28/03/2006 - 21:00

Troubled waters for Hugall

28/03/2006 - 21:00

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Iconic Western Australian reticulation and water solutions brand Hugall & Hoile Ltd faces a difficult 2006 in the wake of a number of factors that have adversely impacted the performance of the business.

Iconic Western Australian reticulation and water solutions brand Hugall & Hoile Ltd faces a difficult 2006 in the wake of a number of factors that have adversely impacted the performance of the business.

The company now operates as Australian Waterwise Solutions Ltd, having absorbed the Hugall & Hoile brand, as well as those of Turf & Irrigation, the group’s eastern states retail brand, and the wholesale division, Rain One Australia, in November last year.

The tough times facing the group have been reflected in its results for the first half of the 2006 financial year, and have led to what newly installed director Geoff Gander calls a “hardcore review”.

“I see it as a clean slate for the company and weather conditions aside we need to improve the performance of the business,” he said.

The Merchandising division was impacted by an unusually mild summer in WA, and water bans in Sydney, Brisbane and the Gold Coast contributed to difficult trading conditions in many stores.

Revenue from this area of the business was down by about 11 per cent on the corresponding period for 2004.

Wholesale operations were also affected by the different but equally damaging weather conditions on opposite sides of the country, although the results were more in line with budgeted net profit forecasts.

AWS is aware of its current unhealthy position, which is highlighted by a continued weakness in its share price, and is looking at ways to ‘weather proof’ the business so sales remain unaffected regardless of weather conditions.

Middle management in the merchandise division will be improved to provide a stronger control over the day to day performance of branches.

Poorly performing branches and product lines, as well non-core assets will be reviewed to determine their on-going viability to the group.                                                        

Last year six branches made losses and two branches were closed. 

Inventory levels, stuck at unacceptably high levels because of unseasonable poor sales over the summer, will be assessed with a view to a potential write down of stock prior to June 30.

The company’s problems have also resulted in a number of board and senior management changes.

David Nicholls has stepped down from the board and his role of general manager, merchandising. Rohan Hardie has resigned as managing director but will continue in his role as general manager, wholesale.

In addition Michael Moore has left the board and has been replaced as a non-executive director by Mr Gander.

In April AWS will also introduce a new range of residential and rural pumps.

It has an exclusive agreement to distribute Universal Pumps throughout Australia via Rain One Australia, and the merchandising division will also retail the pumps through its 37 nation-wide outlets. 

The strategy with Universal pumps is to have them compete directly with well known brands like Davey and Onga.

In the future the company is considering franchising some branches in outlying areas, as having owner-operators run them is seen as being more effective than being run remotely from head-office

In addition, AWS has met with reasonable success from its Waterwise Solutions licences, which are reticulation installation businesses run by individuals under licence from AWS.

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