Hill & Smith Plc · LSE:HILS
Hill & Smith — FY2019 Earnings Presentation
39 slides from Hill & Smith's earnings presentation, Mar 4, 2020
Slide 1: 2019 Preliminary Results
2019 Preliminary Results 4 March 2020 Derek Muir Chief Executive Officer Hannah Nichols Chief Financial Officer Delivering intelligent protection solutions Stock Code HILS
Slide 2: Key messages
Key messages FY19 Results 4 March 2020 Results in line with Board expectations 9% revenue growth; 8% operating profit growth Strong performance from UK and US operations Challenges in Scandinavia; action taken to restructure Continued portfolio development Three acquisitions strengthen o
Slide 3: Results summary
Results summary FY19 Results 4 March 2020 FX impact: - Revenue +ve £6.7m 2019 +/- 2018 - Operating profit +ve £1.4m Revenue (£m) 694.7 +9% 637.9 Constant currency growth +8% Operating profit (£m) 86.3 +8% 80.1 Constant currency growth +6% Operating margin (%) 12.4 -20bps 12.6 Challenges in Scandinav
Slide 4: 2019 at a glance
2019 at a glance FY19 Results 4 March 2020 Revenue by segment: £694.7m Operating Profit by segment: £86.3m ROADS GALVANIZING ROADS 26% 28% 35% GALVANIZING 48% UTILITIES UTILITIES 26% 37% A well balanced business: products, markets and geographies Revenue by end market geography: £694.7m Operating Pr
Slide 5: Roads
Roads FY19 Results 4 March 2020 Organic Operating 2019 2018 Growth £m Revenue Profit 2018 208.5 24.2 Revenue (£m) 246.3 208.5 1% F/X (0.3) - Operating profit (£m) 22.3 24.2 -21% M&A 35.4 3.1 Operating margin 9.1% 11.6% -250bps Organic 2.7 (5.0) UK Roads 2019 246.3 22.3 High level of demand for t
Slide 6: Utilities
Utilities FY19 Results 4 March 2020 Organic Operating 2019 2018 Growth £m Revenue Profit 2018 239.0 18.3 Revenue (£m) 251.3 239.0 1% F/X 4.5 0.5 Operating profit (£m) 22.2 18.3 9% M&A 6.2 1.7 Operating margin 8.8% 7.7% +110bps Organic 1.6 1.7 UK 2019 251.3 22.2 Overall mixed performance; cautiou
Slide 7: Galvanizing
Galvanizing FY19 Results 4 March 2020 Organic Operating 2019 2018 Growth £m Revenue Profit 2018 190.4 37.6 Revenue (£m) 197.1 190.4 2% F/X 2.5 0.9 Operating profit (£m) 41.8 37.6 9% Organic 4.2 3.3 Operating margin 21.2% 19.7% +150bps 2019 197.1 41.8 Overall Good organic profit growth 2019 Reven
Slide 8: Free cash flow and net debt
Free cash flow and net debt FY19 Results 4 March 2020 £m 2019 2018 Underlying Operating Profit 86.3 80.1 Depreciation and amortisation 31.3 19.5 Working capital outflow £12.9m Working capital to annualised sales 17.4% (2018: 17%) Underlying EBITDA 117.6 99.6 Outflow largely due to timing of ke
Slide 9: Financial targets
Financial targets FY19 Results 4 March 2020 3% - 5% Organic revenue growth 12% - 15% Operating margins 17% - 20% Return on invested capital (inc. IFRS 16) 90% underlying cash conversion Cash Net debt: EBITDA 1.5 – 2 times 9
Slide 10: 2019 Financial target performance
2019 Financial target performance FY19 Results 4 March 2020 Organic revenue growth Operating margin Reported revenue Organic revenue growth Target growth range EBIT Operating margin Target margin range Underlying cash conversion* Return on invested capital 120% 22.0% 100% 20.0% 80% 18.0% 60% 16.0% 4
Slide 11: Earnings and Dividend
Earnings and Dividend FY19 Results 4 March 2020 Earnings per share (p) Dividend per share (p) Strategy delivers sustainable long-term growth Dividend per share 2019 2018 Efficient conversion of profit to cash enables progressive dividend policy Interim 10.6p 10.0p 17 years of uninterrupted div
Slide 12: Strategy and outlook
Strategy and outlook FY19 Results 4 March 2020 Derek Muir, Group Chief Executive Officer Scandinavia Infrastructure spend RIS 2 HS2 Key US drivers Acquisition update Roads & Security division Outlook 12
