TIDMSHI
RNS Number : 2199S
SIG PLC
08 March 2023
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
------------ ------------
Underlying(1) revenue GBP2,744.5m GBP2,291.4m
LFL(2) sales growth 17.0% 24.3%
Gross margin 25.9% 26.3%
Underlying(1) operating GBP80.2m GBP41.4m
profit
Underlying(1) operating
margin 2.9% 1.8%
Underlying(1) profit GBP51.6m GBP19.3m
before tax
Underlying(1) earnings
per share 3.2p 0.3p
Net debt GBP444.0m GBP365.0m
Net debt (pre-IFRS GBP160.3m GBP128.6m
16)
Statutory results 2022 2021
------------------------- ------------ ------------
Revenue GBP2,744.5m GBP2,291.4m
Operating profit GBP56.2m GBP14.0m
Profit/(loss) before GBP27.5m (GBP15.9m)
tax
Total profit/(loss) GBP15.5m (GBP28.3m)
after tax
Basic earnings/(loss)
per share 1.3p (2.4p)
Financial highlights
-- Full year Group like-for-like(2) ("LFL") sales growth of 17%, with revenues of GBP2.74bn
-- Substantial increase in underlying operating profit(1) to GBP80m, from GBP41m in 2021
-- Good margin progression, with underlying operating profit(1) 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 flow(3) for the year
-- Further reduction in leverage(4) to 2.8x (2021: 3.2x) and
good liquidity; year end net debt of GBP444.0m post-IFRS 16 (2021:
GBP365.0m) and GBP160.3m pre-IFRS 16 (2021: GBP128.6m)
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 GBP39m
-- Good ESG progress: 10% reduction in emissions(5) 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):
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
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 Chief Executive Officer
Ian Ashton 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
GBPm
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
GBP3.6m.
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 GBP35.3m, 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 GBP130m
(2021: GBP145m). 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 GBP11m. An increase in working capital
of GBP14.4m 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 GBP50m to GBP90m and remained
undrawn as at 31 December 2022.
2022 year end net debt was GBP444m on a post-IFRS 16 basis
(2021: GBP365m), and GBP160m on a pre-IFRS 16 basis (2021:
GBP129m). 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 GBP47m, driven by the timing of lease renewals and
investments in new branches, and a currency movement of GBP14m 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 EUR300m 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 GBP2,744.5m (2021: GBP2,291.4m) 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 GBP711.0m (2021: GBP602.1m) 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
GBP630.8m (2021: GBP560.7m). 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
GBP80.2m (2021: GBP41.4m), 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 GBP5m 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 GBP56.2m (2021:
GBP14.0m) after Other items of GBP24.0m (2021: GBP27.4m). Other
items are set out later in this report.
Segmental analysis
UK
Underlying Underlying
operating operating
Revenue Revenue profit (loss)/profit
2022 2021 LFL sales 2022 2021
GBPm GBPm vs 2021 GBPm GBPm
------------- ------- ------- --------- ---------- --------------
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 GBP702.6m (2021: GBP507.4m).
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 GBP14.3m (2021: GBP2.5m 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
GBP445.2m (2021: GBP422.2m), a LFL increase of 7%. Underlying
operating profit of GBP18.4m (2021: GBP25.0m) was down 26.4%
primarily due to the one-off loss of GBP5m in H2 resulting from the
administration of Avonside.
France
Underlying Underlying
operating operating
Revenue Revenue profit profit
2022 2021 LFL sales 2022 2021
GBPm GBPm vs 2021 GBPm GBPm
----------------- ------- ------- --------- ---------- ----------
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 GBP218.4m (2021: GBP195.3m) driven by input price
inflation pass through and continued strategic execution .
Underlying operating profit increased 9% to GBP12.2m (2021:
GBP11.2m) driven by revenue growth partially offset by higher
operating costs.
Revenue in France Exteriors, a specialist roofing business
trading as Larivière, increased 15% to GBP465.6m (2021: GBP406.0m),
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 GBP23.6m (2021:
GBP17.4m).
Germany
Underlying Underlying
operating operating
Revenue Revenue profit profit
2022 2021 LFL sales 2022 2021
GBPm GBPm vs 2021 GBPm GBPm
-------- ------- ------- --------- ---------- ----------
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 GBP457.8m (2021: GBP393.2m), 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
GBP16.8m, more than four times that of 2021 (2021: GBP3.6m), and
with an increase in underlying operating margin to 3.7% (2021:
0.9%).
Poland
Underlying Underlying
operating operating
Revenue Revenue profit profit
2022 2021 LFL sales 2022 2021
GBPm GBPm vs 2021 GBPm GBPm
------- ------- ------- --------- ---------- ----------
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 GBP230.7m (2021:
GBP186.7m), 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 GBP10.6m
(2021: GBP6.3m).
Benelux
Underlying Underlying
operating operating
Revenue Revenue (loss) (loss)
2022 2021 LFL sales 2022 2021
GBPm GBPm vs 2021 GBPm GBPm
-------- -------- -------- ---------- ----------- -----------
Benelux 115.9 92.4 25% (3.0) (4.9)
-------- -------- -------- ---------- ----------- -----------
Revenue from the Group's businesses in Benelux increased 25% to
GBP115.9m (2021: GBP92.4m), 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 GBP3.0m (2021: GBP4.9m loss).
The continued challenges in the Benelux business led to a
further impairment charge of GBP15.8m being recognised at 31
December 2022 (2021: GBP9.9m).
Ireland
Underlying Underlying
operating operating
Revenue Revenue profit profit
2022 2021 LFL sales 2022 2021
GBPm GBPm vs 2021 GBPm GBPm
-------- ------- ------- --------- ---------- ----------
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
GBP108.3m (2021: GBP88.2m), and by 24% on a LFL basis. Underlying
operating profit improved by over 100% to GBP6.0m (2021: GBP2.8m),
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 GBP24.1m for the year (2021: GBP35.2m) on a pre-tax
basis and are summarised in the table below:
2022 2021
GBPm GBPm
-------------------------------------------------- ------ ------
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 GBP15.8m 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
GBP2.0m provision for impairment of lease receivables.
Taxation
The effective tax rate for the Group on the total profit before
tax of GBP27.5m (2021: GBP15.9m 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 GBP7.4m (2021: GBP6.9m), of which a charge
of GBP0.2m (2021: GBP0.6m) related to defined benefit pension
schemes and GBP7.2m (2021: GBP6.3m) related to defined contribution
schemes.
The total net liability in relation to defined benefit pension
schemes at 31 December 2022 was GBP23.0m (2021: GBP10.7m). 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 GBP196m 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 GBP2.5m 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 GBP3.1m to
GBP267.8m (2021: GBP264.7m), with a gross cash position at year end
of GBP130.1m (2021: GBP145.1m). The movement in the year end cash
balances reflects a positive free cash flow of GBP10.6m delivered
in the year, more than offset by GBP27.5m spent on acquisitions and
investments. Reported year end net debt on a post-IFRS 16 basis was
GBP444.0m (2021: GBP365.0m ) and GBP160.3m on a pre-IFRS 16 basis
(2021: GBP128.6m). 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 GBP46.6m, driven by timing of lease renewals
and investments in new branches, and a currency movement of GBP14m
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 2021
GBPm GBPm
------------------------------------------------ ------ -------
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 flow(1) 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 flow(1) 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
year(2) 145.1 235.3
Effect of foreign exchange rate changes 3.3 (7.5)
------------------------------------------------ ------ -------
Cash and cash equivalents at end of the year(2) 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 GBP130.1m (2021: GBP145.1m) less bank
overdrafts of GBPnil (2021: GBPnil).
During the year, the Group reported a free cash inflow of
GBP10.6m (2021: GBP124.1m 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
EUR300m bond and a GBP1.7m 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 GBP4.0m and a
GBP2.5m 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 GBP14.4m of which GBP13.0m
related to inventory movements, driven mainly by year-over-year
inflation.
Other movements in cash below free cash flow include GBP27.5m
cash outflow primarily in relation to the purchase of businesses in
the UK and Germany (2021: GBP10.6m outflow), including GBP1.3m
deferred consideration payments relating to UK acquisitions in
previous years.
Financing and funding
The Group's financing facilities comprise EUR300m fixed rate
secured notes (due November 2026) and an RCF of GBP90m (due May
2026). During the second half of the year, the Group extended its
RCF by GBP40m, utilising the accordion feature of the existing RCF
and bringing the total committed facility to GBP90m. The increased
RCF, which was entered into on the same terms as the existing
GBP50m 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 2021
GBPm GBPm
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
Other
Underlying(1) items(2) Total Underlying(1) Other items(2) Total
2022 2022 2022 2021 2021 2021
Note GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ----- -------------- ---------- ---------- -------------- --------------- ----------
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 assets(3) (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 Year ended
31 December 31 December
2022 2021
GBPm GBPm
--------------------------------------- ------------- -------------
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 31 December
2022 2021
GBPm GBPm
--------------------------------------- ------------ ------------
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
---------------------------------------- ------------ ------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Called
up Share Treasury Capital Share Hedging and Cost of Retained
share premium shares redemption option translation hedging Merger (losses)/
capital account reserve reserve reserve reserves reserve reserve profits Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ --------- -------- --------- ----------- -------- ------------ -------- -------- ---------- -------
At 1 January 2021 118.2 447.7 (0.2) 0.3 2.0 10.5 0.2 92.5 (369.3) 301.9
Loss after tax - - - - - - - - (28.3) (28.3)
Other
comprehensive
(expense)/income - - - - - (8.1) (0.1) - 9.2 1.0
------------------- --------- -------- --------- ----------- -------- ------------ -------- -------- ---------- -------
Total
comprehensive
(expense)/income - - - - - (8.1) (0.1) - (19.1) (27.3)
Purchase of
treasury shares - - (12.3) - - - - - - (12.3)
Credit to share
option reserve - - - - 2.6 - - - - 2.6
Settlement of
share options - - - - (0.2) - - - - (0.2)
Capital reduction - (447.7) - - - - - - 447.7 -
------------------- --------- -------- --------- ----------- -------- ------------ -------- -------- ---------- -------
At 31 December
2021 118.2 - (12.5) 0.3 4.4 2.4 0.1 92.5 59.3 264.7
------------------- --------- -------- --------- ----------- -------- ------------ -------- -------- ---------- -------
Profit after tax - - - - - - - - 15.5 15.5
Other
comprehensive
income/(expense) - - - - - 2.1 - - (14.8) (12.7)
------------------- --------- -------- --------- ----------- -------- ------------ -------- -------- ---------- -------
Total
comprehensive
income - - - - - 2.1 - - 0.7 2.8
Purchase of
treasury shares - - (4.0) - - - - - - (4.0)
Credit to share
option reserve - - - - 4.4 - - - - 4.4
Settlement of
share options - - 0.1 - (0.2) - - - - (0.1)
------------------- --------- -------- --------- ----------- -------- ------------ -------- -------- ---------- -------
At 31 December
2022 118.2 - (16.4) 0.3 8.6 4.5 0.1 92.5 60.0 267.8
------------------- --------- -------- --------- ----------- -------- ------------ -------- -------- ---------- -------
The share option reserve represents the cumulative
equity-settled share option charge under IFRS 2 "Share-based
payment" less the value of any share options that have been
exercised.
