TIDMHILS
RNS Number : 2316V
Hill & Smith Hldgs PLC
06 August 2015
Hill & Smith Holdings PLC
Half Year Results (unaudited) for the 6 months ended 30 June
2015
Continued strong trading
Infrastructure investment in UK and US fuelling growth
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
unaudited results for the six months ended 30 June 2015.
Financial results
Change
--------------------------
30 June 30 June Reported Constant
2015 2014 % currency
%
------------------------ ---------- ---------- -------------- ----------
Revenue GBP233.0m GBP223.8m + 4 + 4
Underlying(*) :
Operating profit GBP26.3m GBP22.5m + 17 + 14
Operating margin 11.3% 10.1% + 120bps
Profit before taxation GBP24.8m GBP20.8m + 19 + 16
Earnings per share 24.2p 20.3p + 19 + 16
Statutory:
Profit before taxation GBP7.1m GBP16.0m - 56
Basic earnings per
share 5.6p 14.6p - 62
Dividend per share 7.1p 6.4p + 11
Net Debt GBP89.2m GBP98.5m
------------------------ ---------- ---------- -------------- ----------
*All underlying profit measures exclude certain non-operational
items, which are as defined in the Financial Statements. References
to an underlying profit measure throughout this announcement are
made on this basis.
Key points:
-- Continued strong trading, +5% organic revenue growth;
underlying operating margin +120bps to 11.3%
-- 82% of revenue and 92% of underlying operating profit
generated from UK and US operations, where infrastructure
investment and economic outlook remain favourable
-- Underlying operating profit up 17% to GBP26.3m:
- Roads up 35%, driven primarily by the UK Government's 'Road
Investment Strategy' with its focus on managed motorways, which are
at the core of the Group's product offering
- Utilities up 13%, reflecting strong performance in the UK
offsetting weaker pipe supports performance
- Galvanizing up 10% as a result of exceptional growth in US infrastructure volumes
-- Further net debt reduction to GBP89.2m (2014: GBP98.5m); Net
Debt:EBITDA multiple of 1.3 times (31 December 2014: 1.5 times)
-- Interim dividend increased by 11% to 7.1p
Derek Muir, Chief Executive, said:
"Hill & Smith is very well positioned in markets,
particularly in the UK and US, where the economic outlook remains
favourable and where increased infrastructure spending - most
notably on roads and utilities - is fuelling demand for our
products and services.
"As a result, after a very strong finish to last year, the first
half has seen continued robust trading overall which has driven
improvements in underlying operating margins across all three
segments - Roads, Utilities and Galvanizing.
"Our encouraging performance is in line with the Board's
expectations and, whilst mindful of the challenging comparators
from our record second half earnings performance last year, the
continued weakness in mainland Europe and the general global
economic uncertainty, we continue to expect 2015 to be a year of
good progress."
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/Ollie Hoare
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 Services which provides zinc and other coatings for
a wide range of products including fencing, lighting columns,
structural steel work, bridges, agricultural and other products for
the infrastructure and construction markets.
Headquartered in the UK and quoted on the London Stock Exchange
(LSE: HILS.L), Hill & Smith Holdings PLC employs some 3,900
staff across 55 sites, principally in 8 countries.
Business Review
Introduction
Hill & Smith has continued to perform well in the six months
to 30 June 2015.
Infrastructure investment in our key UK and US markets continues
to be strong, underpinning the performance of our operations in
Roads, Utilities and Galvanizing. Improving returns from the UK
operations resulted in them generating half of the Group's
underlying operating profit in the period (2014: 43%). The
diversity and strength of our businesses within their respective
markets continues to underpin our performance, which has shown
improved underlying operating margins across all three
divisions.
Results
Revenue increased by 4% to GBP233.0m (2014: GBP223.8m) with no
material currency translation impacts. Adjusting for a net revenue
reduction of GBP2.4m arising from acquisitions and disposals,
organic revenue grew by GBP11.0m or 5%. Underlying operating margin
improved to 11.3% (2014: 10.1%) with an underlying operating profit
of GBP26.3m (2014: GBP22.5m), including favourable currency
translation of GBP0.5m and a GBP0.7m benefit in respect of
acquisitions and disposals.
Underlying profit before taxation at GBP24.8m was 19% higher
than the previous year (2014: GBP20.8m). Despite the strong
underlying trading performance, statutory profit before taxation
reduced to GBP7.1m (2014: GBP16.0m) reflecting the one off, non
cash impairment of goodwill and intangible assets relating to the
2011 acquisition of The Paterson Group, Inc., amounting to
GBP15.8m.
Underlying earnings per share at 24.2p was up 19% compared to
the previous year (2014: 20.3p). Basic earnings per share was 5.6p
(2014: 14.6p).
Net debt fell to GBP89.2m (31 December 2014: GBP96.0m; 30 June
2014: GBP98.5m) including a beneficial currency translation impact
of GBP1.4m.
Dividend
The Board has declared an interim dividend of 7.1p per share
(2014: 6.4p), representing an 11% increase on the corresponding
period last year. The interim dividend will be paid on 5 January
2016 to shareholders on the register on 20 November 2015.
Outlook
The Group continues to benefit from the industrial and
geographical spread of its markets and businesses, which provide a
resilient base as well as opportunities for growth. Generating 82%
of revenue and 92% of underlying operating profit from its UK and
US operations, the Group principally operates in markets where the
overall economic outlook remains favourable. This, coupled with the
implementation of strategic initiatives to fuel higher returns from
the Group's portfolio, provides momentum to our drive for increased
shareholder value. We do however remain mindful of the challenging
comparators from our record second half earnings performance in
2014, the continued market weakness in mainland Europe and the
general global economic uncertainty.
Overall, our encouraging performance to date has been in line
with expectations and, with a marginal bias to the second half, we
continue to expect 2015 to be a year of good progress for the
Group.
Operational Review
Infrastructure Products
GBPm Constant
Currency
%
-------------- ---- ----------
+/-
2015 2014 %
---------------------- ------ ------ ---- ----------
Revenue 163.4 158.7 +3 +2
---------------------- ------ ------ ---- ----------
Underlying operating
profit 12.5 10.0 +25 +23
---------------------- ------ ------ ---- ----------
Underlying operating
margin % 7.6 6.3
---------------------- ------ ------ ---- ----------
Overall revenue increased to GBP163.4m (2014: GBP158.7m)
including a GBP1.5m positive impact from exchange movements.
Organic revenue growth was GBP5.6m, or 4% at constant currency.
Underlying operating profit was GBP12.5m (2014: GBP10.0m), an
increase of GBP2.5m, including a positive currency translation
impact of GBP0.2m. Operating margin improved to 7.6% (2014:
6.3%).
