Hill & Smith Plc · LSE:HILS
Hill & Smith — H1 2016 Earnings Presentation
28 slides from Hill & Smith's earnings presentation, July 2016
Slide 1: Half Year Results
Half Year Results Half Year Results Six Months Ended 30 June 2015 Six months ended 30 June 2016 Derek Derek Muir Group Muir Group Chief Chief Executive Executive Mark Mark Pegler Group Pegler Group Finance Finance Director Director Hill & Smith Holdings PLC 2016
Slide 2: Key messages
Key messages Strong first half performance − Favourable conditions in UK and US infrastructure markets − Organic revenue* growth 6% (at constant currency) − Operating profit* up 20% (at constant currency) − Margins higher in all 3 segments Strategic actions driving growth and returns Three acq
Slide 3: Underlying Trading Results
Underlying Trading Results FX impact: H1 H1 FY Revenue +£6.4m 2016 +/- 2015 2015 Operating Profit +£1.1m Revenue (£m) 254.0 9% 233.0 467.5 Organic growth +6% Operating profit (£m) 33.0 25% 26.3 56.0 Organic growth +11% Strategic initiatives driving Operating margin (%) 13.0 170bps 11.3 12.0 improved
Slide 4: Segment and geographical analysis
Segment and geographical analysis Revenue: £254.0m Revenue: £254.0m By segment By end market geography Roads Galvanizing 29% 33% UK USA Non Gov 51% 49% UK Utilities Gov 38% A well balanced business: Operating Profit: £33.0m products, markets & Operating Profit: £33.0m By segment geographies By plant
Slide 5: Utilities
Utilities H1 H1 Organic Operating 2016 2015 Growth £m Revenue Profit 2015 98.8 5.2 Revenue (£m) 95.1 98.8 (2%) F/X 2.2 0.2 Operating profit (£m) 5.7 5.2 (16%) Acquisitions 1.4 0.3 Operating margin (%) 6.0 5.3 70bps Non-US Pipes (5.0) 0.9 Organic (2.3) (0.9) Markets 2016 95.1 5.7 UK − Market fund
Slide 6: Roads
Roads H1 H1 Organic Operating 2016 2015 Growth £m Revenue Profit 2015 64.6 7.3 Revenue (£m) 77.5 64.6 17% F/X 1.0 0.1 Operating profit (£m) 9.0 7.3 20% Acquisitions 0.5 0.1 Operating margin (%) 11.6 11.3 30bps Organic 11.4 1.5 2016 77.5 9.0 UK (70% of revenue) − Government’s Road Investment Strate
Slide 7: Galvanizing
Galvanizing H1 H1 Organic Operating 2016 2015 Growth £m Revenue Profit 2015 69.6 13.8 Revenue (£m) 81.4 69.6 6% F/X 3.2 0.8 Operating profit (£m) 18.3 13.8 16% Acquisitions 4.5 1.3 Operating margin (%) 22.5 19.8 270bps Organic 4.1 2.4 2016 81.4 18.3 UK − Underlying volumes similar to prior period
Slide 8: Foreign exchange sensitivities
Foreign exchange sensitivities H1 H1 FY 2016 2015 Change 2015 Average rates Euro 1.28 1.37 7% 1.38 Ready reckoner for annual translation impact of US$ 1.43 1.52 6% 1.53 movement in FX rates Sensitivity to +/- Operating Closing rates Revenue 1 cent move in: profit Euro 1.21 1.41 14% 1.36 Euro +/
Slide 9: Free cash flow and net debt
Free cash flow and net debt H1 H1 FY £m 2016 2015 2015 Underlying Operating Profit 33.0 26.3 56.0 Working capital 13.3% of annualised sales (H1 2015: 14.4%) Depreciation and amortisation 8.7 8.3 16.4 − H1 outflow reflective of seasonal trading patterns Underlying EBITDA 41.7 34.6 72.4 Capex 1.1
Slide 10: Strategic KPI's
Strategic KPI’s Organic revenue growth Return on sales 8% 14% 6% 13% 4% 12% 2% 11% 0% 2011 2012 2013 2014 2015 H1 2016 10% -2% 9% -4% 2011 2012 2013 2014 2015 H1 2016 Driving 5-Yr Average Returns Underlying cash conversion * Return on invested capital 22% 120% 20% Group Target - 20% 100% 80% 18% 60%
Slide 11: Strategy and Outlook
Strategy and Outlook Derek Muir 11
Slide 12: Key opportunities for growth
Key opportunities for growth US Infrastructure UK Infrastructure Market: Current status: Market: Current status: • 5 year extension to solar investment tax • AMP6 projects have been slow to start credits (ITC) Renewables Water • Flood alleviation a priority • Utility sector ITC to increase by 73% •
Slide 13: 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 14: Overseas Acquisitions – US Composites/Swedish Roads
Overseas Acquisitions – US Composites/Swedish Roads Acquired 20 January 2016 Acquired 1 April 2016 Acquisition cost: $1.8m Acquisition cost: £3.7m Revenue: $1.9m Revenue: £3.9m • US leader in the design and manufacture of composite • Designs and manufactures safety barriers, noise bridges reduction
Slide 15: UK Acquisitions - Utilities
UK Acquisitions - Utilities Acquired 13 July 2016 Technocover specialises in the development, manufacture, Acquisition cost: £10m installation and maintenance of high security access products for Revenue: £12.9m the utilities markets. The company has an excellent reputation for quality and service a
Slide 16: UK Acquisitions - Roads
UK Acquisitions - Roads Acquired 13 May 2016 Hardstaff Barriers specialises in the sale and rental of fully tested temporary and permanent pre-cast concrete barriers for the protection of roadworks and critical infrastructure in Acquisition cost: £10.6m vulnerable locations across the UK and Europe.