The hedging and translation reserve represents movements in the
Condensed Consolidated Balance Sheet as a result of movements in
exchange rates and movements in the fair value of cash flow hedges
which are taken directly to reserves.
Treasury shares relate to shares purchased by the SIG Employee
Share Trust to satisfy awards made under the Group's share plans
which are not vested and beneficially owned by employees.
The merger reserve represents the premium on ordinary shares
issued in a previous year through the use of a cash box
structure.
Consolidated Cash Flow Statement
For the year ended 31 December 2022
Year ended Year ended
31 December 31 December
2022 2021
Note GBPm GBPm
--------------------------------------- ----- ------------- -------------
Net cash flow from operating
activities
Cash generated from operating
activities 9 132.3 7.4
Income tax paid (14.3) (10.4)
--------------------------------------- ----- ------------- -------------
Net cash generated from/(used
in) operating activities 118.0 (3.0)
--------------------------------------- ----- ------------- -------------
Cash flows from investing activities
Finance income received 1.3 0.7
Purchase of property, plant
and equipment and computer software (14.5) (18.6)
Initial direct costs of right-of-use
assets (0.8) -
Proceeds from sale of property,
plant and equipment 0.8 2.7
Net cash flow arising on the
purchase of business (26.0) (10.1)
Settlement of amounts payable
for previous purchases of businesses (1.3) (0.5)
Investment in financial assets (0.2) -
--------------------------------------- ----- ------------- -------------
Net cash used in investing activities (40.7) (25.8)
--------------------------------------- ----- ------------- -------------
Cash flows from financing activities
Finance costs paid(1) (30.1) (36.3)
Repayment of lease liabilities (60.1) (57.3)
Repayment of borrowings (1.4) (200.3)
Proceeds from borrowings - 251.5
Settlement of derivative financial
instruments - 0.8
Acquisition of treasury shares (4.0) (12.3)
--------------------------------------- ----- ------------- -------------
Net cash used in financing activities (95.6) (53.9)
--------------------------------------- ----- ------------- -------------
Decrease in cash and cash equivalents
in the period 10 (18.3) (82.7)
--------------------------------------- ----- ------------- -------------
Cash and cash equivalents at
beginning of the period 145.1 235.3
Effect of foreign exchange rate
changes 3.3 (7.5)
--------------------------------------- ----- ------------- -------------
Cash and cash equivalents at
end of the period(2) 130.1 145.1
--------------------------------------- ----- ------------- -------------
(1) Finance costs paid in the prior year included GBP12.9m make
whole payment in connection with the refinancing during the prior
year (see Note 5).
(2) Cash and cash equivalents comprise cash at bank and on hand
of GBP130.1m (2021: GBP145.1m) less bank overdrafts of GBPnil
(2021: GBPnil).
1. Basis of preparation
The Group's financial information has been prepared in
accordance with the recognition and measurement requirements of UK
adopted international accounting standards. It has been prepared on
a basis consistent with that adopted in the previous year. The
Financial statements have been prepared under the historical cost
convention except for derivative financial instruments and unquoted
investments which are stated at their fair value.
Whilst the financial information included in this Preliminary
Results Announcement has been prepared in accordance with the
recognition and measurement criteria of UK adopted international
accounting standards, this announcement does not itself contain
sufficient information to comply with UK adopted international
accounting standards. The Preliminary Results Announcement does not
constitute the Company's statutory accounts for the years ended 31
December 2022 and 31 December 2021 within the meaning of Section
435 of the Companies Act 2006 but is derived from those statutory
accounts.
The Group's statutory accounts for the year ended 31 December
2021 have been filed with the Registrar of Companies, and those for
2022 will be delivered following the Company's Annual General
Meeting. The Auditor has reported on the statutory accounts for
2022 and 2021. Their report for 2022 and 2021 was (i) unqualified,
(ii) included no matters to which the auditor drew attention by way
of emphasis and (iii) did not contain statements under Sections 498
(2) or 498 (3) of the Companies Act 2006 in relation to the
financial statements.
Going concern
The Group closely monitors its funding position throughout the
year, including monitoring compliance with covenants and available
facilities to ensure it has sufficient headroom to fund
operations.
The Group's financing facilities comprise a EUR300m fixed rate
bond (secured notes), due November 2026, and GBP90m Revolving
Credit Facility (RCF) which expires in May 2026. One of the trading
businesses also has a GBP2.9m bank loan repayable over the period
to June 2026. The secured notes are subject to incurrence based
covenants only, and the RCF has a leverage maintenance covenant
which is only effective if the facility is over 40% drawn at a
quarter end reporting date. The RCF was undrawn at 31 December
2022.
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
2024.
The Directors have considered the Group's forecasts which
support the view that the Group will be able to continue to operate
within its banking facilities and comply with its banking
covenants. The Directors have considered the following principal
risks and uncertainties that could potentially impact the Group's
ability to fund its future activities and adhere to its banking
covenants, including:
-- High levels of product inflation, and current economic and
political uncertainties across Europe, all potentially impacting
market demand;
-- Potentially recessionary conditions in the coming year; and
-- Material shortages impacting our ability to meet demand and
hence having an impact on forecast sales.
The forecasts on which the going concern assessment is based
have been subject to sensitivity analysis and stress testing to
assess the impact of the above risks and the Directors have also
reviewed mitigating actions that could be taken. Under a scenario
including a combination of the above resulting in a 73% reduction
in underlying operating profit from the base forecast for the going
concern period, the analysis shows that sufficient cash would be
available without triggering a covenant breach.
The Directors have considered the impact of climate-related
matters on the going concern assessment and this is not expected to
have a significant impact on the Group's going concern assessment
to 31 March 2024.
On consideration of the above, the Directors believe that the
Group has adequate resources to continue in operational existence
for the forecast period to 31 March 2024 and the Directors
therefore consider it appropriate to adopt the going concern basis
in preparing the 2022 financial statements.
New standards, interpretations and amendments adopted by the
Group
The following amendments and interpretations apply for the first
time in 2022, but have not had a material impact on the Financial
Statements of the Group:
-- Amendment to IFRS3 Business Combinations: reference to the Conceptual Framework
-- Amendment to IAS16 Property, Plant and Equipment: proceeds before intended use
-- Amendment to IAS37 Provisions, contingent liabilities and
contingent assets: costs of fulfilling a contract
2. Revenue from contracts with customers
The Group's revenue is analysed by type and nature as
follows:
UK UK UK France France France Total
Interiors Exteriors Total Interiors Exteriors Total Germany Benelux Ireland Poland Eliminations Group
Year ended 31
December
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Type of product
Interiors 702.6 - 702.6 218.4 - 218.4 457.8 115.9 66.7 230.7 - 1,792.1
Exteriors - 445.2 445.2 - 465.6 465.6 - - 41.6 - - 952.4
Inter-segment
revenue(1) 5.5 2.7 8.2 0.1 9.7 9.8 0.1 - - 0.1 (18.2) -
------------------ ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Total underlying
and statutory
revenue 708.1 447.9 1,156.0 218.5 475.3 693.8 457.9 115.9 108.3 230.8 (18.2) 2,744.5
------------------ ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Nature of revenue
Goods for resale
(recognised at
point
in time) 708.1 447.9 1,156.0 218.5 475.3 693.8 457.9 115.9 102.6 230.8 (18.2) 2,738.8
Construction
contracts
(recognised over
time) - - - - - - - - 5.7 - - 5.7
------------------ ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Total 708.1 447.9 1,156.0 218.5 475.3 693.8 457.9 115.9 108.3 230.8 (18.2) 2,744.5
------------------ ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
(1) Inter-segment revenue is charged at the prevailing market
rates.
UK UK UK France France France Total
Interiors Exteriors Total Interiors Exteriors Total Germany Benelux Ireland Poland Eliminations Group
Year ended 31
December
2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Type of product
Interiors 507.4 - 507.4 195.3 - 195.3 393.2 92.4 51.1 186.7 - 1,426.1
Exteriors - 422.2 422.2 - 406.0 406.0 - - 37.1 - - 865.3
Inter-segment
revenue(1) 3.4 0.6 4.0 0.1 11.6 11.7 - - 0.1 - (15.8) -
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Total underlying
and statutory
revenue 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 88.3 186.7 (15.8) 2,291.4
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Nature of revenue
Goods for resale
(recognised at
point
in time) 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 83.7 186.7 (15.8) 2,286.8
Construction
contracts
(recognised over
time) - - - - - - - - 4.6 - - 4.6
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Total 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 88.3 186.7 (15.8) 2,291.4
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
(1) Inter-segment revenue is charged at the prevailing market
rates.
