Tech company Hills Limited (ASX:HIL) has lowered its full-year profit guidance significantly in an announcement to the ASX on Monday. The company has revised its net profit after tax (NPAT) to a range of $11m to $14m, significantly below the $18.5m to $19.5m it cited in February. This is also down from the reported $27.3m in underlying profit for the 2014 year. This drop in profit guidance comes two months after its half-year report up to 31 December 2014 showed a profit of $9m, down from the $14.1m in the previous corresponding period. The market reacted and the underlying share price of HIL fell over 40 per cent. Investors have also taken notice of the fall in profit guidance on Monday. Shares of HIL fell as much as 26 per cent before retreating to around negative 14 per cent.
Hills cited a significant drop in security and communication orders as customers cut capital spending on new projects as one of the reasons for the drop in profits. The falling Australian dollar was also seen as a negative factor for the company’s margins. Chief Executive Ted Pretty said the company would have a renewed focus on cutting costs across the business in recognition of falling capital expenditures for new projects. He also noted that fees paid to non-executive directors would be cut by 20 per cent across the board starting 1 May 2015. Although sales in audiovisuals were “near internal forecasts”, government deferrals in construction, health and mining sectors chipped away at profit margins. Shares of HIL are down 11.5c, or 14.56 per cent, at 67.5c per share near the end of trading hours on Monday. HIL has fallen 60 per cent in the last 12 months and over 40 per cent so far this year.
Author: Imran Valibhoy
Apr 27, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.