Ann: Director resignations, page-32

I know I said I made my last post, but in view of what has happened I was going to write an expose on why I have been critical of HIL management for quite a while and the Management obviously before that. I have chosen not to do that, because that would have involved too many technical issues, however what I wish to point out is that Managers that come from a service industry background, that means non manufacturing, that are put into a manufacturing company are almost destined to fail.

They have no knowledge of manufacturing, costings, margins, budgets that all interlink through Bills of Materials that build up final costings. Product costs and selling prices are not plucked out thin air.

Reports need to be in place to measure margins by product, material costs, plant and labour efficiencies and overhead spending above budget, correct Bills of Material need to be in place, all impact actual manufacturing costs. I am not saying HIL didn't have these I don't know, but if they existed they were not understood or reviewed.

I find it somewhat amazing that all the businesses that were sold, if my memory is correct, were deemed unprofitable. I find it further amazing that the majority these products, if not all, have continued to thrive under new Management. My belief is that reporting was inadequate to allow proper analysis of costs and margins and that there was cross subsidisation between products. Meaning that much of the profitable inventory was being held back by that which was loss making. Unless you have that reporting in place you cannot make informed decisions. I am not sure how they calculated Cost of Goods sold but if it was the old fashioned opening/ closing stock method that is totally inappropriate in manufacturing today. Furthermore by not having proper reporting, product mix can have significant effect on margins if that product mix change is not understood. It's hopeless saying my margins are up or down without knowing why. When you know why you can react or act accordingly.

I am not saying HIL did or didn't do this but from my experience in manufacturing for 50 years my gut tells they didn't.

It's all very well for people to be critical, I want people to understand what I was being critical of. Their lack of obvious understanding.

Furthermore this to the newbie investors, if you are thinking about investing in manufacturing companies make sure their financials are sound and dividends paid. If they are not and management comes with no manufacturing experience, give it a good hard look.

Have a nice day and good bye.