Interim Results
Hill & Smith Hldgs PLC
06 September 2005
INTERIM RESULTS FOR THE PERIOD OF SIX MONTHS ENDED 30 JUNE 2005
The board of Hill & Smith Holdings PLC announces record profits for the period
of six months ended 30 June 2005, reflecting a further significant improvement
in the group's financial performance.
The statements for the half year have been prepared for the first time in
accordance with international financial reporting standards and comparative
figures have been restated accordingly.
HIGHLIGHTS:
Profit before taxation £8.5m (2004: £6.2m)
up by 36.6 per cent
Operating profit before financing costs £10.4m (2004: £7.8m)
up by 32.6 per cent
Revenue £143.4m (2004: £131.0m)
up by 9.4 per cent
Adjusted earnings per share+ 9.47p (2004: 7.01p)
up by 35.1 per cent
Dividend per share 2.60p (2004: 2.25p)
up by 15.6 per cent
Dividend cover+ 3.6 times (2004: 3.1 times)
Underlying net debt++ £33.3m (2004: £38.8m)
+ based on profits before reorganisation and restructuring costs
++ excluding the cost of investing £23.4m in Zinkinvent Gmbh
Apart from record profits and higher dividends, underlying cash flow has been
strong, supporting the group's continuing investment in its core businesses.
Though some additional benefits have been achieved by the successful integration
of acquisitions, the period under review was notable for strong organic growth.
Chairman David Winterbottom said: 'Further substantial progress has been
achieved by the group, resulting in another significant improvement in the
group's financial performance.
'The level of activity in our building, construction and infrastructure markets
continues to increase and we are well placed to take advantage of the many
projects available.
'We continue to focus on our capital expenditure and product development
programmes alongside our innovative and entrepreneurial approach in order to
provide high levels of customer service.
'These are important elements of our business strategy as is our drive to be the
lowest cost producer in the key markets we supply.
'We remain confident of achieving another satisfactory performance for the full
year, subject to a continuation of the current economic and market conditions.'
Copies of the interim report will be posted to shareholders on 7 September 2005.
Further information:
Hill & Smith Holdings PLC 0121 704 7430
David Grove, Chief Executive 07973 325667
Quantum Freshwater UK 0121 633 7775
Edward Carter 07770 378097
CHAIRMAN'S STATEMENT
Further substantial progress has been achieved by the Group during the six month
period ending 30 June 2005, resulting in another significant improvement in the
Group's financial performance.
Revenue for the period was £143.4m, representing a 9.4% increase over the same
period in 2004 (£131.0m). Operating profit improved by 32.6% to £10.4m (2004:
£7.8m) and profit before taxation was 36.6% ahead at £8.5m (2004: £6.2m). Basic
earnings per share for the period increased by 48.4% to 10.49p (2004: 7.07p)
whilst adjusted earnings per share grew by 35.1% to 9.47p (2004: 7.01p). These
results are the first to be prepared in accordance with International Financial
Reporting Standards, and comparative numbers have been restated accordingly.
Operations
The level of activity in our building, construction and infrastructure markets
continues to increase and we are well placed to take advantage of the many
projects available. We continue to focus on our capital expenditure and product
development programmes alongside our innovative and entrepreneurial approach in
order to provide high levels of customer service. These are important elements
of our business strategy as is our drive to be the lowest unit cost producer in
the key markets we supply. Our capital expenditure in the period again
substantially exceeded the depreciation charge
Most of the period's increase in profits was the result of organic like for like
growth and margin improvement, although there was also a valuable contribution
from Lionweld Kennedy which we acquired for £2.5m in November 2004 and its
management team has done an excellent job.
Zinkinvent GmbH Investment
In May 2005 the Group invested €25m in cash to acquire a 33% shareholding in
Zinkinvent GmbH ('Zinkinvent')and also advanced to Zinkinvent an interest
bearing loan of €10m. Zinkinvent is an investment company controlling 86% of a
Belgian company, Vista NV. Vista NV is a galvanizing and lighting pole
fabricating business with significant operations in Benelux, France and the USA,
with many similarities to our existing galvanizing and IPG businesses in the UK.
Subject to further detailed negotiation, we have the opportunity, under an
exclusivity agreement which runs to the end of the current year, to acquire the
remaining 67% of Zinkinvent. Further announcements can be expected before the
end of the current financial year. The investment is being accounted for on an
equity basis as an associate company.
Cash
Net debt increased to £56.7m (30 June 2004: £38.8m) principally as a result of
new borrowings taken on to finance the Zinkinvent transaction described above.
Excluding these, like for like net debt reduced by £4.6m during the period.
Dividend
An interim dividend of 2.60p (2004: 2.25p) has been declared by the Board which
represents a 15.6% increase over the previous year. This level of dividend is
covered 3.6 times, based on adjusted earnings per share. This is further
evidence of the progressive dividend policy we have maintained in recent years.
Acquisition after the period end
In August 2005 we acquired for £0.9m the business and certain assets of Techspan
Limited, a subsidiary of Jarvis PLC, which manufactures and supplies electronic
information display signs for the road, rail and airport markets. This is an
excellent fit with our IPG businesses, particularly in respect of the road
market in the UK and the strategy of reducing congestion and increasing safety
on our road network.
Outlook
Early indications in the second half of the year suggest a continuation of the
excellent performance of the first six months. Although our second half is
usually slightly weaker than the first half, due largely to the effect of the
summer and Christmas holiday periods, we nevertheless remain confident of
achieving another satisfactory performance for the full year, subject to a
continuation of the current economic and market conditions.
