H1 revenue and profits rise for Hill & Smith

INFRASTRUCTURE and galvanising products manufacturer Hill & Smith has said strong markets in the UK and United States have put the group on course to meet full year expectations.

Derek Muir, chief executive of the Shirley-based business, said: “Hill & Smith is very well positioned in markets, particularly in the UK and US, where the economic outlook remains favourable and where increased infrastructure spending – most notably on roads and utilities – is fuelling demand for our products and services.
 
“As a result, after a very strong finish to last year, the first half has seen continued robust trading overall which has driven improvements in underlying operating margins across all three segments – Roads, Utilities and Galvanizing.
 
“Our encouraging performance is in line with the board’s expectations and, whilst mindful of the challenging comparators from our record second half earnings performance last year, the continued weakness in mainland Europe and the general global economic uncertainty, we continue to expect 2015 to be a year of good progress.”
 
H1 revenue increased by 4% to £233m (2014: £223.8m) with no material currency translation impacts. Adjusting for a net revenue reduction of £2.4m arising from acquisitions and disposals, organic revenue grew by £11.0m or 5%. Underlying operating margin improved to 11.3% (2014: 10.1%) with an underlying operating profit of £26.3m (2014: £22.5m), including favourable currency translation of £0.5m and a £0.7m benefit in respect of acquisitions and disposals.  
 
Underlying pre-tax profit of £24.8m was 19% higher than the previous year (2014: £20.8m). Despite the strong underlying trading performance, statutory pre-tax profit reduced to £7.1m (2014: £16.0m) reflecting the one off, non cash impairment of goodwill and intangible assets relating to the 2011 acquisition of The Paterson Group, amounting to £15.8m.
 
Underlying earnings per share at 24.2p was up 19% (2014: 20.3p). Basic earnings per share was 5.6p (2014: 14.6p).
 
Net debt fell to £89.2m (December 31, 2014: £96.0m; June 30, 2014: £98.5m) including a beneficial currency translation impact of £1.4m.
 
The board has declared an interim dividend of 7.1p per share (2014: 6.4p), representing an 11% increase on the corresponding period last year. The interim dividend will be paid on January 5, 2016 to shareholders on the register on November 20, 2015.
 
In outlook, the group said it continued to benefit from the industrial and geographical spread of its markets and businesses, which it said, provided a resilient base as well as opportunities for growth.

“Generating 82% of revenue and 92% of underlying operating profit from its UK and US operations, the group principally operates in markets where the overall economic outlook remains favourable. This, coupled with the implementation of strategic initiatives to fuel higher returns from the group’s portfolio, provides momentum to our drive for increased shareholder value,” it said.

“We do however remain mindful of the challenging comparators from our record second half earnings performance in 2014, the continued market weakness in mainland Europe and the general global economic uncertainty.”

The group makes no mention of its aborted attempt to acquire Telford-based galvaniser W Corbett in a £10.5m which fell foul of market regulators.