TIDMHILS
RNS Number : 9603G
Hill & Smith Hldgs PLC
10 March 2015
Hill & Smith Holdings PLC
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014
Record results; Positive 2015 outlook in major end markets
Hill & Smith Holdings PLC, the international group with
leading positions in the manufacture and supply of infrastructure
products and galvanizing services to global markets, announces its
audited results for the year ended 31 December 2014.
Financial results
Change
Constant
31 December 31 December Reported currency
2014 2013 % %
Revenue GBP454.7m GBP444.5m + 2 + 5
Underlying(*) :
Operating profit GBP49.2m GBP44.5m + 11 + 15
Operating margin 10.8% 10.0% + 80bps
Profit before taxation GBP46.0m GBP41.2m + 12 + 16
Earnings per share 45.0p 40.4p + 11 + 16
Statutory:
Profit before taxation GBP36.9m GBP30.6m + 21
Basic earnings per share 35.1p 29.6p + 19
Dividend per share 18.0p 16.0p + 13
Net Debt GBP96.0m GBP87.2m
*All underlying profit measures exclude certain non-operational
items, which are as defined in note 3 to the financial statements.
References to an underlying profit measure throughout this
announcement are made on this basis.
Key points:
-- Record revenue and earnings performance
-- Revenue increased 5% organically; by 2% on a reported basis
after GBP13.3m adverse currency translation
-- Stronger end markets and active portfolio management driving improved returns
- Underlying operating margin 10.8%, up 80bps on prior year
- ROIC increased to 16% (2013: 15%)
-- The UK Road Investment Strategy (RIS) provides significant
mid-term funding; in sweet spot of Group's product offering
-- Capital investment at 2.4 x depreciation, to capitalise on
specific growth opportunities in UK roads and US galvanizing
-- Net debt reduced to 1.5 x EBITDA; key financing facility
extended to 2019 on more favourable terms
-- Proposed final dividend of 11.6p, up 16% giving full year dividend of 18.0p
Derek Muir, Chief Executive, said:
"2014 has been another good year for the Group resulting in
record revenue generation and profitability.
Trading conditions in many of our end markets continued to
improve throughout the second half which, together with the
implementation of strategic initiatives to increase returns,
delivered strong year on year profit growth.
Overall, although some markets remain challenging, 2015 is again
expected to be a year of good growth."
Details can be found at
www.gov.uk/government/collections/road-investment-strategy
For further information, please contact:
Hill & Smith Holdings PLC Tel: +44 (0)121
704 7430
Derek Muir, Group Chief Executive
Mark Pegler, Group Finance Director
MHP Communications Tel: +44 (0)20 3128
8100
John Olsen/Andrew Leach
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, Sweden, Norway, India and Australia.
The Group's operations are organised into three main business
segments:
Infrastructure Products - Utilities, supplying products and
services such as pipe supports for the power and liquid natural gas
markets, energy grid components, "GRP" railway platforms and flood
prevention barriers, plastic drainage pipes, industrial flooring,
handrails, access covers and security fencing.
Infrastructure Products - Roads, supplying products and services
such as permanent and temporary road safety barriers, street
lighting columns, bridge parapets, gantries, temporary car parks,
variable road messaging solutions and traffic data collection
systems.
Galvanizing Serviceswhich 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 3,800
staff across 54 sites, principally in 8 countries.
Chairman's Statement
Overview
I am pleased to report a record performance for the Group in
2014. The international diversity and strength of our businesses
within their respective markets, together with strategic and
operational actions taken in the year, have led to good organic
revenue and profit growth and improved returns. Against a backdrop
of difficult European market conditions and headwinds created by
adverse movements in exchange rates, the business has delivered an
outstanding result.
In 2014 our reported revenues increased by 2% to GBP454.7m
(2013: GBP444.5m) or by 5% at constant currency. Underlying
operating profit increased to GBP49.2m (2013: GBP44.5m), an
improvement of 11% or 15% at constant currency. All our divisions
have contributed to the increase in profits, which is testament to
the strong positions that we hold in the markets in which we
operate.
During 2014 we made capital investments at double the normal
rate to take advantage of the growing markets both in the USA and
the UK, where a total of 85% of our profits are now generated.
These investments, which will drive future organic growth,
include:
- completion of the new V&S Galvanizing plant in Memphis,
Tennessee, USA, strategically located on a major intersection
leading to the south and north-east to provide galvanizing services
to the steel fabricators in the Memphis area; and
- manufacture of an additional 95km of temporary road safety
barriers to fulfil anticipated demand following the planned
significant increase in investment in the UK road network over the
next five years.
As part of our strategy of active portfolio management the
following actions were taken during the year:
- In July we acquired Variable Message Signs Limited to
complement and strengthen our product and service offering to the
UK Highways Agency. The acquired business will be integrated with
our existing message sign business, Techspan, to create the UK
market leader in this sector. Consolidation of our leading UK
market positions remains a core feature of our acquisition
strategy.
- In August we disposed of our interests in the non-core
operations of Bromford Iron & Steel and JA Envirotanks, both of
which were unable to deliver the returns that we target from our
businesses, and in December we announced the closure of our UK
galvanizing plant in Hereford. Our strategy is to hold strong
positions in our chosen markets and we will dispose of, or
restructure, underperforming businesses where necessary.
Earlier in the year we successfully completed an 'amend and
extend' debt refinancing, extending our key debt financing facility
through to 2019 on more favourable terms. The facility affords us
significant headroom to continue to pursue our strategic growth
objectives.
Performance highlights
The Board is pleased with the Company's financial performance
for 2014, the highlights of which are shown below:
Change %
---------------------
Constant
2014 2013 Reported currency
------------------- ---------- ---------- --------- ----------
Revenue GBP454.7m GBP444.5m + 2 + 5
------------------- ---------- ---------- --------- ----------
Underlying:
Operating profit GBP49.2m GBP44.5m + 11 + 15
Profit before
tax GBP46.0m GBP41.2m + 12 +16
Earnings per
share 45.0p 40.4p + 11 +16
------------------- ---------- ---------- --------- ----------
Dividends
In view of the strong performance the Board is recommending a
final dividend of 11.6p per share (2013: 10.0p per share) making a
total dividend for the year of 18.0p per share (2013: 16.0p per
share) an increase of 12.5%.
We continue to perform at a level that enables us to maintain a
progressive dividend policy and which has resulted in twelve years
of uninterrupted dividend growth. Underlying dividend cover remains
a healthy 2.5 times (2013: 2.5 times). The final dividend, if
approved, will be paid on 3 July 2015 to those shareholders on the
register at the close of business on 29 May 2015.
The Board
During 2014 the Board reviewed its succession plans and its
composition. In December I was delighted to welcome Annette
Kelleher to the Board as a Non-executive Director. Annette is the
Group Human Resources Director for Johnson Matthey PLC and a member
of its group management committee. Her depth of experience will
give us a fresh perspective as we develop our presence in the
global infrastructure and galvanizing markets.
After ten successful years with the Group, John Humphreys
decided to retire from his position as Group Company Secretary on
31 December 2014. John had dedicated himself to the service of the
Group and I would like to take this opportunity to thank him for
his steadfast and longstanding commitment. His ability to provide
well-considered counsel to both the main Board and subsidiary
Directors has been invaluable. John has been succeeded by Alex
Henderson, formerly Company Secretary at Halfords Group plc.
Governance
Honest, open and accountable management of our businesses is key
to the effective governance of the Group, which underpins our
strategy and the sustainability of our performance.
In this year's Annual Report we have set out explanations of our
business model, strategy, risk management and activities of the
Board and its Committees. We also discuss within our Corporate
Responsibility report how our businesses are encouraged to
contribute within the communities in which they operate.
We trust that you will find this information helpful in
understanding how we can, and do, achieve increased value for our
shareholders.
AGM
We will hold our AGM on 14 May 2015 and it is an excellent
opportunity for shareholders to meet the Board and certain senior
executives of the Group. If you are able to attend my colleagues
and I will be delighted to see you.
Outlook
The Group benefits from the industrial and geographical spread
of its markets and businesses, which not only provide a resilient
base, but also opportunities for growth. Generating three quarters
of revenue and 85% of underlying operating profit from its UK and
US operations, the Group principally operates in industrial markets
where the overall economic outlook remains favourable.
Notwithstanding severe weather conditions experienced in north
east USA early in 2015, galvanizing volumes are expected to benefit
from both the strong US economy and commencement of production at
our new plant in Memphis, which we opened at the end of 2014.
Together with the UK galvanizing operations, the US and UK are
expected to more than offset any potential weakness from our French
operations, where economic conditions remain challenging.
With the exception of a weaker Pipe Supports order book,
activity levels in the Utilities division remain healthy and, in
our UK and US niche market sectors, the outlook is positive. The
immediate outlook for Pipe Supports remains difficult, with the
lower demand levels currently being experienced, partly as a result
of lower oil prices, exacerbated by the recent poor US weather
conditions. The longer term market dynamics in the pipe supports
arena remain positive.
The announcement by the UK government of its Road Investment
Strategy in late 2014, sets out its largest ever investment plan in
the UK strategic road network up to and including 2020/21. The
Group's roads product portfolio is ideally placed to benefit from
the investment plans and demand to date has been strong.
Accordingly, we have confidence in the short and medium term growth
prospects for our UK roads business.
Overall, although some markets remain challenging, 2015 is again
expected to be a year of good growth. Beyond 2015, the prospects
for our infrastructure and galvanizing businesses are encouraging
and we are well positioned to continue to deliver sustainable
growth and shareholder value.
Bill Whiteley
Chairman
10 March 2015
Business Model and Strategy
Business Model
To hold leading positions in the niche markets of infrastructure
and galvanizing, diversified over different geographies, with a
focus on service, margins and product development.