Slide 13: Scandinavia: ATA
Scandinavia: ATA FY19 Results 4 March 2020 Operational issues identified in H1 Aggressive new competitor (breakaway from Saferoad) Competitive pricing landscape Rapid cost base growth from new hire depots Delayed contracts Corrective action taken in H2 New leadership team Legacy low
Slide 14: UK Government Road Investment Strategy (RIS2)
UK Government Road Investment Strategy 2 (RIS2) FY19 Results 4 March 2020 Regional Delivery Partnership £8.7bn Smart Motorway Alliance £4.5bn Total Lot Regions value Winners 3 contractors to be announced 1 South-West|Midlands £200m Alun-Griffiths-Farrans JV | Osborne 2 South-East|East of England £
Slide 15: Smart motorways
Smart motorways FY19 Results 4 March 2020 Potential schemes for RIS2 M3 J9 - J14 (all lane running) Smart motorways network M6 J21a - J26 M25 J10 - J16 (upgrade to through junction running) M40 J16 - M42 J3a (upgrade to all lane running) M42 J3 - J4 (all lane running) M56 J6 - J8 (all la
Slide 16: RIS2 Regional Delivery Partnerships potential – green bridges
RIS2 Regional Delivery Partnerships potential – green bridges FY19 Results 4 March 2020 Increase in requirement for green bridges Important part of sustainability of future transport projects Joining up habitats disturbed by new roads Reduces visual environmental impact 16
Slide 17: RIS Potential - lighting, parapets, signs and pre-cast concrete
RIS 2 Potential - lighting, parapets, signs and pre-cast concrete FY19 Results 4 March 2020 Precast concrete central reserve Promotes off-site build Speeds up installation Passive Safety Signs and Lighting Columns Complex parapets on junction improvements 17
Slide 18: HS2 - potential
HS2 - potential FY19 Results 4 March 2020 Opportunities for: Temporary barriers BEBO arches Noise barrier Security fencing HVM bollards Galvanized overhead masts Access platforms (train depots) Bridge parapets Vehicle restraint systems 18
Slide 19: US Roads
US Roads FY19 Results 4 March 2020 ARTBA : American Road & Transportation Builders Association US transportation construction market forecast 2020 US transportation infrastructure market expected to grow by 5% in 2020 Increased transportation investment from all levels of Government – Federal, S
Slide 20: US Composites
US Composites FY19 Results 4 March 2020 Strong backlog for: Cooling towers Access walkways Refrigerated rail car floors Rail platforms Waterfront projects Utility poles & cross arms 20
Slide 21: US Power transmission
US Power transmission FY19 Results 4 March 2020 Power transmission investment strong Upgrades to ageing network New substations for solar connections Market on extended lead times Record backlog entering 2020 21
Slide 22: US Galvanizing
US Galvanizing FY19 Results 4 March 2020 New plant – Owego, New York 20,000 tonne capacity Greenfield to completion 7 months Operational January 2020 Projects transferred from New Jersey Uptake from new local customers encouraging 22
Slide 23: 2019 Acquisitions: Parking Facilities Ltd
2019 Acquisitions FY19 Results 4 March 2020 Parking Facilities Ltd Tamworth, West Midlands Acquired: 27 September 2019 Acquisition cost: £14.0m Annual Revenue: c.£12.5m Parking Facilities specialises in the design, manufacture and supply of a market-leading range of parking and access control produc
Slide 24: 2019 Acquisitions: Signpost Solutions Ltd
2019 Acquisitions FY19 Results 4 March 2020 Signpost Solutions Ltd Tipton, West Midlands Acquired: 3 December 2019 Acquisition cost: £6.4m Annual Revenue: c. £9m Signpost Solutions was acquired by Mallatite, our existing signage and lighting column business. Signpost Solutions operates from two site
Slide 25: HS Roads
