2022
Creating sustainable infrastructure and safe transport through innovation.
Hill & Smith PLC
Annual Report for the year ended 31 December 2022
Stock Code HILS
INVESTMENT CASE
Structural tailwinds in attractive markets
Opportunity to grow market share in meaningful high return markets that are backed by infrastructure investment and long term growth drivers.
Read more on Our Market Place on pages 8 to 9.
Strong execution track record
Hill & Smith's autonomous model has delivered strong performance over the long term. Our agile business model has been key to mitigating challenges around supply chain, labour and COVID.
Our model is scalable and supported by an ambitious management team.
Read more in our Operational and Financial
Review on pages 22 to 31.
Focus on high value niche applications
Our increasing focus on high value, fast growing niche markets fuels organic growth and generates higher gross margins and strong cash conversion.
Read more on Our Divisions on pages 3 and 13.
Portfolio management
Our structured and disciplined approach to acquisitions and disposals means we are increasing the quality of the operating companies that make up the Group and ensuring that they are each aligned to long term growth drivers.
Active management within our operating companies drives gross margin improvement and allows reinvestment in areas of talent and innovation.
Read more on Our Business Model on pages 10 to 11.
Purpose and sustainability
We have a clear and well-understood purpose. Our products are focused on increasing the sustainability of infrastructure and making transport safer.
Read more on Our Sustainability Plan on pages 32 to 57.
Strong balance sheet and cash generation
High and improving returns convert into strong cash generation, allowing investment to further grow the business and deliver a sustainable, progressive dividend policy.
Read more in our Operational and Financial
Review on pages 30 to 31.
FIVE-YEAR TRACK RECORD
Revenue1 (£m)
617.2 | 588.4 | 625.2 | 732.1 | |
564.2 |
2018 2019 2020 2021 2022
Underlying operating profit1 (£m)
97.1
74.4 | 80.3 | 64.7 | 77.3 |
2018 2019 2020 2021 2022
1 Continuing operations
Underlying earnings per share (p)
77.8 | 80.7 | 77.9 | 91.9 |
63.2 |
2018 2019 2020 2021 2022
Dividend per share (p)
31.8 | 26.7 | 31.0 | 35.0 | |
10.6 | ||||
2018 | 2019 | 2020 | 2021 | 2022 |
Scope 1 & 2 Carbon emissions (market-based consumption) (tonnes)
80,918 | 73,281 | 66,774 | 64,597 | |
58,305 | ||||
2018 | 2019 | 2020 | 2021 | 2022 |
CONTENTS
STRATEGIC REPORT | |
Highlights | 02 |
Group at a Glance | 03 |
Interim Executive Chair's Letter | 04 |
Our Purpose and Strategy | 06 |
Our Market Place | 08 |
Our Business Model | 10 |
Our Stakeholders | 12 |
Our Divisions | 13 |
Our Products | 15 |
Measuring Our Performance | 20 |
Operational and Financial Review | 22 |
Our Approach to Sustainability | 32 |
Stakeholder Engagement | 58 |
Risk Management | 60 |
Group Principal Risks | 64 |
Non-financial Information Statement | 69 |
GOVERNANCE | |
Board of Directors | 70 |
Introduction to Governance | 72 |
Governance Report | 74 |
Nomination Committee Report | 84 |
Audit Committee Report | 86 |
Remuneration Committee Report | 92 |
Directors' Remuneration Policy | 105 |
Directors' Report | 114 |
Statement of Directors' Responsibilities | 116 |
FINANCIALS | |
Independent Auditor's Report | 118 |
Consolidated Income Statement | 126 |
Consolidated Statement of Financial Position | 128 |
Consolidated Statement of Changes in Equity | 129 |
Consolidated Statement of Cash Flows | 130 |
Notes to the Consolidated Financial Statements | 131 |
Company Balance Sheet | 181 |
Company Statement of Changes in Equity | 182 |
Notes to the Company Financial Statements | 183 |
Five year summary | 193 |
SHAREHOLDER INFORMATION | |
Financial Calendar | 194 |
Shareholder Information | 195 |
Principal Group Businesses | 196 |
Directors, Contacts and Advisors | 199 |
Shareholder Notes | 200 |
Composite rail platform, by CCG,
Annadale Station, Staten Island, NYC
STRATEGIC REPORT
Stock Code HILS | 01 |
HIGHLIGHTS
GROUP HIGHLIGHTS:
Underlying* | Change | Statutory | Change | |||||
31 | 31 | Constant | 31 | 31 | ||||
December | December | Reported | Currency | December | December | Reported | ||
2022 | 2021(1) | % | % | OCC ^ % | 2022 | 2021(1) | % | |
Continuing Operations (1) | ||||||||
Revenue | £732.1m | £625.2m | +17% | +12% | +14% | £732.1m | £625.2m | +17% |
Operating profit | £97.1m | £77.3m | +26% | +17% | +14% | £78.5m | £48.9m | +61% |
Operating margin | 13.3% | 12.4% | +90bps | 10.7% | 7.8% | +290bps | ||
Profit before tax | £87.9m | £71.2m | +23% | £69.3m | £42.8m | +62% | ||
Earnings per share | 85.4p | 70.0p | +22% | 66.7p | 35.8p | +86% | ||
Total Group (1) | ||||||||
Earnings per share | 91.9p | 77.9p | +18% | 71.0p | 43.0p | +65% | ||
Dividend per share | 35.0p | 31.0p | +13% | 35.0p | 31.0p | +13% | ||
1 Continuing operations exclude France Galva, which has been accounted for as a discontinued operation as explained in note 10 to the financial statements. The prior year comparatives have been restated accordingly. Total Group includes both continuing and discontinued operations.
