REG - SIG PLC - Final Results <Origin Href="QuoteRef">SHI.L</Origin> - Part 2
14/03/2017 07:07
- Part 2: For the preceding part double click ID:nRSN3460Za
reportable segments
as those upon which
the Group Board
regularly bases its
opinion and assesses
performance. The
Group has deemed it
appropriate to
aggregate its
operating segments
into two reported
segments: UK &
Ireland, and
Mainland Europe. The
constituent
operating segments
have been aggregated
as they have
similar: products
and services;
production
processes; types of
customer; methods of
distribution;
regulatory
environments; and
economic
characteristics.
2016 2016 2016 2016 2015 2015 2015 2015
UK & Ireland Mainland Europe Eliminations Total UK & Ireland Mainland Europe Eliminations Total
£m £m £m £m £m £m £m £m
Revenue
Continuing sales 1,392.1 1,347.7 - 2,739.8 1,309.6 1,153.5 - 2,463.1
Sales attributable 105.4 - - 105.4 103.3 - - 103.3
to businesses
identified as non
-core in 2016
Inter-segment sales* 3.3 13.9 (17.2) - 2.3 11.4 (13.7) -
Total revenue 1,500.8 1,361.6 (17.2) 2,845.2 1,415.2 1,164.9 (13.7) 2,566.4
Result
Segment result 53.2 48.9 - 102.1 62.2 45.1 - 107.3
before Other items
Amortisation of (8.0) (2.3) - (10.3) (8.3) (2.0) - (10.3)
acquired intangibles
Goodwill and - (110.6) - (110.6) - - - -
intangible
impairment charges
Profits and losses (40.1) - - (40.1) - - - -
on agreed sale or
closure of non-core
businesses and
associated
impairment charges
Net operating losses (5.8) - - (5.8) (1.2) - - (1.2)
attributable to
businesses
identified as non
-core in 2016
Net restructuring (10.6) (2.7) - (13.3) (5.2) (3.1) - (8.3)
costs
Acquisition expenses 4.7 (0.1) - 4.6 (8.6) (5.7) - (14.3)
and contingent
consideration (Note
9)
Defined benefit (0.9) - - (0.9) - - - -
pension scheme
curtailment loss
Other one-off items (6.0) 0.1 - (5.9) (0.3) 0.4 - 0.1
Segment operating (13.5) (66.7) - (80.2) 38.6 34.7 - 73.3
(loss)/profit
Parent Company costs (10.8) (7.4)
Operating (91.0) 65.9
(loss)/profit
Net finance costs (13.8) (11.3)
before Other items
Net fair value (1.9) (1.9)
losses on derivative
financial
instruments
Unwinding of 0.4 (1.4)
provision
discounting
(Loss)/profit before (106.3) 51.3
tax
Income tax expense (12.3) (15.0)
Non-controlling (0.5) (0.3)
interests
(Loss)/profit for (119.1) 36.0
the year
* Inter-segment
sales are charged at
the prevailing
market rates.
Balance sheet
2016 2016 2016 2015 2015 2015
UK & Ireland Mainland Europe Total UK & Ireland Mainland Europe Total
£m £m £m £m £m £m
Assets
Segment assets 783.9 682.4 1,466.3 850.7 680.2 1,530.9
(restated)
Unallocated assets:
Property, plant and 0.9 1.0
equipment
Derivative financial 4.5 36.8
instruments
Deferred 0.7 1.5
consideration
Other financial - 0.3
assets
Cash and cash 14.5 12.8
equivalents
Deferred tax assets 2.3 4.0
Other assets 3.5 3.2
Consolidated total 1,492.7 1,590.5
assets
Liabilities
Segment liabilities 342.8 231.7 574.5 384.6 196.0 580.6
(restated)
Unallocated
liabilities:
Private placement 200.7 255.9
notes
Bank loans 158.8 88.1
Derivative financial 3.8 2.0
instruments
Other liabilities 15.3 14.3
Consolidated total 953.1 940.9
liabilities
Other segment
information
Capital expenditure
on:
Property, plant and 21.7 12.0 33.7 30.6 10.3 40.9
equipment
Computer software 4.8 1.4 6.2 8.4 0.8 9.2
Goodwill and 11.2 7.3 18.5 60.0 12.7 72.7
intangible assets
(excluding computer
software)
Non-cash
expenditure:
Depreciation 14.4 11.6 26.0 13.5 9.5 23.0
Impairment of 12.0 - 12.0 - - -
property, plant and
equipment and
computer software
Amortisation of 10.9 2.9 13.8 10.8 2.5 13.3
acquired intangibles
and computer
software
Impairment of 22.0 110.6 132.6 - - -
goodwill and
intangibles
(excluding computer
software)
b) Revenue by product group
The Group focuses its activities into three product sectors: Insulation and Energy Management; Exteriors; and Interiors.
