Hill & Smith (LON:HILS) reported a strong first-half performance for 2026, led by double-digit growth in its U.S. operations and prompting the group to raise its full-year operating profit expectations.
Revenue reached $607 million, up 5% on an organic constant-currency basis, while underlying operating profit increased 3% on the same basis. Underlying operating margin was unchanged at 17.0%, as further margin expansion in the U.S. offset weaker profitability in the U.K. engineered solutions operations.
U.S. Businesses Drive Growth
The company’s U.S. businesses delivered 14% organic constant-currency revenue growth during the first half and increased their contribution to 66% of group revenue and 84% of group operating profit.
U.S. Engineered Solutions recorded 14% organic constant-currency revenue growth, with margin rising 20 basis points to 18.1%. V&S Utilities, Hill & Smith’s electrical transmission and distribution business, reported “very strong” double-digit revenue growth and margins above the divisional average. The business ended June with a record order book following higher order intake during the period.
The Paterson Group, which supplies engineered pipe supports to infrastructure, water, data center and energy projects, generated more than 20% revenue growth and record margins after bringing additional capacity online at its Waggaman, Louisiana facility.
Galvanizing Services delivered 11% organic constant-currency revenue growth and 18% profit growth. Divisional margin increased 110 basis points to 25.6%, with U.S. galvanizing revenue rising 16%. McLeish said capacity utilization in both the U.S. and U.K. galvanizing networks was about 70% to 75% of theoretical capacity, a level management considers optimal for maintaining operational flexibility.
The company said it is expanding its Columbus, Ohio galvanizing facility, an investment expected to add roughly 15% to existing theoretical capacity. The additional capacity is due to begin coming online from the end of 2026.
Transmission and Distribution Investment
Management highlighted U.S. power transmission and distribution, or T&D, as a major medium-term growth opportunity. The group generated about $150 million of first-half revenue from T&D, equivalent to 24% of group revenue and almost entirely generated in the U.S.
Hill & Smith said U.S. utility capital spending is projected at about $1.4 trillion over the five years to 2030, with around half expected to be directed toward transmission and distribution. The company said this implied T&D market growth approaching 10% annually across the period.
V&S Utilities accounted for almost 60% of the group’s T&D revenue and about 15% of overall group revenue. Management expects the business to grow at a low-double-digit rate over the medium term, though it cautioned that its particularly strong first-half growth reflected efforts to work through a substantial order book.
Hill & Smith is investing about $10 million to expand V&S Utilities’ Burton, Ohio site, with capacity expected online by year-end. It is also spending approximately $20 million to relocate its Muskogee, Oklahoma operation to a purpose-built facility expected to open late in 2027.
Management said it had not seen meaningful changes in the competitive environment in the substation niches served by V&S Utilities, nor a significant shift in its customer base away from utilities and major engineering, procurement and construction contractors. It cited lead times and service levels as competitive advantages.
Acquisitions and Data Center Exposure
The group said its acquisitions of Freeberg and Hentech had been integrated successfully and were trading well. Freeberg, acquired in April, designs and manufactures custom enclosures and engineered solutions. McLeish said Freeberg produced more than $10 million in revenue during the first half of Hill & Smith ownership and delivered margins in the mid-20% range.
Freeberg is commissioning a new $12 million facility in Eloy, Arizona, which will manufacture generator enclosures for data centers and other markets. Management expects second-half revenue to accelerate to a run rate of about $25 million, although margins are expected to fall to the mid-teens initially as fixed costs are absorbed while production ramps up.
For the nine months of ownership in 2026, Hill & Smith expects Freeberg to generate about $35 million in revenue with an 18% to 20% margin. Management said the business could deliver as much as $60 million in revenue next year, with margins expected to remain at least around the group’s 18% target level.
Group revenue from high-growth and resilient markets increased to 39% in the first half, from 32% a year earlier. Data centers represented 9% of group revenue, with management expecting Freeberg’s growth to increase that contribution. Freeberg has visibility on available data center demand over the next two to three years, management said.
U.K. Actions and Outlook
U.K. and India Engineered Solutions revenue and operating profit declined amid challenging U.K. market conditions, lower activity in roads, industrial infrastructure and residential construction, and a prior-year one-off transport infrastructure project benefit. However, data center revenue increased to 17% of divisional sales from 11% a year earlier.
The company has transferred galvanizing activity from Barkers to Joseph Ash to release capacity at Barkers for data center and other higher-margin work. It also combined Prolectric and Mallatite under common leadership and disposed of its permanent steel road barrier business.
Cash conversion was 50% in the first half, below the comparative period, due to working-capital investment to support growth in U.S. businesses. McLeish said the company expects the working-capital build to begin reversing in the second half and continues to target cash conversion of at least 80% for the full year.
Return on invested capital rose 90 basis points to 26.7%, above the company’s 22%-plus framework target. Covenant leverage stood at 0.4 times, with more than $340 million of funding headroom. The group had completed about £59 million of its £100 million share buyback program.
Hill & Smith now expects full-year 2026 operating profit to be modestly ahead of previous expectations, with a small year-on-year improvement in margin. Management said it would be disappointed if it did not complete further acquisitions before year-end, citing an active and growing M&A pipeline.
About Hill & Smith (LON:HILS)
Our purpose is to create sustainable infrastructure and safe transport through innovation.
Hill & Smith PLC is an international group with leading positions in the supply of infrastructure products and galvanizing services to global markets. Through a focus on leading positions in niche markets we aim to consistently deliver strong returns and shareholder value.
Supplying to, and located in, global markets the Group serves customers from facilities in Australia, India, Sweden, the UK and the USA, building a presence in international markets, where countries are upgrading or improving their infrastructure as their economies grow.
