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Hills predicts return to profitability

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Hills Limited is predicting a return to profitability this financial year after shaving its net loss to $7.9 million.

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In its 2016/17 results announced today, the technology company improved its performance on the $68.3 million loss recorded the previous year.

Despite a decline in revenue, which the company put down to changes in vendor portfolios and its decision to exit NBN Co satellite installations, Hills is predicting a return to profitability.

CEO David Lenz said the company had “established a foundation for growth in the healthcare, security and surveillance, communications and audio-visual sectors, which we believe will have a positive impact on profitability in FY18 and beyond”.

“Given our investments, reduction of operating expenses, strong customer and vendor management, increased profitability of the Health business and the investment in the digital transformation project, we expect to return to profitability in FY18,” he said in a statement.

The company told the ASX that its business had “continued to stabilise” in the past year through a program of corporate cost-cutting, selective outsourcing of administrative functions, better customer and vendor relationships, and the “transition” of Hills Home Living products to AMES after the collapse of Woolworth’s Masters hardware stores, with which it had a licensing agreement.

The latter move, in January, marked the end of Hills Industries’ relationship with the product that made the company’s name in Adelaide – the iconic Hills Hoist. After Masters went under 2016, the company decided it could not afford to resume manufacturing and distribution of the product invented here by Lance Hill in 1945.

Late last year the company decided to sack most of its Adelaide-based accounts staff and outsource the jobs to India, and it also consolidated its senior management.

Today, Hills said it had reduced annualised operating expenses by about $12 million, with $8 million to benefit the company’s books in FY18.

“This has been achieved through continued flattening of the management structure and back-office functions while ensuring minimal impact on front-end customer service,” it said.

Lenz listed a range of contract wins for the company’s health business as well as new major contracts in the security and surveillance side of the business which he says will add to the FY18 profitability outlook.

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