Judging by the shape of its financial results for the 2009 financial year, which all showed sharp declines in profits and dividends, its no wonder Adelaide-based Hills Industries is looking to raise a total of $50 million from big investors in a placement and then an issue to smaller shareholders.
Hills shares went into a trading halt that will remain in place until the capital raising announcement is complete, or when trading starts on Friday.
As we saw at the half year, and then an update, Hills has been hurt by the economic slowdown, causing it to slash dividend payments to shareholders by more than 60%.
Hills said full-year profit slumped 41.6% as the maker of clotheslines to water tanks to security devices indicated that it saw the chance of a small gain in earnings in 2010.
Net profit fell to $28.1 million for the 12 months to June 30 compared with $48 million in the prior corresponding period, the Adelaide-based company said in a statement yesterday.
Revenue for the 12 months rose 2.2% to a record $1.21 billion but earnings slumped as margins were hit by the volatility in steel prices and the slump in the Australian dollar which boosted the cost of imports.
Seeing revenue rose more than 18% in the first half to $657 million, the second half saw a very sharp fall. First half earnings were down 31%, so the fall in margins accelerated in the second half.
The company paid a 2 cents a share final, making 10 for the year, compared with 28 cents in 2008.
Directors reminded shareholders the company has abandoned the previous policy of paying out as much of profit (100%, where possible) as dividends.
Hills Chairman, Ms Jennifer Hill-Ling, said the statement that the full year profit from operations was in line with previous guidance given to the market and was delivered in extremely difficult trading conditions across most of the company’s businesses.
“The slowdown in economic activity in Australia and in particular New Zealand has been well documented.
“As we stated in our first half results, the margins on Hills record revenue were eroded by unprecedented volatility in steel prices and the effect of the devaluation of the Australian dollar.
“We have seen some of this reverse in the latter part of the second half of the year.” Ms Hill-Ling said
“As previously advised to the market Directors had decided to discontinue the policy of paying 100% of after tax profits to shareholders as dividends. The Board views this as more prudent in these times when there still remains a great deal of uncertainty in financial markets.
"We are pleased to declare a fully franked dividend of 10 cents per share for the year, including a final dividend of 2 cents per share, which represents about 60% of our after tax profit from operations for the second half”.
