Half Yearly Report

RNS Number : 5956K

SIG PLC

23 August 2012

 



23 August 2012

Interim results for the six months ended 30 June 2012

SIG plc ("SIG") is a leading distributor of specialist building products in Europe, with strong positions in its core markets of insulation & energy management, interior fit out and roofing.

Continuing operations*	H1 2012	H1 2011
Revenue	£1,292.6m	£1,343.7m
Underlying** operating profit	£40.9m	£43.5m
Underlying** profit before tax	£34.7m	£35.4m
Underlying** basic earnings per share	4.0p	4.1p
Interim dividend per share	1.0p	0.75p
Return on capital employed (post-tax)	7.8%	7.4%
Net debt as at 30 June	£129.9m	£162.8m

Financial highlights

·     Sales flat & underlying profit before tax up 1.4% in continuing operations in constant currency

·     Sales down 3.8% & underlying profit before tax down 2.0% in continuing operations in Sterling due to exchange rate movements

·     Gross margin in continuing operations improved by 50bps to 25.9% (H1 2011: 25.4%)

·     Underlying operating margin in continuing operations maintained at 3.2% (H1 2011: 3.2%)

·     Statutory profit before tax increased to £25.2m (H1 2011: loss of £0.6m)

·     Return on capital employed (post-tax) increased by 40bps to 7.8% (H1 2011: 7.4%)

·     Interim dividend increased by one third to 1.0p per share, reflecting the strength of the Group's balance sheet

Operational highlights

·     15 new branches opened and 1 bolt-on insulation distribution business acquired, bringing total branches in the Group to 725 as at 30 June 2012 (31 December 2011: 715)

·     Tight control on operating costs - underlying inflation held at 1%

·     Targeting an additional £7m of annualised cost savings in 2013

* Continuing operations excludes the results of businesses (up to the date of the disposals) divested in 2011. 

** Underlying is before the amortisation of acquired intangibles, impairment charges, restructuring costs, expenses arising on acquisition of subsidiaries, profit and loss on the sale of businesses, trading profits and losses associated with disposed businesses, the defined benefit pension scheme curtailment gain and gains and losses on derivative financial instruments.

Statutory

Total operations	H1 2012	H1 2011
Revenue	£1,292.6m	£1,399.1m
Operating profit	£32.3m	£9.4m
Profit/(loss) before tax	£25.2m	(£0.6m)
Profit after tax	£17.3m	£1.7m
Earnings per share	2.9p	0.3p

Commenting on the results and outlook, Chris Davies, Chief Executive, said:

"The Group has delivered a resilient performance in the first half, slightly improving underlying profit before tax in constant currency and increasing return on capital employed despite a weaker trading environment, poor weather and strong comparators. 

"We have enhanced the quality of our sales, improved gross margin and maintained a firm stance on credit.  Underlying cost inflation remains under tight control and we are continuing to drive efficiencies from our branch network, with further cost saving actions announced today.

"Like-for-like sales so far in H2 have been in line with prior year, following a slight decline in May and June, with little discernible effect from the Olympics on our UK operations. 

"Our outlook remains unchanged from that indicated in our trading update in July.  We continue to expect market volumes to decline slightly this year and against this background are focused on improving the Group's performance, outperforming our markets and implementing further self-help measures."

Enquiries

SIG plc

Chris Davies, Chief Executive                                    + 44 (0) 114 285 6300

Doug Robertson, Group Finance Director

Simon Bielecki, Head of Investor Relations                 + 44 (0) 7515 794359

FTI Consulting

Richard Mountain/Nick Hasell                                    + 44 (0) 20 7269 7291 

Analyst presentation

A briefing to analysts will take place at 9.00am on Thursday 23 August 2012 at FTI Consulting, Holborn Gate, 26 Southampton Buildings, London, WC2A 1PB.  A webcast will be available on the investor relations section of www.sigplc.comand will also be available for replay later on in the day.

Summary

The Group's performance in the first half was affected by a weakening macro economy, adverse weather conditions in Mainland Europe in February and the wettest Q2 on record in the UK. Despite these headwinds and very strong prior year comparatives, SIG maintained sales at last year's levels in constant currency.  Due to exchange rate movements, sales from continuing operations in Sterling were down by 3.8% to £1,292.6m.

SIG estimates that its volumes in the first half fell by 1.9% compared to H1 2011, offset by product price inflation of 2.0%. 

The reported performance of the Group's Mainland European business was affected by the weakening Euro, which, based on average exchange rates, depreciated by 6.7% compared to Sterling in the first half of the year. 

As a result, sales in Mainland Europe fell by 5.0% in Sterling to £714.3m, despite being up by 1.7% on a constant currency basis.  Benelux was the strongest performer, with sales up 10.5% in constant currency.  France continued to make good progress, in part attributable to the Group's investment in new branches in recent years, growing sales by 3.6% in constant currency.  Revenues in Germany and Austria fell slightly, by 1.1% in constant currency, largely due to weaker activity levels in the non-residential market and a focus on gross margin improvement.

In the UK & Ireland revenues from continuing operations fell by 2.2% to £578.3m, which translated to a 1.9% drop in constant currency.  Sales in the UK, particularly to the outside building trades, were adversely affected by the wet weather and were down by 1.0%.  In Ireland, which now only accounts for 2% of Group revenue, sales were significantly affected by the continuing challenging economic conditions, particularly in the construction industry, decreasing by 14.8% in constant currency.

The Group's focus on the quality of its sales has delivered an improvement in gross margin, which increased by 50bps to 25.9% (H1 2011: 25.4%). 

Underlying operating profit from continuing operations fell by 6.0% to £40.9m (H1 2011: £43.5m).   Underlying net finance costs were reduced by 25.9% to £6.0m (H1 2011: £8.1m), which after the £0.2m share of loss of associate (H1 2011: nil) leaves underlying profit before tax from continuing operations down by 2.0% at £34.7m (H1 2011: £35.4m).  Underlying basic earnings per share from continuing operations fell by 2.4% to 4.0p (H1 2011: 4.1p).

Non-underlying charges before taxation during the period totalled £9.5m (H1 2011: £36.0m) and included amortisation of acquired intangibles of £10.9m (H1 2011: £12.3m), net losses on derivative financial instruments of £0.9m (H1 2011: £1.9m), exceptional restructuring costs of £2.0m (H1 2011: nil), acquisition related expenses of £0.1m (H1 2011: nil) and an exceptional gain of £4.4m (H1 2011: nil) arising from changes to its UK defined benefit pension scheme.

On a statutory basis profit before tax was £25.2m compared to a loss of £0.6m in H1 2011.  Basic earnings per share were 2.9p (H1 2011: 0.3p).

Net debt at 30 June 2012 was £129.9m, a reduction of £32.9m compared to a year ago, but an increase of £14.0m compared to 31 December 2011 (£115.9m) in part due to normal seasonal movements in working capital.  As anticipated, net capital expenditure increased by 54.4% to £12.2m (H1 2011: £7.9m), but remained in line with depreciation of £12.0m.

