8 March 2023

SIG plc

Full year results for the year ended 31 December 2022

 

Strong year; platform established for long term growth

 

SIG plc ("SIG", "the Group" or "the Company") today announces its results for the full year ended 31 December 2022 ("FY 2022" or "the year").

	2022	2021
Underlying1 revenue	£2,744.5m	£2,291.4m
LFL2 sales growth	17.0%	24.3%
Gross margin	25.9%	26.3%
Underlying1 operating profit	£80.2m	£41.4m
Underlying1 operating margin	2.9%	1.8%
Underlying1 profit before tax	£51.6m	£19.3m
Underlying1 earnings per share	3.2p	0.3p
Net debt	£444.0m	£365.0m
Net debt (pre-IFRS 16)	£160.3m	£128.6m
Statutory results	2022	2021
Revenue	£2,744.5m	£2,291.4m
Operating profit	£56.2m	£14.0m
Profit/(loss) before tax	£27.5m	(£15.9m)
Total profit/(loss) after tax	£15.5m	(£28.3m)
Basic earnings/(loss) per share	1.3p	(2.4p)

 

 

Financial highlights

·    Full year Group like-for-like² ("LFL") sales growth of 17%, with revenues of £2.74bn

·    Substantial increase in underlying operating profit¹ to £80m, from £41m in 2021

·    Good margin progression, with underlying operating profit¹ margin up 110bps to 2.9%

·    Pass-through of input cost inflation remained a strong tailwind throughout the year, although at a lower rate in H2 than H1

·    Return to positive free cash flow³ for the year

·    Further reduction in leverage⁴ to 2.8x (2021: 3.2x) and good liquidity; year end net debt of £444.0m post-IFRS 16 (2021: £365.0m) and £160.3m pre-IFRS 16 (2021: £128.6m)

 

Strategic highlights

·    Benefits of a broad geographic footprint (58% of revenues from outside UK) helped to mitigate volatile market conditions:

o  Continuing good performance in France, with both businesses trading at >5% operating margin

o  Strong performance in Germany driven by execution of strategy, with operating profit margin up 280bps to 3.7%

o  UK Interiors returned to profitability

·    Strengthened operational and commercial platform helped drive market share gains, with improved customer engagement

·    Two acquisitions completed in the year for total potential consideration of £39m

·    Good ESG progress: 10% reduction in emissions⁵ driven by increased use of renewable energy and improved fleet mix (% electric/hybrid); continuing increase in employee engagement ("eNPS")

·    New CEO Gavin Slark (formerly CEO of Grafton Group plc) joined the Group on 1 February 2023

 

Commenting, Gavin Slark, Chief Executive Officer, said:

 

"Having joined last month, I would like to thank Steve Francis, the Executive Leadership Team and all of our people across our six European geographies who contributed to SIG's strong performance in 2022.

 

Over my first five weeks I have already had the opportunity to visit a number of our teams, operations, and branches.  I look forward to working with all my colleagues to drive the business forward.

 

Trading in the first two months of 2023 saw mid-single digit like-for-like revenue growth, with the continued effects of input price inflation more than offsetting year-over-year volume declines.  Market conditions continue to vary across our geographic footprint, but overall we expect weaker demand conditions to prevail during 2023, offset by a continued tailwind from input price inflation, albeit the latter will continue to moderate further this year.

 

As a European market leader in the supply of specialist insulation, SIG is well-positioned to benefit from long-term structural growth drivers, notably sustainable construction.  There is an increasing focus on the need to reduce building emissions, to increase energy efficiency and to use more sustainable materials.

 

With a strengthened financial position, good strategic momentum, pan-European footprint, and a diverse portfolio with opportunity for growth, I am confident in our ability to manage short-term market weakness during 2023 while maintaining a focus on sustainable long term value creation for all our stakeholders."  

 

Notes

 

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. Free cash flow is defined as all cash flows excluding M&A transactions, dividend payments, and financing transactions.

4. Post-IFRS 16 leverage.  Pre-IFRS 16 leverage was 1.8x (2021: 2.5x)

5. Emissions by scope 1,2 and business travel, in metric tonnes

 

An Investor and Analyst presentation will be available on www.sigplc.com from 7:15am on Wednesday 8 March 2023.  

