REG - Hill & Smith Hdgs. - Half Year Results <Origin Href="QuoteRef">HILS.L</Origin> - Part 2
10/08/2017 07:06
- Part 2: For the preceding part double click ID:nRSJ5856Na
Share capital £m Share premium£m Otherreserves†£m Translation reserves £m Hedge reserves£m Retained earnings£m Totalequity£m
Opening balance 19.6 32.8 4.6 2.3 (0.2) 139.4 198.5
Comprehensive income
Profit for the year - - - - - 33.8 33.8
Other comprehensive income for the period - - - 27.0 0.2 (12.0) 15.2
Transactions with owners recognised directly in equity
Dividends - - - - - (16.2) (16.2)
Credit to equity of share-based payments - - - - - 1.1 1.1
Satisfaction of long term incentive payments - - - - - (1.4) (1.4)
Own shares held by employee benefit trust - - - - - (0.6) (0.6)
Transfers between reserves - - 0.2 - - (0.2) -
Tax taken directly to the Consolidated Statement of Changes in Equity - - - - - 1.0 1.0
Shares issued 0.1 0.7 - - - - 0.8
Closing balance 19.7 33.5 4.8 29.3 - 144.9 232.2
† Other reserves represents the premium on shares issued in exchange for
shares of subsidiaries acquired and £0.2m capital redemption reserve.
Condensed Consolidated Statement of Cash Flows
Six months ended 30 June 2017
Notes 6 months ended 30 June 2017£m 6 months ended 30 June 2016£m Year ended 31 December 2016£m
Profit before tax 33.5 19.4 48.3
Add back net financing costs 1.9 1.8 3.5
Operating profit 35.4 21.2 51.8
Adjusted for non-cash items:
Share-based payments 1.0 0.7 1.6
Loss/(gain) on disposal of non-current assets 0.1 0.1 (0.2)
Profit on disposal of subsidiary (0.6) - -
Depreciation 9.1 8.2 17.3
Amortisation of intangible assets 2.5 1.4 3.7
Impairment of non-current assets - - 4.1
12.1 10.4 26.5
Operating cash flow before movement in working capital 47.5 31.6 78.3
Increase in inventories (7.4) (4.0) (4.3)
Increase in receivables (16.7) (14.3) (0.6)
Increase in payables 7.5 13.5 4.8
(Decrease)/increase in provisions and employee benefits (1.6) 7.2 -
Net movement in working capital and provisions (18.2) 2.4 (0.1)
Cash generated by operations 29.3 34.0 78.2
Income taxes paid (9.0) (6.9) (15.7)
Interest paid (1.6) (1.5) (3.2)
Net cash from operating activities 18.7 25.6 59.3
Interest received 0.3 0.1 0.4
Proceeds on disposal of non-current assets 1.9 0.1 3.6
Purchase of property, plant and equipment (8.6) (9.2) (19.9)
Purchase of intangible assets (0.7) (0.7) (1.8)
Acquisitions of subsidiaries (5.7) (14.2) (36.9)
Disposal of subsidiary 2.6 - -
Deferred consideration in respect of prior year acquisitions 0.4 - (0.5)
Net cash used in investing activities (9.8) (23.9) (55.1)
Issue of new shares 0.1 0.7 0.8
Satisfaction of long term incentive payments (1.5) (1.4) (2.0)
Dividends paid 10 (6.7) (5.5) (16.2)
Costs associated with refinancing - (1.0) (1.0)
New loans and borrowings 18.7 31.3 46.1
Repayment of loans and borrowings (9.0) (11.6) (31.7)
Net cash raised from/(used in) financing activities 1.6 12.5 (4.0)
Net increase in cash 10.5 14.2 0.2
Cash at the beginning of the period 15.6 12.9 12.9
Effect of exchange rate fluctuations (0.4) 1.8 2.5
Cash at the end of the period 11 25.7 28.9 15.6
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 10 August 2017 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 2016 (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 2016). In 2017 the following amendments had been endorsed by
the EU, became effective and therefore were adopted by the Group:
- Amendments to IAS 12 - Recognition of Deferred Tax Assets for Unrealised
Losses
- Disclosure Initiative - Amendments to IAS 7
The following standards and interpretations, which were not effective as at 30
June 2017 and have not been early adopted by the Group, will be adopted in
future accounting periods:
- IFRS 9 'Financial Instruments' (effective 1 January 2018)
- IFRS 15 'Revenue from Contracts with Customers' (effective 1 January
2018)
- IFRS 16 'Leases' (effective 1 January 2019)
The comparative figures for the financial year ended 31 December 2016 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.
