RNS Number : 4885B
Hill & Smith Hldgs PLC
18 August 2008
Hill & Smith Holdings PLC
Interim Results 2008
Results for the six months ended 30 June 2008
Hill & Smith Holdings PLC, a leading innovative solutions provider to the infrastructure and construction markets, announces interim results well ahead of expectations.
Group Results - Continuing Operations
30 June 2008 | 30 June 2007 | Change | ||
Revenue | £264.1m | £176.1m† | 50.0% | |
Underlying operating profit* | £25.6m | £16.2m | 58.0% | |
Underlying profit before taxation* | £21.1m | £14.5m | 45.5% | |
Underlying earnings per share* | 17.5p | 14.4p | 21.5% | |
Dividend per share | 4.3p | 3.6p | 19.4% |
*Excludes the effect of business reorganisation costs, property items and amortisation of acquisition intangibles
†Excludes revenue from Zinkinvent businesses which were accounted for as an associate undertaking up to 2 July 2007
HIGHLIGHTS
Revenue up 50% to £264.1m (2007: £176.1m†)
Underlying operating profit up 58% to £25.6m (2007: £16.2m)
Underlying earnings per share up 21.5% to 17.5p (2007: 14.4p)
Dividend increase of 19.4% to 4.3p (2007: 3.6p)
Cash generated from operations £34.3m, up £24.1m (2007: £10.2m)
Strong organic growth and product development continuing to add value
Full ownership of Zinkinvent USA and French operations completed July 2008
David Grove, Chairman, reporting on the period said:
"The strategy of developing our core businesses by means of organic growth and selective acquisitions has been extended over the last two years such that the Group is now an international business. This has created significant opportunities for further growth in the future."
David Grove
Chairman
18 August 2008
Chairman's Statement
Overview
I am pleased to report a half year of significant progress in which our strategy has continued to deliver an excellent performance that is again ahead of expectations.
The strategy of developing our core businesses by means of organic growth and selective acquisitions has been extended over the last two years such that the Group is now an international business. This has created significant opportunities for further growth in the future.
Our extremely able management teams across the Group continue to deal with the challenges of steel price increases and energy costs in a consistent manner, as they have demonstrated in previous years.
The performance of our various business units is outlined in the Business Review section below.
Results and Dividend
Revenue in the period from continuing operations was £264.1m, representing a 50.0% increase on the same period last year (2007: £176.1m†).
Profit before taxation from continuing operations increased by 47.2% to £20.9m (2007: £14.2m) and underlying profit before taxation from continuing operations was 45.5% ahead of the previous year at £21.1m (2007: £14.5m).
Basic earnings per share at 17.3p were 21.0% ahead of the previous year (2007: 14.3p) and the more meaningful underlying earnings per share at 17.5p represents a 21.5% improvement on the previous year (2007: 14.4p).
Your Board has declared an interim dividend of 4.3p per share (2007: 3.6p) which represents an increase of 19.4% over the corresponding period last year. This dividend is covered 4.1 times (2007: 4.0 times) by the underlying earnings per share. The interim dividend will be paid on 7 January 2009 to shareholders on the register on 28 November 2008.
Acquisitions & Disposals
Since 30 June 2008 we have been able to conclude the long term objective for our investment in Zinkinvent GmbH.
On 15 July 2008 we announced the proposed acquisition of the remaining minority interest in Zinkinvent GmbH and the proposed sale of its trading businesses in Benelux and Germany. Both transactions were subsequently approved at a General Meeting of shareholders held on 31 July 2008 and have now been legally concluded. Neither transaction impacted on the financial performance for the six months ended 30 June 2008.
This strategic move gives us 100% ownership of Zinkinvent's galvanizing and fabrication operations in France and the USA and maximum benefits from the future development of these businesses. At the same time we have divested the galvanizing only businesses in Benelux and Germany, which were treated as discontinued in our 2007 financial statements. We are confident that our strategic investment in Zinkinvent will yield significant long-term benefits to the Group.
On 28 February 2008 we sold our steel stockholding business, D&J Steels Ltd, for a consideration of £0.7m. This reinforces our strategy of focusing upon our core markets and businesses.
Management
In line with the well prepared succession planning that the Board has been implementing in the last two years, further changes will take place in 2009. Dick Richardson, who has been a non-executive director since May 1997, has indicated his intention to retire at the 2009 AGM and I have agreed with the Board that I will retire at the end of 2009. A new non-executive director will be appointed in 2009 to replace Dick Richardson.
Outlook
We are concentrating on a number of exciting developments which will deliver international growth over the coming years and demonstrate the demand for our product portfolio on a global basis.
