21 September 2021

SIG plc

Results for the 6 months to 30 June 2021

Return to Growth strategy gathers momentum

 

SIG plc ("SIG", "the Group" or "the Company") today announces its half year results for the six months ended 30 June 2021 ("H1 2021" or "the period").

 

Highlights

·    Return to Growth strategy gathers momentum: UK profitable, and France and Poland delivering record first halves

·    Group like-for-like H1 sales up 33% on prior year, and 1% up on 2019. Group sales excluding the UK Distribution business up 8% on 2019, with UK Distribution itself now back on track

·    Strong gross margin management: H1 gross margin of 25.9%, 100bps higher than H1 2020

·    Impact of material shortages and cost price inflation successfully managed to date, with minimal impact in H1

·    £13.6m underlying operating profit in H1 (H1 2020: £42.9m loss). Underlying profit before tax ("PBT") of £3.0m (H1 2020: £53.8m loss)

·    Continued balance sheet strength provides confidence to invest in growth strategy and to manage near term supply challenges.  Net debt in line with expectations after H1 seasonal working capital increase, at £289.4m post IFRS 16 (H1 2020: £341.8m; FY2020: £238.2m) and £57.5m pre IFRS16 (H1 2020: £90.0m; FY2020: £4.1m) 

·    Trading in July/August remained solid, strengthening the Board's confidence in full year outlook despite caution over ongoing impact of material shortages and cost price inflation

·    Continued profit improvement expected in H2 2021 and full year underlying operating profit anticipated to be ahead of prior expectations

 

Underlying1 operations	H1 2021	H1 2020	Change vs 2020
Revenue	£1,108.2m	£838.9m	32.1%
LFL2 sales	33.0%	(23.9)%
Gross margin	25.9%	24.9%	100bps
Underlying1 operating profit/(loss)	£13.6m	(£42.9m)
Underlying1 profit/(loss) before tax	£3.0m	(£53.8m)
Underlying1 (loss) per share	(0.3)p	(9.1)p	8.8p
Operating margin	1.2%	(5.1)%	630bps
Net debt	£289.4m	£341.8m
Net debt (pre IFRS 16)	£57.5m	£90.0m
Statutory results	H1 2021	H1 2020
Revenue3	£1,108.2m	£840.1m
Operating profit/(loss)3	£9.0m	(£102.9)m
Loss before tax3	(£1.6)m	(£125.4)m
Basic loss per share3	(0.7)p	(9.1)p
Total loss after tax4	(£8.1)m	(£53.8)m
Dividend per share	n/d	n/d

 

 

1.Underlying represents the results before Other items. Other items have been disclosed separately in order to give an indication of the underlying earnings of the Group. Further details are disclosed in Note 4. H1 2020 underlying results have been restated to include Building Solutions within underlying results consistent with the current period.

2. Like-for-like ("LFL") is defined as the growth/(decline) in sales per working day in constant currency excluding any current and prior year acquisitions and disposals. Sales are not adjusted for branch openings or closures. H1 2020 LFL sales differ from previously reported due to the reclassification of Building Solutions into underlying consistent with the current period.

3. Statutory results of continuing operations only in H1 2020.

4. Statutory results including both continuing and discontinued operations in H1 2020.

 

Commenting, Steve Francis, Chief Executive Officer, said:

 

"I'm delighted with the progress of our Return to Growth strategy: our customers, supplier partners and colleagues continue to affirm that our focus on empowered and entrepreneurial local teams, delivering exceptional service and expertise to our customers, is a successful approach for building back our market share and profitability.

 

"The strong revenue growth across our broad product offering, together with disciplined margin management, has been key to delivering an earlier and stronger profit than previously anticipated.

 

"The achievements to date have only been possible because of our teams' energy, resilience and commitment in the face of the continually challenging circumstances, both with the effects of Covid-19 and the more recent industry-wide supply challenges.

 

"Trading in July and August has continued to be solid and we expect continued profit improvement through H2 2021, despite the ongoing impact of material shortages and cost price inflation. As a result, providing the disruption from these headwinds does not worsen, we now anticipate full year underlying operating profit will be ahead of our prior expectations.

