Hill & Smith Plc · LSE:HILS
Hill & Smith — FY2015 Earnings Presentation
28 slides from Hill & Smith's earnings presentation, Mar 9, 2016
Slide 1: 2015 Preliminary Results
Half Year Results 2015 Preliminary Results Six Months Ended 30 June 2015 9 March 2016 Derek Derek Muir Group Muir Group Chief Chief Executive Executive Mark Pegler Mark Pegler Group Finance Group Director Finance Director Hill & Smith Holdings PLC
Slide 2: Key messages
Key messages Another good year − Record revenue & profitability − Organic revenue growth 4% − Underlying operating margin 12.0%, up 120bps Strategic actions driving growth and returns − Four acquisitions completed in 2015; one since the year end − Pipe Supports restructuring announced Positive
Slide 3: Results summary
Results summary FX impact: - Revenue -ve £0.5m 2015 +/- 2014 - Underlying operating profit +ve £0.9m Revenue (£m) 467.5 3% 454.7 Organic growth 4% Underlying operating profit* (£m) 56.0 14% 49.2 Organic growth 10% Strategic investment and portfolio Underlying operating margin* (%) 12.0 120bps
Slide 4: Segment and geographical analysis
Segment and geographical analysis Revenue: £467.5m Revenue: £467.5m By segment By end market geography Galvanizing Roads 30% 29% USA UK Non-Gov’t 50% 29% 50% Utilities Europe 16% 41% A well balanced business: Underlying Operating Profit: £56.0m products, Underlying Operating Profit: £56.0m By segmen
Slide 5: Utilities
Utilities Organic Operating 2015 2014 Growth £m Revenue Profit 2014 195.2 9.2 Revenue (£m) 193.9 195.2 1% F/X 5.0 0.4 Operating profit (£m) 10.5 9.2 4% Acquisitions 1.4 0.2 Operating margin 5.4% 4.7% 70bps Disposals (9.5) 0.3 Organic 1.8 0.4 Organic growth 2015 193.9 10.5 UK infrastructure spend
Slide 6: Roads
Roads Organic Operating 2015 2014 Growth £m Revenue Profit Revenue (£m) 131.6 127.7 3% 2014 127.7 13.3 F/X (4.2) (0.1) Operating profit (£m) 16.0 13.3 19% Acquisitions 4.8 0.3 Operating margin 12.2% 10.4% 180bps Organic 3.3 2.5 UK (75% of revenue) 2015 131.6 16.0 − Road Investment Strategy progres
Slide 7: Galvanizing
Galvanizing Organic 2015 2014 Growth Operating £m Revenue Profit Revenue (£m) 142.0 131.8 8% 2014 131.8 26.7 Operating profit (£m) 29.5 26.7 7% F/X (1.3) 0.6 Operating margin 20.8% 20.3% 50bps Acquisitions 0.7 0.2 Organic 10.8 2.0 UK 2015 142.0 29.5 − Profits up despite volume reduction; rationali
Slide 8: Foreign exchange sensitivities
Foreign exchange sensitivities 2015 2014 Change Average rates Euro 1.38 1.24 (11%) Ready reckoner for translation impact of movement US$ 1.53 1.65 7% in FX rates Sensitivity to +/- Operating Closing rates Revenue 1 cent move in: profit Euro 1.36 1.28 (6%) Euro +/- £0.4m +/- £35k US$ +/- £0.9m +/- £1
Slide 9: Free cash flow and net debt
Free cash flow and net debt £m 2015 2014 Underlying Operating Profit 56.0 49.2 Underlying cash conversion 100%; 7-year average +90% Depreciation and amortisation 16.4 15.1 Capex 0.9 times depreciation/amortisation Underlying EBITDA 72.4 64.3 − UK galvanizing expansion £1.6m Other non-cash items
Slide 10: Strategic KPI's
Strategic KPI’s Organic revenue growth Return on sales 8.0% 12.5% 12.0% 6.0% 11.5% 4.0% 11.0% 2.0% 10.5% 0.0% 10.0% 2011 2012 2013 2014 2015 9.5% -2.0% 9.0% -4.0% 2011 2012 2013 2014 2015 Driving 5-Yr Average Returns Underlying cash conversion * Return on invested capital 120% 100% 80% 60% 40% 20% 0
Slide 11: Earnings and Dividend
Earnings and Dividend Dividend (p) 2015 2014 Interim dividend per share 7.1p 6.4p 10.9% Final dividend per share 13.6p 11.6p 17.2% Total dividend per share 20.7p 18.0p 15.0% 20.7 Dividend 18.0 16.0 15.0 13 successive years of dividend growth 12.7 13.2 11.5 Central to strategy and TSR ethos
Slide 12: Strategy and Outlook
Strategy and Outlook Derek Muir 2015 Preliminary Results 12
Slide 13: Business Model and Strategy
Business Model and Strategy Organic & Legislative Growth • Managed Motorways / Rail programme / Crossrail • Revenue and margin growth in existing markets through • Flood prevention / AMP6 product development and innovation • Security and anti-terrorism measures • Identify Government legislation that
Slide 14: Key Opportunities for Growth
Key Opportunities for Growth UK Roads UK & US Infrastructure US & UK Galvanizing UK & US driving >90% of profits 2015 Preliminary Results 14
