Final Results
SIG PLC
14 March 2007
14 March 2007
PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 2006
SIG plc is the leading specialist supplier of insulation, roofing and commercial
interiors products in Europe.
• SIG reports record sales and profit in 2006.
• Each country in which the Group operates achieved sales and underlying*
operating profit growth on a like for like basis (i.e. excluding the impact
of acquisitions made in 2005 and 2006).
• Total ** sales increased by 17.4% to £1,925m (2005: £1,639m).
• Continuing (i.e. excluding the USA) sales increased by 18.4% to £1,860m
(2005: £1,571m). Like for like sales growth was 7.1%.
o UK and Ireland sales increased by 14.2% to £1,254.4m (2005: £1,098.1m).
o Mainland Europe sales increased by 27.9% to £605.5m (2005: £473.4m).
• Underlying operating profit from continuing operations increased by
22.5% to £121.4m (2005: £99.1m).
o UK and Ireland underlying operating profit increased by 18.4% to £99.9m
(2005: £84.4m).
o Mainland Europe underlying operating profit increased by 40.6% to £27.6m
(2005: £19.6m).
• Total underlying profit before tax increased by 18.8% to £112.0m (2005: £94.3m),
slightly above analyst consensus figures.
• Profit before tax from continuing operations increased by 22.6% to
£102.7m (2005: £83.8m).
• Total underlying basic earnings per share increased by 20.3% to 63.4p
(2005: 52.7p). Continuing basic earnings per share increased by 28.5% to
58.1p (2005: 45.2p).
• Dividend per share for the year increased 22% to 20.5p.
• The Group made 23 acquisitions during 2006. Annualised sales (on a
historic basis) for these acquisitions was £240m. Total consideration,
including assumed debt, was £109m.
* - Underlying - means excluding the effect of amortisation of acquired
intangibles, impairment of goodwill, profit on sale of USA business and hedge
ineffectiveness.
** - Total - means including the USA business. The Group sold its USA business
on 20 November 2006 for cash proceeds of £27m. Sales in the USA accounted for 3%
of the Group's sales up to the time of its disposal.
Les Tench, Chairman, commented:
'The Group has made excellent progress during 2006; the strategic disposal of
the USA combined with the continued expansion and diversity of the trading
activities in the two core regions of UK and Ireland and Mainland Europe lay the
foundations for the future growth and development of SIG.
In terms of growth opportunities, we enter 2007 with a healthy pipeline of
opportunities, both organic and through acquisition. Trading since the start of
2007 has been good, and the Group is confident that further progress will be
made.'
Enquiries:
David Williams, Chief Executive SIG plc today 020 7251 3801
Gareth Davies, Finance Director thereafter 0114 285 6300
Faeth Birch / Gordon Simpson Finsbury 020 7251 3801
Full Preliminary Results information is available on www.sigplc.co.uk. An
interview with David Williams, Chief Executive is now available on SIG's website
and www.cantos.com
Chairman's Statement
The Group has made excellent progress during 2006; the strategic disposal of the
USA combined with the continued expansion and diversity of the trading
activities in the two core regions of UK and Ireland and Mainland Europe lay the
foundations for the future growth and development of SIG.
Highlights of the year are:
• Record sales growth
• Increased margins
• Record number of acquisitions
• Record increase in the number of additional trading sites
• Sale of the Group's operations in the USA in November 2006
• Significant growth in Mainland Europe
• Significant increase in the full year dividend, reflecting the Board's
confidence in the Group's outlook.
Results
Where reference is made to 'Total' this refers to the results of both continuing
and the discontinued USA operations. Where reference is made to 'Underlying',
this should be taken as before the amortisation of acquired intangibles, the
impairment of goodwill, the profit on sale of the USA business and hedge
ineffectiveness.
For the year ended 31 December 2006, compared with the corresponding period in
2005:
Sales
• Total sales increased by £285.7m (17.4%) to £1,925.0m (2005: £1,639.3m).
• Continuing sales increased by £288.4m (18.4%) to £1,859.8m (2005: £1,571.4m).
• Like for like sales growth (i.e. excluding the impact of acquisitions
made in 2005 and 2006) on a continuing basis, was 7.1% in Sterling.
• Foreign exchange rate movements on a year on year basis were negligible,
and have no significant impact on the growth figures as stated in Sterling
for the Group as a whole.
Profits
• Total underlying operating profit increased by £23.1m (22.6%) to £125.2m
(2005: £102.1m).
• On a continuing basis, underlying operating profit increased by £22.3m
(22.5%)to £121.4m (2005: £99.1m).
• Underlying net finance costs increased by £5.3m to £13.1m (2005: £7.8m).
• Total underlying profit before tax increased by £17.7m (18.8%) to
£112.0m (2005: £94.3m). Underlying profit before tax from continuing
operations increased by £17.0m (18.6%) to £108.3m (2005: £91.3m).
• Amortisation of acquired intangibles increased by £3.2m to £6.9m (2005: £3.7m).
There was no charge made in the year for goodwill impairment (2005: £5.7m).
A credit of £1.4m has arisen in relation to hedge ineffectiveness (2005: £1.9m).
• A one off profit of £1.9m arose from the disposal of the USA business.
• Total profit before tax increased by £21.6m (24.9%) to £108.4m (2005: £86.8m).
Profit before tax from continuing operations increased by £18.9m (22.6%)
to £102.7m (2005: £83.8m).
Margins
• The total gross margin increased to 27.2% (2005: 27.0%).
• On a continuing basis, the gross margin increased to 27.3% (2005: 27.1%).
• The continuing underlying operating profit margin increased to 6.5% (2005: 6.3%).