 

"The momentum behind our Return to Growth strategy is positioning the Group well, and we have growing confidence in our ability to take advantage of both strong near‐term demand and healthy long‐term fundamentals, including market tailwinds from sustainability initiatives.  The continued strength of our balance sheet, along with the positive trading momentum, provides a strong platform for sustainable, profitable growth and cash generation."

Investor and Analyst presentation will be available on www.sigplc.com from 7:15am on Tuesday 21 September.  A live Q&A session, hosted by Steve Francis, CEO and Ian Ashton, CFO, will take place at 10:00am.

 

To join the Q&A session:

https://storm-virtual-uk.zoom.us/j/86538179499

 

Or join by phone:

Dial (for higher quality, dial a number based on your current location):

US: +1 646 876 9923 or +1 669 900 6833 or +1 253 215 8782 or +1 301 715 8592 or +1 312 626 6799 or +1 346 248 7799 or +1 408 638 0968

United Kingdom: +44 208 080 6592 or +44 330 088 5830 or +44 131 460 1196 or +44 203 481 5237 or

+44 203 481 5240 or +44 203 901 7895 or +44 208 080 6591

 
Webinar ID: 865 3817 9499

International numbers available: https://storm-virtual-uk.zoom.us/u/kbRZYfFScI

 

 

LEI: 213800VDC1BKJEZ8PV53

 

 

Enquiries

SIG plc			+44 (0) 114 285 6300
Steve Francis	Chief Executive Officer
Ian Ashton	Chief Financial Officer
FTI Consulting			+44 (0) 20 3727 1340
Richard Mountain
Peel Hunt LLP - Joint broker to SIG			+44 (0) 20 7418 8900
Mike Bell / Charles Batten
Jefferies International Limited - Joint broker to SIG			+44 (0) 20 7029 8000
Ed Matthews / Will Soutar

 

About

 

SIG plc is a leading European supplier of specialist building solutions to trade customers across the UK, France, Germany, Ireland, Benelux and Poland. As a distributor of insulation and interiors products and merchant of roofing and exteriors products, SIG facilitates one-stop access to an extensive product range, provides expert technical advice and coordinates often complex delivery requirements. For suppliers, SIG offers a channel through which products can be brought to a highly fragmented market of smaller customers and sites that are of insufficient scale to supply direct. SIG employs approximately 6,500 employees across Europe and is listed on the London Stock Exchange (SHI). For more information, please visit the Company's website, www.sigplc.com.

 

Strategic progress

 

The key pillars of our strategy are our people, our business model and its focus on customer proximity and service, and our supplier partnerships.

 

We have invested in our people:

·    Market-experienced MDs in place in all countries following recent appointments in Germany and Benelux

·    Re-built the UK leadership team: 5 of 7 Directors new since mid-2020 with an average of 27 years industry experience

·    UK Distribution: Added 86 commercial or branch leaders with an average industry experience of 13 years; created and filled 32 new P&L responsible branch manager positions

·    Training programmes on product expertise ramped up in France and Poland

·    Strengthened our focus on Health & Safety as a foundation for operational excellence

 

We have implemented a consistent business model - the Seven Pillars Return to Growth Strategy - in all country operations and have streamlined central functions in line with our de-centralised approach.  Key to this are the following:

 

·    Re-connecting with customers - a stronger local branch-led and entrepreneurial approach with more customer facing resources

·    Strengthened supplier partnerships are in place underpinned by investment in category expertise and local empowerment, which has been crucial managing supply challenges this year

·    Growth investments include new branches in all operating countries, upgraded ecommerce capabilities and highly selective M&A

 

We continue to reinforce our "franchised" branch-led business model by upgrading operational processes, systems and controls.

 

These are the foundations for further market share recapture and profitable growth.

 

Our strong trading performance in the first half of 2021 is testimony to the successful implementation of this strategy, particularly within UK Distribution.

 

Now that we are profitable again our focus is on completing the margin improvement programmes in the UK, Germany and Benelux, and continuing to expand the growth driven margin in other operating companies, and thereby moving the Group into stable and strong cash generation as a platform for the next stage of our strategy.

