Half Year Results 2017 Preliminary Results Six Months Ended 30 June 2015 7 March 2018 Derek Muir Group Chief Executive Derek Muir Group Chief Executive Mark Pegler Group Finance Director Mark Pegler Group Finance Director Hill & Smith Holdings PLC
Key messages Operating margin* Another excellent year 14% − Record revenue & profitability 13% 12% − Organic revenue growth 4% (at constant currency) 11% − Operating profit* up 12% (at constant currency) 10% 9% Consistent and proven strategy driving growth and returns 2011 2012 2013 2014 2015 2016 2017 − Operating margin* 13.9%, up 80bps Return on invested capital 22% − ROIC 20.2%, up 80bps 20% Group target - 20% Positive outlook 18% Group ROIC 16% 14% 12% 10% Proposed final dividend 20.6p, up 15% 2011 2012 2013 2014 2015 2016 2017 2017 Preliminary Results * All references to profit measures in this presentation refer to underlying profits, which exclude certain non-underlying items as detailed in the Appendices on page 26 2
Results summary FX impact: - Revenue +ve £14.4m 2017 2016 +/- - Operating profit +ve £2.1m 8% 540.1 Revenue (£m) 585.1 Organic growth 4% (at constant currency) 15% Operating profit (£m) 81.3 70.6 Organic growth 7% (at constant currency) Consistent and proven strategy driving 80 bps Operating margin (%) 13.9 13.1 returns 15% Profit before tax (£m) 78.5 68.0 15% Earnings per share (p) 75.9 65.9 Interest and tax broadly neutral Progressive dividend policy maintained – 14% Dividend (p) 30.0 26.4 15 th successive year 2017 Preliminary Results 3
Segment and geographical analysis Revenue: £585.1m Revenue: £585.1m By segment By end market geography Roads Galvanizing 32% 31% UK USA Non- Gov’t 51% 29% 49% 35% Utilities Europe 17% 37% A well balanced business: Operating Profit: £81.3m Operating Profit: £81.3m products, By segment By plant location markets & geographies Roads 29% USA UK Galvanizing 58% 43% 42% 50% Utilities 21% 2017 Preliminary Results 4
Utilities Organic Operating 2017 2016 Growth £m Revenue Profit Revenue (£m) 215.7 207.6 1% 2016 207.6 13.0 F/X 4.8 0.5 Operating profit (£m) 16.8 13.0 7% M&A 15.5 1.3 Operating margin 7.8% 6.3% 150bps Non-US Pipes (14.8) 1.0 Organic 2.6 1.0 Operating margin increased to 7.8% 2017 215.7 16.8 Active portfolio management Now within ‘target range’ Operating Margin Growth in US composites 12% Good organic revenue and profit progression 10% Two acquisitions enhance product offering Target Range 8% Pipe Supports 6% US margin improvement on restructured cost base 4% Strong performance in expanded Indian operation 2% 0% 2013 2014 2015 2016 2017 2017 Preliminary Results 5
Roads Organic Operating 2017 2016 Growth £m Revenue Profit Revenue (£m) 187.1 168.1 6% 2016 168.1 19.6 Operating profit (£m) 23.6 19.6 15% F/X 3.3 0.1 Operating margin 12.6% 11.7% 90bps M&A 5.6 1.0 Organic 10.1 2.9 UK 66% of revenue (2016: 70%) 2017 187.1 23.6 Government’s Road Investment Strategy spend as expected Good utilisation of temporary rental barrier in H1, lower in H2 2017 Revenue Growing demand for HVM service and product offering £187.1m Up 6% organically International 34% of revenue (2016: 30%) UK up 2% £123m Scandinavia back on track International up 14% £64m Record volumes of temporary barrier sold in Australia / USA Revenue by end geography Portfolio Management 5% CA Traffic (non-core) disposed in April 62% Closure of Indian roads business 24% VMS: Rationalisation of manufacturing footprint 9% 2017 Preliminary Results 6
Galvanizing Organic Operating 2017 2016 Growth £m Revenue Profit Revenue (£m) 182.3 164.4 7% 2016 164.4 38.0 Operating profit (£m) 40.9 38.0 4% F/X 6.3 1.5 Operating margin 22.4% 23.1% -70bps Organic 11.6 1.4 Overall 2017 182.3 40.9 Margin still strong despite zinc cost challenges New profitability benchmarks in UK and USA UK: 205,000 tonnes 4% (H1 6%; H2 2%) Wider infrastructure investment driving growth Focus on returns driving improved profitability France: 123,000 tonnes 1% (H1 2%; H2 5%) Presidential elections impacted H1 Market challenging, but good growth in H2 USA: 160,000 tonnes 9% (H1 16%; H2 2%) LNG and solar projects not repeated in 2017 Day-to-day volumes stronger in H2; utilities/OEM key drivers Well positioned for any further US infrastructure investment 2017 Preliminary Results 7