Slide 15: Highways England: Road Investment Strategy ('RIS')
Highways England: Road Investment Strategy (‘RIS’) Temporary Safety Barrier Crash Cushions Permanent Safety Barrier Variable Message Signs £m • 10 SMART Motorway schemes Profile of investment: £15.2bn announced for 2016/2017 Capital renewals • 3 projects currently under construction Taper Signs • Ma
Slide 16: UK Infrastructure Spending
UK Infrastructure Spending Government’s National Infrastructure Plan 2014-2021: £466bn of public and private investment WATER RAIL ENERGY HOUSING AMP5 £22bn CP5 £38bn Renewables Housing AMP6 £44bn Crossrail £6bn Energy from Waste HS2 £50bn Security Fencing Security Fencing / Covers
Slide 17: USA Galvanizing Market Opportunities
USA Galvanizing Market Opportunities Highway Spending Solar Fixing America’s Surface Transportation (FAST) Act • Solar credit was due to expire end 2016 • $305bn over five years to 2020 • Five year extension to Solar Investment Tax Credit (ITC) • First long term bill for 10 years • 25 Gigawatts of a
Slide 18: Overseas Acquisitions
Overseas Acquisitions • Acquisition cost: $3.0m • Acquisition cost: $1.8m • Revenue: $3.5m • Revenue: $1.9m • Manufacturer of Vibration Isolation, Seismic • US leader in the design and manufacture of Restraints, Roof Curbs, Rails and Beams composite bridges • Over 700 installations for commercial ap
Slide 19: UK Acquisitions
UK Acquisitions • Acquisition cost: £0.3m • Acquisition cost: Minimal • Revenue: £2.0m • Revenue: £2.6m • Offers the widest range of high performance • Supplier of bespoke metal fabrications for composite doors for the commercial and public specialist enclosures, control panels and sectors cabinets
Slide 20: UK Acquisitions
UK Acquisitions 5-Yr Improvement in UK Galvanizing 60 Revenue £m 50 40 30 Acquisition cost: £15m 20 10 Revenue: £8.3m - 2011 2012 2013 2014 2015 2015 P/F EBITDA: £2.5m 16 Operating Margin % 12 8 4 Hull, East Yorkshire Corby, Northamptonshire Bath Size: 7m x 1.2m x 3.2m Bath Size: 7.6m x 1.4m x 3.2m
Slide 21: Outlook
Outlook US/UK infrastructure investment strong UTILITIES Pipe Supports restructuring will deliver improved profitability and returns Second year of UK Road Investment Strategy - progressing well ROADS Strong order backlog driving organic revenue growth France remains challenging GALVANIZIN
Slide 22: Appendices
Appendices 22
Slide 23: Business Segments
Business Segments INFRASTRUCTURE GALVANIZING UTILITIES ROADS USA FRANCE UK Interim Results 30 June 2014 2015 Preliminary Results 23
Slide 24: Segment analysis
Segment analysis £m 2015 Organic M&A FX 2014 Utilities Revenue 193.9 1.8 (8.1) 5.0 195.2 Underlying operating profit 10.5 0.4 0.5 0.4 9.2 Margin 5.4% 4.7% Roads Revenue 131.6 3.3 4.8 (4.2) 127.7 Underlying operating profit 16.0 2.5 0.3 (0.1) 13.3 Margin 12.2% 10.4% Galvanizing Revenue 142.0 10.8 0.7
Slide 25: Non-underlying items
Non-underlying items £m 2015 2014 Operating items Business reorganisation costs (0.3) (2.6) Acquisition costs (1.0) (0.1) Impairment of Paterson Amortisation of acquisition intangibles (1.6) (2.1) Group acquired Impairment of acquisition intangibles (15.7) - intangibles reflecting subdued performanc
Slide 26: Return on Invested Capital
Return on Invested Capital Group 2015 2014 ROIC% before tax Operating Profit (£m) 56.0 49.2 20% Av. Invested Capital (£m) 314.8 308.8 ROIC % 17.8 15.9 18% Group Target - 17.5% 16% Group ROIC 14% Divisional (%) 2015 2014 12% Utilities 13.0 10.6 Group pre-tax WACC- 11% 10% Roads 22.1 18.8 Infrastructu
Slide 27: Margin
Margin Margin Target 2015 2014 Range % % % Infrastructure Products 8.1 7.0 8 – 11 - Utilities 5.4 4.7 7 – 11 - Roads 12.2 10.4 9 – 13 Galvanizing Services 20.8 20.3 18 – 21 Group 12.0 10.8 10 – 13 Roads and Galvanizing within range Utilities improving (margin ex Bergen Pipe Supports c.9% i.e. wi
Slide 28: Availability and usage of debt facilities
Availability and usage of debt facilities Maturity Net Debt by Currency On 2015 2017 £m Net Debt Facility demand to 2016 to 2019 Euros 11% Committed 104.4 215.4 0.6 214.8 On demand - 10.2 10.2 US$ 19% £ + other 70% Cash (12.9) - 91.5 225.6 Facilities provide significant headroom − Net debt : EBITD