Final Results

SIG PLC 9 March 2001 P R E S S R E L E A S E 9 March 2001 SIG plc PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2000 SIG plc is Europe's largest specialist distributor of insulation and related products with market leading positions in all its main product areas and regions. 2000 has been a year of further development and progress. SIG has reported improved sales and operating profits in all its principal businesses with a particularly pleasing performance in the difficult German market. * Sales for the year increased 11% to £931.9m (1999: £841.3m) * Operating profit margin, pre-goodwill amortisation, has increased to 5.6% (1999: 5.3%) giving operating profit up 17% to £52.3m * UK trading profits increased by 13% to £41.0m (1999: £36.2m), mainland Europe was up 17% to £12.2m (1999: £10.4m) and the USA was up to £2.1m (1999: £0.8m) * Strong organic growth in operating profits pre goodwill amortisation of 13% * Profit before taxation was up 14% to £48.2m (1999: £42.3m) * Earnings per share up 13.5% to 27.7p (1999: 24.4p) * Proposed final dividend of 6.8p per share making a total dividend of 10.2p per share, an increase of 9.7% Barrie Cottingham, Chairman of SIG, commenting on the results, said: 'Over the past few years, we have demonstrated our capacity to perform consistently well in competitive market conditions.' 'The trading environment will remain challenging, however, given our demonstrable selling strengths, the proven quality of our management team, and trading in the first two months, the Board is confident that further progress will be made in the current year.' Enquiries: Bill Forrester, Chief Executive SIG plc today 020 7251 3801 Frank Prust, Finance Director SIG plc thereafter 0114 285 6300 Rupert Younger/ Faeth Finnemore Finsbury 020 7251 3801 Introduction The year 2000 has been another period of good progress for the Group. Significant organic growth in sales and operating profit has been achieved in all SIG's principal businesses. This is particularly pleasing in view of the challenging conditions prevailing in most of its main markets. The investment made in management, sales resources and technology has enabled SIG to increase market share and has strengthened further its leading position in chosen sectors in the UK and mainland Europe. Results Sales for the year increased 11% to £931.9m (1999: £841.3m) and Group profit before taxation was up 14% to £48.2m (1999: £42.3m). Earnings per share were 27.7p against 24.4p in the previous year, an increase of 13.5%. Operating profits before goodwill amortisation have increased by 17% from £44.8m to £ 52.3m. Acquisitions during the year have contributed sales of £28.1m and operating profits of £1.7m. The Group operating profit margin has increased to 5.6% from 5.3% in the previous year. Dividend The Board is proposing a final dividend of 6.8p per share which, subject to shareholders' approval, will make a total dividend for the year of 10.2p per share, covered 2.7 times, an increase of 9.7%. If approved, the final dividend will be payable on 16 May 2001 to shareholders on the register at 17 April 2001. Review of Operations Strong performances from UK activities have been complemented by continuing recovery in Germany and a good contribution from the growing ceiling and partitioning business in France. SIG's smaller activities in Poland, Holland and the USA all contributed to the overall improvement in performance. The Group's sales performance has been particularly strong and it has produced good organic and like for like growth in its core activities, outperformed its markets and consolidated leadership in chosen sectors. Throughout the year the Group continued to invest in improving selling and customer service capabilities, and several of its businesses benefited from enhancements in information technology. SIG has also been successful in developing its customer base and moving its sales mix to added value and higher margin products. The Group's operating strategy has continued to be focused on driving organic growth and building market strength through acquisition, with several small bolt-on strategic acquisitions made during the year. The results in 2000 have once again demonstrated the resilience of SIG's business and its capability to grow in challenging trading conditions. UK Sales in the UK grew by 12.9% and operating profits by 13.4%. This is an excellent performance in markets which grew modestly in volume demand and once again suffered price deflation. Despite significant rises in fuel costs, operating efficiencies improved and operating costs fell as a percentage of sales. The insulation and related products distribution operations performed well with Sheffield Insulations and Warren Insulation achieving good organic growth, and it benefited from a significant contribution from the industrial insulation distributor, Kitsons Insulation Products. The Group continued to expand the product range and good sales growth was achieved in roofing and flooring products introduced in the previous year. Further penetration of the industrial and commercial building market was also a major factor in the performance. New and enlarged facilities in London, Northern Ireland and Eire enhanced coverage in these areas, and the Group continued to set new and higher standards of customer service through further investment