Reece Lim­ited (REH)

Money Magazine Australia - - SHARES -

Mel­bourne-based plumb­ing sup­plies com­pany Reece traces its ori­gins back to 1919, when founder Harold Reece started sell­ing his prod­ucts from the back of a truck. It has grad­u­ally ex­panded from its Vic­to­rian roots and is to­day the coun­try’s lead­ing sup­plier of plumb­ing prod­ucts, with some 600 stores. It has also ex­panded into re­lated fields, in­clud­ing a net­work of stores in the heat­ing, ven­ti­la­tion, air­con­di­tion­ing and re­frig­er­a­tion sec­tors, and spe­cial­ist stores for land­scape and agri­cul­tural in­dus­tries. The com­pany also op­er­ates the Me­talflex air­con­di­tioner and heat­ing sys­tem distri­bu­tion busi­ness and the Ac­trol re­frig­er­a­tion and air­con­di­tion­ing parts whole­saler.

Reece’s op­er­a­tions are quite de­pen­dent on the hous­ing, home ren­o­va­tions and com­mer­cial con­struc­tion mar­kets, and it could suf­fer in any down­turn. How­ever, what makes it in­ter­est­ing is its $1.9 bil­lion ac­qui­si­tion in 2018 of the US plumb­ing sup­plies com­pany Morsco, which has vir­tu­ally dou­bled the com­pany’s size.

Texas-based Morsco is a lead­ing dis­trib­u­tor of com­mer­cial and res­i­den­tial plumb­ing, wa­ter­works, and heat­ing and cool­ing equip­ment, with 171 branches and show­rooms in 16 states. Reece hopes to achieve sig­nif­i­cant or­ganic growth from the busi­ness, as well as us­ing it as a base for fur­ther ac­qui­si­tions in the high­growth US$80 bil­lion US plumb­ing, wa­ter­works, heat­ing, ven­ti­la­tion and air­con­di­tion­ing mar­kets.

Reece is a con­ser­va­tive com­pany with a sound record of long-term growth, and in­vestors should cer­tainly be watch­ing this lat­est move.

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