MPG
23/11/2015 08:30
HALFYR
PRICE SENSITIVE
REL: 0830 HRS Metro Performance Glass Limited
HALFYR: MPG: MPG 1H 2016 results in line with guidance
NZX.MPG, ASX.MPP 23 November 2015
Metro Performance Glass 1H 2016 results in line with guidance
Strong construction activity underpins sales and earnings; industry
constraints continue to weigh on momentum particularly in commercial markets.
Highlights:
o Sales of $94.9 million, +8.4% compared to 1H15 and +0.8% above the
company's guidance provided in August;
o Net profit after tax (NPAT) of $11.0 million in line with guidance, but
below the Prospectus forecast as the company invests for growth;
o New Auckland plant is ramping up towards expected volume levels, alongside
continued improvement in customer service performance measures such as
DIFOT2;
o Strong commercial forward order book of $18.6 million, up from $15.8
million as at 31 March 2015;
o The Retrofit double glazing business is growing strongly, with sales +
25.7% compared to last year
o Major plant-related capital investment programme complete, strategic focus
now turns to top line sales and plant optimisation;
o Financial position remains strong with gearing2 at 26.0% providing
considerable financing headroom;
o Guidance for FY16 sales and NPAT remains in the order of $190 million and
$20 - $22 million respectively; and
o Declared fully imputed interim dividend of 3.6 cents per share with a
payment date of 22 January 2016.
New Zealand's largest value-added glass processor Metro Performance Glass
(NZX.MPG; ASX.MPP) today announced its half-year results for the 2016
financial year in line with guidance given in August as strong construction
markets continue to underpin its performance.
Sales for the six months to 30 September 2015 rose to $94.9 million, ahead of
guidance of $94.1 million. Net profit for the same period was $11.0 million,
also at the top end of guidance of $10 - $11 million. The company is unable
to provide full comparative figures for the six months ended 30 September
2014 as Metro Performance Glass only began trading at the time it acquired
Metroglass Holdings via its initial public offering in July 2014.
The company exceeded its prospectus sales forecast for the half year despite
lower than anticipated market growth that reflected industry-wide capacity
constraints. However, as foreshadowed in August, earnings have not kept pace
with sales growth, or our Prospectus forecast, due to the company's decision
to invest for the future. Specifically, the company decided to maintain a
higher operational cost base in order to:
o Support the company's strategic focus on achieving strong revenue and
market share growth through unrivalled customer service;
o Ensure the company is well placed to execute on its largest-ever forward
book of signed commercial orders, as well as preparing for the significant
growth opportunities expected over the next 3 - 5 years; and
o Continue to develop the infrastructure needed to support the company's
growing Retrofit double glazing business.
Chairman Sir John Goulter said: "Metro Performance Glass has delivered a
creditable first half result. With the Auckland and Christchurch plants now
fully operational, the company has completed its major capital investment
programme and is well advanced in its journey to become a
globally-competitive, technically-advanced and integrated glass processor."
"Metro Performance Glass has a strong balance sheet with low gearing. The
Board sees significant processing, product and distribution opportunities
within our existing markets, but will be continuing to monitor any potential
acquisition opportunities that will generate increased shareholder value."
The Metro Performance Glass Board has today declared a fully-imputed interim
dividend of 3.6 cents per share, equating to 58% of NPATA for the period.
The pay-out is consistent with the company's dividend policy of paying
between 55% and 75% of NPATA. The dividend is to be paid on 22 January 2016
to all shareholders on the register as at 8 January 2016.
Chief Executive Officer Nigel Rigby said: "Construction markets are
benefitting from record net migration, low interest rates and rising momentum
in building activity, particularly in Auckland and the non-residential
rebuild in Canterbury. Metro Performance Glass is well placed to benefit from
these trends.
"The company continues to see growth opportunities. As such, we are focusing
on improving our operating capabilities. This includes enhancing the
company's glazing capabilities and resources in line with a growing
commercial pipeline and developing the infrastructure behind its rapidly
growing Retrofit double glazing business.
"It also includes investing in the equipment that keeps Metro Performance
Glass' product offering at the forefront of the industry. While the company
has added some short term temporary costs, this strategy will undoubtedly
help it to achieve its long term goals," Mr Rigby said.
Markets:
Construction activity and building consents have returned to pre global
financial crisis levels. There is a very strong correlation between lagged
residential building consents and Metro Performance Glass' revenue. This
historical correlation has fluctuated slightly throughout the 2015 calendar
year due to the construction industry's difficulty commencing consented
projects.