D S Winterbottom
Chairman
6th September 2005
CONSOLIDATED INCOME STATEMENT
6 months ended 30 June 2005
6 months ended 6 months ended Year ended
30 June 2005 30 June 2004 31 December 2004
Before Before Before
reorganisation Reorganisation reorganisation reorganisation
and and and and
restructuring restructuring restructuring restructuring
costs costs Total costs Total costs Total
Notes £000 £000 £000 £000 £000 £000 £000
------------------------------------------------------------------------------------------------------------------------
Revenue 1 143,374 - 143,374 131,013 131,013 268,652 268,652
========================================================================================================================
Profit from operations 10,249 - 10,249 7,828 7,828 15,084 15,084
Income from associated
companies 132 - 132 - - - -
Business reorganisations 2 - (2,397) (2,397) - (209) - (1,460)
Special bonuses and
associated costs - - - - - - (424)
Profit on sale of
properties - 2,424 2,424 - 187 - 187
------------------------------------------------------------------------------------------------------------------------
Operating profit before
financing costs 1 10,381 27 10,408 7,828 7,806 15,084 13,387
Financial income 230 - 230 271 271 597 597
Financial expenses (2,127) - (2,127) (1,890) (1,890) (3,874) (3,874)
------------------------------------------------------------------------------------------------------------------------
Profit before taxation 8,484 27 8,511 6,209 6,187 11,807 10,110
Tax on profit 3 (2,545) 614 (1,931) (1,869) (1,806) (3,554) (2,563)
------------------------------------------------------------------------------------------------------------------------
Profit for the period 5,939 641 6,580 4,340 4,381 8,253 7,547
========================================================================================================================
Attributable to:
Equity holders of the
parent 6,580 4,381 7,555
Minority interest - - (8)
------------------------------------------------------------------------------------------------------------------------
Profit for the period 6,580 4,381 7,547
========================================================================================================================
Basic earnings per share 4 10.49p 7.07p 12.17p
Diluted earnings per
share 4 10.17p 7.03p 11.65p
========================================================================================================================
CONSOLIDATED BALANCE SHEET
As at 30 June 2005
30 June 30 June 31 December
2005 2004 2004
Notes £000 £000 £000
--------------------------------------------------------------------------------
Non current assets
Intangible assets 28,657 27,415 28,144
Property, plant and equipment 44,022 41,505 44,431
Investments 23,566 25 25
--------------------------------------------------------------------------------
Non current assets 96,245 68,945 72,600
--------------------------------------------------------------------------------
Current assets
Assets held for resale 630 1,097 1,746
Inventories 26,418 26,160 27,004
Trade and other receivables 62,189 62,221 57,977
Cash and cash equivalents 5 12,154 11,502 9,901
--------------------------------------------------------------------------------
Current assets 101,391 100,980 96,628
--------------------------------------------------------------------------------
Total assets 1 197,636 169,925 169,228
================================================================================
Current liabilities
Trade and other current payables (75,792) (72,778) (75,596)
Tax liabilities (3,872) (3,752) (2,471)
Obligations under finance leases 5 (1,295) (1,101) (1,070)
Bank overdrafts and loans 5 (9,966) (5,875) (10,736)
--------------------------------------------------------------------------------
Current liabilities (90,925) (83,506) (89,873)
--------------------------------------------------------------------------------
Net current assets 10,466 17,474 6,755
================================================================================
Non current liabilities
Provisions for liabilities and charges (3,237) (4,818) (2,632)
Retirement benefit obligation (6,222) (3,297) (6,642)
Obligations under finance leases 5 (2,675) (2,786) (2,246)
Bank loans 5 (54,891) (40,500) (33,757)
--------------------------------------------------------------------------------
Non current liabilities (67,025) (51,401) (45,277)
--------------------------------------------------------------------------------
Total liabilities 1 (157,950) (134,907) (135,150)
================================================================================
Net assets 39,686 35,018 34,078
================================================================================
Equity
Share capital 15,826 15,516 15,519
Share premium 4,024 3,513 3,519
Capital redemption reserve 238 238 238
Revaluation reserve 425 517 479
Other reserves 4,313 4,313 4,313
Equity reserves 14,810 10,879 9,960
--------------------------------------------------------------------------------
Equity attributable to equity holders
of the parent 39,636 34,976 34,028
Minority interests 50 42 50
--------------------------------------------------------------------------------
Total equity 39,686 35,018 34,078
================================================================================
CONSOLIDATED STATEMENT OF CASH FLOWS
6 months ended 30 June 2005
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2005 2004 2004
Notes £000 £000 £000
--------------------------------------------------------------------------------
Operating profit before financing
costs 10,408 7,806 13,387
Adjustments for:
Depreciation 3,049 2,818 5,522
Amortisation of intangible assets 71 26 63
(Gain)/loss on disposal of
property, plant and equipment (2,279) (135) (223)
--------------------------------------------------------------------------------
Operating cash flows before
movements in working capital 11,249 10,515 18,749
---------------------------------------
(Increase)/decrease in inventories 586 (2,519) (2,613)
(Increase)/decrease in receivables (4,212) (14,995) (10,284)
Increase/(decrease) in payables 1,740 12,015 12,245
---------------------------------------
(1,886) (5,499) (652)
--------------------------------------------------------------------------------
Cash generated by operations 9,363 5,016 18,097
Income taxes paid (324) (332) (2,258)
Interest paid (2,127) (1,639) (4,341)
--------------------------------------------------------------------------------
NET CASH FROM OPERATING ACTIVITIES 6,912 3,045 11,498
--------------------------------------------------------------------------------
Investing activities