Roads
GBPm Constant
Currency
%
------------ ---- ----------
+/-
2015 2014 %
---------------------- ----- ----- ---- ----------
Revenue 64.6 59.3 +9 +13
---------------------- ----- ----- ---- ----------
Underlying operating
profit 7.3 5.4 +35 +35
---------------------- ----- ----- ---- ----------
Underlying operating
margin % 11.3 9.1
---------------------- ----- ----- ---- ----------
In the UK, the implementation of the Department for Transport's
Road Investment Strategy ("RIS") is progressing as planned. In
April, Highways England was formed (previously the Highways Agency)
as a Government owned company with the objective of delivering a
transformational investment plan in the nation's strategic road
network. The RIS aims to provide certainty of road investment
funding over the period 2015/16 to 2020/21, improve the
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.
Demand for permanent and temporary safety barrier continued to
be strong and utilisation of our temporary safety barrier rental
fleet was high. Our bridge parapet safety product also experienced
higher volumes compared to the prior period. Utilisation of the
temporary safety barrier rental fleet is currently forecast to
soften during the summer months as major projects complete before
new ones are ready to start. However, utilisation is expected to
return to higher levels by the end of the year and through
2016.
The integration of Variable Message Signs ("VMS"), acquired in
July 2014, has progressed to plan and the combined organisation has
a wider product offering to support Highways England in its roll
out of its Smart motorway programme. During the period VMS won
contracts for the supply of remote control temporary traffic signs
on the M1 and M3 motorways as part of the enhanced safety
initiative by Highways England, and its order book remains
encouraging for the second half.
Despite lower volumes following the completion of PFI projects,
our lighting column business performed exceptionally well with
profitability similar to the prior period. The strategy of
diversifying both products and markets continues to deliver
significant benefits.
Outside the UK, our Scandinavian business performed well with
profitability ahead year on year despite adverse currency movements
impacting its competitiveness on imported Group products. The
outlook in the Scandinavian market remains favourable and we have
recently invested further in the business to expand its range and
depth of products. Despite the evident market opportunity, the
performances of our other international businesses in France, USA,
India and Australia remain disappointing with overall profitability
behind the prior period. The French lighting column market remains
difficult due to over-capacity and a weak local economy. In the
USA, Zoneguard, our temporary safety barrier, continues to gain
acceptance among contractors but progress remains slower than
expected. India and Australia remain 'start-up' businesses with the
opportunity for growth in niche markets and we expect to see an
improved performance over the next twelve months.
Utilities
GBPm
------------ ---- ----------
Constant
+/- Currency
2015 2014 % %
---------------------- ----- ----- ---- ----------
Revenue 98.8 99.4 -1 -4
---------------------- ----- ----- ---- ----------
Underlying operating
profit 5.2 4.6 +13 +8
---------------------- ----- ----- ---- ----------
Underlying operating
margin % 5.3 4.6
---------------------- ----- ----- ---- ----------
Revenues were marginally below the prior year at GBP98.8m (2014:
GBP99.4m) principally driven by the prior year disposal of two
businesses, the impact of which was to decrease revenues by GBP7.6m
year on year. Operating margins improved to 5.3% (2014: 4.6%).
Organic revenue growth was GBP3.1m, or 3%, with positive currency
translation and acquisitions contributing GBP3.5m and GBP0.4m
respectively. Underlying operating profit was GBP5.2m (2014:
GBP4.6m) including a positive currency impact of GBP0.2m.
Our US utilities businesses, comprising composite material and
power transmission substation operations, performed well with
revenue and profitability marginally ahead of prior year despite
poor weather during the first quarter which delayed construction
projects, principally in the north east. Our substation utility
business saw increased success in packaging work supplying
structural steel together with the electrical components. They also
gained momentum with framework agreements, which now account for
50% of their revenue. Our composite waterfront products were
installed in the New York area giving pier protection to both new
and existing bridges. Composite utility poles were also supplied to
Baja, Mexico after the hurricane damage experienced earlier in the
year.
Our pipe supports business in the USA also experienced
disruption from the adverse weather conditions in the first quarter
although second quarter trading was more encouraging. The continued
absence of major traditional power projects is being partly
compensated for by delivery of pipe supports to new ethylene and
fertilizer plants. Demand in the industrial pipe hanger business
improved throughout the period and overall, although results remain
below our expectations, revenue and profitability were ahead of the
prior period. On 30 April 2015 the Group completed the acquisition
of Novia Associates, Inc. ("Novia"), a vibration and seismic
control manufacturer located in New Hampshire, USA. In 2014 Novia
had revenue of $3.5m and adjusted EBITDA of $0.3m. Net
consideration was $2.8m. Novia will extend the product offering of
our US pipe supports business and the first two months of trading
has been in line with our expectations.
As previously reported, our pipe supports business outside of
the US entered the year with a lower order book than we would
usually expect. The lower volumes adversely impacted operational
gearing in our UK and Thailand facilities and resulted in a
disappointing first half performance below our expectations.
However, our Indian facility experienced good demand levels and
performed in line with expectations. Encouragingly, and despite
continued low oil prices, order intake improved dramatically during
the second quarter across all three regions with projects for a
pulp and paper mill in Indonesia and three packages on Dahej and
Mundra LNG terminals in India. The thermal power market in India
remains encouraging with all three of our plants in Thailand, India
and the UK supplying products in the second half. We enter the
second half with an order book of GBP12.2m, significantly ahead of
the GBP7.6m at 31 December 2014. Operational improvements in people
and processes made over previous periods should now enable
successful execution and delivery of the enlarged order book and we
look forward to a better second half performance.
In the UK, our utilities businesses have performed strongly year
on year. The industrial flooring operation continues to benefit
from single site operation and investments made in property and
machinery to improve volume and productivity. During the period we
were successful in delivery of handrail and platforms for Crossrail
train maintenance depots and the Cygnus gas field wellhead
platform. The order book and outlook remains healthy.
Our plastic pipe business is currently benefitting from a strong
housing sector with volumes significantly ahead year on year. The
transition to AMP6 projects is slower than originally projected but
enquiry levels are significant. Recent capital investment to drive
productivity improvements is reaping rewards.
Ongoing Government investment in the UK rail network and the
protection of critical infrastructure sites has provided higher
volumes for our security fencing operation, which performed well.
Supply of solar frames was similar to the prior period despite the
removal of certain tax subsidies earlier in the year.
The housing market, principally new build, for Birtley and
Expamet continues to perform strongly with the supply of lintels
and doors ahead of expectations and prior year.
