TIDMHILS
RNS Number : 1603I
Hill & Smith Hldgs PLC
07 August 2019
Hill & Smith Holdings PLC
Half Year Results (unaudited) for the 6 months ended 30 June
2019
Good H1 performance; full year expectations unchanged
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 2019.
Financial results
Change
--------------------------------
30 June 30 June Reported Constant(**)
2019 2018 % Currency
%
-------------------------- ---------- ---------- --------------- ---------------
Revenue GBP339.5m GBP295.4m +15 +13
Underlying(*) :
Operating profit GBP40.2m GBP34.6m +16 +13
Operating margin 11.8% 11.7% +10bps -
Profit before taxation GBP36.9m GBP33.0m +12 +8
Earnings per share 37.5p 32.8p +14 +10
Reported:
Operating profit GBP36.6m GBP31.0m +18
Profit before taxation GBP33.4m GBP28.9m +16
Basic earnings per share 33.9p 28.2p +20
Dividend per share 10.6p 10.0p +6
-------------------------- ---------- ---------- --------------- ---------------
Key points:
-- Good H1 driven by a strong performance in UK and US, partly offset by weaknesses in smaller international markets
-- Underlying operating profit growth of 13% to GBP40.2m, 5% organically
-- Investment of GBP32.4m in expansion of temporary road safety
barrier fleet and acquisition of ATG
-- Solid cash generation; net debt GBP169.5m (ex-IFRS 16), 1.6x underlying EBITDA
-- Key infrastructure drivers remain positive and support longer-term growth prospects
-- Interim dividend increased by 6% to 10.6p
-- Board's full year expectations unchanged
Derek Muir, Chief Executive, said:
"Hill & Smith delivered a much improved performance in the
period over a weaker first half last year. We benefit from our
strong positions in niche infrastructure markets, predominantly in
the UK and US where we continue to see sustained infrastructure
spend, and our proactive approach to the management of our
portfolio of businesses.
"Overall, we are confident that our market leading positions,
business model and financial strength position us well for further
growth. Whilst short term political and macroeconomic uncertainties
remain, particularly in the UK, our expectations for the full year
are unchanged."
For further information, please contact:
Hill & Smith Holdings PLC Tel: +44 (0)121
704 7430
Derek Muir, Group Chief Executive
Mark Else, Interim Group Finance Director
MHP Communications Tel: +44 (0)20 3128
8100
Andrew Jaques / Ollie Hoare / Guy Featherstone
* All underlying measures exclude certain non-underlying items,
which are as detailed in note 6 to the Financial Statements and
described in the Financial Review. References to an underlying
profit measure throughout this announcement are made on this basis
and, in the opinion of the Directors, aid the understanding of the
underlying business performance as they exclude items whose
quantum, nature or volatility would otherwise distort the
underlying performance of the business. Underlying measures are
presented on a consistent basis over time to assist in comparison
of performance.
** Where we make reference to constant currency amounts, these
are prepared using exchange rates which prevailed in the current
year rather than the actual exchange rates that applied in the
prior year. Where we make reference to organic measures we exclude
the impact of currency translation movements, acquisitions,
disposals and closures of subsidiary businesses. In respect of
acquisitions, the amounts referred to represent the amounts for the
period in the current year that the business was not held in the
prior year. In respect of disposals and closures of subsidiary
businesses, the amounts referred to represent the amounts for the
period in the prior year that the business was not held in the
current year.
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, hostile
vehicle mitigation products, street lighting columns, bridge
parapets, temporary car parks, traffic management and variable road
messaging solutions.
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 4,700
staff, principally in 7 countries.
Business Review
Introduction
Hill & Smith has delivered a good performance in the six
months to 30 June 2019. Our focused strategy of developing
businesses with market-leading positions in growth infrastructure
markets, combined with active management of our portfolio and a
focused capital investment approach, has delivered growth in both
revenue and profitability during the period.
The Group's core UK and US operations generate around 80% of our
revenue and 90% of our underlying operating profit, principally
operating in niche infrastructure markets where the overall outlook
remains positive. Results from our UK operations were ahead of
prior year despite the cautious investment environment, with wider
infrastructure spend continuing to underpin demand in our chosen
markets. Our US businesses continue to perform strongly, driven by
investment in the replacement of ageing infrastructure and the
construction of new infrastructure projects, and demand levels have
been good. Whilst conditions in some of our smaller international
markets were more challenging, overall the Group delivered organic
growth in both revenue and underlying operating profit in the
period.
Our portfolio management strategy continues to focus our
operations on our key growth markets. ATG Access Limited, acquired
in February for a consideration of GBP23.7m, is trading well and
provides a platform for the Group to expand its presence in the
growing perimeter security market, increasing our range of
solutions and services and enhancing our global distribution
network.
We continue to invest capital in organic growth opportunities in
our higher return markets. During the period we further expanded
our temporary road safety barrier rental fleet in the UK, adding
41km of steel barrier at a cost of GBP8.7m, and committed to a
further 20km of steel and concrete barrier in the second half of
the year, a further investment of c.GBP3m. The construction of the
new-build greenfield galvanizing facility in New York state, at a
cost of c.GBP9m, is progressing well and is expected to be
completed towards the end of 2019. The total investment in these
programmes of c.GBP21m will assist in driving further organic
growth in our core markets.
Results
Revenue increased by 15% to GBP339.5m (2018: GBP295.4m),
including a translational currency benefit of GBP5.2m or 2%. After
adjusting for additional revenue of GBP29.0m from acquisitions,
organic revenues were 3% ahead of the same period prior year.
Underlying operating profit improved by 16% to GBP40.2m (2018:
GBP34.6m), including a benefit from currency translation of GBP1.0m
and contribution from acquisitions of GBP2.7m. The organic increase
in underlying operating profit was 5%. Underlying operating margin
improved by 10 basis points to 11.8% (2018: 11.7%), while
underlying profit before taxation was 12% higher at GBP36.9m (2018:
GBP33.0m). Reported operating profit was GBP36.6m (2018: GBP31.0m),
an increase of 18% on the prior year. Reported profit before tax
was GBP33.4m (2018: GBP28.9m).
Dividend
The Board has declared an interim dividend of 10.6p per share
(2018: 10.0p), a 6% increase on the corresponding period last year.
The interim dividend will be paid on 3 January 2020 to shareholders
on the register on 29 November 2019.
Governance and the Board
As set out in the 2018 Annual Report, Mark Pegler stepped down
from his role as Group Finance Director on 30 April 2019. On 2 July
2019 the Group announced the appointment of Hannah Nichols as Chief
Financial Officer, with effect from 16 September 2019.
The Group has today announced the appointment of Alan Giddins as
Chairman of the Board with effect from 1 October 2019. He will
succeed Jock Lennox, who will retire from the Board on that date.
Alan joined the Group in October 2017 as Senior Independent
Director and a member of the Audit, Nomination and Remuneration
Committees. His appointment follows a thorough selection process
led by non-executive director Annette Kelleher, that included
external candidates.
The Board has engaged a search firm to support it in the
appointment of an additional non-executive director to join the
Board during the second half of 2019.
Brexit
The United Kingdom is now expected to leave the European Union
on 31 October 2019. In our 2018 Annual Report we set out the
Group's views on the operational and financial risks arising from
the departure and our approach to managing and mitigating those
risks, which include possible supply chain disruption to UK imports
and translational exposure arising from currency fluctuations. We
do not believe that those risks have changed significantly since
March and we continue to believe that our strategy of international
diversification, along with our exposure to longer term
Government-funded infrastructure investment programmes, will help
limit any potential negative impact on the Group.
Outlook
The Group continues to benefit from its leading positions in
niche infrastructure markets, predominantly in the UK and US, clear
business model and financial strength. Together these create the
platform from which the Group is able to deliver long term
sustainable growth.
Whilst short term political and macroeconomic uncertainties
remain, particularly in the UK, our expectations for the full year
are unchanged.
Operational Review
Infrastructure Products
GBPm
-------------- ---- ----------
Constant
+/- Currency
2019 2018 % %
----------------------------- ------ ------ ---- ----------
Revenue 241.2 200.2 +21 +19
----------------------------- ------ ------ ---- ----------
Underlying operating profit 19.9 15.8 +26 +24
----------------------------- ------ ------ ---- ----------
Underlying operating margin
% 8.3 7.9
----------------------------- ------ ------
Reported operating profit 16.9 12.8
----------------------------- ------ ------
The division supplies engineered products to the roads and
utilities markets in geographies where there is sustained long term
investment in infrastructure. Revenues increased by 21% to
GBP241.2m (2018: GBP200.2m) including a currency benefit of GBP2.8m
and contribution from acquisitions of GBP29.0m. Revenue increased
organically by GBP9.2m or 5%. Underlying operating profit was
GBP19.9m (2018: GBP15.8m), an increase of GBP4.1m including GBP0.2m
benefit from currency translation and contribution from
acquisitions of GBP2.7m. The organic improvement in underlying
operating profit was GBP1.2m or 8%. Underlying operating margin
improved to 8.3% (2018: 7.9%). Reported operating profit was
GBP16.9m (2018: GBP12.8m) and included costs of GBP0.7m relating to
acquisitions made during the period.