Earnings and Dividends
• Total underlying basic earnings per share increased by 10.7p to 63.4p
(2005: 52.7p), an increase of 20.3%.
• Total basic earnings per share increased by 14.9p to 61.9p (2005: 47.0p),
an increase of 31.7%.
• On a continuing basis, basic earnings per share increased by 12.9p to
58.1p (2005: 45.2p), an increase of 28.5%.
A final dividend of 14.3p is proposed, subject to shareholder approval. This
would make a total dividend for the full year of 20.5p, an increase of 3.7p
(22%) on the 2005 full year dividend of 16.8p and would be covered 2.8 times. If
approved, this will be payable on 29 May 2007 to Shareholders on the register at
27 April 2007.
Finances
Underlying cash flow (i.e. operating cash flow before working capital movements)
strengthened further throughout 2006 compared with prior year. An increase in
stock levels (partly due to new trading sites and also to support increased
commercial activities), together with further investment in customer service and
the acquisition programme resulted in increased borrowings at the year end.
Gearing rose to 65% as at 31 December 2006 (2005: 60%).
During the year the Company raised £151m and €100m with a maturity of 7,10 and
12 years via its second successful Private Placement transaction. This was used
to repay existing facilities with its UK relationship banks.
The Group has a sound financial position with prudent continuing interest cover
(9.2x).
Acquisitions
The ongoing programme of the acquisition of businesses in market sectors and
geographic regions related to those in which SIG operates, continued with 23
acquisitions completed during 2006.
Annualised sales (on a historic basis) for these acquisitions is a total of
£240m. Total consideration, including assumed debt, was £109m.
Board Appointment
We recently announced the appointment of Chris Davies as Executive Director to
the Board. Chris joined SIG in 1994, and has responsibility as Managing Director
Europe for the Group's operations in that area. Chris has extensive practical
experience of both operational management and M&A activity.
Employees
Our people lie at the heart of our success; the personal efforts of each
employee, and their dedication to customer service and the will to succeed
personally in their own particular job is fundamental to SIG, and I would like
to thank all employees throughout the Group for their hard work and efforts.
Prospects
In the UK and Ireland, overall construction activity is expected to grow
modestly in 2007 over 2006, providing positive conditions for all of the Group's
activities in this region. Non residential new build construction is the most
important single part of the overall market for SIG, and the ongoing recovery in
commercial building together with the continuing public expenditure on schools
and hospitals is expected to be helpful.
Later in the year, the initial impact of the most recent (April 2006) change in
the regulations concerning the minimum standards of thermal efficiency of all
new buildings is expected to begin to increase market demand for insulation
materials.
As explained in our Interim Announcement in September 2006 the volume of work
which is anticipated to be available in 2007 from the EEC2 (Energy Efficiency
Commitment) scheme concerning the upgrading of insulation in existing
residential properties will be reduced in 2007 over previous years. The new
scheme, EEC3, begins in April 2008, and this is expected to increase demand
significantly once it begins.
Following an exceptionally strong second half in 2006 in Mainland Europe,
conditions in all those countries in which we operate are expected to remain
positive, with modest growth in overall construction activity anticipated.
In terms of growth opportunities, we enter 2007 with a healthy pipeline of
opportunities, both organic and through acquisition.
Trading since the start of 2007 has been good, and the Group is confident that
further progress will be made.
Trading Performance
2006 was another year of strong growth, expansion and solid financial
performance for the Group.
Our strategy of investing in the core operations to drive growth and in the
acquisition of complimentary businesses, continued at a strong pace.
During the course of the year we expanded the range of specialist products which
are offered to customers across all of our operations; improved the service and
delivery facilities to ensure that we strengthen further our ability to provide
customers with first class service; increased the number and quality of our
customer-facing staff; and significantly increased the number of trading sites
to facilitate improved service to existing customers and the securing of new
customers.
This continued investment in customer-related services provides the platform for
continued future growth.
Trading Highlights
Where reference is made to 'total' sales, this refers to the results of both
continuing and the discontinued USA operations. Where reference is made to
underlying operating profit and underlying operating profit margin, this is
defined as being before the amortisation of acquired intangibles, the impairment
of goodwill and the profit on sale of the USA business.
UK and Ireland (65% of total sales)
• Sales increased by £156.3m (14.2%) to £1,254.4m (2005: £1,098.1m).
• Like for like sales increased by £45.6m (4.4%).
• Underlying operating profit increased by £15.5m (18.4%) to £99.9m
(2005: £84.4m).
• Like for like underlying operating profit increased by £6.8m (8.7%) to
£85.4m (2005: £78.6m).
• The underlying operating profit margin was increased to 8.0% (2005: 7.7%).
• 85 trading sites were added in the year, taking the total at 31 December
2006 to 422 (31 December 2005: 337).
Within the Insulation market in the UK and Ireland, whilst the volume of demand
grew, prices were on average lower than prior year due to the over-supply
arising from additional capacity coming on stream late 2005 and during 2006.
This additional capacity is in anticipation of higher market demand in
forthcoming years, partly driven by Regulations.
The UK Government introduced new (Part L) Building Regulations in April 2006,
requiring all types of buildings which commenced new construction after that
date to meet new higher standards of thermal efficiency. In practice, this
change means that more insulation will be built-in to new buildings going
forward. As we indicated in September 2006 at the time of our 2006 Interim
Results Announcement, problems within the Local Government planning authorities,
where the implementation of new Building Regulations effectively begins through
the planning consent process, meant that the practical application of the higher
standards of insulation in new construction was delayed. The April 2006 new
(Part L) Building Regulations had no impact on the market in 2006, and are now
expected to begin to influence demand in the second half of 2007.
