Hills loses largest vendor in "challenging" year

Hills Limited expects a switch to direct distribution by its largest vendor, Crestron, will impact its future performance, as the company reported an $86 million loss for the 2015 financial year.

Today’s 2015 financial report cited a number of key events impacting the IT distributor during a “challenging” year, including building automation vendor Crestron’s decision to distribute directly in Australia, in line with its global strategy.

The move is expected to impact Hill’s 2016 results, though the company has started to replace the lost revenue with business from new contracts.

Crestron's products include lighting control, presentation solutions, remote management software for buildings, thermostats and sensors and structured wiring.

The loss of Crestron was just one of several factors impacting Hill’s performance, including reduced government spending and project deferrals across mining, construction and health sectors. The company also cited the declining Australian dollar also hit Hills.

Amid the downbeat performance, Hills boss Ted Pretty left the company in May after nearly three years as chief executive and managing director.

In today's report to the ASX, Hills admitted that the integration of businesses acquired over the previous three years did not go “as well as it could have” and results were impacted.

Hills expects it will take further time to return to the level of profitability expected for a company of its size, following major divestment and restructure begun in 2012. Between the end of its 2012 financial year and the end of the 2015 financial year, Hills has shrunk from 2,642 employees to 862 staff as it “de-risked” the business by moving from manufacturing to technology.

Hills already revealed it was set to take a big impairment charge relating to goodwill and other intangibles, deferred tax assets and freehold property, resulting in an $86 million loss for the 2015 financial year. Revenue fell to $427.8 million, down from $448.3 million the year before.

Underlying net profit not counting impairments and certain other costs, was $11 million after tax.

While the restructure has not been a smooth process, chief executive officer Grant Logan said Hills was still profitable after the changes. He said earnings now come from technology and health where risk is substantially less.

Hills also licensed its home hardware products to Woolworths during the 2015 financial year, from which it expects long-term income. The company also bought Audio Products Group for its AV business, and Hospital Telecommunications. Hills now services 350 hospitals and 800 aged care facilities.