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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Hill & Smith Plc | LSE:HILS | London | Ordinary Share | GB0004270301 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 12.00 | 0.63% | 1,908.00 | 1,908.00 | 1,916.00 | 1,928.00 | 1,896.00 | 1,896.00 | 8,620 | 10:10:54 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Fabricated Structural Metal | 829.8M | 68.8M | 0.8582 | 22.37 | 1.54B |
From Apr 2019 to Apr 2024
TIDMHILS
RNS Number : 1965G
Hill & Smith Hldgs PLC
04 August 2016
Hill & Smith Holdings PLC
Half Year Results (unaudited) for the 6 months ended 30 June 2016
Record revenue and profitability
Continued investment in UK and US infrastructure fuelling growth
Hill & Smith Holdings PLC, the international group with leading positions in the manufacture and supply of infrastructure products and galvanizing services to global markets, announces its unaudited results for the six months ended 30 June 2016.
Financial results
Hot Features
Premium
Change
-------------------------
30 June 30 June Reported Constant
2016 2015 % currency
%
-------------------------- ---------- ---------- ------------- ----------
Underlying(*) :
Revenue GBP254.0m GBP233.0m +9 +6
Operating profit GBP33.0m GBP26.3m +25 +20
Operating margin 13.0% 11.3% +170bps
Profit before taxation GBP31.7m GBP24.8m +28 +22
Earnings per share 30.7p 24.2p +27 +22
Statutory:
Profit before taxation GBP19.4m GBP7.1m +173
Basic earnings per share 16.8p 5.6p +200
Dividend per share 8.5p 7.1p +20
Net Debt GBP99.5m GBP89.2m
-------------------------- ---------- ---------- ------------- ----------
*All underlying profit measures exclude certain non-operational items, which are as defined in the Financial Statements. References to an underlying profit measure throughout this announcement are made on this basis.
Key points:
-- Continued strong trading, +6% organic underlying revenue growth; underlying operating margin +170bps to 13.0%
-- Over 80% of underlying revenue and 90% of underlying operating profit generated from UK and US operations, where infrastructure investment outlook remains favourable
-- Underlying operating profit up 25% driven by growth in UK and US operations
-- Five infrastructure acquisitions completed, non-US Pipe Supports restructuring on plan, in line with strategy of active portfolio management to drive returns
-- Strong cash generation supporting continued investment in acquisitions and organic growth -- Interim dividend increased by 20% to 8.5p
Derek Muir, Chief Executive, said:
"These results represent an excellent performance, with record revenue and profitability and improved underlying operating margins across all three divisions. We continue to benefit from our strong position in niche infrastructure markets, predominantly in the UK and US, where high levels of investment are fuelling demand for our products.
"In the UK, the Government's Road Investment Strategy provides certainty of funding through to 2020/21 and, in addition, exciting progress is now being made in our Roads business in the US and Australia. In Utilities also, our UK and US activities are well placed to continue to benefit from the significant investment in the ageing infrastructure of those countries. In Galvanizing, notwithstanding strong comparatives in the second half, our US and UK operations are expected to more than offset any weakness in France.
"Overall, although risks remain, 2016 is expected to be a year of good progress."
For further information, please contact:
Hill & Smith Holdings PLC Tel: +44 (0)121
704 7430
Derek Muir, Group Chief Executive
Mark Pegler, Group Finance Director
MHP Communications Tel: +44 (0)20 3128
8100
John Olsen/Andrew Leach/Ollie Hoare
Notes to Editors
Hill & Smith Holdings PLC is an international group with leading positions in the design, manufacture and supply of infrastructure products and galvanizing services to global markets. It serves its customers from facilities principally in the UK, France, USA, Sweden, Norway, India and Australia.
The Group's operations are organised into three main business segments:
Infrastructure Products - Roads, supplying products and services such as permanent and temporary road safety barriers, street lighting columns, bridge parapets, gantries, temporary car parks, variable road messaging solutions and traffic data collection systems.
Infrastructure Products - Utilities, supplying products and services such as pipe supports for the power and liquid natural gas markets, energy grid components, composite "GRP" products, plastic drainage pipes, industrial flooring, handrails, access covers and security fencing.
Galvanizing Services which provides zinc and other coatings for a wide range of products including fencing, lighting columns, structural steel work, bridges, agricultural and other products for the infrastructure and construction markets.
Headquartered in the UK and quoted on the London Stock Exchange (LSE: HILS.L), Hill & Smith Holdings PLC employs some 4,100 staff.
Business Review
Introduction
Hill & Smith has delivered a very strong trading performance in the six months to 30 June 2016.
Infrastructure investment in our key UK and US markets remained robust which, along with our focused active portfolio management strategy, resulted in record revenue and profitability. Underlying operating margins again improved across all three divisions.
Our strategy of international diversity, together with the leading positions our businesses hold in their respective markets, continues to underpin our performance. Our US and UK operations grew on the back of increasing infrastructure investment in our chosen end markets. Together the UK and US operations represented 90% of operating profit in the first half. Organic profit growth has been supplemented by targeted bolt-on acquisitions and decisive action to restructure underperforming assets to drive overall returns and shareholder value.
Results
Underlying revenue increased by 9% to GBP254.0m (2015: GBP233.0m), with translational currency benefits contributing GBP6.4m or 3%. After adjusting for additional revenue of GBP6.4m from acquisitions and reduced revenue from restructuring actions of GBP5.0m, organic underlying revenue growth was GBP13.2m or 6%. Underlying operating profit improved by 25% to GBP33.0m (2015: GBP26.3m), including a positive currency translation of GBP1.1m. Acquisitions contributed GBP1.7m and the benefit of restructuring actions a further GBP0.9m. Underlying operating margin improved by 170bps to 13.0% (2015: 11.3%).
Underlying profit before taxation at GBP31.7m was 28% higher than the previous year (2015: GBP24.8m). Statutory profit before taxation was GBP19.4m (2015: GBP7.1m).
Underlying earnings per share at 30.7p was up 27% compared with the previous year (2015: 24.2p). Basic earnings per share was 16.8p (2015: 5.6p).
Net debt increased to GBP99.5m (31 December 2015: GBP91.5m; 30 June 2015: GBP89.2m) including a negative currency translation impact of GBP3.3m.
Dividend
The Board has declared an interim dividend of 8.5p per share (2015: 7.1p), representing a 20% increase on the corresponding period last year. The interim dividend will be paid on 5 January 2017 to shareholders on the register on 25 November 2016.
Governance and the Board
As reported in the 2015 Annual Report, Clive Snowdon, Senior Independent Director and Chairman of the Remuneration Committee, retired at the conclusion of the Annual General Meeting in May 2016. Consequently Jock Lennox, currently Chairman of the Audit Committee, also assumed the role of Senior Independent Director. Annette Kelleher was appointed Chairman of the Remuneration Committee.
Also in May 2016, Mark Reckitt joined the Board as a Non-executive Director. With extensive strategic and financial experience, he will be an invaluable addition to the Board.
Effective 1 July 2016, Mark Pegler was asked by the Board to assume full operational and management responsibility for the businesses within our UK Utilities division. The new role will be in addition to his current role of Group Finance Director.
Brexit
It is too early to assess with any certainty the impact of the decision by the United Kingdom to leave the European Union. In the short time since the referendum result we have not experienced any material positive or negative impact. We are confident that our strategy of international diversification along with market leading positions in key infrastructure investment markets will help limit any potential negative impact on the Group. However, we remain vigilant and will react with our customary speed as necessary.
Outlook
The Group benefits from the industrial and geographical spread of its markets and businesses, which not only provide a resilient base, but also opportunities for growth. Generating over 80% of underlying revenue and 90% of underlying operating profit from its UK and US operations, the Group principally operates in niche infrastructure markets where the overall outlook remains positive.
Our US and UK galvanizing plants have performed well and, notwithstanding strong comparatives in the second half, we anticipate another good year. The US and UK operations will more than offset any weakness from our French business.
In Utilities, notwithstanding a slower start to the year, our UK and US activities are well placed to continue to benefit from the significant investment in the ageing infrastructure of those countries. With strong order books we expect an improved second half performance versus the first. The proposed restructuring of our loss-making non-US Pipe Supports operations will also improve Utilities' profitability.
