Shares in Hills Industries jumped sharply yesterday after the company signalled it was over the rough days of 2009.
The shares ended up 12.7%, or more than 24 cents, at $2.17 after the company’s interim profit statement revealed the improvement.
Hills, a building products and electronics manufacturer based in Adelaide, reported a 2% rise in interim net profit and upgraded its full-year earnings forecast.
Not much of a rise, but it was better than the 40% or so fall last year.
And it was struck on a fall in revenue of around 6%, indicating that the company’s profit margins are on the rise after a terrible 2009.
Net profit for the six months to December 31 was $22.058 million, up from $21.619 million in the previous corresponding period of 2008-09.
Taking into account unusual items in fiscal 2009, the first half 2010 result was up by 39.9%, the company said in a filing with the ASX yesterday.
That almost completely reversed the result after extraordinaries following the 41.6% fall in the first half of 2009.
The slight improvement was struck on an 8.5% fall in revenue for the period to $601.8 million.
Dividend was unchanged on 7 cents a share.
Chairman Jennifer Hill-Ling said in the statement the operating results were ahead of expectations for the opening half of the 2009/10 financial year.
And based on the latest first half performance Hills has upgraded its full-year earnings forecast.
Hills said in October said net profit for the 2010 year would be ahead of the 2008-09 result.
“Overall, it is very difficult to provide specific guidance for our 2010 full year results, especially considering the variety of views of economic forecasters," Ms Ling-Hill said in the statement.
“However, we expect our full year results will be above the prior year, with a full year net operating profit before unusual items attributable to Hills shareholders in the range of $36 million to $42 million.
"This is better than we had indicated at the time of our Annual General Meeting.
“Our very low gearing position leaves Hills in an excellent position to add shareholder value through new business acquisition opportunities and other growth initiatives that may arise.”
“We continue to focus on retaining the cost savings achieved last year and believe Hills is well placed for the future.”
In 2009, Hills had posted a 41.6% fall in annual net profit to $28 million after revenue rose 2.2%.
Trading conditions, while generally better than the previous six month period, remained irregular and in some cases quite difficult, Ms Hill-Ling said.
"It is therefore pleasing that due to a number of initiatives undertaken in the previous year and the ongoing effects of our lower cost base, we have been able to achieve this improved result on revenues that were about 9 per cent below the prior year first half," she said.
“In line with our revised dividend policy of distributing between 50% and 100% of after tax profits to shareholders, I am pleased to announce a fully franked interim dividend of 7.0 cents per share.
“Once again, very strong operating cash flows are a feature of this latest result and follow the record $62.3 million cash flows from our operations in the 2009 financial year.
“Having regard to our strong balance sheet, the Directors have decided not to offer the Dividend Reinvestment Plans for this dividend.”
"Net debt at 31 December 2009 was $59.3 million (net of cash of $52.2 million), compared to $154.4 million at 30 June 2009, while gearing, measured as debt to equity, stood at 11.7% at 31 December 2009.
"During the period, Hills renewed focus on cash flow management saw operating cash flows at record levels for the December half.
"Combined with the capital raising undertaken during the latest December half, Hills’ balance sheet now is very strong and well placed to pursue acquisition opportunities that will add value to Hills shareholders.
During the period we extended our principal bank facilities such that the majority of our facilities are not subject to review until November 2011," directors said.
