Reliance Worldwide Corporation Ltd

ASX:RWC

Earnings Call Transcript 2021-Q3

[Operator]

Good day, ladies and gentlemen, and welcome to the RWC Third Quarter Trading Update. Today's conference is being recorded. At this time, I would like to turn the conference over to Heath Sharp. Please go ahead.

[Heath Sharp, Group CEO, MD & Director]

Good morning, everyone. Thanks for joining us for our Q3 update. This is Heath Sharp, and with me is our CFO, Andrew Johnson. We are connecting today from Atlanta. You will see that we have released an update to the ASX this morning. I'll step through the highlights before opening for Q&A. Third quarter trading was exceptionally strong. Revenue was up 25% over the PCP on a constant currency basis and up 14% on a reported basis. All regions achieved very strong results. In the Americas, we had a record quarter with constant currency sales growth up 39%. The this is ahead of the trend we have seen in the preceding quarters. We saw a dramatic impact due to the freeze in and around Texas. This impact was a lot larger than we had first anticipated. Nonetheless, our preparation and execution allowed us to service this demand incredibly well. We started to see the impacts of the freeze towards the end of February, and it continued right away through March. And we are still seeing the remnants of that increased demand in our numbers in April. I would remind you that March last year in the Americas was a very strong month for us. It included the load-in of a new stop valve range into Lowe's and was, in fact, a record month at that time. So to be substantially ahead of that this year is quite an achievement, and we can attribute that in a large way to the impact of this freeze event. We estimate that of the 39% growth we experienced in the quarter, over half of that can be attributed to the freeze event in the U.S. Critically though, underneath this freeze demand, North America also demonstrated the continuation of the strong momentum in repair and maintenance that has been evident since the middle of last calendar year. In the Asia-Pac region, we continue to see growth with volumes driven by a robust new housing construction market and ongoing repair and model -- remodel activity. Of course, our factors in Australia supply significant volume of brass products to North America. As such, our Asia-Pac operations also benefited from the strong demand that we have been experiencing in the U.S. EMEA, again, recorded a strong quarter. Trends in the U.K. plumbing and heating market are very similar now to those we've seen in other markets we are in, with strong activity in the repair and remodel sectors. Continental Europe sales growth is more subdued, reflecting the commercial orientation of the fluid tech products, which are centered around water filtration and drink dispense. Nonetheless, we have recorded positive growth in the U.K. and Continental Europe for the quarter. Also driving sales growth in EMEA has been increased exports of Fluid Tech products to both Asia Pac and the Americas. In terms of April trading, we have seen momentum continue in all our markets with no sign of a slowdown. As we noted in our release today, April last year was a relatively soft month for us following a very strong March. So we were reporting very strong comps on a like-for-like basis for the month of April to date, but we are cognizant of the relatively weak period in the prior year. I would note, as we have previously, that we are currently seeing very high demand for our products, especially in the U.S.A. And in the months ahead, we will continue to watchpoint of sales data closely. We will look, in particular, for evidence of a decline in remodel activity once vaccinations reach a level where people again start traveling internationally. And of course, the impact of the freeze this year is significant, and we will need to back that out of the volume before contemplating our revenue profile for FY '22. I would, though, stress that none of this changes our view of our long-term growth. Our strategy remains unchanged. And as such, how we go about growing revenue remains valid. You will recall, we have spoken many times about our desire to achieve above-market growth in all our regions. In our core repair and maintenance market, this means a long-term average of 2% to 3%, depending on market conditions, and we will always aim to put a point or 2 of growth on top of that by outperforming the market. We have a decade's long track record of achieving this through product leadership, deep-end user insights, strong distribution relationships, outstanding brands and the industry-leading execution. On top of this, our ongoing goal is to achieve some form of product or customer initiatives in any given period to push our growth even further above-market growth. We will continue to do this. Of course, we have had a period of exceptional demand, which will leave our base revenue at a higher plateau than we would have thought 12 months ago. This is a great position, and we can continue to apply our strategy and build our future growth upon this new plateau. As we have discussed, the current market demand, prompted in part by COVID-related influencers, are consuming the bulk of our time and that of our customers. That said, we have been active on future product and customer initiatives and are very confident that we will have activity to report in this area in the next 6 to 9 months. On the input cost front, we are pleased with the progress we've made so far in implementing price increases to mitigate rising input costs, in particular with brass. We indicated previously that we expect to be able to passthrough the impact of metal commodity pricing and other cost increases via price increases. We are in the middle of the process, so commercial confidentiality prevents us from elaborating further. Other than reiterating, the process is progressing as expected. Ultimately, our expectation remains unchanged. Passing through the impact is the only way to fully mitigate the brass and other cost increases, and our expectation is that we will be able to do so. We iterate that position today, albeit with a little more confidence based on progress to date. Finally, I really need to note that this has been an incredibly demanding period, following an already very challenging 9 months. From an operational perspective, the strong volume growth we've seen in the third quarter has meant that all our facilities have continued to operate at a very high volume. Our teams around the world have really had to step up, and they have done so admirably. Their execution focus and capabilities have allowed us to turn this increased demand into the incredibly strong trading numbers we are able to present today. I really could not be more proud. It is approval, frankly, to be able to work with such a capable and dedicated group of people. So let me leave it there and open it up to any questions that you may have for Andrew and me.