Post-tax Return on Capital Employed ("ROCE"), which is calculated on a rolling 12 month basis as underlying operating profit less tax divided by average net assets plus average net debt, improved by 40bps to 7.8% (H1 2011: 7.4%).  ROCE is an area of key management focus and the Group is targeting further improvements going forward.

Dividend

SIG is declaring an interim dividend of 1.0p per ordinary share, an increase of 33.3% compared to last year's reinstated interim dividend of 0.75p per ordinary share.  This increase reflects the strength of the Group's balance sheet and the Board's commitment to a progressive dividend policy, while maintaining a dividend cover of 2-3x on an underlying basis over the medium term.

The interim dividend will be paid on 7 November 2012 to shareholders on the register at close of business on 12 October 2012.  The ex-dividend date is 10 October 2012.

Operating costs

SIG kept tight control of its operating costs in the first half with underlying cost inflation in its existing perimeter increasing by only 1.0%, which is well below the Group's target of 2%.

The Group announced at the beginning of the year that it had identified £5m of annual cost savings principally relating to the rationalisation of its branch network, with the majority of these efficiencies to be realised in 2012.  In H1 SIG benefited from £2.5m of these savings.

Given prevailing market conditions, the Group has continued to keep its cost base under review and is targeting further annual operating cost savings of £7m in 2013.  £2.3m of these savings were identified and implemented in H1 2012 with an associated exceptional charge of £2.0m.  Further annualised savings of c.£5m are targeted from initiatives to be implemented in H2 2012, with the associated exceptional charge expected to be c.£8m.

Market outperformance

The Group has developed a standard in-house methodology which incorporates published research data, government statistics, sector reports, as well as supplier and competitor information to establish market performance. 

Based on this methodology SIG estimates that overall market demand (including price inflation) declined by c.1.4% in H1 2012, weighted according to the sectors in which it operates.  As the Group grew sales by 0.1% in constant currency this equates to a market outperformance of c.1.5%.  Although lower than last year's outperformance of 2.8%, SIG believes this is due to its increased focus on gross margin and improving the quality of its sales.

New branch openings and bolt-on acquisition

The careful identification and opening of new trading sites is an important part of SIG's organic growth strategy.  In the first half of the year SIG opened a further 15 new trading sites, of which 11 were in Mainland Europe and 4 in the UK.  Overall, the Group aims to open between 15 and 20 new branches per annum, though this depends on the prevailing macro economic environment.  

While relatively inexpensive in terms of capital costs, new branch openings are a temporary drag on profit as they typically take between 12-18 months to break even on a month-by-month basis.  The Group has incurred losses of £0.9m in H1 2012 from new sites that have opened over the previous 12 months.  However, new branches opened during 2008-11 are performing well, contributing £60m to SIG's sales in H1 2012 at a c.3% return.

During the period SIG also acquired a small insulation distribution business in the Netherlands, the gross assets of which were €1.9m as at 31 December 2011.  This acquisition is in the Group's core business area of insulation and energy management and is a good fit with its existing Dutch operations.  The Group is targeting to generate a return from the acquisition that is above SIG's cost of capital in the first full year of ownership and 3% higher by the third year.  Following this acquisition and new site openings, the Group now has 725 branches in its portfolio.

Trading Review

Mainland Europe (55% of Group sales)

·      Sales reduced by 5.0% to £714.3m (H1 2011: £752.2m), but increased by 1.7% in constant currency

·      Gross margin improved by 70bps to 25.5% (H1 2011: 24.8%)

·      Underlying operating profit reduced by 11.2% to £21.5m (H1 2011: £24.2m)

·      Statutory operating profit of £15.7m (H1 2011: £19.5m)

	H1 2012 Sales (£m)	% change	% change  constant currency
France	300.4	(2.8)	3.6
Germany & Austria	265.8	(7.3)	(1.1)
Benelux*	81.7	4.1	10.5
Poland & Central Europe	66.4	(14.7)	(4.2)

* includes international air handling business, headquartered in the Netherlands. 

In H1 2012 SIG opened 11 new trading sites in the region, of which 7 were in France, 3 were in Germany and 1 was in the Netherlands.  The Group also acquired 1 branch in the Netherlands and closed 2 branches in France and 1 in Central Europe.  As a result, the total number of trading sites in Mainland Europe increased by 9 to 394 over the six months to 30 June 2012.

Sales in France were up by 3.6% in constant currency, representing a market outperformance of c.4.6%. Gross margin increased by 80bps.  This sales growth can in large part be attributed to the contribution from SIG's investment in new branches in France, having opened 64 new sites since 1 January 2007.

During the first half of the year there was a slowdown in the French residential market as a result of reduced tax incentives on property and increasingly stringent bank lending conditions.  Together with the poor weather conditions in February, this slowdown affected SIG's roofing business, Lariviere, where sales were down by 2.4% in constant currency compared to the first half of last year.  However, gross margin in this business improved by 40bps.

Despite the French non-residential market remaining flat, SIG's interiors and insulation business, which trades under LiTT and Ouest Isol, grew sales by 12.0% in constant currency due to investment in additional sales resources and new branches. The Group continues to be the market leader for industrial insulation in France.

Although revenues in Germany and Austria decreased by 1.1% in constant currency, gross margin was up by 100bps.  The Group believes its sales performance was in line with the market although some of its competitors appeared to be more focused on volume rather than price.

While the new build residential market in Germany continues to improve, the non-residential market has weakened due to declining public sector demand and a relatively stagnant commercial sector.   As a result, sales in the Group's insulation and interiors business, WeGo, reduced by 0.7% in constant currency compared to prior year and fell by 2.6% in the roofing division.  As elsewhere in Mainland Europe, sales were adversely affected by the harsh winter weather in February.

Although market conditions in the Benelux region remain challenging, SIG performed particularly well, increasing sales by 10.5% in constant currency and outperforming the market by c.15%.   This outperformance was due to the Group winning a number of orders for relatively large projects which, partly due to their product mix, contributed to a reduction in gross margin of 170bps. 

In Poland & Central Europe, sales reduced by 4.2% in constant currency, but gross margin improved by 80bps.  Revenues in Poland, which accounts for around 80% of sales in the region, were down by 2.3% due to a weakening market, partly caused by a tightening of lending conditions by Polish banks and a slowdown in the non-residential sector following the 2012 European Football Championship.

UK & Ireland (45% of Group sales)

·      Total sales on a continuing basis reduced by 2.2% to £578.3m (H1 2011: £591.5m)

·      Gross margin on a continuing basis improved by 40bps to 26.5% (H1 2011: 26.1%)

·      Underlying operating profit maintained at £23.1m (H1 2011: £23.1m)

·      Statutory operating profit of £20.3m (H1 2011: loss of £6.3m)

During the first half of the year the Group opened 4 new trading sites in the UK, of which 3 are Builders Express branches, and closed 3 sites.  As a result, the total number of trading sites in the UK & Ireland increased by 1 to 331 over the six months to 30 June 2012.

