REG - SIG PLC - Half Yearly Report <Origin Href="QuoteRef">SHI.L</Origin> - Part 3
29/10/2014 12:01
- Part 3: For the preceding part double click ID:nRSL8413Ob
It is currently expected that, dependent upon future profits, £2.5m of
contingent consideration will be paid to the vendors of recent
acquisitions who are employed by the Group. As required by IFRS 3 (2008),
this will be treated as remuneration and will be charged to the Income
Statement in accordance with IAS 19 "Employee Benefits". The related
accrual of potential consideration in the period to 30 June 2014 is £0.2m
(30 June 2013: £0.2m; 31 December 2013: £0.6m). In addition to the
contingent consideration noted above, further consideration may be
payable in 2017 and 2019 in regard to the acquisition of Coxbench IP
Limited, dependent upon both future profitability and the vendor
continuing to offer themselves for employment within the business. The
Group's current estimate of the future amount payable is £13.6m. In
accordance with IAS 19 this will also be treated as remuneration, with
the charge in the period to 30 June 2014 being £0.2m. The only other
impact on the Income Statement is the unwinding of the discounting of the
amount expected to be paid through interest expense, which at 30 June
2014 was less than £0.1m. Added to the £0.2m acquisition expenses and
contingent consideration this has led to a charge within "Other items" in
the Condensed Consolidated Income Statement of £0.6m 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
market 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. 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 2014 for all 2014 acquisitions amounted to £2.4m and £0.3m
respectively. The Directors estimate that the combined pre-acquisition
revenue and operating profit of the 2014 acquisitions for the period from
1 January 2014 to the respective acquisition dates was £0.4m and £0.1m
respectively. Post Balance Sheet Events On 2 July 2014, the Group
acquired 100% of the issued share capital of Technische
Handelmaatschappij "Inatherm" B.V., a specialist distributor of air
handling products based in The Netherlands for an initial consideration
of E4.4m (plus deferred consideration of E0.7m) with net liabilities
acquired of E0.1m. On 15 July 2014, the Group acquired 100% of the issued
share capital of RoofSpace Solutions Limited, a designer, supplier and
installer of panelised roofing systems in the United Kingdom for an
initial consideration of £1.9m with net assets acquired of £1. On 17 July
2014, the Group acquired 100% of the issued share capital of Société
Distribution Matériaux SARL, a distributor of flat roofing materials in
France for an initial consideration of E5.0m with net assets acquired of
E0.5m. Due to the proximity to the period end, further
financial information has not been provided. This will be included in the
Group's Annual Report and Accounts for the year ending 31 December 2014.
7. Divestments
German RoofingAs disclosed in the 2013 Annual Report and Accounts, at 31 December 2013 the Board had resolved to dispose of the
Group's German Roofing operations, and because a loss was anticipated the net assets of the business were impaired to reflect
the estimated net proceeds of £7.2m. The disposal was completed on 28 February 2014 and in accordance with IAS 21 "The Effects
of Changes in Foreign Exchange Rates" the cumulative exchange differences on the retranslation of the net assets and goodwill
and intangibles of the business (a credit of £6.7m) were reclassified to the Condensed Consolidated Income Statement. The Group
has recognised a further £0.5m of costs relating to the sale in the period ended 30 June 2014, resulting in a profit on disposal
within "Other items" in the Condensed Consolidated Income Statement of £6.2m. Miller Pattison LimitedOn 24 April 2014 the Group
sold Miller Pattison Limited, formerly known as SIG Energy Management Limited, for a consideration of £1.5m, resulting in a loss
on disposal of £11.2m. Following the payment of a dividend of £4.7m prior to divestment, the net assets of the business were as
follows:
At date of disposal At 30 June 2013 At 31 December 2013
£m £m £m
Goodwill - 2.0 -
Property, plant and equipment 0.6 0.1 0.5
Cash 6.7 2.2 2.7
Inventories 0.3 0.3 0.4
Trade and other receivables 6.4 28.5 25.5
Trade and other payables (4.5) (13.3) (12.7)
Net assets 9.5 19.8 16.4
Provisions recognised on disposal 3.0
Costs to sell 0.2
Loss on disposal (11.2)
Sale proceeds (deferred consideration) 1.5
Reconciliation of cash flows on divestment of businesses
German Roofing
Sale proceeds less costs to sell 8.8
Cash at date of disposal (1.6)
Net cash flow on divestment 7.2
Miller Pattison Limited
Sale proceeds less costs to sell 1.3
Deferred consideration (1.5)
Cash at date of disposal (6.7)
Net cash flow on divestment (6.9)
Net proceeds from sale of businesses 0.3
The profit arising on the sale of the Group's German Roofing operations and the loss on sale of Miller Pattison Limited, along
with the results for their current and prior periods have been disclosed within "Other items" in the Condensed Consolidated
Income Statement in order to present the underlying earnings of the Group.
