Exiting an unprofitable National Broadband Network (NBN) satellite installation business and a shortfall in antenna sales due to a competitive pay TV landscape, has seen Hills’ (ASX:HIL) revenue take a $21 million hit for the six months ending December 31.
Revenue declined 13.4 per cent to $136 million, net profit also fell further down from $214,000 in the first half of 2017 to $748,000 in the red.
Earnings before interest, tax, depreciation and amortisation (EBITDA) was also down from $8.4 million in in the first half of 2017 to $3.6 million, but operating cash flow went from $800,000 in the red to $8.1 million in the black.
According to the distributor, exiting from the NBN satellite installation business, impacted revenues to the tune of $13 million, while the shortfall in antenna sales, scratched a further $5 million off its revenues.
Based on the decision to solely focus on fixed wireless installations,Hills saw margins improve. In addition to this, Hills also extended its service contract with Ericsson for the provision of fixed wireless installations to 2020.
Despite this, Hills CEO and managing director, David Lenz, was relatively upbeat, saying he was pleased with the overall first half performance of the distributor and looked forward to improving figures in the second half.
“Based on the first half results and Hills’ current strategic initiatives, the company continues to anticipate delivering a strong trading profit in the second half of FY18,” Lenz said.
“The launch of the new e-commerce site ushered in a new era in customer service at Hills. We should expect to see a sales uplift of over 10 per cent based on similar system deployments in the A/NZ market and similar improvement in overall productivity.”
The distributor’s security, surveillance and IT business (its largest division), experienced a solid first half, seeing a four per cent growth over FY17.
According to Hills, this was mainly due to a number of projects during the period, including supplying Vivotek IP cameras at Sydney Trains with Indra Australia; working with Siemens supplied Genetec unified IP security solutions and AXIS IP cameras to Woodside Petroleum in Perth.
The distributor also experienced strong sales with networking vendors Ruckus, Brocade and Extreme Networks, all achieving growth.
“It was encouraging to see growth in the largest part of the Hills business in the first half,” Lenz said. “With the successful launch of our new distribution centre and e-commerce platform, we expect to see continued growth in the current half.”
Revenues declined slightly within its audio visual (AV) business, but has maintained solid margins after the distributor made changes to its vendor portfolio, which now includes brands such as Williams Sound, Community Speakers, Wolfvision, Wyrestorm, Barix, Renkus Heinz and Biamp Devio.
“We are also excited about the opportunities with our unified communications business with new initiatives from Yamaha and Revolabs,” he said. “We also expect to announce the addition of a number of complementary new vendors to our AV business shortly, which will see Hills deliver additional growth in the next 12 months.”
The Health business saw strong Nurse Call sales, which grew 23 per cent over the previous period, but that was offset by a slight decline in Patient Entertainment revenue.
Lenz said the Nurse Call business continued to be profitable and had a strong pipeline of sales in the second half, coming off the back of key contract wins with the Royal Hobart Hospital and two Baptcare Nurse Call contracts.
The results come after Hills filed documents to get Milestone Systems' application to wind up the distributor dismissed and for Milestone to pay for all costs.
As first reported by ARN, specialist software vendor, Milestone, applied in January to the Australian corporate regulator to have Hills wound up.
The application by Milestone is set to be heard in Queensland on 28 February.
“Hills disputes that the service of a statutory demand was properly effected and contends that the proceeding is an abuse of process by Milestone,” the company said in a statement.
Lenz revealed that Milestone is claiming $56,000 and that the dispute on this amount had been going on for some time, with “the heart of the dispute being the integrity of the former Milestone partner program”.