REG - SIG PLC - Half Yearly Report <Origin Href="QuoteRef">SHI.L</Origin> - Part 2
11/08/2015 07:00
- Part 2: For the preceding part double click ID:nRSK6420Va
should revenues be worse than expected, to protect
operating profits and cash flows. After making enquiries, the Directors have
formed a judgement that there is a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future. For this reason, the going concern basis has been adopted in preparing
this Interim Report.
Changes in accounting policy
Adoption of new and revised accounting standards
Since the 2014 Annual Report and Accounts was published no significant new
standards and interpretations have been issued.
The following new and revised standards became effective during 2015:
· IFRS 9 "Financial Instruments";
· Annual improvements 2010-2012 cycle; and
· Annual improvements 2011-2013 cycle.
The adoption of these standards has not had a material impact on the financial
statements of the Group.
2. Segmental information
(a) Segmental results
In accordance with IFRS 8
"Operating Segments", the Group
identifies its reportable segments
as those upon which the Group
Board regularly bases its opinion
and assesses performance. The
Group has deemed it appropriate to
aggregate its operating segments
into two reported segments: UK and
Ireland, and Mainland Europe. The
constituent operating segments
have been aggregated as they have
similar: products and services;
production processes; types of
customer; methods of distribution;
regulatory environments; and
economic characteristics. There
has been no change in the basis of
measurement of segment profit or
loss in the period.
Unaudited six months ended 30 June 2015 Unaudited six months ended 30 June 2014 Audited year ended 31 December 2014
UK and Ireland Mainland Europe Eliminations Total UK and Ireland Mainland Europe Eliminations Total UK and Ireland Mainland Europe Eliminations Total
£m £m £m £m £m £m £m £m £m £m £m £m
Revenue
Continuing sales 679.2 564.4 - 1,243.6 642.1 636.5 - 1,278.6 1,336.2 1,266.7 - 2,602.9
Sales attributable to businesses - - - - 17.0 12.9 - 29.9 18.6 12.4 - 31.0
divested in 2014
Inter-segment sales* 1.3 5.6 (6.9) - 1.0 5.7 (6.7) - 2.4 11.2 (13.6) -
Total revenue 680.5 570.0 (6.9) 1,243.6 660.1 655.1 (6.7) 1,308.5 1,357.2 1,290.3 (13.6) 2,633.9
Result
Segment result before Other items 28.0 21.4 - 49.4 25.8 27.5 - 53.3 65.9 54.2 - 120.1
Amortisation of acquired (3.6) (0.9) - (4.5) (4.3) (5.1) - (9.4) (8.9) (10.7) - (19.6)
intangibles
Profits and losses on sale of - - - - (14.5) 6.2 - (8.3) (19.0) 5.0 - (14.0)
businesses and associated
impairment charges
Operating losses attributable to - - - - (3.7) (2.0) - (5.7) (4.7) (2.0) - (6.7)
businesses divested in 2014
Restructuring costs (1.7) (1.7) - (3.4) (1.4) - - (1.4) (7.1) (2.1) - (9.2)
Other one-off items (2.9) (0.2) - (3.1) (5.4) - - (5.4) (7.4) (0.1) - (7.5)
Segment operating profit/(loss) 19.8 18.6 - 38.4 (3.5) 26.6 - 23.1 18.8 44.3 - 63.1
Parent Company costs (4.8) (4.0) (9.9)
Operating profit 33.6 19.1 53.2
Net finance costs before Other (5.5) (6.3) (12.1)
items
Net fair value losses on (0.9) (1.0) (1.9)
derivative financial instruments
Unwinding of provision discounting (0.4) - (0.2)
Profit before tax 26.8 11.8 39.0
Income tax (expense)/credit (8.4) 5.8 (4.5)
Non-controlling interests (0.1) 0.7 (1.5)
Profit for the period 18.3 18.3 33.0
* Inter-segment sales are charged
at the prevailing market rates.