In the UK, the implementation of the Government's Road Investment Strategy ('RIS') is progressing well and is in the second year of an initial five year plan, which provides certainty of funding through to 2020/21. We therefore have confidence that the Group's road product portfolio will continue to benefit from the increased investment in the UK road infrastructure. Improving trends in the outlook for our international roads businesses are also encouraging.
Overall, although risks remain, 2016 is expected to be a year of good progress.
Operational Review
Infrastructure Products
GBPm Constant
Currency
%
-------------- ---- ----------
+/-
2016 2015 %
---------------------- ------ ------ ---- ----------
Revenue 172.6 163.4 +6 +4
---------------------- ------ ------ ---- ----------
Underlying operating
profit 14.7 12.5 +18 +15
---------------------- ------ ------ ---- ----------
Underlying operating
margin % 8.5 7.6
---------------------- ------ ------
The division is focused on supplying engineered products to the roads and utilities markets in geographies where there is sustained long term investment in infrastructure. Underlying revenues increased 6% to GBP172.6m (2015: GBP163.4m) including a GBP3.2m positive impact from exchange rate movements. Acquisitions contributed GBP1.9m and there was GBP5.0m of lower revenue from restructured operations. Organic revenue growth was GBP9.1m, or 5% at constant currency. Underlying operating profit was GBP14.7m (2015: GBP12.5m), an increase of GBP2.2m, with a positive currency translation impact of GBP0.3m. Acquisitions contributed GBP0.4m and restructured operations an additional GBP0.9m. Underlying operating margin improved to 8.5% (2015: 7.6%).
Roads
GBPm Constant
Currency
%
------------ ---- ----------
+/-
2016 2015 %
---------------------- ----- ----- ---- ----------
Revenue 77.5 64.6 +20 +18
---------------------- ----- ----- ---- ----------
Underlying operating
profit 9.0 7.3 +23 +22
---------------------- ----- ----- ---- ----------
Underlying operating
margin % 11.6 11.3
---------------------- ----- -----
Our Roads division designs, manufactures and installs temporary and permanent safety products for the roads market together with intelligent transport systems ('ITS') which collect data and provide information to road users. We principally serve the UK market, with an international presence in selected geographies with a growing demand for tested safety products. Underlying revenues increased by 20% to GBP77.5m (2015: GBP64.6m), an organic increase of 17% after a currency benefit of GBP1.0m and contribution from acquisitions of GBP0.5m. Underlying operating profit of GBP9.0m was GBP1.7m higher than the prior year (2015: GBP7.3m) including GBP0.1m from acquisitions.
UK
In the UK, the implementation of the Government's RIS continues to develop in line with our expectations. Three Smart Motorway programmes are progressing well, supported by early stage engineering for the next phase of investment. As expected, demand for our temporary safety barrier has been strong and utilisation for this rental product has been high. To expand our product and market offering, on 13 May we completed the acquisition of Safety and Security Barrier Holdings Limited ('Hardstaff Barriers') for a cash consideration of GBP10.6m. Hardstaff Barriers is a privately owned business specialising in the sale and rental of fully tested temporary and permanent pre-cast concrete barriers for site and vehicle protection, and complements our existing range of vehicle restraint systems. It has also developed a quick-deploy, high security perimeter system for the protection of critical infrastructure in vulnerable locations with products supplied across the UK and Europe. The business will complement and further enhance our existing range of hostile vehicle mitigation products.
Demand for our permanent safety barrier application has been lower than the same period last year. This is unsurprising, as it is naturally required towards the end of projects, so demand is expected to increase as the current Smart Motorway and other programmes approach finalisation later this year and into next. Lower demand in the UK has been more than offset by significant exports of both Brifen, our wire rope safety barrier system, and Bristorm, our high containment anti-terrorist perimeter barrier. Our bridge parapet safety barrier also experienced higher volumes compared to the prior period.
Our Variable Message Sign business enjoyed a first half similar to prior year, a commendable performance given the current investment cycle in the RIS. Robust order intake over the last nine months bodes well for a strong second half of the year.
We have experienced considerable success with the continued diversification of our lighting column business away from the curtailing PFI market and into the local authority and contractor market. Higher volumes and margins contributed to an excellent first half.
We have today separately announced the acquisition of Signature Limited ('Signature') for a cash consideration of GBP12.5m. Signature is a UK based business which specialises in the development, manufacture, installation and maintenance of street lighting columns, road sign and traffic management systems. The business will complement and expand our product offering into the UK roads market.
Non-UK
Outside the UK, our Scandinavian business continues to perform well with revenue and profitability marginally ahead of the prior year. The recent weakening of Sterling will assist the export of Group product into this market. On 1 April we acquired FMK Trafikprodukter AB ('FMK') for a cash consideration of GBP2.7m, with additional payments of GBP1.1m due on achievement of certain targets. FMK designs and manufactures safety barriers, noise reduction screens and bridge parapets for the Scandinavian market and is based in Sweden. The acquisition of FMK and its suite of products will accelerate the growth plans of our existing Scandinavian roads business.
In France, our lighting column business operates in a difficult market but increased volumes and profitability. Recent investment in automation continues to reduce costs and enhance service capability.
In India, we continue to invest time and effort into developing our wire rope product for the vast Indian roads market. Results were similar to prior year and the second half will be key for the business with many available opportunities.
After a period of investment and incubation, exciting progress is now being made in both the USA and Australia. In the USA, the growing acceptance of Zoneguard, our steel temporary safety barrier, as an alternative to concrete has provided tangible results and revenue and profitability are ahead year on year. In Australia, we have continued to develop our presence in the direct sale and rental market. In the first half, we invested GBP1.1m in 5.5km of Zoneguard rental pool which will be utilised fully until 2017. We also secured a supply contract for 19.8km of Zoneguard for the New South Wales government for an upgrade to the M1 motorway in the Hunter Valley region. For the first time, our Australian business returned a positive result in the first half and we remain cautiously optimistic regarding its future development.
Utilities
GBPm
------------ ---- ----------
Constant
+/- Currency
2016 2015 % %
---------------------- ----- ----- ---- ----------
Revenue 95.1 98.8 -4 -6
---------------------- ----- ----- ---- ----------
Underlying operating
profit 5.7 5.2 +10 +6
---------------------- ----- ----- ---- ----------
Underlying operating
margin % 6.0 5.3
---------------------- ----- -----
Our Utilities division provides industrial flooring, plastic drainage pipes, security fencing and steel products for energy creation markets across the globe. The requirements for new power generation in emerging economies and replacement of ageing infrastructure in developed countries provide excellent opportunities for the Group's utilities businesses. Underlying revenues were marginally below the prior year at GBP95.1m (2015: GBP98.8m) principally as a result of the restructuring and closure programme of our non-US Pipe Supports business (GBP5.0m lower revenue year on year). Currency translation benefits were GBP2.2m with a further GBP1.4m contribution from recent acquisitions. Organically, underlying revenue fell by GBP2.3m. Underlying operating profit was GBP5.7m (2015: GBP5.2m) including a positive currency impact of GBP0.2m, first time contribution from acquisitions of GBP0.3m and a GBP0.9m benefit from ongoing restructuring.
In the US, our power transmission substation operation performed well, with revenue and operating profit ahead of prior year. The strategy of supplying complete packaging work, structural steel and electrical components, under framework agreements with key US utilities continues to bear fruit. Although underlying volumes remain reasonable, our composite material business experienced a disappointing first half with the absence of key one-off contracts impacting performance. However, quoting opportunities have been significant and we remain hopeful of securing a project in the second half to recover the first half shortfall. In January 2016 we completed the acquisition of the trade and assets of E.T. Techtonics, Inc. ('ETT'), a leading designer of composite bridges for pedestrian, equestrian and light vehicle applications. Cash consideration of $1.8m was paid at acquisition with a further $0.2m due later in 2016. ETT has been integrated into our existing composites business and furthers our strategy of enhancing our product offering to end users within infrastructure markets.