The following table provides an analysis of Group sales by type of product:
2016 2015
£m £m
Insulation and Energy Management 1,274.8 1,144.5
Exteriors 871.8 792.5
Interiors 593.2 526.1
Total continuing 2,739.8 2,463.1
Attributable to businesses identified as non-core in 2016 (Interiors) 105.4 103.3
Total 2,845.2 2,566.4
c) Geographic information
The Group's revenue from external customers and its non-current assets (including property, plant and equipment, goodwill
and intangible assets but excluding deferred tax and derivative financial instruments) by geographical location are as
follows:
2016 2015
Country Revenue Non-currentassets Revenue Non-currentassets
£m £m £m £m
United Kingdom 1,306.6 346.4 1,237.5 373.1
Ireland 85.5 2.7 72.1 1.1
France 589.2 124.6 517.3 194.5
Germany & Austria 413.2 22.9 368.3 19.0
Poland 115.1 6.9 103.6 15.4
Benelux* 230.2 53.4 164.3 40.9
Total continuing 2,739.8 556.9 2,463.1 644.0
Attributable to UK businesses identified as non-core in 2016 105.4 - 103.3 24.4
Total 2,845.2 556.9 2,566.4 668.4
*Includes SIG Air Handling.
There is no material difference between the basis of preparation of the information reported above and the accounting
policies adopted by the Group.
3. Income tax
The income tax expense comprises: 2016 2015
£m £m
Current tax
UK corporation tax: - on (losses)/profits for the year 0.1 -
- adjustments in respect of previous years - -
0.1 -
Overseas tax: - on (losses)/profits for the year 11.4 10.8
- adjustments in respect of previous years (0.6) (0.4)
Total current tax 10.9 10.4
Deferred tax
Current year 1.8 5.7
Adjustments in respect of previous years (0.3) (1.0)
Deferred tax charge in respect of pension schemes* 0.2 0.2
Effect of change in rate (0.3) (0.3)
Total deferred tax 1.4 4.6
Total income tax expense 12.3 15.0
* Includes a charge of £0.1m (2015: credit of £0.5m) in respect of the change in rate.
The total tax charge for the year differs from that resulting from applying the standard rate of corporate tax in the UK at
31 December 2016 of 20.0% (31 December 2015: 20.0%). Due to the effect of Other items presented of the Consolidated Income
Statement and their impact on a Group blend rate of tax, the reconciliation of total income tax expenses has been presented
against the UK standard rate of tax, reflecting the tax residency of SIG plc. The differences are explained in the
following reconciliation:
2016 2015
£m % £m %
(Loss)/profit on ordinary activities before tax (106.3) 51.3
Tax at 20.0% (2015: 20.0%) thereon (21.3) 20.0 10.3 20.0
Factors affecting the income tax expense for the year:
- non-deductible and non-taxable items 3.4 (3.2) 4.8 9.4
- impairment charges 25.6 (24.1) - -
- losses arising in the year not recognised for deferred tax purposes 1.4 (1.3) - -
- losses utilised not previously recognised - - (0.3) (0.6)
- other adjustments in respect of previous years (1.1) 1.0 (1.4) (2.7)
- effect of overseas tax rates 4.5 (4.2) 2.4 4.7
- effect of change in rate on deferred tax (0.2) 0.2 (0.8) (1.6)
Total income tax expense 12.3 (11.6) 15.0 29.2
The effective tax rate for the Group on the total loss before tax of £106.3m is negative 11.6% (2015: positive 29.2%). The
effective tax charge for the Group on profit before tax before Other items of £77.5m is 25.2% (2015: 24.2%), which
comprises a tax charge of 25.9% (2015: 25.0%) in respect of current year profits and a tax credit of 0.7% (2015: 0.8%) in
respect of prior years.
The current tax charge in the UK is minimal due to the use of £20.4m of brought forward non-trade tax losses. There is a
corresponding tax charge within the current year deferred tax movement relating to the utilisation of these losses.
The factors that will affect the Group's future total tax charge as a percentage of underlying profits are:
- the mix of profits between the UK and overseas; in particular, France/Germany/Belgium/the Netherlands (corporate tax
rates greater than the rate in the UK) and Ireland/Poland (corporate tax rates less than the rate in the UK). If the
proportion of profits from these jurisdictions changes, this could result in a higher or lower Group tax charge;
- the impact of non-deductible expenditure and non-taxable income;
- the agreement of open tax computations with the respective tax authorities; and
- the recognition or utilisation (with a 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.