In the UK, sales from continuing operations reduced by 1.0% to £547.9m in a flat market.  Gross margin improved by 40bps.  Revenues in Ireland fell by 20.0% to £30.4m and declined by 14.8% in constant currency.   For the UK & Ireland combined sales fell by 1.9% on a constant currency basis.

The UK construction market as a whole weakened during the first half of the year due to the increasingly uncertain macro economic environment, with building site activity further constrained by extreme and prolonged periods of wet weather in Q2.

Although activity in the residential market remained stronger than in non-residential markets, demand continued to be relatively fragile largely due to the continuing lack of both mortgage finance and confidence in the UK housing market.

The non-residential sector was affected by a pronounced slowdown in public sector construction activity resulting from government austerity measures.  Activity in the private sector remained weak and was not strong enough to compensate for the loss of public sector activity, with any growth weighted towards London and the South East of England.

Sales in the Group's UK Interiors and Insulation division fell by 0.5%, and revenues in the Exteriors division were down by 2.0% having been badly affected by the wet weather in Q2.

Revenues in SIG Energy Management, whose main activity is retrofitting insulation in residential properties in the UK, were broadly flat, though profits were ahead due to the effect of cost reduction measures implemented. 

SIG believes that through its Energy Management business it is well positioned to benefit from the Green Deal, the UK Government's initiative to encourage homeowners and businesses to upgrade the energy efficiency of their buildings at no up-front cost, with capital costs paid for over time through the resultant savings on energy bills.  However, the timing of the introduction of the Green Deal remains uncertain, with the start likely to be delayed until mid-2013. 

In Ireland market conditions remained very challenging with credit continuing to be a key issue for the construction market.  For insulation this was compounded by a delay in the release of energy grant funding.  

Group outlook

Like-for-like sales so far in H2 have been in line with prior year, following a slight decline in May and June, with little discernible effect from the Olympics on the Group's UK operations.

SIG's outlook remains unchanged from that indicated at its Trading Update in July.  The Group continues to expect market volumes to decline slightly this year and against this background is focused on improving its performance, outperforming its markets and implementing further self-help measures.

Cautionary Statement

This Interim Report has been prepared in accordance with the requirements of English Company Law and the liabilities of the Directors in connection with this Interim Report shall be subject to the limitations and restrictions provided by such law.

This Interim Report is prepared for and addressed only to the Company's shareholders as a whole and to no other person. The Company, its Directors, employees, agents or advisors do not accept or assume responsibility to any other person to whom this Interim Report is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.

Certain information included in this Interim Report is forward looking and involves risk and uncertainties that could cause the actual results to differ materially from those expressed or implied by forward looking statements. It is believed that the expectations set out in these forward looking statements are reasonable but they may be affected by a wide range of variables which could cause future outcomes to differ from those foreseen in forward looking statements, including but not limited to, changes in risks associated with the eurozone, the level of market demand in SIG's operating markets, competitors and margin management, commercial relationships, government legislation, debt, working capital/cash management, IT infrastructure and resilience and availability of key resources.  All statements in this Interim Report are based upon information known to the Company at the date of this report. The Company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise.

Responsibility Statement

We confirm to the best of our knowledge:

(a) the Interim Report has been prepared in accordance with IAS 34 "Interim Financial Reporting";

(b) the Interim Report includes a fair review of the information required by the Financial Services Authority Disclosure and Transparency Rules ("DTR") 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the Interim Report includes a fair review of the information required by DTR4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board

Chris Davies                                                     Doug Robertson

Director                                                             Director

22 August 2012                                                 22 August 2012

Condensed Consolidated Income Statement
for the six months ended 30 June 2012
		Unaudited six months ended 30 June 2012				Unaudited six months ended 30 June 2011				Audited year ended 31 December 2011
		Before other items*	Other items*	Total		Before other items*	Other items*	Total		Before other items*	Other items*	Total
	Note	£m	£m	£m		£m	£m	£m		£m	£m	£m
Revenue	2	1,292.6	-	1,292.6		1,343.7	55.4	1,399.1		2,744.8	63.6	2,808.4
Cost of sales		(957.5)	-	(957.5)		(1,003.0)	(36.7)	(1,039.7)		(2,042.3)	(39.5)	(2,081.8)
Gross profit		335.1	-	335.1		340.7	18.7	359.4		702.5	24.1	726.6
Other operating expenses		(294.2)	(8.6)	(302.8)		(297.2)	(52.8)	(350.0)		(606.9)	(94.1)	(701.0)
Operating profit	2	40.9	(8.6)	32.3		43.5	(34.1)	9.4		95.6	(70.0)	25.6
Finance income		3.6	0.2	3.8		3.6	-	3.6		7.4	-	7.4
Finance costs		(9.6)	(1.1)	(10.7)		(11.7)	(1.9)	(13.6)		(21.2)	(4.2)	(25.4)
Profit/(loss) before tax and loss of associate		34.9	(9.5)	25.4		35.4	(36.0)	(0.6)		81.8	(74.2)	7.6
Share of loss of associate		(0.2)	-	(0.2)		-	-	-		(0.1)	-	(0.1)
Profit/(loss) before tax		34.7	(9.5)	25.2		35.4	(36.0)	(0.6)		81.7	(74.2)	7.5
Income tax (expense)/credit	4	(10.9)	3.0	(7.9)		(10.9)	13.2	2.3		(25.7)	18.2	(7.5)
Profit/(loss) after tax		23.8	(6.5)	17.3		24.5	(22.8)	1.7		56.0	(56.0)	(0.0)
Attributable to:
Equity holders of the Company		23.8	(6.5)	17.3		24.3	(22.8)	1.5		55.7	(56.0)	(0.3)
Non-controlling interests		-	-	-		0.2	-	0.2		0.3	-	0.3
Earnings per share
Basic earnings/(loss) per share	5	4.0p	(1.1p)	2.9p		4.1p	(3.8p)	0.3p		9.4p	(9.4p)	(0.0p)
Diluted earnings/(loss) per share	5	4.0p	(1.1p)	2.9p		4.1p	(3.8p)	0.3p		9.4p	(9.4p)	(0.0p)
* "Other items" have been disclosed separately in order to give an indication of the underlying earnings of the Group. Further details can be found in Note 3.

Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2012
	Unaudited six months ended 30 June 2012	Unaudited six months ended 30 June 2011	Audited year ended 31 December 2011
	£m	£m	£m
Profit/(loss) after tax	17.3	1.7	(0.0)
Other comprehensive (expense)/income
Exchange difference on retranslation of foreign currency goodwill and intangibles	(8.8)	14.7	(9.6)
Exchange difference on retranslation of foreign currency net investments (excluding goodwill and intangibles)	(8.3)	13.2	(14.7)
Exchange and fair value movements associated with borrowings and derivative financial instruments	5.4	(4.1)	3.6
Tax charge on exchange difference arising on borrowings and derivative financial instruments	(1.4)	(0.2)	(0.9)
Gains and losses on cash flow hedges	(0.5)	(1.0)	(5.2)
Transfer to profit and loss on cash flow hedges	1.1	1.9	3.9
Actuarial loss on defined benefit pension schemes	(2.6)	-	(21.8)
Deferred tax movement associated with actuarial loss	0.6	-	5.4
Effect of change in rate on deferred tax	(0.1)	(0.2)	(0.3)
Other comprehensive (expense)/income	(14.6)	24.3	(39.6)
Total comprehensive income/(expense)	2.7	26.0	(39.6)
Attributable to:
Equity holders of the Company	2.7	25.8	(39.9)
Non-controlling interests	-	0.2	0.3
	2.7	26.0	(39.6)

Condensed Consolidated Balance Sheet
as at 30 June 2012
		Unaudited 30 June 2012	Unaudited  30 June 2011	Audited 31 December 2011
	Note	£m	£m	£m
Non-current assets
Property, plant and equipment		141.4	155.4	142.7
Interest in associate	11	1.3	1.6	1.5
Goodwill		424.9	460.1	431.4
Intangible assets		52.4	81.6	62.7
Deferred tax assets		32.0	33.1	35.7
Derivative financial instruments		51.0	46.1	52.7
		703.0	777.9	726.7
Current assets
Inventories		234.6	245.8	223.4
Trade receivables		409.0	459.0	366.6
Assets held for sale		-	24.0	-
Other receivables		30.1	32.3	25.6
Cash and cash equivalents		104.0	132.1	126.9
		777.7	893.2	742.5
Total assets		1,480.7	1,671.1	1,469.2
Current liabilities
Trade and other payables		387.0	444.2	342.3
Liabilities held for sale		-	13.8	-
Obligations under finance lease contracts		1.9	1.9	1.8
Bank overdrafts		3.1	1.5	4.0
Bank loans		2.4	6.5	2.9
Private placement notes		-	48.0	-
Derivative financial instruments		0.6	7.1	-
Deferred consideration		-	-	5.4
Current tax liabilities		4.4	1.6	7.7
Provisions		14.3	10.9	14.6
		413.7	535.5	378.7
Non-current liabilities
Obligations under finance lease contracts		5.4	5.7	5.5
Bank loans		0.2	0.2	0.2
Private placement notes		261.7	261.3	265.2
Derivative financial instruments		9.6	8.8	10.5
Deferred tax liabilities		17.9	22.7	20.8
Other payables		7.8	4.4	5.0
Retirement benefit obligations		36.1	26.1	44.5
Provisions		27.1	29.0	31.3
		365.8	358.2	383.0
Total liabilities		779.5	893.7	761.7
Net assets		701.2	777.4	707.5
Capital and reserves
Called up share capital	9	59.1	59.1	59.1
Share premium account		447.0	447.0	447.0
Capital redemption reserve		0.3	0.3	0.3
Share option reserve		1.2	1.2	1.2
Hedging and translation reserve		(1.9)	56.4	11.2
Retained profits		194.7	212.0	187.7
Attributable to equity holders of the Company		700.4	776.0	706.5
Non-controlling interests		0.8	1.4	1.0
Total equity		701.2	777.4	707.5

Condensed Consolidated Cash Flow Statement
for the six months ended 30 June 2012
		Unaudited six months ended 30 June 2012	Unaudited six months ended 30 June 2011	Audited year ended 31 December 2011
	Note	£m	£m	£m
Net cash flow from operating activities
Cash generated from operating activities	7	22.4	30.1	96.1
Borrowing costs paid		(6.4)	(7.8)	(16.2)
Interest received		0.7	0.6	1.4
Income tax paid		(10.3)	(4.5)	(10.2)
Net cash generated from operating activities		6.4	18.4	71.1
Cash flows from investing activities
Purchase of property, plant and equipment		(12.9)	(8.9)	(16.4)
Proceeds from sale of property, plant and equipment		1.8	1.2	2.6
Proceeds from sale of businesses		-	18.6	30.6
Settlement of amounts payable for purchase of businesses	6	(7.4)	(1.2)	(1.4)
Net cash (used in)/generated from investing activities		(18.5)	9.7	15.4
Cash flows from financing activities
Capital element of finance lease rental payments		(1.0)	(0.2)	(1.5)
Repayment of loans/settlement of derivative financial instruments		1.8	(28.2)	(81.6)
Dividends paid to equity holders of the Company		(8.9)	-	(4.4)
Dividend payments to non-controlling interests		(0.2)	(0.1)	(0.1)
Net cash used in financing activities		(8.3)	(28.5)	(87.6)
Decrease in cash and cash equivalents in the period	8	(20.4)	(0.4)	(1.1)
Cash and cash equivalents at beginning of period		122.9	127.0	127.0
Effect of foreign exchange rate changes		(1.6)	4.0	(3.0)
Cash and cash equivalents at end of period		100.9	130.6	122.9

Condensed Consolidated Statement of Changes in Equity
For the unaudited six months ended 30 June 2012	Called up share capital	Share premium account	Capital redemption reserve	Share option reserve	Hedging and translation reserve	Retained profits	Total	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 31 December 2011	59.1	447.0	0.3	1.2	11.2	187.7	706.5	1.0	707.5
Profit after tax	-	-	-	-	-	17.3	17.3	-	17.3
Other comprehensive income/(expense):
Exchange difference on retranslation of foreign currency goodwill and intangibles	-	-	-	-	(8.8)	-	(8.8)	-	(8.8)
Exchange difference on retranslation of foreign currency net investments (excluding goodwill and intangibles)	-	-	-	-	(8.3)	-	(8.3)	-	(8.3)
Exchange and fair value movements associated with borrowings and derivative financial instruments	-	-	-	-	5.4	-	5.4	-	5.4
Tax charge on exchange difference arising on borrowings and derivative financial instruments	-	-	-	-	(1.4)	-	(1.4)	-	(1.4)
Gains and losses on cash flow hedges	-	-	-	-	-	(0.5)	(0.5)	-	(0.5)
Transfer to profit and loss on cash flow hedges	-	-	-	-	-	1.1	1.1	-	1.1
Actuarial loss on defined benefit pension schemes	-	-	-	-	-	(2.6)	(2.6)	-	(2.6)
Deferred tax movement associated with actuarial loss	-	-	-	-	-	0.6	0.6	-	0.6
Effect of change in rate on deferred tax	-	-	-	-	-	(0.1)	(0.1)	-	(0.1)
Total comprehensive income/(expense)	-	-	-	-	(13.1)	15.8	2.7	-	2.7
Credit to share option reserve	-	-	-	0.1	-	-	0.1	-	0.1
Exercise of share options	-	-	-	(0.1)	-	0.1	-	-	-
Dividend payments to non-controlling interests	-	-	-	-	-	-	-	(0.2)	(0.2)
Dividends paid to equity holders of the Company	-	-	-	-	-	(8.9)	(8.9)	-	(8.9)
At 30 June 2012	59.1	447.0	0.3	1.2	(1.9)	194.7	700.4	0.8	701.2