Our Pipe Supports business in the USA experienced improving conditions throughout the first half and delivered revenue and profitability marginally ahead of prior year. To provide additional focus and impetus, a new leadership team was installed in June. Market conditions in both the industrial and engineered hanger markets remain competitive.
In March, we announced the restructuring of our non-US Pipe Supports businesses. Plans to close manufacturing operations in the UK and Thailand along with a sales office in China are well advanced with all manufacturing ceasing by the end of September 2016. We have invested further in the capability of our Indian facility which has become the centre of excellence for the manufacture of pipe support products outside of the USA. The transfer of product and customers to India has progressed well.
As expected, results from our UK utilities businesses were lower than the exceptional performance in the first half of 2015. The timing of project completions in industrial flooring along with the investment cycle of AMP6 in the plastic pipe business were key drivers. The order book in industrial flooring is particularly strong with multi product projects for rail maintenance depots, and supports a much stronger second half outlook.
On 14 July we completed the acquisition of Technocover Limited ('Technocover') for a cash consideration of GBP10.0m. Technocover specialises in the development, manufacture, installation and maintenance of high security access products for the utilities markets. Technocover's suite of products is complementary to our existing market offering and will benefit from being part of the UK Utilities division.
Our security fencing operation performed well and, with further investment planned in the UK rail network along with key infrastructure sites, the outlook remains positive. Despite the removal of tax subsidies in 2015, we were able to extend our supply of solar frames and expect to continue to do so until the end of the year.
The housing market, principally new build, for Birtley and Expamet continues to perform strongly with the supply of lintels and doors ahead of the prior year.
Galvanizing Services
GBPm
------------ ---- ----------
Constant
+/- Currency
2016 2015 % %
---------------------- ----- ----- ---- ----------
Revenue 81.4 69.6 +17 +12
---------------------- ----- ----- ---- ----------
Underlying operating
profit 18.3 13.8 +33 +25
---------------------- ----- ----- ---- ----------
Underlying operating
margin % 22.5 19.8
---------------------- ----- -----
The Galvanizing Services division offers corrosion protection services to the steel fabrication industry with multi-plant facilities in the UK, France and the USA. Underlying revenue increased by 17% to GBP81.4m (2015: GBP69.6m) including positive currency translation of GBP3.2m and GBP4.5m from acquisitions. Organic underlying revenue growth was 6%. Underlying operating profit of GBP18.3m (2015: GBP13.8m) included GBP0.8m currency benefit and GBP1.3m contribution from acquisitions. Organic improvement in profitability was GBP2.4m. Underlying operating margin was a record 22.5% (2015: 19.8%).
USA
Volumes were 15% ahead of the same period in 2015. Unusually, weather conditions in the first quarter were favourable with only minimal disruption to production. Strong volumes were experienced from the alternative energy market, particularly solar where recent medium term legislation to extend tax credits has supported demand. A large LNG plant project, due for completion in the third quarter, has also supported two of our plants. Following approval of a new $305bn five-year highway bill, bridge and highway work has been lower than expected as various states await their allocation of funds before committing to local investment initiatives.
France
In a difficult economic climate the business performed well with volumes increasing year on year by 7%. Despite strong price competition that remains evident in certain sectors and regions, the business delivered profitability only marginally below the prior year with a lower cost base assisting. The resizing of one of our structural steel plants to a jobbing plant with a smaller bath will be completed in July and will aid efficiencies and the cost base further.
UK
Overall volumes were 12% higher year on year. Excluding Premier Galvanizing, acquired in November 2015, underlying volumes were 3% lower principally due to the slower start in our UK utilities businesses and permanent road safety barrier. Premier Galvanizing has been integrated into our UK galvanizing business and performed in line with the acquisition rationale. Investment in our Medway and Walsall plants together with our drive for improved efficiencies resulted in higher margins year on year.
Financial Review
Cash generation and financing
Cash generated from operations during the period was GBP34.0m (2015: GBP26.9m), the improvement on last year reflecting record underlying first half profits.
The working capital outflow in the period, which arises from normal seasonal trading patterns, was GBP4.8m (2015: GBP5.6m) and overall working capital as a percentage of annualised sales improved to 13.3% at 30 June 2016 (2015: 14.4%) with a reduction in debtor days to 58 days (31 December 2015: 62 days). There were no material net impacts on the period end balance from movements in zinc and commodity prices.
Capital expenditure of GBP9.9m (2015: GBP8.4m) represents a multiple of depreciation and amortisation of 1.1 times (2015: 1.0 times), in line with the Group's normal level of spend. Significant purchases during the period included GBP1.1m of Zoneguard temporary road safety barrier in Australia to service rental contracts secured for the second half of the year, and GBP0.7m on development of new products for the UK roads market.
Group net debt at 30 June 2016 was GBP99.5m, an increase of GBP8.0m since 31 December 2015 (GBP91.5m) principally driven by spend of GBP14.2m on three acquisitions completed during the period, and an adverse exchange impact of GBP3.3m resulting from the sharp depreciation in Sterling against the Euro and US Dollar towards the end of June.
Change in net debt
6 months 6 months Year Ended
ended ended 31 December
30 June 30 June 2015
2016 2015 GBPm
GBPm GBPm
------------------------------------------------- --------- --------- -------------
Change in net debt
Operating profit 21.2 9.1 37.3
Non-cash items 10.4 25.7 34.6
------------------------------------------------- --------- --------- -------------
Operating cash flow before movement in
working capital 31.6 34.8 71.9
Net movement in working capital (4.8) (5.6) (2.5)
Change in provisions and employee benefits 7.2 (2.3) (3.3)
------------------------------------------------- --------- --------- -------------
Operating cash flow 34.0 26.9 66.1
Tax paid (6.9) (5.9) (12.6)
Net financing costs paid (1.4) (1.5) (3.0)
Capital expenditure (9.9) (8.4) (16.0)
Proceeds on disposal of non-current assets 0.1 0.9 1.2
------------------------------------------------- --------- --------- -------------
Free cash flow 15.9 12.0 35.7
Dividends paid (5.5) (5.0) (14.1)
Acquisitions (14.2) (1.5) (16.6)
Disposals - - -
Issue of new shares 0.7 1.1 1.2
Amortisation of costs associated with revolving
credit facilities (0.2) (0.2) (0.4)
Satisfaction of long term incentive payments (1.4) (1.0) (0.9)
------------------------------------------------- --------- --------- -------------
Net debt decrease/(increase) (4.7) 5.4 4.9 Effect of exchange rate fluctuations (3.3) 1.4 (0.4) Net debt at the beginning of the period (91.5) (96.0) (96.0) ------------------------------------------------- --------- --------- ------------- Net debt at the end of the period (99.5) (89.2) (91.5) ------------------------------------------------- --------- --------- -------------
The net debt to EBITDA ratio under the Group's principal banking facility was 1.2 times at 30 June 2016 (31 December 2015: 1.2 times), with the acquisition spend during the period being offset by improved operating cash flow. Interest cover was 28.4 times (31 December 2015: 25.0 times).
In May 2016 the Group extended the term of its GBP210m principal revolving credit facility from April 2019 to April 2021, providing the Group with significant headroom against its expected funding requirements for an additional two years, whilst also taking advantage of favourable market conditions to reduce overall costs and amend key terms. Costs incurred of GBP1.0m have been deducted from the carrying value of the loans, as required by accounting standards.
Tax
The underlying effective tax rate for the period was 24.0% (year ended 31 December 2014: 23.8%) and is the estimated effective rate for the full year. The tax charge for the period was GBP6.2m (2015: GBP2.7m), including a GBP1.4m credit in respect of non-underlying charges, principally relating to business reorganisation costs. Cash tax paid in the period was GBP6.9m (2015: GBP5.9m), slightly lower than the underlying income statement tax charge of GBP7.6m (2015: GBP5.9m).
Finance costs
Net financing costs for the period were GBP1.9m (2015: GBP2.0m) with an underlying element of GBP1.3m (2015: GBP1.5m). Underlying operating profit covered net underlying finance costs 25.0 times (2015: 17.5 times). The non-underlying element of finance costs of GBP0.5m (2015: GBP0.5m) represents the net cost of pension fund financing of GBP0.3m and GBP0.2m amortisation of refinancing fees capitalised in the current and prior year.
