17 August 2009

Hill & Smith Holdings PLC

INTERIM RESULTS 2009

Hill & Smith Holdings PLC, the international group with leading positions in the supply of infrastructure products, galvanizing services and building and construction products, announces its interim results for the six months ended 30 June 2009. 

Group Results 

	30 June  2009	30 June  2008	Change
		(Restated†)
Revenue	£196.8m	£211.7m	- 7.0%
Underlying operating profit*	£23.1m	£24.5m	- 5.7%
Underlying profit before taxation*	£20.5m	£20.1m	2.0%
Underlying earnings per share*	18.0p	16.5p	9.1%
Dividend per share	4.7p	4.3p	9.3%

Net debt reduced by £40.1m to £106.1m, a 27.4% reduction on the year end level of £146.2m.

Group Highlights:

• Underlying earnings per share up 9.1% to 18.0p (2008: 16.5p)
• Strong operating cash flow of £35.2m, up £2.3m (2008: £32.9m)
• Significant net debt reduction of £40.1m
• Operating profit margins maintained
• Product development continuing to add value and increase market penetration
• Dividend increase of 9.3% to 4.7p per share (2008: 4.3p)

 

Commenting on the results Derek Muir, Chief Executive, said:

"Despite the difficult macro economic conditions in the first half of 2009, the Group increased profit and earnings per share compared to the prior year period.  

"We have started to see signs of improved trading conditions in both Infrastructure Products and Galvanizing Services, with increased levels of order enquiry and availability of project funding reported in June and July. Whilst the extent to which these signs of improvement are maintained in the second half is difficult to predict, our results for the year will nevertheless benefit from the cost reductions already in place, lower interest costs and the actions taken on the rate of taxation.  

The Group has strong positions in broadly resilient markets, increased geographical representation and a sound financial position, all of which will help in dealing with the current economic conditions and to capitalise on any sustained improvement."

*Excludes the effect of business reorganisation costs, property items, amortisation of acquisition intangibles, impairments, gains on disposal of available for sale financial assets, change in the value of financial instruments and net financing return on pension obligations

†Restated to exclude the discontinued businesses of Express Reinforcements Ltd and its related activities

For further information, please contact:

Derek Muir, Group Chief Executive	Tel:   44 (0)121 704 7430
Hill & Smith Holdings PLC
Chris Hardie	Tel:   44 (0)20 7398 1639
Arden Partners plc
Barnaby Fry / Vicky Watkins	Tel:   44 (0)20 7357 9477
Hogarth Partnership Limited

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, Thailand and China.

The Group's operations are organised into three business segments:

Infrastructure Products which supplies products and services such as permanent and temporary road safety barriers, street lighting columns, bridge parapets, temporary car parks, "GRP" railway platforms, variable road messaging solutions, traffic data collection systems, plastic drainage pipes and pipe supports for the power and LNG markets, energy grid components 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 sectors.

Building and Construction Products which supplies roofing systems, safety handrails and flooring, lintels and doors in steel and, increasingly, composite materials.  The range of uses for these products include large infrastructure projects involving schools and other public buildings.

Headquartered in the UK and quoted on the London Stock Exchange (LSE: HILS.L), Hill & Smith Holdings PLC employs some 3,300 staff across 54 sites, principally in 5 countries.  In the year to 31 December 2008, it generated revenues of £419.8 million.

Chairman's Statement

Introduction

The overall performance for the first half of 2009 has been resilient, delivering strong results against a background of difficult macro economic conditions.

Whilst revenue has fallen in the wake of the general economic downturn, the swift and decisive action taken on adjusting our cost base in line with demand, together with other actions on interest costs and taxation, ensured we achieved a level of profitability in line with our strategic objective of delivering continuous growth in earnings per share and long term shareholder value. Of particular note was the robust demand in our Infrastructure Products markets, the strong margin management in the Galvanizing Services division and through good cash generation, a significant reduction in our level of net debt compared to the 2008 year end.

The performance of our various business units is outlined in the Business Review section of this report.

Results

Revenue in the period was £196.8m being 7.0% lower than for the same period last year (2008: £211.7m) primarily due to reduced volumes and the impact of lower steel and zinc prices.

Underlying profit before taxation was 2.0% ahead of the previous year at £20.5m (2008: £20.1m).  Profit before taxation increased by 1.0% to £20.2m (2008: £20.0m).

Underlying earnings per share at 18.0p, achieved a 9.1% improvement on the previous year (2008: 16.5p).  Basic earnings per share at 18.1p were 4.6% ahead of the previous year (2008: 17.3p).

Dividend

Your Board has declared an interim dividend of 4.7p per share (2008: 4.3p) which represents an increase of 9.3% over the corresponding period last year. This dividend is covered 3.8 times (2008: 3.8 times) by the underlying earnings per share. The interim dividend will be paid on 7 January 2010 to shareholders on the register on 27 November 2009.

Disposal

On 26 June 2009 we disposed of our minority investment in Neholl BV, a Netherlands based holding company with galvanizing operations across the Benelux region, for a net cash consideration of €5.7m (£4.9m). The cash proceeds were used to reduce the Group's net debt and the disposal realised a profit on sale of £1.0m.

