REG - SIG PLC - Full year results for the year ended 31 Dec 21
11/03/2022 07:00
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RNS Number : 4278E SIG PLC 11 March 2022
11 March 2022
SIG plc
Full year results for the year ended 31 December 2021
A pivotal year: growing momentum
SIG plc ("SIG", "the Group" or "the Company") today announces its results for
the full year ended 31 December 2021 ("FY 2021" or "the year").
Strategic highlights
· Group back to underlying profit, driven by market share gains and
margin discipline in challenging supply markets
· Strategy delivering ahead of expectations, reinforcing the value of
SIG's core model
· Leadership further strengthened; platform for growth established;
industry reputation regained and acknowledged
· Accelerating revenue growth throughout 2021 against pre Covid-19 2019
comparators
· €300m (£253m) bond issue in November 2021 further increases
financial stability and longer-term flexibility
Financial highlights
· Group like-for-like ("LFL") sales up 24% on prior year, and 8% up on
non Covid-19 affected 2019; H2 growth of 15% vs 2019
· Strong margin progression: H2 2021 gross margin of 26.6%, 70bps higher
than H1 2021 and 120bps higher than H2 2020; underlying operating profit
margin improved consistently throughout 2021
· £41.4m underlying operating profit (2020 restated: £53.1m loss)
· Statutory loss before tax for the year of £15.9m (2020 restated:
£194.6m loss) after reflecting other items of £35.2m (2020 restated:
£118.5m)
· Net debt of £365.0m post IFRS 16 (2020: £238.2m) and £128.6m
pre-IFRS 16 (2020: £4.1m), reflecting investment in inventory to optimise
customer service at a time of supply shortages, as previously guided, as well
as one-off costs related to refinancing and M&A investment
· Gross cash of £145m; new and increased revolving credit facility
("RCF") of £50m remains undrawn
Current trading and outlook
· Trading well in 2022 to date, and ahead of plan
· Supply challenges being managed
· Confidence in 3% Group operating profit margin for FY23, and in the
Group's medium-term path towards 5%
· Cash generation expected in H2; full year cash neutral
( ) 2021 Restated(5) Change vs 2020
2020
Underlying(1) revenue £2,291.4m £1,872.7m 22.4%
LFL(2) sales growth 24.3% (13.3%)
Gross margin 26.3% 25.1% 120bps
Underlying(1) operating profit/(loss) £41.4m (£53.1m)
Underlying(1) profit/(loss) before tax £19.3m (£76.1m)
Underlying(1) earnings/(loss) per share 0.3p (10.0p) 10.3p
Underlying operating margin 1.8% (2.8%) 460bps
Net debt £365.0m £238.2m
Net debt (pre-IFRS 16) £128.6m £4.1m
Statutory results 2021 Restated(5)
2020
Revenue(3) £2,291.4m £1,874.5m
Operating profit/(loss)(3) £14.0m (£160.0m)
Loss before tax(3) (£15.9m) (£194.6m)
Basic loss per share(3) (2.4p) (23.1p)
Total loss after tax(4) (£28.3m) (£131.5m)
Dividend per share n/d n/d
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. Statutory results of continuing operations only in 2020.
4. Statutory results including both continuing and discontinued operations in
2020.
5. 2020 restatement is due to the change in accounting policy regarding
configuration and customisation costs incurred in implementing cloud computing
arrangements following the IFRS Interpretations Committee (IFRIC) Agenda
Decision published in April 2021.
Commenting, Steve Francis, Chief Executive Officer, said:
"2021 was a pivotal year - accelerating progress on our strategy has returned
the Group to profitability ahead of expectations, delivering above market
growth rates and consistent margin improvement, the result of record
performance in France and Poland, and strong turnaround in the UK."
"In uncertain times, SIG demonstrated in 2021, as it has in previous decades,
its ability to manage successfully through inflationary and volatile market
conditions, thanks to our strong relationships with suppliers and customers,
and the quality of our people."
"Growth momentum, resilience of our businesses, and experienced leadership all
underpin our confidence in the organic growth path towards 5% underlying
operating margin in the medium term."
"I'm proud that SIG has a long-established focus on energy efficient
solutions, and we will play a leadership role in the shift to sustainable
construction."
"SIG is back to winning ways, and we look forward to 2022 and beyond with
confidence."
Investor and Analyst presentation will be available on www.sigplc.com from
7:15am on Friday 11 March. A live Q&A session, hosted by Steve Francis,
CEO, Ian Ashton, CFO, and Phil Johns, Managing Director of SIG UK, will take
place at 10:00am.
Join from a PC, Mac, iPad, iPhone or Android device:
Please click this URL to join. https://storm-virtual-uk.zoom.us/j/88998333444
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Or join by phone:
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International numbers available: https://storm-virtual-uk.zoom.us/u/kehtaYf7fs
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Enquiries
SIG plc +44 (0) 114 285 6300
Steve Francis Chief Executive Officer
Ian Ashton Chief Financial Officer
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
Jefferies International Limited - Joint broker to SIG +44 (0) 20 7029 8000
Ed Matthews / Will Soutar
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
approximately 6,800 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
FY21 LFL revenues grew 24% vs prior year, which was distorted by Covid-19,
notably in H1, and 8% vs 2019. Reported Group revenues from underlying
operations were 22% higher in the year vs 2020, including an adverse 3%
currency movement.
LFL sales growth 2021 vs 2019 H1 Q3 Q4 H2 FY
UK Interiors (19)% 0% 15% 7% (8)%
UK Exteriors 14% 26% 29% 28% 21%
UK (7)% 10% 22% 15% 4%
France Interiors 8% 1% 13% 7% 7%
France Exteriors 19% 11% 40% 25% 22%
Germany 1% 3% 12% 7% 4%
Benelux (10)% (12)% (1)% (6)% (8)%
Poland 20% 33% 41% 36% 29%
Ireland (21)% 6% 14% 10% (5)%
EU 7% 8% 22% 15% 11%
Group 1% 9% 22% 15% 8%
LFL sales growth 2021 vs 2020 H1 Q3 Q4 H2 FY FY 2021 sales
£m
UK Interiors 54% 30% 21% 26% 38% 508
UK Exteriors 58% 24% 17% 20% 36% 422
UK 56% 27% 19% 23% 37% 930
France Interiors 38% 2% 10% 6% 20% 195
France Exteriors 34% 6% 17% 12% 22% 406
Germany 11% 7% 9% 8% 10% 393
Benelux 2% 0% 17% 9% 5% 92
Poland 22% 44% 46% 45% 33% 187
Ireland 14% 18% 9% 13% 14% 88
EU 22% 11% 16% 14% 17% 1,361
Group 33% 17% 17% 17% 24% 2,291
Strategic progress
2021 saw a step change in the Group's performance, driven by the major
strategic initiatives initiated at the outset of the Return to Growth strategy
in the summer of 2020.
Reinforcing our decentralised business model, with a focus on driving
operational performance at branch level, has driven record performance in
France and Poland and strong growth in the UK, as a result of:
· Empowered local teams - investing in their sites, giving them the
tools to operate, simplifying targets, and upgrading incentives has generated
huge energy and increased employee engagement
· Disciplined margin management in inflationary conditions
· Superior product range and availability, leveraging our supplier
partnerships to secure scarce products, and supporting customers in a very
challenging supply year
The UK organisation has been rebuilt and is back in profit:
· Decentralised operating model re-established, slimmed down national and
central structures and strengthened regional and branch structures,
underpinned by branch P&L accountability
· Recovery of market share lost since 2018 well under way
· Gross margins back to target levels
· Improved supplier relationships - rebates, terms, stock allocation
· Improved pricing disciplines and focus on enhancing mix of higher
margin products
· The UK business overall returned to underlying profitability for the
year, with Interiors returning to profit in H2
Group wide, investment in our strategy is paying off and laying the
foundations for sustainable growth:
· We invested in stock availability, more expertise, more people in the
field, better training and incentives, modernising and decarbonising the
fleet, and improving our branches
· We opened branches in most countries, with a multi-year programme of
branch openings now underway to in-fill geographic gaps or upgrade our
presence in major urban markets
· Our Germany and Benelux businesses both have new, experienced
leadership in place, and we are confident that they will continue to build on
the early signs of improvement already seen in the later months of the year
· We strengthened our leadership bench whilst streamlining and
upskilling the corporate centre, moving the corporate office from central
London to our new depot at Heathrow airport
· Recent acquisitions - SM Roofing, F30 (construction accessories) and
Penlaw (insulation), all in the UK - are performing well, beating 2021 profit
expectations, and fit our specialist model
· We see a clear opportunity to accelerate delivery against the
strategic plan through targeted investment in extending our product range,
specialist solutions and footprint
As a result, SIG's reputation and influence has been regained:
· Larivière (France Exteriors) awarded "2021 Best Specialist
Distributor" (Geste D'Or 2021) and UK Interiors awarded "Distributor of the
Year" in the supply category (BMJ awards)
· SIG appointments to high profile leadership roles in key industry
associations
· Increasingly viewed as an attractive and trusted home by prospective
industry recruits and M&A targets
Strong Balance Sheet
The Group's liquidity position remained strong throughout 2021, and on 18
November 2021 the Group completed the restructuring of its debt arrangements,
comprising the issue of €300m 5.25% fixed rate senior secured notes and the
establishment of a new RCF of £50m. The senior secured notes are subject to
incurrence-based covenants, and the RCF has a leverage maintenance covenant
which only applies if the facility is over 40% drawn at a quarter end
reporting date. The RCF was undrawn at 31 December 2021.
Where possible and appropriate we have built up increases in our inventory
holding levels, in light of the supply challenges experienced by the industry
in recent months. Our strong balance sheet can accommodate this short-term
investment in inventory, and our strong liquidity position continues to
provide an appropriate buffer given the prevailing macro-economic
uncertainties. Inflation was a headwind in working capital and cash flow
during the year, and the cash outflow was also affected by acquisitions and
one-offs, including those related to the refinancing.
Dividend
No dividend will be paid for 2021. However, continued successful execution
of the Return to Growth strategy, including sensible investment where
appropriate, will return the Group to sustainable, profitable growth and cash
generation, supporting a range of capital allocation priorities. The Board
reiterates its medium-term commitment to return to a progressive dividend
policy, appropriately covered by underlying earnings.
The Group completed a share capital reduction in June by cancelling its share
premium account. This has created distributable reserves to provide
flexibility for dividend payments in future.
People
The Board would like to thank all employees of SIG for their continued
commitment and resilience. Their efforts over the last two years were the key
to the excellent results in 2021, and will remain the key for the next phase
of the Group's evolution, as we focus on building a stronger business with a
high performing workforce that is rewarded for making a positive difference.