 

Strong Balance Sheet

 

The Group's liquidity position has remained strong in H1 2021 with significant headroom of £199m at the end of June comprising cash of £174m and £25m undrawn on the committed Revolving Credit Facility.  Net debt finished H1 2021 at £58m on a pre IFRS 16 basis, and £289m on a post IFRS 16 basis.

 

The cash outflow in H1 was largely as expected, driven by the seasonal increase in working capital, which was more pronounced than usual due to the strong trading. In addition, where possible and appropriate we have built up modest increases in our inventory holding levels, in light of likely ongoing supply challenges in the coming months. We have continued to navigate these uncertainties successfully to date.  Our strong balance sheet can accommodate this short-term investment in inventory, and our strong liquidity position continues to provide an appropriate buffer given the prevailing macro-economic uncertainties.

 

Dividend

 

No interim dividend will be paid for 2021.  However, continued successful execution of the Return to Growth strategy will return the Group to sustainable, profitable growth and cash generation, supporting a range of capital allocation priorities. The Board reiterates its medium-term commitment to return to a progressive dividend policy, appropriately covered by underlying earnings.  

 

The Group completed a share capital reduction in June by cancelling its share premium account.  This has created distributable reserves to provide flexibility for dividend payments in future. 

 

People

 

The Board would like to thank all employees of SIG for their continued commitment and resilience. Their efforts in 2020 and the first half of this year have laid the foundation for the excellent results in 2021 so far, and for the next phase of SIG's evolution as we focus on building a stronger business with a high performing workforce that is rewarded for making a positive difference.  We are committed to building a great company that can play a key role in the construction supply chains across Europe for many years to come.

 

Covid-19

 

The safety of our people, customers and suppliers continues to be our primary concern.  New safety protocols developed during the pandemic continue to be adhered to across the Group, in line with the government guidance across all jurisdictions in which it operates.

 

Despite further lockdowns and restrictions from January onwards, the business was able to trade broadly as normal, albeit within the new operating norms and protocols.  The Irish market continued to be impacted by market restrictions until May 2021 but has been operating largely as normal since then.

 

 

Like-for-like sales growth by market is summarised as follows:

 

1 January to 30 June LFL Sales Growth		2021 vs 2020	2021 vs 2019	2021 Jan-June £'m
UK Distribution		54%	(19)%	239
UK Exteriors		58%	14%	199
UK		56%	(7)%	439
France Distribution		38%	8%	101
France Exteriors		34%	19%	206
Germany		11%	1%	194
Benelux		2%	(10)%	47
Ireland		14%	(21)%	37
Poland		22%	20%	84
EU		22%	7%	669
Group		33%	1%	1,108

 

As noted in the trading update on 14 July 2021, revenues in H1 were strong with a return to profitability faster and more significant than previously expected, with like-for-like ("LFL") growth of 33% compared to the Covid-affected prior year and up 1% against 2019.

 

This reflects the ongoing positive impact of the Group's Return to Growth strategy, which is delivering improved organic sales performance, and has been supported by continuing robust demand in the repair, maintenance and improvement ("RMI") segments in the majority of markets. Profitability improved throughout the period, a result of the normal seasonality in the business and the improving trading across the Group.

 

The UK Distribution turnaround, focused on delivering distinctive expertise and superior local service, is ahead of plan and shows continued momentum. We remain very encouraged by the enthusiasm and energy with which our teams have embraced and driven the new strategy.  The business's sales were on a declining trend throughout 2019 and most of 2020, and hence the 19% drop versus 2019 shown above. The monthly growth figures vs 2019 have turned positive in early H2, in line with previous guidance. The UK Exteriors business is trading very strongly, benefitting from the strong demand environment, growing 14% over 2019.

 

The French businesses are continuing to perform strongly, benefitting in particular from strong RMI demand in Exteriors, as well as the strong foundations built in the business in recent years.  Germany's performance is improving, with good growth throughout the half. We remain confident the Benelux performance will pick up over coming months following the recent changes made in its commercial leadership.

 

Ireland was affected by the significant Government restrictions imposed on construction from  January to May this year, and we have seen a return to LFL sales growth over the summer.

