Methven pours water on Aussie rule makers

By Duncan Bridgeman

Friday 12th November 2004

Regulation is often the bane of business but for one Kiwi company it could turn out to be a blessing.

Tapware maker Methven says tough water-saving legislation expected in Australia will give the company an edge over competitors as its showerhead and valve technology is designed to work at low water flow rates.

Methven, which is set for a sharemarket float this month, is well established across the Tasman, generating 35% of its revenue there.

Chairman Richard Cutfield told analysts at an investor briefing this week the company's main focus for growth is in Australia, with its latest Satin Jet shower technology a key driver.

Satin Jet, which cost more than $1 mill to develop, uses micro-collisions of water to give off a soft intensity similar to rainfall. The big plus as far as Methven is concerned is that it uses up to 35% less water than conventional showerheads.

The showerheads sell at between $300 and $350 each.

Australia, one of the driest countries on earth, is considering laws to reduce the amount of water going down the drain. Minimum efficiency standards are expected to be in force as early as next year.

The Satin Jet product is an important one for Methven, which began life 118 years ago and is now this country's largest tapwear and valve maker.

The extra-sensory shower brands were originally developed for the New Zealand market, where uneven water flows make it difficult for plumbers to install good showers.

The successful entry into Australia is a stepping-stone to other countries, including the $3.1 bill US market, the UK and Europe.
Cutfield said the company was pursuing licensing agreements for Satin Jet in the US and Europe with plans for possible OEM (Original Equipment Manufacturer) agreements, such as the arrangements Fisher & Paykel Appliances had with its overseas distributors.

Methven is looking to raise $36.2 mill with an issue of 25.3 mill new and existing shares at $1.43 each.

Registered plumbers are being offered a priority pool of a million shares while retail investors, staff and institutions make up the rest of the 50% of the shareholding once listed.

The bulk of the money raised is going to existing shareholders who are selling down their stake in the company.

Following a management buyout in 2001, AMP Henderson ended up with 50% of the company.
It will halve its stake following this month's IPO. Senior management will hold the other 25%.

Following the listing the company will have a market capitalisation of $73.2 mill.

Methven posted a net profit of $5 mill for the year to March 2004 on revenue of $47.3 mill.

The company is forecasting a 2005 net profit of $6.2 mill on revenue of $52.8 mill.

The company said housing market fluctuations would not have a significant impact on sales as the majority of sales was made to what it considered the more stable renovation and replacement market.

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