Hill & Smith Holdings Plc (LON: HILS)– Adopting Cost and Cash Management Initiatives

Hill & Smith Holdings Plc is an industrial engineering company which deals in supply and manufacturing of galvanising services and infrastructure products.

Board Changes
On 2^nd April 2020, Hill & Smith Holdings announced that its Chief Executive, Derek Muir, will be stepping down from his position on 31^st December 2020 and will be replaced by Paul Simmons.

Covid-19 Update – Unable to Provide Full Year Guidance Amid the Uncertainties
On 27^th March 2020, Hill & Smith Holdings released an update on the trading, liquidity & financing position, and impact of covid-19 on business performance. The group is focussed on ensuring the health and wellbeing of its employees and advised them to follow the guidelines set by the World Health Organisation and local authorities. The group’s revenue and operating profit remained in line with the management expectations in the first two months of FY2020 to 29^th February 2020 and in the mid-March witnessed disruption in Indian and French operations. In the United Kingdom, the company has closed approximately half of its operations, while the US business remained open with lower demand. The group had committed facilities of GBP 332.6 million, with on-demand facilities of GBP 13.9 million and net borrowings of GBP 185.9 million as on 29^th February 2020. The committed facilities include revolving credit facility of around GBP 285 million and senior unsecured notes of USD 70 million. The group has taken multiple measures to preserve cash and decided to withdraw dividend payment until the situation gets normal. At present, the group is not able to quantify the impact of the outbreak and lockdown imposed by the government and will be giving update once the situation stabilises. In the longer term, the group expect strong investment in infrastructure in both the US and the UK markets.

Share Price Performance

Daily Chart as of April 23^rd, 2020, before the market close (Source: Thomson Reuters)

Hill & Smith Holdings Plc’s shares were trading at GBX 1,102.00 at the time of writing before the market close (at 3:17 PM GMT) on 23^rd April 2020 and up by 2.61% versus the previous day closing price. Stock's 52 weeks High is GBX 1,534.00 and Low is GBX 844.00.

Growth Catalysts
The group responds to the competition and pressure through the launch of new competitive product and strategical acquisitions. The company is confident that the business model, financial strength, and market-leading positions indicate growth prospects for the company in the future.

Conclusion
The company has delivered an improved performance in the first two months of the financial year 2020 and started to experience disruptions in the mid-March. The solid presence in niche infrastructure markets is benefiting the company’s financial and operational performance, primarily in the US and UK. However, the company is dealing in an industry where competition and price pressure is very high; also, it varies from product to product and geographical market. However, the short term macroeconomic and political uncertainties will remain in the market, and the operations are further impacted due to outbreak of Covid-19. The group has been taking multiple steps to tackle the impact of the outbreak and enter a position to get maximum benefits when the situation gets normal.

Based on the above rationale, we have given a "HOLD" recommendation at the current price of GBX 1,072.28 (as on 23^rd April 2020, before the market close at 8:25 AM GMT).

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