Hill & Smith Plc · LSE:HILS
Hill & Smith — H1 2018 Earnings Presentation
29 slides from Hill & Smith's earnings presentation, Aug 8, 2018
Slide 1: 2018 Interim Results
2018 Interim Results Half Year Results Six Months Ended 30 June 2015 8 August 2018 Derek Muir Group Chief Executive Mark DerekPegler GroupChief Muir Group Finance Director Executive Mark Pegler Group Finance Director Hill & Smith Holdings PLC
Slide 2: Key messages
Key messages Disappointing first half − UK below expectations − International businesses performing well, particularly US − Organically revenues similar to prior year (at constant currency) − Operating margin impacted by commodity price volatility Active Portfolio Management − Four acquisitions
Slide 3: Underlying Trading Results
Underlying Trading Results H1 H1 FY FX impact: Revenue -£6.7m 2018 +/- 2017 2017 Operating Profit -£1.5m Constant currency growth Revenue (£m) 295.4 +1% 291.8 585.1 +4% Constant currency decline Operating profit* (£m) 34.6 -11% 38.8 81.3 7% Input cost volatility Operating margin* (%) 11.7 -160bps 13
Slide 4: Utilities
Utilities H1 H1 Organic Operating 2018 2017 Change £m Revenue Profit 2017 107.1 7.6 Revenue (£m) 113.0 107.1 +4% F/X (3.6) (0.4) Operating profit (£m) 7.3 7.6 -3% M&A 5.6 0.3 Operating margin 6.5% 7.1% -60bps Organic 3.9 (0.2) 2018 113.0 7.3 UK Q1 weather impacted; Q2 stronger Mixed performanc
Slide 5: Roads
Roads H1 H1 Organic Operating 2018 2017 Change £m Revenue Profit Revenue (£m) 87.2 93.8 -11% 2017 93.8 10.2 Operating profit (£m) 8.5 10.2 -21% F/X (0.8) (0.1) M&A 4.7 0.5 Operating margin 9.7% 10.9% -120bps Organic (10.5) (2.1) UK 58% of revenue (2017: 68%) 2018 87.2 8.5 Some delays to Smart mo
Slide 6: Galvanizing
Galvanizing H1 H1 Organic 2018 2017 Change Operating £m Revenue Profit Revenue (£m) 95.2 90.9 +7% 2017 90.9 21.0 Operating profit (£m) 18.8 21.0 -6% F/X (2.3) (1.0) Organic 6.6 (1.2) Operating margin 19.7% 23.1% -340bps 2018 95.2 18.8 Overall − Profitability & margin measured against record PY com
Slide 7: Free cash flow and net debt
Free cash flow and net debt H1 H1 FY £m 2018 2017 2017 Working capital outflow £22.3m Underlying Operating Profit 34.6 38.8 81.3 − H1 outflow reflective of seasonal trading Depreciation and amortisation 9.9 9.6 19.2 patterns/organic growth Underlying EBITDA 44.5 48.4 100.5 − Inventory +£7.2m Other
Slide 8: Highways England: Road Investment Strategy (‘RIS’)
Highways England: Road Investment Strategy (‘RIS’) Temporary Safety Barrier Crash Cushions Permanent Safety Barrier Variable Message Signs ROTTM Sign £m 4,000 Major improvement schemes Profile of investment £15.2bn Scheme 2017/18 Plan 2018/19 Plan Notese 3,500 Source: Highways England Strategic Busi
Slide 9: UK Infrastructure
UK Infrastructure Offshore wind - landing platforms CP6 – 2019 to 2024 expected spend £47bn Biogas anaerobic digestion HS2 construction now H2 19 Energy from Waste Composite platform extensions Hinkley Point - nuclear New depots for new rolling stock Security upgrade on electrifica
Slide 10: Galvanizing - USA
Galvanizing - USA Bridge replacements in Puerto Rico following Hurricane Maria HVM ballistic products Investment in energy/chemical plants OEM and industrial markets Committed to greenfield development of a new plant (operational mid 2019) HILS: HY18 10
Slide 11: Composites - USA
Composites - USA 2017 acquisitions fully integrated Strong backlog for: • Waterfront projects • Bridges • Sewage treatment plants • Cooling towers HILS: HY18 11
Slide 12: Utilities - USA
Utilities - USA Power transmission investment strong Upgrades to ageing network New substations for solar connections Market on extended lead times Record backlog for H2 18 HILS: HY18 12
Slide 13: 2018 Acquisitions
2018 Acquisitions Acquired 1 January 2018 Acquired 28 March 2018 Acquired 27 April 2018 Supplying road signs and ancillary products into A Swedish traffic management business, Design, supply and install GRP products to the UK contractors, D Gibson has been absorbed into Signalvakter has been integra
Slide 14: 2018 Acquisitions