 

A live presentation of the results followed by Q&A, hosted by Gavin Slark, CEO, and Ian Ashton, CFO will take place at 10:00am UK time on the date above.

 

Please click the link below to join the webinar:

https://storm-virtual-uk.zoom.us/j/86417803873

 

Or One tap mobile:

United Kingdom: +442080806592,,86417803873#  or +443300885830,,86417803873# 

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

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US:  +1 719 359 4580  or +1 253 205 0468 

Webinar ID: 864 1780 387

International numbers available: https://storm-virtual-uk.zoom.us/u/kb6OTlSB3N

 

 

Enquiries

 

SIG plc		+44 (0) 114 285 6300
Gavin Slark Ian Ashton	Chief Executive Officer Chief Financial Officer
Sarah Ogilvie	Head of Investor Relations
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
Investec Bank plc - Joint broker to SIG		+44 (0) 20 7597 5970
Bruce Garrow / David Anderson

 

LEI: 213800VDC1BKJEZ8PV53

 

 

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 more than 7,000 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

 

FY 2022 LFL revenues grew 17% compared to prior year.  Reported Group revenues were 20% higher in the year, including c4% from acquisitions, slightly offset by c1% adverse currency movements. 

 

 

LFL sales growth 2022 vs 2021	H1	H2	FY	FY 2022 sales
				£m
UK Interiors	24%	22%	23%	703
UK Exteriors	13%	1%	7%	445
UK	19%	12%	15%	1,148
France Interiors	13%	12%	12%	218
France Exteriors	18%	11%	15%	466
Germany	17%	15%	16%	458
Poland	44%	16%	28%	231
Benelux	20%	31%	25%	116
Ireland	55%	2%	24%	108
EU	23%	14%	18%	1,597
Group	21%	13%	17%	2,745

Strategic progress

 

SIG operates across six European geographies with a total branch network of over 440 sites and over 7,000 people.  During 2022, the Group made further good strategic progress through its growth strategy, which has driven improved operational performance across the portfolio.

We continued to empower branches to respond to local trading conditions and drive local performance and as a result we are more specialist, flexible, productive and engaged.  Customer NPS improved in most geographies and the Group's NPS increased from +40 to +46 reflecting a higher rate of customers likely to recommend SIG to others.

In France the operating margin of both the Interiors and Exteriors businesses now exceeds 5%, with continued good execution of our strategy, including market share gains, product mix enhancement and a rigorous focus on branch performance.

In Germany we delivered a strong turnaround, with 16% LFL sales growth in the year, and improved our underlying profit margin from 0.9% in 2021 to 3.7%.  Progress in Germany included the roll-out of an "empower the touchpoints" strategy that increased empowerment of local teams, re-energised the sales force, and bolstered specialist expertise to strengthen customer and supplier relationships.

The UK Interiors business has now delivered a successful two-year turnaround, recovering market share and returning to profitability through consistent execution, better pricing discipline, and improving product mix.  UK Exteriors had a solid year of trading against some strong comparators and, as previously communicated, had a significant one-off bad debt write-off in the second half.

Our Benelux business returned to market share gain in 2022, with further aspects of the turnaround plan now being implemented.

The Group continued to utilise technology to support business transformation through improved productivity and customer experience, with a focus on making SIG a better place to work, buy from and sell to.  In Poland our "omnichannel" services to customers and new ways of working have driven strong sales, profit and productivity improvement, with sales via our market-leading e-commerce platform representing 10% of sales.

Across our operating companies we made good progress in starting to transform our warehouse and transport management systems on to digital platforms for process optimisation and productivity improvements.  We also continued to build our leadership capabilities in our digital business.

During 2022 the Group continued its programme of investment in network expansion with eight new branch openings alongside a number of strategic relocations.  These openings position us to capture local market growth by in-filling geographic gaps or increasing our presence in major urban markets.

Acquisitions

The Group completed two acquisitions in 2022.  These, together with those completed in 2021, reflect our commitment to supplement organic revenue growth with selective acquisitions to boost specialist expertise in high return categories and unlock synergies within our core businesses.

