Hill & Smith delivers record first-half trading performance

(Sharecast News) - Hill & Smith announced a record trading performance in its first half on Wednesday, leading to a hike in full-year expectations. The FTSE 250 company reported a 9% increase in revenue and a 20% jump in operating profit on an organic constant currency basis during the first six months of the year.

A notable improvement in its operating margin, which saw a boost of 240 basis points to reach 14.9%, was attributed to an enhanced product mix and operational gearing.

Hill & Smith's US businesses, which are strategically focused on growing infrastructure markets, maintained strong momentum, accounting for 73% of its operating profit in the period.

The board said the UK businesses also showcased resilience during the same period.

In line with the company's strategic objectives, there had been a significant focus on delivering value through acquisitions.

The company's acquisitions of Enduro and Korns Galvanizing in the first half, which amounted to a combined total investment of £38.5m, were successfully completed and had been performing well.

Specifically, Enduro and National Signal exceeded the company's expectations, with the acquisitions bringing in an additional £41m in revenue and £8m in operating profit.

The firm also emphasised its ongoing efforts in expanding its merger and acquisition pipeline, pointing towards a continued emphasis on growth through strategic partnerships.

On the financial side, Hill & Smith boasted strong cash generation capabilities, with its first-half cash conversion standing at 87%.

Its covenant leverage was also reported at a low 0.7x.

Finally, shareholders were rewarded with a 15% raise to the interim dividend, to 15p per share.

Looking ahead, Hill & Smith was optimistic, with its expected operating profit for the 2023 financial year now predicted to be modestly ahead of current market consensus.

"Hill & Smith has delivered a record first half performance, reflecting the strong performance of our US businesses and the resilient performance of those in the UK," said chief executive officer Alan Giddins.

"This strong trading has been evidenced across the group, in particular through a standout performance in our Engineered Solutions division as well as a strong contribution from recently acquired businesses.

"The full year outlook is now expected to be modestly ahead of market expectations."

Giddins said the geographic mix of the portfolio had also evolved, adding that there was now a heavier weighting towards faster-growing US end markets, which accounted for 73% of group profits.

"Longer-term, we remain confident about our prospects given our structural end market growth drivers, the quality of our operating businesses and strong balance sheet, all of which will allow us to accelerate our growth further."

At 0911 BST, shares in Hill & Smith were up 7.26% at 1,684.06p.

Reporting by Josh White for Sharecast.com.