RNS Number:3735S
Hill & Smith Hldgs PLC
06 March 2007
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006
Hill & Smith Holdings PLC ("the Group") announces an increase in revenue,
profits and dividends for the year ended 31 December 2006. Revenue increased by
10.4 per cent to 306.0m and profit before taxation rose by 9.4 per cent to
17.3m. Underlying profit before taxation grew by 17.6 per cent to 18.5m with
dividends 20% higher at 7.2p per share. Basic earnings per share were 11.9%
lower at 19.8p but underlying earnings per share* increased by 15.3% to 20.7p.
Highlights
Year ended Year ended
31 December 31 December
2006 2005
Revenue 306.0m 277.3m
Profit before taxation 17.3m 15.8m
Underlying profit before taxation* 18.5m 15.7m
Basic earnings per share 19.8p 22.5p
Underlying earnings per share* 20.7p 17.9p
Dividends per share 7.2p 6.0p
* Results stated before reorganisation and property items
The Group's focus on investing in more value-added products and services led to
a further improvement in its operating margins. In particular, underlying
operating profits at the Group's Infrastructure Products division increased by
24.9 per cent. The continuing plans for spending on transport infrastructure
mean that the division's markets remain strong.
During 2006, Hill & Smith invested 29.5m in acquisitions, capital expenditure
and product development and returns are already evident from this investment,
including greater efficiency and improved market positioning. The focus of the
investment continues to be in core areas where the Group is a market leader,
with advantages in terms of innovation and cost.
During the year, the Group raised 26.8m net of expenses through a placing and
open offer, to provide a basis for further growth and investment.
David Winterbottom, Chairman, said: "The current trading period has started in
line with our expectations and, subject to market conditions remaining
favourable, I look forward to further progress in 2007."
Further information:
Hill & Smith Holdings PLC
David Grove, Chief Executive
0121 704 7430
07973 325667
Freshwater UK
Edward Carter/Anna McNeil
0121 633 7775
07770 378097
CHAIRMAN'S STATEMENT
General
I am pleased to be able to report another year of increased profitability and
progress for the Group. In the year ended 31 December 2006 revenue increased by
10.4% to 306.0 million (2005: 277.3 million) and profit before taxation
increased by 9.4% to 17.3 million (2005: 15.8 million). In the absence of last
year's one-off tax benefits, earnings per share fell by 11.9% to 19.8p (2005:
22.5p).
The Group regards its underlying results, which exclude the effects of business
reorganisation and property items, as the most appropriate measure of its
financial performance. Underlying operating profit increased by 15.8% to 22.7
million (2005: 19.6 million) on revenue of 306.0 million (2005: 277.3
million). Underlying profit before taxation increased by 17.6% to 18.5 million
(2005: 15.7 million). There was a further improvement in underlying earnings
per share to 20.7p in 2006 (2005: 17.9p), representing an increase of 15.3%.
Dividends
If approved by shareholders, the proposed final dividend of 4.2p per share will
result in a total dividend for the year of 7.2p, which is 20.0% ahead of last
year (2005: 6.0p). Our progressive policy leaves the dividend covered 2.9 times
by underlying earnings.
Operations
Our focus on investing in more value-added products and services led to a
further improvement in the Group's underlying operating margin to 7.4% (2005:
7.1%).
The performance of the Infrastructure Products division was excellent, with
underlying operating profit increasing by 24.9%. This division has been the main
beneficiary of our investment programme in recent years and it continues to
provide excellent returns.
The Building and Construction Products division was hit by losses in our Express
concrete reinforcement business which led to a fall in the division's underlying
operating profit of 20.4% compared to 2005. Losses have now been eliminated at
this operation, which returned to profitability in the last quarter of the year.
Underlying operating profit in the small Industrial Products division moved
ahead by 47.3%. This performance was primarily attributable to the increasing
profitability of our expanding Pipe Supports operation in Thailand.
Funding
To help finance our acquisition and organic growth plans, in October 2006 the
Group raised some 26.8 million, net of expenses, by means of a Placing and Open
Offer of new ordinary shares. This was well supported by existing shareholders
and also introduced some new institutional holders.
Acquisitions
In February 2006 we acquired Counters & Accessories Limited. This business
designs and supplies traffic data recording equipment primarily for the public
sector and complements our existing Techspan business in the growing transport
information technology sector.
In October we also acquired Metnor Galvanizing Limited, together with its
freehold property. This acquisition will give our existing galvanizing
businesses access to a long bath facility which will strengthen our market
position.