Strategic drivers
- Organic revenue growth
- Geographic diversification
- Target returns and leverage
- Active portfolio management
- Entrepreneurial culture
Strategy in action 2014
- Completion of GBP16m investment in an additional 95kms of
temporary barrier, bringing our total road safety fleet to
265kms.
- Completion of our GBP9.4m investment in a new V&S
Galvanizing plant in Memphis, Tennessee, USA, with further
expansion investment being reviewed in 2015.
- Acquisition of Variable Message Signs Limited and planned
integration with Techspan, to support the Highways Agency with its
signage requirements.
- Disposal of Bromford Iron & Steel Company Limited, JA
Envirotanks and Staco Redman, all non-core operations.
- Completion of the integration of Telford based Access Design business into Lionweld Kennedy, Middlesbrough.
- Opportunities have been identified in the renewable energy
sector for our Weholite large diameter pipes.
Strategy Implementation
Balanced profitable growth
Our strategy is to deliver sustainable profitable growth through
the supply of Infrastructure Products and Galvanizing Services. Our
objective is to achieve at least mid single-digit organic revenue
growth which, combined with selective acquisitions, will deliver
growth in earnings per share. A strong focus on cash generation
supports this growth strategy and enables a progressive dividend
policy.
In the Infrastructure Products division, our focus is on
businesses which supply into the Utilities and Roads markets, both
of which enjoy long term growth dynamics. Our businesses have niche
positions, high margins and provide us with access to global
markets.
For Utilities, our focus is on the power generation, oil and gas
and water sectors, capitalising primarily on the growing demand for
new power generation in emerging markets and the replacement of
ageing infrastructure in developed economies.
For Roads, in the UK, demand for permanent and temporary
barriers has been strong as the Highways Agency implements the UK
Government sponsored Road Investment Strategy. In December 2014 the
UK Government published its plan to invest GBP15.2bn in over 100
schemes across the road network between 2015 and 2021, upgrading
the nation's road transport infrastructure - specifically,
conversion of existing highways to the Smart Motorways scheme.
Given the anticipated demand to fulfil the documented programme, we
invested a total of GBP16m to increase our temporary barrier fleet
by 95 kilometres, bringing our total temporary barrier fleet to
circa 265 kilometres.
In the Galvanizing Services division, which serves external
customers, as well as our own Infrastructure Products businesses,
we are focused on our existing geographies of the UK, USA and
France. Growth will be achieved through increasing our geographical
footprint in the USA, and in November 2014 we opened our seventh US
galvanizing plant in Memphis, Tennessee. We also believe that there
are potential consolidation opportunities in the UK and France.
Geographic diversification
In 2013 operating profit from manufacturing plants located
overseas reached 67%. This reduced in 2014 with 56% of operating
profits coming from overseas, mainly as a result of improvements in
UK profitability. Our overall geographic mix will be dictated by a
focus on developing opportunities in our major developed markets,
together with the performance of our businesses in emerging
markets.
Target returns and leverage
Operating margins are an integral measure of the Group's success
and one which we will continue to drive for improvement through
product mix and value-added customer-focused solutions, as well as
high levels of operational efficiency.
Target operating margin for business units is 10%, although a
lower margin profile may be acceptable if that business' return on
capital employed ('ROCE') is above 20%. A period of grace will be
granted to business units which can demonstrate a plan for margin
improvement to the targeted level. We aim to create value by
consistently exceeding this 20% benchmark for ROCE at a subsidiary
level. At a Group level we monitor our performance using return on
invested capital ('ROIC').
Our objective is to operate with an efficient balance sheet by
maintaining debt at between 1.5 and 2.0 times EBITDA, which in turn
allows us to complement balanced organic growth with value
enhancing acquisitions.
Active portfolio management
Our strategic objective is to develop more substantial
businesses in each of our chosen sectors through both organic and
acquisitive growth. Consequently, this leads us to continually
examine the smaller and lower performing units within the
portfolio, along with rationalisation of production facilities and
business transfers. In 2014 we took the decision to dispose of
Bromford Iron & Steel Company Limited, JA Envirotanks and Staco
Redman and also to close our galvanizing plant in Hereford.
Our acquisition strategy is to buy businesses in markets we
understand through our existing activities. The majority of targets
are likely to be privately owned. We also look at acquiring
distressed businesses in the UK which complement our existing
operations and therefore enable us to consolidate our market
position. This in turn allows us, in some instances, to develop our
smaller business units into larger and more effective businesses
within their markets. Overseas acquisitions must have a high
quality management team in place and a proven earnings stream as it
is more demanding to manage distressed businesses from a distance
effectively.
In 2014, to further our strategy in the key area of road
transport infrastructure, we acquired the trade and assets of
Variable Message Signs Limited ('VMS') on 11 July 2014 for GBP0.3m.
VMS, an established operator in this field, faced financial
constraints due to the current hiatus in demand. The acquisition of
VMS, and its subsequent integration with Techspan, will allow the
Group to support the Highways Agency with its signage requirements
in its roll-out of Smart Motorways over the next five to ten
years.
We continue to actively manage our corporate portfolio through
the acquisition of targets that match our strategic objectives and
meet our targeted operating returns and through the disposal, or
rationalisation, of operations that are either non-core to our
market strategy, incapable of achieving our target returns, or
insufficiently cash generative.
Entrepreneurial culture
We encourage an entrepreneurial culture in our businesses
through a decentralised management structure. We provide our
management teams the freedom to run and grow their own businesses
supported by the resources available through being part of a larger
group, whilst adhering to the levels of governance and controls
appropriate for a quoted company. This culture ensures that
decisions are made close to the market and that our businesses are
agile and responsive to changes in their competitive environment
and through the international spread of the Group, opportunities
are identified and taken through Group collaboration.
Priorities in 2015
- Selective acquisitions to consolidate our market position or
increase our geographical representation.
- Investing in increased capacity and product development to capture potential opportunities.
- Continuation of the structural and operational improvements in
both Infrastructure Products and Galvanizing Services.
Operational and Financial Review
2014 overview
2014 has been another good year for the Group resulting in
record revenue generation and profitability. Following a good first
half performance, trading conditions in many of our end markets
continued to improve throughout the second half which, together
with the implementation of strategic initiatives to increase
returns, have delivered strong year on year profit growth.
Infrastructure Products performed ahead of our expectations with
both Roads and Utilities increasing year on year profitability. A
strong performance from Galvanizing in the USA and UK more than
offset any weakness in France.
The international diversity and strength of our businesses
within their respective markets continues to underpin our
performance. Our USA operations contributed 41% of the underlying
operating profit, marginally below that in the prior year
principally due to the improved performance of our UK operations as
spend in the wider economy and within our niche sectors improved.
The UK based businesses generated 44% of underlying operating
profit compared to 33% in the prior year. Together these two
geographic regions represent around 85% of our underlying operating
profit. Both economies, and the markets in which we operate, have a
strong outlook for 2015 and beyond.
Reported revenue for the year increased by 2% to GBP454.7m
(2013: GBP444.5m). Adjusting for adverse currency impacts of
GBP13.3m and net revenue of GBP2.7m from acquisitions and
disposals, underlying revenue improved by GBP20.8m, an organic
increase of 5%. Underlying operating margin improved by 80bps to
10.8% (2013: 10.0%). Underlying operating profit increased by 11%
to GBP49.2m (2013: GBP44.5m) despite unfavourable exchange impacts
of GBP1.7m, with acquisitions/disposals contributing GBP1.0m. The
organic improvement in underlying operating profit was 13%.
Underlying profit before taxation was 12% higher at GBP46.0m (2013:
GBP41.2m).
Infrastructure Products
GBPm
-------------- ---- ----------
Constant
+/- Currency
2014 2013 % %
---------------------- ------ ------ ---- ----------
Revenue 322.9 316.9 +2 +5
---------------------- ------ ------ ---- ----------
Underlying operating
profit 22.5 19.1 +18 +21
---------------------- ------ ------ ---- ----------
Underlying operating
margin % 7.0 6.0
---------------------- ------ ------
The division is focused on supplying engineered products to the
Roads and Utilities markets in geographies where there is a
prospect of sustained long term investment in infrastructure. In
2014 the division accounted for 71% (2013: 71%) of the Group's
revenue and 46% (2013: 43%) of the Group's underlying operating
profit.
Overall revenues increased marginally to GBP322.9m (2013:
GBP316.9m) despite an GBP8.5m negative impact from exchange rate
movements. Organic revenue growth was GBP15.0m, or 5% at constant
currency. Underlying operating profit was GBP22.5m (2013:
GBP19.1m), an increase of GBP3.4m, with an adverse currency
translation impact of GBP0.5m. Underlying operating margin improved
to 7.0% (2013: 6.0%).
Roads
GBPm
-------------- ---- ----------
Constant
+/- Currency
2014 2013 % %
---------------------- ------ ------ ---- ----------
Revenue 127.7 114.0 +12 +15
---------------------- ------ ------ ---- ----------
Underlying operating
profit 13.3 11.7 +14 +16
---------------------- ------ ------ ---- ----------
Underlying operating
margin % 10.4 10.3
---------------------- ------ ------
Our Roads division designs, manufactures and installs temporary
and permanent safety products for the roads market together with
intelligent transport systems (ITS) which collect data and provide
information to road users. We principally serve the UK market, with
an international presence in selected geographies with a growing
demand for tested safety products. Roads represents 27% of the
Group's underlying operating profit, and 28% of revenues in
2014.
Revenues increased by 12% to GBP127.7m (2013: GBP114.0m).
Underlying operating profit of GBP13.3m was GBP1.6m higher than the
prior year (2013: GBP11.7m) due to the investment in, and higher
utilisation of, our temporary safety barrier fleet in the UK. There
were no material net effects from acquisitions and currency
movements.
