Hill & Smith enjoys improved profits
CONSTRUCTION products supplier Hill & Smith has announced an increase in interim pre-tax profit of almost 5%, despite a 1.7% in group revenue to £193.5m.
The Shirley-based group, which supplies infrastructure products, galvanizing services and building and construction products to global markets, saw its underlying pre-tax profit rise to £21.5m in the six months to June 30, which compares with £20.5m in the same period last year.
Underlying earnings per share rose 6.7% to 19.2p, while net debt was reduced by £11.2m to £76.4m, a 12.8% fall on the year-end level of £87.6m.
It said its strong financial position provided a good platform for acquisitive growth.
Derek Muir, chief executive, said: “The group has again delivered earnings growth in generally challenging macro economic conditions. The performance in the period continues to demonstrate the benefits of the niche market positioning and widening geographical spread of the group’s businesses.
“The significant reduction in indebtedness over the past 18 months will facilitate development of the group’s strategy of targeting growth through acquisitions in new geographical markets.”
“Whilst cognisant of the general economic environment and UK government spending plans, the board remains confident in its business model to deliver shareholder value over the longer term,” he added.
The group’s operations are organised into three business segments: Infrastructure Products; Galvanising Services; and Building and Construction Products.
Infrastructure Products saw overall revenues up 0.8% in the period to £100.5m, compared with £99.7m last year. Underlying operating profit was down 11.7% to £10.6m. Margins declined to 10.5% due to the difficult conditions in the power and petrochemical markets where significant capital expenditure plans were put on hold in 2009.
The UK roads business performed strongly, benefitting from the Highways Agency’s hard shoulder running programme, Managed Motorway Scheme, plus additional fiscal stimulus spend.
Zoneguard, the group’s temporary steel vehicle restraint system developed for the US market, is currently in use on 15 projects including a major 10km contract in West Virginia. To satisfy the growing demand for the product the group has increased its rental pool by a further 10km as this new innovative safety barrier gains acceptance as an alternative to concrete. It said it remained confident the product would contribute in the near term.
In Galvanising Products, at constant currency, revenues declined 0.5% to £57.2m, while underlying operating profit improved 20% to £12m, resulting in an improved operating margin of 21%.
Overall, volumes were broadly in line with 2009 with favourable comparatives in the UK and France offset by that of the US. The US businesses suffered earlier in the year from snowstorms on the East Coast which severely impacted their operations. Since then volumes in the US have shown a marked improvement and the group said it remained hopeful of continuing momentum into the second half.
By successfully managing the supply chain, the group said zinc costs had been kept under control. However, as part of a restructuring programme, the group’s operation in Oldbury closed in June with production switched to Telford.
Margins remained strong in all territories due to strong supply chain management, lower operational cost bases and ongoing efficiency programmes.