Galvanizing Services
GBPm
------------ ---- ----------
Constant
+/- Currency
2015 2014 % %
---------------------- ----- ----- ---- ----------
Revenue 69.6 65.1 +7 +8
---------------------- ----- ----- ---- ----------
Underlying operating
profit 13.8 12.5 +10 +8
---------------------- ----- ----- ---- ----------
Underlying operating
margin % 19.8 19.2
---------------------- ----- ----- ---- ----------
Revenue increased by 7% to GBP69.6m (2014: GBP65.1m), despite
negative currency movements of GBP0.9m. Underlying operating profit
increased by GBP1.3m to GBP13.8m (2014: GBP12.5m) including GBP0.3m
positive currency impact. Overall volumes were 3% ahead of the same
period in the prior year primarily due to strong output in the US.
Operating margins remained strong at 19.8% (2014: 19.2%) despite
some volatility in zinc prices notably in non US$ denominated
currencies.
USA
Volumes were 32% ahead of the same period in 2014. Adjusting for
the new plant in Memphis, underlying volumes from existing plants
were up 21%. Weather patterns were similar to 2014 with poor
conditions in the first quarter delaying construction sites. Second
quarter volumes were exceptional as projects accelerated to catch
up from the first quarter weather impact. Alternative energy
projects have been strong with solar work in particular standing
out. Whilst some of the additional volume attracts a lower margin,
overall the business performed ahead of expectations.
The new plant in Memphis commenced production at the end of
November 2014. Volumes have steadily improved throughout the first
half resulting in profitable trading in the second quarter and
break even overall in the period. The performance bodes well for
the rest of the year and the future.
France
Despite recent economic stimulus from the European Central Bank,
the French and wider mainland European economies remain subdued.
Volumes in France fell 12% year on year. Excluding the impact of
the one off contract for the Bordeaux Stadium, which completed in
early 2014, underlying volumes fell 8%. Pricing discipline and cost
control enabled us to maintain margins in line with the prior
period.
UK
Headline volumes in the UK fell 5% year on year with the
principal driver being our decision to close our Hereford plant,
the smaller of our two structural galvanizing baths, in December
2014 as part of our drive to optimise our network and increase
returns. The closure has been completed to plan and encouragingly
we have retained a higher proportion of the existing customer base
than expected. Structural steel customers are now serviced from our
Chesterfield plant where we have invested significantly to expand
and upgrade facilities. Excluding the impact of the Hereford plant
closure, underlying volumes were similar to the prior year. The
lower cost base more than offset the reduced volumes resulting in
profitability marginally ahead of the prior period.
Financial Review
Cash generation and financing
Cash generated from operations during the period was GBP26.9m
(2014: GBP15.2m), the improvement on last year reflecting higher
underlying profits and working capital efficiencies. The working
capital outflow in the period, which arises from normal seasonal
trading patterns, was GBP5.6m (2014: GBP10.5m) and overall working
capital as a percentage of annualised sales improved to 14.4% at 30
June 2015 (2014: 15.0%) with a reduction in debtor days to 58 days
(30 June 2014: 60 days; 31 December 2014: 60 days). There were no
material net impacts on the period end balance from movements in
zinc and commodity prices. Cash spend of GBP0.7m was incurred in
respect of the costs of closure of one of the Group's operating
sites announced in December 2014.
Capital expenditure of GBP8.4m (2014: GBP16.8m) represents a
multiple of depreciation and amortisation of 1.0 times (2014: 2.3
times), reflecting a more normal level of spend following the
significant outlay in the prior year on construction of Zoneguard
temporary road safety barrier in the UK and the new galvanizing
facility in Memphis, Tennessee.
Group net debt at 30 June 2015 was GBP89.2m, a reduction of
GBP6.8m since 31 December 2014 (GBP96.0m) including a favourable
exchange impact of GBP1.4m principally resulting from the
appreciation of Sterling against the Euro during the period.
Change in net debt
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2014 GBPm
2015 GBPm 2014 GBPm
Change in net debt
Operating profit 9.1 18.1 41.1
Non-cash items 25.7 12.3 23.2
-------------------------------------- ------------ ------------ --------------
Operating cash flow before
movement in working capital 34.8 30.4 64.3
Net movement in working capital (5.6) (10.5) (5.1)
Change in provisions and employee
benefits (2.3) (4.7) (5.5)
-------------------------------------- ------------ ------------ --------------
Operating cash flow 26.9 15.2 53.7
Tax paid (5.9) (4.3) (9.3)
Net financing costs paid (1.5) (1.7) (3.2)
Capital expenditure (8.4) (16.8) (35.9)
Proceeds on disposal of non-current
assets 0.9 0.2 0.7
-------------------------------------- ------------ ------------ --------------
Free cash flow 12.0 (7.4) 6.0
Dividends paid (5.0) (4.7) (12.4)
Acquisitions (1.5) - (0.2)
Disposals - 0.1 0.5
Amortisation of refinancing
costs (0.2) - (0.3)
Issue of new shares 1.1 0.2 0.3
Satisfaction of long term
incentive payments (1.0) (1.0) (2.4)
-------------------------------------- ------------ ------------ --------------
Net debt decrease/(increase) 5.4 (12.8) (8.5)
Effect of exchange rate fluctuations 1.4 1.5 (0.3)
Net debt at the beginning
of the period (96.0) (87.2) (87.2)
-------------------------------------- ------------ ------------ --------------
Net debt at the end of the
period (89.2) (98.5) (96.0)
-------------------------------------- ------------ ------------ --------------
The net debt to EBITDA ratio under the Group's principal banking
facility fell to 1.3 times at 30 June 2015 (31 December 2014: 1.5
times), driven by the positive impact of working capital
efficiencies, reduced capital expenditure and growth in EBITDA.
Interest cover was 23.5 times (31 December 2014: 20.6 times).
Tax
The underlying effective tax rate for the period was 24.0% (year
ended 31 December 2014: 24.0%) and is the estimated effective rate
for the full year. The tax charge for the period was GBP2.7m (2014:
GBP4.6m), including a GBP3.2m credit in respect of non-underlying
charges, principally representing the unwind of deferred tax
liabilities on the amortisation and impairment of acquisition
intangible assets. The underlying income statement tax charge is in
line with the cash tax charge of GBP5.9m (2014: GBP4.3m).
Finance costs
Net financing costs for the period were GBP2.0m (2014: GBP2.1m)
with an underlying element of GBP1.5m (2014: GBP1.7m). Underlying
operating profit covered net underlying finance costs 17.5 times
(2014: 13.2 times). The non-underlying element of finance costs of
GBP0.5m (2014: GBP0.4m) represents the net cost of pension fund
financing of GBP0.3m and GBP0.2m amortisation of refinancing fees
capitalised in the prior year.
