REG - SIG PLC - Full year results for year ended 31 December 2023
05/03/2024 07:00
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RNS Number : 5464F SIG PLC 05 March 2024
5 March 2024
SIG plc
Full year results for the year ended 31 December 2023
Resilient performance in challenging markets
SIG plc ("SIG", "the Group" or "the Company") today announces its results for
the full year ended 31 December 2023 ("FY23" or "the year").
( ) 2023 2022
Underlying(1) revenue £2,761.2m £2,744.5m
LFL(2) sales (2.0)% 17.0%
Gross margin 25.3% 25.9%
Underlying(1) operating profit £53.1m £80.2m
Underlying(1) operating margin 1.9% 2.9%
Underlying(1) profit before tax £17.4m £51.6m
Underlying(1) earnings per share 0.4p 3.2p
Net debt £458.0m £444.0m
Net debt (pre-IFRS 16) £154.0m £160.3m
Statutory results 2023 2022
Revenue £2,761.2m £2,744.5m
Operating profit £4.0m £56.2m
(Loss)/profit before tax £(31.9)m £27.5m
Total (loss)/profit after tax £(43.4)m £15.5m
Basic (loss)/earnings per share (3.8)p 1.3p
Financial highlights
· FY23 results reflect continued strong execution, against a
challenging market backdrop
· Full year Group like-for-like(2) ("LFL") sales down 2%, with revenues
of £2.76bn (2022: £2.74bn)
· Underlying(1) operating profit of £53.1m, down from £80.2m in 2022,
with effective cost actions mitigating in part the impact of operating cost
inflation and subdued market demand
· Underlying(1) profit before tax of £17.4m. Statutory loss before tax
of £(31.9)m, reflecting £49.3m of Other items, including £33.8m non-cash
impairment of UK Interiors business
· Operating cash flow(3) of £53m, representing a 100% conversion of
underlying operating profit to operating cash; positive free cash flow(3) of
£4m
· Year end net debt of £458m post-IFRS 16 (2022: £444m) and £154m
pre-IFRS 16 (2022: £160m)
Operational and strategic highlights
· Benefits of a diversified pan-European portfolio helped in managing
through challenging market conditions:
o UK Exteriors delivered positive LFL sales growth, with good market
momentum following ongoing programme of revitalising branches, sales team
skills, and training
o Both French businesses executing well in a tough market
o Germany benefiting from strengthening execution to maintain operating
margin gains of recent years, despite weaker volumes and difficult local
market conditions
o Poland achieved 5% growth in H2 with local market conditions stabilising
· Restructuring executed during H2 2023 will deliver approximately
£10m of annualised cost savings, the majority of which will benefit FY24
· Increased strategic focus on specialist businesses and operational
execution across the Group
· Management structures in corporate centre and the UK business
simplified to provide greater focus and efficiency
· Strategic actions and priorities set out at Capital Markets Event in
November 2023
Commenting, Gavin Slark, Chief Executive Officer, said:
"The Group delivered robust results in 2023, despite ongoing market weakness,
demonstrating the benefits and resilience of our diversified geographic and
end-market profile. Alongside this, the Group has also been effective in
executing restructuring and productivity initiatives across the business.
These are a key element of our strategic plan to drive operating margin growth
over the medium-term to our target of 5%.
By increasing focus on driving operational efficiencies, stronger commercial
execution and employee engagement, the Board is confident that the Group's
leading market positions will continue to strengthen further when conditions
improve across our markets. We remain financially and commercially well placed
and are taking proactive steps to drive meaningful shareholder value in the
medium and long-term."
Notes
1. Underlying represents the results before Other items. Other items have been
disclosed separately in order to give an indication of the underlying earnings
of the Group. Underlying profit includes a £3.7m profit in H2 2023 on the
sale of the old French Exteriors head office building, as previously guided.
2. Like-for-like ("LFL") is defined as the growth/(decline) in sales per
working day in constant currency excluding any current and prior year
acquisitions and disposals. Sales are not adjusted for branch openings or
closures.
3. Free cash flow is defined as all cash flows excluding M&A transactions,
dividend payments, and financing transactions. Operating cash flow represents
free cash flow before interest and financing, costs of refinancing and tax.
An Investor and Analyst presentation will be available on www.sigplc.com from
7:15am on Tuesday 5 March 2024.
A live presentation of the results followed by Q&A, hosted by Gavin Slark,
CEO, and Ian Ashton, CFO, will take place at 10:15am UK time on the date
above.
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Enquiries
SIG plc +44 (0) 114 285 6300
Gavin Slark Chief Executive Officer
Ian Ashton Chief Financial Officer
Sarah Ogilvie Head of Investor Relations
FTI Consulting +44 (0) 20 3727 1340
Richard Mountain
Peel Hunt LLP - Joint broker to SIG +44 (0) 20 7418 8900
Mike Bell / Charles Batten
Investec Bank plc - Joint broker to SIG +44 (0) 20 7597 5970
Bruce Garrow / David Anderson
LEI: 213800VDC1BKJEZ8PV53
About
SIG plc is a leading pan-European supplier of specialist building products to
trade customers across the UK, France, Germany, Ireland, Benelux and Poland.
With leading market positions in specialist insulation, interiors and
exteriors products, as well as a growing position in construction accessories,
SIG facilitates one-stop access to an extensive product range, provides expert
technical advice and coordinates often complex delivery requirements. For
suppliers, SIG offers a channel through which products can be brought to a
highly fragmented market of smaller customers and sites that are of
insufficient scale to supply direct. SIG employs more than 7,000 employees
across Europe and is listed on the London Stock Exchange (SHI). For more
information, please visit the Company's website, www.sigplc.com
(http://www.sigplc.com) .
Trading overview
Reported Group revenues were 1% higher in the year, including a c1%
contribution from acquisitions and a c1% positive impact from exchange rates.
LFL revenues declined 2% compared to prior year, reflecting the subdued demand
conditions in many of the Group's key markets. Pass through of input cost
inflation added an estimated 5% to revenues for the year as a whole, being 9%
in H1 and flat in H2.
2023 LFL growth rates across most geographies reduced in H2, compared to H1,
due to the declining impact of input cost inflation noted above. As expected,
year-over-year volume declines moderated in H2, reflecting weaker comparators
in H2 2022. Absolute volumes softened through the year due to continued
weakening in market demand, reflecting conditions across the European building
and construction sector.
LFL sales growth H1(1) H2 FY FY23 sales
2023 vs 2022
£m
UK Interiors 5% (7)% (1)% 557
UK Exteriors 1% 2% 1% 369
UK Specialist Markets (7)% (5)% (6)% 248
UK 1% (4)% (1)% 1,174
France Interiors 1% (3)% (1)% 219
France Exteriors 2% (8)% (3)% 458
Germany 0% (2)% (1)% 462
Poland (9)% 5% (2)% 238
Benelux 7% (8)% 0% 117
Ireland (18)% (10)% (15)% 94
EU (1)% (4)% (3)% 1,588
Group 0% (4)% (2)% 2,761
Table note: 1.UK numbers reflect new reporting structure including restatement
of H1.
In the UK Interiors business, the strategic and operational changes made since
mid-2020 continue to enable the business to return towards its previous market
position, reflected in a robust performance against the market in FY23. In UK
Exteriors, the performance was also strong relative to the market, driven by
renewed commercial focus and execution under the new structure.
As announced at our Capital Markets Event on 23 November 2023, we are now
reporting the UK Specialist Markets business as a separate reporting unit, in
line with the new management structure in place. The UK Specialist Markets
business experienced continuing good demand for its high specification and
innovative building solutions, but revenue was affected by weaker demand in
the agricultural and commercial warehousing and residential new build
segments, and by lower year-over-year input pricing on steel.
In France, market conditions affected demand in our specialist roofing
Exteriors business (Larivière) in H2 in particular, but both businesses
continued to execute very effectively on their strategic plans. Larivière,
has successfully expanded product categories in the year including private
label slate, its Irondel range and its solar product offering. In LiTT, our
Interiors business, we have strengthened our market position in insulation and
focused on driving up sales and performance at new and refreshed branch
locations. The German business continued its robust recovery of the last two
years, performing well in what was a very challenging market. During 2023 we
have expanded our product mix in specialist flooring and technical insulation
with a continued focus on branch performance and operational productivity
overall, boosted by modernisation initiatives. Poland's growth rebounded in
the second half, with increased volumes as well as the impact of some softer
H2 comparators. Benelux has had new management in place since October 2023 to
address and improve performance. Ireland's results reflect a tough market
environment in 2023 in the sectors in which we operate.
Strategic progress
In November 2023 the Group presented an update on the Group's vision,
long-term priorities and strategic growth opportunities at a Capital Markets
Event in London.
Our vision is to be the best provider of specialist construction and
insulation products in Europe. Being a "partner of choice" to our customers
remains one of our three long-term objectives, and to achieve this we need to
provide great service, the right products, and excellent logistics.
Our second long-term objective is to improve our operating performance. We
have outlined four key pillars, which are set out further below, to drive our
operating performance over the medium-term to reach our target 5% operating
profit margin. Within this we have set medium-term target operating margins
for each of our operating companies. These targets are a key threshold for
unlocking meaningful value creation for shareholders, specifically through
higher cash generation.
Our third long-term commitment is to grow sustainably, as we work towards five
long-term sustainability commitments including reaching net zero carbon by
2035.
During 2023 we made good progress in improving the underlying quality and
effectiveness of our operations through our four key pillars, summarised
below:
Grow
We are focused on delivering above-market growth in all of our businesses.
Despite the market contraction and lower volumes seen in 2023, we kept our
focus on readying our business for the medium-term sales growth opportunities
ahead of us, and to gain business with our customers by winning on service.
By way of illustration, the UK Exteriors business delivered strong sales
growth in 2023 relative to the market conditions. The business has invested
consistently across the last 18 months in reinvigorating its branches, in
in-store merchandising and in structured programmes to boost the sales and
customer service skills of our teams. This is yielding good results, and there
are similar initiatives being executed across the Group, tailored to reflect
local market dynamics.
Execute
We are focused on strengthening our operational execution and margin across
our geographies.
During the latter part of 2023 we executed a number of restructuring and
productivity initiatives that will benefit the business in 2024 and beyond.
These include a streamlining of central costs, and a review of operating
company cost structures, most notably in the UK, Germany and Ireland. As well
as generating permanent cost reductions of around £10m on an annualised
basis, these initiatives will facilitate improved operational agility and
execution.
Modernise
We are pursuing actions to modernise our operations to increase efficiency and
productivity.
The Group made further progress on modernisation of our operations in 2023. We
are expanding our customer-facing e-commerce platforms, with development work
in Germany and France, where we are leveraging our successful e-commerce
experience in Poland. In Germany we launched a new fast-collection service
utilising technology which allows quicker collections for customers at greater
efficiency for us, and 90% of branch customer collections are now signed for
digitally. In addition we delivered continued technology enabled delivery
improvements in France and Ireland during the year.
Specialise
We will accelerate growth in our more specialist and higher return businesses
within our portfolio.
As outlined above, the creation of UK Specialist Markets as a standalone
reporting unit in the UK will allow us to better focus on and accelerate the
growth and higher margin opportunities that exist in these specialist
businesses that have previously been less of a focus in the Group's strategy.
The UK Specialist Markets team had a successful year in growing our
relationships with, and sales to, some of the UK's largest infrastructure
investment projects, such as the HS2 rail line (stage 1) and the Hinkley Point
development. In addition, the business has seen resilient demand for our
innovative steel structure offerings in solar canopies and bespoke, high
performance insulation fabrication services.
