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Hallenstein Glasson Holdings

By Dan Stratful

Monday 27th February 2012

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It’s a difficult time to be investing in retailers, but several New Zealand retailers are well run companies such as Hallenstein Glasson Holdings (NZX: HLG ), which is a conservative run cash-cow.

HLG is a retailer of menswear and womenswear with over 110 stores, including 25 stores in Australia.

HLG in its current form, was formed after the 1985 merger of Hallensteins and Glassons and its brands include Hallensteins (menswear), Glassons (womeswear) and Storm (womeswear).

Despite challenging retail conditions, HLG has just reported a strong start to the financial year, reporting an increase in sales and buoyant same store sales growth. The retailer showed its usual resilience when it reported its sales for the 6 months ending 1 February 2012 (1H) which were $108 million or 8% higher than the prior year.

This was a good result in soft retail markets in both Australia and New Zealand, and pleasing progress was reported in Australia where HLG reported a gain in market share, in a very competitive environment.

HLG did report that its 1H earnings momentum may be difficult to maintain in the remainder of the financial year, but it has an excellent track record of dividend payments stretching all the way back to the 1990’s and it is conservatively run.

HLG appeals as an income stock because of its high payout of profit, strong balance sheet, including no long term debt and strong net asset position, and shareholders holding HLG should continue to hold for income.

Including imputation credits, the dividend yield is frequently over 10%pa.

HLG expects 1H net profit to be between $8.7 million and $9 million, a 25% increase, and the full 1H result will be released to the market on 28 March 2012.

Shareholders will be looking for last year’s 1H dividend of 14c per share to be maintained, or possibly increased.

Status: HOLD (or YIELD BUY on price weakness)  

HLG’s shares today traded at $3.82

For portfolio, sharemarket and fixed income enquires contact:
Dan Stratful at Investment Research Group (IRG)
Authorised Financial Adviser (AFA)
0800 437 8489, 09 304 0232, dan.stratful@irg.co.nz
**A disclosure statement is available, on request and free of charge.


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