We also indicated in September 2006 that the amount of work relating to the
upgrading of roofing and wall insulation in existing homes was set to decline
during the latter part of 2006, and throughout 2007, due to timing and funding
issues under the government-backed EEC2 (Energy Efficiency Commitment phase 2).
This programme has been very successful, and has generated increased volumes of
demand for insulation over the last four years. The targeted amount of work
required to be conducted under EEC2 has been substantially met, and therefore
the amount of insulation upgrading under this scheme will be very limited until
the next phase of targets and funding commences in 2008, under EEC3.
Against the background of these mixed conditions in 2006, the Insulation
operations in the UK and Ireland increased sales by 6% and underlying operating
profits by a similar amount.
We added four trading sites during the year and relocated five branches into
new, larger premises to cater for increased stockholding and future growth.
In the insulation market, SIG has a number of facilities which convert basic
insulation materials into more specialist products, to meet specific customer
requirements. These activities were expanded, with two additional facilities
acquired during the year.
In the Roofing division, the subdued market conditions which existed in 2005
continued throughout 2006.
Repairs and maintenance of existing buildings, especially residential buildings,
is a significant driver of market demand. Some of this roofing work is of an
essential nature and, as such, carries on regardless of economic conditions.
Other work is less essential, and its timing is more discretionary, depending
upon a range of factors relating to household expenditure. This discretionary
element of the market has been slower than in previous years, reducing overall
market demand for roofing materials. It is believed that these are timing
factors and that the longer term outlook for this market is positive.
Within the residential new-build market, the proportion of dwellings built as
apartments rather than using more traditional designs increased, which has the
effect of reducing the area of roof constructed on a 'per dwelling' basis, thus
reducing demand for roofing materials in the new build sector.
In a market in which the supply chain is still very fragmented, we continued to
expand the number of trading sites both through acquisition and by opening
brownfield trading sites. 63 trading sites were added during the year, including
a number which specialise in new ranges of building maintenance products. In
Ireland, a new central stocking facility was opened, enabling imported roofing
products to be more efficiently distributed throughout the trading site network
and to customers.
The combination of acquisitions and product range expansion enabled the division
to increase sales by 19% and significantly increase underlying operating profits
compared with prior year.
The Commercial Interiors division experienced generally improved demand, and
whilst the volume of new public expenditure related work was slower in being
released than had been expected, private sector developments such as commercial,
retail, sports and leisure were more buoyant.
Several new products were launched during the year, including new security
doorsets, a system of wall panel products for use specifically in hospitals and
other health facilities, and access panels for services in commercial and public
buildings.
The division was the focus of significant investment during the year, including
several relocations to larger premises, additional sales staff, and upgrading
and renewal of processing machinery to improve productivity and product range
diversity. A new facility was opened to improve the range and quality of
manufactured metal clad wall systems, which are essential to certain market
sectors. Two trading sites were added during the year.
The division increased sales by 15% and grew the underlying operating profits
substantially.
The Specialist Construction and Safety Products division continued to expand and
develop its activities significantly.
Supplying an increasing range of specialist products to construction and
industry, the main end markets are new-build non-residential and secondly
residential construction.
16 trading sites were added in the year, including 3 in Ireland, which are our
first stand-alone Specialist Construction Products (SCP) trading sites outside
the UK. This takes the total number of trading sites in this division to 43.
This compares with just 17 at the end of 2003.
This continued expansion of the customer base, trading sites and product range
diversity resulted in sales increasing by 40% and underlying profits increased
substantially.
Mainland Europe (32% of total sales)
• Sales in Mainland Europe increased by £132.1m (27.9%) to £605.5m
(2005: £473.4m).
• Like for like sales on a constant currency basis increased by 13.2%.
• Underlying operating profits increased by £8.0m (40.6%) to £27.6m
(2005: £19.6m).
• Like for like underlying operating profit, on a constant currency basis,
increased by £4.5m (22.9%) to £24.1m (2005: £19.6m).
• The underlying operating profit margin increased to 4.6% (2005: 4.1%).
• All countries in which SIG has trading activities in Mainland Europe
increased both sales and underlying operating profit on a like for like
basis in 2006 compared with prior year.
• 57 trading sites were added to the Group in Mainland Europe during the
year, taking the total to 196 at 31 December 2006.
In Germany and Austria (63% of sales in Mainland Europe), market conditions in
the first four months of the year were very disappointing. Weather conditions
were much more adverse than normal, and the construction industry struggled to
get sites moving until the spring. This low level of activity reduced demand for
materials, and had a knock-on effect of effectively eliminating price increases
that had been intended to take effect in January and February.
From May onwards, activity levels began to rise progressively, and demand
strengthened right through into the final quarter of the year, at which time a
further boost to orders was created by some pull-forward to beat the increased
rate of VAT on building materials which came into effect on 1 January 2007 in
Germany.
Outside the construction sector, demand for more specialist insulation for
industrial applications was good.
Overall results in Germany were further boosted by the acquisition in July of a
regional roofing materials distributor, our first move into this fragmented,
specialist market. The roofing supplies industry in Germany is inherently
sharply seasonal, with a very high proportion of profits being achieved in the
second half year. The timing of this acquisition meant that it had a
disproportionately positive effect on H2 underlying operating profit margins.
In total 11 trading sites were added in the year, taking the total to 76 at 31
December 2006.
Sales increased by 31.2% in Euros, 30.9% in Sterling. Like for like sales growth
was 13.9% in Euros, an excellent performance.
The underlying operating profit margin increased and underlying operating
profits were increased substantially.
In France (22% of sales in Mainland Europe), construction activity and overall
demand was good throughout the year.
We continued to expand our product range and geographic coverage, and added 6
new trading sites during the year, 2 of which were acquired. We now have a total
of 51 trading sites in France.
