Competition squeezes Hill & Smith profits
CONSTRUCTION products supplier Hill & Smith has blamed increasing competition in the infrastructure market for a squeeze on margins that has reduced profits by more than 20%.
The Shirley-based group’s half yearly report showed growth in revenues from £193.5m in 2010 to £195.1m this year, but underlying profits plummeting by 22.6% to £18.2m.
Earnings per share were down by 21.9%, but interim dividends have been increased from 5.2p to 5.4p.
The group’s recent acquisition spree had also increased net debt to £113.9m compared to the year end level of £70.6m.
Chief executive Derek Muir said: “We have made important strategic progress since the start of the year, further enhancing our international capabilities with two acquisitions in the US and Scandinavia, and disposing of the last of our major building and construction businesses.
“The group as a whole traded broadly in line with our expectations in the first half, with reasonable activity levels overall but with operating margins, as expected, being impacted by the highly competitive market conditions and rising material costs, particularly in the infrastructure arena.
“Whilst we enter the second half of the year with a strong order book in our utilities business, greater international diversity and with the benefit of the recent acquisitions, the board remains cautious given the difficult economic conditions and competitive pressures in certain of our markets. Against that background, we are clearly focused on managing the business and its cost base very tightly, taking proactive measures where necessary.”
Mr Muir said that following its acquisitions and disposals, more than 69% of Hill & Smith’s operating profit was now generated from international operations.
