An ongoing review has identified that Hills could save up to $5 million in operational costs over the next two financial years.
The operational review began in February across the distribution business with the goal of returning it to profitability while maintaining the performance of the Hills Health and Communications businesses.
The review by independent consultants was put in place to help the ASX-listed distributor to identify operational efficiencies, potential inventory management improvements and cost savings.
In order to achieve the savings, Hill will incur one-off costs between $300,000 and $500,000 in FY2019. Hills Management will then implement annualised operating cost savings of between $3 and $3.5 million in FY2020.
"These initial changes, with more to come, will put the distribution business on the path to profitability and ensure it is well positioned to meet the challenges within the markets in which it operates," Hills CEO and MD David Lenz said.
"Given our track record of returning the Hills Group to profitability in FY2018, we believe that the performance of our distribution businesses can be substantially improved."
In August 2018, Hills reported a net profit after tax (NPAT) for the first time since 2014. The distributor closed the 2018 financial year with NPAT of $400,000, a considerable turnaround compared to the previous year's $7.9 million loss.
In 2015, Hills closed the year at an $85.9 million loss, which was reduced to $68.3 million the following year. Further uplift came in 2017, when net loss fell to $7.9 million.
Hills started to see financial improvement after the appointment of David Lenz as the company's CEO in August 2016, who was previously the distributor's chief operations officer and head of Hill's building technologies division.
For the half year ended 31 December 2018, Hills posted $242,000 in net profit.