial year ended 30 June 2014 and half-year ended 31 December 2013.

2. Results for announcement to the market

		$A’000
Revenues from ordinary activities	Up 24.6% to	1,051,701
Profit before tax and unrealised gain on foreign exchange contracts	Up 23.4% to	106,444
Profit from ordinary activities after tax attributable to members	Up 34.7% to	80,277
Net profit for the period attributable to members	Up 34.7% to	80,277
Dividends	Amount per security	Franked amount per security
Interim dividend	24 cents	24 cents
Previous corresponding period – interim dividend	22 cents	22 cents
Record date for determining entitlements to the dividend		17 March 2015

Commentary

Sales revenue for the six month ending 31 December 2014 was up 24.6% to $1,051.7M (2013: $844M). The consolidated comparative period does not contain Actrol Parts Holdings Pty Ltd and its subsidiaries (Actrol Group) due to the acquisition being completed on 31 January 2014. Profit before tax and unrealised gains on foreign exchange contracts was up 23.4% to $106.4M (2013: $86.2M). Net profit before tax after unrealised gain on foreign currency was $115.3M, up 34.0% on the prior year (2013: $86.1M). As a result, net profit after tax for the six months ending 31 December 2014 was $80.3M, up 34.7% on the prior year (2013: $59.6M).

Reece has continued to manage currency risk through forward exchange contracts to provide a level of certainty on the foreign exchange position for the company. The unrealised foreign exchange gain of $8.9M reflects the current market valuation of the forward exchange contracts as at 31 December 2014 and the impact of the devaluation of the Australian dollar since 30 June 2014.

The cost of doing business was $225.9M, up 28.1% on the prior year (2013: $176.4M). The increase was driven by the additional operating and funding costs associated with the Actrol Group and the continued investment in the overall business.

Reece opened eight new outlets in the first half of the year and continued its refurbishment program of existing branches. The integration of the Actrol Group is continuing as planned, with one new Metalflex branch opened in Sydney and the relocation of one Actrol Branch.

Inventory levels at December 2014 were up 7.4% to $349.7M from 30 June 2014 ($325.7M). The increase was driven by additional sales, continued focus on improving the in-stock service rate and introduction of new products.

The Board has declared an interim dividend of 24 cents per share (2013: 22 cents per share), fully franked. The interim dividend will be paid on 26 March 2015, with a record date of 17 March 2015.

The Board is positive about the level of building activity during the first half of the year. However, the Board notes an increasing level of uncertainty around economic conditions for the calendar year 2015 and will provide guidance at the appropriate time.

Appendix 4D

Half-year report for the six months to 31 December 2014

Reece Australia Limited (ABN 49 004 313 133) 3. Net tangible assets per security Net tangible asset backing per ordinary security 4. Dividends Ordinary shares Dividends paid during the half-year The final dividend relating to the year ended on 30 June 2014 was paid on 30 October 2014. Subsequent events Since the end of the half-year the directors have declared the following interim dividend: 24 cents (2013: 22 cents) per ordinary share fully franked The interim dividend relating to the half-year ended on 31 December 2014 has not been included as a provision in the financial statements because the dividend was declared after balance date. Date dividend is payable Record date to determine entitlements to the dividend Amount per ordinary security Interim dividend: Current year Previous year	2014 $A’000 2013 $A’000 629 cents 761 cents
	41,832 40,836
	23,904 21,912
	26 March 2015 17 March 2015 Amount per security Franked amount per security
	24 cents 24 cents (at 30% tax rate) 22 cents 22 cents (at 30% tax rate)

5. The financial information provided in the Appendix 4D is based on the half-year condensed consolidated financial report (attached).

6. Independent review of the financial report

The financial report has been independently reviewed. The financial report is not subject to a qualified independent review statement.

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Gavin Street

26 February 2015 Melbourne

Company Secretary

Reece Australia Limited

(ABN 49 004 313 133) and controlled entities

Financial report for the half-year ended 31 December 2014

This half-year financial report is to be read in conjunction with the financial report for the year ended 30 June 2014

Reece Australia Limited and controlled entities

Financial report for the half-year ended 31 December 2014

Table of Contents

	Page
Directors’ Report	1
Auditor’s Independence Declaration	3
Financial Report for the half-year ended 31 December 2014
Condensed Consolidated Statement of Comprehensive Income	4
Condensed Consolidated Statement of Financial Position	5
Condensed Consolidated Statement of Changes in Equity	6
Condensed Consolidated Statement of Cash Flows	7
Notes to the Financial Statements	8
Directors’ Declaration	10
Independent Auditor’s Review Report	11

Reece Australia Limited and controlled entities

Directors’ Report

The Directors present their report together with the condensed financial report of the consolidated entity consisting of Reece Australia Limited and the entities it controlled, for the half-year ended 31 December 2014 and independent review report thereon. This financial report has been prepared in accordance with AASB 134 Interim Financial Reporting .

