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Metroglass downgrades profit again

Monday 18th March 2019

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Metro Performance Glass has cut its profit guidance yet again and now expects annual operating profit will be about 12 percent lower than the last time it downgraded in November.

It says earnings before interest and tax for the year ending this month should come in at about $25 million, down from the November guidance of $28 million, and is blaming a poor performance in Australia, the same reason it gave for the previous downgrade.

As well, the company will be writing off $7-10 million from its intangible assets to recognise the poor Australian performance.

In August, at the annual shareholders’ meeting, Metroglass said ebit would be at the lower end of its $30-33 million range.

“Australian Glass Group has had a transformative but very disappointing year overall,” chief executive Simon Mander said in a statement today.

“We made significant changes in the business and, while resulting financial improvements have lagged our expectations, the business is working to a clear plan and making good progress operationally.”

Mander joined the company on Nov. 19 last year, replacing Nigel Rigby who left the company last March.

Metroglass shares closed last week at 52 cents, valuing the company at $96.4 million. While off the low at 37 cents in November, it’s a long way from the July 2014 float price of $1.70 per share.

“In the second half of the financial year, we markedly improved our service delivery, reduced reworks and have had a much more stable and engaged workforce,” Mander says.

“We’re firmly focused on winning back the trust and confidence of our customers who were impacted by variable service levels in 2018,” he says.

“Whilst our internal execution has improved, the business has considerably further to go and we’re driving towards a clear set of milestones. With improved operational performance and active marketing programmes in place, AGG anticipates revenue growth in the coming year, despite softening lead indicators of construction activity in Australia.”

AGG’s customers are primarily new builds and alterations in South East Australia, which it says are less exposed to the significant declines shown in multi-residential approvals across Australia.

Metroglass also expects to benefit from legislative changes supporting double glazing in Australia.

The company has been downgrading its expectations from its Australian business with monotonous regularity since it bought it for A$43.1 million in September 2016.  

In New Zealand, where Metroglass claims 55 percent market share, Mander says the company has achieved sustained improvements in customer service and operational performance and the results are in line with expectations with gross profit margins improving.

He says the company is on track for capital spending of about $8 million and debt reduction of about $7 million for the year.

Debt at Sept. 30 was $95.2 million.

The Metroglass float raised $244.2 million, with private equity owners Crescent Capital and Anchorage Capital taking $230.5 million of the proceeds.

Another private equity firm, Bain Capital, nabbed an 11 percent stake late last year for its Special Situations Asia Fund.

Metroglass will release its results for the year on Thursday, May 23.


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