On Wednesday it was QBE and Retail Food Group that sprung profit downgrades or warnings, yesterday it was Adelaide based Hills that told the market (it is after all the so-called confession time for June 30 balancing companies) that its recovery plan has stalled and a third yearly loss is in sight.
The news obviously didn’t come as a great surprise to investors and the shares ended steady on 16.5 cents – that’s a value of just $38.5 million.
Up to this week, Hills shares have lost 91% of their value in the past three years – and the company is still alive.
Hills told the ASX that it will make another loss this financial year, due to the costs of a restructure and its scrapped plans to de-merge its health technology business.
The company is forecasting a net loss of between $6 and $8 million for the year to June 30, an improvement on the previous financial year’s $68 million loss, and a $86 million loss in the year before that (which included asset-write downs)
Formerly known for being the maker of the Hills clothes Hoist (now gone), garden products some metal bashing operations, electronics and some nascent hospital software and technology, Hills has moved away from manufacturing since around 2013 to become a distributor of security systems, audio visual equipment and health technology.
But it has been a battle to get decent returns from the new strategy and total losses in the past three years could top the $160 million mark by the time the company reports its 2016-17 results in August.
Hills said yesterday that its cashflow in the current second half of the year to June 30 has been impacted by restructuring costs and charges associated with its plan to de-merge its health business.
The plan was that Hills Health, which provides communications systems for hospitals, would to merge with a rival health technology business Lincor, and the merged company was to be listed on the share market.
But the listing was deferred last November due to market volatility at the time, and the merger idea shelved in January.
“The operating cash flow is currently targeted to be neutral for the second half of FY17 inclusive of restructuring costs and charges associated with the proposed Lincor transaction [a contract to provide inpatient beds with Lincor Patient Engagement Systems], which were paid in the second half,” Hills CEO David Lenz said in Thursday’s statement.
“Given our investments, the reduction in operating expenses, strong customer and vendor relationships and increased profitability in the Hills Health business, we expect to return to profitability in FY18.”
Hills on Thursday said that profits in the health business were growing, and coupled with cost reductions and strong customer relationships, would help it make a profit in in the financial year starting July 1. Shareholders can only hope.
