Interim Results

Hill & Smith Hldgs PLC 6 June 2001 HILL & SMITH HOLDINGS PLC INTERIM RESULTS Hill & Smith Holdings PLC ('Hill & Smith' or the 'Company'), the building, construction and industrial products group, is pleased to announce its interim results for the six months ended 31 March 2001. Highlights * Turnover at £90.6 million (2000: £28.7 million) * Profit before exceptionals, interest and goodwill at £6.1 million (2000: £2.0 million) * Earnings per share before exceptionals and goodwill of 4.5p (2000: 3.2p) * Interim dividend unchanged at 2.1p per share * Healthy increase in operating cash flow * Successful integration of Ash & Lacy businesses * Debt reduction programme ahead of schedule Chairman of Hill & Smith, David Winterbottom, said: 'During this period the acquisition of Ash & Lacy plc was completed and the results of the former Ash & Lacy companies have been consolidated from 1st November 2000, when the bid was declared unconditional. The benefits of the acquisition are already beginning to enhance the enlarged group's performance. 'The integration of the Ash & Lacy companies into the group has been achieved ahead of our expectations and I am pleased to report that our post acquisition due diligence review has revealed no surprises in respect of the trading activities, although we have taken a prudent view of the fixed assets acquired. 'Our businesses have commenced the second half of the year with market conditions varying across the group. Additional sales of surplus properties are likely in the rest of 2001, thus making further inroads into the level of debt, which is being managed well ahead of expectations. 'Overall we believe that the outcome for the full 15 months will be satisfactory, given no deterioration in economic conditions.' For further information, please contact: Hill & Smith Holdings PLC David Winterbottom, Chairman Head Office: 01902 357910 David Grove, Chief Executive D.Grove mobile: 07973 325667 Rawlings Financial PR Limited 01756 770376 John Rawlings Catriona Valentine CHAIRMAN'S STATEMENT Results I am pleased to report the interim results for the six months to 31st March 2001. During this period the acquisition of Ash & Lacy plc was completed and the results of the former Ash & Lacy companies have been consolidated from 1st November 2000, when the bid was declared unconditional. The benefits of the acquisition are already beginning to enhance the enlarged group's performance. Sales for the six month period were £90.6 million (2000: £28.7 million) and profit before exceptional items, interest and goodwill amortisation was £6.1 million (2000: £2.0 million). Interest costs were £2.3 million (2000: £0.3 million). Profit before exceptional items, goodwill amortisation and tax was £3.8 million (2000: £1.7 million). There were substantial net exceptional charges in the period of £4.8 million in respect of costs related to the Ash & Lacy plc takeover, closure of the Ash & Lacy plc head office and various closure and reorganisation costs. These exceptional costs have been incurred to realise the financial benefits of the takeover as soon as possible. The adjusted earnings per share for the six month period increased to 4.5p (2000: 3.2p). Operations The integration of the Ash & Lacy companies into the group has been achieved ahead of our expectations and I am pleased to report that our post acquisition due diligence review has revealed no surprises in respect of the trading activities, although we have taken a prudent view of the fixed assets acquired. The recent investments (both organic and acquisitions) in the Infrastructure Products Group continue to yield increasing returns and the market trends reflecting increased government spending are very positive for our largest division. A number of capital investment projects were successfully completed in the period which will benefit future performance. The acquisition of the galvanising activities within Ash & Lacy has resulted in a rationalisation of the group's galvanising capacity. Two plants have been closed, thus eliminating duplication of facilities in the West Midlands and South Wales. The remaining businesses in the construction and building products division continue to operate against a background of challenging market conditions. In the industrial products division the individual performances have been mixed. Ash & Lacy Perforators has invested in additional capacity to meet the demands of its major customers. On the other hand, our stockholding businesses