[Operator]

[Operator Instructions] We will now take our first question from Peter Wilson of Crédit Suisse.

[Peter Wilson, Associate]

Just on the Texas freeze event. So you mentioned that continued into April. In terms of, I guess, the inventory rebalancing and all the repair work, do you think it will be contained in April? Or could you see kind of stronger sales continue -- that the influence continue later into the year?

[Heath Sharp, Group CEO, MD & Director]

I think, Peter, the freeze-specific influence, we'll have that wrapped up in April. I mean it's the tale of it, as you say, with people just balancing inventory and reviewing what they've got on the shelf and getting it right. So it's -- clearly, we're coming to an end of it. But look, separate to that, the ongoing underlying demand, the general uptick in repair and maintenance is certainly continuing through this month.

[Peter Wilson, Associate]

Got it. Okay. And then APAC, EMEA, you attribute much of the strength to internal sales for the U.S. Can you give us an idea of how the external sales in those regions are going?

[Heath Sharp, Group CEO, MD & Director]

Look, it was -- that result was predominantly driven by external sales. I think we were pleased to see a bit of a return to that intercompany shipments, but what really drove the market, particularly, certainly in Asia-Pac and EMEA locally was the U.K. plumbing and heating market, the core markets, so.

[Peter Wilson, Associate]

Okay. And then on the cost passthrough. Last time we spoke, you -- for the Americas, you said that, I guess, a reasonable guide would be that you expect to hold on to about half of the margin increase since FY '20. Is that still roughly appropriate?

[Heath Sharp, Group CEO, MD & Director]

Look, I think so as a minimum level, volume makes a big, big difference. If this momentum continues, then going forward, we would expect the margins to get closer to the first half than what they were back in '20, the key is, of course, the momentum going forward. And as we talked about the cost increases, we've got to put back into the business, which will take a little bit off.

[Operator]

[Operator Instructions] Please go ahead.

[Peter Steyn, Analyst]

It's Peter Steyn speaking. Just one key question for me. You've stressed the brass costs. Could you give us a bit of a sense of how you've gone in the U.K. with John Guest on resin increases? Obviously, those were spiked subsequent to the freeze event. So just curious to get your views there.

[Heath Sharp, Group CEO, MD & Director]

Sure. So we -- look, the market generally, and we also moved prices back in February. And we were seeing movements in resin prices even ahead of that. So we moved to help cover that. I don't think resin prices have stabilized at this stage. The market, generally, we've seen a few people over there move on prices again, and we're having a look at it as to whether that makes sense. But by and large, I think what we did in the first instance goes an awfully long way to covering what we needed to cover. But we continue to monitor it and judge what we do next.

[Operator]

[Operator Instructions]

[Keith Chau, Building Materials & Packaging Analyst]

It's Keith Chau from MST Marquee. So just to follow up quickly on Peter Wilson's question, just on the margins. Sorry, did I hear correctly that the expectation is to get closer to the first half margin with a bit of giveback from the cost issues that have come through?