In France Exteriors, 2023 was a year of good progress in expanding our solar
product offering, in particular in introducing new highly innovative
lightweight solar panels into our product range.
Balance Sheet
The Group maintained a robust balance sheet during 2023. The Group has
reported a free cash inflow of £4.2m, helped by solid working capital
management, with year end gross cash balances of £132.2m (2022: £130.1m).
The movement in cash balances in the year reflects the free cash flow,
partially offset by small currency movements and deferred acquisition costs.
The Group's revolving credit facility ("RCF") of £90m remained undrawn as at
31 December 2023, providing a significant liquidity reserve.
Year end net debt (post-IFRS 16) was £458.0m (2022: £444.0m). Year end net
debt on a pre-IFRS 16 basis was £154.0m (2022: £160.3m). Year end net debt
represented leverage of 3.5x and 2.8x on post and pre-IFRS 16 bases
respectively. An increase in net lease liabilities of £20.1m due to lease
renewals and extensions, mainly in the UK and Germany, was partially offset by
a favourable currency movement of £5.8m on bond debt.
Dividend
No dividend will be paid for 2023. The Board reiterates its commitment to
return to paying a dividend, appropriately covered by underlying earnings,
when it is prudent to do so. Continued successful strategic execution,
including sensible investment where appropriate, will deliver sustainable,
profitable growth and cash generation, especially as markets recover, allowing
the Board to consider a range of capital allocation options.
Sustainability
SIG is committed to growing sustainably and we have five long-term commitments
to guide us in this journey.
In 2023, we achieved a further 3% reduction in carbon emissions, through
ongoing progress on fleet transition and energy mix and with lower
year-on-year volumes. We also completed our first Scope 3 emissions impact
assessment.
Reducing our waste and diverting it from landfill is also a key focus area,
and waste diverted from landfill in 2023 improved to 94% (2022: 92%), with our
total waste volume 16% lower.
Our safety performance has improved in 2023, with a good reduction in our Lost
Time Injury Frequency Rate ("LTIFR") to 8.4 from 11.1 in 2022, with solid
improvements in France and the UK in particular. We have achieved an
encouraging increase in "near miss" hazard reporting (66%) in 2023,
demonstrating a more open reporting culture and better opportunity to prevent
hazards from becoming incidents. This has been supported by a new "Everyone
Safe, Every Day" safety strategy across the Group, along with aligned safety
objectives and KPIs.
People
The Board would like to thank all employees of the Group for their continued
commitment and hard work throughout the year. During the year, employee
engagement was stable at +14, which the Board regards as a positive result
given the context of the challenging market conditions and restructuring
initiatives in some areas of the business during the year.
Having an engaged and high performing workforce remains a priority within the
Group's ongoing development. We are committed to our ambition of being an
employer of choice in the building materials sector.
Outlook
Looking ahead, the Group expects continued softness in market conditions in
2024.
However, during this period of market weakness we will continue to strengthen
our execution and organisation such that we deliver higher margin growth and
performance for the medium-term. We remain confident in our ability to manage
through this current phase of the cycle and to ensure that we are more than
ready to take advantage of the significant long-term opportunities for the
Group as markets recover.
FINANCIAL REVIEW
The Group managed effectively the impact of increasingly challenging market
conditions during 2023. We maintained robust liquidity, and executed
productivity and restructuring initiatives that will reduce costs and improve
operational agility.
Revenue
Group revenue of £2,761.2m (2022: £2,744.5m) was 1% higher on a reported
basis, including 1% from acquisitions, 1% from movements on exchange rates and
a marginal impact from differences in the number of working days. LFL revenue
was down 2% year-on-year. Within this figure, volumes declined in the majority
of our markets. We estimate the positive impact of the pass through of input
cost inflation on revenue growth for the year was approximately 5%, with this
impact reducing significantly over the course of the year as prior year
increases annualised.
Operating costs and profit
Gross profit decreased 1.6% to £699.6m (2022: £711.0m) with a gross profit
margin of 25.3% (2022: 25.9%). The reduction in gross margin was due partly to
strong comparatives, especially in our UK Exteriors business, and also greater
than normal pricing pressure, reflective of the challenging demand
environment. The businesses continue to manage these dynamics effectively.
The Group's underlying operating costs increased by 2.5% to £646.5m (2022:
£630.8m). The increase was primarily due to inflation, with the biggest
impact being on wages and salaries, followed by property and energy costs.
These headwinds were partially offset by ongoing productivity initiatives and
the initial impact of restructuring actions taken in the second half.
Year-over-year operating costs were also affected by a lower charge for bad
debts as a result of one unusually high charge incurred during 2022 of £5m,
as reported at the time, and a £3.7m profit in 2023 from the sale of the
French Exteriors head office building in Angers.
As a result, the Group's underlying operating profit decreased to £53.1m
(2022: £80.2m), at an operating margin of 1.9% (2022: 2.9%). Reported
operating profit was £4.0m (2022: £56.2m) after Other items of £49.1m
(2022: £24.0m). Other items includes a £33.8m impairment in the UK Interiors
business and restructuring costs of £8.0m, with a further breakdown of Other
items set out later in this report.
Segmental analysis
UK
Revenue Revenue LFL sales Underlying operating Underlying operating
2023 restated vs 2022 (loss)/profit profit
£m 2022 2023 restated(1)
£m £m 2022
£m
UK Interiors 556.5 561.5 (1)% (1.6) 7.9
UK Exteriors 369.4 363.1 1% 10.6 9.9
UK Specialist Markets 247.6 223.2 (6)% 10.3 14.9
UK 1,173.5 1,147.8 (1)% 19.3 32.7
1. The 2022 segmental information has been restated in order to
present on a consistent basis with the current year, see Note 1 for further
details.
Following a change in the UK management structure announced in November 2023,
we now report three segments in the UK, with the Specialist Markets businesses
separated out from the Interiors and Exteriors businesses under which they
were reported previously.
Reported revenue in UK Interiors, a specialist insulation and interiors
distribution business, decreased slightly to £556.5m (2022: £561.5m). LFL
revenue was down 1% year-on-year with the impact of a declining market being
offset by a further strengthening in market position and the pass through of
some continued year-over-year input price inflation. The flat revenue,
together with operating cost inflation, resulted in an operating loss of
£1.6m (2022: £7.9m profit).
Reported revenue in UK Exteriors, a specialist roofing merchant, increased by
2% to £369.4m (2022: £363.1m), with LFL revenue up 1%. This was due to
benefits from purchase price inflation partially offsetting reduced demand,
notably in the new build market. A reduction in gross margin, partly due to
high prior year comparators, combined with operating cost inflation, resulted
in operating profit of £10.6m (2022: £9.9m). The year-on-year improvement
was partly due to the impact in 2022 of the administration of a large
customer, Avonside, as reported last year.
Reported revenue in our UK Specialist Markets increased by 11% to £247.6m
(2022: £223.2m). This included a 16% impact from the acquisition of Miers
Construction Products Limited in July 2022. LFL revenue declined 6%, driven by
a softer market, and by input price deflation in steel, which are a bigger
element of these businesses than elsewhere in the Group. These factors,
coupled with operating cost inflation, resulted in a reduction in operating
profit to £10.3m (2022: £14.9m).
France
Revenue Revenue LFL sales Underlying operating Underlying operating
2023 2022 vs 2022 profit profit
£m £m 2023 2022
£m £m
France Interiors 218.9 218.4 (1)% 10.4 12.2
France Exteriors 458.0 465.6 (3)% 19.3 23.6
France 676.9 684.0 (2)% 29.7 35.8
France Interiors, our structural insulation and interiors business trading as
LiTT, saw reported revenue remain in line with the prior year at £218.9m
(2022: £218.4m), and 1% down on a LFL basis. This was driven by lower demand
and volumes, offset by continued input price inflation pass through. Flat
revenue and operating cost inflation resulted in a £1.8m decrease in
operating profit to £10.4m (2022: £12.2m).
Reported revenue in France Exteriors, our specialist roofing business trading
as Larivière, decreased 2% to £458.0m (2022: £465.6m), and by 3% on a LFL
basis. Demand and volumes were lower due to a reduction in consumer spending
following interest rate increases, as well as softening of the new build
market and a reduction in the benefit from pass through of input price
inflation. The decrease in revenue together with increased operating costs due
to inflation, resulting in an operating profit decrease to £19.3m (2022:
£23.6m). During the year, the Larivière business moved into a new leased
headquarters in Angers to better support the needs of the business going
forward. We had owned the previous office building in Angers for many years,
and the sale of it resulted in a profit on disposal in H2 of £3.7m.
Germany
Revenue Revenue LFL sales Underlying operating Underlying operating
2023 2022 vs 2022 profit profit
£m £m 2023 2022
£m £m
Germany 462.1 457.8 (1)% 15.6 16.8
Reported revenue in WeGo/Vti, our specialist insulation and interiors
distribution business in Germany, increased by 1% to £462.1m (2022:
£457.8m). This included a 1% year-over-year impact from the acquisition of
Thermodämm in 2022. LFL revenue decreased by 1%, with pass through of input
price inflation offset by a decline in volumes, reflecting weaker market
conditions, particularly in new build. Good gross margin management was offset
by operating cost inflation, resulting in reduced operating profit of £15.6m
(2022: £16.8m).
Poland
Revenue Revenue LFL sales Underlying operating Underlying operating profit
2023 2022 vs 2022 profit 2022
£m £m 2023 £m
£m
Poland 237.9 230.7 (2)% 7.1 10.6
In our Polish business, a market-leading distributor of insulation and
interiors, revenue increased to £237.9m (2022: £230.7m), although LFL sales
decreased by 2%. Weaker demand in the market was partially offset by further
improvements made in our market position. Together with operating cost
inflation, this resulted in a reduction in operating profit to £7.1m (2022:
£10.6m).
Benelux
Revenue Revenue LFL sales Underlying operating Underlying operating
2023 2022 vs 2022 (loss) (loss)
£m £m 2023 2022
£m £m
Benelux 116.9 115.9 0% (3.0) (3.0)
Reported revenue from the Group's business in Benelux increased by 1% to
£116.9m (2022: £115.9m) with LFL revenue flat year-on-year. Revenue
benefited from the business recovering some market share after prior years'
losses. The turnaround of the business continues with ongoing progress in
tackling operational issues, and a new Managing Director joined the business
in Q4 to carry this forward. Despite the initial recovery referenced above,
the business continues to trade with lower market share than it had
historically. Margin pressure and operating cost inflation offset the improved
trading and turnaround actions, resulting in an operating loss of £3.0m
(2022: £3.0m loss).
Ireland
Revenue Revenue LFL sales Underlying operating Underlying operating
2023 2022 vs 2022 profit profit
£m £m 2023 2022
£m £m
Ireland 93.9 108.3 (15)% 1.4 6.0
Our business in Ireland is a specialist distributor of interiors and
exteriors, and also includes specialist contracting businesses for office
furnishing, industrial coatings and kitchen/bathroom fit out. Its reported
revenue decreased by 13% to £93.9m (2022: £108.3m), and by 15% on a LFL
basis. This was a result of softening demand in our segments of the Irish
market, along with some strong prior year comparatives, notably in H1.
Operating profit reduced as a result by £4.6m to £1.4m (2022: £6.0m),
reflecting the lower revenue as well as operating cost inflation.
