Final Results - Year Ended 31 December 1999

SIG PLC 8 March 2000 PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 1999 SIG plc, Europe's largest specialist distributor of insulation and related products, has had an excellent year, once again demonstrating its capacity to grow in moderate trading conditions and to continue to outperform its markets. Organic growth in operating profits is well ahead of last year and market share has been increased in all SIG's main markets. Particularly good results from the UK operations have been supported by a significant recovery in the German businesses. - sales increased 6% to £841m (1998 £796m) - operating margin on sales was 5.3% compared with 4.7% last year, giving operating profit up 18% to £44.2m - strong organic growth in operating profits of 14% - profit before tax rose 20% to £42.3m (1998 £35.3m) - earnings per share were 24.4p, an increase of 21% - proposed final dividend of 6.2p per share giving a total dividend for the year up 10.7% at 9.3p per share - e-commerce strategy well advanced Barrie Cottingham, Chairman of SIG, commenting on the results, said: 'Trading in the first two months of the year has been encouraging, and this, combined with the strengths of our businesses and our proven ability to produce organic growth, leads the Board to view the current year with confidence.' Enquiries: Bill Forrester, Chief Executive SIG plc today 0171 251 3801 Frank Prust, Finance Director SIG plc thereafter 0114 285 6300 Rupert Younger/ Faeth Finnemore Finsbury 0171 251 3801 Introduction The Group has produced excellent results for the year and good progress has been made in SIG's principal areas of activity. Organic growth in operating profits is well ahead of last year and SIG has increased market share in all its main markets. Particularly good results from the UK operations have been supported by a significant recovery in the German businesses. Since the recession of 1990/91, turnover and profits have grown every year and earnings per share have increased more than six times. In this period, the Group has expanded its activities both in scope and internationally. SIG has a major presence in Germany and France and has established a position in the USA. From the broader base now created, SIG will continue its proven strategy of developing its specialist distribution activities by acquisition and organic growth. Results Sales for the year were £841m (1998 £796m) and Group profit before taxation was £42.3m (1998 £35.3m). Earnings per share were 24.4p against 20.1p in the previous year, an increase of 21%. Operating profits have increased in the UK from £31.2m to £36.2m and in mainland Europe from £6.4m to £10.4m, and include acquisitions during the year which have contributed sales of £29m and operating profits of £1.3m. The Group operating profit margin on sales was 5.3% compared with 4.7% last year. The Group generated £56m from trading operations during the year. After payments in respect of interest £1.9m, taxation £15.8m, dividends £10.3m and capital expenditure of £13.1m, there was a cash inflow of £14.9m. A further £17.1m was expended on acquisitions, inclusive of borrowings acquired, leaving total borrowings at the year end of £51.3m and capital gearing of 42%, compared with 50% last year. Dividend The Board is proposing a final dividend of 6.2 pence per share which, subject to shareholders' approval, will make a total dividend for the year of 9.3 pence per share, covered 2.6 times, an increase of 10.7%. If approved, the final dividend will be payable on 16th May 2000 to shareholders on the register at 14th April 2000. UK Much of the improvement in the overall performance has come from the UK businesses where good growth in profits across all activities has been achieved. SIG's UK markets have been sluggish with modest volume growth in construction being tempered by a continued decline in industrial and petro- chemical related demand. Competitive pressures have led to further price deterioration in some products and, once again, SIG has operated in a deflationary environment. Despite these market conditions the Group has increased sales, achieved operating margins of 7.3% compared with 6.7% in 1998 and produced a significant improvement in UK earnings. SIG's insulation and related products businesses improved substantially, with operating profits up 10% on a sales increase of 4%, and improvements in both gross and operating margins. Organic growth was also strong, with sales and profits ahead of last year. The ceilings and partitioning division has had another excellent year and, despite significant price erosion in suspended ceiling products, operating profits grew by 13%, reflecting SIG's very strong position in this market. In its second full year as part of SIG, the roofing division produced another year of growth in sales and operating profits. Sales advanced by 19% and operating profits by 35%. EUROPE Germany In Germany, where market conditions in the construction sector have remained difficult, the Group has traded well and produced an excellent recovery. Operating from 10 fewer branches, sales have been maintained at prior year levels and operating margins have improved from 1.3% to 2.6%. The results reflect the actions taken in 1998 to rationalise the branch