3. Segmental information
In accordance with IFRS 8 "Operating Segments", the Group
identifies its reportable operating segments based on the way in
which financial information is reviewed and business performance is
assessed by the Chief Operating Decision Maker (CODM). Reportable
operating segments are grouped on a geographical basis.
a) Segmental analysis
UK UK UK France France France Total
Interiors Exteriors Total Interiors Exteriors Total Germany Benelux Ireland Poland Eliminations Group
Year ended 31
December
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Revenue
Underlying and
statutory
revenue 702.6 445.2 1,147.8 218.4 465.6 684.0 457.8 115.9 108.3 230.7 - 2,744.5
Inter-segment
revenue(1) 5.5 2.7 8.2 0.1 9.7 9.8 0.1 - - 0.1 (18.2) -
Total revenue 708.1 447.9 1,156.0 218.5 475.3 693.8 457.9 115.9 108.3 230.8 (18.2) 2,744.5
---------------- ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Segment result
before
Other items 14.3 18.4 32.7 12.2 23.6 35.8 16.8 (3.0) 6.0 10.6 - 98.9
Amortisation of
acquired
intangibles (1.4) (3.2) (4.6) - (0.2) (0.2) 0.1 - - - - (4.7)
Impairment
charges - - - - - - - (15.8) - - - (15.8)
Acquisition
costs (2.2) - (2.2) (0.2) - (0.2) (0.1) - - - - (2.5)
Cloud computing
configuration
and
customisation
costs - - - (2.0) - (2.0) - (0.7) - - - (2.7)
Net
restructuring
costs - - - - - - - (0.4) - - - (0.4)
Other specific
items 1.0 - 1.0 - - - - - - - - 1.0
---------------- ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Segment
operating
profit/(loss) 11.7 15.2 26.9 10.0 23.4 33.4 16.8 (19.9) 6.0 10.6 - 73.8
---------------- ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Parent company
costs (18.7)
Parent company
Other
items(2) 1.1
---------------- ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Operating
profit 56.2
Net finance
costs
before Other
items (28.6)
Non-underlying
finance
costs (0.1)
---------------- ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Profit before
tax 27.5
Income tax
expense (12.0)
---------------- ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Profit for the
period 15.5
---------------- ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
(1) Inter-segment revenue is charged at the prevailing market
rates.
(2) Parent company Other items include costs associated with
refinancing GBP0.4m, offset by credits relating to onerous
contracts GBP1.2m and other specific items GBP0.3m. See Note 4 for
further details.
UK UK UK France France France Total
Interiors Exteriors Total Interiors Exteriors Total Germany Benelux Ireland Poland Eliminations Group
Year ended 31
December
2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Revenue
Underlying and
statutory
revenue 507.4 422.2 929.6 195.3 406.0 601.3 393.2 92.4 88.2 186.7 - 2,291.4
Inter-segment
revenue(1) 3.4 0.6 4.0 0.1 11.6 11.7 - - 0.1 - (15.8) -
Total revenue 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 88.3 186.7 (15.8) 2,291.4
---------------- ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Result
Segment result
before
Other items (2.5) 25.0 22.5 11.2 17.4 28.6 3.6 (4.9) 2.8 6.3 - 58.9
Amortisation of
acquired
intangibles (0.3) (4.0) (4.3) - (0.4) (0.4) - - - - - (4.7)
Impairment
charges (0.3) - (0.3) - - - - (9.9) - - - (10.2)
Acquisition
costs (1.5) - (1.5) - - - - - - - - (1.5)
Cloud computing
customisation
and
configuration
costs (0.6) (0.5) (1.1) - (0.8) (0.8) (0.8) (0.6) - - - (3.3)
Net
restructuring
costs 0.1 (0.6) (0.5) - - - (1.4) (0.4) - - - (2.3)
Segment
operating
profit/(loss) (5.1) 19.9 14.8 11.2 16.2 27.4 1.4 (15.8) 2.8 6.3 - 36.9
---------------- ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Parent company
costs (17.5)
Parent company
Other
items(2) (5.4)
---------------- ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Operating
profit 14.0
Net finance
costs (22.1)
Non-underlying
finance
costs (7.8)
Loss before tax (15.9)
Income tax
expense (12.4)
---------------- ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
Loss for the
period (28.3)
---------------- ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- ------------- --------
(1) Inter-segment revenue is charged at the prevailing market
rates.
(2) Parent company Other items include costs associated with
refinancing GBP2.4m, onerous contract costs GBP2.0m, restructuring
costs GBP1.4m offset by other specific items GBP0.4m credit. See
Note 4 for further details.
UK UK UK France France France Total
Interiors Exteriors Total Interiors Exteriors Total Germany Benelux Ireland Poland Group
31 December 2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- --------
Assets
Segment assets 287.7 271.9 559.6 81.4 255.2 336.6 150.8 46.7 57.8 82.7 1,234.2
Unallocated
assets:
Property, plant
and
equipment 0.9
Derivative
financial
instruments 1.8
Cash and cash
equivalents 91.1
Other assets 5.1
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- --------
Consolidated
total
assets 1,333.1
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- --------
Liabilities
Segment
liabilities 244.2 128.2 372.4 74.4 160.2 234.6 84.3 25.2 31.2 41.4 789.1
Unallocated
liabilities:
Interest-bearing
loans and
borrowings 264.0
Derivative
financial
instruments 0.1
Other liabilities 12.1
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- --------
Consolidated
total
liabilities 1,065.3
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- --------
UK UK UK France France France Total
Interiors Exteriors Total Interiors Exteriors Total Germany Benelux Ireland Poland Group
31 December 2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- --------
Assets
Segment assets 222.3 262.6 484.9 69.5 208.0 277.5 136.1 53.9 54.2 66.2 1,072.8
Unallocated
assets:
Property, plant
and
equipment 0.3
Derivative
financial
instruments 0.2
Cash and cash
equivalents 126.9
Other assets 1.5
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- --------
Consolidated
total
assets 1,201.7
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- --------
Liabilities
Segment
liabilities 204.6 124.1 328.7 54.6 117.8 172.4 74.7 21.7 30.9 33.5 661.9
Unallocated
liabilities:
Interest-bearing
loans and
borrowings 249.6
Derivative
financial
instruments 0.5
Other liabilities 25.0
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- --------
Consolidated
total
liabilities 937.0
------------------ ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- --------
UK UK UK France France France Parent Total
Interiors Exteriors Total Interiors Exteriors Total Germany Benelux Ireland Poland company Group
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- -------- ------
Other segment
information
Capital
expenditure
on:
Property,
plant and
equipment 2.7 3.4 6.1 1.0 2.0 3.0 1.4 2.1 1.0 0.4 0.3 14.3
Computer
software - - - - 0.2 0.2 - - - - - 0.2
Goodwill and
intangible
assets
acquired 25.2 - 25.2 - - - 3.7 - - - - 28.9
Non-cash
expenditure: -
Depreciation
of fixed
assets 3.4 3.4 6.8 0.7 1.4 2.1 1.5 1.1 0.6 0.4 0.1 12.6
Depreciation
of
right-of-use
assets 17.0 8.7 25.7 5.4 8.9 14.3 13.6 3.0 1.8 2.2 - 60.6
Impairment of
right-of-use
assets - - - - - - - 2.5 - - - 2.5
Impairment of
property,
plant and
equipment
and computer
software - - - - - - - 9.7 - - - 9.7
Amortisation
of acquired
intangibles
and computer
software 3.3 0.5 3.8 - 0.1 0.1 0.1 - 0.3 0.1 3.5 7.9
Impairment of
goodwill
and
intangibles
(excluding
computer
software) - - - - - - - 3.6 - - 3.6
-------------- ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- -------- ------
UK UK UK France France France Parent Total
Interiors Exteriors Total Interiors Exteriors Total Germany Benelux Ireland Poland company Group
2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- -------- ------
Other segment
information
Capital
expenditure
on:
Property,
plant and
equipment 5.3 3.1 8.4 1.4 2.6 4.0 0.7 2.9 0.9 0.2 0.1 17.2
Computer
software - 0.4 0.4 0.1 0.5 0.6 0.1 - 0.2 0.1 - 1.4
Goodwill and
intangible
assets
acquired 9.8 - 9.8 - - - - - - - - 9.8
Non-cash
expenditure:
Depreciation
of fixed
assets 3.1 3.3 6.4 0.6 1.6 2.2 1.1 0.7 0.6 0.3 0.1 11.4
Depreciation
of
right-of-use
assets 13.5 8.6 22.1 5.9 9.1 15.0 12.8 2.1 1.6 3.2 0.1 56.9
Impairment of
right-of-use
assets - - - - - - - 0.1 - - 0.4 0.5
Impairment of
property,
plant and
equipment
and computer
software 0.3 - 0.3 - - - - - - - - 0.3
Amortisation
of acquired
intangibles
and computer
software 2.5 4.5 7.0 - 0.4 0.4 0.1 - 0.2 0.1 0.3 8.1
Impairment of
goodwill
and
intangibles
(excluding
computer
software) - - - - - - - 9.9 - - - 9.9
-------------- ---------- ---------- ------ ---------- ---------- -------- -------- -------- -------- ------- -------- ------
b) Geographic information
The Group's non-current operating assets (including property,
plant and equipment, right-of-use assets, goodwill and intangible
assets but excluding lease receivables, deferred tax and derivative
financial instruments) by geographical location are as follows:
2022 2021
GBPm GBPm
---------------- ------ ------
United Kingdom 258.4 228.7
Ireland 16.5 13.1
France 134.7 108.3
Germany 57.6 49.8
Poland 14.5 12.0
Benelux 10.0 22.7
Total 491.7 434.6
---------------- ------ ------
4. Other operating expenses
a) Analysis of other operating expenses
2022 2021
Before Before
Other Other Other
items items Total items Other items Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------- ------- ------ ------- ------------ ------
Other operating
expenses:
Distribution costs 316.7 0.4 317.1 282.2 3.7 285.9
Selling and marketing
costs 180.2 - 180.2 158.0 1.0 159.0
Management, administrative
and central costs 117.4 21.6 139.0 115.7 22.7 138.4
Total 614.3 22.0 636.3 555.9 27.4 583.3
---------------------------- ------- ------- ------ ------- ------------ ------
b) Other items
Profit/(loss) after tax includes the following Other items which
have been disclosed in a separate column within the Consolidated
Income Statement in order to provide a better indication of the
underlying earnings of the Group:
2022 2021
Other Other
items Tax impact Tax impact items Tax impact Tax impact
GBPm GBPm % GBPm GBPm %
------------------------------- ------- ----------- ----------- ------- ----------- -----------
Amortisation of acquired
intangibles (4.7) 0.9 19.1% (4.7) 0.2 4.3%
Impairment charges(1) (15.8) - - (10.2) - -
Costs related to
acquisitions (2.5) 0.3 12.0% (1.5) - -
Cloud computing configuration
and customisation
costs(2) (2.7) 0.7 25.9% (3.3) 0.5 15.2%
Onerous contract
costs(3) 1.2 - - (2.0) - -
Costs associated
with refinancing(4) (0.4) - - (2.4) 0.5 20.8%
Net restructuring
costs(5) (0.4) 0.1 25.0% (3.7) 0.5 13.5%
Other specific items(6) 1.3 0.4 (30.8)% 0.4 - -
------------------------------- ------- ----------- ----------- ------- ----------- -----------
Impact on operating
profit/(loss) (24.0) 2.4 10.0% (27.4) 1.7 6.2%
Non-underlying finance
costs(7) (0.1) - - (7.8) 1.5 19.2%
------------------------------- ------- ----------- ----------- ------- ----------- -----------
Impact on profit/(loss)
before tax (24.1) 2.4 10.0% (35.2) 3.2 9.1%
------------------------------- ------- ----------- ----------- ------- ----------- -----------
(1) Impairment charges in the current year relate to the Benelux
CGU and comprise GBP3.6m relating to goodwill, GBP2.5m tangible
fixed assets and GBP9.7m right-of-use assets. Impairment charges in
the prior year comprised GBP9.9m relating to goodwill and GBP0.3m
relating to additional impairment of an investment property.