[Heath Sharp, Group CEO, MD & Director]

Look, that's certainly the goal. I think in this quarter, we would expect to achieve it. If the momentum continues through the next quarter, again, that would be our expectation, offset with just a little bit of additional cost coming back in travel and trade shows. Heading into '22, the key question remains the level to which the momentum continues that going forward. If the momentum stays really, really strong, then I would like to think we can get those margins over halfway between the 20 number and the first half number and closer to the first half, but volume makes a huge difference.

[Keith Chau, Building Materials & Packaging Analyst]

Yes, indeed. And I mean, it doesn't seem like there's any signs of this momentum slowing. We've heard it from the distributors that demand remains resilient. Obviously, the world hasn't reopened fully yet. But judging by your first quarter number, and particularly given the comping of that loaded and lows, I mean is there anything that would, at this point, make you think that there could be an easing toward the end of the year? And I guess to that point, just keen to understand why full year guidance wasn't provided given this demand resilience? If you can talk around them, potentially some of the key risks to full year earnings for the couple of months ago?

[Heath Sharp, Group CEO, MD & Director]

Sure, sure. So I guess having looked through the craziness of sort of 9 or 12 months ago, we kind of believe that anything is possible with COVID and what might happen. So there's a little bit of caution there, I guess, underpinning our thought process right now. I would say the momentum, as we discussed -- put the freeze aside for a second, the momentum, as we discussed earlier for the first quarter continued from the first half. April, no sign associated with slowing. I'd like to think that we get to the end of this financial year with that momentum continuing. I think vaccines are going to roll out fast enough to impact that even if they do, which is obviously an unknown question. So I guess what that leaves us with is then the freeze, which is a number we didn't expect, and I don't think anyone on the call expected. So that clearly is going to be incremental to expectations. And I guess that's how I'd view the full year at this point. And into '22, then we start to comp those numbers, so we need that momentum to continue as much as it can to get a good comp particularly the U.S. going forward.

[Keith Chau, Building Materials & Packaging Analyst]

So that freeze event, Heath, do you think the strength of what we saw in terms of revenue benefit, do you attribute that to what has turned out to be a surprisingly large event, I think, in prior discussions, it's been around -- the freeze event being isolated to the south, therefore, the benefits might not be as great. But is the strength from your sales, does that speak to the size of the event or does it speak to your product mix? Is this something fundamentally changed or what you're selling into the market that perhaps has been able to capture the benefits of that freeze more than you would have thought prior?

[Heath Sharp, Group CEO, MD & Director]

Yes, I think that's a really good question. We've obviously looked at this really closely. I think there's 2 main issues there, and you kind of touched on both of them, really. So the first one is, look, it was unprecedented. This was more intense than anything we've seen previously, for sure and certain. And I think looking back, there were 4 or 5 days in a row where the temperatures stayed below freezing. So 0 Celsius, 32 Fahrenheit. And even during the middle of the day, it didn't rise above that temperature. So that is a deep solid freeze in a southern state where the plumbing is not set up for it. And what -- best we can tell, the intensity of that meant in any given street, whereas previously you might get, I don't know, one house in the street that has a broken pipe, it felt like the whole street was impacted. It was one house in the street that didn't have a freeze impact and a burst impact. I think it was just really intense, first thing. Second thing, I think we've got the product on a lot more shelves now, including both the big-box retailers there, plus all the hardware stores there, plus a really good wholesale representation there. So if you compare that availability of product now to -- back in 2018, and certainly back in 2014, it is far, far greater than what it was, much -- many more outlets with more SKUs on the shelf these days than what they were previously. So just more attention to it. And we did manage to mobilize a bit of inventory the week -- the week before that weekend when it hit. So I think we had a lot more product available in an area where the intensity was just -- it was quite amazing. And I think those 2 things combined led to the number. And look, the other thing that was different, how that played out is when we resupplied, and that took us a while because you remember, we talked about that first week after the freeze, not being able to get product in there. The open question then was when we do resupply those stores because everything that was in the stores went really quickly, of course, then they're empty for -- the shelves were empty for a number of days. The question -- the open question back then was when we did resupply, how quickly would that come off the shelf? And the answer that we subsequently saw was pretty quickly. So we had to resupply a couple of times, and that is a little bit unusual. And I think that speaks to the intensity of the impact of the weather. I think they are the 2 big things that have moved that needle such a great amount.

