Interim Results
Hill & Smith Hldgs PLC
14 September 2004
Hill & Smith Holdings plc
Interim results for the period of six months ended 30 June 2004
The board of Hill & Smith Holdings announces record profits for the period of
six months ended 30 June 2004, reflecting a further significant improvement in
the group's financial performance
Highlights:
Profit before tax £5.3m (2003: £3.1m)
up by 70.4 per cent
Profit before exceptional items, goodwill and taxation £6.2m (2003: £5.0m)
up by 23.0 per cent
Operating profits before exceptional items and goodwill £7.8m (2003: £6.9m)
up by 13.6 per cent
Turnover £131.0m (2003: £121.1m)
up by 8.2 per cent
Adjusted earnings per share + 7.2p (2003: 5.9p)
up by 22 per cent
Dividend 2.25p (2003: 2.15p)
up by 4.7 per cent
Dividend cover 3.2 times (2003: 2.8 times)
Net debt £38.8m (2003: £47.8m)
+ based on profits before exceptional items and goodwill amortisation.
The group has adopted FRS 17 in relation to accounting for retirement benefits.
Apart from record profits and higher dividends, cash flow has been strong,
helping to finance capital investment of over £3m and a continuing programme of
innovation and product development.
Chairman David Winterbottom said: 'It is particularly pleasing to report that
this entire enhancement in financial performance has been achieved by organic
growth.
'This improvement is based substantially on the platform of our focused capital
expenditure programme, our product development activity and the strengthening of
our management teams where appropriate.
'Our core businesses, which mainly supply the transport, building and
construction markets also responded well to the healthy levels of demand from
both the public and private sectors resulting in higher levels of profitability.
'The second half of our current financial year has started in line with our
expectations and order books remain at a healthy level.
'Subject to the current conditions remaining favourable in the markets we
service, we look forward to another satisfactory performance for the year as a
whole.'
Chairman's statement
In the six months ended 30 June 2004 the Group achieved a record level of
profits and demonstrated further progress in improving the quality of earnings
generated by its individual business units.
Turnover for the six month period was £131.0m, which was an 8.2% increase on the
comparable period last year. Operating profits before exceptional items and
goodwill amortisation increased by 13.6% to £7.8m (2003: £6.9m) and the profit
before tax, exceptional items and goodwill amortisation was 23.0% ahead at £6.2m
(2003: £5.0m). Pre-tax profits of £5.3m were significantly higher than 2003
(£3.1m). Adjusted earnings per share for the period were 7.2p (2003: 5.9p).
This represents an increase of 22% over last year.
These results take into account for the first time the effects of the accounting
standard, FRS17: Retirement Benefits, which has been adopted in these financial
statements.
Operations
It is particularly pleasing to report that this entire enhancement in financial
performance has been achieved by organic growth (our last acquisition was in
August 2002). This improvement is based substantially on the platform of our
focused capital expenditure programme, our product development activity and the
strengthening of our management teams where appropriate.
Our core businesses, which mainly supply the transport, building and
construction markets, also responded well to the healthy levels of demand from
both the public and private sectors resulting in higher levels of profitability.
The non-core Industrial Products division improved its return on capital
employed and cash generation during the half year.
We also successfully rose to the challenge of the rising cost of raw materials,
particularly steel. Despite the general increase in world prices we were able
to maintain our margins, a situation we hope to be able to sustain for the
remainder of the year.
Cash flow
Despite the higher levels of stock necessitated by the increase in sales, higher
raw material costs and the reversal of the special factors in the previous year
end Balance Sheet mentioned in last year's Annual Report, there was only a
marginal outflow of cash during the period. At the period end net debt stood at
£38.8m, which was substantially lower than it was at the corresponding date last
year (2003: £47.8m).
The strong cash generative qualities of the Group, with our highest ever level
of earnings before interest, tax, depreciation and amortisation in the period of
£10.7m, enabled our value adding capital expenditure programme and the
inevitable effect of steel price increases on working capital to be comfortably
funded from our internal cash generation.
Dividend
An interim dividend of 2.25p per share has been declared by the Board for the
six month period ended 30 June 2004 representing a 4.7% increase (2003: 2.15p).
Based on the adjusted earnings per share figure for the period the dividend is
covered 3.2 times. This is in line with our stated dividend strategy whereby in
the absence of unforeseen circumstances the Board expects to sustain a prudently
progressive dividend policy.
