Administrators appointed to Hills just weeks after losing $5.5m legal stoush

Hills Ltd (ASX: HIL), the Australian company that brought its eponymous clothes hoist to the domestic market in the post-war era and now provides B2B solutions in the building technologies sector, has been placed into administration following action by a company creditor.

The administration comes on the heels of a $5.48 million loss in the Court of Appeal by Hills’ health division last month following a long-standing legal action brought by Stellar Vision Operations.

The appointment of administrators, revealed today in an ASX announcement, was made last Friday 2 June, just days after trading in Hills shares were suspended on 29 May.

Hills, which is no longer associated with the Hills Hoist products, had sought voluntary suspension of its shares pending a resolution to ‘ongoing settlement negotiations’ with Stellar and its financier, saying at the time that the result could have a ‘significant impact on the company’s financial condition’.

The settlement negotiations were triggered after Stellar successfully appealed in May the Supreme Court's dismissal of its claim against Hills Health Solutions. The Court of Appeal overturned the finding in early 2022 that Hills Health had not 'breached express trust, fiduciary obligations, and contract when it appropriated to itself the benefit of a contract for supply of entertainment systems to hospital patients'.

Hills announced today that Sule Arnautovic and John Vouris, of Hall Chadwick Chartered Accountants, have been appointed as joint administrators of the company by AMAL Security Services, as trustees for Causeway Wholesale Private Debt Master Fund. The fund is described as a creditor entitled to enforce a security interest over the whole, or substantially whole of the company’s property.

While a detailed explanation of the reasons for the administration has not been disclosed, Hills has been under considerable financial pressure after widening its interim loss to $3.6 million in the December half year.

The most recent result compounded a 132 per cent blowout in losses for FY22 to $24 million, reflecting the fall of Hills from a company that was making about $1 billion in sales more than 20 years ago.

Hills, a former Australian manufacturing powerhouse that has struggled to find its feet in the health sector since the pandemic, earlier this year tapped investors on the shoulder to raise $6.4 million via an entitlement offer.

As part of the process, Hills attracted private investor Historical Holdings as a significant shareholder after it tipped in an initial $4.4 million capital injection.

Historical Holdings’ board appointees Harley Whitcombe and Balu Jeganathan resigned as non-executive directors of Hills on 29 May, in tandem with the company’s share suspension.

Hills says administrators are undertaking a preliminary review and assessment of the company’s operations for a potential restructuring. This could include a deed of company arrangement with creditors or a sale of the business.

“At this time, the business of the companies is continuing in the ordinary course,” says Hills in a statement to the ASX.

“On present indications the administration period for the companies will last approximately six weeks. We will keep you abreast of any developments in respect of this estimated timetable in due course.”

The first meeting of creditors is expected to be held no later than Thursday, 15 June.

The problems at Hills have been brewing for some time, leading to a board renewal by the company two years ago to turn around its fortunes.

In February last year, Hills announced the sale of its Australian security and IT distribution business for $21.3 million, leaving just two key operating divisions for the group - the health division which it expected to deliver a rebound in earnings and the Technical Services division which focuses largely on the installation of NBN and Sky TV services in regional Australia and New Zealand.

Announcing the company’s interim loss in March this year, Hills CEO David Clarke said the company found itself ‘in a position of strong demand, however, the timing of delivery of our projects combined with supply chain delays have had a negative impact’ on the company’s health division earnings.

The company’s Technical Services business was also hit by the unavailability of key NBN infrastructure components.

Hills, which listed on the ASX in 1962 and grew at a time when Australian manufacturing was hitting its peak, no longer produces the Hills Hoist products.

The company offloaded the manufacturing and sale rights to AMES Australasia, an offshoot of the American Griffon Corporation in 2017, with the products now manufactured in Asia.

The Hills Hoist website notes that the product is no longer associated with Hills Ltd and that the administration will not have any effect on Hills Home Living products.