We are committed to building a great business that can play a key role in the
construction supply chains across Europe for many years to come.
Covid-19
The safety of our people, customers and suppliers continues to be our primary
concern. Safety protocols developed during the pandemic continue to be
adhered to across the Group, in line with the government guidance across all
jurisdictions in which it operates.
Despite various lockdowns and restrictions throughout the year, the business
was able to trade broadly as normal, albeit within the new operating norms and
protocols. The Irish market was, uniquely in the Group, impacted by further
government restrictions on construction from January until May 2021.
Outlook
The Group has strong positions in its core markets, and the fundamentals of
those markets remain attractive. The Board believes that we have the right
strategy and foundations in place to deliver long term, sustainable,
profitable growth and to build a strong and growing Group for the future.
With no direct exposure to Russia or Ukraine, we are currently not seeing any
significant impact on our business arising from the current conflict, but we
will continue to monitor the situation closely. The conflict, and the
response to it, could affect, amongst other things, energy prices, commodity
supply, and exchange rates. This is alongside the existing global backdrop of
inflationary pressures.
In the near-term we are anticipating some remaining impact from material
shortages, but these are gradually abating. We have started the year well,
and ahead of plan, helped by a continuation of the robust demand seen in late
2021. This, together with the effectiveness of our supply chain management
and commercial agility, gives the Board increasing confidence over the full
year performance. We expect to be free cash flow neutral for the year, before
returning to sustainable free cash generation thereafter, enabling us to
continue to invest in and drive our strategic goals.
FINANCIAL REVIEW
Revenue and gross margin
The Group saw a 24.3% increase in its LFL revenue over the year, with Group
underlying revenue up to £2,291.4m (2020: £1,872.7m), reflecting a strong
recovery from the Covid-19 impact in 2020, driven by the effective
implementation of the Return to Growth strategy as well as the inflationary
tailwind. Underlying results exclude businesses that are classified as
non-core, and Other items, in order to provide a better understanding of the
performance of the Group. On a statutory basis, Group revenue was £2,291.4m
(2020: £1,874.5m), with no sales from non-core businesses (2020: £1.8m).
Pass through of product price inflation added to the top line in all
geographies, to an increasing degree in H2. We estimate the impact on
revenue for the full year to be approximately 8%.
Underlying gross profit increased 28% to £602.1m (2020: £470.0m) with a
gross profit margin of 26.3% (2020: 25.1%). This primarily reflects increased
rebate receipts due to increased sales. On a statutory basis, gross profit
increased from £470.5m to £602.1m with gross margin increasing by 120bps to
26.3% (2020: 25.1%).
Operating costs and profit
The Group's underlying operating costs were £560.7m (2020 restated:
£523.1m). The increase was primarily due to the increased trading volumes,
inflation, increased variable compensation, and the non-recurring government
support schemes in the prior year, such as furlough and other wage
initiatives. The Group's underlying operating profit was £41.4m (2020
restated: £53.1m loss), and at a statutory level the Group's operating profit
was £14.0m (2020 restated: £160.0m loss) after Other items of £27.4m (2020
restated: £107.4m). The latter included £9.9m impairment of goodwill, £4.7m
amortisation of intangibles, £2.0m of onerous contract costs, £2.4m costs
associated with refinancing, £3.7m costs relating to restructuring
activities, and £3.3m related to cloud computing costs following IFRS
Interpretation Committee guidance on this topic issued during the year.
Prior year operating profit has also been restated as a result of the cloud
computing guidance issued.
Profitability continued to improve in H2 compared to the first half, with
underlying operating profit approximately doubling in H2 vs H1.
Segmental analysis
UK
LFL sales
Underlying Underlying v2020 v 2019 Underlying operating (loss)/profit Underlying operating
revenue revenue 2021 loss
2021 2020 £m restated
£m £m 2020
£m
UK Interiors 507.4 357.4 38% (8)% (2.5) (45.3)
UK Exteriors 422.2 310.1 36% 21% 25.0 (7.3)
UK 929.6 667.5 37% 4% 22.5 (52.6)
Underlying revenue in UK Interiors, a specialist insulation and interiors
distribution business, was up 42% to £507.4m (2020: £357.4m). This included
a 5% impact from acquisitions in the year. LFL growth was 38%. The LFL
decline against 2019 (pre Covid-19) included a decline in H1 and then good
growth in H2, reflecting the strong progress being made. Despite supply
chain shortages and consequent adoption of "allocations" by suppliers,
especially around dry lining, daily sales showed strong growth throughout the
year. The improved trading volume drove a substantially lower loss, with the
business driving the additional volumes through the existing capacity in the
network. This resulted in an underlying operating loss of £2.5m (2020
restated: £45.3m loss).
UK Exteriors, a specialist roofing merchant, which also includes our Building
Solutions business, traded extremely well, benefitting from both the strong
demand environment and strategic stock management, with underlying revenues of
£422.2m (2020: £310.1m), a LFL increase of 36%. The increase in revenue,
further benefit from an increased margin due to rebates, and favourable
product mix resulted in an underlying operating profit of £25.0m (2020
restated: £7.3m loss).
France
LFL sales
Underlying Underlying v 2019 Underlying operating Underlying operating profit/(loss)
revenue revenue v 2020 profit 2020
2021 2020 2021 £m
£m £m £m
France Interiors 195.3 168.1 20% 7% 11.2 7.1
France Exteriors 406.0 344.8 22% 22% 17.4 8.3
France before non-core 601.3 512.9 21% 17% 28.6 15.4
Non-core businesses - 1.8 - - - (0.3)
France 601.3 514.7 21% 17% 28.6 15.1
France Interiors, trading as LiTT, a structural insulation and interiors
business, saw underlying revenue increase by 16% to £195.3m (2020: £168.1m),
and by 20% on a LFL basis. 2021 continued the revenue growth experienced in
the second half of 2020. The increases in revenue, coupled with an improved
margin as a result of increased supplier rebates, partially offset by higher
operating costs due to trading levels and inflation, resulted in a £4.1m
increase in underlying operating profit to £11.2m (2020: £7.1m).
Underlying revenue in France Exteriors, trading as Larivière, a specialist
roofing business, increased by 18% to £406.0m (2020: £344.8m), and by 22% on
a LFL basis. The strong demand in the RMI market witnessed in late 2020
continued throughout 2021. 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 an underlying operating
profit increase of £9.1m to £17.4m (2020: £8.3m).
LFL sales
Underlying Underlying v 2020 v 2019 Underlying operating Underlying operating profit
revenue revenue profit 2020
2021 2020 2021 £m
£m £m £m
Germany 393.2 370.7 10% 4% 3.6 0.4
Germany
Underlying revenue in WeGo/VTi, our specialist insulation and interiors
distribution business in Germany, increased by 6% to £393.2m (2020: £370.7m)
and by 10% on a LFL basis. The improvement in Germany was aided by proactive
stock management, allowing the business to meet customer demand despite supply
shortages, and input price inflation that was largely passed on to
customers. The increased trading levels resulted in an underlying operating
profit of £3.6m (2020: £0.4m). We have new management in place in our German
business and are encouraged by early progress.
LFL sales
Underlying Underlying v 2020 v 2019 Underlying operating Underlying operating profit
revenue revenue loss 2020
2021 2020 2021 £m
£m £m £m
Benelux 92.4 91.6 5% (8)% (4.9) 2.5
Benelux
Underlying revenue from the Group's business in Benelux increased slightly by
£0.8m to £92.4m (2020: £91.6m), with increased volumes following recovery
from Covid-19 in the prior year largely offset by the impact of strong
competitive pressure in the Netherlands, combined with certain regulatory
changes. This, along with a temporary increase in the cost base necessary to
improve operational effectiveness has resulted in an operating loss of £4.9m
compared to an operating profit of £2.5m in 2020. The new management
appointed in mid-2021 have made good initial progress in addressing both the
operational issues and the cost base.
Ireland
LFL sales
Underlying Underlying v 2020 v 2019 Underlying operating Underlying operating profit
revenue revenue profit 2020
2021 2020 2021 £m
£m £m £m
Ireland 88.2 80.5 14% (5)% 2.8 0.8
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. The business was affected
by further Covid-19 related Government restrictions in the Republic of Ireland
from January until early May 2021, but saw a strong rebound in the second
half, with underlying revenue increasing by 10% to £88.2m (2020: £80.5m),
and by 14% on a LFL basis. Underlying operating profit improved by £2.0m,
finishing at £2.8m (2020: £0.8m) as the business saw a shift in sales mix
towards its higher margin offerings.
Poland
LFL sales
Underlying Underlying v 2020 v 2019 Underlying operating Underlying operating profit
revenue revenue profit 2020
2021 2020 2021 £m
£m £m £m
Poland 186.7 149.5 33% 29% 6.3 2.0
In our Polish business, a market leading distributor of insulation and
interiors, underlying revenue increased to £186.7m (2020: £149.5m), with LFL
sales up 33% due to an increase in customer numbers, branch openings and
significant price inflation. The business had a record year with underlying
profit of £6.3m (2020: £2.0m), driven by the sales growth and partially
offset by volume-related increases in operating costs.
Reconciliation of underlying to statutory result
Other items, being items excluded from underlying results, during the period
amounted to £35.2m (2020 restated: £118.5m) on a pre-tax basis and are
summarised in the table below:
2021 Restated
£m 2020
£m
Underlying profit/(loss) before tax 19.3 (76.1)
Other items - impacting profit/(loss) before tax:
Amortisation of acquired intangibles (4.7) (5.6)
Impairment charges (10.2) (61.5)
Net restructuring costs (3.7) (6.7)
Onerous contract costs (2.0) (13.2)
Cloud computing configuration and customisation costs (3.3) (7.1)
Costs associated with acquisitions (1.5) (0.2)
Costs associated with refinancing (2.4) (7.4)
Non-underlying finance costs (7.8) (11.6)
Profit on agreed sale or closure of non-core businesses and associated - 0.6
impairment charges
Net operating losses attributable to businesses identified as non-core - (0.3)
Investment in omnichannel retailing - (4.2)
Other specific items 0.4 (1.3)
Total Other items (35.2) (118.5)
Statutory loss before tax (15.9) (194.6)
Further details on Other items are as follows:
· Impairment charges of £10.2m (2020: £61.5m) includes £9.9m
relating to the impairment of goodwill in Benelux
· Net restructuring costs of £3.7m (2020: £6.7m) 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
• Onerous contract costs of £2.0m (2020: £13.2m) related to
provisions recognised for licence fee commitments where no future economic
benefit is expected, principally in relation to the SAP 1HANA implementation
· Cloud computing costs relate to project configuration and
customisation costs associated with cloud computing arrangements, which are
expensed rather than being capitalised as intangible assets following IFRS
Interpretation Committee guidance on this topic issued during the year
· Costs associated with refinancing of £2.4m (2020: £7.4m) includes
adviser, legal and other professional fees of £4.9m offset by a £2.5m gain
in relation to the recycling of the cash flow hedging reserve following the
termination of hedging arrangements in connection with the refinancing
• Non-underlying finance costs of £7.8m (2020: £11.6m)
comprise £12.9m make whole payment on settlement of the previous 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 previously recognised in relation to the amendment of the private
placement notes in 2020, together with £0.1m unwinding of the discount on the
onerous contract provision
Taxation
The effective tax rate for the Group on the total loss before tax of £15.9m
(2020 restated: £122.6m) is negative 78.0% (2020 restated: negative 7.3%). 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 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 (2020: 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 £6.9m (2020: £6.9m), of which a charge of £0.6m (2020:
£0.7m) related to defined benefit pension schemes and £6.3m (2020: £6.2m)
related to defined contribution schemes.