For the unaudited six months ended 30 June 2011	Called up share capital	Share premium account	Capital redemption reserve	Share option reserve	Hedging and translation reserve	Retained profits	Total	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 31 December 2010	59.1	447.0	0.3	1.0	32.8	209.3	749.5	1.9	751.4
Profit after tax	-	-	-	-	-	1.5	1.5	0.2	1.7
Other comprehensive income/(expense):
Exchange difference on retranslation of foreign currency goodwill and intangibles	-	-	-	-	14.7	-	14.7	-	14.7
Exchange difference on retranslation of foreign currency net investments (excluding goodwill and intangibles)	-	-	-	-	13.2	-	13.2	-	13.2
Exchange and fair value movements associated with borrowings and derivative financial instruments	-	-	-	-	(4.1)	-	(4.1)	-	(4.1)
Tax charge on exchange difference arising on borrowings and derivative financial instruments	-	-	-	-	(0.2)	-	(0.2)	-	(0.2)
Gains and losses on cash flow hedges	-	-	-	-	-	(1.0)	(1.0)	-	(1.0)
Transfer to profit and loss on cash flow hedges	-	-	-	-	-	1.9	1.9	-	1.9
Actuarial loss on defined benefit pension schemes	-	-	-	-	-	-	-	-	-
Effect of change in rate on deferred tax	-	-	-	-	-	(0.2)	(0.2)	-	(0.2)
Total comprehensive income/(expense)	-	-	-	-	23.6	2.2	25.8	0.2	26.0
Credit to share option reserve	-	-	-	0.2	-	-	0.2	-	0.2
Exercise of option to purchase non-controlling interest shareholding	-	-	-	-	-	0.5	0.5	(0.6)	(0.1)
Dividend payments to non-controlling interests	-	-	-	-	-	-	-	(0.1)	(0.1)
Dividends paid to equity holders of the Company	-	-	-	-	-	-	-	-	-
At 30 June 2011	59.1	447.0	0.3	1.2	56.4	212.0	776.0	1.4	777.4

Condensed Consolidated Statement of Changes in Equity (Continued)
For the audited year ended 31 December 2011	Called up share capital	Share premium account	Capital redemption reserve	Share option reserve	Hedging and translation reserve	Retained profits	Total	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 31 December 2010	59.1	447.0	0.3	1.0	32.8	209.3	749.5	1.9	751.4
Loss after tax	-	-	-	-	-	(0.3)	(0.3)	0.3	(0.0)
Other comprehensive income/(expense):
Exchange difference on retranslation of foreign currency goodwill and intangibles	-	-	-	-	(9.6)	-	(9.6)	-	(9.6)
Exchange difference on retranslation of foreign currency net investments (excluding goodwill and intangibles)	-	-	-	-	(14.7)	-	(14.7)	-	(14.7)
Exchange and fair value movements associated with borrowings and derivative financial instruments	-	-	-	-	3.6	-	3.6	-	3.6
Tax charge on exchange difference arising on borrowings and derivative financial instruments	-	-	-	-	(0.9)	-	(0.9)	-	(0.9)
Gains and losses on cash flow hedges	-	-	-	-	-	(5.2)	(5.2)	-	(5.2)
Transfer to profit and loss on cash flow hedges	-	-	-	-	-	3.9	3.9	-	3.9
Actuarial loss on defined benefit pension schemes	-	-	-	-	-	(21.8)	(21.8)	-	(21.8)
Deferred tax movement associated with actuarial loss	-	-	-	-	-	5.4	5.4	-	5.4
Effect of change in rate on deferred tax	-	-	-	-	-	(0.3)	(0.3)	-	(0.3)
Total comprehensive income/(expense)	-	-	-	-	(21.6)	(18.3)	(39.9)	0.3	(39.6)
Credit to share option reserve	-	-	-	0.2	-	-	0.2	-	0.2
Purchase of non-controlling interest shareholding	-	-	-	-	-	1.1	1.1	(1.1)	-
Dividend payments to non-controlling interests	-	-	-	-	-	-	-	(0.1)	(0.1)
Dividends paid to equity holders of the Company	-	-	-	-	-	(4.4)	(4.4)	-	(4.4)
At 31 December 2011	59.1	447.0	0.3	1.2	11.2	187.7	706.5	1.0	707.5

The share option reserve represents the cumulative share option charge under IFRS 2 less the value of any share options that have been exercised.

                The hedging and translation reserve represents movements in the Condensed Consolidated Balance Sheet as a result of movements in exchange rates which are taken directly to reserves.

Notes to the Condensed Interim Financial Statements

1.    Basis of preparation of condensed interim financial statements

The condensed interim financial statements were approved by the Board of Directors on 22 August 2012.

The condensed interim financial statements do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The interim results to 30 June 2012 and 30 June 2011 have been subject to an Interim Review by the Company's Auditor. The financial information for the full preceding year is based on the audited statutory accounts for the financial year ended 31 December 2011. Those accounts, upon which the Auditor issued an unqualified opinion, have been delivered to the Registrar of Companies. The Auditor's Report did not draw attention to any matters by way of emphasis and contained no statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

The Group's condensed interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the European Union, in accordance with IAS 34 "Interim Financial Reporting" and the accounting policies included in the Annual Report for the year ended 31 December 2011, which have been applied consistently throughout the current and preceding periods.

All results are from continuing operations under International Accounting Standards as the businesses disposed of in 2011 did not meet the disclosure criteria of IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations" as they did not represent a separate major line of business or geographical area of operations. In order to give an indication of the underlying earnings of the Group the results of these businesses have been included in the middle column of the Condensed Consolidated Income Statement entitled "Other items".

Going Concern

The Directors have considered the Group's forecasts which support the view that the Group should be able to continue to operate within its banking facilities and comply with its banking covenants.  Through its various business activities the Group is exposed to a number of risks and uncertainties (see Note 14), which could affect the Group's ability to meet these forecasts and hence its ability to meet its banking covenants. The Directors have considered the challenging trading conditions and the ongoing uncertainty in the Eurozone, the current competitive environment and markets in which the Group's businesses operate and associated credit risks, together with the available ongoing committed finance facilities and the potential actions that can be taken, should revenues be worse than expected, to protect operating profits and cash flows. After making enquiries, the Directors have formed a judgement that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis has been adopted in preparing these condensed interim financial statements.

Changes in accounting policy

New accounting standards

In 2012, no new standards or interpretations have become effective that have a material impact upon the condensed interim financial statements for the period ended 30 June 2012.

