REG - Hill & Smith Hdgs. - Half Year Results <Origin Href="QuoteRef">HILS.L</Origin> - Part 2
04/08/2016 07:08
- Part 2: For the preceding part double click ID:nRSD1965Ga
assets 1.4 1.5 2.5
Impairment of non-current assets - 15.8 15.7
10.4 25.7 34.6
Operating cash flow before movement in working capital 31.6 34.8 71.9
(Increase)/decrease in inventories (4.0) (3.0) 1.1
Increase in receivables (14.3) (9.4) (3.0)
Increase/(decrease) in payables 13.5 6.8 (0.6)
Increase/(decrease) in provisions and employee benefits 7.2 (2.3) (3.3)
Net movement in working capital and provisions 2.4 (7.9) (5.8)
Cash generated by operations 34.0 26.9 66.1
Income taxes paid (6.9) (5.9) (12.6)
Interest paid (1.5) (1.7) (3.5)
Net cash from operating activities 25.6 19.3 50.0
Interest received 0.1 0.2 0.5
Proceeds on disposal of non-current assets 0.1 0.9 1.2
Purchase of property, plant and equipment (9.2) (8.0) (14.8)
Purchase of intangible assets (0.7) (0.4) (1.2)
Acquisitions of subsidiaries (14.2) (1.5) (16.6)
Net cash used in investing activities (23.9) (8.8) (30.9)
Issue of new shares 0.7 1.1 1.2
Purchase of shares for employee benefit trust (1.4) (1.0) (0.9)
Dividends paid 10 (5.5) (5.0) (14.1)
Costs associated with refinancing (1.0) - -
New loans and borrowings 31.3 15.0 46.0
Repayment of loans and borrowings (11.6) (23.1) (45.0)
Repayment of obligations under finance leases - - (0.1)
Net cash raised from/(used in) financing activities 12.5 (13.0) (12.9)
Net increase/(decrease) in cash 14.2 (2.5) 6.2
Cash at the beginning of the period 12.9 6.7 6.7
Effect of exchange rate fluctuations 1.8 (0.3) -
Cash at the end of the period 11 28.9 3.9 12.9
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 2016 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 2015 (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 2015). In 2016 the following amendments had been endorsed by
the EU, became effective and therefore were adopted by the Group:
- 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.
- Amendments to IAS 27 - Equity Method in Separate Financial Statements.
- Annual improvements to IFRSs 2012 - 2014.
- Disclosure Initiative - Amendments to IAS 1.
The following standards and interpretations, which were not effective as at 30
June 2016 and have not been early adopted by the Group, will be adopted in
future accounting periods:
- Disclosure Initiative - Amendments to IAS 7 (effective 1 January 2017).
- Amendments to IAS 12 - Recognition of Deferred Tax Assets for Unrealised
Losses (effective 1 January 2017).
- 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 2015 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 2015.
3. Exchange rates
The principal exchange rates used were as follows:
6 months ended30 June 2016 6 months ended30 June 2015 Year ended31 December 2015
Average Closing Average Closing Average Closing
Sterling to Euro (£1 = EUR) 1.28 1.21 1.37 1.41 1.38 1.36
Sterling to US Dollar (£1 = USD) 1.43 1.34 1.52 1.57 1.53 1.48
Sterling to Thai Bhat (£1 = THB) 50.79 47.15 50.23 53.16 52.49 53.50
Sterling to Swedish Krona (£1 = SEK) 11.94 11.38 12.76 13.05 12.90 12.50
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 2016 6 months ended 30 June 2015
Underlyingrevenue* £m Result £m Underlyingresult* £m Underlyingrevenue*£m Result £m Underlyingresult* £m
Infrastructure Products - Utilities 95.1 (4.6) 5.7 98.8 (11.9) 5.2
Infrastructure Products - Roads 77.5 8.1 9.0 64.6 7.1 7.3
Infrastructure Products - Total 172.6 3.5 14.7 163.4 (4.8) 12.5
Galvanizing Services 81.4 17.7 18.3 69.6 13.9 13.8
Total Group 254.0 21.2 33.0 233.0 9.1 26.3
Net financing costs (1.8) (1.3) (2.0) (1.5)
Profit before taxation 19.4 31.7 7.1 24.8
Taxation (6.2) (7.6) (2.7) (5.9)
Profit after taxation 13.2 24.1 4.4 18.9
Year ended 31 December 2015
Underlyingrevenue*£m Result £m Underlyingresult* £m
Infrastructure Products - Utilities 193.9 (7.1) 10.5
Infrastructure Products - Roads 131.6 15.6 16.0
Infrastructure Products - Total 325.5 8.5 26.5
Galvanizing Services 142.0 28.8 29.5
Total Group 467.5 37.3 56.0
Net financing costs (4.1) (3.0)
Profit before taxation 33.2 53.0
Taxation (9.1) (12.6)
Profit after taxation 24.1 40.4
* Underlying revenue and underlying result are stated before Non-underlying
items as defined in note 6, and are the measures of segment revenue and profit
used by the Chief Operating Decision Maker, who is the Chief Executive. The
Result columns are included as additional information.