UK
In December 2014, the Department for Transport published their
long awaited Road Investment Strategy ('RIS'). Recognising that the
UK has suffered from insufficient and inconsistent investment, the
transformational investment plan sets out the short and longer term
vision for the UK strategic road network. The RIS aims to provide
certainty of road investment funding over the period 2015/16 to
2020/21, improve connectivity and condition of the existing network
and, importantly, increase capacity, with projects that will
deliver 1,300 additional lane miles. The focus of the drive to add
capacity will be additional 'Smart', or managed motorways, which is
at the core of the Group's product offering in the UK. Significant
additional funding is forecast to deliver on the strategy with a
total of GBP15.2bn of spend for the five year period 2015/16 to
2020/2021. The December announcement contained significant
additional expenditure over and above that previously announced.
Legislation to create the Strategic Highways Company (previously
the Highways Agency) to oversee and deliver the RIS will be put to
the UK parliament in April 2015.
Demand for permanent and temporary safety barriers in the year
was strong as the Highways Agency commenced implementation of the
RIS. Conversations with the Highways Agency over the past eighteen
months, together with our market leading position and pre
commitments now contained in the RIS, gave us the confidence to
invest a total of GBP16m in additional rental fleet of Zoneguard,
our temporary steel safety barrier, increasing the size of our
fleet by 95km to 265km. Utilisation of the additional barrier was
in line with our expectations.
During the year there was increased demand for our traditional
permanent safety barrier and our bridge parapet product, as a
number of new projects started construction. We enter 2015 with
strong order backlogs and a good pipeline of enquiries.
In our Technology business, we won a framework agreement with
Transport Scotland to supply between GBP5m and GBP10m of variable
message signs over the next four years. The lower demand levels
experienced in the first half of the year improved as we progressed
through the second half although contracts were smaller in size
than in the prior year. Profitability improved in the second half
such that overall performance was modestly below prior year. To
further our strategy in this key area we acquired the trade and
assets of Variable Message Signs Limited ('VMS') on 11 July 2014
for GBP0.3m. An established operator in this field, VMS had faced
financial constraints due to the current hiatus in demand. The
acquisition of VMS, and its subsequent integration with Techspan,
will allow the Group to support the Highways Agency with its
signage requirements in its roll-out of Smart Motorways as set out
in the RIS. The combined businesses, now called Variable Message
Signs, have supplied a significant number of the signs currently on
the UK roads network. The combination of the businesses plus
improving enquiry levels will result in a stronger performance in
2015.
In December we shipped 280 units, the largest single order, of
our BlackCat traffic monitoring equipment for a project in
Lithuania to enable the classification of traffic flows. This order
demonstrates the high quality of our equipment, which has been
designed for worldwide application. During the year we launched
EvoX, our new three-lane automatic number plate recognition (ANPR)
camera, designed for the high end tolling and security markets.
Our lighting column business in the UK achieved record
profitability for the second year running, however two of the five
PFI projects were completed at the end of 2014 and therefore we
expect a reduction in volumes in 2015. The general lighting market
is showing signs of recovery, especially in the housing market, and
the increased spend on highways over the next five years will help
to offset the completion of the PFI projects.
Non-UK
In France, the local mayoral elections predictably resulted in
lower spend from local councils. Since the elections we have seen
an improvement in the volumes, however the marketplace remains very
competitive due to over capacity and subdued demand.
Our Scandinavian business enjoyed another successful year
despite adverse movements in exchange rates impacting local trading
margins on products purchased from the UK. Despite the adverse
exchange rate, products imported from the UK increased by 230% to
GBP3.4m, predominantly our permanent steel safety barrier.
Sales of Zoneguard to local distributors in the USA demonstrated
increased levels of acceptance of our product in key states and
produced a solid result. Focus is now on generating more sales
leads in new states to grow the business.
Our fledgling businesses in India and Australia provide an
outlet for our tested suite of products, principally Brifen wire
rope and Zoneguard. Australia started to gain some traction with a
key customer and improved its profitability year on year. In India,
the market remains uncertain following national elections in the
first half and performance was below the exceptional first full
year of operation in 2013.
Utilities
GBPm
-------------- ---- ----------
Constant
+/- Currency
2014 2013 % %
---------------------- ------ ------ ---- ----------
Revenue 195.2 202.9 -4 -1
---------------------- ------ ------ ---- ----------
Underlying operating
profit 9.2 7.4 +24 +30
---------------------- ------ ------ ---- ----------
Underlying operating
margin % 4.7 3.6
---------------------- ------ ------
Our Utilities division provides industrial flooring, plastic
drainage pipes, security fencing and steel products for energy
creation markets across the Globe. The requirements for new power
generation in emerging economies and replacement of ageing
infrastructure in developed countries provide excellent
opportunities for the Group's utilities businesses. Utilities
represents 19% of the Group's underlying operating profit, and 43%
of revenues.
Revenues fell to GBP195.2m (2013: GBP202.9m), but after
adjusting for disposals and currency impacts, reflected an organic
improvement of GBP2.4m primarily due to a stronger performance from
our UK utilities businesses. Underlying operating profit increased
by GBP1.8m to GBP9.2m (2013: GBP7.4m), constant currency growth of
30%. Underlying margins improved 110bps to 4.7% (2013: 3.6%).
Creative Pultrusions, our composites company in the USA, entered
2014 with a strong backlog in orders across all product sectors
including OEM customers. During 2014 we saw growing acceptance of
our waterfront sheet piling and fender pile products, used in
coastal and pier protection in waterways projects around the New
York area, where a number of new bridges are being constructed.
Strong organic revenue growth resulted in profits well ahead of
2013.
This improved profitability was offset by a lower contribution
from our USA based transmission structures and substation business.
A late start to the construction season, following poor weather
conditions in the first quarter, led to delayed shipments in the
first half of 2014. The second half returned to more normal levels
and we start 2015 with an encouraging order backlog. The investment
in the USA power grid is set to continue throughout the decade as
renewables and gas fired power stations are connected to the grid.
During 2014 we secured three framework agreements from US utility
companies with their requirements being called off on a regular
basis. These types of agreement now represent a healthy 40% of our
total revenue.
Our pipe supports business in the USA also experienced a slow
start to 2014 following the poor weather conditions. Order backlog
picked up in the second and third quarters where we supplied pipe
supports to new ethylene, fertilizer and a number of gas fired
combined cycle power plants. The industrial pipe hanger business
had a stronger second half and is benefiting from bridge building
projects where pipework is suspended under the bridge structure.
The bridge replacement programme benefits our composites,
galvanizing and pipe supports businesses and sustains our core
strategy of supplying products and services to infrastructure
projects.
Outside of the US, Pipe Supports saw an improvement in
profitability on the previous year with a strengthening of our
operational management teams in both the UK and Thailand. The power
generation market in India gained traction in the second half of
2014 and we are currently working on large projects for
multi-boiler units for Larsen & Toubro and Doosan, and with one
of our Japanese customers for the supply of cryogenic pipe supports
for a large LNG terminal in Dahej, Gujarat. The order backlog gives
good coverage for the first half of 2015 for our Indian facility.
Our other Japanese EPC framework customers are currently completing
power projects in Taiwan/Japan, for which we supplied pipe supports
last year, and therefore it is likely to be later in 2015 before we
commence production of the next tranche of projects. This has
resulted in us entering 2015 with a lower order backlog in Thailand
and the UK than we would usually expect. We are also conscious of
the impact falling oil prices may have on future demand for new
projects in the Middle East, along with capex budgets across the
wider oil and gas sector.
As part of our strategy to rationalise the number of operating
sites in the UK, we relocated and successfully integrated our
Telford based Access Design business to the Lionweld Kennedy site
in Middlesbrough. Benefits of a single site operation were realised
with a strong improvement in the profitability of the Industrial
Flooring group. During the year we were successful in supplying
handrail and flooring products to new Crossrail train depots,
offshore wind platforms and to our largest contract for the supply
and installation of staircases and landing platforms for the main
shaft in the Lee Valley Outfall project in London. As part of our
capital investment programme, a new high speed automated forged
welding machine was installed to produce industrial grating meeting
European Standards and to increase our capacity and product range.
We enter 2015 with a good order book including a large contract for
the supply of flooring to a second platform for AMEC-Tekfen-Azfen
in the Shah Deniz field in Azerbaijan.
The supply of our plastic pipe products to AMP5 was completed in
the early part of 2014 and although enquiries for storm attenuation
tanks for the flood alleviation market were at record levels, only
a small number turned into orders. In contrast, housing market
enquiries were strong and orders improved in the second half of the
year. One notable change in the housing attenuation tank market is
the size of tanks, which have increased by around 50% in volume to
compensate for higher rainfall and an increased risk of flooding.
We start 2015 with a good order backlog and enquiry levels well
ahead of 2014.
Birtley and Expamet continue to perform ahead of expectations
with the synergies of offering both brands to the local independent
builders' merchants, as well as to national merchants, proving very
successful. The business has benefitted from the increased demand
for new build homes which is set to continue in 2015.
As part of our continuous product application development
programme, we have been seeking out new markets for the use of our
Weholite large diameter plastic pipe. In the renewable energy
sector anaerobic digestion, for the food and agricultural markets,
was identified as a suitable opportunity. In the final quarter of
the year we secured a large order of GBP0.4m for the supply of
sixteen storage tanks with a further two projects of a similar size
being secured for the first half of 2015. This again demonstrates
the entrepreneurial strength within the Group.
Our solar frame business had its most successful year as the
demand for large scale UK solar frames increased in the south of
England. We had expected volumes to reduce at the end of March 2015
as the Renewables Obligation scheme was to be scrapped for projects
over 5MW, however the grace period for installation of these larger
schemes has now been extended for a further year to March 2016,
which should result in similar volumes for 2015.
Our security fencing business experienced improved market
conditions as demand for our Stronguard product increased to
protect power stations, railways and sites of critical
infrastructure. Additional demand from the solar farm market also
contributed to year on year growth. During the year we acquired
plant, equipment and inventory from the receiver of one of the
largest manufacturers of palisade fencing who had entered
administration. The assets were absorbed into our own facility
which resulted in improved efficiency and profitability on the
higher volumes. These proactive measures further endorse our
strategy of consolidating the local market to improve returns on
sales and invested capital.
