Hellaby Holdings Limited - NZX / Media Release 25 August 2016
HELLABY ANNUAL RESULT ANNOUNCEMENT
Hellaby full year result at the top end of guidance, dividend maintained as
new strategy is implemented
Hellaby Holdings Limited (HBY) has announced its results for the financial
year ended 30 June 2016, with earnings at the top end of guidance provided on
30 May 2016, as it implements its new strategic direction.
The FY 2016 result[1] reflects a soft performance from the Resource Services
Group, as it was impacted by significant volatility in the oil and gas
sector, along with decreasing sales from the Footwear Group. This was offset
by the Automotive Group which benefited from two acquisitions[2], and a
steady contribution from the Equipment Group, which is under a conditional
sale and purchase contract.
Group sales for the year to 30 June 2016 were $795.5m, up 2.0% (FY 2015:
$779.5m) with contributions from the Automotive Group acquisitions and
positive sales from the Equipment Group offsetting reduced year-on-year sales
in the Resource Services and Footwear Groups. The Packaging Group, which
provided $43.6m of sales in FY 2015, was sold at the end of that year.
Trading EBITDA (net trading surplus before interest, tax, depreciation,
amortisation and other non-trading items) was $46.8m (FY 2015: $59.1m;
guidance $43m to $47m).
Trading EBIT (net trading surplus before interest, tax and other non-trading
items) decreased to $31.4m (FY 2015: $44.7m; guidance $28m to $32m).
The result includes expensed investment costs of $1.0m associated with the
start-up Trucks and Trailer Parts business in the Automotive Group. In
addition, corporate costs increased by $1.4m during the financial year,
largely due to a significant restructure and downsizing of the corporate
office.
Group NPAT (net profit after tax) of $19.6m was down on last year''s record
result of $28.4m. Group NPAT attributable to shareholders of the parent
company was also $19.6m (FY 2015: $27.4m). The result includes a $2.5m
non-cash gain on recalculation of contingent consideration payable in respect
of the Contract Resources put call option on the outstanding 15% minority
shareholding that is exercisable on 30 June 2018.
Hellaby CEO, Alan Clarke, said: "FY 2016 was a difficult year and not one we
expect to be repeated. We do expect to see a stronger performance in FY 2017
as our new strategic plan takes effect and we focus on building scale and
market share in our Automotive and Resource Services Groups."
Hellaby''s directors have declared a final fully imputed dividend of 12.5
cents per share for FY 2016, taking the full year dividend to 21.5 cents per
share. As previously advised to the market, the company''s Dividend
Reinvestment Plan remains suspended.
Steve Smith, Hellaby''s Chairman, said: "This is the same dividend per share
that we paid on our record profit performance last year and is an indication
of the board''s confidence in the company''s new strategy and the future
sustainable earnings that are expected to be generated."
The company maintains a conservative capital structure, with gearing of 28.8%
as at 30 June 2016, providing significant capacity for future growth
initiatives in the two core Groups.
Business Group Performance
Hellaby operated four business Groups in FY 2016 - Automotive, Resource
Services, Footwear and Equipment. The first two of these Groups have been
confirmed as Hellaby''s long term investment areas under its new strategy
which was announced in the final quarter of FY 2016.
Hellaby announced two significant acquisitions during the year. Premier Auto
Trade (PAT) was acquired for A$13.0m (NZ$14.1m) for the Automotive Group and
settled on 2 May 2016. TBS Group was acquired for the Resource Services
Group, for $45m ($40.5m in cash and $4.5m in Hellaby shares) plus up to $6m
in earnout in twelve months'' time. It went unconditional and settled on 1
July 2016. In addition, Hellaby announced the conditional sale of the
Equipment Group for $81m which is expected to settle in the first quarter of
FY 2017, with a gain on sale of approximately $30m. None of this gain has
been taken up in the financial year ended 30 June 2016.
The Automotive Group delivered a year-on-year increase with sales of $259.8m
(FY 2015: $200.2m), Trading EBITDA of $26.8m (FY2015: $25.6m) and Trading
EBIT of $24.5m (FY 2015: $23.9m). BNT, the Group''s largest business,
generated increased sales and earnings. Included in the result was a full
year contribution from the JAS Oceania acquisition and a two-month
contribution from PAT, both of which operate in the Australian
auto-electrical market. Performance was affected by expensed investment into
branch expansion in Australia and the launch of Truck and Trailer Parts. In
addition, there was margin pressure from increased competition in the New
Zealand auto-electrical market and slower trading as a result of the soft
agricultural sector, as well as the impact of unfavourable foreign exchange
movements.