[Keith Chau, Building Materials & Packaging Analyst]

Okay. And just one more follow-up before I'll let someone else have a go. The -- obviously, copper prices continue to go up so your brass costs are continuing to rise. In this kind of environment, last time we spoke, the result couple was at $8,800 a tonne last night, it hit, I think, $9,500 a tonne. Are you confident that even in this kind of cost inflationary environment, you can get all of the cost increases through or pass-through into price?

[Heath Sharp, Group CEO, MD & Director]

Yes. Interesting you mentioned the copper price. We've noticed there seems to be an impact. Just the 2 days before we talk to you guys, the price escalates. But as we said at the half is this is going to have to be dynamic. This feels like it fell back in, I don't know when it was 2005 maybe, where it was going to just have to be a dynamic reaction across the whole market. That's how this year is feeling. So does that mean 2 or 3 moves in pricing during the course of a period or the year. It could do, does that mean more customers in due course will end up on an indexed or rise and fall price structure? That's also an option. So I think we will just need to be really dynamic, really flexible in dealing with what's going to be quite a challenging period or seems to be. But we're not alone. Everyone's faced with the same thing and contemplating the same issues. So it's not as we're the only ones who have to deal with this and have these discussions. And that's certainly helpful.

[Operator]

We will now take our next question from Abraham Akra of Jefferies.

[Abraham Akra, Equity Associate]

Just firstly on the sales update you provided. You mentioned briefly that sales will be well up on April versus the PCP. Can you give us some color on how they are progressing compared to the previous month in March?

[Heath Sharp, Group CEO, MD & Director]

Look, the only real difference is that the big, big impact of the freeze has pretty much come off. As I said, there's some sort of remnants of shipments there and a few sort of backorders we're getting out when related into the freeze. But the momentum in all the regions right now feels the same as what it did mid-March, same as what it did mid-February, mid-January even. So it's continuing -- the momentum is continuing. It just is a different period from a comp point of view. And I think we posted at the end of the '20 year, we had month-by-month revenue for each of the regions. You can see in there that April was just a softer month last year than March. So that is what's going to make the comp better, but the momentum feels the same in April right now as it did in March this year.

[Abraham Akra, Equity Associate]

Yes. Got it. That's helpful. Also then back on the Keith's question on inflationary risk in terms of commodity pricing exposures. Do you have any further thoughts on hedging away any of these risks in the future? Have any of your thoughts changed from that perspective?

[Andrew Johnson, Group Chief Financial Officer]

This is Andrew. I think we've mentioned at the half that we're committed to looking at hedging. We purchased brass through third parties so hedging that transaction gets somewhat complex, but we're working our way through it and hope to land on where we're going to be in the next month or so.

[Abraham Akra, Equity Associate]

Yes. Also, in terms of your supply chain excellence in withstanding the surge in demand across the Americas and then with the freeze event. Can you talk about your DIFOT scores and also there you were stocked out on any products during that period? Were you able to satisfy the demand in the channel throughout?

[Heath Sharp, Group CEO, MD & Director]

Yes. Look, really good question. So DIFOT during the quarter was not normal. It was below normal. And when you look at that level of demand and what was happening, I mean, when you're going into the period, it was going to be tough. And supply chain is difficult around the world right now for all sorts, cardboard, plastic, whatever else. So it's a really tough period. The key from an overall point of view, though, is just being on top of what's happening in the stores, working with your customers to get the right product in the right location, and we can mobilize and do that really quite well. I think it's a real differentiator for us in the marketplace. And really it comes down to -- the DIFOT numbers start to become a bit meaningless in a period like this, it's how well you do you react in relation to specific circumstances and the Texas freeze was a great one. I mean, I have no idea what the DIFOT number is because it doesn't matter. We will be on the phone every hour of the day with our customers to make sure we were serving them. Yes, we were. And I think coming out of this period, we have absolutely bolstered our reputation for service and delivery and customer support. So it's been a great period from that point of view. But it was abnormal in terms of numbers and delivery performance and out of stocks and so on, for sure.

