Hill & Smith Plc · LSE:HILS
Hill & Smith — H1 2020 Earnings Presentation
32 slides from Hill & Smith's earnings presentation, Aug 5, 2020
Slide 1: 2020 Interim Results
2020 Interim Results 5 August 2020 Derek Muir Chief Executive Officer Hannah Nichols Chief Financial Officer Delivering intelligent protection solutions Stock Code HILS
Slide 2: Key messages
Key messages HY20 Results 5 August 2020 ▪ Safety, health and wellbeing of our employees remain our key priority ▪ Resilient H1 performance − Strong Q1 performance; Q2 impacted by COVID-19 related disruption − All divisions remained profitable throughout the period − US businesses delivered organic r
Slide 3: COVID-19 Update
COVID-19 Update HY20 Results 5 August 2020 ▪ Operating a COVID secure environment − Group following all public health and safety guidelines − Social distancing measures have minimal impact on production output ▪ Cost control & cash preservation actions − Businesses acted quickly and decisively to li
Slide 4: Results summary
Results summary HY20 Results 5 August 2020 H1 H1 Reported Organic^ FX 2020 2019 +/- +/- impact Revenue (£m) 315.6 339.5 -7% -10% + £3.1m Operating profit (£m) 26.8 40.2 -33% -35% + £0.6m Operating margin (%) 8.5 11.8 -330bps Profit before tax (£m) 22.8 36.9 -38% -40% Earnings per share (p) 23.1 37.5
Slide 5: H1 2020 at a glance
H1 2020 at a glance HY20 Results 5 August 2020 Revenue by segment: £315.6m Operating Profit by segment: £26.8m ROADS & SECURITY GALVANIZING 16% 27% ROADS & SECURITY 41% GALVANIZING 53% UTILITIES 31% UTILITIES 32% A well balanced business: products, markets and geographies Revenue by end market geogr
Slide 6: Roads & Security
Roads & Security HY20 Results 5 August 2020 H1 H1 Organic Operating 2020 2019* Change £m Revenue Profit H1 2019* 128.9 10.7 Revenue (£m) 128.2 128.9 -9% F/X 0.5 0.1 Operating profit (£m) 4.3 10.7 -59% M&A 10.3 (0.1) Operating margin 3.4% 8.3% Organic (11.5) (6.4) ▪ UK Roads H1 2020 128.2 4.3 − UK Go
Slide 7: Utilities
Utilities HY20 Results 5 August 2020 H1 H1 Organic Operating 2020 2019* Change £m Revenue Profit H1 2019* 112.3 9.2 Revenue (£m) 101.4 112.3 -7% F/X 1.5 0.2 Operating profit (£m) 8.2 9.2 -16% M&A (4.6) 0.3 Operating margin 8.1% 8.2% Organic (7.8) (1.5) ▪ UK H1 2020 101.4 8.2 − Building products busi
Slide 8: Galvanizing
Galvanizing HY20 Results 5 August 2020 H1 H1 Organic Operating 2020 2019 Change £m Revenue Profit H1 2019 98.3 20.3 Revenue (£m) 86.0 98.3 -13% F/X 1.1 0.3 Operating profit (£m) 14.3 20.3 -31% Organic (13.4) (6.3) Operating margin 16.6% 20.7% H1 2020 86.0 14.3 ▪ Overall − H1 trading impacted by COVI
Slide 9: Cash generation and financial position
Cash generation and financial position HY20 Results 5 August 2020 £m H1 2020 H1 2019 FY 2019 ▪ Strong cash generation in period Underlying Operating Profit 26.8 40.2 86.3 − Underlying cash conversion 162% Depreciation and amortisation 16.8 15.3 31.3 Underlying EBITDA 43.6 55.5 117.6 ▪ Working capita
Slide 10: Capital allocation and dividends
Capital allocation and dividends HY20 Results 5 August 2020 Effective deployment of capital to support growth ambitions Progressive Organic Growth Acquisitions Dividend ▪ Allocation of capital to higher ▪ Continued financial capacity for ▪ 2020 Interim dividend: 9.2p per share return markets acquisi
Slide 11: Strategy and outlook
