6th Mar 2007 07:02
Hill & Smith Hldgs PLC06 March 2007 PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 Hill & Smith Holdings PLC ("the Group") announces an increase in revenue,profits and dividends for the year ended 31 December 2006. Revenue increased by10.4 per cent to £306.0m and profit before taxation rose by 9.4 per cent to£17.3m. Underlying profit before taxation grew by 17.6 per cent to £18.5m withdividends 20% higher at 7.2p per share. Basic earnings per share were 11.9%lower at 19.8p but underlying earnings per share* increased by 15.3% to 20.7p. Highlights Year ended Year ended 31 December 31 December 2006 2005 Revenue £306.0m £277.3mProfit before taxation £17.3m £15.8mUnderlying profit before taxation* £18.5m £15.7mBasic earnings per share 19.8p 22.5pUnderlying earnings per share* 20.7p 17.9pDividends per share 7.2p 6.0p * Results stated before reorganisation and property items The Group's focus on investing in more value-added products and services led toa further improvement in its operating margins. In particular, underlyingoperating profits at the Group's Infrastructure Products division increased by24.9 per cent. The continuing plans for spending on transport infrastructuremean that the division's markets remain strong. During 2006, Hill & Smith invested £29.5m in acquisitions, capital expenditureand product development and returns are already evident from this investment,including greater efficiency and improved market positioning. The focus of theinvestment continues to be in core areas where the Group is a market leader,with advantages in terms of innovation and cost. During the year, the Group raised £26.8m net of expenses through a placing andopen offer, to provide a basis for further growth and investment. David Winterbottom, Chairman, said: "The current trading period has started inline with our expectations and, subject to market conditions remainingfavourable, I look forward to further progress in 2007." Further information: Hill & Smith Holdings PLCDavid Grove, Chief Executive0121 704 743007973 325667 Freshwater UKEdward Carter/Anna McNeil0121 633 777507770 378097 CHAIRMAN'S STATEMENT General I am pleased to be able to report another year of increased profitability andprogress for the Group. In the year ended 31 December 2006 revenue increased by10.4% to £306.0 million (2005: £277.3 million) and profit before taxationincreased by 9.4% to £17.3 million (2005: £15.8 million). In the absence of lastyear's one-off tax benefits, earnings per share fell by 11.9% to 19.8p (2005:22.5p). The Group regards its underlying results, which exclude the effects of businessreorganisation and property items, as the most appropriate measure of itsfinancial performance. Underlying operating profit increased by 15.8% to £22.7million (2005: £19.6 million) on revenue of £306.0 million (2005: £277.3million). Underlying profit before taxation increased by 17.6% to £18.5 million(2005: £15.7 million). There was a further improvement in underlying earningsper share to 20.7p in 2006 (2005: 17.9p), representing an increase of 15.3%. Dividends If approved by shareholders, the proposed final dividend of 4.2p per share willresult in a total dividend for the year of 7.2p, which is 20.0% ahead of lastyear (2005: 6.0p). Our progressive policy leaves the dividend covered 2.9 timesby underlying earnings. Operations Our focus on investing in more value-added products and services led to afurther improvement in the Group's underlying operating margin to 7.4% (2005:7.1%). The performance of the Infrastructure Products division was excellent, withunderlying operating profit increasing by 24.9%. This division has been the mainbeneficiary of our investment programme in recent years and it continues toprovide excellent returns. The Building and Construction Products division was hit by losses in our Expressconcrete reinforcement business which led to a fall in the division's underlyingoperating profit of 20.4% compared to 2005. Losses have now been eliminated atthis operation, which returned to profitability in the last quarter of the year. Underlying operating profit in the small Industrial Products division movedahead by 47.3%. This performance was primarily attributable to the increasingprofitability of our expanding Pipe Supports operation in Thailand. Funding To help finance our acquisition and organic growth plans, in October 2006 theGroup raised some £26.8 million, net of expenses, by means of a Placing and OpenOffer of new ordinary shares. This was well supported by existing shareholdersand also introduced some new institutional holders. Acquisitions In February 2006 we acquired Counters & Accessories Limited. This businessdesigns and supplies traffic data recording equipment primarily for the publicsector and complements our existing Techspan business in the growing transportinformation technology sector. In October we also acquired Metnor Galvanizing Limited, together with itsfreehold property. This acquisition will give our existing galvanizingbusinesses access to a long bath facility which will strengthen our marketposition. Disposals In line with our established corporate strategy, in October two of our non-coreactivities, W&S Allely Limited and Eden Material Services (UK) Limited, weresold at approximately net asset value. Zinkinvent The Group has owned 33.3% of this company since May 2005. As we announced on 1March 2007, we have entered into an agreement with some of the other principalshareholders to acquire further shares in Zinkinvent, subject to approval byHill & Smith's shareholders. If approved, this