Daily ShareChat: Hellaby Holdings

Two years of restructuring and a focus on working capital means the financial risks have dissipated and Hellaby Holdings is now well placed for a gradual recovery in the domestic economy, says Craigs Investment Partners analyst Selwyn Blinkhorne.

Hellaby reported a net profit of just $0.7 million for the year ended June, which included a further $4.6 million write-down of its now sold BBQ Factory. The previous year's $4.6 million net profit was after a $14.7 million loss from the BBQ Factory.

The company cut its debt by 26% to $103.4 million during the year while free cashflow was 55.1% higher at $47.8 million.

While the company didn't provide specific guidance, "Hellaby is confident of significantly improved earnings in 2010 with the business substantially derisked and operationally now in good shape," Blinkhorne says. That's even though the company has yet to see any signs of "green shoots" from the economy improving.

Blinkhorne has raised his forecast for reported net profit for the year ending June 2010 to $10.9 million from $7.3 million previously, rising to $12.8 million the following year.

He says his new 2010 forecast reflects a modest 2.4% rise in revenue, a 4.9% EBIT (earnings before interest and tax) profit margin, the same as the company achieved in the second half of 2009, and lower interest costs.

BROKER CALL:  Craigs Investment Partners rate Hellaby Holdings (NZX: HBY ) as buy (raised from hold).

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