Voss Capital, LP on Hill & Smith

Voss views Hill & Smith as a predominantly American infrastructure compounder that is mispriced because it remains listed in the UK, with approximately 84% of first-half operating income generated in the United States. At purchase, the shares traded at roughly 8.7x next-twelve-month EBITDA compared with 11.3x for AZZ and 11.8x for Valmont Industries. Its US Engineered Solutions and Galvanizing businesses are growing at double-digit rates, while electrical-grid infrastructure now represents 24% of group revenue and data centers 9%. The galvanizing operation carries best-in-class margins, and capacity expansions across US businesses should provide additional growth. Management is reducing the importance of the weaker UK operation, shifting financial reporting to US dollars and reallocating capital toward higher-return US opportunities. With high-20s percent ROIC, only 0.4x net debt to EBITDA, disciplined acquisitions and an active £100 million buyback, Voss believes consensus growth expectations are conservative.