in storage and handling equipment. SIG increased its presence in added-value specialist insulation fabrication activities through the acquisition of Mayplas, a small operator in this field. Despite good sales growth in sealant application, operating profits declined in Miller Pattison, the small specialist insulation contractor. This was due to a reduction in the level of local authority contracts and grant assisted domestic business. The suspended ceiling tile market in the UK grew modestly in volume but suffered a decline in the selling prices of volume products. Despite these conditions, the ceilings and partitioning division produced another excellent performance. Both sales and operating profits improved by over 10%, indicating further strengthening of the Group's position in this sector. During the year CP Supplies and Ceilings Distribution established a central services unit and also benefited from new administration and computing systems. Further investment was also made in enlarged trading facilities in Birmingham and Dublin. The specialist partitioning and office interiors business, Komfort Office Environments, had an excellent year and produced substantial growth in sales and operating profits. Further investment in design capability and increased resources in sales and marketing have resulted in greater penetration of the higher specification market sector, and SIG believes it has gained market share in this important area. Komfort showrooms have been opened in Dublin, Athens and Warsaw as part of its continuing export sales drive. In October 2000 SIG enhanced its position in free-standing screen systems through the acquisition of Screenbase, a market leading specialist manufacturer. The roofing division grew strongly during the year, both organically and by acquisition, producing operating profits up 24% on sales which increased by 25%. The division benefited from a full year contribution from acquisitions made in 1999 which are now fully integrated. Asphaltic Roofing Supplies, the core business in the division, performed well and there were sound contributions from Coleman Roofing Supplies, Roofing Centre Group and South Coast Roofing Supplies. The branch network now numbers 73 and UK coverage was improved by the addition of Shropshire Roofing Supplies, The Formerton Group and Cleveland Roofing Centre, small bolt-on acquisitions made during the year. Increased investment in sales and marketing resources produced good growth in profits in the personal protective equipment distributor, Safety Distribution and further development of its major Midlands based stocking and service unit has increased capacity to service its growing customer base. Europe Overall, mainland European businesses produced good growth in both sales and operating profits. In local currencies, sales increased by 9% and operating profits by 25%, and operating profit margin improved to 4.1% from 3.5%. Against a background of weak demand in Germany and price erosion across most markets, this is an excellent result. The performance in Germany has been particularly encouraging. Despite declining market demand, particularly in the second half of the year, sales in local currency were held at prior year levels, gross and operating margins improved and operating profits rose by 27%. Both WKT and Golinski performed well, deriving cost and efficiency benefits from centralised administrative services, improved management information systems and continued focus on sales and marketing initiatives. Good progress was made in developing the position in the ceilings and partitioning and dry wall sectors, and SIG also produced a sound performance in the industrial division, where sales were maintained in a declining market. SIG believe that, given its strong selling performance in Germany, it has improved its market position and taken market share. SIG strengthened its ceilings and dry lining position in Germany through the acquisition in December of A.B.S., a small distributor based in the North West. The Group continued to invest in the growing construction sector in Poland and the branch network was increased to 13 by the opening of a new insulation and dry lining branch in Szczecin. Sales grew by over 90% in the year, albeit from a low base, and included a full year from Canon Artis, acquired in June 1999. It achieved a positive operating profit contribution for the first time since the initial investment in Poland. 2000 has been another year of progress in France, however, increased investment in the business, and the initial costs of branch openings have impacted upon overall operating profits, which have remained similar to prior year. In positive construction related markets SIG has grown the ceilings and partitioning businesses significantly and 5 new branches have been opened, extending the ceilings network to 13. In sluggish industrial markets, where demand was flat and prices remained under pressure, Ouest Isol, the industrial insulation distributor, performed well maintaining sales and out-performing its markets. In line with the Group's strategy of developing core activities in mainland Europe, SIG entered the ceilings and partitioning market in the Netherlands by the acquisition of two specialist distributors: Nouwens and UMB. These small acquisitions have given the Group a position in key market sectors in