Hill & Smith half-year results 2026: US growth drives profit upgrade

Hill & Smith has raised its full-year expectations after strong growth from its US infrastructure businesses powered a solid first half.

The headline numbers look encouraging. Revenue increased by 8% to $606.7 million, underlying operating profit rose by 8% to $102.9 million and underlying earnings per share advanced by 9% to 90.6 cents.

However, there is a clear divide within the group. US operations and galvanizing are delivering strong growth, while difficult UK markets have caused a sharp deterioration in the UK & India Engineered Solutions division.

Investors can read the original company announcement or visit the Hill & Smith PLC share page for further company coverage.

Hill & Smith's key half-year figures

Hill & Smith now reports in US dollars, reflecting the growing importance of its American operations. Comparative figures have been restated accordingly.

Metric	H1 2026	H1 2025	Change
Revenue	$606.7 million	$561.1 million	8%
Underlying operating profit	$102.9 million	$95.5 million	8%
Underlying operating margin	17.0%	17.0%	No change
Underlying profit before tax	$96.1 million	$89.6 million	7%
Underlying earnings per share	90.6 cents	82.9 cents	9%
Statutory operating profit	$76.5 million	$88.3 million	-13%
Statutory earnings per share	60.2 cents	76.3 cents	-21%
Interim dividend	25.0 cents	23.4 cents	7%

Organic constant currency revenue increased by 5%. This measure, abbreviated to OCC, strips out currency movements and changes caused by acquisitions, disposals and business closures.

The underlying operating margin remained at 17.0%. That represents a respectable outcome because stronger US margins had to absorb considerably weaker profitability in the UK-focused division.

Why statutory profit fell despite underlying growth

The gap between the underlying and statutory results deserves attention.

Statutory operating profit fell by 13% to $76.5 million, while statutory profit before tax declined by 16% to $69.2 million. Statutory earnings per share dropped by 21% to 60.2 cents.

Hill & Smith recorded $26.4 million of non-underlying operating charges, compared with $7.2 million a year earlier. These included $13.2 million associated with strategic and operational action in the UK, plus $7.4 million of amortisation relating to acquired intangible assets.

The total also included a $7.8 million accounting loss on the disposal of the UK permanent steel road barrier business. Most of the non-underlying charge was non-cash, with the company reporting a net cash cost of $1.0 million.

Underlying figures therefore show improving day-to-day trading, but the statutory decline highlights the cost of reshaping the weaker parts of the portfolio.

The US businesses are doing the heavy lifting

US Engineered Solutions delivered 14% OCC growth in both revenue and underlying operating profit. Reported revenue increased by 18% to $311.6 million, while underlying operating profit rose by 20% to $56.5 million.

Its margin improved from 17.9% to 18.1%.

Demand was strong across electricity transmission and distribution, data centres, water infrastructure and industrial construction. The electrical transmission and distribution operation entered the second half with record order books.

Freeberg, acquired in April, also performed well. Revenue was in line with expectations and margins were somewhat ahead of expectations. Its new Arizona facility is being commissioned, although Hill & Smith expects its initial contribution to come at lower margins while activity builds.

The growing US weighting is significant. US businesses generated 66% of group revenue and 84% of underlying operating profit during the half, up from 61% and 76% respectively.

That exposure is supporting growth, but it also means group performance is increasingly reliant on maintaining American infrastructure momentum.

Galvanizing delivers the strongest margins

Galvanizing Services produced another strong result. OCC revenue increased by 11%, with underlying operating profit up 18% to $38.7 million.

The divisional margin expanded from 24.5% to 25.6%, making galvanizing the group's most profitable division by a comfortable distance.

Volumes grew by 12% overall, including 16% in the US and 6% in the UK. The company expects another good second-half performance from its US operations, with first-half margins continuing.

Capacity investments in US galvanizing and transmission and distribution remain on track, with commissioning expected to begin from the end of 2026.

UK weakness remains the main concern

UK & India Engineered Solutions had a much tougher half. OCC revenue declined by 13%, while underlying operating profit fell by 61%.

Its operating margin dropped from 9.6% to 5.3%. On a statutory basis, the division recorded an operating loss of $8.2 million.

The problems include weak activity in UK roads, industrial infrastructure and residential construction. Management expects challenging UK conditions to continue during the second half, particularly in roads and housebuilding.

Hill & Smith is responding by disposing of lower-growth activities, combining Prolectric and Mallatite, transferring galvanizing work from Barkers and directing resources towards data centres and other higher-growth markets.

These actions may support a margin recovery over time, but the timing and scale of any UK market improvement remain uncertain.

Cash conversion is the other weak spot

Underlying cash conversion fell to 50% from 85%, while free cash flow declined from $66.8 million to $30.9 million.

The main reason was a $44.8 million working capital outflow as faster-growing US businesses required additional funding. Management expects much of this build to reverse during the second half and continues to target cash conversion of more than 80% over time.

Net debt increased to $170.9 million from $68.7 million at the end of 2025. This reflected acquisitions, capital expenditure and share repurchases. Nevertheless, covenant leverage remained low at 0.4 times, leaving substantial financial flexibility.

Return on invested capital increased from 25.8% to 26.7%, remaining comfortably above the group's target of more than 22%.

Higher dividend and upgraded outlook

The interim dividend increased by 7% to 25.0 cents per share. It is due to be paid on 8 January 2027 to shareholders on the register on 27 November 2026.

Hill & Smith is also continuing its £100 million share buyback programme, with £58.6 million completed by 10 August 2026.

Most importantly, management now expects FY26 underlying operating profit to be modestly ahead of its previous expectations. The earlier guidance was around $212 million, although a precise revised figure has not been disclosed.

The group also expects a small full-year margin improvement compared with 2025 and remains committed to reaching an underlying operating margin of at least 18% over time.

What investors should watch next

This is a positive update overall. US demand is strong, galvanizing margins are excellent, returns remain high and the balance sheet provides room for investment, acquisitions and shareholder returns.

The less comfortable parts are the UK division's margin collapse, weaker first-half cash conversion and the reduction in statutory profit after restructuring and acquisition-related charges.

The investment case now rests heavily on three things: continued US infrastructure demand, successful delivery of new capacity and a gradual recovery in UK profitability. For now, strength in the first two areas has been sufficient for Hill & Smith to raise expectations despite the third remaining firmly under pressure.