2017 Preliminary Results Six Months Ended 30 June 2015 7 March 2018 - PowerPoint PPT Presentation

Half Year Results 2017 Preliminary Results Six Months Ended 30 June 2015 7 March 2018 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 Operating margin*  Another excellent year 14% − Record revenue & profitability 13% 12% − Organic revenue growth 4% (at constant currency) 11% − Operating profit* up 12% (at constant currency) 10% 9%  Consistent and proven strategy driving growth and returns 2011 2012 2013 2014 2015 2016 2017 − Operating margin* 13.9%, up 80bps Return on invested capital 22% − ROIC 20.2%, up 80bps 20% Group target - 20%  Positive outlook 18% Group ROIC 16% 14% 12% 10% Proposed final dividend 20.6p, up 15% 2011 2012 2013 2014 2015 2016 2017 2017 Preliminary Results * 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 26 2

Results summary FX impact: - Revenue +ve £14.4m 2017 2016 +/- - Operating profit +ve £2.1m  8% 540.1 Revenue (£m) 585.1 Organic growth 4% (at constant currency)  15% Operating profit (£m) 81.3 70.6 Organic growth 7% (at constant currency) Consistent and proven strategy driving  80 bps Operating margin (%) 13.9 13.1 returns  15% Profit before tax (£m) 78.5 68.0  15% Earnings per share (p) 75.9 65.9 Interest and tax broadly neutral Progressive dividend policy maintained –  14% Dividend (p) 30.0 26.4 15 th successive year 2017 Preliminary Results 3

Segment and geographical analysis Revenue: £585.1m Revenue: £585.1m By segment By end market geography Roads Galvanizing 32% 31% UK USA Non- Gov’t 51% 29% 49% 35% Utilities Europe 17% 37% A well balanced business: Operating Profit: £81.3m Operating Profit: £81.3m products, By segment By plant location markets & geographies Roads 29% USA UK Galvanizing 58% 43% 42% 50% Utilities 21% 2017 Preliminary Results 4

Utilities Organic Operating 2017 2016 Growth £m Revenue Profit Revenue (£m) 215.7 207.6 1% 2016 207.6 13.0 F/X 4.8 0.5 Operating profit (£m) 16.8 13.0 7% M&A 15.5 1.3 Operating margin 7.8% 6.3% 150bps Non-US Pipes (14.8) 1.0 Organic 2.6 1.0  Operating margin increased to 7.8% 2017 215.7 16.8  Active portfolio management  Now within ‘target range’ Operating Margin  Growth in US composites 12%  Good organic revenue and profit progression 10%  Two acquisitions enhance product offering Target Range 8%  Pipe Supports 6%  US margin improvement on restructured cost base 4%  Strong performance in expanded Indian operation 2% 0% 2013 2014 2015 2016 2017 2017 Preliminary Results 5

Roads Organic Operating 2017 2016 Growth £m Revenue Profit Revenue (£m) 187.1 168.1 6% 2016 168.1 19.6 Operating profit (£m) 23.6 19.6 15% F/X 3.3 0.1 Operating margin 12.6% 11.7% 90bps M&A 5.6 1.0 Organic 10.1 2.9  UK 66% of revenue (2016: 70%) 2017 187.1 23.6  Government’s Road Investment Strategy spend as expected  Good utilisation of temporary rental barrier in H1, lower in H2 2017 Revenue  Growing demand for HVM service and product offering £187.1m Up 6% organically  International 34% of revenue (2016: 30%) UK up 2% £123m  Scandinavia back on track International up 14% £64m  Record volumes of temporary barrier sold in Australia / USA Revenue by end geography  Portfolio Management 5%  CA Traffic (non-core) disposed in April 62%  Closure of Indian roads business 24%  VMS: Rationalisation of manufacturing footprint 9% 2017 Preliminary Results 6

Galvanizing Organic Operating 2017 2016 Growth £m Revenue Profit Revenue (£m) 182.3 164.4 7% 2016 164.4 38.0 Operating profit (£m) 40.9 38.0 4% F/X 6.3 1.5 Operating margin 22.4% 23.1% -70bps Organic 11.6 1.4  Overall 2017 182.3 40.9  Margin still strong despite zinc cost challenges  New profitability benchmarks in UK and USA  UK: 205,000 tonnes 4% (H1 6%; H2 2%)     Wider infrastructure investment driving growth  Focus on returns driving improved profitability  France: 123,000 tonnes 1% (H1 2%; H2 5%)     Presidential elections impacted H1  Market challenging, but good growth in H2  USA: 160,000 tonnes 9% (H1 16%; H2 2%)     LNG and solar projects not repeated in 2017  Day-to-day volumes stronger in H2; utilities/OEM key drivers  Well positioned for any further US infrastructure investment 2017 Preliminary Results 7