The Board feels confident in delivering another year of progress building on the strong first half performance and encouraging start to the second half of 2008. I look forward to reporting our achievements in March 2009.
David Grove
Chairman
18 August 2008
†Excludes revenue from Zinkinvent businesses which were accounted for as an associate undertaking up to 2 July 2007
Business Review
Financial Performance
Revenue from continuing activities at £264.1m was 50% ahead of the comparable period (2007: £176.1m†) resulting from the acquisition of the controlling interest in Zinkinvent in July 2007 and strong organic growth.
Underlying operating profits in the period, rose by 58% to £25.6m (2007: £16.2m) reflecting the additional revenue and an improvement in the Group underlying operating margin, up by 0.5 points to 9.7%.
Net debt at 30 June 2008 stood at £110.3m (31 December 2007: £117.8m) reflecting strong operational cash flow during the period. The Group has at its disposal total funding facilities in excess of £200m through to 2012.
Operational Performance
We achieved significant organic growth across all divisions with order books well ahead of the same period last year. Expenditure on infrastructure projects has ensured our markets remain robust, in particular we have benefitted from projects related to oil and gas, power generation and, in the UK, flood prevention, water treatment and health & safety. The presence we have in our markets is strong and we are able to offer solutions and products to our customers that are deliverable and of a quality in keeping with our established reputation.
For the six months ended 30 June 2008 Infrastructure Products generated 44% of Group underlying operating profit, Galvanizing Services 41% and the remaining 15% came from Building and Construction Products.
All three divisions achieved significant increases in underlying operating profits compared to the same period last year.
Infrastructure Products
Revenue increased by 44.7% to £92.2m compared to the corresponding period last year (2007: £63.7m) and underlying operating profits, up 53.4% to £11.2m, were materially ahead of last year (2007: £7.3m). Results benefitted from the acquisition of the Zinkinvent infrastructure business in the USA and France. We delivered good organic growth in end markets that remain stable and there is a strong order book in our pipe support business which supplies into the worldwide power generation and Liquid Natural Gas ("LNG") markets.
"Topdeck", our temporary, or permanent, car parking structure made its debut in May 2008 with a large project at Gatwick Airport. A great deal of interest has been shown in this product by the railway operators who see it as a solution to increase their station parking facilities.
The announcement by the Highways' Agency in July 2008 to roll out the Variable Message Sign Active Traffic Management Scheme is confirmation that our Techspan operation will see volumes increase in the second half of 2008 and throughout 2009.
The utility products business in the USA had a slower start as schemes were delayed due to increased steel prices. The order book however, is now at a similar level to last year and new schemes are being released.
We have completed our £2m investment in the fourth production line for Weholite High Density Polythene draining pipe at our Newport Gwent site, allowing us to manufacture the world's largest plastic pipe at 3.5m diameter.
Manufacturing of "Zoneguard", our new safety barrier, has commenced in the US through the fabrication plants acquired as part of the Zinkinvent acquisition and we will be launching this product along with other infrastructure opportunities in 2009.
Galvanizing Services
Revenue at £67.0m compares to £21.6m for the same period last year, a 210.2% increase principally reflecting the galvanizing operations of Zinkinvent, acquired in July 2007. Underlying operating profits of £10.5m (2007: £5.4m), up 94.4%, were significantly higher compared to the previous half year. Including Zinkinvent, restated like for like volumes grew by 5% in the UK and 8% in the USA. The UK benefitted from the demand for galvanized steel for the LNG market and in the USA a buoyant demand in road bridge refurbishment and the power transmission markets boosted volumes. France has experienced a volume reduction of 4% the impact of which has been offset with improved margins.
The Metnor acquisition continues to make an excellent contribution to the performance of the UK in this division.
Our USA galvanizing and fabrication business, V&S Inc, commenced work on the expansion of its Delaware operation with the construction of a further 47,000 sq ft of production capability that will become operational in December 2008.
Following the acquisition of the remaining minority interest of Zinkinvent GmbH in July 2008 we can now look to develop and expand our wholly owned galvanizing and fabrication operations in France and the USA.
Building and Construction Products
Revenues at £104.9m (2007: £90.8m) increased by 15.5% mainly due to the large increases in steel prices that were managed through the supply chain. Underlying operating profits of £3.9m compared with last year's performance of £3.5m, an 11.4% improvement.
Volumes in our steel lintel and residential door operations have been down due to a decline in house building, necessitating the flexing of manning levels to maintain profitability.
The industrial flooring business continued to benefit from the increased activity in the power generation, LNG and petrochemical markets. Development of the new Glass Reinforced Plastic ("GRP") railway platform is proceeding well and we will be supplying our first order in the second half of 2008.
