HEM finally gets it! Well, that was certainly an interested conference call/press release. I want to read the sedar filing + ask the company a few questions before I make any conclusions but overall this is the most encouraged I've been regarding shareholder value potential in a while. RH brings a very fresh perspective and one that has a lot of credibility behind it. No need to trash the former CEO, but direction has now changed from growing a mini-empire for the sake of doing so to growing shareholder value.
Some interesting observations, but will keep brief this time:
* The now discontinued operations + associated costs were below break even. So eliminating this business should result in some positive contribution to the bottom line
* I'm not sure what the sale value of this business line is but I can't see more than $7.5mm unless there is significant IP going along with the sale. Still maybe someone really wants the product line and could pay a $20mm price, but that would surprise me.
* The remaining business (core) will experience a $7mm total cost reduction when all is said in done. That equates to roughly 10 cents per share on an FD basis each year
* Benj Gallander on the call pushed management to consider a sale of the entire business (a price between $1.10 to $1.50 was mentioned). RH's response was that after the restructuring, the business should be in a position to show shareholder value "far above" this suggested sale price, hence the boards decision not to sell today
I am going to reserve judgement until I learn more, but what the company is essentially saying is that They will fully fund the restructuring with a sale of the non-core business + add 10 cents to the bottom line each year from restructuring + agriculture segment remains unchanged which could mean another incremental 10 cents per year in EPS as a starting point (think revenue from Agjunction growing, Claas deal kicks in 4Q12 and ramps throughout 2013). So overall that's a minimum 20 cent lift in EPS + add growth potential. Let's hope that this scenario comes to fruition. If it does HEM could be doing a normalized EPS rate of 20 cents in 2013 and 25-30 cents the following year. Sounds almost too good to be true, which is why I want to understand and analyze the new strategy more before drinking the cool aid.