Roads
GBPm +/- Constant
% Currency
%
------------- ---- ----------
2019 2018
---------------------- ------ ----- ---- ----------
Revenue 114.7 87.2 +32 +32
---------------------- ------ ----- ---- ----------
Underlying operating
profit 10.3 8.5 +21 +21
---------------------- ------ ----- ---- ----------
Underlying operating
margin % 9.0 9.7
---------------------- ------ -----
Reported operating
profit 8.4 6.5
---------------------- ------ -----
Our Roads segment designs, manufactures and installs temporary
and permanent safety products for the roads market. We principally
serve the UK, with a growing presence in the US and smaller
operations in other selected geographies that have a demand for
innovative tested safety products. Revenues increased by 32% to
GBP114.7m (2018: GBP87.2m), an organic improvement of 7% after a
negative currency impact of GBP0.2m and contribution from
acquisitions of GBP21.7m. Underlying operating profit of GBP10.3m
was GBP1.8m higher than the prior year (2018: GBP8.5m) with no net
impact from currency translation. Underlying organic operating
profit was similar to the prior year. Underlying operating margin
was 9.0% (2018: 9.7%), the reduction reflecting the impact of more
challenging market conditions in our smaller businesses in
Scandinavia and Australia.
GBPm
-------------
Reconciliation of reported to underlying
operating profit 2019 2018
------------------------------------------ ------ -----
Reported operating profit 8.4 6.5
Gain on disposal of property held (0.5) -
for sale
Acquisition costs and amortisation 2.4 2.0
Underlying operating profit 10.3 8.5
------------------------------------------ ------ -----
UK
The Government's Road Investment Strategy ('RIS 1') is now in
the final year of its five-year implementation period, with safety
of both road users and workers remaining at the heart of the
delivery plan. After a slightly slower start to the year, the
programme is now progressing as expected and we have seen
increasing demand for our rental temporary safety barrier across
the first half of the year, particularly in the second quarter
where utilisation rates have been significantly ahead of the same
period prior year. As planned, during the period we added a further
41km of steel barrier to our rental fleet to manage the additional
demand, at a cost of GBP8.7m. The 'Smart' motorway programme for
the second half of the year is significant and we expect very high
utilisation of our temporary barrier, particularly in the third
quarter. In anticipation, we have commissioned a further 6km of
steel barrier and 14km of concrete barrier, an investment of GBP3m,
to add to our existing fleet.
In October 2018 the Government confirmed funding for its Road
Investment Strategy 2 ('RIS 2') programme, which follows on from
the completion of RIS 1 in 2020 through to 2025. Overall investment
in development of the UK strategic road network will increase to
GBP25.3bn, around 66% ahead of RIS 1, and delivery of Smart
motorways remains core to the strategy. We expect RIS 2 to be
published towards the end of this year, with details of specific
schemes to follow in Highways England's Delivery Plan in 2020.
The phasing of delivery of the Smart motorway programme,
together with some constraints on local authority budgets, has
resulted in lower demand during the period for our suite of
permanent road products including restraint systems, bridge
parapets and variable message signs ('VMS'). The prospects for the
second half of the year are more positive, however, with recent
orders being awarded for the supply of both traditional VMS and our
Remotely Operated Temporary Traffic Management ('ROTTM') signs on
major motorway development schemes. With further opportunities in
the pipeline for the supply of our range of products, we expect
performance in the second half of the year to improve on the first
half.
In the vehicle incursion security market, we continue to see
good demand for our range of Hostile Vehicle Mitigation ('HVM')
products, which include temporary and permanent solutions in both
steel and concrete. Significant projects serviced during the period
include the US President's visit in June, where we provided
protection at sites across London and for the Remembrance
celebrations in Portsmouth. In recognition of the potential in the
HVM security market, on 22 February 2019 we completed the
acquisition of ATG Access Limited ('ATG') for a consideration of
GBP23.7m. ATG specialises in the development, manufacture and
installation of HVM perimeter security solutions including
bollards, blockers, barriers and gates, all of which are highly
complementary to our existing product range, and has a global
distribution network that provides a platform for further expansion
of the Group's perimeter security operations in both UK and
international markets. ATG has traded in line with our expectations
since acquisition and we are excited by its prospects.
USA
Investment in US road infrastructure continues to be robust,
underpinned by a combination of the FAST (Fixing America's Surface
Transportation) Act, which provides Federal funding for development
of the network, and various state-led investment programmes. Demand
for our range of work zone safety solutions, which includes
temporary safety barriers, crash attenuators, temporary variable
message signs and traditional traffic control products, has been
strong and has benefitted from the broadened product range and
wider distribution network acquired with the Work Area Protection
Corp. ('WAPCO') business in May 2018. WAPCO is trading well and,
having successfully integrated it with our existing temporary
safety barrier business last year, we are now realising the
benefits of the expected synergies, enabling us to increase our
market share and drive operational efficiencies across the combined
businesses. We are also investing in further development of the
product range to address customer and legislative requirements. We
are excited about the prospects for further growth and believe that
our product and service offering positions the business well to
benefit
from the additional investment that will arise should a
comprehensive US infrastructure programme be approved.
Other international
Our other smaller international roads businesses saw mixed
performances during the period. Demand for our lighting columns in
France has been good, as local authorities across the country are
developing urban areas ahead of municipal council elections in 2020
and results were ahead of the prior year. In Scandinavia, market
conditions have been challenging with some larger road projects
being delayed and our competitors aggressively targeting market
share. Consequently, first half results were materially lower than
prior year and we expect conditions to continue to be challenging
in the second half. In Australia, despite ongoing investment in the
country's road infrastructure we have seen fewer opportunities for
the sale of our temporary safety barrier than in the first half of
last year, as local contractors focus on utilisation of their
existing fleet of products before committing to new investment.
Utilities
GBPm
-------------- ---- ----------
Constant
+/- Currency
2019 2018 % %
---------------------- ------ ------ ---- ----------
Revenue 126.5 113.0 +12 +9
---------------------- ------ ------ ---- ----------
Underlying operating
profit 9.6 7.3 +32 +28
---------------------- ------ ------ ---- ----------
Underlying operating
margin % 7.6 6.5
---------------------- ------ ------
Reported operating
profit 8.5 6.3
---------------------- ------ ------
Our Utilities segment provides industrial flooring, plastic
drainage pipes, security fencing, steel and composite products for
a wide range of infrastructure markets including energy creation
and distribution, rail, water and housing. 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. Revenues
increased by 12% to GBP126.5m (2018: GBP113.0m) including a benefit
from currency translation of GBP3.0m and a GBP7.3m contribution
from recent acquisitions. Organic revenue growth was 3%. Underlying
operating profit was GBP9.6m (2018: GBP7.3m), including a positive
currency impact of GBP0.2m and a contribution from acquisitions of
GBP0.8m. Underlying organic operating profit grew by GBP1.3m or
17%. Underlying operating margin was 7.6% (2018: 6.5%), benefitting
from improvements in our UK businesses and further progress in our
pipe supports operations.
GBPm
------------
Reconciliation of reported to underlying 2019 2018
operating profit
------------------------------------------ ----- -----
Reported operating profit 8.5 6.3
Loss on remeasurement of business held 0.5 -
for sale
Restructuring actions - 0.4
Acquisition costs and amortisation 0.6 0.6
------------------------------------------ ----- -----
Underlying operating profit 9.6 7.3
------------------------------------------ ----- -----
UK
The performance of our UK utilities businesses in the first half
of the year was mixed, but overall we delivered organic growth in
both revenue and profitability and operating margins were ahead of
the prior year.
The industrial flooring business continues to benefit from the
restructuring actions taken during the first half of last year,
which, together with the ongoing acceptance of new products across
the customer base, delivered improvements in margins and
profitability. The small bolt-on acquisition of The Grating Company
made in April 2018 has provided the business with better access to
markets in the south east and during the period we commenced work
on the Battersea Power Station development in London, designing,
supplying and installing riser products in composite materials.
This is a new market for the business and we anticipate further
orders in the future.
In our utility security businesses, the access cover operation
saw an improved performance and order books at the period end are
ahead of prior year. Activity levels in the water market have
increased as key water utility customers endeavour to meet security
spend requirements ahead of the completion of the current Asset
Management Period ('AMP6'), which ends in March 2020. Demand for
our security enclosures across non-water markets has been lower,
but we are developing relationships with new customers across
various sectors in the transport and energy industries. Our fencing
operation continues to focus on engineering higher-security
solutions for the protection of critical infrastructure sites
including large data centres, military facilities and airfields,
and although we have seen fewer large projects in the first half of
the year we remain encouraged by the opportunities for our growing
range of tested products, both in the UK and overseas.
Our building products business, supplying composite residential
doors, steel lintels and builders' metalwork, saw an improvement in
performance with the doors business in particular benefitting from
an increase in new housing completions during the first half of the
year. Whilst we have seen some slowing in new housing starts
towards the end of the period, the fundamentals for our key
customers appear robust and we expect steady progress. Capital
investment in the automation of production processes will be
completed in the third quarter and will begin to deliver
improvements in operational efficiency in the second half of the
year.