Net Debt

During the period we generated £35.2m of cash (2008: £32.9m) from our operations. This strong cash generation, together with currency benefits, substantially reduced our net debt from £146.2m at 31 December 2008 to £106.1m at 30 June 2009, a reduction of £40.1m (27.4%).

Management

We are delighted to welcome Jock Lennox to the Board, following his formal appointment after the Annual General Meeting in May. Jock's extensive experience in the audit and corporate advisory fields, knowledge of industrial products sectors and understanding of international markets will be a great asset to the Board as the Group continues to grow.

Outlook

We have started to see signs of improved trading conditions in both Infrastructure Products and Galvanizing Services, with increased levels of order enquiry and availability of project funding reported in June and July. Whilst the extent to which these signs of improvement are maintained in the second half is difficult to predict, our results for the year will nevertheless benefit from the cost reductions already in place, lower interest costs and the actions taken on the rate of taxation.  

The Group has strong positions in broadly resilient markets, increased geographical representation and a sound financial position, all of which will help in dealing with the current economic conditions and to capitalise on any sustained improvement.

David Grove

Chairman

17 August 2009

Business Review

FINANCIAL RESULTS

In spite of the challenging economic conditions we have been able to produce a reassuring set of results for the first half of 2009, with overall trading in line with our expectations. The swift and decisive action taken in the second half of 2008 to reduce manning levels and control costs, in anticipation of reduced volumes in certain sectors, has, along with currency benefits, mitigated the impact of lower demand in the Galvanizing Services and Building and Construction Products divisions. The Infrastructure Products group performed particularly well as demand in its main markets remained resilient. In addition the international scale and diversity of the Group, with 58% of operating profits being generated from our operations in the USA, France, Thailand and China, provides us with a degree of resilience against downturns in any particular market.  

Revenue from continuing businesses decreased 7.0% to £196.8m (2008: £211.7m) including a £14.0m currency translation benefit in the period and £7.4m from the 2008 acquisition of Creative Pultrusions, Inc. Underlying operating profit decreased by 5.7% to £23.1m (2008: £24.5m) despite a currency benefit of £2.4m and a contribution of £0.5m from the prior year acquisition. Underlying operating margin improved by 0.1% to 11.7% (2008: 11.6%).

For the six months to 30 June 2009, Infrastructure Products generated 51.9% of the Group's underlying operating profit; Galvanizing Services 44.2% and Building and Construction Products the remaining 3.9%.

The performance to date has been achieved as a result of our strong positions in markets driven by legislation, the strength of our relationships throughout the supply chain in those markets and continued strategic focus on developing new markets and products.

OPERATIONAL REVIEW

Infrastructure Products

Overall revenues increased by 8.1% to £99.7m (2008: £92.2m) including the benefit of £4.4m from exchange movements.  Underlying operating profit was up 8.1% to £12.0m (2008: £11.1m) after incorporating £0.6m benefit of currency translation. The 2008 acquisition of Creative Pultrusions, Inc. contributed £7.4m and £0.5m of revenue and operating profit respectively in the half year. Continual review of the operational cost base protected operating margins, which were maintained at 12.0% despite reduced volumes in some of the operations. This division has focused on the key markets of road, rail, utilities and security, where overall, customer demand has been maintained.

HS Roads

A strong performance was achieved across a number of the business units supplying the UK road sector.  Both our permanent (Flexbeam) and temporary (Varioguard) vehicle restraint systems were involved in supplying materials for contracts on the M1, M42 and M25 motorways. To satisfy this increased demand we enlarged our Varioguard rental pool by a further 25km, having during the first half of 2009 placed 32km on the M25 Design Build Finance and Operate project. This was further increased to 46km in July and will remain in place until the 2012 Olympics.  

The Highways Agency accelerated its managed motorway programme, to provide hard shoulder running at peak times on congested motorways, resulting in our variable electronic message signage business having an excellent first half of 2009. We have a robust order book in place for this product for 2009 and 2010 and the Highways Agency programme has visible potential through to 2014. This programme will also promote volume for our vehicle restraint systems business, our lighting columns business and our new lightweight steel motorway gantry developed in 2008.  

Zoneguard, our vehicle restraint system developed for the USA market, is currently in use on five projects across four American States. A number of States have started to release infrastructure scheme funding as the impact of the US economic stimulus begins to filter through, albeit at a slower rate than anticipated.

Bridge parapets were in demand in the UK, Eire and especially in the Middle East, where our operations continue to grow their export activities and markets.

TopDeck, our innovative demountable car park, which made its debut in 2008, had a slow start to 2009 primarily through delays in funding large capital projects, coupled with a reduction in air travel and overcapacity of parking at airports. However, the recent level of enquiries for TopDeck has been more encouraging and we continue to view the market with confidence for the future.

The UK lighting column operation suffered from a delay in the financing of PFI's for street lighting.  Closure of financing arrangements is now being achieved on a number of projects but the supply of columns for these projects is unlikely to occur until 2010. Our lighting column operation in France also suffered during the period, primarily from the political and financial impact of local elections, although order intake improved in June with signs of funds being released for infrastructure expenditure.

HS Rail

We have continued to focus on extending our offering in the rail sector and further developed, through Creative Pultrusions, Inc., the concept of a quick build GRP (Glass Reinforced Plastic) rail platform. This concept has already been proven with platforms installed at the East Midlands Parkway in the UK and we have seen encouraging levels of enquiry for supply in the last quarter of 2009 and throughout 2010.

