REG - SIG PLC - Full year results for the year ended 31 Dec 2022
08/03/2023 07:15
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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 £2,744.5m £2,291.4m
LFL(2) sales growth 17.0% 24.3%
Gross margin 25.9% 26.3%
Underlying(1) operating profit £80.2m £41.4m
Underlying(1) operating margin 2.9% 1.8%
Underlying(1) profit before tax £51.6m £19.3m
Underlying(1) earnings per share 3.2p 0.3p
Net debt £444.0m £365.0m
Net debt (pre-IFRS 16) £160.3m £128.6m
Statutory results 2022 2021
Revenue £2,744.5m £2,291.4m
Operating profit £56.2m £14.0m
Profit/(loss) before tax £27.5m (£15.9m)
Total profit/(loss) after tax £15.5m (£28.3m)
Basic earnings/(loss) per share 1.3p (2.4p)
Financial highlights
· Full year Group like-for-like(2) ("LFL") sales growth of 17%, with
revenues of £2.74bn
· Substantial increase in underlying operating profit(1) to £80m, from
£41m 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 £444.0m post-IFRS 16 (2021: £365.0m) and
£160.3m pre-IFRS 16 (2021: £128.6m)
Strategic highlights
· Benefits of a broad geographic footprint (58% of revenues from
outside UK) helped to mitigate volatile market conditions:
o Continuing good performance in France, with both businesses trading at
>5% operating margin
o Strong performance in Germany driven by execution of strategy, with
operating profit margin up 280bps to 3.7%
o UK Interiors returned to profitability
· Strengthened operational and commercial platform helped drive market
share gains, with improved customer engagement
· Two acquisitions completed in the year for total potential
consideration of £39m
· Good ESG progress: 10% reduction in 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:
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Or One tap mobile:
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Or join by phone: Dial (for higher quality, dial a number based on your
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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 (http://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 H1 H2 FY FY 2022 sales
2022 vs 2021
£m
UK Interiors 24% 22% 23% 703
UK Exteriors 13% 1% 7% 445
UK 19% 12% 15% 1,148
France Interiors 13% 12% 12% 218
France Exteriors 18% 11% 15% 466
Germany 17% 15% 16% 458
Poland 44% 16% 28% 231
Benelux 20% 31% 25% 116
Ireland 55% 2% 24% 108
EU 23% 14% 18% 1,597
Group 21% 13% 17% 2,745
Strategic progress
SIG operates across six European geographies with a total branch network of
over 440 sites and over 7,000 people. During 2022, the Group made further
good strategic progress through its growth strategy, which has driven improved
operational performance across the portfolio.
We continued to empower branches to respond to local trading conditions and
drive local performance and as a result we are more specialist, flexible,
productive and engaged. Customer NPS improved in most geographies and the
Group's NPS increased from +40 to +46 reflecting a higher rate of customers
likely to recommend SIG to others.
In France the operating margin of both the Interiors and Exteriors businesses
now exceeds 5%, with continued good execution of our strategy, including
market share gains, product mix enhancement and a rigorous focus on branch
performance.
In Germany we delivered a strong turnaround, with 16% LFL sales growth in the
year, and improved our underlying profit margin from 0.9% in 2021 to 3.7%.
Progress in Germany included the roll-out of an "empower the touchpoints"
strategy that increased empowerment of local teams, re-energised the sales
force, and bolstered specialist expertise to strengthen customer and supplier
relationships.
The UK Interiors business has now delivered a successful two-year turnaround,
recovering market share and returning to profitability through consistent
execution, better pricing discipline, and improving product mix. UK
Exteriors had a solid year of trading against some strong comparators and, as
previously communicated, had a significant one-off bad debt write-off in the
second half.
Our Benelux business returned to market share gain in 2022, with further
aspects of the turnaround plan now being implemented.
The Group continued to utilise technology to support business transformation
through improved productivity and customer experience, with a focus on making
SIG a better place to work, buy from and sell to. In Poland our
"omnichannel" services to customers and new ways of working have driven strong
sales, profit and productivity improvement, with sales via our market-leading
e-commerce platform representing 10% of sales.
Across our operating companies we made good progress in starting to transform
our warehouse and transport management systems on to digital platforms for
process optimisation and productivity improvements. We also continued to
build our leadership capabilities in our digital business.
During 2022 the Group continued its programme of investment in network
expansion with eight new branch openings alongside a number of strategic
relocations. These openings position us to capture local market growth by
in-filling geographic gaps or increasing our presence in major urban markets.
Acquisitions
The Group completed two acquisitions in 2022. These, together with those
completed in 2021, reflect our commitment to supplement organic revenue growth
with selective acquisitions to boost specialist expertise in high return
categories and unlock synergies within our core businesses.
On 14 July 2022 we acquired Thermodämm GmbH, a specialist interiors business
in Germany, reinforcing our market leading position in flooring for total
potential consideration of £3.6m.
On 22 July 2022 we acquired Miers Construction Products Limited ("Miers"), one
of the UK's leading suppliers of specialist construction accessories,
increasing our exposure to infrastructure end-markets. Miers was acquired
for total potential consideration of £35.3m, including a deferred amount that
is contingent on financial performance in the year to 31 December 2023.
Balance Sheet
The Group has significantly improved its financial position since 2020, with a
robust 2022 year end balance sheet. The Group has a healthy liquidity
position, returning to positive free cash flow in the year, and had year end
gross cash balances of £130m (2021: £145m). The movement in cash balances
in the year reflects previously reported cash outflows on M&A, as well as
the positive free cash flow of £11m. An increase in working capital of
£14.4m was driven by sales volume growth and year-over-year inflation and
included some normalisation of inventory after 2021 investment. The Group's
revolving credit facility ("RCF") was increased in December 2022 from £50m to
£90m and remained undrawn as at 31 December 2022.
2022 year end net debt was £444m on a post-IFRS 16 basis (2021: £365m), and
£160m on a pre-IFRS 16 basis (2021: £129m). The movement in post-IFRS 16
net debt, beyond the changes in cash balances noted above, is due mainly to an
increase in lease liabilities of £47m, driven by the timing of lease renewals
and investments in new branches, and a currency movement of £14m on bond
debt.