Having undertaken a strategic assessment of the outlook for
Weholite Limited, our non-core plastic drainage pipe operation, we
concluded that divestment was appropriate and on 5 August 2019
completed its disposal to SDS Holdings Limited for a net
consideration of GBP2.7m. In the six months to 30 June 2019 the
business reported revenues of GBP4.6m and an underlying operating
loss of GBP0.3m.
USA
Our US utilities businesses have continued their momentum from
2018 and delivered further organic improvements in both revenues
and profitability.
Activity levels in our composite products markets are high and
we have seen good demand for our wide range of composite solutions
including marine protection, bridge structures, walkways and
protective cover boards. The three acquisitions made in the
composites market over the last two years continue to provide
further breadth to the product portfolio and the Tower Tech
operation, acquired in 2017, has now been fully relocated to our
existing facility in Pennsylvania, enabling operational synergies
to be realised. With a strong order backlog at the end of the
period, we expect further progress in the second half of the
year.
The power transmission substation business delivered another
impressive performance, growing strongly against challenging prior
year comparatives and carrying a good order book into the second
half of the year. The expansion of our facility footprint delivered
by the bolt-on acquisition of Engineered Endeavors Inc. ('EEI') in
August 2018 has provided the capacity for growth, and the customer
relationships acquired with EEI have presented opportunities for
further market penetration of our existing products. With
investment programmes across key US utility markets remaining
positive and forecasted to grow in the medium term, the prospects
for further progress are encouraging.
Pipe Supports
Whilst demand levels across our Pipe Supports operations were
lower than the prior year, our focus on operational efficiencies
and management of the cost base led to increased profitability and
further improvements in operating margins.
In our US pipe supports business, the requirement for engineered
pipe supports in the power sector has been subdued due to a lack of
sustained activity in the construction of larger industrial power
facilities. In contrast, our industrial hangers business delivered
a stronger performance, benefitting from a robust commercial
construction market, particularly in the north east of the country,
and realising the operational efficiencies arising from cost base
restructuring and rationalisation of the facility footprint over
the last two years. The business has successfully managed the
impact of tariffs on Far East commodity imports, passing these
through to the customer base.
In India, both the local and the international power markets for
our engineered pipe supports remain encouraging and we have
supplied a number of coal and gas projects across India, the Middle
East and Asia during the period. The new cryogenic products that we
developed last year are also now starting to gain traction and we
have delivered projects for both domestic and international
customers, with the order book showing encouraging signs for the
second half of the year. Our focus on quality, service and
technical excellence continues to drive strong long-term
relationships with large international EPC customers, and our
development of innovative new products positions us well as power
generation shifts from fossil fuels towards renewable and nuclear
sources.
Galvanizing Services
GBPm
------------ ---- ----------
Constant
+/- Currency
2019 2018 % %
---------------------- ----- ----- ---- ----------
Revenue 98.3 95.2 +3 +1
---------------------- ----- ----- ---- ----------
Underlying operating
profit 20.3 18.8 +8 +4
---------------------- ----- ----- ---- ----------
Underlying operating
margin % 20.7 19.7
---------------------- ----- -----
Reported operating
profit 19.7 18.2
---------------------- ----- -----
The Galvanizing Services division offers corrosion protection
services to the steel fabrication industry with multi-plant
facilities in the UK, the USA and France. Revenue increased by 3%
to GBP98.3m (2018: GBP95.2m) after a currency translation benefit
of GBP2.4m. Organic revenue growth was 1%. Underlying operating
profit of GBP20.3m (2018: GBP18.8m) included a currency benefit of
GBP0.8m. The organic improvement in profitability was 4%.
Underlying operating margin improved by 100 basis points to 20.7%
(2018: 19.7%) reflecting a combination of higher average selling
prices across all geographies and lower zinc input costs in the UK
and USA.
GBPm
------------
Reconciliation of reported to underlying 2019 2018
operating profit
------------------------------------------ ----- -----
Reported operating profit 19.7 18.2
Acquisition amortisation 0.6 0.6
Underlying operating profit 20.3 18.8
------------------------------------------ ----- -----
UK
Our galvanizing businesses are located on ten sites, four of
which are strategically adjacent to our infrastructure products
manufacturing facilities.
Overall volumes galvanized in the period were similar to the
prior year. Demand in the first quarter was strong, although
softened in the second quarter reflecting a slowdown in general UK
construction activity. However, our strategy of focussing on higher
margin work from smaller customers continues to be successful, and
alongside an improvement in average selling prices and lower zinc
input costs we delivered both profitability and margins ahead of
the prior year.
USA
Located in the north east of the country, Voigt & Schweitzer
is the market leader with seven plants offering local services and
extensive support to fabricators and product manufacturers involved
in highways, construction, utilities and transportation.
Infrastructure investment across a wide range of market sectors
is robust, with a growing exposure to commercial construction
supporting demand in the business's more traditional OEM and Bridge
& Highway markets. Although volumes were slightly lower than
the same period in 2018, generally reflecting the sectoral spread
of projects, the trend towards lower volumes of large structural
work has resulted in an increase in average selling prices and
together with further improvements in plant efficiency,
profitability has been maintained at similar levels to the prior
year.
Construction of the new build facility that was committed at the
end of 2018 is progressing well and we expect the plant to be
completed by the end of the year and become operational in the
first quarter of 2020. The facility, in New York state, is
strategically adjacent to a number of key existing customers which
we anticipate will provide a baseload of activity once production
commences.
France
France Galva has ten strategically located galvanizing plants,
each serving a local market. We act as a key part of the
manufacturing supply chain in those markets and deliver a high
level of service and quality to maintain our position as market
leaders.
Volumes in the period were slightly down compared with the prior
year. Demand was lower in the first quarter reflecting the impact
of political factors on wider market activity, although improved
during the second quarter as those factors subsided. The market
remains highly competitive in many sectors and regions and whilst
the smaller customer market continues to be healthy, there remains
a lack of larger construction activity across the country. Despite
these factors, we have been successful in driving selling price
increases and the continued focus on the cost base has helped to
support operating margins.
Financial Review
Cash generation and financing
Operating cash flow before movement in working capital was
GBP55.3m (2018: GBP42.0m), the increase reflecting improved
profitability in the first half over last year. The working capital
outflow in the period was GBP21.8m (2018: GBP22.3m), which arose
from a combination of normal seasonal trading patterns and
inventory build ahead of anticipated projects in the second half of
the year. Working capital as a percentage of annualised sales fell
compared with the same period in the prior year, to 19.1% (30 June
2018: 20.4%), and debtor days were also slightly lower at 59 days
(31 December 2018: 61 days).
Capital expenditure of GBP23.9m (2018: GBP10.6m) represents a
multiple of depreciation and amortisation of 2.2 times
(2018: 1.1 times). Significant purchases during the period
included GBP8.7m of temporary road safety barrier rental products
to support growth in the UK roads market, and GBP2.0m in relation
to the early stages of construction of the new galvanizing plant in
New York state, USA.
Group net debt at 30 June 2019 was GBP203.1m, an increase of
GBP36.1m since 31 December 2018 (GBP132.9m) after adjusting for the
impact of IFRS 16 'Leases' which increased opening reported net
debt by GBP34.1m.
Change in net debt
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018 GBPm
GBPm GBPm
------------------------------------------------- --------- --------- -------------
Change in net debt
Operating profit 36.6 31.0 65.2
Non-cash items 18.7 11.0 31.2
------------------------------------------------- --------- --------- -------------
Operating cash flow before movement in
working capital 55.3 42.0 96.4
Net movement in working capital (21.8) (22.3) (6.3)
Change in provisions and employee benefits (2.2) (1.8) (2.4)
------------------------------------------------- --------- --------- -------------
Operating cash flow 31.3 17.9 87.7
Tax paid (6.0) (7.9) (13.3)
Net financing costs paid (2.8) (1.6) (3.9)
Capital expenditure (23.9) (10.6) (32.8)
Proceeds on disposal of non-current assets 1.4 2.1 1.2
------------------------------------------------- --------- --------- -------------
Free cash flow - (0.1) 38.9
Dividends paid (7.9) (7.4) (23.6)
Acquisitions (24.1) (32.1) (45.8)
Disposals - - -
Net issue of shares - (0.5) (1.2)
New leases and lease remeasurements (3.9) - -
Interest on leases (0.4) - -
Income and expenses associated with refinancing
activities 0.4 (0.2) (1.0)
Net debt increase (35.9) (40.3) (32.7)
Effect of exchange rate fluctuations (0.2) (1.9) (3.3)
Net debt at the beginning of the period (132.9) (99.0) (99.0)
Effect of adopting new accounting standards (34.1) - 2.1
------------------------------------------------- --------- --------- -------------
Net debt at the end of the period (203.1) (141.2) (132.9)
------------------------------------------------- --------- --------- -------------
The net debt to EBITDA ratio under the Group's principal banking
facility was 1.6 times at 30 June 2019 (31 December 2018: 1.3
times), the increase reflecting seasonal working capital outlays,
acquisition spend and capital investment during the period.
Interest cover was 18.9 times (31 December 2018: 26.5 times).
Debt facilities
The Group made two changes to its principal debt facilities
during the period:
-- On 10 January 2019 we amended our syndicated revolving credit
facility, extending the term to January 2024 and increasing the
size by GBP50m to c.GBP280m, with no significant impact on costs
and no changes to financial covenants.