The total net liability in relation to defined benefit pension schemes at 31
December 2021 was £10.7m (2020: £25.1m). The last triennial actuarial
valuation of the UK scheme as at 31 December 2019 was concluded at the end of
March 2021. This showed that the market value of the scheme's assets had
increased by 20% to £196m and that 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.
Financial position
Overall, the net assets of the Group have decreased by £37.2m to £264.7m
(2020 restated: £301.9m), with a cash position at year-end of £145.1m (2020:
£235.3m) and net debt of £365.0m (2020: £238.2m).
Cash flow
2021 Restated
£m 2020
£m
Underlying operating profit/(loss) 41.4 (53.1)
Add back: Depreciation 68.3 68.4
Add back: Amortisation 3.4 4.8
Underlying EBITDA 113.1 20.1
Cash exceptionals (10.9) (19.7)
Increase in working capital (85.4) (42.1)
Repayment of lease liabilities (57.3) (54.8)
Capital expenditure (18.6) (13.3)
Other (15.0) 5.1
Operating cash flow (74.1) (104.7)
Interest and financing (22.7) (22.6)
Refinancing cash costs (16.9) (8.3)
Tax (10.4) (9.7)
Free cash flow (124.1) (145.3)
(Acquisitions)/disposals (10.6) 147.0
Drawdown/(repayment) of debt 52.0 (85.2)
Net proceeds from equity raise - 151.9
Total cash flow (82.7) 68.4
Cash and cash equivalents at beginning of the year(1) 235.3 145.1
Effect of foreign exchange rate changes (7.5) 21.8
Cash and cash equivalents at end of the year 145.1 235.3
1. Cash and cash equivalents comprise cash at bank and on hand of £145.1m
(2020: £235.3m) less bank overdrafts of £nil (2020: £nil). Cash and cash
equivalents at 1 January 2020 include £110.0m from continuing operations and
£35.1m from businesses held for sale.
Free cash flow represents the cash available after supporting operations,
including capex and the repayment of lease liabilities, and before
acquisitions and any movements in funding.
During the year, the Group reported a free cash outflow of £124.1m (2020
restated: £145.3m outflow) as a result of the increased underlying operating
profit in the year being offset by an increase in working capital, together
with payments in relation to interest, tax and capital expenditure, and
exceptional and other cash flows. The costs associated with the refinancing
exercise totalled £16.9m. "Other" includes payments to the Employee Benefit
Trust to fund share plans, and payments of £5m to the UK pension scheme,
including the additional £2.5m referenced above.
The increase in working capital was £85m of which £76m related to inventory
movements. There were three key factors driving the increase being sales
volume growth, year-over-year inflation, and the increases in holding levels
referenced above.
Other movements in cash below free cash flow include £10.6m cash outflow in
relation to the purchase of businesses (2020: £147.0m inflow from the sale of
businesses) and £52.0m net cash inflow from the restructuring of the debt
facilities, consisting of £200.3m repayments of previous facilities offset by
£251.5m net proceeds from the new senior secured notes and £0.8m receipt on
settlement of derivatives (2020: £85.2m repayments).
Financing and funding
On 18 November 2021 the Group completed a restructuring of its debt
arrangements, comprising the issue of €300m 5.25% fixed rate senior secured
notes and the establishment of a new RCF of £50m. The existing private
placement notes of £129.8m and £70m term loan were repaid, together with a
£12.9m make-whole payment on early settlement of the private placement notes.
The Group now has committed facilities in place to November 2026 (senior
secured notes) and May 2026 for the RCF. The senior secured notes are subject
to incurrence based covenants, 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 2021.
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 2023.
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 2021. 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
applicable set of accounting standards, 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 10
March 2022 and signed on its behalf by:
By order of the Board
Steve
Francis
Ian Ashton
Director Director
10 March
2022 10 March
2022
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. Forward-looking statements in this Announcement include, but are
not limited to, statements about the Group's future financial and operational
performance, the management's ability to successfully execute the strategy,
and the ability of the Group and the construction industry generally to
respond to the effects and aftermath of the Covid-19 pandemic. 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.
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014.
Consolidated income statement
for the year ended 31 December 2021
Underlying* Other items** Total Underlying* Other items** Total
Restated Restated Restated
2021 2021 2021 2020 2020 2020
Note £m £m £m £m £m £m
Continuing operations
Revenue 2 2,291.4 - 2,291.4 1,872.7 1.8 1,874.5
Cost of sales (1,689.3) - (1,689.3) (1,402.7) (1.3) (1,404.0)
Gross profit 602.1 - 602.1 470.0 0.5 470.5
Other operating expenses 3 (560.7) (27.4) (588.1) (523.1) (107.4) (630.5)
Operating profit/(loss) 41.4 (27.4) 14.0 (53.1) (106.9) (160.0)
Finance income 0.7 - 0.7 0.7 - 0.7
Finance costs (22.8) (7.8) (30.6) (23.7) (11.6) (35.3)
Profit/(loss) before tax from continuing operations 19.3 (35.2) (15.9) (76.1) (118.5) (194.6)
Income tax (expense)/credit 4 (15.6) 3.2 (12.4) (10.7) 4.1 (6.6)
Profit/(loss) after tax from continuing operations 3.7 (32.0) (28.3) (86.8) (114.4) (201.2)
Discontinued operations
Profit after tax from discontinued operations 11 - - - - 69.7 69.7
Profit/(loss) after tax for the year 3.7 (32.0) (28.3) (86.8) (44.7) (131.5)
Attributable to:
Equity holders of the Company 3.7 (32.0) (28.3) (86.8) (44.7) (131.5)
Loss per share
From continuing operations:
Basic 5 (2.4)p (23.1)p
Diluted 5 (2.4)p (23.1)p
Total:
Basic 5 (2.4)p (15.1)p
Diluted 5 (2.4)p (15.1)p
* 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. Further details are disclosed in Note
3.
The 2020 results have been restated as disclosed in Note 1.
Consolidated statement of comprehensive income
for the year ended 31 December 2021
2021 Restated
2020
£m £m
Loss after tax for the year (28.3) (131.5)
Items that will not subsequently be reclassified to the Consolidated Income
Statement:
Remeasurement of defined benefit pension liability 9.1 (1.7)
Deferred tax movement associated with remeasurement of defined benefit pension 0.1 0.3
liability
Current tax movement associated with remeasurement of defined benefit pension - 0.4
liability
9.2 (1.0)
Items that may subsequently be reclassified to the Consolidated income
statement:
Exchange difference on retranslation of foreign currency goodwill and (3.7) 5.1
intangibles
Exchange difference on retranslation of foreign currency net investments (10.7) 13.2
(excluding goodwill and intangibles)
Exchange and fair value movements associated with borrowings and derivative 8.6 (11.0)
financial instruments
Tax credit on fair value movements arising on borrowings and derivative - -
financial instruments
Exchange differences reclassified to the Consolidated income statement in - (5.9)
respect of the disposal of foreign operations
Gains and losses on cash flow hedges 0.7 (0.5)
Transfer to profit and loss on cash flow hedges (3.1) (0.7)
(8.2) 0.2
Other comprehensive income/(expense) 1.0 (0.8)
Total comprehensive expense (27.3) (132.3)
Attributable to:
Equity holders of the Company (27.3) (132.3)
(27.3) (132.3)
The 2020 results have been restated as disclosed in Note 1.
Consolidated balance sheet
as at 31 December 2021
2021 Restated Restated
2020 1 January 2020
£m £m £m
Non-current assets
Property, plant and equipment 66.9 63.2 58.6
Right-of-use assets 230.9 229.6 255.2
Goodwill 120.1 128.8 159.0
Intangible assets 16.7 18.5 30.2
Lease receivables 2.9 3.6 4.4
Deferred tax assets 4.8 5.7 4.4
Derivative financial instruments - 0.1 1.7
442.3 449.5 513.5
Current assets
Inventories 242.0 170.3 156.5
Lease receivables 0.8 0.7 0.8
Trade and other receivables 371.3 294.4 294.7
Current tax assets - - 0.9
Derivative financial instruments 0.2 - 0.9
Cash at bank and on hand 145.1 235.3 110.0
Assets classified as held for sale - - 258.4
759.4 700.7 822.2
Total assets 1,201.7 1,150.2 1,335.7
Current liabilities
Trade and other payables 369.7 301.4 327.4
Lease liabilities 50.7 50.6 51.5
Interest-bearing loans and borrowings - - 275.1
Deferred consideration 1.1 0.5 -
Other financial liabilities 0.4 0.5 1.5
Derivative financial instruments 0.5 0.5 0.2
Current tax liabilities 4.6 4.2 3.7
Provisions 12.9 10.5 6.7
Liabilities directly associated with assets classified as held for sale - - 115.7
439.9 368.2 781.8
Non-current liabilities
Lease liabilities 210.4 211.6 224.1
Interest-bearing loans and borrowings 249.6 212.2 -
Deferred consideration 0.7 0.4 -
Derivative financial instruments - 0.4 1.9
Other financial liabilities 0.6 1.2 1.4
Other payables 3.8 3.5 1.0
Retirement benefit obligations 10.7 25.1 24.8
Provisions 21.3 25.7 18.6
497.1 480.1 271.8
Total liabilities 937.0 848.3 1,053.6
Net assets 264.7 301.9 282.1
Capital and reserves
Called up share capital 118.2 118.2 59.2
Share premium account - 447.7 447.3
Treasury shares (12.5) (0.2) -
Capital redemption reserve 0.3 0.3 0.3
Share option reserve 4.4 2.0 1.8
Hedging and translation reserves 2.4 10.5 10.2
Cost of hedging reserve 0.1 0.2 0.3
Merger reserve 92.5 92.5 -
Retained profits/(losses) 59.3 (369.3) (237.0)
Attributable to equity holders of the Company 264.7 301.9 282.1
Total equity 264.7 301.9 282.1
The 2020 and 2019 Consolidated balance sheets have been restated as disclosed
in Note 1.