Non-underlying items
The total non-underlying items charged to operating profit in the Consolidated Income Statement amounted to GBP11.8m (2015: GBP17.2m) and comprise the following:
Income
Statement Cash in Future
Charge the year cash Non-cash
GBPm GBPm GBPm GBPm
------------------------------- ----------- ---------- ------- ---------
Business reorganisation costs 10.2 1.4 4.4 4.4
Acquisition costs 0.7 0.7 - -
Amortisation of acquisition
intangibles 0.9 - - 0.9
------------------------------- ----------- ---------- ------- ---------
11.8 2.1 4.4 5.3
------------------------------- ----------- ---------- ------- ---------
-- Business reorganisation costs of GBP10.2m relate to the closure of the Group's non-US Pipe Supports operations announced in March 2016, comprising closure provisions of GBP9.2m and post-announcement operating losses of GBP1.0m. The cash costs of the closure process are expected to be GBP4.8m, of which GBP0.4m has been spent to date. Manufacturing at facilities in the UK and Thailand is expected to cease by the end of September 2016. Completion of the restructuring plan remains on track for the first half of 2017.
-- Acquisition costs of GBP0.7m relate to three acquisitions completed during the period, further details of which are set out below.
-- Amortisation of acquisition intangibles was GBP0.9m.
Further details are set out in note 6 to the Financial Statements.
Acquisitions
The Group completed three acquisitions during the first six months:
-- In January 2016 we acquired ET Techtonics, Inc., a US-based designer of composite bridge products that complements our existing US composites business, Creative Pultrusions. Consideration for the acquisition was GBP1.2m.
-- In April 2016 we acquired FMK Trafikprodukter AB, a Swedish producer of equipment for the Scandinavian roads markets. FMK has been integrated with our existing ATA business, providing an expanded suite of traffic management products. Consideration for the acquisition was GBP3.8m, of which GBP1.1m is deferred and contingent on future performance and product development targets.
-- In May 2016 we acquired Safety and Security Barrier Holdings Limited, the parent company of Hardstaff Barriers Limited, for a consideration of GBP10.6m. Hardstaff Barriers, based in Nottingham, UK, specialises in temporary and permanent concrete safety barriers for site and vehicle protection.
Intangible assets arising on the acquisitions amounted to GBP14.8m, comprising customer relationships of GBP3.0m, contractual arrangements of GBP1.4m and residual goodwill of GBP10.4m.
Pensions
The Group operates defined benefit pension plans in the UK, France and the USA. The IAS19 deficit of these plans at 30 June 2016 was GBP19.7m, an increase of GBP5.1m from 31 December 2015 (GBP14.6m). The increase was driven by a lower discount rate resulting from a substantial reduction in bond yields at 30 June 2016 following the UK referendum on EU membership, which was only partly offset by reductions in future inflation assumptions and a positive asset performance.
Following the triennial valuation of the Group's UK defined benefit pension arrangements at April 2015, the Group has agreed deficit reduction plans in place that require cash contributions amounting to GBP2.3m for the five years to April 2020. During the period the Group completed the merger of its two UK schemes and continues to be actively engaged in dialogue with the schemes' Trustees with regard to management, funding and investment strategies.
Principal Risks and Uncertainties
The Group has a process for identifying, evaluating and managing the principal risks and uncertainties that it faces, and the directors have reconsidered these principal risks and uncertainties during the period. The result of the UK referendum on future membership of the EU is not expected to have a material impact on the Group as our customers are predominantly served locally and cross border trading does not form a significant proportion of the Group's transactions. The risk of a wider macro-economic effect is addressed by the Group's existing Economic risks. Accordingly it is the Directors' opinion that the principal risks set out on pages 32 to 37 of the Group's Annual Report and Accounts for the year ended 31 December 2015 remain applicable to the current financial year.
Going Concern
The Group continues to meet its day to day working capital and other funding requirements through a combination of long term funding and short term overdraft borrowings. The Group's principal financing facility is a GBP210m multi-currency revolving credit agreement which expires in April 2021 following the extension made during the period.
The Group actively manages its strategic, commercial and day to day operational risks and through its Treasury function operates Board approved financial policies, including hedging policies that are designed to ensure that the Group maintains an adequate level of funding headroom and effectively mitigates foreign exchange and other financial risks.
After making due enquiry, the Directors have reasonable expectation that the Company and its subsidiaries have adequate resources to continue in operational existence for the foreseeable future and therefore adopt the going concern principle.
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared in accordance with IAS 34: Interim Financial Reporting as adopted by the EU;
-- The interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period including any changes in the related party transactions described in the last Annual Report that could do so.
This report was approved by the Board of Directors on 4 August 2016 and is available on the Company's website (www.hsholdings.com) under the 'Latest News' or 'Press Release' sections.
W H Whiteley D W Muir M Pegler Chairman Chief Executive Finance Director
4 August 2016
Condensed Consolidated Income Statement
Six months ended 30 June 2016
6 months ended 6 months ended Year ended 31
30 June 2016 30 June 2015 December 2015
----------------------------------- ------------------------------------ ------------------------------------
Non- Non- Non-
Underlying underlying(*) Total Underlying underlying(*) Total Underlying underlying(*) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------ ----------- -------------- ------ ----------- -------------- ------- ----------- -------------- -------
4,
Revenue 6 254.0 5.3 259.3 233.0 - 233.0 467.5 - 467.5
---------------- ------ ----------- -------------- ------ ----------- -------------- ------- ----------- -------------- -------
4,
Trading profit 6 33.0 (1.0) 32.0 26.3 - 26.3 56.0 - 56.0
Amortisation of
acquisition
intangibles 6 - (0.9) (0.9) - (1.1) (1.1) - (1.6) (1.6)
Business
reorganisation
costs 6 - (9.2) (9.2) - 0.2 0.2 - (0.3) (0.3)
Acquisition
costs 6 - (0.7) (0.7) - (0.4) (0.4) - (1.0) (1.0)
Loss on sale of
properties 6 - - - - (0.1) (0.1) - (0.1) (0.1)
Impairment of
intangible
assets 6 - - - - (15.8) (15.8) - (15.7) (15.7)
---------------- ------ ----------- -------------- ------ ----------- -------------- ------- ----------- -------------- -------
Operating 4,
profit 6 33.0 (11.8) 21.2 26.3 (17.2) 9.1 56.0 (18.7) 37.3
Financial
income 7 0.1 - 0.1 0.2 - 0.2 0.5 - 0.5
Financial
expense 7 (1.4) (0.5) (1.9) (1.7) (0.5) (2.2) (3.5) (1.1) (4.6)
---------------- ------ ----------- -------------- ------ ----------- -------------- ------- ----------- -------------- -------
Profit before
taxation 31.7 (12.3) 19.4 24.8 (17.7) 7.1 53.0 (19.8) 33.2
Taxation (7.6) 1.4 (6.2) (5.9) 3.2 (2.7) (12.6) 3.5 (9.1)
---------------- ------ ----------- -------------- ------ ----------- -------------- ------- ----------- -------------- -------
Profit for the
period
attributable
to
owners of the
parent 24.1 (10.9) 13.2 18.9 (14.5) 4.4 40.4 (16.3) 24.1
---------------- ------ ----------- -------------- ------ ----------- -------------- ------- ----------- -------------- -------
Basic earnings
per
share 9 30.7p 16.8p 24.2p 5.6p 51.7p 30.9p
Diluted
earnings
per share 9 30.4p 16.6p 24.0p 5.6p 51.3p 30.6p
---------------- ------ ----------- -------------- ------ ----------- -------------- ------- ----------- -------------- -------
Dividend per
share
- Interim 10 8.5p 7.1p 7.1p
---------------- ------ ----------- -------------- ------ ----------- -------------- ------- ----------- -------------- -------
*The Group's definition of non-underlying items is included in note 6.
