Hellaby closes "disastrous chapter" with small net profit

Thursday 27th August 2009

Hellaby Holdings Ltd broke even with a $700,000 net profit reported today, for the year to June 30.

The diversified equipment, packaging and retail group wrote off $4.44 million in unpaid debt relating to the sale of the BBQ Factory to a consortium led by private equity firm Capital Group Ltd in mid-2008. The sale was on deferred payment terms for $5.79 million, of which Hellaby received only $1.35 million last year. The company concluded it should write off the remainder in the last financial year.

This was "a prudent approach that closes a disastrous chapter," said managing director John Williamson. Hellaby suffered one-off costs of $14 million in the previous year.

Before the writedown, operating NPAT was in line with market guidance at $5.3 million, a 72.7% fall from $19.4 million the previous year, reflecting a collapse in demand for heavy equipment, reduced margins on footwear sales, and price pressures experienced in the company's packaging division.

"These have been incredibly tough trading conditions, and it's a mark of the commitment of our subsidiaries that they have been able to deliver the operating profit of around $5 million that we had foreshadowed to the market," Williamson said.

Despite taking the capital hit on write-downs, gearing fell substantially to 55% as the company aggressively reduced core bank debt by 40.4% to $51 million. Total net debt reduced 26.3% to $103.4 million.

The result produced earnings per share of 1.4 cents, down 84.9% from 9.3 cents the previous year.

The company will pay no final dividend, focusing on cash retention while economic conditions remain uncertain.

On a sectoral basis, the automotive supplies business was a strong defensive performer, with return on funds employed roughly stable at 30.6%. The packaging business's ROE of 14.9% was the next best performer, although down from 47.8% in the previous year, reflecting cost pressures and market repositioning which is now complete.

The footwear division held revenues, but largely because of a major project to exit slow-moving stock, with consequent margin reductions. ROE fell to 10.% from 19.7% in the June 2008 year.

Worst-hit by the recession was the equipment business, which reported an ebit loss of $1.9 milion, compared to $7.1 million ebit surplus a year earlier, after demand for new materials handling and construction equipment fell more than 50

Hellaby says its balance sheet restructuring and turnaround strategy are "now largely complete", with the company positioned to improve earnings and looking to the automotive, industrial and distribution sectors for future investment opportunities.

Businesswire.co.nz

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