Reconciliation of underlying to statutory result
Other items, being items excluded from underlying results, amounted to £49.3m
for the year (2022: £24.1m) on a pre-tax basis and are summarised in the
table below:
2023 2022
£m £m
Underlying profit before tax 17.4 51.6
Other items - impacting profit before tax:
Amortisation of acquired intangibles (2.8) (4.7)
Impairment charges (33.8) (15.8)
Cloud based ERP implementation costs (2.2) (2.7)
Costs associated with acquisitions (3.2) (2.5)
Net restructuring costs (8.0) (0.4)
Onerous contract costs (0.2) 1.2
Costs associated with refinancing - (0.4)
Other specific items 1.1 1.3
Non underlying finance costs (0.2) (0.1)
Total Other items (49.3) (24.1)
Statutory (loss)/profit before tax (31.9) 27.5
Other items are disclosed separately in order to provide a better indication
of the underlying earnings of the Group. Further details of other items are as
follows:
· Impairment charge of £33.8m relates to the impairment of goodwill
and other non-current assets in UK Interiors. This non-cash charge is related
to the splitting out of the more profitable UK Specialist Markets businesses
from UK Interiors and Exteriors, which has reduced the reported margin of the
latter two and notably Interiors. It also reflects the weaker markets at
present and hence a delay in the anticipated improvements in profitability in
the UK Interiors business.
· Cloud based ERP implementation costs relate to project configuration
and customisation costs associated with strategic cloud computing
arrangements, which are expensed, rather than being capitalised as intangible
assets.
· Costs associated with acquisitions relate principally to the
acquisition of Miers Construction Products Limited in the UK in 2022,
including earnout consideration being accrued over the performance period.
· Net restructuring costs in the year comprise £6.7m redundancy costs
and £2.4m branch closure costs, including £1.6m impairment of right-of-use
assets, tangible fixed assets and software, offset by £1.1m gain on the
sublease and termination of property leases previously impaired, all related
to restructuring across the Group.
· "Other specific items" - a credit of £1.1m in aggregate - include
reversal of provision for lease receivables, the reversal of an onerous lease
provision and an impairment of right-of-use asset in relation to a branch
which has been reopened, offset by additional impairment of an investment
property which is no longer in use by the Group.
Taxation
The effective tax rate for the Group on the total loss before tax of £31.9m
(2022: profit £27.5m) is negative 36.1% (2022: 43.6%). The effective tax rate
on underlying profit before tax, excluding the impact of Other items, is 74.7%
(2022: 27.9%).
Tax losses cannot be surrendered or utilised cross border, and the Group is
therefore subject to tax in some countries and not in others. Tax losses in
the UK and Benelux businesses are not currently recognised as deferred tax
assets, which impacts the overall and underlying effective tax rate. The
relative proportions of these losses compared to the total Group underlying
profit before tax are also higher for the year to 31 December 2023 compared to
the previous year, and the combination of these factors has led to the
increase in the underlying effective tax rate in the current year.
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 a number of pension schemes, four of which provide defined
benefits based upon pensionable salary. One of these schemes, in the UK, has
assets held in a separate trustee administered fund, and three are overseas
book reserve schemes. The largest defined benefit pension scheme is the UK
scheme, which was closed to further accrual in 2016.
The Group's total pension charge for the year, including amounts charged to
interest after Other items, was £8.9m (2022: £7.4m), of which a charge of
£1.4m (2022: £0.2m) related to defined benefit pension schemes and £7.5m
(2022: £7.2m) related to defined contribution schemes.
The total net liability in relation to defined benefit pension schemes at 31
December 2023 was £20.3m (2022: £23.0m). The current triennial actuarial
valuation of the UK scheme as at 31 December 2022 is in progress and will
conclude during March 2024. The scheme remains well funded.
Financial position
Overall, the net assets of the Group decreased by £39.3m to £228.5m (2022:
£267.8m), with a gross cash position at year end of £132.2m (2022: £130.1m)
and net debt (post-IFRS 16) of £458.0m (2022: £444.0m). Net debt on a
pre-IFRS 16 basis was £154.0m (2022: £160.3m)
The movement in post‐IFRS 16 net debt includes the movement in cash noted
below. An increase in net lease liabilities of £20.1m due to lease renewals
and extensions, mainly in the UK and Germany, was partially offset by a
favourable currency movement of £5.8m on bond debt. The movement in pre-IFRS
16 net debt is not affected by the movement on leases.
Cash flow
2023 2022
£m £m
Underlying operating profit 53.1 80.2
Add back: Depreciation 76.6 73.2
Add back: Amortisation 2.4 3.2
Underlying EBITDA 132.1 156.6
Decrease/(increase) in working capital 2.8 (14.4)
Repayment of lease liabilities (63.6) (60.1)
Capital expenditure (15.8) (14.5)
Cash exceptional items (6.4) (14.7)
Other 3.8 1.9
Operating cash flow(1) 52.9 54.8
Interest and financing (34.7) (28.8)
Refinancing cash costs - (1.1)
Tax (14.0) (14.3)
Free cash flow(1) 4.2 10.6
Acquisitions and investments (0.7) (27.5)
Repayment of debt (0.8) (1.4)
Total cash flow 2.7 (18.3)
Cash and cash equivalents at beginning of the year(2) 130.1 145.1
Effect of foreign exchange rate changes (0.6) 3.3
Cash and cash equivalents at end of the year(2) 132.2 130.1
1. Free cash flow is defined as all cash flows excluding M&A
transactions, dividend payments, and financing transactions. Operating cash
flow represents free cash flow before interest and financing, costs of
refinancing and tax.
2. Cash and cash equivalents at 31 December 2023 comprise cash at bank
and on hand of £132.2m (2022: £130.1m) less bank overdrafts of £nil (2022:
£nil).
During the period, the Group delivered £52.9m of operating cash flow, which
represents a 100% conversion of the underlying operating profit to operating
cash. Despite the lower profit in the year this operating cash flow was very
similar to the 2022 number, helped by a positive movement on working capital.
The key factor driving the working capital in the period was the lower levels
of trading year-on-year, allied by strong management of the key working
capital drivers. The Group reported a free cash inflow of £4.2m (2022:
£10.6m inflow). This slight decline versus the prior year was driven by the
higher interest charge, driven by the increase in lease liabilities noted
above along with higher interest rates embedded in renewed leases.
Capex during the period was £15.8m (2022: £14.5m). Cash exceptional items
are those that are related to "Other items" in the Consolidated income
statement, and include restructuring costs and Benelux ERP implementation.
"Other" in the cash flow includes payments to the Employee Benefit Trust to
fund share plans of £1.7m (2022: £4.0m), add back of non-cash P&L items
and provision movements, and proceeds on sale of property, plant and
equipment.
Financing and funding
The Group's debt funding comprises €300m of 5.25% fixed rate secured notes
and an RCF of £90m. These mature and expire in November 2026 and May 2026
respectively. The secured notes are subject to incurrence-based covenants
only, and the RCF has a leverage maintenance covenant set at 4.75x which only
applies if the facility is over 40% drawn at a quarter end reporting date. The
RCF was undrawn at 31 December 2023.
The Group's liquidity position remained robust throughout 2023, and at the end
of the period stood at £222m, consisting of cash of £132m and the £90m
undrawn RCF noted above. On the basis of current forecasts, the Group is
expected to remain in compliance with all banking covenants throughout the
forecast period to 31 March 2025.
2023 2022
£m £m
Cash and cash equivalents at end of the year 132.2 130.1
Undrawn RCF at end of the year 90.0 90.0
Liquidity 222.2 220.1
Post-IFRS 16 net debt 458.0 444.0
Pre-IFRS 16 net debt 154.0 160.3
Post-IFRS 16 leverage 3.5x 2.8x
Pre-IFRS 16 leverage 2.8x 1.8x
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 2023. Certain
parts solely thereof are not included within this announcement.
We confirm that to the best of our knowledge:
(a) the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
(b) the Strategic report includes a fair review of the development and
performance of the business and the position of the Company, and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face; and
(c) the Annual Report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
This responsibility statement was approved by the Board of Directors on 4
March 2024 and signed on its behalf by:
By order of the Board
Gavin Slark Ian Ashton
Director Director
4 March 2024 4 March 2024
Cautionary statement
The securities of the Group have not been and will not be registered under the
US Securities Act of 1933, as amended (the "Securities Act"), or under the
securities laws of any state or other jurisdiction of the United States, and
may not be offered, sold, pledged or transferred, directly or indirectly, in,
into or within the United States except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act and in compliance with any applicable securities laws of any relevant
state or other jurisdiction of the United States. There has been and will be
no public offering of the securities of the Group in the United States.
This announcement has been prepared to provide the Company's shareholders with
a fair review of the business of the Group and a description of the principal
risks and uncertainties facing it. It may not be relied upon by anyone,
including the Company's shareholders, for any other purpose.
This announcement contains forward-looking statements that are subject to risk
factors including the economic and business circumstances occurring from time
to time in countries and markets in which the Group operates and risk factors
associated with the building and construction sectors. By their nature,
forward-looking statements involve a number of risks, uncertainties and
assumptions because they relate to events and/or depend on circumstances that
may or may not occur in the future and could cause actual results and outcomes
to differ materially from those expressed in or implied by the forward-looking
statements. No assurance can be given that the forward-looking statements in
this announcement will be realised. Statements about the Directors'
expectations, beliefs, hopes, plans, intentions and strategies are inherently
subject to change and they are based on expectations and assumptions as to
future events, circumstances and other factors which are in some cases outside
the Group's control. Actual results could differ materially from the Group's
current expectations.
It is believed that the expectations set out in these forward-looking
statements are reasonable but they may be affected by a wide range of
variables, which could cause actual results or trends to differ materially,
including but not limited to, changes in risks associated with the level of
market demand, fluctuations in product pricing and changes in foreign exchange
and interest rates.
The Company's shareholders are cautioned not to place undue reliance on the
forward-looking statements. This announcement has not been audited or
otherwise independently verified. The information contained in this
announcement has been prepared on the basis of the knowledge and information
available to Directors at the date of its preparation and the Company does not
undertake any obligation to update or revise this announcement during the
financial year ahead.
Consolidated income statement
For the year ended 31 December 2023
Underlying(1) Other items(1) Total Underlying(1) Other items(1) Total
2023 2023 2023 2022 2022 2022
Note £m £m £m £m £m £m
Revenue 2 2,761.2 - 2,761.2 2,744.5 - 2,744.5
Cost of sales (2,061.6) - (2,061.6) (2,033.5) - (2,033.5)
Gross profit 699.6 - 699.6 711.0 - 711.0
Other operating expenses 3 (640.6) (50.2) (690.8) (614.3) (22.0) (636.3)
Impairment (losses)/gains on financial assets 3 (9.6) 1.1 (8.5) (16.5) (2.0) (18.5)
Gain on disposal of property 3 3.7 - 3.7 - - -
Operating profit 53.1 (49.1) 4.0 80.2 (24.0) 56.2
Finance income 4 2.2 - 2.2 1.3 - 1.3
Finance costs 4 (37.9) (0.2) (38.1) (29.9) (0.1) (30.0)
Profit/(loss) before tax 17.4 (49.3) (31.9) 51.6 (24.1) 27.5
Income tax (expense)/credit 5 (13.0) 1.5 (11.5) (14.4) 2.4 (12.0)
Profit/(loss) after tax 4.4 (47.8) (43.4) 37.2 (21.7) 15.5
Attributable to:
Equity holders of the Company 4.4 (47.8) (43.4) 37.2 (21.7) 15.5
(Loss)/earnings per share
Basic 6 (3.8)p 1.3p
Diluted 6 (3.8)p 1.3p
(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. Further details are disclosed in Note 3.