Condensed Consolidated Statement of Comprehensive Income
Six months ended 30 June 2016
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
GBPm GBPm GBPm
-------------------------------------------------------- --------- --------- -------------
Profit for the period 13.2 4.4 24.1
--------------------------------------------------------- --------- --------- -------------
Items that may be reclassified subsequently
to profit or loss
Exchange differences on translation of overseas
operations 21.7 (7.4) 1.8
Exchange differences on foreign currency borrowings
denominated as net investment hedges (4.4) 1.5 (0.4)
Effective portion of changes in fair value of
cash flow hedges - (0.1) (0.1)
Transfers to the Income Statement on cash flow
hedges 0.2 0.2 0.4
Taxation on items that may be reclassified to
profit or loss - - (0.1)
Items that will not be reclassified subsequently
to profit or loss
Actuarial (loss)/gain on defined benefit pension
schemes (5.6) - 5.0
Taxation on items that will not be reclassified
to profit or loss 1.0 - (1.2)
--------------------------------------------------------- --------- --------- -------------
Other comprehensive income for the period 12.9 (5.8) 5.4
--------------------------------------------------------- --------- --------- -------------
Total comprehensive income for the period attributable
to owners of the parent 26.1 (1.4) 29.5
--------------------------------------------------------- --------- --------- -------------
Condensed Consolidated Statement of Financial Position
As at 30 June 2016
30 June 30 June 31 December
2016 2015 2015
Notes GBPm GBPm GBPm
---------------------------------------- ------ -------- -------- ------------
Non-current assets
Intangible assets 148.6 108.1 126.4
Property, plant and equipment 139.4 123.6 129.2
---------------------------------------- ------ -------- -------- ------------
288.0 231.7 255.6
---------------------------------------- ------ -------- -------- ------------
Current assets
Assets held for sale - 1.0 -
Inventories 66.9 59.4 57.7
Trade and other receivables 119.4 100.9 98.8
Cash and cash equivalents 11 28.9 3.9 12.9
---------------------------------------- ------ -------- -------- ------------
215.2 165.2 169.4
---------------------------------------- ------ -------- -------- ------------
Total assets 503.2 396.9 425.0
---------------------------------------- ------ -------- -------- ------------
Current liabilities
Trade and other liabilities (105.9) (91.8) (87.8)
Current tax liabilities (9.9) (9.1) (8.7)
Provisions for liabilities and charges (8.9) (1.0) (0.2)
Interest bearing borrowings 11 (0.3) (0.4) (0.3)
---------------------------------------- ------ -------- -------- ------------
(125.0) (102.3) (97.0)
---------------------------------------- ------ -------- -------- ------------
Net current assets 90.2 62.9 72.4
---------------------------------------- ------ -------- -------- ------------
Non-current liabilities
Other liabilities (0.2) (0.2) (0.2)
Provisions for liabilities and charges (3.0) (2.0) (2.7)
Deferred tax liability (8.1) (4.2) (7.9)
Retirement benefit obligation (19.7) (19.9) (14.6)
Interest bearing borrowings 11 (128.1) (92.7) (104.1)
---------------------------------------- ------ -------- -------- ------------
(159.1) (119.0) (129.5)
---------------------------------------- ------ -------- -------- ------------
Total liabilities (284.1) (221.3) (226.5)
---------------------------------------- ------ -------- -------- ------------
Net assets 219.1 175.6 198.5
---------------------------------------- ------ -------- -------- ------------
Equity
Share capital 19.6 19.6 19.6
Share premium 33.5 32.7 32.8
Other reserves 4.6 4.5 4.6
Translation reserve 19.6 (5.0) 2.3
Hedge reserve - (0.3) (0.2)
Retained earnings 141.8 124.1 139.4
---------------------------------------- ------ -------- -------- ------------
Total equity 219.1 175.6 198.5
---------------------------------------- ------ -------- -------- ------------
Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June 2016
Share Share Other Translation Hedge Retained Total
capital premium reserves reserves reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Opening balance 19.6 32.8 4.6 2.3 (0.2) 139.4 198.5
Comprehensive income
Profit for the period - - - - - 13.2 13.2
Other comprehensive income
for the period - - - 17.3 0.2 (4.6) 12.9
Transactions with owners
recognised directly in
equity
Dividends - - - - - (5.5) (5.5)
Credit to equity of share-based
payments - - - - - 0.7 0.7
Satisfaction of long term
incentive payments - - - - - (1.4) (1.4)
Own shares held by employee - - - - - - -
benefit trust
Shares issued - 0.7 - - - - 0.7
--------------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Closing balance 19.6 33.5 4.6 19.6 - 141.8 219.1
--------------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Six months ended 30 June 2015
Share Share Other Translation Hedge Retained Total
capital premium reserves reserves reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Opening balance 19.5 31.7 4.5 0.9 (0.4) 125.3 181.5
Comprehensive income
Profit for the period - - - - - 4.4 4.4
Other comprehensive income
for the period - - - (5.9) 0.1 - (5.8)
Transactions with owners
recognised directly in
equity
Dividends - - - - - (5.0) (5.0)
Credit to equity of share-based
payments - - - - - 0.4 0.4
Satisfaction of long term
incentive payments - - - - - (1.9) (1.9)
Own shares held by employee
benefit trust - - - - - 0.9 0.9
Shares issued 0.1 1.0 - - - - 1.1
--------------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Closing balance 19.6 32.7 4.5 (5.0) (0.3) 124.1 175.6
--------------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Year ended 31 December 2015
Share Share Other Translation Hedge Retained Total
capital premium reserves reserves reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Opening balance 19.5 31.7 4.5 0.9 (0.4) 125.3 181.5
Comprehensive income
Profit for the year - - - - - 24.1 24.1
Other comprehensive income
for the period - - - 1.4 0.2 3.8 5.4
Transactions with owners
recognised directly in
equity
Dividends - - - - - (14.1) (14.1)
Credit to equity of share-based
payments - - - - - 0.9 0.9
Satisfaction of long term
incentive payments - - - - - (1.8) (1.8)
Own shares held by employee
benefit trust - - - - - 0.9 0.9
Transfer between reserves - - 0.1 - - (0.1) -
Tax taken directly to
the Consolidated
Statement of Changes in
Equity - - - - - 0.4 0.4
Shares issued 0.1 1.1 - - - - 1.2
--------------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Closing balance 19.6 32.8 4.6 2.3 (0.2) 139.4 198.5
--------------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Other reserves represents the premium on shares issued in exchange for shares of subsidiaries acquired and GBP0.2m capital redemption reserve.
Condensed Consolidated Statement of Cash Flows
Six months ended 30 June 2016
Year ended
6 months ended 6 months ended 31 December
30 June 2016 30 June 2015 2015
Notes GBPm GBPm GBPm
--------------------------------------- ------ --------------- --------------- -------------
Profit before tax 19.4 7.1 33.2
Add back net financing costs 1.8 2.0 4.1
--------------------------------------- ------ --------------- --------------- -------------
Operating profit 21.2 9.1 37.3
Adjusted for non-cash items:
Share-based payments 0.7 0.4 0.9
Loss on disposal of non-current
assets 0.1 0.1 -
Depreciation 8.2 7.9 15.5
Amortisation of intangible assets 1.4 1.5 2.5
Impairment of non-current assets - 15.8 15.7
--------------------------------------- ------ --------------- --------------- -------------
10.4 25.7 34.6
--------------------------------------- ------ --------------- --------------- -------------
Operating cash flow before movement
in working capital 31.6 34.8 71.9
(Increase)/decrease in inventories (4.0) (3.0) 1.1
Increase in receivables (14.3) (9.4) (3.0)
Increase/(decrease) in payables 13.5 6.8 (0.6)
Increase/(decrease) in provisions
and employee benefits 7.2 (2.3) (3.3)
--------------------------------------- ------ --------------- --------------- ------------- Net movement in working capital and provisions 2.4 (7.9) (5.8) --------------------------------------- ------ --------------- --------------- ------------- Cash generated by operations 34.0 26.9 66.1 Income taxes paid (6.9) (5.9) (12.6) Interest paid (1.5) (1.7) (3.5) --------------------------------------- ------ --------------- --------------- ------------- Net cash from operating activities 25.6 19.3 50.0 Interest received 0.1 0.2 0.5 Proceeds on disposal of non-current assets 0.1 0.9 1.2 Purchase of property, plant and equipment (9.2) (8.0) (14.8) Purchase of intangible assets (0.7) (0.4) (1.2) Acquisitions of subsidiaries (14.2) (1.5) (16.6) --------------------------------------- ------ --------------- --------------- ------------- Net cash used in investing activities (23.9) (8.8) (30.9) Issue of new shares 0.7 1.1 1.2 Purchase of shares for employee benefit trust (1.4) (1.0) (0.9) Dividends paid 10 (5.5) (5.0) (14.1) Costs associated with refinancing (1.0) - - New loans and borrowings 31.3 15.0 46.0 Repayment of loans and borrowings (11.6) (23.1) (45.0) Repayment of obligations under finance leases - - (0.1) --------------------------------------- ------ --------------- --------------- ------------- Net cash raised from/(used in) financing activities 12.5 (13.0) (12.9) --------------------------------------- ------ --------------- --------------- ------------- Net increase/(decrease) in cash 14.2 (2.5) 6.2 Cash at the beginning of the period 12.9 6.7 6.7 Effect of exchange rate fluctuations 1.8 (0.3) - --------------------------------------- ------ --------------- --------------- ------------- Cash at the end of the period 11 28.9 3.9 12.9 --------------------------------------- ------ --------------- --------------- -------------
1. Basis of preparation
Hill & Smith Holdings PLC is incorporated in the UK. The Condensed Consolidated Interim Financial Statements of the Company have been prepared on the basis of International Financial Reporting Standards, as adopted by the EU ('Adopted IFRSs') that are effective at 4 August 2016 and in accordance with IAS34: Interim Financial Reporting, comprising the Company, its subsidiaries and its interests in jointly controlled entities (together referred to as the 'Group').