Non-underlying items
The total non-underlying items charged to operating profit in
the Consolidated Income Statement amounted to GBP17.2m (2014:
GBP4.4m) and were made up of the following:
Income
Statement Cash in
charge the year Non-cash
------------------------------ ------------ ---------- ---------
GBPm GBPm GBPm
Impairment of acquired
intangible assets (15.8) - (15.8)
Business reorganisation
costs 0.2 - 0.2
Acquisition costs (0.4) (0.4) -
Amortisation of acquisition
intangibles (1.1) - (1.1)
Losses on sale of properties (0.1) 0.4 (0.5)
Total (17.2) - (17.2)
------------------------------ ------------ ---------- ---------
-- The impairment charge of GBP15.8m represents a full
impairment of the goodwill and acquired intangible assets relating
to the Group's acquisition of The Paterson Group in March 2011.
Despite an improvement in performance in the second quarter of
2015, first half results remain below expectations and, overall,
the business continues to generate levels of profitability that are
significantly below those anticipated at acquisition, largely
driven by changes in the US power generation market including the
hiatus in nuclear spend. As a result an impairment review was
performed at the half year (see note 6) and has resulted in a full
impairment of the goodwill and acquired intangible assets.
-- The credit of GBP0.2m in respect of business reorganisation
costs reflects the net release of provisions made in the prior year
in respect of site closures, following the favourable settlement of
the exposures previously provided.
-- Acquisition costs of GBP0.4m comprise GBP0.1m for the
acquisition of Novia Associates, Inc. on 30 April 2015 and GBP0.3m
relating to the aborted acquisition of W. Corbett & Co
Galvanizing.
-- Amortisation of acquisition intangibles was GBP1.1m.
-- Losses on sales of properties during the year were GBP0.1m.
Assets held for sale
The Group holds a number of properties that are currently being
actively marketed for disposal and which have therefore been
classified as assets held for sale at 30 June 2015, at a value of
GBP1.0m (31 December 2014: GBP1.5m). The reduction in the period
reflects the disposal of one of these properties.
Acquisition
On 30 April 2015 the Group completed the acquisition of Novia
Associates, Inc., a US-based business operating in a similar market
to our pipe supports operations. Net consideration for the
acquisition was GBP1.8m, of which GBP0.3m is deferred and payable
in April 2016.
Pensions
Following the triennial valuation of the Group's UK defined
benefit pension arrangements at April 2012, the Group has agreed
deficit reduction plans in place that require cash contributions
amounting to GBP2.5m for the three years to April 2016, followed by
payments of GBP2.3m for a further seven years. The triennial
valuation as at 5 April 2015 is underway and negotiations with the
Trustees have commenced. Whilst it is too early to predict the
outcome of these discussions it is expected that the results will
be presented in the Annual Report at 31 December 2015.
Principal Risks and Uncertainties
The Group has a process for identifying, evaluating and managing
the principal risks and uncertainties it faces. Details of these
principal risks and uncertainties are contained on pages 17 to 21
of the Group's Annual Report and Accounts for the year ended 31
December 2014. It is the Director's opinion that these are the
risks and uncertainties that could impact the performance of the
Group and that they remain applicable to the current financial
year.
Whilst for the six months ended 30 June 2015 there has been no
significant change in the overall scope of the principal risks and
uncertainties referred to above, the Board has implemented an
educational programme to further strengthen risk management
procedures including, inter alia, contractual management and
competition law compliance. The Directors do not envisage that any
of these additional measures will have a material impact upon the
expected performance of the Group for the remainder of the
financial year.
Going Concern
The Group continues to meet its day to day working capital and
other funding requirements through a combination of long term
funding and short term overdraft borrowings. The Group's principal
financing facility is a GBP210m multi-currency revolving credit
agreement which expires in April 2019.
The Group actively manages its strategic, commercial and day to
day operational risks and through its Treasury function operates
Board approved financial policies, including hedging policies that
are designed to ensure that the Group maintains an adequate level
of funding headroom and effectively mitigates foreign exchange and
other financial risks.
After making due enquiry, the Directors have reasonable
expectation that the Company and its subsidiaries have adequate
resources to continue in operational existence for the foreseeable
future and therefore adopt the going concern principle.
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34: Interim Financial Reporting as adopted
by the EU;
-- The interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period including any changes in the related party transactions
described in the last Annual Report that could do so.
This report was approved by the Board of Directors on 6 August
2015 and is available on the Company's website (www.hsholdings.com)
under the "Latest News" or "Press Release" sections.
W H Whiteley D W Muir M Pegler
Chairman Chief Executive Finance Director
6 August 2015
Condensed Consolidated Income Statement
Six months ended 30 June 2015
6 months ended 6 months ended Year ended
30 June 2015 30 June 2014 31 December
2014
------------------------------------ ----------------------------------- -----------------------------------
Non- Non- Non-
Underlying underlying(*) Total Underlying underlying(*) Total Underlying underlying(*) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------ ----------- -------------- ------- ----------- -------------- ------ ----------- -------------- ------
4,
Revenue 5 233.0 - 233.0 223.8 - 223.8 454.7 - 454.7
---------------- ------ ----------- -------------- ------- ----------- -------------- ------ ----------- -------------- ------
Trading profit 26.3 - 26.3 22.5 - 22.5 49.2 - 49.2
Amortisation
of acquisition
intangibles 6 - (1.1) (1.1) - (1.0) (1.0) - (2.1) (2.1)
Business
reorganisation
costs 6 - 0.2 0.2 - - - - (2.6) (2.6)
Acquisition
costs 6 - (0.4) (0.4) - - - - (0.1) (0.1)
(Loss)/profit
on sale of
properties 6 - (0.1) (0.1) - - - - 0.4 0.4
Impairment loss
on initial
classification
as held for
sale 6 - - - - (3.5) (3.5) - - -
Impairment of
intangible
assets 6 - (15.8) (15.8) - - - - - -
Profit/(loss)
on disposals
of
subsidiaries 6 - - - - 0.1 0.1 - (3.7) (3.7)
---------------- ------ ----------- -------------- ------- ----------- -------------- ------ ----------- -------------- ------
Operating 4,
profit 5 26.3 (17.2) 9.1 22.5 (4.4) 18.1 49.2 (8.1) 41.1
Financial
income 7 0.2 - 0.2 0.2 - 0.2 0.5 - 0.5
Financial
expense 7 (1.7) (0.5) (2.2) (1.9) (0.4) (2.3) (3.7) (1.0) (4.7)
---------------- ------ ----------- -------------- ------- ----------- -------------- ------ ----------- -------------- ------
Profit before
taxation 24.8 (17.7) 7.1 20.8 (4.8) 16.0 46.0 (9.1) 36.9
Taxation (5.9) 3.2 (2.7) (5.0) 0.4 (4.6) (11.1) 1.5 (9.6)
---------------- ------ ----------- -------------- ------- ----------- -------------- ------ ----------- -------------- ------
Profit for the
period
attributable
to owners of
the parent 18.9 (14.5) 4.4 15.8 (4.4) 11.4 34.9 (7.6) 27.3
---------------- ------ ----------- -------------- ------- ----------- -------------- ------ ----------- -------------- ------
Basic earnings
per share 9 24.2p 5.6p 20.3p 14.6p 45.0p 35.1p
Diluted
earnings
per share 9 24.0p 5.6p 20.1p 14.4p 44.4p 34.7p
---------------- ------ ----------- -------------- ------- ----------- -------------- ------ ----------- -------------- ------
Dividend per
share -
Interim 10 7.1p 6.4p 6.4p
---------------- ------ ----------- -------------- ------- ----------- -------------- ------ ----------- -------------- ------
*The Group's definition of non-underlying items is included in
note 6.