network, reduce costs and improve efficiencies. Whilst profits have not yet returned to 1997 levels, the Group has created a sound platform for further progress. Poland In a growing construction sector, the fledgling business in Poland continues to develop and sales have doubled in the year. The acquisition of Canon Artis in mid year added two well established branches in the Warsaw area and the branch network has increased to twelve. France Profits have increased in France where growth in ceilings and partitioning complemented another sound performance from SIG's industrial insulation distribution business. REST OF WORLD USA In a severely depressed oil related market, the small USA based industrial insulation distributor has experienced a reduction in operating profits. Actions have been taken to reduce costs and develop sales of complementary products. Acquisitions The Group has continued its strategy of expansion by making a number of small but important acquisitions. In the UK, two roofing distributors and a personal protective equipment distributor were purchased and are being integrated into the existing network. In Europe, two acquisitions have been made, expanding the distribution of ceiling products in France and the insulation distribution operations in Poland. In the USA, a distributor of commercial and industrial insulation has been added to SIG's US activities. These additions to the Group's core activities will consolidate and strengthen SIG's trading position and contribute to future growth. E-Commerce SIG is well advanced with its E-commerce strategy. A dedicated team is working to establish and maintain active internet sites for the UK businesses and subsequently for SIG's overseas operations. The first site, Protec- direct.co.uk is fully operational and trading in personal protective equipment. SIG is also developing a portal site which will enable entry to its trading sites and offers a potential link with other complementary materials providers outside the Group. SIG believes that its UK and European branch network and logistics support puts it in a very strong position to benefit from E-commerce development in SIG's sectors. Directors In July 2000 Bill Forrester, Chief Executive, reaches the Group's normal retirement age of 60 for executives. The Board is delighted to report that he has accepted the Board's invitation to continue in his present role until 31st December 2001. Prospects In its main markets in the UK and mainland Europe, SIG expects volume demand to be positive and, whilst conditions will remain competitive, the Board believes that selling prices will stabilise and rise as the year progresses In recent years, the UK businesses have achieved growth in excess of the market and SIG expects this to continue. The increase in sales achieved in the past year indicates that SIG has gained market share in its main UK insulation, ceilings & partitioning and roofing distribution activities. The small bolt-on acquisitions made in 1999 will further consolidate and strengthen SIG's leadership position. In slowly improving markets in Germany, SIG expects to build on the recovery made in 1999. In France, SIG believes that its ceilings and partitioning business will benefit from growth in commercial construction activity, and further progress is expected from the industrial insulation distribution operations. The US industrial insulation business will benefit from a modestly improving oil-related market. Trading in the first two months of the year has been encouraging, and this, combined with the strengths of the Group's businesses and its proven ability to produce organic growth, leads the Board to view the current year with confidence. Consolidated Profit and Loss Account for the year ended 31 December 1999 1999 1999 1998 1998 £000's £000's £000's £000's Turnover Continuing operations 811,845 795,780 Acquisitions 29,459 - _______ _______ 841,304 795,780 Cost of sales 632,054 606,438 _______ _______ Gross Profit 209,250 189,342 Other operating expenses 165,043 151,812 _______ _______ Operating Profit Continuing operations 42,918 37,530 Acquisitions 1,289 - ______ ______ 44,207 37,530 Net Interest payable 1,902 2,184 _______ _______ Profit before taxation and amortisation of goodwill 42,854 35,506 Amortisation of goodwill 549 160 ______ ______ Profit on ordinary activities before taxation 42,305 35,346 Tax on profit on ordinary activities 13,233 11,303 _______ _______ Profit on ordinary activities after tax 29,072 24,043 Minority interests (all equity) 185 297 Equity dividends paid and proposed 11,020 9,931 _______ _______ Retained profit for the year 17,867 13,815 _______ _______ Earnings per share Basic earnings per share 24.4p 20.1p Fully diluted earnings per share 24.2p 20.0p ======= ======= Earnings per share before goodwill amortisation Basic earnings per share 24.9p 20.2p Fully diluted earnings per share 24.7p 20.2p ======= ======= Consolidated Statement of Total Recognised Gains and Losses For the year ended 31 December 1999 1999 1998 £000's £000's Profit on ordinary activities after taxation and minority interests 28,887 23,746 Currency translation differences on foreign currency net investments (2,840) 1,965 _______ ______ Total recognised gains and losses for the year 26,047 25,711 Prior year adjustment (2,716) - _______ ______ Total gains and losses recognised since last annual report. 