Notes to the Condensed Interim Financial Statements (Continued)
Notes to the Condensed Interim Financial Statements (Continued)
2. Segmental information (Continued)
(a) Segmental results (Continued)
Balance Sheet Unaudited six months ended 30 June 2015 Unaudited six months ended 30 June 2014 Audited year ended 31 December 2014
UK and Ireland Mainland Europe Total UK and Ireland Mainland Europe Total UK and Ireland Mainland Europe Total
£m £m £m £m £m £m £m £m £m
Assets
Segment assets 766.6 632.2 1,398.8 668.8 706.6 1,375.4 666.4 645.6 1,312.0
Unallocated assets:
Derivative financial instruments 30.4 23.1 33.9
Deferred consideration 1.5 1.5 1.5
Cash and cash equivalents 11.1 8.7 25.5
Deferred tax assets 7.6 11.4 9.6
Other financial assets 1.0 - 0.3
Other assets 3.6 1.3 1.5
Consolidated total assets 1,454.0 1,421.4 1,384.3
Liabilities
Segment liabilities 316.4 182.7 499.1 294.8 199.2 494.0 283.9 165.4 449.3
Unallocated liabilities:
Private placement notes 245.2 244.7 254.3
Bank loans 67.1 - -
Derivative financial instruments 1.0 0.5 1.1
Other liabilities 13.4 12.1 15.3
Consolidated total liabilities 825.8 751.3 720.0
Other segment information
Capital expenditure on:
Property, plant and equipment 15.9 4.5 20.4 6.5 7.5 14.0 16.5 14.8 31.3
Computer software 3.2 0.4 3.6 4.5 0.3 4.8 10.1 0.3 10.4
Goodwill and intangible assets (excluding computer software) 29.1 2.3 31.4 4.7 - 4.7 23.1 8.5 31.6
Non-cash expenditure:
Depreciation 6.4 4.7 11.1 5.5 4.9 10.4 11.4 9.8 21.2
Impairment of property, plant and equipment and computer software - - - 6.1 - 6.1 6.1 - 6.1
Amortisation of acquired intangibles and computer software 4.8 1.1 5.9 5.1 5.6 10.7 10.8 11.6 22.4
Impairment of goodwill - - - 3.3 - 3.3 3.3 - 3.3
Notes to the Condensed Interim Financial Statements (Continued)
2. Segmental information (Continued)
(b) Revenue by product group
The Group focuses its activities into three product sectors: Insulation and Energy Management; Exteriors; and Interiors. The following table provides an analysis of Group sales by type of product:
Unaudited six months ended 30 June 2015 Unaudited six months ended 30 June 2014 Audited year ended 31 December 2014
£m £m £m
Insulation and Energy Management 563.0 586.8 1,195.0
Exteriors 381.2 381.8 807.6
Interiors 299.4 310.0 600.3
Total continuing 1,243.6 1,278.6 2,602.9
Attributable to businesses divested in 2014 - 29.9 31.0
Total 1,243.6 1,308.5 2,633.9
(c) Geographic information
The Group's revenue from external customers and its non-current assets (including property, plant and equipment, goodwill and intangible assets but excluding deferred tax, deferred consideration and derivative financial instruments) by geographical location are as follows:
Unaudited six months ended 30 June 2015 Unaudited six months ended 30 June 2014 Audited year ended31 December 2014
Revenue Non-current assets Revenue Non-current assets Revenue Non-current assets
Country £m £m £m £m £m £m
United Kingdom 644.2 360.9 607.8 300.1 1,265.2 323.2
Ireland 35.0 0.9 34.3 0.8 71.0 0.8
France 261.7 189.3 300.8 212.2 586.1 205.7
Germany and Austria 178.7 16.7 205.1 16.3 412.2 17.8
Poland 48.0 15.4 53.3 17.2 112.0 16.8
Benelux* 76.0 28.6 77.3 29.9 156.4 31.7
Total continuing 1,243.6 611.8 1,278.6 576.5 2,602.9 596.0
Attributable to businesses divested in 2014 - - 29.9 0.1 31.0 -
Total 1,243.6 611.8 1,308.5 576.6 2,633.9 596.0
* Includes Air Trade Centre. There is no material difference between the basis of preparation of the information reported above and the Accounting Policies adopted by the Group.
3. Other items
"Other items" have been disclosed in a separate column within the Condensed Consolidated Income Statement in order to provide a better indication of the underlying earnings of the Group. Included within "Other items" are the following:
Unaudited six months ended 30 June 2015 Unaudited six months ended 30 June 2014 Audited year ended31 December 2014
£m £m £m
Amortisation of acquired intangibles (4.5) (9.4) (19.6)
Profits and losses on sale of businesses and associated impairment charges - (8.3) (14.0)
Operating losses attributable to businesses divested in 2014 - (5.7) (6.7)
Restructuring costs^ (3.4) (1.4) (9.2)
Other one-off items* (3.1) (5.4) (7.5)
Impact on operating profit (11.0) (30.2) (57.0)
Net fair value losses on derivative financial instruments (0.9) (1.0) (1.9)
Unwinding of provision discounting (0.4) - (0.2)
Impact on profit before tax (12.3) (31.2) (59.1)
Income tax credit on Other items 2.0 3.1 8.2
One-off recognition of deferred tax assets - 14.6 14.9
Impact on profit after tax (10.3) (13.5) (36.0)
^ Included within restructuring costs are redundancy costs of £0.6m (30 June
2014: £0.7m; 31 December 2014: £3.9m), property closure costs of £2.0m (30
June 2014: £nil; 31 December 2014: £3.1m), rebranding costs of £nil (30 June
2014: £0.7m; 31 December 2014: £2.2m), and other restructuring costs of £0.8m
(30 June 2014: £nil; 31 December 2014: £nil).