On 14 July 2022 we acquired Thermodämm GmbH, a specialist interiors business in Germany, reinforcing our market leading position in flooring for total potential consideration of £3.6m.

On 22 July 2022 we acquired Miers Construction Products Limited ("Miers"), one of the UK's leading suppliers of specialist construction accessories, increasing our exposure to infrastructure end-markets.  Miers was acquired for total potential consideration of £35.3m, including a deferred amount that is contingent on financial performance in the year to 31 December 2023.

Balance Sheet

 

The Group has significantly improved its financial position since 2020, with a robust 2022 year end balance sheet.  The Group has a healthy liquidity position, returning to positive free cash flow in the year, and had year end gross cash balances of £130m (2021: £145m).  The movement in cash balances in the year reflects previously reported cash outflows on M&A, as well as the positive free cash flow of £11m.  An increase in working capital of £14.4m was driven by sales volume growth and year-over-year inflation and included some normalisation of inventory after 2021 investment.  The Group's revolving credit facility ("RCF") was increased in December 2022 from £50m to £90m and remained undrawn as at 31 December 2022. 

 

2022 year end net debt was £444m on a post-IFRS 16 basis (2021: £365m), and £160m on a pre-IFRS 16 basis (2021: £129m).  The movement in post-IFRS 16 net debt, beyond the changes in cash balances noted above, is due mainly to an increase in lease liabilities of £47m, driven by the timing of lease renewals and investments in new branches, and a currency movement of £14m on bond debt. 

 

The Group made further progress in reducing leverage towards its medium-term targets and finished the year at 2.8x and 1.8x on post and pre-IFRS 16 bases respectively.  The Group's pre-IFRS 16 debt consists almost wholly of a €300m bond at a fixed rate of 5.25%.  The bond, and the currently undrawn RCF, both mature in 2026.

 

Dividend

 

No dividend will be paid for 2022.  The Board reiterates its commitment to return to paying a dividend, appropriately covered by underlying earnings, when it is prudent to do so.  Continued successful strategic execution, including sensible investment where appropriate, will deliver sustainable, profitable growth and cash generation, allowing the Board to consider a range of capital allocation options.

 

 

Sustainability

 

We have set five long-term commitments against which we will measure the Group's continuing progress as a leader in sustainable construction and have made good progress against these in 2022.  We have lowered our carbon emissions (scope 1, scope 2 and business travel emissions) by 10% to 43,328 metric tonnes as we work towards our goal of being net zero carbon by 2035 at the latest.  The key drivers were increased use of renewable energy contracts in the UK and Germany alongside the gradual replacement of conventional vehicles with a greener fleet as leases come up for renewal. 

 

The Group reinforced its commitment to being a health and safety leader in our industry, appointing a new Group Health, Safety and Environmental Director.  Our 2022 lost time injury frequency rate ("LTIFR") reduced to 11.1 (2021: 11.8), alongside increases in our near miss reporting.  The latter encourages all our employees, contractors and stakeholders to report near misses, unsafe situations and behaviours that drive positive interventions.

 

People

 

The Board would like to thank all employees of the Group for their continued commitment and hard work throughout the year.  Their efforts during 2022 and since 2020 have been key to the successful progress of the Group.  During the year, employee engagement increased, with an improvement of 11 points in our employee NPS score from the 2021 survey, and 19 points from 2020.

 

Having an engaged and high performing workforce remains a priority within the Group's ongoing development.  We are committed to our ambition of being an employer of choice in the building materials sector.

 

Outlook

 

The Group has strong positions in attractive, diversified end-markets.  Around 60% of revenue is generated in the EU and 40% in the UK.  c50% of our sales support new-build projects and c50% renovation (RMI) and we support both commercial and residential end-markets.

 

As a European market leader in the supply of specialist insulation, we believe we are well-positioned to benefit from long-term structural growth drivers, notably sustainable construction.  There is an increasing focus on the need to reduce building emissions, to increase energy efficiency and to use more sustainable materials.  These needs are prevalent in SIG's geographies, which are faced with ageing housing stock and housing shortages, and whose governments are increasing their commitments to improvements in building energy efficiency, emission levels, and sustainability.

