This morning plumbing parts business Reliance Worldwide Corp (ASX: RWC) told investors it's sticking to guidance for FY 2020 profit to land between $150 million to $165 million. However, it added that meeting guidance was dependent on a number of factors that are out of its control.
It warns that if "economic and construction market conditions" fall materially then its guidance could come under pressure. It also warns that if new residential construction levels in Australia or the U.S. come in lower than expected this could also be a headwind.
It's also joining a lot of companies in warning that Brexit could hurt its operating performance.
In May 2018 Reliance paid around $1.2 billion for UK plumbing parts business John Guest. However, at its AGM today it flagged that "Brexit uncertainty" and associated weaker construction activity in the UK are headwinds.
Its profit result is also dependent on the level of the Australian dollar as much of its earnings are overseas to mean a weaker Aussie dollar is a positive.
This is notable as for now Brexit has flattened sterling's value, but if a Brexit deal is agreed it should rebound sharply. As such sterling's fluctuations could have a real impact on Reliance's result for the fiscal year ending June 30 2o20.
Finally it has also joined the "second half club" early by telling investors to expect its earnings to be weighted 55% towards the second half.
After its 2016 IPO Reliance was something of a market darling thanks to investor enthusiasm for its innovative 'shark bite' plumbing parts that boasted rapid sales growth.
However, the John Guest acquisition and a May 2019 earnings downgrade have shaken investor confidence.
The prevaricating over current guidance is unlikely to help, but in fairness Reliance has a reasonable track record.
Other industrial businesses with longer track records to take a look at include Amcor Limited (ASX: AMC) or Brambles Limited (ASX: BXB).
