GWA Group Limited (GWA) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the GWA Group Market Briefing FY '20 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Tim Salt, the CEO. Please go ahead.

Good morning, everyone, and thank you for joining us on the webcast or conference call for GWA's financial results for the year ended 30th of June 2020. I'm Tim Salt, GWA's Managing Director, and joining me on the call today is Patrick Gibson, GWA's Group CFO. Before we begin, I want to draw your attention to the disclaimer slide. On Slide 3 of today's results presentation, I'll first provide an overview of our group results and key themes. Patrick will then detail our group financial results, including P&L, balance sheet and cash flow, and I'll conclude with the progress we're making on our evolving superior water solutions strategy, together with an outlook for FY '21. I'll begin with the summary of our results for the year. In the context of what's been a very challenging year, particularly in the second half, GWA has delivered its disciplined result. Our top line was significantly impacted by lower construction activity; merchant destocking, primarily in the first half; and the impact of the COVID-19 pandemic in the last quarter of the year. However, we maintained market share in Australia and New Zealand and grew share in the United Kingdom. Our continuous focus on operational and cost discipline across the business resulted in a resilient pro forma EBIT margin of 18% compared to 18.5% in the prior year. Meanwhile, we continue to generate strong operating cash flow, and that enabled the Board to determine the $0.035 final dividend, bringing the full year dividend to $0.115 per share fully franked. The FY '20 dividend represents a payout ratio of reported profit of 69%, consistent with our policy to pay dividends in the range of 65% to 85% of NPAT. While markets were challenging, our focus continues to be on controlling those elements within our control. First and foremost, that includes a significant improvement in health and safety, including lead measures such as near-miss reporting and lag metrics such as a significant reduction in the total injury frequency rate. The Methven integration is on track with our sales teams fully integrated and synergies achieved ahead of schedule with $3 million delivered in FY '20. A $9 million to $12 million cost-out program also remains on track, and we delivered $5 million in savings in FY '20. We implemented further short-term saving initiatives, which delivered an additional $10.5 million of savings. We consolidated our network in Australia's 4 key distribution centers in New South Wales, Queensland, Victoria and Western Australia, and this will drive operational efficiencies in FY '21. These changes also improve our customer service as we combine Methven and Caroma orders into 1 delivery and 1 invoice. And we continue to execute our medium-term growth strategy. We have invested in growth initiatives such as our intelligent bathroom system, Caroma Smart Command, and new product development. We successfully installed Caroma Smart Command in 49 sites with a solid bank of additional projects in the pipeline. Market support for Caroma Smart Command continues to be positive, not only surrounding the system's sustainability benefits, but also more recently on its enhanced hygiene and touchless applications. Our relationship with trade partners continues to improve through joint business planning and core range extensions for Caroma, Methven and Clark. And we continue to drive growth in commercial segments, including Aged Care and Commercial Renovation and Replacement. Our commercial forward-order bank remains strong and is up 16% year-on-year. Importantly, in an uncertain market, GWA retains a strong financial position to manage through current market challenges, and the business is well positioned for growth as market conditions improve. Our balance sheet remains strong. We enhanced our liquidity in the second half, and we have no significant near-term financing commitments. And in summary, while the markets were clearly challenging in FY '20, we executed well by focusing on the elements within our control to respond to the short-term challenges but also continued our strategy to position the business for medium-term growth. I'll spend a couple of minutes detailing the impact COVID-19 has had on our business and how we continue to respond. Our primary focus has been to ensure the ongoing health and safety of our employees and businesses to our sites while also ensuring the financial sustainability of our business. We've implemented enhanced safety protection, including sanitizers, masks, temperature checks and increased cleaning at our work sites. And at our warehouses, we implemented shift management and social distancing protocols, including staggered break times to limit personal interactions. The shutdown in New Zealand and the United Kingdom from April 2020 meant that we had to furlough 112 of our employees for those periods. And as I said on the previous slide, we implemented additional cost-saving measures with tight control of all discretionary spend, and that resulted in a further $10.5 million in cost savings during the year. We activated our business-continuity plans internally and with our suppliers to minimize disruption to the business and our customers. And during the pandemic, we have been able to maintain continuity of supply for our customers. Finally, our financial position remains strong to support the business through COVID-19 and beyond. We secured $33 million in additional bank facilities, which have not been drawn. We have $283 million in total bank facilities, which provides us with significant liquidity and flexibility to take advantage of opportunities that may arise. The main component of that facility, a $243 million revolving facility does not mature until October 2022. Cash collection remains strong with negligible bad debt and a cash flow from operations conversion ratio in FY '20 of 96%. On Slide 6, this illustrates the impact of COVID-19 on our business in the final quarter. In Australia, as we announced in April, third quarter revenue was broadly in line with the previous corresponding quarter. However, in the fourth quarter, revenue was impacted with sales growth in consumer-focused channels offset by declines in trade channels. We did not experience any major further destocking in the second half. However, the anticipated uplift in revenue we normally experience as some customers pursue year-end incentives did not eventuate in June due to the ongoing market uncertainty. In New Zealand, the sales growth momentum experienced in the first half stalled as the COVID-19 level 4 lockdowns were applied in the fourth quarter. And in our international business, United Kingdom sales were strong in the first half and up 9% in quarter 3 prior to the COVID-19 restrictions being implemented. You can see the impact of that in a significantly lower revenue in Q4. Despite the impacts of the lockdown in quarter 3, Asia sales were actually up 6% for FY '20 compared to the prior year. On to Slide 7. While the last slide demonstrated the COVID-19 revenue impact by market, this slide illustrates the impact by our main customers in Australia. These account for 87% of our sales in Australia, which is our largest market, accounting for 79% of overall group revenue. As we detailed at the half year results in February, trade destocking impacted revenue in the first half. That was across most of our customers with some more pronounced than others. We had good sales momentum. We traded with our main customers in the third quarter prior to the impacts of COVID-19 restrictions in the fourth quarter. And we grew revenue in 3 customers in the second half of the year. You can see the impact that market conditions and COVID-19 had in the fourth quarter, where sales and 2 trade-focused customers declined. Our strategy continues to focus on winning share regardless of market conditions. In FY '20, we held market share on a sales-out basis, and that is the sales from our customers to their customers. This adjusts for the one-off impact of the significant trade destock that we experienced during the year, and that destock results in our reported revenue decline being greater than the market decline. The slowdown in residential construction activity in Australia has been well documented, and we saw that particularly pronounced in detached and multi-residential construction during the year. For the year ended June, these segments declined approximately 20% and 18%, respectively. And while we would typically expect the Renovation and Replacement segment in both the residential and commercial sectors to be relatively stable, the second half of the year was obviously not a typical period. The Renovation and Replacement segment has been somewhat split in the second half. Retail-exposed customers are benefiting from an uptick in DIY and replacement activity. However, on a segment basis, this uptick did not offset the decline in larger renovations in the overall renovation and replacement segment. Activity in the R&R segment declined by approximately 8% for the year. Nonetheless, this segment is more stable than detached and multi-residential housing. The commercial new build segment also deteriorated in the second half with full year market activity declining by approximately 4%. So in total, we estimate a decline of approximately 10% in our addressable market in Australia for FY '20. Despite the challenging conditions, we held market share in Australia on a sales-out basis at around 23.5%. I'll now hand over to Patrick, who will take you through the financial results in more detail.