Re-presentation of prior period comparatives
In March 2016, the Group announced the proposed restructuring of its non-US
Pipe Supports operations. In the Group's half year results to 30 June 2016 the
post-announcement trading results of the non-US Pipe Supports operations
(revenue of £5.3m and an operating loss of £1.0m) were disclosed separately as
non-underlying items given their quantum relative to the overall result for
that period. As reported in the financial statements for the period ending 31
December 2016, the post-announcement trading results of the non-US Pipe
Supports operations (revenue of £10.6m and an operating loss of £0.6m) were
included in the Group's underlying trading results for the year.
Accordingly, to maintain consistent disclosure with the 31 December 2016
financial statements, the trading results of the non-US Pipe Supports
operations for the period ending 30 June 2017 have been included in the
Group's underlying trading results for the period. In order to ensure
comparability of presentation between the period ending 30 June 2017 and 30
June 2016, the income statement for the period ending 30 June 2016 has been
re-presented to disclose the post-announcement trading results of the non-US
Pipe Supports operations within the Group's underlying trading results for
that period.
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 2016.
3. Exchange rates
The principal exchange rates used were as follows:
6 months ended30 June 2017 6 months ended30 June 2016 Year ended31 December 2016
Average Closing Average Closing Average Closing
Sterling to Euro (£1 = EUR) 1.16 1.14 1.28 1.21 1.22 1.17
Sterling to US Dollar (£1 = USD) 1.27 1.30 1.43 1.34 1.35 1.23
Sterling to Swedish Krona (£1 = SEK) 11.17 10.96 11.94 11.38 11.57 11.14
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 30 June 2017 6 months ended 30 June 2016**
Revenue* £m Result £m Underlyingresult* £m Revenue* £m Result £m Underlyingresult* £m
Infrastructure Products - Utilities 107.1 6.5 7.6 100.4 (4.6) 4.7
Infrastructure Products - Roads 93.8 8.5 10.2 77.5 8.1 9.0
Infrastructure Products - Total 200.9 15.0 17.8 177.9 3.5 13.7
Galvanizing Services 90.9 20.4 21.0 81.4 17.7 18.3
Total Group 291.8 35.4 38.8 259.3 21.2 32.0
Net financing costs (1.9) (1.4) (1.8) (1.3)
Profit before taxation 33.5 37.4 19.4 30.7
Taxation (8.1) (9.0) (6.2) (7.4)
Profit after taxation 25.4 28.4 13.2 23.3
** Re-presented as explained in note 1.
Year ended 31 December 2016
Revenue* £m Result £m Underlyingresult* £m
Infrastructure Products - Utilities 207.6 4.0 13.0
Infrastructure Products - Roads 168.1 10.9 19.6
Infrastructure Products - Total 375.7 14.9 32.6
Galvanizing Services 164.4 36.9 38.0
Total Group 540.1 51.8 70.6
Net financing costs (3.5) (2.6)
Profit before taxation 48.3 68.0
Taxation (14.5) (16.3)
Profit after taxation 33.8 51.7
* 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 £3.3m revenues to Infrastructure Products -
Roads (six months ended 30 June 2016: £2.4m, the year ended 31 December 2016:
£4.7m) and £1.0m revenues to Infrastructure Products - Utilities (six months
ended 30 June 2016: £0.6m, the year ended 31 December 2016: £1.4m).
