Hill & Smith Plc · LSE:HILS
Hill & Smith — H1 2024 Earnings Presentation
26 slides from Hill & Smith's earnings presentation, Aug 8, 2024
Slide 1: H1 2024 Interim Results
H1 2024 INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024 8 August 2024
Slide 2: Highlights
HIGHLIGHTS Strong H1 trading performance • Revenue +2% and operating profit +12% on a constant currency basis • Operating margin +130 bps to 16.2% • Continuing strong US infrastructure demand offsetting more challenging UK market backdrop Positive momentum on M&A • Three complementary acquisitions c
Slide 3: H1 2024 Results
H1 2024 RESULTS Reported Constant Currency Organic Constant 2024 2023 +/- +/- Currency +/- Revenue £422.7m £420.8m +0.4% +2% -3% Operating profit £68.4m £62.5m +9% +12% +4% Operating margin 16.2% 14.9% +130bps Profit before tax £63.2m £57.2m +10% Earnings per share 58.3p 53.6p +9% Dividend per share
Slide 4: Group Overview
GROUP OVERVIEW By geography 3% 3% 20% ▪ US OPERATING 38% REVENUE ▪ UK PROFIT £422.7m 59% £68.4m ▪ Rest of World 77% By division 9% 28% ▪ Engineered Solutions OPERATING REVENUE 49% PROFIT £422.7m ▪ Galvanizing 36% £68.4m 55% Services 23% ▪ Roads & Security 2024 INTERIM RESULTS 4
Slide 5: Engineered Solutions
ENGINEERED SOLUTIONS Constant By geography 2024 2023 Currency OCC Revenue (£m) 205.0 181.7 +15% +3% 6% US +5% OCC Operating profit (£m) 37.6 30.9 +25% +10% 19% UK -13% OCC Operating margin 18.3% 17.0% REVENUE £205.0m Headlines India +107% OCC • Strong performance driven by US volume growth and contr
Slide 6: Galvanizing Services
GALVANIZING SERVICES Constant By geography 2024 2023 Currency OCC Revenue (£m) 99.0 99.6 +1% - Operating profit (£m) 24.7 22.6 +11% +10% US +5% OCC Operating margin 24.9% 22.7% 42% REVENUE £99.0m 58% UK -7% OCC Headlines • Strong performance supported by US volume growth • Operating margin +220bps d
Slide 7: Roads & Security
ROADS & SECURITY Constant By geography 2024 2023 Currency OCC Revenue (£m) 118.7 139.5 -14% -13% 1% UK Operating profit (£m) 6.1 9.0 -32% -32% Roads -8% OCC 31% Security -5% OCC Operating margin 5.1% 6.5% US -23% OCC REVENUE Headlines £118.7m • YoY decline due to expected lower demand in US solar li
Slide 8: Cash Generation and Financial Position
CASH GENERATION AND FINANCIAL POSITION Strong cash conversion £m H1 2024 H1 2023 Underlying operating profit 68.4 62.5 • 83% cash conversion Depreciation and amortisation 16.0 15.1 • Working capital outflow in line with usual seasonality Underlying EBITDA 84.4 77.6 • Free cash flow £38.7m Working ca
Slide 9: Financial Framework Through the Cycle
FINANCIAL FRAMEWORK THROUGH THE CYCLE FY FY H1 FRAMEWORK 2022 2023 2024 ORGANIC REVENUE GROWTH 5-7% 14% 5% -3% TOTAL REVENUE GROWTH 10%+ 17% 13% 0.4% OPERATING PROFIT MARGIN 15% 13.3% 14.8% 16.2% RETURN ON INVESTED CAPITAL 18%+ 19.2% 22.0% 22.5% CASH CONVERSION 80%+ 51% 115% 83% COVENANT LEVERAGE 1-
Slide 10: US End Markets
US END MARKETS ACCELERATING LONG TERM SUSTAINABLE GROWTH Hill & Smith is exceptionally well placed Oil, Gas, to benefit from long-term, multi-year US Chemicals & Energy Other infrastructure expansion 2% 4% Transportation Electrical Grid • 66% of US revenue (c.40% of Group) 6% Infrastructure directly
Slide 11: Electrical Grid Infrastructure
ELECTRICAL GRID INFRASTRUCTURE LONG TERM, MULTI-YEAR INVESTMENT Growth Drivers Galvanizing structural steel Ageing US infrastructure US H1 Government investment – IIJA & IRA FRP composite utility REVENUE poles £63m Steel structures for transmission and distribution Increasing demand for electricity
Slide 12: Roads & Bridges