23,331 25,711 _______ ______ 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 1999 1998 £000's £000's Profit after taxation and minority interests 28,887 23,746 Dividends (11,020) (9,931) _______ ______ 17,867 13,815 New share capital issued 77 3 Goodwill written back (off) during the year 139 (780) Gain/(Loss) on foreign currency translation (2,840) 1,965 _______ ______ Net addition to shareholders' funds 15,243 15,003 Opening shareholders' funds as previously stated 109,932 94,929 Prior year adjustment (2,716) (2,716) _______ ______ Closing shareholders' funds 122,459 107,216 _______ _______ Consolidated Balance Sheet As at 31 December 1999 1999 1998 As adjusted £000's £000's Fixed assets Intangible assets 16,035 5,351 Tangible assets 49,946 49,231 ______ ______ 65,981 54,582 ______ ______ Current assets Stocks 61,663 60,468 Debtors 155,015 154,121 Cash at bank and in hand 4,538 4,960 ______ ______ 221,216 219,549 Creditors: Amounts falling due within one year (138,448) (151,361) ______ ______ Net current assets 82,768 68,188 ______ ______ Total assets less current liabilities 148,749 122,770 Creditors: Amounts falling due after more than one year (22,688) (11,017) Provision for liabilities and charges (3,602) (4,537) ______ ______ Net assets 122,459 107,216 ______ ______ Capital and reserves Called up share capital 11,820 11,814 Share premium account 12,100 12,029 Capital redemption reserve 347 347 Special reserve 17,278 17,139 Profit and loss account 86,526 68,659 Exchange reserve (5,612) (2,772) ______ ______ Shareholders' funds (all equity) 122,459 107,216 ______ ______ Consolidated Cash Flow Statement For the year ended 31 December 1999 1999 1999 1998 1998 £000's £000's £000's £000's Net cash inflow from operating activities 55,944 41,558 ______ ______ Returns on investment and servicing of finance Interest received 1,162 1,263 Interest paid (1,808) (2,204) Interest element of finance lease rentals (1,256) (1,243) ______ ______ Net cash outflow from returns on investments and servicing of finance (1,902) (2,184) Tax Paid (15,801) (13,742) Capital expenditure Purchase of tangible fixed assets (14,601) (12,423) Sale of tangible fixed assets 1,520 2,475 ______ ______ (13,081) (9,948) Acquisitions and disposals Purchase of subsidiary undertakings (14,452) (10,460) Net overdrafts acquired with subsidiary undertakings (2,675) - Sale of business - 1,400 ______ ______ Net cash outflow from acquisitions and disposals (17,127) (9,060) Equity dividends paid (10,306) (9,650) Financing Issue of ordinary share capital 77 3 Inception of finance lease agreements 4,788 3,147 Capital element of finance lease rental payments (5,367) (4,341) Repayment of loans (2,293) (3,786) Reclassification of loan 14,673 - ______ ______ Net cash inflow/(outflow) from financing 11,878 (4,977) ______ ______ Increase/(Decrease) in cash 9,605 (8,003) ______ ______ Notes 1. Segmental information Geographical analysis and class of business 1999 1998 Operating Net Operating Net Turnover Profit Assets Turnover Profit Assets £000's £000's £000's £000's £000's £000's Continuing activities - UK 488,047 35,773 93,396 464,502 31,248 69,413 - Europe 281,057 9,689 47,254 283,725 6,424 48,550 - Rest of world 42,741 606 7,581 47,553 1,879 6,364 - Parent Company - (2,601) (29,873) - (1,861)(17,111) - Amortisation of - (549) - - (160) - goodwill _______ ______ _______ _______ ______ _______ 811,845 42,918 118,358 795,780 37,530 107,216 Acquisitions - UK 7,802 395 1,945 - - - - Europe 13,551 699 1,735 - Rest of world 8,106 195 421 - - - _______ ______ _______ _______ ______ _______ 29,459 1,289 4,101 - - - _______ ______ _______ _______ ______ _______ Total Operations 841,304 44,207 122,459 795,780 37,530 107,216 ======= ====== ======= ======= ====== ======= Turnover and operating profit by destination is not materially different from these amounts. The reporting of the activities of the Group was restructured during the year with results being reported on a geographic basis. Prior year segment information has therefore been restated in this format. 2. Earnings per share Basic earnings per share are calculated on Group profit after taxation and minority interests of £28,887,000 (1998 - £23,746,000) and on 118,178,515 (1998 - 118,137,405) ordinary shares, being the weighted average number of ordinary shares in issue and ranking for dividend during the year. Fully diluted earnings per share are calculated on Group profit after taxation and minority interests of £28,887,000 (1998 - £23,746,000) and on 119,171,384 ordinary shares (1998 - 118,507,548). 3. Abridged accounts The 1999 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. The 1998 figures are an extract from the Group's statutory accounts for the year ended 31 December 1998 as adjusted for a provision in respect of onerous leasehold property contracts as required by FRS 12, which have been filed with the Registrar of Companies. The auditors' report thereon was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 4. Proposed dividend The proposed final dividend of 6.2p per ordinary share, if approved, will be payable on 16 May 2000 to shareholders on the register on 14 April 2000.

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