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Daily ShareChat: Methven

By Jenny Ruth

Thursday 31st March 2011

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Methven's profit downgrade indicates current trading is tough, says Greg Main, an analyst at First NZ Capital.

Methven said a potential $700,000 bad debt in Australia, trading weakness in the March quarter and the latest Christchurch earthquake mean net profit for the year ended March will be down about 10% to 15% on the $7.8 million reported the previous year while net debt will rise between 15% to 20% from $17.4 million at March 31 last year.

Main is now forecasting net profit will come in at $7 million for the year, down from his previous $8.2 million forecast.

He says the bad debt provision relates to money owed by Enact Energy, a company involved in the Australian government's water and efficiency program.

"This involved the ability to claim back installation costs as part of the efficiency program but a recent tightening up of criteria around the rebates has resulted in Enact going into administration," Main says, adding there is some potential for some funds to be recovered but Methven has written down the full amount.

"While Methven's key market is the renovation market, it does offer exposure to a cyclical pick-up in building activity, improved performance from its UK operation and continued growth in Australia," Main says.

Rating: neutral.

Daily ShareChat articles report how the main experts in the market might view a certain share and we provide this commentary as a useful resource for investors. Content on this site does not in any way constitute a recommendation to buy, hold or sell any particular share. Investors should always seek professional advice before making any investment decisions.

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