Hellaby lifts 1H net profit 42%

Monday 27th February 2012

Investment company Hellaby Holdings lifted first-half profit 42 percent as interest costs fell sharply and the profitability of its equipment division recovered strongly.

Net profit rose to $7.8 million in the six months ended Dec. 31 from $5.5 million in the same six months of 2010 as sales rose 6.2 percent to $243.2 million.

Chairman John Maasland said the result “reflected a clear focus on performance and financial discipline across the group. “Some of our businesses are still operating in very tough markets.”

The equipment division's sales jumped 29 percent in what the company said was “a belated return of demand” and its earnings before interest and tax (EBIT) rose to $1.5 million from just $100,000 in the previous first half.

Stronger forestry and construction equipment demand aided the outcome.

Other company milestones included a 25 percent return on funds employed, exceeding its own 10 percent target, and a further 35 percent drop in net debt to $29.5 million. Hellaby has cut debt from a peak of $165.6 million in December 2007.

Gearing is now just 17 percent, well below the company's target of up to 45 percent.

While the company started talking about actively seeking acquisitions about this time last year, it hasn't bought anything yet.

It said it continued to actively assess many acquisition opportunities. “All opportunities are evaluated according to the return on investment and valuation criteria identified in the company's strategic framework. Hellaby's investment approach will be patient and selective,” it said.

It is targeting organic growth across all four divisions, seriously looking for acquisitions in Australia and for “bolt-on” acquisitions for its automotive parts and packaging divisions.

It is also considering investments “in one or two new sectors with attractive industry structures.” The long-term shape and composition of the equipment and footwear divisions is also under review, Hellaby said.

Of Hellaby's other three divisions, the footwear division lifted EBIT 22 percent to $1.7 million despite sales falling slightly and its automotive parts division raised EBIT 2 percent to $9.8 million. The packaging division's EBIT fell 46 percent to $1.4 million as sales fell 4 percent, what the company said was “a disappointing result.”

Managing director John Williamson said profitability was affected by one-off costs and recent investment in business development expertise in Australia and New Zealand.

“While the benefits from these strategic initiatives will not be felt immediately, we remain committed to growth and expect to start seeing improved operating efficiency and revenue improvement during the 2012 calendar year,” Williamson said.

Hellaby will pay a fully imputed first-half dividend of 5 cents per share, up from 4 cents last year.

Hellaby shares rose 2.4 percent to $2.60, down from their recent peak at $2.80 late last year but well up on last August's $1.98 low. The shares troughed at 40 cents in March 2009.

BusinessDesk.co.nz

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