Consolidated statement of comprehensive income
For the year ended 31 December 2023
2023 2022
£m £m
(Loss)/profit after tax (43.4) 15.5
Items that will not subsequently be reclassified to the Consolidated income
statement:
Remeasurement of defined benefit pension liability 1.1 (14.3)
Deferred tax movement associated with remeasurement of defined benefit pension (0.1) (0.5)
liability
1.0 (14.8)
Items that may subsequently be reclassified to the Consolidated income
statement:
Exchange difference on retranslation of foreign currency goodwill and (1.1) 2.7
intangibles
Exchange difference on retranslation of foreign currency net investments (2.8) 11.5
(excluding goodwill and intangibles)
Exchange and fair value movements associated with borrowings and derivative 5.8 (13.9)
financial instruments
Losses and gains on cash flow hedges (1.1) 1.6
Transfer to profit and loss on cash flow hedges (1.5) 0.2
(0.7) 2.1
Other comprehensive income/(expense) 0.3 (12.7)
Total comprehensive (expense)/income (43.1) 2.8
Attributable to:
Equity holders of the Company (43.1) 2.8
Consolidated balance sheet
As at 31 December 2023
2023 2022
Restated(1)
£m £m
Non-current assets
Property, plant and equipment 65.4 68.8
Right-of-use assets 263.1 265.9
Goodwill 131.2 134.8
Intangible assets 15.3 22.8
Lease receivables 2.2 1.2
Deferred tax assets 4.4 3.3
Non-current financial assets 0.2 0.4
481.8 497.2
Current assets
Inventories 259.1 270.6
Lease receivables 1.1 0.1
Trade and other receivables 389.1 432.6
Current tax assets 3.6 0.9
Current financial assets - 1.6
Cash at bank and on hand 132.2 130.1
785.1 835.9
Total assets 1,266.9 1,333.1
Current liabilities
Trade and other payables 385.8 425.0
Lease liabilities 64.9 56.5
Interest-bearing loans and borrowings 0.8 0.8
Deferred consideration 1.8 0.7
Derivative financial instruments 1.0 -
Current tax liabilities 6.9 5.8
Provisions 7.9 9.6
469.1 498.4
Non-current liabilities
Lease liabilities 264.9 251.2
Interest-bearing loans and borrowings 260.0 266.1
Deferred consideration - 1.8
Derivative financial instruments 0.1 0.1
Other payables 3.0 7.4
Retirement benefit obligations 20.3 23.0
Provisions 21.0 17.3
569.3 566.9
Total liabilities 1,038.4 1,065.3
Net assets 228.5 267.8
Capital and reserves
Called up share capital 118.2 118.2
Treasury shares (11.6) (16.4)
Capital redemption reserve 0.3 0.3
Share option reserve 7.6 8.6
Hedging and translation reserves 3.8 4.5
Cost of hedging reserve 0.1 0.1
Merger reserve 92.5 92.5
Retained profits 17.6 60.0
Attributable to equity holders of the Company 228.5 267.8
Total equity 228.5 267.8
(1) The 2022 Consolidated balance sheet has been restated as a result of the
finalisation of the acquisition fair values, as explained in Note 1
Consolidated statement of changes in equity
For the year ended 31 December 2023
Treasury shares reserve Capital redemption reserve Share option reserve Hedging and translation reserves Cost of hedging reserve Merger reserve Retained profits/ (losses) Total
Called up share capital
£m £m £m £m £m £m £m £m £m
At 1 January 2022 118.2 (12.5) 0.3 4.4 2.4 0.1 92.5 59.3 264.7
Profit after tax - - - - - - - 15.5 15.5
Other comprehensive income/(expense) - - - - 2.1 - - (14.8) (12.7)
Total comprehensive income - - - - 2.1 - - 0.7 2.8
Purchase of treasury shares - (4.0) - - - - - - (4.0)
Credit to share option reserve - - - 4.4 - - - - 4.4
Settlement of share options - 0.1 - (0.2) - - - - (0.1)
At 31 December 2022 118.2 (16.4) 0.3 8.6 4.5 0.1 92.5 60.0 267.8
Loss after tax - - - - - - - (43.4) (43.4)
Other comprehensive (expense)/income - - - - (0.7) - - 1.0 0.3
Total comprehensive income - - - - (0.7) - - (42.4) (43.1)
Purchase of treasury shares - (1.7) - - - - - - (1.7)
Credit to share option reserve - - - 5.5 - - - - 5.5
Settlement of share options - 6.5 - (6.5) - - - - -
At 31 December 2023 118.2 (11.6) 0.3 7.6 3.8 0.1 92.5 17.6 228.5
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 represent 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 reflected in equity through Other
comprehensive income.
Treasury shares relate to shares purchased by the SIG Employee Share Trust to
satisfy awards made under the Group's share plans which are not vested and
beneficially owned by employees.
The merger reserve represents the premium on ordinary shares issued in a
previous year through the use of a cash box structure.
Consolidated cash flow statement
For the year ended 31 December 2023
2023
2022
Note £m £m
Net cash flow from operating activities
Cash generated from operating activities 8 128.4 132.3
Income tax paid (14.0) (14.3)
Net cash generated from operating activities 114.4 118.0
Cash flows from investing activities
Finance income received 2.2 1.3
Purchase of property, plant and equipment and computer software (15.7) (14.5)
Initial direct costs of right-of-use assets (0.1) (0.8)
Proceeds from sale of property, plant and equipment 5.6 0.8
Net cash flow on the purchase of business - (26.0)
Settlement of amounts payable for previous purchases of businesses (0.7) (1.3)
Investment in financial assets - (0.2)
Net cash flow from investing activities (8.7) (40.7)
Cash flows from financing activities
Finance costs paid (36.9) (30.1)
Repayment of lease liabilities (63.6) (60.1)
Repayment of borrowings (0.8) (1.4)
Acquisition of treasury shares (1.7) (4.0)
Net cash flow from financing activities (103.0) (95.6)
Increase/(decrease) in cash and cash equivalents in the year 9 2.7 (18.3)
Cash and cash equivalents at beginning of the year(1) 130.1 145.1
Effect of foreign exchange rate changes (0.6) 3.3
Cash and cash equivalents at end of the year(1) 132.2 130.1
( )
(1) Cash and cash equivalents comprise cash at bank and on hand of £132.2m
(2022: £130.1m) less bank overdrafts of £nil (2022: £nil).
( )
1. Basis of preparation
The Group's financial information has been prepared in accordance with the
recognition and measurement requirements of UK adopted international
accounting standards. It has been prepared on a basis consistent with that
adopted in the previous year. The Financial statements have been prepared
under the historical cost convention except for derivative financial
instruments and unquoted investments which are stated at their fair value.
Whilst the financial information included in this Preliminary Results
Announcement has been prepared in accordance with the recognition and
measurement criteria of 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 2023 and 31 December 2022 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 2022 have been
filed with the Registrar of Companies, and those for 2023 will be delivered
following the Company's Annual General Meeting. The Auditor has reported on
the statutory accounts for 2023 and 2022. Their report for 2023 and 2022 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.
Restatement of 2022 Consolidated balance sheet
The fair values of the identifiable assets and liabilities acquired in
relation to the acquisition of Miers Construction Products Limited in 2022
have been finalised during the year. This resulted in a decrease in the
current tax asset of £0.3m, an increase in the current tax liability of
£0.3m and a corresponding increase in the goodwill recognised of £0.6m (see
Note 7). This has been accounted for retrospectively and the Consolidated
balance sheet at 31 December 2022 has been restated to reflect this, resulting
in a decrease in the current tax asset of £0.6m and an increase in goodwill
at the year end date. This had no impact on profit or loss, cash flows or net
assets for the year ended or as at 31 December 2022.
Disclosure restatement
Reported operating segments for the UK have been changed during the year to
align with changes in the UK leadership structure. There are now considered to
be three operating segments in the UK, being UK Interiors, UK Exteriors and UK
Specialist Markets, and the segmental reporting disclosure has been updated to
reflect the way in which information is reported to the Chief Operating
Decision Maker ("CODM"). The prior year comparatives have been restated to be
consistent with the current year presentation.
During the preparation of the 2023 Annual report and accounts an error was
identified in the comparative disclosure in relation to the classification of
operating expenses in Note 3. The prior year comparatives have been restated
to correct the error and update the classification of certain costs,
increasing Management, administrative and central costs in 2022 by £16.5m
(14.1%) and decreasing Distribution costs and Selling and marketing costs by
£11.8m (3.7%) and £4.7m (2.6%) respectively. There is no effect on total net
operating expenses and the restatement does not impact any of the primary
statements or other notes to the Consolidated financial statements.
Going concern
The Group closely monitors its funding position throughout the year, including
monitoring compliance with covenants and available facilities to ensure it has
sufficient headroom to fund operations.
The Group's financing facilities comprise a €300m fixed rate bond (secured
notes), due November 2026, and £90m Revolving Credit Facility ("RCF") which
expires in May 2026. One of the trading businesses also has a £2.1m bank loan
repayable over the period to June 2026. The only financial covenant within
these facilities is a leverage maintenance covenant within the RCF, which is
only effective if the facility is over 40% drawn (i.e. £36m) at a quarter end
reporting date. The RCF was undrawn at 31 December 2023 and has remained
undrawn subsequent to the year end.
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 2025 ("the going concern period").
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:
· worsening market conditions and further reductions in demand;
· high levels of product inflation, and current economic and
political uncertainties, potentially impacting market demand; and
· potentially recessionary conditions in the coming year.
The forecasts on which the going concern assessment is based have been subject
to sensitivity analysis and stress testing to assess the impact of the above
risks and the Directors have also reviewed mitigating actions that could be
taken. Under a severe but plausible downside scenario, factoring in a 6%
reduction in volume, a reduction in gross margin and a resulting 55% reduction
in underlying operating profit from the base forecast for the 12 months to 31
March 2025, the analysis shows that sufficient cash would be available without
triggering a covenant breach, as the RCF is not expected to be drawn at a
relevant quarter end. Reverse stress testing has also been performed, which
shows that the Group could withstand up to a 22% reduction in revenue for the
12 months to 31 March 2025, or up to 15% for the nine months to the forecast
liquidity low point of 30 September 2024, before triggering a covenant breach
if the RCF was 40% drawn at a relevant quarter end. Further cash phasing
mitigations would also be available to avoid this situation.
The Directors have considered the impact of climate-related matters and this
is not expected to have a significant impact on the Group's going concern
assessment to 31 March 2025.
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 2025 and the Directors therefore consider it appropriate to
adopt the going concern basis in preparing the 2023 Consolidated financial
statements.
New standards, interpretations and amendments adopted
The Group has adopted the amendments to IAS 12 Income taxes - International
tax reform: Pillar Two model rules and has applied the temporary mandatory
exception from recognising and disclosing information about deferred tax
assets and liabilities related to Pillar Two income taxes.
The following new standards, amendments and interpretations apply for the
first time in 2023, but have not had a material impact on the Financial
statements of the Group:
· IFRS 17 "Insurance contracts"
· Amendments to IAS 1 "Presentation of financial statements", IFRS
Practice statement 2 "Making materiality judgements" and IAS 8 "Accounting
policies, changes in accounting estimates and errors"
· Amendment to IAS 12 "Income taxes" - deferred tax related to
assets and liabilities arising from a single transaction
2. Revenue and 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 CODM. Reportable
operating segments are grouped on a geographical basis.