HS Utilities

Our activities in the growing utilities market continue to develop opportunities. Energy expenditure, mainly in the Liquefied Natural Gas market, is driving demand for our products, particularly pipe supports.

Our Pipe Supports operation in Thailand had a record performance with the order book remaining strong. In June it opened its new facility in China to enter the growing power generation market supplied by nuclear, gas and coal fired power stations.

In the USA the V&S Utilities business improved its profitability over the same period of the prior year. 

HS Security

To satisfy increased demand for security we have developed new anti-personnel security systems for perimeter fencing. These high security perimeter fencing systems have been tested by the Home Office and have been approved for use on strategic homeland security sites, such as power stations, airports and military bases. They are also suitable for high value security facilities, as evidenced by our supply contract for the largest ever perimeter security fencing for a gold mine in the Asia Pacific region.  Supplies under this contract commenced during the half year.  

Further evidence of our growing reputation in the security market was the choice of Bristorm, our anti-terrorist security product, for use during the G20 Summit to protect the US Ambassador's residence in London at the time of President Obama's visit.

Galvanizing Services

Revenues declined by 11.5% to £58.5m (2008: £66.1m) despite currency translation benefits of £9.6m. Underlying operating profit of £10.2m including currency translation benefits of £1.8m was broadly in line with 2008 (£10.4m). Encouragingly, operating margin improved to 17.4% (2008: 15.7%).  Galvanizing volumes declined by 25.0% as a result of the difficult economic environment but the swift and decisive action taken on costs at the end of 2008 enabled us to maintain our operating profit on the lower trading volumes. The new V&S galvanizing plant in Delaware, USA contributed ahead of expectations and we are confident of a return of volumes in the US following the full impact of the economic stimulus spend.  France and the UK are likely to continue through 2009 with 20% volume reductions, compared to 2008.

Building and Construction Products

Revenues at £38.6m were substantially down from £53.4m in 2008 emphasising the severe downturn in activity in the UK construction market.  Consequently, despite decisive action to reduce the cost base, underlying operating profit fell by £2.1m to £0.9m (2008: £3.0m).  Volumes in our steel lintel and residential door operation have recently started to increase, from a very low base, although our roofing division, which is late in the construction cycle, continued to experience low demand.  The industrial flooring business performed well in challenging circumstances as increased activity in power generation and sewage treatment plants delivered good order intake.  Order flow however, for the smaller higher margin projects, has reduced.  

 

FINANCIAL REVIEW

Finance Costs

Net financing costs decreased by £1.6m to £2.7m principally reflecting lower base interest rates across all our financing currencies. The cash element of net financing costs is £2.6m (2008: £4.0m). Underlying operating profit covered net cash interest 8.9 times (2008: 6.1 times). The Group benefitted substantially during the period from its previous policy of utilising floating interest rates as base rates fell. Given the low interest rate environment, the Group decided during the period to fix approximately fifty per cent of its committed term debt to three year fixed interest rate derivatives.

Tax

The tax charge for the period was £6.5m (2008: £7.5m). The underlying effective tax rate for the period was 33.5% (2008: 37.5%) which is our estimated effective rate for the full year.

Cash Generation and Financing

Cash generated from operations was again strong at £35.2m (2008: £32.9m) emphasising the Group's continued focus on cash management. Lower commodity prices and a co-ordinated stock management programme assisted in driving down working capital by £5.3m during the period. Selective capital expenditure amounted to £4.7m (2008: £10.1m) which, as a multiple of depreciation and amortisation, was 0.7 times (2008: 1.8 times). Full year capital expenditure is still expected to be c.£13.0m, just below one times depreciation and amortisation. The Group generated £5.6m from non-core business disposals; £4.9m from the sale of a minority investment in Neholl BV and a £0.7m receipt of deferred consideration from prior year disposals.

Group net debt at 30 June 2009 was £106.1m (2008: £110.3m), a significant £40.1m reduction from the 31 December 2008 position of £146.2m driven by net cash flow of £25.8m and a favourable movement on exchange of £14.3m. The Group's net debt to EBITDA* ratio improved to 1.8 times compared with 2.4 times at 31 December 2008. The Group remains comfortably within its banking covenants. At 30 June 2009 the Group had committed facilities available of £176m and a further £27m in overdrafts and other on demand facilities. The principal debt facility is an amortising £150m multi currency facility which runs to June 2012. The combined facilities of £203m provide significant headroom against the expected requirements.  

