Methven Limited AGM
NZX and Media Release
20 July 2005
Methven To Leverage World-Class Design And Engineering Capabilities To Build Long Term Growth
Methven, the design-driven manufacturer and marketer of exclusive showerware, tapware and valving, intends to invest in building its unique product range, brand experience and sales force, first in Australia and then in target export markets, to secure long term business growth.
“We’ve set our priorities to deliver shareholder wealth in 2005-06 and beyond. We are ready to deliver,” CEO Rick Fala told shareholders at the company’s first Annual General Meeting since listing in November 2004 and exceeding its prospectus profit and revenue forecasts for the 2004-04 financial year.
“We’re focusing on extending sales and market share in Australia and New Zealand, using propriety Satinjet showerware and new variants as the trailblazer for these markets and target export markets in the USA and UK , while seeking to lift our profile and retail presence for our other product ranges.
“We’ve reviewed our R&D design and delivery process to focus on key projects and to speed up the time to market of improved and new products to refresh and excite the category and we’re driving down manufacturing costs,” he said.
Mr Fala said Australia was the priority growth market and that the infrastructure and branding investment was being made now to capitalise on encouraging progress in 2004-05. Australian sales were up 16% last year, retail presence grew significantly and customers and consumers responded positively to Methven’s exclusive new era Satinjet showers.
“Our aim is to maintain positive year on year sales growth although we expect our Australian profitability for the half year to September to be reduced by this increased commitment of resources with some recovery in the second half,” he said.
Mr Fala said the Australian market was challenging.
“We have noted a considerable weakening in Australian building activity in the last two quarters with renovation activity similarly impacted by a weaker housing market and higher interest rates.
“This has resulted in increased price competition in the lower end and house brand product segments which we are not immune to given our 20% share of the Australian showerware market and participation in these markets,” he said.
However, he told shareholders that the success of the Futura Satinjet product, steady growth in tapware sales and reasonable prospects for growth in the valve segment, have enabled the company to maintain sales levels ahead of prior year at a time when some competitors were understood to be retrenching staff.
“We have in fact added four more to our Australian sales force to aggressively target continued growth in the mid and upper end market segments. Our expanding sales team, and the planned release of new Satinjet products to the Australian market in the coming months, supported by brand promotions, should ensure that we continue to maintain year on year sales,” he said.
Looking at New Zealand, Mr Fala said the softening in the building cycle was expected to be less severe in the renovation and replacement market where Methven’s relative strength lies.
“We also believe that there remains a reasonable backlog of work for installing plumbers which should also lessen the impact of this expected slow down and are seeking to develop the potential of the market for easy and affordable bathroom upgrades,” he said.
“The expansion of our Satinjet range and brand development initiatives is intended to support this objective.”
Updating shareholders on overseas market expansion plans, Mr Fala said that the USA and Europe were priority regions.
“The licensing agreement for Satinjet shower technology to leading Italian bathroomware specialist, Visentin, was an important milestone,” he said.
“Although the potential revenue stream from this arrangement in Europe is unproven, we see this agreement as endorsement that our own unique Methven designed and made Satinjet technology has international appeal.”
Visentin is set to launch its own, Italian designed, Satinjet showerware products within the next 6 to 12 months. In the meantime, Methven would supply them modest quantities of Satinjet products in the second half of this financial year.
Opportunities for Satinjet products into the USA were continuing to be progressed with Methven planning to establish its own distribution for a range of Satinjet products, rather than to license the technology.
“We are currently working through ranging, logistical and certification issues with distributors who have confirmed interest in representing us in this market.” Mr Fala said.
The UK market remained a prime target.
“This is a market where our technologies are most relevant and in which we believe we have a long term future. However, we are still in the early stages of planning and compiling a market relevant offering and strategy for long-term success in this market.”
Mr Fala said the formula to achieve sustainable growth into the future would be to create new opportunities, enhance and extend the products Methven offered the different market segments and to introduce brand experiences which trigger the desire to buy.
“We’re going to pitch ourselves to directly appeal to consumers, especially women and especially the house-proud, increasingly style conscious home renovators.” Mr Fala said in giving shareholders a preview of the new “Kissed by Water” Satinjet brand experience which will be launched in New Zealand and Australia over the next few weeks.