UK Interiors UK Exteriors UK UK France Interiors France Exteriors France Germany Benelux Ireland Poland Eliminations Total Group
Specialist Markets Total Total
2023 £m £m £m £m £m £m £m £m £m £m £m £m £m
Type of product
Interiors 556.5 - 173.9 730.4 218.9 - 218.9 462.1 116.9 54.5 237.9 - 1,820.7
Exteriors - 369.4 73.7 443.1 - 458.0 458.0 - - 39.4 - - 940.5
Inter-segment revenue 7.2 1.0 18.4 26.6 0.1 13.3 13.4 - - 0.2 - (40.2) -
Total underlying and statutory revenue 563.7 370.4 266.0 1,200.1 219.0 471.3 690.3 462.1 116.9 94.1 237.9 (40.2) 2,761.2
Nature of revenue
Goods for resale 563.7 370.4 266.0 1,200.1 219.0 471.3 690.3 462.1 116.9 88.5 237.9 (40.2) 2,755.6
(recognised at point in time)
Construction contracts - - - - - - - - - 5.6 - - 5.6
(recognised over time)
Total underlying and statutory revenue 563.7 370.4 266.0 1,200.1 219.0 471.3 690.3 462.1 116.9 94.1 237.9 (40.2) 2,761.2
Segment result before Other items (1.6) 10.6 10.3 19.3 10.4 19.3 29.7 15.6 (3.0) 1.4 7.1 - 70.1
Parent company costs (17.0)
Underlying operating profit 53.1
Other items (Note 3) (49.1)
Operating profit 4.0
Net finance costs before Other items (35.7)
Non-underlying finance costs (0.2)
Loss before tax (31.9)
Income tax expense (11.5)
Loss for the year (43.4)
UK Interiors UK Exteriors UK UK France Interiors France Exteriors France Germany Benelux Ireland Poland Eliminations Total Group
Specialist Markets Total Total
2022 (Restated)(1) £m £m £m £m £m £m £m £m £m £m £m £m £m
Type of product
Interiors 561.5 - 141.1 702.6 218.4 - 218.4 457.8 115.9 66.7 230.7 - 1,792.1
Exteriors - 363.1 82.1 445.2 - 465.6 465.6 - - 41.6 - - 952.4
Inter-segment revenue 5.2 0.7 16.0 21.9 0.1 9.7 9.8 0.1 - - 0.1 (31.9) -
Total underlying and statutory revenue 566.7 363.8 239.2 1,169.7 218.5 475.3 693.8 457.9 115.9 108.3 230.8 (31.9) 2,744.5
Nature of revenue
Goods for resale 566.7 363.8 239.2 1,169.7 218.5 475.3 693.8 457.9 115.9 102.6 230.8 (31.9) 2,738.8
(recognised at point in time)
Construction contracts - - - - - - - - - 5.7 - - 5.7
(recognised over time)
Total underlying and statutory revenue 566.7 363.8 1,169.7 218.5 475.3 693.8 457.9 115.9 108.3 230.8 (31.9) 2,744.5
239.2
Segment result before Other items 7.9 9.9 14.9 32.7 12.2 23.6 35.8 16.8 (3.0) 6.0 10.6 - 98.9
Parent company costs (18.7)
Underlying operating profit 80.2
Other items (Note 3) (24.0)
Operating profit 56.2
Net finance costs before Other items (28.6)
Non-underlying finance costs (0.1)
Profit before tax 27.5
Income tax expense (12.0)
Profit for the year 15.5
(1) The 2022 segmental information has been restated in order to present on a
consistent basis with the current year, as explained in Note 1.
Other segment information
UK Interiors UK Exteriors UK UK France Interiors France Exteriors France Germany Benelux Ireland Poland Parent company Total Group
Specialist Markets Total Total
2023 £m £m £m £m £m £m £m £m £m £m £m £m £m
Depreciation and amortisation of fixed assets, right-of-use assets and 15.5 12.4 5.1 33.0 7.4 12.6 20.0 15.9 2.2 3.0 4.6 0.3 79.0
computer software
Profit on sale of property - - - - - 3.7 3.7 - - - - - 3.7
UK Interiors UK Exteriors UK Specialist Markets UK France Interiors France Exteriors France Germany Benelux Ireland Poland Parent company Total Group
Total Total
2022 (Restated)(1) £m £m £m £m £m £m £m £m £m £m £m £m £m
Depreciation and amortisation of fixed assets, right-of-use assets and 16.6 11.6 3.7 31.9 6.9 11.6 18.5 15.1 4.1 2.7 3.8 0.3 76.4
computer software
(
1) The 2022 segmental information has been restated in order to present on a
consistent basis with the current year, as explained in Note 1.
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:
2023 2022
Restated(1)
£m £m
United Kingdom 240.0 259.0
Ireland 16.1 16.5
France 136.4 134.7
Germany 56.6 57.6
Poland 16.7 14.5
Benelux 9.2 10.0
Total 475.0 492.3
( )
(1) The 2022 Consolidated balance sheet has been restated as a result of the
finalisation of the acquisition fair values, as explained in Note 1.
3. Other operating expenses
a) Analysis of operating expenses
2023 2022 Restated(1)
Before Other items Other items Total Before Other items Other items Total
£m £m £m £m £m £m
Other operating expenses:
Distribution costs 320.9 4.3 325.2 304.9 0.4 305.3
Selling and marketing costs 179.8 2.6 182.4 175.5 - 175.6
Management, administrative and central costs 139.9 43.3 183.2 133.9 21.6 155.4
Total other operating expenses 640.6 50.2 690.8 614.3 22.0 636.3
Impairment losses/(gains) on financial assets 9.6 (1.1) 8.5 16.5 2.0 18.5
Gain on disposal of property (3.7) - (3.7) - - -
Total 646.5 49.1 695.6 630.8 24.0 654.8
(1) The prior year comparative analysis has been restated to correct an error
in the classification of costs. Further details are provided in
Note 1.
b) Other items
Profit/(loss) after tax includes the following Other items which have been
disclosed in a separate column within the Consolidated income statement in
order to provide a better indication of the underlying earnings of the Group:
2023 2022
Other items Tax impact Tax impact Other items Tax impact Tax impact
£m £m % £m £m %
Amortisation of acquired intangibles (2.8) 0.1 3.6% (4.7) 0.9 19.1%
Impairment charges(1) (33.8) - - (15.8) - -
Net restructuring costs(2) (8.0) 1.2 15.0% (0.4) 0.1 25.0%
Costs related to acquisitions (3.2) 0.1 3.1% (2.5) 0.3 12.0%
Cloud based ERP implementation costs(3) (2.2) 0.1 4.5% (2.7) 0.7 25.9%
Onerous contract costs(4) (0.2) - - 1.2 - -
Costs associated with refinancing(5) - - - (0.4) - -
Other specific items(6) 1.1 - - 1.3 0.4 (30.8)%
Impact on operating profit (49.1) 1.5 3.1% (24.0) 2.4 10.0%
Non-underlying finance costs(7) (0.2) - 0.0% (0.1) - -
Impact on profit/(loss) before tax (49.3) 1.5 3.0% (24.1) 2.4 10.0%
(1) Impairment charges in the current year relate to the UK Interiors CGU and
comprise £2.6m relating to goodwill, £2.2m customer relationships, £3.6m
tangible fixed assets and £25.4m right-of-use assets. Impairment charges in
the prior year related to the Benelux CGU and comprised £3.6m relating to
goodwill, £2.5m tangible fixed assets and £9.7m right-of-use assets.
(2) Net restructuring costs in the year comprise £6.7m redundancy costs and
£2.4m branch closure costs, including £1.6m impairment of right-of-use
assets, tangible fixed assets and software, offset by £1.1m gain on the
sublease and termination of property leases previously impaired, all related
to restructuring across the Group. Costs in the prior year related to
consultancy and redundancy costs in Benelux.
(3) Cloud based ERP implementation costs relate to costs incurred on strategic
projects which are expensed as incurred rather than being capitalised as
intangible assets.
(4) Onerous contract costs relate to the final settlement of provisions
recognised in previous years for licence fee commitments where no future
economic benefit was expected to be obtained.
(5) Costs associated with refinancing in the prior year related to the
increase in the RCF and some additional costs relating to the refinancing.
(6) Other specific items comprises £1.1m reversal of provision for lease
receivables, the reversal of onerous lease provisions and impairment of
right-of-use assets in relation to a branch which has been reopened, offset by
additional impairment of an investment property which is no longer in use by
the Group. In the prior year, other specific items comprised the settlement
and/or release of historic provisions, including amounts relating to
businesses divested in previous years, impacts of the pensions member options
exercise undertaken during the year and £2.0m provision for impairment of
lease receivables.
(7) Non-underlying finance costs in the current year relate to the investment
property referred to above. Costs in the prior year related to the unwinding
of the discount on the onerous contract provision.
The total impact of the above amounts on the Consolidated cash flow statement
is a cash outflow of £6.4m (2022: £15.8m).
4. Finance income and finance costs
2023 2022
£m £m
Finance income
Interest on bank deposits 2.2 1.3
Total finance income 2.2 1.3
Finance costs
On bank loans, overdrafts and other associated items(1) 3.6 2.6
On secured notes(2) 14.1 14.0
On obligations under lease contracts 19.4 13.3
Net finance charge on defined benefit schemes 0.8 -
Total finance costs before Other items 37.9 29.9
Non-underlying finance costs(3) 0.2 0.1
Total finance costs 38.1 30.0
Net finance costs 35.9 28.7
(1) Other associated items includes the amortisation of arrangement fees of
£0.2m (2022: £0.1m).
(2) Included within finance costs on the secured notes is the amortisation of
arrangement fees of £0.5m (2022: £0.5m).
(3) See Note 3 for further details on non-underlying finance costs.
5. Income tax
The income tax expense comprises:
2023 2022
£m £m
Current tax
UK & Ireland corporation tax - Charge for the year 0.1 0.8
- Adjustments in respect of previous years (0.1) 0.1
- 0.9
Mainland Europe corporation tax - Charge for the year 12.2 13.4
- Adjustments in respect of previous years 0.5 0.3
12.7 13.7
Total current tax 12.7 14.6
Deferred tax
Origination and reversal of deductible temporary differences (0.7) (2.2)
Adjustments in respect of previous years (0.4) (0.3)
Effect of change in rate (0.1) (0.1)
Total deferred tax (1.2) (2.6)
Total income tax expense 11.5 12.0
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:
2023 2022
£m % £m %
(Loss)/profit before tax (31.9) 27.5
Expected tax (credit)/charge (6.6) 20.7% 8.5 30.9%
Factors affecting the income tax expense for the year:
Expenses not deductible for tax purposes(1) 2.8 (8.8)% 2.1 7.6%
Non-taxable income (0.5) 2.0% (1.3) (4.7)%
Impairment and disposal charges not deductible for tax purposes(2) 0.6 (2.4)% 3.0 10.9%
Deductible temporary differences not recognised for deferred tax purposes(3) 15.3 (48.0)% 2.2 8.0%
Utilisation of deferred tax assets not previously recognised - - (2.5) (9.1)%
Other adjustments in respect of previous years - - 0.1 0.4%
Effect of change in rate on deferred tax (0.1) 0.4% (0.1) (0.4)%
Total income tax expense 11.5 (36.1)% 12.0 43.6%
(1) The majority of the Group's expenses that are not deductible for tax
purposes are in relation to share-based payments, business entertainment,
non-qualifying depreciation and other disallowable expenditure in the current
year. The expenses not deductible for tax purposes in the prior year also
included acquisition related costs.
