Analyst presentation.pdf

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PRESENTATION TO INVESTORS & ANALYSTS

Full Year results and outlook

David Banfield - Group CEO Deidre Campbell - Group CFO 28 August 2017 For 12 months 1 July 2016 – 30 June 2017

Results emphasise the need for simplification and agility

Summary

for 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 29 3. 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).

–3–

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

–4–

Group financial performance for the 12 months ended 30 June 20171

•

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.

–5–

Group financial performance for the 12 months ended 30 June 20171

•

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.

–6–

Group financial performance as at ended 30 June 2017

Net Debt2 increased to $27.1m

•

Net Debt increased to $27.1m. Up $5.0m

•

Inventory up $4.5m:

•

–7–

⁻

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

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%).

–8–

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

National distribution in UK

ACHIEVED

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

–9–

Methven 130

Methven 130 Methven 130 – Our Goals Revenue

$130 Million

NPAT

Towards 10% of revenue

Supply & Operations

$6 – $8M stock reduction

Technology Retail

NPD sales of $10M New markets and customers delivering $6 – $8M of sales

Insight

Improved NPS across key influencers

Digital

# 1-2-3 in search

Employees

Employees as shareholders

Sustainability

Significant reduction in carbon footprint

– 11 –

Momentum in FY16

• FY16 good sales momentum • NZ strong H2 growth • Australia strong H2 growth • UK starting to turn around

– 12 –

Sales CAGR - 2015-2017

• Group sales CAGR +4.2% • NZ sales CAGR +4.2% • Australia sales CAGR +4.2% • UK sales CAGR +3.1%

– 13 –

– 14 –

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.

– 15 –

Markets

Market review – NZ

Our Goals in FY17 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

Increased brand awareness and preference via digital channels

Page views +44%

– 17 –

Market review – AU

Our Goals in FY17 Profitable revenue growth

Revenue no, H2 Profit yes

Grow sales and share of Tapware

Not achieved

Category segmentation at point of purchase

Test to commence in FY18

Increased share of Specification market

Good progress

Increased brand awareness and preference via digital channels

ACHIEVED

– 18 –

Market review – UK

Our Goals in FY17 Double digit sales and profit growth

ACHIEVED H2

£ growth from new national distribution

ACHIEVED

Launch new international markets

France added – no breakthrough

Market share growth of differentiated shower offer

Aurajet sales +123%

Increased brand awareness and preference via digital channels

Page views +21% – 19 –

China Sales

•

Focused investment in our China commercial operations continued in FY17. 20 new distributors have now been appointed. – 20 –

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.

– 21 –

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

– 23 –

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.

– 24 –

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.

– 25 –

Disclaimer 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.

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Questions?

mETHvEN 2017 Full Year Results and Outlook

Non-GAAP Financial information Reconciliation of Net Debt to the consolidated balance sheet As at 30 June 2017

NZ $000

Bank facility loans Finance leases Less: cash and cash equivalents

30,048

23,503

702

859

(3,624)

Net debt

27,126

– 29 –

2016

(2,240) 22,122