(2) Cloud computing configuration and customisation costs relate
to costs incurred on strategic projects involving SaaS arrangements
which are expensed as incurred rather than being capitalised as
intangible assets.
(3) Onerous contract costs relate to provisions recognised for
licence fee commitments where no future economic benefit was
expected to be obtained, principally in relation to the SAP S/4HANA
implementation. There is a credit in the current year following
recent renegotiation of the total commitment for the remaining
year.
(4) Costs associated with refinancing in the current year relate
to the increase in the RCF and some ongoing costs relating to the
refinancing in the prior year. Costs associated with refinancing in
the prior year included legal and professional fees of GBP4.9m
offset by a GBP2.5m gain in relation to the termination of the cash
flow hedging arrangements as a result of the refinancing.
(5) Net restructuring costs in the year relate to consultancy
and redundancy costs in Benelux. Costs in the prior year included
property closure costs of GBP1.2m, redundancy and related staff
costs of GBP2.4m and restructuring consultancy costs of GBP0.1m.
These costs 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.
(6) Other specific items comprises the settlement and/or release
of historic provisions, including amounts relating to businesses
divested in previous years, impacts of the pensions member options
exercise undertaken during the year and GBP2.0m provision for
impairment of lease receivables. The GBP0.4m credit in 2021 related
principally to the transfer from cash flow hedging reserve to
profit and loss in relation to the cash flow hedging arrangements
on the private placement notes following partial repayment in
2020.
(7) Non-underlying finance costs in the current year relate to
the unwinding of the discount on the onerous contract provision.
Costs in the prior year comprised a GBP12.9m make-whole payment on
settlement of the private placement notes, GBP2.8m write-off of
arrangement fees in relation to the previous debt arrangements,
offset by GBP8.0m release of the loss on modification recognised on
amendment of the private placement notes in 2020, together with
GBP0.1m unwinding of the discount on the onerous contract
provision.
The total impact of the above amounts on the Consolidated cash
flow statement is a cash outflow of GBP15.8m (2021: GBP27.8m),
including GBPnil (2021: GBP12.9m) within finance costs paid.
5. Finance income and finance costs
2022 2021
GBPm GBPm
--------------------------------------- ------ -----
Finance income
Interest on bank deposits 1.3 0.7
--------------------------------------- ------ -----
1.3 0.7
--------------------------------------- ------ -----
Finance costs
On bank loans, overdrafts and other
associated items(1) 2.6 4.6
On secured notes(2) 14.0 1.7
On private placement notes(3) - 4.7
On obligations under lease contracts 13.3 11.6
Net finance charge on defined benefit
schemes - 0.2
Total finance costs before Other
items 29.9 22.8
Non-underlying finance costs(4) 0.1 7.8
--------------------------------------- ------ -----
Total finance costs 30.0 30.6
--------------------------------------- ------ -----
Net finance costs 28.7 29.9
--------------------------------------- ------ -----
(1) Other associated items includes the amortisation of
arrangement fees of GBP0.1m (2021: GBP0.9m).
(2) Included within finance costs on the secured notes is the
amortisation of arrangement fees of GBP0.5m (2021: GBP0.1m).
(3) Included within finance costs on private placement notes in
the prior year is the amortisation of arrangement fees of GBP0.6m
and the amortisation of the loss on modification of GBP2.1m.
(4) Non-underlying finance costs in the current year relate to
the unwinding of the discount on the onerous contract provision
included within Other items. Non-underlying finance costs in 2021
comprised a GBP12.9m make-whole payment on settlement of the
private placement notes, GBP2.8m write-off of arrangement fees in
relation to the previous debt arrangements, offset by GBP8.0m
release of the loss on modification recognised on amendment of the
private placement notes in 2020, together with GBP0.1m unwinding of
the discount on the onerous contract provision.
6. Income tax
The income tax expense comprises:
2022 2021
GBPm GBPm
------------------------------------------------- ------ ------
Current tax
UK & Ireland corporation - Charge for the
tax year 0.8 0.3
- Adjustments in
respect of prior
years 0.1 -
------------------------------------------------- ------ ------
0.9 0.3
Mainland Europe corporation - Charge for the
tax year 13.4 10.6
- Adjustments in
respect of prior
years 0.3 2.0
------------------------------------------------- ------ ------
13.7 12.6
------------------------------------------------- ------ ------
Total current tax 14.6 12.9
-------------------------------------------------- ------ ------
Deferred tax
Current year (2.2) (1.1)
Adjustments in respect
of previous years (0.3) 0.6
Deferred tax charge
in respect of pension
schemes - (0.1)
Effect of change
in rate (0.1) 0.1
-------------------------------------------------- ------ ------
Total deferred tax (2.6) (0.5)
-------------------------------------------------- ------ ------
Total income tax
expense 12.0 12.4
-------------------------------------------------- ------ ------
As the Group's profits and losses are earned across a number of
tax jurisdictions an aggregated income tax reconciliation is
disclosed, reflecting the applicable rates for the countries in
which the Group operates.
The total tax charge for the year differs from the expected tax
using a weighted average tax rate which reflects the applicable
statutory corporate tax rates on the accounting profits/losses in
the countries in which the Group operates. The differences are
explained in the following aggregated reconciliation of the income
tax expense:
2022 2021
GBPm % GBPm %
------------------------------------- ------ ------- ------- --------
Profit/(loss) before tax 27.5 (15.9)
Expected tax credit 8.5 30.9% (1.5) 9.4%
Factors affecting the income
tax expense for the year:
Expenses not deductible for
tax purposes(1) 2.1 7.6% 4.5 (28.3)%
Non-taxable income (1.3) (4.7)% (0.1) 0.6%
Impairment and disposal charges
not deductible for tax purposes(2) 3.0 10.9% 1.4 (8.8)%
Deductible temporary differences
not recognised for deferred
tax purposes 2.2 8.0% 5.4 (34.0)%
Losses utilised not previously
recognised for deferred tax
purposes (2.5) (9.1)% - -
Other adjustments in respect
of previous years 0.1 0.4% 2.6 (16.4)%
Effect of change in rate on
deferred tax (0.1) (0.4)% 0.1 (0.6)%
Total income tax expense 12.0 43.6% 12.4 (78.0)%
------------------------------------- ------ ------- ------- --------
(1) The majority of the Group's expenses that are not deductible
for tax purposes are in relation to acquisition related costs,
non-qualifying depreciation and other disallowable expenditure in
the current year. The expenses not deductible for tax purposes in
the prior year related to internal restructuring and impairments of
property.
(2) During the year the Group incurred impairment charges of
GBP15.8m (2021: GBP9.9m) in relation to goodwill and other
non-current assets which are not deductible for tax purposes.
The effective tax rate for the Group on the total profit before
tax of GBP27.5m (2021: GBP15.9m loss) is 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 in respect of the UK business which
has the effect of increasing the overall effective tax rate.
Factors that will affect the Group's future total tax charge as
a percentage of underlying profits are:
-- the mix of profits and losses between the tax jurisdictions in which the Group operates;
-- the impact of non-deductible expenditure and non-taxable income;
-- agreement of open tax computations with the respective tax authorities; and
-- the recognition or utilisation (with corresponding reduction
in cash tax payments) of unrecognised deferred tax assets.
In addition to the amounts charged to the Consolidated income
statement, the following amounts in relation to taxes have been
recognised in the Consolidated statement of comprehensive income,
with the exception of deferred tax on share options which has been
recognised in the Consolidated statement of changes in equity:
2022 2021
GBPm GBPm
----------------------------------------- ------ ------
Deferred tax movement associated
with re-measurement of defined benefit
pension liabilities(1) 0.5 (0.1)
Exchange rate movements 0.1 -
0.6 (0.1)
----------------------------------------- ------ ------
(1) This item will not subsequently be reclassified to the
Consolidated Income Statement.
7. Earnings/(loss) per share
The calculations of earnings/(loss) per share are based on the
following profits/(losses) and numbers of shares:
Basic and diluted
--------------------
2022 2021
GBPm GBPm
---------------------------------------- -------- ----------
Profit/(loss) attributable to ordinary
equity holders of the parent for
basic and diluted earnings per share 15.5 (28.3)
Add back:
Other items (see Note 4) 21.7 32.0
---------------------------------------- -------- ----------
Profit attributable to ordinary
equity holders of the parent for
basic and diluted earnings per share
before other items 37.2 3.7
---------------------------------------- -------- ----------
Weighted average number
of shares
------------------------------
2022 2021
Number Number
--------------------------------------- -------------- --------------
For basic and diluted earnings/(loss)
per share 1,149,776,931 1,177,972,694
Effect of dilution from share options 33,638,307 -
--------------------------------------- -------------- --------------
Adjusted for the effect of dilution 1,183,415,238 1,177,972,694
--------------------------------------- -------------- --------------
Share options were considered antidilutive in the prior periods
as their conversion into ordinary shares would decrease the loss
per share. The calculation of diluted earnings/(loss) per share
does not assume conversion, exercise, or other issue of potential
ordinary shares that would have an antidilutive effect on
earnings/(loss) per share.
