Infrastructure engineering business Hill & Smith (HILS) is today’s biggest faller on the entire FTSE All-Share index, slumping 8.5% to £13.46. This is despite news from elsewhere that might have dragged far more heavily on other stocks.
Today’s £2 fixed-odds betting terminal cap bashing bookmaker share prices, for example, or more letter and parcel delivery declines squeezing Royal Mail (RMG) say. Nope, Hill & Smith’s slide beats the lot, as of mid-morning trading anyway.
For the record, Hill & Smith is best-known for manufacturing roadside crash barriers placed on bends or the central reservation of motorways. It also makes street lighting, bridge-side fencing, pipe network support struts used by water companies and has a galvanising business.
MISS ON PROFITS
Today’s share price slump begs the question, what calamity has befallen the company?
‘Underlying operating profit is lower than the same period in the prior year,’ the company tells us in a trading update covering the January to end April period.
‘Revenue of £185.1m for the period is marginally behind prior year (2017: £191.3m), but similar after adjusting for acquisitions/disposals and currency translation.’
Full year guidance has not been changed. That is currently pitched at operating profit for full year 31 December 2018 of £84.4m, according to consensus data from Reuters. That would imply about 4% up on 2017’s £81.3m equivalent.
DREADED SECOND HALF WEIGHTING
What is now anticipated is a second half weighted performance this year. This is largely due to UK project delays, partly because of work time lost to the Beast from the East snowstorm in February/March.
But investors are spooked. They’ve seen this game of second half catch-up played before and witnessed the frequency of profit warnings as the ultimate result.
Analysts at Numis Securities offer comments of comfort. ‘Whilst this may raise some concerns, there are reasons to feel confident, including pick-up in the second quarter, including the M6 contract commencing and construction markets getting back on track,’ they say.
Numis is currently leaving its underlying forecasts unchanged, which stand at £80.2m of pre-tax profit on £615m of revenue. But the situation will need watching closely.
The shares have been on a super five-year run up from below 500p, but Hill & Smith’s is also one of those very cyclical industries. On a 2018 price to earnings multiple of 17-times even after today’s share price fall, the company has limited scope for error.