[Abraham Akra, Equity Associate]

Yes. That's helpful. And lastly from me before I pass it along. The freeze has been impacting sales and market. Did you see any impact from the stimulus checks that were rolled out across the U.S. in terms of demand picking up furthermore?

[Heath Sharp, Group CEO, MD & Director]

It's -- look, this is a bit sort of second-hand for us or anecdotal for us. We watch closely the statements by the retailers and the hardware stores and what they're seeing. And they are indicating that there is some benefit to them as a result of the stimulus check. Is that a benefit for home improvement or appliances or plumbing? It's -- we don't know. It didn't hurt. But I think when you look at the run rate of the momentum, it didn't feel that different. It's not as though it went from a 20% to a 30% pop during that period, it stayed about the same rate. So that's about all I can point to, I guess.

[Operator]

We will now take our next question from Tim Evans of Morgans Financial.

[Tim Evans]

Just a question, at the half yearly, you spent some time going through a capital management plan for the business going forward. I gather you would have needed to get this trading update out before you initiated the buyback that you mentioned. But -- and I'm guessing your net debt is even further below your target range. Just interested in your view on the buyback going forward.

[Andrew Johnson, Group Chief Financial Officer]

Yes. This is Andrew. I think that from a capital management perspective, our Board hasn't made a commitment yet on a buyback. And what they have committed to is M&A. And I think that's our focus. Once we kind of work through those resource needs, then we'll consider a buyback when we get to that point. But at this point, we haven't made a decision in terms of if we'll have one.

[Heath Sharp, Group CEO, MD & Director]

We also sort of make the comment going forward. Well, I think, probably connect with the market every quarter to give an update, particularly at the moment when there's so many moving parts and so much happening, I think it's helpful, so.

[Operator]

I will now hand over to Phil for further questions on the line.

[Philip King, Group Investor Relations Director]

Thank you, Laura. There are 2 questions online. The first is, we've mentioned that we expect to offset input cost increases through price increases. Can you please tell us what price increases required across the business to offset the higher copper and resin prices?

[Heath Sharp, Group CEO, MD & Director]

What -- I guess, that goes back to what we're talking about in the half, Andrew, with the total impact of the cost level.

[Andrew Johnson, Group Chief Financial Officer]

Yes. And I think we have to be a little careful because this does get into commercially sensitive areas. But look, I think that kind of given where copper and zinc has been, there's a range that's going to be high single digits to low double digits, but it really depends on the customer and the product that we're referencing.

[Heath Sharp, Group CEO, MD & Director]

And look, I mean it's kind of -- it's very definitely on a -- look, I was going to say a range-by-range basis. It's really a SKU-by-SKU basis. What we're doing with steel products is different to stainless steel, is different to brass is different to plastics. So that range probably is a couple of percent up to, I don't know, 12% or 15% depending on the item. So the overall number is -- we're trying to -- 9,000 is what $20-odd million total, $30 million. We've got to offset across the whole business, and we're working through that right now.

[Philip King, Group Investor Relations Director]

So the next question is, could we please provide an update on current manufacturing capacity and accompanying CapEx program?

[Heath Sharp, Group CEO, MD & Director]

Yes. I think that's a really good question. Factories are busy. I think the factories are coping pretty well. It's -- in some cases, it's more getting hold of the raw material imports, whether that be something basically like cardboard or a plastic bag is supply chain is probably more of an issue than the factories themselves. But we are looking closely at capacity right now. And we have to take the view that this momentum will continue. From a production planning and from a capacity planning point of view, we have to believe that the volume will -- the momentum will continue as it is. We talked about CapEx quite a bit and where we did pause some last year, which is going to make this year light on CapEx or lighter than what we expected. Some of that will definitely carry over into next year. And I think there's probably some additional capacity we'll put in next year based on the current volume, the current run rate. But the total amount of CapEx across those 2 years is going to be in keeping with the sort of the guidance that we've given previously in terms relative to sales volume, and it will be directly in relation to the volumes we need -- the capacity we need for the volume run rate we're seeing right now.