The weighted average number of shares excludes those held by the
SIG Employee Share Trust which are not vested and beneficially
owned by employees.
Earnings/(loss) per
share
----------------------
2022 2021
GBPm GBPm
-------------------------------------- --------- -----------
Earnings/(loss) per share
Basic earnings/(loss) per share 1.3p (2.4)p
Diluted earnings/(loss) per share 1.3p (2.4)p
Earnings per share before Other
items(1)
Basic and diluted earnings per share
from continuing operations before
Other items 3.2p 0.3p
-------------------------------------- --------- -----------
(1) Earnings/(loss) per share before Other items (also referred
to as underlying earnings/(loss) per share) has been disclosed in
order to present the underlying performance of the Group.
8. Acquisitions
The Group acquired the following businesses during the year:
% ordinary
share
capital Acquisition Country
acquired date of incorporation Principal activity
--------------------- ----------- ------------ ------------------ --------------------------
Distributor of
14 July interiors and insulation
Thermodämm GmbH 100% 2022 Germany products
Distributor of
Miers Construction 22 July specialist construction
Products Limited 100% 2022 United Kingdom materials
--------------------- ----------- ------------ ------------------ --------------------------
The Group acquired the Thermodämm business to enlarge its market
share in the German screed flooring business and the acquisition is
allocated to the Germany segment. The Group acquired the Miers
business to enlarge the UK Interiors business in terms of product
range and geographic location, and the acquisition is allocated to
the UK Interiors segment.
The provisional fair values of the identifiable assets and
liabilities of the acquisitions at the date of acquisition are as
follows:
2022 2021
Miers Penlaw F30 Building
(UK) Thermodämm Total Group Products Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------- ---------------- ------- ------- ------------- -------
Assets
Intangible assets
(customer relationships) 12.0 1.7 13.7 3.2 1.8 5.0
Property, plant and
equipment 0.8 0.2 1.0 1.4 0.1 1.5
Right-of-use assets 2.7 0.6 3.3 7.2 0.3 7.5
Cash and cash equivalents 4.1 0.2 4.3 2.0 0.2 2.2
Trade and other receivables 13.0 0.3 13.3 20.6 1.1 21.7
Inventories 7.3 0.6 7.9 3.1 0.2 3.3
Current tax asset 0.3 - 0.3 - - -
----------------------------- ------- ---------------- ------- ------- ------------- -------
40.2 3.6 43.8 37.5 3.7 41.2
Liabilities
Trade and other payables (12.2) (0.6) (12.8) (20.8) (1.3) (22.1)
Provisions (1.1) - (1.1) (0.6) (0.1) (0.7)
Current tax liability - - - (0.1) (0.1) (0.2)
Deferred tax liability (3.0) (0.7) (3.7) (0.9) (0.4) (1.3)
Bank loan (3.2) - (3.2) - - -
Lease liabilities (2.7) (0.7) (3.4) (7.2) (0.3) (7.5)
----------------------------- ------- ---------------- ------- ------- ------------- -------
(22.2) (2.0) (24.2) (29.6) (2.2) (31.8)
Total identifiable
net assets at fair
value 18.0 1.6 19.6 7.9 1.5 9.4
Goodwill arising
on acquisition 13.2 2.0 15.2 2.7 2.1 4.8
----------------------------- ------- ---------------- ------- ------- ------------- -------
Purchase consideration
transferred 31.2 3.6 34.8 10.6 3.6 14.2
----------------------------- ------- ---------------- ------- ------- ------------- -------
The fair value of trade receivables amounts to GBP12.1m for
Miers and GBP0.3m for Thermodämm. The gross amount of trade
receivables is GBP12.5m for Miers and GBP0.3m for Thermodämm. The
Group measures the acquired lease liabilities using the present
value of the remaining lease payments at the date of acquisition.
The right-of-use asset was measured at an amount equal to the lease
liability.
The goodwill of GBP13.2m relating to Miers comprises the value
of expected synergies arising from the acquisition, strategic fit
with the UK Interiors business and geographic location, in
particular in relation to developing sales in the construction
accessories sector. The goodwill of GBP2.0m relating to Thermodämm
comprises the value of the strategic fit within the German branch
landscape and expected synergies arising from the acquisition.
From the date of acquisition, Miers contributed GBP27.6m of
revenue and GBP0.2m to underlying profit before tax of the Group,
and Thermodämm contributed GBP2.7m of revenue and GBP0.1m to
underlying profit before tax. If the acquisitions had taken place
at the beginning of the year, revenue for the Group would have been
GBP2,783.0m and profit before tax for the Group would have been
GBP30.5m.
2022 2021
Miers Penlaw F30 Building
(UK) Thermodämm Total Group Products Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------ ---------------- ------ ------- ------------- ------
Cash paid on completion 26.9 3.4 30.3 9.8 2.5 12.3
Deferred consideration
due within one year - 0.2 0.2 0.2 0.5 0.7
Deferred consideration
due after more than
one year 1.8 - 1.8 0.1 0.6 0.7
Contingent consideration
due within one year - - - 0.1 - 0.1
Contingent consideration
due after more than
one year 2.5 - 2.5 0.4 - 0.4
Total consideration 31.2 3.6 34.8 10.6 3.6 14.2
-------------------------- ------ ---------------- ------ ------- ------------- ------
The contingent consideration in relation to Miers is payable
dependent on future performance of the business based on adjusted
EBITDA exceeding an EBITDA threshold, as defined in the sale and
purchase agreement, for the financial year to 31 December 2023,
subject to a maximum of GBP2.6m. The range of contingent
consideration payable is therefore GBPnil to GBP2.6m, with GBP2.5m
recognised at the date of acquisition on the basis of current
forecasts and fair value calculation. This is included within other
payables due after more than one year on the Consolidated balance
sheet. The liability is remeasured to fair value at subsequent
reporting dates with changes in fair value recognised in profit or
loss. The fair value is measured using level 3 inputs and is
sensitive to changes in one or more observable inputs.
A further amount of up to GBP4.0m is also payable in 2024
dependant on the future performance of the business for the
financial year to 31 December 2023 and dependent on the vendors
remaining within the business. This is therefore treated as
remuneration and is being charged to the Consolidated Income
Statement as earned. GBP1.2m has been recognised and included
within other payables due after more than one year at 31 December
2022.
Analysis of cash flows on acquisition
2022 2021
Miers Penlaw F30 Building
(UK) Thermodämm Total Group Products Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------- ---------------- ------- ------- ------------- -------
Consideration paid
(included in cash
flows from investing
activities) (26.9) (3.4) (30.3) (9.8) (2.5) (12.3)
Net cash acquired
with the subsidiary
(included in cash
flows from investing
activities) 4.1 0.2 4.3 2.0 0.2 2.2
----------------------- ------- ---------------- ------- ------- ------------- -------
Total net cash flow
included in cash
flows from investing
activities (22.8) (3.2) (26.0) (7.8) (2.3) (10.1)
Transaction costs
(included in cash
flows from operating
activities) (0.8) (0.1) (0.9) (0.3) (0.1) (0.4)
Net cash flow on
acquisition (23.6) (3.3) (26.9) (8.1) (2.4) (10.5)
----------------------- ------- ---------------- ------- ------- ------------- -------
Deferred consideration
A reconciliation of the movement in deferred consideration is
provided below:
2022 2021
GBPm GBPm
------------------------------------- ------ ------
Liability at 1 January 1.8 0.9
Liability arising on acquisitions
in the year 2.0 1.4
Amounts paid relating to previous
acquisitions (1.3) (0.5)
------------------------------------- ------ ------
Liability at 31 December 2.5 1.8
------------------------------------- ------ ------
Included in current liabilities 0.7 1.1
Included in non-current liabilities 1.8 0.7
------------------------------------- ------ ------
Total 2.5 1.8
------------------------------------- ------ ------
Contingent consideration
A reconciliation of the movement in the fair value measurement
of contingent consideration is provided below:
2022 2021
GBPm GBPm
--------------------------------------- ----- -----
Liability at 1 January 0.5 -
Liability arising on acquisitions
in the year 2.5 0.5
Liability at 31 December 3.0 0.5
--------------------------------------- ----- -----
Included in current liabilities
(within accruals and other payables) 0.5 0.1
Included in non-current liabilities
(within other payables) 2.5 0.4
--------------------------------------- ----- -----
Total 3.0 0.5
--------------------------------------- ----- -----
The GBP2.5m arising on acquisitions in the year relates to
Miers, as set out above. The other amount relates to Penlaw, which
was acquired in the prior year. See below for further details.
Consideration dependent on vendors remaining within the
business
Amounts which may be paid to vendors of recent acquisitions who
are employed by the Group and are contingent upon the vendors
remaining within the business are, as required by IFRS3 'Business
Combinations', treated as remuneration and charged to the
consolidated income statement as earned. A reconciliation of the
movement in amounts accrued is as follows:
2022 2021
GBPm GBPm
--------------------------------------- ------ -----
Liability at 1 January 0.6 -
New amounts accrued 1.4 0.6
Amounts paid (included within cash
flow from operating activities) (0.8) -
--------------------------------------- ------ -----
Liability at 31 December 1.2 0.6
--------------------------------------- ------ -----
Included in current liabilities
(within accruals and other payables) - 0.6
Included in non-current liabilities
(within other payables) 1.2 -
--------------------------------------- ------ -----
Total 1.2 0.6
--------------------------------------- ------ -----
Acquisitions in 2021
In the prior year the Group acquired 100% of the ordinary share
capital of F30 Building Products Limited, a UK distributor of
construction accessories, on 10 March 2021 and 100% of the ordinary
share capital of the Penlaw Group of companies, a UK distributor of
interiors and insulation products, on 26 October 2021. Details of
the consideration, fair values of assets and liabilities acquired
and cash flows on acquisition are shown above.
The contingent consideration in relation to the Penlaw Group is
payable dependent on future performance of the business based on
adjusted EBITDA exceeding an EBITDA threshold, as defined in the
sale and purchase agreement, with up to a maximum of GBP0.6m
payable for the first twelve months from completion and up to a
maximum of GBP1.2m for the second twelve months from completion,
subject to a maximum of GBP1.2m in total. At the acquisition date,
the fair value of contingent consideration was estimated to be
GBP0.5m. No amount is payable in relation to performance for the
first twelve months from completion. On the basis of current
forecasts, the fair value of contingent consideration in relation
to the second twelve months from completion continues to be
estimated to be GBP0.5m at 31 December 2022. This is included
within other payables on the Consolidated balance sheet. The range
of contingent consideration payable is GBPnil to GBP1.2m. The fair
value is measured using level 3 inputs and is sensitive to changes
in one or more observable inputs.
