REG - Hill & Smith Hdgs. - Half Yearly Report <Origin Href="QuoteRef">HILS.L</Origin> - Part 2
06/08/2015 07:00
- Part 2: For the preceding part double click ID:nRSF2316Va
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 ended30 June 2015 6 months ended30 June 2014 Year ended31 December 2014
Average Closing Average Closing Average Closing
Sterling to Euro (£1 = EUR) 1.37 1.41 1.22 1.25 1.24 1.28
Sterling to US Dollar (£1 = USD) 1.52 1.57 1.67 1.71 1.65 1.56
Sterling to Thai Bhat (£1 = THB) 50.23 53.16 54.32 55.47 53.50 51.32
Sterling to Swedish Krona (£1 = 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 30 June 2015 6 months ended 30 June 2014
Revenue £m Result £m Underlyingresult* £m Revenue £m Result £m Underlyingresult* £m
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
Revenue £m Result £m Underlyingresult* £m
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 £2.7m revenues to Infrastructure Products -
Roads (six months ended 30 June 2014: £3.1m, the year ended 31 December 2014:
£5.9m) and £0.9m revenues to Infrastructure Products - Utilities (six months
ended 30 June 2014: £0.9m, the year ended 31 December 2014: £1.8m).
Infrastructure Products - Utilities provided £1.9m revenues to Infrastructure
Products - Roads (six months ended 30 June 2014: £0.7m, the year ended 31
December 2014: £3.6m). 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 ended 30 June 2015£m 6 months ended 30 June 2014£m Year ended 31 December 2014£m
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 ended 30 June 2015£m 6 months ended 30 June 2014£m Year ended 31 December 2014£m
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 £15.8m 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 £1.1m.
· Acquisition expenses of £0.4m, of which £0.1m relates to the acquisition
of Novia Associates, Inc. on 30 April 2015 and £0.3m relates to the aborted
acquisition of W Corbett & Co Galvanizing.
· Losses on disposal of properties of £0.1m.
· A credit in respect of business reorganisations of £0.2m, 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 £15.8m 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 £15.8 million, allocated to
the goodwill (£8.2 million) and the remaining book value of acquired
intangible assets (£7.6 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 £0.3m (2014: £0.4m) and a £0.2m 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 £2.6m, 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 £1.4m.
· Amortisation of acquired intangible fixed assets of £2.1m.
· Acquisition expenses of £0.1m relating to acquisitions made by the
Group during the year.
· Profits on disposal of properties of £0.4m.
· A net loss on disposal of subsidiaries of £3.7m. On 23 April 2014 the
Group disposed of its 50% interest in the shares of Staco Redman Limited for a
consideration of £0.3m, 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 £1.3m. The
details of these disposals are set out below:
Staco Redman Ltd£m Bromford Iron &Steel Co Ltd£m JA Envirotanks£m Total£m
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 £0.7m and financial expenses
associated with refinancing of £0.3m.
7. Net financing costs
6 months ended 30 June 2015£m 6 months ended 30 June 2014£m Year ended 31 December 2014£m
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 ended30 June 2015 6 months ended30 June 2014 Year ended31 December 2014
Pence per share £m Pence per share £m Pence per share £m
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 £5.0m
(2014: £4.7m). The final dividend for 2014 of £9.1m (2014: £7.8m) 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 £5.6m, 7.1p per share
(2014: £5.0m, 6.4p per share).
11. Analysis of net debt
6 months ended 30 June 2015£m 6 months ended 30 June 2014£m Year ended 31 December 2014£m
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 ended 30 June 2015£m 6 months ended 30 June 2014£m Year ended 31 December 2014£m
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.
Designated at fair value £m Amortised cost£m Total carrying value£m Fair value£m
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 1 £m Level 2£m Level 3£m Total£m
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
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