Infrastructure Products - Utilities provided £3.4m revenues to Infrastructure
Products - Roads (six months ended 30 June 2016: £2.0m, the year ended 31
December 2016: £5.4m). These internal revenues, along within revenues
generated within each segment, have been eliminated on consolidation.
The Group presents the analysis of revenue by geographical market,
irrespective of origin:
6 months ended 30 June 2017£m 6 months ended 30 June 2016£m Year ended 31 December 2016£m
UK 149.5 123.7 264.5
Rest of Europe 51.3 44.3 89.1
North America 81.1 74.5 156.9
Asia and the Middle East 6.1 12.4 19.6
Rest of World 3.8 4.4 10.0
Total reported revenue 291.8 259.3 540.1
5. Operating profit
6 months ended 30 June 2017£m 6 months ended 30 June 2016£m Year ended 31 December 2016£m
Revenue 291.8 259.3 540.1
Cost of sales (185.4) (161.3) (340.6)
Gross profit 106.4 98.0 199.5
Distribution costs (14.9) (12.3) (28.7)
Administrative expenses (56.6) (65.1) (120.2)
Other operating income 0.5 0.6 1.2
Operating profit 35.4 21.2 51.8
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
period and prior year are set out below.
Six months ended 30 June 2017
Non-underlying items included in operating profit comprise the following:
- Business reorganisation costs of £2.0m relate to three restructuring
actions taken by the Group:
· In June 2017, the Group initiated a rationalisation of its Variable
Message Signs business that will result in the closure of two of its operating
sites and the consolidation of activities into the remaining site in Hebburn,
UK. The business has been operating across three sites since the acquisitions
of VMS and Tegrel in 2014/15 and expects to take advantage of cost savings and
efficiencies as a result of the rationalisation. The anticipated cost of the
exercise is £1.4m.
· Following a strategic review of the US Pipe Supports business, in March
2017 the Group completed a rationalisation of its branch structure resulting
in the closure of three of the seven existing branches and the consolidation
of their operations into one strategically located service centre between New
York and Philadelphia to serve the eastern region. The cost of this programme
was £0.4m.
· In December 2016 the Group announced the closure of its roads business
in India having reassessed the prospects in that market. The prior year
results included a charge of £1.9m in respect of the closure. A further charge
of £0.2m has been recognised in 2017 representing additional closure costs
that have been incurred.
- Acquisition expenses of £0.2m relate to the acquisition completed during
the period.
- Amortisation of acquired intangible fixed assets of £2.0m.
- A gain of £0.2m arose on the settlement of outstanding defined benefit
liabilities with certain pension scheme members who took transfers of their
pension entitlement during the period.
In April 2017 the Group sold its traffic data collection business, CA Traffic
Limited, to TagMaster AB for net consideration of £2.7m. Net assets disposed
were £2.1m resulting in a profit on disposal of £0.6m. The detail of the
disposal is set out below:
Total£m
Capitalised development costs 0.6
Inventories 1.4
Current assets 0.9
Cash and cash equivalents 0.1
Current liabilities (0.8)
Deferred tax (0.1)
Net assets 2.1
Consideration 2.9
Less costs of disposal (0.2)
Gain on disposal 0.6
Cash flow effect
Consideration less costs of disposal 2.7
Cash and cash equivalents disposed of (0.1)
Net cash consideration shown in the Consolidated Statement of Cash Flows 2.6
Non-underlying items included in financial expense represent the net financing
cost on pension obligations of £0.3m and a £0.2m charge in respect of
amortisation of costs associated with refinancing.
Year ended 31 December 2016
Non-underlying items included in operating profit comprised the following:
- Business reorganisation costs of £10.5m relating to the closure or
reorganisation of three of the Group's businesses as set out below.
