Methven Interim Results HY14: Turnaround Gathers Momentum

Methven Interim Results HY14: Turnaround Gathers Momentum

Leading New Zealand showerware and tapware designer Methven Limited [MVN] is pleased to announce its interim results for the six months ended 30 September 2013.

Key results for the Group include:

• Net profit after tax (NPAT) increased 21% on the prior corresponding period from $2.3 million to $2.8 million. • NPAT excluding significant items1, increased 36% from $2.3 million to $3.2 million. • Earnings before interest, tax, depreciation and amortisation (EBITDA) excluding significant items1 increased 13% from $5.8 million to $6.6 million. • Net Debt2 of $14.4 million is down 25% from September 2012 and 16% from March 2013. • Operating revenue decreased slightly from the prior corresponding period, down 2% from $50.3 million to $49.4 million.

• Our United Kingdom division continued last year’s second half improvement reporting an EBITDA profit of £0.2 million, improved on the prior corresponding period’s EBITDA loss of £(0.2) million. • Agreement to acquire premium tapware manufacturer in China, Invention Sanitary, with additional earnings from July 2014. • New Zealand operating revenue growth of 4% and EBITDA excluding significant items1 up 4%. • Australian sales, in Australian dollars, increased 4%, bucking the trend within the difficult Australian market. • Further international recognition of our products, with two Australian International Design Awards (Gold and Silver) and recognition in the German Design Awards. • Partially imputed final dividend of 5.0 cps to be paid on 31 December 2013, up on prior year interim dividend of 4.5 cps.

“After several years adapting to challenging market conditions as a result of the global financial crisis, we are pleased to report improved results for the first half of the year with NPAT up 21% and Net Debt2 down 25% on the prior year”, said outgoing Group CEO Rick Fala.

“The improved earnings reflect a turnaround in the business, in particular in the UK where we’ve simplified operations and developed a solid platform for profitability. We’re cautiously optimistic that conditions in our core markets have stabilised and we’re now focused on our innovative marketing activities to drive topline growth” Mr Fala added.

1 Refer to reconciliation between reported earnings and earnings after significant items in Appendix A 2 Refer to reconciliation of Net Debt in Appendix A

Operating revenues, in New Zealand dollars, fell 2% during the first half of the year but grew in local currency terms in all Methven’s key market geographies. Mr Fala went on to say, “We were pleased with the steady revenue growth that all divisions achieved in their domestic markets during the first half. Unfortunately currency movements, along with a drop in export sales to the Middle East and South Africa, led to lower operating revenues for the Group.”

Mr Fala reflected on other key achievements during the first half no which to build for the future. “In July this year we were delighted to announce the agreement to acquire premium Chinese manufacturer, Invention Sanitary, in June 2014. The acquisition is value accretive and will secure an important part of our supply chain while adding upstream margin. We also look forward to the benefits from our marketing investment which will form the platform for topline growth moving forward”. Methven has been focused on developing its marketing capability, while continuing to develop innovative products and simplifying operations. “We undertook an independent review of our marketing function and are now in the process of executing its recommendations. The first of these was the ‘Feel the Difference’ campaign where customers can trial our patented Satinjet® products free for 7 days. The feedback we’ve been getting has been overwhelmingly positive. We now look forward to the roll out of the campaign in Australia” said Mr Fala.

Strong operating cashflows led to a reduction in debt. Net debt2 of $14.4 million fell 25% from $19.2 million in September 2012 and 16% from $17.2 million in March 2013.

Methven Chairman Mr Phil Lough said, “In the first half we were able to reduce our debt levels by 16% while continuing our track record of paying regular dividends. With solid cashflows expected to continue through the second half, we are pleased to declare an increased interim dividend.” Methven declared a partially imputed dividend of 5.0 cents per share to be paid on 31 December 2013, up from 4.5 cents per share in both June 2013 and December 2012.

Mr Lough went on to comment on the Chief Executive Officer role, “Rick has made an immense contribution to the business over 16 years as the leader of Methven, taking the company from a New Zealand only business to a truly International design-led company. I’d like to take this opportunity to thank him, on behalf of the Board and shareholders, for his inspirational vision and his immense and tireless contribution in its pursuit in a challenging and competitive international business environment (including in Australia).”

Mr Lough added, “Rick leaves his role with a legacy we should celebrate and do our best to build on. His continued presence around the Board table will hold us to that task.” “We also welcome David Banfield to the team, effective January 2014. With Methven’s focus on growth in international markets, we are delighted to have secured a CEO of David's experience in developing and growing a successful international company.”

For more company information, visit www.methven.com

NZ $000 EBITDA NPAT EBITDA NPAT
Reported earnings 6,376 2,802 5,808 2,320
Acquisition costs 348 348 - -
- 36 -
Earnings excluding significant items 6,626 3,150 5,844 2,320

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