Methven profits slump 22pc to $7.8m

Profits at shower and tapware company Methven has reported a 22pc fall in full year profits. Photo / Bay of Plenty Times

Shower and tapware company Methven Group reported a 22.2 per cent fall in full year net profit to $7.8 million, and said it had weathered the fallout from the global economic crisis.

Sales revenue for the 12 months to the end of March was down 5.5 per cent to $129.8m, while net profit excluding a British intangible asset impairment of $481,000 was down 17.5 per cent to $8.3m.

Chairman Phil Lough said growth in Australian tapware sales and continued robustness in this country were vital in generating the hard earned profit, while also softening the impact of depressed British sales and the loss of a major DIY chain as a customer.

A fully imputed final dividend of 5.5c per share is to be paid, taking the full year dividend to 11cps, down from 11.75cps a year before.

Group chief executive Rick Fala said Methven was targeting a solid lift in year on year sales and profitability in 2010-11, but remained alert to the continued uncertainties from the stop/start economic recovery in key markets.

Australia would continue to be the dynamo of growth despite a more subdued economy with interest rate hikes and an end to the current package of government incentives, he said.

The New Zealand economy was expected to remain fragile and Methven would target modest top line growth and margin improvements as it further consolidated domestic market leadership and brand loyalty, Fala said.

The economic outlook for Britain and more widely across Europe remained uncertain and Methven expected performance to be weaker due to the loss of a major account.

Securing credible distributors to market Methven ranges in new markets beyond Britain and Australasia was a key strategy to extend market and brand reach.

Increased capital spending would be invested in research and development to accelerate development and commercialisation of proprietary products and technologies, said Fala.

Methven's focus was on being the world leading showerware brand.

"The global financial crisis has served to reinforce the need for us to focus on selling proprietary products which generate premium margins," Fala said.

"Methven branded ranges have proven to be consistently robust earners, able to withstand economic and market downturns."

The company said it had weathered the fallout from the global economic crisis with a design-led product differentiation, innovation and market diversification strategy.

In Australia, company operating revenue lifted 7.1 per cent to A$36.6m ($45.7m), with ebitda (earnings before interest, tax, depreciation and amortisation) up 88.9 per cent to A$3.3m. Tapware sales rose 48 per cent with new ranges and a concerted focus on building market share.

In this country, total operating revenue fell 2.6 per cent to $42.8m, reflecting lower intercompany sales, Methven said.

New Zealand sales revenue lifted 3.8 per cent to $38.4m, with margins firm despite a 2 per cent fall in permits for renovation, which was the company's core market. Ebitda fell 5 per cent to $10.1m.

In Britain, operating revenue fell 14 per cent to £18.7m ($39.9m), while ebitda fell 44.5 per cent to £1.7m. Gross margin dropped 3.3 percentage points due to intense competition in a recessionary market.

- NZPA