Hill & Smith Plc · LSE:HILS
Hill & Smith — FY2017 Earnings Presentation
29 slides from Hill & Smith's earnings presentation, Mar 7, 2018
Slide 1: 2017 Preliminary Results
Half Year Results 2017 Preliminary Results Six Months Ended 30 June 2015 7 March 2018 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 Operating margin* Another excellent year 14% − Record revenue & profitability 13% 12% − Organic revenue growth 4% (at constant currency) 11% − Operating profit* up 12% (at constant currency) 10% 9% Consistent and proven strategy driving growth and returns 2011 2012 2013 2014 2015 20
Slide 3: Results summary
Results summary FX impact: - Revenue +ve £14.4m 2017 +/- 2016 - Operating profit +ve £2.1m Revenue (£m) 585.1 8% 540.1 Organic growth 4% (at constant currency) Operating profit (£m) 81.3 15% 70.6 Organic growth 7% (at constant currency) Consistent and proven strategy driving Operating margin (%)
Slide 4: Segment and geographical analysis
Segment and geographical analysis Revenue: £585.1m Revenue: £585.1m By segment By end market geography Galvanizing Roads 31% 32% USA UK Non-Gov’t 51% 29% 49% 35% Utilities Europe 17% 37% A well balanced business: Operating Profit: £81.3m products, Operating Profit: £81.3m By segment By plant locatio
Slide 5: Utilities
Utilities Organic Operating 2017 2016 Growth £m Revenue Profit Revenue (£m) 215.7 207.6 1% 2016 207.6 13.0 F/X 4.8 0.5 Operating profit (£m) 16.8 13.0 7% M&A 15.5 1.3 Operating margin 7.8% 6.3% 150bps Non-US Pipes (14.8) 1.0 Organic 2.6 1.0 Operating margin increased to 7.8% 2017 215.7 16.8 Acti
Slide 6: Roads
Roads Organic 2017 2016 Growth Operating £m Revenue Profit Revenue (£m) 187.1 168.1 6% 2016 168.1 19.6 Operating profit (£m) 23.6 19.6 15% F/X 3.3 0.1 Operating margin 12.6% 11.7% 90bps M&A 5.6 1.0 Organic 10.1 2.9 UK 66% of revenue (2016: 70%) 2017 187.1 23.6 Government’s Road Investment Strate
Slide 7: Galvanizing
Galvanizing Organic 2017 2016 Growth Operating £m Revenue Profit Revenue (£m) 182.3 164.4 7% 2016 164.4 38.0 Operating profit (£m) 40.9 38.0 4% F/X 6.3 1.5 Operating margin 22.4% 23.1% -70bps Organic 11.6 1.4 Overall 2017 182.3 40.9 Margin still strong despite zinc cost challenges New profitab
Slide 8: Foreign exchange sensitivities
Foreign exchange sensitivities 2017 2016 Change Average rates Euro 1.14 1.22 7% Ready reckoner for translation impact of movement in FX rates US$ 1.29 1.35 4% Sensitivity to +/- Operating Closing rates Revenue 1 cent move in: profit Euro +/- £0.6m +/- £50k Euro 1.13 1.17 3% US$ +/- £1.3m +/- £
Slide 9: Free cash flow and net debt
Free cash flow and net debt £m 2017 2016 Underlying cash conversion 78%; 9-year average 90% Underlying Operating Profit 81.3 70.6 Working Capital Depreciation and amortisation 19.2 18.4 Zinc price c.£7m impact on inventories Cost inflation Underlying EBITDA 100.5 89.0 Stock build in advanc
Slide 10: Strategic KPI’s
Strategic KPI’s Organic revenue growth Operating margin 10% 14% 8% 13% 6% 12% 4% 2% 11% 0% 2012 2013 2014 2015 2016 2017 10% -2% 9% -4% 2012 2013 2014 2015 2016 2017 Driving 6-Yr Average Returns Underlying cash conversion* Return on invested capital 22% 120% 20% Group target - 20% 100% 18% 80% Group
Slide 11: Earnings and Dividend
Earnings and Dividend Earnings per share (p) Dividend (p) 80 70 2017 2016 60 Interim dividend per share 9.4p 8.5p 11% 50 Final dividend per share 20.6p 17.9p 15% 40 Total dividend per share 30.0p 26.4p 14% 30 2011 2012 2013 2014 2015 2016 2017 30.0 26.4 Dividend 20.7 15 successive years of d
Slide 12: Growth Strategy Opportunities
Growth Strategy Opportunities Organic & Legislative Growth • Focus on growing revenue and margin in existing • Highways England RIS1 and RIS2 to 2025 markets through product development and innovation • Hinkley Point, HS2, AMP6, Control Period 6 • Identify Governmental legislation that creates • Ene