Outlook
The second half of the current financial year has started in line with our
expectations and our order books remain at a healthy level. Subject to the
current conditions remaining favourable in the markets we service we look
forward to another satisfactory performance for the year as a whole.
We remain focused on the organic growth of our major businesses and, although we
are not dependent on acquisitions for enhancing our performance, we continue to
investigate and evaluate both small and large potential targets, which will
increase shareholder value in the future.
David Winterbottom
Chairman
Group Profit and Loss Account
6 months ended 6 months ended Year ended
30 June 2004 30 June 2003 31 December 2003
(Restated) (Restated)
Before Before Before
exceptional exceptional exceptional
items and Exceptional items and items and
goodwill items and goodwill goodwill
amortisation goodwill amortisation amortisation
amortisation
(note 2) Total Total Total
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000
Turnover 1 131,013 - 131,013 121,081 121,081 241,665 241,665
------- ------- ------- ------- ------- ------- -------
Operating profit 1 7,828 (1,051) 6,777 6,892 5,810 12,592 10,957
Profit on sale of - - - - 540 - 540
business
Profit on sale of - 187 187 - 135 - 85
fixed assets
Loss on termination of - - - - (1,504) - (1,851)
operations
------- ------- ------- ------- ------- ------- -------
Profit on ordinary
activities before
interest 7,828 (864) 6,964 6,892 4,981 12,592 9,731
Net interest payable (1,870) - (1,870) (1,965) (1,965) (3,755) (3,755)
Other finance income 251 - 251 120 120 239 239
------- ------- ------- ------- ------- ------- -------
Profit before taxation 6,209 (864) 5,345 5,047 3,136 9,076 6,215
Tax on profit 3 (1,743) 63 (1,680) (1,413) (1,053) (2,486) (1,872)
------- ------- ------- ------- ------- ------- -------
Profit after taxation 4,466 (801) 3,665 3,634 2,083 6,590 4,343
Minority interest - - - 10 10 (3) (3)
------- ------- ------- ------- ------- ------- -------
Profit for the period 4,466 (801) 3,665 3,644 2,093 6,587 4,340
------- ------- ------- -------
Dividends 4 (1,405) (1,324) (2,838)
------- ------- -------
Retained profit for 2,260 769 1,502
the period ------- ------- -------
Earnings per share 5 7.21p (1.29p) 5.92p 5.92p 3.40p 10.69p 7.04p
Diluted earnings per 5 7.17p (1.29p) 5.88p 5.89p 3.38p 10.61p 6.99p
share
Group Balance Sheet
30 June 2004 30 June 2003 31 December 2003
(Restated) (Restated)
£'000 £'000 £'000
Fixed assets
Intangible assets 26,398 27,771 27,240
Tangible assets 41,680 41,877 41,437
Investments 25 25 25
------- ------- -------
68,103 69,673 68,702
Current assets
Properties held for resale 1,097 430 1,407
Stocks 26,160 24,461 23,641
Debtors 62,221 57,152 47,226
Cash and deposits 11,502 11,516 14,323
------- ------- -------
100,980 93,559 86,597
Creditors: amounts falling due within one year
Borrowings and finance leases (6,976) (10,300) (10,370)
Other creditors (77,935) (67,017) (66,768)
------- ------- -------
(84,911) (77,317) (77,138)
Net current assets 16,069 16,242 9,459
Total assets less current liabilities 84,172 85,915 78,161
Creditors: amounts falling due after one year
Borrowings and finance leases (43,286) (48,971) (40,438)
Provisions for liabilities and charges (5,325) (4,424) (4,343)
------- ------- -------
Net assets excluding pension liability 35,561 35,520 33,380
Pension liability (2,308) (2,791) (2,569)
------- ------- -------
Net assets 33,253 29,729 30,811
------- ------- -------
Share capital and reserves
Called up share capital 15,516 15,394 15,424
Share premium 3,513 3,371 3,423
Capital redemption reserve 238 238 238
Revaluation reserve 739 733 739
Other reserves 4,313 4,313 4,313
Profit and loss account 8,892 5,647 6,632
------- ------- -------
Equity shareholders' funds 33,211 29,696 30,769
Equity minority interests 42 33 42
------- ------- -------
33,253 29,729 30,811
------- ------- -------
Group Cash Flow Statement
Notes 6 months ended 6 months ended Year ended
30 June 2004 30 June 2003 31 December 2003
(Restated) (Restated)
£'000 £'000 £'000
Net cash (outflow)/inflow from operating 6i 5,016 (366) 20,925
activities
