Metroglass sinks into loss, agrees with banks not to pay dividends in 2021

Metroglass reported a $79.9m loss loss for the March 31 year.

Metro Performance Glass went deeply into the red with a net loss of $77.9 million in the March 31 year, driven by asset impairments arising from the Covid-19 pandemic.

The company, which last year said it would not pay dividends while it paid down debt, said in today's result that it had struck a deal with its banks not to pay dividends in 2021, in return for a relaxation of its debt covenants.

Metroglass met its downgraded earnings guidance with earnings before interest, tax and before the one-off costs of $23.2m, down 8 per cent from the previous year.

In November, the company said EBIT would probably be between $21m and $24m.

The glass supplier and maker said it had strengthened its group balance sheet with net debt reducing by $16.5m but that due to the current level of uncertainty, management were planning for a number of potential future scenarios.

"As a consequence of the forecasted significantly lower construction activity, and the increased competitive intensity, a review of the carrying values of Metroglass' assets resulted in an $86.5m impairment on New Zealand goodwill, which initially arose from acquisitions completed in 2012, before the company's initial public offer," it said.

As part of the company's response to the Covid-19 environment, Metroglass agreed with its banks on a relaxation of the key financial covenant - net debt to EBITDA - from 3.0 times to 4.0 times up to March 31, 2021.

"As part of this relief, the group agreed to provide regular updates to its banking partners and to limit growth capital expenditure and pay no dividends in 2021," it said.

"Constructive" discussions were ongoing with regard to providing for future requirements as the economic conditions in both New Zealand and Australia become clearer, it said.

The bottom line loss compared with a net profit of $5m a year earlier

Chief executive Simon Mander said it was a solid result in challenging market conditions.

"In New Zealand, we maintained consistent revenue in our key residential segment but had a decline in commercial glazing revenue as we reduced our risk exposure on large-scale projects," he said.

"In Australia, we have begun to make clear progress on our turnaround plan, growing revenues and delivering a positive EBITDA result for the second half," he said.

The impacts of Covid-19 began to be felt towards the end of March and then had a dramatic effect on New Zealand operations in April and early May.

Metroglass said it was able to continue paying all salaried and wage staff in full throughout the shutdown period, supported by the Government's wage subsidy.

Looking ahead, the company said the negative repercussions on the New Zealand economy caused by the Covid-19 pandemic were expected to be "significant" and result in lower construction activity for the coming 12-24 months.

Metroglass last traded at $20.5c, down 3c, having fallen by 48 per cent over the past 12 months.