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Metro Glass lifts 1H profit 5% on strong local construction

Monday 21st November 2016

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Metro Performance Glass, which has more than half the country's glass processing market, lifted first-half profit 5 percent as it benefited from a strong local construction market and booked a gain from its Australian acquisition.

Net profit rose to $11.5 million in the six months ended Sept. 30, from $11 million a year earlier, on a 23 percent lift in revenue to $116.3 million, the Auckland-based company said in a statement. 

In August, the company bought Australian Glass Group for A$43.1 million, and revenue includes one month of trading from AGG, worth $4.6 million. Chief executive Nigel Rigby said the acquisition reflects "our view that Metro Glass' core competencies in double glazing and high-performance glass position us well for the significant long-term opportunities identified in the Australian market" and he was pleased with the early progress AGG had made.

The company refinanced as part of its AGG acquisition, increasing gearing to 38.5 percent from 26 percent at the previous first half. Net interest-bearing debt rose 82 percent to $95.4 million at the end of the first half. 

The board declared a 3.6 cent interim dividend, payable on Jan. 23 with a Jan. 9 record date, which chair John Goulter said reflected both the company's opportunities and its increased gearing level. 

Construction markets in New Zealand have been "highly supportive", the company said, with construction activity and building consents continuing to increase in the first half. 

North Island residential consents rose 25 percent year-on-year, with an increasing proportion of residential consents issued in the North Island from the year earlier as consents declined in Canterbury.

Rigby said the company had invested in extra capacity in Auckland where the market is growing, and was making good progress at cutting processing costs. 

Metro Glass's forward order book for commercial projects grew 60 percent to $29.7 million as at Sept. 30, from $18.6 million a year earlier, while the Retrofit double glazing business lifted revenue 29 percent to $10 million.

“The commercial and Retrofit businesses generally utilise a higher level of glazing resource than our traditional window manufacturer, merchant and retail businesses," Rigby said. "Therefore with their expansion, Metro Glass’ glazing costs increased in the period both in absolute dollar terms and as a percentage of revenue. The increased costs primarily related to increased activity levels, however our glazing infrastructure and management team was also strengthened to prepare us for future growth."

The shares, which listed at $1.70 on the NZX in 2014, last traded at $2.15, and have gained 25 percent this year. The stock is rated an average 'buy', according to five analyst recommendations compiled by Reuters, with a median target price of $2.20.

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