Tough market affects Hellaby Holdings

The New Zealand market is tough going right now and nothing on the horizon suggests a dramatic change any time soon, Hellaby Holdings John Williamson says.

In a shareholder update, Mr Williamson said the company, which had broad exposure to many New Zealand sectors, could not simply rely on the economy to drive improving returns to shareholders.

''The first quarter of the year has been tough and although we have subsequently seen some improvement, trading remains sluggish.''

However, that did not mean he was gloomy about the prospects for Hellaby.

As the investor update showed, Hellaby subsidiaries had created a wealth of opportunities to deliver incremental bottom-line improvements, he said.

Number One Shoes continued to grow its profits by improving its store format, making better use of its floor space, better management of inventory and extending its range of merchandise in categories whichcomplemented the core footwear business.

TRS Tyre & Wheel was strengthening its share of the agricultural tyre market but was leveraging that expertise to become a credible distributor of truck tyres, Mr Williamson said.

Hellaby had recently merged AB Equipment and Eurolift to create a nationwide group of one-stop sales and service centres for materials handling and industrial equipment.

''All of our businesses can continue to outpace their markets by continuing to better understand the demands of their customers,'' he said.

Craigs Investment Partners broker Chris Timms said Craigs had made some downgrades to its Hellaby forecasts, which excluded possible acquisitions.

While Hellaby had a strong balance sheet, the stock was trading close to target price.

The strong growth achieved in the past three years was unlikely to be repeated in the 2013 financial year, he said.

Earnings were expected to remain relatively flat.

The company was confident acquisitions would be made in the year ahead, Mr Timms said.

''Acquisitions will be used strategically to diversify and create a more balanced portfolio.''

By 2013, Hellaby expected one-third of revenue and assets might come from Australia and beyond.

The company had a strong balance sheet with 6% gearing. The focus on existing businesses was on delivering incremental bottom-line improvement, Mr Timms said.

Hellaby Holdings was positioned to benefit from an uplift in New Zealand economic activity but Craigs had pulled back its forecasts by 6% to 8%.

That reflected the company's expectation that sluggish trading conditions were unlikely to improve soon and management guidance of a relatively flat earnings profile for the 2013 financial year in the absence of acquisitions.

Craigs' 12-month target price was $3.26 per share. Hellaby last traded at $3.20.




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