- All underlying measures exclude certain non-underlying items, which are as detailed in note 5 to the Financial Statements and described in the Financial Review. References to an underlying profit measure throughout this announcement are made on this basis. Non-underlying items are presented separately in the Consolidated Income Statement where, in the Directors' judgement, the quantum, nature or volatility of such items gives further information to obtain a proper understanding of the underlying performance of the business. Underlying measures are deemed alternative performance measures (῾APMs') under the European Securities and Markets Authority guidelines and a reconciliation to the closest IFRS equivalent measure is detailed in note 4 to the financial statements. They are presented on a consistent basis over time to assist in comparison of performance.
- Where we refer to organic constant currency (῾OCC') movements, these exclude the impact of currency translation effects and acquisitions, disposals and closures of subsidiary businesses. In respect of acquisitions, the amounts referred to represent the amounts for the period in the current year that the business was not held in the prior year. In respect of disposals and closures of subsidiary businesses, the amounts referred to represent the amounts for the period in the prior year that the business was not held in the current year. Constant currency amounts are prepared using exchange rates which prevailed in the current year.
KEY HIGHLIGHTS:
• Record trading performance | • Significant progress on portfolio |
− 14% organic constant currency | management |
− Announcement of two value | |
revenue and profit growth | |
− Growth significantly driven by US | enhancing acquisitions in |
October 2022: | |
businesses which represented 64% of | |
Group operating profit | − National Signal, a high growth US |
− Operating margin increased by 90bps | off grid solar lighting business, |
for £24.2m | |
to 13.3%, reflecting strong operational | |
performance, pricing actions and | − Widnes Galvanising, expanding |
portfolio evolution | our galvanizing footprint in the |
− Strong performance highlights the | UK, for £3.9m |
resilience of our chosen long term | − Acquisition of Enduro Composites |
end markets and focus on higher | in February 2023 for £28.7m further |
growth businesses | accelerating our US composites |
growth strategy | |
− Acquisition of Korns Galvanizing in | |
March 2023 for £9.4m, supporting | |
growth in attractive US galvanizing | |
market | |
− Disposal of France Galva in October | |
2022 for £62.0m reduces our | |
exposure to lower growth, lower | |
margin French galvanizing market |
- Refreshed financial framework reflecting Group's growth potential
- Improved cash generation in second half, with year-end covenant leverage at 0.7 times
- Final dividend of 22p proposed, a
16% increase on 2021, in line with the Group's sustainable and progressive dividend policy - Well-positionedin structurally growing end markets and expect to make further progress in 2023, despite macro- economic uncertainties
02 Hill & Smith PLC ⸳ Annual Report and Accounts 2022
GROUP AT A GLANCE
STRATEGIC REPORT
GROUP SUMMARY
Our porfolio: As at 31 December 2022, the Group consisted of 30 companies operating from 57 sites in five countries, through which we aim to deliver high levels of organic growth and strong cash conversion. These companies are supported by a head office team who offer support and leadership in areas including capital allocation, M&A, health & safety, tax, legal and sustainability.
Our operating framework: We operate a decentralised autonomous operating model, which benefits from high accountability, agility and customer intimacy, and helps us to attract talented people who want to make a difference.
Sustainability built in: Our products and services help transport become safer and infrastructure become more sustainable, with our customers benefitting through the value that our products and services provide.
ROADS & | ENGINEERED | GALVANIZING |
SECURITY | SOLUTIONS | SERVICES |
Supplying products and services to support road and highway infrastructure including temporary and permanent road safety barriers, renewable energy lighting and power solutions, intelligent traffic solutions, street lighting columns and bridge parapets. The security portfolio includes hostile vehicle mitigation solutions, high security fencing and automated gate solutions.
Supplying engineered steel and composite solutions with low embodied energy for a wide range of infrastructure markets including energy generation and distribution, marine, rail and housing. The division also supplies seismic protection solutions and engineered pipe supports for the water, power and liquid natural gas markets.
Supplying a service that dramatically increases the sustainability and maintenance free life of steel products. This includes structural steelwork, lighting, bridges, agricultural equipment and other products for the industrial and infrastructure markets.
Roads & Security | Engineered Solutions | Galvanizing Services | ||||
% Group Revenue | 36% | 40% | 24% | |||
% Group Operating | ||||||
19% | 36% | 45% | ||||
Profit | ||||||
Stock Code HILS | 03 |
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Hill & Smith plc published this content on 11 April 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 April 2023 16:27:05 UTC.