-- On 25 June 2019 we signed an agreement with an institutional
investor for a private placement of $70m new senior unsecured
notes. The issue consists of two equal tranches with maturities of
seven and ten years respectively. Key covenants are consistent with
those in the existing syndicated credit facility.
These changes provide us with extended certainty of funding and
further increase the headroom available to the Group in order to
pursue growth opportunities.
Tax
The underlying effective tax rate for the period was 19.5% (year
ended 31 December 2018: 19.6%) and is the estimated effective rate
for the full year. The tax charge for the period was GBP6.6m (2018:
GBP6.7m) including a GBP0.6m credit in respect of non-underlying
charges, principally relating to amortisation of acquisition
intangibles. Cash tax paid in the period was GBP6.0m (2018:
GBP7.9m), marginally lower than the underlying income statement tax
charge of GBP7.2m (2018: GBP7.2m).
Finance costs
Net financing costs for the period were GBP3.2m (2018: GBP2.1m)
with an underlying element of GBP3.3m (2018: GBP1.6m), the increase
reflecting US interest rate rises, higher average net debt in the
first half of the year and the implementation of IFRS 16 'Leases',
which resulted in a lease interest expense of GBP0.4m. Underlying
operating profit covered net underlying finance costs 12.2 times
(2018: 21.6 times). The non-underlying element of net finance
income of GBP0.1m (2018: net finance expense of GBP0.5m) represents
the net cost of pension fund financing of GBP0.3m and a net gain of
GBP0.4m in relation to refinancing activities in accordance with
IFRS 9.
Non-underlying items
The total non-underlying items charged to operating profit in
the Consolidated Income Statement amounted to GBP3.6m (2018:
GBP3.6m) and comprise the following:
-- On 5 August 2019 the Group disposed of Weholite Limited, its
non-core plastic drainage pipe business, for a net consideration of
GBP2.7m. Having met the conditions set out in IFRS 5, the business
has been treated as held for sale at 30 June 2019 and its assets
and liabilities remeasured at their expected realisable value,
resulting in a loss on remeasurement of GBP0.5m.
-- Acquisition related expenses of GBP0.7m reflect costs
associated with acquisitions and include GBP0.2m relating to future
consideration payments to previous owners of acquired businesses,
the terms of which require those costs to be treated as a
post-acquisition employment expense in accordance with IFRS 3
(Revised).
-- Non-cash amortisation of acquisition intangibles was GBP2.9m.
-- During the period the Group completed the disposal of a
property that had been held for sale at 31 December 2018, for
consideration of GBP1.2m resulting in a gain of GBP0.5m.
Further details are set out in note 6 to the Financial
Statements.
Acquisition
In February 2019 the Group acquired ATG Access Limited for a
consideration of GBP23.7m. Intangible assets arising on the
acquisition amounted to GBP27.7m, comprising customer relationships
of GBP5.1m, patents and intellectual property of GBP4.2m, brands of
GBP3.6m and residual goodwill of GBP14.8m.
Pensions
The Group operates defined benefit pension plans in the UK,
France and the USA. The IAS 19 deficit of these plans at
30 June 2019 was GBP23.4m, an increase of GBP0.4m from 31
December 2018 (GBP23.0m). The increase in the deficit relates to
the UK scheme and was largely driven by a reduction of 40 basis
points in the discount rate during the period, in line with falls
in bond yields. The Group has agreed deficit reduction plans in
place that require annual cash contributions amounting to GBP2.5m
for the period to September 2027.
The Group continues to be actively engaged in dialogue with the
schemes' Trustees with regard to management, funding and investment
strategies. A formal actuarial valuation of the UK scheme as at
April 2019 is currently in progress and will be reported on in more
detail in the 2019 Annual Report.
New International Financial Reporting Standard
IFRS 16 'Leases' is applicable to reporting periods beginning on
or after 1 January 2019, and has therefore been adopted by the
Group. The Group has chosen to adopt the modified retrospective
approach on transition, meaning that comparative information for
prior periods has not been restated. The Group expects that the
introduction of the standard will increase 2019 underlying
operating profit by c.GBP1m with no material net impact on
underlying earnings per share. The Group's net debt at 30 June 2019
also increases by GBP33.6m. Further information explaining the
impact of the new standard on the Group's results for the period is
set out in note 1 to the financial statements.
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. It is the Directors' opinion that the principal
risks set out on pages 36 to 39 of the Group's Annual Report and
Accounts for the year ended 31 December 2018, remain applicable to
the current financial year. These are:
-- Changes in government spending plans;
-- Changes in global outlook and geopolitical environment;
-- Increase in competitive pressure;
-- Product failure;
-- Contractual failure;
-- Supply chain deficiency;
-- Weaknesses in IT systems;
-- Acquisition strategy failure;
-- Lack of product development and innovation;
-- Failure to recruit and retain key employees;
-- Failure to comply with applicable health and safety legislation; and
-- Violation of applicable laws and regulations.
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 facilities are a headline GBP280m multi-currency
revolving credit agreement, which expires in January 2024, and $70m
senior unsecured notes with maturities in June 2026 and June
2029.
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 7 August
2019 and is available on the Company's website
(www.hsholdings.com).
J F Lennox D W Muir
Chairman Group Chief Executive
7 August 2019
Condensed Consolidated Income Statement
Six months ended 30 June 2019
6 months ended 6 months ended 30 June 2018 Year
30 June 2019 ended 31 December 2018
================ =============================================== ========================================================================================================
Non- Non- Non-
Underlying underlying* Total Underlying underlying* Total Underlying underlying* Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
====================== =========== =================== ============= =========== =================== ============= =================== =================== =============
Revenue 4 339.5 - 339.5 295.4 - 295.4 637.9 637.9
================ ==== =========== =================== ============= =========== =================== ============= =================== =================== =============
Trading
profit 4 40.2 - 40.2 34.6 - 34.6 80.1 - 80.1
Amortisation of
acquisition
intangibles 6 - (2.9) (2.9) - (2.0) (2.0) - (4.8) (4.8)
Business
reorganisation
costs 6 - - - - (0.3) (0.3) - (0.7) (0.7)
Gain on
disposal
of assets held
for sale 6 - 0.5 0.5 - - - - - -
Pension past
service
expense 6 - - - - - - - (1.1) (1.1)
Impairment of
assets 6 - - - - (0.1) (0.1) - (6.1) (6.1)
Acquisition
costs 6 - (0.7) (0.7) - (1.2) (1.2) - (2.2) (2.2)
Impairment of
disposal
group
held for sale 6 - (0.5) (0.5) - - - - - -
================ ==== =========== =================== ============= =========== =================== ============= =================== =================== =============
Operating 4,
profit 6 40.2 (3.6) 36.6 34.6 (3.6) 31.0 80.1 (14.9) 65.2
Financial
income 7 0.2 0.8 1.0 0.3 - 0.3 0.6 - 0.6
Financial
expense 7 (3.5) (0.7) (4.2) (1.9) (0.5) (2.4) (4.4) (1.6) (6.0)
================ ==== =========== =================== ============= =========== =================== ============= =================== =================== =============
Profit before
taxation 36.9 (3.5) 33.4 33.0 (4.1) 28.9 76.3 (16.5) 59.8
Taxation (7.2) 0.6 (6.6) (7.2) 0.5 (6.7) (14.9) 2.3 (12.6)
====================== =========== =================== ============= =========== =================== ============= =================== =================== =============
Profit for the period
attributable to
owners
of the parent 29.7 (2.9) 26.8 25.8 (3.6) 22.2 61.4 (14.2) 47.2
====================== =========== =================== ============= =========== =================== ============= =================== =================== =============
Basic earnings 37.5p 33.9p 32.8p 28.2p 77.8p 59.9p
per 9 37.2p 33.6p 32.5p 27.9p 77.2p 59.3p
share
Diluted 9
earnings
per share
================ ==== =========== =================== ============= =========== =================== ============= =================== =================== =============
Dividend per
share
- Interim 10 10.6p 10.0p 10.0p
================ ==== =============================================== =========== =================== ============= =================== =================== =============
* The Group's definition of non-underlying items is included in
note 6.
