Daily ShareChat: Methven

Methven's first-half result was respectable and in line with expectations, although it has downgraded its full-year guidance, says Adrian Allbon, an analyst at Goldman Sachs & Partners.

Methven reported an 8% rise in net profit to $4.5 million for the six months ended September while EBITDA (earnings before interest, tax, depreciation and amortisation) rose 8% to $8.8 million.

"Operationally, strong first-half Australian EBITDA growth has been offset by UK decline and NZ flat," Allbon says.

"The hotel opportunity continues to be a 'slow burner' in terms of current profitability .. but we believe it is an important medium term growth opportunity for its investment case," he says.

Hotel earnings will account for less than 5% of full-year profit, he estimates.

The 30% decline in sales from its British operations was partly due to losing major customer Wickes in the March quarter this year and partly from having a 'me too' product range in a weak and highly competitive market, Allbon says.

"Looking forward, the better news is restructuring the UK is Methven's priority and a reputable manager has already been appointed to implement change," he says.

In Australia, sales growth of 10% came from Methven's proprietary showerware Satinjet, up 13%, and tapware, up 60%, offset by a 25% decline in Neva valves.

Recommendation: Buy.

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