Methven eyes global hotel market

Methven's Rick Fala is expecting a trading uplift after what has proved a challenging year for the 124-year-old firm. Photo / Dean Purcell

Listed tap and shower systems maker Methven, which yesterday reported a 22 per cent drop in full-year profit, is eyeing hotel bathroom refits as an avenue for growth.

Chief executive Rick Fala said the Asian hotel sector - China in particular - offered many opportunities.

"Improved guest satisfaction, combined with potential water and energy savings, have strong appeal to hoteliers."

Fala said hotel bathroom refits had the potential, in the long term, to become one of the biggest components of Methven's business.

The company had already fitted out 13,000 hotel rooms with its Satinjet showerware in Australia and Asia.

Jemflo - a non-Methven pressure and temperature-balancing technology the company acquired an exclusive licence to market this year - had been installed in 60,000 hotel rooms.

Fala said Jemflo could help hotel guests avoid the nasty experience of "thermal shock" when showering.

"It stops pressure spiking, either up or down, that often occurs during high usage periods in hotels, normally in the morning between 6am and 8am."

The company highlighted the size of the global hotel market, and pointed out that the largest 300 hotel chains accounted for more than 7.3 million rooms.

Craigs Investment Partners research analyst Selwyn Blinkhorne said Methven's focus on the hotel sector was compelling, although its success depended on how long it took to develop.

Methven's group operating revenue was down 5.5 per cent to $129.8 million. Its share price closed unchanged at $1.58 last night.

Blinkhorne said it was a very good result given the economic environment.

Fala said the past 12 months had seen Methven forced to work through tough trading conditions.

"We're in the building industry so we're right in the thick of the global recession. But I think the signs are encouraging now and we are expecting a solid uplift on the previous year."

He said the net debt reduction of 35 per cent to $17.4 million was achieved through staff cutbacks and reduced inventory levels, particularly in Britain, where business conditions had been especially challenging.

A $481,000 intangible asset impairment recognised Methven's loss of British DIY chain Wickes as a major account, as well as diminished customer base in that country, he said.

Fala said the outlook in Britain and the Continent remained uncertain, and the firm expected weaker sales as a result of the loss of the Wickes account.

Methven says the impact of depressed British sales was softened by growth in Australian tapware revenue and "robustness" in the local market.

Fala said Methven would increase its R&D spending and focus on finding new distribution partners through attending high-profile trade shows.

The 124-year-old manufacturer, established in Dunedin in 1886, would also have another go at the United States market, after an aborted attempt in 2004.

METHVEN

12 months to March 31

2010
* Revenue - $129.8m
* Ebitda - $16.7m
* Net profit - $7.8m

2009
* Revenue - $137.3m
* Ebitda - $19.8m
* Net profit - $10.1m