Hellaby sees earnings growth in rejigged investment portfolio
Hellaby Holdings [NZX: HBY], the conglomerate with interests ranging from footwear to oil and gas services, is still hungry for acquisitions after making two new investments this year, and sees future earnings growth in its rejigged portfolio.
Chief executive John Williamson told shareholders at today's annual meeting in Auckland that the company kicked off a reshaping of its investment portfolio in 2013 with the purchase of a controlling stake in Contract Services, an oil and gas sector provider, and distributor Federal Batteries, and should start to see the benefits in the current financial year from an expected 40 percent boost to earnings before interest, tax, depreciation and amortisation.
"We are different now to how we were a year ago, but this portfolio evolution will be ongoing," Williamson said in speech notes published on the NZX. "We expect to see the initial benefits of our growth strategy in our 2014 financial results, and then, as new opportunities are realised, this growth momentum will build."
Hellaby acquired 85 percent of Contract for about $73 million in April, with the remaining 15 percent owned by that company's managers, and spent A$12 million on Federal Batteries this month to bolster its automotive division. A month earlier it raised $50 million in a placement and share purchase plan to help fund future acquisitions it says will drive earnings growth.
Williamson said the company is still keen on making more purchases, calling this year's two acquisitions the "starting point."
"We are playing a long game - and we have a solid pipeline of opportunities under consideration, which could have significant impact on our combined business," he said. "We will continue to apply the rigour and discipline needed to ensure that we make the right acquisitions."
Hellaby will spend more time in the coming year educating investors about the changing make-up of its portfolio, which Williamson acknowledged needed more work after the introduction of new sectors.
"In some investment quarters we are still mistakenly seen primarily as a retail business," he said. "With performance heading in the right direction, and consistent messaging, I am confident that over time, the markets will develop a greater understanding of our business and rerate our share price accordingly."
The shares rose 1.8 percent to $2.85 in trading today, and have shed 16 percent this year. The stock is rated an average 'hold' based on three analyst recommendations compiled by Reuters, with a median target price of $3.23.
Chairman John Maasland told shareholders the board expects to seek a new director during 2014, and will balance an increasing trend towards greater diversity when making that decision.