Disposals
In line with our established corporate strategy, in October two of our non-core
activities, W&S Allely Limited and Eden Material Services (UK) Limited, were
sold at approximately net asset value.
Zinkinvent
The Group has owned 33.3% of this company since May 2005. As we announced on 1
March 2007, we have entered into an agreement with some of the other principal
shareholders to acquire further shares in Zinkinvent, subject to approval by
Hill & Smith's shareholders. If approved, this transaction will result in
Zinkinvent becoming a subsidiary of the Group, trading through Vista NV, a
leading galvanizer with facilities in mainland Europe and the USA.
Employees
Our innovative and entrepreneurial culture represents a calculated response to
the competitive challenges we face and I would like to thank all our employees
for their support and efforts in meeting these challenges during the year.
Board Changes
As I announced last year, and following ten years as your Chairman, I will be
retiring at the close of the 2007 AGM. I am proud to have made a contribution to
the substantial progress achieved by the Group during my tenure and would like
to thank my colleagues for all their support during this period. The Group is in
a healthy position and I wish the new Chairman, David Grove, and his team, every
success in the future. I would also like to congratulate Derek Muir, who will
take over the position of Chief Executive from David Grove, following a career
spanning nearly 20 years with the Group.
I would also like to extend a warm welcome to Clive Snowdon who will join the
Board as a Non-Executive Director in May 2007.
Outlook
The current trading period has started in line with our expectations and,
subject to market conditions remaining favourable, I look forward to another
progressive performance in 2007.
David Winterbottom
Chairman
6 March 2007
OPERATIONAL REVIEW
Overview
2006 was another successful year for the Group during which we achieved all of
our key strategic objectives, with further additions to our ever growing product
portfolio supplying expanding markets both in the U.K. and, more recently,
overseas.
Infrastructure Products Group (IPG)
Our largest division continues to be the main engine for profit growth with its
active product development programme generating organic growth, complemented by
selected acquisitions.
Revenue increased to 117.4 million, 9.3% higher than in the previous year. The
underlying operating profit increased by 24.9% to 16.2 million (2005: 13.0
million).
Hill & Smith's new range of vehicle restraint systems continued to enhance its
market leadership with increased demand for its 'Flexbeam' crash barrier range
of products. The Brifen wire rope brand made further progress in the U.S.A.
where it is now used in 25 states as the system of choice to prevent cross-over
accidents. During the year we were awarded various contracts on the M1 widening
scheme. We anticipate these will generate substantial revenue opportunities for
our Flexbeam, Varioguard and Multiplate products over the next three years.
Berry Systems also had another very successful year as it continued to provide
innovative solutions for our off-highway customers.
A new technology division within IPG has been created following the recent
acquisitions of Techspan Systems and Counters & Accessories. We are now able to
offer a range of electronic highway information and vehicle logging and
detection systems to complement our more traditional metal based products, to
the same customer base. In December Techspan was one of three successful bidders
for a contract with the Highways Agency worth in total approximately 180
million over four years from 2007, for the supply and installation of variable
message signs. Counters & Accessories has now been successfully integrated into
the Group and a new management team has been created following the retirement of
the previous owner. We are combining these excellent engineering teams to
provide new solutions to help reduce congestion on the nation's roads.
Varley & Gulliver again delivered an excellent performance despite a downturn in
exports. Further new products, including our fully tested high containment
parapet system, are now available to the market.
Barkers Engineering made further progress in its fencing and security products
markets with the development of the Inceptor range of access control gates for
the Homeland security market.
Mallatite was relocated to a single site within our new Metnor "galvanizing
village". The latest technology for manufacturing and finishing has been
installed to allow us to follow our strategy of being the lowest cost producer.
This world class facility will secure our status as a market leader in the U.K.
lighting column market. Disruption arising from the relocation hampered the
performance in 2006 but with recent contract wins in Portsmouth, Ealing and
Dorset, the single site operation should not disappoint.
Asset International continued to win new approvals for its Weholite product and
its record performance in 2006 included the completion of its largest ever
single contract of nearly 1 million. In order to support the expansion of this
business, further investment has now been committed to acquire a fourth
extruding line.
Our galvanizing operations made considerable progress in the year despite having
to contend with the unprecedented increase in zinc raw material prices. The
acquisition of Metnor Galvanizing Limited late in the year has given Joseph Ash
the advantage of a long bath facility in its portfolio. Joseph Ash's Envirotanks
division had another excellent year and has secured a strong order book to carry
forward into 2007.
