Profit improvement continues for Hellaby Holdings

Hellaby Holdings Limited - NZX / Media Release: 27 February 2012

Profit improvement continues for Hellaby Holdings

Performance highlights for the half year to 31 December 2011

EBIT up 12% to $12.2 million

NPAT up 42% to $7.8 million

Total net debt down 35% to $29.5 million

25% return on funds employed

Significant improvement by Equipment division

Interim dividend of 5 cents per share, fully imputed

Investment company Hellaby Holdings Limited today announced a further improvement in earnings as operational and capital restructuring initiatives of recent years continue to deliver efficiencies. Despite sluggish economic conditions in the final quarter of 2011, net profit after tax (NPAT) for the six months ended 31 December 2011 rose 41.9% to $7.8m, from $5.5m in the prior comparative period (pcp).

Group revenues for the half year period rose 6.2% to $243.2 million from last year’s $229.0 million. Most of the growth was driven by a belated return of demand to the Equipment sector, which grew sales by 28.9% against the pcp. Other divisions experienced generally flat sales growth despite relatively stable market shares.

Trading conditions notwithstanding, group EBITDA (trading surplus before interest, tax, depreciation, amortisation and before one-off transactions) and EBIT (trading surplus before interest, tax and oneoff transactions) again grew at a greater rate than group revenue, as subsidiaries continued to lock in operational efficiencies. Group trading EBITDA was $15.8 million, 8.1% higher than the pcp; and group trading EBIT was $12.2 million, up 11.6 % on the pcp.

Hellaby cut total net debt (interest-bearing including core bank debt) by 34.8% to $29.5 million at 31 December 2011, reflecting higher profits and reduced capital expenditure. Group gearing (total net debt to total net debt plus equity) at 31 December 2011 fell to 17.1% (compared to 26.3% for the pcp).

Hellaby’s return on funds employed (EBIT as a percentage of average working capital plus fixed assets) for the rolling 12 month period was 25.2% compared to 21.6% for the pcp – comfortably exceeding the group target of 20%.Earnings per share for the period rose 19.3% to 10.5 cents from 8.8c per share for the pcp. Net asset backing at 31 December 2011 was $1.92 per share ($1.72 per share for pcp) and net tangible asset backing was $1.16 per share ($0.95 per share for pcp).

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 and the board believes these are creditable financial results for the company.”

Dividend:

Mr Maasland said the board had declared an interim dividend of 5 cents per share, fully imputed, (compared to 4 cents for the pcp). The dividend will be paid on Friday 20 April 2012. The record date for determination of entitlements to the dividend is 13 April 2012.

Operational Performance:

Chief Executive John Williamson said that the standout performance for the half year came from the Equipment division where an increased focus on aftermarket services was now being rewarded in addition to a much-improved demand for capital equipment.

“While progress is currently being measured against a relatively low base, we’re confident momentum will continue building over the second half,” he said.

Mr Williamson also noted the gradual return of on-farm capital expenditure in the rural sector where TRS Tyre & Wheel performed strongly against the pcp.

Mr Williamson said the Automotive, Packaging and Footwear divisions generally experienced soft market conditions, particularly in the second quarter, as consumers chose to defer discretionary spending.

“However this has not deterred subsidiaries from reaping the benefits from operational efficiencies introduced in recent years and meeting profit targets. Footwear, for example, improved its EBIT by 22.0% against last year despite slightly lower revenues. This is an outstanding achievement.”

The Packaging division returned a disappointing result with revenues slightly down but a significant drop in EBIT. Mr Williamson said that profitability was affected by one-off costs in relation to the closure of Elldex Packaging’s Wellington plant and the consolidation of all manufacturing to the larger Christchurch plant. Recent investment in business development expertise in New Zealand and Australia further impacted overheads. “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,” he said.

Acquisitions and disposals:

While there were no acquisitions or disposals for the half year period to December 2011, the group 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.

Outlook:

Looking ahead, Mr Williamson said that Hellaby has now established an effective performance culture of ‘doing more with less’ and would continue to focus on improving earnings and building strong market positions through customer knowledge and service.

“In addition, the upside of a weak economy is that value accretive acquisition and investment opportunities are more likely to occur. We intend to ignore the state of the economy and get on with reshaping our portfolio with a mix of assets which we believe will create superior growth in shareholder value.”

Full Details at http://www.hellabyholdings.co.nz/Presentations.php

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