Methven shares rise as earnings gain; dividend cut

Wednesday 27th May 2009

Methven shares rose after the manufacturer of taps and bathroom fittings posted a 3.1% gain in annual profit, meeting its forecast, on a one-time tax gain and earnings contributions from its U.K. business.

Net income rose to $10.1 million in the 12 months ended March 31, from $9.8 million a year earlier, the company said in a statement. Operating revenue jumped 20% to $137.3 million. The shares climbed 4.7% to $1.35, bringing their gain in the past three months to 29%.

The results include a full-year contribution from the Deva Tap Co. in the U.K., which “produced an outstanding result given that this was the market worst affected by recession, combined with the expected contraction in New Zealand,” chairman Phil Lough said. “Trading conditions in all Methven’s key markets remained extremely challenging,” he said.

Methven acquired Deva in 2007 for $57 million, gaining a launch-pad into the U.K. for its Satinjet showerware products through Deva’s distribution channels. Deva has about 6% of the U.K.’s brassware market. The acquisition was part of the company’s strategy to diversify its revenue sources.

At the time, Methven said the deal would triple its market from 25 million people in Australasia to 85 million in the U.K and Australasia combined.

Sales in the U.K. were $57.5 million in the latest year, making that the biggest single market, from a seven-month contribution of $37.3 million a year earlier. EBITDA met expectations at $7.9 million, it said.

Operating revenue in Methven’s home market of New Zealand fell 11% to $42.7 million, generating EBITDA of NZ$11 million, down 9.5% from the previous year.

In Australia, sales climbed 20% to $41.6 million though EBITDA slipped 26% to $2.9 million as rivalry eroded the company’s margins. In the U.S., Methven posted an EBITDA loss of $1.2 million.

The company cut its final dividend by 8.3% to 5.5 cents a share, which the company said was a “prudent” step given the uncertain economic outlook. The company reduced debt to $26.9 million from $32.6 million.

Businesswire.co.nz

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