Building and Construction Products
Revenue increased by 10.9% to 146.2 million in 2006 (2005: 131.8 million)
although underlying operating profit at 3.8 million fell by 20.4% (2005: 4.8
million).
The losses made in the Express reinforcing bar and mesh business more than
offset the progress made in the remainder of the division. Express was adversely
affected by major steel price increases and margin erosion in the year. However
the business returned to profitability in the last quarter of the year and this
trend is expected to continue in 2007.
Further growth and gains in market share led to another increase in
profitability for Ash & Lacy Building Systems. Highlights in the year include
the relocation of its depot in the South to larger premises and the opening of a
new depot in Leeds to serve the North of England.
Birtley Building Products continued to grow its product portfolio and improve
efficiencies as a result of the investment in the site infrastructure.
The industrial flooring and related products of Access Engineering, Redman
Fisher and Lionweld Kennedy produced an excellent performance and we continue to
invest in new products for the future.
Industrial Products
Revenue increased to 42.5 million which was an 11.6% improvement on the 2005
figure (38.1 million). Underlying operating profits also increased by 47.3% to
2.6 million (2005: 1.8 million).
Benefiting from recent capital investment, there was a significant expansion of
our pipe supports operations in Thailand during the year, as they take advantage
of the current activity in the building of liquid natural gas plants around the
world.
The other smaller companies in this division traded adequately in difficult
market conditions. Two of the smaller non-core metal stockholding businesses
were sold during the year.
Zinkinvent
Our associated company, Zinkinvent GmbH, which we acquired in May 2005, had an
excellent year. As explained in the Chairman's Statement, we have recently
entered into a conditional agreement to acquire control of Zinkinvent. If
approved by our shareholders, this acquisition will greatly expand the scope of
our galvanizing and lighting column manufacturing operations and provide us with
a platform for international expansion.
Acquisitions
In February 2006 we acquired Counters & Accessories and in October 2006 we
acquired Metnor Galvanizing. As mentioned above, Counters & Accessories will
work closely with Techspan Systems to form the core of our new technology
division within IPG. Metnor Galvanizing is located near Chesterfield, an area
which is not well served by our existing galvanizing activities. It also has a
longer bath facility than any of the other plants, thus enabling us to process
longer lengths of poles and structured steel. This plant is now the fourth
galvanizing facility situated adjacent to one of our major manufacturing units.
The Future
Our infrastructure and construction markets remain buoyant and demand in the
U.K. for our continually expanding product portfolio, aimed at health and
safety, security and the environment, will continue to drive the Company's
performance. The acquisition of Zinkinvent and our planned expansion into
overseas markets will diversify our future earnings and provide further
opportunities to develop the Group on an international basis.
David Grove
Chief Executive
6 March 2007
FINANCIAL REVIEW
Basis of consolidation
The results cover the twelve months to 31 December 2006. They include for the
first time the results of Counters & Accessories Limited, which we acquired in
February, and Metnor Galvanizing Limited, which we acquired in October, as well
as a first full year contribution from our associated company, Zinkinvent GmbH,
which was acquired in 2005. They also include the results of W&S Allely Limited
and Eden Material Services (UK) Limited, up to the date of their disposal in
October.
Summary of Results
The Group regards its underlying results, which exclude the effects of business
reorganisation and property items, as the most appropriate measure of its
financial performance.
The Group's 2006 results represent another record year with revenue and profit
before tax at their highest ever levels. This performance was achieved despite
major increases in energy and commodity prices, particularly zinc, which is used
in our galvanizing operations, and some steel products. Although we were able in
many instances to pass on these cost increases, they had the effect of reducing
our overall trading profit margin. However, the higher full year contribution
from Zinkinvent enabled us to maintain the growth in our underlying operating
margin and profit before tax.
Revenue and Operating Profit
Revenue increased by 10.4% to 306.0 million (2005: 277.3 million). Adjusting
for the effect of acquisitions and disposals, the like-for-like increase was
9.6%, with growth in all divisions. Revenue in our core Infrastructure Products
Group division (IPG) increased by 9.3%, due in part to the effects of the
increase in the price of zinc. The Building and Construction division increased
revenue by 10.9%, reflecting the passing on of the increased cost of raw
materials and the continued expansion in our Ash & Lacy Building Systems
operation. Growth in the Industrial Products division was due almost entirely to
our Pipe Supports businesses which increased revenue significantly on the back
of the surging worldwide demand for power generation, in particular in the
liquid natural gas market.