Slide 17: UK Acquisitions - Roads
UK Acquisitions - Roads Acquired 3 August 2016 Signature was a subsidiary of Plastic Omnium SA and specialises in the development, manufacture, installation and maintenance of street lighting columns, road sign and traffic management systems. Their excellent range of long established products comple
Slide 18: Outlook
Outlook US and UK infrastructure investment outlook positive UTILITIES Pipe Supports restructuring delivering improved profitability and returns UK Road Investment Strategy – certainty of funding to 2021 ROADS Niche growth opportunities in international markets France remains challenging G
Slide 19: Appendices
Appendices 19
Slide 20: Business model and strategy
Business model and strategy To hold leading positions in the niche markets of infrastructure and galvanizing, diversified over different geographies, with a focus on service, margins and product development. Organic revenue growth Geographic diversification Sustainable Superior Strategic Business Ta
Slide 21: Shaping the Group for growth
Shaping the Group for growth 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 tha
Slide 22: Segment analysis
Segment analysis PS H1 Closure H1 £m 2016 Organic M&A Impact FX 2015 Utilities • UK and US infrastructure markets robust • Non-US Pipe Supports closure progressing Revenue 95.1 (2.3) 1.4 (5.0) 2.2 98.8 well Underlying operating profit 5.7 (0.9) 0.3 0.9 0.2 5.2 Margin 6.0% 5.3% Roads • Government inv
Slide 23: Non-underlying items
Non-underlying items H1 H1 FY 2016 2015 2015 Operating items Revenue 5.3 EBIT loss (1.0) Non-US Pipe Supports post-closure trading (1.0) - - Business reorganisation costs (9.2) 0.2 (0.3) Acquisition costs (0.7) (0.4) (1.0) Amortisation of acquisition intangibles (0.9) (1.1) (1.6) Loss on sale of pro
Slide 24: Return on Invested Capital
Return on Invested Capital 12m to 12m to ROIC% Group H1 16 H1 15 before tax Operating Profit (£m) 62.7 53.0 22% Av. Invested Capital (£m) 331.1 309.2 ROIC % 18.9 17.1 20% Group Target - 20% 18% 16% 12m to 12m to Group ROIC Divisional (%) H1 16 H1 15 14% Utilities 13.8 11.7 12% Roads 22.5 20.9 Group
Slide 25: Margin
Margin Margin H1 H1 Target 2016 2015 Range % % % Infrastructure Products 8.5 7.6 8 – 11 - Utilities 6.0 5.3 7 – 11 - Roads 11.6 11.3 9 – 13 Galvanizing Services 22.5 19.8 19 – 22 Group 13.0 11.3 11 – 14 Utilities improving; Non-US Pipe Supports closure assists Roads within range Galvanizing ma
Slide 26: Availability and usage of debt facilities
Availability and usage of debt facilities Maturity Net Debt by Currency On 2016 £m Net Debt Facility demand to 2020 2021 Committed 128.4 226.5 2.5 224.0 US$ On demand - 11.2 11.2 £ + other 23% 70% Cash (28.9) - 99.5 237.7 Principal facility “Amended & Extended” May 2016 2 year extension to April
Slide 27: Earnings and Dividend
Earnings and Dividend Earnings per share (p) Dividend (p) 60 50 2016 Change 2015 Change 2014 40 +27% Interim dividend per share 8.5 20.0% 7.1p 10.9% 6.4p 30 20 Final dividend per share 13.6p 17.2% 11.6p 10 Total dividend per share 20.7p 15.0% 18.0p 0 2011 2012 2013 2014 2015 H1 2016 Dividend
Slide 28: Hostile Vehicle Mitigation
Hostile Vehicle Mitigation Hostile Vehicle Mitigation Products Interim Results 30 June 2016 28
Hill & Smith Holdings — H1 2016 Earnings Presentation on 6ix