2. Segmental information
(a) Segmental results
In accordance with IFRS 8 "Operating Segments", the Group identifies its reportable segments as those upon which the Group Board regularly bases its opinion and assesses performance. The Group has deemed it appropriate to aggregate its operating segments into two reporting segments: UK and Ireland and Mainland Europe. The constituent operating segments have been aggregated as they have similar products and services; production processes; types of customer; methods of distribution; regulatory environments; and economic characteristics.
	Unaudited six months ended 30 June 2012					Unaudited six months ended 30 June 2011					Audited year ended 31 December 2011
	UK and Ireland	Mainland Europe	Eliminations	Total		UK and Ireland	Mainland Europe	Eliminations	Total		UK and Ireland	Mainland Europe	Eliminations	Total
	£m	£m	£m	£m		£m	£m	£m	£m		£m	£m	£m	£m
Revenue
Continuing sales	578.3	714.3	-	1,292.6		591.5	752.2	-	1,343.7		1,201.0	1,543.8	-	2,744.8
Sales attributable to businesses divested in 2011	-	-	-	-		55.4	-	-	55.4		63.6	-	-	63.6
Inter-segment sales*	0.3	3.0	(3.3)	-		-	2.7	(2.7)	-		0.6	5.5	(6.1)	-
Total revenue	578.6	717.3	(3.3)	1,292.6		646.9	754.9	(2.7)	1,399.1		1,265.2	1,549.3	(6.1)	2,808.4
Result
Segment result before other items^	23.1	21.5	-	44.6		23.1	24.2	-	47.3		49.6	53.5	-	103.1
Amortisation of acquired intangibles and impairment charges	(6.2)	(4.7)	-	(10.9)		(7.6)	(4.7)	-	(12.3)		(15.1)	(20.5)	-	(35.6)
Net loss arising from sale of businesses and associated impairment charges	-	-	-	-		(22.1)	-	-	(22.1)		(22.7)	-	-	(22.7)
Expenses arising on acquisition of subsidiaries	-	(0.1)	-	(0.1)		-	-	-	-		-	-	-	-
Restructuring costs	(1.0)	(1.0)	-	(2.0)		-	-	-	-		(11.0)	(1.0)	-	(12.0)
Operating profit attributable to businesses divested in 2011	-	-	-	-		0.3	-	-	0.3		0.3	-	-	0.3
Defined benefit pension scheme curtailment gain	4.4	-	-	4.4		-	-	-	-		-	-	-	-
Segment operating profit/(loss)	20.3	15.7	-	36.0		(6.3)	19.5	-	13.2		1.1	32.0	-	33.1
Parent Company costs				(3.7)					(3.8)					(7.5)
Operating profit				32.3					9.4					25.6
Net finance costs				(6.0)					(8.1)					(13.8)
Net losses on derivative financial instruments				(0.9)					(1.9)					(4.2)
Share of loss of associate				(0.2)					-					(0.1)
Profit/(loss) before tax				25.2					(0.6)					7.5
Income tax (expense)/credit				(7.9)					2.3					(7.5)
Non-controlling interests				-					(0.2)					(0.3)
Retained profit/(loss)				17.3					1.5					(0.3)
* Inter-segment sales are charged at the prevailing market rates. ^ "Other items" relate to the amortisation of acquired intangibles, impairment charges, restructuring costs, expenses arising on acquisition of subsidiaries, profit and loss on the sale of businesses, trading profits and  losses associated with disposed businesses and the defined benefit pension scheme curtailment gain.

Notes to the Condensed Interim Financial Statements (Continued)

2. Segmental information (continued)
(a) Segmental results (continued)
Balance Sheet	Unaudited six months ended 30 June 2012					Unaudited six months ended 30 June 2011					Audited year ended 31 December 2011
	UK and Ireland	Mainland Europe	Eliminations	Total		UK and Ireland	Mainland Europe	Eliminations	Total		UK and Ireland	Mainland Europe	Eliminations	Total
	£m	£m	£m	£m		£m	£m	£m	£m		£m	£m	£m	£m
Assets
Segment assets	631.7	769.9	-	1,401.6		667.6	879.8	-	1,547.4		631.8	731.4	-	1,363.2
Unallocated assets:
Derivative financial instruments				51.0					46.1					52.7
Cash and cash equivalents				24.8					50.5					50.8
Other unallocated assets				3.3					3.1					2.5
				1,480.7					1,647.1					1,469.2
Assets held for sale				-					24.0					-
Consolidated total assets				1,480.7					1,671.1					1,469.2
Liabilities
Segment liabilities	286.5	213.7	-	500.2		308.9	237.8	-	546.7		297.6	179.9	-	477.5
Unallocated liabilities:
Private placement notes				261.7					309.3					265.2
Derivative financial instruments				10.2					15.9					10.5
Other unallocated liabilities				7.4					8.0					8.5
				779.5					879.9					761.7
Liabilities held for sale				-					13.8					-
Consolidated total liabilities				779.5					893.7					761.7
Other segment information
Capital expenditure on:
Property, plant and equipment	8.2	5.8	-	14.0		4.8	4.1	-	8.9		9.3	8.8	-	18.1
Goodwill and intangibles	-	2.9	-	2.9		-	-	-	-		-	-	-	-
Non-cash expenditure:
Depreciation	5.8	6.2	-	12.0		8.9	7.3	-	16.2		15.4	14.0	-	29.4
Impairment charges associated with businesses disposed of in 2011	-	-	-	-		20.9	-	-	20.9		21.1	-	-	21.1
Impairments of property, plant and equipment	-	-	-	-		-	-	-	-		0.3	-	-	0.3
Amortisation of acquired intangibles	6.2	4.7	-	10.9		7.6	4.7	-	12.3		15.1	9.5	-	24.6
Impairment of goodwill and intangibles	-	-	-	-		-	-	-	-		-	11.0	-	11.0

Notes to the Condensed Interim Financial Statements (Continued)

2. Segmental information (continued)
(b) Revenue by product group
The Group focuses its activities into three product sectors: Insulation and Energy Management; Interiors; and Exteriors. The following table provides an analysis of Group sales by type of product:
				Unaudited six months ended 30 June 2012	Unaudited six months ended 30 June 2011	Audited year ended 31 December 2011
				£m	£m	£m
Insulation and Energy Management				599.9	600.4	1,251.7
Interiors				293.4	305.1	604.5
Exteriors				399.3	438.2	888.6
Total continuing				1,292.6	1,343.7	2,744.8
Attributable to businesses divested in 2011				-	55.4	63.6
Total				1,292.6	1,399.1	2,808.4

(c) Geographic information
The Group's revenue from external customers and its non-current assets (including property, plant and equipment, goodwill and intangible assets but excluding deferred tax and derivative financial instruments) by geographical location are as follows:
	Unaudited six months ended 30 June 2012			Unaudited six months ended 30 June 2011			Audited year ended 31 December 2011
	Revenue	Non-current assets^		Revenue	Non-current assets^		Revenue	Non-current assets^
Country	£m	£m		£m	£m		£m	£m
United Kingdom	547.9	281.0		553.5	293.6		1,123.7	285.3
Ireland	30.4	0.9		38.0	1.1		77.3	1.0
France	300.4	225.3		309.1	261.1		605.2	237.2
Germany and Austria	265.8	53.1		286.7	63.0		616.6	56.5
Poland	54.4	15.9		63.3	19.9		134.3	16.1
Benelux*	81.7	42.1		78.5	45.0		156.4	40.7
Central Europe	12.0	1.7		14.6	15.0		31.3	1.5
Total continuing	1,292.6	620.0		1,343.7	698.7		2,744.8	638.3
Attributable to businesses divested in 2011	-			55.4			63.6
Total	1,292.6			1,399.1			2,808.4
* Includes international air conditioning and air handling business (headquartered in the Netherlands). ^ Excluding deferred tax assets and derivative financial instruments. There is no material difference between the basis of preparation of the information reported above and the Accounting Policies adopted by the Group (Note 1).