transaction will result inZinkinvent becoming a subsidiary of the Group, trading through Vista NV, aleading galvanizer with facilities in mainland Europe and the USA. Employees Our innovative and entrepreneurial culture represents a calculated response tothe competitive challenges we face and I would like to thank all our employeesfor their support and efforts in meeting these challenges during the year. Board Changes As I announced last year, and following ten years as your Chairman, I will beretiring at the close of the 2007 AGM. I am proud to have made a contribution tothe substantial progress achieved by the Group during my tenure and would liketo thank my colleagues for all their support during this period. The Group is ina healthy position and I wish the new Chairman, David Grove, and his team, everysuccess in the future. I would also like to congratulate Derek Muir, who willtake over the position of Chief Executive from David Grove, following a careerspanning nearly 20 years with the Group. I would also like to extend a warm welcome to Clive Snowdon who will join theBoard as a Non-Executive Director in May 2007. Outlook The current trading period has started in line with our expectations and,subject to market conditions remaining favourable, I look forward to anotherprogressive performance in 2007. David WinterbottomChairman 6 March 2007 OPERATIONAL REVIEW Overview 2006 was another successful year for the Group during which we achieved all ofour key strategic objectives, with further additions to our ever growing productportfolio supplying expanding markets both in the U.K. and, more recently,overseas. Infrastructure Products Group (IPG) Our largest division continues to be the main engine for profit growth with itsactive product development programme generating organic growth, complemented byselected acquisitions. Revenue increased to £117.4 million, 9.3% higher than in the previous year. Theunderlying operating profit increased by 24.9% to £16.2 million (2005: £13.0million). Hill & Smith's new range of vehicle restraint systems continued to enhance itsmarket leadership with increased demand for its 'Flexbeam' crash barrier rangeof products. The Brifen wire rope brand made further progress in the U.S.A.where it is now used in 25 states as the system of choice to prevent cross-overaccidents. During the year we were awarded various contracts on the M1 wideningscheme. We anticipate these will generate substantial revenue opportunities forour Flexbeam, Varioguard and Multiplate products over the next three years.Berry Systems also had another very successful year as it continued to provideinnovative solutions for our off-highway customers. A new technology division within IPG has been created following the recentacquisitions of Techspan Systems and Counters & Accessories. We are now able tooffer a range of electronic highway information and vehicle logging anddetection systems to complement our more traditional metal based products, tothe same customer base. In December Techspan was one of three successful biddersfor a contract with the Highways Agency worth in total approximately £180million over four years from 2007, for the supply and installation of variablemessage signs. Counters & Accessories has now been successfully integrated intothe Group and a new management team has been created following the retirement ofthe previous owner. We are combining these excellent engineering teams toprovide new solutions to help reduce congestion on the nation's roads. Varley & Gulliver again delivered an excellent performance despite a downturn inexports. Further new products, including our fully tested high containmentparapet system, are now available to the market. Barkers Engineering made further progress in its fencing and security productsmarkets with the development of the Inceptor range of access control gates forthe Homeland security market. Mallatite was relocated to a single site within our new Metnor "galvanizingvillage". The latest technology for manufacturing and finishing has beeninstalled to allow us to follow our strategy of being the lowest cost producer.This world class facility will secure our status as a market leader in the U.K.lighting column market. Disruption arising from the relocation hampered theperformance in 2006 but with recent contract wins in Portsmouth, Ealing andDorset, the single site operation should not disappoint. Asset International continued to win new approvals for its Weholite product andits record performance in 2006 included the completion of its largest eversingle contract of nearly £1 million. In order to support the expansion of thisbusiness, further investment has now been committed to acquire a fourthextruding line. Our galvanizing operations made considerable progress in the year despite havingto contend with the unprecedented increase in zinc raw material prices. Theacquisition of Metnor Galvanizing Limited late in the year has given Joseph Ashthe advantage of a long bath facility in its portfolio. Joseph Ash's Envirotanksdivision had another excellent year and has secured a strong order book to carryforward into 2007. Building and Construction Products Revenue increased by 10.9% to £146.2 million in 2006 (2005: £131.8 million)although underlying operating profit at £3.8 million fell by 20.4% (2005: £4.8million). The losses made in the Express reinforcing bar and mesh business more thanoffset the progress made in the remainder of the division. Express was adverselyaffected by major steel price increases and margin erosion in the year. Howeverthe business returned to profitability