Underlying operating margins in IPG increased from 12.1% to 13.8% and underlying
operating profit grew by 24.9%, fuelled by new product launches, strong market
demand, both domestically and abroad, and the two acquisitions of Counters &
Accessories Limited and Metnor Galvanizing Limited. Our Joseph Ash galvanizing
operations benefited from the cost reductions arising from the closure of their
Digbeth factory in 2005 and the Asset International plastic pipe business
increased profits substantially, due to strong demand from the house building
sector.
In the Building and Construction division profit advances in most businesses
were offset by a substantially reduced performance from our concrete
reinforcement operation Express Reinforcements Limited, which was adversely
affected by a rapid rise in the cost of raw materials in the first half of the
year, which squeezed margins. Sales prices are now back at much more
satisfactory levels and we look forward to a significantly improved performance
from this business in 2007.
The improved results in the Industrial Products division was due primarily to
the substantially increased contribution from our Pipe Supports operations where
operating profit nearly doubled due to strong customer demand.
There was also an increased contribution from our associated company, Zinkinvent
GmbH, where our share of its post tax profits increased by 2.5 million.
Although this is due in part to it being a full year contribution, rather than
only seven months in 2005, there was nevertheless a substantial improvement in
its underlying full year performance with higher volumes and operating margins.
Group operating profit increased by 9.2% to 21.5 million (2005: 19.7 million)
whilst underlying operating profit increased by 15.8% to 22.7 million (2005:
19.6 million).
Net reorganisation and property items at operating profit level amounted to 1.2
million. These include the cost of relocating our Mallatite lighting column
operations to a new site at Chesterfield, which involved the closures of the
existing factories in Levenshulme and Cresswell. These costs were partially
offset by gains on the sale of two vacant sites in Glasgow and Hartlepool.
Financing costs
Net financing costs increased by 0.3 million, primarily as a result of the
higher average borrowings during the year and the base rate increases later in
the year. Based on underlying operating profit, net interest cover was 5.4 times
(2005: 5.1 times).
Profit before taxation
Underlying profit before taxation rose by 17.6% to a record 18.5 million (2005:
15.7 million). Including the effect of the net reorganisation and property
items, profit before taxation increased by 9.4% to 17.3 million (2005: 15.8
million).
Taxation
The effective tax rate on both underlying and overall profits were lower than
the standard rate of 30%. This was due mainly to the inclusion of the Zinkinvent
post tax profits at the pre tax level as required by International Accounting
Standards. The overall tax rate of 24.6% was higher than the previous year,
which benefited additionally from the release of a deferred tax provision
arising from property transactions.
Earnings per share
Underlying earnings per share amounted to 20.7p, representing an increase of
15.3% over last year (2005: 17.9p) and the highest ever achieved by the Group.
However, because of the higher tax charge, the year's basic earnings per share
fell by 11.9% to 19.8p (2005: 22.5p).
Dividends
We again propose to increase the level of the distribution to shareholders. The
recommended final dividend, together with the interim dividend already paid,
makes a total for the year of 7.2p per share, an increase of 20.0% over last
year. This level of dividend is covered 2.8 times by basic earnings per share.
Based on underlying earnings per share, dividend cover is 2.9 times.
Financing and investment
Year end net borrowings decreased slightly to 46.1 million (2005: 47.3
million). We continued our vigorous programme of capital expenditure and product
development, investing a total of 19.0 million, 12.2 million in excess of the
depreciation charge. Working capital increased by 13.5 million during the year
primarily to support the higher costs of raw materials and the growth in
revenue. We also made additional contributions totalling 1.5 million towards
the Group's pension deficit. The year end financing position benefited from the
proceeds of the successful placing and open offer in October 2006 which raised a
total, net of costs, of 26.8 million. We generated 3.1 million from the sale
of properties and plant and equipment. 10.5 million was spent in making the
acquisitions of Counters & Accessories Limited and Metnor Galvanizing Limited.
Pensions
Our year end net retirement obligation reduced by 3.4 million. Net investment
returns during the year exceeded expectations and long term bond rates
increased, although these benefits were partially negated by the effect of new
mortality assumptions. As noted above, we made additional contributions on
account of the deficit amounting to 1.5 million.