Principal Risks and Uncertainties
The Group has a process for identifying, evaluating and managing the principal risks it faces. Details of these principal risks are contained on pages 15, 16 and 17 of the Group's Annual Report & Accounts for the year ended 31 December 2007. It is the Directors' opinion that these are the risks that could impact on the performance of the Group and that they are also applicable to the current financial year.
For the six months ended 30 June 2008 there has been no significant change in the overall scope of the principal risks referred to above. Changes have however taken place in the degree of certain of these risks, namely volatility of raw material (steel and zinc) costs, energy costs, interest rates and currency fluctuations. As in previous years such risks are being managed and their anticipated impact mitigated. The Directors do not therefore, envisage any significant effect of these changes upon the expected performance of the Group for the remainder of 2008, notwithstanding the increased uncertainty in the general economic environment.
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; and any changes in the related party transactions described in the last annual
report that could do so.
By order of the Board
D. L. GROVE D. W. MUIR M. PEGLER
Chairman Chief Executive Finance Director
18 August 2008
† Excludes revenue from Zinkinvent businesses which were accounted for as an associate undertaking up to 2 July 2007.
Consolidated Income Statement | |||||||||
6 months ended 30 June 2008 | |||||||||
6 months ended | 6 months ended | Year ended | |||||||
30 June 2008 | 30 June 2007 | 31 December 2007 | |||||||
Non- | |||||||||
Underlying | Underlying | Underlying | Underlying | ||||||
Results* | items | Total | Results* | Total | Results* | Total | |||
Notes | £m | £m | £m | £m | £m | £m | £m | ||
Revenue | 4 | 264.1 | - | 264.1 | 176.1 | 176.1 | 402.1 | 402.1 | |
Trading profit | 25.6 | - | 25.6 | 13.1 | 13.1 | 35.6 | 35.6 | ||
Share of profits from associate | - | - | - | 3.1 | 3.1 | 3.1 | 3.1 | ||
Amortisation of acquisition intangibles | - | (0.2) | (0.2) | - | - | - | (0.4) | ||
Business reorganisation costs | 6 | - | - | - | - | (0.8) | - | (3.2) | |
Profit on sale of properties | 6 | - | - | - | - | 0.5 | - | 3.1 | |
Operating profit | 4 | 25.6 | (0.2) | 25.4 | 16.2 | 15.9 | 38.7 | 38.2 | |
Financial income | 7 | 3.6 | - | 3.6 | 3.0 | 3.0 | 6.1 | 6.1 | |
Financial expense | 7 | (8.1) | - | (8.1) | (4.7) | (4.7) | (11.9) | (11.9) | |
Profit before taxation | 21.1 | (0.2) | 20.9 | 14.5 | 14.2 | 32.9 | 32.4 | ||
Taxation | 8 | (7.9) | 0.1 | (7.8) | (3.6) | (3.4) | (11.6) | (10.4) | |
Profit from continuing operations | 13.2 | (0.1) | 13.1 | 10.9 | 10.8 | 21.3 | 22.0 | ||
Discontinued operations | 5 | - | - | 0.6 | |||||
Profit for the period | 13.1 | 10.8 | 22.6 | ||||||
Attributable to: | |||||||||
Equity holders of the parent | 13.1 | 10.8 | 22.3 | ||||||
Minority interest | - | - | 0.3 | ||||||
Profit for the period | 13.1 | 10.8 | 22.6 | ||||||
Continuing basic earnings per share | 9 | 17.3p | 14.3p | 28.7p | |||||
Basic earnings per share | 9 | 17.3p | 14.3p | 29.5p | |||||
Continuing diluted earnings per share | 9 | 17.1p | 13.9p | 28.3p | |||||
Diluted earnings per share | 9 | 17.1p | 13.9p | 29.1p | |||||
Dividend per share - Interim | 10 | 4.3p | 3.6p | ||||||
* Excludes the effect of business reorganisation costs, property items and amortisation of acquisition intangibles
Consolidated Statement of Recognised Income and Expense | ||||
6 months ended 30 June 2008 | ||||