Thanks, Tim. Slide 10 shows you the waterfall chart that we typically present to set out the key drivers of earnings over the period. And just to be clear on this slide, this is on a pro forma basis, which means it includes earnings from Methven in FY '20 and in FY '19 as a comparison, even though we only owned the business from the 10th of April 2019. Also, these are normalized results. They exclude significant items relating to costs associated with the integration of Methven. Volume and mix. As Tim has already discussed, volumes were impacted by weaker market conditions, trade destocking and the impact of COVID-19. We continue to focus on segments such as Caroma Cleanflush to drive mix improvement. Cleanflush sales increased 8.5% on the prior year and now account for approximately 37% of all GWA toilet suite sales. Price. We took a 2.5% price increase from 1st of November 2019 to partially mitigate the impact of FX headwinds, and we've implemented a further price increase in August 2020. FX. Through our foreign exchange hedging, we were able to mitigate some but not all of the impact from the weaker Australian dollar for the year. The average Australian U.S. dollar rate was $0.71 in FY '20 versus $0.76 for the prior year. Net cost changes reflect that our continued strong operational discipline mitigated a significant amount of the earnings decline for the year, and I will detail the components of this cost discipline on the next slide. This slide provides the further breakdown of the key components of EBIT during FY '20. This is on the same pro forma normalized basis as the previous slide. We've itemized the earnings decline by the 3 main components. The market decline impacted full year FY '20 EBIT by an estimated $11.1 million and destocking by approximately $7.9 million. The EBIT impact of the COVID-19 restrictions was approximately $8.6 million, primarily reflecting the restrictions in the second half of the year in the United Kingdom, New Zealand and China. We had negligible revenue in New Zealand during the period of level 4 restrictions and significantly reduced revenue in the United Kingdom during the shutdowns. Despite significantly reduced revenue in these markets, we continue to incur a number of fixed costs, including rent, and the number of staff not being stood down as they were involved in future-focused development activities. For staff fully stood down, we did receive government assistance of approximately $1 million across the U.K. and New Zealand. We also had a $3 million adverse net impact as price increases did not fully recover the impact of the weaker Australian dollar for the year. In total, market decline, merchant destocking, the COVID-19 impact and adverse net FX and price represent a gross EBIT decline of $30.6 million on a pro forma basis. However, we were able to successfully offset $18.5 million of this EBIT impact through our continued strong focus on operational discipline. This includes cost discipline across all lines of the P&L; for example, travel, consultancy, vacancies and savings from 0 STI payments in FY '20 and also a 20% cut in fixed remuneration of the Board and group executive for the fourth quarter. I would caution that not all of these further cost reductions will be repeatable in FY '21. We need to ensure that our business is sustainable, not only through this period, but also for the medium term. We successfully delivered $5 million in savings as part of the overall $9 million to $12 million cost-out program by FY '21 and $3 million in Methven synergies, which are in line with our increased target. On acquisition, we announced that we expected New Zealand $5 million in Methven integration synergies by the end of FY '21. And we realized AUD 3 million in FY '20 and remain on track to deliver ahead of that initial target with at least AUD 6 million in cost synergies by the end of FY '21. These initiatives assisted GWA to maintain a normalized pro forma EBIT margin of 18% compared to 18.5% for the prior year, a resilient result in a challenging market. On Slide 12, you can see the results on a pro forma basis. The revenue decline reflects the downturn in residential new build and renovation and construction activity in Australia, coupled with merchant destocking and the COVID-19 impact. Net profit after tax was down 16.5% on the prior year on lower earnings and due to increased interest costs on debt related to the Methven acquisition. The effective tax rate was just under 29%, which we think is a reasonable guide for the group going forward. The decline in ROFE reflects a combination of lower earnings and the increased goodwill related to the acquisition of Methven. While it is lower than the prior year, ROFE remains well ahead of the group's cost of capital. Most of our commentary to date has been on a pro forma basis because we believe that provides a more meaningful performance measurement. However, Slide 13 is not on a pro forma basis, and we have included it so you can reconcile the result back to the Appendix 4E. This includes Methven for FY '20 but for FY '19 only includes Methven from the date of acquisition, the 10th of April 2019. So effectively, 2.5 months contribution only in 2019. This is normalized before significant items. Revenue grew 4% due to the inclusion of Methven in FY '20, offset partially by the decline in residential new build and renovation construction activity in Australia. And normalized EBIT margin was 18% compared to 20.5% for the prior year, and that reflects the full year inclusion of Methven's lower-margin earnings in FY '20 and the impact of COVID-19, which, together, dilute the overall group EBIT margin. Our ongoing strong financial position enabled the Board to determine a final dividend of $0.035 per share, bringing the full year dividend to $0.115 per share fully franked. We have also activated the DRP for the final FY '20 dividend at a 1.5% discount. Turning now to cash flow from operations on Slide 14. Again, just to be clear, we've presented this on a pro forma basis, that is including Methven for the whole of the prior year. Given the impact of COVID-19, we maintained a key focus on cash management, and in the second half, that's been reflected in a solid operating cash flow performance for the year. Pro forma cash flow from operations was $88.6 million compared to $107.7 million in the prior year. Our cash conversion remains strong with the cash conversion ratio from continuing operations at 96%. We were focused on debtor management to ensure no deterioration as a result of COVID-19. And our collections were not impacted, and our days sales outstanding at 30th of June were consistent with the prior year. We have negligible bad debts. Capital expenditure was $12.3 million in FY '20. That is towards the lower end of the guidance we provided at the half year result, reflecting our prudent approach to cash management as COVID-19 restrictions were implemented. Our CapEx program is focused on growth initiatives to drive revenue-enhancing opportunities and cost efficiencies, including further investment in Caroma Smart Command, warehouse and office consolidation and further investment in IT systems. Cash restructuring and other costs relate primarily to Methven integration costs. GWA remains in a strong financial position to manage in the current environment, and we remain well placed for growth as market conditions improve. We also have no significant near-term refinancing commitments. Net debt as of 30th of June 2020 was $144.8 million, which is similar to the prior year's total of $141.9 million. In October last year, we refinanced our syndicated banking facility, while in April this year, we secured an additional $33 million in facilities. This has not been drawn. Total group facilities are $283 million. That comprises a multicurrency revolving facility of $243 million, which does not mature until October of 2022; and a $40 million revolving bilateral facility, which is due to mature in October this year. The bilateral facility is a short-term working capital facility, which we plan to extend in quarter 1 FY '21. So our credit metrics remain strong, as you can see on the slide. I will now hand back to Tim to take you through our strategic objectives and outlook.