 

Poland has achieved record levels of revenue in Q2 2021, and this has continued into Q3, with increasing customer numbers and strong product mix.

 

 

 

Outlook

 

We are anticipating a continued impact from material shortages, which could be more significant than in H1, and which could persist for an extended period.  Driver shortages have also affected the supply chain in recent weeks, notably in the UK.

 

Given these prevailing macro-economic uncertainties, we retain a cautious view on market conditions for the remainder of the second half at this stage.  However, the strong results in H1, the solid trading seen in July/August and continuing robust demand, together with the effectiveness of our supply chain management and commercial agility, gives the Board confidence for the full year performance.  Providing the disruption from material shortages and haulage constraints does not worsen in coming months, full year underlying operating profit is now anticipated to be ahead of prior expectations.

 

 

 

 

Revenue and gross margin

 

The Group saw a 33% increase in its LFL revenue over the first half of the year, principally as a result of the Covid-19 impact on 2020, along with some impact from the passing on of input cost inflation, with Group underlying revenue up to £1,108.2m (H1 2020: £838.9m). Underlying results exclude the results from the businesses that are classified as non-core and Other items, in order to provide a better understanding of the performance of the Group on a continuing basis. When comparing 2021 performance with 2019, which was unaffected by Covid-19, revenues grew by 1%, although this in itself is distorted by the declines in the UK Distribution business seen from mid-2019 to late 2020.  Excluding UK Distribution, revenues grew by 8% compared with 2019. On a statutory basis, Group revenue was £1,108.2m (H1 2020: £840.1m).

 

Underlying gross profit increased 37.3% to £287.0m (H1 2020: £209.1m) with a gross profit margin of 25.9% (H1 2020: 24.9%). This improvement primarily reflects stronger performance in the UK and France.

 

Operating costs and profit

 

The Group's underlying operating costs were £273.4m (H1 2020: £252.0m). The increase was primarily due to an increase in freight and other handling costs, driven by the substantially higher sales, inflation on indirect costs, and employee incentives. The Group's underlying operating profit was £13.6m (H1 2020: £42.9m loss), and at a statutory level the Group's loss before tax was £1.6m (H1 2020: £125.4m) after Other items of £4.6m (H1 2020: £71.6m). The latter included £2.3m amortisation of acquired intangibles and £2.2m costs relating to restructuring activities.

 

Segmental analysis

UK

	Underlying revenue H1 2021 £m	Underlying revenue H1 2020 £m	LFL sales	Underlying operating profit/(loss) H1 2021 £m	Underlying operating loss H1 2020 £m
			H1 2021
UK Distribution	239.3	154.9	54%	(5.4)	(27.4)
UK Exteriors	199.2	125.3	58%	7.9	(8.6)
UK	438.5	280.2	56%	2.5	(36.0)

UK Distribution, a specialist insulation and interiors distribution business, shows continued progress in regaining market share, delivering underlying revenues of £239.3m (H1 2020: £154.9m), a LFL increase of 54%. Despite supplier shortages and material allocations, specifically around plasterboard, daily sales show consistent progress. The improved trading volume drove a substantially lower loss, with the business driving the additional volumes through the existing capacity in the network.  This resulted in an underlying operating loss of £5.4m (H1 2020: £27.4m loss).

UK Exteriors, a specialist roofing merchant, which also includes our Building Solutions business, is trading extremely well, benefitting from the strong demand environment, and this resulted in underlying revenues of £199.2m (H1 2020: £125.3m), a LFL increase of 58%. The increase in revenue, further benefitting from an increased margin due to rebates and mitigation of input price increases resulted in an underlying operating profit of £7.9m (H1 2020: £8.6m loss). 

The lockdown during March and April 2020 severely impacted UK trading. Despite the lockdowns, parts of our UK business did remain open to service critical and emergency projects only, such as for the NHS, energy and food sectors. After rapidly enhancing health and safety protocols, the UK businesses were able to operate a staged reopening through April and May, in conjunction with local government guidelines.