ROADS & BRIDGES SIGNIFICANT INVESTMENT COMMITTED Growth Drivers The Paterson Group Engineered support systems FRP composite for bridges Ageing US infrastructure and bridge decks US H1 Temporary barrier and Solar lighting for road applications REVENUE traffic management Government investment – IIJA £
Slide 13: Industrial Infrastructure
INDUSTRIAL INFRASTRUCTURE SIGNIFICANT INVESTMENT IN TECHNOLOGY AND MANUFACTURING Growth Drivers Technology change Galvanizing structural steel US H1 REVENUE Industrial onshoring £41m FRP products and cooling towers The Paterson Group Engineered supports and Government investment – CHIPS Act hangers
Slide 14: M&A Update
M&A UPDATE SUCCESSFULLY ONBOARDED, TRADING AHEAD OF EXPECTATIONS • Acquired in January 2024: $6.3m (6.3x EBIT) • Acquired in March 2024: $8.3m (5.2x EBIT) • Supplies structural steel products and services into • Manufactures stainless steel pipe supports, expansion high growth transmission and distr
Slide 15: M&A Update: Trident Industries
M&A UPDATE: TRIDENT INDUSTRIES ACQUIRED JULY 2024 Strategic rationale • Designer and supplier of highly resilient, single and multi-layer composite utility poles • Based in Greater St Louis, Illinois, with a long-term outsourced manufacturing relationship with Enduro Composites • Accelerates our str
Slide 16: 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 17: Positive Outlook
POSITIVE OUTLOOK CONFIDENCE IN FULL YEAR PROGRESS Short term • Expect demand in US businesses to remain strong • UK outlook remains challenging, some recovery expected in 2025 • FY24 operating profit in line with recently upgraded market expectations, with an even weighting to the year’s performance
Slide 18: Appendices
APPENDICES 2024 INTERIM RESULTS 18
Slide 19: 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 M&A ENHANCES GROWTH infrastructure MA
Slide 20: Sustainability
SUSTAINABILITY A STRUCTURAL GROWTH DRIVER Talent and engagement PROTECTING THE WORLD • Introduction of regional Group President structure to FOCUS AREAS: enable a closer focus on growth opportunities • Greenhouse gas emissions and • Launch of high potential programme, a first for the energy efficien
Slide 21: Modelling Guidance
2024 MODELLING GUIDANCE Capex Interest2 c.£30m c.£10m Maintenance spend c.£15m Cash conversion H1/H2 weighting c.80%+ FY24 operating profit expected to be evenly weighted prior to acquisition Effective tax rate1 Translation impact of c.25.5% FX rate movements +/- FY FY 1 cent move in: Revenue Operat
Slide 22: Divisional Analysis
DIVISIONAL ANALYSIS £m H1 2024 Organic M&A FX H1 2023 Engineered Solutions Revenue 205.0 5.6 21.1 (3.4) 181.7 Underlying operating profit 37.6 2.9 4.6 (0.8) 30.9 Margin 18.3% 17.0% Galvanizing Services Revenue 99.0 (0.4) 1.1 (1.3) 99.6 Underlying operating profit 24.7 2.2 0.3 (0.4) 22.6 Margin 24.9%
Slide 23: Financial Capacity
FINANCIAL CAPACITY FACILITIES AND USAGE Principal debt facilities £m Net debt Facility • Revolving credit facility: £250m maturing H2 2027 Committed 109.0 307.7 • Senior notes: $70m unsecured notes mature 2026/29 On demand - 6.7 • c.50% of drawn debt at period end subject to fixed Cash (55.8) - inte
Slide 24: Non-underlying Items
NON-UNDERLYING ITEMS £m H1 2024 H1 2023 Business reorganisation costs (net) - 0.7 Expenses relating to acquisitions and disposals (1.1) (2.2) Amortisation of acquisition related intangibles (4.3) (4.3) Loss on disposal of subsidiaries - (3.2) (5.4) (9.0) Cash in year (net) (0.6) 1.7 Future cash (0.5
Slide 25: 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 26: 2024 Interim Results
VAS \\ NS Hill & Smith PLC 2024 INTERIM RESU