By Jenny Ruth
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Monday 6th September 2010 |
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Investment company Hellaby Holdings has turned the recovery corner with management continuing to squeeze more out of the business, says Selwyn Blinkhorne, an analyst at Craigs Investment Partners.
Hellaby's normalised $8.8 million net profit for the year ended June was up 66% on the previous year and 19% ahead of Blinkhorne's forecast.
The result "is a continuation of the Hellaby recovery story which has been achieved against a backdrop of weak consumer demand in a depressed New Zealand economy," Blinkhorne says.
"Over the last three years, management have focused on reducing debt and Hellaby has moved from a precarious financial position with total net debt, including $50 million of capital notes, peaking at $166 million (debt-to-equity 187%) in December 2007," he says.
Debt at June 30 was down to $73.2 million with $69 million of the reduction coming from working capital and the rest from asset sales.
"The defensive automotive division, mainly automotive parts distribution to trade customers, which accounted for 74% of 2010 trading earnings before interest and tax (EBIT) .... has underpinned Hellaby's earnings for the last four years," Blinkhorne says.
The other three divisions, equipment, packaging and shoe retailing, achieved a marked recovery in the latest year.
Recommendation: Buy.
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