Timing issues hurt Hellaby Holdings

Timing issues and a lower-than-expected profit from a newly acquired division saw Hellaby Holdings shares sold off brutally after the NZX announcement yesterday.

The shares closed on Friday at $2.92 and opened yesterday at $2.84 before falling slumping further.

A late recovery meant the shares last traded at $2.90.

However, Hellaby chief executive officer John Williamson still had good news for the market, forecasting group operating earnings of about $54 million for the year ended June, 43% higher than last year.

Craigs Investment Partners broker Chris Timms said that was down from the $60 million earlier forecast, causing investors to sell off some of their holdings.

Mr Williamson also forecast the reported profit after tax to be about $25 million, 35% higher than last year.

The full-year forecast reflected improved year-on-year profit performances by four of its five divisions.

The exception was footwear.

''The forecasted group outcome is a creditable performance. Most of our subsidiaries have improved year-on-year.''

Three recent acquisitions - Federal Batteries and Dasko, in the auto parts sector, and NZ Trucks, in the heavy equipment sector - were integrating well and performing as expected, he said.

''Our balance sheet remains very strong and we are continuing to pursue further growth opportunities that meet our investment criteria and will add value to our shareholders.''

Unfortunately, several secured projects in Australia and the Middle East had recently been deferred and would now start in the new financial year, Mr Williamson said.

While the scheduling gaps had been backfilled with other work at lower margins, Contract Resources had invested to support the anticipated increase in work and the impact of the changes.

Combined with the lower margin projects, there would be a lower-than-expected profit for the subsidiary of about $15 million for the year.

Hellaby remained confident Contract Resources would deliver an operating profit above $20 million next year, he said.

The variation in profitability was mainly a project timing issue and was a characteristic of contracting companies.

Since the acquisition, Hellaby had invested in additional management resources and worked hard to improve the company's financial capability.

The footwear division, which included Hannahs and Number One Shoes, had improved in recent months but trading conditions remained tough and the division had forecast a full-year operating profit of about $6 million, below last year's $9.1 million, Mr Williamson said.

Mr Timms said Hellaby still had a ''good story to tell'', just not as good as it was previously.

With the exception of footwear, the other divisions were tracking well.

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