Hill & Smith Plc · LSE:HILS
Hill & Smith — H1 2021 Earnings Presentation
28 slides from Hill & Smith's earnings presentation, Aug 11, 2021
Slide 1: 2021 Interim Results
2021 Interim Results Creating sustainable infrastructure and safe transport through innovation 11 August 2021
Slide 2: Key messages
Key messages • Strong H1 trading performance: • Good recovery in trading across all divisions, with return to Group margin target range • Ahead of 2019: +6% revenue and +9% operating profit organic constant currency growth • Ongoing raw material inflation and labour shortages have been successfully
Slide 3: Results summary
Results summary Organic Constant Reported Currency (OCC) ^ H1 2021 H1 2020 +/- +/- Revenue (£m) 354.2 315.6 +12% +16% Operating profit (£m) 42.5 26.8 +59% +73% Operating margin (%) 12.0 8.5 +350bps +390bps Profit before tax (£m) 39.2 22.8 +72% Earnings per share (p) 38.5 23.1 +67% Dividend (p) 12.0
Slide 4: H1 2021 at a glance
H1 2021 2020 at a glance By division 23% 28% 41% Operating Revenue £354.2m 53% 49% Profit £42.5m Roads & Security 28% 31% Utilities Galvanizing By end market geography By plant location 20% 9% 38% Operating Revenue US 38% Profit 53% £354.2m UK £42.5m Rest of World 42% HY21 Results 11 August 2021 4
Slide 5: Roads & Security
Roads & Security OCC Operating H1 2021 H1 2020 change £m Revenue Profit Revenue (£m) 146.8 128.2 +15% H1 2020 128.2 4.3 Operating profit (£m) 9.5 4.3 +138% F/X (2.5) (0.4) M&A 2.1 0.2 Operating margin (%) 6.5% 3.4% Organic 19.0 5.4 UK Roads • Temporary rental barrier operated as expected with lower
Slide 6: Utilities
Utilities OCC Operating H1 2021 H1 2020 change £m Revenue Profit Revenue (£m) 107.7 101.4 +14% H1 2020 101.4 8.2 Operating profit (£m) 12.0 8.2 +64% F/X (6.8) (0.9) Organic 13.1 4.7 Operating margin (%) 11.1% 8.1% H1 2021 107.7 12.0 UK • Markets for UK building products have recovered strongly • Goo
Slide 7: Galvanizing
Galvanizing OCC Operating H1 2021 H1 2020 change £m Revenue Profit Revenue (£m) 99.7 86.0 +21% H1 2020 86.0 14.3 Operating profit (£m) 21.0 14.3 +59% F/X (3.5) (1.1) Organic 17.2 7.8 Operating margin (%) 21.1% 16.6% H1 2021 99.7 21.0 Overall • Strong recovery in trading compared to H1 2020 which was
Slide 8: Cash generation and financial position
Cash generation and financial position £m HY 2021 HY 2020 Underlying operating profit 42.5 26.8 • Group continues to be highly cash generative Depreciation and amortisation 16.4 16.8 • 61% cash conversion reflective of H1 trading patterns; expect Underlying EBITDA 58.9 43.6 improvement in H2 Working
Slide 9: Capital allocation and dividends
Capital allocation and dividends Effective deployment of capital to support growth ambitions: H1 2021 ROIC improved to 16.3% Organic Growth Acquisitions Progressive Dividend • Allocation of capital to higher • Strong cash generation provides • 2021 Interim dividend: 12p per share return, higher grow
Slide 10: Our strategy
Our strategy Why? Where? How? What? Autonomous operating model • Autonomy/agility/proximity 1 Macro drivers Increasing population, to market Organic urbanisation, climate • Premium on talent growth change, increasing health & • Innovation safety regulations Portfolio management Creating sustainable
Slide 11: Sustainability – our products and services make the world better
Sustainability – our products and services make the world better ESG Steering team established Resultant focus areas • Role is to demystify ESG for the operating companies: 1. Sustainable products translating our ESG plans into common sense initiatives, 2. GHG emissions and energy reduction near-ter
Slide 12: Strategy update
Strategy update • Portfolio reshaping • Multiple initiatives to rebuild the M&A pipeline following the change in criteria • Prolectric acquired in March is meeting our expectations • Announced the closure of loss-making VMS • June disposal of loss-making Technocover for £2.2m • Internal re-organisat
Slide 13: Strategy update continued
Strategy update continued • People • Andrew Park joined as Chief People Officer • Good progress on adding another Group President and Head of Health & Safety • Added cyber security resource, early stages of adding a Head of Sustainability • Innovation • Launched an innovation initiative in July • A