in the last quarter of the year and thistrend is expected to continue in 2007. Further growth and gains in market share led to another increase inprofitability for Ash & Lacy Building Systems. Highlights in the year includethe relocation of its depot in the South to larger premises and the opening of anew depot in Leeds to serve the North of England. Birtley Building Products continued to grow its product portfolio and improveefficiencies as a result of the investment in the site infrastructure. The industrial flooring and related products of Access Engineering, RedmanFisher and Lionweld Kennedy produced an excellent performance and we continue toinvest in new products for the future. Industrial Products Revenue increased to £42.5 million which was an 11.6% improvement on the 2005figure (£38.1 million). Underlying operating profits also increased by 47.3% to£2.6 million (2005: £1.8 million). Benefiting from recent capital investment, there was a significant expansion ofour pipe supports operations in Thailand during the year, as they take advantageof the current activity in the building of liquid natural gas plants around theworld. The other smaller companies in this division traded adequately in difficultmarket conditions. Two of the smaller non-core metal stockholding businesseswere sold during the year. Zinkinvent Our associated company, Zinkinvent GmbH, which we acquired in May 2005, had anexcellent year. As explained in the Chairman's Statement, we have recentlyentered into a conditional agreement to acquire control of Zinkinvent. Ifapproved by our shareholders, this acquisition will greatly expand the scope ofour galvanizing and lighting column manufacturing operations and provide us witha platform for international expansion. Acquisitions In February 2006 we acquired Counters & Accessories and in October 2006 weacquired Metnor Galvanizing. As mentioned above, Counters & Accessories willwork closely with Techspan Systems to form the core of our new technologydivision within IPG. Metnor Galvanizing is located near Chesterfield, an areawhich is not well served by our existing galvanizing activities. It also has alonger bath facility than any of the other plants, thus enabling us to processlonger lengths of poles and structured steel. This plant is now the fourthgalvanizing facility situated adjacent to one of our major manufacturing units. The Future Our infrastructure and construction markets remain buoyant and demand in theU.K. for our continually expanding product portfolio, aimed at health andsafety, security and the environment, will continue to drive the Company'sperformance. The acquisition of Zinkinvent and our planned expansion intooverseas markets will diversify our future earnings and provide furtheropportunities to develop the Group on an international basis. David GroveChief Executive 6 March 2007 FINANCIAL REVIEW Basis of consolidation The results cover the twelve months to 31 December 2006. They include for thefirst time the results of Counters & Accessories Limited, which we acquired inFebruary, and Metnor Galvanizing Limited, which we acquired in October, as wellas a first full year contribution from our associated company, Zinkinvent GmbH,which was acquired in 2005. They also include the results of W&S Allely Limitedand Eden Material Services (UK) Limited, up to the date of their disposal inOctober. Summary of Results The Group regards its underlying results, which exclude the effects of businessreorganisation and property items, as the most appropriate measure of itsfinancial performance. The Group's 2006 results represent another record year with revenue and profitbefore tax at their highest ever levels. This performance was achieved despitemajor increases in energy and commodity prices, particularly zinc, which is usedin our galvanizing operations, and some steel products. Although we were able inmany instances to pass on these cost increases, they had the effect of reducingour overall trading profit margin. However, the higher full year contributionfrom Zinkinvent enabled us to maintain the growth in our underlying operatingmargin and profit before tax. Revenue and Operating Profit Revenue increased by 10.4% to £306.0 million (2005: £277.3 million). Adjustingfor the effect of acquisitions and disposals, the like-for-like increase was9.6%, with growth in all divisions. Revenue in our core Infrastructure ProductsGroup division (IPG) increased by 9.3%, due in part to the effects of theincrease in the price of zinc. The Building and Construction division increasedrevenue by 10.9%, reflecting the passing on of the increased cost of rawmaterials and the continued expansion in our Ash & Lacy Building Systemsoperation. Growth in the Industrial Products division was due almost entirely toour Pipe Supports businesses which increased revenue significantly on the backof the surging worldwide demand for power generation, in particular in theliquid natural gas market. Underlying operating margins in IPG increased from 12.1% to 13.8% and underlyingoperating profit grew by 24.9%, fuelled by new product launches, strong marketdemand, both domestically and abroad, and the two acquisitions of Counters &Accessories Limited and Metnor Galvanizing Limited. Our Joseph Ash galvanizingoperations benefited from the cost reductions arising from the closure of theirDigbeth factory in 2005 and the Asset International plastic pipe businessincreased profits substantially, due to strong demand from the house buildingsector. In the Building and Construction division profit advances in most businesseswere offset by