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About HGL
HGL sources market leading branded products and sells them into niche markets not typically dominated by the very large retailers. HGL operates through individually run businesses each focussed on their customers, the brands they represent and on product innovation and sourcing. These commercial operations are supported by a central office in Sydney. Historically HGL’s business was sourcing and selling niche branded products, funds management and a portfolio of listed shares. HGL has now decided to simplify its business model by concentrating its activities on sourcing and selling niche branded products. Consequently during the financial year to 30 September 2009 $25.7 million was raised from the sale of shares. Financial summary The financial performance for the year ended 30 September 2009 is summarised as follows:
The year ended 30 September 2009 was very challenging due to the financial crisis and the difficulties this created for the Group. The principal impacts on HGL were a depreciating Australian dollar and a weakening of consumer confidence. The majority of the products sold are purchased in US dollars. The US$ exchange rate averaged 91 cents in 2008 and 74 cents in 2009. The rapid 30% decline in the Australian dollar to near 60 cents, which occurred between July and November 2008, produced significant additional costs. The strategy adopted by management to combat increased product costs can be summarised into three components; price reductions from suppliers, price increases to our customers and expense control. The financial strength and credibility of HGL assists in the negotiations with customers and suppliers. A rigorous expense control culture was adopted from early in the financial year with discretionary expenses being minimised. Unfortunately there is also a human element to expense control, the number of employees across the businesses fell by 30 or 7%. To retain our knowledgeable and skilled workforce the Group utilised annual and long service leave, especially in the first six months of the year. In aggregate expenses fell to $58.5 million (2008: $61.3 million). During the year several new product agencies supplemented the existing product portfolio. Given the uncertain economic conditions the focus was on our existing businesses, no new acquisitions were made. HGL continues to search for new product agencies and acquisitions. A key performance measure is the EBIT to net business assets ratio as it drives prudent growth and working capital management. This year the EBIT to net business asset ratio fell to 15.4% and was below the target of 20% and 21.4% achieved last year. The fall was due to the lower profitability and a $1.2 million increase in net business assets to $72.2 million. Business approach HGL builds brands for the long term benefit of shareholders, customers, suppliers and employees. The management team of each business, led by its chief executive, are specialists in its market. Consistent investment into marketing, increasing sales and entering into long term distribution agreements provide suppliers with comfort that HGL is prepared to make a long term commitment to their brand. Through providing first class services and quality products we build trust and brand loyalty with our customers. By investing in our staff, brands and in appropriate advertising and marketing promotions each HGL business strives to provide both customers and suppliers with trouble free and profitable transactions. |