11 March 2022

SIG plc

Full year results for the year ended 31 December 2021

A pivotal year: growing momentum

 

SIG plc ("SIG", "the Group" or "the Company") today announces its results for the full year ended 31 December 2021 ("FY 2021" or "the year").

 

Strategic highlights

·   Group back to underlying profit, driven by market share gains and margin discipline in challenging supply markets

·   Strategy delivering ahead of expectations, reinforcing the value of SIG's core model

·  Leadership further strengthened; platform for growth established; industry reputation regained and acknowledged

·   Accelerating revenue growth throughout 2021 against pre Covid-19 2019 comparators

·   €300m (£253m) bond issue in November 2021 further increases financial stability and longer-term flexibility

 

Financial highlights

·   Group like-for-like ("LFL") sales up 24% on prior year, and 8% up on non Covid-19 affected 2019; H2 growth of 15% vs 2019

·   Strong margin progression: H2 2021 gross margin of 26.6%, 70bps higher than H1 2021 and 120bps higher than H2 2020; underlying operating profit margin improved consistently throughout 2021

·    £41.4m underlying operating profit (2020 restated: £53.1m loss)

·   Statutory loss before tax for the year of £15.9m (2020 restated: £194.6m loss) after reflecting other items of £35.2m (2020 restated: £118.5m)

·    Net debt of £365.0m post IFRS 16 (2020: £238.2m) and £128.6m pre-IFRS 16 (2020: £4.1m), reflecting investment in inventory to optimise customer service at a time of supply shortages, as previously guided, as well as one-off costs related to refinancing and M&A investment

·    Gross cash of £145m; new and increased revolving credit facility ("RCF") of £50m remains undrawn

 

Current trading and outlook

·    Trading well in 2022 to date, and ahead of plan

·    Supply challenges being managed

·  Confidence in 3% Group operating profit margin for FY23, and in the Group's medium-term path towards 5%

·    Cash generation expected in H2; full year cash neutral

 

	2021	Restated5 2020	Change vs 2020
Underlying1 revenue	£2,291.4m	£1,872.7m	22.4%
LFL2 sales growth	24.3%	(13.3%)
Gross margin	26.3%	25.1%	120bps
Underlying1 operating profit/(loss)	£41.4m	(£53.1m)
Underlying1 profit/(loss) before tax	£19.3m	(£76.1m)
Underlying1 earnings/(loss) per share	0.3p	(10.0p)	10.3p
Underlying operating margin	1.8%	(2.8%)	460bps
Net debt	£365.0m	£238.2m
Net debt (pre-IFRS 16)	£128.6m	£4.1m
Statutory results	2021	Restated5 2020
Revenue3	£2,291.4m	£1,874.5m
Operating profit/(loss)3	£14.0m	(£160.0m)
Loss before tax3	(£15.9m)	(£194.6m)
Basic loss per share3	(2.4p)	(23.1p)
Total loss after tax4	(£28.3m)	(£131.5m)
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.

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.

3. Statutory results of continuing operations only in 2020.

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

5. 2020 restatement is due to the change in accounting policy regarding configuration and customisation costs incurred in implementing cloud computing arrangements following the IFRS Interpretations Committee (IFRIC) Agenda Decision published in April 2021.

 

Commenting, Steve Francis, Chief Executive Officer, said:

 

"2021 was a pivotal year - accelerating progress on our strategy has returned the Group to profitability ahead of expectations, delivering above market growth rates and consistent margin improvement, the result of record performance in France and Poland, and strong turnaround in the UK."

"In uncertain times, SIG demonstrated in 2021, as it has in previous decades, its ability to manage successfully through inflationary and volatile market conditions, thanks to our strong relationships with suppliers and customers, and the quality of our people."

"Growth momentum, resilience of our businesses, and experienced leadership all underpin our confidence in the organic growth path towards 5% underlying operating margin in the medium term."

"I'm proud that SIG has a long-established focus on energy efficient solutions, and we will play a leadership role in the shift to sustainable construction."

"SIG is back to winning ways, and we look forward to 2022 and beyond with confidence."