6 months ended | 6 months ended |
Year ended | ||
30 June | 30 June | 31 December | ||
2008 | 2007 | 2007 | ||
Notes | £m | £m | £m | |
Exchange differences on translation of foreign operations | 0.6 | 0.1 | 2.5 | |
Share of exchange differences on translation of foreign operations in associate | - | (0.1) | (0.1) | |
Actuarial gain on defined benefit pension schemes | - | - | 0.5 | |
Taxation on items taken directly to equity | - | (0.2) | (0.1) | |
Net income/(expense) recognised directly in equity | 0.6 | (0.2) | 2.8 | |
Profit for the period | 13.1 | 10.8 | 22.6 | |
Total recognised income and expense for the period | 12 | 13.7 | 10.6 | 25.4 |
Attributable to: | ||||
Equity holders of the parent | 13.7 | 10.6 | 25.1 | |
Minority interest | - | - | 0.3 | |
Total recognised income and expense for the period | 12 | 13.7 | 10.6 | 25.4 |
Consolidated Balance Sheet | ||||
As at 30 June 2008 | ||||
30 June | 30 June | 31 December | ||
2008 | 2007 | 2007 | ||
Notes | £m | £m | £m | |
Non-current assets | ||||
Intangible assets | 100.7 | 40.4 | 92.7 | |
Property, plant and equipment | 97.1 | 54.0 | 92.5 | |
Investment in associate | - | 29.2 | - | |
Available for sale financial assets | 6.2 | - | 5.7 | |
Deferred tax asset | - | 0.4 | - | |
204.0 | 124.0 | 190.9 | ||
Current assets | ||||
Assets held for sale | 53.9 | - | 51.8 | |
Inventories | 65.7 | 34.8 | 55.7 | |
Trade and other receivables | 120.8 | 85.3 | 102.2 | |
Cash and cash equivalents | 11 | 32.1 | 14.9 | 41.3 |
272.5 | 135.0 | 251.0 | ||
Total assets | 476.5 | 259.0 | 441.9 | |
Current liabilities | ||||
Liabilities held for sale | (35.8) | - | (32.1) | |
Trade and other liabilities | (135.1) | (95.4) | (104.2) | |
Current tax liabilities | (7.8) | (6.3) | (8.1) | |
Interest bearing borrowings | 11 | (25.8) | (11.2) | (38.5) |
(204.5) | (112.9) | (182.9) | ||
Net current assets | 68.0 | 22.1 | 68.1 | |
Non-current liabilities | ||||
Other liabilities | (21.1) | (0.5) | (15.2) | |
Provisions for liabilities and charges | (7.2) | (0.8) | (4.8) | |
Deferred tax liability | (11.4) | - | (10.7) | |
Retirement benefit obligation | (9.2) | (9.9) | (9.7) | |
Interest bearing borrowings | 11 | (116.6) | (50.3) | (120.6) |
(165.5) | (61.5) | (161.0) | ||
Total liabilities | (370.0) | (174.4) | (343.9) | |
Net assets | 106.5 | 84.6 | 98.0 | |
Equity | ||||
Share capital | 18.9 | 18.9 | 18.9 | |
Share premium | 27.9 | 27.8 | 27.8 | |
Capital redemption reserve | 0.2 | 0.2 | 0.2 | |
Other reserves | 4.3 | 4.3 | 4.3 | |
Translation reserve | 2.8 | (0.2) | 2.2 | |
Retained earnings | 52.4 | 33.6 | 43.1 | |
Equity attributable to equity holders of the parent | 106.5 | 84.6 | 96.5 | |
Minority interests | - | - | 1.5 | |
Total equity | 12 | 106.5 | 84.6 | 98.0 |
Consolidated Statement of Cash Flows | |||||||
6 months ended 30 June 2008 | |||||||
6 months ended 30 June | 6 months ended 30 June |
Year ended 31 December | |||||
2008 | 2007 | 2007 | |||||
Notes | £m | £m | £m | ||||
Profit before tax | 20.9 | 14.2 | 32.4 | ||||
Add back net financing costs | 7 | 4.5 | 1.7 | 5.8 | |||
Operating profit | 25.4 | 15.9 | 38.2 | ||||
Adjustments for non-cash items: | |||||||
Share of profits from associated company | - | (3.1) | (3.1) | ||||
Share-based payment | 0.2 | 0.1 | 0.3 | ||||
Fair value on forward contracts | - | - | (0.1) | ||||
Loss on disposal of subsidiaries | - | - | 0.1 | ||||
Loss on remeasurement as held for sale | - | - | 0.3 | ||||
Gain on disposal of property, plant and equipment | - | (0.5) | (3.2) | ||||
Depreciation | 5.6 | 3.4 | 8.8 | ||||