· On 9 March 2016 the Group announced its intention to exit its non-US
Pipe Supports business, involving cessation of manufacturing in the UK and
Thailand, the closure of its sales office in China and the transfer of work to
its facility in India. The cost of closure was £7.8m.
· Following the acquisition of Signature Limited on 3 August 2016, the
Group completed a reorganisation of the business as part of its integration
with Mallatite Limited, the Group's existing lighting column operation. The
cost of the reorganisation and restructuring plan was £0.8m and included a
reduction in the number of operating sites of the integrated business from
five to three.
· In December 2016 the Group committed to the closure of Hill & Smith
Infrastructure Products India Pvt. Limited, our Roads business in India. The
provision made for the cost of closure was £1.9m.
- An impairment charge of £4.1m in respect of the goodwill relating to CA
Traffic Limited. The business was subsequently sold in the current period.
- Amortisation of acquired intangible fixed assets of £2.6m (2015:
£1.6m).
- Acquisition expenses of £1.8m (2015: £1.0m) principally relating to
acquisitions made by the Group during 2016.
- A gain of £0.2m relating to the settlement of certain defined benefit
pension obligations during the year.
Non-underlying items included in financial expense represent the net financing
cost on pension obligations of £0.5m and a £0.4m charge in respect of
amortisation of costs associated with refinancing.
7. Net financing costs
6 months ended 30 June 2017£m 6 months ended 30 June 2016£m Year ended 31 December 2016£m
Interest on bank deposits 0.3 0.1 0.4
Financial income 0.3 0.1 0.4
Interest on bank loans and overdrafts 1.7 1.4 3.0
Interest on finance leases and hire purchase contracts - - -
Total interest expense 1.7 1.4 3.0
Financial expenses related to refinancing 0.2 0.2 0.4
Interest cost on net pension scheme deficit 0.3 0.3 0.5
Financial expense 2.2 1.9 3.9
Net financing costs 1.9 1.8 3.5
8. Taxation
Tax has been provided on the underlying profit at the estimated effective rate
of 24.0% (2016: 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
78.6m, diluted for the effect of outstanding share options 79.5m (six months
ended 30 June 2016: 78.5m and 79.2m diluted, the year ended 31 December 2016:
78.5m and 79.3m 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 ended30 June 2017 6 months ended30 June 2016** Year ended31 December 2016
Pence per share £m Pence per share £m Pence per share £m
Basic earnings 32.3 25.4 16.8 13.2 43.0 33.8
Non-underlying items* 3.9 3.0 12.9 10.1 22.9 17.9
Underlying earnings 36.2 28.4 29.7 23.3 65.9 51.7
Diluted earnings 31.9 25.4 16.6 13.2 42.5 33.8
Non-underlying items* 3.8 3.0 12.8 10.1 22.6 17.9
Underlying diluted earnings 35.7 28.4 29.4 23.3 65.1 51.7
* Non-underlying items as detailed in note 6.
** Re-presented as explained in note 1.
10. Dividends
Dividends paid in the period were the prior year's interim dividend of £6.7m
(2015: £5.5m). The final dividend for 2016 of £14.1m (2016: £10.7m) was paid
on 2 July 2017. 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 £7.4m, 9.4p per share
(2016: £6.7m, 8.5p per share), which will be paid on 4 January 2018 to
shareholders on the register on 1 December 2017.