 

Investor and Analyst presentation will be available on www.sigplc.com from 7:15am on Friday 11 March.  A live Q&A session, hosted by Steve Francis, CEO, Ian Ashton, CFO, and Phil Johns, Managing Director of SIG UK, will take place at 10:00am.

 

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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 6,800 employees across Europe and is listed on the London Stock Exchange (SHI). For more information, please visit the Company's website, www.sigplc.com.

 

Trading overview

 

FY21 LFL revenues grew 24% vs prior year, which was distorted by Covid-19, notably in H1, and 8% vs 2019.  Reported Group revenues from underlying operations were 22% higher in the year vs 2020, including an adverse 3% currency movement.

 

LFL sales growth 2021 vs 2019	H1	Q3	Q4	H2	FY
UK Interiors	(19)%	0%	15%	7%	(8)%
UK Exteriors	14%	26%	29%	28%	21%
UK	(7)%	10%	22%	15%	4%
France Interiors	8%	1%	13%	7%	7%
France Exteriors	19%	11%	40%	25%	22%
Germany	1%	3%	12%	7%	4%
Benelux	(10)%	(12)%	(1)%	(6)%	(8)%
Poland	20%	33%	41%	36%	29%
Ireland	(21)%	6%	14%	10%	(5)%
EU	7%	8%	22%	15%	11%
Group	1%	9%	22%	15%	8%

 

 

 

LFL sales growth 2021 vs 2020	H1	Q3	Q4	H2	FY	FY 2021 sales
						£m
UK Interiors	54%	30%	21%	26%	38%	508
UK Exteriors	58%	24%	17%	20%	36%	422
UK	56%	27%	19%	23%	37%	930
France Interiors	38%	2%	10%	6%	20%	195
France Exteriors	34%	6%	17%	12%	22%	406
Germany	11%	7%	9%	8%	10%	393
Benelux	2%	0%	17%	9%	5%	92
Poland	22%	44%	46%	45%	33%	187
Ireland	14%	18%	9%	13%	14%	88
EU	22%	11%	16%	14%	17%	1,361
Group	33%	17%	17%	17%	24%	2,291

 

 

Strategic progress

 

2021 saw a step change in the Group's performance, driven by the major strategic initiatives initiated at the outset of the Return to Growth strategy in the summer of 2020.

Reinforcing our decentralised business model, with a focus on driving operational performance at branch level, has driven record performance in France and Poland and strong growth in the UK, as a result of:

·   Empowered local teams - investing in their sites, giving them the tools to operate, simplifying targets, and upgrading incentives has generated huge energy and increased employee engagement

·    Disciplined margin management in inflationary conditions

·   Superior product range and availability, leveraging our supplier partnerships to secure scarce products, and supporting customers in a very challenging supply year

The UK organisation has been rebuilt and is back in profit:

·  Decentralised operating model re-established, slimmed down national and central structures and strengthened regional and branch structures, underpinned by branch P&L accountability

·    Recovery of market share lost since 2018 well under way

·    Gross margins back to target levels

·    Improved supplier relationships - rebates, terms, stock allocation

·    Improved pricing disciplines and focus on enhancing mix of higher margin products

·    The UK business overall returned to underlying profitability for the year, with Interiors returning to profit in H2

Group wide, investment in our strategy is paying off and laying the foundations for sustainable growth:

·    We invested in stock availability, more expertise, more people in the field, better training and incentives, modernising and decarbonising the fleet, and improving our branches

·    We opened branches in most countries, with a multi-year programme of branch openings now underway to in-fill geographic gaps or upgrade our presence in major urban markets

·    Our Germany and Benelux businesses both have new, experienced leadership in place, and we are confident that they will continue to build on the early signs of improvement already seen in the later months of the year

·    We strengthened our leadership bench whilst streamlining and upskilling the corporate centre, moving the corporate office from central London to our new depot at Heathrow airport

·    Recent acquisitions - SM Roofing, F30 (construction accessories) and Penlaw (insulation), all in the UK - are performing well, beating 2021 profit expectations, and fit our specialist model

·    We see a clear opportunity to accelerate delivery against the strategic plan through targeted investment in extending our product range, specialist solutions and footprint  

As a result, SIG's reputation and influence has been regained:

·   Larivière (France Exteriors) awarded "2021 Best Specialist Distributor" (Geste D'Or 2021) and UK Interiors awarded "Distributor of the Year" in the supply category (BMJ awards)

·    SIG appointments to high profile leadership roles in key industry associations

·    Increasingly viewed as an attractive and trusted home by prospective industry recruits and M&A targets

 

Strong Balance Sheet

 

The Group's liquidity position remained strong throughout 2021, and on 18 November 2021 the Group completed the restructuring of its debt arrangements, comprising the issue of €300m 5.25% fixed rate senior secured notes and the establishment of a new RCF of £50m.  The senior secured notes are subject to incurrence-based covenants, and the RCF has a leverage maintenance covenant which only applies if the facility is over 40% drawn at a quarter end reporting date. The RCF was undrawn at 31 December 2021.

Where possible and appropriate we have built up increases in our inventory holding levels, in light of the supply challenges experienced by the industry in recent months.  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.  Inflation was a headwind in working capital and cash flow during the year, and the cash outflow was also affected by acquisitions and one-offs, including those related to the refinancing.

 

Dividend

 

No dividend will be paid for 2021.  However, continued successful execution of the Return to Growth strategy, including sensible investment where appropriate, 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 over the last two years were the key to the excellent results in 2021, and will remain the key for the next phase of the Group'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 business 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.  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 various lockdowns and restrictions throughout the year, the business was able to trade broadly as normal, albeit within the new operating norms and protocols.  The Irish market was, uniquely in the Group, impacted by further government restrictions on construction from January until May 2021.

 

Outlook

 

The Group has strong positions in its core markets, and the fundamentals of those markets remain attractive. The Board believes that we have the right strategy and foundations in place to deliver long term, sustainable, profitable growth and to build a strong and growing Group for the future.

 

With no direct exposure to Russia or Ukraine, we are currently not seeing any significant impact on our business arising from the current conflict, but we will continue to monitor the situation closely.  The conflict, and the response to it, could affect, amongst other things, energy prices, commodity supply, and exchange rates. This is alongside the existing global backdrop of inflationary pressures.

 

In the near-term we are anticipating some remaining impact from material shortages, but these are gradually abating.  We have started the year well, and ahead of plan, helped by a continuation of the robust demand seen in late 2021.  This, together with the effectiveness of our supply chain management and commercial agility, gives the Board increasing confidence over the full year performance. We expect to be free cash flow neutral for the year, before returning to sustainable free cash generation thereafter, enabling us to continue to invest in and drive our strategic goals.

 

FINANCIAL REVIEW

 

Revenue and gross margin

 

The Group saw a 24.3% increase in its LFL revenue over the year, with Group underlying revenue up to £2,291.4m (2020: £1,872.7m), reflecting a strong recovery from the Covid-19 impact in 2020, driven by the effective implementation of the Return to Growth strategy as well as the inflationary tailwind. Underlying results exclude 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 statutory basis, Group revenue was £2,291.4m (2020: £1,874.5m), with no sales from non-core businesses (2020: £1.8m).

Pass through of product price inflation added to the top line in all geographies, to an increasing degree in H2.  We estimate the impact on revenue for the full year to be approximately 8%. 

Underlying gross profit increased 28% to £602.1m (2020: £470.0m) with a gross profit margin of 26.3% (2020: 25.1%). This primarily reflects increased rebate receipts due to increased sales. On a statutory basis, gross profit increased from £470.5m to £602.1m with gross margin increasing by 120bps to 26.3% (2020: 25.1%).

Operating costs and profit

 

The Group's underlying operating costs were £560.7m (2020 restated: £523.1m). The increase was primarily due to the increased trading volumes, inflation, increased variable compensation, and the non-recurring government support schemes in the prior year, such as furlough and other wage initiatives.  The Group's underlying operating profit was £41.4m (2020 restated: £53.1m loss), and at a statutory level the Group's operating profit was £14.0m (2020 restated: £160.0m loss) after Other items of £27.4m (2020 restated: £107.4m). The latter included £9.9m impairment of goodwill, £4.7m amortisation of intangibles, £2.0m of onerous contract costs, £2.4m costs associated with refinancing, £3.7m costs relating to restructuring activities, and £3.3m related to cloud computing costs following IFRS Interpretation Committee guidance on this topic issued during the year.  Prior year operating profit has also been restated as a result of the cloud computing guidance issued.