Residential building consent issuance grew 12% in the September quarter (vs.
the June quarter), with consents for the twelve months to September exceeding
26,000. Commercial construction activity is also on an upward trajectory,
with August and September 2015 consent issuances at all-time high levels.
Operations:
The company's new Auckland plant, which consolidated five sites on a single
site at Highbrook in South Auckland, is performing well with production
ramping up towards expected levels.
As a strongly customer focussed business, the primary key performance
indicator for Metro Performance Glass is the proportion of customer orders
'delivered in full on time' (DIFOT). The average DIFOT for the first half was
83% (covering the four primary processing plants). While this is below the
company's current target of 90%, performance is trending upwards with
September DIFOT of 89%.
The company has won a number of high quality commercial glass projects, with
a pipeline of accepted forward work increasing to $18.5 million as at 30
September 2015 (up from $15.8 million at 31 March 2015). While commercial
market activity is growing, the conversion of accepted forward orders into
revenue remains difficult to predict, with many projects experiencing delays
that are outside of our control.
The Retrofit double glazing business is growing strongly, with first half
sales up +25.7% compared to the same period last year. The company ran a
highly successful television advertising campaign in April and May 2015,
highlighting the benefits of retrofitting double glazed windows into existing
houses. This resulted in significant interest in the company's product
offering. The retrofit market represents a significant opportunity for the
company, with a potential market of 1.1 million homes.
In October 2015, Metro Performance Glass acquired certain processing assets
of a former glass processor in Wellington. These assets and the leased
premises will strengthen the company's lower North Island processing
capabilities and customer service.
Outlook:
Metro Performance Glass is well positioned for the balance of the 2016
financial year. The company's priorities are:
o Driving top line growth through the company's product and supply chain
strategy and by ensuring customers' expectations are exceeded and Metro Glass
remains the company of choice;
o Delivering manufacturing excellence to achieve the desired service and cost
leadership position;
o Capturing an increasing share of the growing commercial construction
market; and
o Driving the Retrofit double glazing replacement business.
Chairman Sir John Goulter said: "Metro Performance Glass has significant
growth opportunities ahead, and as such is continuing to focus on operating
capability improvements that will help the company achieve its long term
goals. The company is looking forward to the remainder of the financial year
with confidence and maintains its guidance for sales and NPAT for the year to
31 March 2016 in the order of $190 million and $20 - $22 million
respectively.
"We see the key risk to our near term outlook being that if current industry
delays in initiating and completing commercial projects do not improve, then
revenues would be deferred and NPAT would be at the lower end of the guidance
range." Sir John said.
For further information contact:
Nigel Rigby John Fraser-Mackenzie
Executive Director, Chief Executive Officer Chief Financial Officer
+64 (0) 27 703 4184 +64 (0) 27 551 6751
Reconciliation of GAAP to non-GAAP profit measures:
$m 1H16 actual
NPAT 11.0
Add back: taxation expense 3.4
Add back: net finance expense 1.6
EBIT 15.9
Add back: depreciation & amortisation 3.2
EBITDA 19.2
Note: Metro Performance Glass' financial results are prepared under New
Zealand IFRS. The company has used non-GAAP profit measures in this document,
of 'earnings before interest and taxes' and 'earnings before interest, taxes
and depreciation' when discussing financial performance. The Directors
believe that these non-GAAP financial measures provide useful information to
readers to assist in the understanding of our financial performance,
financial position or returns, but that they should not be viewed in
isolation, nor considered as a substitute for measures reported in accordance
with NZIFRS. Non-GAAP financial measures may not be comparable to similarly
titled amounts reported by other companies. The figures above may not add
exactly to the total due to rounding.
About Metro Performance Glass
Metro Performance Glass (NZX.MPG; ASX.MPP) is New Zealand's largest and most
innovative glass processor, distributor and glazier. With more than 750
staff, a fleet of over 280 service vehicles and 16 sites located throughout
the country, we supply and service the architectural, building and
residential markets with industry leading glass products.
Whether it be high performance Low E double glazing units for new builds or
the retrofit market, bathroom shower screens, kitchen splashback or pool and
deck balustrades, Metro Performance Glass have been at the forefront of
providing performance glass products and industry leading customer service,
what we like to call Performance without Compromise. Learn more at:
www.metroglass.co.nz
End CA:00273846 For:MPG Type:HALFYR Time:2015-11-23 08:30:04
