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Winding up the Hills Hoist line

13/01/2015
 
Innovation It's out with the old and a new focus on expanding further into growth stock 
 
Hills Ltd chief executive Ted Pretty says giving up control of the iconic Hills hoist clothesline brand to retailer Woolworths after almost 70 years is a bold step and heavy in symbolism.
 
But he's convinced it's the right one, and emblematic of what Australia itself should be trying to achieve as a nation, as it transforms its old world manufacturing.
 
"From January 1 we're talking about only the future now. We don't have to talk about the past," Mr Pretty said. 
 
Hills in practical terms has outsourced the Hills clothesline business to Woolworths.
 
Mr Pretty sees the wider transformation of Hills from a manufacturer into a firm focused on electronics, health-care technology and security systems, as a microcosm of how Australia as a nation should be advancing.
 
Pretty is a former top-ranking Telstra executive who took on the top job in September, 2012, at the company best known as the inventor of the Hills hoist clothesline in 1945. He says the transformation is now complete after a string of asset sales over the past two
years. In 2015, he aims to tilt Hills much further into the category of growth
stock. "The good news for us is we have now completed the restructure" he said. 
 
He acknowledges the deal with Woolworths was one that rattled the traditionalists and there are risks because the Hills hoist is so closely connected with the ASX-listed Hills.
 
"It's so tightly bound up with the brand," Mr Pretty said."
 
I think we've achieved a really interesting outcome. That allows us to close that chapter now," he said. 
 
That particular chapter began in 1945 when Lance Hill returned from World War II to Adelaide. His wife was complaining that her linear clothesline between two posts was getting tangled up in a lemon tree. Lance designed a rotary clothesline out of metal tubes and wires that evolved into a big seller, with a presence in most Australian backyards in the 1950s and 1960s.
But Mr Pretty said the Hills range, which covers 240 products led by clotheslines, clothes care items and garden sprayers, now represents less than 10 per cent of Hills' total annual revenue of $464 million.
Under the deal signed with Woolworths on December 4,2014, Hills has granted Woolworths exclusive distribution rights in Australia and more than 20 overseas markets to the Hills brand for 19 years. Hills receives royalty payments and there is an annual licensing fee involved that has in-built increases if product sales exceed a certain level. The Hills brand is the market leader in the $75 million clothesline sectorin Australia. "They're taking our staff and our supply chain," Mr Pretty said, referring to the back-end operations that will also head to the Woolworths stable. Hills is now heavily focused on making further acquisitions in health technology, security, and communications and electronics. The ageing of the population and a focus on security in "uncertain times" are big shifts underway in Australia, and this is what Hills is aiming capitalise on.
 
Tm looking for businesses that have growth run rates, and are nimble," he said From existing cash flows, Hills has balance sheet capacity of $200 million, but for the right acquisitions it could spend more, provided the returns stack up. 
 
Mr Pretty is a demanding boss who believes that both Hills and Australia as a whole need to be moving much faster in embracing innovation, and the new world. "What we've said we'd do next month, we've got to do this week," he said. Speed is of the essence, because the rest of the world is accelerating as the shift to a digital economy gathers pace. Smart, advanced manufacturing is still crucial to an economy, he said. 
 
Australia is now at a real crossroads as the mining boom fades and economic activity subsides.
 
"We're caught in a bit of a perfect storm at the moment," Mr Pretty said of Australia as it heads into 2015.
 
Pretty believes that the Reserve Bank of Australia and the Federal Government have under-estimated the extent of a slowdown in the Australian economy in the last few months of calendar 2014. Demand is weak across many sectors.
 
I would have liked to see an interest rate drop before Christmas," Mr Pretty said.
 
Reserve Bank Governor Glenn Stevens has been placing more emphasis on the benefits of a drop in the Australian dollar, and has publicly outlined that he'd like to see the currency at the US$0.75cents mark.
 
But Mr Pretty said the benefits of a falling dollar take a long time to work their way through the economy.
 
He also believes Australia needs to cultivate a more entrepreneurial culture and diversify further to try and smooth out the inevitable boom and bust cycles in the resources industry.
 
"What are we doing to smooth or flatten the trough between one resources boom to the next?" he said.
 
One of the elements which frustrates him is that most Australians are very reluctant to shift geographies to take up a new job opportunity. They would prefer to take a redundancy payout than shift to a new city or region.
 
"Australians won't move for a job". 
 
Mr Pretty said consumer confidence is still soft and many businesses are reluctant to take on risks even though banks are keen to try and rebuild their corporate lending books. An overarching conservatism and lack of confidence is restraining economic activity, and economic momentum takes time to rebuild.
 
"It takes a day to close a business, it takes two years to build one," Mr Pretty said.
 
-Simon Evans 
 
 
MEDIA CONTACT
Melanie Stewart, Hills Limited, Product Communication and Innovation Manager
MB: +61 448 431 378