Hellaby Holdings (NZX: HBY ) has made remarkable progress on its balance sheet position over the last few years and has reduced total net debt from $165 million in 2007 to $24 million today.
This was achieved via a capital raising to shareholders and other debt reduction initiatives including the early repayment of its capital notes.
HBY’s gearing currently stands at 15% well below its target of <45% over the medium term, and this is its lowest gearing level in years. This leaves it in a better position to make investments and after an ongoing focus on debt reduction, it now reports it is in ‘buy’ mode and will initially review bolt-on opportunities to complement its automotive parts and packaging subsidiaries.
In the 6 months to 31 December 2011 HBY reported a net profit of $7.8 million, up 42% on the previous corresponding period (pcp), while EBIT increased 12% to $12.2 million. The interim dividend was increased to 5c per share up from 4c in the pcp. In the current financial year ending 30 June 2012 (FY12) HBY expects to further improve the profitability of its Equipment and Footwear businesses and to grow Packaging revenues.
After several years of balance sheet initiatives and debt reduction HBY finally appears in a position to add value to its portfolio, and it has a reasonable track record of doing so. Apart from its hiccup with the BBQ Factory a few years ago, its investments appear to perform well. Future growth will come from Management’s ability to create value from new acquisitions and to improve on existing operations.
HBY owns a diversified portfolio of New Zealand and Australian industrial, distribution and retail businesses with 4 divisions – Automotive, Equipment, Packaging and Footwear. The company creates shareholder value through a mix of performance improvement in its assets, investment in organic growth, and acquisitions and divestments in a strategy it calls ‘buy, build, harvest’. It aims to make a rolling 12 month return on funds employed (ROFE) of 20% from its portfolio, with 25% ROFE reported in the year to 30 June 2011.
Status: HOLD
HBY’s shares today traded at $2.81
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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Comments from our readers
On 22 March 2012 at 8:08 am don said:
great, thanks to the high dollar Hellabys can now buy some more disparate businesses that they fail to extract any synergies from before flogging them off at a loss
