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HRL Holdings Limited (ASX:HRL) has announced the first 6 months trading update of the FY2019 year ending December 2018, which reflected a mixed success. HRL Holdingsâ subsidiaries include Octief, Octfolio, Precise Consulting & Laboratory, Morrison Geotechnic and Analytica Laboratories. The laboratories are located at Brisbane, Sunshine Coast, Gold Coast, Darwin, Canberra, Auckland, Wellington, Christchurch, Dunedin and Hamilton.
The company reported 28% jump from ordinary activities to $14.10 million. The Net loss for the period came down to $4,225,925.
As part of the HRLâs acquisition of Analytica Laboratories, the vendors had the opportunity to achieve an earnout payment which was up to NZ$11m cash earn-out consideration, based on the criteria of Analytica business to achieve 12-month post-settlement EBITDA in excess of NZ$3m, Analytica Vendors to receive a 6x multiple on each NZ$1 of EBITDA greater than NZ$3m, up to a maximum earn-out consideration of NZ$11m and with 50% of earn-out was payable 12 months after the settlement, and 50% in the next 12 months by monthly instalments.
The underlying profit after tax/(loss) for the year decreased by $863,882 compared with the prior period. The key reason for the decrease was the lower earnings from the HAZMAT division, primarily due to the impact of reduced methamphetamine property testing in New Zealand. The other reason being lower earnings from Analytica in the methamphetamine testing, although offset by substantial growth in all other areas including honey, dairy, and environmental and decreased profitability from the Geotechnic division from increased competition and pricing pressure.
The key financial headlines of the HRL Groupâs ending 31 December 2018 results comprised of statutory loss after tax of $4,225,925, Underlying loss after tax of $138,806 1, Revenues of $14,103,845, Net cash/(borrowings) of $2,822,633 and Working capital of $524,991.
The HAZMAT division, which incorporates the OCTIEF and Precise, had a very tough half year with earnings substantially down on the corresponding period last year. New Zealand operations were significantly impacted by the changes in the New Zealand Government methamphetamine guidelines. Methamphetamine testing revenue was down 80% on the prior period.
Revenues for Morrison Geotechnic increased a modest 2% over the prior period H1FY18. Pricing pressures remain high throughout the sector impacting profitability for the period. Other cost savings initiatives were put in place such as the consolidation of Gold Coast operations to the OCTIEF Yatala.
The OCTFOLIO business is focussed on business development and software enhancement during the period. The next version of the software has already been released in late January which offered its customers improved mobile applications and support for Android, easily customisable client portals, Lower costs of hosting and streamlined customer onboarding and data migration. OCTFOLIO secured several new contracts in late 2018 which would continue growing its revenue base in the second half of FY2019.
The stock of HRL is currently trading at A$0.080 (as on 8 February 2019), down by 4.762% or 0.004 points.
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