The Group made further progress in reducing leverage towards its medium-term
targets and finished the year at 2.8x and 1.8x on post and pre-IFRS 16 bases
respectively. The Group's pre-IFRS 16 debt consists almost wholly of a
€300m bond at a fixed rate of 5.25%. The bond, and the currently undrawn
RCF, both mature in 2026.
Dividend
No dividend will be paid for 2022. The Board reiterates its commitment to
return to paying a dividend, appropriately covered by underlying earnings,
when it is prudent to do so. Continued successful strategic execution,
including sensible investment where appropriate, will deliver sustainable,
profitable growth and cash generation, allowing the Board to consider a range
of capital allocation options.
Sustainability
We have set five long-term commitments against which we will measure the
Group's continuing progress as a leader in sustainable construction and have
made good progress against these in 2022. We have lowered our carbon
emissions (scope 1, scope 2 and business travel emissions) by 10% to 43,328
metric tonnes as we work towards our goal of being net zero carbon by 2035 at
the latest. The key drivers were increased use of renewable energy contracts
in the UK and Germany alongside the gradual replacement of conventional
vehicles with a greener fleet as leases come up for renewal.
The Group reinforced its commitment to being a health and safety leader in our
industry, appointing a new Group Health, Safety and Environmental Director.
Our 2022 lost time injury frequency rate ("LTIFR") reduced to 11.1 (2021:
11.8), alongside increases in our near miss reporting. The latter encourages
all our employees, contractors and stakeholders to report near misses, unsafe
situations and behaviours that drive positive interventions.
People
The Board would like to thank all employees of the Group for their continued
commitment and hard work throughout the year. Their efforts during 2022 and
since 2020 have been key to the successful progress of the Group. During the
year, employee engagement increased, with an improvement of 11 points in our
employee NPS score from the 2021 survey, and 19 points from 2020.
Having an engaged and high performing workforce remains a priority within the
Group's ongoing development. We are committed to our ambition of being an
employer of choice in the building materials sector.
Outlook
The Group has strong positions in attractive, diversified end-markets.
Around 60% of revenue is generated in the EU and 40% in the UK. c50% of
our sales support new-build projects and c50% renovation (RMI) and we support
both commercial and residential end-markets.
As a European market leader in the supply of specialist insulation, we believe
we are well-positioned to benefit from long-term structural growth drivers,
notably sustainable construction. There is an increasing focus on the need
to reduce building emissions, to increase energy efficiency and to use more
sustainable materials. These needs are prevalent in SIG's geographies, which
are faced with ageing housing stock and housing shortages, and whose
governments are increasing their commitments to improvements in building
energy efficiency, emission levels, and sustainability.
Trading in the first two months of 2023 saw mid-single digit like-for-like
revenue growth, with the continued effects of input price inflation more than
offsetting year-over-year volume declines. Market conditions continue to
vary across our geographic footprint, but overall we expect weaker demand
conditions to prevail during 2023, offset by a continued tailwind from input
price inflation, albeit the latter will continue to moderate further this
year.
During 2023 we will maintain our operational agility and discipline, with
continued emphasis on productivity, whilst remaining focused on long term
value creation.
Our priorities in 2023 will continue to include active product category
management to develop product mix and leveraging prior year investment in new
branches and strategic relocations. For example, in France this includes
growing our own-label product mix within Exteriors and benefitting from our
2022 branch openings and renovations, as well as new product range
development. In Germany, the branch and sales force reorganisation and
performance management processes implemented over the last 18 months have
strengthened our ability to capture and manage market demand, improve customer
proximity and enhance our presence in areas such as ceilings and flooring
systems. Productivity across the Group will also be supported by new
technologies, for example further warehouse and transport management system
adoption.
When market conditions recover, we continue to see the opportunity to increase
the Group's operating margin to our previously stated medium-term target of
5%.
With a strengthened financial position, good strategic momentum, pan-European
footprint, and a diverse portfolio with opportunity for growth, we remain
confident in our ability to manage short-term market weakness during 2023
while maintaining a focus on sustainable long term value creation for all our
stakeholders.
FINANCIAL REVIEW
Revenue
The Group saw a 17% increase in its LFL revenue over the year, with revenue up
to £2,744.5m (2021: £2,291.4m) driven by the pass through of product price
inflation in all geographies and the impact of our strategic growth
initiatives. We estimate the impact of inflation on revenue growth for the
full year was approximately 17%, with this gradually reducing as the year
progressed.
Operating costs and profit
Gross profit increased 18% to £711.0m (2021: £602.1m) with a gross profit
margin of 25.9% (2021: 26.3%). The reduction in gross margin was primarily
driven by strong comparatives in UK Exteriors.
The Group's underlying operating costs increased by 12.5% to £630.8m (2021:
£560.7m). Around half of this was due to inflation, with the balance due to
the additional year-over-year operating costs within businesses acquired
during 2021 and 2022, an increase in bad debt charges, and selective
investments across the Group, notably in our French businesses.
The Group's underlying operating profit increased 93.7% to £80.2m (2021:
£41.4m), at an underlying operating margin of 2.9% (2021: 1.8%), an increase
of 110 bps on the prior year. Adjusted operating margin improvement was
driven by improved profitability across the Group's operating countries.
The Group's operating profit performance was achieved despite a one-off loss
of £5m in H2 resulting from the administration of Avonside, a major UK
roofing contractor and one of the Group's largest customers. Whilst
disappointing, the Group believes that this situation arose from
company-specific factors. Customer bad debt metrics more broadly were in
line with management's expectations.
The Group's statutory operating profit was £56.2m (2021: £14.0m) after Other
items of £24.0m (2021: £27.4m). Other items are set out later in this
report.