	6 months ended 30 June 2009	6 months ended 30 June 2008 (Restated)	Year  ended  31 December 2008
	£m	£m	£m
Change in net debt
Operating profit	22.9	24.3	43.4
Non-cash items	7.0	6.1	14.8
Operating cash flow before movement in working capital	29.9	30.4	58.2
Net movement in working capital	5.3	2.5	(4.0)
Operating cash flow	35.2	32.9	54.2
Tax paid	(5.3)	(7.3)	(16.0)
Net financing costs paid	(1.9)	(4.2)	(7.0)
Capital expenditure	(4.7)	(10.1)	(22.5)
Sale of fixed assets	0.1	-	0.7
	23.4	11.3	9.4
Dividends paid	(3.3)	(2.7)	(6.6)
Disposals	5.6	0.3	29.5
Acquisitions	-	(2.2)	(33.8)
Issue of new shares	0.1	0.1	0.1
Net debt decrease/(increase) from continuing operations	25.8	6.8	(1.4)
Net cash inflow from discontinued operations	-	5.8	5.6
Net debt decrease	25.8	12.6	4.2
Effect of exchange rate fluctuations	14.3	(5.1)	(32.6)
Net debt at the beginning of the period	(146.2)	(117.8)	(117.8)
Net debt at the end of the period	(106.1)	(110.3)	(146.2)

* Rolling 12 months

Principal Risks and Uncertainties

The Group has a process for identifying, evaluating and managing the principal risks it faces. Details of these risks are contained on pages 21 and 22 of the Group's Annual Report & Accounts for the year ended 31 December 2008. 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 2009 there has been no significant change in the overall scope of the principal risks referred to above. 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 2009, notwithstanding the continued uncertainty in the general economic environment.

GOING CONCERN

The Group meets 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 facility is an amortising £150m multi currency facility which expires in June 2012.

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 the Group maintains an adequate level of funding headroom and effectively mitigates foreign exchange and other financial risks.  During the first half of 2009, the Group remained strongly cash generative in spite of challenging market conditions.

After making enquiries, the Directors have a reasonable expectation that the Company and its subsidiaries have adequate resources to continue in operational existence for the foreseeable future and therefore adopt a 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 IAS34:

  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 (see page 17 note 12); and 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 17 August 2009 and is available on the Company's website (www.hsholdings.com).

By order of the Board

D W Muir	M Pegler
Chief Executive	Finance Director

17 August 2009

Condensed Consolidated Income Statement

Six months ended 30 June 2009

 

		6 months ended 30 June 2009			6 months ended 30 June 2008 (Restated)			Year ended 31 December 2008
		Underlying results	Non-Underlying  items*	Total	Underlying results	Non-Underlying items*	Total	Underlying results	Non-Underlying items*	Total
	Notes	£m	£m	£m	£m	£m	£m	£m	£m	£m
Revenue	4	196.8	-	196.8	211.7	-	211.7	419.8	-	419.8
Trading profit		23.1	-	23.1	24.5	-	24.5	47.4	(0.2)	47.2
Amortisation of
acquisition intangibles		-	(0.5)	(0.5)	-	(0.2)	(0.2)	-	(0.6)	(0.6)
Business reorganisation costs	6	-	(0.7)	(0.7)	-	-	-	-	(3.2)	(3.2)
Gain on disposal of available for sale financial assets	6	-	1.0	1.0	-	-	-	-	-	-
Operating profit	4	23.1	(0.2)	22.9	24.5	(0.2)	24.3	47.4	(4.0)	43.4
Financial income	7	0.3	1.7	2.0	1.4	2.2	3.6	1.4	4.5	5.9
Financial expense	7	(2.9)	(1.8)	(4.7)	(5.8)	(2.1)	(7.9)	(9.9)	(4.3)	(14.2)
Profit before taxation		20.5	(0.3)	20.2	20.1	(0.1)	20.0	38.9	(3.8)	35.1
Taxation	8	(6.9)	0.4	(6.5)	(7.6)	0.1	(7.5)	(14.6)	(0.7)	(15.3)
Profit from continuing operations		13.6	0.1	13.7	12.5	-	12.5	24.3	(4.5)	19.8
Discontinued operations	5			-			0.6			2.9
Profit for the period				13.7			13.1			22.7
Attributable to:
Equity holders of the parent				13.7			13.1			22.7
Minority interest				-			-			-
Profit for the period				13.7			13.1			22.7
Continuing basic
earnings per share	9			18.1p			16.5p			26.2p
Basic earnings per share	9			18.1p			17.3p			30.0p
Continuing diluted
earnings per share	9			18.0p			16.3p			25.9p
Diluted earnings per share	9			18.0p			17.1p			29.7p
Dividend per share - interim	10			4.7p			4.3p

 

 

*      Non-Underlying items represent business reorganisation costs, property items, amortisation of acquisition intangibles, impairments, gains on disposal of available for sale financial assets, change in the value of financial instruments and net financing return on pension obligations.

Condensed Consolidated Statement of Comprehensive Income

Six months ended 30 June 2009

		6 months ended 30 June 2009	6 months ended 30 June 2008	Year ended 31 December 2008
		£m	£m	£m
Profit for the period		13.7	13.1	22.7
Exchange differences on translation of foreign operations		(19.5)	3.1	29.0
Exchange differences on foreign currency borrowings denominated as net investment hedges		13.7	(2.7)	(21.6)
Effective portion of changes in fair value of cash flow hedges		(0.4)	-	-
Net change in fair value of available for sale financial assets		1.0	-	-
Net change in fair value of available for sale financial assets transferred to profit or loss		(1.0)	-	-
Actuarial loss on defined benefit pension schemes		-	-	(5.7)
Taxation on items taken directly to equity		-	0.2	1.2
Other Comprehensive income for the period		(6.2)	0.6	2.9
Total Comprehensive income for the period		7.5	13.7	25.6
Attributable to:
Equity holders of the parent		7.8	13.7	25.2
Minority interest		(0.3)	-	0.4
Total Comprehensive income for the period		7.5	13.7	25.6

