Methven Forecasts Reasonable Lift in Yearly Profit

Methven Forecasts Reasonable Lift in Full Year Profit and No Increase in Debt


F/Y Forecast 2010-11 Key Points

Reasonable lift in full year Net Profit
Half year profit in line with the prior year
Net Debt, which reduced by 35% in 2009-10, expected to remain at the same level
Dividends also expected to be maintained at current levels
Strong growth in Australia from increasing tapware and hotel sales
Modest gains in New Zealand with rollout of new products
UK weaker but reinvesting to support move to Methven brand

Luxury showerware designer and international marketer, Methven, is targeting a reasonable lift in Net Profit for the year ending 31 March 2011, Net Debt to be in line with prior year at around $17.4 million, cash flows to remain healthy and dividends to be maintained. This would equate to a gross dividend yield of close to 11.0 per cent based on the current share price.

“We’re picking a creditable improvement in profitability for the full year, holding Net Debt to current levels, even after an anticipated increase in debt of 15-20 per cent at half year due to planned capital expenditure for growth. We also aim to hold annual dividends at current levels,” Chairman Phil Lough told shareholders at the company’s Annual Meeting in Auckland today (22 July).

“Given the uncertain economic outlook in key markets, especially the UK, and the stop/start nature of the recovery domestically, it would be foolhardy of me to put a number on it. But I can say we are confident that we are looking at a better result and will update you when we report our six monthly results later in the year.”

Mr Lough said Australia would be the dynamo for growth again with Methven winning market share and sales in the tapware sector and introducing new top end Satinjet showerware to refresh the range.

“We're not banking on any huge recovery in the New Zealand economy. Instead we'll extend our market leadership with the release of new bathroomware technology and solutions to keep customers interested."

Mr Lough said the UK remained very depressed and Methven had downsized the operation but also reinvested to support the move to Methven’s premium branded showerware.

“We were too slow in moving the UK business away from its traditional DIY model. The recession has proven to us that Methven branded ranges are consistently robust earners, able to withstand economic and market downturns.”

Mr Lough said Methven had a resilient business model and would focus on premium priced and positioned products that delivered distinct benefits and experiences to earn high margins and secure brand loyalty.

Group CEO Rick Fala said the priorities in 2010-11 were to:
Develop new world leading showerware and tapware solutions and experiences
Push hard into the UK market and establish Methven’s full range of premium branded products with the shower market and hotel sector prime targets
Accelerate hotel sales in Europe and Asia with retrofits of Satinjet showerware and Jemflo technology which regulates water pressure to remove temperature spikes
Grow tapware market share in Australia
Develop international distributor partnerships

“We’re investing in new technologies and products as well as lifting our people and leadership skills so that we achieve our vision of being the leading Shower brand, loved world-wide for delivering superior, life-enhancing shower experiences,” he said.

Mr Fala said Methven’s biggest growth opportunity was the hotel sector where the largest 300 hotel chains around the world accounted for 7.3 million rooms.

“We have a unique technology package, tailored to the hotel bathroom space, using luxury Satinjet showerware and patented Jemflo technology to regulate water pressure and minimise temperature fluctuations. The outcome is improved guest satisfaction from a fantastic shower experience yet at the same time delivering water and energy savings to the hotel.”
T0 date 60,000 rooms have been installed with Jemflo pressure regulators and 13,000 hotel bathrooms retrofitted with Satinjet shower heads.

Mr Fala said a specialist team had been recruited to drive hotel sales in Australasia and Asia and a team was being established in the UK.

The UK was been restructured from the low price, high volume and limited product differentiation model to Methven’s premium, proprietary branded product operation with fresh investment in marketing and sales and the placement of a design specialist in-market to ensure that the offering was tuned to market opportunities.

“Methven will be positioned as the hero brand in the UK where we will focus on marketing and selling proprietary showerware ranges to hotels, upmarket showrooms and plumbing merchants. Deva will remain as the familiar and respected DIY brand.”

Mr Fala said Methven had to stand out from competitors in all markets and build on its unique points of difference, particularly its design capabilities which have been recognised as world class with an Honourable Mention for the ingenious Shower Infusion moisturising and aromatherapy pods in the 2010 Red Dot Awards.

“We’re investing in creating new categories and superior experiences with products like the Shower Infusions and bringing to market a constant stream of innovative showering and tapware solutions that people will love.”

Mr Fala said 2010-11 would be challenging again but the company was financially sound and had a clear strategy, a distinctive offering that promised superior experiences along with conservation of water and energy, and an ability to be ingenious and in touch with people.

“We are focused on earning premium margins from a premium offering to deliver growth,” he said. “We have a great culture and spirit, a talented team and an assuredness to create a sensory revolution in the shower environment that will generate returns for a sustainable future.”

Long serving directors Phil Lough and Rick Fala and David Mair, who was appointed in October 2009 as a fourth independent director, were elected unopposed, joining Gary Nel, Richard Cutfield and Peter Stanes on the Board of Directors.

All resolutions were passed unopposed.

For further company information go to: www.methven.com

ENDS

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