Chris Burr
Finance Director
6 March 2007
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2006
Year ended 31 December 2006 Year ended 31 December 2005
Reorganisation Reorganisation
Underlying and property Underlying and property
results items Total results items Total
Notes 000 000 000 000 000 000
------------------------------------------------------------------------------------------------------------------------
Revenue 1 306,042 - 306,042 277,296 - 277,296
========================================================================================================================
Trading Profit 19,464 - 19,464 18,893 - 18,893
Share of profits from
associate (net of tax) 2 3,191 - 3,191 677 - 677
Business reorganisation costs 3 - (2,175) (2,175) - (4,260) (4,260)
Profit on sale of properties 3 - 1,025 1,025 - 4,389 4,389
------------------------------------------------------------------------------------------------------------------------
Operating profit 1 22,655 (1,150) 21,505 19,570 129 19,699
Financial income 4 4,413 - 4,413 4,294 - 4,294
Financial expense 4 (8,602) - (8,602) (8,166) - (8,166)
------------------------------------------------------------------------------------------------------------------------
Profit before taxation 18,466 (1,150) 17,316 15,698 129 15,827
Taxation 5 (4,861) 605 (4,256) (4,397) 2,766 (1,631)
------------------------------------------------------------------------------------------------------------------------
Profit for the year 13,605 (545) 13,060 11,301 2,895 14,196
========================================================================================================================
Attributable to:
Equity holders of the parent - - 13,056 - - 14,176
Minority interest - - 4 - - 20
------------------------------------------------------------------------------------------------------------------------
Profit for the year - - 13,060 - - 14,196
========================================================================================================================
Basic earnings per share 6 - - 19.8p - - 22.5p
Diluted earnings per share 6 - - 19.3p - - 21.8p
Dividend per share - Interim 7 - - 3.0p - - 2.6p
Dividend per share - Final
proposed 7 - - 4.2p - - 3.4p
------------------------------------------------------------------------------------------------------------------------
Total 7 - - 7.2p - - 6.0p
========================================================================================================================
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Year ended 31 December 2006
Year ended Year ended
31 December 31 December
2006 2005
000 000
------------------------------------------------------------------------------------------------------------------------
Exchange differences on translation of foreign operations 110 18
Share of exchange differences on translation of foreign operations from associate (275) -
Actuarial gain/(loss) on defined benefit pension schemes 1,522 (8,094)
Taxation on items taken directly to equity (318) 2,491
------------------------------------------------------------------------------------------------------------------------
Net income/(expense) recognised directly in equity 1,039 (5,585)
Profit for the year 13,060 14,196
------------------------------------------------------------------------------------------------------------------------
Total recognised income and expense for the year 14,099 8,611
========================================================================================================================
Attributable to:
Equity holders of the parent 14,095 8,591
Minority interest 4 20
------------------------------------------------------------------------------------------------------------------------
Total recognised income and expense for the year 14,099 8,611
========================================================================================================================
CONSOLIDATED BALANCE SHEET
As at 31 December 2006
31 December 31 December
2006 2005
Notes 000 000
------------------------------------------------------------------------------------------------------------------------
Non-current assets
Intangible assets 39,845 29,727
Property, plant and equipment 51,007 40,972
Investment in associate 2 27,163 24,832
Deferred tax asset 572 2,407
------------------------------------------------------------------------------------------------------------------------
118,587 97,938
------------------------------------------------------------------------------------------------------------------------
Current assets
Assets held for sale - freehold land - 631
Inventories 33,248 24,804
Trade and other receivables 72,935 61,057
Cash and cash equivalents 14,176 16,313
------------------------------------------------------------------------------------------------------------------------
120,359 102,805
------------------------------------------------------------------------------------------------------------------------
Total assets 1 238,946 200,743
========================================================================================================================
Current liabilities
Trade and other liabilities (87,142) (79,528)
Current tax liabilities (2,798) (2,088)
Interest bearing borrowings (7,893) (8,162)
------------------------------------------------------------------------------------------------------------------------
(97,833) (89,778)
------------------------------------------------------------------------------------------------------------------------
Net current assets 22,526 13,027
========================================================================================================================