Slide 14: Focus markets
Focus markets Galvanizing • Protects and extends the life of infrastructure • Allows steel to be recycled • US growth higher than Europe due to lower market penetration and US infrastructure spend Roads • Bipartisan US infrastructure bill • UK strategic road investment spend (RIS2) • US temporary ba
Slide 15: Outlook
Outlook Short term • FY2021 outlook positive, operating profit expected to be slightly ahead of current analyst range • Mindful of ongoing raw material cost inflation and labour availability uncertainty • Awaiting outcome of UK parliamentary review on benefits and safety of Smart Motorway schemes Me
Slide 16: Summary
Summary • Our purpose is becoming embedded into our working lives, aligning us with long term drivers and medium term Change market stimuli photo • Strong trading performance against 2020 and 2019 comparators reflects the resilience of our markets and our effective operational execution • Confidence
Slide 17: Slide 17
Slide 18: Appendices
Appendices HY21 Results 11 August 2021
Slide 19: Portfolio management
Portfolio management Continue strategy of thoughtful acquisitions and selective disposals Preferred Application Characteristics Business Performance • Fits purpose • Gross margins at or above Group average • Strong long term market drivers • Credible plan to deliver organic profit growth • Market ni
Slide 20: Off-grid solar solutions
Off-grid solar solutions Why did we acquire Prolectric? • A clear fit with our purpose • Backed by strong macro drivers (increasing population, urbanisation, climate change) and market drivers (decarbonisation, infrastructure safety, enabling technology) • Strong historical profit growth, clear and
Slide 21: Financial guidelines
Financial guidelines >3% Organic revenue growth 12%-15% Group operating margin >17% Return on invested capital >90% Underlying cash conversion 1.5 -2x Net Debt to EBITDA HY21 Results 11 August 2021 21
Slide 22: Operating margin
Operating margin Margin H1 2021 H1 2020 Target % % Range % Roads & Security 6.5 3.4 9 – 13 Utilities 11.1 8.1 8 – 11 Galvanizing 21.1 16.6 19 – 22 Group 12.0 8.5 12 – 15 • Strong recovery in margins, with Group margin now within target range • Roads & Security increase driven by good recovery in UK
Slide 23: Segment analysis
Segment analysis £m H1 2021 Organic M&A FX H1 2020 Roads & Security Revenue 146.8 19.0 2.1 (2.5) 128.2 Underlying operating profit 9.5 5.4 0.2 (0.4) 4.3 Margin 6.5% 3.4% Utilities Revenue 107.7 13.1 - (6.8) 101.4 Underlying operating profit 12.0 4.7 - (0.9) 8.2 Margin 11.1% 8.1% Galvanizing Revenue
Slide 24: Non-underlying items
Non-underlying items £m H1 2021 H1 2020 Operating items Business reorganisation costs (2.9) - Acquisition costs (0.5) (0.2) Amortisation of acquisition intangibles (3.0) (3.1) Impairment of goodwill/other assets (11.2) - Loss on disposal of subsidiary (0.8) - (18.4) (3.3) Cash in year (net) 0.7 - Fu
Slide 25: Return on Invested Capital
Return on Invested Capital Divisional (%) H1 2021 H1 2020 Roads & Security 8.0 7.1 ROIC is defined as underlying operating profit for the last 12 Utilities 24.0 18.1 months, divided by average invested capital. Galvanizing 21.8 16.8 Invested capital is defined as the sum of intangible assets, proper
Slide 26: Availability and usage of debt facilities
Availability and usage of debt facilities Maturity On 2021 to Dec 2026 / £m Net Debt Facility demand 2022 2023 2029 Committed 134.9 324.6 0.8 273.1 50.7 On demand 1.6 13.4 13.4 Cash (14.9) - Net borrowings 121.6 338.0 £216.4m total headroom IFRS 16 35.9 - IFRS 9 (2.9) - Net Debt by currency (exc. IF
Slide 27: Foreign exchange sensitivities
Foreign exchange sensitivities H1 2021 H1 2020 Change Average rates Euro 1.15 1.14 1% US$ 1.39 1.26 10% Closing rates Euro 1.17 1.10 6% US$ 1.38 1.24 11% Impact on Revenue -ve £12.8m or 4% HY 2021 Operating profit -ve £2.4m or 9% Ready reckoner for FY translation impact of FX rate movements
Slide 28: 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 number