Condensed Consolidated Statement of Comprehensive Income
Six months ended 30 June 2015
6 months 6 months
ended ended Year
30 June 30 June ended
2015 2014 31 December
GBPm GBPm 2014
GBPm
--------------------------------------------- --------- --------- --------------
Profit for the period 4.4 11.4 27.3
---------------------------------------------- --------- --------- --------------
Items that may be reclassified subsequently
to profit or loss
Exchange differences on translation
of overseas operations (7.4) (7.1) 1.2
Exchange differences on foreign currency
borrowings denominated as net investment
hedges 1.5 1.6 (0.1)
Effective portion of changes in fair
value of cash flow hedges (0.1) (0.1) (0.1)
Transfers to the Income Statement
on cash flow hedges 0.2 0.2 0.3
Taxation on items that may be reclassified - - -
to profit or loss
Items that will not be reclassified
subsequently to profit or loss
Actuarial loss on defined benefit
pension schemes - - (3.6)
Taxation on items that will not be
reclassified to profit or loss - - 0.8
---------------------------------------------- --------- --------- --------------
Other comprehensive income for the
period (5.8) (5.4) (1.5)
---------------------------------------------- --------- --------- --------------
Total comprehensive income for the
period attributable to owners of
the parent (1.4) 6.0 25.8
---------------------------------------------- --------- --------- --------------
Condensed Consolidated Statement of Financial Position
As at 30 June 2015
30 June 30 June 31 December
2015 2014 2014
Notes GBPm GBPm GBPm
-------------------------------- ------ -------- -------- ------------
Non-current assets
Intangible assets 108.1 122.3 126.1
Property, plant and equipment 123.6 115.0 128.7
Other receivables - - 0.3
-------------------------------- ------ -------- -------- ------------
231.7 237.3 255.1
-------------------------------- ------ -------- -------- ------------
Current assets
Assets held for sale 1.0 5.6 1.5
Inventories 59.4 55.1 57.9
Trade and other receivables 100.9 99.1 92.7
Cash and cash equivalents 11 3.9 3.6 6.7
-------------------------------- ------ -------- -------- ------------
165.2 163.4 158.8
-------------------------------- ------ -------- -------- ------------
Total assets 396.9 400.7 413.9
-------------------------------- ------ -------- -------- ------------
Current liabilities
Liabilities held for sale - (1.8) -
Trade and other liabilities (91.8) (87.8) (87.7)
Current tax liabilities (9.1) (8.5) (8.9)
Provisions for liabilities and
charges (1.0) (1.1) (1.4)
Interest bearing borrowings 11 (0.4) (0.4) (1.1)
-------------------------------- ------ -------- -------- ------------
(102.3) (99.6) (99.1)
-------------------------------- ------ -------- -------- ------------
Net current assets 62.9 63.8 59.7
-------------------------------- ------ -------- -------- ------------
Non-current liabilities
Other liabilities (0.2) (0.1) (0.2)
Provisions for liabilities and
charges (2.0) (2.5) (2.8)
Deferred tax liability (4.2) (8.2) (7.6)
Retirement benefit obligation (19.9) (18.5) (21.1)
Interest bearing borrowings 11 (92.7) (101.7) (101.6)
-------------------------------- ------ -------- -------- ------------
(119.0) (131.0) (133.3)
-------------------------------- ------ -------- -------- ------------
Total liabilities (221.3) (230.6) (232.4)
-------------------------------- ------ -------- -------- ------------
Net assets 175.6 170.1 181.5
-------------------------------- ------ -------- -------- ------------
Equity
Share capital 19.6 19.4 19.5
Share premium 32.7 31.7 31.7
Other reserves 4.5 4.5 4.5
Translation reserve (5.0) (5.7) 0.9
Hedge reserve (0.3) (0.5) (0.4)
Retained earnings 124.1 120.7 125.3
-------------------------------- ------ -------- -------- ------------
Total equity 175.6 170.1 181.5
-------------------------------- ------ -------- -------- ------------
Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June 2015
Share Share Other Translation Hedge Retained Total
capital premium reserves reserves reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Opening balance 19.5 31.7 4.5 0.9 (0.4) 125.3 181.5
Comprehensive income
Profit for the period - - - - - 4.4 4.4
Other comprehensive
income for the period - - - (5.9) 0.1 - (5.8)
Transactions with
owners recognised
directly in equity
Dividends - - - - - (5.0) (5.0)
Credit to equity
of share-based payments - - - - - 0.4 0.4
Satisfaction of long
term incentive payments - - - - - (1.9) (1.9)
Own shares held by
employee benefit
trust - - - - - 0.9 0.9
Shares issued 0.1 1.0 - - - - 1.1
-------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Closing balance 19.6 32.7 4.5 (5.0) (0.3) 124.1 175.6
-------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Six months ended 30 June 2014
Share Share Other Translation Hedge Retained Total
capital premium reserves reserves reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Opening balance 19.4 31.5 4.5 (0.2) (0.6) 114.5 169.1
Comprehensive income
Profit for the period - - - - - 11.4 11.4
Other comprehensive
income for the period - - - (5.5) 0.1 - (5.4)
Transactions with
owners recognised
directly in equity
Dividends - - - - - (4.7) (4.7)
Credit to equity
of share-based payments - - - - - 0.5 0.5
Satisfaction of long
term incentive payments - - - - - (1.0) (1.0)
Shares issued - 0.2 - - - - 0.2
-------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Closing balance 19.4 31.7 4.5 (5.7) (0.5) 120.7 170.1
-------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Year ended 31 December 2014
Share Share Other Translation Hedge Retained Total
capital premium reserves reserves reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Opening balance 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 period - - - 1.1 0.2 (2.8) (1.5)
Transactions with
owners recognised
directly in equity
Dividends - - - - - (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 - - - - - 0.2 0.2
Shares issued 0.1 0.2 - - - - 0.3
-------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Closing balance 19.5 31.7 4.5 0.9 (0.4) 125.3 181.5
-------------------------- --------- --------- ---------- ------------ ---------- ---------- --------
Other reserves represents the premium on shares issued in
exchange for shares of subsidiaries acquired and GBP0.2m capital
redemption reserve.
