REG - SIG PLC - 2022 Full Year Trading Update

SIGAnnouncement

10/01/2023 07:00

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RNS Number : 1600M  SIG PLC  10 January 2023

 

10 January 2023

SIG plc: 2022 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 2022 ("FY22").

 

Highlights

·    FY22 results reflect the continuing successful delivery of the Return
to Growth strategy and the resilience of the Group's diversified business
model

·    Full year like-for-like(1) ("LFL") sales growth of 17%, with revenues
of £2.74bn

·    Substantial increase in underlying operating profit(2); expected to
be at c£80m, in line with market expectations, up from £41m in 2021

·    Positive free cash flow(3) for the year

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

 

Summary

The Return to Growth Strategy, initiated in 2020, continued to deliver
significant progress in the year, with strong growth in revenue and
profitability, underpinned by continued improvement in operational performance
and superior customer service.  As anticipated, market demand softened in
most geographies in H2, but we continued to benefit from solid execution of
our commercial strategy, strengthening our positions in the markets in which
we operate.  Input price inflation eased in H2, as expected, but remained a
strong tailwind to year-on-year revenue growth.

 

As a result of the above, and subject to audit, the Board expects to report
FY22 revenues of c£2,743m, together with a substantial improvement in
underlying operating profit to c£80m, up from the £41.4m reported in 2021.

 

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

 

The improved operating performance and profitability, allied with good working
capital management, means that the Group expects to report positive free cash
flow for the year of c£12m, and year-end gross cash balances of £131m (2021:
£145m).  The movement in cash balances in the year reflects previously
reported cash outflows on M&A, as well as the positive free cash flow.
The Group's revolving credit facility ("RCF") was increased in November 2022
from £50m to £90m and remained undrawn as at 31 December 2022.

 

The Group expects to report net debt as at 31 December 2022 of c£440m on a
post IFRS 16 basis (2021: £365m), and c£159m on a pre IFRS 16 basis (2021:
£129m).  The movement in post IFRS 16 net debt is due mainly to increase in
lease liabilities of c£45m, driven by timing of lease renewals and
investments in new branches, and a currency movement of c£17m 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.
 The Group's pre IFRS 16 debt consists almost wholly of a €300m bond at a
fixed rate of 5.25%.  The bond, and the currently undrawn RCF, both mature in
2026.

 

Trading performance

The Group continues to benefit from a balanced geographic spread of country
revenues, with 58% of revenues derived from the EU in FY22, and 42% from the
UK.

 

FY22 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.

 

Group revenue growth rates across most geographies moderated in H2 compared to
H1 primarily due to the impact of lower rates of input cost inflation,
following the annualisation of significant rises in H2 21, and some broadly
based softening in market demand. Pass through of input cost inflation added
to the top line in all geographies.  We estimate the impact on revenue for
the full year to be around 17-18%.

 

 LFL sales growth  H1   H2   FY   FY 2022 sales

 2022 vs 2021
                                  £m
 UK Interiors      24%  22%  23%  701
 UK Exteriors      13%  1%   7%   446
 UK                19%  12%  15%  1,147

 France Interiors  13%  12%  12%  218
 France Exteriors  18%  11%  15%  465
 Germany           17%  15%  16%  458
 Poland            44%  16%  28%  231
 Benelux           20%  31%  25%  116
 Ireland           55%  2%   24%  108
 EU                23%  14%  18%  1,596

 Group             21%  13%  17%  2,743

In the UK Interiors business, the strategic and operational changes made since
mid-2020 continue to drive the business's return towards its previous market
position and performance.  In UK Exteriors, volumes were down, more notably
in H2, in line with weaker market conditions and against particularly strong
2021 comparators. Recent UK acquisitions, including Miers Construction
Products acquired in July 2022, are performing well.

 

In the EU, FY growth of 18% reflected solid trading across all our businesses,
including some incremental market share gains, and H2 growth remained robust
at 14%.  Performance remains strong in our French businesses.  Our German
business is benefiting from the new, experienced leadership put in place in
the second half of 2021.  Benelux's performance is improving, with progress
to date on the top line.  Poland's growth normalised in H2 after the
exceptional growth seen in H1, and sales in Ireland reflected some weaker
market conditions in H2.

 

CEO Transition

As previously announced, Gavin Slark will join as Group CEO on 1 February
2023. Gavin joins SIG with a long track record of success in the pan-European
construction distribution industry, including most recently as CEO of Grafton
Group plc for 11 years. Steve Francis steps down as CEO following the Group's
successful turnaround and return to profitability.

Steve Francis, CEO, commented:

"SIG's performance in 2022 demonstrated the resilience, flexibility and
diversity of its pan-European business.  Thanks to strong employee and
customer engagement, the Group has continued to drive strong profit growth,
even as market conditions became increasingly challenging as the year
progressed.  SIG now has strong foundations for the future, and the Group
remains well-positioned to benefit from the need for governments and
end-customers to increase the sustainability and energy efficiency of
buildings over time.  Gavin and I are now completing a very smooth leadership
handover, and I am confident that Gavin and the team will build on the
progress made in the last three years."

 

FY 22 Results date, and Outlook

We will publish our full FY22 results on 8 March 2023, 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 2023 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
 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.

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