Returns on investments and servicing of (1,550) (1,753) (4,040)
finance
Taxation (332) (818) (1,182)
Capital expenditure and financial 6ii (2,654) (971) (4,230)
investment
Acquisitions and disposals - 2,732 1,031
Equity dividends paid (1,326) (1,282) (2,759)
------- ------- -------
Cash flow before financing (846) (2,458) 9,745
Financing:
Issue of new shares 182 7 89
Increase/(decrease) in borrowings (2,157) 1,156 (8,322)
------- ------- -------
(1,975) 1,163 (8,233)
------- ------- -------
Increase/(decrease) in cash in the period (2,821) (1,295) 1,512
------- ------- -------
Reconciliation of net cash flow to movement
in net debt
Increase/(decrease) in cash (2,821) (1,295) 1,512
Cash (inflow)/outflow from borrowings 2,157 (1,156) 8,322
------- ------ -------
Change in net debt resulting from cash (664) (2,451) 9,834
flows
New finance leases (1,542) (434) (1,414)
Amortisation of arrangement fees (69) - (35)
------- ------- -------
Movement in net debt in the period (2,275) (2,885) 8,385
Net debt at the start of the period (36,485) (44,870) (44,870)
------- ------- -------
Net debt at the end of the period (38,760) (47,755) (36,485)
------- ------- -------
Statement of Group Total Recognised Gains and Losses
6 months ended 6 months ended Year ended
30 June 2004 30 June 2003 31 December 2003
(Restated) (Restated)
£'000 £'000 £'000
Profit for the period 3,665 2,093 4,340
Actuarial gain recognised in the pension scheme - - 393
Deferred tax arising on gains in the pension - - (118)
scheme
Currency translation differences on overseas net - - (17)
investments
------- ------- -------
Total recognised gains and losses relating to the 3,665 2,093 4,598
period ------- -------
Prior year adjustment (see note 7) (7,177)
-------
Total recognised (losses) since the last annual (3,512)
report -------
Reconciliation of Movement in Group Shareholders' Funds
6 months ended 6 months ended Year ended
30 June 2004 30 June 2003 31 December 2003
(Restated) (Restated)
£'000 £'000 £'000
Profit for the period 3,665 2,093 4,340
Dividends (1,405) (1,324) (2,838)
------- ------- -------
2,260 769 1,502
Other recognised net gains and losses - - 258
relating to the period
New ordinary share capital issued 182 7 89
------- ------- -------
Net increase in shareholders' funds 2,442 776 1,849
Opening shareholders' funds 30,769 28,920 28,920
(originally £37,946,000 restated for
prior year adjustment of £7,177,000)
------- ------- -------
Shareholders' funds at the end of the 33,211 29,696 30,769
period ------- ------- -------
Notes to the Interim Financial Statements
1. Segmental Information
6 months ended 30 June 2004 6 months ended 30 June 2003 Year ended 31 December 2003
(Restated) (Restated)
Operating Net Operating Net Operating Net
Profit* Assets Profit* Assets Profit* Assets
Turnover Turnover Turnover
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Building and
construction
Products 112,125 7,322 48,895 101,038 6,552 48,103 204,687 11,633 39,639
Industrial products 18,888 506 11,021 20,043 340 14,923 36,978 959 12,572
------- ------- ------- ------- ------- ------- ------- ------- -------
Total operations 131,013 7,828 59,916 121,081 6,892 63,026 241,665 12,592 52,211
------- ------- ------- ------- ------- -------
Tax and dividends (9,354) (7,792) (7,929)
Long-term debtors
and other
Provisions (4,947) (5,521) (4,226)
Net borrowings (38,760) (47,755) (36,485)
Goodwill 26,398 27,771 27,240
------- ------- -------
Total Group 33,253 29,729 30,811
------- ------- -------
* Operating profit is stated before exceptional items and goodwill amortisation.
2. Exceptional items and goodwill amortisation
The charge against operating profit comprises £842,000 of goodwill amortisation
and £209,000 for business reorganisation costs.
The profit on sale of fixed assets relates to the sale of freehold land and
buildings.
3. Taxation
Tax has been provided on the profit before exceptional items and goodwill at the
estimated effective rate for the full year.
4. Dividends
The Directors have declared an interim dividend for the current year of 2.25p
per share (six months to 30 June 2003: 2.15p) which will be paid on 21 January
2005 to shareholders on the register on 24 December 2004.