Strategy and outlook HY20 Results 5 August 2020 Derek Muir, Group Chief Executive Officer ▪ Operating a COVID-19 secure environment ▪ Key growth opportunities − UK Road Investment Strategy 2 (RIS 2) − US road infrastructure spend − US Composites ▪ Outlook 11
Slide 12: Operating a COVID-19 secure environment
Operating a COVID-19 secure environment HY20 Results 5 August 2020 ▪ UK and US subsidiary businesses categorised ‘essential’ ▪ Enhanced protocols in all facilities ▪ Compliant with Government guidance on managing the risk of COVID-19: - Risk assessments completed and results shared with employees -
Slide 13: Key growth opportunities
Key growth opportunities HY20 Results 5 August 2020 ▪ ROADS & SECURITY − UK Road Investment Strategy 2 - £27.4bn − Ageing US infrastructure − Collaborative security partnerships − Growth markets in data centres − Strong product development programme ▪ UTILITIES – Creative Composites Group − Market e
Slide 14: UK Government Road Investment Strategy 2 (RIS 2)
UK Government Road Investment Strategy 2 (RIS 2) HY20 Results 5 August 2020 ▪ UK Government commitment to ring-fence English Vehicle Excise Duty for roads spending, announcing National Roads Fund (‘NRF’) of £28.8bn between 2020-2025 ▪ March 2020 Government publications: - Road Investment Strategy 2:
Slide 15: US road infrastructure spend
US road infrastructure spend HY20 Results 5 August 2020 Comparison of Federal-Aid Highway Proposals, FY 2020-FY 2025 Federal $350 ▪ 5-year FAST Act ends September 2020 $319.0 $300 $287.0 ▪ No agreement yet on new bill; likely 1-yr extension $250 $226.0 ▪ Bipartisan support for increase in spending I
Slide 16: Composites – the benefits
Composites – the benefits HY20 Results 5 August 2020 ▪ Corrosion resistant - will not rust, spall or rot ▪ Lightweight - 80% lighter than steel ▪ High strength - greater tensile strength than most grade steels ▪ High dielectric strength - reduction in electrocution hazards ▪ Lower environmental impa
Slide 17: Composites – growth opportunities
Composites – growth opportunities HY20 Results 5 August 2020 Broad range of growth opportunities: ▪ Cooling towers ▪ Access walkways ▪ Waterfront protection ▪ Lightweight vehicles ▪ Utility poles & cross arms 17
Slide 18: Composites case study: fire resistant utility poles
Composites case study: fire resistant utility poles HY20 Results 5 August 2020 The issue: Our solution: ▪ Frequent damage to existing electricity poles caused by ▪ Creative Pultrusions has developed a fire-resistant composite hurricanes and storms in the US pole to State specifications ▪ Fallen pole
Slide 19: Short term outlook (assuming end markets remain open)
Short term outlook (assuming end markets remain open) HY20 Results 5 August 2020 Hill & Smith Holdings PLC ROADS & SECURITY UTILITIES GALVANIZING Pipe UK USA RoW UK USA UK USA France Supports ROADS SECURITY COVID-19 market effect in the near term: Limited/no impact Some impact Significant impact 19
Slide 20: Longer term outlook
Longer term outlook HY20 Results 5 August 2020 ▪ Gradual improvements in UK as market activity resumes UTILITIES ▪ Continued growth opportunities in US, particularly in Composites ▪ Pipe Supports stable; focussing on profitability and returns ▪ 5-year RIS 2 underpins UK demand ROADS & ▪ Growth oppor
Slide 21: Appendices
HY20 Results 5 August 2020 Appendices 21
Slide 22: Growth strategy
