3rd Sep 2007 07:00
Hill & Smith Hldgs PLC03 September 2007 INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 The Board of Hill & Smith Holdings PLC announces increased profits for the sixmonths ended 30 June 2007, reflecting a further significant improvement in theGroup's trading performance. FINANCIAL HIGHLIGHTS: 6 months ended 6 months ended Change 30 June 2007 30 June 2006 Revenue £176.1m £147.4m +19.5% Underlying operating profit* £16.2m £11.8m +36.9% Profit before taxation £14.2m £10.9m +30.2% Underlying profit before taxation* £14.5m £9.9m +47.0% Underlying earnings per share* 14.4p 11.3p +27.4% Dividend per share 3.6p 3.0p +20.0% Net debt £46.6m £61.2m -23.9% * based on profits before reorganisation and property items Commenting on the results, Chairman David Grove said: "I am pleased to be ableto report another substantial improvement in the financial performance of theGroup in the six months ended 30th June 2007. All of the Group's divisionsincreased underlying operating profits by in excess of 20% compared to the sameperiod last year. Since 30th June the Group has continued to trade in line withthe Board's expectations and I look forward to reporting to you anothersatisfactory full year result in March 2008." Copies of the interim report will be posted to shareholders shortly. Further information: Hill & Smith Holdings PLCDavid Grove, ChairmanTel: 0121 704 7430Mobile: 07973 325667 Freshwater UKEdward CarterTel: 0121 633 7775Mobile: 07770 378097 CHAIRMAN'S STATEMENT I am pleased to be able to report another substantial improvement in thefinancial performance of the Group in the six months ended 30th June 2007. Revenue in the current period was £176.1m which represents a 19.5% increase onthe same period in 2006 (£147.4m). Underlying operating profits increased by36.9% to £16.2m compared with last year (£11.8m). This resulted in a 9.2%underlying operating margin compared with 8.0% last year. Underlying profitbefore taxation improved by 47.0% to £14.5m (2006: £9.9m). The underlyingearnings per share grew by 27.4% to 14.4p (2006: 11.3p). All the divisions increased underlying operating profits by in excess of 20%compared to the same period last year. With the acquisition of a majority stake in Zinkinvent GmbH on 2nd July 2007,the presentation of the segmental information has been amended to reflect thechanged size and focus of the Group's activities, which now comprise threedivisions: Infrastructure Products, Galvanizing Services and Building andConstruction. Infrastructure Products Operating profits of £7.3m were materially ahead of last year (£5.9m) with allbusiness units making a contribution. During the period the Mallatite lightingcolumn business was relocated onto a new site adjacent to our recent galvanizingacquisition, Metnor, thus reducing our operating costs. Also the Group's largestever order was secured when the Highways Agency awarded Techspan an approximateone third share of a four year £185m contract for the supply and installation ofmotorway and trunk road variable message signs across England. Ordering againstthis contract is expected to commence in 2008. Our product development programmecontinues to launch new solutions for transport systems, homeland security andthe general infrastructure spend, such as flood prevention. Galvanizing Services Operating profits of £5.4m were well ahead of last year (£3.4m) with a majorcontribution from our associated company Zinkinvent GmbH. After the period endwe increased our investment in Zinkinvent GmbH as reported below. The ZinkinventGmbH performance was boosted by the benefit from the forward buying of zinc,which may not be repeatable in the future. Fluctuations in the price of zincwill continue to be a challenge for the whole of the galvanizing industry. TheMetnor acquisition in October 2006 has now been fully integrated into the JosephAsh operation and it made an excellent contribution during the period. Building & Construction Operating profits of £3.5m compared very favourably with last year's performanceof £2.6m. In 2006 we suffered losses in our steel reinforcement operation and itis pleasing to report that this business has made a positive contribution in thecurrent period. The remaining businesses in this division continued to makeprogress on the back of healthy demand in the construction market. Finance The Group's net debt position of £46.6m at 30th June 2007 was £0.5m higher thanat 31st December 2006 due in part to the increase in working capital (£5.8m)required to finance the increased level of revenue. Funds were also absorbed byour vigorous capital expenditure and product development programmes (£7.7m)which was more than double our depreciation charge during the period. This is acontinuing feature of our business as we continue with our strategic aim ofgenerating organic growth from our core businesses. The Group has also reorganised its main banking arrangements by way of a newfive year unsecured £150 million Term and Revolving Credit Facility, withfunding provided by a group of six major banks on improved terms. Dividend Your Board has declared an interim dividend of 3.6p (2006: 3.0p) whichrepresents an increase of 20% over the corresponding period last year. Thedividend is covered 4.0 times (2006: 3.8 times) by underlying earnings pershare. Acquisitions On 2nd July shareholder approval was obtained to acquire the whole of theSchweitzer family stake in Zinkinvent GmbH for €26.1m, thus increasing ouroverall holding from 33.3.