a new region and contributed positively to the overall performance of the Group in Europe. Rest of world Trading conditions in the petro-chemical related industrial market in the USA remained difficult, with weak demand and continuing pressure on selling prices. Actions taken in the previous year to reduce costs, develop the sales mix and customer base and to improve operating efficiencies, have resulted in a significant improvement in operating profits. The industrial distribution businesses, Distribution International and Branton Industries have both performed well and BWI, the East Coast based commercial and heating and ventilation insulation distributor, also improved sales and operating profits. Acquisitions In line with the Group's strategic aims it has continued to expand by acquiring small businesses in related areas of activity. In the UK SIG added a small insulation fabricator, three distribution businesses to the roofing products division, and a manufacturer and distributor of partitioning products. In Europe SIG developed further its specialist ceilings and partitioning business through the acquisition of two operations in Holland and one in Germany. These acquisitions, some already fully integrated, will strengthen the Group's core activities and broaden its product and geographical base. E-Commerce SIG continues to develop its internet trading capability and now has three active trading web-sites. Further sites are being developed across the Group. Prospects In the current year, we expect trading conditions in our principal markets to be broadly similar to those in 2000. In the UK volume is expected to grow modestly in the construction sector, and remain stable in the industrial market. Whilst product pricing was generally deflationary in 2000, SIG expects this to change in 2001 and manufacturer input cost pressure should cause selling prices of core products to rise as the year progresses. SIG has strengthened its UK selling resources and consolidated its position as market leader in its main sectors and believes that this will once again enable SIG to outperform its competitors in a challenging trading environment. The Group expects the small bolt-on acquisitions made in 2000 to contribute positively to performance in the current year. The German businesses have performed well in 2000, are well managed and strong in their markets. However, the German construction market is forecast to decline in 2001 and the Group cannot expect to remain immune from any significant downturn. In France, SIG's markets are anticipated to be broadly positive with growth in demand and modest price inflation. In these conditions SIG's growing ceilings and partitioning business and its industrial insulation operations are expected to benefit. SIG expects positive contributions from the small but growing business in Poland and the ceilings and partitioning businesses acquired in Holland. SIG believes the progress made in the US industrial and commercial insulation businesses in 2000 will continue in 2001 in more positive oil related markets. Over the past few years, SIG has demonstrated its capacity to perform consistently well in competitive market conditions. SIG's businesses are robust and well managed and it has strengthened its position in key market sectors through good organic growth and successful bolt-on acquisitions. The trading environment will remain challenging, however, given SIG's demonstrable selling strengths, the proven quality of the management team, and trading in the first two months, the Board is confident that further progress will be made in the current year. Consolidated Profit and Loss Account For the year ended 31 December 2000 2000 2000 1999 1999 £000's £000's £000's £000's Turnover Continuing operations 903,860 841,304 Acquisitions 28,067 - ________ ________ 931,927 841,304 Cost of sales 697,574 632,054 ________ ________ Gross profit 234,353 209,250 Other operating expenses 183,479 165,043 ________ ________ Operating profit Continuing operations 49,145 44,207 Acquisitions 1,729 - ________ ________ 50,874 44,207 Net interest payable 2,703 1,902 ________ ________ Profit before taxation and amortisation of 49,596 42,854 goodwill Amortisation of goodwill 1,425 549 ________ ________ Profit on ordinary activities before taxation 48,171 42,305 Tax on profit on ordinary activities 15,222 13,233 _______ ________ Profit on ordinary activities after taxation 32,949 29,072 Minority interests (all equity) 207 185 Equity dividends paid and proposed 12,036 11,020 _______ _______ Retained profit for the year 20,706 17,867 _______ _______ Earnings per share Basic earnings per share 27.7p 24.4p Fully diluted earnings per share 27.4p 24.2p _______ _______ Earnings per share before goodwill amortisation Basic earnings per share 28.9p 24.9p Fully diluted earnings per share 28.6p 24.7p _______ _______ Consolidated Statement of Total Recognised Gains and Losses For the year ended 31 December 2000 2000 1999 £000's £000's Profit on ordinary activities after taxation and minority 32,742 28,887 interests Currency translation differences on foreign currency net 50 (3,047) investments ______ ______ Total recognised gains and losses for the year 32,792 25,840 Prior year adjustment - (2,716) ______ ______ Total gains and losses recognised since last annual report 32,792 23,124 There is no difference