Half Year Results 2017 Interim Results Six Months Ended 30 June 2015 Six months ended 30 June 2017 Derek Muir Group Chief Executive Derek Muir Group Chief Executive Mark Pegler Group Finance Director Mark Pegler Group Finance Director Hill & Smith Holdings PLC
Key messages Another strong performance − Record first half revenue & profitability − Organic revenue growth 5% (at constant currency) − Operating profit* up 13% (at constant currency) − Operating margin* 13.3%, up 100bps Active Portfolio Management − One acquisition and one disposal completed − Four restructuring projects further improving returns Positive outlook Proposed interim dividend 9.4p, up 11% 2017 Interim Results 2 * All references to profit measures in this presentation refer to underlying profits, which exclude certain non-underlying items as detailed in the Appendices on page 25
Underlying Trading Results FX impact: H1 H1 * FY Revenue +£15.0m 2017 2016 +/- 2016 Operating Profit +£2.3m Organic growth +5% Revenue (£m) 291.8 259.3 13% 540.1 (at constant currency) Organic growth +4% Operating profit (£m) 38.8 32.0 21% 70.6 (at constant currency) Strategic initiatives driving Operating margin (%) 13.3 12.3 100bps 13.1 improved returns PBT (£m) 37.4 30.7 22% 68.0 EPS (p) 36.2 29.7 22% 65.9 Tax and interest neutral Maintaining progressive Dividend (p) 9.4 8.5 11% 26.4 dividend policy 2017 Interim Results Interim Results 30 June 2016 3 * The prior year H1 comparatives throughout this presentation have been re-presented as explained in the Appendices on page 25
Utilities H1 H1 Organic Operating £m Revenue Profit 2017 2016 Growth 2016 100.4 4.7 Revenue (£m) 107.1 100.4 2% F/X 5.9 0.4 4.7 8% Operating profit (£m) 7.6 Acquisitions 8.0 0.6 4.7 240bps Operating margin (%) 7.1 Non-US Pipes (9.5) 1.5 Organic 2.3 0.4 UK − Overall mixed performance, AMP6 delays continuing 2017 107.1 7.6 − Security fencing/housing markets strong 2017 Revenue US £107.1m Up 2% organically − Absence of larger contracts in H1 − Market fundamentals remain, improved outlook for H2 UK up 4% £61m − Kenway (composites) acquired March US down 11% £22m Pipe Supports Pipes (US/India) up 9% £24m − US demand for engineered supports continuing Revenue by geography − Rationalisation of US distribution network − India expansion completed, strong growth in domestic and United Kingdom 38% North America international markets 55% Rest of Europe Rest of the World 3% 4% 2017 Interim Results 4
Roads H1 H1 Organic Operating £m Revenue Profit 2017 2016 Growth 2016 77.5 9.0 Revenue (£m) 93.8 77.5 9% F/X 2.5 0.1 Operating profit (£m) 10.2 9.0 1% Acquisitions / 6.7 1.0 Disposals 11.6 -70bps Operating margin (%) 10.9 Organic 7.1 0.1 UK (68% of revenue) 2017 93.8 10.2 − Government’s Road Investment Strategy progressing as planned − Good utilisation of temporary safety barrier rental fleet 2017 Revenue − Positive trends continuing in VMS, parapets and lighting columns £93.8m Up 9% organically International (32% of revenue) − Scandinavia solid, enhanced product offering UK up 7% £64m − Excellent progress with Zoneguard safety barrier in US and Australia International up 13% £30m Portfolio Management Revenue by geography − CA Traffic (non-core) disposed in April 6% − VMS: Rationalisation of manufacturing footprint United Kingdom − Closure of Indian roads business North America 64% Rest of Europe 23% Rest of the World 6% 2017 Interim Results 5
Galvanizing H1 H1 Organic Operating 2017 2016 Growth £m Revenue Profit 2016 81.4 18.3 Revenue (£m) 90.9 81.4 3% F/X 6.6 1.8 Operating profit (£m) 21.0 18.3 5% Organic 2.9 0.9 22.5 60bps Operating margin (%) 23.1 2017 90.9 21.0 UK − Wider infrastructure investment driving 6% volume growth − Operational efficiencies delivering further margin improvement 2017 Tonnes Galvanized 248,000 tonnes Down 4% France − Volumes down 2%, Presidential elections impacting 200 H1 H2 − Signs of improving sentiment in French/European markets 180 160 USA 140 − As expected, volumes down 16%, strong prior year comparatives 120 6% − LNG and solar projects not repeated in 2017 100 − Underlying market demand remains robust 16% 80 2% − Improved margin on more favourable product mix 60 40 20 - 2016 2017 2016 2017 2016 2017 UK FRANCE US 2017 Interim Results 6