Amortisation of intangible assets | 0.6 | 0.3 | 1.1 | ||||
6.4 | 0.2 | 4.2 | |||||
Operating cash flows before movement in working capital | 31.8 | 16.1 | 42.4 | ||||
Increase in inventories | (6.0) | (1.6) | (0.9) | ||||
(Increase)/decrease in receivables | (17.4) | (10.9) | 1.2 | ||||
Increase/(decrease) in payables | 26.8 | 6.9 | (11.7) | ||||
Decrease in provisions and employee benefits | (0.9) | (0.3) | (1.2) | ||||
Net movement in working capital | 2.5 | (5.9) | (12.6) | ||||
Cash generated by operations | 34.3 | 10.2 | 29.8 | ||||
Income taxes paid | (7.6) | (0.3) | (8.2) | ||||
Interest paid | (5.9) | (2.4) | (7.5) | ||||
Net cash from operating activities | 20.8 | 7.5 | 14.1 | ||||
Interest received | 1.5 | 0.8 | 1.6 | ||||
Proceeds on disposal of property, plant and equipment | 0.1 | 1.2 | 10.4 | ||||
Purchase of property, plant and equipment | (9.5) | (7.0) | (14.5) | ||||
Purchase of intangible assets | (0.7) | (0.6) | (1.4) | ||||
Disposal of subsidiaries | 0.3 | - | 0.4 | ||||
Deferred consideration received in respect of disposals | - | - | 0.2 | ||||
Deferred consideration paid in respect of acquisitions | (0.1) | - | (0.7) | ||||
Acquisitions of minority interests | (2.1) | - | (2.6) | ||||
Acquisitions of subsidiaries and associates | - | - | (9.4) | ||||
Net cash used in investing activities | (10.5) | (5.6) | (16.0) | ||||
Issue of new shares | 0.1 | - | - | ||||
Dividends paid | (2.7) | (2.3) | (5.4) | ||||
New loans raised | 1.5 | 5.0 | 147.4 | ||||
Repayments of loans | (18.1) | (2.8) | (113.0) | ||||
Repayment of loan notes | - | (0.1) | (0.1) | ||||
Repayment of obligations under finance leases | (1.4) | (1.0) | (2.5) | ||||
Net cash (used in)/from financing activities | (20.6) | (1.2) | 26.4 | ||||
Net (decrease)/increase in cash from continuing operations | (10.3) | 0.7 | 24.5 | ||||
Cashflow from discontinued operations | - | - | 1.2 | ||||
Net (decrease)/increase in cash | (10.3) | 0.7 | 25.7 | ||||
Cash at the beginning of the period | 41.3 | 14.2 | 14.2 | ||||
Effect of exchange rate fluctuations | 1.1 | - | 1.4 | ||||
Cash at the end of the period | 11 | 32.1 | 14.9 | 41.3 | |||
Notes to the Consolidated Interim Financial Statements | |||||||||
1. Basis of preparation | |||||||||
Hill & Smith Holdings PLC is incorporated in the UK. The condensed set of consolidated interim financial statements of the Company as at and for the six months ended 30 June 2008 comprise the Company and its subsidiaries, proportionately consolidate any jointly controlled entities and equity account the Group's interest in associates (together referred to as the 'Group') and have been prepared in accordance with IAS 34: Interim Financial Reporting, as adopted by the EU. As required by the Disclosure and Transparency Rules of the Financial Services Authority, the condensed consolidated set of interim financial statements has 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 2007 (with which they should be read in conjunction), except for the following change: • The Group has adopted IFRIC 11: IFRS2 - Group and Treasury Share Transactions. This has had no effect on the results for the period. IFRS 8: Operating Segments has been endorsed by the EU and, while this standard is only mandatory for periods commencing on or after 1 January 2009, it is now available for early adoption. This standard has not been adopted early and the Group does not anticipate that its adoption will have a significant effect, as reported in the company's published consolidated financial statements for the year ended 31 December 2007.
