Engineering group remains cautious as revenues dip by 26%

Engineering firm Hill & Smith says it remains “cautious” after revenue for April and May was 26% lower than in 2019, due to the Covid-19 pandemic.

The fall off in turnover contrasted with a successful first three months for the firm, with revenues for the quarter to 31 March increasing organically by 4.8% to £170.7m with underlying operating profit also growing year on year.

A statement from the company outlined its current position. It said: “In the UK, all galvanizing sites remained open to support essential work, albeit with reduced shift patterns and lower year on year volumes.

“Our temporary and permanent road safety product businesses have continued to operate with limited negative impact, and while our other UK businesses either closed or materially reduced activity levels, they have now all resumed operations and we are seeing a gradual increase in customer demand.

“Our galvanizing and lighting column businesses in France and our pipe supports business in India have also re-opened and activity levels are improving.

“Our US businesses principally operate in essential critical infrastructure markets and have all remained open throughout the period.

“While the US galvanizing business has seen an expected reduction in volumes compared to prior year, our US roads and utilities businesses have experienced minimal disruption and continue to perform well.”

The company says it has “strong liquidity headroom”. Net debt as at 31 May 2020 was £202m compared with net debt of £215.3m as at 31 December 2019 and £224.5m as at 29 February 2020. At 31 May 2020, the firm had £185.3m of headroom against its borrowing facilities of £354m (£341m committed, £13m on demand).

The statement added: “Given the ongoing uncertainty caused by COVID-19, it is still too early to predict the duration or the severity of the economic disruption. We would, however, note that the Group’s FY20 trading performance is likely to be second half weighted.

“We have confidence in our strategy of growing market leading businesses in niche infrastructure markets, supported by a strong balance sheet. As a result, the Group remains well positioned to benefit from market opportunities as they arise. Experience of previous economic downturns suggests that governments may look to stimulate economic activity through investment in ‘shovel ready’ infrastructure schemes and the Group’s businesses are well placed to benefit from such programmes. In the medium and longer term we expect to see continued strong levels of infrastructure investment in our core markets both in the UK and the US.”