a substantially reduced performance from our concretereinforcement operation Express Reinforcements Limited, which was adverselyaffected by a rapid rise in the cost of raw materials in the first half of theyear, which squeezed margins. Sales prices are now back at much moresatisfactory levels and we look forward to a significantly improved performancefrom this business in 2007. The improved results in the Industrial Products division was due primarily tothe substantially increased contribution from our Pipe Supports operations whereoperating profit nearly doubled due to strong customer demand. There was also an increased contribution from our associated company, ZinkinventGmbH, where our share of its post tax profits increased by £2.5 million.Although this is due in part to it being a full year contribution, rather thanonly seven months in 2005, there was nevertheless a substantial improvement inits underlying full year performance with higher volumes and operating margins. Group operating profit increased by 9.2% to £21.5 million (2005: £19.7 million)whilst underlying operating profit increased by 15.8% to £22.7 million (2005:£19.6 million). Net reorganisation and property items at operating profit level amounted to £1.2million. These include the cost of relocating our Mallatite lighting columnoperations to a new site at Chesterfield, which involved the closures of theexisting factories in Levenshulme and Cresswell. These costs were partiallyoffset by gains on the sale of two vacant sites in Glasgow and Hartlepool. Financing costs Net financing costs increased by £0.3 million, primarily as a result of thehigher average borrowings during the year and the base rate increases later inthe year. Based on underlying operating profit, net interest cover was 5.4 times(2005: 5.1 times). Profit before taxation Underlying profit before taxation rose by 17.6% to a record £18.5 million (2005:£15.7 million). Including the effect of the net reorganisation and propertyitems, profit before taxation increased by 9.4% to £17.3 million (2005: £15.8million). Taxation The effective tax rate on both underlying and overall profits were lower thanthe standard rate of 30%. This was due mainly to the inclusion of the Zinkinventpost tax profits at the pre tax level as required by International AccountingStandards. The overall tax rate of 24.6% was higher than the previous year,which benefited additionally from the release of a deferred tax provisionarising from property transactions. Earnings per share Underlying earnings per share amounted to 20.7p, representing an increase of15.3% over last year (2005: 17.9p) and the highest ever achieved by the Group.However, because of the higher tax charge, the year's basic earnings per sharefell by 11.9% to 19.8p (2005: 22.5p). Dividends We again propose to increase the level of the distribution to shareholders. Therecommended final dividend, together with the interim dividend already paid,makes a total for the year of 7.2p per share, an increase of 20.0% over lastyear. This level of dividend is covered 2.8 times by basic earnings per share.Based on underlying earnings per share, dividend cover is 2.9 times. Financing and investment Year end net borrowings decreased slightly to £46.1 million (2005: £47.3million). We continued our vigorous programme of capital expenditure and productdevelopment, investing a total of £19.0 million, £12.2 million in excess of thedepreciation charge. Working capital increased by £13.5 million during the yearprimarily to support the higher costs of raw materials and the growth inrevenue. We also made additional contributions totalling £1.5 million towardsthe Group's pension deficit. The year end financing position benefited from theproceeds of the successful placing and open offer in October 2006 which raised atotal, net of costs, of £26.8 million. We generated £3.1 million from the saleof properties and plant and equipment. £10.5 million was spent in making theacquisitions of Counters & Accessories Limited and Metnor Galvanizing Limited. Pensions Our year end net retirement obligation reduced by £3.4 million. Net investmentreturns during the year exceeded expectations and long term bond ratesincreased, although these benefits were partially negated by the effect of newmortality assumptions. As noted above, we made additional contributions onaccount of the deficit amounting to £1.5 million. Chris BurrFinance Director 6 March 2007 CONSOLIDATED INCOME STATEMENTYear ended 31 December 2006 Year ended 31 December 2006 Year ended 31 December 2005 Reorganisation Reorganisation Underlying and property Underlying and property results items Total results items Total Notes £000 £000 £000 £000 £000 £000------------------------------------------------------------------------------------------------------------------------ Revenue 1 306,042 - 306,042 277,296 - 277,296======================================================================================================================== Trading Profit 19,464 - 19,464 18,893 - 18,893Share of profits from associate (net of tax) 2 3,191 - 3,191 677 - 677Business reorganisation costs 3 - (2,175) (2,175) - (4,260) (4,260)Profit on sale of properties 3 - 1,025 1,025 - 4,389 4,389------------------------------------------------------------------------------------------------------------------------ Operating profit 1 22,655 (1,150) 21,505 19,570 129 19,699Financial income 4 4,413 - 4,413 4,294 - 4,294Financial expense 4 (8,602) - (8,602) (8,166) - (8,166)------------------------------------------------------------------------------------------------------------------------ Profit