Metroglass operating earnings rise but net loss deepens

Impairments took Metro Performance Glass deeper into loss in the year to March while its operating earnings doubled.

The company said its statutory net loss came to $10.5 million from a $0.5m loss in the previous March year, driven by a $10m impairment of intangible assets due to the softer outlook for New Zealand construction.

Group earnings before interest and tax (ebit), and before significant items, improved by 100 per cent to $11.8m, supported by price and cost management disciplines across the business and the strong performance of Australian Glass Group (AGG).

Metroglass said the group delivered a result at the upper end of guidance, buoyed by AGG’s improvement in profitability to $6.4m.

On the flipside, supply-chain disruption, cost inflation and the early signs of a construction down-turn affected the New Zealand business.

New Zealand revenue improved 5 per cent, year-on-year, and price increases have begun to improve gross margin, the company said.

The group’s net debt at the end of the period was $60.4m — at the lower end of previously advised guidance.

Group revenue for the year was $263.5m, 12 per cent higher than the prior year, with New Zealand up 5 per cent and Australia up 32 per cent.

In the New Zealand residential segment, revenue of $122.1m was 6 per cent above the prior year.

AGG performed well, despite disruptions to supply chains and labour availability.

In February, Metroglass announced its intention to explore divestment options for the Australian business. “This process continues to progress and is expected to take a number of months,” it said.

Proceeds from any sale would go towards the reduction of debt.

Metroglass has concluded an extension of its syndicated banking facilities out to the end of October 2024 from October 2023 previously.

Looking ahead, Metroglass noted that the 12-month rolling number of residential consents issued in New Zealand had declined from its peak through the first quarter of 2023.

“Activity levels in the beginning of 2024 have remained within expectations and customers continue to indicate a stable pipeline of work in the near term, although the economic outlook presents significant uncertainty for the number of consents issued and the dwellings ultimately constructed in 2024,” chief executive Simon Mander said.

“As a consequence of expected lower construction activity, a review of the carrying values of Metroglass’ assets resulted in a $10m impairment of New Zealand goodwill, which initially arose from acquisitions completed in 2012 (before the company’s initial public offer).

“This non-cash charge has no impact on the company’s bank covenants and is presented as a significant item in the 2023 financial statements.”

As international freight costs and disruption moderate in the next six months, the company said its level of financial performance in the first half of 2024 is expected to be better than the prior comparable period.

Economic headwinds from inflation, lower house prices and other external pressures were likely to accelerate the decline in building activity through the second half of 2024, the company said.

“An improvement in the financial performance of the New Zealand business in the first half of 2024, an unwinding of working capital and a continued contribution from AGG, will allow for a meaningful reduction in net debt in the first half of 2024.”

Net debt was expected to be below $55m.

For the current year to March 2024, management forecasts are for AGG to achieve ebit of A$7.5m ($8.08m).