Thanks, Patrick. Our growth strategy continues to be customer and consumer focused, underpinned by internal cost and capability improvements. Our strategy continues to evolve to support our purpose of making life better through products, services and technologies that create superior solutions for water. We expect to hold another investor market briefing later this financial year, where we'll provide a lot more detail on our growth strategy. So today, we thought we'd provide a summary of our core activities and how they are strengthening our business for medium-term growth. Our strategic growth drivers are focused in 4 key areas: build our share in renovation and replacement in Australia and New Zealand; extend our Australia and New Zealand leadership position in the commercial segment; lead the growth of water smart connected bathrooms and buildings; and grow select overseas markets, leveraging our Australian and New Zealand commercial expertise, and I'll talk briefly to these points in the subsequent slides. GWA remains a strong, resilient business. And while we have already been successful in addressing the challenges posed by COVID-19, our focus remains on implementing further actions to strengthen our ability to compete. In Australia, we will prioritize our investments and efforts behind our winning brands, Caroma and Methven, to maintain and build our market share, and we will continue to drive consumer digital engagement, reflecting the changing consumer and market dynamics. We will extend our already strong position in the commercial segment, leveraging our expertise to drive growth. In New Zealand, our focus is on leveraging the integrated business to drive market opportunities and share gains. We have established a tap and showerware center of excellence for the group in New Zealand, and we will use this innovation for new product development and range extensions. Asia currently represents a small component of our revenue but a significant opportunity. We will strengthen and simplify our foothold in the region and evolve our supply network to deliver further efficiencies. At the same time, we will continue to develop our local customer understanding to develop -- to deliver growth in that segment. While in the U.K., we will drive profitable share growth through Methven. We are laying the groundwork for Caroma entry, including Caroma Smart Command. This was originally planned for the second half of FY '20 and has been delayed due to regulatory requirement changes and COVID-19. Our strategy to build our share in Renovation and Replacement in Australia and New Zealand is centered on enhanced consumer engagement, new product development and broadening our omnichannel presence. We are engaging with consumers more effectively through social media. Caroma website traffic increased by 23% in the second half of FY '20. And our combined social media reach is now around 800,000 hits each month. We've launched new product ranges in FY '20, and these include Caroma Elvire premium range, Methven Turoa colored tapware and Nefa and Fastflow valves in New Zealand. In the first half of FY '21, we are upgrading 3 core Caroma ranges with new colored tapware and refined sanitary ware, all with clean flush and with germ guard antibacterial glaze on all sanitary ware, which kills 99% of germs. This has increased importance post-COVID-19. And in addition, we are leveraging Methven intellectual property in Caroma showers to take advantage of Methven's world-leading shower technology. And we will be using common in-wall bodies to drive efficiencies and make life easier for plumbers. We're launching new shower and tapware ranges in both the United Kingdom and Asia, and we are broadening our omnichannel experiences to consumers. That includes increased focus on digital engagement and visibility across outdoor and targeted television. And we are continuing to leverage our flagship stores to engage with the market despite the impacts of COVID-19. For example, we are now live streaming events to engage with key audiences, including specifiers, designers, architects and consumers. On Slide 20, our position in the commercial segment continues to be strong. Our order book is 16% ahead of the prior year through continued strong traction, particularly in Aged Care and health. We're leveraging our strength in sanitary ware to cross-sell tapware in key projects, and the Methven product portfolio is important in accessing that opportunity. We're also accelerating Caroma Smart Command installations, notwithstanding the limitations of COVID-19, and I'll talk about this on the next slide. The momentum behind our innovative, intelligent bathroom system, Caroma Smart Command, continues to build, and we're very encouraged by the continuing strong reception in the market. The system has now been installed in 49 sites across both Australia and New Zealand. We had anticipated rollout into other sites during the second half of FY '20. However, this was delayed by COVID-19, particularly in shopping centers and airports, and there remains a solid bank of additional projects in the pipeline for FY '21. To date, 23 sites have been migrated to our new cloud data capture solution with further migrations expected. Importantly, this is a first small step creating an ongoing fee-for-service solution. We continue to launch additional complementary products to further enhance the offering of this system. In the last quarter of FY '20, that included the intelligent shower that can be programmed for temperature and duration and an intelligent shutoff valve that can detect a water leak and instantaneously shut down the water supply if required. We have a strong new product development pipeline into FY '21 with a number of products, technologies and cloud interface enhancements in development. We're also working through international expansion options through GWA-generated leads and from leveraging Methven's footprint across Southeast Asia and China. I'm pleased to report we continue to live our purpose of delivering superior solutions for water. As an example of this, our first Caroma Smart Command trial in Asia is going live this month. Water scarcity is a global issue. The desire of customers outside Australia and New Zealand to embrace world-leading innovation such as Caroma Smart Command is evidence of this. This is another small step towards our goal of saving a Sydney Harbour of water each and every year through GWA's superior solutions for water. On Slide 22, we acquired Methven in April 2019, and we're pleased with how the integration has progressed and the further diversification, scale and capability Methven brings to our business. We implemented our go-to-market strategy with a single integrated sales team in Australia and New Zealand, each selling our total combined portfolio, and that is resulting in additional ranging of Methven products in Australia and emerging channels. We mentioned earlier the consolidation of our distribution network to 4 key distribution centers in New South Wales, Queensland, Victoria and Western Australia, and that's enabling us to integrate Methven products into GWA systems and enhanced customer service through single invoice and single order delivery. Our tap and showerware center of excellence in New Zealand is building a strong pipeline of NPD with the market-leading Methven shower IPs to be using Caroma new shower launches across Australia and New Zealand in FY '21. And the addition of Methven provides with enhanced geographic diversification, which continues to be a strategic growth opportunity for the group. Around 21% of our revenue now comes from outside Australia. In our international business, we are leveraging Caroma products to go-to-market with a whole of bathroom solution. We realized AUD 3 million of cost synergies in FY '20, and we remain on track to deliver ahead of the initial target with at least AUD 6 million in cost synergies by the end of FY '21. I'll now provide a summary and outlook for the full year FY '21. Trading in July 2020 in Australia, New Zealand and the U.K. has been slightly ahead of the same period in the prior year. However, trading is expected to remain very challenging in FY '21 due to weak construction market conditions, further exacerbated by the uncertainty surrounding the effects of COVID-19 across all regions and as highlighted by the rapidly evolving situation in Victoria. Lead macro indicators such as lower net migration, lower consumer confidence and increased unemployment and building specifically indicators such as residential building approvals and housing turnover point to a reduction in GWA's overall addressable market for FY '21. We expect that decline will be driven predominantly by the residential newbuild segment in multi-residential and detected housing with decline in the Residential Renovation and Replacement segment to be less pronounced. The timing and extent of any potential longer-term benefit from government stimulus measures such as HomeBuilder remains uncertain as to whether it will bring building work forward or actually generate incremental business. While commercial renovation and new build activity is expected to moderate, our forward order book remains solid and is 16% higher than its corresponding period last year. In FY '21, we'll continue to execute our focused customer and consumer initiatives to generate share growth. These initiatives include agreed business plans with primary merchant customers, targeting specific segment and categories and ongoing collaboration with key secondary customers in core segments such as Aged Care. We'll leverage the market-leading Caroma and Methven brands with new product development and range launches in sanitary ware, taps and showerware to build further consumer engagement in core categories. And we'll continue to drive further growth in Caroma Smart Command both in Australia and New Zealand and in international markets. We'll continue to leverage Methven's presence in the U.K. and Asia. And to mitigate input cost inflation, we have announced price increases to be implemented from August 2020 across Australia and New Zealand in conjunction with other cost-saving initiatives, including Methven cost synergies and the final year of our $9 million to $12 million cost saving target by FY '21. We'll provide a further update at our Annual General Meeting on the 30th of October 2020. So while markets remain challenging, GWA has demonstrated its ability to deliver a disciplined result in FY '20. We executed well by focusing on the elements within our control to respond to the short-term challenges. As a result, we've created a strong platform for growth as market conditions improve with enhanced operational leverage supported by an ongoing strong financial position. Ladies and gentlemen, that concludes the presentation, and we're happy to now take your questions. Thank you.

