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Methven lifts 1H profit 27% as Australasia offsets decline in China

Thursday 25th February 2016

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Methven, the NZX-listed tap and shower manufacturer and exporter, lifted first-half profit 27 percent as its core business in Australia and New Zealand more than made up for weakness in China. 

Net profit rose to $4.7 million in the six months ended Dec. 31, from $3.7 million a year earlier, the Auckland-based company said in a statement. Revenue rose 8 percent to $52.9 million.

The company reiterated annual guidance for profit growth of between 15 percent to 25 percent, and said it expects to be at the top of that range. It also expects revenue to rise 5 percent or more and to reduce net debt.

“We’re pleased with the progress being made towards delivery of our plan announced last year to grow sales to $130 million by 2018 and profits towards our longer term target of 10 percent of sales," chairman Phil Lough said. "Six months in, we’re on track with our plan and delighted to have gained agreement to launch in to five new international test markets to better leverage our international patents and help drive future sales growth.” 

Methven changed its balance date to June 30 from March 31 last year. The board declared a 4 cent dividend, with a March 18 record date, payable on March 31. 

Earnings before interest and tax in China plummeted to $1,000, from $123,000 a year earlier, as revenue dropped 38 percent to $141,000. 

The company said it had implemented a new business model in China, with distribution focused on Shanghai, Shenzhen and Guangzhou. There has also been a leadership transition in its Chinese factory Methven Heshan. 

In the Australian division, ebit rose 16 percent to A$1.6 million, which Methven said was due to sales growth and operational cost savings. Revenue gained 6.4 percent to A$19.8 million, with a mix of price and volume growth. 

Ebit in the company's New Zealand segment fell 0.4 percent to $2.3 million, though revenue grew 8 percent to $17.8 million. 

"Ebit was in line with the prior year's actuals due to the significant impact of the weakening New Zealand dollar," the company said. "Price increases have been passed to the trade to offset this impact over the next 12 months."

In the United Kingdom, revenue dropped 5.8 percent to 5.6 million British pounds, as a result of distribution costs increasing and new contracts being delayed. Ebit rose to 211,000 pounds, from 62,000 pounds a year earlier.

This growth was "encouraging as the business model was amended to meet future expectations," Methven said. It expects sales growth in the second half for the UK division, as new national and international distribution agreements begin.

The shares rose 0.9 percent to $1.17, having increased 0.9 percent so far this year.

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