2016 2015
£m £m
Deferred tax movement associated with remeasurement of defined benefit pension liabilities* 2.3 (0.2)
Deferred tax on share options (0.6) (0.1)
Tax credit/(charge) on exchange and fair value movements arising on borrowings and derivative financial instruments 6.3 (1.5)
Effect of change in rate on deferred tax* (0.5) (0.7)
Total 7.5 (2.5)
*These items will not subsequently be reclassified to the Consolidated Income Statement.
4. Earnings per share
The calculations of (loss)/earnings per share are based on the following (losses)/profits and numbers of shares:
Basic and diluted
2016 2015
£m £m
(Loss)/profit after tax (118.6) 36.3
Non-controlling interests (0.5) (0.3)
(119.1) 36.0
Basic and diluted beforeOther items
2016 2015
£m £m
(Loss)/profit after tax (118.6) 36.3
Non-controlling interests (0.5) (0.3)
Other items:
Amortisation of acquired intangibles 10.3 10.3
Goodwill and intangible impairment charges 110.6 -
Profits and losses on agreed sale or closure of non-core businesses and associated impairment charges 40.1 -
Net operating losses attributable to businesses identified as non-core in 2016 5.8 1.2
Net restructuring costs 13.3 8.3
Acquisition expenses and contingent consideration (4.6) 14.3
Defined benefit pension scheme curtailment loss 0.9 -
Other one-off items 5.9 (0.1)
Net fair value losses on derivative financial instruments 1.9 1.9
Unwinding of provision discounting (0.4) 1.4
Tax credit relating to Other items (6.6) (4.6)
One-off recognition of deferred tax assets - (0.7)
Utilisation of losses not previously recognised - (0.3)
Effect of change in rate on deferred tax (0.2) (0.8)
Other tax adjustments in respect of previous years (0.4) -
57.5 66.9
Weighted average number of shares
2016Number 2015Number
For basic and diluted earnings per share 591,365,906 591,183,300
Earnings per share
Basic and diluted (loss)/earnings per share (20.1)p 6.1p
Earnings per share before Other items^
Basic and diluted earnings per share 9.7p 11.3p
^ Earnings per share before Other items has been disclosed in order to present the underlying performance of the Group.
The impact of Other items on the Consolidated Income Statement, along with their associated tax impact, is disclosed in the
table below:
2016 2015
Otheritems Taximpact Taximpact Otheritems Taximpact Taximpact
£m £m % £m £m %
Amortisation of acquired intangibles 10.3 2.1 20.4 10.3 2.2 21.4
Goodwill and intangible impairment charges 110.6 - - - - -
Profits and losses on agreed sale or closure of non-core businesses and associated impairment charges 40.1 0.9 2.2 - - -
Net operating losses attributable to businesses identified as non-core in 2016 5.8 0.6 10.3 1.2 0.4 33.3
Net restructuring costs 13.3 2.9 21.8 8.3 1.7 20.5
Acquisition expenses and contingent consideration (4.6) - - 14.3 - -
Defined benefit pension scheme curtailment loss 0.9 0.2 22.2 - - -
Other one-off items 5.9 (0.5) (8.5) (0.1) (0.1) -
Impact on operating profit 182.3 6.2 3.4 34.0 4.2 12.4
Net fair value losses on derivative financial instruments 1.9 0.4 21.1 1.9 0.4 21.1
Unwinding of provision discounting (0.4) - - 1.4 - -
Impact on profit before tax 183.8 6.6 3.6 37.3 4.6 12.3
One-off recognition of deferred tax assets - - - - 0.7 -
Utilisation of losses not previously recognised - - - - 0.3 -
Effect of change in rate on deferred tax - 0.2 - - 0.8 -
Other tax adjustments in respect of previous years - 0.4 - - - -
Impact on profit attributable to equity holders of the Company 183.8 7.2 3.9 37.3 6.4 17.2
5. Reconciliation of operating (loss)/profit to cash generated from operating activities
2016 2015
£m £m
Operating (loss)/profit (91.0) 65.9
Depreciation 26.0 23.0
Amortisation of computer software 3.5 3.0
Amortisation of acquired intangibles 10.3 10.3
Impairment of computer software 7.9 -
Impairment of property, plant and equipment 0.3 -
Goodwill and intangible impairment charges 110.6 -
Profits and losses on agreed sale or closure of non-core businesses and associated impairment charges 40.1 -
Profit on sale of property, plant and equipment (8.5) (2.4)
Share-based payments (0.3) -
Working capital movements:
Increase in inventories (0.5) (15.8)
Increase in receivables (30.5) (9.0)
Increase/(decrease) in payables 7.9 (13.4)
Cash generated from operating activities 75.8 61.6
Included within the cash generated from operating activities is a defined benefit pension scheme employer's special
contribution of £2.5m (2015: £2.5m).
