Some of my observations from today's result:- In 2019, RWC has...

Some of my observations from today's result:

- In 2019, RWC has been investing in John Guest's working capital to reduce the arrears in delivery of orders. This has resulted in the arrears down 75% compared to last year. This investment caused RWC's operating cashflow generation to be negatively impacted. This one off investment in working capital shouldn't need to be repeated in FY2020 and the operating cashflows will revert to a normal level.

- Assuming operating cash flow conversion of 90% (the rate achieved in 2nd half of 2019) and EBITDA for FY2020 at the lower end of the guidance, i.e. $280m, then operating cash flow should be around $252m.

Operating cash flow: $252m
minus Capex $70m
minus Interests paid $22m
minus Dividend paid $71m
minus Tax paid $45m
minus Treasury shares purchased $7m

Leaves us with $37m available to be used to reduce net debt.

- Management didn't achieve the targeted EBITDA level to earn the financial component of their STI remuneration. Although the personal KPIs component of the STI was achieved, management suggested to the Board that no STI award be granted. This gesture from the management gets my big tick of approval.

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Overall, notwithstanding the absence of Munz family from the share register, I'm still happy to continue to hold. There are still very powerful factors helping RWC business moving forward well into the future:
- Continued acceptance of PTC products by younger plumbers
- Decreasing number of available plumbers needing to service a bigger market
- Faster application time than other alternatives
- Further entry into the commercial and new development markets
- Further push into Continental Europe

The only thing that worries me a bit is the reference to possible further M&As in the future. I think management need to consolidate and prove that the last two (Holdrite & John Guest) really work before embarking on further M&A shopping spree.