Trading Update

RNS Number : 3866P

Hill & Smith Hldgs PLC

17 November 2016

 

17 November 2016

Hill & Smith Holdings PLC

Trading Update

Hill & Smith Holdings PLC ("Hill & Smith" or "the Group"), the international group with leading positions in the supply of infrastructure products and galvanizing services to global markets, today issues a trading update covering the period 1 July 2016 to 31 October 2016 ("the period").

Current Trading

The Board is pleased to report that trading in the period has continued to be encouraging and that it expects Group trading performance for the current financial year to be at the top end of market expectations. The Group's results will also benefit from the positive translational impact on its overseas earnings from the recent weakness in Sterling.

Underlying revenue increased by 15% to £185.0m (2015: £160.8m), with translational currency benefits contributing £9.1m or 6%. After adjusting for additional revenue of £12.7m from acquisitions and reduced revenue from restructuring actions of £6.8m, organic underlying revenue growth was £9.2m or 5%. Underlying operating profit and operating margin are ahead of the same period last year.

Markets - summary

Infrastructure - Roads

In the UK, implementation of the Government's Road Investment Strategy continues to develop in line with our expectations and demand for our temporary safety barrier has been strong. In September 2016 we committed to expanding our temporary safety barrier rental fleet by a further 10,000m to 280,000m to support expected demand levels from the second half of 2017. Our portfolio of other products have also performed well in the wider UK market.

On 4 August 2016, the Group announced the acquisition of Signature Limited ("Signature") for a cash consideration of £12.5m. Signature is a UK based business which specialises in the development, installation and maintenance of street lighting columns, road sign and traffic management systems. The business complements and expands our product offering in the UK roads market and has been integrated into our existing lighting column business.

Internationally, overall we continue to make pleasing progress. Results are ahead of the same period last year, principally driven by a strong performance in our US business where we continue to see a growing acceptance of our steel temporary safety barrier.

Infrastructure - Utilities

As expected, following a slower first half, our UK Utilities companies have delivered a much stronger trading performance in the period. Operating profit was ahead of the same period last year.

On 14 July 2016 we completed the acquisition of Technocover Limited ('Technocover') for a cash consideration of £10.0m. Technocover specialises in the development, manufacture, installation and maintenance of high security access products for the utilities markets. Technocover's suite of products is complementary to our existing market offering and will benefit from its integration with our UK Utilities division.

In the US, our composite material business has continued to experience a lack of major contracts and, although underlying volumes are reasonable, the results have been below expectations. However, the transmission substation business continues to perform strongly and ahead of expectations.

Although market conditions remain competitive, our Pipe Supports business in the US delivered improved profitability and margins over the same period last year, driven principally by demand for engineered supports for combined cycle gas power plants. Recent restructuring initiatives will reduce the cost base and improve efficiencies within the business.

On 8 March 2016, we announced the restructuring of our non-US Pipe Supports businesses. Plans to close manufacturing operations in the UK and Thailand along with a sales office in China are ahead of schedule and nearing completion. Our remaining Indian facility has become our centre of excellence for the manufacture of pipe support products outside of the US and is performing in line with expectations.

Galvanizing

Reported volumes were 1% ahead of (organically 3% behind) the same period in 2015. Management focus on production efficiencies together with market leading quality and service helped to improve margins year on year. In the US, against record comparatives in 2015, volumes were 7% lower, principally due to the phasing of projects in the international temporary bridge market. However, this was largely offset by increased demand from a significant number of smaller infrastructure jobs, resulting in improved margins and profitability similar to last year. In France, volumes were 3% lower than last year but with a lower cost base as a result of increased automation, and the benefit of restructuring actions, profitability was ahead of expectations and similar to prior year. Reported volumes in the UK were 13% ahead (underlying flat) including the impact of the acquisition of Premier Galvanizing, completed late last year. Focus on smaller, quick turnaround work helped improve margins and as a result, profitability was ahead of prior year.

Financial position

Net debt at 31 October 2016 was £127.4m compared to £99.5m at 30 June 2016, principally reflecting £22.5m of expenditure on two acquisitions. Unfavourable movements in exchange rates since the half year on the translation of non-Sterling denominated debt also added £4.4m.

Outlook

Derek Muir, Group Chief Executive, commented: "Overall, conditions in many of our infrastructure end markets remain favourable and we continue to expect the Group to report good progress for 2016."

Financial calendar

The 2016 interim dividend of 8.5 pence per share, announced on 4 August 2016, will be paid on 5 January 2017 to shareholders on the Hill & Smith register on 25 November 2016. The ex-dividend date is 24 November 2016.

The Group's preliminary results for the year ending 31 December 2016 are scheduled to be announced on 8 March 2017.

- Ends -

All underlying measures include certain non-operational items, which are defined in the Group's Half Year Results to 30 June 2016 and can be found on www.hsholdings.com.  References to an underlying measure throughout this trading update are made on this basis.

Cautionary Statement

This announcement contains forward looking statements which are made in good faith based on the information available at the time of its approval. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of risks and uncertainties that are inherent in any forward looking statement which could cause actual results to differ materially from those currently anticipated. Nothing in this document should be regarded as a profits forecast.

For further information, please contact:

Hill & Smith Holdings PLC

Derek Muir, Group Chief Executive                                                         Tel:  [phone]

Mark Pegler, Group Finance Director

MHP Communications

John Olsen/Andrew Leach/Ollie Hoare                                                 Tel:  [phone]

Notes to Editors

Hill & Smith Holdings PLC is an international group with leading positions in the design, manufacture and supply of infrastructure products and galvanizing services to global markets. It serves its customers from facilities principally in the UK, France, USA, Sweden, Norway, India and Australia.

The Group's operations are organised into three main business segments:

Infrastructure Products - Roads, supplying products and services such as permanent and temporary road safety barriers, street lighting columns, bridge parapets, gantries, temporary car parks, variable road messaging solutions and traffic data collection systems.

Infrastructure Products - Utilities, supplying products and services such as pipe supports for the power and liquid natural gas markets, energy grid components, "GRP" railway platforms and flood prevention barriers, plastic drainage pipes, industrial flooring, handrails, access covers and security fencing.

Galvanizing Services which provides zinc and other coatings for a wide range of products including fencing, lighting columns, structural steel work, bridges, agricultural and other products for the infrastructure and construction markets.

Headquartered in the UK and quoted on the London Stock Exchange (LSE: HILS.L), Hill & Smith Holdings PLC employs some 4,250 staff.

 

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