Interest received 230 20 95
Purchase of property, plant and
equipment (4,584) (3,237) (7,098)
Proceeds on disposal of property,
plant and equipment 4,555 583 812
Acquisitions of subsidiaries
and associates 6 (23,533) - (2,533)
--------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (23,332) (2,634) (8,724)
--------------------------------------------------------------------------------
Financing activities
Issue of new shares 812 182 191
Dividends paid (3,142) (1,326) (2,846)
New loans 23,391 - 1,500
Repayments of loans (2,250) (2,000) (4,250)
Repayment of loan notes (158) (576) (827)
New obligations under finance leases 1,275 1,542 1,542
Repayment of obligations under
finance leases (621) (532) (1,102)
Increase/(decrease) in borrowings (634) (522) (1,404)
--------------------------------------------------------------------------------
NET CASH (USED IN)/FROM FINANCING
ACTIVITIES 18,673 (3,232) (7,196)
--------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS 2,253 (2,821) (4,422)
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE PERIOD 9,901 14,323 14,323
================================================================================
CASH AND CASH EQUIVALENTS AT THE
END OF THE PERIOD 5 12,154 11,502 9,901
================================================================================
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
6 months ended 30 June 2005
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2005 2004 2004
£000 £000 £000
--------------------------------------------------------------------------------
Exchange differences on translation of
foreign operations - - 34
Actuarial gain on defined benefit pension
schemes - - (3,920)
Tax on items taken directly to equity - - 1,176
--------------------------------------------------------------------------------
Net income recognised directly in equity - - (2,710)
Profit for the period 6,580 4,381 7,547
--------------------------------------------------------------------------------
Total recognised income and expense for
the period 6,580 4,381 4,837
================================================================================
Attributable to:
Equity holders of the parent 6,580 4,381 4,845
Minority interest - - (8)
--------------------------------------------------------------------------------
Total recognised income and expense for
the period 6,580 4,381 4,837
================================================================================
ACCOUNTING POLICIES
Adoption of IFRS
EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidated
financial statements of Hill & Smith Holdings PLC, for the year ending 31
December 2005, be prepared in accordance with International Financial Reporting
Standards (IFRSs) adopted for use in the EU, i.e., 'adopted IFRSs'.
This interim financial information has been prepared on the basis of the
recognition and measurement requirements of IFRSs in issue that either are
endorsed by the EU and effective (or available for early adoption) at 30 June
2005 or are expected to be endorsed and effective (or available for early
adoption) at 31 December 2005, the Group's first annual reporting date at which
it is required to use adopted IFRSs. Based on these adopted and unadopted IFRSs,
the directors have made assumptions about the accounting policies expected to be
applied, which are as set out below, when the first annual IFRS financial
statements are prepared for the year ending 31 December 2005.
In particular, the directors have assumed that the following IFRSs issued by the
International Accounting Standards Board and IFRIC Interpretations issued by the
International Financial Reporting Interpretations Committee will be adopted by
the EU in sufficient time that they will be available for use in the annual IFRS
financial statements for the year ending 31 December 2005:
• IAS19 Employee benefits
In addition, the adopted IFRSs that will be effective or available for early
adoption in the annual financial statements for the year ending 31 December 2005
are still subject to change and to additional interpretations and therefore
cannot be determined with certainty. Accordingly, the accounting policies for
that annual period will be determined finally only when the annual financial
statements are prepared for the year ending 31 December 2005.
Basis of preparation
The accounting policies applied in the preparation of this consolidated
financial information are set out below. These policies have been applied
consistently to all the periods presented, unless otherwise stated, and in
preparing an opening International Financial Reporting Standards (IFRS) balance
sheet at 1 January 2004 for the purposes of transition to IFRS. See note 7 and
the appendices for further details.
This financial information has been prepared under the historical cost
accounting rules, modified to include the revaluation of certain land and
buildings.
Basis of consolidation
The consolidated financial information is made up to 30 June 2005. The
acquisition method of accounting has been adopted. Under this method, the
results of subsidiary undertakings acquired or disposed of in the period are
included in the consolidated income statement from the date of acquisition or up
to the date of disposal.
Where a group company is party to a jointly controlled entity, the Group
accounts for its proportion of the income and expenditure, assets, liabilities
and cash flows on consolidation.
Where the Group have associated interests in other entities, the net results of
the associated interest have been equity accounted into the results of the Group
from the date the interest is acquired to the date that interest ceases.
Intangible assets
Goodwill on acquisition comprises the excess of fair value of the consideration
plus any associated costs for the investment in subsidiary undertakings and
joint ventures over the Group's share of the fair value of the net identifiable
assets acquired.
Hill & Smith Holdings PLC has elected not to apply IFRS3 retrospectively.
Goodwill prior to 1 October 1998 was written off to reserves. Goodwill from 1
October 1998 to 31 December 2003 was amortised in line with UK GAAP. Goodwill
from 1 January 2004 is subject to annual impairment testing.
Gains and losses on the disposal of an entity include the carrying amount of
goodwill relating to the entity sold.
Customer lists have been valued on acquisition and are amortised over their
estimated useful life on an item by item basis.
Where research and development expenditure meets the criteria laid out in IAS38
Intangible assets, it has been capitalised and is amortised over its estimated
useful life on an item by item basis.