Consolidated statement of changes in equity
for the year ended 31 December 2021
Called up share capital Share premium account Capital redemption reserve Share option reserve Hedging and translation reserves Cost of hedging reserve Retained profits/ Total
(losses)
Treasury shares reserve Merger reserve
£m £m £m £m £m £m £m £m £m £m
At 1 January 2020 (restated) 59.2 447.3 - 0.3 1.8 10.2 0.3 - (237.0) 282.1
Loss after tax (restated) - - - - - - - - (131.5) (131.5)
Other comprehensive income/(expense) - - - - - 0.3 (0.1) - (1.0) (0.8)
Total comprehensive income/(expense) - - - - - 0.3 (0.1) - (132.5) (132.3)
Issue of share capital 59.0 0.4 - - - - - 92.5 - 151.9
Transfer of unallocated treasury shares - - (0.2) - - - - - 0.2 -
Credit to share option reserve - - - - 0.2 - - - - 0.2
At 31 December 2020 (restated) 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
Total equity at 1 January 2020 and 31 December 2021 has been restated as
disclosed in Note 1.
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 reserves represents movements in the 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 reserve relate to shares purchased by the SIG Employee Benefit
Trust to satisfy awards made under the Group's share plans which are not
vested and beneficially owned by employees. Shares became unallocated during
the prior year and were transferred to the treasury share reserve.
The share premium account was cancelled during the year through a capital
reduction.
The merger reserve represents the premium on ordinary shares issued during the
prior year through the use of a cash box structure.
Consolidated cash flow statement
for the year ended 31 December 2021
2021 Restated
2020
Note £m £m
Net cash flow from operating activities
Cash generated from/(used in) operating activities 6 7.4 (50.5)
Income tax paid (10.4) (9.7)
Net cash used in operating activities (3.0) (60.2)
Cash flows from investing activities
Finance income received 0.7 0.7
Purchase of property, plant and equipment and computer software (18.6) (13.3)
Proceeds from sale of property, plant and equipment 2.7 5.6
Net cash flow on the purchase of businesses (10.1) (0.8)
Settlement of amounts payable for previous purchases of businesses (0.5) -
Net cash flow arising on the sale of businesses 10 - 147.8
Net cash flow from investing activities (25.8) 140.0
Cash flows from financing activities
Finance costs paid(1) (36.3) (23.3)
Repayment of lease liabilities (57.3) (54.8)
Repayment of borrowings (200.3) (55.1)
Proceeds from borrowings 251.5 -
Repayment of revolving credit facility(2) - (30.0)
Settlement of derivative financial instruments 0.8 (0.1)
Acquisition of treasury shares (12.3) -
Net proceeds from equity raise - 151.9
Net cash flow from financing activities (53.9) (11.4)
(Decrease)/increase in cash and cash equivalents in the year (82.7) 68.4
Cash and cash equivalents at beginning of the year 235.3 145.1
Effect of foreign exchange rate changes (7.5) 21.8
Cash and cash equivalents at end of the year(3) 145.1 235.3
(1) Finance costs paid in the current year includes £12.9m make-whole payment
in connection with the refinancing during the year.
(2) As part of the changes to the debt facility agreements on 18 June 2020,
£70.0m drawn under the existing revolving credit facility was converted into
a £70.0m term facility, with no additional repayment or drawdown made.
(3) Cash and cash equivalents comprise cash at bank and on hand of £145.1m
(2020: £235.3m) less bank overdrafts of £nil (2020: £nil). Cash and cash
equivalents at 1 January 2020 include £110.0m from continuing operations and
£35.1m from businesses held for sale.
The 2020 cash flow statement has been restated as disclosed in Note 1.
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, except for the change in accounting policy noted
below.
The Financial statements have been prepared under the historical cost
convention except for derivative financial instruments 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 IFRS, this announcement does not itself contain
sufficient information to comply with IFRS.
The Preliminary Results Announcement does not constitute the Company's
statutory accounts for the years ended 31 December 2021 and 31 December 2020
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 2020 have been
filed with the Registrar of Companies, and those for 2021 will be delivered
following the Company's Annual General Meeting. The Auditor has reported on
the statutory accounts for 2021 and 2020. Their report for 2021 and 2020 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.
In preparing the Consolidated Financial Statements management has considered
the impact of climate change, particularly in the context of the financial
statements as a whole, in addition to disclosures included in the Strategic
Report this year. This included an assessment of the impact on the carrying
value of non-current assets and the impact on forecasts used in the impairment
review and the assessments of going concern and longer-term viability. These
considerations did not have a material impact on the financial reporting
judgements and estimates, consistent with the assessment that climate change
is not expected to have a significant impact on the Group's going concern
assessment to 31 March 2023 nor the viability of the Group over the next three
years.
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.
On 18 November 2021 the Group completed the restructuring of its debt
arrangements, comprising the issue of €300m senior secured notes and a new
RCF of £50m. The existing private placement notes of £129.8m and £70m term
loan were repaid, together with a £12.9m make-whole payment on early
settlement of the private placement notes. The Group now has committed
facilities in place to November 2026 (senior secured notes) and May 2026 for
the RCF. The senior 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 2021.
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 2023.
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:
· a decline in market conditions resulting in lower than forecast
sales;
· continued implementation of the Return to Growth strategy taking
longer than anticipated to deliver forecast increases in revenue and profit;
· potential impact of material shortages on forecast sales; and
· further waves of the Covid-19 pandemic having an impact on
trading.
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.
The Directors have considered the impact of climate-related matters on the
going concern assessment and is not expected to have a significant impact on
the Group's going concern.
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 2023 and the Directors therefore consider it appropriate to
adopt the going concern basis in preparing the 2021 financial statements.
New standards, interpretations and amendments
The following amendments and interpretations apply for the first time in 2021,
but have not had a material impact on the Financial Statements of the Group:
· Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16 and IAS 39 Interest
Rate Benchmark Reform - Phase 2
· Amendments to IFRS 16 Covid-19 Related Rent Concessions beyond 30
June 2021
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2021 reporting periods and have not been
early adopted by the Group. None of these are expected to have a material
impact on the Group in the current or future reporting periods or on
foreseeable future transactions.
Change in accounting policy - Software as a Service ("SaaS") arrangements
Following the IFRS Interpretations Committee ("IFRIC") agenda decision
published in April 2021, the Group has reviewed its accounting policy
regarding the configuration and customisation costs incurred in implementing
SaaS arrangements.
SaaS arrangements are arrangements in which the Group does not currently
control the underlying software used in the arrangement.
The Group's revised policy is as follows:
· Where costs incurred to configure or customise SaaS arrangements
result in the creation of a resource which is identifiable, and where the
Group has the power to obtain the future economic benefit flowing from the
underlying resource and to restrict the access of others to those benefits,
such costs are capitalised as separate software intangible assets and
amortised over the useful life of the software on a straight-line basis.
· Where costs incurred to configure or customise do not result in
the recognition of an intangible software asset then those costs that provide
the Group with a distinct service (in addition to the SaaS access) are
recognised as expenses when the supplier provides the services. When such
costs incurred do not provide a distinct service, the costs are expensed as
incurred. Costs are included within Other items in the consolidated income
statement if they relate to significant strategic projects and are considered
to meet the Group's definition of Other items.
Previously some configuration and customisation costs relating to SaaS
arrangements which did not result in a separately identifiable software
intangible assets had been capitalised.
The change in accounting policy has been retrospectively applied, resulting in
a restatement to previously reported numbers. The impact on the Consolidated
balance sheet and equity is a reduction in intangible assets and retained
profits/(losses) of £12.1m at 1 January 2020 and £4.4m at 31 December 2020.
The impact on the Consolidated income statement is as follows:
Increase/(decrease) in profit/(loss) 31 December 2020
£m
Other underlying operating expenses (0.4)
Amortisation of computer software 0.6
Underlying operating profit 0.2
Impairment charges 14.6
Cloud computing configuration and customisation costs (7.1)
Other items 7.5
Operating loss 7.7
Loss before and after tax from continuing operations 7.7
£14.6m impairment was previously recognised in 2020 and included within Other
items in relation the SAP 1HANA and related project implementation costs. The
impact of the restatement is that £9.7m of this is now included in costs
expensed in the previous year (so is reflected within the £12.1m reduction in
intangibles at 1 January 2020) and £4.9m is included within cloud computing
configuration and customisation costs within Other items in 2020. A further
£2.2m other costs relating to significant strategic projects are also now
included within Other items in 2020, amounting to the total £7.1m shown
above.
The impact on basic and diluted loss per share is an increase in basic and
diluted loss per share from continuing operations of 0.9p per share and an
increase in basic and diluted total loss per share of 0.9p per share.
The impact on the Consolidated cash flow statement is an increase in the net
cash inflow from investing activities of £7.5m (due to a reduction in the
purchase of property, plant and equipment and computer software) and a
decrease in the net cash used in operating activities of £7.5m, with no
change in the overall increase in cash and cash equivalents in the year.
Disclosure restatement
Disaggregation of revenue:
Heating, ventilation and air conditioning is no longer considered to be a
distinct product type requiring separate disclosure in Note 2. The prior year
comparatives have been restated to present revenue by product type on a
consistent basis with the current year, with £6.9m of revenue previously
shown as heating, ventilation and air conditioning combined within the
Interiors product type. This does not impact any of the primary statements or
other notes to the financial statements.
2. Revenue and segmental information
Revenue
UK Interiors UK Exteriors Total UK France Interiors France Exteriors Total France Germany Benelux Ireland Poland Eliminations Total Group
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^ 3.4 0.6 4.0 0.1 11.6 11.7 - - 0.1 - (15.8) -
Total underlying 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
Revenue attributable to businesses identified as non-core - - - - - - - - - - - -
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
Nature of revenue
Goods for resale (recognised at point in time) 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 83.7 186.7 (15.8) 2,286.8
Construction contracts (recognised over time) - - - - - - - - 4.6 - - 4.6
Total 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 88.3 186.7 (15.8) 2,291.4
^ Inter-segment revenue is charged at the prevailing market
rates.
