Homewares’ solid growth

BREVILLE’S parent company Housewares International Limited is likely to be an out-performer in the next year. It posted a final net profit for the 2001-02 financial year of $16.4 million on sales of $379 million.

Ahead of expectations, both the Australian homeware and electrical divisions reported stronger growth as HWI.

Much of the steady performance was due to the successful integration of Breville, according to Paterson Ord Minnett analyst Kim Christie.

“Further synergistic benefits should be extracted over the current financial year,” she says in a company brief.

“HWI’s gearing is lower than expected, with strong operating cash flows having been used to reduce debt.”

The only cloud over the past year came from the US operations, which returned a weaker-than-expected performance. However, Ms Christie sees future opportunities to emerge with the finalisation of its sales and marketing plans for introducing Breville to North America in January 2003.

“Overall, the balance sheet remains strong with net debt to equity of just 39.8 per cent,” she says.

“HWI has indicated that it will continue to seek appropriate expansion opportunities, most likely to cutlery, hospitality or other international agency brands. This is viewed as a positive move.”

Given the better-than-expected performance, Paterson has reviewed and adjusted its forecasts for the current financial year. It suggests that, based on increased profits, the target price of the company should by $2.42 per share, compared with the previous target of $2.30 per share.

“We have retained our buy recommendation given the share price is trading on a normalised PE of just 10.2 times 2003 earnings and offers and fully franked financial year of 2003 dividend yield of 4.3 per cent at current prices,” Ms Christie says.

While these estimates are based on HWI bedding down and consolidating its position, further growth could come through other acquisitions, which could change the revenue mix. Geographically 72 per cent of the company’s revenue comes from Australia, 17 per cent from the US, 3 per cent from Hong Kong and 8 per cent from New Zealand.

“HWI is well placed to seek other opportunities in Australia and we would expect some activity in this area over the next year. HWI has consistently noted its interest in entering the cutlery and hospitality markets as well as expanding its stable of international agency brands,” Ms Christie says.

HWI, which is chaired by Clive Little and managed by Mark Kirkby, was listed on the Australian Stock Exchange in 1999. The company’s brands include Ronson, Goldair and Arcosteel, Baccarat, Liddy and Mayfair and Jackson and Metro in the US.

Integration taps into resource boom

INTEGRATED Workforce – which is purchasing Total Marine Services Pty Ltd for $20 million, including a cash payment of $8 million together with the issue of 11 million shares – is viewed positively but it may take time to settle the purchase down.

Total Marine is a provider of maritime personnel, vessels and services principally to the oil and gas industry.

“This acquisition is positive on several fronts, but also brings with it acquisition risk,” Paterson says.

“The acquisition provides scale to the current national labour hire business. This is a major new third arm to the group, which provides greater diversity of earnings. However, TMS operates in the maritime industry in which IWF management have limited experience.”

The company is likely to also benefit from the expanding resource sector particularly in the North West shelf.

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