Metro Performance Glass: MPP interim report 1H22

Chair

Letter

aloneRecent events in Australia and New Zealand have reminded us once again that the future is uncertain. It seems that little time has passed since our general meeting, where we hoped for a fiscal year increasingly free from the pandemic and predicted a return to dividend payments,

useas our debt levels declined.

The situation changed very quickly and the company faced a series of Covid-19 related restrictions and international supply chain disruptions for a significant portion of the first half of fiscal 2022. As a result, Metroglass did not meet the profitability and cash flow targets we set for the half year.

staffIn the first four months, the company performed well, with strong sales demand

e a solid future order book.

Our New Zealand business had diversified the weighting in its product mix and broadened the customer base in the Residential segment. The new revenues generated were partly offset

the impact of competitive pressures in the North Island. We continued to see strong sales momentum in our Retrofit segment, and process improvements in the commercial glazing unit were reflected in our consistent project execution and encouraging growth in our portfolio over time.

On August 17, Metroglass closed all four processing plants in New Zealand as the country moved to Alert Level 4. Three of our plants were able to resume operations 14 days later. However,

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our largest facility in Auckland was closed for a total of 35 days. The loss of sales, limited distribution capacity and reduced manufacturing capacity had a significant impact on our results.

Building on last year’s experience, the Metroglass team was able to react quickly, focusing on the safety and well-being of our employees, maintaining ties with our customers and preparing for the resumption of operations. once alert levels allow.

We were eligible for the first two rounds of the New Zealand government wage subsidy, receiving $ 2.2 million. As we had done during previous closings, we continued to pay our staff in full. We have taken a number of other short-term steps to minimize the financial impact on the business, including discussions with our owners. We have also ensured that our banking union is fully aware of the consequences of the lockdown period.

At Australian Glass Group (AGG), which has experienced an even more prolonged Covid-19 outbreak, the three processing plants have fortunately managed to remain operational. This allowed the company to achieve stable turnover. It is clear, however, that state-by-state restrictions related to Covid-19 have caused a continuing series of disruption to construction sites and supply chains, and reduced the availability of labor. Difficulties in delivering to customers on time and the impact on costs reduced AGG’s profitability.

Despite this, AGG continues to record steady growth in its double glazing markets which are at the heart of our strategy in Australia. The long-awaited changes to the National Building Code supporting the adoption of double glazing are planned in

calendar years 2022 and 2023. We are well positioned with a strong product line and service offering to take advantage of the expected increase in demand.

For the first half of fiscal year 2022, the Group achieved sales of $ 116.9 million and achieved EBIT1 of $ 3.0 million. This is our second year with disruptions related to Covid-19. Metroglass recorded similar revenue in the previous comparable period, which also included an Alert Level 4 foreclosure. However, EBIT result was reduced by higher glass and freight costs, a lower contribution to wage subsidies and the protracted disruption of Covid-19 in Australia. Price increases have been implemented in both countries to reflect these cost changes.

Our historic focus on allocating our cash flow to debt reduction has placed Metroglass in a strong position to deal with the immediate impacts of the recent Covid-19 outbreaks.

We have agreed with the banks to extend the timeline for restrictive covenants relief in recognition of the short-term impacts of Covid-19. As of September 30, 2021, net debt was $ 47.8 million, and at a similar level as of March 31, 2021.

Due to the impact on Metroglass’s finances, the board of directors has made the prudent decision not to consider a dividend in addition to the interim results of 2022. We understand that this is disappointing for shareholders. The Board of Directors still intends to return to a conservative and sustainable dividend policy as soon as economic conditions permit.

It is clear that the level of uncertainty has increased sharply since the emergence of the Delta strain of Covid-19 in New Zealand and Australia. As of this writing, changes in the way the pandemic is to be handled in New Zealand are being announced. In addition, various Australian states have strongly mandated vaccines for all people in the construction industry. As vaccination levels increase in New Zealand and Australia, we believe this will create a safer business environment for Metroglass.

New Zealand residential housing permits and approvals in Australia continue to support a major pipeline of works despite

1. Profit before interest, taxes and before significant items

Peter Griffiths

CHAIR

the pandemic. As we saw the experience of last year, customer demand remained strong and the construction sector was able to rebound quickly. However, the difficulties in the supply chain and the resulting increased costs will be with us for some time to come.

The group continues to closely monitor the evolution of restrictions linked to Covid-19 in the two countries while maintaining its commitment to achieve its strategic objectives:

1. Maintain our leadership position and refine our sales mix to take advantage of opportunities in an increasingly competitive New Zealand market
2. Develop and improve the profitability of our Australian business and benefit from the growing demand for double glazing
3. Ensure that our balance sheet remains strong and sufficient to face future risks and opportunities.

On behalf of the Board of Directors, I would like to thank the employees of Metroglass for their dedication and commitment during a very difficult time.

Peter Griffiths

CHAIR

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