Directors’ Names

The names of the Directors in office at any time during or since the end of the half-year are:

Name	Period of directorship
Mr L. A. Wilson	45 years
Mr B. W. C. Wilson	44 years
Mr J. G. Wilson	30 years
Mr P. J. Wilson	17 years
Mr R. G. Pitcher, AM	12 years
Mr A.T. Gorecki	6 years

Each Director has been in office since the start of the financial period to the date of this report unless otherwise stated.

Review of Operations

Sales revenue for the six month ending 31 December 2014 was up 24.6% to $1,051.7M (2013: $844M). The consolidated comparative period does not contain Actrol Parts Holdings Pty Ltd and its subsidiaries (Actrol Group) due to the acquisition being completed on 31 January 2014. Profit before tax and unrealised gains on foreign exchange contracts was up 23.4% to $106.4M (2013: $86.2M). Net profit before tax after unrealised gain on foreign currency was $115.3M, up 34.0% on the prior year (2013: $86.1M). As a result, net profit after tax for the six months ending 31 December 2014 was $80.3M, up 34.7% on the prior year (2013: $59.6M).

Reece has continued to manage currency risk through forward exchange contracts to provide a level of certainty on the foreign exchange position for the company. The unrealised foreign exchange gain of $8.9M reflects the current market valuation of the forward exchange contracts as at 31 December 2014 and the impact of the devaluation of the Australian dollar since 30 June 2014.

The cost of doing business was $225.9M, up 28.1% on the prior year (2013: $176.4M). The increase was driven by the additional operating and funding costs associated with the Actrol Group and the continued investment in the overall business.

Reece opened eight new outlets in the first half of the year and continued its refurbishment program of existing branches. The integration of the Actrol Group is continuing as planned, with one new Metalflex branch opened in Sydney and the relocation of one Actrol Branch.

Inventory levels at December 2014 were up 7.4% to $349.7M from 30 June 2014 ($325.7M). The increase was driven by additional sales, continued focus on improving the in-stock service rate and introduction of new products.

The Board has declared an interim dividend of 24 cents per share (2013: 22 cents per share), fully franked. The interim dividend will be paid on 26 March 2015, with a record date of 17 March 2015.

The Board is positive about the level of building activity during the first half of the year. However, the Board notes an increasing level of uncertainty around economic conditions for the calendar year 2015 and will provide guidance at the appropriate time.

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Reece Australia Limited and controlled entities

Directors’ Report

Significant changes in the state of affairs

There have been no significant changes in the consolidated group’s state of affairs during the financial period.

Auditor’s Independence Declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 in relation to the review for the half-year is provided with this report.

Rounding of amounts to nearest thousand dollars

The amounts contained in the report and in the financial report have been rounded to the nearest thousand dollars (where rounding is applicable) under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the Class Order applies.

Signed in accordance with a resolution of Directors.

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L.A. Wilson Executive Chairman

P.J. Wilson

Chief Executive Officer

Melbourne

26 February 2015

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AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF REECE AUSTRALIA LIMITED AND CONTROLLED ENTITIES

In relation to the independent review for the half-year ended 31 December 2014, to the best of my knowledge and belief there have been:

• (i) No contraventions of the auditor independence requirements of the Corporations Act 2001 ; and

• (ii) No contraventions of any applicable code of professional conduct.

This declaration is in respect of Reece Australia Ltd and the entities it controlled during the period.

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D A KNOWLES Partner 26 February 2015

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PITCHER PARTNERS Melbourne

An independent Victorian Partnership ABN 27 975 255 196 Pitcher Partners is an association of independent firms - 3- Liability limited by a scheme approved under Professional Standards Legislation Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle

