Methven hit by UK customer's troubles

Methven managing director Rick Fala says it's too soon to say how much of the owed $1.5m will be recovered. Photo / Brett Phibbs

Methven's chief executive says it's highly likely the listed shower systems maker will cut its full-year profit guidance today after the news that its biggest British customer has called in administrators.

If a revision is announced, it will be the second time the company has issued a downgrade since March, when the firm said full-year net profit would be 10 to 15 per cent below - instead of in line with - the prior year's result.

Methven chief executive Rick Fala said any downgrade would relate to the firm's last financial year, as the developments in the UK affected the value of Methven's assets as at March 31, 2011.

The Avondale-based company would also issue guidance on future earnings today, he said, adding that the firm would report its result for the year to March 31 at the end of this month.

Methven announced yesterday that Britain's Focus DIY hardware chain had filed a notice of intention to appoint administrators.

The value of receivable owed to the New Zealand firm by the British chain was $1.5 million.

Shares fell 5c to close at $1.51 last night.

Fala said it was too early to quantify how much of the $1.5 million the company was likely to recover.

All Methven knew was that the directors of Focus DIY were seeking consent from their business lenders to appoint Ernst & Young as administrators, he said.

Fala said the company had retention of title on its stock, meaning a recovery of the goods from the British chain's stores could take place.

"But we don't know if we can physically get in [to the stores], and even if we get in how much stock we should take out," he said.

"Until we spend some time with that customer we won't know. The worst case scenario could be that that amount [$1.5 million] is written off."

Fala said Focus DIY accounted for 15 to 20 per cent of Methven's UK revenue, while about third of the group's total sales were made in Britain.

"They are a significant customer and it's an area we've been struggling in, so we certainly didn't want this to happen."

Craigs Investment Partners analyst Selwyn Blinkhorne said Methven was "not really making any money" in the UK, so the fallout from the Focus DIY issues would not have much of an impact on the company's bottom line.

But it would not help, either, he said.

"It's just another bit of bad news."

Britain's Independent reported that Focus DIY was forced to call in administrators after it defaulted on a loan repayment.

The move put almost 4000 jobs under threat, according to the newspaper.