Hill & Smith Plc · LSE:HILS
Hill & Smith — FY2018 Earnings Presentation
30 slides from Hill & Smith's earnings presentation, Mar 6, 2019
Slide 1: 2018 Preliminary Results
2018 Preliminary Results Half Year Results Six Months Ended 30 June 2015 6 March 2019 Derek Muir Group Chief Executive Mark Derek Pegler Group Muir Group ChiefFinance ExecutiveDirector Mark Pegler Group Finance Director Hill & Smith Holdings PLC
Slide 2: Key messages
Key messages Overall, a good year − Improved H2 in UK after challenging H1 − International businesses performing well, particularly US − Organic revenue growth 3% (at constant currency) − Operating margin* 12.6%, down 130bps Active portfolio management – investing for growth − Seven acquisitions
Slide 3: Results summary
Results summary FX impact: - Revenue -ve £7.1m 2018 +/- 2017 - Operating profit -ve £1.4m Revenue (£m) 637.9 9% 585.1 Organic growth 3% Operating profit (£m) 80.1 1% 81.3 Similar to prior year (at constant currency) Operating margin (%) 12.6 130bps 13.9 Profit before tax (£m) 76.3 3% 78.5 Ea
Slide 4: Segment and geographical analysis
Segment and geographical analysis Revenue: £637.9m Revenue: £637.9m By segment By end market geography Galvanizing Roads 30% 33% USA UK 35% Non-Gov’t 56% 33% 44% Utilities Europe 37% 18% A well balanced business: Operating Profit: £80.1m products, Operating Profit: £80.1m By segment markets & By pla
Slide 5: Utilities
Utilities Organic Operating 2018 2017 Growth £m Revenue Profit Revenue (£m) 239.0 215.7 7% 2017 215.7 16.8 F/X (3.4) (0.4) Operating profit (£m) 18.3 16.8 6% M&A 12.2 0.9 Operating margin 7.7% 7.8% -10bps Organic 14.5 1.0 UK 2018 239.0 18.3 Overall mixed; generally more cautious investment envir
Slide 6: Roads
Roads Organic 2018 2017 Growth Operating £m Revenue Profit Revenue (£m) 208.5 187.1 -3% 2017 187.1 23.6 Operating profit (£m) 24.2 23.6 -5% F/X (2.0) (0.3) Operating margin 11.6% 12.6% -100bps M&A 28.3 2.1 UK: 53% of revenue (2017: 66%) Organic (4.9) (1.2) Government’s Road Investment Strategy:
Slide 7: Galvanizing
Galvanizing Organic 2018 2017 Growth Operating £m Revenue Profit Revenue (£m) 190.4 182.3 5% 2017 182.3 40.9 Operating profit (£m) 37.6 40.9 -6% F/X (1.7) (0.7) Operating margin 19.7% 22.4% -270bps Organic 9.8 (2.6) Overall 2018 190.4 37.6 Profitability & margin measured against record PY compar
Slide 8: Foreign exchange sensitivities
Foreign exchange sensitivities 2018 2017 Change Average rates Euro 1.13 1.14 1% Ready reckoner for translation impact of movement US$ 1.33 1.29 3% in FX rates Sensitivity to +/- Operating Closing rates 1 cent move in: Revenue profit Euro 1.11 1.13 2% Euro +/- £0.7m +/- £50k US$ +/- £1.7m +/- £
Slide 9: Free cash flow and net debt
Free cash flow and net debt £m 2018 2017 Underlying cash conversion 78%; 10-year average 88% Underlying Operating Profit 80.1 81.3 Excluding strategic capex, cash conversion 93%; 10-year Depreciation and amortisation 19.5 19.2 average 97% Underlying EBITDA 99.6 100.5 Working Capital – strong H
Slide 10: Strategic KPI's
Strategic KPI’s Organic revenue growth Operating margin 10% 14% 8% 13% 6% 12% 4% 11% 2% 0% 10% 2012 2013 2014 2015 2016 2017 2018 -2% 9% 2012 2013 2014 2015 2016 2017 2018 -4% Driving 7-Yr Average Adjusted for impact of acquisitions Returns Underlying cash conversion* Return on invested capital 120%
Slide 11: Earnings and Dividend
Earnings and Dividend Earnings per share (p) Dividend (p) 80 70 2018 2017 60 Interim dividend per share 10.0p 9.4p 6% 50 Final dividend per share 21.8p 20.6p 6% 40 Total dividend per share 31.8p 30.0p 6% 30 2012 2013 2014 2015 2016 2017 2018 31.8 Dividend 30.0 26.4 16 successive years of div
Slide 12: Growth Strategy Opportunities
Growth Strategy Opportunities Organic & Legislative Growth • Highways England RIS1 and RIS2 to 2025 • Focus on growing revenue and margin in existing markets • Hinkley Point, HS2, AMP6, Control Period 6 through product development and innovation • Energy policy - offshore wind farms • Identify Gover
Slide 13: Highways England: Road Investment Strategy (RIS) 1 & 2
Highways England: Road Investment Strategy (‘RIS’) 1 & 2 Temporary Safety Barrier Crash Cushions Permanent Safety Barrier Variable Message Signs ROTTM Sign £m National Roads Fund (‘NRF’) - Government 4,000 Profile of investment £15.2bn NRF £28.8bn delivering commitment to ring-fence English Source
Slide 14: 2018 Acquisitions
2018 Acquisitions Work Area Protection Corporation (“WAPCO”) Acquired 9 May 2018 Acquisition cost: $42.0m WAPCO is a leading provider of innovative traffic safety and work zone safety solutions. WAPCO develop, manufacture and distribute a range of road work safety zone products. Product portfolio co
