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Hellaby cuts guidance as resources unit hurt by refinery shutdowns, name new resources CEO

Monday 30th May 2016

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Hellaby Holdings cut its full-year guidance, saying earnings would fall because of the impact of refinery shutdowns on its resource services division, and whose chief executive will step aside in favour of a new recruit.

The announcement shows a predicted second-half rebound for the resources group, which undertakes oil refinery maintenance, didn't eventuate. Chief executive Alan Clarke had said crude oil prices at a 12-year low kept refineries open in the first half because of fatter margins, with maintenance scheduled for the second half. But today the company said a second-half bonanza of refinery maintenance work didn't eventuate because "further refinery shutdown delays have continued to affect the timing of international contracts."

"As a consequence, whilst second half earnings will be an improvement on the first half, full year earnings for this group will be significantly down on the last financial year," the company said.

Consolidated trading earnings before interest, tax, depreciation and amortisation are forecast at $43 million to $47 million in the 12 months ending June 30, down from $59 million in 2015. Trading ebit would tumble to a range of $28 million to $32 million, from $44.7 million last year.

“Our focus for the remainder of this financial year is to work with our very large resource services customers around the world to confirm scheduled shutdowns in the next three to six months; resource and complete current jobs; and drive additional cost savings synergies," Clarke said. "Considerable effort is also being made to progress opportunities to broaden our specialist maintenance revenue streams into adjacent areas of our customers’ industrial processing operations.”

As part of those changes, current resources CEO Andy Wells will step aside and a new CEO will be recruited. Wells will become an executive director for business development and have a technical advisory role, Clarke said.

Hellaby acquired 85 percent of what was then known as Contract Resources in a deal announced in December 2012 at a price of $73 million. Wells was one of three existing Contract Resources management shareholders who retained a small holding when the business was poured into a new Hellaby controlled structure.

Clarke said Hellaby's automotive group was expected to report a gain in full-year earnings including a full-year contribution from JAS Oceania and a two-month contribution from Premier Auto Trade. The 2016 result would also reflect the investment in Truck and Trailer Parts and the impact of a weaker New Zealand dollar.

The equipment group would report higher sales, mainly from increased truck servicing revenue, but margins would be lower "partly because of the sales mix change, and partly because of the weaker NZ dollar."

Footwear "continues to struggle in a very soft and difficult retail environment and several options for this group are currently under investigation," Clarke said. Hellaby, which is undergoing a transition from an investment vehicle to an active owner and builder of businesses, describes the footwear division as 'non-core'.

The full-year result will also include head office restructuring costs and operational cost saving initiatives, the company said. The 2016 annual dividend would be held at the 2015 level, it said.

Clarke said Hellaby's balance sheet "is strong and we are well-resourced to deliver attractive and growing medium-to-long term shareholder value.”

The company had "undertaken an in-depth strategic review and identified a number of new initiatives and investment opportunities for our groups and further announcements are likely to be made in coming months," Clarke said.

Hellaby stock last traded at $2.57 and has declined 14 percent in the past 12 months.

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