Interim Results Demonstrate Earnings Resilience
NZX Statement 29 November 2010
Interim Results Demonstrate Earnings Resilience in Recessionary Times
Performance Summary for six months ended 30 September 2010
NPAT up 8.3% from $4.2m to $4.5m before UK
restructuring costs (guidance was “in line”)
Net Debt up 6.4% from $18.3m to $19.5m (guidance was 15-20% up)
EBITDA up 3.4% from $8.5m to $8.8m before UK restructuring costs
Operating Revenue down 7.7% from $68.1m to $62.8m
Strong Australian profit growth offsets UK profit decline; NZ holds its own
Partially imputed interim dividend of 5.5 cps to be paid on 31 December 2010 (in line with guidance)
Methven Group achieved all half year targets despite mixed trading conditions, delivering a modest lift in interim profit and a much better net debt position than indicated in the July 2010 market guidance.
Group interim NPAT, which was expected to be flat, was up 8.3% from $4.2 million to $4.5 million before UK restructuring costs of $264,000, and up 2% on prior year after restructuring costs. Net Debt had been forecast to increase by 15-20% on the prior half year but was up only 6.4% from $18.3 million to $19.5 million.
The result was based on Operating Revenue of $62.8 million, down 7.7% from $68.1 million and EBITDA of $8.8 million before UK restructuring costs, up 3.4% on prior half year earnings of $8.5 million.
“Methven has again demonstrated earnings resilience in recessionary times despite continuing mixed trading conditions in our three key markets. At this point we expect to deliver a full year profit in line with last year,” Methven Group Chairman, Phil Lough said.
He said the UK was the most depressed market in the first half while the New Zealand economy remained stagnant at historically low levels, showing few signs of recovery. Australian conditions, while easing, still remained the bright spot. Despite the market conditions, Methven continued to invest in R&D and international growth opportunities.
Mr Lough said that Directors have recommended an interim dividend of 5.5 cps to be paid on 31 December 2010. The cents per share amount to be paid is the same as the June 2010 final dividend and is in line with guidance. As previously indicated to shareholders, dividends will only be partially imputed from this dividend forward as the business continues to expand offshore.
Outlook to March 31 2011
“Based on our latest information from the markets we’re forecasting a full year NPAT in line with the prior year, but with momentum for improved performance in the 2011-12 financial year,” the Chairman said. “Previously we’d indicated a reasonable lift in 2010-11 profitability. Year end Net Debt is expected to be slightly up on prior year when we’d previously expected that Net Debt would be in line with the previous year.
“New Zealand market conditions, and to a lesser extent Australia, are not expected to improve to the degree that we had thought in July 2010. In addition the UK is now forecast to end the year close to break-even as we implement the turnaround strategies that will create sustainable profitability.”
Group CEO, Rick Fala, said repositioning the UK business to become a high value, premium, Methven branded operation was an absolute focus while at the same time realising growth opportunities for the Deva brand through offering new value products and leveraging Group buying synergies.
“Success in turning around our UK operations will reduce the drag on earnings and set the course for strong growth in Group profitability,” Mr Fala said.
Methven has appointed the former Chairman and Chief Executive Officer of Bristan, the largest UK tapware supplier, and previous head of the UK Bathroom Manufacturers Association, Steve Lee, CEO of its UK operation. He is being assisted in the UK transition by Group Chief Operating Officer, Matthew Crichton, who had oversight of the successful transformation of Methven Australia from its former low value model to incorporate premium, proprietary showerware such as Satinjet showers and tapware products.
Mr Fala said Methven’s global hotel initiative was a long term investment and while Australian sales have tracked well in the interim, results would take time to show through from new markets in Europe and Asia where the priority was to build customer relationships and recruit local expertise.
“We’re confident we have a compelling and unique offer that delivers improved satisfaction to guests and water and energy savings to hotels through retrofitting bathrooms with Satinjet showerware and Jemflo technologies.”
Mr Fala said that as part of Methven’s design-led ethos, new proprietary showerware and tapware were in development and would be unveiled at the premier, international, plumbing trade show to be held in Frankfurt in March 2011. The half year results reflect successful growth in tapware market share in Australia with significant opportunity for ongoing growth in both tapware and also showerware with the introduction of new Satinjet designs.
“These innovations are key to our differentiation strategy that has the resilience to consistently deliver higher sustainable margins, consumer appeal and new market and niche opportunities,” he said.