Slide 15: WAPCO - H&S Inc Integration
WAPCO - H&S Inc Integration Proforma Revenue $65m ITS & Work Zone Safety Roadside Safety Smart Work Zones RoadSafe Territories Exclusive RoadSafe Distributor HILS: FY18 TRAVEL SAFE : WORK PROTECTED 15
Slide 16: 2018 Acquisitions
2018 Acquisitions Global pultruded composites market c.$1.5bn Acquired 5 October 2018 (USA 50% of total) Acquisition cost: $12.2m Strong future growth >8% pa in many US market Engineered solutions supplier of innovative, lightweight, segments high strength, cost effective Fibre Reinforced Polyme
Slide 17: Creative Composites Group
Creative Composites Group CREATIVE PULTRUSIONS Proforma Revenue $80m Composite Redman UK ET Techtonics Tower Tech Kenway Waterfront Advantage Pro Composites Harbor Camels Bridge Decks TGC Bridges Cooling towers Waterfront Rail platforms Waste water Harbor Camels Wind Tower Accessories HILS: FY18 17
Slide 18: 2018 Acquisitions
2018 Acquisitions USA ageing infrastructure Acquired 17 August 2018 Acquisition cost: $6.4m Underinvestment in power transmission grid – forward visibility of investment ahead Acquired at auction following bankruptcy, Engineered Wider customer base; framework agreement Endeavors manufactures u
Slide 19: US V&S Utilities Group
US V&S Utilities Group V & S SCHULER Proforma Revenue $50m V&S Schuler V&S Clark V&S Schuler Engineered Engineering Substations Tubular Products Endeavors V&S Schuler, the combination of four companies offering products and services to the electrical utilities market, as well as to contractors and e
Slide 20: ATG Access
ATG Access ATG Access (‘ATG’) ATG agent and distributor network Acquired 22 February 2019 Acquisition cost: £22.5m Global market leader in high security, anti-terrorist, hostile vehicle mitigation (‘HVM’) market, providing innovative engineered products, tested to UK and International standards. - H
Slide 21: ATG Access Global Product Applications
ATG Access Global Product Applications Airports Railway stations Stadia Embassies Financial centres Crowded spaces [Insert picture] Los Angeles International Airport London Underground Wembley Stadium British Embassy, Athens Financial District, Germany Premier League Football Clubs [[MNGT PROVIDE NE
Slide 22: HS Security Group
HS Security Group HS SECURITY GROUP Proforma Revenue £70m Bristorm Barkers ATG Access Technocover Hardstaff Wire Rope Stronguard HVM Kiosks National Barrier Asset Bollards Fencing Bollards Manhole Covers Concrete blocks Gates Gates Blockers Grills / Cabinets Zoneguard HILS: FY18 22
Slide 23: Outlook
Outlook GEOGRAPHIES SEGMENTS Short term uncertainty UK remains mixed UK Infrastructure investment UTILITIES US composites/utilities growth outlook strong opportunities Pipe Supports improving returns Industrial activity robust RIS certainty of spending to 2025 USA ‘On-shoring’ trends
Slide 24: Appendices
Appendices hs HILS: FY18 24
Slide 25: Segment analysis
Segment analysis £m 2018 Organic M&A FX 2017 Utilities Revenue 239.0 14.5 12.2 (3.4) 215.7 Underlying operating profit 18.3 1.0 0.9 (0.4) 16.8 Margin 7.7% 7.8% Roads Revenue 208.5 (4.9) 28.3 (2.0) 187.1 Underlying operating profit 24.2 (1.2) 2.1 (0.3) 23.6 Margin 11.6% 12.6% Galvanizing Revenue 190.
Slide 26: Non-underlying items
Non-underlying items £m 2018 2017 Operating items Business reorganisation costs (0.7) (2.8) Acquisition costs (2.2) (0.6) Amortisation of acquisition intangibles (4.8) (4.0) Technocover goodwill Impairment of acquisition intangibles/other assets (6.1) (0.4) impairment Profit on sale of CA Traffic -
Slide 27: Return on Invested Capital
Return on Invested Capital Group 2018 2017 ROIC% before tax Operating Profit (£m) 80.1 81.3 Av. Invested Capital (£m) 446.6 403.1 ROIC % 17.9 20.2 Divisional (%) 2018 2017 Utilities 17.6 17.5 Roads 17.3 22.0 Infrastructure Products 17.4 19.9 Galvanizing 18.5 20.4 HILS: FY18 27
Slide 28: Margin
Margin Margin Target 2018 2017 Range % % % Infrastructure Products 9.5 10.0 8 – 11 - Utilities 7.7 7.8 7 – 10 - Roads 11.6 12.6 10 – 14 Galvanizing Services 19.7 22.4 19 – 22 Group 12.6 13.9 12 – 15 All divisions within target range Roads impacted by lower barrier utilisation in H1 and VMS defer
Slide 29: Availability and usage of debt facilities
Availability and usage of debt facilities Maturity Net Debt by Currency On 2019 £m Net Debt Facility demand to 2024 2024 Euros 10% Committed 169.8 282.7 2.1 280.6 On demand - 11.3 11.3 £ + other US$ 49% 41% Cash (36.9) - 132.9 294.0 Principal debt facility refinanced on 10 January 2019 − Term exte
Slide 30: Disclaimer
Disclaimer Cautionary statement This presentation 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