Final Results

SIG PLC 11 March 2002 P R E S S R E L E A S E 11 March 2002 PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2001 SIG plc, Europe's largest specialist distributor of insulation, commercial interiors and roofing products, reports record preliminary results, with sales growth and market share gains made in all three regions of the UK, mainland Europe and the USA. * SIG achieved sales of over £1 billion for the first time in its history with revenues up 11.3% to £1,037.3m. * Operating profit before amortisation of goodwill up 13% to £59.1m (2000 - £52.3m). * Profit before tax and goodwill amortisation up 9% to £54.1m (2000 - £49.6m), after goodwill amortisation pre-tax profits were £51.3m (2000 - £48.2m). * Earnings per share increased 6.5% to 29.5p (2000 - 27.7p). * Proposed final dividend of 7.3p per share, making a total dividend of 11.0p for 2001, up 7.8% from 10.2p in 2000. * David Williams appointed Chief Executive in January 2002. * Seven acquisitions made during the year for £36.5m, including Capco Holdings Ltd, a 19 branch distributor in the UK and Eire. * Since the year end SIG has acquired Proos Roofing Supplies, the UK's second largest distributor for a consideration of approximately £12m. Barrie Cottingham, Chairman of SIG, commenting on the results, said: 'The Group has produced another excellent performance in 2001 endorsing our position as the leading specialist supplier in our key markets.' 'Against a background of mixed market conditions, SIG faces the future with confidence and looks forward to continued progress in the year ahead.' Enquiries: David Williams, Chief Executive SIG plc today 020 7251 3801 thereafter 0114 285 6300 Faeth Finnemore/Gordon Simpson Finsbury 020 7251 3801 Further information and photographs are available on SIG's website www.sigplc.co.uk. A webcast of the results presentation will be available from lunchtime Tuesday 12 March 2002. Introduction The Group has produced another excellent performance in 2001. It is especially pleasing that sales exceeded £1 billion for the first time - a goal that was met even without the contribution from acquisitions made during the year. This endorses SIG's position as the leading specialist supplier in its key markets. Underlining the continued development of SIG's core businesses, almost 70% of the sales growth and over 75% of the growth in operating profits was organic. Acquisitions made during the year all performed in line with SIG's expectations and provide the opportunity to strengthen SIG's operations going forward. Results Sales increased by £105.3m (11.3%) to £1,037.3m (2000 - £931.9m). £70.6m of the increase was organic whilst £34.7m derived from acquisitions made during the year. Sales were up in all three geographic areas in which the Group operates: UK and Eire by 14.1%, Europe by 8.2% and USA by 2.4%. Within mainland Europe, sales increased in every country except Poland. The main highlights in relation to the profit performance of the Group were as follows: * Operating profit before goodwill amortisation up 13.0% to £59.1m (2000 - £52.3m) * Profit before tax and goodwill amortisation up 9% to £54.1m (2000 - £49.6m) * Profit before tax up 6.4% to £51.3m (2000 - £48.2m) The Group operating margin has been maintained at 5.4% during the year. In the UK and Eire, margin improved to 7.7% (2000 - 7.3%). In Europe it reduced from 4.1% in 2000 to 3.2% in 2001, due mainly to the decline in Germany and a loss arising in Poland. In the USA the operating margin was held at 2.9%. Earnings and Dividends Earnings per share increased by 6.5% to 29.5p (2000 - 27.7p) and the Board is proposing a final dividend of 7.3p. Subject to shareholders' approval, this would make the total dividend 11.0p for 2001, up 7.8% from 10.2p in 2000, and represents the eighth successive year of increased dividend. If approved, the final dividend will be payable on 16 May 2002 to shareholders on the register at 19 April 2002. Funding In August 2001, SIG successfully completed its first issue in the U.S. Private Placement market raising the sterling equivalent of £85m to provide additional working capital for the Group's continued expansion and to extend the overall maturity of its debt facilities. Trading Conditions Overall, the markets in which we operate in the UK were positive with modest growth in demand, combined with a small element of price inflation in all three of our product sectors. In Europe, conditions were mixed. France and The Netherlands experienced similar conditions to the UK - modest growth in demand and prices. In Germany, it is estimated that demand in our markets fell by over 8%. In Poland, the fall in prices and reduction in construction sector activity together amounted to a market decline of over 10%. In the USA, whilst prices were maintained, demand fell in the petro-chem sector in the Southern States giving a slightly reduced market overall. Against this background, SIG businesses out-performed in all areas of activity. Review of operations In 2001 SIG made further significant progress, improving sales, operating profits and earnings per share. The Group continued to invest in its core businesses and supplement organic growth with carefully targeted acquisitions. This strategy