Sales increased by 11.0% in Euros, 10.7% in Sterling. Like for like sales grew
by 9.1% in Euros. Again, the underlying operating profit margin was increased,
and the underlying operating profit was increased substantially.
In Poland (9% of sales in Mainland Europe), overall construction activity
continued to grow, with non-residential construction doing rather better than
residential, which is a more favourable mix in terms of the SIG product range.
2006 was a transforming year for SIG in Poland due to a significant increase in
the number of trading sites, chiefly arising from two acquisitions during the
second half year, and a substantial expansion of the range of specialist
products offered to customers including roofing materials and a range of
building chemicals and other products which are sold in the UK within the
Specialist Construction Products (SCP) division.
In total, 40 trading sites were added in the year, taking the total to 59 at 31
December 2006.
Sales in Poland increased by 70.0% in local currency, 75.1% in Sterling. Like
for like sales increased by 23.1% in local currency and the underlying operating
profits were substantially increased.
Market conditions improved in Benelux (6% of sales in Mainland Europe), with
some modest growth in overall construction activity.
Whilst the number of trading sites was unchanged at 10, various investments were
made to the facilities including improvements to the fabrication and processing
facilities for industrial insulation materials.
Sales increased by 20.8% in Euros, 20.5% in Sterling. Like for like sales growth
was 11.9% in Euros.
The underlying operating profit margin was increased and underlying operating
profits grew substantially.
USA (3% of total Group sales)
The Group sold its business in the USA in November 2006 for a total of $51m
(£27m) in cash. The decision to divest the USA operations was taken following a
strategic review of all the Group's activities, and of the opportunity for
future growth within each trading region.
Up to the time of its disposal, sales in the USA were £65.2m, slightly less than
the full year 2005 figure of £67.9m. Good cost control and gross margin
improvement enabled the underlying operating profit to increase by £0.8m to
£3.8m (2005: £3.0m).
Acquisitions
2006 was a year of record acquisition activity, with 23 transactions completed
in the year, for a total consideration of £109m, including assumed debt. Sales
of these acquired businesses was £240m on a historic annualised basis, and their
combined impact on 2006 was sales of £93m.
The acquisitions added 133 trading sites to the Group, and substantially widened
the product range on a regional basis.
Of the 23 acquisitions, 19 were in the UK and Ireland, and 4 in Mainland Europe.
The £240m historic sales breaks down £132m Mainland Europe and £108m UK and
Ireland.
Each of the acquired businesses fits into the Group's strategy of strengthening
and developing our position as a leading European supplier of specialist
products for the building, construction and related industries, with emphasis on
professional trades rather than consumer-led markets.
The acquisitions are being successfully absorbed into the Group, and progressing
well with their respective individual improvement plans.
Summary of Trading Performance
2006 has been a year of high performance and strong growth, with each region and
each business stream showing expansion and development; the dynamic nature of
SIG is clearly reflected in the excellent results.
Consolidated Income Statement
for the year ended 31 December 2006
Before Other Total Before Other Total
other items* other items*
items* items*
2006 2006 2006 2005 2005 2005
Note £000's £000's £000's £000's £000's £000's
------------------------------------------------------------------------------------------
Revenue
Existing operations 1,766,682 - 1,766,682 1,513,258 - 1,513,258
Acquisitions 93,150 - 93,150 58,190 - 58,190
------------------------------------------------------------------------------------------
Continuing operations 2 1,859,832 - 1,859,832 1,571,448 - 1,571,448
Cost of sales 1,352,483 - 1,352,483 1,145,337 - 1,145,337
------------------------------------------------------------------------------------------
Gross profit 507,349 - 507,349 426,111 - 426,111
Other operating expenses 385,948 6,942 392,890 327,016 9,342 336,358
------------------------------------------------------------------------------------------
Operating profit
Existing operations 116,696 (6,942) 109,754 93,348 (9,342) 84,006
Acquisitions 4,705 - 4,705 5,747 - 5,747
------------------------------------------------------------------------------------------
Continuing operations 2 121,401 (6,942) 114,459 99,095 (9,342) 89,753
Finance income (6,056) (1,357) (7,413) (6,691) (1,880) (8,571)
Finance costs 19,200 - 19,200 14,509 - 14,509
------------------------------------------------------------------------------------------
Profit before tax 108,257 (5,585) 102,672 91,277 (7,462) 83,815
Income tax expense 32,515 (1,676) 30,839 28,377 (542) 27,835
------------------------------------------------------------------------------------------
Profit after tax from 75,742 (3,909) 71,833 62,900 (6,920) 55,980
continuing operations
------------------------------------------------------------------------------------------
Discontinued operation:
Profit on disposal of
discontinued operation 7 - 1,947 1,947 - - -
Profit before tax from
discontinued operation 7 3,774 - 3,774 2,996 - 2,996
Income tax expense on
discontinued operation 7 1,124 (92) 1,032 834 - 834
------------------------------------------------------------------------------------------
2,650 2,039 4,689 2,162 - 2,162
------------------------------------------------------------------------------------------
Profit after tax 78,392 (1,870) 76,522 65,062 (6,920) 58,142
------------------------------------------------------------------------------------------
Attributable to:
Equity holders of the 77,719 (1,870) 75,849 64,106 (6,920) 57,186
Company
Minority interests 673 - 673 956 - 956
------------------------------------------------------------------------------------------
Earnings per share
From continuing operations:
Basic earnings per share 3 61.3p (3.2p) 58.1p 50.9p (5.7p) 45.2p
Diluted earnings per share 3 60.6p (3.1p) 57.5p 50.1p (5.6p) 44.5p
------------------------------------------------------------------------------------------
From continuing and discontinued
operations:
Basic earnings per share 3 63.4p (1.5p) 61.9p 52.7p (5.7p) 47.0p
Diluted earnings per share 3 62.8p (1.6p) 61.2p 51.9p (5.6p) 46.3p
------------------------------------------------------------------------------------------
* Other items relate to the amortisation of acquired intangibles, goodwill impairment,
hedge ineffectiveness and the profit on disposal of discontinued operation. Other items
have been disclosed separately in order to give an indication of the underlying earnings
of the Group.
