Hill & Smith Plc · LSE:HILS
Hill & Smith — FY2016 Earnings Presentation
28 slides from Hill & Smith's earnings presentation, Mar 8, 2017
Slide 1: 2016 Preliminary Results
Half Year Results 2016 Preliminary Results Six Months Ended 30 June 2015 8 March 2017 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 excellent year − Record revenue & profitability − Organic revenue growth 5% (at constant currency) − Operating profit* up 17% (at constant currency) − Operating margin* 13.1%, up 110bps Strategic actions driving growth and returns − Five acquisitions completed in 2016 − Non-
Slide 3: Results summary
Results summary FX impact: - Revenue +ve £27.9m 2016 +/- 2015 - Operating profit +ve £4.4m Revenue (£m) 540.1 16% 467.5 Organic growth 5% (at constant currency) Operating profit (£m) 70.6 26% 56.0 Organic growth 8% (at constant currency) Strategic investment and portfolio Operating margin (%) 13
Slide 4: Segment and geographical analysis
Segment and geographical analysis Revenue: £540.1m Revenue: £540.1m By segment By end market geography Galvanizing Roads 31% 31% USA UK Non-Gov’t 51% 29% 49% 36% Utilities Europe 16% 38% A well balanced business: Operating Profit: £70.6m products, Operating Profit: £70.6m By segment By plant locatio
Slide 5: Utilities
Utilities Organic Operating 2016 2015 Growth £m Revenue Profit Revenue (£m) 207.6 193.9 - 2015 193.9 10.5 F/X 10.5 0.9 Operating profit (£m) 13.0 10.5 (10%) Acquisitions 6.7 0.8 Operating margin 6.3% 5.4% 90bps Non-US Pipes (3.4) 1.9 Overview Organic (0.1) (1.1) UK mixed – strong prior year comp
Slide 6: Roads
Roads Organic 2016 2015 Growth Operating £m Revenue Profit Revenue (£m) 168.1 131.6 17% 2015 131.6 16.0 Operating profit (£m) 19.6 16.0 21% F/X 4.0 0.2 Operating margin 11.7% 12.2% -50bps Acquisitions 10.1 - UK (70% of revenue) Organic 22.4 3.4 Government’s Road Investment Strategy underpinning
Slide 7: Galvanizing
Galvanizing Organic 2016 2015 Growth Operating £m Revenue Profit Revenue (£m) 164.4 142.0 - 2015 142.0 29.5 Operating profit (£m) 38.0 29.5 8% F/X 13.4 3.3 Operating margin 23.1% 20.8% 230bps Acquisitions 8.6 2.6 Organic 0.4 2.6 UK LFL volume maintained despite lower internal work; market share
Slide 8: Foreign exchange sensitivities
Foreign exchange sensitivities % 2016 2015 Change Average rates Euro 1.22 1.38 (12) Ready reckoner for translation impact of movement US$ 1.35 1.53 (12) in FX rates Sensitivity to +/- Operating Closing rates Revenue 1 cent move in: profit Euro 1.17 1.36 (14) Euro +/- £0.5m +/- £50k US$ +/- £1.4m +/-
Slide 9: Free cash flow and net debt
Free cash flow and net debt £m 2016 2015 Underlying Operating Profit 70.6 56.0 Underlying cash conversion 93%; 8-year average +90% Depreciation and amortisation 18.4 16.4 Working capital 14.2% of sales (2015: 14.3%) Underlying EBITDA 89.0 72.4 Capex 1.2 times depreciation/amortisation Other no
Slide 10: Strategic KPI's
Strategic KPI’s Organic revenue growth Operating margin 8% 14% 6% 13% 4% 12% 2% 11% 0% 2011 2012 2013 2014 2015 2016 10% -2% 9% -4% 2011 2012 2013 2014 2015 2016 Driving 6-Yr Average Returns Underlying cash conversion * Return on invested capital 120% 20% Group target - 20% 100% 18% 80% Group ROIC 1
Slide 11: Earnings and Dividend
Earnings and Dividend Earnings per share (p) Dividend (p) 70 2016 2015 60 Interim dividend per share 8.5p 7.1p 20% 50 Final dividend per share 17.9p 13.6p 32% 40 Total dividend per share 26.4p 20.7p 28% 30 2011 2012 2013 2014 2015 2016 Dividend 26.4 20.7 14 successive years of dividend growt
Slide 12: Strategy and Outlook
Strategy and Outlook Derek Muir 2016 Preliminary Results 12
Slide 13: UK Infrastructure
UK Infrastructure ENERGY RAIL MASS Visirail Guard at Hinkley Point C CP5 – markets remain strong Solar projects reinvigorated using battery storage Five year security upgrade on electrification and renewals Energy from Waste opportunities HS2 – Royal Assent – Construction to start 2017