Property, plant and equipment and depreciation
Depreciation is provided to write-off the cost or valuation less the estimated
residual value of property, plant and equipment by equal instalments over their
estimated useful economic lives as follows:
•Freehold buildings 50 years
•Leasehold land and buildings life of lease
•Plant, machinery and vehicles 4 to 20 years
No depreciation is provided on freehold land.
Hill & Smith Holdings PLC has chosen to take the first time adoption exemption
available under IFRS 1 to use a previous revaluation for an item of PPE as its
deemed cost at the transition date.
Investments
In this financial information investments are stated at cost, less amounts
written off for impairment.
Assts held for resale
Resale properties are valued at the lower of fair value less cost to sell and
their carrying amount. Any surplus, deficit or impairment arising is credited or
charged to the income statement for the period. These assets are classed as
current assets in line with IFRS5, which was adopted early to give meaningful
comparatives.
Inventories
Inventories are stated at the lower of cost and net realisable value. In
determining the cost of raw materials, consumables and goods purchased for
resale, the FIFO method is used. Cost for work in progress and finished goods
comprises of direct materials, direct labour and an appropriate proportion of
attributable overheads.
Long term contracts
The profit attributable to the stage of completion of a long term contract is
recognised when the outcome of the contract can be reliably estimated. Turnover
for such contracts is stated as cost appropriate to their stage of completion
plus attributable profits, less amounts recognised in previous periods.
Provision is made for losses as soon as they are foreseen.
Contract work in progress is stated at costs incurred, less those transferred to
the income statement, after deducting foreseeable losses and payments on account
not matched with turnover.
Amounts recoverable on contracts are included in debtors and represent turnover
recognised in excess of payments on account.
Financial Instruments
Financial assets and liabilities are recognised on the Group's balance sheet
when the Group becomes a party to the contractual provisions of the instrument.
Trade receivables are stated at their nominal value as reduced by appropriate
allowances for estimated irrecoverable amounts.
Trade payables are stated at their nominal value.
Derivative financial instruments of the Group are used to hedge its exposure to
interest rate risks arising from operational, financing and investment
activities.
In accordance with its treasury policy, the Group does not hold or issue
derivative financial instruments for trading purposes. However, derivatives that
do not qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments are recognised initially at cost, if any.
Subsequent to initial recognition, derivative financial instruments are stated
at fair value. The gain or loss on remeasurement to fair value is recognised
immediately in the income statement.
The fair value of interest rate swaps is the estimated amount that the Group
would receive or pay to terminate the swap at the balance sheet date, taking
into account current interest rates and the current creditworthiness of the swap
counterparties.
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference
between cost and redemption value being recognised in the income statement over
the period of the borrowings on an effective interest basis.
Cash and cash equivalents
For the purposes of the consolidated statement of cash flows, cash and cash
equivalents comprise balances with less than three months maturity from the date
of acquisition, including cash and non restricted balances with central banks.
Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Any gain or loss on translation arising
from a movement in exchange rates subsequent to the date of a transaction is
included as an exchange gain or loss in the income statement.
The assets and liabilities of overseas subsidiary undertakings are translated at
the closing exchange rate. Income statements of such undertakings are
consolidated at the average exchange rate during the period and the adjustment
to period end rates is taken directly to reserves.
Net investment hedges for exchange differences arising on the retranslation of
the opening net assets of foreign subsidiaries are offset against the exchange
differences on foreign currency loans designated to fund them. The ineffective
portion of the hedge is recognised in the income statement for the period.
The Group has not taken advantage of the option to zero the translation effects
of foreign currencies as allowed in IFRS1 First time adoption of International
Accounting Standards.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event and it is probable
that an outflow of economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, when appropriate, the risks specific to the
liability.
A provision for restructuring is recognised when the Group has approved a
detailed and formal restructuring plan, and the restructuring either has
commenced or has been announced publicly. Future operating costs are not
provided for.
A provision for site restoration in respect of contaminated land is recognised
when the land is identified as contaminated and the Group has a liability.
The estimated cost of returning properties held under leases to their original
condition in accordance with the terms of specific lease contracts is recognised
as soon as such costs are able to be reliably estimated.
Impairment of assets
The carrying amount of the Group's assets is reviewed at each balance sheet date
to determine whether there is an indication of impairment. If such an indication
exists, the asset is written down to its estimated recoverable amount.
For goodwill, assets that have an indefinite life and intangible assets not yet
available for use, the
recoverable amount is estimated at each balance sheet date.
An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. Impairment losses are recognised in the
income statement.
Leases
Assets acquired under finance leases where the Group has substantially all the
risks and rewards of ownership are capitalised. The outstanding future lease
obligations are shown in creditors. Operating lease rentals are charged to the
income statement on a straight-line basis over the period of the lease.
Revenue
Except for work completed under long term contracts (see above), revenue
represents the amount (excluding value added tax) invoiced to third party
customers following the delivery of goods or provision of services.
Segmental reporting
The primary segmental analysis provided represents the whole of the Group's
operations. The secondary geographical analysis is regarded by the management as
unnecessary as substantially all of the Group's operations are performed in the
UK.
Government grants
Government grants are included within accruals and deferred income in the
balance sheet and credited to operating profit over the estimated useful
economic life or the length of employment specified in the grant.
Retirement benefit costs
The Group operates a number of pension schemes under which contributions by
employees and by the sponsoring companies are held in trust funds separated from
the Group's finances.
Obligations for contributions to defined contribution pension schemes are
recognised as an expense in the income statement as incurred.