before taxation 18,466 (1,150) 17,316 15,698 129 15,827Taxation 5 (4,861) 605 (4,256) (4,397) 2,766 (1,631)------------------------------------------------------------------------------------------------------------------------ Profit for the year 13,605 (545) 13,060 11,301 2,895 14,196======================================================================================================================== Attributable to:Equity holders of the parent - - 13,056 - - 14,176Minority interest - - 4 - - 20------------------------------------------------------------------------------------------------------------------------ Profit for the year - - 13,060 - - 14,196======================================================================================================================== Basic earnings per share 6 - - 19.8p - - 22.5pDiluted earnings per share 6 - - 19.3p - - 21.8p Dividend per share - Interim 7 - - 3.0p - - 2.6pDividend per share - Final proposed 7 - - 4.2p - - 3.4p------------------------------------------------------------------------------------------------------------------------ Total 7 - - 7.2p - - 6.0p======================================================================================================================== CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEYear ended 31 December 2006 Year ended Year ended 31 December 31 December 2006 2005 £000 £000------------------------------------------------------------------------------------------------------------------------ Exchange differences on translation of foreign operations 110 18Share of exchange differences on translation of foreign operations from associate (275) -Actuarial gain/(loss) on defined benefit pension schemes 1,522 (8,094)Taxation on items taken directly to equity (318) 2,491------------------------------------------------------------------------------------------------------------------------ Net income/(expense) recognised directly in equity 1,039 (5,585)Profit for the year 13,060 14,196------------------------------------------------------------------------------------------------------------------------ Total recognised income and expense for the year 14,099 8,611======================================================================================================================== Attributable to:Equity holders of the parent 14,095 8,591Minority interest 4 20------------------------------------------------------------------------------------------------------------------------ Total recognised income and expense for the year 14,099 8,611======================================================================================================================== CONSOLIDATED BALANCE SHEETAs at 31 December 2006 31 December 31 December 2006 2005 Notes £000 £000------------------------------------------------------------------------------------------------------------------------ Non-current assets Intangible assets 39,845 29,727Property, plant and equipment 51,007 40,972Investment in associate 2 27,163 24,832Deferred tax asset 572 2,407------------------------------------------------------------------------------------------------------------------------ 118,587 97,938------------------------------------------------------------------------------------------------------------------------ Current assetsAssets held for sale - freehold land - 631Inventories 33,248 24,804Trade and other receivables 72,935 61,057Cash and cash equivalents 14,176 16,313------------------------------------------------------------------------------------------------------------------------ 120,359 102,805------------------------------------------------------------------------------------------------------------------------ Total assets 1 238,946 200,743======================================================================================================================== Current liabilities Trade and other liabilities (87,142) (79,528)Current tax liabilities (2,798) (2,088)Interest bearing borrowings (7,893) (8,162)------------------------------------------------------------------------------------------------------------------------ (97,833) (89,778)------------------------------------------------------------------------------------------------------------------------ Net current assets 22,526 13,027======================================================================================================================== Non-current liabilitiesOther liabilities (420) (427)Provisions for liabilities and charges (810) (833)Retirement benefit obligation (10,503) (13,885)Interest bearing borrowings (52,341) (55,408)------------------------------------------------------------------------------------------------------------------------ (64,074) (70,553)------------------------------------------------------------------------------------------------------------------------ Total liabilities 1 (161,907) (160,331)======================================================================================================================== Net assets 1 77,039 40,412======================================================================================================================== Equity Share capital 18,887 15,799Share premium 27,803 4,036Capital redemption reserve 238 238Other reserves 4,313 4,313Translation reserve (203) (38)Retained earnings 25,989 15,994------------------------------------------------------------------------------------------------------------------------ Equity attributable to equity holders of the parent 77,027 