Revenue
UK Interiors UK Exteriors Total UK France Interiors France Exteriors Total France Germany Benelux Ireland Poland Eliminations Total Group
2020 (Restated) £m £m £m £m £m £m £m £m £m £m £m £m
Type of product
Interiors 357.4 - 357.4 168.1 - 168.1 370.7 91.6 46.3 149.5 - 1,183.6
Exteriors - 310.1 310.1 - 344.8 344.8 - - 34.2 - - 689.1
Inter-segment revenue^ 1.5 0.5 2.0 0.9 7.6 8.5 0.1 0.1 0.1 - (10.8) -
Total underlying revenue 358.9 310.6 669.5 169.0 352.4 521.4 370.8 91.7 80.6 149.5 (10.8) 1,872.7
Revenue attributable to businesses identified as non-core - - - - 1.8 1.8 - - - - - 1.8
Total 358.9 310.6 669.5 169.0 354.2 523.2 370.8 91.7 80.6 149.5 (10.8) 1,874.5
Nature and timing of revenue
Goods for resale (recognised at point in time) 358.9 310.6 669.5 169.0 354.2 523.2 370.8 91.7 75.2 149.5 (10.8) 1,869.1
Construction contracts (recognised over time) - - - - - - - - 5.4 - - 5.4
Total 358.9 310.6 669.5 169.0 354.2 523.2 370.8 91.7 80.6 149.5 (10.8) 1,874.5
^ Inter-segment revenue is charged at the prevailing market
rates.
The 2020 revenue disclosure has been restated as disclosed in Note 1.
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.
a) Segmental analysis
UK Interiors UK Exteriors Total UK France Interiors France Exteriors Total France Germany Benelux Ireland Poland Eliminations Total Group
2021 £m £m £m £m £m £m £m £m £m £m £m £m
Revenue
Underlying revenue 507.4 422.2 929.6 195.3 406.0 601.3 393.2 92.4 88.2 186.7 - 2,291.4
Revenue attributable to businesses identified as non-core - - - - - - - - - - - -
Inter-segment revenue^ 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
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 (loss)/profit (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* (5.4)
Operating profit 14.0
Net finance costs before Other items (22.1)
Non-underlying finance costs (7.8)
Loss before tax (15.9)
Income tax expense (12.4)
Loss for the year (28.3)
^ Inter-segment revenue is charged at the prevailing market
rates.
* 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 3 for further details.
a) Segmental analysis
UK Interiors UK Exteriors Total UK France Interiors France Exteriors Total France Germany Benelux Ireland Poland Eliminations Total Group
2020 (Restated) £m £m £m £m £m £m £m £m £m £m £m £m
Revenue
Underlying revenue 357.4 310.1 667.5 168.1 344.8 512.9 370.7 91.6 80.5 149.5 - 1,872.7
Revenue attributable to businesses identified as non-core - - - - 1.8 1.8 - - - - - 1.8
Inter-segment revenue^ 1.5 0.5 2.0 0.9 7.6 8.5 0.1 0.1 0.1 - (10.8) -
Total revenue 358.9 310.6 669.5 169.0 354.2 523.2 370.8 91.7 80.6 149.5 (10.8) 1,874.5
Segment result before Other items (45.3) (7.3) (52.6) 7.1 8.3 15.4 0.4 2.5 0.8 2.0 - (31.5)
Amortisation of acquired intangibles (0.9) (4.3) (5.2) - (0.4) (0.4) - - - - - (5.6)
Impairment charges (49.7) (11.8) (61.5) - - - - - - - - (61.5)
Acquisition costs - (0.2) (0.2) - - - - - - - - (0.2)
Profits and losses on agreed sale or closure of non-core businesses (0.3) - (0.3) - (0.9) (0.9) - - - - - (1.2)
Net operating losses attributable to businesses identified as non-core - - - - (0.3) (0.3) - - - - - (0.3)
Onerous contract costs (1.0) - (1.0) - - - - - - - - (1.0)
Net restructuring costs (4.0) (1.7) (5.7) - (0.1) (0.1) (0.5) (0.4) - - - (6.7)
Cloud computing customisation and configuration costs (1.5) (0.9) (2.4) - - - - - - - - (2.4)
Other specific items (0.1) - (0.1) - 0.1 0.1 0.2 - - - - 0.2
Segment operating (loss)/profit (102.8) (26.2) (129.0) 7.1 6.7 13.8 0.1 2.1 0.8 2.0 - (110.2)
Parent Company costs (21.6)
Parent Company Other items* (28.2)
Operating loss (160.0)
Net finance costs before Other items (23.0)
Non-underlying finance costs (11.6)
Loss before tax and discontinued operations (194.6)
Income tax expense (6.6)
Profit from discontinued operations 69.7
Loss for the year (131.5)
^ Inter-segment revenue is charged at the prevailing market rates.
* Parent company Other items include investment in omnichannel retailing
£4.2m, costs associated with refinancing £7.4m, onerous contract costs
£12.2m, cloud computing customisation and configuration costs
£4.7m and other specific items £1.6m, offset by profit on agreed sale
or closure of non-core businesses of £1.9m.
The 2020 results have been restated as a result of the change in accounting
policy relating to configuration and customisation costs in cloud computing
arrangements. See note 1 for further details.
Balance Sheet
UK Interiors UK Exteriors Total UK France Interiors France Exteriors Total France Germany Benelux Ireland Poland Total
2021 £m £m £m £m £m £m £m £m £m £m £m
Balance sheet
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 Total UK France Interiors France Exteriors Total France Germany Benelux Ireland Poland Total
2020 (Restated) £m £m £m £m £m £m £m £m £m £m £m
Balance sheet
Assets
Segment assets 150.6 241.0 391.6 67.6 210.6 278.2 138.1 48.7 52.6 59.5 968.7
Unallocated assets:
Right-of-use assets 1.4
Property, plant and equipment 0.3
Derivative financial instruments 0.1
Cash and cash equivalents 174.9
Other assets 4.8
Consolidated total assets 1,150.2
Liabilities
Segment liabilities 188.3 112.1 300.4 48.8 104.9 153.7 79.5 9.6 31.9 28.3 603.4
Unallocated liabilities:
Interest-bearing loans and borrowings 212.2
Derivative financial instruments 0.9
Other liabilities 31.8
Consolidated total liabilities 848.3
The 2020 balance sheet has been restated as disclosed in Note 1.
UK Interiors UK Exteriors Total UK France Interiors France Exteriors Total France Germany Benelux Ireland Poland Parent company Total Group
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 property, plant and equipment and computer software 0.3 - 0.3 - - - - - - - - 0.3
Impairment of right-of-use assets - - - - - - - 0.1 - - 0.4 0.5
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
UK Interiors UK Exteriors Total UK France Interiors France Exteriors Total France Germany Benelux Ireland Poland Total Group
Parent company
2020 (Restated) £m £m £m £m £m £m £m £m £m £m £m £m
Other segment information
Capital expenditure on:
Property, plant and equipment 4.4 3.9 8.3 0.3 2.4 2.7 0.9 0.7 0.4 0.2 0.1 13.3
Computer software^ 0.2 0.1 0.3 - - - 0.2 - 0.3 - 0.4 1.2
Goodwill and intangible assets acquired - 1.8 1.8 - - - - - - - - 1.8
Non-cash expenditure:
Depreciation of fixed assets 3.3 2.5 5.8 0.6 1.5 2.1 1.7 0.6 0.5 0.4 0.1 11.2
Depreciation of right-of-use assets 15.2 8.0 23.2 5.1 8.6 13.7 12.9 1.6 1.7 3.2 0.3 56.6
Impairment of right-of-use assets 10.2 - 10.2 - - - - - - - - 10.2
Impairment of property, plant and equipment and computer software^ 4.0 - 4.0 - - - - - - - - 4.0
Amortisation of acquired intangibles and computer software 4.1 4.7 8.8 - 0.4 0.4 - - 0.2 0.1 0.9 10.4
Impairment of goodwill and intangibles^ (excluding computer software) 35.5 11.8 47.3 - - - - - - - - 47.3
^ Restated due to the change in accounting policy in relation to customisation
and configuration costs in cloud computing arrangements. See Note 1 for
further details.
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:
2021 Restated
2020
Country £m £m
United Kingdom 228.7 217.6
Ireland 13.1 14.6
France 108.3 113.4
Germany 49.8 59.5
Poland 12.0 13.4
Benelux 22.7 21.6
Total 434.6 440.1
3. Other operating expenses
3a. Analysis of other operating expenses
2021 2020 (restated)
Before Other items Other items Total Before Other items Other items Total
£m £m £m £m £m £m
Other operating expenses:
Distribution costs 282.2 3.7 285.9 261.2 8.0 269.2
Selling and marketing costs 158.0 1.0 159.0 138.8 1.4 140.2
Management, administrative and central costs 120.5 22.7 143.2 123.3 98.2 221.5
Property profits - - - (0.2) (0.2) (0.4)
Total 560.7 27.4 588.1 523.1 107.4 630.5
3b. 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:
2021 2020 (restated)
Other items Tax impact Tax impact Other items Tax impact Tax impact
£m £m % £m £m %
Amortisation of acquired intangibles (4.7) 0.2 4.3% (5.6) 1.1 19.6%
Impairment charges(1) (10.2) - - (61.5) - -
Net restructuring costs(2) (3.7) 0.5 13.5% (6.7) 1.0 14.9%
Onerous contract costs(3) (2.0) - - (13.2) 0.3 2.3%
Cloud computing configuration and customisation costs(4) (3.3) 0.5 15.2% (7.1) - -
Costs related to acquisitions (1.5) - - (0.2)
Costs associated with refinancing(5) (2.4) 0.5 20.8% (7.4) 1.4 18.9%
Profits and losses on agreed sale or closure of non-core businesses - - - 0.6 - -
Net operating losses attributable to businesses identified as non-core - - - (0.3) - -
Investment in omnichannel retailing - - - (4.2) - -
Other specific items(6) 0.4 - - (1.3) 0.2 15.4%
Impact on operating profit/(loss) (27.4) 1.7 6.2% (106.9) 4.0 3.7%
Non-underlying finance costs(7) (7.8) 1.5 19.2% (11.6) 0.1 0.9%
Impact on profit/(loss) before tax (35.2) 3.2 9.1% (118.5) 4.1 3.5%
(1 )Impairment charges comprises £9.9m relating to goodwill and £0.3m
relating to additional impairment of an investment property. Impairment
charges in the prior year comprised £45.4m related to goodwill, £1.9m
customer relationships in intangibles, £0.5m other software costs, £3.5m
tangible fixed assets and £10.2m right-of-use assets. The prior year numbers
have been restated to remove £14.6m impairment of software due to the change
in accounting policy relating to configuration and customisation costs in
cloud computing arrangements. See Note 1 for further details.