Consolidated Statement of Recognised Income and Expense
for the year ended 31 December 2006
2006 2005
£000's £000's
----------------------------------------------------------------------------
Profit after tax 76,522 58,142
Exchange difference on retranslation of (918) (725)
foreign currency goodwill and intangibles
Exchange difference on retranslation of (3,980) (1,669)
foreign currency net investments (excluding
goodwill and intangibles)
Exchange and fair value movements associated 6,712 1,111
with borrowings and derivative financial
instruments
Tax charge on exchange difference arising on (1,078) (639)
borrowings and derivative financial
instruments
Current and deferred tax on share options 2,214 596
Actuarial gain/(loss) on defined benefit 3,292 (1,885)
pension schemes
Deferred tax movement associated with (966) 563
actuarial gain/(loss)
Transitional adjustment to adopt IAS 32 and IAS 39 - (6,625)
at 1 January 2005
Recognition of deferred tax assets on - 3,869
certain transitional adjustments at 1 January 2005
----------------------------------------------------------------------------
Total recognised income and expense for the 81,798 52,738
year
----------------------------------------------------------------------------
Attributable to:
Equity holders of the Company 81,125 51,782
Minority interests 673 956
81,798 52,738
----------------------------------------------------------------------------
Consolidated Balance Sheet
as at 31 December 2006
2006 2005
Note £000's £000's
--------------------------------------------------------------------------------
Non-current assets
Property, plant and equipment 134,943 102,093
Goodwill 216,257 164,675
Intangible assets 81,925 49,252
Deferred tax assets 16,435 21,085
--------------------------------------------------------------------------------
449,560 337,105
--------------------------------------------------------------------------------
Current assets
Inventories 151,791 128,101
Trade receivables 310,418 281,053
Other receivables 20,527 21,745
Derivative financial instruments 1,668 -
Cash and cash equivalents 62,447 32,120
--------------------------------------------------------------------------------
546,851 463,019
--------------------------------------------------------------------------------
Total assets 996,411 800,124
--------------------------------------------------------------------------------
Current liabilities
Trade and other payables 260,601 224,859
Obligations under finance leases and hire purchase 1,391 756
agreements
Bank overdrafts 3,302 3,211
Bank loans 50,845 95,148
Loan notes 483 2,253
Derivative financial instruments 61 -
Current tax liabilities 21,366 25,483
Provisions 12,019 2,252
--------------------------------------------------------------------------------
350,068 353,962
--------------------------------------------------------------------------------
Non-current liabilities
Obligations under finance leases and hire purchase 1,448 838
agreements
Bank loans 4,703 521
Loan notes - 5,081
Private placement notes 193,043 70,659
Derivative financial instruments 37,659 28,376
Deferred tax liabilities 17,764 7,507
Other payables 1,267 2,159
Retirement benefit obligations 23,633 26,987
Provisions 14,164 13,695
--------------------------------------------------------------------------------
293,681 155,823
--------------------------------------------------------------------------------
Total liabilities 643,749 509,785
--------------------------------------------------------------------------------
Net assets 352,662 290,339
--------------------------------------------------------------------------------
Capital and reserves
Called up share capital 4 12,310 12,189
Share premium account 4 19,636 17,883
Capital redemption reserve 4 347 347
Special reserve 4 22,113 22,113
Share option reserve 4 1,786 1,375
Hedging and translation reserve 4 (4,570) (2,282)
Retained profits 4 299,887 237,515
--------------------------------------------------------------------------------
Attributable to equity holders of the Company 351,509 289,140
--------------------------------------------------------------------------------
Minority interests 4 1,153 1,199
--------------------------------------------------------------------------------
Total equity 4 352,662 290,339
--------------------------------------------------------------------------------
Consolidated Cash Flow Statement
for the year ended 31 December 2006
2006 2005
Note £000's £000's
-------------------------------------------------------------------------
Net cash flow from operating activities
Cash inflow from operating activities 5 132,355 113,581
Borrowing costs paid (14,206) (11,511)
Interest received 2,433 3,518
Income tax paid (36,615) (21,850)
-------------------------------------------------------------------------
Net cash inflow from operating 83,967 83,738
activities
-------------------------------------------------------------------------
Cash flows from investing activities
Purchase of property, plant and (44,682) (33,576)
equipment
Proceeds from sale of property, plant 2,009 2,098
and equipment
Purchase of businesses (90,061) (83,482)
Net proceeds from sale of discontinued 25,327 -
operation
-------------------------------------------------------------------------
Net cash used in investing activities (107,407) (114,960)
-------------------------------------------------------------------------
Cash flows from financing activities
Proceeds from issue of ordinary share 1,874 1,140
capital
Capital element of finance lease rental (1,723) (1,306)
payments
Repayment of loans (135,112) (22,020)
New loans 211,562 84,511
Dividends paid to equity holders of the (21,719) (17,861)
Company
Payments to minority shareholder (719) (572)
-------------------------------------------------------------------------
Net cash generated in financing 54,163 43,892
activities
-------------------------------------------------------------------------
Increase in cash and cash equivalents in 6 30,723 12,670
the year
-------------------------------------------------------------------------
Cash and cash equivalents at beginning 28,909 16,501
of year
Effect of foreign exchange rate changes (487) (262)
-------------------------------------------------------------------------
Cash and cash equivalents at end of year 59,145 28,909
-------------------------------------------------------------------------
1. Basis of preparation
The Group's financial information has been prepared in accordance with
International Financial Reporting Standards ('IFRS') issued for use in the
European Union and on a basis consistent with that adopted in the previous year.