[Operator Instructions] Our first question comes from Lisa Huynh of Citi.

I just had a question around the destocking impact in FY '20. So you've outlined an $8 million impact. Can you just specify how much of that was incurred in the first half versus the impact from restocking that didn't happen in the fourth quarter?

Yes. Sort of the $8 million, the majority of that destock occurred in the first half. So I think that was around 13 and 14. So that was the impact overall primarily, and we didn't count the lack of restock in the second half. That wasn't factored into those numbers.

Okay. Cool. Got it. And can you just kind of talk to what the retailers are telling you in terms of this destocking, whether it's just due to the weaker outlook ahead? And I'd also be interested to hear what types of products you're seeing being destocked as well within the retailers.

Yes. I think the first thing to say that it's varied across different customers and different merchants. So it's not -- we haven't seen a consistent level of destocking across all of our customers. It's actually been more around the customers who are more exposed to trade channels than consumer channels. So that's the first thing to say. So those customers who have a strong consumer presence or franchise, actually, they haven't really destocked at all. It's been the ones that are more focused on trade channels where we've seen that. And that really -- that's come across the board because they tend to -- well, in terms of the categories, the products, as you call it, that's because they tend to look forward and try and think about what products they're going to be selling in the forthcoming periods. And they want to make sure they've got plenty of availability on that. The uncertainty that's been driven out of COVID has actually meant that they pulled back across a number of categories. So whether it's tap and showers or sanitary ware, it's not really -- we've not really seen any significant difference across one particular category.

Okay. Sure. Got it. And I'll just also be interested to hear about how sales tracked by brand and particularly whether Caroma fit better than some of the other brands in the portfolio. I guess I'm interested to hear whether you saw the consumer or the builder shift towards the more -- some of the more cost-conscious brands in the portfolio or not.

Yes. It's a good point. I mean actually, Caroma increased its share of that business. I think it was 60% for the full year in FY '20, and that was up from, I think, 58% in prior year. So that suggests that Caroma is actually -- was actually -- its decline was lower than the overall business. So that's a function, I think, that we've seen some strength in Caroma in some particular segments. But I also think, to your point, there has been -- now you will see in some of the market where particularly builder, to your point, you're seeing a bit of a trading down there. Now that's not necessarily impacted Caroma, but it has benefited us with Clark at that sort of more entry-level points into the market or slightly lower price points. So you're absolutely right. There's no doubt there has been a bit of trading down there. But overall, we've also seen pretty good strength again some of the sort of higher-end Caroma, and particularly when you think about things like Caroma Cleanflush, which is a higher-margin product, that we've actually seen good traction continue with that. So the mix piece has probably gone up and a little bit down, for one of a better word -- better way of articulating.

Our next question is from Chloe Lim of Crédit Suisse.

A couple of questions for me this morning. First one is on cost savings. So just on the elements of the $10.5 million of short-term cost savings you've highlighted, you also said that $9.5 million is expected to be nonrepeatable. Could you firstly provide any color on what the largest portion of that is? And is the $9.5 million nonrepeatable regardless of kind of what happens to revenue? Or is there potential for more costs to come out?

Sure, Chloe. It's Patrick. Thanks for the question. Look, the single biggest item in the $10.5 million is sales incentive and bonus, STI, and that accounts for about $6 million of the $10.5 million. And then the other balance is really a number of items is approximately $1.5 million of travel in there. There's approximately $1 million or so of vacancies in roles that we delayed filling. There's also a contribution of about $400,000 from the 20% reduction in Board and executive pay in Q4. Those are the major items. And then -- and the remaining sort of $1 million is really just tightening the belt across a number of small cost centers. So that's the bulk of the $10.5 million. And so we've, as you called out, have said about $9.5 million of that is nonrepeatable, assuming, of course, that things like travel get back to a more normal state where we can visit customers and including -- ensuring business also performed well. I think it's worth pointing out, though, Chloe, that we will deliver further savings in the $9 million to $12 million program in FY '21 of around about $4 million. And we expect to deliver another $3 million from the Methven integration savings in FY '21. So those other cost savings will flow through to the bottom line is our expectation. But the reason we need to -- we obviously have to manage the business for the medium term, and it's important we continue to invest in our growth initiatives and particularly fill some of those key roles for the medium and long-term health of the business. Does that help?

Okay. Great. Yes, that's really helpful. So beyond the $3 million in synergies, about $4 million of your 3-year program and maybe a carryover of $1 million from the $10.5 million, it would be just around $8 million going forward?

Yes. Yes, that's about right. Yes. And most of that -- there's a slide in the appendix, Chloe, I think it's #27, that tries to detail some of that for you.

Yes. Yes. Great. And then just on July, you stated that it's up versus prior period, and also the commercial order book is pretty solid. But you've also pointed to industry forecast expecting a decline in market of 7%. Just wondering what's in that July number that's expected to abate or why might July trends not continue going forward?