Of the total profit on sale of property, plant and equipment, £2.8m has been included within Other items of the
Consolidated Income Statement.
Included within working capital movements are payments of £6.1m (2015: £2.1m) in settlement of contingent consideration
dependent upon the vendors remaining with the business.
6. Reconciliation of net cash flow to movements in net debt
2016 2015
£m £m
Increase/(decrease) in cash and cash equivalents in the year 25.8 (14.1)
Cash flow from increase in debt (19.5) (86.6)
Decrease/(increase) in net debt resulting from cash flows 6.3 (100.7)
Debt added on acquisition (1.6) (2.5)
Recognition of loan notes (2.7) (2.7)
Non-cash items^ (14.4) (3.9)
Exchange differences (11.6) 0.8
Increase in net debt in the year (24.0) (109.0)
Net debt at 1 January (235.9) (126.9)
Net debt at 31 December (259.9) (235.9)
^ Non-cash items relate to the fair value movement of debt recognised in the year which does not give rise to a cash inflow
or outflow.
Net debt is defined as follows:
2016 2015Restated
£m £m
Non-current assets:
Derivative financial instruments 4.4 2.4
Current assets:
Derivative financial instruments 0.1 34.4
Deferred consideration 0.7 1.5
Other financial assets 1.1 1.3
Cash and cash equivalents (restated) 127.6 146.2
Current liabilities:
Obligations under finance lease contracts (3.1) (2.5)
Bank overdrafts (restated) (3.5) (59.5)
Bank loans (171.6) (90.9)
Private placement notes - (160.1)
Loan notes and deferred consideration (2.7) (3.0)
Derivative financial instruments (0.2) (1.3)
Non-current liabilities:
Obligations under finance lease contracts (8.1) (7.5)
Bank loans (0.3) (0.4)
Private placement notes (200.7) (95.8)
Derivative financial instruments (3.6) (0.7)
Net debt (259.9) (235.9)
7. Dividends
An interim dividend of 1.83p per ordinary share was paid on 4 November 2016 (2015: 1.69p). The Directors have proposed a
final dividend for the year ended 31 December 2016 of 1.83p per ordinary share (2015: 2.91p). The proposed final dividend
is subject to approval by Shareholders at the Annual General Meeting and has not been included as a liability in these
financial statements. No dividends have been paid between 31 December 2016 and the date of signing the Accounts.
8. Divestments and exit of non-core businesses (events after the balance sheet date)
The Group has recognised a total charge of £40.1m in respect of "profits and losses on agreed sale or closure of non-core
businesses and associated impairment charges" within Other items of the Consolidated Income Statement.
Divestment of Carpet & Flooring
At 31 December 2016 the Group Board resolved to dispose of its UK specialist flooring distribution operation, Carpet &
Flooring. On 17 February 2017 the disposal was agreed with Endless LLP, a UK based private equity investor, and it
completed on 28 February 2017. The assets and liabilities sold were as follows:
At 31 December 2016
Recoverablevalue Impairmentand asset writedown Originalcarrying value At 31 December2015
£m £m £m £m
Goodwill and intangible assets - (17.3) 17.3 17.3
Property, plant and equipment - (3.6) 3.6 3.5
Inventories 8.5 (7.7) 16.2 18.8
Trade and other receivables 7.1 (6.6) 13.7 14.9
Total assets 15.6 (35.2) 50.8 54.5
Trade and other payables (15.6) - (15.6) (15.9)
Total liabilities (15.6) - (15.6) (15.9)
Net Assets - (35.2) 35.2 38.6
Classification on the Consolidated Balance Sheet £m
Assets held for sale 15.6
Liabilities held for sale (15.6)
Net assets held for sale -
The assets of the business have been impaired to reflect the recoverable amount indicated by the consideration received in
respect of the sale, and the assets and liabilities presented as held for sale within the Consolidated Balance Sheet. The
loss arising on the agreed sale of Carpet & Flooring of £35.2m and the results for the current and prior year have been
disclosed within Other items in the Consolidated Income Statement.