HS Roads FY19 Results 4 March 2020 ROADS Strategic Business Development UK USA RoW H&S Ltd Asset VRS Mallatite VMS Varley & H&S Inc ATA Conimast H&S Pty Group Gulliver WAPCO (Sweden) (France) (Australia) Barrier Temporary Lighting barrier columns Strategic Bridge Zoneguard Barrier Lighting Zoneguard
Slide 26: HS Security
HS Security FY19 Results 4 March 2020 Bristorm Barkers ATG Access Technocover Hardstaff Parking Facilities Wire Rope Stronguard HVM Kiosks National Barrier Asset Gates Bollards Fencing Bollards Secure Covers Concrete Blocks Barriers Gates Gates Blockers Grills / Cabinets Zoneguard Blockers 26
Slide 27: Roads & Security financials
Roads & Security financials FY19 Results 4 March 2020 2019 Current structure Operating Operating Target margin £m Revenue profit margin range % Roads 246.3 22.3 8.8% 10 - 14 Utilities 251.3 22.2 9.1% 7 - 10 Galvanizing 197.1 41.8 21.2% 19 - 22 Group 694.7 86.3 12 - 15 2019 New structure Operating Op
Slide 28: Outlook
Outlook FY19 Results 4 March 2020 UK: growing optimism for infrastructure spend UTILITIES US: growth opportunities in both composites and power transmission Pipe Supports: good order book for 2020 RIS 2 underpins UK demand; short-term uncertainty on timing of schemes ROADS & Growth opportu
Slide 29: Appendices
FY19 Results 4 March 2020 Appendices 29
Slide 30: Growth strategy
Growth strategy FY19 Results 4 March 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 31: Where we operate
Where we operate FY19 Results 4 March 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 barrier
Slide 32: Financial framework
Financial framework FY19 Results 4 March 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 33: Segment analysis
Segment analysis FY19 Results 4 March 2020 £m 2019 Organic M&A FX 2018 Roads Revenue 246.3 2.7 35.4 (0.3) 208.5 Underlying operating profit 22.3 (5.0) 3.1 - 24.2 Margin 9.1% 11.6% Utilities Revenue 251.3 1.6 6.2 4.5 239.0 Underlying operating profit 22.2 1.7 1.7 (0.5) 18.3 Margin 8.8% 7.7% Galvanizi
Slide 34: Margin
Margin FY19 Results 4 March 2020 Margin 2019 2018 Target % % Range % Utilities 8.8 7.7 7 – 10 Roads 9.1 11.6 10 – 14 Galvanizing Services 21.2 19.7 19 – 22 Group 12.4 12.6 12 – 15 Margin within Group target range Further progress in Utilities Roads impacted by Scandinavia; expect within range
Slide 35: Return on Invested Capital
Return on Invested Capital FY19 Results 4 March 2020 ROIC 22.0% 20.0% Group 2019* 2018 18.0% Operating Profit (£m) 86.3 80.1 16.0% Av. Invested Capital (£m) 541.7 446.6 14.0% ROIC % 15.9 17.9 12.0% *2019 average invested capital increased on adoption of IFRS 16 - 10.0% ROIC impact of 90bps 2014 2015
Slide 36: Non-underlying items
Non-underlying items FY19 Results 4 March 2020 £m 2019 2018 Operating items Business reorganisation costs (1.9) (0.7) Acquisition costs (1.8) (2.2) Amortisation of acquisition intangibles (6.2) (4.8) Scandinavia Impairment of acquisition intangibles/other assets (7.0) (6.1) Loss on sale of Weholite
Slide 37: Availability and usage of debt facilities
Availability and usage of debt facilities FY19 Results 4 March 2020 Net Debt by Currency Maturity (Exc. IFRS 16) On 2020 2026 / £m Net Debt Facility demand to 2023 2024 2029 EUR Committed 205.4 330.9 1.6 276.3 53.0 10% On demand - 13.7 13.7 GBP + other 63% USD Cash and other (30.1) - 27% IFRS 16 40.
Slide 38: Foreign exchange sensitivities
Foreign exchange sensitivities FY19 Results 4 March 2020 2019 2018 Change Average rates Euro 1.14 1.13 1% Ready reckoner for translation impact of FX rates movement US$ 1.28 1.33 4% Sensitivity to +/- Operating Revenue 1 cent move in: profit Closing rates Euro +/- £0.6m +/- £50k Euro 1.18 1.11
Slide 39: Disclaimer
Disclaimer FY19 Results 4 March 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 m