In relation to F30 Building Products, a further amount of up to
GBP0.8m was also payable over the twelve months from completion
dependant on the future performance of the business and dependent
on the vendor remaining within the business. This was therefore
treated as remuneration and was charged to the Consolidated Income
Statement as earned. GBP0.6m was recognised and included within
accruals in relation to this at 31 December 2021, with a further
GBP0.2m recognised and the total amount of GBP0.8m paid during
2022.
The goodwill of GBP2.1m relating to F30 Building Products
comprised the value of expected synergies arising from the
acquisition, strategic fit with the UK Interiors business and
geographic location, in particular the developing sales in the
construction accessories sector. The 2021 provisional fair values
of the identifiable assets and liabilities have been finalised
during the current year with no further adjustments recognised.
The goodwill of GBP2.7m relating to the Penlaw Group comprised
the value of expected synergies arising from the acquisition and
the strategic fit with the UK Interiors business. The 2021
provisional fair values of the identifiable assets and liabilities
have been finalised during the current year resulting in a net
GBP0.1m reduction in the goodwill previously recognised. Trade
receivables were reduced by GBP0.2m, trade and other payables
increased by GBP0.1m and current tax liability reduced by
GBP0.4m.
From the date of acquisition, the Penlaw Group contributed
GBP9.9m of revenue and GBP0.4m loss to underlying profit before tax
of the Group in 2021, and F30 Building Products contributed GBP6.5m
of revenue and GBP0.8m to underlying profit before tax. If the
acquisitions had taken place at the beginning of 2021, revenue for
the Group would have been GBP2,349.6m and loss before tax for the
Group would have been GBP13.9m.
9. Reconciliation of operating profit to cash generated from
operating activities
2022 2021
GBPm GBPm
------------------------------------------- ------- -------
Profit/(loss) before tax 27.5 (15.9)
Net finance costs 28.7 29.9
Depreciation of property, plant
and equipment 12.6 11.4
Depreciation of right-of-use assets 60.6 56.9
Amortisation of computer software 3.2 3.4
Amortisation of acquired intangibles 4.7 4.7
Impairment of property, plant and
equipment 2.5 0.3
Impairment of goodwill 3.6 9.9
Impairment of right-of-use asset 9.7 0.5
Impairment of lease receivables 2.0 -
Profit on sale of property, plant
and equipment (0.4) (0.9)
Share-based payments 4.4 2.4
Gains on derivative financial instruments - (2.8)
Net foreign exchange differences (1.0) 0.3
Decrease in provisions (11.4) (7.3)
Working capital movements:
- Increase in inventories (13.0) (75.7)
- Increase in receivables (41.6) (68.1)
- Increase in payables 40.2 58.4
------------------------------------------- ------- -------
Cash generated from operating activities 132.3 7.4
------------------------------------------- ------- -------
Included within the cash generated from operating activities is
a defined benefit pension scheme employer's contribution of GBP2.5m
(2021: GBP5.0m).
10. Reconciliation of net cash flow to movements in net debt
2022 2021
GBPm GBPm
---------------------------------------- -------- --------
Decrease in cash and cash equivalents
in the period (18.3) (82.7)
Cash flow from decrease in debt 76.1 15.8
---------------------------------------- -------- --------
Decrease/(increase) in net debt
resulting from cash flows 57.8 (66.9)
Deferred consideration added on
acquisitions (2.0) (0.9)
Other debt added on acquisitions (6.6) (7.5)
Non-cash movement in lease liabilities
and lease receivables (111.3) (68.0)
Non-cash items(1) 1.4 8.0
Exchange differences (18.3) 8.5
---------------------------------------- -------- --------
Increase in net debt in the period (79.0) (126.8)
Net debt at beginning of period (365.0) (238.2)
---------------------------------------- -------- --------
Net debt at end of the period (444.0) (365.0)
---------------------------------------- -------- --------
(1) Non-cash items include the fair value movement of debt and
derivative financial instruments recognised in the year which does
not give rise to a cash inflow or outflow.
Net debt is defined as follows:
2022 2021
GBPm GBPm
--------------------------------------- -------- --------
Non-current assets:
Derivative financial instruments 0.2 -
Lease receivables 1.2 2.9
Current assets:
Derivative financial instruments 1.6 0.2
Lease receivables 0.1 0.8
Cash at bank and on hand 130.1 145.1
Current liabilities:
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)
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)
--------------------------------------- -------- --------
Net debt (444.0) (365.0)
--------------------------------------- -------- --------
Analysis of movements in net debt:
At 31 At 31
December Cash Non-cash Exchange December
2021 flows Acquisitions items(1) differences 2022
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ---------- ------- ------------- ---------- ------------- ----------
Cash at bank and on hand 145.1 7.7 (26.0) - 3.3 130.1
Lease receivables 3.7 (0.4) - (2.0) - 1.3
------------------------------- ---------- ------- ------------- ---------- ------------- ----------
148.8 7.3 (26.0) (2.0) 3.3 131.4
Liabilities arising
from financing activities
Financial assets - derivative
financial instruments 0.2 - - 1.6 - 1.8
Debts due within one
year (2.0) 1.8 (1.3) - - (1.5)
Debts due after one year (250.9) 0.9 (3.9) (0.2) (13.9) (268.0)
Lease liabilities (261.1) 73.8 (3.4) (109.3) (7.7) (307.7)
------------------------------- ---------- ------- ------------- ---------- ------------- ----------
(513.8) 76.5 (8.6) (107.9) (21.5) (575.4)
Net debt (365.0) 83.8 (34.6) (109.9) (18.3) (444.0)
------------------------------- ---------- ------- ------------- ---------- ------------- ----------
(1) Non-cash items include the fair value movement of debt
recognised in the year which does not give rise to a cash inflow or
outflow, movements between debts due within one year and after one
year, and non-cash movements in lease liabilities.
11. Dividends
No interim dividend was paid for the year ended 31 December 2022
(2021: GBPnil) and no final dividend is proposed. No final dividend
was proposed or paid for the year ended 31 December 2021. No
dividends have been paid between 31 December 2022 and the date of
signing the Financial Statements.
12. Provisions
Onerous Leasehold Onerous Other
leases dilapidations contracts amounts Total
GBPm GBPm GBPm GBPm GBPm
------------------------- -------- --------------- ----------- --------- ------
At 1 January 2022 1.3 22.0 8.8 2.1 34.2
Unused amounts reversed
in the period (0.1) (0.6) (1.2) (0.4) (2.3)
Utilised (1.2) (0.2) (6.8) (1.4) (9.6)
New provisions 0.1 2.1 - 1.1 3.3
Added on acquisition - 1.1 - - 1.1
Unwinding of discount - - 0.1 - 0.1
Exchange differences - - - 0.1 0.1
At 31 December 2022 0.1 24.4 0.9 1.5 26.9
------------------------- -------- --------------- ----------- --------- ------
2022 2021
GBPm GBPm
--------------------------------- ----- -----
Included in current liabilities 9.6 12.9
Included in non-current
liabilities 17.3 21.3
Total 26.9 34.2
------------------------------------ ----- -----
Onerous leases
In accordance with IFRS 16, the future rental payments due over
the remaining term of existing lease contracts is included in the
lease liability, with the right-of-use asset impaired to reflect
the future cost not covered through sublease income. The remaining
onerous lease provision relates to other non-rental costs due over
the remaining lease term based on expected value of costs to be
incurred and assumptions regarding subletting. The balance at 31
December 2022 is payable over the relevant lease terms, the longest
unexpired term being 19 years to 2041.
Leasehold dilapidations
This provision relates to contractual obligations to reinstate
leasehold properties to their original state of repair. The
provision is calculated based on both the estimated liability to
rectify or reinstate leasehold improvements and modifications
carried out on the inception of the lease (recognised on inception
with corresponding fixed asset) and the liability to rectify
general wear and tear which is recognised as incurred over the life
of the lease. The costs will be incurred both at the end of the
leases (reinstatement) and during the lease term (wear and
tear).
Onerous contracts
Onerous contract provisions relate to licence fee commitments
where no future economic benefit is expected to be obtained,
principally in relation to the SAP S/4HANA implementation following
the change in scope of the project in previous years. The remaining
cost will be incurred in the next year.
Other amounts
Other amounts relate principally to claims and warranty
provisions based on expected value and past experience. The
transfer of economic benefit is expected to be made between one and
four years' time.
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.
Those subsidiaries sold an insulation product manufactured by a
third party, and made requested adaptations to the product prior to
selling it. The claim relates to the adaptations. This matter arose
during 2022 and the provision recognised in the year is included
within the "new provisions" charge of GBP1.1m. This claim is
discussed further in Note 13.
13. Contingent liabilities
Legal claim
As noted in Note 12, two of SIG's wholly owned subsidiaries in
Benelux are subject to legal proceedings.
Subsequent to the year end, the Group has obtained additional
independent technical expert input on the matter, which is
currently being discussed with our customer. This matter may give
rise to a possible further obligation whose existence will be
confirmed only by the occurrence of uncertain future events not
wholly within the control of the Group. Given the outcome of the
matter remains highly uncertain at this stage, the Group cannot
estimate the possible further financial impact in the event that
the subsidiaries were determined to have any further obligation
arising from this matter. Further information about the matter and
its possible outcomes are not provided, as such disclosures could
prejudice the position and interests of the Group in this
matter.
Other
As at the balance sheet date, the Group had outstanding
obligations under customer guarantees, claims, standby letters of
credit and discounted bills of up to GBP11.7m (2021: GBP9.9m). Of
this amount, GBP5.2m (2021: GBP4.7m) relates to a standby letter of
credit issued by HSBC Bank plc in respect of the Group's insurance
arrangements.
As disclosed in the Statement of significant accounting
policies, SIG Building Systems Limited have taken advantage of the
exemption available under Section 479A of the Companies Act 2006 in
respect of the requirement for audit. As a condition of the
exemption, the Company has guaranteed the year end liabilities of
the entity until they are settled in full.