11. Analysis of net debt
6 months ended 30 June 2017£m 6 months ended 30 June 2016£m Year ended 31 December 2016£m
Cash and cash equivalents 25.7 28.9 15.6
Interest bearing loans and borrowings due within one year (0.3) (0.3) (0.3)
Interest bearing loans and borrowings due after more than one year (134.5) (128.1) (127.3)
Net debt (109.1) (99.5) (112.0)
6 months ended 30 June 2017£m 6 months ended 30 June 2016£m Year ended 31 December 2016£m
Change in net debt
Operating profit 35.4 21.2 51.8
Non-cash items 12.1 10.4 26.5
Operating cash flow before movement in working capital 47.5 31.6 78.3
Net movement in working capital (16.6) (4.8) (0.1)
Change in provisions and employee benefits (1.6) 7.2 -
Operating cash flow 29.3 34.0 78.2
Tax paid (9.0) (6.9) (15.7)
Net financing costs paid (1.3) (1.4) (2.8)
Capital expenditure (9.3) (9.9) (21.7)
Proceeds on disposal of non-current assets 1.9 0.1 3.6
Free cash flow 11.6 15.9 41.6
Dividends paid (note 10) (6.7) (5.5) (16.2)
Acquisitions (5.3) (14.2) (37.4)
Disposals 2.6 - -
Amortisation of costs associated with refinancing revolving credit facilities (0.2) (0.2) (0.4)
Issue of new shares 0.1 0.7 0.8
Satisfaction of long term incentive payments (1.5) (1.4) (2.0)
Net debt decrease/(increase) 0.6 (4.7) (13.6)
Effect of exchange rate fluctuations 2.3 (3.3) (6.9)
Net debt at the beginning of the period (112.0) (91.5) (91.5)
Net debt at the end of the period (109.1) (99.5) (112.0)
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.
Designated at fair value £m Amortised cost£m Total carrying value£m Fair value£m
Cash and cash equivalents - 25.7 25.7 25.7
Interest bearing loans due within one year - (0.3) (0.3) (0.3)
Interest bearing loans due after more than one year - (134.5) (134.5) (134.5)
Derivative assets - - - -
Derivative liabilities (0.2) - (0.2) (0.2)
Other assets - 117.3 117.3 117.3
Other liabilities - (98.9) (98.9) (98.9)
Total at 30 June 2017 (0.2) (90.7) (90.9) (90.9)
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 1 £m Level 2£m Level 3£m Total£m
Derivative financial assets - - - -
Derivative financial liabilities - (0.2) - (0.2)
At 30 June 2017 - (0.2) - (0.2)
At 30 June 2017 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.
13. Acquisitions
On 27 March 2017 the Group acquired the trade and assets of Kenway Corporation
('Kenway') to expand the Group's presence in the US composite market. Kenway
is a specialist in technologically advanced composite design, manufacturing
and field service work across a broad range of industries including marine,
power, pulp and paper, transportation and renewable energy. Details of this
acquisition are as follows:
Kenway Corporation Pre acquisition carrying amount£m Policy alignment and fair value adjustments£m Total£m
Intangible assets - 1.5 1.5
Property, plant and equipment 0.5 - 0.5
Inventories 1.0 (0.6) 0.4
Current assets 0.7 - 0.7
Cash and cash equivalents - - -
Total assets 2.2 0.9 3.1
Current liabilities (0.2) - (0.2)
Deferred tax - (0.3) (0.3)
Total liabilities (0.2) (0.3) (0.5)
Net assets 2.0 0.6 2.6
Consideration
Consideration in the period 6.2
Goodwill 3.6
Cash flow effect
Consideration 6.2
Deferred consideration (0.5)
Cash and cash equivalents received in the business -
Net cash consideration shown in the Consolidated Statement of Cash Flows 5.7
Brands and customer relationships have been recognised as specific intangible
assets as a result of the acquisition. The residual goodwill arising primarily
represents the assembled workforce, market share and geographical advantages
afforded to the Group. Fair value adjustments have been made to better align
the accounting policies of the acquired business with the Group's accounting
policies and to reflect the fair value of assets and liabilities acquired.
There is no difference between the gross value and fair value of acquired
receivables.
Post acquisition the acquired business has contributed £1.3m revenue and £0.1m
underlying operating profit, which are included in the Group's Consolidated
Income Statement. If the acquisition had been made on 1 January 2017, the
Group's results for the period would have shown underlying revenue of £292.6m
and underlying operating profit of £38.8m.
This information is provided by RNS
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