28 August 2017For 12 months 1 July 2016 – 30 June 2017
Full Year results and outlook
David Banfield - Group CEODeidre Campbell - Group CFO
PRESENTATION TO INVESTORS & ANALYSTS
Results emphasise the need for simplification and agility
Summaryfor the 12 months ended 30 June 20171
• NPAT (Net Profit After Tax) of $5.8m, down 24.5% reported or 15% on a constant currency4 basis.
• Sales of $100m, down 5% reported and flat in constant currency.
• EBIT3 of $9.2m, down 17% reported or 7.8% in constant currency.
• Constant currency full year EBIT deviation caused by:
⁻ Heshan supply disruption
⁻ Tapware sales performance in Australia and New Zealand
⁻ NZ market fixed cost investment
• Reported Net Debt2 up $5m due to increased inventory levels.
• UK revenue up 9% and EBIT by 32%, with total sales at the highest in six years and NPAT the highest in seven years.
• Partially imputed final dividend of 3.0 cents per share payable on 29 September 2017
1. Al results presented references are for the 12 months ended 30 June 2017 (audited) and are compared against the 12 months ended 30 June 2016 (unaudited).
2. Refer to the reconciliation of net debt on slide 293. Earnings before interest and tax (EBIT). Refer to the reconciliation of EBIT to the consolidated income statement in note 2.1 of the
financial statements. 4. Constant currency is the previous year’s individual trading entities’ performance in their local currency translated into NZ$ 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 (PY4.3174).
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Summary (cont’d)for the 12 months ended 30 June 20171
• Methven 130 remains the strategic focus for the organisation.
• One-off events of FY17 emphasised the need to transform the existing business model.
• Fit 4 the Future transformation plan launched:
1. Streamlined market teams
2. Manufacturing consolidation driving margin improvement
3. Simplified processes and integrated systems driving operational efficiency
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Group financial performancefor the 12 months ended 30 June 20171
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• Sales of $100m, down 5% reported and flat in constant currency.
• NPAT finished at $5.8m, down 24.5% reported and down 15% on a constant currency basis.
• Net Debt increased to $27.1m increase due to inventory build for anticipated sales that did not materialise in this period.
Group financial performancefor the 12 months ended 30 June 20171
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• Sales of $100m, down 5% reported and flat in constant currency.
• NPAT finished at $5.8m, down 15% on a constant currency basis.
• Net Debt increased to $27.1m increase due to inventory build for anticipated sales that did not materialise in this period.
Group financial performanceas at ended 30 June 2017
• Net Debt increased to $27.1m. Up $5.0m
• Inventory up $4.5m:
⁻ Build for sales
⁻ Low PCP
• Capex:
⁻ FY17 normalised following investment in FY16 (NZ and UK premises, and manufacturing equipment)
⁻ FY18 Capex to increase to c. $3.3m to deliver Fit 4 the Future efficiencies
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Net Debt2 increased to $27.1m
Dividend
• Final dividend of 3.0 cps to be paid on 29 September 2017.
• Full year pay-out ratio of 89%.
• Partially imputed to 14.4% (maximum of 28%).
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Business Review
Our Goals in FY17
Revenue growth in New Zealand Revenue –2.5%
Profitable growth in Australia Revenue no, H2 Profit yes
Double digit sales and profit growth in UK ACHIEVED H2
ACHIEVEDNational distribution in UK
Market share growth of differentiated shower offer (Satinjet® and Aurajet®)
ACHIEVED
Heshan utilisation increased by 10% Not achieved
Improvement in Group NPAT % to sales Not achieved
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Methven 130
Methven 130
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Employees Employees as shareholders
Sustainability Significant reduction in carbon footprint
Methven 130 – Our Goals
Revenue $130 Million
NPAT Towards 10% of revenue
Supply & Operations $6 – $8M stock reduction
Technology NPD sales of $10M
Retail New markets and customers delivering $6 – $8M of sales
Insight Improved NPS across key influencers
Digital # 1-2-3 in search
Momentum in FY16
• FY16 good sales momentum• NZ strong H2 growth• Australia strong H2 growth• UK starting to turn around
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Sales CAGR - 2015-2017
• Group sales CAGR +4.2%• NZ sales CAGR +4.2%• Australia sales CAGR +4.2%• UK sales CAGR +3.1%
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Fit 4 the Future
• 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.
• Expected to take two years to implement.
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Markets
Market review – NZ
Increase our Revenue Revenue -2.5%
Grow sales and share of Tapware Not achieved
Launch new services for the Plumber Full service offering being developed
Increased share of Specification market Good progress
Page views +44%Increased brand awareness and preferencevia digital channels
Our Goals in FY17
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Market review – AU
Category segmentation at point of purchase Test to commence in FY18
Profitable revenue growth Revenue no, H2 Profit yes
ACHIEVEDIncreased brand awareness and preferencevia digital channels
Our Goals in FY17
Grow sales and share of Tapware Not achieved
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Increased share of Specification market Good progress
Market review – UK
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Our Goals in FY17
Launch new international markets France added – no breakthrough
Market share growth of differentiated shower offer Aurajet sales +123%
ACHIEVED£ growth from new national distribution
Page views +21%Increased brand awareness and preferencevia digital channels
Double digit sales and profit growth ACHIEVED H2
China Sales
• Focused investment in our China commercial operations continued in FY17. 20 new distributors have now been appointed.
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Group Operations segment(including NZ and China manufacturing)
• 2016 performance positively impacted non-recurring items of $1.0m.
• 2017 performance of factories negatively impacted by the previously reported management issue that constrained production in Q1 FY17, and the lower tapware demand from Australia and New Zealand.
• Heshan plant awarded the new Environmental Protection Certificate for Guangdong Province, which sets us up well for the future.
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2018 full year earnings outlook
Our Goals in FY18
Our Goals in FY18
Profitable growth in New Zealand and Australia
Double digit growth in UK
Fit 4 the Future – fixed cost savings realised
Fit 4 the Future – Manufacturing insource delivering margin improvement
Tapware innovation launched in Australia and New Zealand
Heshan utilisation and productivity increase
Improvement in Group NPAT % to sales
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Guidance 12 months ending 30 June 2018
• Guidance for the year ending June 2018:⁻ Even with Fit 4 the Future investment, we are still expecting
year-on-year NPAT growth of at least 10% in constant currency.
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Summary
• FY17 earnings negatively impacted by one-offs in Q1.• 2015 – 17 CAGR 4.2%.• UK showing very positive momentum. • Tapware innovation forecast to deliver improved performance in
FY18.• Fit 4 the Future designed to deliver 300 basis point
improvement in gross margin over two years. • Even with Fit 4 the Future investment, we are still expecting
year-on-year NPAT growth of at least 10% in constant currency.
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Disclaimer
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This presentation contains not only a review of operations, but also some forward-looking statements about Methven Limited and the environment in which the company operates. Because these statements are forward looking, Methven Limited’s actual results could differ materially.
Although management and directors may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward-looking statements will be realised.
Please read this presentation in the wider context of material previously published by Methven Limited.
Questions?
mETHvEN
2017 Full Year Results and Outlook
Non-GAAP Financial information
Reconciliation of Net Debt to the consolidated balance sheet
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As at 30 June
NZ $000 2017 2016
Bank facility loans 30,048 23,503
Finance leases 702 859
Less: cash and cash equivalents (3,624) (2,240)
Net debt 27,126 22,122