Segmental analysis
UK
Revenue Revenue LFL sales Underlying operating Underlying operating
2022 2021 vs 2021 profit (loss)/profit
£m £m 2022 2021
£m £m
UK Interiors 702.6 507.4 23% 14.3 (2.5)
UK Exteriors 445.2 422.2 7% 18.4 25.0
UK 1,147.8 929.6 15% 32.7 22.5
Revenue in UK Interiors, a specialist insulation and interiors distribution
business, was up 38% to £702.6m (2021: £507.4m). This included an 18%
impact from the acquisition of Miers in July and a full year of trading for
Penlaw and F30, both acquired in 2021. LFL revenue grew 23%, driven by good
strategic execution and a strengthened market position as well as benefitting
from input price inflation. The improved revenue saw the business
successfully return to profitability, generating an underlying operating
profit of £14.3m (2021: £2.5m loss), with the business largely delivering
the additional volumes through the existing capacity in the network.
UK Exteriors, a specialist roofing merchant, which also includes our Building
Solutions business, traded well despite some softening in the RMI market
through the latter part of the year. Continued high levels of purchase price
inflation contributed to revenues of £445.2m (2021: £422.2m), a LFL increase
of 7%. Underlying operating profit of £18.4m (2021: £25.0m) was down 26.4%
primarily due to the one-off loss of £5m in H2 resulting from the
administration of Avonside.
France
Revenue Revenue LFL sales Underlying operating Underlying operating
2022 2021 vs 2021 profit profit
£m £m 2022 2021
£m £m
France Interiors 218.4 195.3 12% 12.2 11.2
France Exteriors 465.6 406.0 15% 23.6 17.4
France 684.0 601.3 14% 35.8 28.6
France Interiors, a structural insulation and interiors business trading as
LiTT, saw revenue increase 12% on a reported and LFL basis to £218.4m (2021:
£195.3m) driven by input price inflation pass through and continued strategic
execution. Underlying operating profit increased 9% to £12.2m (2021:
£11.2m) driven by revenue growth partially offset by higher operating costs.
Revenue in France Exteriors, a specialist roofing business trading as
Larivière, increased 15% to £465.6m (2021: £406.0m), and by 15% on a LFL
basis. Demand remained solid in the French RMI market and revenue also
benefitted from pass through of input price inflation. The increase in
revenue together with increased supplier rebates and strict pricing
discipline, partially offset by increased costs to fulfil higher trading
volumes, resulted in underlying operating profit increasing 36% to £23.6m
(2021: £17.4m).
Germany
Revenue Revenue LFL sales Underlying operating Underlying operating
2022 2021 vs 2021 profit profit
£m £m 2022 2021
£m £m
Germany 457.8 393.2 16% 16.8 3.6
Revenue in Wego/Vti, our specialist insulation and interiors distribution
business in Germany, increased 16% on a reported and LFL basis to £457.8m
(2021: £393.2m), with the impact of the acquisition of Thermodämm being
under 1%. The German team remained highly focused on their turnaround
initiatives. Revenue growth was driven by improved market performance as a
result of these initiatives, as well as benefitting from the pass through of
input price inflation and proactive stock management. The increased revenue
resulted in significantly improved operating profit of £16.8m, more than four
times that of 2021 (2021: £3.6m), and with an increase in underlying
operating margin to 3.7% (2021: 0.9%).
Poland
Revenue Revenue LFL sales Underlying operating Underlying operating profit
2022 2021 vs 2021 profit 2021
£m £m 2022 £m
£m
Poland 230.7 186.7 28% 10.6 6.3
In our Polish business, a market-leading distributor of insulation and
interiors, revenue increased to £230.7m (2021: £186.7m), with LFL sales up
28% due to an increase in market share, branch openings and pass through of
significant price inflation. The Polish business also saw further operating
margin improvement and underlying operating profit grew by 68% to £10.6m
(2021: £6.3m).
Benelux
Revenue Revenue LFL sales Underlying operating Underlying operating
2022 2021 vs 2021 (loss) (loss)
£m £m 2022 2021
£m £m
Benelux 115.9 92.4 25% (3.0) (4.9)
Revenue from the Group's businesses in Benelux increased 25% to £115.9m
(2021: £92.4m), with LFL sales up 25%. Revenue benefitted from increased
volumes, but the turnaround of the business remains in progress, and despite
recent market share recovery, it continues to trade with lower market share
than it had previously. Whilst the management team appointed in mid-2021 is
making progress regaining market share in the Netherlands and starting to
address the operational issues, this has taken longer than previously
anticipated. This progress resulted in a reduced underlying operating loss
of £3.0m (2021: £4.9m loss).
The continued challenges in the Benelux business led to a further impairment
charge of £15.8m being recognised at 31 December 2022 (2021: £9.9m).
Ireland
Revenue Revenue LFL sales Underlying operating Underlying operating
2022 2021 vs 2021 profit profit
£m £m 2022 2021
£m £m
Ireland 108.3 88.2 24% 6.0 2.8
Our business in Ireland is a specialist distributor of interiors and
exteriors, as well as a specialist contractor for office furnishing,
industrial coatings and kitchen/bathroom fit out. A strong rebound in the
second half of 2021 following the impact of further Covid-19-related
Government restrictions in the Republic of Ireland in H1 2021, continued into
2022, although some demand softening was seen in H2 2022. Revenue increased
by 23% to £108.3m (2021: £88.2m), and by 24% on a LFL basis. Underlying
operating profit improved by over 100% to £6.0m (2021: £2.8m), reflecting
the increased revenue and a shift in sales mix towards higher margin
offerings.
Reconciliation of underlying to statutory result
Other items, being items excluded from underlying results, amounted to £24.1m
for the year (2021: £35.2m) on a pre-tax basis and are summarised in the
table below:
2022 2021
£m £m
Underlying profit before tax 51.6 19.3
Other items - impacting profit before tax:
Amortisation of acquired intangibles (4.7) (4.7)
Impairment charges (15.8) (10.2)
Cloud computing configuration and customisation costs (2.7) (3.3)
Costs associated with acquisitions (2.5) (1.5)
Net restructuring costs (0.4) (3.7)
Onerous contract costs 1.2 (2.0)
Costs associated with refinancing (0.4) (2.4)
Other specific items 1.3 0.4
Non underlying finance costs (0.1) (7.8)
Total Other items (24.1) (35.2)
Statutory profit/(loss) before tax 27.5 (15.9)
Further details of Other items are as follows:
· Impairment charge of £15.8m relates to the impairment of goodwill
and other non-current assets in Benelux.