have suffered from poor market conditions during the period. In general terms market conditions remain tough. The net cash flow from operating activities during the period before exceptional items was £11.4 million (2000: (£0.3) million) which included a net reduction of £2.1 million in working capital. Gearing At 31st March 2001 the level of net borrowings had been reduced to £66.8 million from a peak level of £78.0 million immediately following the Ash & Lacy acquisition. This represents gearing of 198%. Furthermore, on 25th May 2001 four group properties were sold under a sale and leaseback arrangement for a gross sum of £8.9 million. This transaction has resulted in a reduction in our net indebtedness to below £60 million. Dividends I am pleased to report that an interim dividend of 2.1p per share (2000: 2.1p) has been declared by the Board. Based on the adjusted earnings per share of 4.5p, this gives a dividend cover of 2.1 times (2000 full year: 1.9 times). All ordinary shares rank for this dividend. Outlook Our businesses have commenced the second half of the year with market conditions varying across the group. Additional sales of surplus properties are likely in the rest of 2001, thus making further inroads into the level of debt, which is being managed well ahead of expectations. Overall we believe that the outcome for the full 15 months will be satisfactory, given no deterioration in economic conditions. David S Winterbottom Chairman 6 June 2001 GROUP PROFIT AND LOSS ACCOUNT For the six months to 31 March 2001 compared with the six months to 31 March 2000 Six months to Six months to 31 March 2001 31 March 2000 Before Before exceptional exceptional items and items and goodwill Goodwill goodwill amortis- amortis- Exceptional amortis- ation ation items Total ation Total £'000 £'000 £'000 £'000 £'000 £'000 Turnover Continuing operations 31,353 - - 31,353 28,658 28,658 Acquisitions 59,228 - - 59,228 - - Total turnover 90,581 - - 90,581 28,658 28,658 Operating profit Continuing operations 2,228 (94) (1,779) 355 2,031 1,956 Acquisitions 3,895 (540) (3,517) (162) - - Total operating profit 6,123 (634) (5,296) 193 2,031 1,956 Profit/(loss) on sale of business - 159 159 - Profit on sale of property - 381 381 464 Profit on ordinary activities before interest 6,123 (634) (4,756) 733 2,031 2,420 Net interest (2,321) (2,321) (302) (302) payable Profit/(loss) before taxation 3,802 (634) (4,756) (1,588) 1,729 2,118 Tax on profit (1,225) - 714 (511) (495) (495) Profit after 2,577 (634) (4,042) (2,099) 1,234 1,623 taxation Dividends paid and proposed (1,771) (815) Transfer to reserves (3,870) 808 Earnings per share 4.5p (1.1)p (7.1)p (3.7)p 3.2p 4.2p Diluted earnings per share 4.5p (1.1)p (7.0)p (3.7)p 3.2p 4.2p GROUP PROFIT & LOSS ACCOUNT For the six months to 31 March 2001 compared with the year to 30 September 2000 Six months to Year to 31 March 2001 30 September 2000 Before Before exceptional exceptional items and items and goodwill Goodwill goodwill amortis- amortis- Exceptional amortis- ation ation items Total ation Total £'000 £'000 £'000 £'000 £'000 £'000 Turnover Continuing 31,353 31,353 58,858 58,858 operations Acquisitions 59,228 59,228 Total turnover 90,581 90,581 58,858 58,858 Operating profit Continuing 2,228 (94) (1,779) 355 4,770 4,620 operations Acquisitions 3,895 (540) (3,517) (162) Total operating profit 6,123 (634) (5,296) 193 4,770 4,620 Profit/(loss) on sale of business 159 159 (64) Profit on sale of property 381 381 464 Profit on ordinary activities before interest 6,123 (634) (4,756) 733 4,770 5,020 Net interest (2,321) (2,321) (668) (668) payable Profit/(loss) before taxation 3,802 (634) (4,756) (1,588) 4,102 4,352 Tax on profit (1,225) 714 (511) (879) (879) Profit after 2,577 (634) (4,042) (2,099) 3,223 3,473 taxation Dividends paid and proposed (1,771) (1,621) Transfer to (3,870) 1,852 reserves Earnings per share 4.5p (1.1)p (7.1)p (3.7)p 8.3p 9.0p Diluted earnings per share 4.5p (1.1)p (7.0)p (3.7)p 8.3p 8.9p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the six months to 31 March 2001 Six months to Six months to Year to 31 March 31 March 30 September 2001 2000 2000 £'000 £'000 £'000 (Loss)/profit for the period (2,099) 1,623 3,473 Realised gain on revaluation of properties 126 Currency translation differences (54) Total recognised gains and losses for the period (2,099) 1,623 3,545 RECONCILIATION OF MOVEMENT IN GROUP SHAREHOLDERS' FUNDS For the six months to 31 March 2001 Six months to Six months to Year to 31 March 