As required by the Disclosure and Transparency Rules of the Financial Services Authority, the Condensed Consolidated Interim Financial Statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published Consolidated Financial Statements for the year ended 31 December 2015 (these statements do not include all of the information required for full Annual Financial Statements and should be read in conjunction with the full Annual Report for the year ended 31 December 2015). In 2016 the following amendments had been endorsed by the EU, became effective and therefore were adopted by the Group:
- Amendments to IFRS 11 - Accounting for Acquisitions of Interests in Joint Operations.
- Amendments to IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation.
- Amendments to IAS 27 - Equity Method in Separate Financial Statements. - Annual improvements to IFRSs 2012 - 2014. - Disclosure Initiative - Amendments to IAS 1.
The following standards and interpretations, which were not effective as at 30 June 2016 and have not been early adopted by the Group, will be adopted in future accounting periods:
- Disclosure Initiative - Amendments to IAS 7 (effective 1 January 2017).
- Amendments to IAS 12 - Recognition of Deferred Tax Assets for Unrealised Losses (effective 1 January 2017).
- IFRS 9 'Financial Instruments' (effective 1 January 2018). - IFRS 15 'Revenue from Contracts with Customers' (effective 1 January 2018). - IFRS 16 'Leases' (effective 1 January 2019).
The comparative figures for the financial year ended 31 December 2015 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor (i) was unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
These Condensed Consolidated Interim Financial Statements have not been audited or reviewed by an auditor pursuant to the Auditing Practices Board's Guidance on Financial Information.
The Financial Statements are prepared on the going concern basis. This is considered appropriate given that the Company and its subsidiaries have adequate resources to continue in operational existence for the foreseeable future.
2. Financial risks, estimates, assumptions and judgements
The preparation of the Condensed Consolidated Interim Financial Statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from estimates.
In preparing these Condensed Consolidated Interim Financial Statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements as at and for the year ended 31 December 2015.
3. Exchange rates
The principal exchange rates used were as follows:
6 months ended 6 months ended Year ended
30 June 2016 30 June 2015 31 December
2015
------------------- ------------------- -------------------
Average Closing Average Closing Average Closing
------------------------------- -------- --------- -------- --------- -------- ---------
Sterling to Euro (GBP1 = EUR) 1.28 1.21 1.37 1.41 1.38 1.36
Sterling to US Dollar (GBP1
= USD) 1.43 1.34 1.52 1.57 1.53 1.48
Sterling to Thai Bhat (GBP1
= THB) 50.79 47.15 50.23 53.16 52.49 53.50
Sterling to Swedish Krona
(GBP1 = SEK) 11.94 11.38 12.76 13.05 12.90 12.50
------------------------------- -------- --------- -------- --------- -------- ---------
4. Segmental information
The Group has three reportable segments which are Infrastructure Products - Roads, Infrastructure Products - Utilities and Galvanizing Services. Several operating segments that have similar economic characteristics have been aggregated into these reporting segments.
Income Statement
6 months ended 30 June 6 months ended 30 June
2016 2015
--------------------------- ----------------------------------- -----------------------------------
Underlying Underlying Underlying Underlying
revenue* Result result* revenue* Result result*
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ----------- --------- ----------- ----------- --------- -----------
Infrastructure Products -
Utilities 95.1 (4.6) 5.7 98.8 (11.9) 5.2
Infrastructure Products -
Roads 77.5 8.1 9.0 64.6 7.1 7.3
--------------------------- ----------- --------- ----------- ----------- --------- -----------
Infrastructure Products -
Total 172.6 3.5 14.7 163.4 (4.8) 12.5
Galvanizing Services 81.4 17.7 18.3 69.6 13.9 13.8
--------------------------- ----------- --------- ----------- ----------- --------- -----------
Total Group 254.0 21.2 33.0 233.0 9.1 26.3
--------------------------- ----------- -----------
Net financing costs (1.8) (1.3) (2.0) (1.5)
--------------------------- ----------- --------- ----------- ----------- --------- -----------
Profit before taxation 19.4 31.7 7.1 24.8
Taxation (6.2) (7.6) (2.7) (5.9)
--------------------------- ----------- --------- ----------- ----------- --------- -----------
Profit after taxation 13.2 24.1 4.4 18.9
--------------------------- ----------- --------- ----------- ----------- --------- -----------
Year ended 31 December
2015
------------------------------------- -----------------------------------
Underlying Underlying
revenue* Result result*
GBPm GBPm GBPm
------------------------------------- ----------- --------- -----------
Infrastructure Products - Utilities 193.9 (7.1) 10.5
Infrastructure Products - Roads 131.6 15.6 16.0
------------------------------------- ----------- --------- -----------
Infrastructure Products - Total 325.5 8.5 26.5
Galvanizing Services 142.0 28.8 29.5
------------------------------------- ----------- --------- -----------
Total Group 467.5 37.3 56.0
------------------------------------- -----------
Net financing costs (4.1) (3.0)
------------------------------------- ----------- --------- -----------
Profit before taxation 33.2 53.0
Taxation (9.1) (12.6)
------------------------------------- ----------- --------- -----------
Profit after taxation 24.1 40.4
------------------------------------- ----------- --------- -----------
* Underlying revenue and underlying result are stated before Non-underlying items as defined in note 6, and are the measures of segment revenue and profit used by the Chief Operating Decision Maker, who is the Chief Executive. The Result columns are included as additional information.
Galvanizing Services provided GBP2.4m revenues to Infrastructure Products - Roads (six months ended 30 June 2015: GBP2.7m, the year ended 31 December 2015: GBP5.2m) and GBP0.6m revenues to Infrastructure Products - Utilities (six months ended 30 June 2015: GBP0.9m, the year ended 31 December 2015: GBP1.6m). Infrastructure Products - Utilities provided GBP2.0m revenues to Infrastructure Products - Roads (six months ended 30 June 2015: GBP1.9m, the year ended 31 December 2015: GBP3.0m). These internal revenues, along within revenues generated within each segment, have been eliminated on consolidation.