Condensed Consolidated Balance Sheet

As at 30 June 2009

		30 June 2009	30 June 2008	31 December  2008
	Notes	£m	£m	£m
Non-current assets
Intangible assets		108.5	100.7	118.6
Property, plant and equipment		105.0	97.1	113.6
Available for sale financial assets		-	6.2	6.4
Other receivables		1.1	-	1.3
		214.6	204.0	239.9
Current assets
Assets held for sale		-	53.9	-
Inventories		49.7	65.7	57.1
Trade and other receivables		80.8	120.8	97.2
Cash and cash equivalents	11	35.4	32.1	25.9
		165.9	272.5	180.2
Total assets		380.5	476.5	420.1
Current liabilities
Liabilities held for sale		-	(35.8)	-
Trade and other liabilities		(81.5)	(135.1)	(90.7)
Current tax liabilities		(7.6)	(7.8)	(6.9)
Interest bearing borrowings	11	(31.9)	(25.8)	(16.7)
		(121.0)	(204.5)	(114.3)
Net current assets		44.9	68.0	65.9
Non-current liabilities
Other liabilities		(0.2)	(21.1)	(0.3)
Provisions for liabilities and charges		(6.0)	(7.2)	(6.7)
Deferred tax liability		(13.1)	(11.4)	(14.5)
Retirement benefit obligation		(11.6)	(9.2)	(11.8)
Interest bearing borrowings	11	(109.6)	(116.6)	(155.4)
		(140.5)	(165.5)	(188.7)
Total liabilities		(261.5)	(370.0)	(303.0)
Net assets		119.0	106.5	117.1
Equity
Share capital		18.9	18.9	18.9
Share premium		28.0	27.9	27.9
Capital redemption reserve		0.2	0.2	0.2
Other reserves		4.3	4.3	4.3
Translation reserve		3.7	2.8	9.2
Retained earnings		63.9	52.4	54.5
Equity attributable to equity holders of the parent		119.0	106.5	115.0
Minority interest		-	-	2.1
Total equity		119.0	106.5	117.1

Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2009

	Share capital	Share premium	Capital redemption reserve	Other reserves	Translation reserve	Retained earnings	Minority interest	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m
Opening balance	18.9	27.9	0.2	4.3	9.2	54.5	2.1	117.1
Total comprehensive income for the period	-	-	-	-	(5.5)	13.3	(0.3)	7.5
Dividends	-	-	-	-	-	(4.3)	-	(4.3)
Change in ownership interests in subsidiaries	-	-	-	-	-	-	(1.8)	(1.8)
Credit to equity of share-based payments	-	-	-	-	-	0.4	-	0.4
Shares issued	-	0.1	-	-	-	-	-	0.1
Closing balance	18.9	28.0	0.2	4.3	3.7	63.9	-	119.0

Six months ended 30 June 2008

	Share capital	Share premium	Capital redemption reserve	Other reserves	Translation reserve	Retained earnings	Minority interest	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m
Opening balance	18.9	27.8	0.2	4.3	2.2	43.1	1.5	98.0
Total comprehensive income for the period	-	-	-	-	0.6	13.1	-	13.7
Dividends	-	-	-	-	-	(3.9)	-	(3.9)
Change in ownership interests in subsidiaries	-	-	-	-	-	-	(1.5)	(1.5)
Credit to equity of share-based payments	-	-	-	-	-	0.1	-	0.1
Shares issued	-	0.1	-	-	-	-	-	0.1
Closing balance	18.9	27.9	0.2	4.3	2.8	52.4	-	106.5

Year ended 31 December 2008

	Share capital	Share premium	Capital redemption reserve	Other reserves	Translation reserve	Retained earnings	Minority interest	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m
Opening balance	18.9	27.8	0.2	4.3	2.2	43.1	1.5	98.0
Total comprehensive income for the period	-	-	-	-	7.0	18.2	0.4	25.6
Dividends	-	-	-	-	-	(7.1)	-	(7.1)
Change in ownership interests in subsidiaries	-	-	-	-	-	-	0.2	0.2
Credit to equity of share-based payments	-	-	-	-	-	0.3	-	0.3
Shares issued	-	0.1	-	-	-	-	-	0.1
Closing balance	18.9	27.9	0.2	4.3	9.2	54.5	2.1	117.1