between the results presented above and the results on an unmodified historical cost basis, therefore, a note of historical cost profits is not required. Reconciliation of Movement in Consolidated Shareholders' Funds 2000 1999 £000's £000's Profit after taxation and minority interests 32,742 28,887 Dividends (12,036) (11,020) ________ _______ 20,706 17,867 New share capital issued 60 77 Goodwill written back during the year - 139 Gain/(loss) on foreign currency translation 50 (3,047) Credit to L-TIP reserve 173 207 ________ _______ Net addition to shareholders' funds 20,989 15,243 Opening shareholders' funds 122,459 107,216 ________ _______ Closing shareholders' funds 143,448 122,459 Consolidated Balance Sheet As at 31 December 2000 2000 1999 £000's £000's Fixed assets Intangible assets 36,116 16,035 Tangible assets 59,078 49,946 ________ ________ 95,194 65,981 ________ ________ Current assets Stocks 70,204 61,663 Debtors 172,957 152,628 Cash at bank and in hand 10,509 4,538 ________ ________ 253,670 218,829 Creditors: Amounts falling due within one year (176,066) (136,061) ________ ________ Net current assets 77,604 82,768 ________ ________ Total assets less current liabilities 172,798 148,749 Creditors: Amounts falling due after more than one year (25,299) (22,688) Provision for liabilities and charges (4,051) (3,602) ________ ________ Net assets 143,448 122,459 Capital and reserves Called up share capital 11,823 11,820 Share premium account 12,157 12,100 Capital redemption reserve 347 347 Special reserve 17,278 17,278 Profit and loss account 107,232 86,526 L-TIP reserve 525 352 Exchange reserve (5,914) (5,964) ________ ________ Shareholders' funds (all equity) 143,448 122,459 Consolidated Cash Flow Statement For the year ended 31 December 2000 2000 2000 1999 1999 £000's £000's £000's £000's Net cash inflow from operating 52,837 55,944 activities _________ ________ Returns on investments and servicing of finance Interest received 525 1,162 Interest paid (1,472) (1,808) Interest element of finance lease (1,756) (1,256) rentals ________ ________ Net cash outflow from returns on investments and servicing of finance (2,703) (1,902) Tax paid (10,707) (15,801) Capital expenditure Purchase of tangible fixed assets (18,944) (14,601) Sale of tangible fixed assets 1,042 1,520 _________ ________ (17,902) (13,081) Acquisitions Purchase of subsidiary undertakings (28,276) (14,452) Net overdrafts acquired with subsidiary undertakings (1,196) (2,675) _________ ________ Net cash outflow from acquisitions (29,472) (17,127) Equity dividends paid (11,325) (10,306) Financing Issue of ordinary share capital 60 77 Lease financing 4,608 4,788 Capital element of finance lease rental payments (4,004) (5,367) Repayment of loans (515) (2,293) New loans 974 - Refinancing of bank overdraft - 14,673 ________ ________ Net cash inflow from financing 1,123 11,878 ________ ________ (Decrease)/increase in cash (18,149) 9,605 ________ ________ Notes 1 Segmental information Geographical analysis Turnover 2000 Turnover 1999 Operating Net Operating Net Profit Assets Profit Assets £000's £000's £000's £000's £000's £000's Continuing operations - UK 545,170 40,393 107,487 495,849 36,168 95,341 - Europe 290,262 11,349 60,975 294,608 10,388 48,989 - Rest of world 68,428 1,810 13,862 50,847 801 8,002 - Parent Company - (2,982) (53,463) - (2,601) (29,873) - Amortisation - (1,425) - - (549) - of goodwill ________ ________ ________ ________ ________ _______ 903,860 49,145 128,861 841,304 44,207 122,459 ________ ________ ________ ________ ________ _______ Acquisitions - UK 14,719 607 4,541 - - - - Europe 10,697 863 10,046 - - - - Rest of world 2,651 259 - - - - ________ ________ ________ ________ ________ _______ 28,067 1,729 14,587 - - - ________ ________ ________ ________ ________ _______ Total operations 931,927 50,874 143,448 841,304 44,207 122,459 ________ ________ ________ ________ ________ _______ Turnover and operating profit by destination is not materially different from these amounts. 2 Earnings per share The calculations of earnings per share are based upon the following profits and numbers of shares: Basic and Basic and diluted before goodwill diluted amortisation 2000 1999 2000 1999 £000's £000's £000's £000's Profit after tax 32,949 29,072 32,949 29,072 Minority interests (207) (185) (207) (185) Goodwill amortisation - - 1,425 549 ________ ______ ________ ________ 32,742 28,887 34,167 29,436 ________ ______ ________ ________ Weighted average number of shares: 2000 1999 Number Number For basic earnings per 118,224,134 118,178,515 share Exercise of share options 1,289,382 992,869 __________ __________ For diluted earnings per 119,513,516 119,171,384 share 3 Abridged accounts The 2000 financial information is an abridged version of the Group's financial statements which have not yet been filed with the Registrar of Companies but upon which the auditors have given an unqualified report, which did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The 1999 figures are an extract from the Group's statutory accounts for the year ended 31 December 1999 which have been filed with the Registrar of Companies. 4 Proposed dividend The proposed final dividend of 6.8p per ordinary share, if approved, will be payable on 16 May 2001 to shareholders on the register at 17 April 2001.

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