Condensed Consolidated Statement of Cash Flows
Six months ended 30 June 2015
Notes 6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2014
2015 2014 GBPm
GBPm GBPm
------------------------------ ------ --------- --------- -------------
Profit before tax 7.1 16.0 36.9
Add back net financing
costs 2.0 2.1 4.2
------------------------------ ------ --------- --------- -------------
Operating profit 9.1 18.1 41.1
Adjusted for non-cash
items:
Share-based payments 0.4 0.5 1.2
Impairment loss on initial - 3.5 -
classification as held
for sale
Loss/(gain) on disposal
of non-current assets 0.1 - (0.3)
(Profit)/loss on disposal
of subsidiaries - (0.1) 3.7
Depreciation 7.9 7.0 14.2
Amortisation of intangible
assets 1.5 1.4 3.0
Impairment of non-current
assets 6 15.8 - 1.4
------------------------------ ------ --------- --------- -------------
25.7 12.3 23.2
------------------------------ ------ --------- --------- -------------
Operating cash flow before
movement in working capital 34.8 30.4 64.3
Increase in inventories (3.0) (3.8) (4.3)
Increase in receivables (9.4) (12.0) (2.7)
Increase in payables 6.8 5.3 1.9
Decrease in provisions
and employee benefits (2.3) (4.7) (5.5)
------------------------------ ------ --------- --------- -------------
Net movement in working
capital (7.9) (15.2) (10.6)
------------------------------ ------ --------- --------- -------------
Cash generated by operations 26.9 15.2 53.7
Income taxes paid (5.9) (4.3) (9.3)
Interest paid (1.7) (1.9) (3.7)
------------------------------ ------ --------- --------- -------------
Net cash from operating
activities 19.3 9.0 40.7
Interest received 0.2 0.2 0.5
Proceeds on disposal
of non-current assets 0.9 0.2 0.7
Purchase of property,
plant and equipment (8.0) (16.3) (34.6)
Purchase of intangible
assets (0.4) (0.5) (1.3)
Acquisition of subsidiary (1.5) - -
Disposals of subsidiaries - 0.1 0.5
------------------------------ ------ --------- --------- -------------
Net cash used in investing
activities (8.8) (16.3) (34.2)
Issue of new shares 1.1 0.2 0.3
Satisfaction of long
term incentive payments (1.0) (1.0) (2.4)
Dividends paid 10 (5.0) (4.7) (12.4)
Costs associated with
refinancing - (1.4) (1.5)
New loans and borrowings 15.0 21.9 39.2
Repayment of loans and
borrowings (23.1) (13.6) (32.7)
Repayment of obligations
under finance leases - (0.2) (0.3)
------------------------------ ------ --------- --------- -------------
Net cash (used in)/raised
from financing activities (13.0) 1.2 (9.8)
------------------------------ ------ --------- --------- -------------
Net decrease in cash (2.5) (6.1) (3.3)
Cash at the beginning
of the period 6.7 10.0 10.0
Effect of exchange rate
fluctuations (0.3) (0.3) -
------------------------------ ------ --------- --------- -------------
Cash at the end of the
period 11 3.9 3.6 6.7
------------------------------ ------ --------- --------- -------------
1. Basis of preparation
Hill & Smith Holdings PLC is incorporated in the UK. The
Condensed Consolidated Interim Financial Statements of the Company
have been prepared on the basis of International Financial
Reporting Standards, as adopted by the EU ('Adopted IFRSs') that
are effective at 4 August 2015 and in accordance with IAS34:
Interim Financial Reporting, comprising the Company, its
subsidiaries and its interests in jointly controlled entities
(together referred to as the 'Group').
As required by the Disclosure and Transparency Rules of the
Financial Services Authority, the Condensed Consolidated Interim
Financial Statements have been prepared applying the accounting
policies and presentation that were applied in the preparation of
the Company's published Consolidated Financial Statements for the
year ended 31 December 2014 (these statements do not include all of
the information required for full Annual Financial Statements and
should be read in conjunction with the full Annual Report for the
year ended 31 December 2014). The following standards and
interpretations, which were not effective as at 30 June 2015 and
have not been early adopted by the Group, will be adopted in future
accounting periods (*denotes standards and interpretations that
have been EU endorsed):
-- Amendment to IAS 19 - Employee Benefits*
-- Annual improvements to IFRSs 2010-2012*
-- Annual improvements to IFRSs 2011-2013*
-- IFRS 9 - Financial Instruments
-- Amendments to IAS 1 - Presentation of financial statements
-- Annual improvements to IFRSs 2012 - 2014
-- Amendments to IFRS 11 - Accounting for Acquisitions of Interests in Joint Operations
-- Amendments to IAS 16 and IAS 38 - Clarification of Acceptable
Methods of Depreciation and Amortisation
-- IFRS 15 - Revenue Recognition
The comparative figures for the financial year ended 31 December
2014 are not the Company's statutory accounts for that financial
year. Those accounts have been reported on by the Company's auditor
and delivered to the Registrar of Companies. The report of the
auditor (i) was unqualified, (ii) did not include a reference to
any matters to which the auditor 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.
These Condensed Consolidated Interim Financial Statements have
not been audited or reviewed by an auditor pursuant to the Auditing
Practices Board's Guidance on Financial Information.
The Financial Statements are prepared on the going concern
basis. This is considered appropriate given that the Company and
its subsidiaries have adequate resources to continue in operational
existence for the foreseeable future.
2. Financial risks, estimates, assumptions and judgements
The preparation of the Condensed Consolidated Interim Financial
Statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
Actual results may differ from estimates.
In preparing these Condensed Consolidated Interim Financial
Statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
Consolidated Financial Statements as at and for the year ended 31
December 2014.
3. Exchange rates
The principal exchange rates used were as follows:
6 months 6 months Year ended
ended ended 31 December
30 June 2015 30 June 2014 2014
------------------- ------------------- -------------------
Average Closing Average Closing Average Closing
------------------------ -------- --------- -------- --------- -------- ---------
Sterling to Euro (GBP1
= EUR) 1.37 1.41 1.22 1.25 1.24 1.28
Sterling to US Dollar
(GBP1 = USD) 1.52 1.57 1.67 1.71 1.65 1.56
Sterling to Thai Bhat
(GBP1 = THB) 50.23 53.16 54.32 55.47 53.50 51.32
Sterling to Swedish
Krona (GBP1 = SEK) 12.76 13.05 10.90 11.43 11.30 12.07
------------------------ -------- --------- -------- --------- -------- ---------
4. Segmental information
The Group has three reportable segments which are Infrastructure
Products - Roads, Infrastructure Products - Utilities and
Galvanizing Services. Several operating segments that have similar
economic characteristics have been aggregated into these reporting
segments.