The comparative figures for the financial year ended 31 December 2007 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
These interim financial statements have not been audited or reviewed by auditors pursuant to the Auditing Practices Board's guidance on Financial Information. | |||||||||
2. Risks and uncertainties | |||||||||
The principal risks and uncertainties affecting the business activities of the Group are discussed in the Business Review. | |||||||||
3. Exchange Rates | |||||||||
The principal exchange rates used were as follows: | |||||||||
6 months ended 30 June 2008 | 6 months ended 30 June 2007 | Year ended 31 December 2007 | |||||||
Average | Closing | Average | Closing | Average | Closing | ||||
Sterling to Euro (£1 = €) | 1.29 | 1.27 | 1.47 | 1.48 | 1.45 | 1.36 | |||
Sterling to US Dollar (£1 = $) | 1.98 | 1.99 | 2.03 | 2.01 | 2.03 | 2.00 | |||
Sterling to Thai Baht (£1 = Baht) | 62.84 | 66.68 | 65.40 | 64.64 | 64.61 | 60.06 | |||
Assets and liabilities of overseas undertakings are translated at the rate of exchange ruling at the balance sheet date and the income statement is translated at the average rate of exchange. | |||||||||
4. Segmental information | |||||||||
The Group presents its primary segmental information on continuing operations. The segmental classification can be found on pages 100 to 103 inclusive of the financial statements for 2007. The segmental results include items directly attributable to the segment and items allocated on a reasonable and consistent basis. All the information given below is based on continuing operations. The discontinued operations are subsidiaries held exclusively with a view to resale and were these continuing operations they would have been included in the Galvanizing Services and the Rest of Europe segments. | |||||||||
Income Statement | 6 months ended 30 June 2008
| 6 months ended 30 June 2007 | |||||||
Underlying | Underlying | ||||||||
Segment | Segment | segment | Segment | Segment | segment | ||||
revenue | result | result * | revenue | result | result * | ||||
£m | £m | £m | £m | £m | £m | ||||
Infrastructure Products | 92.2 | 11.2 | 11.2 | 63.7 | 7.6 | 7.3 | |||
Galvanizing Services | 67.0 | 10.3 | 10.5 | 21.6 | 5.4 | 5.4 | |||
Building and Construction | 104.9 | 3.9 | 3.9 | 90.8 | 2.9 | 3.5 | |||
Total Group | 264.1 | 25.4 | 25.6 | 176.1 | 15.9 | 16.2 | |||
Net financing costs | (4.5) | (4.5) | (1.7) | (1.7) | |||||
Underlying profit before taxation | 20.9 | 21.1 | 14.2 | 14.5 | |||||
Income Statement | Year ended 31 December 2007 | ||||||||
Underlying | |||||||||
Segment | Segment | segment | |||||||
revenue | result | result * | |||||||
£m | £m | £m | |||||||
Infrastructure Products | 145.2 | 18.4 | 18.6 | ||||||
Galvanizing Services | 84.8 | 15.5 | 15.4 | ||||||
Building and Construction | 172.1 | 4.3 | 4.7 | ||||||
Total Group | 402.1 | 38.2 | 38.7 | ||||||
Net financing costs | (5.8) | (5.8) | |||||||
Underlying profit before taxation | 32.4 | 32.9 | |||||||
* Underlying segment result is stated before reorganisation, property items and amortisation of acquisition intangibles. | |||||||||
Includes income from associated company in 2007 | |||||||||
The Group presents the analysis of continuing operations revenue by geographical market, irrespective of origin: | |||||||||
6 months ended 30 June 2008 | 6 months ended 30 June 2007 |
Year ended 31 December 2007 | |||||||
£m | £m | £m | |||||||
UK | 175.2 | 157.8 | 302.9 | ||||||
Rest of Europe | 55.5 | 8.6 | 55.4 | ||||||
Asia | 5.3 | 8.0 | 15.4 | ||||||
North America | 24.0 | 0.2 | 24.7 | ||||||
Rest of the World | 4.1 | 1.5 | 3.7 | ||||||
Total Group | 264.1 | 176.1 | 402.1 | ||||||
5. Discontinued operations and assets and liabilities held for sale | |||||||||
Discontinued operations | |||||||||
Following the acquisition on 2 July 2007 of Zinkinvent GmbH the Group decided that it did not wish to retain the Benelux and German trading operations of that company. Since that time the Group has been actively seeking a purchaser of these businesses and a sale was completed after the date of these interim financial statements, as detailed in note 13. Accordingly, these businesses have continued to be accounted for as discontinued operations from the date of acquisition. Their respective assets and liabilities have been separately included in the balance sheet as held exclusively with a view to resale. | |||||||||