The Group's net obligation in respect of defined benefit pension schemes is
calculated separately for each scheme by estimating the amount of future benefit
that employees have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value, and the fair
value of any scheme assets is deducted. The discount rate is the yield at the
balance sheet date on AA rated bonds that have maturity dates approximating to
the terms of the Group's obligations. The calculation is performed by a
qualified actuary using the projected unit method. Scheme assets are valued at
bid price.
Current and past service costs are recognised in operating profit and net
financing costs include interest on pension scheme liabilities and expected
return on assets.
All actuarial gains and losses in calculating the Group's obligation in respect
of a scheme are recognised annually in reserves and reported in the Statement Of
Recognised Income and Expense (SORIE).
Share based payment transactions
The fair value of shares/options granted is recognised as an employee expense,
with a corresponding increase in equity reserves. The fair value is recognised
at the grant date and spread over the period the employees become
unconditionally entitled to the shares/options. The fair value is based on
market value.
In accordance with IFRS2 transitional allowance, no expense is recorded for
equity settled options granted prior to 7 November 2002, but not vested by 1
January 2005.
Income tax
Income tax on the profit or loss for the year represents the sum of the tax
currently payable and deferred tax. Income tax is recognised in the income
statement except to the extent that it relates
to items recognised directly in equity, in which case it is recognised in
equity.
Current tax is the expected tax payable on the taxable profit for the year.
Taxable profit differs from net profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible.
The Group's liability for current tax is calculated using tax rates enacted or
substantially enacted at the balance sheet date, and any adjustments to tax
payable in respect of previous years.
Deferred taxation
Deferred tax is provided in full using the balance sheet liability method. It is
the tax expected to be payable or recoverable on the temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary
differences are not provided for: goodwill not deductible for tax purposes, the
initial recognition of assets and liabilities that affect neither accounting or
taxable profit, and differences relating to investments in subsidiaries to the
extent that they will not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised. The carrying amount of deferred tax assets are reviewed at each
balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the asset to
be recovered.
Additional income taxes that arise from the distribution of dividends are
recognised at the same time as the liability to pay the related dividend.
Deferred tax assets and liabilities are offset when they relate to income taxes
levied by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION
1. Segmental information
Income Statement 6 months ended 6 months ended 12 months ended
30 June 2005 30 June 2004 31 December 2004
Operating Operating Operating
Profit Profit Profit
before before before
financing financing financing
Revenue costs* Revenue costs* Revenue costs*
£000 £000 £000 £000 £000 £000
-----------------------------------------------------------------------------
Infrastructure products 52,638 6,340 47,613 4,616 95,729 9,103
Building and
construction products 71,270 3,087 64,512 2,707 134,120 4,512
Industrial products 19,466 954 18,888 505 38,803 1,469
-----------------------------------------------------------------------------
Total Group 143,374 10,381 131,013 7,828 268,652 15,084
=============================== ======= =======
Net financing costs (1,897) (1,619) (3,277)
-------- ------- -------
Profit before taxation 8,484 6,209 11,807
======== ======= =======
* Operating profit before financing costs is stated before reorganisation and
restructuring costs.
Balance Sheet 6 months ended 6 months ended 12 months ended
30 June 2005 30 June 2004 31 December 2004
Total Total Total Total Total Total
assets liabilities assets liabilities assets liabilities
£000 £000 £000 £000 £000 £000
Infrastructure products 62,817 (23,485) 34,403 (8,687) 45,568 (19,195)
Building and
construction products 72,190 (37,390) 77,514 (49,159) 67,058 (39,701)
Industrial products 22,764 (13,180) 20,108 (12,016) 20,660 (12,774)
----------------------------------------------------------------------------------------------------
Total operations 157,771 (74,055) 132,025 (69,862) 133,286 (71,670)
Tax and dividends (6,612) (8,847) (7,400)
Other provisions (8,456) (5,936) (8,271)
Net debt (note 5) 12,154 (68,827) 11,502 (50,262) 9,901 (47,809)
Goodwill 27,711 26,398 26,041
----------------------------------------------------------------------------------------------------
Total Group 197,636 (157,950) 169,925 (134,907) 169,228 (135,150)
====================================================================================================
Net assets 39,686 35,018 34,078
====================================================================================================
2. Business reorganisation costs
The charge relates primarily to the costs of relocating galvanizing
production from the Digbeth operation of Joseph Ash Limited to alternative
locations.
3. Taxation
Tax has been provided on the profit before reorganisation and restructuring
costs at the estimated effective rate for the full year.
4. Earnings per share
The weighted average number of shares in issue during the period was
62,736,490, diluted for the effect of outstanding share options 64,695,734
(six months ended 30 June 2004: 61,933,559, and 62,325,994 diluted).
Earnings per share have been calculated on profits of £6,580,000 (six months
ended 30 June 2004: earnings of £4,381,000) and earnings per share before
reorganisation and restructuring costs on earnings of £5,939,000 (six months
ended 30 June 2004: earnings of £4,340,000). Earnings per share before
reorganisation and restructuring costs are as shown below. The Directors
consider that this measurement of earnings gives a more meaningful indication
of the underlying performance of the Group:
30 June 2005 30 June 2004
Adjusted earnings per share 9.47p 7.01p
Adjusted diluted earnings per share 9.18p 6.96p
5. Analysis of Net Debt
30 June 2005 30 June 2004 31 December 2004
£000 £000 £000
-----------------------------------------------------------------------------
Cash and cash equivalents 12,154 11,502 9,901
Debt due within one year (9,966) (5,875) (10,736)
Debt due after one year (54,891) (40,500) (33,757)
Finance leases (3,970) (3,887) (3,316)
------------------------------------------------------------------------------
Net debt (56,673) (38,760) (37,908)
================================== ====================================
Less Debt raised for Zinkinvent
investment (note 6) 23,391
--------
Underlying net debt (33,282)
========
6. Acquisition of subsidiaries and associates
In May 2005 the Group invested €35m in Zinkinvent GmbH, a German holding
company that owns 86% of Vista NV, a Belgium company that operates a
galvanizing and lighting pole fabrication business in Benelux, France and the
United States of America. The results of this business are being equity
accounted into the results of the Group. There is an exclusivity agreement
that offers the Group the opportunity to enter into negotiations to acquire
the remaining 67% of Zinkinvent GmbH later this year.
