Unprofitable UK unit sees Methven profit dip 27%, missing target

Rick Fala:

Methven, the tapware maker whose board agreed to link directors' fee increases to earnings growth, reported a worse-than-expected 27% drop in first-half profit on its unprofitable British operation.

Net profit fell to $2.3 million, or 3.5 cents per share, in the six months ended September 30, from $3.2 million, or 4.8 cents, a year earlier, the Auckland-based company says in a statement.

The company had forecast a 25% decline in September. Sales fell 7.2% to $50.3 million.

"The global market conditions continue to impact the Methven business, with the uplift in second quarter earnings not sufficient enough to offset the forecast weak first quarter," chief executive Rick Fala says. "Returning the UK business to profitability is a key priority."

The shares rose 0.7% to $1.36 and have gained 25% this year. The stock is rated an average "outperform" based on five analyst recommendations compiled by Reuters, with a median target price of $1.375.

Methven's board declared an interim dividend of 4.5 cents per share, or $3 million, with a record date of December 14, payable on December 31.

Earnings before interest, tax, depreciation and amortistion in the New Zealand unit rose 8.2% to $4.3 million, while Australian earnings climbed 18% to $A1.6 million.

The UK unit posted an ebitda loss of £184,000. Methven's British management team formalised a restructuring plan last month to address earnings in the first half to return the unit to profit. The restructuring is expected to cost $270,000.

The company did not forecast annual earnings, saying "with continued global market uncertainty it still remains imprudent to provide guidance on the level of growth we might achieve".


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