% to 68.2%. In the period to 30th June 2007 theinvestment has been accounted for as an associated company, whereas from 2ndJuly its results will be fully consolidated as a subsidiary. We are currentlyreviewing our options for further increasing our investment in this business. Disposals On 13th August 2007 we disposed of one of our non-core businesses, Ash & LacyPressings Limited, for its net asset value of approximately £600k, subject tothe finalisation of completion accounts. Management David Winterbottom retired from the Board at the AGM on 11th May 2007. David hadspent 10 years with Hill & Smith as the Non-Executive Chairman and we wish him ahappy retirement. On the same date Clive Snowdon, Chief Executive of Umeco plc,joined the Board as a Non-Executive Director and I would like to extend a warmwelcome to him. Chris Burr will retire from the Board at the next AGM in May 2008. Ourrecruitment consultants are currently at an advanced stage in sourcing a newGroup Finance Director for the enlarged group. I would like to personally congratulate all the staff in the Hill & SmithHoldings PLC Group on an outstanding first half performance. Outlook I am confident that our highly focused capital expenditure and productdevelopment programme, in conjunction with our selective bolt-on acquisitionpolicy, will continue to deliver growth and enhance shareholder value. Since 30th June the Group has continued to trade in line with the Board'sexpectations and I look forward to reporting to you another satisfactory fullyear result in March 2008. D L GroveChairman 3 September 2007 Consolidated Income Statement6 months ended 30 June 2007 6 months ended 6 months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Reorganisation Underlying and property Underlying Underlying results items Total results Total results Total Notes £000 £000 £000 £000 £000 £000 £000________________________________________________________________________________________________________________________ Revenue 1 176,132 - 176,132 147,449 147,449 306,042 306,042________________________________________________________________________________________________________________________ Trading profit 13,081 - 13,081 10,458 10,458 19,464 19,464Income from associated company 3,105 - 3,105 1,361 1,361 3,191 3,191Business reorganisation costs 2 - (859) (859) - - - (2,175)Profit on sale of properties 2 - 527 527 - 1,015 - 1,025________________________________________________________________________________________________________________________ Operating profit 1 16,186 (332) 15,854 11,819 12,834 22,655 21,505Financial income 3 2,996 - 2,996 2,032 2,032 4,413 4,413Financial expense 3 (4,657) - (4,657) (3,968) (3,968) (8,602) (8,602)________________________________________________________________________________________________________________________ Profit before taxation 14,525 (332) 14,193 9,883 10,898 18,466 17,316Taxation 4 (3,629) 258 (3,371) (2,727) (2,727) (4,861) (4,256)________________________________________________________________________________________________________________________ Profit for the period 10,896 (74) 10,822 7,156 8,171 13,605 13,060________________________________________________________________________________________________________________________ Attributable to:Equity holders of the parent - - 10,812 - 8,169 - 13,056Minority interest - - 10 - 2 - 4________________________________________________________________________________________________________________________ Profit for the period - - 10,822 - 8,171 - 13,060________________________________________________________________________________________________________________________ Basic earnings per share 5 - - 14.3p - 12.9p - 19.8pDiluted earnings per share 5 - - 13.9p - 12.5p - 19.3p________________________________________________________________________________________________________________________ Dividend per share - Interim - - 3.6p - 3.0p - -________________________________________________________________________________________________________________________ Consolidated Statement of Recognised Income and Expense6 months ended 30 June 2007 6 months ended 6 months ended Year ended 30 June 2007 30 June 2006 31 December 2006 £000 £000 £000________________________________________________________________________________________________________________________ Exchange differences on translation of foreign operations 102 8 110Share of exchange differences on translation of foreign operations from associate (102) - (275)Actuarial profit on defined benefit pension schemes - - 1,522Taxation on items taken directly to equity (218) - (318)________________________________________________________________________________________________________________________ Net (expense)/income recognised directly in equity (218) 8 1,039Profit for the period 10,822 8,171 13,060________________________________________________________________________________________________________________________ Total recognised income and expense for the period 10,604 8,179 14,099________________________________________________________________________________________________________________________ Attributable to:Equity holders of the parent 10,594 8,177 14,095Minority interest 10 2 4________________________________________________________________________________________________________________________ Total recognised income and expense for the period 10,604 8,179 14,099________________________________________________________________________________________________________________________ Consolidated Balance SheetAs at 30 June 2007 30 June 2007 30 June 2006 31 December 2006 Notes £000 £000 £000________________________________________________________________________________________________________________________ Non-current assetsIntangible assets 40,388 34,276 39,845Property, plant and equipment 54,007 45,792 51,007Investment in associated company 29,167 26,488 27,163Deferred tax asset 379 2,411 572________________________________________________________________________________________________________________________ 123,941 108,967 118,587Current assetsInventories 34,854 31,793 33,248Trade and other receivables 85,330 74,003 72,935Cash and cash equivalents 6 14,874 15,317 14,176________________________________________________________________________________________________________________________ 135,058 121,113 120,359________________________________________________________________________________________________________________________ Total assets 1 258,999 230,080 238,946________________________________________________________________________________________________________________________ Current liabilitiesTrade and other liabilities (95,361) (87,476) (87,142)Current tax liabilities (6,334) (4,539) (2,798)Interest bearing borrowings 6 (11,166) (22,002) (7,893)________________________________________________________________________________________________________________________ (112,861) (114,017) (97,833)________________________________________________________________________________________________________________________ Net current assets 22,197 7,096 22,526________________________________________________________________________________________________________________________ Non-current liabilitiesTrade and other liabilities (463) (409) (420)Provisions for liabilities and charges (802) (1,221) (810)Retirement benefit obligation (9,921) (13,451) (10,503)Interest bearing borrowings 6 (50,287) (54,511) (52,341)________________________________________________________________________________________________________________________ (61,473) (69,592) (64,074)________________________________________________________________________________________________________________________ Total liabilities 1 (174,334) (183,609) (161,907)________________________________________________________________________________________________________________________ Net assets 84,665 46,471 77,039________________________________________________________________________________________________________________________ EquityShare capital 18,891 15,814 18,887Share premium 27,814 4,060 27,803Capital redemption reserve 238 238 238Other reserves 4,313 4,313 4,313Translation reserve (203) (30) (203)Equity reserves 33,590 22,066 25,989________________________________________________________________________________________________________________________ Equity attributable to equity holders of the parent 84,643 46,461 77,027Minority interest 22 10 12________________________________________________________________________________________________________________________ Total equity 84,665 46,471 77,039________________________________________________________________________________________________________________________ Consolidated Statement of Cash Flows6 months ended 30 June 2007 6 months ended 6 months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Notes £000 £000 £000________________________________________________________________________________________________________________________ Profit before tax 14,193 10,898 17,316Add back net financing costs 3 1,661 1,936 4,189________________________________________________________________________________________________________________________ Operating profit 15,854 12,834 21,505________________________________________________________________________________________________________________________ Adjustments for non-cash items: Income from associated company (3,105) (1,361) (3,191) Share-based payments 92 57 152 Fair value on forward contracts - - 145 Loss on disposal of subsidiaries - - 144 Gain on disposal of property, plant and equipment (530) (1,026) (1,137) Depreciation 3,417 3,154 6,404 Amortisation of intangible assets 252 151 395________________________________________________________________________________________________________________________ 126 975 2,912________________________________________________________________________________________________________________________ Operating cash flows before movement in working capital 15,980 13,809 24,417________________________________________________________________________________________________________________________ Increase in inventories (1,606) (6,562) (8,406)Increase in receivables (10,871) (12,994) (11,351)Increase in payables 6,937 7,527 7,783Increase/(decrease) in provisions and employee benefits (253) 106 (1,549)________________________________________________________________________________________________________________________ Net movement in working capital (5,793) (11,923) (13,523)________________________________________________________________________________________________________________________ Cash generated by operations 10,187 1,886 10,894Income taxes paid (305) (800) (2,720)Interest paid (2,425) (2,269) (3,848)________________________________________________________________________________________________________________________ Net cash from/(used in) operating activities 7,457 (1,183) 4,326________________________________________________________________________________________________________________________ Interest received 768 212 684Proceeds on disposal of property, plant and equipment 1,161 2,166 3,129Purchase of property, plant and equipment (7,007) (8,199) (17,456)Purchase of intangible assets (649) (366) (1,559)Disposal of subsidiaries - - 359Acquisitions of minority interests - - (59)Acquisitions of subsidiaries and associates - (5,278) (10,452)________________________________________________________________________________________________________________________ Net cash used in investing activities (5,727) (11,465) (25,354)________________________________________________________________________________________________________________________ Issue of new shares 15 39 26,855Dividends paid (2,266) (1,643) (3,793)New loans raised 5,026 16,612 4,812Repayments of loans (2,750) (2,500) (7,250)Repayment of loan notes (47) (40) (40)Repayment of obligations under finance leases (1,010) (816) (1,693)________________________________________________________________________________________________________________________ Net cash (used in)/from financing activities (1,032) 11,652 18,891________________________________________________________________________________________________________________________ Net increase/(decrease) in cash 698 (996) (2,137)Cash at the beginning of the period 14,176 16,313 16,313________________________________________________________________________________________________________________________ Cash at the end of the period 6 14,874 15,317 14,176________________________________________________________________________________________________________________________ Notes to the Consolidated Interim Financial Information 1. Segmental information The acquisition of a controlling interest in Zinkinvent GmbH and the continuing disposal of the Group's non-core Industrial Products businesses has led to a fundamental change in the focus and scope of its operations. Accordingly the basis of the Group's segmental information has been revised in order to reflect this change and to provide a more relevant analysis of its operational performance. Comparatives have been restated accordingly. All operations are continuing. Income Statement 6 months ended 6 months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Underlying Underlying Underlying Segment Segment Segment Segment Segment Segment revenue result* revenue result* revenue result* £000 £000 £000 £000 £000 £000 _____________________________________________________________________________________________________________________ Infrastructure Products 63,722 7,253 49,601 5,891 102,255 11,840 Galvanizing Services + 21,561 5,416 13,959 3,378 31,036 6,807 Building and Construction 90,849 3,517 83,889 2,550 172,751 4,008 _____________________________________________________________________________________________________________________ Total Group 176,132 16,186 147,449 11,819 306,042 22,655 _______________________________________________________________ _______ _______ Net financing costs (1,661) (1,936) (4,189) _____________________________________________________________________________________________________________________ Underlying profit before taxation 14,525 9,883 18,466 _____________________________________________________________________________________________________________________ * Underlying segment result is stated before reorganisation and property items. + Includes income from associated company Balance Sheet 30 June 2007 30 June 2006 31 December 2006 Total Total Total Total Total Total assets liabilities assets liabilities assets liabilities £000 £000 £000 £000 £000 £000 _____________________________________________________________________________________________________________________ Infrastructure Products 83,956 (25,034) 66,288 (18,598) 65,147 (16,648) Galvanizing Services + 75,315 (9,730) 58,386 (9,292) 75,149 (11,351) Building and Construction 84,475 (57,875) 87,678 (57,846) 83,902 (57,296) _____________________________________________________________________________________________________________________ Total operations 243,746 (92,639) 212,352 (85,736) 224,198 (85,295) Tax and dividends 379 (9,519) 2,411 (6,688) 572 (5,065) Non-current items - (10,723) - (14,672) - (11,313) Net debt (note 6) 14,874 (61,453) 15,317 (76,513) 14,176 (60,234) _____________________________________________________________________________________________________________________ Total Group 258,999 (174,334) 230,080 (183,609) 238,946 (161,907) _____________________________________________________________________________________________________________________ Net assets 84,665 46,471 77,039 _____________________________________________________________________________________________________________________ + Includes investment in associated company 2. Business reorganisation and property items The business reorganisation costs relate principally to the reorganisation of the manufacturing operations of Ash & Lacy Perforators Limited, including the costs of the closure of its Hayle factory. The profit on sale of properties relates to the sale of the vacant Levenshulme site of Mallatite Limited, following the relocation of this business to a new site at Chesterfield, as reported in the 2006 Annual Report. 