Condensed Consolidated Statement of Comprehensive Income
Six months ended 30 June 2019
6 months 6 months
ended ended 30 Year ended
30 June June 31 December
2019 2018 2018
GBPm GBPm GBPm
======================================================== ================ ================= ================
Profit for the period 26.8 22.2 47.2
======================================================== ================ ================= ================
Items that may be reclassified subsequently to
profit or loss
Exchange differences on translation of overseas
operations 0.3 (0.3) 11.7
Exchange differences on foreign currency borrowings
denominated as net investment hedges 0.1 1.9 (4.7)
Items that will not be reclassified subsequently
to profit or loss
Actuarial (loss)/gain on defined benefit pension
schemes (1.3) 1.4 1.7
Taxation on items that will not be reclassified
to profit or loss 0.2 (0.2) (0.3)
======================================================== ================ ================= ================
Other comprehensive (expense)/income for the
period (0.7) 2.8 8.4
======================================================== ================ ================= ================
Total comprehensive income for the period attributable
to owners of the parent 26.1 25.0 55.6
======================================================== ================ ================= ================
Condensed Consolidated Statement of Financial Position
Six months ended 30 June 2019
30 June 30 June 31 December
2019 2018 2018
Notes GBPm GBPm GBPm
===================================== ======= ======= ===========
Non-current assets
Intangible assets 208.8 183.4 183.8
Property, plant and equipment 180.7 150.3 170.2
Right-of-use assets 31.7 - -
Deferred tax assets 1.8 - 0.5
===================================== ======= ======= ===========
423.0 333.7 354.5
===================================== ======= ======= ===========
Current assets
Disposal groups and assets held
for sale 2.7 0.6 0.8
Inventories 104.5 97.4 96.6
Trade and other receivables 155.9 149.1 142.0
Cash and cash equivalents 11 24.9 27.4 36.9
================================= ======= ======= ===========
288.0 274.5 276.3
===================================== ======= ======= ===========
Total assets 711.0 608.2 630.8
===================================== ======= ======= ===========
Current liabilities
Trade and other liabilities (123.6) (115.4) (120.9)
Current tax liabilities (12.1) (10.0) (10.4)
Provisions for liabilities and
charges (0.3) (1.5) (1.3)
Lease liabilities (9.3) - -
Interest bearing borrowings 11 (0.4) (0.4) (0.4)
================================= ======= ======= ===========
(145.7) (127.3) (133.0)
===================================== ======= ======= ===========
Net current assets 142.3 147.2 143.3
===================================== ======= ======= ===========
Non-current liabilities
Other liabilities (3.4) (0.8) (2.7)
Provisions for liabilities and
charges (2.7) (2.9) (2.7)
Deferred tax liability (8.2) (8.4) (6.8)
Retirement benefit obligation (23.4) (23.2) (23.0)
Lease liabilities (24.3) - -
Interest bearing borrowings 11 (194.0) (168.2) (169.4)
================================= ======= ======= ===========
(256.0) (203.5) (204.6)
===================================== ======= ======= ===========
Total liabilities (401.7) (330.8) (337.6)
===================================== ======= ======= ===========
Net assets 309.3 277.4 293.2
===================================== ======= ======= ===========
Equity
Share capital 19.8 19.8 19.8
Share premium 36.4 34.8 35.5
Other reserves 4.9 4.9 4.9
Translation reserve 30.3 24.5 29.9
Retained earnings 217.9 193.4 203.1
===================================== ======= ======= ===========
Total equity 309.3 277.4 293.2
===================================== ======= ======= ===========
Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June 2019
Share Share Other Translation Hedge Retained Total
capital premium reserves reserves reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================================================================ =============== ================ ==================== ================ ================ ===========
At 1 January 2019 19.8 35.5 4.9 29.9 - 203.1 293.2
Adoption of new accounting
standards - - - - - (2.5) (2.5)
============================================ ============================== =============== ================ ==================== ================ ================ ===========
At 1 January 2019 - restated 19.8 35.5 4.9 29.9 - 200.6 290.7
Comprehensive income
Profit for the period - - - - - 26.8 26.8
Other comprehensive income
for the period - - - 0.4 - (1.1) (0.7)
Transactions with owners
recognised directly
in equity
Dividends - - - - - (7.9) (7.9)
Credit to equity of share-based
payments - - - - - 0.5 0.5
Satisfaction of long term
incentive payments - - - - - (1.3) (1.3)
Own shares held by employee
benefit trust - - - - - 0.3 0.3
Shares issued - 0.9 - - - - 0.9
============================================ ============================== =============== ================ ==================== ================ ================ ===========
At 30 June 2019 19.8 36.4 4.9 30.3 - 217.9 309.3
============================================ ============================== =============== ================ ==================== ================ ================ ===========
Six months ended 30 June
2019
Share Share Other Translation Hedge Retained Total
capital premium reserves reserves reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================================ ============================== =============== ================ ==================== ================ ================ ===========
At 1 January 2018 19.7 34.1 4.9 22.9 - 177.0 258.6
Adoption of new accounting
standards - - - - - 0.9 0.9
============================================ ============================== =============== ================ ==================== ================ ================ ===========
At 1 January 2018 - restated 19.7 34.1 4.9 22.9 - 177.9 259.5
Comprehensive income
Profit for the period - - - - - 22.2 22.2
Other comprehensive income
for the period - - - 1.6 - 1.2 2.8
Transactions with owners
recognised directly in equity
Dividends - - - - - (7.4) (7.4)
Credit to equity of share-based
payments - - - - - 0.8 0.8
Satisfaction of long term
incentive payments - - - - - (2.5) (2.5)
Own shares held by employee
benefit trust - - - - - 1.2 1.2
Shares issued 0.1 0.7 - - - - 0.8
============================================ ============================== =============== ================ ==================== ================ ================ ===========
At 30 June 2018 19.8 34.8 4.9 24.5 - 193.4 277.4
============================================ ============================== =============== ================ ==================== ================ ================ ===========
Year ended 30 June 2019
Share Share Other Translation Hedge Retained Total
capital premium reserves reserves reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================== =========== ============ ============= ============ ============ ============
At 1 January 2018 19.7 34.1 4.9 22.9 - 177.0 258.6
Adoption of new accounting
standards
- - - - - 2.7 2.7
================================== =========== ============ ============= ============ ============ ============
At 1 January 2018 - restated 19.7 34.1 4.9 22.9 - 179.7 261.3
Comprehensive income
Profit for the year - - - - - 47.2 47.2
Other comprehensive income for
the year - - - 7.0 - 1.4 8.4
Transactions with owners
recognised
directly in equity
Dividends - - - - - (23.6) (23.6)
Credit to equity of share-based
payments - - - - - 1.1 1.1
Satisfaction of long term
incentive
payments - - - - - (2.9) (2.9)
Own shares held by employee
benefit
trust - - - - - 0.2 0.2
Transfers between reserves - - - - - - -
Tax taken directly to the - - - - - -
Consolidated
Statement of Changes in Equity
-
Shares issued 0.1 1.4 - - - - 1.5
================================== =========== ============ ============= ============ ============ ============
At 31 December 2018 19.8 35.5 4.9 29.9 - 203.1 293.2
================================== =========== ============ ============= ============ ============ ============
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 2019
6 months ended 6 months ended Year ended
30 June 2019 30 June 2018 31 December
Notes GBPm GBPm 2018
GBPm
============================================= ============== ============== =======================
Profit before tax 33.4 28.9 59.8
Add back net financing costs 3.2 2.1 5.4
============================================= ============== ============== =======================
Operating profit 36.6 31.0 65.2
Adjusted for non-cash items:
Share-based payments 0.5 0.8 1.1
Gain on disposal of non-current
assets (0.5) (1.8) (0.3)
Depreciation 9.8 9.4 18.6
Lease asset depreciation 4.9 - -
Amortisation of intangible assets 3.5 2.5 5.7
Impairment of disposal groups and
assets held for sale 0.5 0.1 0.1
Impairment of non-current assets - - 6.0
============================================= ============== ============== =======================
18.7 11.0 31.2
============================================= ============== ============== =======================
Operating cash flow before movement
in working capital 55.3 42.0 96.4
Increase in inventories (5.5) (7.2) (3.4)
Increase in receivables (15.4) (20.2) (9.8)
(Decrease)/Increase in payables (0.9) 5.1 6.9
Decrease in provisions and employee
benefits (2.2) (1.8) (2.4)
============================================= ============== ============== =======================
Net movement in working capital
and provisions (24.0) (24.1) (8.7)
============================================= ============== ============== =======================
Cash generated by operations 31.3 17.9 87.7
Purchase of assets for rental to
customers (10.7) - (14.5)
Income taxes paid (6.0) (7.9) (13.3)
Interest paid (3.4) (1.9) (4.4)
============================================= ============== ============== =======================
Net cash from operating activities 11.2 8.1 55.5
Interest received 0.2 0.3 0.5
Proceeds on disposal of non-current
assets 0.1 2.1 0.6
Proceeds on disposal of assets held
for resale 1.3 - 0.6
Purchase of property, plant and
equipment (12.8) (10.3) (17.4)
Purchase of intangible assets (0.4) (0.3) (0.9)
Acquisitions of businesses (23.5) (32.1) (45.2)
Deferred consideration in respect
of prior year acquisitions - - (0.6)
============================================= ============== ============== =======================
Net cash used in investing activities (35.1) (40.3) (62.4)
Issue of new shares 0.9 0.8 1.5
Purchase of shares for employee
benefit Trust (0.9) (1.3) (2.7)
Dividends paid 10 (7.9) (7.4) (23.6)
Costs associated with financing (2.0) - -
Repayments of lease liabilities (5.0) - -
New loans and borrowings 96.2 65.0 78.3
Repayment of loans and borrowings (69.4) (14.1) (26.8)
========================================= ============== ============== =======================
Net cash raised from financing activities 11.9 43.0 26.7
============================================= ============== ============== =======================
Net (decrease)/increase in cash (12.0) 10.8 19.8
Cash at the beginning of the period 36.9 16.4 16.4
Effect of exchange rate fluctuations - 0.2 0.7
============================================= ============== ============== =======================
Cash at the end of the period 11 24.9 27.4 36.9
========================================= ============== ============== =======================
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 7
August 2019 and in accordance with IAS 34: 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 2018 (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 2018) except for the adoption of new
standards effective as of 1 January 2019.