 

Profitability continued to improve in H2 compared to the first half, with underlying operating profit approximately doubling in H2 vs H1.

 

Segmental analysis

 

UK

			LFL sales
	Underlying revenue 2021 £m	Underlying revenue 2020 £m	v2020	v 2019	Underlying operating (loss)/profit 2021 £m	Underlying operating loss restated 2020 £m
UK Interiors	507.4	357.4	38%	(8)%	(2.5)	(45.3)
UK Exteriors	422.2	310.1	36%	21%	25.0	(7.3)
UK	929.6	667.5	37%	4%	22.5	(52.6)

Underlying revenue in UK Interiors, a specialist insulation and interiors distribution business, was up 42% to £507.4m (2020: £357.4m). This included a 5% impact from acquisitions in the year.  LFL growth was 38%.  The LFL decline against 2019 (pre Covid-19) included a decline in H1 and then good growth in H2, reflecting the strong progress being made.  Despite supply chain shortages and consequent adoption of "allocations" by suppliers, especially around dry lining, daily sales showed strong growth throughout the year. 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 £2.5m (2020 restated: £45.3m loss).

UK Exteriors, a specialist roofing merchant, which also includes our Building Solutions business, traded extremely well, benefitting from both the strong demand environment and strategic stock management, with underlying revenues of £422.2m (2020: £310.1m), a LFL increase of 36%. The increase in revenue, further benefit from an increased margin due to rebates, and favourable product mix resulted in an underlying operating profit of £25.0m (2020 restated: £7.3m loss).

 

France

			LFL sales
	Underlying revenue 2021 £m	Underlying revenue 2020 £m	v 2020	v 2019	Underlying operating profit 2021 £m	Underlying operating profit/(loss) 2020 £m
France Interiors	195.3	168.1	20%	7%	11.2	7.1
France Exteriors	406.0	344.8	22%	22%	17.4	8.3
France before non-core	601.3	512.9	21%	17%	28.6	15.4
Non-core businesses	-	1.8	-	-	-	(0.3)
France	601.3	514.7	21%	17%	28.6	15.1

France Interiors, trading as LiTT, a structural insulation and interiors business, saw underlying revenue increase by 16% to £195.3m (2020: £168.1m), and by 20% on a LFL basis. 2021 continued the revenue growth experienced in the second half of 2020. The increases in revenue, coupled with an improved margin as a result of increased supplier rebates, partially offset by higher operating costs due to trading levels and inflation, resulted in a £4.1m increase in underlying operating profit to £11.2m (2020: £7.1m).

Underlying revenue in France Exteriors, trading as Larivière, a specialist roofing business, increased by 18% to £406.0m (2020: £344.8m), and by 22% on a LFL basis.  The strong demand in the RMI market witnessed in late 2020 continued throughout 2021.  The increase in revenue together with increased supplier rebates and strict pricing discipline, partially offset by increased costs to fulfil higher trading volumes, resulted in an underlying operating profit increase of £9.1m to £17.4m (2020: £8.3m).

 

			LFL sales
	Underlying revenue 2021 £m	Underlying revenue 2020 £m	v 2020	v 2019	Underlying operating profit 2021 £m	Underlying operating profit 2020 £m
Germany	393.2	370.7	10%	4%	3.6	0.4

Germany

Underlying revenue in WeGo/VTi, our specialist insulation and interiors distribution business in Germany, increased by 6% to £393.2m (2020: £370.7m) and by 10% on a LFL basis. The improvement in Germany was aided by proactive stock management, allowing the business to meet customer demand despite supply shortages, and input price inflation that was largely passed on to customers.  The increased trading levels resulted in an underlying operating profit of £3.6m (2020: £0.4m). We have new management in place in our German business and are encouraged by early progress.

