Hill & Smith facing tough second half on CSR cuts
CONSTRUCTION products supplier Hill & Smith said today it had faced a challenging second half of the year, blaming market uncertainty on the Government’s Comprehensive Spending Review.
The Shirley-based group, which supplies infrastructure products, galvanizing services and building and construction products to global markets, said it now expected pre-tax profits to be marginally below last year – this despite improvements I its overseas business, especially the United States.
Investors reacted badly to the news with the group’s share price dropping in early trading.
In an interim management statement covering the period July 1 to date, the group said underlying earnings per share were expected to be broadly in line with those for 2009, benefitting from lower taxation costs year on year.
The group said it continued to focus on cash generation and control of its net debt, which stands at £78.4m, similar to that reported for the half year.
Derek Muir, Group Chief Executive Officer of Hill & Smith said: “Overall we are pleased with the outcome of the UK Government’s spending review although there will be a twelve month delay in starting the first managed motorway programme, which will have an effect on our UK infrastructure businesses in 2011.
“We remain confident in the Group’s business model and continue to work on strengthening our international profile which will continue to provide resilience in the short to medium term and growth opportunities for the longer term.”
The CSR confirmed a marked reduction in spending on new road projects in the UK, traditionally a strong market for the group. However, it said it was pleased to see confirmation that the major managed motorway programmes would proceed, albeit over a more protracted period.
The group’s Infrastructure Products strategy, over the last few years, has been to supply as many products as possible for these schemes and in the medium term, it said this would continue to provide opportunities for business.
The Pipe Supports operation delivered an excellent third quarter performance it said, but order intake for the final quarter and first half of 2011 was slower than expected. Enquiry levels however, remained encouraging and the medium term outlook was positive.
The board has also approved investment to expand the group’s presence and market share in India with the opening in April of a new pipe supports plant.
Combined Galvanizing volumes remain at similar levels to the same period in 2009 and it said it had been encouraged by the US volumes, which have recovered from the slow start earlier in the year.
The UK Building and Construction market remains challenging, although operating profits are ahead of 2009. Despite this, it said its intention was to rationalise the number of manufacturing operations to further improve profitability.
