Methven profits fall 15pc, shares rise

Methven chief executive Rick Fala. Photo / Brett Phibbs.

Bathroom products company Methven reported a 15.4 per cent fall in half year net profit to $4.2 million, but the result was better than forecast and the company's share price rose.

In July the company produced guidance of a 30 to 35 per cent fall in profitability for the six months to the end of September.

After excluding a $636,000 British tax credit from last year's results, underlying interim net profit fell 3.2 per cent, Methven said today.

An interim dividend of 5.5c per share is to be paid, compared to 6.25cps a year earlier.

The company said the result reflected a resilient renovation sector in this country, growth in tapware and valving sales in Australia, margin pressure in the depressed British market and a further significant reduction in losses in the United States.

Operating revenue fell 5.1 per cent from the corresponding period in 2008 to $68.1m, while net debt was cut by 47.4 per cent to $18.3m, which was better than the forecast 30 per cent fall.

Chairman Phil Lough said Methven had tactical plans in place and a strategy of diversification of geographic markets, channels and ranges to enable it to ride out the economic downturn and be in a strong position to accelerate growth as recovery emerged.

Full year net profit guidance provided in July remained unchanged at a drop of 15 to 20 per cent, but net debt was expected to improve on the guidance level of around 20 per cent and finish 30 to 35 per cent down, chief executive Rick Fala said.

Methven New Zealand was expected to continue to perform well compared to the second half in 2008/09 due to a resilient renovation market, strong merchant support and the introduction of new products, Fala said.

"We are targeting strong year on year growth in Australian profitability, based on increased topline sales, underpinned by the comparative strength of the Australian economy."

Britain was forecast to be down markedly on the second half of 2008/09 due to continued pressure on margins in a severely depressed market.

Methven had also forecast the potential loss of a key DIY customer as it moved to sourcing tapware direct from Chinese manufacturers.

"Our mitigation and UK market development strategy is to step up sales activity of premium, proprietary Methven products to showrooms and plumbing merchants," said Fala.

"We are also seeking to increase our share of the UK showerware category, target sales in the hotel sector, extend the distributor base in Europe and the Middle East and continue to rationalise costs."

There was no better time to be marketing energy and water efficiency and Methven was making good progress with a global initiative to fit Satinjet showerware in hotels and leisure outlets and extend distribution of Methven products into new markets.

Methven shares are up 7c to $1.56, having ranged between 97c and $1.80 in the past year.

- NZPA