France

	Underlying revenue H1 2021 £m	Underlying revenue H1 2020 £m	LFL sales	Underlying operating profit H1 2021 £m	Underlying operating profit/(loss) H1 2020 £m
			H1 2021
France Distribution	101.1	73.8	38%	6.2	1.3
France Exteriors	206.4	154.4	34%	10.8	1.6
France before non-core	307.5	228.2	35%	17.0	2.9
Non-core businesses	-	1.2	-	-	(0.2)
France	307.5	229.4	35%	17.0	2.7

France Distribution, trading as LiTT, a structural insulation and interiors business, saw underlying revenue increase by 37.0% to £101.1m (H1 2020: £73.8m), and by 38% on a LFL basis after adjusting for foreign exchange movements and working days. The first half of 2021 continued the revenue growth experienced in the second half of 2020 as higher levels of trading activity positively impacted revenue.  The increase in revenue, coupled with an improved margin as a result of increased supplier rebates, partially offset by an increase in operating costs due to inflation and increased trading levels, resulted in an operating profit of £6.2m (H1 2020: £1.3m).

Underlying revenue in France Exteriors, trading as Larivière, a specialist roofing business, increased by 33.7% to £206.4m (H1 2020: £154.4m), and by 34% on a LFL basis after adjusting for foreign exchange movements and working days.  The strong demand in the RMI market, witnessed in H2 2020 has continued into H1 2021.  The increase in revenue together with increased supplier rebates, partially offset by inflationary cost increases as well as increased costs to fulfil higher trading volumes, resulted in underlying operating profit of £10.8m (H1 2020: £1.6m).

2020 trading activity suffered a temporary setback in France following the short-term closure of all branches for three days in mid-March. The businesses then commenced a staged reopening through into April.

Germany

	Underlying revenue H1 2021 £m	Underlying revenue H1 2020 £m	LFL sales	Underlying operating profit H1 2021 £m	Underlying operating loss H1 2020 £m
			H1 2021
Germany	194.3	177.1	11%	2.6	(1.3)

Germany, trading as WeGo/VTi, our specialist insulation and interiors distribution business, increased revenue by 9.7% to £194.3m (H1 2020: £177.1m) and by 11% on a LFL basis after adjusting for foreign exchange movements and working days.  The improvement in H1 trading in Germany was helped by proactive stock management that allowed the business to meet customer demand in an environment of material shortages and increased lead times from suppliers.  The increased trading levels resulted in underlying operating profit of £2.6m (H1 2020: £1.3m loss).

Germany was impacted by government measures due to Covid-19 in 2020, but to a lesser extent than in the UK, Ireland and France, and trading continued from all sites throughout the period.

Benelux

	Underlying revenue H1 2021 £m	Underlying revenue H1 2020 £m	LFL sales	Underlying operating loss H1 2021 £m	Underlying operating profit H1 2020 £m
			H1 2021
Benelux	47.1	47.7	2%	(0.0)	1.8

Underlying revenue in the Benelux region fell by 1.3% to £47.1m (H1 2020: £47.7m), although increased by 2% on a LFL basis after adjusting for foreign exchange movements and working days. Trading volumes were hampered by particularly intense competitive pressure, combined with some regulatory changes in the Netherlands.  Operating profit decreased to £nil (H1 2020: £1.8m), with a growth in the cost base necessary to address some temporary operational challenges related to disruption associated with the move to new premises.

Benelux was impacted by government measures due to Covid-19 in 2020, but to a lesser extent than in the UK, Ireland and France, and trading continued from all sites throughout the period.

Ireland

	Underlying revenue H1 2021 £m	Underlying revenue H1 2020 £m	LFL sales	Underlying operating loss H1 2021 £m	Underlying operating loss H1 2020 £m
			H1 2021
Ireland	37.3	33.4	14%	(0.2)	(1.4)

Ireland, a specialist distributor of interiors, insulation, and construction accessories, continued to be impacted by Covid-19 related Government restrictions in the Republic of Ireland until 4^th May. However, due to the greater impact of the Covid-19 pandemic in H1 2020, underlying revenue for the half increased 11.7% to £37.3m (H1 2020: £33.4m), and by 14% on a LFL basis after adjusting for working days and foreign currency movements.