Following the acquisition on 2 July 2007, the Directors estimated the fair value of the operations of Zinkinvent GmbH acquired exclusively with a view to resale to be €25m on a net debt/cash free basis. During the period adjustment has been made to the estimated fair value (less costs to sell) to reflect the net debt/cash within the discontinued operations at 31 December 2007, to reflect the change in circumstance of the agreed deal. | |||||||||
The result of the discontinued operations included in the interim income statement amounts to £nil, reflecting that the consideration receivable in respect of the assets and liabilities held for sale will not be adjusted for the result in the interim period. Consequently, the carrying value of the net assets and liabilities held for sale have not been adjusted to reflect the result. | |||||||||
6. Non-underlying items | |||||||||
In February, the Group completed the sale of one of its non-core operations, D&J Steels Limited, the loss on remeasurement having been declared in its 2007 Annual Report. In the comparative period last year the business reorganisation costs relate principally to the reorganisation of the manufacturing operations of Ash & Lacy Perforators Limited, including the costs of the closure of its Hayle factory, and profit on sale of properties relates to the sale of the vacant Levenshulme site of Mallatite Limited, following the relocation of this business to a new site at Chesterfield. For the full year 2007, the costs include £1.0m relating to the relocation and factory closures of the production facilities of Ash & Lacy Perforators Limited and the newly acquired H M Doors business. Also included is £0.4m in respect of losses incurred on the disposal of Ash & Lacy Pressings Limited and the remeasurement of D & J Steels Limited, two non-core Group businesses. A further £0.7m relates to relocation costs of other Group operations. There is also a charge of £1.1m relating to the changes in the contractual agreements of Directors. | |||||||||
7. Net financing costs | |||||||||
6 months ended 30 June 2008 | 6 months ended 30 June 2007 | Year ended 31 December 2007 | |||||||
£m | £m | £m | |||||||
Financial income | |||||||||
Interest on bank deposits | 1.4 | 0.2 | 0.7 | ||||||
Interest on other loans | - | 0.6 | 1.0 | ||||||
Total interest income | 1.4 | 0.8 | 1.7 | ||||||
Expected return on pension scheme assets | 2.2 | 2.2 | 4.4 | ||||||
3.6 | 3.0 | 6.1 | |||||||
Financial expense | |||||||||
Interest on loans, overdrafts and hire purchase contracts | 5.6 | 2.6 | 7.3 | ||||||
Interest on other loans | - | - | 0.1 | ||||||
Total interest expense | 5.6 | 2.6 | 7.4 | ||||||
Net change in fair value of financial assets and liabilities | - | 0.2 | 0.3 | ||||||
Put option discount unwind | 0.4 | - | 0.4 | ||||||
Expected interest cost on pension scheme obligations | 2.1 | 1.9 | 3.8 | ||||||
8.1 | 4.7 | 11.9 | |||||||
Net financing costs | 4.5 | 1.7 | 5.8 | ||||||
8. Taxation | |||||||||
Tax has been provided on the underlying profit at the estimated effective rate of 37.2% for existing operations for the full year. | |||||||||
The Finance Act 2008 includes legislation which prevents the Group from claiming industrial buildings allowances on affected assets after 2011. The Directors estimate that this will increase the 2008 tax charge by up to £0.9m. | |||||||||
9. Earnings per share | |||||||||
The weighted average number of shares in issue during the period was 75,609,141, diluted for the effect of outstanding share options | |||||||||
76,489,141 (6 months ended 30 June 2007: 75,555,306, and 77,609,916 diluted, the year ended 31 December 2007: 75,565,565, and 76,550,467 | |||||||||
diluted). | |||||||||
Underlying earnings per share are highlighted below as the Directors consider that this measurement of earnings gives valuable information on the performance of the Group: | |||||||||
6 months ended 30 June 2008 | 6 months ended 30 June 2007 | Year ended 31 December 2007 | |||||||
Per share | £m | Per share | £m | Per share | £m | ||||
Basic earnings | 17.3p | 13.1 | 14.3p | 10.8 | 29.5p | 22.3 | |||
Discontinued business | 0.0p | 0.0 | 0.0p | 0.0 | (0.8p) | (0.6) | |||
Continuing basic earnings | 17.3p | 13.1 | 14.3p | 10.8 | 28.7p | 21.7 | |||
Effect of non-underlying items | 0.2p | 0.1 | 0.1p | 0.1 | (0.9p) | (0.7) | |||
Continuing underlying earnings | 17.5p | 13.2 | 14.4p | 10.9 | 27.8p | 21.0 | |||
Diluted earnings | 17.1p | 13.1 | 13.9p | 10.8 | 29.1p | 22.3 | |||
Discontinued business | 0.0p | 0.0 | 0.0p | 0.0 | (0.8p) | (0.6) | |||
Continuing diluted earnings | 17.1p | 13.1 | 13.9p | 10.8 | 28.3p | 21.7 | |||