31 March 30 September 2001 2000 2000 £'000 £'000 £'000 (Loss)/profit for the period (2,099) 1,623 3,473 Dividends (1,771) (815) (1,621) (3,870) 808 1,852 Other recognised gains and losses relating to the period - (198) (252) New ordinary share capital issued 12,875 3 4 Net increase in shareholders' funds for the period 9,005 613 1,604 Shareholders' funds at start of period 24,684 23,080 23,080 Shareholders' funds at end of period 33,689 23,693 24,684 GROUP BALANCE SHEET As at 31 March 2001 31 March 31 March 30 September 2001 2000 2000 £'000 £'000 £'000 Fixed assets Intangible assets 28,702 2,755 3,213 Tangible assets 53,428 17,004 17,470 Investments 1,365 1,400 1,365 ------ ------ ------ 83,495 21,159 22,048 ------ ------ ------ Current Assets Stocks 19,915 8,157 7,632 Debtors 57,795 16,435 17,689 Investments 275 - - Short term deposits 2,829 - - Cash - - 288 ------ ------ ------ 80,814 24,592 25,609 ------ ------ ------ Creditors: amounts falling due within one year Borrowings and finance leases (7,804) (2,857) (4,590) Other creditors (59,460) (16,320) (17,712) ------ ------ ------ (67,264) (19,177) (22,302) ------ ------ ------ Net current assets 13,550 5,415 3,307 Total assets less current liabilities 97,045 26,574 25,355 Creditors: amounts falling due after one year Borrowings and finance leases (61,774) (2,391) (287) Other creditors (526) - (18) ------ ------ ------ (62,300) (2,391) (305) ------ ------ ------ Provisions for liabilities and charges (1,020) (490) (330) ------ ------ ------ Net assets 33,725 23,693 24,720 ====== ====== ====== Capital and reserves Called up share capital 15,242 9,654 9,654 Share premium 3,335 135 135 Other reserves 4,087 - - Revaluation reserve 1,781 1,898 1,781 Capital redemption reserve 238 238 238 Profit & loss account 9,006 11,768 12,876 ------ ------ ------ Equity shareholders' funds 33,689 23,693 24,684 Minority interest 36 - 36 ------ ------ ------ 33,725 23,693 24,720 ====== ====== ====== GROUP CASH FLOW STATEMENT For the six months to 31 March 2001 Six months to Six months to Year to 31 March 31 March 30 September 2001 2000 2000 £'000 £'000 £'000 Net cash flow from operating activities 7,564 (287) 4,213 Returns on investment and servicing of finance (2,321) (302) (669) Taxation 133 397 (386) Capital expenditure 1,760 573 (475) Acquisitions and disposals (64,209) (184) (729) Equity dividends paid (810) (817) (1,632) ------ ------ ------ Cash flow before financing (57,883) (620) 322 Financing Issue of ordinary shares 5,870 3 4 Increase/(decrease) in borrowings 64,625 (2,442) (3,878) Purchase of own shares - (198) (198) ------ ------ ------ 70,495 (2,637) (4,072) ------ ------ ------ Increase/(decrease) in cash in the period 12,612 (3,257) (3,750) Reconciliation of net cash flow to movement in net borrowings Increase/(decrease) in cash in the period 12,612 (3,257) (3,750) Cash (inflow)/outflow from borrowings (64,625) 2,442 3,878 ------ ------ ------ Change in borrowings resulting from cash flows (52,013) (815) 128 Borrowings assumed with acquisitions (9,469) - - Finance leases (718) - (284) ------ ------ ------ Movement in net borrowings in the period (62,200) (815) (156) Net borrowings at the start of period (4,589) (4,433) (4,433) ------ ------ ------ Net borrowings at end of period (66,789) (5,248) (4,589) ------ ------ ------ NOTES TO THE CASH FLOW STATEMENT Six months to Six months to Year to 31 March 31 March 30 September 2001 2000 2000 £'000 £'000 £'000 1. Reconciliation of operating profit to net cash flow from operating activities Operating profit before goodwill Amortisation and exceptional items 6,123 2,031 4,770 Depreciation 3,092 878 1,822 Changes in working capital: Stocks 1,530 (1,504) (725) Debtors 709 (1,954) (3,145) Creditors and provisions (95) 262 1,491 Net cash flow from operating activities before exceptional items 11,359 (287) 4,213 Cash element of exceptional items (3,795) - - Net cash flow from operating activities 7,564 (287) 4,213 2. Capital expenditure Purchase of fixed assets (4,766) (840) (1,989) Sale of fixed assets 6,526 1,413 1,514 1,760 573 (475) 3. Acquisitions and disposals Purchase of subsidiary undertakings (64,309) - - Sale of business 847 - (64) Purchase of business (747) (184) (665) (64,209) (184) (729) NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. Segmental Information Six months to 31 March 2001 compared with six months to 31 March 2000 Six months to Six months to 31 March 2001 31 March 2000 £'000 £'000 Operating Net Operating Net Turnover profit