This additional volume, combined with a favourable sales mix and careful supply chain management in the face of material shortages and extended lead times, contributed to a much lower underlying operating loss of £0.2m (H1 2020: £1.4m loss).

Poland

	Underlying revenue H1 2021 £m	Underlying revenue H1 2020 £m	LFL sales	Underlying operating profit H1 2021 £m	Underlying operating profit H1 2020 £m
			H1 2021
Poland	83.5	72.3	22%	2.5	0.6

Poland, a market leading distributor of insulation and interiors, saw underlying revenue increase to £83.5m (H1 2020: £72.3m), with LFL sales up 22%. Despite some negative market indicators in Poland, revenue growth was strong, underpinned by an increase in customer numbers and branch openings. The business encountered extended lead times on some of its key products, although this has not had a material impact on performance.

Underlying profit for the period was £2.5m (H1 2020: £0.6m), driven by volume growth and partially offset by volume-related increases in operating costs.

Reconciliation of underlying to statutory result

 

Other items, being items excluded from underlying results, during the period amounted to £4.6m (H1 2020: £71.6m) on a pre-tax basis and are summarised in the table below:

	H1 2021	H1 2020
	£m	£m
Underlying profit/(loss) before tax	3.0	(53.8)
Other items - impacting profit/(loss) before tax:
Amortisation of acquired intangibles	(2.3)	(2.8)
Impairment charges	-	(42.8)
Profit on agreed sale or closure of non-core businesses and associated impairment charges	-	1.4
Net operating losses attributable to businesses identified as non-core	-	(0.2)
Net restructuring costs	(2.2)	(3.5)
Investment in omnichannel retailing	-	(4.1)
Costs related to acquisitions	(0.3)	-
Costs associated with refinancing	-	(6.9)
Non-underlying finance costs	-	(11.6)
Other specific items	0.2	(1.1)
Total Other items	(4.6)	(71.6)
Statutory loss before tax	(1.6)	(125.4)

 

Net restructuring costs of £2.2m (H1 2020: £3.5m) have been incurred principally in connection with the restructuring of corporate functions as part of the implementation of the Return to Growth strategy and restructuring in Benelux.

 

Costs related to acquisitions relate to the acquisition of F30 Building Products during the period.

 

Taxation

 

The effective tax rate for the Group on the total loss before tax of £1.6m (H1 2020: £125.4m) is 227% (H1 2020: nil%). As the Group operates in several different countries, tax losses cannot be surrendered, or utilised cross border and the Group therefore pays tax in some countries and not in others. Tax losses are not currently recognised in respect of the UK business, which also impacts the overall effective tax rate. The combination of these factors means that the effective tax rate is less meaningful as an indicator or comparator for the Group.

 

In accordance with UK legislation, the Group publishes an annual tax strategy, which is available on our website, www.sigplc.com.

 

Pensions

 

The Group operates four (2020: four) defined benefit pension schemes and a number of defined contribution pension schemes. The largest defined benefit scheme is a UK scheme, which was closed to future accrual in 2016. The total net pension liability in relation to defined benefit schemes at 30 June 2021 was £17.2m (30 June 2020: £33.0m; 31 December 2020: £25.1m). The last triennial actuarial valuation of the UK scheme as at 31 December 2019 was concluded at the end of March 2021. This showed that the market value of the scheme's assets had increased by 20% to £196m and their actuarial value covered 102% of the benefits accrued to members after allowing for expected future increases in pensionable salaries. As part of the funding negotiations the Company agreed to pay an additional contribution of £2.5m into the Plan in July 2021 to accelerate plans to achieve a secondary funding target.

 

Financial position

 

Overall, the net assets of the Group have decreased by 2.8% to £297.8m from £306.3m at 31 December 2020 due principally to the loss after tax for the period of £8.1m. The cash position at 30 June 2021 was £173.9m (H1 2020: £197.3m; 31 December 2020: £235.3m) with net debt of £289.4m (H1 2020: £341.8m; 31 December 2020: £238.2m).