* Other one-off items in the current period relate to acquisition expenses and
contingent consideration (see Note 6).
Notes to the Condensed Interim Financial Statements (Continued)
4. Income tax
The income tax expense/(credit) comprises:
Unaudited six months ended 30 June 2015 Unaudited six months ended 30 June 2014 Audited year ended 31 December 2014
£m £m £m
UK taxation 3.0 (12.4) (7.7)
Overseas taxation 5.4 6.6 12.2
Total income tax expense/(credit) for the period 8.4 (5.8) 4.5
Tax for the six month period ended 30 June 2015 on underlying profits (i.e. before "Other items") is charged at 26.6% (30 June
2014: 27.7%; 31 December 2014: 28.1%), representing the best estimate of the average annual effective tax rate expected for the
full year being applied to the underlying pre-tax income of the six month period to 30 June 2015. On 2 July 2013 the Finance Act
2013 passed through the House of Commons and hence became substantively enacted, which confirmed the proposed reductions in the
UK corporation tax rate by 1% to 20% with effect from 1 April 2015. This rate reduction has been reflected in the calculation of
the Group's deferred tax.
5. Earnings per share
The calculations of earnings per share are based on the following profits and numbers of shares:
Basic and diluted
Unaudited six months ended 30 June 2015 Unaudited six months ended 30 June 2014 Audited year ended 31 December 2014
£m £m £m
Profit after tax 18.4 17.6 34.5
Non-controlling interests (0.1) 0.7 (1.5)
18.3 18.3 33.0
Basic and diluted before Other items
Unaudited six months ended 30 June 2015 Unaudited six months ended 30 June 2014 Audited year ended 31 December 2014
£m £m £m
Profit after tax 18.4 17.6 34.5
Non-controlling interests (0.1) 0.7 (1.5)
Other items:
Amortisation of acquired intangibles 4.5 9.4 19.6
Profits and losses on sale of businesses and associated impairment charges - 8.3 14.0
Operating losses attributable to businesses divested in 2014 - 5.7 6.7
Restructuring costs 3.4 1.4 9.2
Other one-off items 3.1 5.4 7.5
Net fair value losses on derivative financial instruments 0.9 1.0 1.9
Unwinding of provision discounting 0.4 - 0.2
One-off recognition of deferred tax assets - (14.6) (14.9)
Tax credit relating to Other items (2.0) (3.1) (8.2)
Other items attributable to non-controlling interests - (0.8) 1.1
28.6 31.0 70.1
(8.2)
Weighted average number of shares 1.1
Unaudited six months ended 30 June 2015 Unaudited six months ended 30 June 2014 Audited year ended 31 December 2014
Number Number Number
For basic earnings per share 591,141,273 591,100,447 591,112,524
Exercise of share options 99,237 154,065 99,237
For diluted earnings per share 591,240,510 591,254,512 591,211,761
Notes to the Condensed Interim Financial Statements (Continued)
5. Earnings per share (Continued)
Earnings per share
Unaudited six months ended 30 June 2015 Unaudited six months ended 30 June 2014 Audited year ended 31 December 2014
Total basic earnings per share 3.1p 3.1p 5.6p
Total diluted earnings per share 3.1p 3.1p 5.6p
Earnings per share before Other items*
Total basic earnings per share 4.8p 5.2p 11.9p
Total diluted earnings per share 4.8p 5.2p 11.9p
* Earnings per share before Other items has been disclosed in order to present the underlying performance of the Group.
6. Acquisitions
During the period SIG acquired the following companies:
Acquisition name % of share capital acquired Acquisition date Country of incorporation Principal activity
Advanced Cladding & Insulation Group Limited 100% 30 January 2015 United Kingdom Manufacturer and distributor of roofing materials and associated products
Gutters & Ladders (1968) Limited 100% 7 March 2015 United Kingdom Distributor of roofing materials and associated products
Multijoint SA 100% 30 April 2015 Switzerland Distributor of insulating materials and associated products
Undercover Holdings Limited 100% 30 April 2015 United Kingdom Distributor of roofing materials and associated products
Flex-R Limited 100% 1 May 2015 United Kingdom Distributor of flat roofing materials
KG SML System und Metallbau GmbH & Co. 100% 7 May 2015 Germany Distributor of commercial interiors products
Drywall Qatar LLC 49%* 28 May 2015 Qatar Distributor of commercial interiors products
* Although the Group owns less than 50% of the ordinary share capital of
Drywall Qatar LLC it has full operational control of the business. Therefore
the assets, liabilities and results of the business are consolidated in full
in the Group's Condensed Financial Statements.