 

			LFL sales
	Underlying revenue 2021 £m	Underlying revenue 2020 £m	v 2020	v 2019	Underlying operating loss 2021 £m	Underlying operating profit 2020 £m
Benelux	92.4	91.6	5%	(8)%	(4.9)	2.5

Benelux

Underlying revenue from the Group's business in Benelux increased slightly by £0.8m to £92.4m (2020: £91.6m), with increased volumes following recovery from Covid-19 in the prior year largely offset by the impact of strong competitive pressure in the Netherlands, combined with certain regulatory changes. This, along with a temporary increase in the cost base necessary to improve operational effectiveness has resulted in an operating loss of £4.9m compared to an operating profit of £2.5m in 2020.  The new management appointed in mid-2021 have made good initial progress in addressing both the operational issues and the cost base.

 

Ireland

			LFL sales
	Underlying revenue 2021 £m	Underlying revenue 2020 £m	v 2020	v 2019	Underlying operating profit 2021 £m	Underlying operating profit 2020 £m
Ireland	88.2	80.5	14%	(5)%	2.8	0.8

Our business in Ireland is a specialist distributor of interiors and exteriors, as well as a specialist contractor for office furnishing, industrial coatings and kitchen/bathroom fit out.  The business was affected by further Covid-19 related Government restrictions in the Republic of Ireland from January until early May 2021, but saw a strong rebound in the second half, with underlying revenue increasing by 10% to £88.2m (2020: £80.5m), and by 14% on a LFL basis. Underlying operating profit improved by £2.0m, finishing at £2.8m (2020: £0.8m) as the business saw a shift in sales mix towards its higher margin offerings.

 

Poland

			LFL sales
	Underlying revenue 2021 £m	Underlying revenue 2020 £m	v 2020	v 2019	Underlying operating profit 2021 £m	Underlying operating profit 2020 £m
Poland	186.7	149.5	33%	29%	6.3	2.0

In our Polish business, a market leading distributor of insulation and interiors, underlying revenue increased to £186.7m (2020: £149.5m), with LFL sales up 33% due to an increase in customer numbers, branch openings and significant price inflation. The business had a record year with underlying profit of £6.3m (2020: £2.0m), driven by the sales 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 £35.2m (2020 restated: £118.5m) on a pre-tax basis and are summarised in the table below:

	2021 £m	Restated 2020 £m
Underlying profit/(loss) before tax	19.3	(76.1)
Other items - impacting profit/(loss) before tax:
Amortisation of acquired intangibles	(4.7)	(5.6)
Impairment charges	(10.2)	(61.5)
Net restructuring costs	(3.7)	(6.7)
Onerous contract costs	(2.0)	(13.2)
Cloud computing configuration and customisation costs	(3.3)	(7.1)
Costs associated with acquisitions	(1.5)	(0.2)
Costs associated with refinancing	(2.4)	(7.4)
Non-underlying finance costs	(7.8)	(11.6)
Profit on agreed sale or closure of non-core businesses and associated impairment charges	-	0.6
Net operating losses attributable to businesses identified as non-core	-	(0.3)
Investment in omnichannel retailing	-	(4.2)
Other specific items	0.4	(1.3)
Total Other items	(35.2)	(118.5)
Statutory loss before tax	(15.9)	(194.6)

Further details on Other items are as follows:

·     Impairment charges of £10.2m (2020: £61.5m) includes £9.9m relating to the impairment of goodwill in Benelux

·     Net restructuring costs of £3.7m (2020: £6.7m) were incurred principally in connection with the restructuring of corporate functions as part of the implementation of the Return to Growth strategy, and restructuring in Germany and Benelux

•       Onerous contract costs of £2.0m (2020: £13.2m) related to provisions recognised for licence fee commitments where no future economic benefit is expected, principally in relation to the SAP 1HANA implementation

·     Cloud computing costs relate to project configuration and customisation costs associated with cloud computing arrangements, which are expensed rather than being capitalised as intangible assets following IFRS Interpretation Committee guidance on this topic issued during the year

·     Costs associated with refinancing of £2.4m (2020: £7.4m) includes adviser, legal and other professional fees of £4.9m offset by a £2.5m gain in relation to the recycling of the cash flow hedging reserve following the termination of hedging arrangements in connection with the refinancing

