Hill & Smith Plc · LSE:HILS
Hill & Smith — H1 2022 Earnings Presentation
24 slides from Hill & Smith's earnings presentation, Aug 3, 2022
Slide 1: 2022 Interim Results
2022 Interim Results 3 August 2022 Six months ended 30 June 2022
Slide 2: Highlights
HIGHLIGHTS Good constant currency revenue and operating profit growth • +9% revenue and +10% profit vs 2021 • Highlights resilience of our chosen long-term end markets • Pricing actions taken to recover input cost inflation Progress on portfolio management • Proposed disposal of French galvanizing a
Slide 3: H1 Results Summary
H1 RESULTS SUMMARY 30 June 30 June Reported Constant Currency Organic Constant 2022 2021 +/- +/- Currency +/- CONTINUING OPERATIONS Revenue £349.9m £313.6m +12% +9% +12% Operating profit £43.6m £37.7m +16% +10% +8% Operating margin 12.5% 12.0% +50 bps Profit before tax £40.2m £34.4m +17% Earnings pe
Slide 4: Group Overview
GROUP OVERVIEW CONTINUING OPERATIONS By division 19% 24% 37% Galvanizing OPERATING REVENUE £349.9m Engineered 49% PROFIT Solutions £43.6m 32% Roads & 39% Security By end market geography By plant location 6% US 42% OPERATING REVENUE 45% £349.9m UK PROFIT £43.6m 58% 49% Rest of World INTE
Slide 5: Galvanizing
GALVANIZING Constant Operating H1 2022 CONTINUING OPERATIONS H1 2022 H1 2021 Currency +/- OCC +/- £m Revenue Profit Revenue £m OCC +/- Revenue (£m) 84.5 70.2 +17% +17% H1 2021 70.2 17.1 UK 41.4 +17% Operating profit (£m) 21.4 17.1 +20% +20% F/X 2.2 0.8 US 43.1 +16% Operating margin 25.3% 24.4% Organ
Slide 6: Engineered Solutions
ENGINEERED SOLUTIONS Constant Operating H1 2022 CONTINUING OPERATIONS H1 2022 H1 2021 Currency +/- OCC +/- £m Revenue Profit Revenue £m OCC +/- Revenue (£m) 136.5 107.7 +21% +21% H1 2021 107.7 11.8 UK 47.8 +30% Operating profit (£m) 14.1 11.8 +14% +14% F/X 4.8 0.6 US 85.0 +19% Operating margin 10.3%
Slide 7: Roads & Security
ROADS & SECURITY Constant Operating H1 2022 CONTINUING OPERATIONS H1 2022 H1 2021 currency +/- OCC +/- £m Revenue Profit Revenue £m OCC +/- Revenue (£m) 128.9 135.7 -6% +2% H1 2021 135.7 8.8 UK 64.3 +8% Operating profit (£m) 8.1 8.8 -12% -21% F/X 1.7 0.4 US 30.0 -9% Operating margin 6.3% 6.5% M&A (1
Slide 8: Cash Generation and Financial Position
CASH GENERATION AND FINANCIAL POSITION £m H1 2022 H1 2021 Headlines Proforma Group* operating profit 48.4 42.5 • Lower cash conversion due to working capital outflow Depreciation and amortisation 15.7 16.4 Underlying EBITDA 64.1 58.9 o typical seasonal trends with working capital absorption to suppo
Slide 9: Our ESG Focus Areas
OUR ESG FOCUS AREAS PROGRESS UPDATE The growth of our business is naturally aligned to the ESG agenda PROTECTING THE WORLD UN SDGs • Continued focus on ESG across the Group ESG FOCUS AREAS: o Head of Sustainability joined in February 2022 1. Greenhouse gas emissions and energy reduction o Sustainabi
Slide 10: Our Long Term Growth Drivers Remain Resilient
OUR LONG TERM GROWTH DRIVERS REMAIN RESILIENT Galvanizing • Long term need for infrastructure investment, supported by current government commitments: IIJA (US) • Increasing recognition of sustainability benefits • Lifetime maintenance cost benefits of galvanizing as a steel corrosion protection sys
Slide 11: Our Purpose and Strategy
OUR PURPOSE AND STRATEGY WHY? WHERE? HOW? WHAT? ORGANIC GROWTH 1 MACRO DRIVERS • Autonomous operating model Creating • Increasing population • Urbanisation • Agility/proximity to market • Premium on talent • Innovation • Climate change sustainable • Increasing health and safety PORTFOLIO MANAGEMENT
Slide 12: Portfolio Management: Proposed Disposal of France Galva SA