(2 )Net restructuring costs include property closure costs of £1.2m (2020:
£0.8m), redundancy and related staff costs of £2.4m (2020: £2.8m),
restructuring consultancy costs of £0.1m (2020: £2.9m) and other costs of
£nil (2020: £0.2m). These costs have been 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.
(3 )Onerous contract costs includes £2.0m (2020: £11.4m) relating to
provisions recognised for licence fee commitments where no future economic
benefit is expected to be obtained, principally in relation to the SAP 1HANA
implementation together with £nil (2020: £1.8m) licence fees recognised in
the Consolidated income statement during the year whilst the project was on
hold.
(4) Cloud computing configuration and customisation costs relate to costs
incurred on strategic projects involving software as a service arrangements
which are expensed as incurred rather than being capitalised as intangible
assets. Prior year amounts have been restated to include these costs as a
result of the change in accounting policy during the year. See Note 1 for
further details.
(5) Costs associated with refinancing includes legal and professional fees of
£4.9m (2020: £8.3m) offset by a £2.5m (2020: £0.9m) gain in relation to
the termination of the cash flow hedging arrangements as a result of the
refinancing.
(6) Other specific items of £0.4m credit in 2021 relates 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. The prior year amount included PwC investigation
costs £1.8m and GMP equalisation costs £0.4m, offset by £0.6m gain on fair
value of a forward currency option not hedged, £0.1m costs in relation to the
cyber attack in France and £0.2m other specific items.
(7) Non-underlying finance costs comprise 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. Costs in 2020 comprised £11.3m loss on modification
recognised in relation to the private placement notes and £0.3m write-off of
arrangement fees in relation to the previous RCF which was extinguished during
2020.
4. Income tax
The income tax expense comprises:
2021 2020
£m £m
Current tax
UK & Ireland corporation tax: - charge for the year 0.3 0.5
- adjustments in respect of previous years - -
0.3 0.5
Mainland Europe corporation tax - charge for the year 10.6 5.6
- adjustments in respect of previous years 2.0 (0.1)
12.6 5.5
Total current tax 12.9 6.0
Deferred tax
Current year credit (1.1) (2.2)
Adjustments in respect of previous years 0.6 2.6
Deferred tax charge in respect of pension schemes (0.1) -
Effect of change in rate 0.1 0.2
Total deferred tax (0.5) 0.6
Total income tax expense 12.4 6.6
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:
2021 Restated 2020
£m % £m %
Loss before tax from continuing operations (15.9) (194.6)
Profit before tax from discontinued operations - 72.0
Loss before tax (15.9) (122.6)
Expected tax credit (1.5) 9.4% (13.4) 10.9%
Factors affecting the income tax expense for the year:
Expenses not deductible for tax purposes^ 4.5 (25.8)% 19.6 (16.0)%
Non-taxable income* (0.1) 0.6% (33.2) 27.1%
Impairment and disposal charges not deductible for tax purposes** 1.4 (8.8)% 15.1 (12.3)%
Deductible temporary differences not recognised for deferred tax purposes 5.4 (34.0)% 18.1 (14.8)%
Losses utilised not previously recognised for deferred tax purposes -
Other adjustments in respect of previous years 2.6 (16.4)% 2.5 (2.0)%
Effect of change in rate on deferred tax 0.1 (0.6)% 0.2 (0.2)%
Total income tax expense 12.4 (78.0)% 8.9 (7.3)%
Income tax expense reported in the consolidated income statement 12.4 6.6
Income tax attributable to a discontinued operation - 2.3
12.4 8.9
^ The majority of the Group's expenses that are not deductible for tax
purposes are in relation to internal restructuring and impairments of property
in 2021 and 2020, and the divestments of businesses in 2020.
* The majority of the Group's non-taxable income in 2020 relates to the
divestments of businesses.
** During the year the Group incurred impairment charges of £9.9m (2020:
£45.4m) in relation to goodwill which are not deductible for tax purposes.
The effective tax rate for the Group on the total loss before tax of £15.9m
(2020 restated: £122.6m) is negative 78.0% (2020 restated: negative 7.3%). 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 reducing 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.
The Group has previously disclosed the EU's investigation into the UK
controlled foreign company (CFC) rules which gave rise to potential additional
tax payable of up to £5m (before interest and penalties), which was not
provided for. HMRC has now completed its review of the Group's tax
arrangements for the periods in question and confirmed that they complied with
the requirements of the UK CFC legislation and that it considers that the
Group's arrangements did not result in unlawful State Aid. Accordingly, HMRC
has accepted the Group's tax returns as submitted and there is no longer a
potential exposure or payment to be made.
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:
2021 2020
£m £m
Deferred tax movement associated with re-measurement of defined benefit (0.1) 0.3
pension liabilities*
Tax credit associated with re-measurement of defined benefit pension - 0.4
liabilities*
Total (0.1) 0.7
* These items will not subsequently be reclassified to the Consolidated income
statement.
5. (Loss)/earnings per share
The calculations of (loss)/earnings per share are based on the following
(losses)/profits and numbers of shares:
Basic and diluted
2021 Restated
2020
£m £m
Loss attributable to ordinary equity holders of the parent for basic and (28.3) (201.2)
diluted earnings per share from continuing operations
Profit attributable to ordinary equity holders of the parent from discontinued - 69.7
operations
Loss attributable to ordinary equity holders of the parent for basic and (28.3) (131.5)
diluted earnings per share
Basic and diluted before Other items
2021 Restated
2020
£m £m
Loss attributable to ordinary equity holders of the parent for basic and (28.3) (201.2)
diluted earnings per share from continuing operations
Add back:
Other items 32.0 114.4
Profit/(loss) attributable to ordinary equity holders of the parent for 3.7 (86.8)
basic and diluted earnings per share from continuing operations before other
items
2021 Restated
2020
Weighted average number of shares Number Number
For basic and diluted (loss)/earnings per share 1,177,972,694 871,941,603
Effect of dilution from share options - -
Adjusted for the effect of dilution 1,177,972,694 871,941,603
2021 2020
Loss per share
From continuing operations:
Basic loss per share (2.4)p (23.1)p
Diluted loss per share (2.4)p (23.1)p
Total:
Basic loss per share (2.4)p (15.1)p
Diluted loss per share (2.4)p (15.1)p
Earnings/(loss) per share before Other items^
Basic earnings/(loss) per share from continuing operations before Other items 0.3p (10.0)p
^ 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.
Loss per share for the year ended 31 December 2020 has been restated to
reflect the restatement of the 2020 results as explained in Note 1. The
diluted loss per share for the year ended 31 December 2020 has also been
restated to reflect the antidilutive nature of the share options.
6. Reconciliation of loss before tax to cash generated from
operating activities
2021 2020
£m £m
Loss before tax from continuing operations (15.9) (194.6)
Profit before tax from discontinued operations - 72.0
Loss before tax (15.9) (122.6)
Net finance costs 29.9 34.6
Depreciation of property, plant and equipment 11.4 11.2
Depreciation of right-of-use assets 56.9 57.2
Amortisation of computer software 3.4 4.8
Amortisation of acquired intangibles 4.7 5.6
Impairment of computer software - 0.5
Impairment of property, plant and equipment 0.3 3.5
Impairment of goodwill 9.9 45.4
Impairment of acquired intangibles - 1.9
Impairment of right-of-use assets 0.5 10.2
Profit on agreed sale or closure of non-core businesses - (71.6)
(Profit)/loss on sale of property, plant and equipment (0.9) 0.7
Share-based payments 2.4 0.2
Gains on derivative financial instruments (2.8) (1.5)
Net foreign exchange differences 0.3 0.2
(Decrease)/increase in provisions (7.3) 11.3
Working capital movements:
- Increase in inventories (75.7) (5.4)
- (Increase)/decrease in receivables (68.1) 19.7
- Decrease/(increase) in payables 58.4 (56.4)
Cash generated from/(used in) operating activities 7.4 (50.5)
Included within the cash generated from/(used in) operating activities is a
defined benefit pension scheme employer's contribution of £5.0m (2020:
£2.5m).
Of the total loss on sale of property, plant and equipment, £nil profit
(2020: £0.2m) has been included within Other items of the Consolidated income
statement.
7. Reconciliation of net cash flow to movements in net debt
2021 2020
£m £m
(Decrease)/increase in cash and cash equivalents in the year (82.7) 68.4
Cash flow from decrease in debt 15.8 183.0
(Increase)/decrease in net debt resulting from cash flows (66.9) 251.4
Movement in deferred consideration (0.9) (0.9)
Debt added on acquisitions (7.5) -
Non-cash items^ (60.0) (39.3)
Exchange differences 8.5 6.0
(Increase)/decrease in net debt in the year (126.8) 217.2
Net debt at 1 January (238.2) (455.4)
Net debt at 31 December (365.0) (238.2)
^ 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, the movement in
cash restricted for use in relation to the asset backed funding arrangement
implemented in relation to the UK defined benefit pension plan and non-cash
movements in relation to lease liabilities.
8. Dividends
No interim dividend was paid for the year ended 31 December 2021 and no final
dividend is proposed. No interim or final dividend was proposed or paid for
the year ended 31 December 2020. No dividends have been paid between 31
December 2020 and the date of signing the Financial Statements.
At 31 December 2021 the Company has distributable reserves of £190.2m (2020:
negative £217.1m). On 24 June 2021 the Group completed the cancellation of
its share premium account, resulting in the transfer of £447.7m from share
premium to retained profits/(losses) and the creation of distributable
reserves.
9. Acquisitions
The Group acquired the following businesses during the year:
% ordinary share capital acquired Acquisition date Country of incorporation Principal Activity
F30 Building Products Limited 100% 10 March 2021 United Kingdom Distributor of construction accessories
Penlaw and Company Limited 100% 26 October 2021 United Kingdom Distributor of interiors and insulation products
Penlaw Northwest Limited 100% 26 October 2021 United Kingdom Distributor of interiors and insulation products
Penlaw Norfolk Limited 100% 26 October 2021 United Kingdom Distributor of interiors and insulation products
Penlaw Fixings Limited 100% 26 October 2021 United Kingdom Distributor of interiors and insulation products
The Group acquired the above businesses to enlarge the UK Interiors business
in terms of product range and geographic location, and the acquisitions are
allocated to the UK Interiors segment. The four Penlaw companies were acquired
as one transaction and are therefore considered as one business combination
below and referred to as the Penlaw Group.