•       Non-underlying finance costs of £7.8m (2020: £11.6m) comprise £12.9m make whole payment on settlement of the previous private placement notes, £2.8m write-off of arrangement fees in relation to the previous debt arrangements, offset by £8.0m release of the loss on modification previously recognised in relation to the amendment of the private placement notes in 2020, together with £0.1m unwinding of the discount on the onerous contract provision

 

Taxation

 

The effective tax rate for the Group on the total loss before tax of £15.9m (2020 restated: £122.6m) is negative 78.0% (2020 restated: negative 7.3%). As the Group operates in several different countries, tax losses cannot be surrendered or utilised cross border. 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 further accrual in 2016.

The Group's total pension charge for the year, including amounts charged to interest, was £6.9m (2020: £6.9m), of which a charge of £0.6m (2020: £0.7m) related to defined benefit pension schemes and £6.3m (2020: £6.2m) related to defined contribution schemes.

The total net liability in relation to defined benefit pension schemes at 31 December 2021 was £10.7m (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 that 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 discussions the Company paid an additional one-off 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 £37.2m to £264.7m (2020 restated: £301.9m), with a cash position at year-end of £145.1m (2020: £235.3m) and net debt of £365.0m (2020: £238.2m).

 

Cash flow

	2021 £m	Restated 2020 £m
Underlying operating profit/(loss)	41.4	(53.1)
Add back: Depreciation	68.3	68.4
Add back: Amortisation	3.4	4.8
Underlying EBITDA	113.1	20.1
Cash exceptionals	(10.9)	(19.7)
Increase in working capital	(85.4)	(42.1)
Repayment of lease liabilities	(57.3)	(54.8)
Capital expenditure	(18.6)	(13.3)
Other	(15.0)	5.1
Operating cash flow	(74.1)	(104.7)
Interest and financing	(22.7)	(22.6)
Refinancing cash costs	(16.9)	(8.3)
Tax	(10.4)	(9.7)
Free cash flow	(124.1)	(145.3)
(Acquisitions)/disposals	(10.6)	147.0
Drawdown/(repayment) of debt	52.0	(85.2)
Net proceeds from equity raise	-	151.9
Total cash flow	(82.7)	68.4
Cash and cash equivalents at beginning of the year1	235.3	145.1
Effect of foreign exchange rate changes	(7.5)	21.8
Cash and cash equivalents at end of the year	145.1	235.3

1. Cash and cash equivalents comprise cash at bank and on hand of £145.1m (2020: £235.3m) less bank overdrafts of £nil (2020: £nil).  Cash and cash equivalents at 1 January 2020 include £110.0m from continuing operations and £35.1m from businesses held for sale.

 

Free cash flow represents the cash available after supporting operations, including capex and the repayment of lease liabilities, and before acquisitions and any movements in funding. 

During the year, the Group reported a free cash outflow of £124.1m (2020 restated: £145.3m outflow) as a result of the increased underlying operating profit in the year being offset by an increase in working capital, together with payments in relation to interest, tax and capital expenditure, and exceptional and other cash flows.  The costs associated with the refinancing exercise totalled £16.9m.  "Other" includes payments to the Employee Benefit Trust to fund share plans, and payments of £5m to the UK pension scheme, including the additional £2.5m referenced above.

 

The increase in working capital was £85m of which £76m related to inventory movements.  There were three key factors driving the increase being sales volume growth, year-over-year inflation, and the increases in holding levels referenced above.

 

Other movements in cash below free cash flow include £10.6m cash outflow in relation to the purchase of businesses (2020: £147.0m inflow from the sale of businesses) and £52.0m net cash inflow from the restructuring of the debt facilities, consisting of £200.3m repayments of previous facilities offset by £251.5m net proceeds from the new senior secured notes and £0.8m receipt on settlement of derivatives (2020: £85.2m repayments).

