Hill & Smith Plc · LSE:HILS

Hill & Smith — H1 2019 Earnings Presentation

23 slides from Hill & Smith's earnings presentation, Aug 7, 2019

  1. Slide 1: 2019 Interim Results

    2019 Interim Results 7 August 2019 Derek Muir Group Chief Executive Mark Else Interim Group Finance Director Delivering intelligent protection solutions Stock Code HILS Hill & Smith Holdings PLC

  2. Slide 2: Key messages

    Key messages  A good first half − Strong performance from UK and US operations − Smaller international businesses more challenging − Organic growth in revenue (+3%) and operating profit (+5%)  Continued portfolio development − ATG acquired in February − Investment in expansion of temporary road sa

  3. Slide 3: Underlying Trading Results

    Underlying Trading Results H1 H1 FY FX impact: Revenue +£5.2m 2019 +/- 2018 2018 Operating Profit +£1.0m Constant currency Revenue (£m) 339.5 ↑ 15% 295.4 637.9 growth 13% Constant currency Operating profit* (£m) 40.2 ↑ 16% 34.6 80.1 growth 13% Operating margin* (%) 11.8 ↑ 10bps 11.7 12.6 PBT* (£m) 3

  4. Slide 4: Roads

    Roads H1 H1 Organic Operating 2019 2018 Change £m Revenue profit Revenue (£m) 114.7 87.2 +7% 2018 87.2 8.5 F/X (0.2) - Operating profit (£m) 10.3 8.5 -1% M&A 21.7 1.9 Operating margin 9.0% 9.7% -70bps Organic 6.0 (0.1)  UK 2019 114.7 10.3  Road Investment Strategy (“RIS1”)  Increasing utilisation

  5. Slide 5: Utilities

    Utilities H1 H1 Organic Operating 2019 2018 Change £m Revenue profit 2018 113.0 7.3 Revenue (£m) 126.5 113.0 +3% F/X 3.0 0.2 Operating profit (£m) 9.6 7.3 +17% M&A 7.3 0.8 Operating margin 7.6% 6.5% +110bps Organic 3.2 1.3 2019 126.5 9.6  UK  Overall mixed; cautious investment environment 2019 Rev

  6. Slide 6: Galvanizing

    Galvanizing H1 H1 Organic 2019 2018 Change Operating £m Revenue Profit Revenue (£m) 98.3 95.2 +1% 2018 95.2 18.8 Operating profit (£m) 20.3 18.8 +4% F/X 2.4 0.8 Operating margin 20.7% 19.7% +100bps Organic 0.7 0.7 2019 98.3 20.3  UK: 97k tonnes  1%  Q2 demand affected by slowing UK construction a

  7. Slide 7: Free cash flow and net debt

    Free cash flow and net debt H1 H1 FY £m 2019 2018 2018 Underlying Operating Profit 40.2 34.6 80.1  Working capital outflow £21.8m Depreciation and amortisation 15.3 9.9 19.5 − Reflects seasonality of trading Underlying EBITDA 55.5 44.5 99.6 − Lead indicators ahead of prior year H1 Other non-cash it

  8. Slide 8: New appointments

    New appointments Alan Giddins Hannah Nichols Andrew Beaney Chairman Group CFO MD, Roads & Security Group 1 October 2019 16 September 2019 1 August 2019 Following a thorough selection Hannah joins the Board after 14 years A new senior management role process, Alan will become Chairman with BT Group p

  9. Slide 9: Group structure

    Group structure UTILITIES ROADS & SECURITY GALVANIZING UK USA PIPES UK USA RoW UK USA FRANCE ROADS SECURITY HILS: HY19 9

  10. Slide 10: Key growth opportunities - USA

    Key growth opportunities - USA  GALVANIZING – V&S  Growth in infrastructure spend  Product substitution from paint (e.g. trailer chassis)  Increased footprint – New York site increases capacity  Acquisition opportunities  Focus on customer service to gain market share  ROADS – Hill & Smith In

  11. Slide 11: Key growth opportunities - UK

    Key growth opportunities - UK  SECURITY  Market expected to grow 5-6% per annum  Higher potential growth if threat level increases  Strong pipeline of product development for specialist applications  Develop international export markets  Packaging opportunities – Fences / Bollards / Gates / Co