continues to strengthen the Group's market position for the longer term. UK and Eire SIG achieved an excellent performance in all its core operations in the UK and Eire. * Sales up 14.1% * Operating Profit up 19.8% * Operating Profit Margin improved * Number of trading locations increased by 35 during the year * Sales and operating profits were increased in all three core sectors of Insulation, Roofing and Commercial Interiors In the main Insulation business, the organic improvement in operating profit exceeded 10%, based on a modest volume increase, tight cost control and further good progress in price management. Market pricing was generally stronger than in previous years. Sales were increased in all the Group's main markets, including both the industrial and building sectors and further benefits were gained from concentration on higher margin and added-value products. SIG's ability to meet the demands of its customers was improved and the Group invested further in the delivery vehicle fleet. SIG also made good progress in the sales of new products. During the year the Group added four trading locations to its UK Insulation business, improving its market coverage and broadening its customer base. UK Roofing operations grew very strongly during the year, with sales up more than 15%, chiefly organic. SIG benefited from a range of investments, including an increase in sales management and sales resources, improvements to branch facilities, a broader stock range and the relocation of several branches to larger sites. SIG has firmly established itself as the leading supplier to the roofing industry and it extended its services to all sectors, including flat and pitch roofs, across the whole spectrum from housing refurbishment to industrial and retail buildings. Customer service has been further improved by the investment in additional mechanical off-loading delivery vehicles, which improves the operational efficiency of the fleet. New alliances were formed with several manufacturers during the year and overall market conditions were reasonably positive with a small improvement in the general level of pricing and demand. In Commercial Interiors, organic sales increased by 8%, highlighting a strengthening of SIG's position in a market that is estimated to have seen only modest growth in the year. The commercial interiors market has become more demanding and sophisticated in recent years, and the Group has responded to this by stepping up its investment in new product development and by strengthening its design and planning services. New initiatives during the year included the successful launch of a new office furniture range, an extension to the specialist steel partitioning products, the introduction of new ceiling tile designs and the creation of a new commercial alliance in the interior architectural glass market. Sales of mainstream, mid-market ceilings and partitioning products performed well and the Group relocated several branches to improve its coverage and stockholding capabilities. SIG's development business in the Safety Products and Workwear sector increased sales. Profits were down on prior year due to costs associated with a major reorganisation of the operations. Investments during the year included new product storage systems and new computer aided order picking and tracking systems. Europe Sales overall in Europe increased by 8.2% whilst operating profits fell by 14.6%. This decline was expected and due to two factors: reduced profits in Germany and the loss incurred in Poland. Sales in Germany were up 4.5%, a tremendous achievement against the background of a construction market that fell by an estimated 8% by value. Despite these difficult conditions, which were compounded by price deflation in some areas, the Group's gross margin was held and the gross profit actually increased. However, operating costs increased as a proportion of sales due to investments in branch resources, improved IT facilities and the establishment of new trading locations. SIG also incurred restructuring costs in the year associated with branch closures and the consolidation of the accounting function onto a single site. These measures were part of the continued process of improving the Group's sales effectiveness and its overall efficiency levels in Germany. SIG continues to be profitable in Germany, improving its market position considerably and strengthening its operations for the future. SIG's small business in Poland traded in extremely difficult market conditions. Construction activity is reported to have declined by around 10% and sales fell in line. This decline, coupled with a rise in operational costs and increased provisions for possible bad debts, resulted in a loss of £1.4m during the year. SIG's performance in France was excellent. Sales were up over 9%, substantially ahead of the estimated growth in the Group's market sectors. Progress was made in both the Insulation and Commercial Interiors divisions. Insulation benefited from several large industrial maintenance projects and the Group also grew sales in the air conditioning sector. Growth in SIG's Commercial Interiors operations was very strong. New branches opened in 2000 continued to progress well and the