3. Other items
"Other items" have been disclosed in a separate column within the Condensed Consolidated Income Statement in order to provide a better indication of the underlying earnings of the Group. "Other items" are as follows:
	Unaudited six months ended 30 June 2012	Unaudited six months ended 30 June 2011	Audited year ended 31 December 2011
	£m	£m	£m
Amortisation of acquired intangibles	(10.9)	(12.3)	(24.6)
Goodwill and intangible asset impairment charges	-	-	(11.0)
Net loss arising from sale of businesses in 2011	-	(22.1)	(22.7)
Operating profit attributable to businesses divested in 2011	-	0.3	0.3
Defined benefit pension scheme curtailment gain	4.4	-	-
Expenses arising on acquisition of subsidiaries	(0.1)	-	-
Restructuring costs	(2.0)	-	(12.0)
Operating loss	(8.6)	(34.1)	(70.0)
Net losses on derivative financial instruments	(0.9)	(1.9)	(4.2)
Loss before tax	(9.5)	(36.0)	(74.2)
Income tax credit	3.0	13.2	18.2
Loss after tax	(6.5)	(22.8)	(56.0)

Notes to the Condensed Interim Financial Statements (Continued)

4. Income tax
The income tax expense/(credit) comprises:
	Unaudited six months ended 30 June 2012	Unaudited six months ended 30 June 2011	Audited year ended  31 December 2011
	£m	£m	£m
UK Taxation	3.4	(7.2)	(6.1)
Overseas Taxation	4.5	4.9	13.6
Total income tax expense/(credit) for the period	7.9	(2.3)	7.5
Tax for the six month period ended 30 June 2012 on profits before other items is charged at 31.2% (30 June 2011: 30.8%; 31 December 2011: 31.5%), representing the best estimate of the average annual effective tax rate expected for the full year.

5. Earnings per share
The calculations of earnings per share are based on the following profits and numbers of shares:
	Basic and diluted
	Unaudited six months  ended 30 June 2012	Unaudited six months ended 30 June 2011	Audited year ended 31 December 2011
	£m	£m	£m
Profit/(loss) after tax	17.3	1.7	(0.0)
Non-controlling interests	-	(0.2)	(0.3)
	17.3	1.5	(0.3)
	Basic and diluted before other items*
	Unaudited six months  ended 30 June 2012	Unaudited six months ended 30 June 2011	Audited year ended 31 December 2011
	£m	£m	£m
Profit/(loss) after tax	17.3	1.7	(0.0)
Non-controlling interests	-	(0.2)	(0.3)
Amortisation of acquired intangibles	10.9	12.3	24.6
Goodwill and intangible asset impairment charges	-	-	11.0
Net loss arising from sale of businesses in 2011	-	22.1	22.7
Restructuring costs	2.0	-	12.0
Expenses arising on acquisition of subsidiaries	0.1	-	-
Operating profit attributable to businesses divested in 2011	-	(0.3)	(0.3)
Defined benefit pension scheme curtailment gain	(4.4)	-	-
Net losses on derivative financial instruments	0.9	1.9	4.2
Tax relating to other items*	(3.0)	(13.2)	(18.2)
	23.8	24.3	55.7
* "Other items" relate to the amortisation of acquired intangibles, impairment charges, restructuring costs, expenses arising on acquisition of  subsidiaries, profit and loss on the sale of businesses, trading profits and losses associated with disposed businesses, defined benefit pension scheme curtailment gain and gains and losses on derivative financial instruments.
Weighted average number of shares:
	Unaudited six months  ended 30 June 2012	Unaudited six months ended 30 June 2011	Audited year ended 31 December 2011
	Number	Number	Number
For basic earnings per share	590,832,604	590,829,339	590,829,339
Exercise of share options	4,737,279	3,218,569	3,703,528
For diluted earnings per share	595,569,883	594,047,908	594,532,867

Earnings per share
Total basic earnings/(loss) per share	2.9p	0.3p	(0.0p)
Total diluted earnings/(loss) per share	2.9p	0.3p	(0.0p)
Earnings per share before other items^
Total basic earnings per share	4.0p	4.1p	9.4p
Total diluted earnings per share	4.0p	4.1p	9.4p
^ Earnings per share before "Other items" is disclosed in order to present the underlying performance of the Group.

Notes to the Condensed Interim Financial Statements (Continued)

6. Acquisitions made in the period
On 5 June 2012, the Group acquired 100% of the issued share capital of M. Van Tol B.V., a distributor of insulating materials and associated products in the Netherlands.
Recognised amounts of identifiable assets acquired and liabilities assumed	£m
Total identifiable assets and financial liabilities	0.9
Goodwill	1.3
Intangible assets	1.6
Deferred tax on acquired intangibles	(0.4)
Total consideration	3.4
Satisfied by:
Contingent consideration	1.1
Cash	2.3
Total consideration transferred	3.4
Net cash outflow arising on acquisition
Cash consideration	2.3
Less: cash and cash equivalents acquired	(0.3)
Net cash outflow arising on acquisition	2.0
Due to the proximity of the acquisition to the period end, the Directors have made a provisional assessment of the fair value of the net assets acquired. Any further adjustments arising will be accounted for over the next 12 months. These fair value adjustments could relate to: a) the review of the carrying value of all non-current assets to ensure that they accurately reflect their market value; b) the alignment of valuation and provisioning methodologies to those adopted by the Group; and c) an assessment of all provisions and payables to ensure they are accurately reflected in accordance with the Group's policies. Contingent consideration of €1.4m (£1.1m) is payable only upon the business achieving certain performance targets over a specified future period. Included within goodwill are staff acquired as part of the business and strategic acquisition synergies which are specifically excluded in the identification of intangible assets on acquisition by the relevant accounting standards. The post-acquisition revenue and operating profit recognised in the Group's Condensed Consolidated Income Statement for the six months ended 30 June 2012 in respect of this acquisition was £0.3m and £ nil respectively.   Payment of deferred consideration During the period, deferred consideration of £5.4m was paid to Gerry Carr in respect of his 20% shareholding in the Group's Ireland business in settlement of his option to sell. The Group owned 100% of Insulation Distributors Limited before and after the settlement of deferred consideration.

