Demanding guidance provided by Methven disappointed brokers yesterday, despite the tapware maker lifting its operating profit for the year ended March by 12.4%.
Operating earnings rose to $12.7 million in the period under review from $11.3 million in the previous corresponding period (pcp). Reported profit rose nearly 21% to $5.7 million from $4.7 million and revenue fell slightly to $96.3 million.
Net debt increased to $22.8 million, or 57.5%, as a result of the China acquisition settled during the year, higher-than-targeted inventory and investment for the future.
A fully imputed 4c-per-share dividend will be paid on June 30.
Chief executive David Banfield said the company was comfortably within its banking covenant limits.
As previously reported, the company completed the acquisition of Chinese premium tapware manufacturer Invention Sanitary, now Methven Heshan, during the year.
The earnings benefit had been realised during the second half of the year with a profit after tax contribution of $1.1 million.
Full-year profit from Methven Heshan was still expected to be in line with expectations of at least $US2million ($NZ2.74 million).
Craigs Investment Partners broker Chris Timms said the ''average result'' from Methven was in line with Craigs' forecast.
''But the 2016 financial year guidance should disappoint many, because it is not demanding. All this suggests muted share price response.''
Mr Timms noted Methven Heshan contributed $1.1 million to the reported profit but excluding Heshan, the profit was down 2.2% on the pcp.
The dividend was also below expectations.
Key drivers were better-than-expected performance from Australia and the United Kingdom and the contribution of Heshan.
The second-half operating profit was mixed, as was the profit in the first half, he said.
Australian earnings were up 34% and the UK was up 44% but New Zealand operating profit was down 18%, suggesting the company had not benefited from a domestic construction upswing.
The company expected 2016 reported profit growth of 15% to 25%, up $1 million to $1.6 million.
That was an undemanding target because Heshan alone was expected to contribute annualised profit of more than $US2million and, with the $1.1million included in the 2015 profit, the 2016 incremental benefit would be $1.5million, Mr Timms said.
