The chief executive of GWA Group expects robust demand from residential bathroom and kitchen renovators to be a solid buffer against a housing downturn as he also eyes future upside from householders eventually adopting “smart” water usage technology.
GWA Group sells Caroma toilets and bathroom basins, Dorf taps and the Clark brand of kitchen and laundry sinks, and chief executive Tim Salt said there had been no let-up in demand from renovators amid a broader property price decline. “I think it’s fair to say that we’re seeing a fairly consistent trend in the market,” he said.
GWA shares have tumbled 31 per cent since mid-May when the stock was at $3.93. GWA is one of the stocks that investors have become more cautious about among a broad sell-off of companies with substantial exposure to the housing sector. Property prices have been falling in Sydney and Melbourne and the big banks are tightening their lending policies in the wake of bruising revelations from the Hayne royal commission.
But Mr Salt emphasised that GWA generated about 35 per cent of its revenues from residential renovations, and around the same level from commercial building new builds and renovations, and the natural replacement and upgrade cycle was an important driver.
“Certainly from our perspective we expect the renovation space to stay robust,” he said.
Mr Salt said credit tightening from banks and other lenders wasn’t likely to have a substantial impact either, with renovators recognising that refurbished kitchens and bathrooms delivered long-term value. “Some of it will depend on the size and scale of the renovation. We are predominantly a renovation and replacement business.”
He reinforced he was focused on building long-term value, and macro economic conditions did move in cycles. “We’re about controlling what we can control within the business,” he said.
Customers voting with feet
GWA is also stepping up a push into hi-tech smart water management systems for office tower landlords and shopping centre owners, which used Internet of Things technology to enable real-time data analysis and remote monitoring. Mr Salt said a new Caroma Smart Command system for commercial bathrooms would help conserve water but also had an economic payback.
“This has a very attractive payback for the building owner,” he said. Advances in technology in water management had been gathering pace, but had perhaps been overshadowed by a focus on cutting high electricity bills.
Shopping centre customers were voting with their feet. “These things have got a payback on it. The cost benefits are definitely there but it’s the customer experience that is very important too. There’s a real battle going on”.
Mr Salt said simple elements like cleaning of bathrooms were changing fast from historical models. “Historically, cleaning has been on a routine basis rather than an as-needs basis,” he said.
He said the smart water system would become the norm in residential bathrooms and kitchens of the future, but it would take some time. “We do believe this will migrate into consumer and residential. You will still be measuring this in years”.
Mr Salt said there were potential applications in overseas countries for GWA with the new technology, including the United States, Singapore, some parts of the Middle East and tier-one cities in China, but those plans were at an early stage.
Mr Salt has been at the helm at GWA since early 2016. He joined GWA from spirits maker Diageo, where for seven years he ran the Australian operations of the global drinks firm, which sells brands including Johnnie Walker and Smirnoff.