 

Trading in the first two months of 2023 saw mid-single digit like-for-like revenue growth, with the continued effects of input price inflation more than offsetting year-over-year volume declines.  Market conditions continue to vary across our geographic footprint, but overall we expect weaker demand conditions to prevail during 2023, offset by a continued tailwind from input price inflation, albeit the latter will continue to moderate further this year.

 

During 2023 we will maintain our operational agility and discipline, with continued emphasis on productivity, whilst remaining focused on long term value creation.

 

Our priorities in 2023 will continue to include active product category management to develop product mix and leveraging prior year investment in new branches and strategic relocations.  For example, in France this includes growing our own-label product mix within Exteriors and benefitting from our 2022 branch openings and renovations, as well as new product range development.  In Germany, the branch and sales force reorganisation and performance management processes implemented over the last 18 months have strengthened our ability to capture and manage market demand, improve customer proximity and enhance our presence in areas such as ceilings and flooring systems.  Productivity across the Group will also be supported by new technologies, for example further warehouse and transport management system adoption.

 

When market conditions recover, we continue to see the opportunity to increase the Group's operating margin to our previously stated medium-term target of 5%. 

 

With a strengthened financial position, good strategic momentum, pan-European footprint, and a diverse portfolio with opportunity for growth, we remain confident in our ability to manage short-term market weakness during 2023 while maintaining a focus on sustainable long term value creation for all our stakeholders.

 

FINANCIAL REVIEW

 

Revenue

 

The Group saw a 17% increase in its LFL revenue over the year, with revenue up to £2,744.5m (2021: £2,291.4m) driven by the pass through of product price inflation in all geographies and the impact of our strategic growth initiatives.  We estimate the impact of inflation on revenue growth for the full year was approximately 17%, with this gradually reducing as the year progressed.

Operating costs and profit

 

Gross profit increased 18% to £711.0m (2021: £602.1m) with a gross profit margin of 25.9% (2021: 26.3%).  The reduction in gross margin was primarily driven by strong comparatives in UK Exteriors.

The Group's underlying operating costs increased by 12.5% to £630.8m (2021: £560.7m).  Around half of this was due to inflation, with the balance due to the additional year-over-year operating costs within businesses acquired during 2021 and 2022, an increase in bad debt charges, and selective investments across the Group, notably in our French businesses.

 

The Group's underlying operating profit increased 93.7% to £80.2m (2021: £41.4m), at an underlying operating margin of 2.9% (2021: 1.8%), an increase of 110 bps on the prior year.  Adjusted operating margin improvement was driven by improved profitability across the Group's operating countries.

 

The Group's operating profit performance was achieved despite a one-off loss of £5m in H2 resulting from the administration of Avonside, a major UK roofing contractor and one of the Group's largest customers.  Whilst disappointing, the Group believes that this situation arose from company-specific factors.  Customer bad debt metrics more broadly were in line with management's expectations.

 

The Group's statutory operating profit was £56.2m (2021: £14.0m) after Other items of £24.0m (2021: £27.4m).  Other items are set out later in this report.  

 

 

Segmental analysis

 

UK

	Revenue 2022 £m	Revenue 2021 £m	LFL sales vs 2021	Underlying operating profit 2022 £m	Underlying operating (loss)/profit 2021 £m
UK Interiors	702.6	507.4	23%	14.3	(2.5)
UK Exteriors	445.2	422.2	7%	18.4	25.0
UK	1,147.8	929.6	15%	32.7	22.5

Revenue in UK Interiors, a specialist insulation and interiors distribution business, was up 38% to £702.6m (2021: £507.4m).  This included an 18% impact from the acquisition of Miers in July and a full year of trading for Penlaw and F30, both acquired in 2021.  LFL revenue grew 23%, driven by good strategic execution and a strengthened market position as well as benefitting from input price inflation.  The improved revenue saw the business successfully return to profitability, generating an underlying operating profit of £14.3m (2021: £2.5m loss), with the business largely delivering the additional volumes through the existing capacity in the network.

 

UK Exteriors, a specialist roofing merchant, which also includes our Building Solutions business, traded well despite some softening in the RMI market through the latter part of the year.  Continued high levels of purchase price inflation contributed to revenues of £445.2m (2021: £422.2m), a LFL increase of 7%.  Underlying operating profit of £18.4m (2021: £25.0m) was down 26.4% primarily due to the one-off loss of £5m in H2 resulting from the administration of Avonside. 