The financial information has been prepared under the historical cost convention
except for derivative financial instruments that are stated at their fair value.
While the financial information included in this preliminary announcement has
been computed in accordance with IFRS, this announcement does not itself contain
sufficient information to comply with IFRS. The Company will publish full IFRS
compliant accounts in April 2007.
The preliminary announcement does not constitute the Company's statutory
accounts for the year ended 31 December 2006 or 31 December 2005 within the
meaning of Section 240 of the Companies Act 1985 but is derived from those
statutory accounts.
The Group's statutory accounts for the year ended 31 December 2005 have been
filed with the Registrar of Companies, and those for 2006 will be delivered
following the Company's Annual General Meeting. The auditors have reported on
the statutory accounts for 2006 and 2005, and their reports were unqualified and
did not contain statements under section 237 (2) or 237 (3) of the Companies Act
1985.
2. Revenue and segmental information
Revenue
An analysis of the Group's revenue is as follows:
2006 2005
£000's £000's
----------------------------------------------------------
Continuing operations - 1,859,832 1,571,448
sale of goods
Discontinued operation - 65,228 67,884
sale of goods
----------------------------------------------------------
Total revenue 1,925,060 1,639,332
----------------------------------------------------------
Segmental information
As at 31 December 2006, the Group is managed and organised in two geographies: UK and Ireland and Mainland Europe. On
20 November 2006, the Group disposed of its operations in the USA. These geographies are the basis on which the Group
reports its primary segment information. Segment information about these geographies is presented below:
2006 2006 2006 2006 2006 2005 2005 2005 2005 2005
UK & Main Discont'd Elimin Total UK & Main Discont'd Elimin Total
Ireland -land operation -ations Ireland -land operation -ations
Europe (USA) Europe (USA)
£000's £000's £000's £000's £000's £000's £000's £000's £000's £000's
-----------------------------------------------------------------------------------------------------------------------
Revenue
External sales 1,254,376 605,456 65,228 - 1,925,060 1,098,055 473,393 67,884 - 1,639,332
Inter-segment sales* 34 - 17 (51) - - 2 50 (52) -
-----------------------------------------------------------------------------------------------------------------------
Total revenue 1,254,410 605,456 65,245 (51) 1,925,060 1,098,055 473,395 67,934 (52) 1,639,332
-----------------------------------------------------------------------------------------------------------------------
Result
Segment result
before amortisation
of acquired intangibles
and goodwill 99,919 27,577 3,758 - 131,254 84,359 19,612 3,008 - 106,979
impairment loss
Amortisation of
acquired
intangibles (6,470) (472) - - (6,942) (3,630) (58) - - (3,688)
Goodwill impairment
loss - - - - - (5,654) - - - (5,654)
------------------------------------------------------------------------------------------------------------------------
Segment result 93,449 27,105 3,758 - 124,312 75,075 19,554 3,008 - 97,637
Parent Company costs (6,095) (4,876)
------------------------------------------------------------------------------------------------------------------------
Operating profit 118,217 92,761
Net finance costs -
continuing operations (11,787) (5,938)
Net finance income/(costs) -
discontinued operation 16 (12)
------------------------------------------------------------------------------------------------------------------------
Profit before tax 106,446 86,811
Profit on disposal of discontinued operation 1,947 -
Income tax credit -
on profit on disposal of
discontinued operation 92 -
Income tax expense -
continuing operations (30,839) (27,835)
Income tax expense -
discontinued operation (1,124) (834)
Minority interests (673) (956)
------------------------------------------------------------------------------------------------------------------------
Retained profit 75,849 57,186
------------------------------------------------------------------------------------------------------------------------
Attributable to:
Continuing operations 71,160 55,024
Discontinued operation 4,689 2,162
------------------------------------------------------------------------------------------------------------------------
75,849 57,186
------------------------------------------------------------------------------------------------------------------------
* Inter-segment sales are charged at the prevailing market rates.