Galvanizing Services
GBPm
-------------- ---- ----------
Constant
+/- Currency
2014 2013 % %
---------------------- ------ ------ ---- ----------
Revenue 131.8 127.6 +3 +7
---------------------- ------ ------ ---- ----------
Underlying operating
profit 26.7 25.4 +5 +10
---------------------- ------ ------ ---- ----------
Underlying operating
margin % 20.3 19.8
---------------------- ------ ------
The Galvanizing Services division offers corrosion protection
services to the steel fabrication industry with multi-plant
facilities in the UK, France and USA. The division accounts for 29%
(2013: 29%) of the Group's revenue and 54% (2013: 57%) of the
Group's underlying operating profit.
Reported revenue increased by 3% to GBP131.8m (2013: GBP127.6m),
although growth at constant currency was 7%. Underlying operating
profit improved to GBP26.7m (2013: GBP25.4m), constant currency
growth of 10%. Underlying operating margins remained strong and
improved to 20.3% (2013: 19.8%) despite a rising zinc commodity
price and the adverse zinc pricing impact in Sterling and Euro of a
stronger US$.
Overall galvanizing volumes were 7% ahead of 2013 principally as
a result of improved economic conditions in the USA and UK.
USA
Located in the north east of the country, Voigt & Schweitzer
are the market leader with seven plants offering local services and
extensive support to fabricators and product manufacturers involved
in highways, construction, utilities and transportation.
Overall volumes for the year were 14% higher with second half
production particularly strong at 25% year on year growth,
significantly ahead of the first half which returned growth of 3%.
Weather patterns were a significant contributor to the phasing,
with the poor weather in the north east in the early part of the
year being compensated for by favourable conditions toward the year
end. Key markets including bridge & highway, alternative energy
and OEM equipment all performed ahead of expectations which,
together with our focus on productivity and business improvement
initiatives, returned a record result for the operation.
The construction of our seventh plant, strategically located in
Memphis, Tennessee was completed on schedule at a cost of GBP9.4m
and the plant commenced production at the end of November. Built to
our own proven design, production has started satisfactorily and we
are building our reputation and customer base in this regionalised
market. Early performance has been in line with expectations and we
remain excited about the longer term opportunities this investment
will afford.
France
France Galva has ten strategically located galvanizing plants
each serving a local market. We act as a key part of the
manufacturing supply chain in those markets and have delivered a
high level of service and quality to maintain our position as
market leaders.
The macro-economic environment in France remains challenging and
thus the business performed very credibly in reporting volumes in
line with the prior year. The first half of the year was buoyed by
completion of the Bordeaux Stadium project ahead of the 2016
European Football Championship and overall volumes were 3% ahead of
the prior year. An absence of large projects in the second half of
the year resulted in volumes 4% below prior year. Increased
competition from non-domestic galvanizers resulted in lower overall
market pricing and although we did not lose market share our
profitability was marginally lower year on year.
The business, a market leader run by a highly experienced team,
continues to perform well in a difficult market with a focus on
price and cost management pending an improvement in the French and
wider European economies.
UK
Our galvanizing businesses are located on eight sites, four of
which are strategically adjacent to our Infrastructure Products
manufacturing facilities.
Overall, volumes improved by 9% year on year with the strong 17%
growth experienced in the first half reducing to 1% in the second
half of the year as the business faced much tougher comparatives
given the improving economy. Growth in the first half of the year
was supported by the inclusion of Medway volumes in the period
January to April given the acquisition in the prior year on 30
April. The additional four months of trading contributed 6% of the
17% first half reported growth. Our own internally generated
volumes from the Roads and Utilities businesses were strong
throughout the year. Our focus on targeting higher margins resulted
in a significant increase in profitability. Contributions from the
Arkinstall transaction (December 2013), the full year impact of the
Medway acquisition and a strategy of winning and servicing smaller
customers outside of our normal geographic areas all assisted in
increasing margins.
In furtherance of our strategy of active portfolio management,
on 1 December we announced the closure of our galvanizing site in
Hereford. In need of substantial capital expenditure to upgrade the
facility, market volumes and the financial returns available could
not justify the investment. The cost of closure, amounting to
GBP2.9m, has been included in non-underlying items. Production
ceased on 6 February 2015. A reasonable proportion of the volume
will be absorbed into our other structural steel galvanizing
facility in Chesterfield.
Financial Review
Income statement phasing
First Second Full
half half Year
---------------------- ------ ------- ------
2014
Revenue GBPm 223.8 230.9 454.7
Underlying operating
profit GBPm 22.5 26.7 49.2
Margin % 10.1 11.6 10.8
---------------------- ------ ------- ------
2013
Revenue GBPm 221.6 222.9 444.5
Underlying operating
profit GBPm 20.2 24.3 44.5
Margin % 9.1 10.9 10.0
---------------------- ------ ------- ------
Reported revenue of GBP454.7m was GBP10.2m or 2% ahead of the
prior year, with acquisitions and disposals completed during both
2013 and 2014 contributing a net GBP2.7m additional revenue and
GBP1.0m underlying operating profit. The translation impact arising
from changes in exchange rates, principally the US Dollar and Euro,
reduced total revenue by GBP13.3m and underlying operating profit
by GBP1.7m. At constant exchange rates, organic revenue growth was
GBP20.8m and underlying operating profit growth was GBP5.4m, or 5%
and 13% respectively. Further details of the performance of the
Group are provided in the Operational Review.
The phasing of revenue and to a greater extent underlying
operating profit was again second half biased in 2014, principally
reflecting the growing levels of demand in the UK Roads market and
the generally improving economic conditions in the US, together
with a normal degree of seasonality.
Cash generation and financing
The Group again demonstrated its cash generating abilities with
strong operating cash flow of GBP53.7m (2013: GBP54.2m), despite an
increase in working capital of GBP5.1m (2013: GBP1.9m reduction).
The overall impact on working capital of zinc and steel commodity
prices year on year was not material. Working capital as a
percentage of annualised sales held steady at 13.9% at 31 December
2014 (2013: 13.9%). Debtor days were unchanged from the prior year
at 61 days.
Capital expenditure at GBP35.9m (2013: GBP22.1m) represents a
multiple of depreciation and amortisation of 2.4 times (2013: 1.5
times). As previously reported, the Group has made a significant
investment in its UK temporary road safety barrier fleet with a
total cash spend of GBP14.3m during the year, and has completed the
construction of its new galvanizing facility in Memphis, USA at a
cost in the year of GBP7.4m. Other significant items of expenditure
included GBP1.5m on further development and equipment for the
Industrial Flooring manufacturing facility in Middlesbrough
following the closure and relocation of the Telford operation in
2013, and GBP1.2m of development expenditure in relation to the
Group's suite of products for the UK roads market. Whilst the Group
expects capital investment to fall to more normalised levels in
2015, it continues to invest in organic growth opportunities where
returns exceed internal benchmarks and its cost of capital.
The Group measures its operating cash flow performance based on
its underlying cash conversion rate, defined as the ratio of
underlying operating cash flow less capital expenditure to
underlying operating profit. In 2014 the Group achieved an
underlying cash conversion rate of 51% (2013: 93%). Excluding the
strategic investments in UK temporary road safety barrier and the
Memphis galvanizing plant during the year, underlying cash
conversion was 95%. Over the past six years the Group has achieved
an average rate of 90% despite a number of other major capital
projects being undertaken during that time.
The Group's strong underlying operating cash flow provides the
funds to invest in growth, both organic and acquisitive, to service
debt, pension and tax obligations and to maintain a growing
dividend stream, whilst a sound balance sheet provides a platform
to take advantage of future growth opportunities.
Group net debt at 31 December 2014 was GBP96.0m, representing a
year on year increase of GBP8.5m before adverse exchange rate
movements of GBP0.3m. The Group's net debt includes 23% denominated
in US Dollars and 13% denominated in Euros which act as a hedge
against the net asset investments in overseas businesses.
Change in net debt
2014 2013
GBPm GBPm
-------------------------------- ------- -------
Operating profit 41.1 34.5
Depreciation and amortisation* 17.2 16.9
Working capital movement (5.1) 1.9
Pensions and provisions (5.5) 0.4
Other items 6.0 0.5
-------------------------------- ------- -------
Operating cash flow 53.7 54.2
Tax paid (9.3) (15.3)
Interest paid (net) (3.2) (3.4)
Capital expenditure (35.9) (22.1)
Sale of fixed assets 0.7 3.0
-------------------------------- ------- -------
Free cash flow 6.0 16.4
Dividends (12.4) (11.6)
Acquisitions (0.2) (6.6)
Disposals 0.5 -
Amortisation of refinancing
costs (0.3) -
Net issue of shares (2.1) 2.0
-------------------------------- ------- -------
Change in net debt (8.5) 0.2
Opening net debt (87.2) (86.8)
Exchange (0.3) (0.6)
-------------------------------- ------- -------
Closing net debt (96.0) (87.2)
-------------------------------- ------- -------
* includes GBP2.1m (2013: GBP2.2m) in respect of acquisition
intangibles.
The Group's principal debt facility consists of a headline
GBP210m multicurrency revolving credit agreement. In May 2014 the
Group extended the term of the then-existing facility from April
2016 to April 2019, providing the Group with significant headroom
against its expected future funding requirements for an additional
three years, whilst also taking advantage of favourable market
conditions to reduce costs and amend key terms. Costs associated
with the amendment of GBP1.5m were deducted from the carrying value
of the loans and will be amortised over the life of the facility,
as required by accounting standards.
Maturity profile of debt facilities
2014 2013
---------- ---------- ---------- ----------
On demand GBP9.3m On demand GBP16.4m
2015-2016 GBP1.3m 2014-2015 GBP1.3m
2017-2019 GBP212.9m 2016 GBP210.9m
At the year end the Group had committed debt facilities
available of GBP214.2m and a further GBP9.3m in overdrafts and
other on-demand facilities.