 

France

	Revenue 2022 £m	Revenue 2021 £m	LFL sales vs 2021	Underlying operating profit 2022 £m	Underlying operating profit 2021 £m
France Interiors	218.4	195.3	12%	12.2	11.2
France Exteriors	465.6	406.0	15%	23.6	17.4
France	684.0	601.3	14%	35.8	28.6

France Interiors, a structural insulation and interiors business trading as LiTT, saw revenue increase 12% on a reported and LFL basis to £218.4m (2021: £195.3m) driven by input price inflation pass through and continued strategic execution.  Underlying operating profit increased 9% to £12.2m (2021: £11.2m) driven by revenue growth partially offset by higher operating costs.

 

Revenue in France Exteriors, a specialist roofing business trading as Larivière, increased 15% to £465.6m (2021: £406.0m), and by 15% on a LFL basis.  Demand remained solid in the French RMI market and revenue also benefitted from pass through of input price inflation.  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 underlying operating profit increasing 36% to £23.6m (2021: £17.4m).

 

Germany

	Revenue 2022 £m	Revenue 2021 £m	LFL sales vs 2021	Underlying operating profit 2022 £m	Underlying operating profit 2021 £m
Germany	457.8	393.2	16%	16.8	3.6

Revenue in Wego/Vti, our specialist insulation and interiors distribution business in Germany, increased 16% on a reported and LFL basis to £457.8m (2021: £393.2m), with the impact of the acquisition of Thermodämm being under 1%.  The German team remained highly focused on their turnaround initiatives.  Revenue growth was driven by improved market performance as a result of these initiatives, as well as benefitting from the pass through of input price inflation and proactive stock management.  The increased revenue resulted in significantly improved operating profit of £16.8m, more than four times that of 2021 (2021: £3.6m), and with an increase in underlying operating margin to 3.7% (2021: 0.9%). 

 

Poland

	Revenue 2022 £m	Revenue 2021 £m	LFL sales vs 2021	Underlying operating profit 2022 £m	Underlying operating profit 2021 £m
Poland	230.7	186.7	28%	10.6	6.3

In our Polish business, a market-leading distributor of insulation and interiors, revenue increased to £230.7m (2021: £186.7m), with LFL sales up 28% due to an increase in market share, branch openings and pass through of significant price inflation.  The Polish business also saw further operating margin improvement and underlying operating profit grew by 68% to £10.6m (2021: £6.3m).

 

Benelux

	Revenue 2022 £m	Revenue 2021 £m	LFL sales vs 2021	Underlying operating  (loss) 2022 £m	Underlying operating  (loss) 2021 £m
Benelux	115.9	92.4	25%	(3.0)	(4.9)

Revenue from the Group's businesses in Benelux increased 25% to £115.9m (2021: £92.4m), with LFL sales up 25%.  Revenue benefitted from increased volumes, but the turnaround of the business remains in progress, and despite recent market share recovery, it continues to trade with lower market share than it had previously.  Whilst the management team appointed in mid-2021 is making progress regaining market share in the Netherlands and starting to address the operational issues, this has taken longer than previously anticipated.  This progress resulted in a reduced underlying operating loss of £3.0m (2021: £4.9m loss). 

 

The continued challenges in the Benelux business led to a further impairment charge of £15.8m being recognised at 31 December 2022 (2021: £9.9m).

 

Ireland

	Revenue 2022 £m	Revenue 2021 £m	LFL sales vs 2021	Underlying operating profit 2022 £m	Underlying operating profit 2021 £m
Ireland	108.3	88.2	24%	6.0	2.8

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.  A strong rebound in the second half of 2021 following the impact of further Covid-19-related Government restrictions in the Republic of Ireland in H1 2021, continued into 2022, although some demand softening was seen in H2 2022.  Revenue increased by 23% to £108.3m (2021: £88.2m), and by 24% on a LFL basis.  Underlying operating profit improved by over 100% to £6.0m (2021: £2.8m), reflecting the increased revenue and a shift in sales mix towards higher margin offerings.