Non-current liabilities
Other liabilities (420) (427)
Provisions for liabilities and charges (810) (833)
Retirement benefit obligation (10,503) (13,885)
Interest bearing borrowings (52,341) (55,408)
------------------------------------------------------------------------------------------------------------------------
(64,074) (70,553)
------------------------------------------------------------------------------------------------------------------------
Total liabilities 1 (161,907) (160,331)
========================================================================================================================
Net assets 1 77,039 40,412
========================================================================================================================
Equity
Share capital 18,887 15,799
Share premium 27,803 4,036
Capital redemption reserve 238 238
Other reserves 4,313 4,313
Translation reserve (203) (38)
Retained earnings 25,989 15,994
------------------------------------------------------------------------------------------------------------------------
Equity attributable to equity holders of the parent 77,027 40,342
Minority interests 12 70
------------------------------------------------------------------------------------------------------------------------
Total equity 77,039 40,412
========================================================================================================================
CONSOLIDATED STATEMENT OF CASH FLOWS
As at 31 December 2006
Year ended Year ended
31 December 31 December
2006 2005
Notes 000 000 000 000
------------------------------------------------------------------------------------------------------------------------
Profit before tax - 17,316 - 15,827
Add back net financing costs 4 - 4,189 - 3,872
------ ------
Operating profit 1 - 21,505 - 19,699
Adjusted for non cash items
Income from associated company 2 (3,191) - (677) -
Share-based payment 152 - 100 -
Fair value of forward contracts 145 - - -
Loss on disposal of subsidiaries 144 - - -
Gain on disposal of property, plant and equipment (1,137) - (4,396) -
Depreciation 6,404 - 6,012 -
Amortisation of intangible assets 395 - 183 -
====== ------
- 2,912 - 1,222
------ ------
Operating cash flow before movement in working capital - 24,417 - 20,921
(Increase)/Decrease in inventories (8,406) 2,616 -
Increase in receivables (11,351) - (2,195) -
Increase in payables 7,783 - 3,460 -
Decrease in provisions and employee benefits (1,549) - (869) -
====== ======
Net movement in working capital - (13,523) - 3,012
------ ------
Cash generated by operations 1 - 10,894 - 23,933
Income taxes paid - (2,720) - (2,727)
Interest paid - (3,848) - (4,676)
------------------------------------------------------------------------------------------------------------------------
Net cash from operating activities - 4,326 - 16,530
Interest received 684 - 455 -
Proceeds on disposal of property, plant and equipment 3,129 - 13,788 -
Purchase of property, plant and equipment (17,456) - (10,776) -
Purchase of intangible assets (1,559) - (1,506) -
Disposal of subsidiaries 359 - - -
Acquisitions of minority interests (59) - - -
Acquisitions of subsidiaries and associates (10,452) - (25,219) -
====== ======
Net cash used in investing activities - (25,354) - (23,258)
Issue of new shares 26,855 - 797 -
Dividends paid (3,793) - (3,134) -
New loans raised 4,812 - 25,516 -
Repayments of loans (7,250) - (7,750) -
Repayment of loan notes (40) - (1,030) -
Repayment of obligations under finance leases (1,693) - (1,259) -
====== ======
Net cash from financing activities - 18,891 - 13,140
------------------------------------------------------------------------------------------------------------------------
Net (decrease)/increase in cash - (2,137) - 6,412
Cash at the beginning of the year - 16,313 - 9,901
------------------------------------------------------------------------------------------------------------------------
Cash at the end of the year - 14,176 - 16,313
========================================================================================================================
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Segmental information
The Group is currently organised into three main operating segments which represent its primary segmental
information. All operations are continuing.
Income Statement Year ended 31 December 2006 Year ended 31 December 2005
Underlying Underlying
Segment Segment Segment Segment Segment Segment
Revenue result result* Revenue result result*
000 000 000 000 000 000
------------------------------------------------------------------------------------------------------------------------
Infrastructure Products 117,370 15,171 16,241 107,414 11,872 13,003
Building and Construction Products 146,171 3,544 3,835 131,797 4,353 4,816
Industrial Products 42,501 2,790 2,579 38,085 3,474 1,751
------------------------------------------------------------------------------------------------------------------------
Total Group 306,042 21,505 22,655 277,296 19,699 19,570
-------------------------------------------- -------
Net financing costs - (4,189) (4,189) - (3,872) (3,872)
--------------------- ----------------------
Profit before taxation - 17,316 18,466 - 15,827 15,698
Taxation - (4,256) (4,861) - (1,631) (4,397)
------------------------------------------------------------------------------------------------------------------------
Profit after taxation - 13,060 13,605 - 14,196 11,301
========================================================================================================================
* Underlying segment result is stated before reorganisation and property items.
2006 includes 3,191,000 (2005: 677,000) share of profit from associate.