Condensed Consolidated Statement of Cash Flows

Six months ended 30 June 2009

		6 months ended  30 June  2009	6 months ended  30 June  2008 (Restated)	Year  ended  31 December 2008
	Notes	£m	£m	£m
Profit before tax		20.2	20.0	35.1
Add back net financing costs		2.7	4.3	8.3
Operating profit		22.9	24.3	43.4
Share-based payment		0.4	0.2	0.3
Movement in fair value of forward contracts		-	-	0.2
Gain on disposal of available for sale financial assets		(1.0)	-	-
Gain on disposal of property, plant and equipment		0.1	-	(0.4)
Depreciation		6.6	5.3	11.4
Amortisation of intangible assets		0.9	0.6	1.4
Impairment of intangible assets		-	-	1.9
Adjustment for non-cash items		7.0	6.1	14.8
Operating cash flows before movement in working capital		29.9	30.4	58.2
Decrease/(increase) in inventories		4.8	(6.0)	2.3
Decrease/(increase) in receivables		11.7	(17.4)	(5.2)
(Decrease)/increase in payables		(11.1)	26.8	1.2
Decrease in provisions and employee benefits		(0.1)	(0.9)	(2.3)
Net movement in working capital		5.3	2.5	(4.0)
Cash generated by operations		35.2	32.9	54.2
Income taxes paid		(5.3)	(7.3)	(16.0)
Interest paid		(4.5)	(5.7)	(9.3)
Net cash from operating activities		25.4	19.9	28.9
Interest received		2.6	1.5	1.3
Loan settlement		-	-	1.0
Proceeds on disposal of non-current assets		0.1	-	0.7
Purchase of property, plant and equipment		(4.3)	(9.4)	(16.8)
Purchase of intangible assets		(0.3)	(0.7)	(2.1)
Disposal of subsidiaries	6	4.9	0.3	0.3
Deferred consideration received in respect of disposals		0.7	-	0.1
Deferred consideration paid in respect of acquisitions		-	(0.1)	-
Acquisitions of minority interests		-	(2.1)	(21.0)
Acquisitions of subsidiaries and associates		-	-	(12.8)
Net cash from/(used in) investing activities		3.7	(10.5)	(49.3)
Issue of new shares		0.1	0.1	0.1
Dividends paid	10	(3.3)	(2.7)	(6.6)
New loans raised		16.2	1.5	-
Repayments of loans		(27.4)	(18.1)	(17.9)
Repayment of obligations under finance leases		(3.5)	(1.4)	(2.3)
Net cash used in financing activities		(17.9)	(20.6)	(26.7)
Net increase/(decrease) in cash from continuing operations		11.2	(11.2)	(47.1)
Cash flow from assets and liabilities held exclusively for sale		-	-	19.1
Cash flow from discontinued operations	5	-	0.9	8.6
Net increase/(decrease) in cash		11.2	(10.3)	(19.4)
Cash at the beginning of the period		25.9	41.3	41.3
Effect of exchange rate fluctuations		(1.7)	1.1	4.0
Cash at the end of the period	11	35.4	32.1	25.9

Notes to the Condensed Consolidated Interim Financial Statements

  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 in accordance with IAS34: Interim Financial Reporting, as adopted by the EU as at and for the six months ended 30 June 2009, 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 2008 (with which they should be read in conjunction), except for the following which became effective and were adopted by the Group:

• IAS1 (Revised) - Presentation of Financial Statements
  
  
• IAS23 (Revised) - Borrowing costs
  
  
• Amendment to IFRS2 - Share-based payments
  
  
• IFRS8 - Operating segments
  
  
• IFRIC14 IAS19 - The limit on a defined benefit asset, minimum funding requirements and their interaction
  
  
• IFRIC16 - Hedges of a Net Investment in a Foreign Operation
  
  

As of 1 January 2009 the Group determines and presents operating segments based on the information that is presented internally to the Group's Chief Executive, who is the Group's chief operating decision maker. Following the adoption of IFRS8 - Operating segments, the Group continues to report the same three operating segments since these form the basis of internal reporting.

The adoption of the remaining standards and interpretations has not had a significant impact on the results for the period.

In the published Consolidated Financial Statements for the year ended 31 December 2008, the Group amended its treatment of Non-Underlying items in the Consolidated Income Statement to reflect a more representative view of the Group's definition of underlying earnings. In addition to business reorganisation costs, property items and amortisation of acquisition intangibles, Non-Underlying items now also include impairments, gains on disposal of available for sale financial assets, change in the fair value of financial instruments and financial income and expense on pension obligations.  

As reported in the published Consolidated Financial Statements for the year ended 31 December 2008, the Group exited the steel bar reinforcing market in November 2008 through the disposal of its interests in Express Reinforcements Limited and the cessation of its related activities. As a result these operations are treated as discontinued activities and the comparatives for the six months ended 30 June 2008 have been restated accordingly.

The comparative figures for the financial year ended 31 December 2008 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 Condensed Consolidated Interim Financial Statements have not been audited or reviewed by auditors pursuant to the Auditing Practices Board's Guidance on Financial Information.

  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 2008.

  3. Exchange rates

The principal exchange rates used were as follows:

	6 months ended 30 June 2009		6 months ended  30 June 2008		Year ended  31 December 2008
	Average	Closing	Average	Closing	Average	Closing
Sterling to Euro (£1 = €)	1.12	1.17	1.29	1.27	1.25	1.03
Sterling to US Dollar (£1 = $)	1.50	1.65	1.98	1.99	1.84	1.44
Sterling to Thai Baht (£1 = Baht)	52.62	56.12	62.84	66.68	60.69	50.00

  4. Segmental information

The Group presents its primary segmental information on continuing operations that have not changed in composition from those shown in the published Consolidated Financial Statements for the year ended 31 December 2008.

The Group has restated the comparatives for the six months ended 30 June 2008 to reflect the discontinuation of Express Reinforcements Limited and the cessation of its related activities. The impact of this restatement on the Building and Construction Products segment is a reduction in segment revenue of £52.4m and a reduction in segment result of £1.1m.