7. Reconciliation of operating profit to cash generated from operating activities
	Unaudited six months  ended 30 June 2012	Unaudited six months ended 30 June 2011	Audited year ended 31 December 2011
	£m	£m	£m
Operating profit	32.3	9.4	25.6
Depreciation charge	12.0	16.2	29.4
Net loss arising from sale of businesses in 2011	-	22.1	22.7
Impairment of property, plant and equipment	-	-	0.3
Amortisation of acquired intangibles and goodwill impairment charges	10.9	12.3	35.6
Profit on sale of property, plant and equipment	(0.4)	(0.1)	(0.1)
Share-based payments	0.1	0.3	0.2
Increase in working capital	(32.5)	(30.1)	(17.6)
Cash generated from operating activities	22.4	30.1	96.1
Included in cash generated from operating activities is a special contribution to the defined benefit pension scheme of £7.0m (30 June 2011: £ nil; 31 December 2011: £2.4m) and cash paid on exceptional restructuring costs of £4.8m (30 June 2011: £6.6m; 31 December 2011: £12.4m).

Notes to the Condensed Interim Financial Statements (Continued)

8. Reconciliation of net cash flow to movements in net debt
	Unaudited six months  ended 30 June 2012	Unaudited six months ended 30 June 2011	Audited year ended 31 December 2011
	£m	£m	£m
Decrease in cash and cash equivalents in the period	(20.4)	(0.4)	(1.1)
Cash flow from (increase)/decrease in debt	(2.0)	28.4	81.3
(Increase)/decrease in net debt resulting from cash flows	(22.4)	28.0	80.2
Non-cash items*	(1.0)	(1.1)	(12.2)
Settlement of deferred consideration	5.4	-	-
Exchange differences	4.0	(4.7)	1.1
(Increase)/decrease in net debt in the period	(14.0)	22.2	69.1
Net debt at beginning of period	(115.9)	(185.0)	(185.0)
Net debt at end of period	(129.9)	(162.8)	(115.9)
* Non-cash items relate to the fair value movement of debt recognised in the period which does not give rise to a cash inflow or outflow. Net debt is defined as the net of cash and cash equivalents, loans, derivatives and other finance liabilities.

9. Called up share capital
	Unaudited six months  ended 30 June 2012	Unaudited six months ended 30 June 2011	Audited year ended 31 December 2011
	£m	£m	£m
Authorised:
800,000,000 ordinary shares of 10p each (30 June 2011: 800,000,000; 31 December 2011: 800,000,000)	80.0	80.0	80.0
Allotted, called up and fully paid:
590,837,435 ordinary shares of 10p each (30 June 2011: 590,829,339; 31 December 2011: 590,829,339)	59.1	59.1	59.1
The Company allotted 8,096 shares during the period (30 June 2011 and 31 December 2011: nil).

10. Pension schemes

Defined benefit schemes

The Group operates a number of pension schemes, five of which provide defined benefits based upon pensionable salary. One of these schemes has assets held in a separate trustee administered fund, and four are overseas book reserved schemes. The UK defined benefit pension scheme obligation is calculated on a year to date basis, using the latest actuarial valuation as at 31 December 2010.

In March 2012, a special contribution of £7.0m was made by the Company to the scheme in response to the triennial valuation as at 31 December 2010.

During the period changes were made to cap the amount by which pensionable pay may increase to a maximum of 2.5% per annum on a cumulative basis, and to limit the amount by which all pensionable service earned from 1 July 2012 increases to be the increase in the Consumer Price Index ("CPI") capped at 2.5% per annum. Upon formal approval of these changes, the Company recognised a curtailment gain of £4.4m within "Other items" in the Condensed Consolidated Income Statement.

The assets of the UK scheme have been updated to reflect their market value at 30 June 2012. Differences between the expected return on assets and the actual return on assets have been recognised as an actuarial loss in the Condensed Statement of Comprehensive Income in accordance with the Group's accounting policies.

Actuarial valuations of the pension schemes for the purposes of the Annual Report are performed on an annual basis, whereas the pension cost for the half year is calculated on a year-to-date basis by applying the actuarially determined pension cost rate as at the end of the prior financial year. Where considered necessary, this cost is adjusted to take account of significant market fluctuations since that time and for significant curtailments, settlements or other one-time events in the period. 

11. Interest in associate

The Group's share of operating loss arising from its interest in associate, Ice Energy Technologies Limited ("Ice"), for the period ending 30 June 2012 was a loss of £0.2m (30 June 2011: £ nil; 31 December 2011: loss of £0.1m), which has been recognised on the face of the Condensed Consolidated Income Statement.

The only material transaction between SIG plc and its associate is a loan made by SIG plc to Ice amounting to £1.8m as at 30 June 2012 (30 June 2011: £1.2m; 31 December 2011: £1.2m) which is included within other receivables. Interest receivable on the loan for the period was £31,000 (30 June 2011: £25,000; 31 December 2011: £51,000). The loan is due for repayment in 2013.

Notes to the Condensed Interim Financial Statements (Continued)

12. Interim dividend

An interim dividend of 1.0p per share has been declared (2011: 0.75p). In accordance with IAS 10 "Events After the Balance Sheet Date", dividends declared after the balance sheet date are not recognised as a liability in the financial statements.

The final dividend for the year ended 31 December 2011 of 1.5p per share has been recognised as a distribution to equity holders in the period.

13. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and have therefore not been disclosed.

During the period, deferred consideration of £5.4m was paid to Gerry Carr, a Director of the Group's Ireland business, in respect of his 20% shareholding of Insulation Distributors Limited in settlement of his option to sell.

Other than the relationships disclosed above and in Note 11, the Group has not identified any other material related party transactions in the six month period to 30 June 2012.

14. Risks and uncertainties

The principal risks and uncertainties which could have a material impact upon the Group's performance over the remaining six months of the 2012 financial year have not changed significantly from those set out on pages 30 to 33 of the Business Review included in the Group's 2011 Annual Report and Accounts. These risks and uncertainties include, but are not limited to:

(1) eurozone risk;

(2) level of demand in SIG's operating markets;

(3) competitors and margin management;

(4) commercial relationships;

(5) government legislation;

(6) debt;

(7) working capital/cash management;

(8) IT infrastructure and resilience; and

(9) availability of key resources.       

The primary risk affecting the Group for the remaining six months of the year is the level of market demand in the markets in which SIG operates. SIG's diverse market sectors are affected by macroeconomic factors which limit visibility and therefore render the short to medium term outlook difficult to predict. The "Outlook" section of the Trading Review summarises the current assessment of the markets in which the Group operates.                                                                                                                                                                                                                                                                                                                                    

15. Seasonality

The Group's operations are not normally affected by significant seasonal variations between the first and second halves of the calendar year and it is anticipated that the seasonality experienced in 2012 will be largely consistent with that experienced previously.

INDEPENDENT REVIEW REPORT TO SIG PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Cash Flow Statement and related notes 1 to 15. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

Leeds, UK

22 August 2012

 

END

 

 

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