Income Statement
6 months ended 6 months ended
30 June 2015 30 June 2014
------------------------- ---------------------------------- ----------------------------------
Underlying Underlying
Revenue Result result* Revenue Result result*
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ---------- --------- ----------- ---------- --------- -----------
Infrastructure Products
- Utilities 98.8 (11.9) 5.2 99.4 0.5 4.6
Infrastructure Products
- Roads 64.6 7.1 7.3 59.3 5.2 5.4
------------------------- ---------- --------- ----------- ---------- --------- -----------
Infrastructure Products
- Total 163.4 (4.8) 12.5 158.7 5.7 10.0
Galvanizing Services 69.6 13.9 13.8 65.1 12.4 12.5
------------------------- ---------- --------- ----------- ---------- --------- -----------
Total Group 233.0 9.1 26.3 223.8 18.1 22.5
------------------------- ---------- ----------
Net financing costs (2.0) (1.5) (2.1) (1.7)
------------------------- ---------- --------- ----------- ---------- --------- -----------
Profit before taxation 7.1 24.8 16.0 20.8
Taxation (2.7) (5.9) (4.6) (5.0)
------------------------- ---------- --------- ----------- ---------- --------- -----------
Profit after taxation 4.4 18.9 11.4 15.8
------------------------- ---------- --------- ----------- ---------- --------- -----------
Year ended 31
December 2014
------------------------------------- ----------------------------------
Underlying
Revenue Result result*
GBPm GBPm GBPm
------------------------------------- ---------- --------- -----------
Infrastructure Products - Utilities 195.2 5.4 9.2
Infrastructure Products - Roads 127.7 12.5 13.3
------------------------------------- ---------- --------- -----------
Infrastructure Products - Total 322.9 17.9 22.5
Galvanizing Services 131.8 23.2 26.7
------------------------------------- ---------- --------- -----------
Total Group 454.7 41.1 49.2
------------------------------------- ----------
Net financing costs (4.2) (3.2)
------------------------------------- ---------- --------- -----------
Profit before taxation 36.9 46.0
Taxation (9.6) (11.1)
------------------------------------- ---------- --------- -----------
Profit after taxation 27.3 34.9
------------------------------------- ---------- --------- -----------
(*) Underlying result is stated before non-underlying items as
defined in note 6 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 GBP2.7m revenues to Infrastructure
Products - Roads (six months ended 30 June 2014: GBP3.1m, the year
ended 31 December 2014: GBP5.9m) and GBP0.9m revenues to
Infrastructure Products - Utilities (six months ended 30 June 2014:
GBP0.9m, the year ended 31 December 2014: GBP1.8m). Infrastructure
Products - Utilities provided GBP1.9m revenues to Infrastructure
Products - Roads (six months ended 30 June 2014: GBP0.7m, the year
ended 31 December 2014: GBP3.6m). These internal revenues, along
within revenues generated within each segment, have been eliminated
on consolidation.
The Group presents the analysis of continuing operations revenue
by geographical market, irrespective of origin:
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
-------------------------- --------- --------- -------------
UK 121.3 109.7 220.4
Rest of Europe 38.0 49.9 95.1
North America 65.6 53.7 113.7
Asia and the Middle East 7.6 9.0 21.1
Rest of World 0.5 1.5 4.4
-------------------------- --------- --------- -------------
Total 233.0 223.8 454.7
-------------------------- --------- --------- -------------
5. Operating profit
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
---------------------------------------- --------- --------- -------------
Revenue 233.0 223.8 454.7
Cost of sales (148.6) (145.9) (296.9)
---------------------------------------- --------- --------- -------------
Gross profit 84.4 77.9 157.8
Distribution costs (10.8) (11.0) (22.9)
Administrative expenses(*) (65.0) (49.3) (95.3)
(Loss)/gain on disposal of non-current
assets (0.1) - 0.3
Other operating income 0.6 0.5 1.2
---------------------------------------- --------- --------- -------------
Operating profit 9.1 18.1 41.1
---------------------------------------- --------- --------- -------------
(*) In the 6 months ended 30 June 2015 including a GBP15.8m
impairment charge in respect of goodwill and acquired intangible
assets (2014: nil).
6. Non-underlying items
Non-underlying items are 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 below.
Six months ended 30 June 2015
Non-underlying items included in operating profit comprise the
following:
-- Amortisation of acquired intangible fixed assets of GBP1.1m.
-- Acquisition expenses of GBP0.4m, of which GBP0.1m relates to
the acquisition of Novia Associates, Inc. on 30 April 2015 and
GBP0.3m relates to the aborted acquisition of W Corbett & Co
Galvanizing.
-- Losses on disposal of properties of GBP0.1m.
-- A credit in respect of business reorganisations of GBP0.2m,
reflecting the net release of provisions made in previous years in
respect of site closures following a favourable settlement during
the period of the exposures identified.
-- An impairment charge of GBP15.8m in respect of goodwill and
acquired intangible assets. As set out in the Finance Review, the
current and forecast financial performance of The Paterson Group
(part of the Infrastructure Products - Utilities segment) is below
that assumed in the impairment review performed as at 31 December
2014 and, overall, the business continues to generate levels of
profitability that are significantly below those anticipated at
acquisition. As a result, an impairment review was performed at 30
June 2015, based on the Board's revised expectation of future
profitability and cash generation. The impairment review concluded
that the carrying values of the assets of the business were less
than their recoverable amount (determined by reference to the Value
in Use) by GBP15.8 million, allocated to the goodwill (GBP8.2
million) and the remaining book value of acquired intangible assets
(GBP7.6 million) arising on acquisition. The basis for determining
the Value in Use, including the discount rate and rate of future
growth, was consistent with that used in the annual impairment
review performed as at 31 December 2014.
Non-underlying items included in financial expense represent the
net financing cost on pension obligations of GBP0.3m (2014:
GBP0.4m) and a GBP0.2m charge in respect of amortisation of costs
associated with refinancing.
Year ended 31 December 2014
Non-underlying items included in operating profit comprise the
following:
-- Business reorganisation costs of GBP2.6m, principally
relating to redundancies and other net costs associated with site
closures including the Joseph Ash Galvanizing plant at Hereford.
The net costs included asset impairment charges of GBP1.4m.
-- Amortisation of acquired intangible fixed assets of GBP2.1m.
-- Acquisition expenses of GBP0.1m relating to acquisitions made by the Group during the year.
-- Profits on disposal of properties of GBP0.4m.
-- 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 JA
Redman Iron Envirotanks
Ltd & GBPm
GBPm Steel
Co Ltd Total
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
and financial expenses associated with refinancing of GBP0.3m.
