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Methven profit misses profit guidance

Monday 31st May 2010

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Tapmaker Methven posted a 22% decline in full-year earnings, missing its guidance after taking an impairment charge in the UK, where it lost DIY chain Wickes as a major customer.

Net income fell to $7.8 million, or 11.7 cents a share in the 12 months ended March 31, from $10.1 million, or 15.1 cents, a year earlier, the company said in a statement today. Sales fell 5.5% to $129.8 million.

Methven first flagged the potential loss of Wickes in its first-half results, when it forecast full-year profit would drop 15% to 20%. The results missed the forecast because of a one-time asset impairment of $481,000, the company said today. Methven is de-emphasising the DIY market to concentrate on hotel fitting and premium-end products after “a significant downsizing” of Methven U.K.

“Methven responded to the realities of the trading environment with tight cost management across the business, better stock control, restructuring the U.K. operation following the loss of Wickes, recruiting capability to drive hotel sales and progressing new market development strategies,” said chairman Phil Lough.

Shares of Methven fell 1.3% to $1.56 and have declined about 4% this year, outperforming the NZX 50 Index, which fell about 6%. The company will pay a final dividend of 5.5 cents a share, bringing payments for the year to 11 cents, down from 11.75 cents a year earlier.

The company is targeting a “solid lift’ in sales and earnings this year though it said there are “continued uncertainties from the stop/start economic recovery in our key markets,” it said.

Net debt was slashed by 35% to $17.4 million, within its first-half forecast range, as the liquidation of surplus inventories in the UK stoked cash flow. The company renewed its debt facilities for three years, with no change in its covenants, it said.

One of Methven’s major drives is sales of its Satinjet luxury shower products for hotels, which it offers in conjunction with a third-party pressure and temperature setting technology call Jemflo. The company has an option to buy Jemflo.

Some 13,000 hotel rooms in Asia and Australia have been retro-fitted with Satinjet in Asia and Australia, it said today.

In New Zealand, sales fell 2.6% to $42.8 million while EBITDA declined 5% to $10.1 million. Revenue in Australia, its most resilient market, gained 7.1% to A$36.6 million while EBITDA surged 89% to A$3.3 million.

In the UK, operating revenue declined 14% to 18.7 million pounds and EBITDA tumbled 45% to 1.7 million pounds.

Its gross margin in the US dropped 3.3 percentage points “due to intense competition in a recessionary market.”

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