REG - SIG PLC - 2023 Full Year Trading Update

InvestecAnnouncement

09/01/2024 08:15

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240109:nRSI0141Za&default-theme=true

RNS Number : 0141Z  SIG PLC  09 January 2024

 

9 January 2024
 
 

SIG plc: 2023 Full Year Trading Update

 

SIG plc ("SIG", or "the Group"), a leading supplier of specialist insulation
and building products across Europe, today issues a trading update for the
year ended 31 December 2023 ("FY23").

 

Highlights

·    FY23 results reflect continued strong execution, against a challenging
market backdrop

·    Full year like-for-like(1) ("LFL") sales down 2% on the prior year,
with revenues of £2.76bn

·    Underlying operating profit(2) expected to be in the upper half of the
guidance range of £50m to £55m provided previously

·    Positive free cash flow(3) of c£4m expected for the year

·    Restructuring and productivity initiatives completed in H2 2023 will
deliver approximately £10m of annualised cost savings, the majority of which
will benefit FY24

·    Increased strategic focus on specialist businesses and operational
execution across the Group

 

Summary

The Group has managed effectively the impact of increasingly challenging
market conditions through the year, delivering robust trading results relative
to the market.  As anticipated and reported in our October 2023 trading
update, demand softened in most of our geographic markets in the second half.
 Despite this, we continued to benefit from execution of our commercial
strategy, retaining a strong focus on customer service across our branch
network and ensuring we maintained strong momentum.

 

Subject to audit, the Board expects to report FY23 revenues of £2.76bn, and
underlying operating profit in the upper half of the guidance range of £50m
to £55m provided in October.

 

The Group expects to report a modest free cash inflow for the year of c£4m,
helped by solid working capital management, with year-end gross cash balances
of around £132m (2022: £130m).  The movement in cash balances in the year
reflects the free cash flow, partially offset by small currency movements and
deferred acquisition costs.  The Group's revolving credit facility ("RCF") of
£90m remained undrawn as at 31 December 2023.

 

The Group expects to report net debt as at 31 December 2023 of c£457m on a
post IFRS 16 basis (2022: £444m), and c£154m on a pre IFRS 16 basis (2022:
£160m).  The movement in post IFRS 16 net debt is due mainly to an increase
in lease liabilities of c£19m, mostly a result of market driven inflation,
combined with some investments in new branches.  This was partially offset by
the cash movement and a favourable currency movement on bond debt.  Leverage
at 31 December 2023 is expected to be around 3.4x and 2.7x on post and pre
IFRS 16 bases respectively.

 

Trading performance

Reported Group revenues were 1% higher in the year, including c1% from
acquisitions and a c1% positive impact from exchange rates.  LFL revenues
declined 2% compared to prior year.  Pass through of input cost inflation
added an estimated 5% to revenues in the full year, 9% in H1 and flat in H2.
 

 

LFL growth rates across most geographies dropped in H2, compared to H1, due to
the declining impact of input cost inflation noted above.  Year over year
volume declines moderated in H2 as expected, reflecting weaker comparators in
H2 2022.  Absolute volumes softened through the year due to

continued weakening in market demand, reflecting conditions across the
building and construction sector.

 

 LFL sales growth       H1     H2     FY     FY 2023 sales

 2023 vs 2022
                                             £m
 UK Interiors           5%     (7)%   (1)%   557
 UK Exteriors           1%     2%     1%     369
 UK Specialist Markets  (7)%   (5)%   (6)%   248
 UK                     1%     (4)%   (1)%   1,174

 France Interiors       1%     (3)%   (1)%   219
 France Exteriors       2%     (8)%   (3)%   458
 Germany                0%     (2)%   (1)%   462
 Poland                 (9)%   5%     (2)%   238
 Benelux                7%     (8)%   0%     117
 Ireland                (18)%  (10)%  (15)%  94
 EU                     (1)%   (4)%   (3)%   1,588

 Group                  0%     (4)%   (2)%   2,762

 

As announced at our Capital Markets Event on 23 November 2023, and as shown
above, we will now report the UK Specialist Markets business as a separate
reporting unit, in line with the new management structure in place.