40,342Minority interests 12 70------------------------------------------------------------------------------------------------------------------------ Total equity 77,039 40,412======================================================================================================================== CONSOLIDATED STATEMENT OF CASH FLOWSAs at 31 December 2006 Year ended Year ended 31 December 31 December 2006 2005 Notes £000 £000 £000 £000------------------------------------------------------------------------------------------------------------------------ Profit before tax - 17,316 - 15,827Add back net financing costs 4 - 4,189 - 3,872 ------ ------Operating profit 1 - 21,505 - 19,699Adjusted for non cash items Income from associated company 2 (3,191) - (677) - Share-based payment 152 - 100 - Fair value of forward contracts 145 - - - Loss on disposal of subsidiaries 144 - - - Gain on disposal of property, plant and equipment (1,137) - (4,396) - Depreciation 6,404 - 6,012 - Amortisation of intangible assets 395 - 183 - ====== ------ - 2,912 - 1,222 ------ ------Operating cash flow before movement in working capital - 24,417 - 20,921(Increase)/Decrease in inventories (8,406) 2,616 -Increase in receivables (11,351) - (2,195) -Increase in payables 7,783 - 3,460 -Decrease in provisions and employee benefits (1,549) - (869) - ====== ====== Net movement in working capital - (13,523) - 3,012 ------ ------Cash generated by operations 1 - 10,894 - 23,933Income taxes paid - (2,720) - (2,727)Interest paid - (3,848) - (4,676)------------------------------------------------------------------------------------------------------------------------Net cash from operating activities - 4,326 - 16,530 Interest received 684 - 455 -Proceeds on disposal of property, plant and equipment 3,129 - 13,788 -Purchase of property, plant and equipment (17,456) - (10,776) -Purchase of intangible assets (1,559) - (1,506) -Disposal of subsidiaries 359 - - -Acquisitions of minority interests (59) - - -Acquisitions of subsidiaries and associates (10,452) - (25,219) - ====== ======Net cash used in investing activities - (25,354) - (23,258) Issue of new shares 26,855 - 797 -Dividends paid (3,793) - (3,134) -New loans raised 4,812 - 25,516 -Repayments of loans (7,250) - (7,750) -Repayment of loan notes (40) - (1,030) -Repayment of obligations under finance leases (1,693) - (1,259) - ====== ======Net cash from financing activities - 18,891 - 13,140------------------------------------------------------------------------------------------------------------------------ Net (decrease)/increase in cash - (2,137) - 6,412 Cash at the beginning of the year - 16,313 - 9,901------------------------------------------------------------------------------------------------------------------------ Cash at the end of the year - 14,176 - 16,313======================================================================================================================== NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Segmental information The Group is currently organised into three main operating segments which represent its primary segmental information. All operations are continuing. Income Statement Year ended 31 December 2006 Year ended 31 December 2005 Underlying Underlying Segment Segment Segment Segment Segment Segment Revenue result result* Revenue result result* £000 £000 £000 £000 £000 £000------------------------------------------------------------------------------------------------------------------------ Infrastructure Products+ 117,370 15,171 16,241 107,414 11,872 13,003Building and Construction Products 146,171 3,544 3,835 131,797 4,353 4,816Industrial Products 42,501 2,790 2,579 38,085 3,474 1,751------------------------------------------------------------------------------------------------------------------------ Total Group 306,042 21,505 22,655 277,296 19,699 19,570-------------------------------------------- -------Net financing costs - (4,189) (4,189) - (3,872) (3,872) --------------------- ----------------------Profit before taxation - 17,316 18,466 - 15,827 15,698Taxation - (4,256) (4,861) - (1,631) (4,397)------------------------------------------------------------------------------------------------------------------------Profit after taxation - 13,060 13,605 - 14,196 11,301======================================================================================================================== * Underlying segment result is stated before reorganisation and property items.+ 2006 includes £3,191,000 (2005: £677,000) share of profit from associate. Balance sheet 31 December 2006 31 December 2005 Total Total Total Total assets liabilities assets liabilities £000 £000 £000 £000------------------------------------------------------------------------------------------------------------------------ Infrastructure Products+ 118,273 (17,068) 94,598 (22,770)Building and Construction Products 70,847 (49,092) 55,653 (36,676)Industrial Products 35,078 (19,135) 31,772 (18,866)------------------------------------------------------------------------------------------------------------------------ Total segment assets/(liabilities) 224,198 (85,295) 182,023 (78,312)Tax and dividends 572 (5,065) 2,407 (3,731)Provisions and retirement benefits - (11,313) - (14,718)Net debt 14,176 (60,234) 16,313 (63,570)------------------------------------------------------------------------------------------------------------------------ Total Group 238,946 (161,907) 200,743 (160,331)========================================================================================================================Net