So just -- if you can just repeat that last bit again. I just -- I missed that. So I heard a bit about commercial forecast, a decline, and that's sort of in contrast with our forward order book. What was the last bit? Sorry, I just missed the last bit.

Yes. So July up on pcp. Why might that be expected to abate? Or why might July trends not continue to carry forward?

Yes. Yes. Well, I think it's the uncertainty that we've got at the moment. There's so many factors playing out that we just actually don't know what's going to happen, I think, is the concern because I think, obviously, in July, it was good pull-through of our products in that month. What we don't know yet is whether that's going to be sustained because of the strong demand out there for other customers. We don't know whether they've bought up ahead of an expectation of pull-through. I mean, as I said that the uncertainty that we're seeing in Victoria is already sort of -- that's sort of coming to literally 2 weeks ago. So we can't even book at 2 weeks out at the moment. So our ability to be prescriptive about what's happening over the longer term is somewhat challenging at the moment. As it relates specifically to the commercial segment where we've got a really good forward order book, I think that's -- there's 2 things there that are really positive and one that's a question mark. But the really positive aspect of that, I think, is the fact that we've identified segments where we wanted to hump the growth in commercial. And over the last couple of years, we've really started to improve traction within that by having dedicated salespeople understand the segment far better and actually start to build relationships to drive growth in those particular areas. So for example, our Aged Care order bank, it's now actually has doubled since the beginning of FY '20 and is now the second largest component of our order bank. And that's more than offset decline that we've seen in things like offices and airports of late, as you might imagine, because we've seen quite a drop-down there. So A, we've gone hunting for opportunities, and we've delivered those; secondly, we're now actually doing -- as I mentioned in the presentation, we're doing a much better job on the cross-sell because we were -- historically, we were selling a lot of sanitary ware and a lot less tapware. We're now actually getting to a stage where I think tapware is around just under 20% of our order bank, which is significantly up from where it was just a year ago. So by putting focus and wanting to get the whole of the bathroom rather than just the sanitary ware. So that's 2 positives. And I suppose the third positive around that is that we've still got a very good forward order bank included on that on Caroma Smart Command, which is actually -- continues to pick up year-on-year. So there's a positive. The one question mark I have on that or the disconnect, if you like, between what the segment is forecast to do, and we think it's going to be down, but probably low single digit, but again, not 100% sure yet. But the big disconnect is I think that what we don't know is how quickly the jobs will get called off by our customers. So as they -- we've not seen any delay or lag to date other than, as I say, a little bit in the sort of retail shopping centers in airports where we have projects that have been delayed. But other than that, we've not seen any great moves. But there's nothing -- I don't know yet whether that will sort of worsen across FY '21 if market conditions and economic sentiment continue to deteriorate. Does that make sense? So you've got 2 or 3 really good positive reasons why our order bank has grown, which is we've hunted for it. We've grown tapware, and we've got Caroma Smart Command. And the bit that might be causing it to grow is that there's a delay in the customer pulling orders off from us at the moment. But we just haven't got enough visibility on that yet to know whether that's -- what's impacting it.

Yes. That sounds excellent. Conscious of the uncertainty. I guess last question would be on the revenue side. Trade declines more than offset a slight growth in the retail channel. I guess from your point of view, what do you think has been the barrier for GWA to benefit from such increase in the home improvement trends? Is it a product of being overwhelmingly trade exposed or perhaps the channels that you're in? Could you perhaps expand on that, please?

I'm actually really pleased with actually our second half performance in those consumer-facing channels, actually, where I think we've made pretty good traction in all of the major consumer-focused customers. So without -- we've deliberately not wanted to call out which customer is which, and here I don't think it's appropriate for us to do that. But actually, we've seen growth in the major customer -- customers with a consumer bias. We've actually seen growth at or ahead of their growth through them in the second half, which suggests that we're helping them grow their business. So I don't think there's a barrier in that sense. I think we've talked about the importance of building business plans with our customers and trying to partner with them to find growth opportunities. And I think we're probably getting -- we're getting better at doing that at the moment. The big shift that I think happened in this second half of the year, though, in lockdown is that there's been that shift, I think, away from big renovations into smaller DIY activity. So a lot of that looks like stuck at high and what kind of say fundings. Is this still an essential service or whatever it might be. Let's go down there and buy some stuff for the garden, but also replace taps and whatever. So you're seeing a number of smaller transactions, I think, driving that consumer DIY growth. But I think that's been in contrast to what's happening in some of the larger renovations, where you're seeing -- particularly as housing turnover comes down, that's normally a big driver of big renovation as people move house, that's not been as robust. And you're also -- if you look at the amount of the -- I think it's the HIA that reports on the number of plumbers and electricians who actually are available for work. I want to -- if you look in the second half also, the first half of FY -- sorry, the second half of FY '20, significantly more plumbers and electricians available, which talks to a downturn in big reno jobs and conflicting with that uptick in those smaller jobs. The net-net, though, is that you might be paying $10,000 for a big reno, but only $100 to replace a tap of $50. So you're seeing a lot more transactions, but the overall value of the segment has declined as a result because the mix has shifted to those much smaller jobs.

[Operator Instructions] David Schwartz of Goldman Sachs.

Just a couple from me. The first one's around the gross profit margin deterioration you saw in the second half. Is that the new base for FY '21? Is that how we should think about that?

Yes. Let me take that one. I think if you look at the reported gross profit margin, there's a decline of about 2.2 points, I believe. However, we would not expect that sort of level of decline to continue. And the primary reason is if you look at the pro forma margins actually only down at gross profit 0.9% for the year. So what you're seeing is the part-year impact of Methven in FY '19 and then the full year dilution impact in '20 because although Methven's profitability has significantly improved in FY '20, it is still at a much lower EBIT margin than the, if you like, the traditional Caroma business. So I think while it will depend really, as Tim said, on what happens in the marketplace and that uncertainty. Having said that, we are pricing and took price on the 1st of August across both Australia and New Zealand. And then as we said earlier, in addition to that, there is $5 million of the $9 million to $12 million cost-out program to flow through in FY '21 and $3 million further of the Methven integration savings. So I think if you bundle all that up, price, cost-out and so forth, I think we would expect gross margins to be broadly stable as we go forward into '21. Obviously, there is a volume impact there. So if volumes do come down significantly, there might be a little bit of pressure. But all things being equal, I think assuming sort of similar to FY '21 would be a reasonable guide on gross margin.

Okay. Excellent. That's quite clear. The other question that I had was more in the market. In terms of the destocking activity, do you think that's a trough at current level? And what do you think the normalized outlook is from here? Operation is quite tough to gauge.

