Methven : Media Release.pdf 88.12 KB

NZX Release

28 August 2017

Methven Limited (MVN)

Results emphasise the need for simplification and agility

RESULTS FOR THE TWELVE MONTHS ENDED 30 JUNE 2017

Methven performance summary for the year to 30 June 2017:

• NPAT (Net Profit After Tax) of $5.8m, down 24.5% reported or 15.1% on a constant currency3basis.

• Sales of $100m, down 5.4% reported, flat in constant currency3.

• EBIT2of $9.2m, down 17% reported or 7.8% in constant currency3.

• Reported Net Debt1up $5m due to increased inventory levels.

• UK revenue up 9% and EBIT by 32%, with total sales at the highest in six years and EBIT the highest in seven years.

• Final partially imputed dividend of 3.0 cents per share payable on 29 September 2017.

• Business transformation plan launched targeting margin improvement and operational efficiency.

First quarter one-offs impact performance

Group CEO David Banfield commented "2017 was a very disappointing year, with top and bottom line performance below our expectations, though significantly impacted in Q1 FY17 by Masters' closure in Australia, FX in Australia, group supply disruption, and a major NZ customer changing stock holding. The inability to recover the Q1 shortfall emphasised the need to simplify the business and ensure increased agility for the future so as to be able to weather any unforeseen events."

Fit 4 the Future

We intend to invest in our business model transformation plan named Fit 4 the Future which is expected to take two years to implement.

Our three point plan:

1. Streamlined market teams.

2. Manufacturing consolidation and automation driving margin improvement.

3. Simplified processes and integrated systems driving operational efficiency. The goals of our Fit 4 the Future transformation plan are targeted to deliver:

• a 300 basis point improvement in gross margin

• a 10% reduction in fixed costs that will be reinvested in variable costs such as brand support.

• and to decrease the sales required to break-even by $1m per month.

.

Markets Performance

Group CEO David Banfield stated "Sales were disappointing in both New Zealand and Australia markets, primarily caused by the underperformance of tapware and in the case of New Zealand, demand returning to pre-quake levels in the South Island. Full year gross margins improved in both markets, with H2 FY17 EBIT in Australia up 25% versus H1 FY17. The UK market delivered sales growth of 9% and an earnings2increase of 32%, as volume margin benefits flowed through. Total sales were the highest in six years and EBIT the highest in seven years."

Technology and International Distribution

Innovation has mainly being focused on showerware over the last three years. Tapware innovation was finalised during FY17 and will be launched over the next 12 months, which will increase the relevance and performance of Methven tapware, in addition to the shower technology which is planned to launch in H2 FY18.

"International distribution of Methven proprietary innovation remains key to deliver long term profitable growth. It's therefore encouraging to report over 20 new distributors in China and a new exclusive distributor in Malaysia. We continue to have positive discussions with other potential new international partners." said Group CEO David Banfield.

Dividend

A final partially imputed dividend of 3.0 cents per share will be payable on 29 September 2017 - a pay-out ratio of 89%.

Outlook

Even with Fit 4 the Future investment, we are still expecting year-on-year NPAT growth of at least 10%.in constant currency. A further update on progress will be provided at the Annual Shareholder Meeting to be held on 1 November 2017.

- ends -

Contact: David Banfield, Group CEO, +64 9 829 0419, dbanfield@methven.net

About Methven:

Methven is an NZX-listed market-leading designer and manufacturer of showers, taps and valves. Our business is headquartered in Auckland where we design, develop and manufacture many award-winning products and technologies. Our international operations see our products distributed in Australia, China, UK, Middle East and Europe in addition to our home market of New Zealand.

For more company information, visit http://www.methven.com/nz

1. Refer to the reconciliation of Net debt to the consolidated balance sheet in note 3.6 of the financial statements.

2. Earnings before interest and tax (EBIT). Refer to the reconciliation of EBIT to the consolidated income statement in note 2.1 of the financial statements.

3. Constant currency is the previous year's individual trading entities' performance in their local currency translated into NZ$ at the current year's fx rates. These rates are GBP/NZD 0.5606 (PY 0.4554), AUD/NZD 0.9466 (PY 0.9198) and RMB/NZD 4.8514 (PY 4.3174).