 

Financing and funding

 

On 18 November 2021 the Group completed a restructuring of its debt arrangements, comprising the issue of €300m 5.25% fixed rate senior secured notes and the establishment of a new RCF of £50m. The existing private placement notes of £129.8m and £70m term loan were repaid, together with a £12.9m make-whole payment on early settlement of the private placement notes. The Group now has committed facilities in place to November 2026 (senior secured notes) and May 2026 for the RCF. The senior secured notes are subject to incurrence based covenants, and the RCF has a leverage maintenance covenant set at 4.75x which only applies if the facility is over 40% drawn at a quarter end reporting date. The RCF was undrawn at 31 December 2021.

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 31 March 2023.

 

Directors' responsibility statement on the Annual Report

The responsibility statement below has been prepared in connection with the Company's full Annual Report for the year ended 31 December 2021. Certain parts solely thereof are not included within this announcement.

We confirm that to the best of our knowledge:

(a) the financial statements, prepared in accordance with the relevant applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

(b) the Strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

(c) the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

This responsibility statement was approved by the Board of Directors on 10 March 2022 and signed on its behalf by:

 

By order of the Board

 

Steve Francis                                     Ian Ashton

Director                                              Director

10 March 2022                                 10 March 2022

 

Cautionary statement 

The securities of the Group have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"), or under the securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, pledged or transferred , directly or indirectly, in, into or within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any relevant state or other jurisdiction of the United States. There has been and will be no public offering of the securities of the Group in the United States.

 

This announcement has been prepared to provide the Company's shareholders with a fair review of the business of the Group and a description of the principal risks and uncertainties facing it. It may not be relied upon by anyone, including the Company's shareholders, for any other purpose.

 

This announcement 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. Forward-looking statements in this Announcement include, but are not limited to, statements about the Group's future financial and operational performance, the management's ability to successfully execute the strategy, and the ability of the Group and the construction industry generally to respond to the effects and aftermath of the Covid-19 pandemic. No assurance can be given that the forward-looking statements in this announcement 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, changes in risks associated with the level of market demand, fluctuations in product pricing and changes in foreign exchange and interest rates.

 

The Company's shareholders are cautioned not to place undue reliance on the forward-looking statements. This announcement has not been audited or otherwise independently verified. The information contained in this announcement 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 announcement during the financial year ahead.

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

 

Consolidated income statement
for the year ended 31 December 2021
		Underlying*	Other items**	Total	Underlying*	Other items**	Total
					Restated	Restated	Restated
		2021	2021	2021	2020	2020	2020
	Note	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue	2	2,291.4	-	2,291.4	1,872.7	1.8	1,874.5
Cost of sales		(1,689.3)	-	(1,689.3)	(1,402.7)	(1.3)	(1,404.0)
Gross profit		602.1	-	602.1	470.0	0.5	470.5
Other operating expenses	3	(560.7)	(27.4)	(588.1)	(523.1)	(107.4)	(630.5)
Operating profit/(loss)		41.4	(27.4)	14.0	(53.1)	(106.9)	(160.0)
Finance income		0.7	-	0.7	0.7	-	0.7
Finance costs		(22.8)	(7.8)	(30.6)	(23.7)	(11.6)	(35.3)
Profit/(loss) before tax from continuing operations		19.3	(35.2)	(15.9)	(76.1)	(118.5)	(194.6)
Income tax (expense)/credit	4	(15.6)	3.2	(12.4)	(10.7)	4.1	(6.6)
Profit/(loss) after tax from continuing operations		3.7	(32.0)	(28.3)	(86.8)	(114.4)	(201.2)
Discontinued operations
Profit after tax from discontinued operations	11	-	-	-	-	69.7	69.7
Profit/(loss) after tax for the year		3.7	(32.0)	(28.3)	(86.8)	(44.7)	(131.5)
Attributable to:
Equity holders of the Company		3.7	(32.0)	(28.3)	(86.8)	(44.7)	(131.5)
Loss per share
From continuing operations: Basic	5			(2.4)p			(23.1)p
Diluted	5			(2.4)p			(23.1)p
Total:
Basic	5			(2.4)p			(15.1)p
Diluted	5			(2.4)p			(15.1)p
* 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 3.                                                                                                                                                                        The 2020 results have been restated as disclosed in Note 1.

