Hill & Smith Plc · LSE:HILS
Hill & Smith — FY2023 Earnings Presentation
24 slides from Hill & Smith's earnings presentation, Mar 12, 2024
Slide 1: Preliminary Results for the year ended 31 December 2023
FY 2023 PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023 12 March 2024
Slide 2: Highlights
HIGHLIGHTS Record trading performance • 14% revenue and 26% profit growth at constant currency • Strong momentum across US businesses, representing 76% of profits • Operating margin +150bps to 14.8% Positive momentum on M&A • £48m invested in growth and margin accretive acquisitions in 2023 o Q1 202
Slide 3: 2023 Results
2023 RESULTS Reported Constant Currency Organic Constant CONTINUING OPERATIONS 2023 2022 +/- +/- Currency +/- Revenue £829.8m £732.1m +13% +14% +5% Operating profit £122.5m £97.1m +26% +26% +12% Operating margin 14.8% 13.3% +150 bps Profit before tax £111.9m £87.9m +27% Earnings per share 105.4p 85.
Slide 4: Group Overview
GROUP OVERVIEW By geography 3% 4% 20% US OPERATING 41% REVENUE UK PROFIT £829.8m 56% £122.5m Rest of World 76% By division 10% 24% 32% Engineered 37% Solutions OPERATING REVENUE PROFIT £829.8m Galvanizing £122.5m Services 53% Roads & 44% Security 2023 FULL YEAR RESULTS 4
Slide 5: Engineered Solutions
ENGINEERED SOLUTIONS Constant By geography 2023 2022 Currency OCC Revenue (£m) 367.0 289.9 +27% +15% 5% US +20% OCC Operating profit (£m) 64.4 35.0 +84% +69% 24% UK -6% OCC Operating margin 17.5% 12.1% REVENUE £367.0m India +118% OCC Highlights 71% • Standout performance driven by buoyant demand in
Slide 6: Galvanizing Services
GALVANIZING SERVICES Constant By geography 2023 2022 Currency OCC Revenue (£m) 196.7 180.7 +9% +5% Operating profit (£m) 45.7 44.0 +4% - US +9% OCC Operating margin 23.2% 24.3% 43% REVENUE £196.7m 57% UK -1% OCC Highlights • Robust performance supported by strong US volume growth • Division continue
Slide 7: Roads & Security
ROADS & SECURITY Constant By geography 2023 2022 Currency OCC Revenue (£m) 266.1 261.5 +2% -5% 2% Operating profit (£m) 12.4 18.1 -31% -71% UK Roads -3% OCC 33% Operating margin 4.7% 6.9% Security -6% OCC REVENUE US -10% OCC £266.1m Highlights • Strong performance in National Signal 65% RoW +11% OCC
Slide 8: Cash Generation and Financial Position
CASH GENERATION AND FINANCIAL POSITION Strong cash conversion £m 2023 2022 Total Group* operating profit 122.5 103.9 • Focus on working capital efficiency, lower raw material costs Depreciation and amortisation 30.2 30.0 • Capital investment to maintain and grow: £31.8m (gross) Underlying EBITDA 152
Slide 9: Sustainability
SUSTAINABILITY A STRUCTURAL GROWTH DRIVER Our commitment to Net Zero PROTECTING THE WORLD • Successful baseline and validation of Scope 3 emissions FOCUS AREAS: • Near and long term SBTi targets approved • Greenhouse gas emissions and • Commitment to be Net Zero across value chain by 2050, energy ef
Slide 10: Financial Framework
FINANCIAL FRAMEWORK THROUGH THE CYCLE FRAMEWORK FY 2023 FY 2022 ORGANIC REVENUE GROWTH 5-7% 5 5% 5 14% 5 TOTAL REVENUE GROWTH 10%+ 13% 17% OPERATING PROFIT MARGIN 15% 14.8% 13.3% RETURN ON INVESTED CAPITAL 18%+ 22.0% 19.2% CASH CONVERSION 80%+ 115% 51% COVENANT LEVERAGE 1-2x 0.4x 0.7x 2023 FULL YEAR
Slide 11: M&A Update: 2023 Acquisitions
M&A UPDATE 2023 ACQUISITIONS PERFORMING WELL Enduro Composites United Fiberglass Korns Galvanizing • Acquired in February 2023: $35m • Acquired in November 2023: $14m • Acquired in March 2023: $11m • Market leader in the design and • Market leader in the design and • Expands our offering in spin man