Galvanizing Services provided £2.4m revenues to Infrastructure Products -
Roads (six months ended 30 June 2015: £2.7m, the year ended 31 December 2015:
£5.2m) and £0.6m revenues to Infrastructure Products - Utilities (six months
ended 30 June 2015: £0.9m, the year ended 31 December 2015: £1.6m).
Infrastructure Products - Utilities provided £2.0m revenues to Infrastructure
Products - Roads (six months ended 30 June 2015: £1.9m, the year ended 31
December 2015: £3.0m). 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 2016£m 6 months ended 30 June 2015£m Year ended 31 December 2015£m
UK 123.7 121.3 235.8
Rest of Europe 44.3 38.0 73.4
North America 74.5 65.6 135.0
Asia and the Middle East 12.4 7.6 20.5
Rest of World 4.4 0.5 2.8
Total reported revenue 259.3 233.0 467.5
Non-underlying revenue (5.3) - -
Underlying revenue 254.0 233.0 467.5
5. Operating profit
6 months ended 30 June 2016£m 6 months ended 30 June 2015£m Year ended 31 December 2015£m
Revenue 259.3 233.0 467.5
Cost of sales (161.3) (148.6) (300.6)
Gross profit 98.0 84.4 166.9
Distribution costs (12.3) (10.8) (23.2)
Administrative expenses (65.0) (65.0) (107.6)
Loss on disposal of non-current assets (0.1) (0.1) -
Other operating income 0.6 0.6 1.2
Operating profit 21.2 9.1 37.3
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 and post-announcement trading 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 2016
Non-underlying items included in operating profit comprise the following:
- Business reorganisation costs of £9.2m. 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 for which
the Group intends to seek a buyer when the transfer is complete. A provision
of £9.2m was made in respect of the estimated costs of closure.
Prior to the announcement of the closure, the trading results of the non-US
Pipe Supports operations, including those of the Indian business, have been
reported as underlying items and include revenue of £3.0m and an operating
loss of £0.5m. Following the announcement, the non-US Pipe Supports results
have been reported as non-underlying items so as not to distort the Group's
underlying trading performance. The post-announcement results of the non-US
Pipe Supports businesses are set out below:
Total£m
Revenue 5.3
Cost of sales (4.0)
Gross profit 1.3
Distribution costs (0.1)
Administrative expenses (2.2)
Operating loss (1.0)
In the six months ended 30 June 2015 the results of the non-US Pipe Supports
operations included revenue of £7.1m and an operating loss of £1.7m. For the
year ended 31 December 2015 those businesses reported revenue of £16.1m and an
operating loss of £3.0m.
- Amortisation of acquired intangible fixed assets of £0.9m.
- Acquisition expenses of £0.7m principally relating to acquisitions made
by the Group during the period.
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 2015
Non-underlying items included in operating profit comprised the following:
- Amortisation of acquired intangible fixed assets of £1.6m.
- Acquisition expenses of £1.0m principally relating to acquisitions made
by the Group during the prior year.
- Losses on disposal of properties of £0.1m.
- Net costs in respect of business reorganisations of £0.3m, reflecting
costs associated with restructuring of certain of the Group's subsidiaries
together with the net release of provisions made in previous years in respect
of site closures following a favourable settlement during the year of the
exposures identified.