New IFRS standards and interpretations adopted during 2019
In 2019 the following standards and amendments had been endorsed
by the EU, became effective and therefore were adopted by the
Group:
-- IFRS 16 'Leases'; and
-- IFRIC 23 'Uncertainty over Income Tax Treatments'. IFRIC 23
has not had a material impact on the financial statements.
IFRS 16 'Leases'
IFRS 16 replaces IAS 17 'Leases' and has been adopted by the
Group from 1 January 2019. The new standard requires lessees to
recognise a lease liability reflecting the discounted future lease
payments and a right-of-use asset for all applicable lease
contracts. The present value of the Group's operating lease
liabilities is now presented as a liability in the statement of
financial position, together with a right-of-use asset, which is
unwound and amortised to the income statement over the life of the
lease.
Transition option adopted
The Group has applied the modified retrospective method.
Therefore, comparative figures are not restated and the cumulative
effect of initially applying the standard is recognised as an
adjustment to the opening balance of retained earnings at 1 January
2019. In applying this method, the Group used historical payment
data as if IFRS 16 had always existed but with the benefit of
hindsight for actual changes in the leases.
The Group also applied the available practical expedients
wherein it:
-- Grandfathered the definition of a lease on transition. The
Group has applied IFRS 16 to all contracts entered into before 1
January 2019 and identified as leases in accordance with IAS 17 and
related interpretations;
-- Applied a single discount rate to a portfolio of leases with
reasonably similar characteristics;
-- Relied on its assessment of whether leases are onerous
immediately before the date of initial application;
-- Applied the short-term leases exemption to leases with lease
terms that end within 12 months of the date of initial
application;
-- Applied the lease of low-value assets recognition exemption
to leases of assets that are considered of low value; and
-- Excluded the initial direct costs from the measurement of the
right-of-use asset at the date of initial application.
The impact on retained earnings at 1 January 2019, net of tax,
was a reduction of GBP2.5m.
Change to accounting policies
The Group has lease contracts for various items of land,
buildings, plant, machinery, vehicles and other equipment.
Prior to 1 January 2019 and before the adoption of IFRS 16, the
Group classified each of its leases (as lessee) at the inception
date as either a finance lease or an operating lease. A lease was
classified as a finance lease if it transferred substantially all
of the risks and rewards incidental to ownership of the leased
asset to the Group; otherwise it was classified as an operating
lease. Finance leases were capitalised at the commencement of the
lease at the inception date fair value of the leased asset or, if
lower, at the present value of the minimum lease payments. Lease
payments were apportioned between interest (recognised as finance
costs) and principal (reduction of the lease liability). In an
operating lease, the leased assets were not capitalised and the
lease payments were recognised as rental expense in profit or loss
on a straight-line basis over the lease term. Any prepaid rent and
accrued rent were recognised under Prepayments and Trade and other
payables respectively.
From 1 January 2019, the Group's accounting policy for leasing
arrangements is as follows:
To the extent that right-of-control exists over an asset subject
to a lease and with a lease term exceeding one year, the Group
recognises a right-of-use asset, representing the underlying lease
asset, and a lease liability, representing the Group's obligation
to make lease payments. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before the
commencement date, any initial direct costs incurred and an
estimate of the dismantling, removal and restoration costs as
required by the terms of the lease contract.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of
the lease term.
The lease liability is measured at the present value of the
future lease payments discounted using the Group's incremental
borrowing rate, being the rate that the lessee would have to pay to
borrow the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.
Future lease payments include fixed payments, variable lease
payments that depend on an index or a rate (initially measured
using the index or rate as at the commencement date), amounts
expected to be payable under a residual guarantee and the exercise
price of purchased options where it is reasonably certain that the
option will be exercised. Finance charges, representing the
unwinding of the discount rate, are recognised in the Consolidated
Income Statement over the period of the lease.
Lease payments for low value assets and short term leases (less
than 12 months) are recognised as an expense on a straight line
basis over the lease term.
Impact of adoption
The table below reconciles the Group's operating lease
commitments as at 31 December 2018 to the opening lease liability
as at 1 January 2019:
GBPm
Operating lease commitments as at 31 December 2018
* 38.5
Effect of discounting at the incremental borrowing
rate at the date of initial application (4.0)
Leases covered by recognition exemptions (0.3)
==================================================== =====
Lease liabilities as at 1 January 2019 34.2
==================================================== =====
* Prepared using foreign exchange rates at 31 December 2018.
The weighted average incremental borrowing rate for lease
liabilities recognised on 1 January 2019 was 2.50%.
The following tables summarise the impacts on the Group's income
statement and statement of financial position for the current
period.
Impact on the consolidated income
statement As reported Adjustments Amounts without
adoption of
IFRS 16
GBPm GBPm GBPm
Revenue 339.5 - 339.5
===================================== ============= ============= =========================
Operating profit 36.6 (0.7) 35.9
===================================== ============= ============= =========================
Net Finance costs (3.2) 0.4 (2.8)
Income tax expense (6.6) - (6.6)
===================================== ============= ============= =========================
Profit for the period 26.8 (0.3) 26.5
===================================== ============= ============= =========================
Impact on the consolidated statement
of financial position
As reported Adjustments Amounts without
adoption of
IFRS 16
GBPm GBPm GBPm
Assets
Right-of-use assets 31.7 (31.7) -
Deferred tax asset 1.8 (0.5) 1.3
Others 677.5 1.0 678.5
===================================== ============= ============= =========================
Total assets 711.0 (31.2) 679.8
===================================== ============= ============= =========================
Liabilities
Lease liabilities (33.6) 33.6 -
Others (368.1) - (368.1)
===================================== ============= ============= =========================
Total liabilities (401.7) 33.6 (368.1)
===================================== ============= ============= =========================
The only impact to the Group's cash flow statement is in
presentation. Previously payments on leases were presented in
operating activities. From 1 January 2019, cash payments for the
principal portion of the lease liability are presented as cash
flows used in financing activities and cash payments for the
interest portion of the lease liability are presented in operating
activities. Short-term lease payments and payments for leases of
low-value assets not included in the measurement of the lease
liability are presented within operating activities.
The comparative figures for the financial year ended 31 December
2018 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 2018.
3. Exchange rates
The principal exchange rates used were as follows:
6 months ended 6 months ended Year ended
30 June 2019 30 June 2018 31 December
2018
=============================== =========================== ========================= ======= ====================
Average Closing Average Closing Average Closing
=============================== ============= ============ ========================= ======= =========== =======
Sterling to Euro (GBP1 =
EUR) 1.15 1.12 1.14 1.13 1.13 1.11
Sterling to US Dollar (GBP1
= USD) 1.29 1.27 1.38 1.32 1.33 1.28
Sterling to Swedish Krona
(GBP1 = SEK) 12.04 11.81 11.54 11.81 11.60 11.43
Sterling to Indian Rupee
(GBP1 = INR) 90.61 87.76 90.36 90.45 91.25 89.10
Sterling to Australian Dollar
(GBP1 = AUD) 1.83 1.81 1.78 1.79 1.79 1.81
=============================== ============= ============ ========================= ======= =========== =======
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
2019 2018
========================= ====================================== ======================================
Underlying Underlying
Revenue Result result* Revenue Result result*
GBPm GBPm GBPm GBPm GBPm GBPm
========================= ============ ========== ============ ============ ========== ============
Infrastructure Products
- Utilities 126.5 8.5 9.6 113.0 6.3 7.3
Infrastructure Products
- Roads 114.7 8.4 10.3 87.2 6.5 8.5
========================= ============ ========== ============ ============ ========== ============
Infrastructure Products
- Total 241.2 16.9 19.9 200.2 12.8 15.8
Galvanizing Services 98.3 19.7 20.3 95.2 18.2 18.8
========================= ============ ========== ============ ============ ========== ============
Total Group 339.5 36.6 40.2 295.4 31.0 34.6
========================= ============ ============
Net financing costs (3.2) (3.3) (2.1) (1.6)
========================= ============ ========== ============ ============ ========== ============
Profit before taxation 33.4 36.9 28.9 33.0
Taxation (6.6) (7.2) (6.7) (7.2)
========================= ============ ========== ============ ============ ========== ============
Profit after taxation 26.8 29.7 22.2 25.8
========================= ============ ========== ============ ============ ========== ============
Year ended 31 December 2018
Underlying
Revenue Result result*
====================================
GBPm GBPm GBPm
==================================== ========= ======== =================
Infrastructure Products - Utilities 239.0 9.0 18.3
Infrastructure Products - Roads 208.5 20.3 24.2
==================================== ========= ======== =================
Infrastructure Products - Total 447.5 29.3 42.5
Galvanizing Services 190.4 35.9 37.6
==================================== ========= ======== =================
Total Group 637.9 65.2 80.1
==================================== =========
Net financing costs (5.4) (3.8)
==================================== ========= ======== =================
Profit before taxation 59.8 76.3
Taxation (12.6) (14.9)
==================================== ========= ======== =================
Profit after taxation 47.2 61.4
==================================== ========= ======== =================
* Underlying result is stated before Non-underlying items as
defined in note 6 and is the measure of segment profit used by the
Chief Operating Decision Maker, who is the Chief
Executive. The Result columns are included as additional
information.
