HLG - Hallenstein Glassons Holdings

[Basil]

Most people might like to spare themselves a lot of technical discussion and simply read the highlighted purple bits.

OK I see that.  From section 2.1 'segment information':

Profits over 2021 for Glassons NZ ($11.553m) plus Hallensteins ($4.818m) add to $16.371m
Profits over 2022 for Glassons NZ ($4.079m) plus Hallensteins ($2.092m) add to $6.171m

That means that if provisional tax was paid for the 2022 year, based on the earnings from 2021, much more provisional tax will have been paid compared to the ultimate tax bill owed. Correct, they paid installments one and two and didn't need to pay installment three.

It also means that in 2023 in New Zealand, assuming a recovery, the provisional tax paid for 2023, based on earnings from 2022, will grossly underfund the ultimate tax bill owed for 2023.  This is the situation we find ourselves in now.  Their balance date is August.  By February 2023 they usually update the market with their expected profit for the first half.  This will give them and us a useful handle on forecasting N.Z. profit for FY23 and I think its almost certain they will need to use an alternative to the safe harbour (standard last year + 5%) provisional tax methodology to minimize use of money interest.  (Probably the estimation method).  

Stuart has told us that the 'tax refund' of $0.572m at 2022 balance date,, is actually higher than that when we look at NZ component only.  This is because that recorded 'refund' of $0.572m is sum, where the New Zealand refund has been offset against a tax payment due in Australia (?).You can't offset tax between two jurisdictions but yes the amount disclosed on the balance sheet, $572K is the sum group total of a bigger refund for N.Z. tax (my estimate $2.04m), and tax due in Australia, estimated at $1.47m    Is it likely that the 'NZ tax refund component' has been reassigned to the 2023 accounting year, to offset the underpayment in provisional tax that is becoming apparent for 2023?  Not sure how they treated it but based on information provided, (excluding any FY23 provisional tax that may already have been paid, Stuart did not advise on this), I estimate the ICA balance as at 30/11/2022 at just under $700K in credit   

And these 'historical issues' are broadly as I have described above?  Yes.

I don't understand this comment.  It implies they are not paying provisional tax for FY2023 already, which surely they are (even if not at a rate that covers expected 2023 profits).

RB

It's a nonstandard balance date, (August) so provisional tax payment dates will be very different to what you, I and others are used too.  I don't have any clients with an August balance date but assuming everything is pushed back by 5 months from standard 31 March balance date that would suggest the first installment of FY23 prov tax is due by 28 January 2023 and its unlikely there will be another one due before 31 March.  I assume their ICA account has to be in credit by balance date instead of 31 March each year.

Its easy to get lost in all this technical stuff, all most people on here will want to know is this...I am 100% confident that the April 2023 dividend will be imputed as much as possible.   I'd rather channel my energy into as accurately as possible forecasting FY23 earnings per share as more information comes to hand at the annual meeting and then with the February 2023 half year forecast and then again with the half year financial statements in late March 2023.  With these March financials we should be able to get a good handle on the expected N.Z. trading performance for the year (without all the Covid shutdown complications of FY22) and this will be a very useful guide in determining in the medium term the extent to which future dividends may be able to be imputed.

If they get anywhere near my forecasted 80 cps in FY23 there is clear upside to my forecasted dividends for FY23 of 48 cps.
Obviously, all shareholders are hoping that N.Z. trading recovers nicely so that future dividends can be imputed as much as possible.  I can't imagine anyone likes seeing 33% of their dividend being withheld and going to the IRD. I'm going to move on from the imputation issue now and focus on what really matters.  Growth in earnings.  Really looking forward to the annual meeting on Thursday and update on trading conditions to date in FY23.
Friday's dividend will also be a real highlight next week.

[winner (n)]

Just trying to remember - wasn't there something our friend KW told us about buying shares in a downtrend?

I see an uptrend from late September

Even the 100M seems to be heading up (slightly)

So maybe we should be BUYING

[Basil]

On the TA front its clear the share price has built a very solid base in the low $5 range over the last 6 months and is up over the 100 day moving average even after going ex a 24 cent dividend this week.  When fundamentally something is a STRONG BUY and there's TA support as well, I don't muck around any more, I really open my shoulders and get stuck in because I have learned that's when you make the really serious money.

[winner (n)]

Next weeks announcement-

'The first 19 weeks of the new financial year have seen Group sales up 39.24% on the prior year'

That's about $40m more sales than prior year (in 19 weeks) and that's probably about $18m profit before tax - all in 19 weeks

And chart looking good

Next week going to be exciting

[BlackPeter]

On the TA front its clear the share price has built a very solid base in the low $5 range over the last 6 months and is up over the 100 day moving average even after going ex a 24 cent dividend this week.  When fundamentally something is a STRONG BUY and there's TA support as well, I don't muck around any more, I really open my shoulders and get stuck in because I have learned that's when you make the really serious money.

So - where do you see them going?