The principal debt facility is subject to covenants which are
tested semi-annually on 30 June and 31 December. The covenants
require that the ratio of EBITDA (adjusted profit before interest,
tax, depreciation and amortisation as defined in the facility
agreement) to net interest costs exceeds four times and require the
ratio of net debt to EBITDA to be no more than three times.
The results of the covenant calculations at 31 December 2014
were:
Actual Covenant
Interest Cover 20.6 times > 4.0 times
Net debt to EBITDA 1.5 times < 3.0 times
Appropriate monitoring procedures are in place to ensure
continuing compliance with banking covenants and, based on our
current estimates, we expect to comply with the covenants for the
foreseeable future.
Net finance costs
2014 2013
GBPm GBPm
--------------------------- ---- ------ ---- ------
Underlying net cash
interest:
Bank loans / overdrafts 3.1 3.2
Finance leases /
other 0.1 3.2 0.1 3.3
---- ----
Non cash:
Net pension interest 0.7 0.6
Costs of refinancing 0.3 1.0 - 0.6
---- ------ ---- ------
4.2 3.9
------ ------
Net financing costs were marginally higher than prior year at
GBP4.2m (2013: GBP3.9m). The net cost from pension fund financing
under IAS19 was GBP0.7m (2013: GBP0.6m), the increase of GBP0.1m
reflecting the higher net pension deficit at the end of 2013
compared with 2012. Given its non-cash nature the pension interest
charge continues to be treated as 'non-underlying' in the
Consolidated Income Statement. Non-underlying financing costs also
include GBP0.3m relating to the Group's amendment of the terms of
its principal banking facilities during the year, reflecting the
amortisation of the costs capitalised against the loans in
accordance with IAS39. The underlying cash element of net financing
costs decreased by GBP0.1m to GBP3.2m (2013: GBP3.3m), as a result
of marginal reductions in bank interest rates. Underlying operating
profit covered net cash interest 15.4 times (2013: 13.5 times).
The Group has approximately 26% (2013: 38%) of its gross debt of
GBP102.7m at fixed interest rates, either through interest rate
swaps or finance leases. Interest rate swaps are predominantly
denominated in US Dollars, with a smaller tranche of Euros. The
Sterling swap held at 31 December 2013 was terminated in 2014 as
part of the amendment to the principal debt facility.
Return on invested capital (ROIC)
The Group aims to maintain ROIC above its pre-tax weighted
average cost of capital (currently c.11%), with a target return of
17.5%. In 2014, ROIC increased to 16% (2013: 15%) largely as a
result of improvements in underlying operating margins and active
portfolio management, including the disposal and restructuring of
under-performing businesses. The Group measures ROIC as the ratio
of underlying operating profit to average invested capital.
Invested capital is defined as net assets excluding current and
deferred tax, net debt, retirement benefit obligations and
derivative financial instruments, and therefore includes goodwill
and other acquired intangible assets.
Exchange rates
Given its international operations and markets, the Group is
exposed to movements in exchange rates when translating the results
of international operations into Sterling. Retranslating 2013
revenue and underlying operating profit using 2014 average exchange
rates would have reduced the prior year revenue and underlying
operating profit by GBP13.3m and GBP1.7m respectively. Exchange
rates continue to move in line with worldwide events and currency
flows and hence are inherently difficult to predict. Movements in
exchange rates will continue to have an impact on the translation
of overseas earnings in 2015. Retranslating 2014 revenue and
underlying operating profit using exchange rates at 3 March 2015
(inter alia GBP1 = US$1.54 and GBP1 = EUR1.37) would increase the
revenue and underlying operating profit by GBP2.1m and GBP0.8m
respectively. For US Dollar, a 1 cent movement results in a
GBP140,000 adjustment to underlying operating profit and for the
Euro, a GBP60,000 adjustment.
Non-underlying items
The total non-underlying items charged to operating profit in
the Consolidated Income Statement amounted to GBP8.1m (2013:
GBP10.0m) and were made up of the following:
Income
statement Cash in Future
charge the year cash Non-cash
GBPm GBPm GBPm GBPm
Business reorganisation
costs (2.6) (0.6) (1.5) (0.5)
Losses on sale of subsidiaries (3.7) 0.5 0.5 (4.7)
Amortisation of acquisition
intangibles (2.1) - - (2.1)
Acquisition expenses (0.1) (0.1) - -
Profit on sale of properties 0.4 0.4 - -
(8.1) 0.2 (1.0) (7.3)
========== ========= ======= =========
- Business reorganisation costs of GBP2.6m (2013: GBP9.2m)
principally relate to redundancies and other costs associated with
site restructuring. The charge is net of a release of GBP0.9m of
unutilised provisions relating to prior year site closures
following the favourable settlement of previously estimated
exposures. The charge also includes asset impairments of
GBP1.4m;
- Losses on disposal of subsidiaries of GBP3.7m (2013: GBPnil)
represent the net losses arising from the disposal of the Group's
interests in the non-core businesses of Staco Redman, Bromford Iron
& Steel and JA Envirotanks during the year, further details of
which are set out below;
- Non-cash amortisation of acquired intangible fixed assets was GBP2.1m (2013: GBP2.2m);
- Acquisition related expenses of GBP0.1m (2013: GBP0.4m)
reflect costs associated with acquisitions expensed to the
Consolidated Income Statement in accordance with IFRS3 (Revised);
and
- Profits on sale of properties during the year were GBP0.4m (2013: GBP1.8m).
The net cash impact of the above items was an inflow of GBP0.2m
(2013: outflow of GBP3.1m) with a further GBP1.0m net spend
expected in 2015. The non-cash element therefore amounted to
GBP7.3m. The Directors continue to believe that the classification
of these items as 'non-underlying' aids the understanding of the
underlying business performance.
Tax
The Group's tax charge for the year was GBP9.6m (2013: GBP7.6m).
The underlying effective tax rate for the Group was 24% (2013:
24%), which is lower than the weighted average mix of tax rates in
the jurisdictions in which the Group operates following the
successful conclusion of tax uncertainties related to prior years
and the resultant provision release. Cash tax paid of GBP9.3m
(2013: GBP15.3m), although broadly in line with the income
statement charge, benefitted from advanced capital allowances in
connection with the Group's investment in the new Memphis
galvanizing plant in the USA. Cash tax paid in the prior year
included the cash settlement of certain one-off deferred tax
liabilities in France.
The Group's net deferred tax liability is GBP7.6m (2013:
GBP9.5m). An GBP8.5m (2013: GBP8.7m) deferred tax liability is
provided in respect of brand names and customer relationships
acquired. A further GBP1.5m (2013: GBP1.9m) is provided on the fair
value revaluation of French properties acquired as part of the
Zinkinvent acquisition in 2007. These liabilities do not represent
future cash tax payments and will unwind as the brand names,
customer relationships and properties are amortised.
Earnings per share
The Board believes that underlying earnings per share (UEPS)
gives the best reflection of performance in the year as it strips
out the impact of non-underlying items, essentially one off
non-trading items and acquisition intangible amortisation. UEPS for
the period under review increased by 11% to 45.0p (2013: 40.4p),
with organic growth in revenue and improvements in underlying
operating profit margins more than compensating for the adverse
movements in exchange rates. The diluted UEPS was 44.4p (2013:
39.8p). Basic earnings per share was 35.1p (2013: 29.6p). The
weighted average number of shares in issue was 77.8m (2013: 77.6m)
with the diluted number of shares at 78.8m (2013: 78.6m) adjusted
for the outstanding number of dilutive share options.
Pensions
The Group operates a number of defined contribution and defined
benefit pension plans in the UK, the USA and France. The IAS19
deficit of the defined benefit plans as at 31 December 2014 was
GBP21.1m, marginally higher than the GBP20.2m reported at 31
December 2013. The impact of a reduction in the discount rate, in
line with falling bond yields in the latter part of the year, was
largely offset by reductions in inflation assumptions and an
improvement of GBP5.6m in underlying asset values.
The Hill & Smith Executive Pension Scheme and the Hill &
Smith Pension Scheme (the 'Schemes') remain the largest employee
benefit obligations within the Group. In common with many other UK
companies, the Schemes are mature having significantly more
pensioners and deferred pensioners than active participating
members. The Schemes are closed to new members, with future
accruals ceasing in the Executive Scheme in December 2011 and in
the Main Scheme in November 2012. The IAS19 deficit of the Schemes
as at 31 December 2014 was GBP17.7m (2013: GBP17.6m). The Group has
agreed deficit recovery plans in place that require cash
contributions over and above the current service accrual amounting
to GBP2.5m for the three years to April 2016, followed by payments
of GBP2.3m for a further seven years.
Deficit contributions of GBP3.6m in 2014 include an additional
GBP1.1m crystallising on cessation of trade in businesses sold or
closed. The date of the next triennial review is 5 April 2015. The
Group is actively engaged in dialogue with the Trustees with
respect to management, funding and investment strategy.
Acquisitions
On 11 July 2014 the Group acquired the trade and certain assets
of Variable Message Signs Limited, a manufacturer and distributor
of electronic variable message signs for the UK road and rail
markets, for GBP0.3m including costs and the assumption of
outstanding debt. The business will be merged with the Group's
existing variable message sign business, Techspan Systems, to
create the UK market leader in this sector. The combined business
will be known as Variable Message Signs.
Disposals
On 18 August 2014 the Group disposed of its interests in the
non-core businesses of Bromford Iron & Steel Company Limited, a
producer of rolled steel, and JA Envirotanks, a small niche market
supplier of storage tanks for industrial applications. Total
consideration was GBP1.3m, of which GBP0.5m is deferred for a
period of up to two years, resulting in a loss on disposal of
GBP3.8m.
On 23 April 2014 the Group disposed of its interest in Staco
Redman Limited, a small producer of steel floor grating, for a
consideration of GBP0.3m resulting in a profit on disposal of
GBP0.1m.