Foreign exchange sensitivities 2017 2016 Change Average rates  Euro 1.14 1.22 7% Ready reckoner for translation impact of movement  in FX rates US$ 1.29 1.35 4% Sensitivity to +/- Operating Revenue Closing rates 1 cent move in: profit  Euro +/- £0.6m +/- £50k Euro 1.13 1.17 3% US$ +/- £1.3m +/- £280k  US$ 1.35 1.23 10% Impact on FY 2017 Revenue +ve £14.4m or 3% Operating profit +ve £2.1m or 3% Projection for FY 2018* Revenue -ve £15.6m or 3% Operating profit -ve £3.3m or 4% * Compares impact on 2017 results of using exchange rates at 23 February 2018 (£1 = $1.40 and £1 = € 1.14) versus average exchange rates for 2017 2017 Preliminary Results 8

Free cash flow and net debt  Underlying cash conversion 78%; 9-year average 90% £m 2017 2016  Working Capital Underlying Operating Profit 70.6 81.3  Zinc price c. £7m impact on inventories Depreciation and amortisation 19.2 18.4  Cost inflation Underlying EBITDA 100.5 89.0  Stock build in advance of 2018 projects c.£6m Other non-cash items 1.8 1.4  Gross Capex £20.7m, 1.1 times DA  2018 guidance c. £25m (1.2 times) Working capital (19.1) (3.8)  Net debt: EBITDA 1.0 times (2016: 1.2 times) Capital expenditure (net) (19.5) (20.9) Underlying operating cash flow 63.7 65.7 Cumulative cash flow 2009-2017 Restructuring spend (2.2) (1.5) Memo: £m 2009 2017 Provisions/Pension (2.8) (2.3) Operating Profit 47.0 81.3 EPS 38.3p 75.9p Interest paid (net) (2.8) (2.8) ^ Net debt 146.2 99.0 ^ At 31/12/2008 Tax paid (16.7) (15.7) Statutory free cash flow 39.2 43.4 Dividends (20.7) (16.2) Acquisitions/disposals (6.4) (39.2) Share issues/other (net) (2.4) (1.6) 2008: 10.0p Net cash flow 9.7 (13.6) 2017: 30.0p Note: F/X impact 3.3 (6.9) * 112.0 Net debt 99.0 * Total Net debt reduction £47.2m including £9.3m F/X 2017 Preliminary Results 9

Strategic KPI’s Organic revenue growth Operating margin 10% 14% 8% 13% 6% 12% 4% 2% 11% 0% 10% 2012 2013 2014 2015 2016 2017 -2% 9% -4% 2012 2013 2014 2015 2016 2017 Driving 6-Yr Average Returns Return on invested capital Underlying cash conversion* 22% 120% 20% Group target - 20% 100% 18% 80% Group ROIC 60% 16% 40% 14% 20% 12% 0% 10% 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017 *excluding strategic capex 2017 Preliminary Results 10

Earnings and Dividend Earnings per share (p) Dividend (p) 80 2017 2016 70  Interim dividend per share 9.4p 8.5p 11% 60  50 Final dividend per share 20.6p 17.9p 15% 40  Total dividend per share 30.0p 26.4p 14% 30 2011 2012 2013 2014 2015 2016 2017 30.0 26.4 Dividend 20.7  15 successive years of dividend growth 18.0 15.0 16.0  Central to strategy and TSR ethos 11.5 12.7 13.2 10.0 8.7  UEPS increase of 15% - dividend up 14% 7.2 6.0 5.0  Target cover ratio c. 2.5 times 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2017 Preliminary Results 11

Growth Strategy Opportunities Organic & Legislative Growth • Highways England RIS1 and RIS2 to 2025 • Focus on growing revenue and margin in existing • Hinkley Point, HS2, AMP6, Control Period 6 markets through product development and innovation • Energy policy - offshore wind farms • Identify Governmental legislation that creates • USA FAST Act, wider Industrial Policy opportunities to deliver innovative products and services Geographical Expansion • Rental products into Scandinavian roads • Introduce proprietary products to UK & US specification • Zoneguard USA and Australia/NZ into new geographies • HVM products to Middle East • Countries with new and ageing infrastructure requirements • Pipe Supports into Far East Power Generation • Utilise manufacturing capacity for other Group products Strategic Acquisition • Composite and power utility products in USA • Acquisitions adding value by creating synergies with • Road products in countries with legislative spend existing businesses, extending our product portfolio • Galvanizing in existing geographies and geographical coverage • Developing off-site modular build capability 2017 Preliminary Results 12