Bathroom designer and marketer Methven yesterday did not deliver the news anxiously awaited by investors.
Instead, the company issued a profit downgrade and talked of tighter margins and reduced sales and profitability.
With the talk of the recession ending, investors are looking ahead to try to see some improvement on their investments.
Methven is the first company of a significant size to hold its annual meeting this winter. Methven shares fell 8% immediately on the news.
Chairman Phil Lough told the meeting in Auckland 2009-10 would be "hard going", although Methven's core renovation and replacement market appeared less depressed than other segments.
"Tough times can be times of opportunity. Methven is well placed to weather the recession and we are looking for opportunities.
"Yes, we are being practical and careful, implementing very strict cost containment measures, seeking operating efficiencies across the company and freezing salaries and director fees.
"But we are not pruning back on growth activities in areas where we believe we can lift long-term profitability and market presence."
The company was forecasting net profit to be down by up to 20% for the year. Net debt would reduce by 20%, dividends were expected to remain at current levels and working capital would reduce.
In line with earlier indications, the company was forecasting a very trying first half year, with underlying profits expected to be down 20% to 25% on the corresponding period last year, Mr Lough said.
Excluding the one-off 2008-09 United Kingdom tax benefit of $636,000, net profit would be down by up to 35%.
Group chief executive Rick Fala said the outlook for the 2009-10 year was for a strong improvement in Australian sales and profitability based on targeting the tapware market, where Methven currently had a low market share, and the valving sector with a much broader and more competitive offering.
Methven had pulled out of the United States market to focus on its core markets but was providing market support from New Zealand and seeking distributorships.
"no-one expects 2009-10 to be easy with extremely challenging trading conditions in all markets, but we are fit to compete."
Methven at a glance
• Net profit to go down 15% to 20%.
• Dividends remain at current levels.
• Working capital to reduce.
• NZ trading well but reduction in sales and profitability.
• Strong improvement in Australian sales and profit.
