Methven shares jump to 4-month high as 20% gain in first-half profit shows strategy on track

Methven's [NZX: MVN] shares jumped to a four-month high after the NZX-listed tap and shower manufacturer reported a 20% gain in six-month profit and announced a special dividend, reassuring investors that its strategy of developing and marketing new products is paying off.

Methven said profit rose about 20% to $3.4 million in the six months ended Sept. 30, based on its old balance date, and it will pay a fully imputed special dividend of 3c a share. Sales grew 7.8% to $52.5 million. Methven changed its balance date to June 30 from March 31 and wasn't expected to post first-half results until February next year. However, chief executive David Banfield said the company wanted to update the market "on our first six months' performance in this transition year to ensure that up-to-date top-line information was available for current and prospective investors."

The shares rose 8.5% to $1.15, and earlier traded at $1.16, as investors took today's announcement as a sign that Methven's three-year strategy is on track to lift revenue to $130 million from $96 million and increase profit to 10% of revenue from 5.9% by 2018. In the 12 months ended March 31, the Auckland-based firm turned around five years of declining revenue and profit, lifting earnings by 21% on a constant currency basis to $5.7 million, in line with guidance. Methven shares have declined 29% in the past two years.

The share price hike today suggests the market "had harboured some doubts about their profit guidance" but today's announcement was "very encouraging", said Matthew Goodson, managing director of Salt Funds Management, which owns about 9% of Methven. Profit was within the company's guidance, but Methven had struggled to make its numbers in recent years.

Mr Banfield, former chief operating officer for Canadian ozone cleaning products company Tersano before taking his current job in January 2014, said the company's investment in new product lines is driving profit growth. Methven has invested $3.9 million in the past year, including the global launch of its Aio range, which uses the company's patented Aurajet shower spray and tapware that is free of lead and other heavy metals.

Separately, Methven said its dividend policy is to have a payout ratio of between 70-90% of net profit, after taking account of significant one-time items that affect profit, the company's operating earnings and cash needs, investments, debt covenants and other relevant economic factors.

(BusinessDesk)