· Cloud computing costs relate to project configuration and
customisation costs associated with strategic cloud computing arrangements,
which are expensed, rather than being capitalised as intangible assets.
· Costs associated with acquisitions relate principally to the
acquisition of Miers Construction Products Limited in the UK, including legal
and other advisor costs associated with the acquisition, and earnout
consideration being accrued over the performance period.
· Other specific items comprises the settlement and/or release of
certain historic provisions, including amounts relating to businesses divested
in previous years, impacts of the pensions member options exercise undertaken
in the UK during the year, and a £2.0m provision for impairment of lease
receivables.
Taxation
The effective tax rate for the Group on the total profit before tax of £27.5m
(2021: £15.9m loss) was 43.6% (2021: negative 78.0%). As the Group operates
in several different countries, tax losses cannot be surrendered or utilised
cross border. Tax losses are not currently recognised as deferred tax assets
in respect of the UK business, which also impacts the overall effective tax
rate. The combination of these factors means that the effective tax rate is
less meaningful as an indicator or comparator for the Group.
In accordance with UK legislation, the Group publishes an annual tax strategy,
which is available on our website (www.sigplc.com (http://www.sigplc.com) ).
Pensions
The Group operates four (2021: four) defined benefit pension schemes and a
number of defined contribution pension schemes.
The largest defined benefit scheme is a UK scheme, which was closed to further
accrual in 2016.
The Group's total pension charge for the year, including amounts charged to
interest, was £7.4m (2021: £6.9m), of which a charge of £0.2m (2021:
£0.6m) related to defined benefit pension schemes and £7.2m (2021: £6.3m)
related to defined contribution schemes.
The total net liability in relation to defined benefit pension schemes at 31
December 2022 was £23.0m (2021: £10.7m). The last triennial actuarial
valuation of the UK scheme as at 31 December 2019 was concluded in March
2021. This showed that the market value of the scheme's assets had increased
by 20% to £196m and their actuarial value covered 102% of the benefits
accrued to members after allowing for expected future increases in pensionable
salaries. As part of the funding discussions, the Company paid an additional
one-off contribution of £2.5m into the Plan in July 2021 to accelerate plans
to achieve a secondary funding target. The next triennial valuation as at 31
December 2022 will commence shortly. The scheme remains well funded despite
the recent volatility of rates experienced during 2022.
Financial position
Overall, the net assets of the Group increased by £3.1m to £267.8m (2021:
£264.7m), with a gross cash position at year end of £130.1m (2021:
£145.1m). The movement in the year end cash balances reflects a positive
free cash flow of £10.6m delivered in the year, more than offset by £27.5m
spent on acquisitions and investments. Reported year end net debt on a
post-IFRS 16 basis was £444.0m (2021: £365.0m) and £160.3m on a pre-IFRS 16
basis (2021: £128.6m). The movement in post-IFRS 16 net debt, beyond the
change in cash noted above, is due mainly to an increase in lease liabilities
of £46.6m, driven by timing of lease renewals and investments in new
branches, and a currency movement of £14m on bond debt. Leverage continued
to come down towards the Group's medium-term targets and finished the year at
2.8x and 1.8x on post- and pre-IFRS 16 bases respectively (2021: 3.2x and 2.5x
respectively).
Cash flow
2022 2021
£m £m
Underlying operating profit 80.2 41.4
Add back: Depreciation 73.2 68.3
Add back: Amortisation 3.2 3.4
Underlying EBITDA 156.6 113.1
Increase in working capital (14.4) (85.4)
Repayment of lease liabilities (60.1) (57.3)
Capital expenditure (14.5) (18.6)
Cash exceptional items (14.7) (10.9)
Other 1.9 (15.0)
Operating cash 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 £130.1m (2021: £145.1m) less bank overdrafts of £nil (2021:
£nil).
During the year, the Group reported a free cash inflow of £10.6m (2021:
£124.1m outflow) as a result of the increased underlying operating profit in
the year, partially offset by an increase in working capital, and after
payments in relation to lease liabilities, capital expenditure, interest, tax,
and exceptional and other cash flows. Interest and financing costs increased
as a result of the full year impact of interest on the €300m bond and a
£1.7m increase in interest on lease liabilities. Tax paid increased due to
increased profits in the tax paying mainland European businesses. "Other"
includes payments to the Employee Benefit Trust to fund share plans of £4.0m
and a £2.5m annual payment to the UK pension scheme, offset by non-cash items
and proceeds on sale of property, plant and equipment.
The increase in working capital was £14.4m of which £13.0m related to
inventory movements, driven mainly by year-over-year inflation.
Other movements in cash below free cash flow include £27.5m cash outflow
primarily in relation to the purchase of businesses in the UK and Germany
(2021: £10.6m outflow), including £1.3m deferred consideration payments
relating to UK acquisitions in previous years.
Financing and funding
The Group's financing facilities comprise €300m fixed rate secured notes
(due November 2026) and an RCF of £90m (due May 2026). During the second
half of the year, the Group extended its RCF by £40m, utilising the accordion
feature of the existing RCF and bringing the total committed facility to
£90m. The increased RCF, which was entered into on the same terms as the
existing £50m facility, will be used to provide additional committed standby
liquidity given the uncertain macro environment and to potentially take
advantage of additional profit and cash flow enhancing opportunities in the
medium term. The secured notes are subject to incurrence-based covenants
only, and the RCF has a leverage maintenance covenant set at 4.75x which only
applies if the facility is over 40% drawn at a quarter end reporting date.
The RCF was undrawn at 31 December 2022.
The Group has a healthy level of available liquidity, and on the basis of
current forecasts is expected to remain in compliance with all banking
covenants throughout the forecast period to 31 March 2024.