 

In the UK Interiors business, the strategic and operational changes made since
mid-2020 continue to enable the business to return towards its previous market
position, reflected in a robust performance against the market in FY23.  In
UK Exteriors, the performance was also strong relative to the market, driven
by renewed commercial focus and execution under the new structure.  The
Specialist Markets business experienced continuing good demand for its high
specification and innovative building solutions, but revenue was affected by
weaker demand in the agricultural and commercial warehousing and residential
new build segments, and by lower year over year input pricing on steel.

 

In France, market conditions affected demand, in the Exteriors business in H2
in particular, but both businesses continue to execute very effectively on
their strategic plans.  The German business continued its robust recovery of
the last two years, performing well in what is currently a very challenging
market.  Poland's growth rebounded in the second half, with increased volumes
as well as the impact of some softer H2 comparators.  Benelux has had new
management in place since October to address and improve performance, and
Ireland's results reflect an especially tough market environment in 2023, as
previously reported.

 

Operating efficiency is a key plank of our medium and long term margin
ambitions.  To that end, during the latter part of 2023 we executed a number
of restructuring and productivity initiatives that will benefit the business
in 2024 and beyond.  These include a streamlining of central costs, and a
review of operating company cost structures, most notably in the UK and
Ireland.  As well as generating permanent cost reductions of around £10m on
an annualised basis, these initiatives will facilitate improved operational
agility and execution.

Gavin Slark, CEO, commented:

"Despite challenging market conditions across the European building and
construction sector, the Group has delivered a robust trading performance,
through a strong focus on our customers and the great efforts of all our
people.

 

"In my first year as CEO, I have been impressed by the opportunities that
exist within SIG's portfolio for strengthening our operating performance and
accelerating our specialist businesses, and for delivering more profitable
growth over the medium term.  Whilst we expect continued softness in market
conditions in 2024, we are confident in our ability to manage through this
current phase of the cycle and to continue to strengthen our operations, ready
to take advantage of the significant long-term opportunities for the Group as
markets recover."

 

 

FY23 Results date, and Outlook

We will publish our full FY23 results on 5 March 2024, and will hold a
presentation and conference call for analysts and investors at 10.00am (GMT)
on that date. We will provide a more detailed outlook on 2024 at that time.

 

The numbers in this update remain subject to final close procedures and to
audit.

 

1.      Like-for-like is defined as sales per working day in constant
currency, excluding completed acquisitions and disposals

2.      Underlying represents the results before Other items. Other items
relate to the amortisation of acquired intangibles, impairment charges,
profits and losses on agreed sale or closure of non-core businesses and
associated impairment charges, net operating profits and losses attributable
to businesses identified as non-core, net restructuring costs, and other
non-underlying profits or losses.

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

 

Contacts

 SIG plc                                           +44 (0) 114 285 6300 / ir@sigplc.com
 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

 

Cautionary Statement

This document contains certain forward-looking statements concerning the
Group's business, financial condition, results of operations and certain
Group's plans, objectives, assumptions, projections, expectations or beliefs
with respect to these items. Forward-looking statements are sometimes, but not
always, identified by their use of a date in the future or such words as
'anticipates', 'aims', 'due', 'could', 'may', 'will', 'would', 'should',
'expects', 'believes', 'intends', 'plans', 'potential', 'targets', 'goal',
'forecasts' or 'estimates' or similar expressions or negatives thereof.

 

Forward-looking statements involve known and unknown risks, uncertainties and
other factors, which may cause the Group's actual financial condition,
performance and results to differ materially from the plans, goals, objectives
and expectations set out in the forward-looking statements included in this
document.

 

All written or verbal forward-looking statements, made in this document or
made subsequently, which are attributable to the Group or any persons acting
on its behalf are expressly qualified in their entirety by the factors
referred to above. Accordingly, readers are cautioned not to place undue
reliance on forward-looking statements. No assurance can be given that the
forward-looking statements in this document will be realised; actual events or
results may differ materially as a result of risks and uncertainties facing
the Group. Subject to compliance with applicable law and regulation, the Group
does not intend to update the forward-looking statements in this document to
reflect events or circumstances after the date of this document and does not
undertake any obligation to do so.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTBIGDBCSGDGSI