Hellaby lifts dividend pay-out policy

Hellaby lifts dividend pay-out policy
NEWS RELEASE: 1 December 2014

Move follows capital market feedback. Acquisition and portfolio strategy unchanged.

Investment company Hellaby Holdings Limited (Hellaby, NZX:HBY) today announced it is lifting its dividend pay-out policy to around 75% of net profit after tax attributable to shareholders of the parent company (NPAT). The previous policy was to pay out around 50% of NPAT.

The move follows a review of Hellaby’s capital management policies, which considered the company’s strong record of free cash flow generation and feedback from shareholders and advisers that investors are increasingly looking for yield as well as growth.

Hellaby Chairman Steve Smith said: “The revised dividend policy reflects the company’s confidence in future cash flows as well as ensuring we retain financial flexibility to support our growth strategy.”

“As we noted at the annual shareholders meeting in October, the acquisition of businesses that meet our investment criteria remains a priority. With a very strong balance sheet to fund acquisitions, we believe it is now appropriate for shareholders to receive a larger proportion of our net profits each year.”

Hellaby Managing Director John Williamson said the company had initiated a review of its capital management policies because Hellaby’s share price movement was underperforming relative to its earnings growth, analyst valuations, and when compared to the NZX50.

“Hellaby’s share price has remained largely unchanged over the past two years despite delivering a 44% increase in normalised group NPAT and a 15% increase in dividends per share in the financial year to June 2014.”

“We have a clearly communicated growth strategy, and have recently made four acquisitions, all of which have enhanced earnings per share“, he said.

“Hellaby is committed to improving total shareholder returns, being one of our key performance indicators. However, we consider the current share price is not reflecting the company’s strong earnings growth and increased scale over the past couple of years. We are currently trading at a 12 month forward price-earnings ratio of around 9 times, well short of the current NZX50 average of around 17 times.”

Mr Williamson said Hellaby’s previous policy of paying around 50% of NPAT was driven by the need to deliver growth initiatives and strengthen the company’s balance sheet. Hellaby’s actual dividend over the past two years has been slightly above the 50% policy, reflecting the company’s strong cash flows and confidence in future performance. In reviewing the dividend policy, the Board considered that the company remained in a strong position to grow but would also be able to provide a greater dividend yield.

“We are in excellent financial shape with a gearing ratio (total net debt to total net debt and total equity) of 23% as at 30 June 2014, well short of our 45% target. Our Directors expect that the combination of strong earnings performance and an increased dividend pay-out should progressively lead to a re-rating of Hellaby’s share price.”

Hellaby’s dividend policy remains subject to business performance, market conditions and capital requirements for growth. Imputation credits are attached only when they are available from taxation payments.

The increased dividend policy will apply to the interim dividend to be announced along with the half year results in February 2015.

Mr Williamson said the Board had also determined that, as signalled in Hellaby’s annual result announcement in August 2014, the company would be suspending its Dividend Reinvestment Plan.

The company also advises that it may consider the merits of a share buy back as a further capital management measure. No decision has been made with regard to a share buy back.

© Scoop Media