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Metro Performance Glass says new strategy is about going back to basics

Thursday 24th May 2018

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Metro Performance Glass said earnings will be relatively unchanged this year as the company beds in its "back to basics" strategy. 

Earlier the company presented the outcome of a strategic review and said it is shifting from "expansion and diversification, to optimisation and enhancement of our internal capability to execute," it said. 

What that means "is we have a mindset of back to basics, a real focus on control and discipline through our plants and glaziers, and the market plateauing (in New Zealand) gives us the breathing space to do that," chief financial officer John Fraser‐Mackenzie told BusinessDesk in an interview. 

Earlier the company said profit was $16.3 million, or 8.8 cents a share, for the 12 months to March 31 versus $19.4 million, or 10.5 cents a share, in the prior period. That was in line with guidance it gave in April. Sales rose 10 percent to $268.3 million, including 12 months of trading from Australian Glass Group. Earnings before interest and tax before significant items were $30.9 million versus $33.9 million in the prior period.

For the current financial year, it is targeting group ebit of between $30 million and $33 million, capital expenditure of about $10 million and debt repayment of between $7 million and $10 million. The company also expects to maintain its current dividend policy, it said.  

Fraser‐Mackenzie said the company hasn't previously given guidance this early in the year and so "we are taking a conservative approach."  

The company expects Australian revenue to grow and New Zealand to remain broadly flat in the year.

As a result, any growth will come from the Australian top line and profitability and efficiency improvements in New Zealand. However, "it will be offset by some headwinds, which we see coming around wages," as minimum wages lift.

"We are anticipating the beginning of a step up in wages in general," he said, adding that another headwind was rising fuel costs, particularly in Auckland but more broadly at a national level.

Earlier this year, Auckland Council voted 15-2 in favour of a regional fuel tax to partially fund the city's transport needs over the coming decade. 

Regarding the revamped strategy, Fraser‐Mackenzie said it will include a "renewed focus on people, from recruitment through induction, personal growth and development throughout the business and a recognition of good and bad performance."

"We also want to start putting the customer back at the center of everything we do."

Fraser‐Mackenzie also said Metro Glass will be focusing on debt reduction and reducing its leverage.

"Previously we would have been developing a scale position, now we are talking about maintaining a scale position. While we will still invest in new technology and want to be the leader in our product range and capability but it will be a balanced approach and we will be focused on paying down debt," he said. 

Group gearing was at 37 percent as at March 31, versus 37.6 percent on the same date last year.  

The stock traded up 7.3 percent at 88 cents after the release. Grant Williamson, director at Hamilton Hindin Greene said investors were likely cheered the company had met its guidance. "There may just be a bit of confidence returning from investors after they achieved what they said they were going to achieve," he said. 


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