Hill & Smith's (HILS) sturdy foothold on the global infrastructure boom continues to take investors by surprise. The engineer delivered better-than-expected results for the fourth year in a row in 2017, triggering an appreciative mark up in the share price.
Major projects to overhaul ageing infrastructure in the UK and US once again underpinned strong demand for Hill & Smith’s metal galvanising services and temporary barriers, gantries and other products necessary for the upgrading of motorways. A favourable trading environment, combined with effective portfolio management, helped feed a 12 per cent uptick in underlying operating profit at constant currencies, as the underlying operating margin widened by 80 basis points to 13.9 per cent.
Analysts at Peel Hunt were left flabbergasted by Hill & Smith’s margin-building capabilities, particularly during a year when the group had to contend with “significantly higher” zinc raw material costs. Additional expenses were comfortably offset in the end by successful endeavours to improve customer service, focus on smaller, higher-margin infrastructure jobs, boost productivity and hive off underperforming assets.
Investec forecasts adjusted pre-tax profit of £78.3m for the 2018 year-end, leading to EPS of 76.6p (from £77.8m and 74p in 2017).
| HILL & SMITH (HILS) | ||||
| ORD PRICE: | 1,343p | MARKET VALUE: | £1.06bn | |
| TOUCH: | 1,342-1,344p | 12-MONTH HIGH: | 1,480p | LOW: 1,130p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 329p* | NET DEBT: | 38% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 445 | 30.6 | 29.6 | 16.0 |
| 2014 | 455 | 36.9 | 35.1 | 18.0 |
| 2015 | 468 | 33.2 | 30.9 | 20.7 |
| 2016 | 540 | 48.3 | 43.0 | 26.4 |
| 2017 | 585 | 70.2 | 68.6 | 30.0 |
| % change | +8 | +45 | +60 | +14 |
| Ex-div: | 24 May | |||
| Payment: | 2 Jul | |||
| *Includes intangible assets of £164m, or 208p a share | ||||