The Resource Services Group was impacted by continuing volatile conditions in
the international oil and gas sector which affected the timing of a number of
shutdown contracts around the world. Overall, while second half earnings were
an improvement on the first half, full year sales at $176.0m (FY 2015:
$189.1m), Trading EBITDA of $11.0m (FY 2015: $18.5m) and Trading EBIT of
$2.9m (FY 2015: $11.2m) were significantly down on the previous year.
Cost reduction and diversification strategies to smooth income in the
Resource Services Group were implemented in the second half. The TBS Group
acquisition introduces new services and will help diversify earnings and
assist in the recovery of the Resource Services Group going forward.
The Footwear Group continued to struggle in a very soft and difficult retail
environment with sales of $137.3m (FY 2015: $140.8m), Trading EBITDA of $4.3m
(FY 2015: $5.8m) and Trading EBIT of $1.3m (FY 2015: $2.8m), all down on last
year. Several cost savings were implemented across both businesses in the
course of the year. Specialist retail consultants are expected to be
appointed shortly to advise and implement a comprehensive restructure of the
Footwear Group, with benefits expected from FY 2018 onwards. As a
consequence, this Group has been removed from the sale process that was
underway but remains non-core within the Hellaby portfolio.
The Equipment Group delivered year-on-year sales growth to $225.4m (FY 2015:
$208.7m) but at reduced margins due to a change in the sales mix. As a
result, Trading EBITDA was $12.9m (FY 2015: $14.0m) and Trading EBIT was
$11.1m (FY 2015: $12.5m), both down on the last financial year. The
conditional sale of this Group was announced in June 2016.
Outlook
With a clear new direction and a long term commitment to two core business
Groups, profitable growth remains a priority. Hellaby will build scale,
strengthen its services and expand its geographical footprint, while
improving earnings and growing shareholder wealth. This will be achieved
through both acquisition and organic expansion within each of its two core
Groups.
Alan Clarke commented: "This has been a transition year as we enter a new
chapter in the Hellaby story. We are excited about the future of our company
and the opportunities available to us in our targeted markets.
"In Automotive, we have identified growth opportunities in the Australasian
auto-electrical sector and we will evaluate other bolt-on acquisitions that
complement our existing businesses.
"The Resource Services team will be integrating TBS Group and identifying
synergies and opportunities across the two businesses. Continuing volatility
in the oil and gas sector is impacting on our clients in this industry and we
expect uncertainty and depressed earnings in Contract Resources''
international businesses to continue in the near term. Management are focused
on generating more stable earnings streams to balance our high margin but
more volatile specialist refinery shutdown work."
Chairman Steve Smith said: "Hellaby is in excellent financial shape with a
strong balance sheet and a clear strategy to support our future growth. The
board constantly reviews our capital needs. The majority of the proceeds from
the sale of the Equipment Group will effectively fund the acquisition of the
TBS Group, and we have several other investments that we are actively
considering. In that light, we are comfortable with our capital position. We
are committed to delivering an improved performance in FY 2017."
Mr Smith also advised that long standing director Gary Mollard is retiring at
the 2016 Annual Shareholders Meeting, and the board is well advanced on a
search process to appoint two new directors before the end of 2016.
Notes:
[1] Commentary includes the combined performance of continuing and
discontinued operations. The Packaging Group was divested in FY 2015 and in
June 2016 the Equipment Group was announced as being conditionally sold. Both
Groups are therefore treated in this commentary and the financial statements
as discontinued operations. The total results of continuing and discontinued
operations are the Group''s preferred measure for comparing year-on-year
performance
[2] JAS Oceania acquired June 2015 and Premier Auto Trade (PAT) acquired May
2016
ENDS
For further information please contact:
Alan Clarke
Chief Executive Officer & Managing Director
T +64 9 306 7406
M +64 21 368 818
E alan@hellabyholdings.co.nz
Richard Jolly
Chief Financial Officer
T +64 9 307 6844
M +64 27 497 6710
E richard@hellabyholdings.co.nz
www.hellabyholdings.co.nz
Hellaby at a glance
Hellaby Holdings (NZX: HBY) is a long term committed business owner with a
focus on businesses that provide innovative solutions in specialised
industrial services sectors.
Our goal is to be a leading Australasian investment opportunity, based on the
value we add to our portfolio, the returns we deliver to our shareholders and
the calibre of our people.
Hellaby''s core purpose is to generate long-term shareholder value by building
better businesses. We achieve this through a combination of performance
improvement and organic growth in the businesses we own, as well as smart
acquisitions and divestments.
We have identified the Automotive and Resource Services sectors as our core
focus, and also operate businesses in the Footwear market, which we have
identified as non-core. Our 3,000 people span New Zealand, Australia, the
Middle East and the Americas.
We have a decentralised business model, with Hellaby''s head office providing
strategic oversight and support for each business'' talented and experienced
business and technical teams.
End CA:00287837 For:HBY Type:FLLYR Time:2016-08-25 08:31:57