I think it's a really interesting one, and if I'm being honest, I don't think we 100% know that the way we sort of thought about it is that the amount of stock that a customer holds is a reflection of what they think the future demand is going to be. So in simple terms, like anybody, you want to make sure that you can make a sale if that customer comes knocking. So I think that the answer to that is that at the moment, that this is probably the level of stock that we can expect until we start to see an uptick in market demand. And as that starts to flow through, then I think what we'll see is that our customers will start to take on more stock because they won't -- the cash will probably take lower precedents compared to actually making sure they make a sale. So from that perspective, we would say at the moment that stock levels are going to stay. Now we saw in the second half, we pretty much held flat. In the second half, it was primarily a first half destocking that we saw. We think it will carry on pretty much as is until the uncertainty in the market starts to get more clarity. And then we'll -- we expect that stock levels will potentially pick up from there. There's a reality, though, that like everybody, and we've looked to how we can reduce our stock levels like everybody else. I mean one of our major customers implemented an auto restocker in this second half of the year. And essentially, that is tied to their sales out, so that when a sale goes through one of their cash tills, it actually triggers a response on the shelf. And if the amount of stock available goes below a minimum, then it actually triggers a reorder, an electronic reorder. So in that case, you're seeing customers becoming more savvy around how they manage their own inventory as well. So no difference to how we're doing within our business. So I suspect that we're going to see a lot more, I suppose, hand to mouth in the foreseeable future where customers are taking just what they need and try to hold as little stock as they can while making sure that they can continue to service customers. So I wouldn't sort of bank in any great restocking potential in the short to medium term.

Our next question is from Raju Ahmed of CCZ Equities.

Can you hear me?

Yes, we can. Thank you, yes.

Okay. Great. A couple of questions. The first one, Tim, you got me thinking a little bit towards the end on your outlook commentary. You mentioned that GWA now does a better job of cross selling its products so that you guys get a better share of the bathroom revenue. So if that's the case, I assume the salespeople are not just getting better at sales, but they've also got to get better products to sell. So the question here is as you look at your CapEx profile, is there an urgency to bring better, higher level of CapEx spend in the near to medium term? What's your view there?

I think the way we -- I mean, I'll comment first, on CapEx and Patrick maybe talk about our outlook. From our perspective, we've focused our CapEx on where we believe we can get best bank for our buck in terms of growth, both in terms of new product development, in terms of IT solutions that will actually improve our efficiencies, but also in things like Caroma Smart Command. So as of today, I don't think there's any pressing need for us to see a significant ramp-up in our CapEx spend. I mean I think the stuff that we're doing around -- you made the comment around our salespeople getting better capability. And I think the answer is yes. I mean, historically, for all GWA before Methven selling, we did sell taps and showers before that. But predominantly, I think everybody in the business who've been here for some time saw much more of a sanitary ware business. And certainly, that's how customers and consumers, to a great extent, see in our business as well. We're now doing far more to -- on the customer side to make sure that, as I say, we do cross sell. And that's been particularly an opportunity for us in that commercial space, where we would normally have tapware would be about 10% of our order bank, and it's now at just -- I think it's at 19% now. So we've made a significant shift there, and that is really about training and developing people to ask the question beyond sanitary ware. And similarly with consumers, a lot of our digital activity is about demonstrating that we have a whole of bathroom solution, not just the sort of toilets that people might make around before. So I don't think that the CapEx needs to ramp up significantly from where we are. And I think we're comfortable with the level of investment we're making is reflective of the growth strategy that we've got. So I do think we need to continue to do some great innovation, and you'll see this year, as I mentioned, the fact that we've got new Cleanflush toilets coming out with germs harm, which, in the current environment, kills 99% of all germs. That was developed internally. That's been done by our team here. We've got colored tapware coming out. We're leveraging the Methven shower IP into Caroma products, which we -- the first time we've done that. And I mentioned earlier, we've got consistent back of wall, which basically means that whatever you choose to put on the front of the wall in your bathroom, the body or the things that you don't see that go behind the tiles will be consistent, which, again, is an efficiency benefit for us, but also a benefit for the plumber and that it's easier for them to install stuff, and they can just get used to using one type of kit. So I think, Raju, I think we've actually got the right level of investment, and we're actually focusing on the right things. So Patrick, I don't think if you want to...

Yes. Look, we came in at the lower end of the range this year at around $12 million. I think we've guided $12 million to $14 million at the half, Raju. And look, we call out a similar sort of expected range for FY '21 on Slide 27. So $12 million to $14 million is our estimate at this stage early on in the year, so similar levels to what we guided in FY '20.

Okay. That's helpful. The next question, more on the revenue line is -- Tim and Patrick, we've probably talked about this before, is the effectiveness, I suppose, of some of the government incentive schemes, particularly the homebuilder. Are you seeing any early-stage positivity in any particular market as a result of its introduction?

I think it would be too early to call a benefit from homebuilder. I mean, I think -- I mean I saw some stats a couple of days ago that said something like 40,000 people have registered an interest. But so far, only...

247.

247 have actually applied for it. So I think it's a little bit early at the moment. I mean my concern on homebuilder, well, I think it's really well-intentioned, and I think it's absolutely needed within the industry. But I'm still concerned that there are too many restrictions placed on who can access it and who can't, and I think that's going to end up being a dampener. So it's going to be on homes less than $750,000. If it's a newbuild, it's got to be a reno that's greater than $150,000. You can only do it if you earn less than $200,000 as a couple, $120,000 as an individual, and it's all got to be contracts locked and loaded by December this year at the moment. So I'm not convinced at the moment that it's going to stimulate massive increase in demand. But I think what it will do is perhaps bring forward some people who go to already build or already buy somewhere, so renovate somewhere. All of a sudden, they go, "Well, let's go in and actually make sure we take advantage of that." So it may bring some people forward, but I'm still concerned that the restrictions are a little bit too onerous at the moment. And I suspect that the government will, in the coming months, look at this, and we've already talked -- I mean in the paper this morning, I think it's Master Builders talking about potentially trying to extend it into beyond December this year into next calendar year as well. And I think the government will look to make changes depending on what sort of uptick they get because there's no doubt that I think there will need to be some stimulus to continue to drive interest in a segment across FY '21 that is going to be challenged, given all the external factors that are playing out at the moment. And if you think about the net migration, that alone has the potential to drop something like a couple of hundred thousand people out of the population in terms of the growth that we won't see come through this year. So I applaud the government in what they're doing, but I think it may need to be modified to really capture some of the upside potential that they're trying to get out of it.

Okay. Just 2 more quick questions, if I may. The first one is around the commercial market share. You talked about things like Aged Care contribution significantly increasing over the year. But on the flip side, you've got major CapEx programs like in the airports and shopping centers going the other way. How do you sort of characterize your FY '21 for the commercial segment? Should we see further contributions from Aged Care or the impact from COVID-19 in places like Melbourne Aged Care market and so on that might stagnate it?