(2) During the year the Group incurred impairment charges of £4.2m (2022:
£15.8m) in relation to goodwill and other non-current assets which are not
deductible for tax purposes.
(3) Deductible temporary differences not recognised for deferred tax purposes
mainly relate to losses in the UK and Benelux and interest restricted under
the UK corporate interest restriction rules which are not recognised as
deferred tax assets.
The effective tax rate for the Group on the total loss before tax of £31.9m
(2022: £27.5m profit) is negative 36.1% (2022: 43.6%). The effective tax rate
on underlying profit before tax, excluding the impact of Other items, is 74.7%
(2022: 27.9%). The tax impact of Other items is shown in Note 3. As the Group
operates in several different countries tax losses cannot be surrendered or
utilised cross border and the Group is therefore subject to tax in some
countries and not in others. Tax losses in the UK and Benelux are not
currently recognised as deferred tax assets, which impacts the overall and
underlying effective tax rate. The relative proportions of these losses
compared to the total Group underlying profit before tax are also higher for
the year to 31 December 2023 compared to the previous year, and the
combination of these factors has led to the increase in the underlying
effective tax rate in the current year.
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.
Pillar Two legislation has been enacted or substantively enacted in certain
jurisdictions in which the Group operates. The legislation will be effective
for the Group's financial year beginning 1 January 2024. The Group is in scope
of the enacted or substantively enacted legislation and has performed an
assessment of the Group's potential exposure to Pillar Two income taxes.
Based on the assessment, the Pillar Two effective tax rates in most of the
jurisdictions in which the Group operates are above 15% or one of the other
transitional safe harbour reliefs are available. Management is not currently
aware of any circumstances under which this might change and therefore the
Group does not expect a potential exposure to Pillar Two top-up taxes.
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:
2023 2022
£m £m
Deferred tax movement associated with remeasurement of defined benefit pension (0.1) 0.5
liabilities(1)
Exchange rate movements 0.1 0.1
- 0.6
(1) This item will not subsequently be reclassified to the Consolidated income
statement.
6. (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
2023 2022
£m £m
(Loss)/profit attributable to ordinary equity holders of the parent for basic (43.4) 15.5
and diluted earnings per share
Add back:
Other items (see Note 3) 47.8 21.7
Profit attributable to ordinary equity holders of the parent for basic and 4.4 37.2
diluted earnings per share before Other items
Weighted average number of shares
2023 2022
Number Number
For basic (loss)/earnings per share 1,148,348,913 1,149,776,931
Effect of dilution from share options - 33,638,307
Adjusted for the effect of dilution 1,148,348,913 1,183,415,238
Share options are considered antidilutive in the current year as their
conversion into ordinary shares would decrease the loss per share. The
calculation of diluted (loss)/earnings per share does not assume conversion,
exercise, or other issue of potential ordinary shares that would have an
antidilutive effect on (loss)/earnings per share.
The weighted average number of shares excludes those held by the SIG Employee
Share Trust which are not vested and beneficially owned by employees.
(Loss)/earnings per share
2023 2022
(Loss)/earnings per share
Basic (loss)/earnings per share (3.8)p 1.3p
Diluted (loss)/earnings per share (3.8)p 1.3p
Earnings per share before Other items(1)
Basic earnings per share before Other items 0.4p 3.2p
(1) Earnings per share before Other items (also referred to as underlying
earnings per share) has been disclosed in order to present the underlying
performance of the Group.
7. Acquisitions
The Group has not made any business acquisitions during the year.
On 14 July 2022 the Group acquired Thermodämm GmbH to enlarge its market
share in the German screed flooring business and the acquisition was allocated
to the Germany segment. On 22 July 2022 the Group acquired Miers Construction
Products Limited to enlarge the UK Interiors business in terms of product
range and geographic location, and the acquisition was allocated to the UK
Interiors segment. The Miers business is now allocated to the UK Specialist
Markets segment following the change in reported operating segments during the
year.
The fair values of the identifiable assets and liabilities of the acquisitions
at the date of acquisition have been finalised during the current year. This
resulted in a decrease in the current tax asset of £0.3m, an increase in the
current tax liability of £0.3m and a corresponding increase in the goodwill
recognised of £0.6m in relation to the Miers acquisition. This has been
recognised as a restatement of the 2022 Consolidated balance sheet and the
final balances on acquisition are as follows:
2022
Miers Restated Thermodämm Total Restated
£m £m £m
Assets
Intangible assets (customer relationships) 12.0 1.7 13.7
Property, plant and equipment 0.8 0.2 1.0
Right-of-use assets 2.7 0.6 3.3
Cash and cash equivalents 4.1 0.2 4.3
Trade and other receivables 13.0 0.3 13.3
Inventories 7.3 0.6 7.9
39.9 3.6 43.5
Liabilities
Trade and other payables (12.2) (0.6) (12.8)
Provisions (1.1) - (1.1)
Current tax liability (0.3) - (0.3)
Deferred tax liability (3.0) (0.7) (3.7)
Bank loan (3.2) - (3.2)
Lease liabilities (2.7) (0.7) (3.4)
(22.5) (2.0) (24.5)
Total identifiable net assets at fair value 17.4 1.6 19.0
Goodwill arising on acquisition 13.8 2.0 15.8
Purchase consideration transferred 31.2 3.6 34.8
The fair value of trade receivables amounted to £12.1m for Miers and £0.3m
for Thermodämm. The gross amount of trade receivables was £12.5m for Miers
and £0.3m for Thermodämm. The Group measured the acquired lease liabilities
using the present value of the remaining lease payments at the date of
acquisition. The right-of-use assets were measured at an amount equal to the
lease liability.
The goodwill of £13.8m relating to Miers comprised the value of expected
synergies arising from the acquisition, strategic fit with the UK Interiors
business and geographic location, in particular the developing sales in the
construction accessories sector. The goodwill of £2.0m relating to
Thermodämm comprised the value of the strategic fit within the German branch
landscape and expected synergies arising from the acquisition.
From the date of acquisition, Miers contributed £27.6m of revenue and £0.2m
to underlying profit before tax of the Group for the year ended 31 December
2022, and Thermodämm contributed £2.7m of revenue and £0.1m to underlying
profit before tax. If the acquisitions had taken place at the beginning of the
prior year, revenue for the Group would have been £2,783.0m and profit before
tax for the Group would have been £30.5m. Acquisition-related costs of £0.8m
for Miers and £0.1m for Thermodämm were recognised within Other items in the
Consolidated income statement in 2022.
2022
Miers Thermodämm Total
£m £m £m
Cash paid on completion 26.9 3.4 30.3
Deferred consideration due within one year - 0.2 0.2
Deferred consideration due after more than one year 1.8 - 1.8
Contingent consideration due after more than one year 2.5 - 2.5
Total consideration 31.2 3.6 34.8
The contingent consideration in relation to Miers is payable dependent on the
performance of the business based on adjusted EBITDA exceeding an EBITDA
threshold, as defined in the sale and purchase agreement, for the financial
year to 31 December 2023, subject to a maximum of £2.6m. The range of
contingent consideration payable is therefore £nil to £2.6m, with £2.5m
recognised at the date of acquisition on the basis of forecasts and fair value
calculation. This has been increased to the maximum £2.6m at 31 December 2023
based on actual results for the year, with the £0.1m increase recognised in
profit or loss (within Other items), and the liability included within other
payables due within one year on the Consolidated balance sheet. The fair value
is measured using Level 3 inputs and is sensitive to changes in one or more
observable inputs.
A further amount of up to £4.0m is also payable in relation to Miers in 2024,
which is dependent on the performance of the business for the financial year
to 31 December 2023 and dependent on the vendors remaining within the
business. This is therefore treated as remuneration and is being charged to
the Consolidated income statement as earned. £1.2m was recognised and
included within other payables at 31 December 2022, with a further £2.8m
recognised in 2023 and the total liability of £4.0m included in other
payables due within one year at 31 December 2023.
Analysis of cash flows on acquisition
2022
Miers Thermodämm Total
£m £m £m
Consideration paid (included in cash flows from investing activities) (26.9) (3.4) (30.3)
Net cash acquired with the subsidiary (included in cash flows from investing 4.1 0.2 4.3
activities)
Total net cash flow included in cash flows from investing activities (22.8) (3.2) (26.0)
Transaction costs (included in cash flow from operating activities) (0.8) (0.1) (0.9)
Net cash flow on acquisition (23.6) (3.3) (26.9)
Deferred consideration
A reconciliation of the movement in deferred consideration is provided below:
2023 2022
£m £m
Liability at 1 January 2.5 1.8
Liability arising on acquisitions in the year - 2.0
Amounts paid relating to previous acquisitions (included in cash flows from (0.7) (1.3)
investing activities)
Liability at 31 December 1.8 2.5
Included in current liabilities 1.8 0.7
Included in non-current liabilities - 1.8
Total 1.8 2.5
Contingent consideration
A reconciliation of the movement in the fair value measurement of contingent
consideration is provided below:
2023 2022
£m £m
Liability at 1 January 3.0 0.5
Liability arising on acquisitions in the year - 2.5
Unrealised fair value changes recognised in profit or loss 0.1 -
Liability at 31 December 3.1 3.0
Included in current liabilities (within accruals and other payables) 3.1 0.5
Included in non-current liabilities (within other payables) - 2.5
Total 3.1 3.0
Consideration dependent on vendors remaining within the business
Amounts which may be paid to vendors of recent acquisitions who are employed
by the Group and are contingent upon the vendors remaining within the business
are, as required by IFRS 3 "Business Combinations", treated as remuneration
and charged to the Consolidated income statement as earned. A reconciliation
of the movement in amounts accrued is as follows:
2023 2022
£m £m
Liability at 1 January 1.2 0.6
New amounts accrued 2.8 1.4
Amounts paid (included within cash flow from operating activities) - (0.8)
Liability at 31 December 4.0 1.2
Included in current liabilities (within accruals and other payables) 4.0 -
Included in non-current liabilities (within other payables) - 1.2
Total 4.0 1.2
8. Reconciliation of (loss)/profit before tax to cash generated from operating
activities
2023 2022
£m £m
(Loss)/profit before tax (31.9) 27.5
Net finance costs 35.9 28.7
Depreciation of property, plant and equipment 12.7 12.6
Depreciation of right-of-use assets 63.9 60.6
Amortisation of computer software 2.4 3.2
Amortisation of acquired intangibles 2.8 4.7
Impairment of property, plant and equipment 4.4 2.5
Impairment of goodwill 2.6 3.6
Impairment of acquired intangibles and computer software 2.5 -
Impairment of right-of-use assets 26.2 9.7
(Reversal of impairment)/impairment of lease receivable (1.1) 2.0
Gain on lease transactions (1.1) -
Gain on disposal of property, plant and equipment (4.3) (0.4)
Share-based payment expense 5.5 4.4
Net foreign exchange differences - (1.0)
Decrease in provisions (0.2) (11.4)
Working capital movements:
- Decrease/(increase) in inventories 9.2 (13.0)
- Decrease/(increase) in receivables 45.2 (41.6)
- (Decrease)/increase in payables (46.3) 40.2
Cash generated from operating activities 128.4 132.3
Included within the cash generated from operating activities is a defined
benefit pension scheme employer's contribution of £2.5m (2022: £2.5m)
9. Reconciliation of net cash flow to movements in net debt
2023 2022
£m £m
Increase/(decrease) in cash and cash equivalents in the year 2.7 (18.3)
Net cash outflow from repayment of leases and other debt(1) 84.5 76.1
Decrease in net debt resulting from cash flows 87.2 57.8
Deferred consideration added on acquisitions - (2.0)
Other debt added on acquisitions - (6.6)
Non-cash movement in lease liabilities and lease receivables (105.8) (111.3)
Non-cash items(2) (3.3) 1.4
Exchange differences 7.9 (18.3)
Increase in net debt in the year (14.0) (79.0)
Net debt at 1 January (444.0) (365.0)
Net debt at 31 December (458.0) (444.0)
(1) Including interest element of lease payments.
