The storm is beginning to subside for Hill & Smith (HILS), after bad weather and delays to UK road projects prompted management to warn on full-year profits in August. However, the infrastructure engineer’s latest quarterly update revealed 5 per cent organic revenue growth, along with a corrective acquisitions approach, that earned a warm response from markets.
The delayed UK projects are all now underway, but management has identified other weaknesses in the FTSE 250 group. Recognising long lead times in its utility pole business, the company has expanded its capacity with the acquisition of struggling US utility pole manufacturer Engineered Endeavours’ factory for $6.4m (£5m). It has also picked up polymer products manufacturer Composite Advantage for $10.6m - both acquisitions have been made out of the company’s debt facility. Hill & Smith now generates over half its profits from the US market, according to chief executive Derek Muir. This acquisitive group has a pipeline of further purchases, he adds.
High zinc prices, which had risen until March and squeezed margins at the galvanising division, have come down. Zinc prices take six months to filter through the company’s production of kettles, but these stocks have now been depleted, allowing the business to manufacture at a lower cost. That should lead to an improvement in margins.