2022 2021
£m £m
Cash and cash equivalents at end of the year 130.1 145.1
Undrawn RCF at end of the year 90.0 50.0
Liquidity 220.1 195.1
Post-IFRS 16 net debt 444.0 365.0
Pre-IFRS 16 net debt 160.3 128.6
Post-IFRS 16 leverage 2.8x 3.2x
Pre-IFRS 16 leverage 1.8x 2.5x
Contingent liability
Two of SIG's wholly owned subsidiaries in Benelux are subject to legal
proceedings brought by a customer in connection with the installation of
insulation at an industrial facility in Belgium. Further details are
provided in notes 12 and 13.
Directors' responsibility statement on the Annual Report
The responsibility statement below has been prepared in connection with the
Company's full Annual Report for the year ended 31 December 2022. Certain
parts solely thereof are not included within this announcement.
We confirm that to the best of our knowledge:
(a) the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
(b) the Strategic report includes a fair review of the development and
performance of the business and the position of the Company, and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face; and
(c) the Annual Report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
This responsibility statement was approved by the Board of Directors on 7
March 2023 and signed on its behalf by:
By order of the Board
Gavin Slark Ian Ashton
Director Director
7 March 2023 7 March 2023
Cautionary statement
The securities of the Group have not been and will not be registered under the
US Securities Act of 1933, as amended (the "Securities Act"), or under the
securities laws of any state or other jurisdiction of the United States, and
may not be offered, sold, pledged or transferred , directly or indirectly, in,
into or within the United States except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act and in compliance with any applicable securities laws of any relevant
state or other jurisdiction of the United States. There has been and will be
no public offering of the securities of the Group in the United States.
This announcement has been prepared to provide the Company's shareholders with
a fair review of the business of the Group and a description of the principal
risks and uncertainties facing it. It may not be relied upon by anyone,
including the Company's shareholders, for any other purpose.
This announcement contains forward-looking statements that are subject to risk
factors including the economic and business circumstances occurring from time
to time in countries and markets in which the Group operates and risk factors
associated with the building and construction sectors. By their nature,
forward-looking statements involve a number of risks, uncertainties and
assumptions because they relate to events and/or depend on circumstances that
may or may not occur in the future and could cause actual results and outcomes
to differ materially from those expressed in or implied by the forward-looking
statements. No assurance can be given that the forward-looking statements in
this announcement will be realised. Statements about the Directors'
expectations, beliefs, hopes, plans, intentions and strategies are inherently
subject to change and they are based on expectations and assumptions as to
future events, circumstances and other factors which are in some cases outside
the Group's control. Actual results could differ materially from the Group's
current expectations.
It is believed that the expectations set out in these forward-looking
statements are reasonable but they may be affected by a wide range of
variables, which could cause actual results or trends to differ materially,
including but not limited to, changes in risks associated with the level of
market demand, fluctuations in product pricing and changes in foreign exchange
and interest rates.
The Company's shareholders are cautioned not to place undue reliance on the
forward-looking statements. This announcement has not been audited or
otherwise independently verified. The information contained in this
announcement has been prepared on the basis of the knowledge and information
available to Directors at the date of its preparation and the Company does not
undertake any obligation to update or revise this announcement during the
financial year ahead.
Consolidated Income Statement
For the year ended 31 December 2022
Underlying(1) Other items(2) Total Underlying(1) Other items(2) Total
2022 2022 2022 2021 2021 2021
Note £m £m £m £m £m £m
Revenue 2 2,744.5 - 2,744.5 2,291.4 - 2,291.4
Cost of sales (2,033.5) - (2,033.5) (1,689.3) - (1,689.3)
Gross profit 711.0 - 711.0 602.1 - 602.1
Other operating expenses 4 (614.3) (22.0) (636.3) (555.9) (27.4) (583.3)
Impairment losses on financial 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 2022 31 December 2021
£m £m
Profit/(loss) after tax 15.5 (28.3)
Items that will not subsequently be reclassified to the Consolidated Income
Statement:
Remeasurement of defined benefit pension liability (14.3) 9.1
Deferred tax movement associated with remeasurement of defined benefit pension (0.5) 0.1
liability
(14.8) 9.2
Items that may subsequently be reclassified to the Consolidated Income
Statement:
Exchange difference on retranslation of foreign currency goodwill and 2.7 (3.7)
intangibles
Exchange difference on retranslation of foreign currency net investments 11.5 (10.7)
(excluding goodwill and intangibles)
Exchange and fair value movements associated with borrowings and derivative (13.9) 8.6
financial instruments
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
£m £m
Non-current assets
Property, plant and equipment 68.8 66.9
Right-of-use assets 265.9 230.9
Goodwill 134.2 120.1
Intangible assets 22.8 16.7
Lease receivables 1.2 2.9
Deferred tax assets 3.3 4.8
Non-current financial assets 0.4 -
496.6 442.3
Current assets
Inventories 270.6 242.0
Lease receivables 0.1 0.8
Trade and other receivables 432.6 371.3
Current tax assets 1.5 -
Current financial assets 1.6 0.2
Cash at bank and on hand 130.1 145.1
836.5 759.4
Total assets 1,333.1 1,201.7
Current liabilities
Trade and other payables 425.0 369.7
Lease liabilities 56.5 50.7
Interest-bearing loans and borrowings 0.8 -
Deferred consideration 0.7 1.1
Other financial liabilities - 0.4
Derivative financial instruments - 0.5
Current tax liabilities 5.8 4.6
Provisions 9.6 12.9
498.4 439.9
Non-current liabilities
Lease liabilities 251.2 210.4
Interest-bearing loans and borrowings 266.1 249.6
Deferred consideration 1.8 0.7
Derivative financial instruments 0.1 -
Other financial liabilities - 0.6
Other payables 7.4 3.8
Retirement benefit obligations 23.0 10.7
Provisions 17.3 21.3
566.9 497.1
Total liabilities 1,065.3 937.0
Net assets 267.8 264.7
Capital and reserves
Called up share capital 118.2 118.2
Treasury shares (16.4) (12.5)
Capital redemption reserve 0.3 0.3
Share option reserve 8.6 4.4
Hedging and translation reserves 4.5 2.4
Cost of hedging reserve 0.1 0.1
Merger reserve 92.5 92.5
Retained profits 60.0 59.3
Attributable to equity holders of the Company 267.8 264.7
Total equity 267.8 264.7
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Share premium account Treasury shares reserve Capital redemption reserve Share option reserve Hedging and translation reserves Cost of hedging reserve Merger reserve Retained (losses)/ profits Total
Called up share capital
£m £m £m £m £m £m £m £m £m £m
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 2022 31 December 2021
Note £m £m
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 £12.9m 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 £130.1m
(2021: £145.1m) less bank overdrafts of £nil (2021: £nil).
( )
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 €300m fixed rate bond (secured
notes), due November 2026, and £90m Revolving Credit Facility (RCF) which
expires in May 2026. One of the trading businesses also has a £2.9m 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 Interiors UK Exteriors UK France Interiors France Exteriors France Germany Benelux Ireland Poland Eliminations Total Group
Total Total
Year ended 31 December 2022 £m £m £m £m £m £m £m £m £m £m £m £m
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 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
(recognised at point in time)
Construction contracts - - - - - - - - 5.7 - - 5.7
(recognised over time)
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 Interiors UK Exteriors UK France Interiors France Exteriors France Germany Benelux Ireland Poland Eliminations Total Group
Total Total
Year ended 31 December 2021 £m £m £m £m £m £m £m £m £m £m £m £m
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 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
(recognised at point in time)
Construction contracts - - - - - - - - 4.6 - - 4.6
(recognised over time)
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 Interiors UK Exteriors UK France Interiors France Exteriors France Germany Benelux Ireland Poland Eliminations Total Group
Total Total
Year ended 31 December 2022 £m £m £m £m £m £m £m £m £m £m £m £m
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
£0.4m, offset by credits relating to onerous contracts £1.2m and other
specific items £0.3m. See Note 4 for further details.
UK Interiors UK Exteriors UK France Interiors France Exteriors France Germany Benelux Ireland Poland Eliminations Total Group
Total Total
Year ended 31 December 2021 £m £m £m £m £m £m £m £m £m £m £m £m
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
£2.4m, onerous contract costs £2.0m, restructuring costs £1.4m offset by
other specific items £0.4m credit. See Note 4 for further details.
UK Interiors UK Exteriors UK France Interiors France Exteriors France Germany Benelux Ireland Poland Total Group
Total Total
31 December 2022 £m £m £m £m £m £m £m £m £m £m £m
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 Interiors UK Exteriors UK France Interiors France Exteriors France Germany Benelux Ireland Poland Total Group
Total Total
31 December 2021 £m £m £m £m £m £m £m £m £m £m £m
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 Interiors UK Exteriors UK France Interiors France Exteriors France Germany Benelux Ireland Poland Parent company Total Group
Total Total
2022 £m £m £m £m £m £m £m £m £m £m £m £m
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 Interiors UK Exteriors UK France Interiors France Exteriors France Germany Benelux Ireland Poland Parent company Total Group
Total Total
2021 £m £m £m £m £m £m £m £m £m £m £m £m
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
£m £m
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 Other items Other items Total Before Other items Other items Total
£m £m £m £m £m £m
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 items Tax impact Tax impact Other items Tax impact Tax impact
£m £m % £m £m %
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 £3.6m relating to goodwill, £2.5m tangible fixed assets and £9.7m
right-of-use assets. Impairment charges in the prior year comprised £9.9m
relating to goodwill and £0.3m 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 £4.9m offset by a £2.5m 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
£1.2m, redundancy and related staff costs of £2.4m and restructuring
consultancy costs of £0.1m. 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 £2.0m provision for impairment of lease receivables. The £0.4m
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 £12.9m make-whole payment on settlement of the private placement
notes, £2.8m write-off of arrangement fees in relation to the previous debt
arrangements, offset by £8.0m release of the loss on modification recognised
on amendment of the private placement notes in 2020, together with £0.1m
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 £15.8m (2021: £27.8m), including £nil (2021: £12.9m)
within finance costs paid.
5. Finance income and finance costs
2022 2021
£m £m
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
£0.1m (2021: £0.9m).
(2) Included within finance costs on the secured notes is the amortisation of
arrangement fees of £0.5m (2021: £0.1m).
(3) Included within finance costs on private placement notes in the prior year
is the amortisation of arrangement fees of £0.6m and the amortisation of the
loss on modification of £2.1m.
(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 £12.9m make-whole payment
on settlement of the private placement notes, £2.8m write-off of arrangement
fees in relation to the previous debt arrangements, offset by £8.0m release
of the loss on modification recognised on amendment of the private placement
notes in 2020, together with £0.1m unwinding of the discount on the onerous
contract provision.
6. Income tax
The income tax expense comprises:
2022 2021
£m £m
Current tax
UK & Ireland corporation tax - Charge for the year 0.8 0.3
- Adjustments in respect of prior years 0.1 -
0.9 0.3
Mainland Europe corporation tax - Charge for the 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
£m % £m %
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 £15.8m (2021:
£9.9m) 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 £27.5m
(2021: £15.9m 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
£m £m
Deferred tax movement associated with re-measurement of defined benefit 0.5 (0.1)
pension liabilities(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
£m £m
Profit/(loss) attributable to ordinary equity holders of the parent for basic 15.5 (28.3)
and diluted earnings per share
Add back:
Other items (see Note 4) 21.7 32.0
Profit attributable to ordinary equity holders of the parent for basic and 37.2 3.7
diluted earnings per share before other items
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
£m £m
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 3.2p 0.3p
items
(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 acquired Acquisition date Country of incorporation Principal activity
Thermodämm GmbH 100% 14 July 2022 Germany Distributor of interiors and insulation products
Miers Construction Products Limited 100% 22 July 2022 United Kingdom Distributor of specialist construction 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 (UK) Thermodämm Total Penlaw Group F30 Building Products Total
£m £m £m £m £m £m
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 £12.1m for Miers and £0.3m
for Thermodämm. The gross amount of trade receivables is £12.5m for Miers
and £0.3m 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 £13.2m 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 £2.0m
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 £27.6m of revenue and £0.2m
to underlying profit before tax of the Group, and Thermodämm contributed
£2.7m of revenue and £0.1m to underlying profit before tax. If the
acquisitions had taken place at the beginning of the year, revenue for the
Group would have been £2,783.0m and profit before tax for the Group would
have been £30.5m.
