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Hill & Smith drives up margins

The galvanising products and infrastructure group continues to deliver - and shareholders are feeling the benefits
March 9, 2017

Hill & Smith's (HILS) full-year results are always notable for their clarity, but why would you seek to obfuscate when the figures speak for themselves. The infrastructure and galvanizing specialist drove up underlying operating profit 17 per cent at constant currencies to £70.6m, with the underlying margin up 90 basis points to 13.1 per cent. Management felt at ease to increase the final dividend by a third as free cash flows came in at £41.6m, against £35.7m in 2015.

IC TIP: Buy at 1262p

The Solihull group highlighted the benefits accruing from the government's UK Road Investment Strategy. Management has sensed greater urgency on the part of ministers to drive through large-scale infrastructure projects, evidenced by a surge in revenue at Hill & Smith's roads segment, up a quarter to £168m.

Galvanizing products found good support at home and in the US market. Segmental revenue was up 6 per cent to £164m at constant currencies, while a focus on smaller, high-margin jobs drove a 230 basis point increase in the margin. Elsewhere, the rationalisation measures in relation to the non-US pipe supports business have been completed, with the resultant transfer of production to the Indian manufacturing facility coming in ahead of time and under budget.

N+1 Singer gives adjusted pre-tax profit of £74.9m and EPS of 71.8p for the 2017 year-end, against £67.5m and 64.6p in 2016.

HILL & SMITH (HILS)
ORD PRICE:1,262pMARKET VALUE:£991m
TOUCH:1,261-1,263p12-MONTH HIGH:1,318pLOW: 755p
DIVIDEND YIELD:2.1%PE RATIO:29
NET ASSET VALUE:296p*NET DEBT:48%

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201244135.233.915.0
201344530.629.616.0
201445536.935.118.0
201546833.230.920.7
201654048.343.026.4
% change+16+45+39+28

Ex-div: 25 May

Payment: 3 Jul

*Includes intangible assets of £167m, or 212p a share