[Philip King, Group Investor Relations Director]

So final question online, and I think we've got one more on the call. Are we able to provide an indication of how our penetration into new construction markets in Americas and EMEA is coming?

[Heath Sharp, Group CEO, MD & Director]

Look, I don't think it would have changed a whole lot over the last period. I mean, our products are heavily repair, maintenance and remodel-focused, and that's really been the driver over the last few months. I mean, our new construction is really strong in all parts of the world, and that doesn't hurt us, but it's not really the driver of our business. I don't think that's changed in this period.

[Philip King, Group Investor Relations Director]

Nothing more online. We've got one more on the call from Brook.

[Operator]

[Operator Instructions] We will now take our next question from Campbell-Carwford of JPMorgan.

[Brook Campbell-Crawford]

Just on the impact to sales from the storm, you provided sort of a bottom end saying kind of half the growth rate being due to the storm. Are you able to provide sort of a cap to that kind of commentary as well? Is it less than 2/3 of the growth? Just want to try and understand a bit better how's that range?

[Heath Sharp, Group CEO, MD & Director]

Look, I guess if it had been beyond 2/3, we probably would have said 2/3. But look, it's in that range. It's actually getting an exact number is a little bit challenging. When you look at the size of that -- the change in just the demand generally, plus the freeze on top of it. It's getting within a few points, is as close as we will -- as close as we will get. I guess the way we look at it, as best we can, we back out that freeze. We also adjust velocity of the rolling of the products into Lowe's. It all stacks up. If you apply that first half change in the revenue for Americas, which is 22% against first quarter last year Americas, less that roll in. It all -- it all makes sense. It all kind of adds up so that we haven't -- that momentum doesn't feel -- underlying momentum doesn't feel like it's changed. But look, putting our final number on that freeze, as I said, we've still got a few back orders to deliver, a few orders coming in. It will take the rest of this month to get a final number on it.

[Brook Campbell-Crawford]

No that's understandable, probably not easy to estimate. Just one other question. You talked about being in the process of going through the pass-through on pricing. Just want to understand really what you mean by being in the middle of the process. Is it the case that you've announced kind of a first round and you're going back for a second round as you suggested earlier? Or is this there some customers you get to talk to? Is it -- yes, just trying to understand really what's left to be done?

[Heath Sharp, Group CEO, MD & Director]

Look, every customer has a different notice period for price changes. Every customer has a different process form you've got to fill out. They then have their own internal processes where they posted around various analysts and whatever else they do and out of each stage questions come, and we get the questions and we answer them and they go back through their analysis and so on. So it really is quite different for each customer. It takes from giving notice of the date that you're going to move price to getting there just the hoops you've got to go through. I would say what we're seeing right now is completely expected. None of the questions we've been asked were unexpected, none of the reactions have been unexpected. And it just -- it feels like the same process we've been through previously that we -- when we done this.

[Operator]

While waiting for further questions in queue, I'm handing over to Phil.

[Philip King, Group Investor Relations Director]

One more online. Thanks, Laura. This concerns Europe and changes to regulation around climate and whether that has any implications for us and our manufacturing operations. I know Polly Parker have referenced changes there sort of aware of in terms of some of the resins they use for some of their products, et cetera.

[Heath Sharp, Group CEO, MD & Director]

Okay. Look, at this point, it doesn't look as though will be impacted, but obviously, we're very close to that. And looking at what those implications, if any, are. But at this point, it doesn't seem to be the case.

[Operator]

We'll now take next question from Keith Chau of MST Marquee.

[Keith Chau, Building Materials & Packaging Analyst]

Andrew, sorry, just a quick follow-up on the price increase. You mentioned the range of price increases that you'd need to recover costs anywhere between Heath, I think you called out low single-digit to maybe 12% to 15%, something to that effect, depending on the SKU. So do I take it that the discussions you're having with customers revolve around those ranges as well? So are you matching like-for-like what you're requiring to cover costs through your negotiations with your customers?

