17 June 2020
Hill & Smith Holdings PLC
Hill & Smith Holdings PLC ("Hill & Smith" or "the Group"), the international group with leading positions in the supply of infrastructure products and galvanizing services to global markets, provides a trading update for the five month period to 31 May 2020 ("the Period").
Derek Muir, Chief Executive, said:
"I would like to thank our people for their hard work and commitment during these challenging times. Their health, safety and well-being remain our key priority. Our decentralised model, with agile leaders close to their local markets, has enabled Hill & Smith to respond swiftly to COVID-19 developments as they have unfolded over recent months."
"Looking forward, we believe the Group is well positioned to benefit from likely government stimulus in our major markets, as well as targeted new business opportunities underpinned by our strong financial position."
Trading in the first quarter was strong, despite the disruption caused by COVID-19 in certain of our businesses from the middle of March. Group revenues for the quarter to 31 March 2020 increased organically by 4.8% to £170.7m with underlying operating profit also growing year on year. As expected, trading in April was significantly impacted by COVID-19 related business closures and reduced activity levels. In May we have seen a modest recovery in trading and whilst this is encouraging, we remain cautious given the level of market uncertainty. Revenue for April and May was 26% lower than the same period last year, however, the Group remained profitable in both months.
In the update provided on 27 March 2020, we outlined the impact of COVID-19 on our operations. Since that time, those businesses that were temporarily closed have now re-opened and we are seeing a gradual and controlled recovery across the Group's operations.
In the UK, all galvanizing sites remained open to support essential work, albeit with reduced shift patterns and lower year on year volumes. Our temporary and permanent road safety product businesses have continued to operate with limited negative impact, and while our other UK businesses either closed or materially reduced activity levels, they have now all resumed operations and we are seeing a gradual increase in customer demand. Our galvanizing and lighting column businesses in France and our pipe supports business in India have also re-opened and activity levels are improving. Our US businesses principally operate in essential critical infrastructure markets and have all remained open throughout the Period. While the US galvanizing business has seen an expected reduction in volumes compared to prior year, our US roads and utilities businesses have experienced minimal disruption and continue to perform well.
During the Period, the Group has taken a number of measures to manage costs and conserve operational cash flows without impacting our longer-term growth prospects. These include curtailing other than essential capital expenditure, tightly managing working capital and reducing discretionary spend. In addition, the Group has made use of government employee furlough schemes in the UK and France to help preserve jobs.
Financial Position and Liquidity
The Group continues to be cash generative and maintain a strong liquidity headroom position with a robust balance sheet. Net debt as at 31 May 2020 was £202.0m compared with net debt of £215.3m as at 31 December 2019 and £224.5m as at 29 February 2020. At 31 May 2020, the Group had £185.3m of headroom against its borrowing facilities of £354m (£341m committed, £13m on demand).
The Group continues to operate well within its borrowing covenants, being net debt to EBITDA of 3.0x and interest cover of 4.0x. The covenants are calculated excluding the impact of IFRS16 and are tested twice yearly on a 12-month historic basis.
Given the ongoing uncertainty caused by COVID-19, it is still too early to predict the duration or the severity of the economic disruption. We would, however, note that the Group's FY20 trading performance is likely to be second half weighted.
We have confidence in our strategy of growing market leading businesses in niche infrastructure markets, supported by a strong balance sheet. As a result, the Group remains well positioned to benefit from market opportunities as they arise. Experience of previous economic downturns suggests that governments may look to stimulate economic activity through investment in "shovel ready" infrastructure schemes and the Group's businesses are well placed to benefit from such programmes. In the medium and longer term we expect to see continued strong levels of infrastructure investment in our core markets both in the UK and the US.
The Group will be announcing interim results for the half year to 30 June 2020 on Wednesday 5 August 2020.
- Ends -
This announcement contains forward looking statements which are made in good faith based on the information available at the time of its approval. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a number of risks and uncertainties that are inherent in any forward looking statement which could cause actual results to differ materially from those currently anticipated. Nothing in this document should be regarded as a profits forecast nor should it be taken to mean that earnings per share of Hill & Smith in the year ending 31 December 2020, or in future years, will necessarily match or exceed the Group's historical earnings per share.
For further information, please contact:
Hill & Smith Holdings PLC
Derek Muir, Chief Executive
Hannah Nichols, Chief Financial Officer
Tel: 44 (0)121 704 7430
Andrew Jaques/Catherine Chapman/James Bavister
Tel: 44 (0)20 3128 8100
Notes to Editors
Hill & Smith Holdings PLC is an international group with leading positions in the design, manufacture and supply of infrastructure products and galvanizing services to global markets. It serves its customers from facilities principally in the UK, France, USA, Sweden, India and Australia.
The Group's operations are organised into three main business segments:
Infrastructure Products - Roads & Security, supplying products and services such as permanent and temporary road safety barriers, hostile vehicle mitigation products, street lighting columns, bridge parapets, temporary car parks, variable road messaging solutions, access covers and security fencing.
Infrastructure Products - Utilities, supplying products and services such as pipe supports for the power and liquid natural gas markets, energy grid components, composite products, building products, industrial flooring and handrails.
Galvanizing Services which provides zinc and other coatings for a wide range of products including fencing, lighting columns, structural steel work, bridges, agricultural and other products for the infrastructure and construction markets.
Headquartered in the UK and quoted on the London Stock Exchange (LSE: HILS.L), Hill & Smith Holdings PLC employs some 4,450 staff, principally in six countries.