Recent appetite for hygiene products drives profit for Harris Technology
The strong news flow from IT and consumer electronics vendor Harris Technology Group Limited (ASX:HT8) continued on Tuesday as management provided upbeat profit guidance.
The company is forecasting a profit before income tax for the year ended 30 June 2020 of approximately $700,000 based on an anticipated sales revenue of approximately $13 million.
This compares with a loss before income tax (excluding discontinued operations) of $732,000 on revenue of $9 million (audited) for the year ended 30 June 2019.
Consequently, this year will not only see a sharp uptick in revenues, but also a material profit. The increase in annual revenue and profit has been driven by growth in Harris Technology's traditional IT/CE (Consumer Electronics Division) and from its newly established Pro-Hygiene division.
The latter has opened up enormous new opportunities for the group as it involves the sale of protective hygiene products including facemasks, hand sanitiser gels and alcohol wipes.
While there are obvious demand drivers in the coronavirus environment, it is anticipated that there will be a substantial increase in the use of these products post-COVID-19, now that there is increased public awareness of the importance of personal hygiene and the need to maintain high standards of cleanliness in places such as businesses, public transport and homes.
Governments and health organisations will be better prepared for spikes in demand in the future, and they are likely to stock a much more extensive range of protective hygiene products after experiencing shortages of items such as facemasks during the pandemic.
Consequently, Harris' transformation to a profitable enterprise could well be the start of a strong and sustained earnings growth trajectory.
Benefiting from supply chain relationships
Harris' move into the PPE industry took advantage of the company's years of experience in product sourcing and relationship building, differentiating it from fly-by-night opportunists.
The establishment of the Pro-Hygiene range is a long-term strategy as management expects spending by consumers on PPE products will be far greater in 2020 and onwards than it has been in the past.
Harris was authorised by Jointown Pharmaceutical Group, one of the leading medical supply and distribution companies in China, to distribute its Jointown and Aumacom face masks.
The company sold an initial 30,000 face masks in March, and a new shipment of 200,000 TGA approved face masks arrived in Australia for sale in late April.
HT8 has been appointed by China-based GOTDYA Fine Chemicals Co. Ltd to market its GOTDYA branded hand sanitiser products in Australia.
The first shipment of 90,000 units of GOTDYA brand sanitisers arrived this month and these are now being sold in Australia.
Orders have been placed for a further 225,000 units of hand sanitisers.
Harris has expanded its product range by securing the non-exclusive Australian distribution rights for the ‘Tender Kiss' brand of alcohol tissues from Guangzhou Baihua Sanitary Products Co.
The tissues are being imported from China, and sales of the brand will commence this month. The distribution rights are ongoing with no specific termination date.
Management is continuing to develop strategies to expand its online offerings in the IT/CE division to build on the momentum generated in the first half of calendar year 2020.