Slide 1: Half Year Results
Half Year Results Half Year Results Six Months Ended 30 June 2015 Six months Ended 30 June 2015 Derek Derek Muir Group Muir Group Chief Chief Executive Executive Mark Mark Pegler Group Pegler Group Finance Finance Director Director Hill & Smith Holdings PLC 2015
Slide 2: Key messages
Key messages Strong first half performance − Favourable conditions in UK and US infrastructure markets − Organic revenue growth 5% − Good operating profit* growth - up 14% (at constant currency) − Margins higher in all 3 segments Momentum continuing into second half Proposed interim dividend 7.1
Slide 3: Trading Results
Trading Results FX impact: Revenue +£0.6m H1 15 +/- H1 14 FY 2014 Underlying OP +£0.5m Revenue (£m) 233.0 4% 223.8 454.7 Organic growth +5% Underlying operating profit (£m) 26.3 17% 22.5 49.2 Organic growth +11% Strategic initiatives driving Underlying operating margin (%) 11.3 120bps 10.1 10.
Slide 4: Segment and geographical analysis
Segment and geographical analysis Revenue : £233.0m Revenue : £233.0m By segment By end market geography Galvanizing Roads 30% 28% UK USA Non-Gov’t 48% 52% Utilities 42% A well balanced business: products, Underlying Operating Profit : £26.3m Underlying Operating Profit : £26.3m By segment markets &
Slide 5: Utilities
Utilities Operating H1 H1 Organic £m Revenue Profit 2015 2014 Growth 2014 99.4 4.6 Revenue (£m) 98.8 99.4 3% F/X 3.5 0.2 Operating profit (£m) 5.2 4.6 - Acquisitions (7.2) 0.4 /Disposals Operating margin (%) 5.3 4.6 70bps Organic 3.1 - UK 2015 98.8 5.2 − Good organic growth − Margins assisted by p
Slide 6: Roads
Roads Operating H1 H1 Organic £m Revenue Profit 2015 2014 Growth 2014 59.3 5.4 Revenue (£m) 64.6 59.3 4% F/X (2.0) - Operating profit (£m) 7.3 5.4 30% Acquisitions 4.8 0.3 Operating margin (%) 11.3 9.1 220bps Organic 2.5 1.6 2015 64.6 7.3 UK (73% of revenue) − Government’s investment plan progress
Slide 7: Galvanizing
Galvanizing H1 H1 Organic Operating 2015 2014 Growth £m Revenue Profit Revenue (£m) 69.6 65.1 8% 2014 65.1 12.5 Operating profit (£m) 13.8 12.5 8% F/X (0.9) 0.3 Organic 5.4 1.0 Operating margin (%) 19.8 19.2 60bps 2015 69.6 13.8 UK − Hereford closure Dec 14; underlying volumes similar to prior per
Slide 8: Foreign exchange sensitivities
Foreign exchange sensitivities H1 H1 Memo: 2015 2014 Change 2014 FY Average rates Euro 1.37 1.22 (12%) 1.24 Ready reckoner for translation impact of movement US$ 1.52 1.67 9% 1.65 in FX rates Sensitivity to +/- Operating Closing rates Revenue 1 cent move in: profit Euro 1.41 1.25 (13%) 1.28 Euro +/-
Slide 9: Free cash flow and net debt
Free cash flow and net debt H1 H1 FY £m 2015 2014 2014 Working capital 14.4% of annualised sales (H1 2014: 15.0%) Underlying Operating Profit 26.3 22.5 49.2 − H1 outflow reflective of seasonal trading patterns Depreciation and amortisation 8.3 7.4 15.1 − Efficiency improvement c.£3m yoy Underlying
Slide 10: Strategy and Outlook
Strategy and Outlook Derek Muir Interim Results 30 June 2015 10
Slide 11: Key opportunities for growth
Key opportunities for growth US & UK Galvanizing UK Roads UK & US Infrastructure Market Opportunities UK & US driving 92% of profits Interim Results 30 June 2015 11
Slide 12: Highways England: Investment Plan
Highways England: Investment Plan Medium term investment Modernising the network • A14 Cambridge to Huntingdon • Smart Motorways • Junctions, widening & bypass schemes • Tackling pinch points Temporary safety barrier Permanent safety barrier VMS Maintaining the network • Stepping up the asset re
Slide 13: Roads: UK Smart Motorways
Roads: UK Smart Motorways Source: Construction News 31 July 2015 WHAT WILL THE WORK INVOLVE? Signage and gantries: With the focus of smart motorways on communication, the new network will require comprehensive CCTV coverage and the installation of traffic management technology, alongside new stati
Slide 14: UK Infrastructure Spending
UK Infrastructure Spending Government’s National Infrastructure Plan 2014-2021: £466bn of public and private investment WATER RAIL OFFSHORE POWER ENERGY HOUSING AMP5 £22bn CP5 £38bn North Sea Oil Nuclear rebuild Renewables Housing AMP6 £44bn Crossrail £6bn North Sea Gas or gas