Galvanizing Services provided GBP2.9m revenues to Infrastructure
Products - Roads (six months ended 30 June 2018: GBP3.3m, the year
ended 31 December 2018: GBP6.4m) and GBP0.8m revenues to
Infrastructure Products - Utilities (six months ended 30 June 2018:
GBP0.8m, the year ended 31 December 2018: GBP1.6m). Infrastructure
Products - Utilities provided GBP3.2m revenues to Infrastructure
Products - Roads (six months ended 30 June 2018: GBP2.5m, the year
ended 31 December 2018: GBP5.2m). Infrastructure Products - Roads
provided GBP0.1m revenues to Infrastructure Products - Utilities
(six months ended 30 June 2018: GBPnil, the year ended 31 December
2018: GBP0.2m). These internal revenues, along within revenues
generated within each segment, have been eliminated on
consolidation.
Revenue from contracts with customers is disaggregated by
primary geographical market, major product/service lines and timing
of revenue recognition. The table below also includes a
reconciliation of the disaggregated revenue with the Group's
reportable segments.
Utilities Roads Galvanizing Total
June 2019 June 2018 June 2019 June 2018 June 2019 June 2018 June 2019 June 2018
======================= ========= ========= ========= ========= ========= ========= ========= =========
Primary geographical GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
markets
UK 56.1 54.2 54.6 48.2 31.6 30.6 142.3 133.0
Rest of Europe 2.8 2.8 28.5 25.4 27.4 27.5 58.7 55.7
North America 64.4 51.0 28.2 8.7 39.3 37.1 131.9 96.8
The Middle East 0.4 1.7 1.6 0.5 - - 2.0 2.2
Rest of Asia 2.2 3.1 0.4 - - - 2.6 3.1
Rest of the world 0.6 0.2 1.4 4.4 - - 2.0 4.6
========= ========= ========= ========= ========= ========= ========= =========
126.5 113.0 114.7 87.2 98.3 95.2 339.5 295.4
========= ========= ========= ========= ========= ========= ========= =========
Major product/service
lines
Manufacture, supply
and
installation of
products 126.5 113.0 103.7 77.6 - - 230.2 190.6
Galvanizing services - - - - 98.3 95.2 98.3 95.2
Rental income - - 11.0 9.6 - - 11.0 9.6
========= ========= ========= ========= ========= ========= ========= =========
126.5 113.0 114.7 87.2 98.3 95.2 339.5 295.4
========= ========= ========= ========= ========= ========= ========= =========
Timing of revenue
recognition
Products and services
transferred at
a point in time 80.1 74.4 88.6 62.0 98.3 95.2 267.0 231.6
Products and services
transferred over
time 46.4 38.6 26.1 25.2 - - 72.5 63.8
========= ========= ========= ========= ========= ========= ========= =========
126.5 113.0 114.7 87.2 98.3 95.2 339.5 295.4
========= ========= ========= ========= ========= ========= ========= =========
Year ended 31 December 2018
Utilities Roads Galvanizing Total
====================================== =============== ========= ============= ========= =====
Primary geographical markets GBPm GBPm GBPm GBPm
UK 113.3 104.7 60.5 278.5
Rest of Europe 5.4 56.2 53.2 114.8
North America 112.0 35.9 76.7 224.6
The Middle East 2.5 2.1 - 4.6
Rest of Asia 5.4 0.2 - 5.6
Rest of the world 0.4 9.4 - 9.8
=============== ========= ============= ========= =====
239.0 208.5 190.4 637.9
=============== ========= ============= ========= =====
Major product/service lines
Manufacture, supply and installation
of products 239.0 186.5 - 425.5
Galvanizing services - - 190.4 190.4
Rental income - 22.0 - 22.0
=============== ========= ============= ========= =====
239.0 208.5 190.4 637.9
=============== ========= ============= ========= =====
Timing of revenue recognition
Products and services transferred
at a point in time 151.9 152.1 190.4 494.4
Products and services transferred
over time 87.1 56.4 - 143.5
=============== ========= ============= ========= =====
239.0 208.5 190.4 637.9
=============== ========= ============= ========= =====
5. Operating profit
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018 GBPm
GBPm GBPm
========================= ======== ======== ====================
Revenue 339.5 295.4 637.9
Cost of sales (214.3) (189.4) (409.3)
========================= ======== ======== ====================
Gross profit 125.2 106.0 228.6
Distribution costs (18.2) (16.6) (35.8)
Administrative expenses (71.3) (59.1) (129.1)
Other operating income 0.9 0.7 1.5
========================= ======== ======== ====================
Operating profit 36.6 31.0 65.2
========================= ======== ======== ====================
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 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, which can vary depending on the nature, size and
frequency of acquisitions in each financial year.
-- Expenses associated with acquisitions, comprising
professional fees incurred and any consideration which, under IFRS
3 (Revised) is required to be treated as a post-acquisition
employment expense.
-- 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 non-underlying tax charge or credit comprises the tax effect
of the above non-underlying items.
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 2019
Non-underlying items included in operating profit comprise the
following:
-- On 5 August 2019 the Group disposed of Weholite Limited, its
non-core plastic drainage pipe business, for a net consideration of
GBP2.7m. Having met the conditions set out in IFRS 5, the business
has been treated as held for sale at 30 June 2019 and its assets
and liabilities remeasured at their expected realisable value,
resulting in a loss on remeasurement of GBP0.5m.
-- Acquisition related expenses of GBP0.7m reflect costs
associated with acquisitions and include GBP0.2m relating to future
consideration payments to previous owners of acquired businesses,
the terms of which require those costs to be treated as a
post-acquisition employment expense in accordance with IFRS 3
(Revised).
-- Amortisation of acquisition intangibles was GBP2.9m.
-- During the period the Group completed the disposal of a
property that had been held for sale at 31 December 2018, at a
profit of GBP0.5m.
Non-underlying items included in financial income represent a
gain on refinancing under IFRS 9 of GBP0.8m, and included in
financial expense represent the net financing cost on pension
obligations of GBP0.3m and a GBP0.4m charge in respect of
amortisation of costs associated with refinancing.
Year ended 31 December 2018
Non-underlying items included in operating profit comprised the
following:
-- Business reorganisation costs of GBP0.7m relating to two
restructuring actions taken by the Group:
- During the prior year the Group undertook a restructuring of
its UK Industrial Flooring business, part of the Infrastructure
Products
- Utilities segment, a decision taken in light of weaker market
conditions in the first half of the prior year. The restructuring
has improved the efficiency and productivity of the business and
supported an improved performance in the second half of the prior
year. The cost in the year was GBP0.5m.
- Following the acquisition of Tower Tech in August 2017, the
Group commenced a programme to close Tower Tech's facility in
Oklahoma City and relocate the business to the existing Creative
Pultrusions site in Pennsylvania, resulting in charge in 2017
of
GBP0.4m. A further charge of GBP0.2m was recognised in 2018
representing additional closure costs that will be incurred. The
relocation was completed in Q1 2019.
-- Amortisation of acquired intangible fixed assets of GBP4.8m.
-- Acquisition expenses of GBP2.2m related to the acquisitions
completed during 2018. The costs included GBP0.4m relating to
future consideration payments to previous owners of the acquired
businesses, the terms of which require those costs to be treated as
a post- acquisition employment expense in accordance with IFRS 3
(Revised).
-- An impairment charge of GBP6.0m in respect of goodwill and
acquired intangible assets relating to the Group's acquisition of
Technocover Limited in July 2016.
-- A past service cost of GBP1.1m in respect of defined benefit
pension schemes. In October 2018 the High Court handed down a
judgement requiring businesses with defined benefit pension schemes
to equalise historical Guaranteed Minimum Pensions (GMPs) between
male and female members. The Group has taken professional advice as
to the impact of this judgement and concluded that a cost of
GBP1.0m is likely to be incurred in equalising GMPs arising in
prior years. In drawing this conclusion the Group has taken into
account the four potential approaches that the judgement ruled to
be suitable for calculating the equalisation cost, and has
calculated that the range of outcomes under each of these
approaches is likely to be between GBP0.9m and GBP1.2m. The charge
was treated as a non-underlying item in accordance with the Group's
definitions of such items. A further charge of GBP0.1m was incurred
in respect of changes to the terms of the Group's pension schemes
in France.
-- An impairment charge of GBP0.1m in respect of assets held for
sale reflecting a loss on the disposal of that property during
2018.
Non-underlying items included in financial expense represented
the net financing cost on pension obligations of GBP0.6m and a
GBP1.0m 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 2018
2019 2018 GBPm
GBPm GBPm
============================================= ======== ======== ====================
Interest on bank deposits 0.2 0.3 0.6
============================================= ======== ======== ====================
Total interest income 0.2 0.3 0.6
============================================= ======== ======== ====================
Financial gain relating to refinancing 0.8 - -
============================================= ======== ======== ====================
Financial income 1.0 0.3 0.6
============================================= ======== ======== ====================
Interest on bank loans and overdrafts 3.1 1.9 4.4
Interest on lease liabilities 0.4 - -
============================================= ======== ======== ====================
Total interest expense 3.5 1.9 4.4
Financial expenses related to refinancing 0.4 0.2 1.0
Interest cost on net pension scheme deficit 0.3 0.3 0.6
============================================= ======== ======== ====================
Financial expense 4.2 2.4 6.0
============================================= ======== ======== ====================
Net financing costs 3.2 2.1 5.4
============================================= ======== ======== ====================
8. Taxation
Tax has been provided on the underlying profit at the estimated
effective rate of 19.5% (2018: 22%) for existing operations for the
full year.