The provisional fair values of the identifiable assets and liabilities of the
Penlaw acquisition and the final fair values of the F30 acquisition at the
date of acquisition are as follows:
F30 Building Products 2021 2020
Penlaw Group Total Total
£m £m £m £m
Assets
Intangible assets (customer relationships) 3.2 1.8 5.0 0.8
Property, plant and equipment 1.4 0.1 1.5 0.1
Right-of-use assets 7.2 0.3 7.5 0.2
Cash and cash equivalents 2.0 0.2 2.2 3.2
Trade and other receivables 20.6 1.1 21.7 0.7
Inventories 3.1 0.2 3.3 0.4
37.5 3.7 41.2 5.4
Liabilities
Trade and other payables (20.8) (1.3) (22.1) (0.8)
Provisions (0.6) (0.1) (0.7) (0.2)
Current tax liability (0.1) (0.1) (0.2) (0.2)
Deferred tax liability (0.9) (0.4) (1.3) (0.1)
Lease liabilities (7.2) (0.3) (7.5) (0.2)
(29.6) (2.2) (31.8) (1.5)
Total identifiable net assets at fair value 7.9 1.5 9.4 3.9
Goodwill arising on acquisition 2.7 2.1 4.8 1.0
Purchase consideration transferred 10.6 3.6 14.2 4.9
The fair value of trade receivables amounts to £13.8m for the Penlaw Group
and £1.2m for F30 Building Products. The gross amount of trade receivables is
£15.1m for the Penlaw Group and £1.2m for F30 Building
Products.
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 £2.1m relating to F30 Building Products comprises 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 goodwill of £2.7m relating to the Penlaw Group comprises the value of
expected synergies arising from the acquisition and the strategic fit with the
UK Interiors business.
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, 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 the year, revenue
for the Group would have been £2,349.6m and loss before tax for the Group
would have been £13.9m.
Purchase
Consideration
F30 Building Products 2021 2020
Penlaw Group Total Total
£m £m £m £m
Cash paid on completion 9.8 2.5 12.3 4.0
Deferred consideration due within one year 0.2 0.5 0.7 0.5
Deferred consideration due after more than one year 0.1 0.6 0.7 0.4
Contingent consideration due within one year 0.1 - 0.1 -
Contingent consideration due after more than one year 0.4 - 0.4 -
Total consideration 10.6 3.6 14.2 4.9
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. The range of contingent
consideration payable is therefore £nil to £1.2m. £0.5m has been recognised
at the date of acquisition on the basis of current forecasts. This is included
within other payables on the Consolidated balance sheet. The provision 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.
In relation to F30 Building Products, a further amount of up to £0.8m is 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 is therefore treated as remuneration and is being charged to
the Consolidated income statement as earned. £0.6m has been recognised and
included within accruals in relation to this at 31 December 2021.
Analysis of cash flows on acquisition
Penlaw Group F30 Building Products 2021 2020
Total Total
£m £m £m £m
Consideration paid (included in cash flows from investing activities) (9.8) (2.5) (12.3) (4.0)
Net cash acquired with the subsidiary (included in cash flows from investing 2.0 0.2 2.2 3.2
activities)
Total net cash flow included in cash flows from investing activities (7.8) (2.3) (10.1) (0.8)
Transaction costs (included in cash flows from operating activities) (0.3) (0.1) (0.4) (0.2)
Net cash flow on acquisition (8.1) (2.4) (10.5) (1.0)
2020
The 2020 amounts above relate to the acquisition of S M Roofing Supplies
Limited. On 17 October 2020 the Group acquired 100% of the share capital of S
M Roofing Supplies Limited, a non-listed company based in the UK, for an
enterprise value of £1.9m on a debt free cash free basis. Total consideration
was £4.9m, including £3.2m for cash within the business on completion.
£4.0m was paid in cash on completion and two further amounts totalling £0.9m
are payable in one and two years' time (not subject to performance criteria
and not conditional upon vendors remaining within the
business).
The goodwill of £1.0m comprises the value of expected synergies arising from
the acquisition (e.g. overhead costs in relation to finance, administration
and management), strategic fit with the UK Exteriors business and geographic
location. The 2020 provisional fair values of the identifiable assets and
liabilities have been finalised during the current year with no further
adjustments
recognised.
From the date of acquisition, S M Roofing Supplies Limited contributed £1.0m
of revenue and £nil to underlying profit before tax from continuing
operations of the Group for the year ended 31 December 2020. If the
combination had taken place at the beginning of the year, revenue from
continuing operations for the Group would have been £1,877.8m and loss before
tax from continuing operations for the Group would have been £70.1m
(restated).
10. Divestments
There have been no business divestments or closures during the current year
and no amounts recognised in respect of profits and losses on agreed sale or
closure of non-core businesses (2020: net gain of £0.6m). The prior year gain
consisted of £2.0m gain in relation to the disposal of the Middle East
business, offset by costs of £0.2m in relation to the proposed disposal of
Building Solutions which was due to complete in the first half of 2020 but was
terminated in May 2020, a loss on the sale of the Maury business of £0.9m and
other costs in relation to previous disposals of £0.3m. These are explained
further below.
The sale of the Air Handling business also completed in the prior year and the
gain on sale was included with the results from discontinued operations.
Prior year divestments
The Middle East business, which was in the process of being closed, was sold
on 22 January 2020 for AED1. A gain on sale of £2.0m was recognised in 2020,
in relation to the reclassification to the Consolidated income statement of
the cumulative exchange differences on the retranslation of the net assets of
the business previously recognised in other comprehensive income in accordance
with IAS 21 "The effects of foreign exchange rates".
On 10 September 2020 the Group completed the sale of Maury NZ SAS ("Maury"),
the Group's high-end fabrication business in France and part of the France
Exteriors (Larivière) segment, for proceeds of €25,000. An overall loss on
sale of £0.9m was recognised within Other items, including the
reclassification of the cumulative exchange differences on the retranslation
of the net assets from equity to the Consolidated income statement, in
accordance with IAS 21 "The effects of changes in foreign exchange rates". Net
assets at the date of disposal were £0.9m and costs of less than £0.1m were
incurred, resulting in the overall loss on sale of £0.9m.
Costs of £0.2m were recognised during 2020 in relation to the proposed
disposal of the Building Solutions business, which was previously classified
as held for sale at 31 December 2019 as a sale had been agreed and was due to
complete in the first half of 2020, which was subsequently terminated in May
2020 (and the business is now included within underlying operations). £0.3m
costs were also incurred and recognised within Other items in relation to the
Commercial Drainage business which was closed in 2019.
Contribution to revenue and operating loss
The only business classified as non-core in the prior year was Maury, which
contributed £1.8m to revenue for the year ended 31 December 2020 and £0.3m
operating loss for the year.
Cash flows associated with divestments and exit of non-core businesses
There is no net cash inflow in the year ended 31 December 2021 in respect of
divestments and the exit of non-core businesses. Amounts for the prior year
were as follows:
2020
Air Handling Other non-core businesses Total
£m £m £m
Cash consideration received for divestments 189.7 0.7 190.4
Cash at date of disposal (29.2) (0.2) (29.4)
Disposal costs paid (12.9) (0.3) (13.2)
Net cash inflow 147.6 0.2 147.8
Included within 'Other non-core businesses' is £0.7m received during the year
in relation to contingent consideration on the sale of the Building Plastics
division in 2017.
The losses arising on the agreed sale or closure of non-core businesses and
associated impairment charges, along with their results for the current and
prior periods were disclosed within Other items in the Consolidated income
statement in order to present the underlying earnings of the Group.
11. Discontinued operations
On 7 October 2019, the Group announced that it had agreed a sale of the Air
Handling business for consideration of €222.7m on a cash free, debt free
basis. The sale was approved by shareholders at a general meeting on 23
December 2019 and completed on 31 January 2020. At 31 December 2019, Air
Handling was classified as a disposal group held for sale and as a
discontinued operation as it represented a major line of business of the
Group. The results of the Air Handling business for the prior year are
presented below. There are no amounts relating to discontinued operations in
the current year.
2020
£m
Revenue 25.4
Cost of sales (15.0)
Gross profit 10.4
Other operating expenses (9.3)
Operating profit 1.1
Finance costs (0.1)
Profit before tax from discontinuing operations 1.0
Income tax expense (0.3)
Profit after tax from discontinued operations 0.7
Gain on sale of subsidiary after income tax (see below) 69.0
Profit from discontinued operation 69.7
There were no amounts included in OCI.
The net cash flows incurred by Air Handling were as follows:
2020
£m
Operating 1.1
Investing 147.6
Financing -
Net cash inflow 148.7
Earnings per share:
2020
Basic earnings per share from discontinued operations 8.0p
Diluted earnings per share from discontinued operations 8.0p
Gain on sale
2020
£m
Consideration received(1):
Cash 191.9
Adjustment to consideration (2.2)
Final consideration 189.7
Carrying amount of net assets sold(2) (118.1)
Gain on sale before costs, income tax and reclassification of foreign currency 71.6
translation reserve
Costs incurred in connection with the agreed disposal of the Air Handling (4.3)
business(3)
Reclassification of foreign currency translation reserve 3.7
Income tax expense on gain (2.0)
Gain on sale after income tax 69.0
( )
(1) Consideration received was based on an enterprise value of €222.7m on a
cash free, debt free basis, adjusted for actual levels of cash, debt and
working capital in the Air Handling division at completion to give proceeds
received of €228.6m (£191.9m). Net proceeds received exclusive of amounts
repaid in relation to debt owed to the Group by the Air Handling division was
€187.4m (£157.3m). As part of the completion process, further adjustments
to the consideration were agreed and repaid by the Group, together with
settlement of tax payments, reducing total consideration by £2.2m.
(2) The carrying amount of net assets sold was the net assets held for sale at
31 December 2019 plus £0.4m relating to the net profit for the month of
January 2020 less tax payments and working capital movements.
(3) £12.2m of costs were incurred and recognised in 2019 in connection with
the sale. Including these in the overall calculation of the gain on sale above
would give a gain on sale after income tax of £57.0m.
12. 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 2021, SIG incurred expenses of £0.6m (2020: £0.5m) 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".
2021 2020
£m £m
Short term employee benefits 6.7 5.8
Termination and post-employment benefits - 0.1
IFRS 2 share option charge 1.5 -
8.2 5.9
13. Non-statutory information
The Group uses a number 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 (as explained in further detail within the Statement of
significant accounting policies) 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 31
December 2021. Measures presented are aligned with the key performance
measures used in the business and as included in this report. Operating costs
as a percentage of sales is not included as a KPI in the current year and is
therefore not presented below, and gross margin by segment are no longer
presented, whilst free cash flow is included for the first time in the current
year.