assets - 77,039 - 40,412======================================================================================================================== + 2006 includes £27,163,000 (2005: £24,832,000) investment in associate. Cash flows Year ended Year ended 31 December 2006 31 December 2005 Underlying Underlying Cash flow cash flow* Cash flow cash flow* £000 £000 £000 £000------------------------------------------------------------------------------------------------------------------------ Infrastructure products 7,020 8,468 10,826 12,846Building and Construction products 1,507 1,798 10,087 11,282Industrial products 2,367 2,276 3,020 3,346------------------------------------------------------------------------------------------------------------------------Cash generated by operations 10,894 12,542 23,933 27,474======================================================================================================================== * Underlying cash flow is stated before reorganisation and property items. 2. Associate company The Group owns 33.3% of the ordinary shares in Zinkinvent GmbH, a German holding company, which owns 100% of Vista NV, a Belgian company with galvanizing and lighting pole fabrication businesses in mainland Europe and the USA. The results of this business are being equity accounted into the results of the Group. The share of the profit for the year ended 31 December 2006, which is stated net of local taxes, was £3,191,000 (post acquisition in May 2005: £677,000). 3. Reorganisation and property items Business reorganisation costs In 2006 these costs related primarily to the relocation of the production facilities of Mallatite Limited to Chesterfield and of the Kingston depot of Ash & Lacy Building Systems Limited to Chessington. In 2005 the costs related primarily to the relocation of galvanizing production from the Digbeth operation of Joseph Ash Limited and the Hartlepool operation of Birtley Building Products Limited to alternative locations, and the costs arising from the restructuring of Express Reinforcements Limited including the closure of its Rainham depot. Also in 2006, a loss was realised on the disposal of W&S Allely Limited and Eden Material Services (UK) Limited. There were no business disposals in 2005. Profit on sale of properties In 2006 this relates to the sale of two vacant properties located in Glasgow and Hartlepool. The profit in 2005 relates to the sale of two vacant properties located in Barnsley and Newcastle and the sale and leasebacks of five other operating properties. In both years no tax liability arose on these sales due to the availability of indexation allowances and capital losses for offset, 2005 also benefited from the release of a deferred tax provision arising from property disposals. 4. Net financing costs Year ended Year ended 31 December 31 December 2006 2005 £000 £000 Financial income Interest on bank deposits 681 578 Net change in fair value of financial assets and liabilities - 160 Expected return on pension scheme assets 3,732 3,556 -------------------------------------------------------------------------------------------------------------------- 4,413 4,294 ==================================================================================================================== Financial expense Interest on bank loans and overdrafts 4,471 4,418 Amortisation of arrangement fees 374 276 Interest on finance leases and hire purchase contracts 300 193 Net change in fair value of financial assets and liabilities 2 - Expected interest cost on pension scheme obligations 3,391 3,205 Interest on other loans 64 74 -------------------------------------------------------------------------------------------------------------------- 8,602 8,166 ==================================================================================================================== Net financing costs 4,189 3,872 ==================================================================================================================== 5. Taxation Tax charged on profit shown in the income statement Year ended Year ended 31 December 31 December 2006 2005 £000 £000 -------------------------------------------------------------------------------------------------------------------- Current tax UK corporation tax at 30% (2005: 30%) 3,271 2,519 Adjustments in respect of prior periods (174) (30) Foreign tax at prevailing local rates 156 110 -------------------------------------------------------------------------------------------------------------------- 3,253 2,599 Deferred tax Current year 971 (980) Adjustments in respect of prior periods 32 12 -------------------------------------------------------------------------------------------------------------------- Tax on profit in the Income Statement 4,256 1,631 ==================================================================================================================== Tax charged/(credited) on items taken directly to equity Year ended Year ended 31 December 31 December 2006 2005 £000 £000 -------------------------------------------------------------------------------------------------------------------- Current tax Relating to defined benefit schemes (558) (255) Relating to share based payments (2) - -------------------------------------------------------------------------------------------------------------------- (560) (255) Deferred tax Relating to defined benefit schemes 1,015 (2,173) Relating to share based payments (137) (63) -------------------------------------------------------------------------------------------------------------------- Tax