 

Reconciliation of underlying to statutory result

 

Other items, being items excluded from underlying results, amounted to £24.1m for the year (2021: £35.2m) on a pre-tax basis and are summarised in the table below:

	2022 £m	2021 £m
Underlying profit before tax	51.6	19.3
Other items - impacting profit before tax:
Amortisation of acquired intangibles	(4.7)	(4.7)
Impairment charges	(15.8)	(10.2)
Cloud computing configuration and customisation costs	(2.7)	(3.3)
Costs associated with acquisitions	(2.5)	(1.5)
Net restructuring costs	(0.4)	(3.7)
Onerous contract costs	1.2	(2.0)
Costs associated with refinancing	(0.4)	(2.4)
Other specific items	1.3	0.4
Non underlying finance costs	(0.1)	(7.8)
Total Other items	(24.1)	(35.2)
Statutory profit/(loss) before tax	27.5	(15.9)

 

Further details of Other items are as follows:

·    Impairment charge of £15.8m relates to the impairment of goodwill and other non-current assets in Benelux.

·    Cloud computing costs relate to project configuration and customisation costs associated with strategic cloud computing arrangements, which are expensed, rather than being capitalised as intangible assets.

·    Costs associated with acquisitions relate principally to the acquisition of Miers Construction Products Limited in the UK, including legal and other advisor costs associated with the acquisition, and earnout consideration being accrued over the performance period.

·    Other specific items comprises the settlement and/or release of certain historic provisions, including amounts relating to businesses divested in previous years, impacts of the pensions member options exercise undertaken in the UK during the year, and a £2.0m provision for impairment of lease receivables.

 

 

Taxation

 

The effective tax rate for the Group on the total profit before tax of £27.5m (2021: £15.9m loss) was 43.6% (2021: negative 78.0%).  As the Group operates in several different countries, tax losses cannot be surrendered or utilised cross border.  Tax losses are not currently recognised as deferred tax assets 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 (2021: 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 £7.4m (2021: £6.9m), of which a charge of £0.2m (2021: £0.6m) related to defined benefit pension schemes and £7.2m (2021: £6.3m) related to defined contribution schemes.

 

The total net liability in relation to defined benefit pension schemes at 31 December 2022 was £23.0m (2021: £10.7m).  The last triennial actuarial valuation of the UK scheme as at 31 December 2019 was concluded in 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 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.  The next triennial valuation as at 31 December 2022 will commence shortly.  The scheme remains well funded despite the recent volatility of rates experienced during 2022.

 

Financial position

 

Overall, the net assets of the Group increased by £3.1m to £267.8m (2021: £264.7m), with a gross cash position at year end of £130.1m (2021: £145.1m).  The movement in the year end cash balances reflects a positive free cash flow of £10.6m delivered in the year, more than offset by £27.5m spent on acquisitions and investments.  Reported year end net debt on a post-IFRS 16 basis was £444.0m (2021: £365.0m) and £160.3m on a pre-IFRS 16 basis (2021: £128.6m).  The movement in post-IFRS 16 net debt, beyond the change in cash noted above, is due mainly to an increase in lease liabilities of £46.6m, driven by timing of lease renewals and investments in new branches, and a currency movement of £14m on bond debt.  Leverage continued to come down towards the Group's medium-term targets and finished the year at 2.8x and 1.8x on post- and pre-IFRS 16 bases respectively (2021: 3.2x and 2.5x respectively).

 

Cash flow

	2022 £m	2021 £m
Underlying operating profit	80.2	41.4
Add back: Depreciation	73.2	68.3
Add back: Amortisation	3.2	3.4
Underlying EBITDA	156.6	113.1
Increase in working capital	(14.4)	(85.4)
Repayment of lease liabilities	(60.1)	(57.3)
Capital expenditure	(14.5)	(18.6)
Cash exceptional items	(14.7)	(10.9)
Other	1.9	(15.0)
Operating cash flow1	54.8	(74.1)
Interest and financing	(28.8)	(22.7)
Refinancing cash costs	(1.1)	(16.9)
Tax	(14.3)	(10.4)
Free cash flow1	10.6	(124.1)
Acquisitions and investments	(27.5)	(10.6)
(Repayment)/drawdown of debt	(1.4)	52.0
Total cash flow	(18.3)	(82.7)
Cash and cash equivalents at beginning of the year2	145.1	235.3
Effect of foreign exchange rate changes	3.3	(7.5)
Cash and cash equivalents at end of the year2	130.1	145.1

1.     Free cash flow represents the cash available after supporting operations, including capital expenditure and the repayment of lease liabilities, and before acquisitions and any movements in funding.  Operating cash flow represents free cash flow before interest, financing, costs of refinancing and tax.