Income Statement - Continuing

	6 months ended 30 June 2009			6 months ended 30 June 2008 (Restated)
	Segment revenue	Segment result	Underlying segment result*	Segment revenue	Segment result	Underlying segment result*
	£m	£m	£m	£m	£m	£m
Infrastructure Products	99.7	11.9	12.0	92.2	11.1	11.1
Galvanizing Services	58.5	10.5	10.2	66.1	10.2	10.4
Building and Construction Products	38.6	0.5	0.9	53.4	3.0	3.0
Total Group	196.8	22.9	23.1	211.7	24.3	24.5
Net financing costs		(2.7)	(2.6)		(4.3)	(4.4)
Profit before taxation		20.2	20.5		20.0	20.1

	Year ended 31 December 2008
	Segment revenue	Segment result	Underlying segment result*
	£m	£m	£m
Infrastructure Products	191.8	22.5	23.2
Galvanizing Services	127.1	18.8	19.7
Building and Construction Products	100.9	2.1	4.5
Total Group	419.8	43.4	47.4
Net financing costs		(8.3)	(8.5)
Profit before taxation		35.1	38.9

* Underlying segment result is stated before Non-Underlying items as defined on the Condensed Consolidated Income Statement.

Galvanizing Services provided £2.2m revenues to Infrastructure Products (six months ended 30 June 2008: £3.4m, the year ended 31 December 2008: £5.8m) and £0.9m revenues to Building and Construction Products (six months ended 30 June 2008: £1.4m, the year ended 31 December 2008: £2.0m). Building and Construction Products provided £0.1m revenues to Infrastructure Products (six months ended 30 June 2008: £nil, the year ended 31 December 2008: £0.7m). These internal revenues, along with revenues generated from within their own segments, have been eliminated on consolidation.

The Group presents the analysis of continuing operations revenue by geographical market, irrespective of origin:

	6 months ended  30 June  2009	6 months ended  30 June  2008 (Restated)	Year  ended  31 December 2008
	£m	£m	£m
UK	101.8	122.8	239.0
Rest of Europe	46.8	55.5	102.5
Asia and the Middle East	11.0	5.3	15.1
North America	33.8	24.0	57.0
Rest of the World	3.4	4.1	6.2
Total Group	196.8	211.7	419.8

  

  5. Discontinued operations and assets and liabilities held for sale 

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. Accordingly, these businesses were accounted for as discontinued operations from the date of acquisition. The assets and liabilities of these businesses were separately included in the Balance Sheet at fair value as held exclusively with a view to resale. These operations and a 31.8% minority interest in Vista Investment NV were disposed of in August 2008. In November 2008, the Group exited the steel bar reinforcing market through the disposal of its interests in Express Reinforcements Limited and the cessation of its related activities. As a result these operations have been treated as discontinued activities and the comparatives for the six months ended 30 June 2008 have been restated.

The results of the discontinued operations are as follows:

	6 months ended 30 June 2009	6 months ended 30 June 2008	Year ended 31 December 2008
	£m	£m	£m
Operating profit	-	2.8	5.1
Net financing charges	-	(0.4)	(0.5)
Profit before taxation	-	2.4	4.6
Taxation	-	(1.8)	(1.7)
Discontinued operations profit for the year	-	0.6	2.9
Cash flows
Net cash from operating activities	-	0.9	5.6
Net cash from investing activities	-	-	8.0
Net cash used in financing activities	-	-	(5.0)
Cash flow from other discontinued operations	-	0.9	8.6

  6. Non-Underlying items

Six months ended 30 June 2009

Non-Underlying items in the six months ended 30 June 2009 principally comprise reorganisation and redundancy costs of £0.7m. Amounts included within financial income and expense represent the net financing expense on pension obligations of £0.2m (restated net return for the six months ended 30 June 2008 of £0.1m) and changes in the fair value of financial assets and liabilities of £0.1m gain.

In June 2009, the Group disposed of its 68.2% interest in Vista Investment NV to the minority interest shareholder. The main asset of Vista Investment NV was its 33.3% shareholding in Neholl BV, the ultimate holding company for a group of galvanizing operations in the Benelux region. The impact of the disposal on the Group's results is as follows:

			£m
Available for sale financial asset			5.7
Minority interest			(1.8)
Shareholder's equity			3.9
Consideration:
Cash consideration			5.0
Expenses			(0.1)
Total net proceeds			4.9
Profit on disposal			1.0
Cash flow effect:
Cash consideration			5.0
Expenses			(0.1)
Net cash consideration			4.9

Year ended 31 December 2008

Non-Underlying items in the year ended 31 December 2008 principally comprise reorganisation and redundancy costs of £1.9m and a goodwill impairment charge of £1.9m offset by a net curtailment gain of £0.6m in respect of the Group's retirement obligations. Amounts included within financial income and expense represent the net financing return on pension obligations of £0.2m. Tax on Non-Underlying items includes a charge of £1.1m resulting from a change in the UK tax legislation preventing the recoverability of Industrial Buildings Allowances.