An independent member of Baker Tilly International

Reece Australia Limited and controlled entities

Condensed consolidated statement of comprehensive income for the half-year ended 31 December 2014

ended 31 December 2014
	Half-year 2014 $A’000 2013 $A’000
Revenue Sales revenue Other income Less: expenses Cost of sales Employee benefits expense Depreciation Finance costs Other expenses Profit before Gain/(Loss) on foreign exchange contracts and Income tax Unrealised Gain/(Loss) on foreign exchange contracts Profit before income tax expense Income tax expense Profit from continuing operations Profit for the half-year Other comprehensive income Items that may be reclassified subsequently to profit and loss: Exchange differences on translation of foreign operations, net of tax Total comprehensive income Earnings per security (EPS) for profit from continuing operations attributable to equity holders of the parent entity: Basic EPS Diluted EPS	1,049,996 840,844 1,705 3,576
	1,051,701 844,020 719,329 581,409 112,839 87,785 21,744 20,625 4,747 153 86,598 67,803
	945,257 757,775 106,444 86,245 8,864 (187)
	115,308 86,058 35,031 26,470
	80,277 59,588
	80,277 59,588
	258 740
	80,535 60,328
	81 cents 60 cents 81 cents 60 cents

The accompanying notes form part of these financial statements

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Reece Australia Limited and controlled entities

Condensed consolidated statement of financial position as at 31 December 2014

	31 December 2014 $A’000 30 June 2014 $A’000
Current assets Cash and cash equivalents Trade and other receivables Inventories Total current assets Non-current assets Property, plant and equipment Intangible assets Deferred tax assets Total non-current assets Total assets Current liabilities Trade and other payables Short-term borrowings Current tax payable Provisions Other Total current liabilities Non-current liabilities Long–term payables Long-term borrowings Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity	55,099 73,762 285,962 282,715 349,716 325,655
	690,777 682,132
	456,699 452,138 211,843 211,843 27,751 30,671
	696,293 694,652
	1,387,070 1,376,784
	273,365 281,992 29,113 29,777 2,973 10,518 45,571 44,077 0 2,935
	351,022 369,299
	3,086 3,347 165,000 175,000 2,291 2,170
	170,377 180,517
	521,399 549,816
	865,671 826,968
	9,960 9,960 4,194 3,936 851,517 813,072
	865,671 826,968

The accompanying notes form part of these financial statements

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Reece Australia Limited and controlled entities

Condensed consolidated statement of changes in equity for the half-year ended 31 December 2014

Balance as at 1 July 2013 Profit for the half-year Exchange differences on translation of foreign operations, net of tax Total other comprehensive income Total comprehensive income for the half-year Transactions with owners in their capacity as owners: Dividends paid Total transactions with owners in their capacity as owners Balance as at 31 December 2013 Balance as at 1 July 2014 Profit for the half-year Exchange differences on translation of foreign operations, net of tax Total other comprehensive income Total comprehensive income for the half-year Transactions with owners in their capacity as owners: Dividends paid Total transactions with owners in their capacity as owners Balance as at 31 December 2014	Contributed equity Reserves Retained earnings Total equity $A’000 $A’000 $A’000 $A’000 9,960 3,077 752,795 765,832 - - 59,588 59,588 - 740 - 740
	- 740 - 740
	- 740 59,588 60,328
	- - (40,836) (40,836)
	- - (40,836) (40,836)
	9,960 3,817 771,547 785,324
	Contributed equity Reserves Retained earnings Total equity $A’000 $A’000 $A’000 $A’000 9,960 3,936 813,072 826,968 - - 80,277 80,277 - 258 - 258
	- 258 - 258
	- 258 80,277 80,535
	- - (41,832) (41,832)
	- - (41,832) (41,832)
	9,960 4,194 851,517 865,671

The accompanying notes form part of these financial statements

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Reece Australia Limited and controlled entities

Condensed consolidated statement of cash flows for the half-year ended 31 December 2014

ended 31 December 2014
	Half-year 2014 $A’000 2013 $A’000
Cash flow from operating activities Receipts from customers Payments to suppliers and employees Interest received Borrowing costs Income tax paid Net cash provided by operating activities Cash flow from investing activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Net cash used in investing activities Cash flow from financing activities Proceeds from borrowings Repayments of borrowings Dividends paid Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the half-year Cash and cash equivalents at the end of the half-year	1,151,919 945,584 (1,043,716) (860,169) 706 2,433 (4,782) (100) (39,655) (27,324)
	64,472 60,424
	(31,567) (33,311) 927 2,400
	(30,640) (30,911)
	55,000 19,136 (65,663) (18,432) (41,832) (40,836)
	(52,495) (40,132)
	(18,663) (10,619) 73,762 156,232
	55,099 145,613

The accompanying notes form part of these financial statements

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Reece Australia Limited and controlled entities

Notes to the condensed consolidated financial statements for the half-year ended 31 December 2014

Note 1: Statement of significant accounting policies

This half-year financial report does not include all the notes of the type usually included in the annual financial report.

