Market diversification boosts H1 for Hill & Smith

Infrastructure products and galvanizing services supplier Hill & Smith has seen first half growth as the business continues to benefit from its lack of exposure to European markets.

The Shirley-based group generates more than 80% of revenue and 87% of underlying operating profit from its UK and US operations, and it said its niche infrastructure markets remained positive.

“We are confident that our strategy of international diversification along with market leading positions in key infrastructure investment markets will help limit any potential negative impact (from Brexit) on the group,” it said in its interim statement.

Nevertheless, it said it remained vigilant and would react accordingly where necessary.

Derek Muir, chief executive, said: “Hill & Smith continues to deliver a strong performance, again underpinned by our tried and tested strategy of international diversity together with the leading positions our businesses hold in their respective markets.

“Rising infrastructure investment, together with our focus on active portfolio management to drive shareholder value, resulted in record returns in the first half.

“Overall, despite increased political and macroeconomic uncertainties, our expectations for the year remain unchanged and we continue to expect 2017 to be a year of good progress.”

In the Utilities sector, it said its UK and US activities were well placed to continue benefiting from the significant investment going into the replacement of ageing infrastructure and new infrastructure projects.

In Galvanizing, with wider market conditions remaining favourable, it said it expected its various businesses to consolidate their strong market positions and take advantage of opportunities as they present themselves.

In the UK, the implementation of the Department of Transport’s Road Investment Strategy is in the third year of the initial five year timeframe. It said this provided certainty of funding through to 2020/21.

“We therefore have confidence that the group’s road product portfolio will continue to benefit from the increased investment in the UK road infrastructure,” it said.

For the six months to June 30, revenue increased by 13% to £291.8m (2016: £259.3m), of which translational currency benefits contributed £15.0m or 6%. After adjusting for net additional revenue of £14.7m from acquisitions/disposals and reduced revenue from the prior year restructuring of the non-US Pipe Supports businesses of £9.5m, organic revenue growth was £12.3m or 5%.

Underlying operating profit improved by 21% to £38.8m (2016: £32.0m), including a positive currency translation of £2.3m. Acquisitions/disposals contributed £1.6m and the benefit of the non-US Pipe Supports restructuring actions a further £1.5m.

The organic improvement in underlying operating profit was 4%. Underlying pre-tax profit was up 22% higher at £37.4m (2016: £30.7m). Reported operating profit was £35.4m (2016: £21.2m), an increase of 67% on the prior year. Reported pre-tax profit was £33.5m (2016: £19.4m).

The board has declared an interim dividend of 9.4p per share (2016: 8.5p), an 11% increase on the corresponding period last year.