Basic Analysis: Hallenstein Glasson Holdings (HLG.NZX)
Annual Accounts to 1.8.21
Five Year Trading History
Two Year Trading History
Overview
Hallenstein Glasson Holdings (HLG) comprises four main operating segments:
The mostly New Zealand based Hallenstein chain of clothing stores.
The New Zealand Glasson's stores.
The Australian Glasson's stores.
Commercial properties.
HLG is listed under the code HLG on both the NZX and the ASX.
Revenue Statement
Takeaways:
Sales rose 21.9% to $350.8 mn
EBIT rose 25.8% to $49.3 mn
Selling expenses increased 18.2% while distribution expenses increased 31.6%
Total earnings increased 20.0% to $33.3 mn
Balance Sheet
Takeaways:
43.1% drop in receivables
21% decline in cash & short-term investments
12.9% increase in inventories on a 21.9% sales increase
No interest bearing debt
Movements in Equity
Takeaways:
Property revaluations run through reserves not the revenue statement
Negative retained earnings of $3.6 mn due to high dividend of $37.9 mn
Shareholders' funds would have declined had it not been for unrealised property revaluations
Cash Flows
Takeaways:
Positive cash flow from operations in both periods even with dividends paid included
Declining operating cash flow
$25.4 mn of lease liabilities paid down
$7.9 mn of fixed assets purchased
Closing cash balance down 21.0%
Cash flow pattern good with both periods' operating cash flows used for PPE purchases and liability reductions
Ratio Analysis
Takeaways:
Very high funding cost cover of 20.3
Improving equity ratio at 44.7%
High earnings per share of 55.9 cents
Reasonable P/E ratio of 13.0 times
Raw dividend yield of 5.2% on share price at balance date
Market capitalisation of $432.5 mn at balance date
High return on equity of 37.4%
Segmental Analysis
Takeaways:
Gross margins declining slightly across all segments
Glassons Australia has highest EBIT return on assets at 131.5%
Glassons Australia has highest EBIT return on equity at 426.4%
All Hallenstein & Glasson segments make high returns in equity
Summary
The company paid a large dividend of $37.0 mn which was greater than its total earnings of $33.3 mn.
The question therefore is whether this high dividend is sustainable.
The company would need a significant increase in total earnings to keep paying out this kind of dividend.
Profits did rise by 20.0% however in what was a difficult trading environment.
Sales also increased significantly, by 21.9%.
Cash flows from operations were strongly positive.
The company appears to be coming out of the Covid period in good shape with strong profitability and a good balance sheet.
Glasson's Australia in particular is doing well.
The lack of interest bearing debt gives the company financial room to expand.
But it’s nice to see a company run in this conservative way even though it might not be maximising its returns in doing so.