7. Net financing costs
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
------------------------------------------- --------- --------- -------------
Interest on bank deposits 0.2 0.2 0.5
------------------------------------------- --------- --------- -------------
Financial income 0.2 0.2 0.5
------------------------------------------- --------- --------- -------------
Interest on bank loans and overdrafts 1.7 1.9 3.7
Interest on finance leases and hire - - -
purchase contracts
------------------------------------------- --------- --------- -------------
Total interest expense 1.7 1.9 3.7
Financial expenses related to refinancing 0.2 - 0.3
Interest cost on net pension scheme
deficit 0.3 0.4 0.7
------------------------------------------- --------- --------- -------------
Financial expense 2.2 2.3 4.7
------------------------------------------- --------- --------- -------------
Net financing costs 2.0 2.1 4.2
------------------------------------------- --------- --------- -------------
8. Taxation
Tax has been provided on the underlying profit at the estimated
effective rate of 24.0% (2014: 24.0%) for existing operations for
the full year.
9. Earnings per share
The weighted average number of ordinary shares in issue during
the period was 78.0m, diluted for the effect of outstanding share
options 78.8m (six months ended 30 June 2014: 77.8m and 78.8m
diluted, the year ended 31 December 2014: 77.8m and 78.8m
diluted).
Underlying earnings per share are shown below as the Directors
consider that this measurement of earnings gives valuable
information on the underlying performance of the Group:
6 months 6 months Year ended
ended ended 31 December
30 June 2015 30 June 2014 2014
---------------- ---------------- ----------------
Pence Pence Pence
per GBPm per GBPm per GBPm
share share share
----------------------------- ------- ------- ------- ------- ------- -------
Basic earnings 5.6 4.4 14.6 11.4 35.1 27.3
Non-underlying items(*) 18.6 14.5 5.7 4.4 9.9 7.6
----------------------------- ------- ------- ------- ------- ------- -------
Underlying earnings 24.2 18.9 20.3 15.8 45.0 34.9
----------------------------- ------- ------- ------- ------- ------- -------
Diluted earnings 5.6 4.4 14.4 11.4 34.7 27.3
Non-underlying items(*) 18.4 14.5 5.7 4.4 9.7 7.6
----------------------------- ------- ------- ------- ------- ------- -------
Underlying diluted earnings 24.0 18.9 20.1 15.8 44.4 34.9
----------------------------- ------- ------- ------- ------- ------- -------
(*) Non-underlying items as detailed in note 6.
10. Dividends
Dividends paid in the period were the prior year's interim
dividend of GBP5.0m (2014: GBP4.7m). The final dividend for 2014 of
GBP9.1m (2014: GBP7.8m) was paid on 3 July 2015. Dividends declared
after the Balance Sheet date are not recognised as a liability, in
accordance with IAS10. The Directors have proposed an interim
dividend for the current year of GBP5.6m, 7.1p per share (2014:
GBP5.0m, 6.4p per share).
11. Analysis of net debt
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
--------------------------------------- --------- --------- -------------
Cash and cash equivalents 3.9 3.6 6.7
Interest bearing loans and borrowings
due within one year (0.4) (0.4) (1.1)
Interest bearing loans and borrowings
due after more than one year (92.7) (101.7) (101.6)
--------------------------------------- --------- --------- -------------
Net debt (89.2) (98.5) (96.0)
--------------------------------------- --------- --------- -------------
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
-------------------------------------- --------- --------- -------------
Change in net debt
Operating profit 9.1 18.1 41.1
Non-cash items 25.7 12.3 23.2
-------------------------------------- --------- --------- -------------
Operating cash flow before movement
in working capital 34.8 30.4 64.3
Net movement in working capital (5.6) (10.5) (5.1)
Change in provisions and employee
benefits (2.3) (4.7) (5.5)
-------------------------------------- --------- --------- -------------
Operating cash flow 26.9 15.2 53.7
Tax paid (5.9) (4.3) (9.3)
Net financing costs paid (1.5) (1.7) (3.2)
Capital expenditure (8.4) (16.8) (35.9)
Proceeds on disposal of non-current
assets 0.9 0.2 0.7
-------------------------------------- --------- --------- -------------
Free cash flow 12.0 (7.4) 6.0
Dividends paid (note 10) (5.0) (4.7) (12.4)
Acquisitions (1.5) - (0.2)
Disposals - 0.1 0.5
Amortisation of costs associated
with refinancing revolving credit
facilities (0.2) - (0.3)
Issue of new shares 1.1 0.2 0.3
Satisfaction of long term incentive
payments (1.0) (1.0) (2.4)
-------------------------------------- --------- --------- -------------
Net debt decrease/(increase) 5.4 (12.8) (8.5)
Effect of exchange rate fluctuations 1.4 1.5 (0.3)
Net debt at the beginning of the
period (96.0) (87.2) (87.2)
-------------------------------------- --------- --------- -------------
Net debt at the end of the period (89.2) (98.5) (96.0)
-------------------------------------- --------- --------- -------------
12. Financial instruments
The table below sets out the Group's accounting classification
of its financial assets and liabilities and their fair values as at
30 June. The fair values of all financial assets and liabilities
are not materially different to the carrying values.
Total
Designated Amortised carrying
at cost value Fair
fair GBPm GBPm value
value GBPm
GBPm
------------------------------------ ------------- ------------ ---------- --------
Cash and cash equivalents - 3.9 3.9 3.9
Interest bearings loans due within
one year - (0.4) (0.4) (0.4)
Interest bearing loans due after
more than one year - (92.7) (92.7) (92.7)
Derivative assets 0.1 - 0.1 0.1
Derivative liabilities (0.3) - (0.3) (0.3)
Other assets - 95.2 95.2 95.2
Other liabilities - (79.3) (79.3) (79.3)
------------------------------------ ------------- ------------ ---------- --------
Total at 30 June 2015 (0.2) (73.3) (73.5) (73.5)
------------------------------------ ------------- ------------ ---------- --------
Fair value hierarchy
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
Level 1 : unadjusted quoted prices in active markets for
identical assets or liabilities.
Level 2 : inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either as a
direct price or indirectly derived from prices.
Level 3 : inputs for the asset or liability that are not based
on observable market data.
Level Level Level Total
1 2 3 GBPm
GBPm GBPm GBPm
---------------------------------- ------- ------ ------ ------
Derivative financial assets - 0.1 - 0.1
Derivative financial liabilities - (0.3) - (0.3)
---------------------------------- ------- ------ ------ ------
At 30 June 2015 - (0.2) - (0.2)
---------------------------------- ------- ------ ------ ------
At 30 June 2015 the Group did not have any liabilities
classified at Level 1 or Level 3 in the fair value hierarchy. There
have been no transfers in any direction in the period.
The Group determines Level 2 fair values for its financial
instruments based on broker quotes, tested for reasonableness by
discounting expected future cash flows using market interest rates
for a similar instrument at the measurement date.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BUGDIUDGBGUU
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