 

Group structure

 

The results for H1 2020 have been restated to include Building Solutions within underlying results consistent with the current period and the 2020 Annual Report and Accounts, as summarised in the table below:

	Underlying revenue £m	Underlying PBT £m
As reported at HY 2020 results	817.7	(53.7)
Building Solutions	21.2	(0.1)
Restated at FY 2020 results	838.9	(53.8)

 

 

Cash flow   

	H1 2021	H1 2020
	£m	£m
Total operating profit/(loss), excluding gain on sale from Air Handling	9.0	(101.8)
Depreciation and non-cash items	38.9	79.8
(Increase)/decrease in working capital and provisions	(45.9)	(6.5)
Interest and tax	(15.8)	(14.0)
Capital expenditure	(12.0)	(13.4)
Proceeds from sale of property, plant and equipment	1.6	4.6
Free cash flow	(24.2)	(51.3)
Sale and purchase of businesses	(2.3)	149.5
Payment of lease liabilities	(29.2)	(27.2)
Repayment of debt	(0.3)	(29.0)
Costs paid in relation to capital raise	-	(1.3)
Change in cash and cash equivalents	(56.0)	40.7
Cash and cash equivalents at beginning of the year	235.3	145.1
Effect of foreign exchange rate changes	(5.4)	11.5
Cash and cash equivalents at end of the year	173.9	197.3

During the period, the Group reported a free cash outflow of £24.2m (H1 2020: £51.3m) as a result of the operating profit in the period offset by an increase in working capital, together with payments in relation to interest, tax and capital expenditure. Other movements in cash relate to £2.3m cash outflow in relation to the purchase of businesses (H1 2020: £149.5m inflow from the sale of businesses), £0.3m repayments of debt (H1 2020: £29.0m) and £29.2m payment of lease liabilities (H1 2020: £27.2m).

 

Free cash flow represents the cash available after supporting operations and maintaining capital assets, and before financing and investing activities.

 

Financing and funding

 

The Group has significant available liquidity and on the basis of current forecasts is expected to remain in compliance with all banking covenants throughout the forecast period to 30 September 2022. On 1 March 2021, the Group agreed with its lending banks and private placement noteholders to amend certain financial covenants to better align the different tests and to provide additional headroom on the interest cover covenant under stress test scenarios from March 2022.

 

Responsibility Statement

 

We confirm to the best of our knowledge that:

 

(a)       the condensed interim set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

 

(b)       the Interim Report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

 

(c)       the Interim Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

 

 

By order of the Board

 

 

 

Steve Francis                                     Ian Ashton

Director                                              Director

20 September 2021                        20 September 2021

 

 

Cautionary statement

 

This Interim Report is prepared for and addressed only to the Company's Shareholders as a whole and to no other person. The Company, its Directors, employees, agents or advisors do not accept or assume responsibility to any other person to whom this Interim Report is shown or into whose hands it may come and such responsibility or liability is expressly disclaimed.

 

This Interim Report contains forward-looking statements that are subject to risk factors including the economic and business circumstances occurring from time to time in countries and markets in which the Group operates and risk factors associated with the building and construction sectors. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions because they relate to events and/or depend on circumstances that may or may not occur in the future and could cause actual results and outcomes to differ materially from those expressed in or implied by the forward-looking statements. No assurance can be given that the forward-looking statements in this Interim Report will be realised. Statements about the Directors' expectations, beliefs, hopes, plans, intentions and strategies are inherently subject to change and they are based on expectations and assumptions as to future events, circumstances and other factors which are in some cases outside the Group's control. Actual results could differ materially from the Group's current expectations.

 

It is believed that the expectations set out in these forward-looking statements are reasonable but they may be affected by a wide range of variables which could cause actual results or trends to differ materially, including but not limited to, market conditions, competitors and margin management, commercial relationships, fluctuations in product pricing, changes in foreign exchange and interest rates, government legislation, availability of funding, working capital and cash management, IT infrastructure and cyber security and availability and quality of key resources.

 

The Company's Shareholders are cautioned not to place undue reliance on the forward-looking statements. This Interim Report has not been audited or otherwise independently verified. The information contained in this Interim Report has been prepared on the basis of the knowledge and information available to Directors at the date of its preparation and the Company does not undertake any obligation to update or revise this Interim Report during the financial year ahead.