THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

25 July 2022

Hill & Smith Holdings PLC

Proposed Disposal of France Galva SA

Hill & Smith Holdings PLC ("Hill & Smith", "the Group", "our" or "we"), the international group creating sustainable infrastructure and safe transport through innovation, announces the proposed disposal of its French galvanizing and steel lighting column operations, France Galva SA ("France Galva"), to a consortium comprising ZINQ France SAS ("ZINQ") and Sofigalva SAS ("Sofigalva"), for a net equity purchase price of €72.6m (c.£61.5m¹) (the "Proposed Disposal").

Transaction highlights

·   The Proposed Disposal is expected to be immediately enhancing to the Group's growth profile and operating profit margin.

·    French Works Council consultations and employee-related information processes are required in connection with the Proposed Disposal, which is also conditional upon approval by Hill & Smith shareholders.

·    Subject to the receipt of satisfactory notifications and approvals, and assuming Hill & Smith decides to further consider the Proposed Disposal, completion of the Proposed Disposal and receipt of proceeds would be expected in Q4 2022.

Alan Giddins, Executive Chair, said:

"The proposed disposal of France Galva is in line with the Group's strategy of focussing our capital into higher growth markets. While galvanizing continues to be an important part of our long-term plans, we see the UK and US as offering better growth opportunities. The completion of the Proposed Disposal would provide the Group with additional financial firepower to support our organic and inorganic growth ambitions and would serve the best interests of our shareholders."

The Proposed Disposal would constitute both a Related Party and Class 2 transaction for the purpose of the Financial Conduct Authority's Listing Rules. Following completion of the French Works Council consultations and employee-related information processes, we anticipate that a circular and notice of General Meeting will be posted to shareholders. A further announcement will be made on posting.

Background to and reasons for the Proposed Disposal

France Galva was acquired in full by the Group in 2008 and offers hot-dip galvanizing services across ten strategically located plants in France, alongside a steel lighting column fabrication business. Hot-dip galvanizing is a proven steel corrosion protection solution which significantly extends the service life of steel structures and products.

Since acquisition, France Galva has been a profitable and cash generative part of the Group and has maintained a strong market position in France.  However, as we look forward, the forecast growth rates for France Galva do not meet the Group's long-term growth ambitions and its operating margins are below the Group average. Given our galvanizing operations serve local geographical markets, the Proposed Disposal would have no impact on our higher growth, higher margin galvanizing operations in the UK and US, both of which we remain committed to in the long-term.

Principal terms and conditions of the Proposed Disposal

Sofigalva and ZINQ as joint purchasers have granted a put option to the Group to effect the Proposed Disposal (the "Put Option"). The Put Option gives the Group the right, but not the obligation, to require Sofigalva and ZINQ to purchase the entire share capital and voting rights of France Galva on the terms of an agreed share purchase agreement (the "SPA").

Due to French law requirements, any decision of Hill & Smith to further consider the Proposed Disposal requires consultation with the French Works Council and that employees of France Galva be informed of the Proposed Disposal and provided an opportunity to make an offer to purchase the shares in France Galva, although there is no obligation on the Group to accept any such offer.

These processes may take up to two months to complete. A further announcement will be made should the Put Option be exercised.

Under the SPA, Sofigalva would acquire 43% and ZINQ would acquire 57% of the share capital and voting rights of France Galva for a fixed equity purchase price of €96.5m (c.£81.8m¹), less the amount of a pre-completion dividend of €23.9m (c.£20.3m¹), which Hill & Smith will apply in settlement of an intercompany loan from France Galva to Hill & Smith.  

The Proposed Disposal is a Related Party transaction under the Listing Rules because of the interests of Christophe Delot, France Galva's Managing Director, in Sofigalva; its completion would therefore be conditional upon approval by Hill & Smith shareholders, as well as other customary closing conditions. 

Information on France Galva

France Galva is a France-based group, comprising of three main business areas:

·    Hot-dip galvanizing

·    Painting and powder-coating of galvanized steel

·    Fabrication of street lighting columns

France Galva operates ten sites across France, employing approximately 680 people.

For the year ending 31 December 2021, France Galva reported underlying operating profit of €10.0m (c.£8.7m⁴) on revenue of €92.5m (c.£79.8m⁴).

Use of proceeds and financial effects

The net cash proceeds arising from the Proposed Disposal are expected to be approximately €72.6m (c.£61.5m¹), after the settlement of an intercompany loan of €23.9m (c.£20.3m¹) from France Galva to Hill & Smith.

These proceeds will reduce the Group's net debt and will be used to support further growth in strategically important markets, consistent with our disciplined portfolio management strategy.

As at 31 December 2021, France Galva had gross assets, before the deduction of any liabilities and excluding the intragroup loan, of €80.5m (c.£67.6m³), representing c.10% of the Group's gross assets as at 31 December 2021.

In the year ending 31 December 2021, the Group reported underlying operating profit of £86.0m, and France Galva reported underlying operating profit of €10.0m (c.£8.7m⁴), representing c.10% of the Group's underlying operating profit. 

The Proposed Disposal is expected to be dilutive to Hill & Smith's earnings per share and accretive to the Group's operating profit margin and return on invested capital.