2.     Cash and cash equivalents at 31 December 2022 comprise cash at bank and on hand of £130.1m (2021: £145.1m) less bank overdrafts of £nil (2021: £nil).

 

During the year, the Group reported a free cash inflow of £10.6m (2021: £124.1m outflow) as a result of the increased underlying operating profit in the year, partially offset by an increase in working capital, and after payments in relation to lease liabilities, capital expenditure, interest, tax, and exceptional and other cash flows.  Interest and financing costs increased as a result of the full year impact of interest on the €300m bond and a £1.7m increase in interest on lease liabilities.  Tax paid increased due to increased profits in the tax paying mainland European businesses.  "Other" includes payments to the Employee Benefit Trust to fund share plans of £4.0m and a £2.5m annual payment to the UK pension scheme, offset by non-cash items and proceeds on sale of property, plant and equipment.

 

The increase in working capital was £14.4m of which £13.0m related to inventory movements, driven mainly by year-over-year inflation.

 

Other movements in cash below free cash flow include £27.5m cash outflow primarily in relation to the purchase of businesses in the UK and Germany (2021: £10.6m outflow), including £1.3m deferred consideration payments relating to UK acquisitions in previous years.

 

Financing and funding

 

The Group's financing facilities comprise €300m fixed rate secured notes (due November 2026) and an RCF of £90m (due May 2026).  During the second half of the year, the Group extended its RCF by £40m, utilising the accordion feature of the existing RCF and bringing the total committed facility to £90m.  The increased RCF, which was entered into on the same terms as the existing £50m facility, will be used to provide additional committed standby liquidity given the uncertain macro environment and to potentially take advantage of additional profit and cash flow enhancing opportunities in the medium term.  The secured notes are subject to incurrence-based covenants only, 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 2022.

 

The Group has a healthy level of 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 2024.

 

	2022 £m	2021 £m
Cash and cash equivalents at end of the year	130.1	145.1
Undrawn RCF at end of the year	90.0	50.0
Liquidity	220.1	195.1
Post-IFRS 16 net debt	444.0	365.0
Pre-IFRS 16 net debt	160.3	128.6
Post-IFRS 16 leverage	2.8x	3.2x
Pre-IFRS 16 leverage	1.8x	2.5x

 

Contingent liability

 

Two of SIG's wholly owned subsidiaries in Benelux are subject to legal proceedings brought by a customer in connection with the installation of insulation at an industrial facility in Belgium.  Further details are provided in notes 12 and 13.

 

 

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 2022. 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 financial reporting framework, 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 7 March 2023 and signed on its behalf by:

 

By order of the Board

 

Gavin Slark	Ian Ashton
Director	Director
7 March 2023	7 March 2023

 

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. 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.

 

 

Consolidated Income Statement

For the year ended 31 December 2022

 

		Underlying1	Other items2	Total	Underlying1	Other items2	Total
		2022	2022	2022	2021	2021	2021
	Note	£m	£m	£m	£m	£m	£m
Revenue	2	2,744.5	-	2,744.5	2,291.4	-	2,291.4
Cost of sales		(2,033.5)	-	(2,033.5)	(1,689.3)	-	(1,689.3)
Gross profit		711.0	-	711.0	602.1	-	602.1
Other operating expenses	4	(614.3)	(22.0)	(636.3)	(555.9)	(27.4)	(583.3)
Impairment losses on financial assets3		(16.5)	(2.0)	(18.5)	(4.8)	-	(4.8)
Operating profit/(loss)	4	80.2	(24.0)	56.2	41.4	(27.4)	14.0
Finance income	5	1.3	-	1.3	0.7	-	0.7
Finance costs	5	(29.9)	(0.1)	(30.0)	(22.8)	(7.8)	(30.6)
Profit/(loss) before tax		51.6	(24.1)	27.5	19.3	(35.2)	(15.9)
Income tax (expense)/credit	6	(14.4)	2.4	(12.0)	(15.6)	3.2	(12.4)
Profit/(loss) after tax		37.2	(21.7)	15.5	3.7	(32.0)	(28.3)
Attributable to:
Equity holders of the Company		37.2	(21.7)	15.5	3.7	(32.0)	(28.3)
Earnings/(loss) per share
Basic	7			1.3p			(2.4)p
Diluted	7			1.3p			(2.4)p

