Daily ShareChat: Methven

The performance of tap and showerware company Methven's New Zealand operations was robust at the sales line and demonstrates the strength of the company in a difficult market while its Australian operations were a stand-out performer, says Macquarie Equities analyst Brooke Bone.

NZ operating earnings in the year ended March were below forecast but the outlook is sound, "if not spectacular," Bone says.

The Australian business' "impressive" increase in earnings before interest and tax (EBIT) for the year of $3.4 million compared with $1.3 million the previous year still leaves significant scope for EBIT margin improvement, Bone says. The Australian EBIT margin was 7.3% compared with the NZ EBIT margin of 20.1%

Methven's Deva operations in Britain, where sales fell 18.8% in local currency terms and EBIT was down more than 70% in New Zealand dollar terms, will be a challenge requiring significant management focus over coming years.

"While management has a good track record with the NZ and Australian businesses, the UK is (a) difficult challenge half a world away," Bone says.

The company's cashflow, debt and dividends look secure. The company cut net debt to $17.4 million from $26.8 million a year earlier and paid a 5.5 cent a share final dividend, bringing the annual payout to 11 cents a share.

Recommendation: neutral.

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