Slide 15: Utilities: US New developments
Utilities: US New developments Novia Associates Carpenter & Paterson Creative Pultrusions $3m acquisition $1m investment in New Composite utility poles • Vibration Isolation Orleans • High voltage 280 kva Crossarms • Seismic restraints • New PUF (polyurethane • 14m long C channels 400 H x 150
Slide 16: Utilities: Pipe Supports
Utilities: Pipe Supports Strengthened operational management Order book restored for H2 in India and Thailand − Thermal power project awards in India − LNG project awards in US and India − Lower demand in RoW; geographical relocation of refining facilities − Subdued activity in Framework Supply
Slide 17: Utilities: The Paterson Group – Market Dynamics
Utilities: The Paterson Group – Market Dynamics $m US Group GM 70.0 45% Total SalesSales $m$m Obama’s Climate Change / less coal Gross Gross margin margin 60.0 40% Fukushima impacted Nuclear programme 50.0 35% Growth in Gas plants 40.0 30% 30.0 25% 2008 2009 2010 2011 2012 2013 2014 10.0 8.0 C
Slide 18: Galvanizing: US Market Landscape
Galvanizing: US Market Landscape Small number of key players Fragmented competitive landscape Key: V&S Galvanizing (Hill & Smith) - 7 AZZ Galvanizing – 41 Valmont Industries - 18 South Atlantic Galvanizing- 6 Metalplate Galvanizing - 5 Independents - 64 Interim Results 30 June 2015 18
Slide 19: Group outlook unchanged
Group outlook unchanged France difficult GALVANIZING US and UK performance maintained Continued investment in UK roads network ROADS Niche growth opportunities in international markets Infrastructure investment strong in our chosen markets UTILITIES Order book restored in Pipe Supports O
Slide 20: Appendices
Appendices 20
Slide 21: Business model and strategy
Business model and strategy To hold leading positions in the niche markets of infrastructure and galvanizing, diversified over different geographies, with a focus on service, margins and product development. Organic revenue growth Geographic diversification Sustainable Superior Strategic Business Ta
Slide 22: Segment analysis
Segment analysis £m H1 15 Organic M&A FX H1 14 Utilities Revenue 98.8 3.1 (7.2) 3.5 99.4 • UK infrastructure spend strong • Prior year disposal assists margins Underlying operating profit 5.2 - 0.4 0.2 4.6 • Bergen Pipe Supports suffered from weak Margin 5.3% 4.6% opening order book Roads Revenue 64
Slide 23: Non-underlying items
Non-underlying items Year Ended H1 15 H1 14 2014 Operating items Business reorganisation costs 0.2 - (2.6) Acquisition costs (0.4) - (0.1) Amortisation of acquisition intangibles (1.1) (1.0) (2.1) (Loss)/profit on sale of properties (0.1) - 0.4 Loss on disposal of subsidiaries - (3.4) (3.7) Impairme
Slide 24: Return on Invested Capital
Return on Invested Capital ROIC% 12m to 12m to before tax Group H1 15 H1 14 Operating Profit (£m) 53.0 47.5 Av. Invested Capital (£m) 309.2 308.8 ROIC % 17.1 15.4 12m to 12m to Divisional (%) H1 15 H1 14 Utilities 11.7 12.0 Roads 20.9 18.1 Infrastructure Products 15.9 14.5 Galvanizing 18.4 16.3 Inte
Slide 25: Margin
Margin Margin Target H1 15 H1 14 Range % % % Infrastructure Products 7.6 6.3 8 – 11 - Utilities 5.3 4.6 7 – 11 - Roads 11.3 9.1 9 – 13 Galvanizing Services 19.8 19.2 18 – 21 Group 11.3 10.1 10 – 13 Roads and Galvanizing within range Utilities improving (margin ex Pipe Supports c.9% i.e. mid rang
Slide 26: Availability and usage of debt facilities
Availability and usage of debt facilities Maturity Net Debt by Currency On 2014 £m Net Debt Facility demand to 2019 2019 Euros 11% Committed 93.1 210.3 2.4 207.9 US$ On demand - 9.7 9.7 25% £ + other Cash (3.9) - 64% 89.2 220.0 Principal facility in place until April 2019 Facilities provide sign
Slide 27: Dividends
Dividends 2015 Change % 2014 Change % 2013 Interim dividend per share 7.1 11% 6.4p 6.7% 6.0p Final dividend per share 11.6p 16.0% 10.0p Total dividend per share 18.0p 12.5% 16.0p 12 successive years of dividend growth Central to strategy and TSR ethos 11.60 Progressive dividend policy driven b