David Lenz, Hills CEO and managing director.

HILLS Security, Surveillance and IT has delivered a mixed first-half result, with strong growth in the enterprise and IT business counterbalanced by below expectation performance in the SMB market.

The business continued to see strong growth from key vendors, with Genetec delivering 41 per cent sales growth and Axis product sales increasing by 20 per cent. The company also won projects and continued roll-outs during the period including:

* Supply of Axis CCTV products into a major correctional facility; and
* Delivery of a Genetec solution for law enforcement.
* Transportation solutions in conjunction with Transurban; and
* CCTV across regional and metro rail stations with Indra for Sydney Trains and Transport for New South Wales (NSW).

“We saw strong performances from our Health, Hills Connection Solutions, Enterprise SSIT and IT business areas which underpinned our improved first half performance,” said Hills CEO and managing director, David Lenz. “What was also encouraging is these business areas grew versus prior year.

“However, we still had challenges in certain parts of our distribution business, which need to be improved and impacted our first half results.
In order to ensure we deliver continuous business improvement we will undertake a strategic review in Q4 to ensure we have the correct structure,
processes and systems in place to deliver sustained and improved profitability.”

Hills Security, Surveillance and IT business (SSIT) had a mixed first half result. Enterprise and IT business areas continued to deliver high
single digit growth over the prior period, however, the sales divisions targeting SMB business continued to perform below expectation in the
1H of FY19.

The Hills IT business had a strong first half, growing sales by 6 per cent with key networking vendors, Ruckus and Extreme Networks. The SMB business continued to experienced challenges in the 1H and will be a key focus in the strategic review during Q4. Hills expects to deliver an improved trading profit for the full year.

Financial Summary:

* NPAT increased $A1m over the prior year corresponding period
* EBITDA of $5.1m represented a 41.7 per cent improvement
* Revenue declined primarily due to changes to the AV vendor portfolio and challenges within the small to medium business (SMB) sector of our security and surveillance business
* Operating expenses down $3.1m or 7.1 per cent on the prior year corresponding period
* Net debt up $5.5m from 30 June 2018 to $22.4m
* Cash flow from operating activities was an outflow of $1.2m in the period versus prior year inflow of $8.1m reflecting investment in new brands and key projects due for delivery in H2.

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