  7. Net financing costs

	6 months ended  30 June  2009	6 months   ended  30 June  2008 (Restated)	Year ended 31 December 2008
	£m	£m	£m
Interest on bank deposits	0.2	1.4	1.2
Interest on other loans	0.1	-	0.2
Total interest income	0.3	1.4	1.4
Change in fair value of financial assets and liabilities	0.1	-	0.1
Expected return on pension scheme assets	1.6	2.2	4.4
Financial income	2.0	3.6	5.9
Interest on loans, overdrafts and hire purchase contracts	2.7	5.4	8.9
Interest on other loans	0.2	-	0.5
Total interest expense	2.9	5.4	9.4
Net change in fair value of financial assets and liabilities	-	-	0.1
Put option discount unwind	-	0.4	0.5
Expected interest cost on pension scheme obligations	1.8	2.1	4.2
Financial expense	4.7	7.9	14.2
Net financing costs	2.7	4.3	8.3

The Group has restated the comparatives for the six months ended 30 June 2008 to reflect the discontinuation of Express Reinforcements Limited and the cessation of its related activities. The impact on net financing costs is a reduction of £0.2m.

  8. Taxation

Tax has been provided on the underlying profit at the estimated effective rate of 33.5% for existing operations for the full year. 

  9. Earnings per share

The weighted average number of ordinary shares in issue during the period was 75,676,983, diluted for the effect of outstanding share options 76,292,325 (six months ended 30 June 2008: 75,609,141 and 76,489,141 diluted, the year ended 31 December 2008: 75,623,123 and 76,498,845 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 ended  30 June 2009		6 months ended  30 June 2008 (Restated)		Year ended  31 December 2008
	Per share	£m	Per share	£m	Per share	£m
Basic earnings	18.1p	13.7	17.3p	13.1	30.0p	22.7
Discontinued business	-	-	(0.8p)	(0.6)	(3.8p)	(2.9)
Continuing basic earnings	18.1p	13.7	16.5p	12.5	26.2p	19.8
Non-Underlying items	(0.1p)	(0.1)	-	-	6.0p	4.5
Continuing underlying earnings	18.0p	13.6	16.5p	12.5	32.2p	24.3
Diluted earnings	18.0p	13.7	17.1p	13.1	29.7p	22.7
Discontinued business	-	-	(0.8p)	(0.6)	(3.8p)	(2.9)
Continuing diluted earnings	18.0p	13.7	16.3p	12.5	25.9p	19.8
Non-Underlying items	(0.1p)	(0.1)	-	-	5.9p	4.5
Continuing underlying diluted earnings	17.9p	13.6	16.3p	12.5	31.8p	24.3

10. Dividends

Dividends paid in the period were the prior year's interim dividend of £3.3m (2008: £2.7m). The final dividend for 2008 of £4.3m (2007: £3.9m) was paid on 10 July 2009 and is provided for at 30 June 2009. 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 £3.6m, 4.7p per share (2008: £3.3m, 4.3p per share).

11. Analysis of net debt

	30 June  2009	30 June 2008	31 December 2008
	£m	£m	£m
Cash and cash equivalents	35.4	32.1	25.9
Interest bearing loans and borrowings due within one year	(31.9)	(25.8)	(16.7)
Interest bearing loans and borrowings due after one year	(109.6)	(116.6)	(155.4)
Net debt	(106.1)	(110.3)	(146.2)
	6 months ended  30 June  2009	6 months ended  30 June  2008 (Restated)	Year  ended  31 December 2008
	£m	£m	£m
Change in net debt
Operating profit	22.9	24.3	43.4
Non-cash items	7.0	6.1	14.8
Operating cash flow before movement in working capital	29.9	30.4	58.2
Net movement in working capital	5.3	2.5	(4.0)
Operating cash flow	35.2	32.9	54.2
Tax paid	(5.3)	(7.3)	(16.0)
Net financing costs paid	(1.9)	(4.2)	(7.0)
Capital expenditure	(4.7)	(10.1)	(22.5)
Sale of fixed assets	0.1	-	0.7
	23.4	11.3	9.4
Dividends paid	(3.3)	(2.7)	(6.6)
Disposals	5.6	0.3	29.5
Acquisitions	-	(2.2)	(33.8)
Issue of new shares	0.1	0.1	0.1
Net debt decrease/(increase) from continuing operations	25.8	6.8	(1.4)
Net cash inflow from discontinued operations	-	5.8	5.6
Net debt decrease	25.8	12.6	4.2
Effect of exchange rate fluctuations	14.3	(5.1)	(32.6)
Net debt at the beginning of the period	(146.2)	(117.8)	(117.8)
Net debt at the end of the period	(106.1)	(110.3)	(146.2)

12. Related Party Transaction

On 26 June 2009 the Group completed a related party transaction between Vista BVBA, a Belgian subsidiary of Hill & Smith Holdings PLC, and Galva Power Group NV, a subsidiary of Fontaine Holdings NV, a company which is controlled by Mr Lars Baumguertel. Mr Baumguertel was until 31 July 2008 a director of a number of overseas subsidiaries of Hill & Smith Holdings PLC, and Fontaine Holdings NV was therefore a related party within the meaning of the Stock Exchange Listing Rules. Under the terms of the transaction, Vista BVBA sold to Fontaine Holdings NV its 68.2% shareholding in Vista Investment NV for cash consideration of €5.8m (£5.0m), paid at completion. Vista Investment NV was a non-trading company whose only asset was its 33.3% shareholding in a Dutch company, Neholl BV.

ENDIR BLGDICUBGGCS