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Methven posts 32% drop in 1H profit, maintains full-year guidance

Wednesday 1st March 2017

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Methven, the shower and tapware designer, posted a 32 percent drop in first-half profit after a major supplier in its biggest market Australia shut down, but says it's on track for a stronger second half.

Net profit fell to $3.2 million in the six months ended Dec. 31, from $4.7 million a year earlier, as sales fell 5.7 percent to $49.9 million, the Auckland-based company said in a statement. 

The profit weakness reflected the impact of significant one-offs in the first quarter, the company said, with the second quarter showing significant improvement. It has maintained full-year guidance for revenue growth of at least 5 percent but expects net profit growth to be at the lower end of its 10 percent to 20 percent range, with both numbers on a constant currency basis. 2015 full year net profit was $7.7 million, while revenue was $105.8 million.

The company's Australian segment showed weakness, with 1.5 percent revenue growth to A$20.1 million which the company described as below expectations, and a 21.4 percent drop in earnings before tax (ebit) to A$1.3 million. That was caused by "the biggest fire sale in Australian corporate history" with the December closure of Masters, the second largest DIY retailer in the country, which came after "months of clearance activity that undermined rest of market demand and impacted our sales in to other customers," Methven said.

Margins in Australia were also dragged by Australian dollar devaluation compared to USD, though the company increased prices in December and expects those to support profit recovery in that segment.

In New Zealand, revenue was flat at $17.8 million, with a major customer reducing stock holding, while ebit fell 4.2 percent to $2.2 million, which Methven said was driven by it investing $600,000 in the business and it expects to recover in the second half. 

UK sales rose 5.2 percent to 5.9 million pounds, while ebit rose 25 percent to 264,000 pounds. Group operations, which include manufacturing in China and New Zealand, had a 53.7 percent ebit drop to $1.2 million, due to a supplier issue limiting its factory output from Heshan.

The company declared a 4 cent dividend, payable on March 31, in line with last year's interim dividend. The shares last traded at $1.32, up 10.9 percent in the last year.

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