Assets Turnover profit Assets Building and construction Products Continuing operations 28,986 2,211 26,683 24,789 1,897 28,156 Acquisitions 40,431 2,694 27,768 Total 69,417 4,905 54,451 24,789 1,897 28,156 Industrial products Continuing operations 2,367 17 1,402 3,869 134 915 Acquisitions 18,797 1,201 22,087 Total 21,164 1,218 23,489 3,869 134 915 Total operations Continuing operations 31,353 2,228 28,085 28,658 2,031 29,071 Acquisitions 59,228 3,895 49,855 Total 90,581 6,123 77,940 28,658 2,031 29,071 Tax and dividends (6,128) (2,885) Net borrowings (66,789) (5,248) Goodwill 28,702 2,755 Total Group 33,725 23,693 Operating profit is stated before exceptional items and goodwill amortisation. Six months to 31 March 2001 compared with year to 30 September 2000 Six months to Year to 31 March 2001 30 September 2000 £'000 £'000 Operating Net Operating Net Turnover profit assets Turnover profit Assets Building and construction products Continuing operations 28,986 2,211 26,683 52,704 4,643 27,699 Acquisitions 40,431 2,694 27,768 Total 69,417 4,905 54,451 52,704 4,643 27,699 Industrial products Continuing operations 2,367 17 1,402 6,154 127 871 Acquisitions 18,797 1,201 22,087 Total 21,164 1,218 23,489 6,154 127 871 Total operations Continuing operations 31,353 2,228 28,085 58,858 4,770 28,570 Acquisitions 59,228 3,895 49,855 Total 90,581 6,123 77,940 58,858 4,770 28,570 Tax and dividends (6,128) (2,474) Net borrowings (66,789) (4,589) Goodwill 28,702 3,213 Total Group 33,725 24,720 Operating profit is stated before exceptional items and goodwill amortisation 2. Acquisitions and disposals During the period the Company acquired Ash & Lacy plc. It also completed the acquisition of the residential doors business of P.C. Henderson Ltd to whom it sold its Birtley garage doors operation. Goodwill arising from these acquisitions amounted to £25m and is being amortised over a period of 20 years. Only a preliminary assessment has so far been made of the fair value of the Ash & Lacy net assets. This will be finalised by the year end. 3. Exceptional items The profit on the sale of business relates to the Birtley garage doors operation. The profit on sale of property relates to the sale and leaseback of an operating property at Telford. The exceptional items from continuing operations represent the costs of reorganising the business of Asset International and the lintel production facility at Birtley Building Products. The exceptional items from acquisitions represent closure costs of the Ash & Lacy head office, bank arrangement fees and related due diligence costs and closure costs of acquired businesses. 4. Taxation Tax has been provided on the profit before goodwill and exceptional items at the estimated effective rate for the full year. 5. Dividends The Directors have declared an interim dividend for the current year of 2.1p per share (six months to 31 March 2000: 2.1p), which will be paid on 8th October 2001 to shareholders on the register on 13th July 2001. The dividends for the period include £491,000 in respect of the additional final dividend for the year ended 30th September 2000, which was paid on the additional shares issued to Ash & Lacy shareholders as part of the acquisition of that company. 6. Earnings per share The weighted average number of shares in issue during the period was 57.16m, diluted for the effect of outstanding share options 57.41m (six months ended 31st March 2000: 38.88m, 39.13m diluted). Earnings per share have been calculated on losses of £2,099,000 (six months ended 31 March 2000: earnings £1,623,000) and earnings per share before exceptional items and goodwill amortisation on earnings of £2,577,000 (six months ended 31st March 2000: £1,234,000). Earnings per share before exceptional items and goodwill amortisation have been shown because the Directors consider that this gives a more meaningful indication of the underlying performance. The results for the half years ended 31 March 2000 and 2001 are unaudited and do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information for the year ended 30th September 2000 has been extracted from the statutory accounts for that year which will be filed with the Registrar of Companies and on which the auditors have given an unqualified opinion. Copies of the Interim Report will be sent to shareholders and will be available from the Company's registered office at Springvale Business & Industrial Park, Bilston, West Midlands, WV14 0QL.

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