Slide 14: Highways England: Road Investment Strategy ('RIS')
Highways England: Road Investment Strategy (‘RIS’) Taper Signs Temporary Safety Barrier Crash Cushions Permanent Safety Barrier Variable Message Signs £m 4,000 Profile of investment £15.2bn Source: Highways England Strategic Business Plan 17 December 2014 3,500 Highways England Chief Executive Jim O
Slide 15: US Infrastructure
US Infrastructure HIGHWAYS RENEWABLES Fixing America’s Surface Transportation (‘FAST’) Act 5 year extension to solar investment tax credits (ITC) $305bn five year bill to 2020 Utility sector ITC to increase by 73% Long-term funding certainty and project visibility Demand to steadily incr
Slide 16: 2016 Acquisitions
2016 Acquisitions Acquired 20 January 2016 Acquired 1 April 2016 Acquired 3 August 2016 Acquisition cost: £1.4m Acquisition cost : £3.3m Acquisition cost : £12.6m Revenue: £1.5m* Revenue: £3.9m* Revenue: £14.8m* ET Techtonics is the US leader in the FMK designs and manufactures safety Signature spec
Slide 17: 2016 Acquisitions
2016 Acquisitions Acquired 13 May 2016 Acquired 13 July 2016 Acquisition cost: £10.4m Acquisition cost: £9.2m Revenue: £3.8m* Revenue: £12.9m* Hardstaff Barriers specialises in the sale and rental of fully Technocover specialises in the development, manufacture, tested temporary and permanent pre-ca
Slide 18: Hostile Vehicle Mitigation
Hostile Vehicle Mitigation Hostile Vehicle Mitigation Products 2016 Preliminary Results 18
Slide 19: Temporary Safety Barrier Investment
Temporary Safety Barrier Investment USA UK 16.7km existing rental fleet 270km Zoneguard/Varioguard existing rental fleet - 9km investment in 2017 5km investment in 2016 - 23.5km sales in 2016 10km investment in 2017 - 30km concrete barrier rental fleet 10km investment in 2017 - AUSTRALIA Man
Slide 20: Outlook
Outlook US/UK infrastructure investment outlook strong UTILITIES Pipe Supports delivering improved profitability and returns UK Road Investment Strategy underpinning spend ROADS Opportunities to grow International businesses GALVANIZING US/UK operations in sweet spot of infrastructure plan
Slide 21: 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 22: Appendices
Appendices 22
Slide 23: Business Segments
Business Segments INFRASTRUCTURE GALVANIZING UTILITIES ROADS USA FRANCE UK Interim Results 30 June 2014 2016 Preliminary Results 23
Slide 24: Segment analysis
Segment analysis Non-US £m 2016 Organic M&A Pipes FX 2015 Utilities Revenue 207.6 (0.1) 6.7 (3.4) 10.5 193.9 Underlying operating profit 13.0 (1.1) 0.8 1.9 0.9 10.5 Margin 6.3% 5.4% Roads Revenue 168.1 22.4 10.1 - 4.0 131.6 Underlying operating profit 19.6 3.4 - - 0.2 16.0 Margin 11.7% 12.2% Galvani
Slide 25: Non-underlying items
Non-underlying items £m 2016 2015 Operating items Non-US Pipes 7.8 India Roads 1.9 Business reorganisation costs (10.5) (0.3) Signature 0.8 10.5 Acquisition costs (1.8) (1.0) Amortisation of acquisition intangibles (2.6) (1.6) Impairment of acquisition intangibles (4.1) (15.7) (Loss)/Profit on prope
Slide 26: Return on Invested Capital
Return on Invested Capital Group 2016 2015 ROIC% before tax Operating Profit (£m) 70.6 56.0 Av. Invested Capital (£m) 363.3 314.8 20% Group target - 20% ROIC % 19.4 17.8 18% 16% Group ROIC 14% Divisional (%) 2016 2015 Utilities 15.3 13.0 12% Roads 21.7 22.1 Group pre-tax WACC – 11% 10% Infrastructur
Slide 27: Margin
Margin Margin Target 2016 2015 Range % % % Infrastructure Products 8.7 8.1 8 – 11 - Utilities 6.3 5.4 7 – 11 - Roads 11.7 12.2 9 – 13 Galvanizing Services 23.1 20.8 19 – 22 Group 13.1 12.0 11 –14 Roads within target range Galvanizing marginally ahead of target range Utilities improving – 7.3%
Slide 28: 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 Euros 7% Committed 127.6 234.9 0.6 234.3 On demand - 11.4 11.4 £ + other US$ 57% 36% Cash (15.6) - 112.0 246.3 Facilities provide significant headroom − Net debt : EBITDA 1.2 ti