Balance sheet 31 December 2006 31 December 2005
Total Total Total Total
assets liabilities assets liabilities
000 000 000 000
------------------------------------------------------------------------------------------------------------------------
Infrastructure Products 118,273 (17,068) 94,598 (22,770)
Building and Construction Products 70,847 (49,092) 55,653 (36,676)
Industrial Products 35,078 (19,135) 31,772 (18,866)
------------------------------------------------------------------------------------------------------------------------
Total segment assets/(liabilities) 224,198 (85,295) 182,023 (78,312)
Tax and dividends 572 (5,065) 2,407 (3,731)
Provisions and retirement benefits - (11,313) - (14,718)
Net debt 14,176 (60,234) 16,313 (63,570)
------------------------------------------------------------------------------------------------------------------------
Total Group 238,946 (161,907) 200,743 (160,331)
========================================================================================================================
Net assets - 77,039 - 40,412
========================================================================================================================
2006 includes 27,163,000 (2005: 24,832,000) investment in associate.
Cash flows Year ended Year ended
31 December 2006 31 December 2005
Underlying Underlying
Cash flow cash flow* Cash flow cash flow*
000 000 000 000
------------------------------------------------------------------------------------------------------------------------
Infrastructure products 7,020 8,468 10,826 12,846
Building and Construction products 1,507 1,798 10,087 11,282
Industrial products 2,367 2,276 3,020 3,346
------------------------------------------------------------------------------------------------------------------------
Cash generated by operations 10,894 12,542 23,933 27,474
========================================================================================================================
* Underlying cash flow is stated before reorganisation and property items.
2. Associate company
The Group owns 33.3% of the ordinary shares in Zinkinvent GmbH, a German
holding company, which owns 100% of Vista NV, a Belgian company with
galvanizing and lighting pole fabrication businesses in mainland Europe and
the USA. The results of this business are being equity accounted into the
results of the Group. The share of the profit for the year ended 31
December 2006, which is stated net of local taxes, was 3,191,000 (post
acquisition in May 2005: 677,000).
3. Reorganisation and property items
Business reorganisation costs
In 2006 these costs related primarily to the relocation of the production
facilities of Mallatite Limited to Chesterfield and of the Kingston depot
of Ash & Lacy Building Systems Limited to Chessington. In 2005 the costs
related primarily to the relocation of galvanizing production from the
Digbeth operation of Joseph Ash Limited and the Hartlepool operation of
Birtley Building Products Limited to alternative locations, and the costs
arising from the restructuring of Express Reinforcements Limited including
the closure of its Rainham depot. Also in 2006, a loss was realised on the
disposal of W&S Allely Limited and Eden Material Services (UK) Limited.
There were no business disposals in 2005.
Profit on sale of properties
In 2006 this relates to the sale of two vacant properties located in
Glasgow and Hartlepool. The profit in 2005 relates to the sale of two
vacant properties located in Barnsley and Newcastle and the sale and
leasebacks of five other operating properties. In both years no tax
liability arose on these sales due to the availability of indexation
allowances and capital losses for offset, 2005 also benefited from the
release of a deferred tax provision arising from property disposals.
4. Net financing costs Year ended Year ended
31 December 31 December
2006 2005
000 000
Financial income
Interest on bank deposits 681 578
Net change in fair value of financial assets and liabilities - 160
Expected return on pension scheme assets 3,732 3,556
--------------------------------------------------------------------------------------------------------------------
4,413 4,294
====================================================================================================================
Financial expense
Interest on bank loans and overdrafts 4,471 4,418
Amortisation of arrangement fees 374 276
Interest on finance leases and hire purchase contracts 300 193
Net change in fair value of financial assets and liabilities 2 -
Expected interest cost on pension scheme obligations 3,391 3,205
Interest on other loans 64 74
--------------------------------------------------------------------------------------------------------------------
8,602 8,166
====================================================================================================================
Net financing costs 4,189 3,872
====================================================================================================================
5. Taxation
Tax charged on profit shown in the income statement Year ended Year ended
31 December 31 December
2006 2005
000 000
--------------------------------------------------------------------------------------------------------------------
Current tax
UK corporation tax at 30% (2005: 30%) 3,271 2,519
Adjustments in respect of prior periods (174) (30)
Foreign tax at prevailing local rates 156 110
--------------------------------------------------------------------------------------------------------------------
3,253 2,599
Deferred tax
Current year 971 (980)
Adjustments in respect of prior periods 32 12
--------------------------------------------------------------------------------------------------------------------
Tax on profit in the Income Statement 4,256 1,631
====================================================================================================================
Tax charged/(credited) on items taken directly to equity
Year ended Year ended
31 December 31 December
2006 2005
000 000
--------------------------------------------------------------------------------------------------------------------
Current tax
Relating to defined benefit schemes (558) (255)
Relating to share based payments (2) -
--------------------------------------------------------------------------------------------------------------------
(560) (255)
Deferred tax
Relating to defined benefit schemes 1,015 (2,173)
Relating to share based payments (137) (63)
--------------------------------------------------------------------------------------------------------------------
Tax on items taken directly to equity 318 (2,491)
====================================================================================================================
The tax charge to the income statement for the period is lower than the standard rate of corporation tax in the UK.