In August 2005, the Group acquired from Jarvis PLC, the business and certain
assets of Techspan Limited, a sign display manufacturer, for £0.9m.
7. Financial information
The results for the half years ended 30 June 2005 and 2004 are unaudited and
do not constitute statutory accounts within the meaning of section 240 of the
Companies Act 1985. The financial information for the year ended 31 December
2004 has been extracted from the statutory accounts for that year which have
been filed with the Registrar of Companies and on which the auditors have
given an unqualified opinion, subject to the restatement as per note 8 and
the appendices.
8. Prior year restatement
Following the European Union Regulation issued in 2002, Hill & Smith Holdings
PLC must report its consolidated figures under IFRSs (as adopted by the
European Union) from 1 January 2005. The Group's first annual report under
IFRS will be for the year ending 31 December 2005. The half year financial
information presented in this report includes restated figures for 2004
(details of which can be seen in the Appendices to this financial
information) and represents the first IFRS results to be announced.
There are a number of presentational changes which have no effect on the
profit or the net assets, as well as no cash impact from IFRS adjustments
and the impact of IAS7 Cashflow statements merely has a presentational effect
on the statement of cash flows.
Transitional arrangements
On transition to IFRS, an entity is generally required to apply IFRS
retrospectively, except where an exemption is available under IFRS1
First-time adoption of International Financial Reporting Standards. The
following is a summary of the key elections from IFRS1 that were made by the
Group:
• The Group has elected to adopt the IFRS1 exemption in relation to business
combinations and will only apply IFRS3 Business combinations prospectively
from 1 January 2004. As a result, the balance of goodwill under UK GAAP as
31 December 2003 will be deemed the cost of goodwill at 1 January 2004.
• Hill & Smith Holdings PLC has chosen to take the first time adoption
exemption available under IFRS 1 to use a previous revaluation for an item
of PPE as its deemed cost at the transition date.
• The Group has elected not to adopt the IFRS 1 option to reset foreign
currency cumulative translation reserves to zero on transition to IFRS.
Furthermore, the Group has adopted the exemption in IFRS1 not to prepare
comparative information in accordance with IAS32 Financial Instruments:
Disclosure and Presentation and IAS39 Financial Instruments: Recognition and
Measurement. These standards will therefore only apply from 1 January 2005
and in the comparative figures for the year ended 31 December 2004, financial
instruments have been accounted for on a UK GAAP basis. The Group has also
elected to adopt IFRS5 Non-current Assets Held for Sale and Discontinued
Operations from 1 January 2005.
Principal areas of impact
The main areas of impact for Hill & Smith Holdings PLC are discussed below:
IFRS2 Share based payment
In accordance with IFRS2 transitional allowance, no expense is recorded for
equity settled options granted prior to 7 November 2002, but not vested by
1 January 2005. In the current period an annualised charge against the
operating profit of £186,000 resulting from the fair value adjustment SAYE
options granted in January 2005. The effect of this charge has a
corresponding increase in equity reserves.
IFRS3 Business combinations
Goodwill is no longer amortised. The IFRS1 adoption applied is as explained
in the transitional arrangements above.
IAS10 Events after the Balance Sheet date
Dividends declared after the balance sheet are not recognised as a liability.
The Directors have declared an interim dividend for the current year of 2.6p
per share (six months to 30 June 2004: 2.25p) which will be paid on
13 January 2006 to shareholders on the register on 9 December 2005.
IAS12 Income taxes
IAS12 requires all temporary differences rather than just timing differences
(as required under UK GAAP) to be provided in deferred tax. The main impact
for Hill & Smith Holdings PLC relates to the deferred tax provided on
revalued properties.
IAS19 Employee benefits
As a result of adopting FRS17 Retirement Benefits last year, the impact of
IAS19 is minimal. The differential between mid and bid price valuations
resulted in an immaterial variance to the fund valuation, and as such has not
been reflected in this report. The only change is a Balance Sheet
reclassification for the deferred tax, which under FRS17 was netted against
the pension liability, but under IAS19 this has been transferred to deferred
tax.
While the unendorsed amendment to IAS19 to allow the full actuarial gain and
loss to be taken to equity rather than the income statement for the period
has no effect on this interim financial information, the Group intends to
apply this amendment in the preparation of its annual report at 31 December
2005.
