Hills’ distribution business restructure cost it $15M

Hills’ distribution business restructure cost it $15M

Comes as distribution revenue sinks by $11.5 million

David Lenz (Hills Limited)

David Lenz (Hills Limited)

Credit: Hills Limited

Hills Limited spent almost $14.7 million on a restructure of its distribution business following a turbulent year that ended with an $8.8 million loss.

The recently announced restructure incurred costs and a “one-off provision” of $7.7 million and non-cash impairments of $6.5 million, which were noted as intangibles and non-current assets. Its financial balance sheet also included a loss of $6.5 million provisions made for redundancies. 

The restructure comes as the distribution arm reported an $11.5 million decline in revenue to $229.3 million for the year ended 30 June.

The distribution business accounts for roughly 85 per cent of Hills’ overall revenue, which declined by 1.6 per cent to $267 million. 

According to its shareholder announcement, the division’s decline was driven primarily by changes to the vendor mix, lower than expected performance in the small-to-medium business sector and the continued decline of Foxtel revenues.

As such, following a notice earlier this month, Hills is to exit the antenna and Step satellite services business and will not renew its contract to supply satellite dishes to Foxtel.

In addition, the distribution business’ EBITDA declined 61 per cent due primarily to reduced revenue and margin pressure from a deterioration in the AUD/USD exchange rate, although these were “partially” offset by cost reductions achieved during the year. 

According to the company, the distribution business will become a “more streamlined” operation and will focus on audiovisual, security and IT systems and services for customers in Australia and New Zealand. 

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. 

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 total, the company employs 500 employees across Australia and New Zealand, who underpin its connection solutions business and health arm, as well as its distribution division. 

The connections business was said to be benefiting from the nationwide NBN roll-out and new partnerships with Downer EDI Limited and Lendlease Group. 

“We are now a much more streamlined and simplified distribution business, and well-positioned to deliver growth in FY20,” Hills MD and CEO David Lenz said.

The health arm meanwhile was said to have “exciting potential”, having increased EBITDA by 49 per cent over the year.  

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