The Group presents the analysis of revenue by geographical market, irrespective of origin:
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2015
2016 2015 GBPm
GBPm GBPm
-------------------------- --------- --------- -------------
UK 123.7 121.3 235.8
Rest of Europe 44.3 38.0 73.4
North America 74.5 65.6 135.0
Asia and the Middle East 12.4 7.6 20.5
Rest of World 4.4 0.5 2.8
-------------------------- --------- --------- -------------
Total reported revenue 259.3 233.0 467.5
Non-underlying revenue (5.3) - -
-------------------------- --------- --------- -------------
Underlying revenue 254.0 233.0 467.5
-------------------------- --------- --------- -------------
5. Operating profit
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2015
2016 2015 GBPm
GBPm GBPm
---------------------------------------- --------- --------- -------------
Revenue 259.3 233.0 467.5
Cost of sales (161.3) (148.6) (300.6)
---------------------------------------- --------- --------- -------------
Gross profit 98.0 84.4 166.9
Distribution costs (12.3) (10.8) (23.2)
Administrative expenses (65.0) (65.0) (107.6)
Loss on disposal of non-current assets (0.1) (0.1) -
Other operating income 0.6 0.6 1.2
---------------------------------------- --------- --------- -------------
Operating profit 21.2 9.1 37.3
---------------------------------------- --------- --------- -------------
6. Non-underlying items
Non-underlying items are disclosed separately in the Consolidated Income Statement where the quantum, nature or volatility of such items would otherwise distort the underlying trading performance of the Group. The following are included by the Group in its assessment of non-underlying items:
- Gains or losses and post-announcement trading arising on disposal, closure, restructuring or reorganisation of businesses that do not meet the definition of discontinued operations. - Amortisation of intangible fixed assets arising on acquisitions. - Expenses associated with acquisitions. - Impairment charges in respect of tangible or intangible fixed assets. - Changes in the fair value of derivative financial instruments.
- Significant past service items or curtailments and settlements relating to defined benefit pension obligations resulting from material changes in the terms of the schemes.
- Net financing costs or returns on defined benefit pension obligations. - Costs incurred as part of significant refinancing activities.
The tax effect of the above is also included.
Details in respect of the non-underlying items recognised in the current period and prior year are set out below.
Six months ended 30 June 2016
Non-underlying items included in operating profit comprise the following:
- Business reorganisation costs of GBP9.2m. On 9 March 2016 the Group announced its intention to exit its non-US Pipe Supports business, involving cessation of manufacturing in the UK and Thailand, the closure of its sales office in China and the transfer of work to its facility in India for which the Group intends to seek a buyer when the transfer is complete. A provision of GBP9.2m was made in respect of the estimated costs of closure.
Prior to the announcement of the closure, the trading results of the non-US Pipe Supports operations, including those of the Indian business, have been reported as underlying items and include revenue of GBP3.0m and an operating loss of GBP0.5m. Following the announcement, the non-US Pipe Supports results have been reported as non-underlying items so as not to distort the Group's underlying trading performance. The post-announcement results of the non-US Pipe Supports businesses are set out below:
Total
GBPm
------------------------- ------
Revenue 5.3
Cost of sales (4.0)
------------------------- ------
Gross profit 1.3
Distribution costs (0.1)
Administrative expenses (2.2)
------------------------- ------
Operating loss (1.0)
------------------------- ------
In the six months ended 30 June 2015 the results of the non-US Pipe Supports operations included revenue of GBP7.1m and an operating loss of GBP1.7m. For the year ended 31 December 2015 those businesses reported revenue of GBP16.1m and an operating loss of GBP3.0m.
- Amortisation of acquired intangible fixed assets of GBP0.9m.
- Acquisition expenses of GBP0.7m principally relating to acquisitions made by the Group during the period.
Non-underlying items included in financial expense represent the net financing cost on pension obligations of GBP0.3m and a GBP0.2m charge in respect of amortisation of costs associated with refinancing.
Year ended 31 December 2015
Non-underlying items included in operating profit comprised the following:
- Amortisation of acquired intangible fixed assets of GBP1.6m.
- Acquisition expenses of GBP1.0m principally relating to acquisitions made by the Group during the prior year.
- Losses on disposal of properties of GBP0.1m. - Net costs in respect of business reorganisations of GBP0.3m, reflecting costs associated with restructuring of certain of the Group's subsidiaries together with the net release of provisions made in previous years in respect of site closures following a favourable settlement during the year of the exposures identified.
- An impairment charge of GBP15.7m in respect of goodwill and acquired intangible assets relating to The Paterson Group (part of the Infrastructure Products - Utilities segment).
Non-underlying items included in financial expense represent the net financing cost on pension obligations of GBP0.7m and a GBP0.4m charge in respect of amortisation of costs associated with refinancing.
7. Net financing costs
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2015
2016 2015 GBPm
GBPm GBPm
---------------------------------------------- --------- --------- -------------
Interest on bank deposits 0.1 0.2 0.5
---------------------------------------------- --------- --------- -------------
Financial income 0.1 0.2 0.5
---------------------------------------------- --------- --------- -------------
Interest on bank loans and overdrafts 1.4 1.7 3.5
Interest on finance leases and hire purchase - - -
contracts
---------------------------------------------- --------- --------- -------------
Total interest expense 1.4 1.7 3.5
Financial expenses related to refinancing 0.2 0.2 0.4
Interest cost on net pension scheme deficit 0.3 0.3 0.7
---------------------------------------------- --------- --------- -------------
Financial expense 1.9 2.2 4.6
---------------------------------------------- --------- --------- -------------
Net financing costs 1.8 2.0 4.1
---------------------------------------------- --------- --------- -------------
8. Taxation
Tax has been provided on the underlying profit at the estimated effective rate of 24.0% (2015: 24.0%) for existing operations for the full year.
9. Earnings per share
The weighted average number of ordinary shares in issue during the period was 78.5m, diluted for the effect of outstanding share options 79.2m (six months ended 30 June 2015: 78.0m and 78.8m diluted, the year ended 31 December 2015: 78.1m and 78.8m diluted).
Underlying earnings per share are shown below as the Directors consider that this measurement of earnings gives valuable information on the underlying performance of the Group:
6 months ended 6 months ended Year ended
30 June 2016 30 June 2015 31 December
2015
-------------------- -------------------- --------------------
Pence Pence Pence
per share GBPm per share GBPm per share GBPm
----------------------------- ----------- ------- ----------- ------- ----------- -------
Basic earnings 16.8 13.2 5.6 4.4 30.9 24.1
Non-underlying items(*) 13.9 10.9 18.6 14.5 20.8 16.3
----------------------------- ----------- ------- ----------- ------- ----------- -------
Underlying earnings 30.7 24.1 24.2 18.9 51.7 40.4
----------------------------- ----------- ------- ----------- ------- ----------- -------
Diluted earnings 16.6 13.2 5.6 4.4 30.6 24.1
Non-underlying items(*) 13.8 10.9 18.4 14.5 20.7 16.3
----------------------------- ----------- ------- ----------- ------- ----------- -------
Underlying diluted earnings 30.4 24.1 24.0 18.9 51.3 40.4
----------------------------- ----------- ------- ----------- ------- ----------- -------
(*) Non-underlying items as detailed in note 6.
10. Dividends
Dividends paid in the period were the prior year's interim dividend of GBP5.5m (2014: GBP5.0m). The final dividend for 2015 of GBP10.7m (2015: GBP9.1m) was paid on 1 July 2016. Dividends declared after the Balance Sheet date are not recognised as a liability, in accordance with IAS10. The Directors have proposed an interim dividend for the current year of GBP6.7m, 8.5p per share
(2015: GBP5.5m, 7.1p per share), which will be paid on 5 January 2017 to shareholders on the register on 25 November 2016.