- An impairment charge of £15.7m in respect of goodwill and acquired
intangible assets relating to The Paterson Group (part of the Infrastructure
Products - Utilities segment).
Non-underlying items included in financial expense represent the net financing
cost on pension obligations of £0.7m and a £0.4m charge in respect of
amortisation of costs associated with refinancing.
7. Net financing costs
6 months ended 30 June 2016£m 6 months ended 30 June 2015£m Year ended 31 December 2015£m
Interest on bank deposits 0.1 0.2 0.5
Financial income 0.1 0.2 0.5
Interest on bank loans and overdrafts 1.4 1.7 3.5
Interest on finance leases and hire purchase contracts - - -
Total interest expense 1.4 1.7 3.5
Financial expenses related to refinancing 0.2 0.2 0.4
Interest cost on net pension scheme deficit 0.3 0.3 0.7
Financial expense 1.9 2.2 4.6
Net financing costs 1.8 2.0 4.1
8. Taxation
Tax has been provided on the underlying profit at the estimated effective rate
of 24.0% (2015: 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
78.5m, diluted for the effect of outstanding share options 79.2m (six months
ended 30 June 2015: 78.0m and 78.8m diluted, the year ended 31 December 2015:
78.1m 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 ended30 June 2016 6 months ended30 June 2015 Year ended31 December 2015
Pence per share £m Pence per share £m Pence per share £m
Basic earnings 16.8 13.2 5.6 4.4 30.9 24.1
Non-underlying items* 13.9 10.9 18.6 14.5 20.8 16.3
Underlying earnings 30.7 24.1 24.2 18.9 51.7 40.4
Diluted earnings 16.6 13.2 5.6 4.4 30.6 24.1
Non-underlying items* 13.8 10.9 18.4 14.5 20.7 16.3
Underlying diluted earnings 30.4 24.1 24.0 18.9 51.3 40.4
* Non-underlying items as detailed in note 6.
10. Dividends
Dividends paid in the period were the prior year's interim dividend of £5.5m
(2014: £5.0m). The final dividend for 2015 of £10.7m (2015: £9.1m) was paid on
1 July 2016. 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 £6.7m, 8.5p per share
(2015: £5.5m, 7.1p per share), which will be paid on 5 January 2017 to
shareholders on the register on 25 November 2016.
11. Analysis of net debt
6 months ended 30 June 2016£m 6 months ended 30 June 2015£m Year ended 31 December 2015£m
Cash and cash equivalents 28.9 3.9 12.9
Interest bearing loans and borrowings due within one year (0.3) (0.4) (0.3)
Interest bearing loans and borrowings due after more than one year (128.1) (92.7) (104.1)
Net debt (99.5) (89.2) (91.5)
6 months ended 30 June 2016£m 6 months ended 30 June 2015£m Year ended 31 December 2015£m
Change in net debt
Operating profit 21.2 9.1 37.3
Non-cash items 10.4 25.7 34.6
Operating cash flow before movement in working capital 31.6 34.8 71.9
Net movement in working capital (4.8) (5.6) (2.5)
Change in provisions and employee benefits 7.2 (2.3) (3.3)
Operating cash flow 34.0 26.9 66.1
Tax paid (6.9) (5.9) (12.6)
Net financing costs paid (1.4) (1.5) (3.0)
Capital expenditure (9.9) (8.4) (16.0)
Proceeds on disposal of non-current assets 0.1 0.9 1.2
Free cash flow 15.9 12.0 35.7
Dividends paid (note 10) (5.5) (5.0) (14.1)
Acquisitions (14.2) (1.5) (16.6)
Amortisation of costs associated with refinancing revolving credit facilities (0.2) (0.2) (0.4)
Issue of new shares 0.7 1.1 1.2
Purchase of shares for employee benefit trust (1.4) (1.0) (0.9)
Net debt (increase)/decrease (4.7) 5.4 4.9
Effect of exchange rate fluctuations (3.3) 1.4 (0.4)
Net debt at the beginning of the period (91.5) (96.0) (96.0)
Net debt at the end of the period (99.5) (89.2) (91.5)
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 - 28.9 28.9 28.9
Interest bearing loans due within one year - (0.3) (0.3) (0.3)
Interest bearing loans due after more than one year - (128.1) (128.1) (128.1)
Derivative assets - - - -
Derivative liabilities (0.3) - (0.3) (0.3)
Other assets - 112.3 112.3 112.3
Other liabilities - (90.7) (90.7) (90.7)
Total at 30 June 2016 (0.3) (77.9) (78.2) (78.2)
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 - (0.3) - (0.3)
At 30 June 2016 - (0.3) - (0.3)
At 30 June 2016 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 13 May 2016 the Group acquired the share capital of Safety and Security
Barrier Holdings Limited, the parent company of Hardstaff Barriers Limited.