8. Reconciliation of operating profit to cash generated from operating activities
Unaudited six months ended 30 June 2014 Unaudited six months ended 30 June 2013 Audited year ended 31 December 2013
£m £m £m
Operating profit 19.1 20.2 15.4
Depreciation 10.4 10.9 21.8
Amortisation of computer software 1.3 0.9 1.9
Impairment of property, plant and equipment 6.1 - 0.2
Profits and losses on sale of businesses and associated impairment charges 5.0 - 42.8
Amortisation of acquired intangibles 9.4 10.2 20.6
Goodwill impairment charge 3.3 - 2.0
Profit on sale of property, plant and equipment (1.2) (0.6) (1.2)
Share-based payments 0.4 0.2 0.4
Working capital movements (29.3) (26.6) (17.7)
Cash generated from operating activities 24.5 15.2 86.2
Included in cash generated from operating activities is a special contribution to the defined benefit pension scheme of £2.5m
(30 June 2013: £3.0m; 31 December 2013: £3.0m) and cash paid on current and prior period restructuring costs of £4.4m (30 June
2013: £10.5m; 31 December 2013: £13.3m).
9. Reconciliation of net cash flow to movements in net debt
Unaudited six months ended 30 June 2014 Unaudited six months ended 30 June 2013 Audited year ended 31 December 2013
£m £m £m
Decrease in cash and cash equivalents in the period (10.4) (34.4) (11.9)
Cash flow from decrease in debt 0.6 2.6 4.0
Increase in net debt resulting from cash flows (9.8) (31.8) (7.9)
Debt added on acquisition (0.1) - (0.3)
Non-cash items* (2.4) (1.2) (6.7)
Exchange differences 2.0 (3.4) (1.0)
Increase in net debt in the period (10.3) (36.4) (15.9)
Net debt at beginning of the period (121.2) (105.3) (105.3)
Net debt at end of the period (131.5) (141.7) (121.2)
* Non-cash items includes the fair value movement of debt recognised in the period which does not give rise to a cash inflow or outflow. Net debt is defined as the net of cash and cash equivalents, bank overdrafts, financial derivatives, associate loans, deferred consideration, private placement debt, bank loans and obligations under finance lease contracts.
10. Financial instruments fair value disclosures
At the balance sheet date the Group held the following financial instruments at fair value:
Unaudited six months ended 30 June 2014 Unaudited six months ended 30 June 2013 Audited year ended 31 December 2013
£m £m £m
Financial assets
Derivative financial instruments 23.1 51.4 29.7
23.1 51.4 29.7
Financial liabilities
Derivative financial instruments 0.5 10.6 2.1
Contingent consideration 0.6 - 0.6
1.1 10.6 2.7
The derivative financial instruments above all have fair values which are calculated by reference to observable inputs (i.e.
classified as level 2 in the fair value hierarchy). The fair values of these derivative financial instruments, adjusted for
credit risk, are calculated by discounting the associated future cash flows to net present values using appropriate market rates
prevailing at the balance sheet date. The carrying value of financial assets and liabilities recorded at amortised cost in the
accounts are approximately equal to their fair value.