In October 2017, the European Commission ('EC') opened a state
aid investigation into the Group Financing Exemption in the UK
controlled foreign company legislation. In April 2019, the EC
released its full decision in relation to this investigation
upholding its preliminary findings that, up until 31 December 2018,
aspects of the UK controlled foreign company legislation
constituted State Aid. In June 2019, the EC decision was appealed
by the UK government and there remains significant uncertainty as
to the outcome of both the appeals process and any recovery
mechanism. If the EC decision is ultimately upheld, we have
estimated the Group's maximum potential liability to be GBP2.6m.
However, we consider that it remains sufficiently unclear that it
is more likely than not that any liability would arise and
therefore no provision has been made at 30 June 2019.
9. Earnings per share
The weighted average number of ordinary shares in issue during
the period was 79.1m, diluted for the effect of outstanding share
options 79.6m (six months ended 30 June 2018: 78.7m and 79.6m
diluted, the year ended 31 December 2018: 78.8m and 79.5m
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 6 months Year ended
ended ended 31 December
30 June 30 June 2018 2018
2019
===================== =============================== ============================== ========== ==================
Pence per Pence per Pence
share GBPm share GBPm per GBPm
share
===================== ===================== ======== ===================== ======= ========== ==================
Basic earnings 33.9 26.8 28.2 22.2 59.9 47.2
Non-underlying
items* 3.6 2.9 4.6 3.6 17.9 14.2
===================== ===================== ======== ===================== ======= ========== ==================
Underlying earnings 37.5 29.7 32.8 25.8 77.8 61.4
===================== ===================== ======== ===================== ======= ========== ==================
Diluted earnings 33.6 26.8 27.9 22.2 59.3 47.2
Non-underlying
items* 3.6 2.9 4.6 3.6 17.9 14.2
===================== ===================== ======== ===================== ======= ========== ==================
Underlying diluted
earnings 37.2 29.7 32.5 25.8 77.2 61.4
===================== ===================== ======== ===================== ======= ========== ==================
* Non-underlying items as detailed in note 6.
10. Dividends
Dividends paid in the period were the prior year's interim
dividend of GBP7.9m (2017: GBP7.4m). The final dividend for 2018 of
GBP17.3m (2017:
GBP16.2m) was paid on 1 July 2019. 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 GBP8.4m, 10.6p per share (2018: GBP7.9m,10.0p per
share), which will be paid on 3 January 2020 to shareholders on the
register on 29 November 2019.
11. Analysis of net debt
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018 GBPm
GBPm GBPm
================================================ ======== ======== ====================
Cash and cash equivalents 24.9 27.4 36.9
Interest bearing borrowings due within one
year (0.4) (0.4) (0.4)
Lease liabilities due within one year (9.3) - -
Interest bearing borrowings due after more
than one year (194.0) (168.2) (169.4)
Lease liabilities due after more than one
year (24.3) - -
================================================ ======== ======== ====================
Net debt (203.1) (141.2) (132.9)
================================================ ======== ======== ====================
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018 GBPm
GBPm GBPm
================================================ ======== ======== ======================
Change in net debt
Operating profit 36.6 31.0 65.2
Non-cash items 18.7 11.0 31.2
================================================ ======== ======== ======================
Operating cash flow before movement in working
capital 55.3 42.0 96.4
Net movement in working capital (21.8) (22.3) (6.3)
Change in provisions and employee benefits (2.2) (1.8) (2.4)
================================================ ======== ======== ======================
Operating cash flow 31.3 17.9 87.7
Tax paid (6.0) (7.9) (13.3)
Net financing costs paid (2.8) (1.6) (3.9)
Capital expenditure (23.9) (10.6) (32.8)
Proceeds on disposal of non-current assets
and assets held for sale 1.4 2.1 1.2
================================================ ======== ======== ======================
Free cash flow - (0.1) 38.9
Dividends paid (note 10) (7.9) (7.4) (23.6)
Acquisitions (24.1) (32.1) (45.8)
Income/(expense) associated with financing 0.4 (0.2) (1.0)
Purchase of shares for employee benefit
trust (0.9) (1.3) (2.7)
Issue of new shares 0.9 0.8 1.5
New leases and lease measurements (3.9) - -
Interest on lease liabilities (0.4) - -
Net debt increase (35.9) (40.3) (32.7)
Effect of exchange rate fluctuations (0.2) (1.9) (3.3)
================================================ ======== ======== ======================
Net debt at the beginning of the period (132.9) (99.0) (99.0)
Adoption of new accounting standards (34.1) - 2.1
================================================ ======== ======== ======================
Net debt at beginning of the period - restated (167.0) (99.0) (96.9)
================================================ ======== ======== ======================
Net debt at the end of the period (203.1) (141.2) (132.9)
================================================ ======== ======== ======================
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 at Amortised Total
fair value cost carrying Fair
GBPm GBPm value value
GBPm GBPm
====================================== ============= ========= ========= =======
Cash and cash equivalents - 24.9 24.9 24.9
Interest bearing loans due within
one year - (0.4) (0.4) (0.4)
Interest bearing loans due after more
than one year - (194.0) (194.0) (194.0)
Lease liabilities due within one year - (9.3) (9.3) (9.3)
Lease liabilities due after more than
one year - (24.3) (24.3) (24.3)
Derivative assets - - - -
Derivative liabilities - - - -
Other assets - 146.9 146.9 146.9
Other liabilities - (111.3) (111.3) (111.3)
====================================== ============= ========= ========= =======
Total at 30 June 2019 - (167.5) (167.5) (167.5)
====================================== ============= ========= ========= =======
Fair value hierarchy
There were no financial instruments carried at fair value at 30
June 2019 or 30 June 2018.
13. Acquisitions
On 22 February 2019 the Group acquired 100% of the share capital
of Cobaco Holdings Limited and its subsidiaries including ATG
Access Limited ("ATG"). Based in the UK and exporting to over 30
countries, ATG specialises in the development, manufacture, and
installation of hostile vehicle mitigation perimeter security
solutions including bollards (automated, static, impact and
non-impact tested), road blockers, barriers and gates. Details of
the acquisition are set out below:
Policy
alignment
and
provisional
Pre acquisition fair
carrying value
amount adjustments Total
ATG GBPm GBPm GBPm
================================================== =============== ============ ======
Intangible assets
Brands - 3.6 3.6
Customer lists - 5.1 5.1
Contracts, licenses and other assets 0.7 3.5 4.2
Property, plant and equipment 0.5 - 0.5
Right-of-use assets - 0.6 0.6
Inventories 3.9 (0.4) 3.5
Current assets 5.7 (4.2) 1.5
Cash 0.2 - 0.2
================================================== =============== ============ ======
Total assets 11.0 8.2 19.2
================================================== =============== ============ ======
Lease liabilities - (0.6) (0.6)
Current liabilities (9.0) 1.0 (8.0)
Deferred tax (0.1) (1.6) (1.7)
================================================== =============== ============ ======
Total liabilities (9.1) (1.2) (10.3)
================================================== =============== ============ ======
Net assets 1.9 7.0 8.9
================================================== =============== ============
Consideration
Consideration in the period 23.7
================================================== =============== ============ ======
Goodwill 14.8
================================================== =============== ============ ======
Cash flow effect
Consideration 23.7
Cash acquired with the business (0.2)
================================================== =============== ============ ======
Net cash consideration shown in the Consolidated
Statement of Cash Flows 23.5
================================================== =============== ============ ======
Brands, patents and associated intellectual property,
contractual arrangements and customer lists 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. Fair value adjustments have been made to better align the
accounting policies of the acquired businesses with the Group's
accounting policies and to reflect the fair value of assets and
liabilities acquired. The fair value of the current assets acquired
included GBP2.3m of trade receivables which have a gross value of
GBP2.9m.
Post acquisition the acquired business has contributed GBP7.0m
revenue and GBP0.9m underlying operating profit, which are included
in the Group's Consolidated Income Statement. If the acquisition
had been made on 1 January 2019, the Group's results for the year
would have shown revenue of GBP343.0m and underlying operating
profit of GBP40.6m.
14. Subsequent events
On 5 August 2019, the Group sold its plastic drainage pipe
business, Weholite Limited, for net consideration of GBP2.7m.
Having met the conditions of IFRS 5, the business has been treated
as held for sale at 30 June 2019 and its assets and liabilities
were remeasured at their expected realisable value, resulting in a
loss on remeasurement of GBP0.5m as explained in note 6.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFVDTLIRIIA
(END) Dow Jones Newswires
August 07, 2019 02:00 ET (06:00 GMT)
Hill & Smith (LSE:HILS)
Historical Stock Chart
From Apr 2024 to May 2024
Hill & Smith (LSE:HILS)
Historical Stock Chart
From May 2023 to May 2024