Signs of improvement at Adelaide-based Hills Holdings (HIL) after some big write-downs earlier in the year with the company revealing in an update yesterday that it expects to report a slightly higher profit, before one off items, for the year to June 30.
The company yesterday told the market that it now expects underlying profit in the year to June 30 will be slightly higher than market forecasts of $16.1 million to $18.6 million.
Hills shares were up 11c, or 11%, at $1.165 at the close as investors reacted positively to the news on a day when the wider market rose.
HIL YTD – Hills Hoists Profit Guidance
The company will report an overall loss thanks to a new total of $155 million in write-downs and impairment costs.
That’s after an extra $40 million was estimated on top of the $114.8 million announced last March.
Hills reported a loss of $73.6 million in the first half of the financial year, meaning that full year loss will be around $136 million after the higher figure for write-downs.
The company said that the results will be released on August 20 and at that stage the board should be in a position to declare a dividend.
"The Board of the Company advises that, subject to final audit and market conditions, it expects to declare a dividend at the time of the full year results release in August.
"The degree to which the dividend will be franked, if at all, is subject to the outcome of a Private Binding Ruling which the Company is seeking from the Australian Taxation Office in relation to this particular dividend as a result of the restructuring and impairment charges in FY13.
"The Board also reconfirms its intention to target, on an annual basis, a dividend payout ratio of 50% to 75% of profits on a fully franked basis," the company said.
In yesterday’s statement, Hills Managing Director and CEO Mr Ted Pretty said, “Although we expect the market in FY14 to remain challenging in line with the Reserve Bank’s observations in May and June that growth of economic activity is likely to remain below trend, Hills is very well positioned. We enter the new financial year with little to zero net debt and we expect to build positive momentum over the period”.
Hills said it "continues to operate very comfortably within its banking covenants with little net debt as at 30 June 2013". But no actual figures were given yesterday.
The extra write-downs came as a result of the reclassification of its Orrcon and Fielders steel assets as held for sale and discontinued operations.
"The Board has now determined that based on progress with the sales process and market interest, these assets will now be classified as ‘held for sale’ under AASB 5. Orrcon and Fielders were reported as part of the Group’s Building & Industrial segment. These will now be reported as discontinued operations for the full year just ended 30 June 2013.
"AASB 5 Non-current Assets Held for Sale and Discontinued Operations requires that a non- current asset or disposal group is classified as held for sale if its carrying amount will be recovered through sale rather than continuing use. In addition, AASB 5 requires that these assets are measured at the lower of their carrying value and fair value less costs to sell.
"As a result of the fair value measurement requirement for Orrcon and Fielders as set out above, other associated impairments, accelerated transformation activities and gains or losses on the disposal of businesses, the total net charges for the year are expected to be approximately $155 million. This is subject to finalising our annual accounts and external audit.
"The majority of these write-downs, impairments and provisions are non-cash in nature and will not affect continuing operations.
"The cash proceeds from the sale of assets will enable the Company to consider other capital management alternatives and pursue future acquisitions which will see Hills focus on the delivery of innovative technology and communications solutions to the home, business and government," the company said.
