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Methven

By Dan Stratful

Monday 21st May 2012

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In a yield hungry market, Methven (NZX: MVN ) last week reported a resilient result for the year to 31 March 2012 (FY12) as reported net profit after tax (NPAT) was up 36.1% from $4.7 million to $6.5 million, and within guidance of $6 million to $8 million. Underlying Group EBITDA and Group NPAT were up 1.1% and 5.3% respectively on FY11 showing that the underlying performance of the group improved slightly year on year.

Full year dividends amounted to 10c per share (partially imputed) which provides a 10%pa gross dividend yield for shareholders based on the current price, and MVN’s excellent progress on its debt reduction should see dividends at least maintained in FY13 or even increased slightly, which makes the shares an attractive income proposition.

In the Australian division, a sharp decline in Australian building and renovation activity was seen in FY12 and the Australian Division delivered a drop in sales, down 7.3%, but tight cost control and working capital management saw Australian FY12 EBITDA up 1%. In New Zealand MVN saw continued low levels of building approvals, with FY12 sales down 9.8% for the year, resulting in EBITDA falling 15.4%. MVN will also benefit from the rebuilding of Christchurch when this gets underway and this will be a huge boost.

Key results for the year to 31 March 2012 (FY12) were: Group reported net profit after tax (NPAT) up 36.1% from $4.7 million to $6.5 million, within guidance of $6 million to $8 million; Underlying Group NPAT adjusted for Focus (DIY) Limited, up 5.3% from $5.8 million to $6.1 million; Net Debt decreasing 38.4% from $19.1 million to $11.7 million, improving on its guidance of a 20% reduction in net debt; and Group Operating Revenue down 13% from $122.1 million to $106.2 million.

Other highlights included: All divisions in profit including the UK which has returned to EBITDA profit following the loss of major customer Focus (DIY) Limited; Further international design accolades - GOOD DESIGN Award for Tahi Twin Lever tapware and Green GOOD DESIGN Award for the Kiri Satinjet Ultra Low Flow Shower; Continued investment in research and design, with over 60 new global products released; a small trading profit from its promising China operation; and second phase global rollout of its computer system completed in the UK and delivered on time and on budget.

MVN’s solid cashflow ensured further debt reduction whilst maintaining a dividend stream and a partially imputed final dividend of 5.5 cps will be paid up 22% on the FY11 final dividend, and in addition to the December 2011 interim dividend of 4.5 cps.

Looking forward MVN is targeting continued earnings and cashflow growth for the year to 31 March 2013 (FY13) however conditions in all markets are fickle and uncertain. MVN is confident that it has the resilience to thrive and prosper in tough economic conditions and deliver sustainable returns and growth to shareholders. No FY13 guidance has been given as at May 2012.

About Methven:
Methven’s origins go back to 1886 and today it is one of New Zealand’s leading designers and suppliers of showerheads, faucets and hot water valves. Its core markets are the UK, Australia and New Zealand and it has plans to expand into Asia.  MVN has won numerous international awards and acclaim for its designs and innovative products. After a recent focus on restructuring MVN is now intent on pursuing growth opportunities.

Status: YIELD BUY

MVN’s shares today traded at $1.22

For portfolio, sharemarket and fixed income enquires contact:
Dan Stratful at Investment Research Group (IRG)
Authorised Financial Adviser (AFA)
0800 437 8489, 09 304 0232, dan.stratful@irg.co.nz
**A disclosure statement is available, on request and free of charge.


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