The Group also acquired the trade and certain assets and liabilities of the
following business:
Acquisition name Acquisition date Country of operation Principal activity
Airtech 23 March 2015 France Distributor of air handling products
The fair value of the net assets of these businesses at acquisition (in
aggregation) were as follows:
£m
Property, plant and equipment 1.6
Inventories 4.5
Trade and other receivables 10.1
Cash 4.3
Trade and other payables (7.7)
Corporation tax (0.9)
Finance leases (0.9)
Net assets acquired 11.0
Intangible assets - customer relationships 22.8
Intangible assets - non-compete clauses 0.4
Deferred tax liability on acquired intangible assets (4.5)
Goodwill 8.2
Total consideration 37.9
Consideration is represented by:
Cash 34.0
Contingent consideration 3.9
Total consideration 37.9
Cash (per above) 34.0
Net cash acquired (4.3)
Settlement of amounts payable for purchase of businesses 29.7
Notes to the Condensed Interim Financial Statements (Continued) 6. Acquisitions (Continued) In accordance with IFRS 3 "Business Combinations", acquisition expenses of £0.6m in relation to the above acquisitions have been recognised within the Condensed Consolidated Income Statement and have been presented in "Other items" in accordance with the Group's accounting policies. In addition, it is currently expected that, dependent upon future profits, a further £16.8m will be paid to the vendors of acquisitions
who are employed by the Group. These payments are contingent upon the vendors remaining within the business, and as required by IFRS 3, this will be treated as remuneration and will be charged to the Income Statement as earned. The related accrual for potential consideration as at 30 June 2015 is £4.3m (30 June 2014: £0.2m; 31 December 2014: £2.9m) after charging £2.5m in the current period. Added to the £0.6m acquisition expenses, this has led to a charge within "Other items" in the Condensed Consolidated
Income Statement of £3.1m in respect of acquisitions. The Directors have made a provisional assessment of the fair value of the net assets acquired. Any further adjustments arising will be accounted for within the hindsight period. These fair value adjustments relate primarily to:(a) a review of the carrying value of all non-current assets to ensure that they accurately reflect their fair value; (b) the alignment of valuation and provisioning methodologies to those adopted by the Group; and(c) an
assessment of all provisions and payables to ensure they are accurately reflected in accordance with the Group's policies. The fair value of financial assets includes trade receivables with a fair value of £9.1m and a gross contractual value of £9.3m. The best estimate at the date of acquisition of the contractual cash flows not to be collected is £0.2m. Included within goodwill is the benefit of staff acquired as part of the business and strategic acquisition synergies which are specifically excluded in
the identification of intangible assets on acquisition in accordance with the relevant accounting standards. Goodwill arising is not deductible for tax purposes. Post-acquisition revenue and operating profit for the period ended 30 June 2015 for all 2015 acquisitions amounted to £10.9m and £1.5m respectively. The Directors estimate that the combined pre-acquisition revenue and operating profit of the 2015 acquisitions for the period from 1 January 2015 to the respective acquisition dates was £15.1m and
£2.8m respectively. Post balance sheet events On 31 July 2015, the Group acquired 100% of the issued share capital of AIS Insulation Supplies Limited, Ainsworth Insulation Limited and Ainsworth Insulation Supplies Limited (the "Ainsworth Group") for net consideration of £10.9m, with net assets acquired of £2.1m. The Ainsworth Group is a distributor of thermal, acoustic, fire and building insulation products registered in the United Kingdom.
7. Reconciliation of operating profit to cash generated from operating activities
Unaudited six months ended 30 June 2015 Unaudited six months ended 30 June 2014 Audited year ended 31 December 2014
£m £m £m
Operating profit 33.6 19.1 53.2
Depreciation 11.1 10.4 21.2
Amortisation of computer software 1.4 1.3 2.8
Impairment of property, plant and equipment - 6.1 6.1
Profits and losses on sale of businesses and associated impairment charges - 8.3 14.0
Amortisation of acquired intangibles 4.5 9.4 19.6
Profit on sale of property, plant and equipment (0.3) (1.2) (2.2)
Share-based payments 0.7 0.4 0.7
Working capital movements (39.5) (29.3) (19.8)
Cash generated from operating activities 11.5 24.5 95.6
Included in cash generated from operating activities is a special contribution to the defined benefit pension scheme of £2.5m
(30 June 2014: £2.5m; 31 December 2014: £2.5m) and cash paid on current and prior period restructuring costs of £3.2m (30 June
2014: £4.4m; 31 December 2014: £10.8m). Included within working capital movements are payments of £1.1m (30 June 2014: £nil; 31
December 2014: £nil) in settlement of contingent consideration dependent upon the vendors remaining with the business.
Notes to the Condensed Interim Financial Statements (Continued)
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