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Investing.com -- Shares of Hill & Smith (LON:HILS) surged more than 10% on Wednesday after the company’s latest earnings reported stronger-than-expected results for fiscal year 2024, prompting analysts at Jefferies to reaffirm their positive outlook.
The infrastructure company posted EBITA of £143.5 million, 3% ahead of consensus estimates, with margins improving across all divisions.
The company also raised its EBITA margin target to 18% or higher and increased its return on invested capital goal to 22% from the previous 18%, signaling confidence in its earnings quality.
Revenue for the year rose 3% year-over-year, with organic revenue flat. A 5% boost from acquisitions offset a 2% foreign exchange headwind.
Organic growth turned positive in the second half, rising by approximately 2%. Earnings per share came in at 122.6p, marking a 16% year-over-year increase and exceeding consensus forecasts by 4%.
Net debt stood at £96.9 million, with a net debt-to-EBITDA ratio of 0.3x, both better than anticipated.
Among its segments, Engineered Solutions saw a strong performance, with revenue rising 5% organically and 17% on a constant currency basis, driven by acquisitions in structural steel products.
EBITA climbed 21% to £77.8 million, supported by a solid order book in the U.S. composites business. The Galvanizing division also posted gains, with EBITA up 10% to £50.3 million, benefiting from strong demand in the U.S.
The Roads & Security segment, however, faced headwinds, with organic revenue down 9% due to a slowdown in the U.S. off-grid solar business and budgetary pressures in the UK.
Despite the revenue decline, EBITA margins improved to 6.5%, helped by the absence of one-off costs from the previous year.
The company also moved to streamline operations, selling its loss-making Australian roads and UK Parking Facilities businesses in early 2025.
Under new CEO Rutger Helbing, Hill & Smith has begun refining its strategy, focusing on market classification to guide future acquisitions.
The company’s M&A budget remains at £50 million to £70 million, with management indicating that excess capital could be returned to shareholders if leverage remains low.
Hill & Smith expects strong momentum in the U.S. to continue, while the UK remains a more challenging market with some potential for recovery.
India is seen as an area of growth. Jefferies maintains its “buy” rating on the stock, with a price target of 2,540p, suggesting further upside potential.