Hills business transformation impacts bottom line

Hills business transformation impacts bottom line

Net profit down from $14.1 million to $9 million as it shed businesses to transform into a technology focused company within the health care sector

Since completing its restructure and transformation into a technology focused company, Hills (ASX:HIL) has reported a net profit decline to $9 million, for the first half of the 2015 financial year ending December 31.

The same period last year, Hills achieved $14.1 million in net profit. The prior period results included the Steel business, which was divested in February last year as well as other businesses closed or sold.

Despite this, revenue for the first half was up 11.1 per cent to $229.5 million. During the first six months, Hills secured $110 million three-year core banking facility featuring better terms and pricing than the previous facility.

Hills also built its health business on the back of four acquisitions and a recent licensing agreement with Ireland and US-based Lincor Solutions, which provides patient engagement technology platforms.

Hills states that a $10 million per annum EBITDA health business has been spawned in the restructure process and it has a keen eye on further acquisitions to help boost its health portfolio in areas such as interactive patient care and medical technology services and solutions.

“Our key focus is on new service platforms supporting patient directed care,” Hills stated.

Hills will train its focus on creating a strong presence within hospitals, aged care facilities and independent living communities to drive business opportunities across its core security, AV, audio and communications business.

Its security, AV, audio and communications business unit saw revenue increase 5.8 per cent to $175 million, but Hills stated the business continues to experience pressure from aggressive competition and the impact on margins from a lower exchange rate.

In response to this, Hills stepped up its marketing efforts and undertook appropriate price book increases.

In February it also secured distribution rights Tyco’s range of security products including access control systems, electronic ID tags and video surveillance systems.

Changes were made to its distribution relationship with control and automation systems vendor, Crestron, who decided to take direct responsibility for their product distribution. Hills will still have access to its Pyng range of home automation solutions.

Hills stated the changes will impact its AV portfolio margin and earnings in FY16, but it will be partially offset by the Tyco relationship.

Hills Connection Solutions secured the renewal contract for installing NBN fixed wireless for a further four years and is tendering for new businesses in the broadband and media sectors.

Hills maintains a conservative outlook for the remainder of the 2015 financial year due to the downward pressure of the Australian dollar and Reserve Bank’s forecast of below trend growth.

As a result, it expects net profit will sit between $18.5 million to $19.5 million for the full 2015 financial year.

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