- Top-line growth accelerates in latest quarter
- Full-year profits now seen above best estimates
- Firm demonstrates strong pricing power
Shares in engineering group Hill & Smith (HILS) jumped as much as 9% to £11.94 in early trading, topping the mid-cap leader board, after the firm posted a positive trading update and raised its full year outlook.
WHAT DOES HILL & SMITH DO?
The Birmingham-based company mainly provides road safety equipment including crash barriers, gantries and traffic solutions, steel and composite products for the rail, energy and utility markets, industrial flooring and galvanizing services, and sells to customers in the UK and the US.
The firm said it enjoyed ‘robust’ trading in the four months to the end of October, with like-for-like revenues up 18% on a constant-currency basis compared with a 12% increase at the half-year stage.
Most of the uplift came from price increases as the firm passed on higher material and other input costs, and operating margins expanded on the same period last year.
As a result of better trading and a tailwind from the strong dollar, the company now expects full year operating profits to come in above the top end of market expectations, which are between £85 million and £90 million.
The Roads & Security division delivered decent growth with the security business offsetting lower safety barrier orders as UK road upgrade projects were delayed.
The Engineered Solutions business performed well, especially in the US, and the Galvanising division delivered a solid performance thanks to price rises and the integration of a recent acquisition.
WHAT DO ANALYSTS THINK?
Following the update and the increase in guidance, analysts at Shore Capital raised their 2022 operating profit forecast to £93 million but left their 2023 estimates unchanged due to the uncertain economic outlook.
However, given the company’s record of managing expectations, they say they see ‘increased scope for upgrades’ thanks to the firm’s exposure to public-sector infrastructure spending and its US presence which thanks to several recent deals drives over half of operating profits.