Exit of the Drywall Qatar business
The Group Board resolved to exit the Drywall Qatar business and in March 2017 agreed, subject to contract, to dispose of
its controlling interest. The associated assets and liabilities were as follows:
At 31 December 2016
Recoverablevalue Impairmentand asset writedown Originalcarryingvalue At 31 December2015
£m £m £m £m
Goodwill and intangible assets - (4.7) 4.7 5.2
Property, plant and equipment - (0.2) 0.2 0.1
Inventories 0.7 - 0.7 0.6
Trade and other receivables 6.1 - 6.1 4.4
Total assets 6.8 (4.9) 11.7 10.3
Trade and other payables (3.0) - (3.0) (2.4)
Total liabilities (3.0) - (3.0) (2.4)
Net Assets 3.8 (4.9) 8.7 7.9
The fixed assets of the business have been impaired to reflect the recoverable amount indicated by the year end impairment
review process. The loss arising on the agreed exit of Drywall Qatar of £4.9m and the results for the current and prior
year have been disclosed within Other items in the Consolidated Income Statement.
9. Acquisitions
During the period the Group acquired the following:
Acquisition name % of ordinary sharecapital acquired Acquisitiondate Country ofincorporation Principal activity
Metall Architektur Limited* 100% 5 January 2016 United Kingdom Manufacturer and supplier of facade panel systems
Profant Lufttechnik HandelsgmbH 100% 11 January 2016 Austria Developer and fabricator of specialist air handling systems
Maury SAS 100% 20 January 2016 France Manufacturer and supplier of metal roofing and facades
Metechno Limited 100% 1 March 2016 United Kingdom Designer and manufacturer of offsite products
SAS Direct & Partitioning Limited 100% 5 March 2016 United Kingdom Distributor of partitioning systems and associated products
BLH - Bauelemente für Lüftungstechnik Hennen GmbH 100% 4 July 2016 Germany Fabricator and distributor of specialist air handling systems
* Includes acquisition of the trade and certain assets of KME Yorkshire Limited.
The provisional fair value of the net assets of these businesses at acquisition (in aggregation) were as follows:
£m
Property, plant and equipment 2.0
Inventories 3.2
Trade and other receivables 6.4
Cash acquired 1.1
Debt acquired (1.6)
Trade and other payables (5.5)
Net corporation tax and deferred tax liability (0.3)
Net assets acquired 5.3
Intangible assets - customer relationships 6.8
Intangible assets - non-compete clauses 0.1
Deferred tax liability on acquired intangible assets (1.5)
Goodwill 10.8
Total consideration 21.5
Consideration is represented by:
Cash 21.1
Contingent consideration 0.4
Total consideration 21.5
Cash (per above) 21.1
Cash acquired (1.1)
Settlement of loan notes and contingent consideration in respect of acquisitions 5.3
Settlement of amounts payable for purchase of businesses 25.3
In accordance with IFRS 3 "Business Combinations", acquisition expenses of £0.8m in relation to the above acquisitions have
been recognised within the Consolidated Income Statement and have been presented within Other items.
Dependent upon future profits, a further £15.5m may be paid to the vendors of recent acquisitions who are employed by the
Group. These payments are contingent upon the vendors remaining within the business and, as required by IFRS 3, this will
be treated as remuneration and will be charged to the Consolidated Income Statement as earned. The related accrual of
potential consideration in the year to 31 December 2016 is a credit of £0.3m (31 December 2015: charge of £10.2m). Added to
the £0.8m acquisition expenses is a £5.1m net decrease in contingent consideration based solely on a reassessment of
post-acquisition performance of the acquired businesses; this has led to a net credit within Other items in the
Consolidated Income Statement of £4.6m in respect of acquisitions.
In addition, £0.5m of deferred and contingent consideration (not subject to the vendors remaining within the business) has
been recognised within goodwill and intangible assets in the year.
The Directors have made a provisional assessment of the fair value of the net assets acquired. Any further adjustments
arising will be accounted for in 2017. These fair value adjustments may relate primarily to:
a) the review of the carrying value of all non-current assets to ensure that they accurately reflect their fair value;
b) the alignment of valuation and provisioning methodologies to those adopted by the Group; and
c) an assessment of all provisions and payables to ensure they are accurately reflected in accordance with the Group's
policies.
The fair value of financial assets includes trade receivables with a fair value of £6.0m and a gross contractual value of
£6.1m. The best estimate at the date of acquisition of the contractual cash flows not able to be collected is £0.1m.
Included within goodwill is the benefit of staff acquired as part of the business and strategic acquisition synergies which
are specifically excluded in the identification of intangible
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