By Jenny Ruth
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Monday 19th July 2010 |
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Hellaby Holdings is making excellent progress in reducing its core bank debt, says John Cairns, an analyst at Forsyth Barr.
Hellaby has cut core bank debt to $25 million at June 30 compared with $53.4 million a year earlier and $75 million in June 2008. Cairns had been forecasting net bank debt would be $45 million at June 30 this year.
The debt reduction program is being driven by the targeting of KPIs (key performance indicators) incorporating working capital as a key variable. Further reductions in working capital will become more challenging, especially as activity levels begin to recover,Cairns says.
The debt reduction has allowed Hellaby to rule out converting its $50 million in capital notes, which mature in June next year, to equity. Instead, it will either repay the notes or roll them over.
Trading conditions across all four operating divisions remain patchy, Cairns says.
Demand for forklifts is recovering slowly from depressed levels and demand for construction equipment remains weak. Trading at its No. 1 Shoes and Hannahs shoe stores remains volatile, although operating performance is benefiting from changes introduced by new management, he says.
Hellaby is well-positioned to take advantage of any pick up in activity following extensive restructuring over recent years.
Recommendation: Accumulate
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