2018 Acquisitions Work Area Protection Corporation (“WAPCO”) Acquired 9 May 2018 Acquisition cost: $42.0m Annual Revenue: $47.7m St. Charles, IL New Castle, DE (Traffic Cones / Channelizer Drums) (Intelligent Transportation Systems) A leading provider of innovative traffic safety solutions. WAPCO de
Slide 15: Work Area Protection Corporation (“WAPCO”)
Work Area Protection Corporation (“WAPCO”) Message ITS Boards 13% 20% Channelizer Drums 16% Attenuators 24% Traffic Cones 20% HILS: HY18 15
Slide 16: Outlook
Outlook US infrastructure investment remains strong UTILITIES UK improved order book for H2 UK Road Investment Strategy (‘RIS1’/’RIS2’) underpins investment ROADS Organic growth opportunities from International businesses US benefitting from increased infrastructure spend GALVANIZING Sta
Slide 17: 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 approval. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of
Slide 18: Appendices
Appendices hs HILS: HY18 18
Slide 19: Business Segments
Business Segments INFRASTRUCTURE GALVANIZING UTILITIES ROADS USA FRANCE UK Interim Results 30 June 2014 HILS: HY18 19
Slide 20: Segment and geographical analysis
Segment and geographical analysis Revenue: £295.4m Revenue: £295.4m By segment By end market geography Roads Galvanizing 30% 32% Europe UK Non Gov 55% 45% Utilities 38% A well balanced business: Operating Profit: £34.6m products, Operating Profit: £34.6m By segment markets & By plant location geogra
Slide 21: Segment analysis
Segment analysis H1 H1 £m 2018 Organic M&A FX 2017 Utilities • UK mixed, weather impacted Q1 • Strong growth in US Revenue 113.0 3.9 5.6 (3.6) 107.1 • Positive Pipe Supports market Underlying operating profit 7.3 (0.2) 0.3 (0.4) 7.6 Margin 6.5% 7.1% Roads • Some delays in Smart motorway programme •
Slide 22: Margin
Margin Margin (%) H1 FY H1 H1 Target Target 2018 2017 Range % Range % Infrastructure Products 7.9 8.9 8 – 11 8 – 11 - Utilities 6.5 7.1 7 – 11 7 – 11 - Roads 9.7 10.9 9 – 13 10 – 14 Galvanizing Services 19.7 23.1 19 – 22 19 – 22 Group 11.7 13.3 11 – 14 12 – 15 Raw material input cost volatility im
Slide 23: Return on Invested Capital
Return on Invested Capital 12m to 12m to Group H1 18 H1 17 ROIC% Operating Profit (£m) 77.1 77.4 before tax Av. Invested Capital (£m) 425.4 390.2 ROIC % 18.1 19.8 12m to 12m to Divisional (%) H1 18 H1 17 Utilities 16.7 17.3 Roads 17.7 20.4 Infrastructure Products 17.2 19.0 Galvanizing 19.1 20.7 HILS
Slide 24: Foreign exchange sensitivities
Foreign exchange sensitivities H1 H1 FY 2018 2017 Change 2017 Average rates Euro 1.14 1.16 2% 1.14 Ready reckoner for annual translation impact of movement in FX rates US$ 1.38 1.27 9% 1.29 Sensitivity to +/- Operating Closing rates Revenue 1 cent move in: profit Euro 1.13 1.14 1% 1.13 Euro +/
Slide 25: Non-underlying items
Non-underlying items H1 H1 FY 2018 2017 2017 Operating items Business reorganisation costs (0.3) (2.0) (2.8) Acquisition costs (1.2) (0.2) (0.6) Amortisation of acquisition intangibles (2.0) (2.0) (4.0) Impairment of asset held for sale (0.1) - (0.4) Pension settlement gain - 0.2 - CA Traffic - prof
Slide 26: Availability and usage of debt facilities
Availability and usage of debt facilities Maturity Net Debt by Currency On 2017 £m Net Debt Facility demand to 2020 2021 Committed 168.6 229.5 On demand 10.7 10.7 0.4 229.1 £ + other US $ 45% 51% Cash (27.4) - 141.2 240.2 Principal facility in place until April 2021 Facilities provide significan
Slide 27: Strategic KPI’s
Strategic KPI’s Organic revenue growth Operating margin 10% 14% 8% 6% 13% 4% 12% 2% 11% 0% 10% 2011 2012 2013 2014 2015 2016 2017 H1 2018 -2% 9% 2011 2012 2013 2014 2015 2016 2017 H1 2018 -4% Driving Returns Underlying cash conversion* Return on invested capital 120% 100% 80% 60% 40% 20% 0% 2011 201
Slide 28: Earnings and Dividend
Earnings and Dividend Earnings per share (p) Dividend (p) 80 70 2018 Change 2017 Change 2016 60 50 Interim dividend per share 10.0p 6% 9.4p 11% 8.5p 40 30 Final dividend per share 20.6p 15% 17.9p 20 10 Total dividend per share 30.0p 14% 26.4p 0 2011 2012 2013 2014 2015 2016 2017 H1 2018 Divi
Slide 29: Hill & Smith Holdings PLC
Half Year Results Six Months Ended 30 June 2015 Derek Muir Group Chief Executive Mark Pegler Group Finance Director Hill & Smith Holdings PLC
Hill & Smith Holdings — H1 2018 Earnings Presentation on 6ix