As part of the disposal of the Building Plastics business in
2017 a guarantee was provided to the landlord of the leasehold
properties transferred with the business covering rentals over the
remaining term of the leases in the event that the acquiring
company enters into administration before the end of the lease
term. The maximum liability that could arise from this would be
approximately GBP0.8m (2021: GBP1.1m) based on the remaining future
rent commitment at 31 December 2022. No provision has been made in
these financial statements as it is not considered likely that any
loss will be incurred in connection with this .
14. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and have
therefore not been disclosed.
In 2022, SIG incurred expenses of GBP0.2m (2021: GBP0.6m) on
behalf of the SIG plc Retirement Benefits Plan, the UK defined
benefit pension scheme.
Remuneration of key management personnel
The total remuneration of key management personnel of the Group,
being the Executive Leadership Team members and the Non-Executive
Directors, is set out below in aggregate for each of the categories
specified in IAS 24 "Related Party Disclosures".
2022 2021
GBPm GBPm
--------------------------------- ----- -----
Short-term employment benefits 7.9 6.7
Termination and post-employment
benefits 0.1 -
IFRS 2 share option charge 2.9 1.5
--------------------------------- ----- -----
10.9 8.2
--------------------------------- ----- -----
Principal risks and uncertainties
The Board, supported by the Audit Committee, sets the strategy
for the Group and ensures the associated risks are effectively
identified and managed through the implementation of the risk
management and control frameworks.
The Group employs a three lines model to provide a simple and
effective way to enhance risk and control management processes and
ensure roles and responsibilities are clear. The Board maintains
oversight to ensure risk management and control activities carried
out by the three lines are proportionate to the perceived degree of
risk and its own risk appetite across the Group.
To identify our risks, we focus on our strategic objectives and
consider what might stop us achieving our plan within our strategic
planning period. The approach combines a top-down strategic
Group-level view and a bottom-up operational view of the risks at
operating company level. Meetings are held with our operating
company leadership teams to identify the risks within their
operations. These are consolidated and, in conjunction with a
series of discussions held with Executive Leadership Team and
Non-Executive Directors, provide the inputs to identify and
validate our principal risks.
The Board regularly monitors the Group risk register, which
includes the ten principal risks to the Group set out below. These
risks, if they materialise, could have a significant impact on the
Group's ability to meet its strategic objectives.
Risk Mitigations
Cyber security: Internal or external cyber-attacks could Cyber security continues to receive Board and Executive
result in system disruption or sensitive Leadership Team focus with an emphasis
data being compromised on ensuring that appropriate technologies are deployed
across IT
In the context of widespread dependency on increasingly infrastructure to manage cyber threats.
complex digital systems, growing cyber threats are
outpacing societies' ability to effectively prevent and Regular and independent reviews are performed to assess
manage them. These risks are also exacerbated by the nature of our cyber threats, security
an increasing willingness of nation states to engage in processes and initiatives. They also ensure that we
asymmetric cyber warfare to achieve geopolitical aims. implement appropriate tools and processes
to better identify and remediate new and emerging cyber
There is a risk that we lack the capabilities to risks and vulnerabilities.
effectively prevent, monitor, respond to,
or recover from, suspected cyber-attacks on our IT Cyber-incident response protocols are also in place to
infrastructure. Such attacks may result support our ability to effectively
in a loss of data or disruption to IT services which may respond to and recover from a cyber threat or incident
have a significant impact on our and ongoing cyber training campaigns
ability to operate and comply with data protection and and initiatives ensure employees are alert to the nature
privacy laws (e.g. GDPR) and have a and consequences of cyber-attacks.
detrimental effect on our reputation.
----------------------------------------------------------
Health and safety: Danger of incident or accident, The Group Health, Safety and Environment Director is a
resulting in injury or loss of life to member of the Executive Leadership Team and provides
employees, customers, or the general public strategic leadership for all matters relating to health,
safety and
There is a risk that poor organisational arrangements or environmental performance, oversight and strategy. During
behavioural culture with regards the
to health and safety causes harm to individuals and as a year we appointed a new Group Health, Safety and
result may result in enforcement Environment
action, penalties, reputational damage, or adverse press Director and she is supported by local health and safety
coverage. managers, embedded in each of our businesses, who provide
local leadership and support, and provide regular
monitoring
and reporting of key performance metrics and the status
of local
actions and initiatives implemented.
A compliance standards framework is in place to ensure
the
adequacy of local health and safety standards and
arrangements,
with assurance provided through a programme of compliance
audits performed by suitably trained and experienced
health and
safety professionals.
----------------------------------------------------------
Macroeconomic uncertainty: Macroeconomic volatility We continue to assess inflationary, other supply chain
impacts the Group's ability to accurately pressures
forecast and to meet internal and external expectations and impacts on product pricing and will continue to work
with
Geopolitical tensions have been a key feature of 2022 and our suppliers to identify opportunities to improve supply
are unlikely to disappear in 2023. The ongoing impacts chain
of restoring post-Covid-19 financial stability, conflict resilience and to selectively pre-purchase products in
in order to
Ukraine and the response of Western governments, ensure continuity of supply.
particularly regarding the imposition of sanctions on
Russia and retaliatory disruption to energy supplies, has The Group's geographical diversity across Europe reduces
resulted in unprecedented economic turbulence and the
financial uncertainty with significant ongoing impact of changes in market conditions in any one country
inflationary while
and cost of living impacts for both the UK and Europe. industry-based KPIs, monitored monthly at a Group and
operating
This volatility has the potential to impact customer company level, help to ensure that warnings and
demand, along with presenting significant challenges to indicators of
our financial, operational and commercial resilience, risk are identified early, and appropriate mitigation
whilst strategies
adding costs to our operations and making planning and implemented.
forecasting more difficult. Changes in macroeconomic
conditions may adversely affect the Group's people,
business, results of operations, financial condition,
or prospects.
----------------------------------------------------------
Attract, recruit and retain our people: Failure to We continue to invest in learning and development
attract and retain people with the right programmes
skills, drive and capability to reshape and grow the to ensure both vocational and technical training needs
business are met
whilst retaining an agile workforce.
A combination of structural labour and vocational skills
shortages in the construction sector, exacerbated by We ensure accountabilities, responsibilities, and
increased employee concerns regarding post-Covid-19 organisational
wellbeing, mental health anxieties and significant wage structures are regularly reviewed and where necessary
inflation pressure resulting from an increased cost of restructured to optimise employee motivation and
living, has the potential to negatively impact SIG's engagement.
ability Employee engagement is also monitored through the annual
to attract, recruit and retain staff across the full employee engagement survey process and the Workforce
spectrum Engagement programme run by the Board.
of disciplines.
Ongoing enhancements to pay and conditions, including
benchmarking remuneration packages to ensure market
competitiveness, addressing the financial challenges
experienced
by our lower paid colleagues, broadening the scope of
variable
elements of remuneration and the development of retention
and
succession plans for critical roles helps to mitigate
this risk.
----------------------------------------------------------
Data quality and governance: Poor data quality negatively Product and customer data quality remains a focus area
impacts our financial management, for
fact-based decision making, business efficiency, and our operating companies, who continue to monitor, assess
credibility with customers and upgrade their product data requirements, capabilities
and
There is a risk that we lack the necessary quality of governance considering ongoing changes in business needs
systems and processes to ensure sufficient granularity, and regulation. We also continue to maintain and upgrade
completeness, and accuracy of vendor, product and our
pricing master data. This has the potential to impact our ERP systems where relevant to ensure these systems
ability to deliver a digital customer experience, provide support the
enhanced product and customer analytics or insight required data quality and governance required.
and comply with both existing and new regulatory
requirements.
----------------------------------------------------------
Environmental, social and governance (ESG): SIG suffers We have set ambitious ESG commitments and will focus on
reputational impacts due to poor demonstrating health and safety leadership
environmental, social and governance arrangements and in our sector, committing to a net zero carbon target by
performance 2035 at the latest, sending zero
SIG waste to landfill by 2025, partnering with
Public and commercial consciousness has been growing manufacturers and customers to reduce carbon
on a wide range of environmental, social and governance and waste across the supply chain, and to being
issues, including climate change, employee wellbeing and recognised as the employer of choice in building
how an organisation contributes to society. Organisations materials distribution.
should not only minimise their negative impacts, but also
contribute positively to both society and the These commitments will be supported by verifiable and
environment. evidenced-based data to ensure that progress in achieving
these
While SIG has a long and rich heritage in helping the aims and ambitions is monitored and subject to
construction industry deliver energy efficient solutions appropriate
and products, risks remain in terms of how we deliver rigour. To do this, we have enhanced our sustainability
our ESG agenda. This is particularly the case in how reporting
we ensure we achieve our stated aims with regards and budgeting processes (particularly in relation to
to climate change. These risks include the cost and carbon
complexity of compliance, the challenges presented by emissions and waste) to ensure that we are able to
the decarbonisation of our vehicle fleet and estate and effectively
how we engage with the wider industry to reduce product track both the progress and financial impacts of
and supply-chain carbon impacts. commitments.
In terms of employee wellbeing, each of our businesses
has
introduced programmes and initiatives to support
employees,
underpinned by a Group-wide employee health and wellbeing
policy and training for all employees
to understand their responsibilities to keep themselves
and their colleagues safe and well.
----------------------------------------------------------
Mergers and acquisitions: We lack the capabilities to We have dedicated M&A Group resource supported by
identify, acquire and integrate significant appropriately skilled in-house expertise and the use of
mergers and acquisition opportunities and ensure deals approved
deliver desired scalability and value external advisors.
creation
Clear accountability and authority limits for the
As part of our growth strategy, we may from time to time initiation and
acquire new businesses. Such decisions are based on approval of M&A activity are defined in the Group
detailed plans that assess the value creation opportunity Delegation
for the Group. By their nature, there is an inherent risk of Authority.
that we fail to manage the execution and integration Resource is also available in the organisation to ensure
risks that
which may result in delays or additional costs and impact transactions are subject to post-integration and lessons
the future value and revenues generated. learnt
exercises and we continue to streamline and enhance our
M&A
policies and procedures.