2006 2006 2006 2006 2006 2005 2005 2005 2005 2005
UK & Main Discont'd Elimin Total UK & Main Discont'd Elimin Total
Ireland -land operation -ations Ireland -land operation -ations
Europe (USA) Europe (USA)
£000's £000's £000's £000's £000's £000's £000's £000's £000's £000's
-----------------------------------------------------------------------------------------------------------------------
Balance sheet
Assets
Segment assets 718,293 266,490 - - 984,783 587,710 179,100 31,535 - 798,345
Unallocated assets 11,628 1,779
-----------------------------------------------------------------------------------------------------------------------
Consolidated total assets 996,411 800,124
-----------------------------------------------------------------------------------------------------------------------
Liabilities
Segment
liabilities 264,338 91,886 - - 356,224 238,255 54,200 6,327 - 298,782
Unallocated
liabilities 287,525 211,003
-----------------------------------------------------------------------------------------------------------------------
Consolidated
total 643,749 509,785
liabilities
-----------------------------------------------------------------------------------------------------------------------
Other segment information
Capital expenditure on:
Property, plant
and equipment 37,289 8,121 391 45,801 25,773 8,448 326 34,547
Intangible assets 28,835 10,793 - 39,628 37,543 689 - 38,232
Goodwill 36,470 18,891 - 55,361 56,107 1,474 - 57,581
Non-cash expenditure:
Depreciation 18,217 5,540 346 24,103 16,537 4,781 501 21,819
Amortisation of
acquired
intangibles 6,470 472 - 6,942 3,630 58 - 3,688
Goodwill
impairment loss - - - - 5,654 - - 5,654
-----------------------------------------------------------------------------------------------------------------------
3. Earnings per share
The calculations of earnings per share are based on the following profits and numbers of shares:
Basic and diluted
--------------------------------------------------------------------------------------------
2006 2006 2006 2005 2005 2005
Continuing Discontinued Total Continuing Discontinued Total
operations operation operations operation
£000's £000's £000's £000's £000's £000's
--------------------------------------------------------------------------------------------
Profit after tax 71,833 4,689 76,522 55,980 2,162 58,142
Minority interests (673) - (673) (956) - (956)
--------------------------------------------------------------------------------------------
71,160 4,689 75,849 55,024 2,162 57,186
--------------------------------------------------------------------------------------------
Basic and diluted before amortisation of acquired intangibles,
goodwill impairment, hedge ineffectiveness and profit on disposal of
discontinued operation
--------------------------------------------------------------------------------------------
2006 2006 2006 2005 2005 2005
Continuing Discontinued Total Continuing Discontinued Total
operations operation operations operation
£000's £000's £000's £000's £000's £000's
--------------------------------------------------------------------------------------------
Profit after tax 71,833 4,689 76,522 55,980 2,162 58,142
Minority interests (673) - (673) (956) - (956)
Amortisation of 6,942 - 6,942 3,688 - 3,688
acquired intangibles
Goodwill impairment - - - 5,654 - 5,654
loss
Hedge ineffectiveness (1,357) - (1,357) (1,880) - (1,880)
Tax relating to the (1,676) - (1,676) (542) - (542)
amortisation of
acquired intangibles
and hedge
ineffectiveness
Profit after tax on - (2,039) (2,039) - - -
disposal of
discontinued operation
--------------------------------------------------------------------------------------------
75,069 2,650 77,719 61,944 2,162 64,106
--------------------------------------------------------------------------------------------
Weighted average number of shares:
2006 2005
Number Number
---------------------------------------------------------------------------------------------
For basic earnings per share 122,560,171 121,625,474
Exercise of share options 1,287,923 1,970,146
---------------------------------------------------------------------------------------------
For diluted earnings per share 123,848,094 123,595,620
---------------------------------------------------------------------------------------------
2006 2005
---------------------------------------------------------------------------------------------
Earnings per share
Basic earnings per share - 58.1p 45.2p
continuing operations
Basic earnings per share - 3.8p 1.8p
discontinued operation
Total basic earnings 61.9p 47.0p
per share
Diluted earnings per share - 57.5p 44.5p
continuing operations
Diluted earnings per share - 3.8p 1.7p
discontinued operation
Total diluted earnings 61.2p 46.3p
per share
---------------------------------------------------------------------------------------------
Earnings per share before amortisation of acquired intangibles, goodwill impairment, hedge
ineffectiveness and profit on disposal of discontinued operation
Basic earnings per share - 61.3p 50.9p
continuing operations
Basic earnings per share - 2.2p 1.8p
discontinued operation
Total basic earnings 63.4p 52.7p
per share
Diluted earnings per share - 60.6p 50.1p
continuing operations
Diluted earnings per share - 2.1p 1.7p
discontinued operation
Total diluted earnings 62.8p 51.9p
per share
---------------------------------------------------------------------------------------------
Earnings per share before amortisation of acquired intangibles, goodwill impairment, hedge
ineffectiveness and profit on disposal of discontinued operation is disclosed in order to
present the underlying performance of the Group.
4. Consolidated statement of changes in equity
Called Share Capital Share Hedging and
up share premium redemption Special option translation Retained Minority Total
capital account reserve reserve reserve reserve profits Total interests equity
£000's £000's £000's £000's £000's £000's £000's £000's £000's £000's
-----------------------------------------------------------------------------------------------------------------------
At 31 December 2004 12,139 16,793 347 22,113 639 (360) 201,672 253,343 572 253,915
Profit after tax - - - - - - 57,186 57,186 956 58,142
Dividends - - - - - - (17,861) (17,861) - (17,861)
New share capital issued 50 1,090 - - - - - 1,140 - 1,140
Exchange difference on
retranslation of foreign
currency goodwill and
intangibles - - - - - (725) - (725) - (725)
Exchange difference on
retranslation of foreign
currency net investments
(excluding goodwill
and intangibles) - - - - - (1,669) - (1,669) - (1,669)
Exchange and fair
value movements
associated with borrowings
and derivative financial
instruments - - - - - 1,111 - 1,111 - 1,111
Tax charge on exchange
difference arising on
borrowings and derivative
financial instruments - - - - - (639) - (639) - (639)
Current and deferred
tax on share options - - - - - - 596 596 - 596
Credit to share option
reserve - - - - 736 - - 736 - 736
Actuarial loss on defined
benefit pension schemes - - - - - - (1,885) (1,885) - (1,885)
Deferred tax movement
associated with
actuarial loss - - - - - - 563 563 - 563
Payment to minority
interest shareholder - - - - - - - - (572) (572)
Recognition of minority
interest on acquisition - - - - - - - - 243 243
Transitional adjustment
to adopt IAS 32 and IAS 39
