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Methven posts flat first-half profit as NZ underperforms; encouraged by restructure

Thursday 1st March 2018

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Methven reported a flat first-half profit as its New Zealand business underperformed with Christchurch activity settling down after the rebuild, but is encouraged by its restructuring plans to widen margins and chase global markets. 

Net profit was unchanged at $3.2 million, or 4.5 cents, in the six months ended Dec. 31, on a 5.7 percent gain in revenue to $52.8 million, the Auckland-based company said in a statement. Stripping out $516,000 of costs from its 'Fit 4 the Future (FFF)' restructuring programme, earnings rose 12 percent, in line with expectations and giving the tapware manufacturer reason to affirm annual guidance for a 10 percent gain in normalised profit on a constant currency basis. 

The New Zealand division was the company's laggard in the period, with a 2.4 percent increase in earnings before interest and tax to $2.3 million on a 10 percent decline in sales to $15.9 million, of which almost half the revenue decline came from Canterbury activity slowing down in the post-quake rebuild environment. 

"Our absolute focus remains on delivering on our tapware plans in New Zealand so that we can benefit from our positive momentum in international markets and the ongoing upside of our FFF programme," chair Alison Barrass said. 

At Methven's annual meeting in November, the company warned first-half profit wouldn't rise due to spending on the restructuring programme, which seeks to widen gross margin by 300 basis points, cut fixed costs by 10 percent, and lower the level of sales needed to breakeven by $1 million a month. 

Chief executive David Banfield said the programme is on track, and he's "extremely encouraged by our strong international performance", which "reduces our reliance on the New Zealand market." 

Methven's Australian unit lifted ebit 76 percent to A$2.3 million on a 7.5 percent gain in sales to A$21.6 million, due to an expanded product range and new contracts, while UK earnings rose 15 percent to 304,000 British pounds on a 13 percent increase in revenue to 6.7 million pounds. 

The company's increased Chinese sales to $507,000 from $81,000 a year earlier, delivering earnings of $3,000 compared to a loss of $89,000 a year earlier and said it's in final negotiations with a number of new distributors to expand its presence in Asia's biggest economy. 

The board declared an unimputed interim dividend of 4 cents per share, payable on March 29 with a March 16 record date. That's unchanged from a year earlier. 

The shares last traded at $1.05 and have dropped 17 percent over the past 12 months. 


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