Insider: FTSE 250 boss tops up stake after windfall

The boss of Hill & Smith (LSE:HILS) has followed up a quick-fire £120,000 paper profit by making another big investment in support of the high-flying FTSE 250 company.

Executive chair Alan Giddins topped up his stake on Wednesday by spending £151,000 with shares in the infrastructure products firm at their highest level in 18 months.

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They have risen 20% since his previous purchase worth £632,000 at the end of May, which Giddins made shortly after telling the AGM about a record start to the year.

That strong performance has continued, with half-year results last week driven by the fast-growing US end markets that now account for 73% of group profits.

Shares closed the week at 1,714p after the better-than-expected interim figures encouraged a number of City analysts to upgrade their earnings estimates and price targets.

They included Numis Securities, which continues to regard the company as one of its top picks after moving from 1,800p to 1,850p. Its new financial estimates leave the shares on 15.1 times forward earnings, versus the long-term average of 15.5 times.

Peel Hunt, which now sits at 1,900p, believes the company is one of the best ways to play the wave of infrastructure investment in the United States.

This has been seen in the “exceptional performance” of the company’s engineered solutions division, which supplies steel and composite materials to a range of markets including energy generation, marine, rail and housing.

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Demand has also been underpinned by the ongoing modernisation of the US electric grid, while in galvanising services the US arm delivered record revenue and operating profit.

The UK roads and security infrastructure portfolio delivered lower revenue and profit as inflationary and budget pressures in central and local government resulted in project delays and cancellations.

The division’s products include road safety barriers, street lighting columns and bridge parapets, as well as high security fencing and automated gates. Domestic conditions are likely to remain challenging heading into 2024, given the possibility that project activity may slow in anticipation of the 2025-30 Road Investment Strategy period.  

Across the group, half-year revenues rose 20% to £420.8 million, while a 240 basis point jump in operating margin to 14.9% contributed to a 39% rise in earnings per share to 53.6p.

The company is highly cash generative and a strong balance sheet provides flexibility to target growth opportunities through acquisitions. Shareholders are due to receive 15p a share dividend on 5 January, which represents a 15% increase on a year earlier. 

Currency headwinds and the phasing of orders means this year’s results are likely to be first-half weighted, but modestly better than the City thought prior to last week.

In the medium to longer term, Hill & Smith believes its outlook for sustainable infrastructure markets is strong. In particular, its US businesses look well placed due to factors such as onshoring and Federal funding through the Infrastructure Investment and Jobs Act.

Giddins, the former head of private equity at 3i, joined the board in 2017 and has been executive chair since July 2022 following the departure of CEO Paul Simmons.

He is expected to continue day-to-day running of the company for another 12 to 18 months to provide the group with continuity and stability.

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Elsewhere in the FTSE 250, the boss of OSB Group (LSE:OSB) has spent £100,000 backing shares to continue their recovery after a profit warning at the start of July.

Andy Golding’s purchase on Friday at 396.5p compared with 331p in the days after the OneSavings Bank business revealed a big one-off hit as customers rushed to lock in new fixed-term deals.

Their changed behaviour in response to higher interest rates meant they spent much less time than previously on the reversion or variable rate when deals ended. As accounting standards recognise interest income evenly over the expected life of a mortgage, OSB said it would need to book a provision of up to £180 million in half-year results.

This adjustment caused last week’s profits to fall 60% to £117 million, but Golding said the fundamentals of the business were strong as he reported net loan book growth of 4% and three months-plus arrears broadly stable at 1.2%.

Peel Hunt, which reiterated its “buy” recommendation and price target of 672p, drew reassurance from the company’s unchanged guidance that includes 2023 underlying net loan book growth of about 7% and a net interest margin of 2.6%.

The broker added that the OSB retains the firepower to continue share buybacks and special dividend payments. Jefferies has a target of 780p, compared with 393.8p at last week’s close.