Hills Limited reveals impact of tough restructuring

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Hills Limited reveals impact of tough restructuring

Hills has updated shareholders on its turnaround plan, which has seen the distributor make significant cuts to staff, sites and costs as it transforms its business.

The company is a shadow of its former self, with a quarter of the staff, 20 percent of the offices and roughly a third of the revenue after shedding multiple business units over the past four years. Hills' 2012 revenue was $1.1 billion; in the first half of 2016, it turned over $164 million.

In a trading update published last week, Hills revealed its progress in getting "back to basics" through tough restructuring measures: the company has reduced its sites from 124 in 2012 to 26 as of May 2016; headcount is down by 75 percent over that period; and its debt has been trimmed from $130 million to $38 million.

Its workforce now sits at 670 full-time staff – down 200 from June 2015 – and Hills expects to see the impact on profits from redundancy payments to "reduce substantially" in the coming financial year. The company's "costs out" plan has seen $8 million removed from the business, with another $2 million on track for the end of this financial year.

Hills has adjusted its sales staff incentives, with remuneration now based on gross margin, not sales.

The company told shareholders how it has been repairing its supply chain, with same-day shipping ability up from 63 percent in April 2015 to 88 percent this April. Third-party logistics costs have been trimmed by 60 percent in this fiscal year.

Hills has gone through a tumultuous few years. Under the leadership of former top-ranking Telstra executive Ted Pretty, the company's share price more than halved from around $1.20 before his appointment in August 2012 to 57c when he was rolled in May 2015 and replaced by Grant Logan.

Famous for its heritage as the maker of the Hills Hoist clothes lines, the company is now heavily invested in the IT channel as a distributor of brands such as IP security providers Genetec and Tyco, intelligent building company UTC and wireless vendor Ruckus, which named Hills ANZ distributor of the year in 2015.

It hasn't all been good news on the vendor front – Hills took a hit last August when it lost key vendor Crestron, which decided to go direct to market.

Hills' share price has been tracking up since a historic low of 13c on 13 April, and has now more than doubled to 26c.

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