----------------------------------------------------------
Legal or regulatory compliance: We fail to comply with or Our Group General Counsel is a member of the Executive
are found to be in breach of, legal Leadership Team and is supported by appropriately skilled
or regulatory requirements in-house legal and company secretarial resource at Group
and
The Group's operations are subject to an increasing operating company level, with further support provided by
and evolving range of regulatory and other requirements an
in the markets in which it operates. A major corporate approved panel of external lawyers and advisors.
failure resulting from a non-compliance with legislative,
regulatory or other requirements would impact our brand Policies and procedures are in place to ensure compliance
and reputation, could expose us to significant with
operational legal and regulatory frameworks, including health and
disruption or result in enforcement action or penalties. safety,
environmental, ethical, fraud, data protection and
product safety.
The Group has a dedicated internal controls function to
ensure
that appropriate controls are in place and are operating
effectively to mitigate against material
financial misstatement, errors, omissions or fraud.
Our Code of Conduct is available on our website and forms
part
of our employee induction programme. E-learning tools are
also
deployed across the organisation to ensure employees are
aware
of, and understand, their obligations.
A whistleblowing hotline, managed and facilitated by an
independent third party, is in place
throughout the Group. All calls are followed up and
investigated fully with all findings reported
to the Board.
----------------------------------------------------------
Digitalisation: SIG fails to maintain or offer the We continue to evaluate new technologies and make
digital capabilities necessary to either investments
maintain market competitiveness or to support the ongoing in the digital workplace to ensure that we maintain a
investments required to modernise competitive
and deliver future efficiency and productivity gains digital proposition.
Increased technological innovation and change has Across our markets each operating company is responsible
accelerated the increasing role digitalisation will have for
in ensuring that it implements the necessary technologies
the construction materials supply chain. We continue and ways
to seek opportunities to ensure we can deliver digital of working to ensure that it can maximise digital
solutions to enable a more integrated and frictionless opportunities
experience for both customers and suppliers. in terms of enhancing the customer experience and
optimising
This risk may be exacerbated by legacy systems and transactional, fulfilment or process efficiencies.
technologies which are heavily customised, require
significant system maintenance to prevent outages and During 2022, we identified opportunities for further
lack the functionality to allow their integration into a progress
more in digital, particularly with regards to how we can
modern digital infrastructure. increase our
productivity, optimise process efficiencies and enhance
the
customer experience. This will form the basis of how we
further
develop our digital capabilities.
----------------------------------------------------------
Change management: Failure to deliver the change and Operating companies continue to manage change portfolios
growth agenda in an effective and efficient through programme management governance committees.
manner, resulting in management stretch, compromised Increased monitoring has been implemented, particularly
quality, and inability to meet growth regarding progress against growth initiatives, in line
targets with
our strategy.
As we enter the next phase of executing our strategy,
there will be a key focus on identifying and implementing Monitoring of business growth metrics and early warning
opportunities to drive efficiency and productivity and to indicators or trends continues as part of business
ensuring that we optimise our service, product offer and reviews at
processes, and manage our cost base. both the management and Board level.
This will inevitably require changes to roles, and ways Our ongoing employee engagement surveys continue to
of facilitate the early identification of change impact in
working, while we continue to modernise existing and terms of our
implement new IT systems. employees, and action plans are implemented and monitored
accordingly.
There is a risk that these initiatives, allied to the
impacts
of an increasingly volatile market and the associated
pressures resulting from an increased cost of living,
results
in "change fatigue" and either future changes are not
implemented as planned, or the benefits are not realised.
----------------------------------------------------------
Non-statutory information
The Group uses a variety of alternative performance measures,
which are non-IFRS, to describe the Group's performance. The Group
considers these performance measures to provide useful historical
financial information to help investors evaluate the underlying
performance of the business. Alternative performance measures are
not a substitute for or superior to statutory IFRS measures.
These measures, as shown below, are used to improve the
comparability of information between reporting periods and
geographical units, to adjust for Other items or to adjust for
businesses identified as non-core to provide information on the
ongoing activities of the Group. This also reflects how the
business is managed and measured on a day-to-day basis. Non-core
businesses are those businesses that have been closed or disposed
of or where the Board has resolved to close or dispose of the
businesses by the end of the reporting period.
a) Net debt
Net debt is a key metric for the Group, and monitoring it is an
important element of treasury risk management for the Group. Net
debt excluding the impact of IFRS 16 is no longer relevant for
financial covenant purposes but is still monitored for comparative
purposes. Net debt on frozen GAAP basis and covenant net debt which
were presented at 30 June 2021 are no longer relevant following the
change in debt arrangements during the prior year and are therefore
no longer presented.
2022 2021
GBPm GBPm
---------------------------------------- -------- --------
Reported net debt 444.0 365.0
Lease liabilities recognised in
accordance with IFRS 16 (285.0) (239.1)
Lease receivables recognised in
accordance with IFRS 16 1.3 3.7
Other financial liabilities recognised
in accordance with IFRS 16 - (1.0)
---------------------------------------- -------- --------
Net debt excluding impact of IFRS
16 160.3 128.6
---------------------------------------- -------- --------
b) Leverage
Leverage is one of the covenants applicable to the Revolving
Credit facility and is used as a key performance metric for the
Group. It is calculated as net debt divided by the last twelve
months underlying EBITDA.
2022 2021
GBPm GBPm
------------------------------------- ------ ------
Underlying operating profit 80.2 41.4
Add back:
Depreciation of right-of-use assets
and property, plant and equipment 73.2 68.3
Amortisation of computer software 3.2 3.4
------------------------------------- ------ ------
Underlying EBITDA 156.6 113.1
------------------------------------- ------ ------
Reported net debt 444.0 365.0
------------------------------------- ------ ------
Leverage 2.8x 3.2x
------------------------------------- ------ ------
Leverage excluding the impact of IFRS 16 is calculated as
follows:
2022 2021
GBPm GBPm
--------------------------------------- ------ ------
Underlying operating profit 80.2 41.4
Impact of IFRS 16 (8.6) (4.3)
--------------------------------------- ------ ------
Underlying operating profit excluding
impact of IFRS 16 71.6 37.1
Add back:
Depreciation of right-of-use assets
and property, plant and equipment 12.2 11.2
Amortisation of computer software 3.2 3.4
--------------------------------------- ------ ------
Underlying EBITDA 87.0 51.7
--------------------------------------- ------ ------
Net debt excluding the impact of
IFRS 16 160.3 128.6
--------------------------------------- ------ ------
Leverage excluding the impact of
IFRS 16 1.8x 2.5x
--------------------------------------- ------ ------
c) Like-for-like sales
Like-for-like sales is calculated on a constant currency basis
and represents the growth in the Group's sales per day excluding
any acquisitions or disposals completed or agreed in the current
and prior year. Revenue is not adjusted for branch openings and
closures. This measure shows how the Group has developed its
revenue for comparable business relative to the prior period. As
such it is a key measure of the growth of the Group during the
year. Underlying revenue is revenue from continuing operations
excluding non-core businesses.
UK UK UK France France France Total
Interiors Exteriors Total Interiors Exteriors Total Germany Benelux Ireland Poland Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- --------
Statutory and
underlying
revenue 2022 702.6 445.2 1,147.8 218.4 465.6 684.0 457.8 115.9 108.3 230.7 2,744.5
Statutory and
underlying
revenue 2021 507.4 422.2 929.6 195.3 406.0 601.3 393.2 92.4 88.2 186.7 2,291.4
% change year
on
year:
Underlying
revenue 38.5% 5.4% 23.5% 11.8% 14.7% 13.8% 16.4% 25.4% 22.8% 23.6% 19.8%
Impact of
currency - - 0.6% 0.6% 0.5% 0.6% 0.7% 0.6% 3.9% 0.6%
Impact of
acquisitions (17.0)% - (9.4)% - - - (0.7)% - - - (4.8)%
Impact of
working
days 1.4% 1.3% 1.3% - (0.5)% (0.3)% - (1.0)% 0.5% 0.5% 1.4%
--------------- ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- --------
Like-for-like
sales 22.9% 6.7% 15.4% 12.4% 14.8% 14.0% 16.3% 25.1% 23.9% 28.0% 17.0%
--------------- ---------- ---------- -------- ---------- ---------- -------- -------- -------- -------- ------- --------
d) Operating margin
This is used to enhance understanding and comparability of the
underlying financial performance of the Group and is calculated as
underlying operating profit/(loss) as a percentage of underlying
revenue.
2022 2021
GBPm GBPm
----------------------------- -------- --------
Underlying revenue 2,744.5 2,291.4
Underlying operating profit 80.2 41.4
----------------------------- -------- --------
2.9% 1.8%
----------------------------- -------- --------
e) Free cash flow
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. These measures
are used to enhance understanding and comparability of the cash
generation of the Group.
2022 2021
GBPm GBPm
--------------------------------------- ------- --------
Decrease in cash and cash equivalents
in the year (18.3) (82.7)
Add back:
Net cash flow on the purchase of
businesses 26.0 10.1
Settlement of amounts payable for
previous purchases of businesses 1.3 0.5
Investment in financial assets 0.2 -
Repayment of borrowings 1.4 200.3
Proceeds from borrowings - (251.5)
Settlement of derivative financial
instruments - (0.8)
--------------------------------------- ------- --------
Free cash flow 10.6 (124.1)
--------------------------------------- ------- --------
Add back:
Finance costs paid 30.1 36.3
Finance income received (1.3) (0.7)
Other refinancing cash costs(1) 1.1 4.0
Tax paid 14.3 10.4
--------------------------------------- ------- --------
Operating cash flow 54.8 (74.1)
--------------------------------------- ------- --------
(1) Includes costs accrued in the prior year and paid in the
current year. Excludes the make-whole payment in the prior year of
GBP12.9m which is included in the finance costs paid line.
f) Other non-statutory measures
In addition to the alternative performance measures noted above,
the Group also uses underlying EPS (as set out in Note 7),
underlying net finance costs (as set out in Note 5) and average
trade working capital to sales ratio. Average trade working capital
to sales ratio is calculated as the average trade working capital
each month end (net inventory, gross trade creditors, net trade
receivables and supplier rebates receivable) divided by underlying
revenue.
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END
FR FDLLBXXLEBBV
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March 08, 2023 02:00 ET (07:00 GMT)
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