Hills strategic refocus delivers solid improvement in first half 2020 profit

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Hills Limited released its results for the six months to 31 December 2019, reporting profit growth as forecast, with net profit after tax (NPAT) up $2.4m to $2.6m.

In the company’s ASX statement, it was report:

The company’s net profit after tax (NPAT) rose significantly to $2.6 million, up from $242,000 in the previous corresponding period.

Overall revenue was $126.7 million, down 4.2% from $132.3 million in the prior year, with revenues from the divested Antenna business (including Foxtel) down $3.5 million on declining sales and the divested AV business down $2 million.

The Nurse Call business signed six contracts for the new IP7500 platform in H1 and delivered 3,600 net new beds during the period. We will complete the delivery of a number of key projects in H2, including projects at Westmead, Casey, Western Health, Alfred and Royal Hobart hospitals. The new IP series wireless platform remains on track for launch in April 2020.

The first installation of the GetWellNetwork patient engagement platform took place in the first half, with the system now operating in 400 beds at the Calvary Hospital in Adelaide.

An extra 350 beds are under contract for installation in second half, with the GetWellNetwork product continuing to gain sales momentum.

Hills’ patient engagement solutions business delivered solid growth in H1, adding 1,060 net new beds and renewing 2,800 beds at 15 hospitals during the period. Hills’ guest wi-fi system is now deployed in 13 NSW Health districts, delivering services to more than 4,300 beds, with the number expected to continue to grow in the second half.

As part of our continued focus on driving momentum within our Health business, management is actively reviewing all opportunities to accelerate growth in existing and adjacent markets.

The Distribution division – a leading provider of integrated Security, IT and Technical Services across Australia and New Zealand – has worked hard to return to profitability following the divestment of non-performing businesses in H1.

The division delivered first half EBITDA of $5.35 million compared to $0.91 million in the previous corresponding period.

While revenue for the division was down primarily from the businesses exited in December 2019, revenue from the continuing businesses increased by 0.6 per cent with additional improvement in overall margin quality.

Operating expenses in the division fell $4.0 million to $22.9 million, with the Distribution business on track to deliver cost savings (including depreciation) of up to $5 million in FY20. Inventory further reduced by $6.4 million on the back of improved trading and the divestment of the AV, Antenna and STEP business units during the period.

While conditions remain challenging across the Distribution division, all the work undertaken in H1 of FY20 points towards continued profitability of the business.

Outlook

In line with previous guidance, Hills expects a continuation of solid results in the second half of FY20.

The group will continue to monitor the impact of the coronavirus, or COVID-19, on the supply chain of the Distribution and Health businesses.

While the Distribution business has a strong inventory position today, some delays associated with products sourced from China are anticipated in the coming months and this has been catered for in our safety stock levels.

The impact on the Health business is expected to be minimal given the low exposure to goods sourced from China.

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