Information on the purchasers

Established in 1889, ZINQ Group (of which ZINQ France is a wholly owned subsidiary) employs over 1,800 people and provides hot-dip galvanizing services from approximately 50 plants across Europe. ZINQ Group is solely owned by Mr Lars Baumgürtel, who was formerly the Managing Director of Zinkinvent GmbH, which owned France Galva prior to Hill & Smith's ownership.

Sofigalva is a newly incorporated entity for the purpose of effecting the Proposed Disposal. Should completion of the Proposed Disposal occur, Christophe Delot is expected to be the majority shareholder (alongside local financial investors Caisse d'Epargne and Banque Populaire Bourgogne Franche-Comté) and President of Sofigalva. Christophe Delot is the current President of the Board of Directors (Président du Conseil d'administration) and the Managing Director (Directeur Général) of France Galva.

Other than Christophe Delot, no other individuals which are considered key to Hill & Smith will be exiting Hill & Smith by virtue of the Proposed Disposal.

[1] Based on an exchange rate of £1 : €1.18

2 Compared to Group Revenue for the financial year ending 31 December 2020

3 Assumes an exchange rate of £1 : €1.19 as at 31 December 2021

4 Assumes an average exchange rate over calendar year 2021 of £1 : €1.16

ENDS

For further information, please contact:

Hill & Smith Holdings PLC                                                                                                Tel:  44 (0)121 704 7434

Alan Giddins, Executive Chair                                                                                         

Hannah Nichols, Chief Financial Officer

MHP Communications                                                                                                   Tel:  44 (0)20 3128 8613

Andrew Jaques

Rachel Farrington

Catherine Chapman

Rothschild & Co (Financial Adviser and Sponsor to Hill & Smith)                          Tel:  44 (0)20 7280 5000

Alistair Allen

Notes to Editors

Hill & Smith Holdings PLC creates sustainable infrastructure and safe transport through innovation. The Group employs c.4,400 people worldwide with the majority employed by its autonomous, agile, customer focussed operating businesses based in the UK, USA, Australia, India and, currently France and Sweden. The Group office is in the UK and it is quoted on the London Stock Exchange (LSE: HILS.L).

The Group's operating businesses are organised into three main business divisions:

Galvanizing Services: dramatically increasing the sustainability and maintenance free life of steel products including structural steel work, lighting, bridges, agricultural and other products for the industrial and infrastructure markets.

Utilities: supplying engineered steel and composite solutions with low embodied energy for a wide range of infrastructure markets including energy generation and distribution, marine, rail and housing. The division also supplies engineered pipe supports for the water, power and liquid natural gas markets and seismic protection solutions.

Roads & Security: supplying products and services to support road and highway infrastructure including temporary and permanent road safety barriers, renewable energy lighting and power solutions, Intelligent Traffic Solutions, street lighting columns and bridge parapets. The security portfolio includes hostile vehicle mitigation solutions, high security fencing and automated gate solutions.

Cautionary statement

This announcement is not intended to be, and does not constitute or form part of, an offer or invitation to purchase, acquire, subscribe for, sell, dispose of or issue, or any solicitation of any offer to sell, dispose of, purchase, acquire or subscribe for, any security or a solicitation of any vote or approval, in any jurisdiction. Hill & Smith's shareholders are advised to read carefully the formal documentation in relation to the Proposed Disposal once it has been despatched. Any response to the Proposed Disposal should be made only on the basis of the information in the formal documentation to follow.

No profit forecast or estimates

No statement in this announcement, is intended to be or is to be construed as a profit forecast or estimate for any period and no other statement in this document should be interpreted to mean that earnings or earnings per share for Hill & Smith for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for Hill & Smith.

Forward-Looking Statements

This announcement, oral statements made regarding the Proposed Disposal, and other information published in connection with the Proposed Disposal contain statements which are, or may be deemed to be, "forward-looking statements". Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections about future events and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. The forward-looking statements contained in this announcement include statements relating to the expected effects of the Proposed Disposal on Hill & Smith, the expected timing and scope of the Proposed Disposal and other statements other than historical facts. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "is expected", "estimates", "forecasts", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", or "will" be taken, occur or be achieved.

Although Hill & Smith believes that the expectations reflected in such forward-looking statements are reasonable, Hill & Smith can give no assurance that such expectations will prove to be correct. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include the requirement for shareholder approval, as well as factors such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of regulators and other factors such as changes in the political, social and regulatory framework in which Hill & Smith operates or in economic or technological trends or conditions. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. Such forward-looking statements should therefore be construed in the light of such factors.

None of Hill & Smith or any of its associates, directors, officers or advisers provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. You are cautioned not to place undue reliance on these forward-looking statements. Other than in accordance with their legal or regulatory obligations (including under the Listing Rules and the Disclosure Guidance and Transparency Rules of the FCA, and the Market Abuse Regulation), Hill & Smith is under no obligation, and Hill & Smith expressly disclaims any intention or obligation, to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Important information relating to the financial adviser and sponsor

N.M. Rothschild & Sons Limited ("Rothschild & Co"), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for Hill & Smith and no one else in connection with the matters described in this announcement and will not be responsible to anyone other than Hill & Smith for providing the protections afforded to clients of Rothschild & Co nor for providing advice in connection with any matter referred to herein. Neither Rothschild & Co nor any of its affiliates (nor their respective directors, officers, employees or agents) owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Rothschild & Co in connection with this announcement, any statement contained herein or otherwise.