APPENDIX TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION
Prior year restatements
A) 2004 Opening Balances
i. Consolidated Balance Sheet as at 1 January 2004
IFRS3 IAS10 IAS12 IAS19
Business IFRS
As published combinations Dividends Income taxes Pensions Reclassified Restated
£000 £000 £000 £000 £000 £000 £000
------------------------------------------------------------------------------------------------------------------------
Non current assets
Intangible assets 27,240 - - - - - 27,240
Property, plant and equipment 41,437 - - - - - 41,437
Investments 25 - - - - - 25
------------------------------------------------------------------------------------------------------------------------
68,702 - - - - - 68,702
------------------------------------------------------------------------------------------------------------------------
Current assets
Assets held for resale 1,407 - - - - - 1,407
Inventories 23,641 - - - - - 23,641
Trade and other receivables 47,226 - - - - - 47,226
Cash and cash equivalents 14,323 - - - - - 14,323
------------------------------------------------------------------------------------------------------------------------
86,597 - - - - - 86,597
------------------------------------------------------------------------------------------------------------------------
Current liabilities
Trade and other current payables (64,363) - 1,514 - - - (62,849)
Tax liabilities (2,405) - - - - - (2,405)
Obligations under finance leases (807) - - - - - (807)
Bank loans and overdrafts (9,563) - - - - - (9,563)
------------------------------------------------------------------------------------------------------------------------
(77,138) - 1,514 - - - (75,624)
------------------------------------------------------------------------------------------------------------------------
Net current assets 9,459 - 1,514 - - - 10,973
-----------------------------------------------------------------------------------------------------------------------
Non current liabilities
Provisions for liabilities and charges (4,343) - - (356) 1,101 - (3,598)
Retirement benefit obligation (2,569) - - - (1,101) - (3,670)
Obligations under finance leases (2,069) - - - - - (2,069)
Bank loans (38,369) - - - - - (38,369)
------------------------------------------------------------------------------------------------------------------------
Net assets 30,811 - 1,514 (356) - - 31,969
========================================================================================================================
Equity
Called up share capital 15,424 - - - - - 15,424
Share premium 3,423 - - - - - 3,423
Capital redemption reserve 238 - - - - - 238
Revaluation reserve 739 - - (222) - - 517
Other reserves 4,313 - - - - - 4,313
Profit and loss account 6,632 - 1,514 (134) - - 8,012
------------------------------------------------------------------------------------------------------------------------
Equity shareholders' funds 30,769 - 1,514 (356) - - 31,927
Equity minority interests 42 - - - - - 42
------------------------------------------------------------------------------------------------------------------------
Total equity 30,811 - 1,514 (356) - - 31,969
========================================================================================================================
B) 2004 Interim Accounts
i. Consolidated Income Statement for the 6 months ended 30 June 2004
IFRS3 IAS10 IAS12 IAS19
Business IFRS
As published combinations Dividends Income taxes Pensions Reclassified Restated
£000 £000 £000 £000 £000 £000 £000
------------------------------------------------------------------------------------------------------------------------
Revenue 131,013 - - - - - 131,013
------------------------------------------------------------------------------------------------------------------------
Profit from operations 6,777 842 - - - 209 7,828
Business reorganisations - - - - - (209) (209)
Profit on sale of fixed assets 187 - - - - - 187
------------------------------------------------------------------------------------------------------------------------
Operating profit before financing
costs 6,964 842 - - - - 7,806
Interest receivable - - - - - 20 20
Interest payable (1,870) - - - - (20) (1,890)
Other finance income 251 - - - - - 251
------------------------------------------------------------------------------------------------------------------------
Profit before taxation 5,345 842 - - - - 6,187
Tax on profit (1,680) (9) - (117) - - (1,806)
------------------------------------------------------------------------------------------------------------------------
Profit for the period 3,665 833 - (117) - - 4,381
========================================================================================================================
B) 2004 Interim Accounts
ii. Consolidated Balance Sheet as at 30 June 2004
IFRS3 IAS10 IAS12 IAS19
Business IFRS
As published combinations Dividends Income taxes Pensions Reclassified Restated
£000 £000 £000 £000 £000 £000 £000
------------------------------------------------------------------------------------------------------------------------
Non current assets
Intangible assets 26,398 842 - - - 175 27,415
Property, plant and equipment 41,680 - - - - (175) 41,505
Investments 25 - - - - - 25
------------------------------------------------------------------------------------------------------------------------
68,103 842 - - - - 68,945
------------------------------------------------------------------------------------------------------------------------
Current assets
Assets held for resale 1,097 - - - - - 1,097
Inventories 26,160 - - - - - 26,160
Trade and other receivables 62,221 - - - - - 62,221
Cash and cash equivalents 11,502 - - - - - 11,502
------------------------------------------------------------------------------------------------------------------------
100,980 - - - - - 100,980
------------------------------------------------------------------------------------------------------------------------
Current liabilities
Trade and other current payables (74,183) - 1,405 - - - (72,778)
Tax liabilities (3,752) - - - - - (3,752)
Obligations under finance leases (1,101) - - - - - (1,101)
Bank loans and overdrafts (5,875) - - - - - (5,875)
------------------------------------------------------------------------------------------------------------------------
(84,911) - 1,405 - - - (83,506)
------------------------------------------------------------------------------------------------------------------------
Net current assets 16,069 - 1,405 - - - 17,474
------------------------------------------------------------------------------------------------------------------------
Non current liabilities
Provisions for liabilities and
charges (5,325) (9) - (473) 989 - (4,818)
Retirement benefit obligation (2,308) - - - (989) - (3,297)
Obligations under finance leases (2,786) - - - - - (2,786)
Bank loans (40,500) - - - - - (40,500)