[Heath Sharp, Group CEO, MD & Director]

Yes. Look, I guess so. I mean, we -- back to the question, Brook just asked about the process. I mean, we might deal with any given customer with 2,500 or 3,000 SKUs through line items. We'll group them up as best we can, and we'll apply -- we're trying to offset commodity costs here. This is not a marginal increase activity. So each product range has a different impact due to commodity. A bright valve has a different percentage of copper in it than a brass setting. I mean, the price increases that we're pushing through reflect that. So it's a really a mechanical process and whatever that percentage is, the range we go is sort of the range that's dropping out, if you like, on that spreadsheet. So yes, it's very much in relation to specific products, given their material maker.

[Keith Chau, Building Materials & Packaging Analyst]

And then a follow-up for Andrew. Andrew, I think in one of the prior questions, you mentioned M&A being the key priority with respect to capital. Can I try to get an understanding of what the process has been internally, whether the company is actively engaged in the M&A potential acquisitions at this point in time?

[Andrew Johnson, Group Chief Financial Officer]

Well Keith, I'll kind of restate my answer. I think the priority is funding growth in the business, and that's supporting our manufacturing capacity, as we've mentioned, but it's also M&A. And M&A has always been an important part of our growth story, and I think it will continue to be an important part of how we grow this business going forward.

[Operator]

We'll now take our next question from James Casey.

[James F. Casey, Senior Research Analyst]

I just wondered if you could quantify the sales growth you're cycling in May and June this year. I know you included a chart in the FY '20 results, I think it was. But are you able to provide some numbers around the cycling impact.

[Heath Sharp, Group CEO, MD & Director]

Look, I haven't got that to hand. I would -- if humanly, let me generalize here. So it was really starting in May last year in the U.S. It's very different by region, James. In May last year in the U.S., we started to see the revenue pickup. So May was up on '19. June was up more on '19. July was up even more on '19, and then that kind of sets the run rate for the rest of the half. U.K. was just the other way around. April fell in a hole, I think we were, what, 35% or 40% of the prior year in the U.K. So look, our comp in the U.K. or EMEA for April and May will be really strong. Based on the current run rate and what happened last year is going to be a great comp. Whereas the U.S., the comp is going to get harder from April, certainly, May, June and then July, we're comping over that full sort of, if you like, the 22% run rate that we talked about for the half. So that will be a tough comp, great position to be in. It's -- if you compare back to '19, from a 2-year point of view, that's a great move. So it really is going to be quite different based on the region.

[James F. Casey, Senior Research Analyst]

Yes. Okay. It was mainly the U.S., I was interested in what you're cycling there. Just one final thing. What was the Aussie dollar sales growth rate from the U.S., so translated back?

[Heath Sharp, Group CEO, MD & Director]

For the quarter?

[James F. Casey, Senior Research Analyst]

For the U.S. market, yes, so you've got 39% constant currency.

[Heath Sharp, Group CEO, MD & Director]

That's a really good question. I haven't got that to hand.

[James F. Casey, Senior Research Analyst]

I will adjust that with Phil after the call.

[Operator]

I'm now handing over to Phil. Please go ahead, Phil.

[Philip King, Group Investor Relations Director]

Just one last question online, and then we can wrap it up. Are our company systems more sophisticated today than they were when previously facing such significant price increases?

[Heath Sharp, Group CEO, MD & Director]

For sure. Yes. For sure and certain. I think the system is more sophisticated, the cover of the people, the number of people we've got, there's the scale of the business is different. So yes, without doubt. That said, on the other side of the ledger, it's the same process that we're dealing with as we've dealt with in the past. So I think we're better equipped to deal with it, but the process from the other end, hasn't changed, and that's, I guess, reassuring.

[Philip King, Group Investor Relations Director]

Thank you, Heath. No more questions online or via the phone call either.

[Heath Sharp, Group CEO, MD & Director]

Okay. Well, that being the case, I think we will wrap that up for the day. I really appreciate everyone's time tuning in, and we look forward to getting back to you later in the year with our full year result. Thank you very much, everyone.

[Operator]

Thank you, all. Ladies and gentlemen, this concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.