Slide 12: M&A Update: 2024 Acquisitions to Date
M&A UPDATE 2024 ACQUISITIONS TO DATE Capital Steel Service FM Stainless • Acquired in January 2024: $6.3m (6.3x EBIT) • Acquired in March 2024: $8.3m (5.2x EBIT) • Supplies structural steel products and • Manufactures stainless steel pipe supports, services, principally into high growth expansion an
Slide 13: V&S Utilities - Case Study
V&S UTILITIES - CASE STUDY A FAST-GROWING PART OF THE GROUP What we do Engineered Solutions 2023 revenue V&S Utilities fabricates and supplies structural steel and component packages for US high voltage electrical substations and transmission & distribution lines, operating from four locations in th
Slide 14: V&S Utilities - Case Study: Significant M&A Opportunities
V&S UTILITIES - CASE STUDY SIGNIFICANT M&A OPPORTUNITIES Burton, OH Canton, OH Trenton, NJ Muskogee, OK Site locations 2023 FULL YEAR RESULTS 14
Slide 15: Investment Case
INVESTMENT CASE DELIVERING LONG TERM STAKEHOLDER VALUE • Structural growth underpinned by the need for infrastructure investment in our core markets • Market leader, with a strong track record, in attractive niches with high barriers to entry • Sustainability at the core of our business model • Entr
Slide 16: Positive Outlook
POSITIVE OUTLOOK CONFIDENT OF MAKING FURTHER PROGRESS Short term • Well positioned in infrastructure markets with attractive, structural growth drivers • Weighted towards faster growing US end markets, which accounted for 76% of Group operating profit in 2023 • 2024 to be modestly second half weight
Slide 17: Appendices
APPENDICES 2023 FULL YEAR RESULTS 17
Slide 18: Modelling Guidance
2024 MODELLING GUIDANCE Capex Interest2 c.£35m c.£10m Maintenance spend c.£15m Cash conversion H1/H2 weighting c.80%+ Profit expected to be modestly H2 weighted in line with historic norms Effective tax rate1 Translation impact of c.25.5% FX rate movements +/- FY FY 1 cent move in: Revenue Operating
Slide 19: Divisional Analysis
DIVISIONAL ANALYSIS CONTINUING OPERATIONS £m 2023 Organic M&A FX 2022 Engineered Solutions Revenue 367.0 42.4 35.1 (0.4) 289.9 Underlying operating profit 64.4 24.3 5.1 - 35.0 Margin 17.5% 12.1% Galvanizing Services Revenue 196.7 8.2 7.8 - 180.7 Underlying operating profit 45.7 0.2 1.5 - 44.0 Margin
Slide 20: Our Strategy
OUR STRATEGY WHY? WHERE? HOW? ORGANIC GROWTH WHAT? NICHE MARKETS • Autonomous operating model brings Creating • High barriers to entry • Moderate competition • Higher growth and margins agility and proximity to market • Premium on talent • Innovation sustainable infrastructure MACRO DRIVERS • Increa
Slide 21: Financial Capacity
FINANCIAL CAPACITY FACILITIES AND USAGE Principal debt facilities £m Net debt Facility Committed 101.1 307.3 • Revolving credit facility: £250m maturing H2 2027 following one-year extension agreed during the year On demand - 6.6 • Senior notes: $70m unsecured notes mature 2026/29 Cash (34.4) - • c.5
Slide 22: Non-Underlying Items
NON-UNDERLYING ITEMS CONTINUING OPERATIONS £m 2023 2022 Business reorganisation costs (net) (0.2) (2.9) Expenses relating to acquisitions and disposals (5.3) (2.3) Amortisation of acquisition related intangibles (8.4) (6.0) Impairment of goodwill/other assets (0.6) (6.4) Loss on disposal of subsidia
Slide 23: 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 publication. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a numbe
Slide 24: 2023 Full Year Results
2023 FULL YEAR RESULTS 24