Reece Limited (REH)
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.