Methven's new strategy sets $130m revenue target for 2018

Methven [NZX: MVN], the NZX-listed tap and shower manufacturer, has set a target of raising annual revenue from $96 million to $130 million by 2018 under a three-year strategic plan released at its annual general meeting in Auckland today.

The plan aims to grow net profit after tax from 5.9 percent of revenue to 10 percent in the next three years by focusing on its three main markets in New Zealand, Australia, and the UK, lifting its online profile and pushing disruptive, new technology.

The Auckland-based firm turned around five years of revenue and profit decline this year, lifting annual profit for the year ended March 31 by 21 percent on a constant currency basis, in line with guidance, and lifting profit to $5.69 million from $4.71 million a year earlier. The targets for the 2016 financial year include lifting revenue by 5 percent and net profit by between 15 and 25 percent.

The $130 million target was criticised as not being aspirational enough by shareholder Bruce Sheppard, the former head of the New Zealand Shareholders Association. Sheppard said he'd been disappointed with the company's performance since he first bought shares six years ago and the turnaround in revenue decline was mainly due to last year's acquisition of a Chinese manufacturing plant rather than organic growth.

"This business is not growing as it should," he said.

He called for the resignation of chairman Phil Lough if next year's targets are not achieved.

Board member Norah Barlow, one of three directors re-elected at the annual meeting, said the board wanted to stretch management but still make the targets obtainable.

Chief executive David Banfield, who's been in the role for 18 months, said $130 million was "not an easy target" but long-term sustainable profits were achievable providing there was reinvestment back into the business.

In response to a shareholder question around dividend forecasts, Lough said he couldn't provide a figure although he expected it to be in line with previous years and that Methven would continue to be a "yield stock, rather than a growth one".

The three-year strategy was based around getting out and telling people the story about the company's world-leading technology, said Banfield.

"When we launched the Satinjet technology in 2004 we always said it was world leading spray technology, and it is. Yet it's not talked about in the world. We've now invested in the Aio range and designed a footprint that will enable us to start that conversation."

The company invested $3.9 million in future-focused projects during the last year, including the Aio launch, which included launching the patented shower spray Aurajet and industry-first tapware, which is free of both lead and heavy metals, into global markets. Both products have been nominated for design awards in Australia and Germany after only three months on the market.

Methven's shares are currently trading at $1.13, up 5 percent in the past year.

The company has changed its reporting date from March 31 to June 30 and is shifting into a new leased factory and head office in Auckland next year when it celebrates 130 years in business.

Results for the first three months of the new financial year saw sales up 6.7 percent and net profit up 36.7 percent, Banfield said.

(BusinessDesk)