It is recommended that this half-year financial report be read in conjunction with the annual financial report for the year ended 30 June 2014 and any public announcements made by Reece Australia Limited during the half-year in accordance with any continuous disclosure obligations arising under the Corporations Act 2001.

The half year financial report was authorised for issue by the directors as at the date of the directors’ report.

(a) Basis of preparation of the half-year financial report

This general purpose half-year financial report has been prepared in accordance with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001 .

(b) Summary of the significant accounting policies

The half-year consolidated financial statements have been prepared using the same accounting policies as used in the annual financial statements for the year ended 30 June 2014.

(c) Rounding amounts

The company is of a kind referred to in ASIC Class Order CO 98/0100 and in accordance with that Class Order, amounts in the financial statements have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar.

Note 2: Accounting standards issued but not yet operative

AASB15 Revenue from contracts with customers introduces a five step process for revenue recognition with the core principle of the new Standard being for entities to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services.

AASB15 Revenue from contracts with customers will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements.

The directors have not yet assessed the impact (if any) of changes in the standard above.

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Reece Australia Limited and controlled entities

Notes to the condensed consolidated financial statements for the half-year ended 31 December 2014

Note 3: Subsequent events

There have been no material events subsequent to the end of the half-year that require recognition or disclosure in the half-year financial report.

Note 4: Dividends

(a) Dividends paid or declared Dividends paid at 42 cents per share (2013: 41 cents) fully franked at 30% (b) Dividends proposed after the reporting period and not recognised Proposed dividends not recognised at the end of the half-year at 24 cents per share (2013: 22 cents) fully franked at 30%	31 Dec 2014 $A’000 31 Dec 2013 $A’000
	41,832 40,836
	23,904 21,912

Note 5: Segment reporting

The sole activity of the operating companies within the group is that of plumbing, building and hardware merchants in Australia and New Zealand.

Note 6: Property, plant and equipment

Acquisitions and disposals

During the six months ended 31 December 2014 the Group acquired assets with a cost of $26.8 million (six months ended 31 December 2013: $27.3 million).

Assets with a carrying amount of $2.3 million were disposed of during the six months ended 31 December 2013 (six months ended 31 December 2013: $2.6 million), resulting in a loss on disposal of $1.4 million (six months ended 31 December 2013: loss of $0.2 million).

Note 7: Fair value measurements

The consolidated entity holds foreign exchange agreements to purchase foreign currency. The full amount of the foreign currency the consolidated entity will be required to pay or purchase when settling the brought forward exchange contracts should the counterparty not pay the currency it is committed to deliver at balance day was $A119.4 million. The foreign exchange agreements are recurring level 2 financial instruments in the fair value hierarchy. The fair value of these foreign exchange agreements is determined with reference to the current exchange rates.

At 31 December 2014 the unrealised gain on these agreements totalling $6.5 million was included within the trade and other receivables asset within the Consolidated Statement of Financial Position.

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Reece Australia Limited and controlled entities ABN 49 004 313 133

Directors’ Declaration

The directors declare that the financial statements and notes set out on pages 4 to 9 in accordance with the Corporations Act 2001 :

• (a) Comply with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 , and other mandatory professional reporting requirements, and

• (b) Give a true and fair view of the financial position of the consolidated entity as at 31 December 2014 and of its performance for the half-year ended on that date.

In the directors’ opinion there are reasonable grounds to believe that Reece Australia Limited will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the directors.

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L. A. Wilson Executive Chairman

P. J. Wilson

Chief Executive Officer

Melbourne 26 February 2015

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REECE AUSTRALIA LIMITED AND CONTROLLED ENTITIES ABN 49 004 313 133

INDEPENDENT AUDITOR'S REVIEW REPORT TO THE MEMBERS OF REECE AUSTRALIA LIMITED AND CONTROLLED ENTITIES

We have reviewed the accompanying half-year financial report of Reece Australia Limited and controlled entities, which comprises the condensed consolidated statement of financial position as at 31 December 2014, the condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the period's end or from time to time during the half year.

Directors' Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2014 and its performance for the half- year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Reece Australia Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

An independent Victorian Partnership ABN 27 975 255 196 Pitcher Partners is an association of independent firms Liability limited by a scheme approved under Professional Standards Legislation Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle An independent member of Baker Tilly International

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Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Reece Australia Limited is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the consolidated entity's financial position as at 31 December 2014 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001 .

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D A KNOWLES Partner 26 February 2015

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PITCHER PARTNERS Melbourne

An independent Victorian Partnership ABN 27 975 255 196 Pitcher Partners is an association of independent firms Liability limited by a scheme approved under Professional Standards Legislation Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle An independent member of Baker Tilly International

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