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Methven first-half earnings rise on strong UK, China sales; GWA costs dent bottom line

Thursday 28th February 2019

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Methven lifted first-half earnings 7.9 percent as the tapware maker enjoyed strong sales in the UK and China, although transaction costs from its pending takeover by Australia's GWA weighed on the bottom line. 

Net profit fell to $2.4 million in the six months ended Dec. 31 from $3.2 million a year earlier, although that included a $721,000 bill relating to its scheme implementation agreement with GWA, which will likely see it leave the NZX in April. 

Stripping out those one-off costs, underlying earnings rose to $3.5 million from $3.2 million, with revenue up 3.8 percent at $54.8 million.

China and the UK were the stand-outs for Methven, offsetting a recovering market in New Zealand and softness in Australia. 

Methven's Australian business posted a 1.8 percent decline in first-half sales to A$21.2 million and a 13 percent drop in earnings before interest and tax to A$2 million, while New Zealand revenue decreased 3.8 percent to $15.3 million for a 12 percent fall in earnings to $2 million. 

Chinese sales tripled to $1.5 million and contributed $316,000 in earnings, having broken even the year earlier, while UK revenue was up 12 percent at 7.4 million pounds for a 43 percent jump in earning to 435,000 pounds. 

"Over the last few years, we have worked tirelessly to grow earnings from our international business in order to deliver more resilience across the group and less dependence on performance in the New Zealand market," chief executive David Banfield said in a statement. 

"We have seen a recovery in the New Zealand market and are confident that our investment in colour finish capability at our New Zealand factory, as well as a strong new product development programme, will see us return to growth in New Zealand in the second half," he said. 

Methven is poised to leave the local stock exchange, with GWA's $118 million takeover offer of $1.60 a share at the top of independent adviser Grant Samuel's valuation range. Unlike Trade Me, another Kiwi firm set to de-list, Methven will pay an interim dividend of 4.69 cents per share on April 10. 

Shareholders will vote on the scheme at a special meeting on March 12, with GWA needing 75 percent support and at least half the company's votes to be cast. It already has the backing of Methven's biggest shareholder, Brendan Lindsay of Sistema fame, who has 19.99 percent and its directors have committed another 2.1 percent in unanimously backing the deal. 

"The proposed scheme of arrangement with GWA creates a significant opportunity to bring two leading businesses together to create an even better combined business," chair Alison Barrass said. "The businesses are strategically aligned, and have very similar values and create a compelling proposition for customers and consumers." 

The deal crossed an important threshold this week when the Overseas Investment Office cleared the transaction. 

The shares closed at $1.62 yesterday, compared to the $1.15 price before the deal emerged in December. 


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