Treasury management
All treasury activities are co-ordinated through a central
treasury function, the purpose of which is to manage the financial
risks of the Group and to secure short and long term funding at the
minimum cost to the Group. It operates within a framework of
clearly defined board-approved policies and procedures, including
permissible funding and hedging instruments, exposure limits and a
system of authorities for the approval and execution of
transactions. It operates on a cost centre basis and is not
permitted to make use of financial instruments or other derivatives
other than to hedge identified exposures of the Group. Speculative
use of such instruments or derivatives is not permitted. Liquidity,
interest rate, currency and other financial risk exposures are
monitored weekly. The overall indebtedness of the Group is reported
on a daily basis to the Finance Director.
Going concern
The Directors have assessed the future funding requirements of
the Group and the Company and compared them to the level of
committed available borrowing facilities. The assessment included a
review of both divisional and Group financial forecasts, financial
instruments and hedging arrangements, for the 15 months from the
balance sheet date. Major assumptions have been compared to
external reference points such as infrastructure spend forecasts
across our chosen market sectors, Government spending plans on road
infrastructure, zinc, steel price and economic growth forecasts.
The forecasts show that the Group will have sufficient headroom in
the foreseeable future and the likelihood of breaching banking
covenants in this period is considered to be remote.
Having undertaken this work, the Directors are of the opinion
that the Group has adequate committed resources to fund its
operations for the foreseeable future and so determine that it is
appropriate for the Financial Statements to be prepared on a going
concern basis.
Derek Muir Mark Pegler
Group Chief Executive Group Finance Director
10 March 2015
Year ended 31 December 2014
Consolidated Income Statement
2014 2013
----------- --------------- ------ ----------- --------------- ------
Non- Non-
Underlying underlying(*) Total Underlying underlying(*) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------ ----------- --------------- ------ ----------- --------------- ------
1,
Revenue 2 454.7 - 454.7 444.5 - 444.5
---------------------------------- ------ ----------- --------------- ------ ----------- --------------- ------
Trading profit 49.2 - 49.2 44.5 - 44.5
Amortisation of acquisition
intangibles 3 - (2.1) (2.1) - (2.2) (2.2)
Business reorganisation costs 3 - (2.6) (2.6) - (9.2) (9.2)
Loss on disposal of subsidiaries 3 - (3.7) (3.7) - - -
Acquisition costs 3 - (0.1) (0.1) - (0.4) (0.4)
Profit on sale of properties 3 - 0.4 0.4 - 1.8 1.8
---------------------------------- ------ ----------- --------------- ------ ----------- --------------- ------
1,
Operating profit 2 49.2 (8.1) 41.1 44.5 (10.0) 34.5
Financial income 4 0.5 - 0.5 0.7 - 0.7
Financial expense 4 (3.7) (1.0) (4.7) (4.0) (0.6) (4.6)
---------------------------------- ------ ----------- --------------- ------ ----------- --------------- ------
Profit before taxation 46.0 (9.1) 36.9 41.2 (10.6) 30.6
Taxation 5 (11.1) 1.5 (9.6) (9.9) 2.3 (7.6)
---------------------------------- ------ ----------- --------------- ------ ----------- --------------- ------
Profit for the year attributable
to owners of the parent 34.9 (7.6) 27.3 31.3 (8.3) 23.0
---------------------------------- ------ ----------- --------------- ------ ----------- --------------- ------
Basic earnings per share 6 45.0p 35.1p 40.4p 29.6p
Diluted earnings per share 6 44.4p 34.7p 39.8p 29.2p
---------------------------------- ------ ----------- --------------- ------ ----------- --------------- ------
Dividend per share - Interim 7 6.4p 6.0p
Dividend per share - Final
proposed 7 11.6p 10.0p
---------------------------------- ------ ----------- --------------- ------ ----------- --------------- ------
Total 7 18.0p 16.0p
---------------------------------- ------ ----------- --------------- ------ ----------- --------------- ------
* The Group's definition of non-underlying items is included in
note 1 'Basis of Preparation'.
Year ended 31 December 2014
Consolidated Statement of Comprehensive Income
2014 2013
Notes GBPm GBPm
------------------------------------------------------ ------ ------ ------
Profit for the year 27.3 23.0
------------------------------------------------------ ------ ------ ------
Items that may be reclassified subsequently to
profit or loss
Exchange differences on translation of overseas
operations 1.2 (1.6)
Exchange differences on foreign currency borrowings
denominated as net investment hedges (0.1) (0.7)
Effective portion of changes in fair value of cash (0.1) -
flow hedges
Transfers to the income statement on cash flow
hedges 0.3 0.4
Taxation on items that may be reclassified to profit
or loss 5 - (0.1)
Items that will not be reclassified subsequently
to profit or loss
Actuarial loss on defined benefit pension schemes (3.6) (5.8)
Taxation on items that will not be reclassified
to profit or loss 5 0.8 0.4
------------------------------------------------------ ------ ------ ------
Other comprehensive income for the year (1.5) (7.4)
------------------------------------------------------ ------ ------ ------
Total comprehensive income for the year attributable
to owners of the parent 25.8 15.6
------------------------------------------------------ ------ ------ ------
Year ended 31 December 2014
Consolidated Statement of Financial Position
2014 2013
Notes GBPm GBPm
---------------------------------------- ------ -------- --------
Non-current assets
Intangible assets 126.1 126.7
Property, plant and equipment 128.7 111.9
Other receivables 0.3 -
---------------------------------------- ------ -------- --------
255.1 238.6
---------------------------------------- ------ -------- --------
Current assets
Assets held for sale 1.5 -
Inventories 57.9 55.1
Trade and other receivables 92.7 91.2
Cash and cash equivalents 8 6.7 10.0
---------------------------------------- ------ -------- --------
158.8 156.3
---------------------------------------- ------ -------- --------
Total assets 2 413.9 394.9
---------------------------------------- ------ -------- --------
Current liabilities
Trade and other liabilities (87.7) (85.0)
Current tax liabilities (8.9) (7.5)
Provisions for liabilities and charges (1.4) (3.5)
Interest bearing borrowings (1.1) (0.8)
---------------------------------------- ------ -------- --------
(99.1) (96.8)
---------------------------------------- ------ -------- --------
Net current assets 59.7 59.5
---------------------------------------- ------ -------- --------
Non-current liabilities
Other liabilities (0.2) (0.1)
Provisions for liabilities and charges (2.8) (2.8)
Deferred tax liability (7.6) (9.5)
Retirement benefit obligation (21.1) (20.2)
Interest bearing borrowings (101.6) (96.4)
---------------------------------------- ------ -------- --------
(133.3) (129.0)
---------------------------------------- ------ -------- --------
Total liabilities (232.4) (225.8)
---------------------------------------- ------ -------- --------
Net assets 181.5 169.1
---------------------------------------- ------ -------- --------
Equity
Share capital 19.5 19.4
Share premium 31.7 31.5
Other reserves 4.5 4.5
Translation reserve 0.9 (0.2)
Hedge reserve (0.4) (0.6)
Retained earnings 125.3 114.5
---------------------------------------- ------ -------- --------
Total equity 181.5 169.1
---------------------------------------- ------ -------- --------
Approved by the Board of Directors on 10 March 2015 and signed
on its behalf by:
D W Muir
Director
M Pegler
Director
Year ended 31 December 2014
Consolidated Statement of Changes in Equity
Share Share Other Translation Hedge Retained Total
capital premium reserves reserves reserves earnings equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------ --------- --------- ---------- ------------ ---------- ---------- --------
At 1 January 2013 19.3 29.6 4.5 2.1 (0.9) 107.8 162.4
Comprehensive income
Profit for the year - - - - - 23.0 23.0
Other comprehensive income
for the year - - - (2.3) 0.3 (5.4) (7.4)
Transactions with owners
recognised directly in
equity
Dividends 7 - - - - - (11.6) (11.6)
Credit to equity of
share-based
payments - - - - - 0.4 0.4
Tax taken directly to
the Consolidated
Statement of Changes
in Equity 5 - - - - - 0.3 0.3
Shares issued 0.1 1.9 - - - - 2.0
---------------------------- ------ --------- --------- ---------- ------------ ---------- ---------- --------
At 31 December 2013 19.4 31.5 4.5 (0.2) (0.6) 114.5 169.1
Comprehensive income
Profit for the year - - - - - 27.3 27.3
Other comprehensive income
for the year - - - 1.1 0.2 (2.8) (1.5)
Transactions with owners
recognised directly in
equity
Dividends 7 - - - - - (12.4) (12.4)
Credit to equity of
share-based
payments - - - - - 0.9 0.9
Satisfaction of long
term incentive payments - - - - - (1.0) (1.0)
Own shares acquired by
employee benefit trust - - - - - (1.4) (1.4)
Tax taken directly to
the Consolidated
Statement of Changes
in Equity 5 - - - - - 0.2 0.2
Shares issued 0.1 0.2 - - - - 0.3
---------------------------- ------ --------- --------- ---------- ------------ ---------- ---------- --------
At 31 December 2014 19.5 31.7 4.5 0.9 (0.4) 125.3 181.5
---------------------------- ------ --------- --------- ---------- ------------ ---------- ---------- --------
Other reserves represent the premium on shares issued in
exchange for shares of subsidiaries acquired and GBP0.2m (2013:
GBP0.2m) capital redemption reserve.
During the year the Group purchased 230,000 of its own shares,
which are held in an employee benefit trust for the purposes of
settling awards granted to employees under equity-settled share
based payment plans. The cost of these shares, amounting to
GBP1.4m, is included within retained earnings at 31 December
2014.