11. Called up share capital
Unaudited six months ended 30 June 2014 Unaudited six months ended 30 June 2013 Audited year ended 31 December 2013
£m £m £m
Authorised:
800,000,000 ordinary shares of 10p each (30 June 2013: 800,000,000; 31 December 2013: 800,000,000) 80.0 80.0 80.0
Allotted, called up and fully paid:
591,100,447 ordinary shares of 10p each (30 June 2013: 590,870,448; 31 December 2013: 591,100,447) 59.1 59.1 59.1
The Company allotted no shares during the period (30 June 2013: 33,013; 31 December 2013: 263,012).
12. Retirement benefit schemes
Defined benefit schemes
The Group operates a number of pension schemes, five of which provide defined
benefits based upon pensionable salary. One of these schemes has assets held
in a separate trustee administered fund, and four are overseas book reserve
schemes. The UK defined benefit pension scheme obligation is calculated on a
year to date basis, using the latest triennial valuation as at 31 December
2010. The triennial valuation as at 31 December 2013 is currently underway and
it is anticipated that this will have been completed by 31 December 2014.
The IAS 19 valuation conducted as at 31 December 2013 has been updated to
reflect current market conditions, and as a result an actuarial loss of £5.0m
and an associated deferred tax credit of £1.0m has been recognised within the
Condensed Consolidated Statement of Comprehensive Income.
13. Interim dividend
An interim dividend of 1.42p per share has been declared for the period (30
June 2013: 1.15p). In accordance with IAS 10 "Events After the Balance Sheet
Date", dividends declared after the balance sheet date are not recognised as a
liability in the financial statements.
The final dividend for the year ended 31 December 2013 of 2.4p per share has
been recognised as a distribution to equity holders in the period.
14. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and have therefore not been
disclosed.
During the period the Group exercised its option to acquire the remaining 2%
non-controlling interest of Air Trade Centre Romania s.r.l. The Group now
holds 100% of the ordinary share capital of Air Trade Centre Romania s.r.l.
SIG has a shareholding of less than 0.1% in a German purchasing co-operative.
Net purchases from this co-operative (on commercial terms) totalled £131m in
the period to 30 June 2014 (30 June 2013: £135m; 31 December 2013: £364m). At
the balance sheet date trade payables in respect of the co-operative amounted
to £14m (30 June 2013: £16m; 31 December 2013: £15m).
The Group has not identified any other material related party transactions in
the six month period to 30 June 2014.
15. Risks and uncertainties
The principal risks and uncertainties which could have a material impact upon
the Group's performance over the remaining six months of the 2014 financial
year have not changed significantly from those set out on pages 18 to 21 of
the Strategic Review included in the Group's 2013 Annual Report and Accounts.
These risks and uncertainties include, but are not limited to:
(1) market conditions;
(2) competitors and margin management;
(3) commercial relationships;
(4) government legislation;
(5) debt;
(6) working capital/credit management;
(7) IT infrastructure and resilience; and
(8) availability of key resources.
The primary risk affecting the Group for the remaining six months of the year
is the level of market demand in the markets in which SIG operates. SIG's
diverse market sectors are affected by macroeconomic factors which limit
visibility and therefore render the short to medium-term outlook difficult to
predict. The "Outlook" section of the Trading Review details the current
assessment of the markets in which the Group operates.
16. Seasonality
The Group's operations are not normally affected by significant seasonal
variations between the first and second halves of the calendar year, and it is
likely that the seasonality experienced in 2014 will be largely consistent
with that experienced historically.
Independent review report to SIG plc
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2014 which comprises the Condensed Income Statement, the Condensed
Statement of Comprehensive Income, the Condensed Balance Sheet, the Condensed
Statement of Changes in Equity, the Condensed Cash Flow Statement and related
notes 1 to 16. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity"
issued by the Auditing Practices Board. Our work has been undertaken so that
we might state to the company those matters we are required to state to it in
an independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our review work, for this report, or for the conclusions
we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The Directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2014 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Leeds, United Kingdom
11 August 2014
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