Manufacturer’s shares plummet after impact of headwinds revealed

Hill & Smith failed to reassure investors that trading is back on track, with its share price dropping 20% on opening this morning after the manufacturer revealed a “disappointing” performance.

It told the stock market a range of problems contributed to a “shortfall” in the first half of the year, blaming poor weather in the first quarter, short-term delays to some UK road projects, a more cautious UK investment environment, and volatile zinc prices for a below-par performance.

Hill & Smith’s market value dropped by around £200m in early trading to around an 18-month low.

The manufacturer had reported pre-tax profits were down 12%, to £33.0m, although revenues edged up 1% to £295.4m.

Hill & Smith’s chief executive Derek Muir said: “Despite this disappointing first half performance, the fundamentals of our niche infrastructure markets remain encouraging, and, notwithstanding the more cautious investment environment in the UK, we continue to benefit from our industrial and geographical spread.

“Overall, we believe that our focused strategy of developing and investing in businesses with market leading positions in growth infrastructure markets, combined with our active and decisive approach to portfolio management, will provide continued growth and drive returns.”

The Shirley-headquartered group has increased its interim dividend by 6% to 10.0p, and has said its “order books support a good second half”.

AJ Bell investment director Russ Mould said: “All great runs have to come to an end eventually and infrastructure specialist Hill & Smith hits a significant road bump after warning on profit alongside first half results.

“What may be causing investors particular alarm this morning is the deterioration in the outlook since May. This implies a longer-term downward pressure on demand, rather than a shorter-term blip relating to a harsh winter which the company would already have been fully aware of in the spring.

“This looks a poor example of expectations management. The company should probably have guided full year forecasts lower in May rather than expecting to make up the shortfall in the second half. Very often this is a recipe for a later warning down the line and so it has proved again.”