Yes. Look, I think there's no doubt -- I suppose the first thing to say is that we've got a very strong position in that commercial segment. I think the quality and reliability and what the nature of our brand and the fact that we have dedicated sales teams in that commercial area has meant that we've been able to continue to grow our share in that segment. We've got share in the 30s, 30% plus, as I've said before, in that area. The interesting thing, as I mentioned previously, that the majority of that historically has come from our sanitary ware and less from our tapware. So we will continue to drive that in FY '21 in terms of growing with sanitary ware and with tapware. But I think to the point that you just made, we've already started to see a mix shift within that order bank, where we're seeing less airport, less office at the moment, less retail. But certainly, growth in health, growth in Aged Care, education already started to be something that's surprisingly given what's happening in the universities. But I think as a function of touchless, in particular, so maybe a shift to the sort of hygiene solutions actually seem to be playing through already, Raju. So we expect that our order bank is up 16% higher today than it was or sort of the end of the year than it was the year prior. We would expect that, that sort of strength that we've got there to continue through regardless of what happens in the market. I can't predict what happens. All I think, we want to focus on is how do we win share in that segment, so that we're actually growing at a faster rate than a rate in the market or that segment. And I think we're well equipped to do that. Yes, as I say, Aged Care has been a significant focus for us over the past 18 months, and we're really starting to see the benefit of that now with how we've got traction and a lot of orders coming through within that particular subsegment.

Okay. And the very last question, if I may. Going to Slide 7, where you sort of disclosed the top 5 customer contributions in the context of growth. Have they been ranked in -- from customer A to customer B, have they been ranked in the context of how much revenue is generated in GWA? That was the first question, I suppose. And also...

The answer to that is a very simple no. We've deliberately not done it that way. And we've tried to -- what we wanted to do is share a picture of what was happening to be able to explain what was going on in the market without actually us sort of putting specific customers under scrutiny, so to speak. So I think the answer is a definite no. It's not done alphabetically. It's not done on volumes or anything like that. We make that point at the bottom of the slide. It's quite small.

Okay. Yes, sorry. So the follow-up question here is, I mean these are big customers. I mean you've got Reece and Tradelink and so on. What is driving such a sharp distinction in their respective performances via the GW -- through GWA, I suppose?

I think I'd break it down into probably the first half and second half. I think, the first half, as I say, was the fact that there was tough market conditions, anyway. The market was down around 6% in the first half. And then on top of that, we had the compounding challenge of trade destock that did occur across a number of customers. But as you can see, it was probably more pronounced in one than in many other customers. So that's the sort of first half. And then the second half is really a function -- if you look along the top, a number of those customers have a much stronger consumer-facing business. So in the second half, that whole consumer's looking to do something as they're in lockdown or isolated at home, that's really driven or fuel that DIY interest or necessity or just the desire to get out of the home, I suspect to get out of the house. So we're seeing there a strong growth from those customers who have a better consumer-facing proposition, whereas the ones at the bottom, customer D and customer E, are those that are much more trade oriented in their business around having a much greater number of trades going in the business, but not necessarily seeing consumers walk through the door or they might be exposed to more specific commercial segments such as airports or retail shopping centers may also have played into that as well. So it's having less consumer-facing propositions and much greater trade and commercial focus or specific commercial focus where they've actually maybe been overexposed to one particular center, whether it's multi-res or whether it's, let's say, airports or shopping centers. Does that make sense? I just want to...

Okay. That makes sense and very helpful.

Our next question comes from Mitchell Sonogan of Macquarie.

Tim and Patrick, can you hear me?

Yes, Mitch.

Yes. Just a quick one. On that July trading slightly ahead of pcp, can you just provide a little bit of detail on how that looks across Australia and New Zealand and the U.K.?

Yes. I mean, Australia, as I say, was up sort of low single digit, which is encouraging. New Zealand was up sort of double digit. And the U.K., which is probably the most surprising one for me, was also up sort of low single digit as well. So that's at a revenue line. And our team in the U.K., I'll just pick on that one first because we don't really talk about them. It's 7%of our revenue in the U.K. But we've done a very good job of actually coming out of COVID pretty fast, actually. I mean Patrick mentioned earlier that while we had staff furloughed in both New Zealand and in the U.K., we did have people who were still working in those markets, and a lot of the stuff they were doing was trying to work on recovery plans that when we came out of it, they were actually well positioned to come out faster. And I think in the U.K. that we know that we picked up a lot of share because many of our competitors have remained -- they've furloughed and continue to furlough a lot of their people, whereas we made the decision about 6 weeks ago, 4 weeks ago, and it was to actually bring people back to work. So we've actually sort of been progressing very well, and that's reflected in, I think, the performance in the U.K. The New Zealand position, I think, is, again, similar thing that they've had some good plans that they've activated with customers down in New Zealand. And then in Australia, it has been the same continuation of the question that Raju just placed around how are you doing on each of the different customers? And the ones that are more consumer-centric still are -- continue to perform strongly in July. And we've seen that interestingly today. Victoria, as yet, we haven't seen a significant drop-off so -- but obviously, it's early days in Vic at the moment. And I don't know -- we're not 100% sure what the impacts of the lockdowns down there are going to be. But it's something that we continue to monitor, and we'll have to adapt our business accordingly. But the net is overall, I'd say, it was encouraging across each of those 3 markets.

Yes. And maybe, Patrick, just a quick one. On that expected 5% pricing increase in August, are you getting any pushback on that? And do you know if your competitors have also pushed through price recently as well?

Yes. Look, I'll answer. I mean we've always said it's -- we've been able to take price in the market. And this time, we have got those prices away. But if I'm being honest, it was probably a little bit more difficult this time because when we announced it, I think the Aussie dollar was sitting at $0.56, $0.57 versus just under $0.72. So there has been a sort of why -- what's the justification. But as you saw on the slide last year, our price increase didn't cover FX. And we've always made the point that we don't necessarily look to capture it back in the year that will take a view over to maybe 2.5 years to actually get the FX and pricing back in. So we felt we needed to do that. I mean the key thing that we've done with our customers, though, is one thing, taking price. There's another thing then demonstrated to them how we can actually help them grow their business. So in -- each of our major customers, we've sat down with them and said, "Look, we're taking this price, but here's what we're doing around our product availability, improving the customer experience, here's how we want to drive growth for you over the coming year in terms of activities that we can engage within the store, with things that we can do to help your customers actually grow their business as well." So we've tried to do it as part of a broader growth package for customers rather than just talking about pricing isolation, and that's been the key thing. And to be honest, Mitch, I mean, look, put it bluntly, we're not the only ones who have taken price. It's been pretty much across every sector in the building industry. We've seen quite significant price increases play through over the last 3 months or so. So we're not Robinson Crusoe on this one.