Group opened a new location in Le Mans in mid 2001. SIG's growing operations in The Netherlands performed well and sales and operating profits increased significantly. Most of the sales are within the Commercial Interiors market and the Group has a small, highly specialised insulation fabrication operation that sells to customers in The Netherlands and Germany. Two trading locations were added during the year. USA Sales and operating profits in the USA improved. Safety, environmental and fire protection products performed particularly well and SIG's insulated jacketing and trace heating division had excellent growth in sales and profits. Demand from the petro-chem markets on the Gulf of Mexico continued to be disappointingly sluggish and two branches in Alabama were merged to improve operational efficiencies. Acquisitions SIG made seven acquisitions during 2001, of which two were in Roofing and four in Insulation and related markets in the UK. Capco, acquired in September, strengthened the Group's position in Commercial Interiors in the UK and Eire. Capco also represents SIG's first Roofing Products expansion outside the UK. Since the year end SIG has acquired Proos Roofing Supplies, the UK's second largest distributor, for a consideration of approximately £12m. FRS 17 The company has adopted the transitional arrangements of FRS 17 - Retirement Benefits. If this standard had been adopted in full in 2001, the Group's consolidated net assets would have been reduced by £5.1m, with no material effect on reported earnings. Prospects In the UK SIG expects flat market conditions, particularly in the Industrial and Commercial sectors which account for much of its business, although the Group hopes to see some modest effect from the new Building Regulations (Part L) later in the year. There have been signs of a very slight weakening in the Commercial Interiors new build sector. However, SIG has taken action to extend its product range and remains confident of its prospects in this sector. It expects the Roofing market to remain positive. In Europe, SIG believes market conditions in France and The Netherlands will continue to be steady and expects construction in Germany and Poland to remain weak. In the USA, it anticipates that the industrial and petro-chem markets will weaken slightly. Against the background of these mixed market conditions, SIG faces the future with confidence and looks forward to continued progress in the year ahead. Consolidated Profit and Loss Account For the year ended 31 December 2001 2001 2001 2000 2000 £000's £000's £000's £000's Turnover Continuing operations 1,002,507 931,927 Acquisitions 34,751 - --------- --------- 1,037,258 931,927 Cost of sales 770,193 697,574 --------- --------- Gross profit 267,065 234,353 Other operating expenses 210,753 183,479 --------- --------- Operating profit Continuing operations 54,919 50,874 Acquisitions 1,393 - --------- --------- 56,312 50,874 Net interest payable 5,045 2,703 --------- --------- Profit before taxation and amortisation of goodwill 54,068 49,596 Amortisation of goodwill 2,801 1,425 --------- --------- Profit on ordinary activities before taxation 51,267 48,171 Tax on profit on ordinary activities 16,227 15,222 --------- --------- Profit on ordinary activities after taxation 35,040 32,949 Minority interests (all equity) 160 207 Equity dividends paid and proposed 13,051 12,036 --------- --------- Retained profit for the year 21,829 20,706 ====== ====== Earnings per share Basic earnings per share 29.5p 27.7p Fully diluted earnings per share 29.2p 27.4p ====== ====== Earnings per share before goodwill amortisation Basic earnings per share 31.8p 28.9p Fully diluted earnings per share 31.5p 28.6p ====== ====== Consolidated Statement of Total Recognised Gains and Losses For the year ended 31 December 2001 2001 2000 £000's £000's Profit on ordinary activities after taxation and minority interests 34,880 32,742 Currency translation differences on foreign currency net investments (398) 50 ---------- ---------- Total recognised gains and losses for the year 34,482 32,792 ---------- ---------- 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 2001 2000 £000's £000's Profit after taxation and minority interests 34,880 32,742 Dividends (13,051) (12,036) ---------- ---------- 21,829 20,706 New share capital issued 384 60 (Loss)/gain on foreign currency translation (398) 50 Credit to L-TIP reserve 223 173 ---------- ---------- Net addition to shareholders' funds 22,038 20,989 Opening shareholders' funds 143,448 122,459 ---------- ---------- Closing shareholders' funds 165,486 143,448 ======= ======= Consolidated Balance Sheet As at 31 December 2001 2001 2000 £000's £000's Fixed assets Intangible assets 67,413 36,116 Tangible assets 65,031 59,078 ---------- ---------- 132,444 95,194 ---------- ---------- Current assets Stocks 78,504 70,204 Debtors 199,330 172,957 Cash at bank and in hand 10,348 10,509 ---------- ---------- 288,182 253,670 Creditors: Amounts falling due within one year (151,868) (176,066) ---------- ---------- Net current assets 136,314 77,604 ---------- ---------- Total assets less current liabilities 268,758 172,798 Creditors: Amounts falling due after more than one year (99,815) (25,299) Provision