------------------------------------------------------------------------------------------------------------------------
Net assets 33,253 833 1,405 (473) - - 35,018
========================================================================================================================
Equity
Called up share capital 15,516 - - - - - 15,516
Share premium 3,513 - - - - - 3,513
Capital redemption reserve 238 - - - - - 238
Revaluation reserve 739 - - (222) - - 517
Other reserves 4,313 - - - - - 4,313
Profit and loss account 8,892 833 1,405 (251) - - 10,879
------------------------------------------------------------------------------------------------------------------------
Equity shareholders' funds 33,211 833 1,405 (473) - - 34,976
Equity minority interests 42 - - - - - 42
------------------------------------------------------------------------------------------------------------------------
Total equity 33,253 833 1,405 (473) - - 35,018
========================================================================================================================
C) 2004 Year End Accounts
i. Consolidated Income Statement for the 12 months ended 31 December 2004
IFRS3 IAS10 IAS12 IAS19
Business IFRS
As published combinations Dividends Income taxes Pensions Reclassified Restated
£000 £000 £000 £000 £000 £000 £000
------------------------------------------------------------------------------------------------------------------------
Revenue 268,652 - - - - - 268,652
------------------------------------------------------------------------------------------------------------------------
Profit from operations 11,526 1,674 - - - 1,884 15,084
Business reorganisations - - - - - (1,460) (1,460)
Special bonuses and associated
costs - - - - - (424) (424)
Profit on sale of fixed assets 187 - - - - - 187
------------------------------------------------------------------------------------------------------------------------
Operating profit before
financing costs 11,713 1,674 - - - - 13,387
Interest receivable - - - - - 95 95
Interest payable (3,779) - - - - (95) (3,874)
Other finance income 502 - - - - - 502
------------------------------------------------------------------------------------------------------------------------
Profit before taxation 8,436 1,674 - - - - 10,110
Tax on profit (2,324) (18) - (221) - - (2,563)
------------------------------------------------------------------------------------------------------------------------
Profit for the period 6,112 1,656 - (221) - - 7,547
========================================================================================================================
C) 2004 Year End Accounts
ii. Consolidated Balance Sheet as at 31 December 2004
IFRS3 IAS10 IAS12 IAS19
Business IFRS
As published combinations Dividends Income taxes Pensions Reclassified Restated
£000 £000 £000 £000 £000 £000 £000
------------------------------------------------------------------------------------------------------------------------
Non current assets
Intangible assets 26,041 1,674 - - - 429 28,144
Property, plant and equipment 44,860 - - - - (429) 44,431
Investments 25 - - - - - 25
------------------------------------------------------------------------------------------------------------------------
70,926 1,674 - - - - 72,600
------------------------------------------------------------------------------------------------------------------------
Current assets
Assets held for resale 1,746 - - - - - 1,746
Inventories 27,004 - - - - - 27,004
Trade and other receivables 57,977 - - - - - 57,977
Cash and cash equivalents 9,901 - - - - - 9,901
------------------------------------------------------------------------------------------------------------------------
96,628 - - - - - 96,628
------------------------------------------------------------------------------------------------------------------------
Current liabilities
Trade and other payables (77,303) - 1,707 - - - (75,596)
Tax obligation (2,471) - - - - - (2,471)
Obligation under finance leases (1,070) - - - - - (1,070)
Bank overdrafts and loans (10,736) - - - - - (10,736)
------------------------------------------------------------------------------------------------------------------------
(91,580) - 1,707 - - - (89,873)
------------------------------------------------------------------------------------------------------------------------
Net current assets 5,048 - 1,707 - - - 6,755
------------------------------------------------------------------------------------------------------------------------
Non current liabilities
Provisions for liabilities
and charges (4,030) (18) - (577) 1,993 - (2,632)
Retirement benefit obligation (4,649) - - - (1,993) - (6,642)
Obligation under finance leases (2,246) - - - - - (2,246)
Bank loans (33,757) - - - - - (33,757)
------------------------------------------------------------------------------------------------------------------------
Net assets 31,292 1,656 1,707 (577) - - 34,078
========================================================================================================================
Equity
Called up share capital 15,519 - - - - - 15,519
Share premium 3,519 - - - - - 3,519
Capital redemption reserve 238 - - - - - 238
Revaluation reserve 685 - - (206) - - 479
Other reserves 4,313 - - - - - 4,313
Profit and loss account 6,968 1,656 1,707 (371) - - 9,960
------------------------------------------------------------------------------------------------------------------------
Equity shareholders' funds 31,242 1,656 1,707 (577) - - 34,028
Equity minority interests 50 - - - - - 50
------------------------------------------------------------------------------------------------------------------------
Total equity 31,292 1,656 1,707 (577) - - 34,078
========================================================================================================================
PRINCIPAL GROUP BUSINESSES
Infrastructure products:
•Asset International Limited
•Barkers Engineering Limited
•Hill & Smith Limited
•Joseph Ash Limited
•Mallatite Limited
•Varley & Gulliver Limited
Building and construction products:
•Ash & Lacy Building Services Limited
•Birtley Building Products Limited
•Express Reinforcements Limited
•Redman Fisher Engineering Limited
•Lionweld Kennedy Flooring Limited
Industrial products:
•W & S Allely Limited
•Ash & Lacy Perforators Limited
•Ash & Lacy Pressings Limited
•Bromford Iron & Steel Company Limited
•D & J Steels Limited
•Eden Material Services (UK) Limited
•Pipe Supports Limited
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)
Secretary
J.C. Humphreys, FCIS
Financial Calendar
•Payment of interim dividend
(ex dividend date 7 December 2005) 13 January 2006
•Preliminary announcement of results for the
year to 31 December 2005 March 2006
•Next Annual General Meeting May 2006
End
September 6th, 2005
This information is provided by RNS
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