(2) Other non-cash items relates to the fair value movement of debt and
derivative financial instruments recognised in the year which does not give
rise to a cash inflow or outflow.
Net debt is defined as follows:
2023 2022
£m £m
Non-current assets:
Derivative financial instruments - 0.2
Lease receivables 2.2 1.2
Current assets:
Derivative financial instruments - 1.6
Lease receivables 1.1 0.1
Cash at bank and on hand 132.2 130.1
Current liabilities:
Lease liabilities (64.9) (56.5)
Interest-bearing loans and borrowings (0.8) (0.8)
Deferred consideration (1.8) (0.7)
Derivative financial instruments (1.0) -
Non-current liabilities:
Lease liabilities (264.9) (251.2)
Interest-bearing loans and borrowings (260.0) (266.1)
Deferred consideration - (1.8)
Derivative financial instruments (0.1) (0.1)
Net debt (458.0) (444.0)
Of the cash at bank and on hand of £132.2m, £1.0m is required to be held to
cover bank guarantees issued to third parties and is therefore restricted for
use by the Group.
Analysis of movements in net debt:
At 31 December 2022 Cash flows Non-cash items(1) Exchange differences At 31 December 2023
£m £m £m £m £m
Cash at bank and on hand 130.1 2.7 - (0.6) 132.2
Lease receivables 1.3 (0.6) 2.6 - 3.3
131.4 2.1 2.6 (0.6) 135.5
Liabilities arising from financing activities
Financial assets - derivative financial instruments 1.8 - (1.8) - -
Debts due within one year (1.5) 1.5 (3.6) - (3.6)
Debts due after one year (268.0) - 2.1 5.8 (260.1)
Lease liabilities (307.7) 83.6 (108.4) 2.7 (329.8)
(575.4) 85.1 (111.7) 8.5 (593.5)
Net debt (444.0) 87.2 (109.1) 7.9 (458.0)
(1) Non-cash items include the fair value movement of debt recognised in the
year which does not give rise to a cash inflow or outflow, movements between
debts due within one year and after one year, and non-cash movements in lease
liabilities.
10. Dividends
No interim dividend was paid for the year ended 31 December 2023 and no final
dividend is proposed. No interim or final dividend was proposed or paid for
the year ended 31 December 2022. No dividends have been paid between 31
December 2023 and the date of signing the Financial statements.
11. Provisions
Onerous leases Leasehold dilapidations Onerous contracts Other amounts Total
£m £m £m £m £m
At 1 January 2023 0.1 24.4 0.9 1.5 26.9
Unused amounts reversed in the period - (1.1) - (0.2) (1.3)
Utilised (0.1) (1.0) (1.1) (0.8) (3.0)
New provisions 0.3 3.5 0.2 2.4 6.4
Exchange differences - (0.1) - - (0.1)
At 31 December 2023 0.3 25.7 - 2.9 28.9
2023 2022
£m £m
Included in current liabilities 7.9 9.6
Included in non-current liabilities 21.0 17.3
Total 28.9 26.9
Onerous leases
In accordance with IFRS 16, the future rental payments due over the remaining
term of existing lease contracts is included in the lease liability, with the
right-of-use asset impaired to reflect the future cost not covered through
sublease income. The remaining onerous lease provision relates to other
non-rental costs due over the remaining lease term based on expected value of
costs to be incurred and assumptions regarding subletting. The balance at 31
December 2023 is payable over the relevant lease terms, the longest unexpired
term being 18 years to 2041.
Leasehold dilapidations
This provision relates to contractual obligations to reinstate leasehold
properties to their original state of repair. The provision is calculated
based on both the estimated liability to rectify or reinstate leasehold
improvements and modifications carried out on the inception of the lease
(recognised on inception with corresponding fixed asset) and the liability to
rectify general wear and tear which is recognised as incurred over the life of
the lease. The costs will be incurred both at the end of the leases and during
the lease term (wear and tear).
Onerous contracts
Onerous contract provisions related to licence fee commitments where no future
economic benefit was expected to be obtained, principally in relation to the
SAP S/4HANA implementation following the change in scope of the project in
previous years. The licence fee contract is now ended and there is no
remaining provision at 31 December 2023.
Other amounts
Other amounts relate principally to claims and warranty provisions based on
expected value and past experience and provisions for restructuring costs
based on expected value but where the amount and timing are uncertain. The
transfer of economic benefit is expected to be made between one and four
years' time.
As disclosed in the prior year, two of SIG's wholly owned subsidiaries in
Benelux were subject to legal proceedings brought by a customer in connection
with the installation of insulation at an industrial facility in Belgium. A
provision was recognised within "Other amounts" at 31 December 2022. The
matter was settled during the year, included within the "utilised" amount of
£0.8m, and no further provision in relation to this remains at 31 December
2023.
12. Contingent liabilities
At 31 December 2022 the Group disclosed a contingent liability in relation to
legal proceedings being brought against two of the Group's subsidiaries in
Benelux. The claim has been settled during the year and the contingent
liability no longer exists.
As at the balance sheet date, the Group had outstanding obligations under
customer guarantees, claims, standby letters of credit and discounted bills of
up to £12.5m (2022: £11.7m). Of this amount, £6.1m (2022: £5.2m) relates
to a standby letter of credit issued by HSBC Bank plc in respect of the
Group's insurance arrangements.
As part of the disposal of the Building Plastics business in 2017 a guarantee
was provided to the landlord of the leasehold properties transferred with the
business covering rentals over the remaining term of the leases in the event
that the acquiring company enters into administration before the end of the
lease term. The maximum liability that could arise from this would be
approximately £0.6m (2022: £0.8m) based on the remaining future rent
commitment at 31 December 2023. No provision has been made in these financial
statements as it is not considered likely that any loss will be incurred in
connection with this.
13. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and have therefore not been
disclosed.
In 2022, SIG incurred expenses of £0.3m (2022: £0.2m) 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".
2023 2022
£m £m
Short-term employment benefits 6.7 7.9
Termination and post-employment benefits 0.3 0.1
IFRS 2 share-based payment expense 4.6 2.9
11.6 10.9
Principal risks and uncertainties
The Board, supported by the Audit Committee, sets the strategy for the Group
and ensures the associated risks are effectively identified and managed
through the implementation of the risk management and control frameworks.
The Group employs a three lines model to provide a simple and effective way to
enhance risk and control management processes and ensure roles and
responsibilities are clear. The Board maintains oversight to ensure risk
management and control activities carried out by the three lines are
proportionate to the perceived degree of risk and its own risk appetite across
the Group.
To identify our risks, we focus on our strategic objectives and consider what
might stop us achieving our plan within our strategic planning period. The
approach combines a top-down strategic Group-level view and a bottom-up
operational view of the risks at operating company level. Meetings are held
with our operating company leadership teams to identify the risks within their
operations. These are consolidated and, in conjunction with a series of
discussions held with Executive Leadership Team and Non-Executive Directors,
provide the inputs to identify and validate our principal risks.
The Board regularly monitors the Group risk register, which includes the ten
principal risks to the Group set out below. These risks, if they materialise,
could have a significant impact on the Group's ability to meet its strategic
objectives.
Risk Mitigations
Cyber security: Internal or external cyber attacks could result in system Cyber security continues to receive Board and Executive Leadership Team focus
disruption or sensitive date being compromised with an emphasis on ensuring that appropriate technologies are deployed across
IT infrastructure to manage cyber threats.
In the context of widespread dependency on increasingly complex digital
systems, growing cyber threats are outpacing societies' ability to effectively Regular and independent reviews are performed to assess the nature of
prevent and manage them. These risks are also exacerbated by an increasing potential cyber threats, security processes and initiatives. They also ensure
willingness of nation states to engage in asymmetric cyber warfare to achieve that we implement appropriate tools and processes to better identify and
geopolitical aims and the relative ease with which new artificial intelligence remediate new and emerging cyber risks and vulnerabilities.
(AI) and machine learning (ML) technologies can be utlised for adversarial
purposes. For example Generative AI is making cyberattacks more sophisticated
through more believable social engineering, automated phishing attacks and
adaptive malware. Cyber-incident response protocols are in place to support our ability to
effectively respond to and recover from a cyber threat or incident and ongoing
cyber training campaigns and initiatives ensure employees are alert to the
nature and consequences of cyber-attacks.
There is a risk that we lack the capabilities to effectively prevent, monitor,
respond to, or recover from, suspected cyber-attacks on our IT infrastructure.
Such attacks may result in a loss of data or disruption to IT services which
may have a significant impact on our ability to operate and comply with data Cyber policies are regularly reviewed and updated to ensure they reflect the
protection and privacy laws (e.g. GDPR), and may have a detrimental effect on nature of risks and threats and, for example, during 2023 we have published
our reputation. policies regarding the opportunities and risks regarding the use of new AI and
ML technologies.
Health & Safety: Danger of incident or accident, resulting in injury or The Group Health, Safety and Environment Director is a member of the Executive
loss of life to employees, customers, or the general public Leadership Team and provides strategic leadership for all health, safety and
environmental matters. Local health and safety managers in each of our
businesses provide local leadership and support, monitor and report our
performance and key metrics, and implement actions and initiatives. A new
There is a risk that poor organisational arrangements or behavioural culture Group-wide 'Everyone Safe, Every Day' health and safety strategy, objectives
with regards to health & safety causes harm to individuals and as a result and KPIs were introduced in 2023.
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 and safety standards and arrangements, with assurance provided through
a programme of compliance audits performed by suitably trained and experienced
health and safety professionals.
Macro-economic uncertainty: Macro-economic volatility may impact 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.
Geo-political and macroeconomic events can lead to a decline in general
economic activity and, or including, a decline in construction industry The Group's geographical diversity across Europe, serving customers across
activity. residential, commercial, industrial and infrastructural sectors, combined with
our broad portfolio of categories, product offerings and specialisms, all
serve to reduce the impact of changes in a specific territory or market. While
industry-based KPIs, monitored monthly at a Group and operating company level,
Conflicts in Ukraine and the Middle-East, political and governmental change, help to ensure that warnings and indicators of risks and opportunities are
will all contribute to economic turbulence and volatility which can impact our identified early, and appropriate mitigation strategies implemented.
business.
While headline inflation is broadly expected to fall throughout 2024,
inflation remains uncertain and impacts tighter monetary policy, deflationary
pressures, higher interest rates, higher costs of living and doing-business
across our end markets.
This volatility has the potential to impact customer demand, and create
financial and operational pressure, while adding costs to our operations and
making planning and forecasting more difficult.
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. Our apprenticeships and training academies help develop the near
and long-term skills of our employees.
SIG's ability to deliver its objectives and to compete effectively is, in
part, dependent on its ability to recruit and retain colleagues with the
necessary skills, experience and ability to deliver expected performance We regularly review our organisational structures and accountabilities, and
levels. ensure our structures optimise employee motivation and engagement. Employee
engagement is monitored through an annual survey and a Workforce Engagement
programme run by the Board.