 

¹ Underlying represents the results before Other items.

² 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.

³ Impairment losses on financial assets (trade receivables and lease receivables), as determined in accordance with IFRS 9 Financial Instruments, previously included in other operating expenses, are shown separately, and the prior year comparative has been updated to present on a consistent basis.

 

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2022

 

		Year ended 31 December 2022	Year ended 31 December 2021
		£m	£m
Profit/(loss) after tax		15.5	(28.3)
Items that will not subsequently be reclassified to the Consolidated Income Statement:
Remeasurement of defined benefit pension liability		(14.3)	9.1
Deferred tax movement associated with remeasurement of defined benefit pension liability		(0.5)	0.1
		(14.8)	9.2
Items that may subsequently be reclassified to the Consolidated Income Statement:
Exchange difference on retranslation of foreign currency goodwill and intangibles		2.7	(3.7)
Exchange difference on retranslation of foreign currency net investments (excluding goodwill and intangibles)		11.5	(10.7)
Exchange and fair value movements associated with borrowings and derivative financial instruments		(13.9)	8.6
Gains and losses on cash flow hedges		1.6	0.7
Transfer to profit and loss on cash flow hedges		0.2	(3.1)
		2.1	(8.2)
Other comprehensive (expense)/income		(12.7)	1.0
Total comprehensive income/(expense)		2.8	(27.3)
Attributable to:
Equity holders of the Company		2.8	(27.3)

 

 

Consolidated Balance Sheet

As at 31 December 2022

 

		31 December  2022	31 December  2021
		£m	£m
Non-current assets
Property, plant and equipment		68.8	66.9
Right-of-use assets		265.9	230.9
Goodwill		134.2	120.1
Intangible assets		22.8	16.7
Lease receivables		1.2	2.9
Deferred tax assets		3.3	4.8
Non-current financial assets		0.4	-
		496.6	442.3
Current assets
Inventories		270.6	242.0
Lease receivables		0.1	0.8
Trade and other receivables		432.6	371.3
Current tax assets		1.5	-
Current financial assets		1.6	0.2
Cash at bank and on hand		130.1	145.1
		836.5	759.4
Total assets		1,333.1	1,201.7
Current liabilities
Trade and other payables		425.0	369.7
Lease liabilities		56.5	50.7
Interest-bearing loans and borrowings		0.8	-
Deferred consideration		0.7	1.1
Other financial liabilities		-	0.4
Derivative financial instruments		-	0.5
Current tax liabilities		5.8	4.6
Provisions		9.6	12.9
		498.4	439.9
Non-current liabilities
Lease liabilities		251.2	210.4
Interest-bearing loans and borrowings		266.1	249.6
Deferred consideration		1.8	0.7
Derivative financial instruments		0.1	-
Other financial liabilities		-	0.6
Other payables		7.4	3.8
Retirement benefit obligations		23.0	10.7
Provisions		17.3	21.3
		566.9	497.1
Total liabilities		1,065.3	937.0
Net assets		267.8	264.7
Capital and reserves
Called up share capital		118.2	118.2
Treasury shares		(16.4)	(12.5)
Capital redemption reserve		0.3	0.3
Share option reserve		8.6	4.4
Hedging and translation reserves		4.5	2.4
Cost of hedging reserve		0.1	0.1
Merger reserve		92.5	92.5
Retained profits		60.0	59.3
Attributable to equity holders of the Company		267.8	264.7
Total equity		267.8	264.7