2022 2021
Miers (UK) Thermodämm Total Penlaw Group F30 Building Products Total
£m £m £m £m £m £m
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 £2.6m. The
range of contingent consideration payable is therefore £nil to £2.6m, with
£2.5m 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 £4.0m 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. £1.2m 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 (UK) Thermodämm Total Penlaw Group F30 Building Products Total
£m £m £m £m £m £m
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 4.1 0.2 4.3 2.0 0.2 2.2
activities)
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
£m £m
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
£m £m
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 £2.5m 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
£m £m
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 £0.6m payable for the first twelve months from
completion and up to a maximum of £1.2m for the second twelve months from
completion, subject to a maximum of £1.2m in total. At the acquisition
date, the fair value of contingent consideration was estimated to be £0.5m.
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 £0.5m at 31 December 2022. This
is included within other payables on the Consolidated balance sheet. The
range of contingent consideration payable is £nil to £1.2m. 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 £0.8m 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. £0.6m was recognised and
included within accruals in relation to this at 31 December 2021, with a
further £0.2m recognised and the total amount of £0.8m paid during 2022.
The goodwill of £2.1m 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 £2.7m 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 £0.1m reduction in the goodwill previously recognised. Trade
receivables were reduced by £0.2m, trade and other payables increased by
£0.1m and current tax liability reduced by £0.4m.
From the date of acquisition, the Penlaw Group contributed £9.9m of revenue
and £0.4m loss to underlying profit before tax of the Group in 2021, and F30
Building Products contributed £6.5m of revenue and £0.8m to underlying
profit before tax. If the acquisitions had taken place at the beginning of
2021, revenue for the Group would have been £2,349.6m and loss before tax for
the Group would have been £13.9m.
9. Reconciliation of operating profit to cash generated from operating
activities
2022 2021
£m £m
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 £2.5m (2021: £5.0m).
10. Reconciliation of net cash flow to movements in net debt
2022 2021
£m £m
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
£m £m
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 December 2021 Cash flows Acquisitions Non-cash items(1) Exchange differences At 31 December 2022
£m £m £m £m £m £m
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: £nil)
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 leases Leasehold dilapidations Onerous contracts Other amounts Total
£m £m £m £m £m
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
£m £m
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 £1.1m. 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 £11.7m (2021: £9.9m). Of this amount, £5.2m (2021: £4.7m) 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 £0.8m (2021: £1.1m) 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 £0.2m (2021: £0.6m) 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
£m £m
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 result in system Cyber security continues to receive Board and Executive Leadership Team focus
disruption or sensitive data being compromised with an emphasis on ensuring that appropriate technologies are deployed across
IT
infrastructure to manage cyber threats.
In the context of widespread dependency on increasingly
complex digital systems, growing cyber threats are
Regular and independent reviews are performed to assess the nature of our
outpacing societies' ability to effectively prevent and cyber threats, security processes and initiatives. They also ensure that we
implement appropriate tools and processes to better identify and remediate new
manage them. These risks are also exacerbated by and emerging cyber risks and vulnerabilities.
an increasing willingness of nation states to engage in
asymmetric cyber warfare to achieve geopolitical aims. Cyber-incident response protocols are also in place to support our ability to
effectively respond to and recover from a cyber threat or incident and ongoing
cyber training campaigns and initiatives ensure employees are alert to the
nature and consequences of cyber-attacks.
There is a risk that we lack the capabilities to effectively prevent, monitor,
respond to, or recover from, suspected cyber-attacks on our IT infrastructure.
Such attacks may result in a loss of data or disruption to IT services which
may have a significant impact on our ability to operate and comply with data
protection and privacy laws (e.g. GDPR) and have a detrimental effect on our
reputation.
Health and safety: Danger of incident or accident, resulting in injury or loss The Group Health, Safety and Environment Director is a
of life to employees, customers, or the general public
member of the Executive Leadership Team and provides
strategic leadership for all matters relating to health, safety and
There is a risk that poor organisational arrangements or behavioural culture
with regards to health and safety causes harm to individuals and as a result environmental performance, oversight and strategy. During the
may result in enforcement action, penalties, reputational damage, or adverse
press coverage. year we appointed a new Group Health, Safety and Environment
Director and she is supported by local health and safety
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 impacts the Group's We continue to assess inflationary, other supply chain pressures
ability to accurately forecast and to meet internal and external expectations
and impacts on product pricing and will continue to work with
our suppliers to identify opportunities to improve supply chain
Geopolitical tensions have been a key feature of 2022 and
resilience and to selectively pre-purchase products in order to
are unlikely to disappear in 2023. The ongoing impacts
ensure continuity of supply.
of restoring post-Covid-19 financial stability, conflict in
Ukraine and the response of Western governments,
The Group's geographical diversity across Europe reduces the
particularly regarding the imposition of sanctions on
impact of changes in market conditions in any one country while
Russia and retaliatory disruption to energy supplies, has
industry-based KPIs, monitored monthly at a Group and operating
resulted in unprecedented economic turbulence and
company level, help to ensure that warnings and indicators of
financial uncertainty with significant ongoing inflationary
risk are identified early, and appropriate mitigation strategies
and cost of living impacts for both the UK and Europe.
implemented.
