Hellaby reduces management team

Hellaby Holdings [NZX: HBY] is restructuring its business, with the chief operating officer and chief investment officer both resigning, and says it will update the market on guidance in three weeks after a weaker-than-expected second half.

In a statement, the diversified investment company said it was moving toward a decentralised business model with a smaller corporate team and will not replace outgoing chief operating officer Neil MacCulloch or chief information officer Greg Batkin, following a six-month review by managing director Alan Clarke who joined the company last November.

"This means the individual business groups will take on full responsibility for their own performance outcomes and they will now drive their own market development," Mr Clarke said. "Hellaby's head office team will provide strategic oversight and support for each group, and a rigorous planning and process framework will guide performance and direction. As a result of the smaller Hellaby corporate team going forward, there will be a significant reduction in Hellaby's corporate overheads on an annualised basis."

The shares fell 2.2% to $2.64 and have dropped 8.2% this year.

Clarke said his review had found near-term earnings volatility inherent in some of the markets where Hellaby operates, and he would focus on building lower-margin but steadier and more predictable earning streams. Hellaby has four segments – automotive, oil and gas services, equipment and footwear, which it is looking to sell.

Expected second-half gains from the oil and gas segment did not materialise, the company said, as oil price and production volatility had continued to impact on refinery maintenance schedules. In February, Clarke said 12-year low oil prices meant refineries had pushed out work to take advantage of fat margins in the first half, scheduling maintenance in the second half of the year, and he anticipated record months in March, April and May.

"The expected second-half contract work has not eventuated at the levels estimated prior to Christmas as a number of our Australian and Middle East customers have again pushed out scheduled maintenance work even further," Mr Clarke said. "We expect to have an update on trading conditions and to issue guidance ranges for the financial year in three weeks' time, following completion of a detailed review, which is underway."

The company also said it has acquired an Australian automotive wholesaler, Premier Auto Trade. It bought Melbourne-based JAS Oceania, a wholesale distributor of auto parts, in 2015. Mr Clarke has previously said the company was looking to expand the automotive division, which has good growth margins in large markets.

Hellaby's chairman, Steve Smith, said the company's balance sheet remained strong, with gearing of just under 30% and it was well-positioned to fund future growth and pay "attractive annual dividends."

"The board fully supports the new strategic direction and believes it will enhance medium-to-long term shareholder value as we position ourselves as a more focused owner and builder of scalable industrial and service-related businesses," Mr Smith said.

(BusinessDesk)