  12. Slide 12: Highways England: Road Investment Strategy (RIS)

    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

  13. Slide 13: Outlook

    Outlook  UK steady; cautious investment environment UTILITIES  Growth opportunities in USA  Pipe Supports continuing improvements in profitability and returns  Road Investment Strategy underpinning UK demand ROADS & SECURITY  Opportunities for growth in US markets  Short term challenges in Sca

  14. Slide 14: Appendices

    Appendices 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

  15. Slide 15: Segment and geographical analysis

    Segment and geographical analysis Revenue: £339.5m Revenue: £339.5m By segment By end market geography Galvanizing Roads 29% Europe UK 34% 17% Non Gov 34% 42% 58% USA Utilities 39% 37% A well balanced business: Operating Profit: £40.2m products, Operating Profit: £40.2m By segment markets & By plant

  16. Slide 16: Segment analysis

    Segment analysis H1 H1 £m 2019 Organic M&A FX 2018 Utilities • UK mixed but overall positive • Strong growth in US Revenue 126.5 3.2 7.3 3.0 113.0 • Pipe Supports improving returns Underlying operating profit 9.6 1.3 0.8 0.2 7.3 Margin 7.6% 6.5% Roads • Smart motorway programme underpinning UK deman

  17. Slide 17: Growth strategy Outcome

    Growth strategy Outcome  Revenue Growth and Targeted Returns  Mid-single digit organic revenue growth  Increase operating margins; Group range 12% to 15%  ROIC target 20% A strong track record, over  Underlying cash conversion target 90% many years, of profitable growth, cash generation and inc

  18. Slide 18: Margin

    Margin Margin (%) H1 FY H1 H1 Target Target 2019 2018 Range % Range % Infrastructure Products 8.3 7.9 8 – 11 8 – 11 - Utilities 7.6 6.5 7 – 11 7 – 11 - Roads 9.0 9.7 9 – 13 10 – 14 Galvanizing Services 20.7 19.7 19 – 22 19 – 22 Group 11.8 11.7 11 – 14 12 – 15  All divisions within respective ranges

  19. Slide 19: Return on Invested Capital

    Return on Invested Capital 12m to H1 19 12m Group to H1 ROIC% Post Pre before tax IFRS 16 IFRS 16 18 Operating Profit (£m) 85.7 85.0 77.1 Av. Invested Capital (£m) 518.7 486.7 425.4 ROIC % 16.5 17.5 18.1 12m to H1 19 12m Divisional (%) Post Pre to H1 IFRS 16 IFRS 16 18 Utilities 17.3 18.7 16.7 Roads

  20. Slide 20: Foreign exchange sensitivities

    Foreign exchange sensitivities H1 H1 FY 2019 2018 Change 2018 Average rates Euro 1.15 1.14  1% 1.13 Ready reckoner for annual translation impact of US$ 1.29 1.38  7% 1.33 movement in FX rates Sensitivity to +/- Operating Closing rates Revenue 1 cent move in: profit  Euro 1.12 1.13 1% 1.11 Euro +/

  21. Slide 21: Non-underlying items

    Non-underlying items H1 H1 FY 2019 2018 2018 Operating items Business reorganisation costs - (0.3) (0.7) Acquisition costs (0.7) (1.2) (2.2) Amortisation of acquisition intangibles (2.9) (2.0) (4.8) Impairment of acquisition intangibles/other assets (0.5) (0.1) (6.1) Pension past service costs - - (

  22. Slide 22: Availability and usage of debt facilities

    Availability and usage of debt facilities Net Debt (excl IFRS 16) Maturity by Currency 2019 On to 2025 £m Net Debt Facility demand 2023 2024 onwards Committed 194.4 338.0 US $ 29% On demand - 11.3 11.3 0.8 282.0 55.2 £ + other Cash (24.9) - 65% Leases liability 33.6 - 203.1 349.3  Principal revolvi

  23. Slide 23: Delivering intelligent protection solutions

    Half Year Results Six Months Ended 30 June 2015 Derek Muir Group Chief Executive Mark Pegler Group Finance Director Delivering intelligent protection solutions Stock Code HILS Hill & Smith Holdings PLC

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