 

Consolidated statement of comprehensive income
for the year ended 31 December 2021
		2021	Restated 2020
		£m	£m
Loss after tax for the year		(28.3)	(131.5)
Items that will not subsequently be reclassified to the Consolidated Income Statement:
Remeasurement of defined benefit pension liability		9.1	(1.7)
Deferred tax movement associated with remeasurement of defined benefit pension liability		0.1	0.3
Current tax movement associated with remeasurement of defined benefit pension liability		-	0.4
		9.2	(1.0)
Items that may subsequently be reclassified to the Consolidated income statement:
Exchange difference on retranslation of foreign currency goodwill and intangibles		(3.7)	5.1
Exchange difference on retranslation of foreign currency net investments (excluding goodwill and intangibles)		(10.7)	13.2
Exchange and fair value movements associated with borrowings and derivative financial instruments		8.6	(11.0)
Tax credit on fair value movements arising on borrowings and derivative financial instruments		-	-
Exchange differences reclassified to the Consolidated income statement in respect of the disposal of foreign operations		-	(5.9)
Gains and losses on cash flow hedges		0.7	(0.5)
Transfer to profit and loss on cash flow hedges		(3.1)	(0.7)
		(8.2)	0.2
Other comprehensive income/(expense)		1.0	(0.8)
Total comprehensive expense		(27.3)	(132.3)
Attributable to:
Equity holders of the Company		(27.3)	(132.3)
		(27.3)	(132.3)

The 2020 results have been restated as disclosed in Note 1.

 

Consolidated balance sheet
as at 31 December 2021
	2021	Restated 2020	Restated 1 January 2020
	£m	£m	£m
Non-current assets
Property, plant and equipment	66.9	63.2	58.6
Right-of-use assets	230.9	229.6	255.2
Goodwill	120.1	128.8	159.0
Intangible assets	16.7	18.5	30.2
Lease receivables	2.9	3.6	4.4
Deferred tax assets	4.8	5.7	4.4
Derivative financial instruments	-	0.1	1.7
	442.3	449.5	513.5
Current assets
Inventories	242.0	170.3	156.5
Lease receivables	0.8	0.7	0.8
Trade and other receivables	371.3	294.4	294.7
Current tax assets	-	-	0.9
Derivative financial instruments	0.2	-	0.9
Cash at bank and on hand	145.1	235.3	110.0
Assets classified as held for sale	-	-	258.4
	759.4	700.7	822.2
Total assets	1,201.7	1,150.2	1,335.7
Current liabilities
Trade and other payables	369.7	301.4	327.4
Lease liabilities	50.7	50.6	51.5
Interest-bearing loans and borrowings	-	-	275.1
Deferred consideration	1.1	0.5	-
Other financial liabilities	0.4	0.5	1.5
Derivative financial instruments	0.5	0.5	0.2
Current tax liabilities	4.6	4.2	3.7
Provisions	12.9	10.5	6.7
Liabilities directly associated with assets classified as held for sale	-	-	115.7
	439.9	368.2	781.8
Non-current liabilities
Lease liabilities	210.4	211.6	224.1
Interest-bearing loans and borrowings	249.6	212.2	-
Deferred consideration	0.7	0.4	-
Derivative financial instruments	-	0.4	1.9
Other financial liabilities	0.6	1.2	1.4
Other payables	3.8	3.5	1.0
Retirement benefit obligations	10.7	25.1	24.8
Provisions	21.3	25.7	18.6
	497.1	480.1	271.8
Total liabilities	937.0	848.3	1,053.6
Net assets	264.7	301.9	282.1
Capital and reserves
Called up share capital	118.2	118.2	59.2
Share premium account	-	447.7	447.3
Treasury shares	(12.5)	(0.2)	-
Capital redemption reserve	0.3	0.3	0.3
Share option reserve	4.4	2.0	1.8
Hedging and translation reserves	2.4	10.5	10.2
Cost of hedging reserve	0.1	0.2	0.3
Merger reserve	92.5	92.5	-
Retained profits/(losses)	59.3	(369.3)	(237.0)
Attributable to equity holders of the Company	264.7	301.9	282.1
Total equity	264.7	301.9	282.1

The 2020 and 2019 Consolidated balance sheets have been restated as disclosed in Note 1.