Daily ShareChat: Hellaby Holdings

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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