Effect of non-underlying items | 0.2p | 0.1 | 0.1p | 0.1 | (0.9p) | (0.7) | |||
Continuing underlying diluted earnings | 17.3p | 13.2 | 14.0p | 10.9 | 27.4p | 21.0 | |||
10. Dividends | |||||||||
Dividends paid in the period were the prior year's interim dividend of £2.7m (2007: £2.2m). The final dividend for 2007 £3.9m (2006: £3.2m) was paid on 11 July 2008 and is provided for at 30 June 2008. 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 £3.3m, 4.3p per share (2007: £2.7m, 3.6p per share). | |||||||||
11. Analysis of net debt | |||||||||
30 June 2008 | 30 June 2007 | 31 December 2007 | |||||||
£m | £m | £m | |||||||
Cash and cash equivalents | 32.1 | 14.9 | 41.3 | ||||||
Debt due within one year | (25.8) | (11.2) | (38.5) | ||||||
Debt due after one year | (116.6) | (50.3) | (120.6) | ||||||
Net debt | (110.3) | (46.6) | (117.8) | ||||||
Change in Net Debt | |||||||||
Operating profit | 25.4 | 15.9 | 38.2 | ||||||
Non-cash items | 6.4 | 0.1 | 4.2 | ||||||
Operating cash flow before movement in working capital | 31.8 | 16.0 | 42.4 | ||||||
Net movement in working capital | 2.5 | (5.8) | (12.6) | ||||||
Operating cash flow | 34.3 | 10.2 | 29.8 | ||||||
Tax paid | (7.6) | (0.3) | (8.2) | ||||||
Net financing costs paid | (4.4) | (1.7) | (5.9) | ||||||
Capital expenditure | (10.1) | (7.7) | (19.9) | ||||||
Sale of fixed assets | 0.1 | 1.2 | 10.4 | ||||||
12.3 | 1.7 | 6.2 | |||||||
Dividends paid | (2.7) | (2.3) | (5.4) | ||||||
Disposals | 0.3 | - | 0.6 | ||||||
Acquisitions | (2.2) | - | (71.0) | ||||||
Issue of new shares | 0.1 | - | - | ||||||
Net debt decrease/(increase) from continuing operations | 7.8 | (0.6) | (69.6) | ||||||
Net transfer to/contribution from discontinued operations | 4.8 | - | 1.2 | ||||||
Net debt decrease/(increase) | 12.6 | (0.6) | (68.4) | ||||||
Effect of exchange rate fluctuations | (5.1) | 0.1 | (3.3) | ||||||
Net debt at the beginning of the period | (117.8) | (46.1) | (46.1) | ||||||
Net debt at the end of the period | (110.3) | (46.6) | (117.8) | ||||||
12. Change in total equity | |||||||||
30 June 2008 | 30 June 2007 | 31 December 2007 | |||||||
£m | £m | £m | |||||||
Opening Balance | 98.0 | 77.0 | 77.0 | ||||||
Total recognised income and expense for the period | 13.7 | 10.6 | 25.4 | ||||||
Dividends | (3.9) | (3.2) | (5.9) | ||||||
(Disposal)/acquisition of minorities | (1.5) | - | 1.2 | ||||||
Credit to equity of share-based payments | 0.1 | 0.2 | 0.3 | ||||||
Shares issued | 0.1 | - | - | ||||||
Closing balance | 106.5 | 84.6 | 98.0 | ||||||
In January, the Group completed the acquisition of the final minority interests in the USA fabrication operations for a consideration of $4.0m from Prism Enterprises Inc. Goodwill of £0.6m arose on the excess of consideration over the carrying value of the minority interest. | |||||||||
13. Post balance sheet events | |||||||||
In July, the Group acquired the remaining 31.8% minority interest in Zinkinvent GmbH for a consideration of €23.7m. The resulting remeasurement of the put option, held in non-current liabilities, representing the minority interest in Zinkinvent GmbH, increased goodwill by €5.7m.
In August, the assets and liabilities held for resale were disposed of for a consideration of €27.8m. The Group also sold for a consideration of €2.1m, 31.8% of Galva Belgium 2 NV whose only asset at the date of disposal is a 33% investment in Neholl BV which is held as an available for sale financial asset. | |||||||||
Directors
D.L. Grove BA, FCA (Chairman)
D.W. Muir BSc, CEng, MICE (Chief Executive)
M Pegler BCom, ACA (Finance Director)
H.C. Marshall MSc, BSc (Non-Executive)
R.E. Richardson FCMI (Non-Executive)
C.J. Snowdon BA, FCA (Non-Executive)
Financial Calendar
Payment of interim dividend 7 January 2009
Ex dividend date 26 November 2008
Preliminary announcement of results for the year to 31 December 2008 March 2009
Annual General Meeting 2009 May 2009
Hill & Smith offers a Dividend Reinvestment Plan ("Plan"). The Plan, administered by the Company's Registrars, Computershare Investor Services, allows shareholders to reinvest their cash dividends in Hill & Smith ordinary shares. Shareholders who have not already joined the Plan, and who wish to participate in the Plan in respect of the interim dividend to be paid on 7 January 2009, need to elect to do so by 12 December 2008. In order to make an election, Shareholders should contact Computershare Investor Services either by telephoning 0870 707 1058 or by visiting its website www.Computershare.com/investor/UK.
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