Year ended 31 December 2014
Consolidated Statement of Cash Flows
2014 2013
---------------- ----------------
Notes GBPm GBPm GBPm GBPm
------------------------------------------- ------ ------- ------- ------- -------
Profit before tax 36.9 30.6
Add back net financing costs 4 4.2 3.9
------------------------------------------- ------ ------- ------- ------- -------
Operating profit 2 41.1 34.5
Adjusted for non-cash items:
Share-based payments 1.2 0.5
Loss on disposal of subsidiaries 3.7 -
Gain on disposal of non-current assets (0.3) (1.8)
Depreciation 14.2 13.6
Amortisation of intangible assets 3.0 3.3
Impairment of non-current assets 1.4 1.8
------------------------------------------- ------ ------- -------
23.2 17.4
------------------------------------------- ------ ------- ------- ------- -------
Operating cash flow before movement
in working capital 64.3 51.9
(Increase)/decrease in inventories (4.3) 2.7
Increase in receivables (2.7) (1.3)
Increase in payables 1.9 0.5
(Decrease)/increase in provisions
and employee benefits (5.5) 0.4
------------------------------------------- ------ ------- -------
Net movement in working capital (10.6) 2.3
------------------------------------------- ------ ------- ------- ------- -------
Cash generated by operations 53.7 54.2
Income taxes paid (9.3) (15.3)
Interest paid (3.7) (4.1)
------------------------------------------- ------ ------- ------- ------- -------
Net cash from operating activities 40.7 34.8
Interest received 0.5 0.7
Proceeds on disposal of non-current
assets 0.7 3.0
Purchase of property, plant and equipment (34.6) (21.0)
Purchase of intangible assets (1.3) (1.1)
Acquisitions of subsidiaries - (6.6)
Disposals of subsidiaries 0.5 -
------------------------------------------- ------ ------- -------
Net cash used in investing activities (34.2) (25.0)
Issue of new shares 0.3 2.0
Purchase of shares for employee benefit (2.4) -
trust
Dividends paid 7 (12.4) (11.6)
Costs associated with refinancing (1.5) -
of revolving credit facility
New loans and borrowings 39.2 34.2
Repayment of loans and borrowings (32.7) (31.7)
Repayment of obligations under finance
leases (0.3) (1.5)
------------------------------------------- ------ ------- -------
Net cash used in financing activities (9.8) (8.6)
------------------------------------------- ------ ------- ------- ------- -------
Net (decrease)/increase in cash (3.3) 1.2
Cash at the beginning of the year 10.0 8.9
Effect of exchange rate fluctuations - (0.1)
------------------------------------------- ------ ------- ------- ------- -------
Cash at the end of the year 8 6.7 10.0
------------------------------------------- ------ ------- ------- ------- -------
Notes of the Condensed Consolidated Annual Financial
Statements
1. Basis of preparation
Hill & Smith Holdings PLC is a company incorporated in the
UK.
New IFRS standards and interpretations adopted during 2014
In 2014 the following amendments had been endorsed by the EU,
became effective and therefore were adopted by the Group:
- IFRS 10 Consolidated Financial Statements
- IFRS 11 Joint Arrangements
- IFRS 12 Disclosure of Interests in Other Entities
- IAS 27 (2011) Separate Financial Statements
- IAS 28 (2011) Investments in Associates and Joint Ventures
The adoption of these standards and amendments has not had a
material impact on the Group's Financial Statements.
The following standards and interpretations which are not yet
effective and have not been early adopted by the Group will be
adopted in future accounting periods:
- IFRS 15 'Revenue from Contracts with Customers' (effective 1 January 2017).
- IFRS 9 'Financial Instruments' (effective 1 January 2018).
New IFRS standards, amendments and interpretations not
adopted
The IASB and IFRIC have issued additional standards and
amendments which are effective for periods starting after the date
of these Financial Statements. The following standards and
amendments have not yet been adopted by the Group:
- Amendments to IAS 19 Defined Benefit Plans: Employee
Contributions (effective for annual periods beginning on or after 1
February 2015).
- Annual Improvements to IFRSs - 2010-2012 Cycle (effective for
annual periods beginning on or after 1 February 2015).
None of the standards or amendments above are expected to have a
material impact on the Group.
The principal exchange rates used were as follows:
2014 2013
------------------- -------------------
Average Closing Average Closing
----------------------------- -------- --------- -------- ---------
Sterling to Euro (GBP1 =
EUR) 1.24 1.28 1.18 1.20
Sterling to US Dollar (GBP1
= USD) 1.65 1.56 1.56 1.65
Sterling to Thai Bhat (GBP1
= THB) 53.50 51.32 48.09 54.13
Sterling to Swedish Krona
(GBP1 = SEK) 11.30 12.07 10.19 10.59
----------------------------- -------- --------- -------- ---------
Non-underlying items
Non-underlying items are non-trading items disclosed separately
in the Consolidated Income Statement where the quantum, nature or
volatility of such items would otherwise distort the underlying
trading performance of the Group. The following are included by the
Group in its assessment of non-underlying items:
- Gains or losses arising on disposal, closure, restructuring or
reorganisation of businesses that do not meet the definition of
discontinued operations.
- Amortisation of intangible fixed assets arising on acquisitions.
- Expenses associated with acquisitions.
- Impairment charges in respect of tangible or intangible fixed assets.
- Changes in the fair value of derivative financial instruments.
- Significant past service items or curtailments and settlements
relating to defined benefit pension obligations resulting from
material changes in the terms of the schemes.
- Net financing costs or returns on defined benefit pension obligations.
- Costs incurred as part of significant refinancing activities.
The tax effect of the above is also included.
Details in respect of the non-underlying items recognised in the
current and prior year are set out in note 3.
2. Segmental information
Business segment analysis
The Group has three reportable segments which are Infrastructure
Products - Utilities, Infrastructure Products - Roads and
Galvanizing Services. Several operating segments that have similar
economic characteristics have been aggregated into these reporting
segments. The Group's internal management structure and financial
reporting systems differentiate between these segments on the basis
of the following economic characteristics:
- The Infrastructure Products - Utilities segment contains a
group of businesses supplying products characterised by a degree of
engineering expertise, to public and private customers involved in
the construction of facilities serving the Utilities markets or in
the maintenance of such facilities;
- The Infrastructure Products - Roads segment contains a group
of companies supplying permanent and temporary safety products to
customers involved in the construction or maintenance of national
roads infrastructure; and
- The Galvanizing Services segment contains a group of companies
supplying galvanizing and related materials coating services to
companies in a wide range of markets including construction,
agriculture and infrastructure.
Income Statement
2014 2013
------------------------------------- ------------------------------ ------------------------------
Underlying Underlying
Revenue Result result* Revenue Result result*
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- ------- ----------- -------- ------- -----------
Infrastructure Products - Utilities 195.2 5.4 9.2 202.9 (2.0) 7.4
Infrastructure Products - Roads 127.7 12.5 13.3 114.0 11.2 11.7
------------------------------------- -------- ------- ----------- -------- ------- -----------
Infrastructure Products - Total 322.9 17.9 22.5 316.9 9.2 19.1
Galvanizing Services 131.8 23.2 26.7 127.6 25.3 25.4
------------------------------------- -------- ------- ----------- -------- ------- -----------
Total Group 454.7 41.1 49.2 444.5 34.5 44.5
------------------------------------- -------- --------
Net financing costs (4.2) (3.2) (3.9) (3.3)
------------------------------------- -------- ------- ----------- -------- ------- -----------
Profit before taxation 36.9 46.0 30.6 41.2
Taxation (9.6) (11.1) (7.6) (9.9)
------------------------------------- -------- ------- ----------- -------- ------- -----------
Profit after taxation 27.3 34.9 23.0 31.3
------------------------------------- -------- ------- ----------- -------- ------- -----------
* Underlying result is stated before non-underlying items as
defined in note 1 'Basis of Preparation' and is the measure of
segment profit used by the Chief Operating Decision Maker, who is
the Chief Executive. The Result columns are included as additional
information.
Galvanizing Services provided GBP5.9m (2013: GBP5.0m) revenues
to Infrastructure Products - Roads and GBP1.8m (2013: GBP1.6m)
revenues to Infrastructure Products - Utilities. Infrastructure
Products - Utilities provided GBP3.6m (2013: GBP2.2m) revenues to
Infrastructure Products - Roads. These internal revenues, along
with revenues generated from within their own segments, have been
eliminated on consolidation.
Geographical analysis
Revenue (irrespective of origin)
2014 2013
GBPm GBPm
----------------- ------ ------
UK 220.4 205.9
Rest of Europe 95.1 101.2
North America 113.7 113.2
The Middle East 6.4 8.2
Asia 14.7 12.7
Rest of World 4.4 3.3
----------------- ------ ------
Total 454.7 444.5
----------------- ------ ------
Total assets
2014 2013
GBPm GBPm
---------------- ------ ------
UK 154.3 146.1
Rest of Europe 95.9 102.5
North America 147.2 131.3
Asia 14.4 13.5
Rest of World 2.1 1.5
---------------- ------ ------
Total Group 413.9 394.9
---------------- ------ ------
3. Non-underlying items
Non-underlying items included in operating profit comprise the
following:
- Business reorganisation costs of GBP2.6m (2013: GBP9.2m) -
principally relating to redundancies and other net costs associated
with site closures including the Joseph Ash Galvanizing plant at
Hereford. The net costs include asset impairment charges of GBP1.4m
(2013: GBP1.8m).
- Amortisation of acquired intangible fixed assets of GBP2.1m (2013: GBP2.2m).
- Acquisition expenses of GBP0.1m (2013: GBP0.4m) relating to
acquisitions made by the Group during the year.
- Profits on disposal of properties of GBP0.4m (2013: GBP1.8m).