Foreign exchange sensitivities 2017 2016 Change Average rates Euro 1.14 1.22 7% Ready reckoner for translation impact of movement in FX rates US$ 1.29 1.35 4% Sensitivity to +/- Operating Revenue Closing rates 1 cent move in: profit Euro +/- £0.6m +/- £50k Euro 1.13 1.17 3% US$ +/- £1.3m +/- £280k US$ 1.35 1.23 10% Impact on FY 2017 Revenue +ve £14.4m or 3% Operating profit +ve £2.1m or 3% Projection for FY 2018* Revenue -ve £15.6m or 3% Operating profit -ve £3.3m or 4% * Compares impact on 2017 results of using exchange rates at 23 February 2018 (£1 = $1.40 and £1 = € 1.14) versus average exchange rates for 2017 2017 Preliminary Results 8
Free cash flow and net debt Underlying cash conversion 78%; 9-year average 90% £m 2017 2016 Working Capital Underlying Operating Profit 70.6 81.3 Zinc price c. £7m impact on inventories Depreciation and amortisation 19.2 18.4 Cost inflation Underlying EBITDA 100.5 89.0 Stock build in advance of 2018 projects c.£6m Other non-cash items 1.8 1.4 Gross Capex £20.7m, 1.1 times DA 2018 guidance c. £25m (1.2 times) Working capital (19.1) (3.8) Net debt: EBITDA 1.0 times (2016: 1.2 times) Capital expenditure (net) (19.5) (20.9) Underlying operating cash flow 63.7 65.7 Cumulative cash flow 2009-2017 Restructuring spend (2.2) (1.5) Memo: £m 2009 2017 Provisions/Pension (2.8) (2.3) Operating Profit 47.0 81.3 EPS 38.3p 75.9p Interest paid (net) (2.8) (2.8) ^ Net debt 146.2 99.0 ^ At 31/12/2008 Tax paid (16.7) (15.7) Statutory free cash flow 39.2 43.4 Dividends (20.7) (16.2) Acquisitions/disposals (6.4) (39.2) Share issues/other (net) (2.4) (1.6) 2008: 10.0p Net cash flow 9.7 (13.6) 2017: 30.0p Note: F/X impact 3.3 (6.9) * 112.0 Net debt 99.0 * Total Net debt reduction £47.2m including £9.3m F/X 2017 Preliminary Results 9
Strategic KPI’s Organic revenue growth Operating margin 10% 14% 8% 13% 6% 12% 4% 2% 11% 0% 10% 2012 2013 2014 2015 2016 2017 -2% 9% -4% 2012 2013 2014 2015 2016 2017 Driving 6-Yr Average Returns Return on invested capital Underlying cash conversion* 22% 120% 20% Group target - 20% 100% 18% 80% Group ROIC 60% 16% 40% 14% 20% 12% 0% 10% 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017 *excluding strategic capex 2017 Preliminary Results 10
Earnings and Dividend Earnings per share (p) Dividend (p) 80 2017 2016 70 Interim dividend per share 9.4p 8.5p 11% 60 50 Final dividend per share 20.6p 17.9p 15% 40 Total dividend per share 30.0p 26.4p 14% 30 2011 2012 2013 2014 2015 2016 2017 30.0 26.4 Dividend 20.7 15 successive years of dividend growth 18.0 15.0 16.0 Central to strategy and TSR ethos 11.5 12.7 13.2 10.0 8.7 UEPS increase of 15% - dividend up 14% 7.2 6.0 5.0 Target cover ratio c. 2.5 times 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2017 Preliminary Results 11
Growth Strategy Opportunities Organic & Legislative Growth • Highways England RIS1 and RIS2 to 2025 • Focus on growing revenue and margin in existing • Hinkley Point, HS2, AMP6, Control Period 6 markets through product development and innovation • Energy policy - offshore wind farms • Identify Governmental legislation that creates • USA FAST Act, wider Industrial Policy opportunities to deliver innovative products and services Geographical Expansion • Rental products into Scandinavian roads • Introduce proprietary products to UK & US specification • Zoneguard USA and Australia/NZ into new geographies • HVM products to Middle East • Countries with new and ageing infrastructure requirements • Pipe Supports into Far East Power Generation • Utilise manufacturing capacity for other Group products Strategic Acquisition • Composite and power utility products in USA • Acquisitions adding value by creating synergies with • Road products in countries with legislative spend existing businesses, extending our product portfolio • Galvanizing in existing geographies and geographical coverage • Developing off-site modular build capability 2017 Preliminary Results 12
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