Details of this acquisition are as follows:
Safety and Security Barrier Holdings Limited Pre acquisition carrying amount£m Policy alignment and fair value adjustments£m Total£m
Intangible assets - 4.4 4.4
Property, plant and equipment 1.9 (0.7) 1.2
Inventories 0.2 - 0.2
Current assets 0.7 - 0.7
Cash and cash equivalents 0.3 - 0.3
Total assets 3.1 3.7 6.8
Current liabilities (0.8) (0.1) (0.9)
Corporation tax (0.2) (0.7) (0.9)
Deferred tax (0.3) (0.7) (1.0)
Total liabilities (1.3) (1.5) (2.8)
Net assets 1.8 2.2 4.0
Consideration
Consideration in the year 10.6
Goodwill 6.6
Cash flow effect
Consideration 10.6
Deferred consideration (0.1)
Cash and cash equivalents received in the business (0.3)
Net cash consideration shown in the Consolidated Statement of Cash Flows 10.2
Contractual 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. Policy alignment and fair value
adjustments principally relate to harmonisation with Group IFRS accounting
policies, including the provisional application of fair values on
acquisition.
Post acquisition the acquired business has contributed £0.5m 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 2016, the
Group's results for the period would have shown underlying revenue of £255.1m
and underlying operating profit of £33.2m.
The Group also made two smaller acquisitions during the period:
- The share capital of ET Techtonics, Inc. ('ETT'), acquired in January
2016; and
- The share capital of FMK Trafikprodukter AB ('FMK'), acquired in April
2016.
Details of these acquisitions are set out below:
ETTPre acquisition carrying amount£m FMKPre acquisition carrying amount£m Policy alignment and fair value adjustments£m Total£m
Intangible assets - - - -
Property, plant and equipment - - - -
Inventories - 1.3 (0.1) 1.2
Current assets 0.1 0.2 - 0.3
Cash and cash equivalents - - - -
Total assets 0.1 1.5 (0.1) 1.5
Current liabilities - (0.2) - (0.2)
Deferred tax - - - -
Total liabilities - (0.2) - (0.2)
Net assets 0.1 1.3 (0.1) 1.3
Consideration
Consideration in the year 5.1
Goodwill 3.8
Cash flow effect
Consideration 5.1
Deferred consideration (0.3)
Contingent consideration (0.8)
Cash and cash equivalents received in the businesses -
Net cash consideration shown in the Consolidated Statement of Cash Flows 4.0
The goodwill arising primarily represents the market share and know-how
afforded to the Group. Policy alignment and fair value adjustments principally
relate to harmonisation with Group IFRS accounting policies, including the
provisional application of fair values on acquisition. Contingent
consideration relates to the acquisition of FMK and is payable dependent on
the achievement of performance and product development targets.
14. Subsequent events
On 13 July 2016 the Group acquired the share capital of Technocover Limited
('Technocover') for a consideration of £10.0m. Based in the UK, Technocover
specialises in the development, manufacture, installation and maintenance of
high security access products for the utilities market.
On 3 August 2016 the Group acquired the share capital of Signature Limited
('Signature') for a consideration of £12.5m. Based in the UK, Signature
specialises in the development and manufacture of street lighting columns and
traffic management systems for the UK roads market.
Full details of these acquisitions will be included in the Group's 2016 Annual
Report & Accounts.
This information is provided by RNS
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