Slide 13: 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 Highways England (HE) could receive as much as Scheme Start £30bn for the next Road Investment Strategy (RIS2) Prof
Slide 14: UK Infrastructure
UK Infrastructure ENERGY RAIL Offshore wind - landing platforms CP6 – 2019 to 2024 expected spend £47bn Biogas anaerobic digestion New train depots for new rolling stock Energy from Waste HS2 construction commences 2018 Hinkley Point - nuclear Security upgrade on electrification SECU
Slide 15: UK Off-Site Modular Build
UK Off-Site Modular Build Suspended Internal Platform (SIP) Weholite Manholes 2017 Preliminary Results 15
Slide 16: US Infrastructure
US Infrastructure HIGHWAYS OEM Fixing America’s Surface Transportation (‘FAST’) Act Strong US economy driving $305bn five year bill to 2020 day-to-day volumes Long-term funding certainty and project visibility Year 2 spending on track Further investment in Zoneguard fleet UTILITIES Presi
Slide 17: International Development
International Development ATA Scandinavia Bergen Pipe Supports India 2017 Preliminary Results 17
Slide 18: 2017 Acquisitions
2017 Acquisitions Acquired 24 March 2017 Acquired 15 August 2017 Acquisition cost: £6.1m Acquisition cost: £2.4m Annual Revenue: £8m Annual Revenue: £12m Kenway Corporation, a specialist in technologically Tower Tech manufacture the world’s most efficient advanced composite design, manufacturing and
Slide 19: US Composites
US Composites ET Techtonics Global pultruded composites market c.$1.5bn (USA 50% of total*) Strong future growth >8% p.a. in many US market segments* Tower Tech Growth driven by: increased awareness of potential COMPOSITES applications GROUP introduction of composite specifications into a
Slide 20: Outlook
Outlook US/UK infrastructure investment outlook strong UTILITIES Pipe Supports delivering improved profitability and returns UK Road Investment Strategy gives certainty of spending ROADS Good organic growth opportunities from International businesses US/UK operations maximising opportuniti
Slide 21: Appendices
Appendices 2017 Preliminary Results 21
Slide 22: 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 23: Business Segments
Business Segments INFRASTRUCTURE GALVANIZING UTILITIES ROADS USA FRANCE UK Interim Results 30 June 2014 2017 Preliminary Results 23
Slide 24: Hostile Vehicle Mitigation (“HVM”)
Hostile Vehicle Mitigation (“HVM”) Hostile Vehicle Mitigation Products 2017 Preliminary Results 24
Slide 25: Segment analysis
Segment analysis Non-US £m 2017 Organic M&A Pipes FX 2016 Utilities Revenue 215.7 2.6 15.5 (14.8) 4.8 207.6 Underlying operating profit 16.8 1.0 1.3 1.0 0.5 13.0 Margin 7.8% 6.3% Roads Revenue 187.1 10.1 5.6 - 3.3 168.1 Underlying operating profit 23.6 2.9 1.0 - 0.1 19.6 Margin 12.6% 11.7% Galvanizi
Slide 26: Non-underlying items
Non-underlying items £m 2017 2016 Operating items Business reorganisation costs (2.8) (10.5) Acquisition costs (0.6) (1.8) Amortisation of acquisition intangibles (4.0) (2.6) Impairment of acquisition intangibles/other assets (0.4) (4.1) Profit on sale of CA Traffic 0.6 - Pension settlement gains -
Slide 27: Return on Invested Capital
Return on Invested Capital Group 2017 2016 ROIC% before tax Operating Profit (£m) 81.3 70.6 Av. Invested Capital (£m) 403.1 363.3 22% ROIC % 20.2 19.4 20% Group target - 20% 18% Group ROIC 16% Divisional (%) 2017 2016 14% Utilities 17.5 15.3 Roads 22.0 21.7 12% Infrastructure Products 19.9 18.6 10%
Slide 28: Margin
Margin Margin Target 2017 2016 Range % % % Infrastructure Products 10.0 8.7 8 – 11 - Utilities 7.8 6.3 7 – 10 - Roads 12.6 11.7 10 – 14 Galvanizing Services 22.4 23.1 19 – 22 Group 13.9 13.1 12 – 15 Utilities improving and now within target range Further progression in Roads Galvanizing margin
Slide 29: 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 8% Committed 115.4 227.8 0.7 227.1 On demand - 9.5 9.5 £ + other US$ 51% 41% Cash (16.4) - 99.0 237.3 Facilities provide significant headroom − Net debt : EBITDA 1.0 times