5. Earnings per share
The weighted average number of shares in issue during the period was 61,933,559,
diluted for the effect of outstanding share options 62,325,994 (six months ended
30 June 2003: 61,573,940 and 61,860,162 diluted).
Earnings per share have been calculated on profits of £3,665,000 (restated six
months ended 30 June 2003: earnings of £2,093,000) and earnings per share before
exceptional items and goodwill amortisation on earnings of £4,466,000 (restated
six months ended 30 June 2003: earnings of £3,644,000).
Earnings per share before exceptional items and goodwill amortisation have been
shown because the Directors consider that this gives a more meaningful
indication of the underlying performance of the Group.
6. Notes to the Cash Flow Statement
i. Reconciliation of operating profit to net cash flow from operating
activities
6 months ended 30 June 2004 6 months ended Year ended
30 June 2003 31 December 2003
(Restated) (Restated)
Before Before Before
exceptional exceptional exceptional
items and Exceptional items and items and
goodwill items and goodwill goodwill
amortisation goodwill amortisation amortisation
amortisation Total Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Operating profit 7,828 (1,051) 6,777 6,892 5,810 12,592 10,957
Depreciation 2,844 - 2,844 2,744 2,744 5,497 5,619
Amortisation of goodwill - 842 842 - 840 - 1,630
(Profit)/loss of sale of fixed 52 - 52 - - (160) (160)
assets
Change in working capital:
Stocks (2,519) - (2,519) (1,721) (1,393) (818) (573)
Debtors (14,995) - (14,995) (8,822) (7,656) 3,496 3,283
Creditors and provisions 12,015 - 12,015 727 (711) 660 169
------- ------- ------- ------- ------- ------- -------
(5,499) - (5,499) (9,816) (9,760) 3,338 2,879
------- ------- ------- ------- ------- ------- -------
Net cash (outflow) / inflow from
operating
activities 5,225 (209) 5,016 (180) (366) 21,267 20,925
------- ------- ------- ------- ------- ------- -------
ii. Capital expenditure
Purchase of tangible fixed assets (3,237) (2,141) (5,442)
Sale of fixed assets 583 1,170 1,212
------- ------- -------
(2,654) (971) (4,230)
------- ------- -------
7. Prior year restatement
The company has adopted FRS17: Retirement Benefits in these financial
statements. The comparative figures have been restated accordingly.
The adoption of FRS17 has resulted in a decrease in the reported profit
before tax for the year ended 31 December 2003 of £750,000 and for the six
months ended 30 June 2003 of £8,000. There is an overall decrease in
shareholders' funds as at 31 December 2003 of £7,177,000 and as at 30 June 2003
of £6,933,000. The amount of the restatement credited directly to P&L reserve
for the year ended 31 December 2003 which is included in the movement in
shareholders funds above was £275,000.
8. Financial Information
The results for the half years ended 30 June 2004 and 2003 are unaudited and do
not constitute statutory accounts within the meaning of s240 of the Companies
Act 1985. The financial information for the year ended 31 December 2003 has
been extracted from the statutory accounts for that year (as adjusted for the
change in accounting policy detailed in note 7) which have been filed with the
Registrar of Companies and on which the auditors have given an unqualified
opinion.
Other than the change in accounting policy detailed in note 7, the same
accounting policies disclosed in the previous Annual Report have been applied in
the results for the half year ended 30 June 2004.
Copies of the interim report will be sent to shareholders and will be available
from Hill & Smith Holdings PLC office at:
2 Highlands Court
Cranmore Avenue
Shirley
Solihull
B90 4LE
Directors and Financial Calendar
Directors:
D.S. Winterbottom FCA, FCT
(Chairman)
D.L. Grove BA, FCA
(Deputy Chairman and Chief Executive)
C.J. Burr FCA
(Finance Director)
H.C. Marshall MSc, BSc
(Non-Executive)
R.E. Richardson FCMI
(Non-Executive)
Secretary:
C.J. Burr FCA
Financial Calendar
Payment of interim dividend (ex dividend date 22 December 2004) 21 January 2005
Preliminary announcement of results for the year to 31 December 2004 March 2005
Annual General Meeting 2005 May 2005
Further information:
Hill & Smith Holdings plc
David Grove - Chief Executive 0121 704 7430 or 07973 325667
Quantum PR plc
Edward Carter 0121 633 7775 or 07770 378097
End
September 14th, 2004
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