at 1 January 2005 - - - - - - (6,625) (6,625) - (6,625)
Recognition of deferred
tax assets on certain
transitional adjustments
at 1 January 2005 - - - - - - 3,869 3,869 - 3,869
-----------------------------------------------------------------------------------------------------------------------
At 31 December 2005 12,189 17,883 347 22,113 1,375 (2,282) 237,515 289,140 1,199 290,339
-----------------------------------------------------------------------------------------------------------------------
Profit after tax - - - - - - 75,849 75,849 673 76,522
Dividends - - - - - - (21,719) (21,719) - (21,719)
New share capital issued 121 1,753 - - - - - 1,874 - 1,874
Exchange difference
on retranslation of
foreign currency
goodwill and intangibles - - - - - (918) - (918) - (918)
Exchange difference on
retranslation of foreign
currency net investments
(excluding goodwill
and intangibles) - - - - - (3,980) - (3,980) - (3,980)
Exchange and fair value
movements associated
with borrowings and
derivative financial
instruments - - - - - 3,688 3,024 6,712 - 6,712
Tax charge on exchange
difference arising on
borrowings and derivative
financial instruments - - - - - (1,078) - (1,078) - (1,078)
Current and deferred tax
on share options - - - - - - 2,214 2,214 - 2,214
Actuarial gain on defined
benefit pension schemes - - - - - - 3,292 3,292 - 3,292
Deferred tax movement
associated with actuarial
gain - - - - - - (966) (966) - (966)
Credit to share option
reserve - - - - 1,089 - - 1,089 - 1,089
Exercise of share options - - - - (678) 678 - - -
Payment to minority
interest shareholder - - - - - - - (719) (719)
-----------------------------------------------------------------------------------------------------------------------
At 31 December 2006 12,310 19,636 347 22,113 1,786 (4,570) 299,887 351,509 1,153 352,662
-----------------------------------------------------------------------------------------------------------------------
5. Reconciliation of operating profit to cash inflow from operating activities
2006 2005
£000's £000's
----------------------------------------------------------------------------
Operating profit from continuing operations 114,459 89,753
Operating profit from discontinued operation 3,758 3,008
----------------------------------------------------------------------------
Operating profit 118,217 92,761
----------------------------------------------------------------------------
Depreciation charge 24,103 21,819
Amortisation of acquired intangibles 6,942 3,688
Goodwill impairment loss - 5,654
Profit on sale of property, plant and equipment (630) (572)
Share-based payments 1,089 736
Increase in inventories (14,896) (5,066)
Increase in receivables (4,320) (10,043)
Increase in payables 1,850 4,604
----------------------------------------------------------------------------
Cash inflow from operating activities 132,355 113,581
----------------------------------------------------------------------------
6. Reconciliation of net cash flow to movements in net debt
2006 2005
£000's £000's
-----------------------------------------------------------------------------
Increase in cash and cash equivalents in the year 30,723 12,670
Cash flow from increase in debt (75,846) (62,156)
-----------------------------------------------------------------------------
Increase in net debt resulting from cash flows (45,123) (49,486)
Debt acquired with acquisitions* (15,920) (21,270)
Non-cash items+ 5,911 (271)
IFRS transitional adjustment - (6,625)
Exchange differences 1,035 1,247
-----------------------------------------------------------------------------
Increase in net debt in the year (54,097) (76,405)
Net debt at beginning of year (174,723) (98,318)
-----------------------------------------------------------------------------
Net debt at end of year (228,820) (174,723)
-----------------------------------------------------------------------------
* including loan notes issued.
+ Non-cash items relate to the fair value movement of debt recognised in the
year which does not give rise to a cash inflow or outflow.
7. Disposal of discontinued operation
a) Profit on disposal of discontinued operation
On 20 November 2006, the Group disposed of its USA business to Grey Mountain
Partners for a total consideration of $51m (£26.999m equivalent) in cash. This
generated a Group profit on disposal after tax of £2.039m. This is calculated as
follows:
£000's
---------------------------------------------------------------------------------
Consideration 26,999
Disposal expenses incurred (1,672)
---------------------------------------------------------------------------------
Net proceeds from sale 25,327
---------------------------------------------------------------------------------
Net assets disposed of (22,918)
Recycling of hedging and translation reserve movements from 1 January (462)
2004 to date of disposal
---------------------------------------------------------------------------------
Profit on disposal of USA business before tax 1,947
---------------------------------------------------------------------------------
Tax credit on profit on disposal 92
---------------------------------------------------------------------------------
Profit after tax on disposal of USA business 2,039
---------------------------------------------------------------------------------
b) Profits generated by the discontinued operation up to the date of disposal
The following revenue and profit numbers have been included in the Consolidated
Income Statement which represent the contribution of the USA business up to the
date of disposal:
2006 2005
£000's £000's
---------------------------------------------------------------------------------
Revenue 65,228 67,884
Cost of sales 48,480 50,991
---------------------------------------------------------------------------------
Gross profit 16,748 16,893
---------------------------------------------------------------------------------
Operating expenses 12,990 13,885
---------------------------------------------------------------------------------
Operating profit 3,758 3,008
---------------------------------------------------------------------------------
Net finance (income)/costs (16) 12
---------------------------------------------------------------------------------
Profit before tax 3,774 2,996
---------------------------------------------------------------------------------
Income tax expense 1,124 834
---------------------------------------------------------------------------------
Profit after tax 2,650 2,162
---------------------------------------------------------------------------------
c) Cash flows from discontinued operation
2006 2005
£000's £000's
---------------------------------------------------------------------------------
Net cash flows from operating activities 3,535 (128)
Net cash flows from investing activities (360) (287)
Net cash flows from financing activities (1,802) (1)
--------------------------------------------------------------------------------
1,373 (416)
--------------------------------------------------------------------------------
8. Final dividend
A final dividend of 14.3p per share (2005: 11.5p) has been proposed, taking the
full year dividend to 20.5p (2005: 16.8p).
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
Accounts.
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