- A net loss on disposal of subsidiaries of GBP3.7m. On 23 April
2014 the Group disposed of its 50% interest in the shares of Staco
Redman Limited for a consideration of GBP0.3m, while on 18 August
2014 the Group disposed of its subsidiary Bromford Iron & Steel
Company Limited and JA Envirotanks, a trading division of Joseph
Ash Limited, for a combined consideration of GBP1.3m. The details
of these disposals are set out below:
Staco Bromford
Redman Iron &
Ltd Steel Co JA
GBPm Ltd Envirotanks Total
GBPm GBPm GBPm
------------------------------- -------- ---------- ------------- ------
Property, plant and equipment - 1.8 0.1 1.9
Inventories - 2.1 0.5 2.6
Current assets 0.1 1.3 0.9 2.3
Cash and cash equivalents 0.2 0.1 0.1 0.4
Current liabilities (0.1) (1.4) (0.5) (2.0)
Deferred tax - (0.1) - (0.1)
------------------------------- -------- ---------- ------------- ------
Net assets 0.2 3.8 1.1 5.1
------------------------------- -------- ---------- ------------- ------
Consideration:
Cash consideration 0.3 0.4 0.4 1.1
Deferred consideration - 0.5 - 0.5
Less costs to sell - (0.1) (0.1) (0.2)
------------------------------- -------- ---------- ------------- ------
Profit/(loss) on disposal 0.1 (3.0) (0.8) (3.7)
------------------------------- -------- ---------- ------------- ------
Non-underlying items included in financial income and expense
represent the net financing cost on pension obligations of GBP0.7m
(2013: GBP0.6m) and financial expenses associated with refinancing
of GBP0.3m (2013: GBPnil).
4. Net financing costs
Non- Non-
Underlying underlying 2014 Underlying underlying 2013
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- ----------- ------------ ------ ----------- ------------ ------
Interest on bank deposits 0.5 - 0.5 0.7 - 0.7
--------------------------------------- ----------- ------------ ------ ----------- ------------ ------
Financial income 0.5 - 0.5 0.7 - 0.7
--------------------------------------- ----------- ------------ ------ ----------- ------------ ------
Interest on bank loans and overdrafts 3.7 - 3.7 3.9 - 3.9
Interest on finance leases and
hire purchase contracts - - - 0.1 - 0.1
--------------------------------------- ----------- ------------ ------ ----------- ------------ ------
Total interest expense 3.7 - 3.7 4.0 - 4.0
Financial expenses related to
refinancing - 0.3 0.3 - - -
Interest cost on net pension
scheme deficit - 0.7 0.7 - 0.6 0.6
--------------------------------------- ----------- ------------ ------ ----------- ------------ ------
Financial expense 3.7 1.0 4.7 4.0 0.6 4.6
--------------------------------------- ----------- ------------ ------ ----------- ------------ ------
Net financing costs 3.2 1.0 4.2 3.3 0.6 3.9
--------------------------------------- ----------- ------------ ------ ----------- ------------ ------
5. Taxation
2014 2013
GBPm GBPm
----------------------------------------------------- ------ ------
Current tax
UK corporation tax 3.6 2.0
Adjustments in respect of prior periods (1.8) (2.7)
Overseas tax at prevailing local rates 8.7 9.8
----------------------------------------------------- ------ ------
10.5 9.1
Deferred tax
Current year 0.1 0.1
Adjustments in respect of prior periods (0.9) -
Overseas tax at prevailing local rates (0.1) (1.0)
Effect of change in tax rate - (0.6)
----------------------------------------------------- ------ ------
Tax on profit in the Consolidated Income Statement 9.6 7.6
----------------------------------------------------- ------ ------
Deferred tax
Relating to defined benefit pension schemes (0.8) (0.4)
Relating to financial instruments - 0.1
----------------------------------------------------- ------ ------
Tax on items taken directly to Other Comprehensive
Income (0.8) (0.3)
----------------------------------------------------- ------ ------
Current tax
Relating to share-based payments - (0.2)
Deferred tax
Relating to share-based payments (0.2) (0.1)
----------------------------------------------------- ------ ------
Tax taken directly to the Consolidated Statement of
Changes in Equity (0.2) (0.3)
----------------------------------------------------- ------ ------
The tax charge in the Consolidated Income Statement for the
period is higher (2013: higher) than the standard rate of
corporation tax in the UK. The differences are explained below:
2014 2013
GBPm GBPm
------------------------------------------------------------- ------ ------
Profit before taxation 36.9 30.6
------------------------------------------------------------- ------ ------
Profit before taxation multiplied by the effective rate
of corporation tax in the UK of 21.5% (2013: 23.25%) 7.9 7.1
Expenses not deductible for tax purposes 2.0 1.8
Capital profits less losses and write downs not subject
to tax (1.6) (0.8)
Utilisation of brought forward tax losses not recognised (0.1) (0.7)
Overseas profits taxed at higher/(lower) rates 3.4 3.1
Overseas losses not relieved 0.4 0.2
Withholding taxes 0.3 0.2
Deferred tax benefit of future reductions in UK corporation
tax rates - (0.6)
Adjustments in respect of prior periods (2.7) (2.7)
------------------------------------------------------------- ------ ------
Tax charge 9.6 7.6
------------------------------------------------------------- ------ ------
6. Earnings per share
The weighted average number of ordinary shares in issue during
the year was 77.8m (2013: 77.6m), diluted for the effects of the
outstanding dilutive share options 78.8m (2013: 78.6m). Underlying
earnings per share have been shown because the Directors consider
that this provides valuable additional information about the
underlying performance of the Group.
2014 2013
----------------------------- ------------------ ------------------
Pence Pence
per share GBPm per share GBPm
----------------------------- ----------- ----- ----------- -----
Basic earnings 35.1 27.3 29.6 23.0
Non-underlying items* 9.9 7.6 10.8 8.3
----------------------------- ----------- ----- ----------- -----
Underlying earnings 45.0 34.9 40.4 31.3
----------------------------- ----------- ----- ----------- -----
Diluted earnings 34.7 27.3 29.2 23.0
Non-underlying items* 9.7 7.6 10.6 8.3
----------------------------- ----------- ----- ----------- -----
Underlying diluted earnings 44.4 34.9 39.8 31.3
----------------------------- ----------- ----- ----------- -----
* Non-underlying items as detailed in note 3.
7. Dividends
Dividends paid in the year were the prior year's interim
dividend of GBP4.6m (2013: GBP4.5m) and the final dividend of
GBP7.8m (2013: GBP7.1m). Dividends declared after the year end date
are not recognised as a liability, in accordance with IAS10. The
Directors have proposed the following interim dividend and final
dividend for the current year, subject to shareholder approval:
2014 2013
--------------- ------------------ ------------------
Pence Pence
per share GBPm per share GBPm
--------------- ----------- ----- ----------- -----
Equity shares
Interim 6.4 5.0 6.0 4.6
Final 11.6 9.0 10.0 7.8
--------------- ----------- ----- ----------- -----
Total 18.0 14.0 16.0 12.4
--------------- ----------- ----- ----------- -----
8. Cash and borrowings
2014 2013
GBPm GBPm
--------------------------------------------------------- -------- -------
Cash and cash equivalents in the Consolidated Statement
of Financial Position
Cash and bank balances 6.7 10.0
Call deposits - -
--------------------------------------------------------- -------- -------
Cash 6.7 10.0
Interest bearing loans and borrowings
Amounts due within one year (1.1) (0.8)
Amounts due after more than one year (101.6) (96.4)
--------------------------------------------------------- -------- -------
Net debt (96.0) (87.2)
--------------------------------------------------------- -------- -------
Change in net debt
Operating profit 41.1 34.5
Non-cash items 23.2 17.4
--------------------------------------------------------- -------- -------
Operating cash flow before movement in working capital 64.3 51.9
Net movement in working capital (5.1) 1.9
Changes in provisions and employee benefits (5.5) 0.4
--------------------------------------------------------- -------- -------
Operating cash flow 53.7 54.2
Tax paid (9.3) (15.3)
Net financing costs paid (3.2) (3.4)
Capital expenditure (35.9) (22.1)
Proceeds on disposal of non-current assets 0.7 3.0
--------------------------------------------------------- -------- -------
Free cash flow 6.0 16.4
Dividends paid (12.4) (11.6)
Acquisitions (0.2) (6.6)
Disposals 0.5 -
Costs associated with refinancing revolving credit (0.3) -
facilities
Purchase of shares for employee benefit trust (2.4) -
Issue of new shares 0.3 2.0
--------------------------------------------------------- -------- -------
Net debt (increase)/decrease (8.5) 0.2
Effect of exchange rate fluctuations (0.3) (0.6)
Net debt at the beginning of the year (87.2) (86.8)
--------------------------------------------------------- -------- -------
Net debt at the end of the year (96.0) (87.2)
--------------------------------------------------------- -------- -------
Notes:
1. The financial information previously set out does not
constitute the Company's statutory accounts for the years ended 31
December 2014 or 2013 but is derived from those accounts. Statutory
accounts for 2013 have been delivered to the registrar of
companies, and those for 2014 will be delivered in due course. The
auditors have reported on those accounts; their report was:
i. unqualified;
ii. did not include references 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 498(2) or (3) of the Companies Act 2006.
2. The Annual Report will be posted to shareholders on or before
9 April 2014 and will be displayed on the Company's website at
www.hsholdings.com. Copies of the Annual Report will also be
available from the registered office at Westhaven House, Arleston
Way, Shirley, Solihull, B90 4LH.
3. Events calendar:
i. The Annual General Meeting will be held on Thursday 14 May
2015 at 11.00 a.m. at The Village Hotel, The Green Business Park,
Shirley, Solihull, B90 4GW.
ii. The proposed final dividend for 2014 will be paid on 3 July
2015 to shareholders on the register on 29 May 2015 (ex-dividend
date 28 May 2015).
iii. The last date for receipt of Dividend Reinvestment Plan elections is 12 June 2015.
iv. Interim results announcement for the period to 30 June 2015 due August 2015.
v. Payment of the 2015 interim dividend due January 2016.
4. This preliminary announcement of results for the year ended
31 December 2014 was approved by the Directors on 10 March
2015.
Cautionary statement
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 from
those currently anticipated.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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