We create value by providing solutions that enhance the resilience of vital infrastructure and the built environment
Fulfilling our purpose
Case Study
Structurally growing US end markets
In recent years we have seen strong organic growth and margin expansion in our US businesses, which operate in a range of structurally growing end markets including investment in the electrical grid, roads and bridges, and industrial infrastructure.
Investment in the US electrical grid is driven both by a need to upgrade an ageing infrastructure, much of which was built in the 1960s and 1970s, and also the need to address the significant growth in electricity consumption coming from new technologies. We see this as a 10 to 20 year investment cycle with funding coming from both federal government and publicly listed utility companies. A number of our businesses are seeing the benefits of this increased demand, particularly V&S Utilities, which designs and manufactures steel substation structures. Our composite and galvanizing businesses also provide products and services into this fast growing market.
Industrial infrastructure includes the physical investment in data centres, semiconductor and EV plants, and more general investment in industrial plants linked to onshoring. The scale of some of these projects is significant and multi-year, in many instances funded jointly by public and private sector. The construction of almost any type of industrial plant plays well to Hill & Smith. We are able to galvanize the steel, supply the cooling towers and composite products, such as cable trays, and supply engineered supports.
The roads and bridges market has been one of the first areas of US infrastructure investment to materially benefit from government investment through the Infrastructure Investment and Jobs Act (‘IIJA’), with a significant proportion of the funding allocated to surface transportation. Our high margin composite and galvanizing businesses benefit from this investment alongside our road safety products business.
Our significant exposure to these attractive, growing end markets, provides us with confidence that the Group is capable of delivering on its growth ambitions. We also see significant opportunities for value enhancing M&A.
Case Study
High and improving returns
We follow a disciplined approach to capital allocation, prioritising organic growth and focusing our investment on our higher growth, higher return businesses, particularly in the US.
We require our operating companies to manage working capital efficiently and we invest in capital projects, talent and innovation to support future growth. Additionally, we allocate capital to inorganic investment, with a focus on acquiring financially accretive businesses with good strategic fit and long-term growth potential.
We use return on invested capital to measure our overall capital efficiency, with the improving returns seen over the past five years demonstrating the success of our strategy and capital allocation approach. Given this impressive performance, we have upgraded our target for return on invested capital from 18% to 22%+ to reflect the stronger returns generated by the portfolio of businesses within the Group today.