Free cash flow and net debt H1 H1 FY £m 2017 2016 2016 Working capital £16.6m Underlying Operating Profit 38.8 32.0 70.6 − H1 outflow reflective of seasonal trading patterns/organic Depreciation and amortisation 9.6 8.7 18.4 growth Underlying EBITDA 48.4 40.7 89.0 − Zinc price c. £5m impact on inventories Other non-cash items 1.1 0.8 1.4 Capex 1.0 times depreciation/amortisation Working capital (16.6) (4.8) (3.8) − 2017 guidance c. £22m (1.1 times) Capital expenditure (net) (9.8) (20.9) (7.4) Restructuring spend £2.4m Underlying operating cash flow 25.5 26.9 65.7 − Non-US Pipe Supports, India Roads, US Pipes reorganisation Restructuring (2.4) (0.8) (1.5) − Full year c. £4m Pension (1.2) (1.2) (2.3) Acquisition of Kenway £5.7m Interest paid (net) (1.3) (1.4) (2.8) Tax paid (9.0) (6.9) (15.7) Disposal of CA Traffic £2.6m Statutory free cash flow 11.6 16.6 43.4 Net debt : EBITDA 1.1 times (Dec 2016: 1.2 times) Dividends (6.7) (5.5) (16.2) Acquisitions (5.3) (14.9) (39.2) Disposals 2.6 - - Share issues/other (net) (1.6) (0.9) (1.6) £m H1 2017 H1 2016 Dec 2016 Net cash flow 0.6 (4.7) (13.6) Net debt 109.1 99.5 112.0 Note: F/X impact 2.3 (3.3) (6.9) 2017 Interim Results 7
Strategic KPI’s Organic revenue growth Operating margin 14% 8% 6% 13% 4% 12% 2% 11% 0% 2011 2012 2013 2014 2015 2016 H1 2017 10% -2% 9% -4% 2011 2012 2013 2014 2015 2016 H1 2017 Driving 6-Yr Average Returns Return on invested capital Underlying cash conversion * 22% 120% Group Target - 20% 20% 100% 18% 80% Group ROIC 60% 16% 40% 14% 20% 12% 0% Group WACC c.11% 2011 2012 2013 2014 2015 2016 H1 2017 10% *excluding strategic capex 2011 2012 2013 2014 2015 2016 H1 2017 8
Strategy and Outlook Derek Muir 2017 Interim Results 9
UK Infrastructure ENERGY RAIL Offshore wind - landing platforms CP5 - markets remain strong Biogas anaerobic digestion HS2 - contracts awarded - construction commences 2018 Solar with battery storage Five year security upgrade on electrification and renewals Energy from Waste New train depots for Crossrail and other network franchisees Hinkley Point - nuclear AMP6 HOUSING Water treatment plant security a focus UK housing market remains strong AMP6 projects slow to start Good volume for building products business Thames Tideway Tunnel Increased demand for flood alleviation systems 2017 Interim Results 10
Highways England: Road Investment Strategy (‘RIS’) Temporary Safety Barrier Crash Cushions Permanent Safety Barrier Variable Message Signs ROTTM Sign £m £1bn annual fund for councils to improve or replace Major improvement schemes 4,000 the most important A-roads in England Scheme Start Profile of investment £15.2bn 3,500 Central to proposals is the creation of a Major Road Network, M1 junctions 13-19 Current by combining Highways England’s 4,200 miles of strategic M6 junctions 16-19 Current 3,000 roads with 3,800 miles of council- controlled ‘A’ roads. Priority Y5 would be given to council schemes that combat congestion and A14 Cambridge to Huntingdon Current improve connections around towns and cities. 2,500 M1 junctions 24-25 Current Y4 Part of the cash will be used as a bypass fund to alleviate traffic M20 junction 10a Q1 18 Y3 2,000 issues in villages. M4 junctions 3-12 Q1 18 Y2 Long Term Up to £1bn a year is expected to be ring-fenced from the near Y1 SR 2013 1,500 M6 junctions 2-4 Q1 18 £6bn raised annually from vehicle excise duty. M6 junctions 13-15 Q1 18 1,000 Transport Secretary Chris Grayling said: Medium Term M20 junctions 3-5 Q1 18 SR 2013 “The transport investment strategy sets out a blueprint for 500 M23 junctions 8-10 Q1 18 how we can harness the power of transport investment to drive SR 2010 M27 junctions 4-11 Q1 18 balanced economic growth, unlock new housing projects, and 0 Mar 1515/ 2016/17 2017/18 2018/19 2019/20 2020/21 support the government’s modern industrial strategy.” M62 junctions 10-12 Q1 18 RIS 1 RIS 2 Source: Highways England Strategic Business Plan 17 December 2014 Source: Highways England Delivery Plan 2017-2018 Source: Construction Enquirer July 2017 2017 Interim Results 11
UK Market for HVM products Hostile Vehicle Mitigation (‘HVM’) Pedestrian Protection Varioguard / Multibloc / Maxibloc Increased demand for our market leading range of temporary and permanent, steel and concrete products in key locations as the threat of terrorism increases. 2017 Interim Results 12
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