3. Net financing costs 6 months ended 6 months ended Year ended 30 June 2007 30 June 2006 31 December 2006 £000 £000 £000 _____________________________________________________________________________________________________________________ Financial income Interest on bank deposits 213 99 681 Interest on loans to associated company 594 - - Net change in fair value of financial assets and liabilities - 68 - Expected return on pension scheme assets 2,189 1,865 3,732 _____________________________________________________________________________________________________________________ 2,996 2,032 4,413 _____________________________________________________________________________________________________________________ Financial expense Interest on loans, overdrafts and hire purchase contracts 2,415 2,086 4,835 Amortisation of arrangement fees 109 187 374 Net change in fair value of financial assets and liabilities 238 - 2 Expected interest cost on pension scheme obligations 1,895 1,695 3,391 _____________________________________________________________________________________________________________________ 4,657 3,968 8,602 _____________________________________________________________________________________________________________________ Net financing costs 1,661 1,936 4,189 _____________________________________________________________________________________________________________________ 4. Taxation Tax has been provided on the underlying profit at the estimated effective rate for existing operations for the full year. 5. Earnings per share The weighted average number of shares in issue during the period was 75,555,306, diluted for the effect of outstanding share options 77,609,916 (6 months ended 30 June 2006: 63,227,430, and 65,118,450 diluted). Earnings per share have been calculated on profits of £10,822,000 (6 months ended 30 June 2006: earnings of £8,171,000) and underlying earnings per share on earnings of £10,896,000 (6 months ended 30 June 2006:earnings of £7,156,000). Underlying earnings per share are as shown below. 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 2007 30 June 2006 31 December 2006 £000 £000 £000 _____________________________________________________________________________________________________________________ Basic earnings per share 14.3p 12.9p 19.8p Effect of reorganisation and property items 0.1p (1.6p) 0.8p _____________________________________________________________________________________________________________________ Underlying earnings per share 14.4p 11.3p 20.7p _____________________________________________________________________________________________________________________ Diluted earnings per share 13.9p 12.5p 19.3p Effect of reorganisation and property items 0.1p (1.6p) 0.8p _____________________________________________________________________________________________________________________ Underlying diluted earnings per share 14.0p 11.0p 20.1p _____________________________________________________________________________________________________________________ 6. Analysis of net debt 30 June 2007 30 June 2006 31 December 2006 £000 £000 £000 _____________________________________________________________________________________________________________________ Cash and cash equivalents 14,874 15,317 14,176 Debt due within one year (11,166) (22,002) (7,893) Debt due after one year (50,287) (54,511) (52,341) _____________________________________________________________________________________________________________________ Net debt (46,579) (61,196) (46,058) _____________________________________________________________________________________________________________________ 7. Post balance sheet events a) On 2 July 2007 the Group invested €26.1m (£17.4m) in acquiring a further 34.9 per cent of Zinkinvent GmbH as a result of which its total shareholding is now 68.2 per cent. b) On the same date the Group reorganised its main banking arrangements by way of a new five year £150m unsecured Term and Revolving Credit Facility, with funding provided by a group of six major banks. c) On 13 August the Group disposed of its subsidiary, Ash & Lacy Pressings Limited, for approximately £600,000 in cash, subject to completion accounts, an amount that equates to the net asset value. 8. Financial information The comparative figures for the financial year ended 31 December 2006 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The accounting policies as disclosed in the previous Annual Report have been applied in the results for the half year ended 30 June 2007. Directors and Financial Calendar • Directors D.L. Grove BA, FCA (Chairman) D.W. Muir BSc, CEng, MICE (Chief Executive) C.J. Burr FCA (Finance Director) H.C. Marshall MSc, BSc (Non-Executive) R.E. Richardson FCMI (Non-Executive) C.J. Snowdon BA, FCA (Non-Executive) • Secretary J.C. Humphreys FCIS Financial Calendar Payment of interim dividend (ex dividend date 12 December 2007) 14 January 2008Preliminary announcement of results for the year to 31 December 2007 March 2008Annual General Meeting 2008 May 2008 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Hill & Smith