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Hill and Smith expands capacity

The infrastructure engineer has increased capacity as its key markets attempt to remedy years of under-investment
March 4, 2020

The full-year operating margin for Hill & Smith (HLS) was constrained, partly due to restructuring costs linked to the group’s Scandinavian roads business, although organic underlying profits increased by 6 per cent, with infrastructure profits split evenly between roadwork and utilities. The higher-margin galvanising services division nearly matched the underlying contribution from infrastructure (£44.5m), on the back of an 11 per cent profit increase to £41.8m.

IC TIP: Buy at 1,444p

Three UK acquisitions were completed during the year, the largest of which – ATG Access Limited – was completed for £23.5m, thereby enhancing the group’s ability to serve the growing perimeter security market.

Hill & Smith anticipates growth in its core markets, evidenced by a 46 per cent increase in capital expenditure to £47.9m, a fair portion of which was allocated to meet growing demand from the UK Government's Road Investment Strategy. The other significant outlay was linked to the expansion of the group’s fleet of steel and concrete temporary road safety rental barriers, as traffic volumes expand on the controversial RIS 1 Smart Motorway scheme. 

Consensus forecasts compiled by Bloomberg give operating profits of £92.9m for 2020, leading to EPS of 79.3p, rising to £96.5m and 82.9p in 2021.

HILL AND SMITH (HILS)   
ORD PRICE:1,444pMARKET VALUE:£1.15bn
TOUCH:1,444-1,450p12-MONTH HIGH:1,534pLOW: 1,049p
DIVIDEND YIELD:2.3%PE RATIO:24
NET ASSET VALUE:386p*NET DEBT:70%**
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201546833.230.920.7
201654048.343.026.4
201758570.268.630.0
201863859.859.931.8
201969561.861.133.6
% change+9+3+2+6
Ex-div:28 May   
Payment:7 Jul   
*Includes intangible assets of £213m, or 268p a share. **Includes lease liabilities of £40m.