On Wednesday it was QBE and Retail Food Group that sprung profit downgrades or warnings, yesterday it was Adelaide based Hills that told the market (it is after all the so-called confession time for June 30 balancing companies) that its recovery plan has stalled and a third yearly loss is in sight.
Donald Trump’s win in the US presidential election, the resultant rise in market volatility and a dose of good old fashioned cold feet have combined to sink the proposed merger by Hills Limited (HIL) of its health solutions business with global firm Lincor.
Investors yesterday took a second look at Tuesday afternoon’s news that Hills (HIL) plans to spin off its health solutions business and merging it with technology company Lincor Solutions to create a new listing on the Australian market.
The ACCC has cleared the sale of Hills’ Orrcon Steel to Bluescope ((BSL)) but the regulator wants to conduct further inquiries before approving the sale of Fielders. The decision has been pushed back to end Jan and the sales are interdependent (both or nothing), albeit Hills remains confident. The broker expects a successful sale to have a positive impact on Hills’ balance sheet and to allow the company to focus on core assets.
Hills seems to be clawing its way back from the doldrums, with asset sales reducing debt to virtually zero and with the company yesterday issuing a profit upgrade, predicting it will beat the top of current market estimates for the present financial year. The company does expect FY14 to remain challenging, but Citi analysts see a healthy balance sheet opening up acquisitive opportunities again.
Hills management delivered the bad news everyone was already expecting: production of pipes and tubes in Unanderra continues hurting the bottom line and it has now been decided to cease production overall. Citi analysts quickly point out all costs should be taken in FY11, leaving the opportunity for FY12 to start anew without this major drag.