for liabilities and charges (3,457) (4,051) ---------- ---------- Net assets 165,486 143,448 ======= ======= Capital and reserves Called up share capital 11,865 11,823 Share premium account 12,499 12,157 Capital redemption reserve 347 347 Special reserve 17,278 17,278 Profit and loss account 129,503 107,232 L-TIP reserve 306 525 Exchange reserve (6,312) (5,914) ---------- ---------- Shareholders' funds (all equity) 165,486 143,448 ======= ======= Consolidated Cash Flow Statement For the year ended 31 December 2001 2001 2001 2000 2000 £000's £000's £000's £000's Net cash inflow from operating activities 50,932 52,837 ---------- ---------- Returns on investments and servicing of finance Interest received 1,665 525 Interest paid (2,539) (1,472) Interest element of finance lease rentals (1,863) (1,756) ---------- ---------- Net cash outflow from returns on investments and servicing of finance (2,737) (2,703) Tax paid (17,888) (10,707) Capital expenditure Purchase of tangible fixed assets (21,755) (18,944) Sale of tangible fixed assets 2,249 1,042 ---------- ---------- (19,506) (17,902) Acquisitions Purchase of subsidiary undertakings (38,530) (28,276) Net cash/ (overdrafts) acquired with subsidiary undertakings 1,994 (1,196) ---------- ---------- Net cash outflow from acquisitions (36,536) (29,472) Equity dividends paid (12,431) (11,325) Financing Issue of ordinary share capital 384 60 Lease financing 5,212 4,608 Capital element of finance lease rental payments (4,426) (4,004) Repayment of loans (15,643) (515) New loans 91,284 974 ---------- ---------- Net cash inflow from financing 76,811 1,123 ---------- ---------- Increase/(decrease) in cash 38,645 (18,149) ======= ======= Notes 1 Basis of preparation The preliminary announcement does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The announcement has been agreed with the company's auditors for release. The financial information has been prepared on a basis consistent with the previous year. The 2001 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 2000 figures are an extract from the Group's statutory accounts for the year ended 31 December 2000 which have been filed with the Registrar of Companies. 2 Segmental information Geographical analysis 2001 2000 Operating Net Operating Net Turnover Profit Assets Turnover Profit Assets £000's £000's £'000's £000's £000's £000's Continuing operations - UK & Eire 604,132 47,727 96,155 559,889 41,000 85,503 - Europe 325,614 10,424 72,167 300,959 12,212 69,872 - Rest of world 72,761 2,097 15,399 71,079 2,069 13,862 - Parent Company - (2,528) (58,813) - (2,982) (25,789) - Amortisation of goodwill - (2,801) - - (1,425) - ---------- ---------- ---------- ---------- ---------- ---------- 1,002,507 54,919 124,908 931,927 50,874 143,448 ---------- ---------- ---------- ---------- ---------- ---------- Acquisitions - UK & Eire 34,751 1,393 40,578 - - - ---------- ---------- ---------- ---------- ---------- ---------- Total operations 1,037,258 56,312 165,486 931,927 50,874 143,448 ======= ======= ======= ======= ======= ======= Turnover and operating profit by destination is not materially different from these amounts. 3 Earnings per share The calculations of earnings per share are based upon the following profits and numbers of shares: Basic and diluted before Basic and diluted goodwill amortisation 2001 2000 2001 2000 £000's £000's £000's £000's Profit after tax 35,040 32,949 35,040 32,949 Minority interests (160) (207) (160) (207) Goodwill amortisation - - 2,801 1,425 ---------- ---------- ---------- ---------- 34,880 32,742 37,681 34,167 ---------- ---------- ---------- ---------- Weighted average number of shares: 2001 2000 Number Number For basic earnings per share 118,415,817 118,224,134 Exercise of share options 1,215,171 1,289,382 -------------- -------------- For diluted earnings per share 119,630,988 119,513,516 ========= ========= Earnings per share before goodwill amortisation is presented in order to give an indication of the underlying performance of the Group. 4 Reconciliation of operating profit to net cash inflow from operating activities 2001 2000 £000's £000's Operating profit 56,312 50,874 Depreciation and amortisation 17,101 13,529 Profit on sale of tangible fixed assets (504) (329) Changes in working capital (21,977) (11,237) --------- --------- Net cash inflow from operating activities 50,932 52,837 --------- --------- 5 Reconciliation of net cash flow to movements in net debt 2001 2000 £000's £000's Increase/(decrease) in cash in the year 38,645 (18,149) Cash inflow from increase in debt (76,427) (1,063) --------- --------- Changes in net debt resulting from cash flows (37,782) (19,212) Acquisitions (84) (913) Exchange differences 935 (946) --------- --------- Movement in net debt in the year (36,931) (21,071) Net debt at 1 January 2001 (72,397) (51,326) --------- --------- Net debt at 31 December 2001 (109,328) (72,397) --------- --------- 6 Proposed dividend The proposed final dividend of 7.3p per ordinary share, if approved, will be payable on 16 May 2002 to shareholders on the register at 19 April 2002. This information is provided by RNS The company news service from the London Stock Exchange

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