Yes. And just a final quick one. Dividend thoughts into FY '21. Is that payout range of 65% to 85% expected to be maintained? Or were you maybe being more conservative?

Look, that's the current policy, Mitch, 65% to 85% of NPAT. There's certainly no current plans to change that at all. I think it's broad enough to sort of cope with most sort of scenarios or economic conditions. But look, obviously, that's a decision the Board will make in February as regards the interim. It really will just depend on -- overall on market conditions. But currently no plans to change that policy.

We have a follow-up question from Lisa Huynh of Citi.

Just a quick follow-up on the shifting nature of the order bank. You've talked about a shift towards Aged Care and away from office and airport. So I just want to know whether the sales or margin profile changes as you go through that sales mix shift, whether the number of toilets that go into a retail office tower changes versus Aged Care. And any implications from a margin perspective whether the cost to serve changes? That would be great.

Yes. It's a good question. I mean the absolute number, obviously, you're building a significant new building with -- for office centers, there's bathrooms on every floor. So the absolute quantum actually does -- it's greater within office than it would be in most Aged Care facilities. So in that sense, the answer is yes, you get a different number or value per order, if you like, from your customer. But there are a lot more smaller jobs within Aged Care. So when we look at our order bank, we look at it on a dollar value basis. So it might be $1 million job for an office, but -- for an office tower, but it might be $10,000, $100,000 jobs for an Aged Care facility or something or 10 Aged Care facilities. So the net-net, as I say, we've seen that we've actually been more than able to compensate for some of those short-term movements in some of those, what you call, larger scales up into the sort of more but lower value orders from things like Aged Care. So it doesn't really affect the absolute numbers, and I say, we've grown that really well. As regards to the profitability, commercial tends to be -- on a gross margin basis across the board tends to be more profitable at that level. And so the mix shift doesn't really change anything within that commercial segment. The bit that probably people don't see, though, in commercial is that you need a police, you need a team of people to manage a job through over a number of years. So there's probably a little bit more cost below the gross margin line in SG&A with our sales team requirements within that. But that's one of the reasons we believe we get good stickiness within that commercial segment. It's because of that dedicated sales team that we have within that commercial segment. So overall, net-net shifting sort of jobs get smaller that you get more of them, margin holding pretty flat regardless of segment within that.

Okay. Got it. And then if I could just sneak in one more. You've called out market declines of 7% in FY '21. I just want to confirm that's the number that you're using for your internal business planning?

Yes. the 7% is an Oxford economics number for the total construction market. We've included that just really as a reference point. Our assumption will be not necessarily exactly 7% for our addressable market, but it's fair to say it will be within that sort of probably 6% to 8% range currently. And obviously, as conditions evolve, we'll review that. But broadly, it's indicative of the view on the market.

I think...

You want to add something, Tim?

Well, I was just going to say, look, at the moment, I just think it's the uncertainty that we're facing because New Zealand is holding at level 3 lockdown at the moment, if, all of a sudden, that goes to level 4, then I think there are going to be significant consequences. And nobody can predict that. If you'd said even 6 months ago that we were going to go Victoria, and that would be going sort of where it is at the moment. I think, again. I think what we're seeing is such great uncertainty that any planning assumptions that we make today will potentially be wrong, not only next month, but potentially next week at the moment. So we -- as Patrick said earlier, when we were talking about what we're doing with the DT, we've done a whole load of scenario planning, and we keep having to look between each of those to work out where we think they're going to be at the end of -- not only the sort of year, but also the first quarter and then the first half as well. So it's very fluid at the moment. And I wouldn't want to anchor into that because it could end up being better than better. It could end up being much worse. I think it's the challenge that we all face.

Certainly, yes, which is really obviously why we've put out some assumptions there. But obviously, we haven't given guidance. I think you have to take your own view on the market.

Yes. Look, and our job is -- we don't know what our market is going to do, but the initiatives that we're putting in place are ones that will hopefully allow us to outperform the market, and that's the key thing. And I think we've said that quite some time that regardless of what the market does, we need to outperform that because we can't control the market. And I think in FY '20, we did a good job of managing and controlling those things that were within our control because there were so many things that were to be focused on the things that we could control.

We have a follow-up question from Raju Ahmed of CCZ Equities.

One more quick question. When we talk about R&R, repairs and renovations, we gravitate towards renovations, but this question is more on repairs. It is a reasonable part of your business. And it periodically should be defensive unless you tell me otherwise. I suppose the question is how defensive are you finding it right now? And what is GWA's ability to grow market share in that repairs sort of subsegment?

Yes. Let me -- so it's a good question, Raju. We're actually trying to look -- dig a bit deeper into that as we speak. So when we talk about repairs, just the people on the line, it might be something that you have a leaking tap in your laundry, and you need a new tap replacing, so which is very different from going in and sort of gutting the laundry or gutting your kitchen and putting a whole new bathroom in or whatever it might be. But it's repairing, in consumer, obviously, repairing a broken tape or leaking hoses or what it might be. In commercial, it might be actually about replacing a toilet seat in a pub that got broken on the weekend or something like that. So that, to your point, there are things that need to be fixed in the home, so -- or in a commercial premise. The interesting thing about it, though, is that when you look at the market, replacement seems to account for something like 80% of the volume of the transactions. This is just -- well, 80% of the transactions, but only about 15% to 20% of the actual value because if you're replacing a tap, it might be $170 versus doing a renovation, which is normally around somewhere between $3,000 to $5,000 a bathroom as a sort of an entry point. So what we're seeing is that I think is on this replacement, but it is more stable or consistent because people generally, you can't put off doing some of these things. However, I don't want to get too excited because it's actually only around 15% of that renovation and replacement value. And therefore, what's really important is getting after that renovation, which is driven, as I say, by housing turnover and others at any given time. As people buy and sell existing properties, that's when most renovation takes place. And so that remains the most important part of this particular segment. And well, yes, we do a good job on replacement generally. It's not where the lion's share of the value is, and that's what we want to go after in the renovation. Does that help? Just understand that difference between renovation and replacement and where we're at.

No, it does. Look, that's helpful to give us some quantum around the contribution of repairs to GWA. So look, that's helpful.

There are no further questions at this time. I'd like to hand the call back to Mr. Salt for closing comments.

Thank you very much, everybody, for attending the call this morning. Appreciate the time, and we look forward to catching up, probably what actually is going to be, I think, in the video at the AGM at the end of October. So we look forward to connecting with you then. Thanks for your time today. Stay safe, everybody.

Thank you for joining us. You may now disconnect your line.