Hills blames loss on COVID-19 lockdowns, chip shortages

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Hills blames loss on COVID-19 lockdowns, chip shortages

Distributor Hills has revealed it has taken hits to its revenue and bottom line due to “challenging trading conditions” in the past 12 months, including the COVID-19 lockdowns and the global semiconductor shortage.

The company said restrictions for hospitals and aged care facilities, as well as deferrals of elective surgery, have affected its health technology business, while the IT distribution unit had a number of delayed and cancelled projects, and also took a hit from its underperforming New Zealand business.

In the 12 months ended 30 June 2021, revenue was $180.2 million, down 18 percent year over year from $220.1 million, while net loss after tax was $10.2 million, up from $6.5 million last year.

The loss included a one-time $7.5 million expense on non-operating items, including non-cash asset reductions, non-operating foreign exchange losses and $3.1 million in legal costs.

The New Zealand business also contributed a $1.9 million operating loss for the period, up from $1.4 million last year, citing a more competitive trading environment, the exit of key vendor partners and losing some larger projects. Hills said it would continue to explore ways to make the unit profitable.

Hills also disclosed that it had a boost from the Government’s Jobkeeper program during the first three months of FY2021, receiving $2.95 million.

“Operating conditions were challenging this year with the impacts of COVID-19 felt across all our divisions,” Hills chief executive David Clarke said.

“The distribution division, notwithstanding the external factors of COVID-19, supply chain challenges and ongoing competitive pressures, has underperformed. The new leadership team are introducing a range of initiatives to improve operational performance, address revenue decline and support profitability.”

Clarke also expressed optimism with the health business, saying it had a “solid” result despite a volatile operating environment. “We are excited by the prospects for this business and are investing to bolster our sales, marketing, technical and research capability to expand
upon and capture greater health technology-related revenue and opportunities,” he said.

With the distribution business, the company said it would introduce a renewed focus on lifting sales and marketing performance, rationalising the product portfolio, increasing the
value contribution, carefully controlling costs, better managing availability and sell-through of inventory, and driving greater operational efficiency.

Looking ahead, Hills expects the delayed projects would provide a boost for FY2022 but still expects to see impacts from COVID-19 and the semiconductor shortage.

“In the first half of FY22, the team at Hills is focused on ensuring the company is in good shape to make the most of market conditions as they recover, along with continued and careful implementation of the strategic growth plans,” the announcement read.

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