Hellaby Holdings managing director John Williamson has
some straightforward goals for the next 12 months - several
more acquisitions and a share price which better reflects the
sale of operations. He explains his strategy to Business editor
Hellaby Holdings managing director John Williamson. Photo
In the past year, Hellaby Holdings made two acquisitions
which would together account for an expected operating profit
increase of 40% in the current financial year.
However, managing director John Williamson told the Otago
Daily Times that was just the start.
''We are playing a long game and we have a solid pipeline of
opportunities under consideration which could have a
significant impact on our combined business.''
At the group's annual meeting last week, Mr Williamson
presented three key messages.
The first was about how the group's profile was changing
substantially and it had changed in ways the market did not
The purchase of Contract Resources and Federal Batteries had
added significantly to the company's operating profit, but
the acquisitions were not widely understood.
Secondly, Mr Williamson said the group performance was flat
in some sectors and the next lift would come from
''We make no bones about this.''
The last message was he felt the share price was below what
it should be, and where it was in December 2012.
''Yet since then, we have acquired two businesses which will
significantly boost our operating earnings in the financial
"We have successfully raised $50 million with which to
finance future acquisitions and we will make further progress
on the start already made to reshape our investment portfolio
to create a more balanced exposure to economic, geographic
and currency risks.''
Furthermore, group return on funds employed (rofe) was 23%,
Asked why he thought the share price was not performing as
well as he expected, Mr Williamson said Hellaby was a
conglomerate which attracted a certain type of investor.
Some investors were more interested in a ''pure play''
investments but Hellaby offered access to segments of the
economy not accessible through other vehicles.
Hellaby, which owns the Hannahs and Number One Shoes chains,
was seen as a retailer and apparel retailers had done it
The footwear division made up only 15% of operating earnings
and 85% of earnings came from non-retail.
Other reasons for the languishing share price included
investors waiting to see how successful the group was
integrating its large acquisitions and the fact a capital
raising of $50 million earlier this year was not all spent.
''I understand all of that.''
Acquisitions were on the agenda but they would be bought
''per the plan'', he said.
''The ball's in our court to communicate better. I
acknowledge I have to explain clearly in a cluttered market
what we have bought and how those assets are fitting in.
"We won't be rushed. If that frustrates some, they should
think about all the poorly executed acquisitions made in New
Zealand and how it took to right those problems.''
Asked if the shoe division would be sold, Mr Williamson said
he was comfortable with all businesses under the Hellaby
brand but that did not mean the group would be a long-term
There was a target of each division reaching $20 million of
operating profit. Three did not reach that target in the past
year, including footwear.
The footwear division reported $9 million of profit and a 20%
rofe, performing as well as any apparel retailer in a tough
''We have the best management teams and we back the teams,
but they operate in a tough space. Any divestment we make is
all about timing.''
Two years ago, Mr Williamson said he wanted a third of the
group's revenue to be generated offshore by 2015. At the
time, only 5% was being generated from Australia.
Transtasman businesses would be the focus of any acquisition
and the business needed to have a ''firm footprint'' in
either New Zealand or Australia.
''With performance heading in the right direction, and
consistent messaging, I am confident over time the markets
will develop a greater understanding of our business and
re-rate our share price accordingly,'' he said.
Forsyth Barr broker Suzanne Kinnaird has retained her
accumulate recommendation on Hellaby shares.
Following the $50 million capital raising and after the
Federal Batteries acquisition, Hellaby had the capacity to
debt fund further acquisitions of about $85 million and
maintain a gearing ratio of less than 45%.
''We believe future acquisitions will continue to target the
Australian automotive parts sector.''
The debt-funded acquisition of Contract Resources was an
encouraging start to the restructuring of the Hellaby
investment portfolio, providing sector and geographical
diversification and a positive growth profile, key objectives
of the group's acquisition strategy, she said.
''Hellaby is continuing to pursue further acquisitions
applying a rigorous framework and reviewing the composition
of its investment portfolio,'' Ms Kinnaird said.