on items taken directly to equity 318 (2,491) ==================================================================================================================== The tax charge to the income statement for the period is lower than the standard rate of corporation tax in the UK. The differences are explained below: Year ended Year ended 31 December 31 December 2006 2005 £000 £000 -------------------------------------------------------------------------------------------------------------------- Profit before taxation 17,316 15,827 ==================================================================================================================== Profit before taxation multiplied by the standard rate of corporation tax in the UK of 30% 5,195 4,748 Expenses not deductible for tax purposes 233 360 Deductible employee share option gains not charged against profit (31) (309) Share of profit from associate already taxed (677) (203) Capital profits less losses and write downs not subject to tax (264) (1,526) Deferred tax benefit arising from asset disposals - (1,363) Overseas profits taxed at lower rates (58) (58) Adjustments in respect of previous periods (142) (18) -------------------------------------------------------------------------------------------------------------------- Tax charge 4,256 1,631 ==================================================================================================================== 6. Earnings per share The weighted average number of ordinary shares in issue during the year was 65,834,026 (2005: 62,960,978), diluted for the effects of all outstanding share options 67,604,552 (2005: 64,968,617). Underlying earnings per share have been shown because the Directors consider that this provides valuable additional information about the underlying performance of the Group. Year ended Year ended 31 December 2006 31 December 2005 Pence per Pence per share £000 share £000 -------------------------------------------------------------------------------------------------------------------- Basic earnings 19.8 13,056 22.5 14,176 Effect of reorganisation and property items 0.9 545 (4.6) (2,895) -------------------------------------------------------------------------------------------------------------------- Underlying earnings 20.7 13,601 17.9 11,281 ==================================================================================================================== Diluted earnings 19.3 13,056 21.8 14,176 Effect of reoganisation and property items 0.8 545 (4.4) (2,895) -------------------------------------------------------------------------------------------------------------------- Underlying diluted earnings 20.1 13,601 17.4 11,281 ==================================================================================================================== 7. Dividends Dividends declared after the balance sheet date are not recognised as a liability, in accordance with IAS10. The Directors have recommended a final dividend for the curent year, subject to shareholder approval, as shown below: Year ended Year ended 31 December 2006 31 December 2005 Pence per Pence per share £000 share £000 -------------------------------------------------------------------------------------------------------------------- Equity shares: Interim 3.0 2,267 2.6 1,643 Final proposed 4.2 3,185 3.4 2,150 -------------------------------------------------------------------------------------------------------------------- Total 7.2 5,452 6.0 3,793 ==================================================================================================================== 8. Subsequent events On 28 February 2007, the Group entered into an agreement with some of the other principal shareholders of its associate company Zinkinvent GmbH, to acquire further shares in that company, subject to Hill & Smith Holdings PLC shareholder approval. If approved, this transaction will result in Zinkinvent GmbH becoming a subsidiary of the Group. Zinkinvent GmbH is an investment company owning 100% of Vista NV, a Belgian holding company with galvanizing and lighting column manufacturing operations in mainland Europe and the USA. Notes 1. The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2006 or 2005 but is derived from those accounts. Statutory accounts for 2005 have been delivered to the registrar of companies, and those for 2006 will be delivered in due course. The auditors have reported on those accounts; their reports were: (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports, and (iii) did not contain statements under section 237(2) or (3) of the Companies Act 1985. 2. The proposed final dividend will be paid on 11 July 2007 to shareholders on the register on 8 June 2007 (ex-dividend date 6 June 2007). 3. The Annual Report will be posted to shareholders on 5 April 2007, and will be displayed on the Company's website at www.hsholdings.co.uk. Copies of the Annual Report will also be available from the Registered Office at 2 Highlands Court, Cranmore Avenue, Shirley, Solihull, B90 4LE. 4. The Annual General Meeting will be held at The Balcony Suite, The National Motorcycle Museum, Solihull at 10.30 a.m. on Friday 11 May 2007. Financial calendar: • Annual General Meeting 11 May 2007• Payment of proposed final dividend 11 July 2007• Interim results announcement for the period to 30 June 2007 September 2007• Payment of interim dividend January 2008 5. This preliminary announcement of results for the year ended 31 December 2006 was approved by the Directors on 6 March 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Hill & Smith