The differences are explained below:
Year ended Year ended
31 December 31 December
2006 2005
000 000
--------------------------------------------------------------------------------------------------------------------
Profit before taxation 17,316 15,827
====================================================================================================================
Profit before taxation multiplied by the standard rate of corporation tax in the UK of 30% 5,195 4,748
Expenses not deductible for tax purposes 233 360
Deductible employee share option gains not charged against profit (31) (309)
Share of profit from associate already taxed (677) (203)
Capital profits less losses and write downs not subject to tax (264) (1,526)
Deferred tax benefit arising from asset disposals - (1,363)
Overseas profits taxed at lower rates (58) (58)
Adjustments in respect of previous periods (142) (18)
--------------------------------------------------------------------------------------------------------------------
Tax charge 4,256 1,631
====================================================================================================================
6. Earnings per share
The weighted average number of ordinary shares in issue during the year was
65,834,026 (2005: 62,960,978), diluted for the effects of all outstanding
share options 67,604,552 (2005: 64,968,617). Underlying earnings per share
have been shown because the Directors consider that this provides valuable
additional information about the underlying performance of the Group.
Year ended Year ended
31 December 2006 31 December 2005
Pence per Pence per
share 000 share 000
--------------------------------------------------------------------------------------------------------------------
Basic earnings 19.8 13,056 22.5 14,176
Effect of reorganisation and property items 0.9 545 (4.6) (2,895)
--------------------------------------------------------------------------------------------------------------------
Underlying earnings 20.7 13,601 17.9 11,281
====================================================================================================================
Diluted earnings 19.3 13,056 21.8 14,176
Effect of reoganisation and property items 0.8 545 (4.4) (2,895)
--------------------------------------------------------------------------------------------------------------------
Underlying diluted earnings 20.1 13,601 17.4 11,281
====================================================================================================================
7. Dividends
Dividends declared after the balance sheet date are not recognised as a
liability, in accordance with IAS10. The Directors have recommended a
final dividend for the curent year, subject to shareholder approval, as
shown below:
Year ended Year ended
31 December 2006 31 December 2005
Pence per Pence per
share 000 share 000
--------------------------------------------------------------------------------------------------------------------
Equity shares:
Interim 3.0 2,267 2.6 1,643
Final proposed 4.2 3,185 3.4 2,150
--------------------------------------------------------------------------------------------------------------------
Total 7.2 5,452 6.0 3,793
====================================================================================================================
8. Subsequent events
On 28 February 2007, the Group entered into an agreement with some of the
other principal shareholders of its associate company Zinkinvent GmbH, to
acquire further shares in that company, subject to Hill & Smith Holdings PLC
shareholder approval. If approved, this transaction will result in
Zinkinvent GmbH becoming a subsidiary of the Group. Zinkinvent GmbH is an
investment company owning 100% of Vista NV, a Belgian holding company with
galvanizing and lighting column manufacturing operations in mainland
Europe and the USA.
Notes
1. The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2006 or 2005 but is
derived from those accounts. Statutory accounts for 2005 have been delivered
to the registrar of companies, and those for 2006 will be delivered in due
course. The auditors have reported on those accounts; their reports were:
(i) unqualified,
(ii) did not include references to any matters to which the auditors drew
attention by way of emphasis without qualifying their reports, and
(iii) did not contain statements under section 237(2) or (3) of the Companies
Act 1985.
2. The proposed final dividend will be paid on 11 July 2007 to shareholders on
the register on 8 June 2007 (ex-dividend date 6 June 2007).
3. The Annual Report will be posted to shareholders on 5 April 2007, and will be
displayed on the Company's website at www.hsholdings.co.uk. Copies of the
Annual Report will also be available from the Registered Office at 2
Highlands Court, Cranmore Avenue, Shirley, Solihull, B90 4LE.
4. The Annual General Meeting will be held at The Balcony Suite, The National
Motorcycle Museum, Solihull at 10.30 a.m. on Friday 11 May 2007.
Financial calendar:
Annual General Meeting 11 May 2007
Payment of proposed final dividend 11 July 2007
Interim results announcement for the period to 30 June 2007 September 2007
Payment of interim dividend January 2008
5. This preliminary announcement of results for the year ended 31 December 2006
was approved by the Directors on 6 March 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
END