[Basil]

basil .... since 2006 HLG average PE has been 12.5

So I charted actual share price v what it would be at a PE of 12.5 ..... never very away eh ...and shows the time to buy eh (as you have sussed out a few times already)

Note - the at 12.5 PE line is based on July year EPS applied to the full year (like July 20 EPS applied Jan20 to Dec 20) so a mix of past and forward looking if you get the gist

So 10 bucks not outrageous at EPS of 80 cents

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Just for you BP.  Truly extraordinary how closely the share price has tracked 12.5 times earnings over the years. 
When you buy a share of HLG look at the deep history you're buying into:-  From their website

Hallenstein Glasson Holdings Limited is a retailer of menswear and womenswear, listed on the New Zealand Stock Exchange.
The company operates in excess of 130 stores, with 36 stores in Australia.

Hallenstein Glasson Holdings Limited was formed in 1985 on the merger of Hallenstein Brothers - an iconic menswear retailer first established in 1873, and Glassons - a fashion retailer founded in the early 1900's.

Hallenstein Glasson is recognised as New Zealand's leading specialty retailer, and is now making an impact in the Australian market.

[Basil]

Next weeks announcement-

'The first 19 weeks of the new financial year have seen Group sales up 39.24% on the prior year'

That's about $40m more sales than prior year (in 19 weeks) and that's probably about $18m profit before tax - all in 19 weeks

And chart looking good

Next week going to be exciting

At this stage I have no clue whatsoever how I am going to hold myself back from buying truck loads more if sales are up more than that...which I reckon is a very real chance.

[Waltzing]

Could the likes of HLG and TRA, EBO be the only growth retail stocks on the NZX?

market hates MHJ no matter what it does and the crims love it.

If this war goes on and on with no end in sight then the NZX could go no where and become soley a traders market with only a few stocks showing growth prospects.

its doubtful there is any business leadership from CGVT. Market becomes rudderless.

worst start to summer ever wont be helping KMD local sales for sure.

God has handed down the verdict...La Nina..Swimming is the best sport for this summer so far.

off for another 4 K today....bon voyage

[winner (n)]

Plenty of peacocking going on at Glassons Lambton Quay today .......very busy in store and some were buying

And even a few hunky guys in Hallensteins part of store.

Just anecdotal stuff but remember when the 'anecdotes and the data disagree, the anecdotes are usually right' .....so HGH sales going well.

[Fiordland Moose]

Hallensteins as a brand that seems to be in terminal decline and Glassons not fairing particularly well in NZ either.  Fortunately for HLG, Glassons in AU for the moment are at the top of their game. But if you look at the weighting of stores and start to think through the impacts of operational leverage, a less rosy picture becomes apparent. By sheer virtue of the lockdowns last year will FY23 look like a positive year, driven overwhelmingly by a positive 1H. But NZ is looking grim, and AU in FY24 doesn't look particularly promising

[Basil]

More to it than that.  Sales for the first 8 weeks of FY23 were up 50% on pre-pandemic level's so much more to it than a bounceback from lockdowns last year.  We might see some store rationalization with Glassons N.Z. and Hollensteins in the years ahead.  These are mature brands in N.Z. and the retail footprint is fulsome.
Fortunately, the Australian market is ~ 6 times the size of ours and Australian women think the brand is fresh and cool.  Target market don't generally have mortgages and just want to get out and about and look cool, AKA peacocking.  Strong growth with an exceptionally long runway for Glassons Au.

[Fiordland Moose]

I remember when this and WHS were being barked up aggressively, which I looked at and ignored, but did opt to invest into Universal Store on the ASX (which I disclosed on ST'r). Bought half a yard on 21 June at A$3.5, which I had talked to on the retail and HLG threads. Now up 47% in constant currency and before dividends. Compares to HLG up 4.8% and WHS down 13%.

Glassons has a good, long term future ahead of it, but in the short to medium term (FY24-25 etc), highly uncertain. Womenswear is hard work and higher risk than menswear, in any event. I personally think FY24 will be a tough year and I fully expect both SP to increase this year before hitting more turbulent times next year (IE yes, including I reckon UNI will fall....I'm not prone to bark up a share I own even if others are).  But I am pleased I did my own work and I hope everyone does their own work, rather back up the truck based on some barking.

[winner (n)]

FT.com reports UK fashion retailer 'Monsoon to open more stores as it defies retail gloom'

Seems plenty of 'peacocking' post covid blues etc going on over in the UK as well

[Whome]

Going to be an interesting and compelling watch between now and whenever to track Winners Earnings vs sp graph towards $10. Can't argue with that trend. But we have to be 'well positioned' if we want to enjoy the fruits methinks. Discl. - well positioned.

[winner (n)]

Doubt whether they'll say much at the ASM but the important part of the F23 outlook in the results announcement was 'There have also been increases in operating costs due to inflationary pressure.'

Need to keep those costs under control - not just inflationary pressures but from the umwinding of corporate welfare / rent relief that had favourable impacts on F21 and F22

Wouldn't want to see another year of expenses increasing faster than sales would we