Growth strategy HY20 Results 5 August 2020 ▪ Entrepreneurial culture − Agile and entrepreneurial culture in business units − Decentralised management structure − Close to local market conditions; responsive to opportunities ▪ Portfolio Management − Active portfolio management to drive higher returns
Slide 23: Where we operate
Where we operate HY20 Results 5 August 2020 AUSTRALIA: office in Queensland for the SWEDEN: location of ATA, the road safety USA: our V&S galvanizing and utilities plants are development of our wire rope and safety barrier and signage business. situated on the East Coast along with the Bergen barrie
Slide 24: Financial framework
Financial framework HY20 Results 5 August 2020 An organic and acquisitive growth strategy that maintains a strong margin and cash performance Strong cash Capital Progressive generation & allocation to Acquisitions to earnings and sustainable higher growth enhance dividend financial and return growth
Slide 25: Financial targets
Financial targets HY20 Results 5 August 2020 3% - 5% Organic revenue growth 12% - 15% Operating margins 17% - 20% Return on invested capital 90% underlying cash conversion Cash Net debt: EBITDA 1.5 – 2 times 25
Slide 26: Segment analysis
Segment analysis HY20 Results 5 August 2020 H1 H1 £m 2020 Organic M&A FX 2019* Roads & Security Revenue 128.2 (11.5) 10.3 0.5 128.9 Underlying operating profit 4.3 (6.4) (0.1) 0.1 10.7 Margin 3.4% 8.3% Utilities Revenue 101.4 (7.8) (4.6) 1.5 112.3 Underlying operating profit 8.2 (1.5) 0.3 0.2 9.2 Ma
Slide 27: Operating Margin
Operating Margin HY20 Results 5 August 2020 Margin H1 H1 2020 2019* Target % % Range % Roads & Security 3.4 8.3 10 – 14 Utilities 8.1 8.2 7 – 10 Galvanizing Services 16.6 20.7 19 – 22 Group 8.5 11.8 12 – 15 ▪ H1 2020 margin impacted by operational leverage on lower revenues ▪ Significant decline in
Slide 28: Return on Invested Capital
Return on Invested Capital HY20 Results 5 August 2020 Return on Invested Capital 22% 12m to 12m to H1 H1 20% Group 2020 2019 18% Operating Profit (£m) 72.9 85.7 16% 14% Av. Invested Capital (£m) 560.2 518.7 12% ROIC % 13.0 16.5 10% 2014 2015 2016 2017 2018 2019 H1 2020 Group ROIC Group target range
Slide 29: Non-underlying items
Non-underlying items HY20 Results 5 August 2020 H1 H1 £m 2020 2019 Operating items Acquisition costs (0.2) (0.7) Amortisation of acquisition intangibles (3.1) (2.9) Impairment of acquisition intangibles/other assets - (0.5) Gain on disposal of assets held for sale - 0.5 (3.3) (3.6) Financing costs N
Slide 30: Availability and usage of debt facilities
Availability and usage of debt facilities HY20 Results 5 August 2020 Net Debt by currency Maturity (exc. IFRS 16) On 2020 2026 / £m Net Debt Facility demand to 2023 2024 2029 Committed 183.4 341.8 0.9 284.4 56.5 EUR 10% On demand - 14.5 14.5 GBP + other 69% USD Cash (20.5) - 21% Net borrowings 162.9
Slide 31: Foreign exchange sensitivities
Foreign exchange sensitivities HY20 Results 5 August 2020 H1 H1 2020 2019 Change Average rates Euro 1.14 1.15 1% Ready reckoner for translation impact of FX rates movement US$ 1.26 1.29 2% Sensitivity to +/- Operating Revenue 1 cent move in: profit Closing rates Euro +/- £0.6m +/- £40k Euro 1.
Slide 32: Disclaimer
Disclaimer HY20 Results 5 August 2020 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
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