11. Analysis of net debt
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2015
2016 2015 GBPm
GBPm GBPm
------------------------------------------- --------- --------- -------------
Cash and cash equivalents 28.9 3.9 12.9
Interest bearing loans and borrowings due
within one year (0.3) (0.4) (0.3)
Interest bearing loans and borrowings due
after more than one year (128.1) (92.7) (104.1)
------------------------------------------- --------- --------- -------------
Net debt (99.5) (89.2) (91.5)
------------------------------------------- --------- --------- -------------
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2015
2016 2015 GBPm
GBPm GBPm
--------------------------------------------------- --------- --------- -------------
Change in net debt
Operating profit 21.2 9.1 37.3
Non-cash items 10.4 25.7 34.6
--------------------------------------------------- --------- --------- -------------
Operating cash flow before movement in working
capital 31.6 34.8 71.9
Net movement in working capital (4.8) (5.6) (2.5)
Change in provisions and employee benefits 7.2 (2.3) (3.3)
--------------------------------------------------- --------- --------- -------------
Operating cash flow 34.0 26.9 66.1
Tax paid (6.9) (5.9) (12.6)
Net financing costs paid (1.4) (1.5) (3.0)
Capital expenditure (9.9) (8.4) (16.0)
Proceeds on disposal of non-current assets 0.1 0.9 1.2
--------------------------------------------------- --------- --------- -------------
Free cash flow 15.9 12.0 35.7
Dividends paid (note 10) (5.5) (5.0) (14.1)
Acquisitions (14.2) (1.5) (16.6)
Amortisation of costs associated with refinancing
revolving credit facilities (0.2) (0.2) (0.4)
Issue of new shares 0.7 1.1 1.2
Purchase of shares for employee benefit trust (1.4) (1.0) (0.9)
--------------------------------------------------- --------- --------- -------------
Net debt (increase)/decrease (4.7) 5.4 4.9
Effect of exchange rate fluctuations (3.3) 1.4 (0.4)
Net debt at the beginning of the period (91.5) (96.0) (96.0)
--------------------------------------------------- --------- --------- -------------
Net debt at the end of the period (99.5) (89.2) (91.5)
--------------------------------------------------- --------- --------- -------------
12. Financial instruments
The table below sets out the Group's accounting classification of its financial assets and liabilities and their fair values as at 30 June. The fair values of all financial assets and liabilities are not materially different to the carrying values.
Designated Total
at fair Amortised carrying Fair
value cost value value
GBPm GBPm GBPm GBPm
-------------------------------------------- ----------- ---------- ---------- --------
Cash and cash equivalents - 28.9 28.9 28.9
Interest bearing loans due within one year - (0.3) (0.3) (0.3)
Interest bearing loans due after more than
one year - (128.1) (128.1) (128.1)
Derivative assets - - - -
Derivative liabilities (0.3) - (0.3) (0.3)
Other assets - 112.3 112.3 112.3 Other liabilities - (90.7) (90.7) (90.7) -------------------------------------------- ----------- ---------- ---------- -------- Total at 30 June 2016 (0.3) (77.9) (78.2) (78.2) -------------------------------------------- ----------- ---------- ---------- --------
Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
- Level 1 : unadjusted quoted prices in active markets for identical assets or liabilities.
- Level 2 : inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either as a direct price or indirectly derived from prices.
- Level 3 : inputs for the asset or liability that are not based on observable market data.
Level Level Level Total
1 2 3 GBPm
GBPm GBPm GBPm
---------------------------------- ------- ------ ------ ------
Derivative financial assets - - - -
Derivative financial liabilities - (0.3) - (0.3)
---------------------------------- ------- ------ ------ ------
At 30 June 2016 - (0.3) - (0.3)
---------------------------------- ------- ------ ------ ------
At 30 June 2016 the Group did not have any liabilities classified at Level 1 or Level 3 in the fair value hierarchy. There have been no transfers in any direction in the period.
The Group determines Level 2 fair values for its financial instruments based on broker quotes, tested for reasonableness by discounting expected future cash flows using market interest rates for a similar instrument at the measurement date.
13. Acquisitions
On 13 May 2016 the Group acquired the share capital of Safety and Security Barrier Holdings Limited, the parent company of Hardstaff Barriers Limited. Details of this acquisition are as follows:
Pre acquisition Policy alignment
carrying and fair
amount value adjustments Total
Safety and Security Barrier Holdings Limited GBPm GBPm GBPm
-------------------------------------------------- ---------------- ------------------- ------
Intangible assets - 4.4 4.4
Property, plant and equipment 1.9 (0.7) 1.2
Inventories 0.2 - 0.2
Current assets 0.7 - 0.7
Cash and cash equivalents 0.3 - 0.3
-------------------------------------------------- ---------------- ------------------- ------
Total assets 3.1 3.7 6.8
-------------------------------------------------- ---------------- ------------------- ------
Current liabilities (0.8) (0.1) (0.9)
Corporation tax (0.2) (0.7) (0.9)
Deferred tax (0.3) (0.7) (1.0)
-------------------------------------------------- ---------------- ------------------- ------
Total liabilities (1.3) (1.5) (2.8)
-------------------------------------------------- ---------------- ------------------- ------
Net assets 1.8 2.2 4.0
-------------------------------------------------- ---------------- ------------------- ------
Consideration
Consideration in the year 10.6
-------------------------------------------------- ---------------- ------------------- ------
Goodwill 6.6
-------------------------------------------------- ---------------- ------------------- ------
Cash flow effect
Consideration 10.6
Deferred consideration (0.1)
Cash and cash equivalents received in the
business (0.3)
-------------------------------------------------- ---------------- ------------------- ------
Net cash consideration shown in the Consolidated
Statement of Cash Flows 10.2
-------------------------------------------------- ---------------- ------------------- ------
Contractual and customer relationships have been recognised as specific intangible assets as a result of the acquisition. The residual goodwill arising primarily represents the assembled workforce, market share and geographical advantages afforded to the Group. Policy alignment and fair value adjustments principally relate to harmonisation with Group IFRS accounting policies, including the provisional application of fair values on acquisition.
Post acquisition the acquired business has contributed GBP0.5m revenue and GBP0.1m underlying operating profit, which are included in the Group's Consolidated Income Statement. If the acquisition had been made on 1 January 2016, the Group's results for the period would have shown underlying revenue of GBP255.1m and underlying operating profit of GBP33.2m.
The Group also made two smaller acquisitions during the period:
- The share capital of ET Techtonics, Inc. ('ETT'), acquired in January 2016; and
- The share capital of FMK Trafikprodukter AB ('FMK'), acquired in April 2016.
Details of these acquisitions are set out below:
Policy
alignment
ETT FMK and
Pre acquisition Pre acquisition fair
carrying carrying value
amount amount adjustments Total
GBPm GBPm GBPm GBPm
-------------------------------------------------- ----------------- ----------------- ------------- ------
Intangible assets - - - -
Property, plant and equipment - - - -
Inventories - 1.3 (0.1) 1.2
Current assets 0.1 0.2 - 0.3
Cash and cash equivalents - - - -
-------------------------------------------------- ----------------- ----------------- ------------- ------
Total assets 0.1 1.5 (0.1) 1.5
-------------------------------------------------- ----------------- ----------------- ------------- ------
Current liabilities - (0.2) - (0.2)
Deferred tax - - - -
-------------------------------------------------- ----------------- ----------------- ------------- ------
Total liabilities - (0.2) - (0.2)
-------------------------------------------------- ----------------- ----------------- ------------- ------
Net assets 0.1 1.3 (0.1) 1.3
-------------------------------------------------- ----------------- ----------------- -------------
Consideration
Consideration in the year 5.1
-------------------------------------------------- ----------------- ----------------- ------------- ------
Goodwill 3.8
-------------------------------------------------- ----------------- ----------------- ------------- ------
Cash flow effect
Consideration 5.1
Deferred consideration (0.3)
Contingent consideration (0.8)
Cash and cash equivalents received in the -
businesses
-------------------------------------------------- ----------------- ----------------- ------------- ------
Net cash consideration shown in the Consolidated Statement of Cash Flows 4.0 -------------------------------------------------- ----------------- ----------------- ------------- ------
The goodwill arising primarily represents the market share and know-how afforded to the Group. Policy alignment and fair value adjustments principally relate to harmonisation with Group IFRS accounting policies, including the provisional application of fair values on acquisition. Contingent consideration relates to the acquisition of FMK and is payable dependent on the achievement of performance and product development targets.
14. Subsequent events
On 13 July 2016 the Group acquired the share capital of Technocover Limited ('Technocover') for a consideration of GBP10.0m. Based in the UK, Technocover specialises in the development, manufacture, installation and maintenance of high security access products for the utilities market.
On 3 August 2016 the Group acquired the share capital of Signature Limited ('Signature') for a consideration of GBP12.5m. Based in the UK, Signature specialises in the development and manufacture of street lighting columns and traffic management systems for the UK roads market.
Full details of these acquisitions will be included in the Group's 2016 Annual Report & Accounts.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DXLFBQVFXBBV
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