This volatility has the potential to impact customer
demand, along with presenting significant challenges to
our financial, operational and commercial resilience, whilst
adding costs to our operations and making planning and
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 attract and retain people We continue to invest in learning and development programmes
with the right skills, drive and capability to reshape and grow the business
to ensure both vocational and technical training needs 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 organisational
increased employee concerns regarding post-Covid-19
structures are regularly reviewed and where necessary
wellbeing, mental health anxieties and significant wage
restructured to optimise employee motivation and engagement.
inflation pressure resulting from an increased cost of
Employee engagement is also monitored through the annual
living, has the potential to negatively impact SIG's ability
employee engagement survey process and the Workforce
to attract, recruit and retain staff across the full 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 impacts our Product and customer data quality remains a focus area for
financial management, fact-based decision making, business efficiency, and
credibility with customers our operating companies, who continue to monitor, assess
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 our
completeness, and accuracy of vendor, product and ERP systems where relevant to ensure these systems support the
pricing master data. This has the potential to impact our required data quality and governance required.
ability to deliver a digital customer experience, provide
enhanced product and customer analytics or insight
and comply with both existing and new regulatory
requirements.
Environmental, social and governance (ESG): SIG suffers reputational impacts We have set ambitious ESG commitments and will focus on demonstrating health
due to poor environmental, social and governance arrangements and performance and safety leadership in our sector, committing to a net zero carbon target by
2035 at the latest, sending zero SIG waste to landfill by 2025, partnering
with manufacturers and customers to reduce carbon and waste across the supply
chain, and to being recognised as the employer of choice in building materials
Public and commercial consciousness has been growing distribution.
on a wide range of environmental, social and governance
issues, including climate change, employee wellbeing and These commitments will be supported by verifiable and
how an organisation contributes to society. Organisations evidenced-based data to ensure that progress in achieving these
should not only minimise their negative impacts, but also aims and ambitions is monitored and subject to appropriate
contribute positively to both society and the environment. rigour. To do this, we have enhanced our sustainability reporting
and budgeting processes (particularly in relation to carbon
While SIG has a long and rich heritage in helping the emissions and waste) to ensure that we are able to effectively
construction industry deliver energy efficient solutions track both the progress and financial impacts of commitments.
and products, risks remain in terms of how we deliver
our ESG agenda. This is particularly the case in how In terms of employee wellbeing, each of our businesses has
we ensure we achieve our stated aims with regards introduced programmes and initiatives to support employees,
to climate change. These risks include the cost and underpinned by a Group-wide employee health and wellbeing policy and training
for all employees to understand their responsibilities to keep themselves and
complexity of compliance, the challenges presented by their colleagues safe and well.
the decarbonisation of our vehicle fleet and estate and
how we engage with the wider industry to reduce product
and supply-chain carbon impacts.
Mergers and acquisitions: We lack the capabilities to identify, acquire and We have dedicated M&A Group resource supported by
integrate significant mergers and acquisition opportunities and ensure deals
deliver desired scalability and value creation appropriately skilled in-house expertise and the use of approved
external advisors.
As part of our growth strategy, we may from time to time
acquire new businesses. Such decisions are based on Clear accountability and authority limits for the initiation and
detailed plans that assess the value creation opportunity approval of M&A activity are defined in the Group Delegation
for the Group. By their nature, there is an inherent risk of Authority.
that we fail to manage the execution and integration risks Resource is also available in the organisation to ensure that
which may result in delays or additional costs and impact transactions are subject to post-integration and lessons learnt
the future value and revenues generated. exercises and we continue to streamline and enhance our M&A
policies and procedures.
Legal or regulatory compliance: We fail to comply with or are found to be in Our Group General Counsel is a member of the Executive
breach of, legal or regulatory requirements
Leadership Team and is supported by appropriately skilled
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 an
and evolving range of regulatory and other requirements
approved panel of external lawyers and advisors.
in the markets in which it operates. A major corporate
failure resulting from a non-compliance with legislative,
Policies and procedures are in place to ensure compliance with
regulatory or other requirements would impact our brand
legal and regulatory frameworks, including health and safety,
and reputation, could expose us to significant operational
environmental, ethical, fraud, data protection and product safety.
disruption or result in enforcement action or penalties.
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 digital capabilities We continue to evaluate new technologies and make investments
necessary to either maintain market competitiveness or to support the ongoing
investments required to modernise and deliver future efficiency and in the digital workplace to ensure that we maintain a competitive
productivity gains
digital proposition.
Increased technological innovation and change has
Across our markets each operating company is responsible for
accelerated the increasing role digitalisation will have in
ensuring that it implements the necessary technologies and ways
the construction materials supply chain. We continue
of working to ensure that it can maximise digital opportunities
to seek opportunities to ensure we can deliver digital
in terms of enhancing the customer experience and optimising
solutions to enable a more integrated and frictionless
transactional, fulfilment or process efficiencies.
experience for both customers and suppliers.
During 2022, we identified opportunities for further progress
This risk may be exacerbated by legacy systems and
in digital, particularly with regards to how we can increase our
technologies which are heavily customised, require
productivity, optimise process efficiencies and enhance the
significant system maintenance to prevent outages and
customer experience. This will form the basis of how we further
lack the functionality to allow their integration into a more
develop our digital capabilities.
modern digital infrastructure.
Change management: Failure to deliver the change and growth agenda in an Operating companies continue to manage change portfolios
effective and efficient manner, resulting in management stretch, compromised
quality, and inability to meet growth targets through programme management governance committees.
Increased monitoring has been implemented, particularly
As we enter the next phase of executing our strategy, regarding progress against growth initiatives, in line with
there will be a key focus on identifying and implementing our strategy.
opportunities to drive efficiency and productivity and to
ensuring that we optimise our service, product offer and Monitoring of business growth metrics and early warning
processes, and manage our cost base. indicators or trends continues as part of business reviews at
both the management and Board level.
This will inevitably require changes to roles, and ways of
working, while we continue to modernise existing and Our ongoing employee engagement surveys continue to
implement new IT systems. facilitate the early identification of change impact in terms of our
employees, and action plans are implemented and monitored
There is a risk that these initiatives, allied to the impacts accordingly.
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
£m £m
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
£m £m
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
£m £m
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 Interiors UK Exteriors UK France Interiors France Exteriors France Germany Benelux Ireland Poland Total Group
Total Total
£m £m £m £m £m £m £m £m £m £m £m
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
£m £m
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
£m £m
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 £12.9m 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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