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 IFRS16 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 last year are no longer relevant
following the change in debt arrangements during the year and are therefore no
longer presented.
2021 2020
£m £m
Reported net debt 365.0 238.2
Lease liabilities recognised in accordance with IFRS 16 (239.1) (237.0)
Lease receivables recognised in accordance with IFRS 16 3.7 4.3
Other financial liabilities recognised in accordance with IFRS 16 (1.0) (1.4)
Net debt excluding the impact of IFRS 16 128.6 4.1
b) 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 Total UK France Interiors (LiTT) France Exteriors (Larivière) Germany Benelux Ireland Poland Total Group
Total France
£m £m £m £m £m £m £m £m £m £m £m
Statutory 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
Non-core businesses - - - - - - - - - - -
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
Statutory revenue 2020 310.1 667.5 168.1 346.6 514.7 370.7 91.6 80.5 149.5 1,874.5
357.4
Non-core businesses - - - - (1.8) (1.8) - - - - (1.8)
Underlying revenue 2020 357.4 310.1 667.5 168.1 344.8 512.9 370.7 91.6 80.5 149.5 1,872.7
% change year on year:
Underlying revenue 42.0% 36.1% 39.3% 16.2% 17.7% 17.2% 6.1% 0.9% 9.6% 24.9% 22.4%
Impact of currency - - - 3.9% 4.0% 4.0% 3.5% 3.4% 3.6% 7.0% 2.6%
Impact of acquisitions (4.6)% (1.2)% (3.0)% - - - - - - - (0.3)%
Impact of working days 0.6% 0.6% 0.6% - - - - 0.8% 0.5% 1.6% (0.4)%
Like-for-like sales 38.0% 35.5% 36.9% 20.1% 21.7% 21.2% 9.6% 5.1% 13.7% 33.5% 24.3%
c) 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.
2021 Restated
2020
£m £m
Underlying revenue 2,291.4 1,872.7
Underlying operating profit/(loss) 41.4 (53.1)
Operating margin 1.8% (2.8)%
d) Free cash flow
Free cash flow represents the cash available after supporting operations,
including the repayment of lease liabilities, and capital expenditure,
including the maintenance of capital assets, and before investing activities.
2021 2020
£m £m
(Decrease)/increase in cash and cash equivalents in the year (82.7) 68.4
Add back:
Net cash flow on the purchase of businesses 10.1 0.8
Settlement of amounts payable for previous purchases of businesses 0.5 -
Net cash flow arising on the sale of businesses - (147.8)
Repayment of borrowings 200.3 55.1
Proceeds from borrowings (251.5) -
Repayment of revolving credit facility - 30.0
Settlement of derivative financial instruments (0.8) 0.1
Net proceeds from equity raise - (151.9)
Free cash flow (124.1) (145.3)
e) Other non-statutory measures
In addition to the alternative performance measures noted above, the Group
also uses underlying EPS (as set out in Note 5), underlying net finance costs
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.
14. 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 the risk and control management process 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.
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 date being compromised with an emphasis on ensuring that appropriate technologies are deployed across
IT infrastructure to manage cyber threats.
There is a risk that we lack the capabilities to effectively prevent, monitor,
respond or recover from suspected cyber-attacks on our IT infrastructure. Such Regular and independent reviews are performed to assess the nature of our
attacks may result in a loss of data or disruption to IT services which may cyber threats, security processes and initiatives. They also ensure that we
have a significant impacts on our ability to operate and comply with data implement appropriate tools and processes to better identify and remediate new
protection and privacy laws (e.g. GDPR) and may have a detrimental effect on and emerging cyber risks and vulnerabilities.
our reputation.
Cyber-incident response protocols are also in place to support our ability to
effectively respond 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.
Health & Safety: Danger of incident or accident, resulting in injury or The Group Director of Health & Safety is a member of the Executive
loss of life to employees, customers, or the general public Leadership Team and provides strategic leadership for all matters relating to
health, safety and environmental performance, oversight and strategy. He is
supported by local Health & Safety managers, embedded in each of our
businesses, who provide local leadership and support, and provide regular
There is a risk that poor organisational arrangements or behavioural culture monitoring and reporting of key performance metrics and the status of local
with regards to Health & Safety causes harm to individuals and as a result actions and initiatives implemented.
may result in enforcement action, penalties, reputational damage, or adverse
press coverage.
A compliance standards framework is in place to ensure the adequacy of local
Health & Safety standards and arrangements with assurance provided through
a programme of compliance audits performed by suitably trained and experienced
Health & Safety professionals.
Macro-economic uncertainty: Macro-economic volatility impacts the Group's We continue to assess inflationary and other supply chain pressures and
ability to accurately forecast and to meet internal and external expectations impacts on product pricing and will continue to work with our suppliers to
identify opportunities to improve supply chain resilience and to selectively
pre-purchase products in order to ensure continuity of supply.
Supply and demand distortions (such as goods and materials shortages
throughout the global supply chains and increased inflationary pressures) and
the re-imposition of public health restrictions in response to future waves The Group's geographical diversity across Europe reduces the impact of changes
and variants of Covid-19 may continue to impact European economies throughout in market conditions in any one country while industry based KPIs, monitored
2022. This volatility has the potential to impact customer demand, along with monthly at a Group and operating company level, help to ensure that warnings
presenting significant challenges to our financial, operational and commercial and indicators of risk are identified early, and appropriate mitigation
resilience, whilst adding costs to our operations and making planning and strategies implemented.
forecasting more difficult. Very recently the conflict in Ukraine has
contributed to heightened uncertainty. Changes in macro-economic 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 to ensure both
with the right skills, drive and capability to reshape and grow the business 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 reduced short term intra-EU and UK-EU We ensure accountabilities, responsibilities, and organisational structures
mobility resulting from both Covid-19 restrictions and Brexit, has the are regularly reviewed and where necessary restructured to optimise employee
potential to negatively impact SIG's ability to attract, recruit and retain motivation and engagement.
staff across the full spectrum of disciplines.
Ongoing enhancements to pay and conditions, including benchmarking
remuneration packages to ensure market competitiveness, 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 our operating
financial management, fact-based decision making, business efficiency, and companies, who continue to monitor, assess, and upgrade their product data
credibility with customers requirements, capabilities, and governance considering ongoing changes in
business needs and regulation.
There is a risk that we lack the necessary quality of systems and processes to
ensure sufficient granularity, completeness, and accuracy of vendor, product,
and pricing master data. This has the potential to impact our 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
due to poor environmental, social and governance arrangements and performance leadership in building materials distribution, Health & Safety, 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
Public and commercial consciousness has been growing on a wide range of choice in building materials distribution.
environmental, social and governance issues, including climate change,
employee wellbeing and how an organisation contributes to society.
Organisations should not only minimise their negative impacts, but to also
contribute positively to both society and the environment. These commitments will be supported by verifiable and evidenced based data to
ensure that progress in achieving these aims and ambitions is monitored and
subject to appropriate rigour.
While SIG has a long and rich heritage in helping the construction industry
deliver energy efficient solutions and products, risks remain in terms of how
we deliver our ESG agenda. This is particularly the case in how we ensure we
achieve our stated aims with regards to climate change. These risks include
the cost and complexity of compliance, the challenges presented by 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 appropriately skilled
integrate significant mergers and acquisition opportunities and ensure deals in-house expertise and the use of approved external advisors.
deliver desired scalability and value creation
Clear accountability and authority limits for the initiation and approval of
As part of our growth strategy, we may from time to time acquire new M&A activity is clearly defined in the Group Delegation of Authority.
businesses. Such decisions are based on detailed plans that assess the value
creation opportunity for the Group. By their nature, there is an inherent risk Resource is also available in the organisation to ensure that transactions are
that we fail to manage the execution and integration risks which may result in subject to post-integration and lessons learnt exercises.
delays or additional costs and impact the future value and future revenues
generated.
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 Leadership Team and is
breach of legal or regulatory requirements supported by appropriately skilled in-house legal and company-secretarial
resource at Group and operating company level with further support provided by
an approved panel of external lawyers and advisors.
The Group's operations are subject to an increasing and evolving range of
regulatory and other requirements in the markets in which it operates. A major
corporate failure resulting from a non-compliance with legislative, regulatory Policies and procedures are in place to ensure compliance with legal and
or other requirements would impact our brand and reputation, could expose us regulatory frameworks, including Health & Safety, environmental, ethical,
to significant operational disruption or result in enforcement action or fraud, data protection and product safety.
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's 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 in the digital
necessary to maintain market competitiveness workplace to ensure that we maintain a competitive digital proposition.
Increased technological innovation and change, some of which has been driven Across our markets each operating company is responsible for ensuring that it
by the societal and working environment challenges presented by the Covid-19 implements the necessary technologies and ways of working to ensure that it
pandemic, has accelerated the increasing role digitalisation will have in the can maximise digital opportunities in terms of enhancing the customer
construction materials supply chain. Both suppliers and customers are experience and optimising transactional, fulfilment or process efficiencies.
increasingly seeking digital solutions to enable a more integrated and
frictionless experience.
During 2021, we benchmarked our digital capabilities across the Group and have
identified opportunities for further growth in digital, particularly with
This risk may be exacerbated by legacy systems and technologies which are regards to how we can increase our own internal efficiencies and enhance the
heavily customised, require significant system maintenance to prevent outages customer experience. This will form the basis of the focus on developing our
and lack the functionality to allow their integration into a more modern digital capabilities throughout 2022.
digital infrastructure.
Change management: Failure to deliver the change and growth agenda in an Operating companies continue to manage change portfolios through programme
effective and efficient manner, resulting in management stretch, compromised management governance committees. Increased monitoring has been implemented,
quality, and inability to meet growth targets particularly regarding progress against growth initiatives, in line with our
strategy.
As part of the "Return to Growth" strategy we have made significant changes to
our operating model, infrastructure, and leadership. As we enter the next Monitoring of business growth metrics and early warning indicators or trends,
phase of executing our strategy, allied to ongoing economic and continues as part of business reviews at both the management and Board level.
pandemic-driven shifts in everything from demand patterns, delivery models and
working arrangements, there is a risk that the business is challenged by
"change fatigue" and future changes either are not implemented as planned or
benefits realised. Our ongoing staff engagement surveys continue to facilitate the early
identification of change impacts in terms of our employees and action plans
are implemented and monitored accordingly.
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