A combination of structural labour and vocational skills shortages in the
construction sector, exacerbated by increased employee concerns regarding the
significant wage inflation pressure resulting from an increased cost of Ongoing enhancements to pay and conditions, including market benchmarking,
living, has the potential to negatively impact SIG's ability to attract, broadening variable remuneration elements and retention and succession
recruit and retain staff across the full spectrum of disciplines. planning also helps to mitigate this risk.
Our businesses have also introduced programmes to support employee health and
wellbeing. This includes training for all employees on keeping themselves and
their colleagues safe and well.
Data quality and governance: Poor data quality could impact our financial Product and customer data quality remains a focus area for our operating
management, fact-based decision making, business efficiency, and credibility companies, who continue to monitor, assess and upgrade their product data
with customers requirements, capabilities and governance considering ongoing changes in
business needs and regulation. We also continue to maintain and upgrade our
ERP systems where relevant to ensure these systems support the required data
quality and governance required.
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): Reputational impacts from poor Our ESG commitments include a focus on health and safety leadership, reaching
environmental, social and governance arrangements and performance net zero carbon, sending zero SIG waste to landfill, partnering to reduce
carbon and waste across the supply chain, and becoming an employer of choice
in our industry.
Public and commercial consciousness, driven in part by ongoing regulatory
pressures, continues to evolve on a wide range of environmental, social and
governance issues, including climate change, employee wellbeing and how an These commitments will be supported by verified data to ensure that progress
organisation contributes to society. in achieving these aims and ambitions is monitored and subject to appropriate
rigour. To do this, we have enhanced our sustainability reporting and
budgeting processes (particularly in relation to carbon emissions and waste)
to ensure that we are able to effectively track both the progress and
While SIG has a long and rich heritage in helping the construction industry financial impacts of commitments.
deliver energy efficient solutions and products, risks remain in terms of how
we deliver our ESG agenda.
In terms of employee wellbeing, each of our businesses has introduced
programmes and initiatives to support employees, underpinned by a Group-wide
This is particularly the case in how we ensure we achieve our stated aims with employee health and wellbeing policy and training for all employees to
regards to climate change and decarbonisation. These risks include the cost understand their responsibilities to keep themselves and their colleagues safe
and complexity of compliance, the challenges presented by the decarbonisation and well.
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: Inability to successfully execute, integrate and We have appropriate M&A resource across the organisation supported, and
leverage merger and acquisition opportunities utilise external advisors where necessary for the effective identification and
prioritisation of acquisition opportunities.
Where necessary, we may from time to time acquire new businesses. Such
decisions are based on detailed plans that assess the value creation Resource is also available in the organisation to ensure that transactions are
opportunity for the Group. By their nature, there is an inherent risk that we subject to the necessary pre and post-acquisition and integration activities
fail to manage the execution and integration risks which may result in delays and processes.
or additional costs and impact the future value and revenues generated.
Clear accountability and authority limits for the initiation and approval of
M&A activity are defined in the Group Delegation of Authority.
Legal or regulatory compliance: Failing to comply with or breaching legal or Our Group General Counsel is a member of the Executive Leadership Team and is
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 and safety, environmental, ethical,
to significant operational disruption or result in enforcement action or fraud, data protection and product safety.
penalties.
The Group's internal controls function ensures that appropriate and effective
controls are in place against material financial misstatement, errors,
omissions or fraud.
Our Code of Conduct is available on our website and forms part of our employee
induction programme. E-learning tools are also deployed across the
organisation to ensure employees are aware of, and understand, their
obligations.
A whistleblowing hotline, managed and facilitated by an independent third
party, is in place throughout the Group. All calls are followed up and
investigated fully with all findings reported to the Board.
Modernisation: Failure to deliver the digital capabilities necessary to We continue to evaluate new technologies and make investments in the digital
support improved efficiency and productivity or to remain competitive in the workplace to ensure that we maintain a competitive digital proposition.
marketplace
Across our markets each operating company is responsible for ensuring that it
Increased technological innovation and change has accelerated the increasing has an appropriate technology roadmap to identify how it implements the
role digitalisation will have in the construction materials supply chain. We necessary technologies and ways of working to ensure that it can maximise
continue to seek opportunities to ensure we can deliver digital solutions to digital opportunities in terms of enhancing the customer experience and
enable a more efficient, integrated, and frictionless experience for our optimising transactional, fulfilment or process efficiencies.
colleagues, customers and suppliers.
During 2023, we invested in new ERP technologies in our Benelux and French
This risk may be exacerbated by legacy systems and technologies which are businesses and started the necessary planning for a number of ERP replacement
heavily customised, require significant system maintenance to prevent outages or enhancement programmes across our operating companies.
and lack the functionality to allow their integration into a more modern
digital infrastructure.
Change management: Inability to change and grow the organisation as planned in Operating companies continue to manage change portfolios through programme
order to meet growth targets management governance committees. Increased monitoring has been implemented,
particularly regarding progress against growth initiatives, in line with our
strategy.
The Group is committed to improving its operating performance, with a
strategy, key actions and progress on these.
Monitoring of business growth metrics and early warning indicators or trends
continues as part of business reviews at both the management and Board level.
This will inevitably require changes to organisational structures, roles, and
ways of working, while we continue to modernise existing and implement new IT
systems. Our ongoing employee engagement surveys continue to facilitate the early
identification of change impact in terms of our employees, and action plans
are implemented and monitored accordingly.
There is a risk that these initiatives, allied to the impacts of challenging
market conditions for our business and employees, results in 'change fatigue'
and either future changes are not implemented as planned, or the benefits are
not realised.
Non-statutory information
The Group uses a 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 and to adjust for
Other items (as explained in further detail within the Accounting policies).
This also reflects how the business is managed and measured on a day-to-day
basis. Measures presented are aligned with the key performance measures used
in the business and as included in the Strategic report.
a) Net debt
Net debt is a key metric for the Group, and monitoring it is an important
element of treasury risk management for the Group. Net debt excluding the
impact of IFRS 16 is no longer relevant for financial covenant purposes but is
still monitored for comparative purposes.
2023 2022
£m £m
Reported net debt 458.0 444.0
Lease liabilities recognised in accordance with IFRS 16 (307.3) (285.0)
Lease receivables recognised in accordance with IFRS 16 3.3 1.3
Net debt excluding impact of IFRS 16 154.0 160.3
b) Leverage
Leverage is one of the covenants applicable to the RCF and is used as a key
performance metric for the Group. It is calculated as net debt divided by the
last twelve months underlying EBITDA.
2023 2022
£m £m
Underlying operating profit 53.1 80.2
Add back:
Depreciation of right-of-use assets and property, plant and equipment 76.6 73.2
Amortisation of computer software 2.4 3.2
Underlying EBITDA 132.1 156.6
Reported net debt 458.0 444.0
Leverage 3.5x 2.8x
Leverage excluding the impact of IFRS 16 is calculated as follows:
2023 2022
£m £m
Underlying operating profit 53.1 80.2
Impact of IFRS 16 (13.5) (8.6)
Underlying operating profit excluding impact of IFRS 16 39.6 71.6
Add back:
Depreciation excluding impact of IFRS 16 13.0 12.2
Amortisation of computer software 2.4 3.2
Underlying EBITDA excluding the impact of IFRS 16 55.0 87.0
Net debt excluding the impact of IFRS 16 154.0 160.3
Leverage excluding the impact of IFRS 16 2.8x 1.8x
c) Like-for-like sales
Like-for-like sales is calculated on a constant currency basis and represents
the growth in the Group's sales per day excluding any acquisitions or
disposals completed or agreed in the current and prior year. Revenue is not
adjusted for branch openings and closures. This measure shows how the Group
has developed its revenue for comparable business relative to the prior
period. As such it is a key measure of the growth of the Group during the
year. Underlying revenue is revenue from continuing operations excluding
non-core businesses.
UK Interiors UK Exteriors UK Specialist Markets UK France Interiors France Exteriors France Germany Benelux Ireland Poland Total Group
Total Total
£m £m £m £m £m £m £m £m £m £m £m £m
Statutory and underlying revenue 2023 563.7 370.4 266.0 1,200.1 219.0 471.3 690.3 462.1 116.9 94.1 237.9 2,801.4
Less inter-segment revenue (7.2) (1.0) (18.4) (26.6) (0.1) (13.3) (13.4) - - (0.2) - (40.2)
External revenue 556.5 369.4 247.6 1,173.5 218.9 458.0 676.9 462.1 116.9 93.9 237.9 2,761.2
Statutory and underlying revenue 2022 566.7 363.8 239.2 1,169.7 218.5 475.3 693.8 457.9 115.9 108.3 230.8 2,776.4
Less inter-segment revenue (5.2) (0.7) (16.0) (21.9) (0.1) (9.7) (9.8) (0.1) - - (0.1) (31.9)
External revenue 561.5 363.1 223.2 1,147.8 218.4 465.6 684.0 457.8 115.9 108.3 230.7 2,744.5
% change year on year:
Underlying revenue (0.9)% 1.7% 10.9% 2.2% 0.2% (1.6)% (1.0)% 0.9% 0.9% (13.3)% 3.1% 0.6%
Impact of currency - - - - (1.6)% (1.6)% (1.6)% (1.6)% (1.6)% (1.4)% (5.1)% (1.2)%
Impact of acquisitions - - (16.4)% (3.0)% - - - (1.0)% - - - (1.4)%
Impact of working days (0.4)% (0.4)% (0.4)% (0.4)% 0.4% 0.4% 0.4% 0.4% 0.4% - - -
Like-for-like sales (1.3)% 1.3% (5.9)% (1.2)% (1.0)% (2.8)% (2.2)% (1.3)% (0.3)% (14.7)% (2.0)% (2.0)%
d) Operating margin
This is used to enhance understanding and comparability of the underlying
financial performance of the Group and is calculated as underlying operating
profit as a percentage of underlying revenue.
2023 2022
£m £m
Underlying revenue 2,761.2 2,744.5
Underlying operating profit 53.1 80.2
Operating margin 1.9% 2.9%
e) Free cash flow
Free cash flow is defined as all cash flows excluding M&A transactions,
dividend payments and financing transactions. Operating cash flow represents
free cash flow before interest and financing, costs of refinancing and tax.
These measures are used to enhance understanding and comparability of the cash
generation of the Group.
2023 2022
£m £m
Increase/(decrease) in cash and cash equivalents in the year 2.7 (18.3)
Add back:
Net cash flow on the purchase of businesses - 26.0
Settlement of amounts payable for previous purchases of businesses 0.7 1.3
Investment in financial assets - 0.2
Repayment of borrowings 0.8 1.4
Free cash flow 4.2 10.6
Add back:
Finance costs paid 36.9 30.1
Finance income received (2.2) (1.3)
Other refinancing cash costs(1) - 1.1
Tax paid 14.0 14.3
Operating cash flow 52.9 54.8
(1) Includes costs accrued in the prior year and paid in the current year.
f) Other non-statutory measures
In addition to the alternative performance measures noted above, the Group
also uses underlying EPS (as set out in Note 6), underlying net finance costs
(as set out in Note 4) and average trade working capital to sales ratio.
Average trade working capital to sales ratio is calculated as the average
trade working capital each month end (net inventory, gross trade creditors,
net trade receivables and supplier rebates receivable) divided by underlying
revenue.
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