PORTFOLIO MANAGEMENT PROPOSED DISPOSAL OF FRANCE GALVA SA Transaction overview • Proposed disposal of our French galvanizing and lighting column operations: France Galva SA • Net equity purchase price of c.£61.5m • Joint purchasers: ZINQ France SAS and Sofigalva (related party) • Subject to French W
Slide 13: Outlook
OUTLOOK Short term • Expectations for FY22 remain unchanged, with current foreign exchange rates providing potential outperformance • Group operates in a range of resilient industrial and infrastructure end markets • Teams continue to actively manage the ongoing inflationary and supply chain headwin
Slide 14: Appendices
APPENDICES DEN EEN
Slide 15: Modelling Guidance
2022 MODELLING GUIDANCE Working capital Interest1 Maintained at c.18% c.£7.5m annualised sales Capex H1/H2 weighting Total c.£40-45m Profit for continuing • Maintenance c.£15m operations modestly H2 • Growth investments c.£28m weighted Effective tax rate2 Translation impact of c.23% FX rate movement
Slide 16: Proposed Disposal of France Galva Financial Impact
PROPOSED DISPOSAL OF FRANCE GALVA FINANCIAL IMPACT 30 June 2022 30 June 2021 Proforma Total Group Change Continuing France Proforma Continuing France Proforma Constant Operations Galva Total Group Operations Galva Total Group Reported Currency OCC Revenue £349.9m £47.3m £397.2m £313.6m £40.6m £354.2
Slide 17: Portfolio Management: Acquisition Heat Map
PORTFOLIO MANAGEMENT ACQUISTION HEAT MAP 2022 INTERIM RESULTS 17
Slide 18: Capital Allocation and Dividends
CAPITAL ALLOCATION AND DIVIDENDS Effective deployment of capital to support growth ambitions H1 2022 ROIC: 17.5% (continuing operations) Organic Growth Acquisitions Progressive Dividend • Focus on higher • Aligned with our purpose • Focus on maintaining return, higher growth sustainable and markets
Slide 19: Divisional Analysis
DIVISIONAL ANALYSIS CONTINUING OPERATIONS £m H1 2022 Organic M&A FX H1 2021 Galvanizing Revenue 84.5 12.1 - 2.2 70.2 Underlying operating profit 21.4 3.5 - 0.8 17.1 Margin 25.3% 24.4% Engineered Solutions Revenue 136.5 24.0 - 4.8 107.7 Underlying operating profit 14.1 1.7 - 0.6 11.8 Margin 10.3% 11.
Slide 20: Return on Invested Capital
RETURN ON INVESTED CAPITAL CONTINUING OPERATIONS Group H1 2022 H1 2021 ROIC is defined as underlying operating profit for the last 12 months, divided by average invested capital. Operating profit (£m) 83.1 76.4 Invested capital is defined as the sum of intangible assets, Average invested capital (£m
Slide 21: Non-Underlying Items
NON-UNDERLYING ITEMS CONTINUING OPERATIONS £m H1 2022 H1 2021 Business reorganisation costs (1.6) (2.9) Costs relating to acquisitions and disposals (1.1) (0.5) Amortisation of acquisition intangibles (2.9) (2.9) Impairment of goodwill/other assets (2.5) (11.2) Loss on disposal of subsidiaries (0.7)
Slide 22: Debt Facilities
DEBT FACILITIES AVAILABILITY AND USAGE Principal debt facilities £m Net debt Facility • Revolving credit facility in place until December Committed 148.1 343.2 2023; expect to refinance in H2 2022 On demand - 11.6 • Senior notes: $70m unsecured notes mature 2026/29 Cash (17.0) - • Average cost of de
Slide 23: Our Commitment to Net Zero
OUR COMMITMENT TO NET ZERO Background Net Zero Scope 1 and 2 emissions by 2040 • Committed to SBTi in 2021 • Scope 1 & 2 CO2 emissions >50% gas for galvanizing >20% electricity (Scope 2) >15% HGVs, forklift trucks etc. >5% domestic heating Costed plan • Details the key actions and assumptions from 2
Slide 24: 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 numbe